Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is made and dated as of November 8, 2012 and is
entered into by and between MERRIMACK PHARMACEUTICALS, INC., a Delaware
corporation, and each of its Subsidiaries that from time to time becomes a party
hereto (hereinafter collectively referred to as the “Borrower”), and HERCULES
TECHNOLOGY GROWTH CAPITAL, INC., a Maryland corporation (“Lender”).

 

RECITALS

 

A.                                    Borrower has requested Lender to make
available to Borrower loans in an aggregate principal amount of up to
$40,000,000 (the “Term Loan”); and

 

B.                                    Lender is willing to make the Term Loan on
the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, Borrower and Lender agree as follows:

 

SECTION 1.  DEFINITIONS AND RULES OF CONSTRUCTION

 

1.1                               Unless otherwise defined herein, the following
capitalized terms shall have the following meanings:

 

“Account Control Agreement(s)” means any agreement entered into by and among the
Lender, Borrower and a third party Bank or other institution (including a
Securities Intermediary) in which Borrower maintains a Deposit Account or an
account holding Investment Property and which grants Lender a perfected first
priority security interest in the subject account or accounts.

 

“ACH Authorization” means the ACH Debit Authorization Agreement in substantially
the form of Exhibit G.

 

“Advance(s)” means a Term Advance.

 

“Advance Date” means the funding date of any Advance.

 

“Advance Request” means a request for an Advance submitted by Borrower to Lender
in substantially the form of Exhibit A.

 

“Agreement” means this Loan and Security Agreement, as amended from time to
time.

 

“Assignee” has the meaning given to it in Section 11.13.

 

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“Borrower Products” means all products, technical data or technology currently
being developed, manufactured or sold by Borrower or which Borrower intends to
sell, manufacture, license, or distribute in the future including any products
or service offerings under development, collectively, together with all
products, technical data or technology that have been sold, developed, licensed
or distributed by Borrower since its incorporation.

 

“Cash” means all cash and liquid funds.

 

“Change in Control” means any (i) reorganization, recapitalization,
consolidation or merger (or similar transaction or series of related
transactions) of Merrimack in which the holders of Merrimack’s outstanding
shares immediately before consummation of such transaction or series of related
transactions (together with any affiliates of such holders) do not, immediately
after consummation of such transaction or series of related transactions, retain
shares representing more than fifty percent (50%) of the voting power of the
surviving entity of such transaction or series of related transactions (or the
parent of such surviving entity if such surviving entity is wholly owned by such
parent), in each case without regard to whether Merrimack is the surviving
entity, or (ii) sale or issuance by Merrimack of new shares of Preferred Stock
of Merrimack to investors, none of whom are current investors in Merrimack (or
their affiliates), representing more than fifty percent (50%) of the voting
power of the surviving entity (or the parent of such surviving entity if such
surviving entity is wholly owned by such parent); provided, however, a bona fide
equity financing for the purpose of raising capital from institutional investors
reasonably acceptable to Lender, shall not constitute a Change in Control.

 

“Claims” has the meaning given to it in Section 11.10.

 

“Closing Date” means the date of this Agreement.

 

“Collateral” means the property described in Section 3.

 

“Commitment Fee” means $60,000, which fee Lender received prior to the Closing
Date, and shall be deemed fully earned on such date regardless of the early
termination of this Agreement, and which shall be applied to the Lender’s
non-legal costs and expenses prior to the Closing Date.

 

“Confidential Information” has the meaning given to it in Section 11.12.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
Indebtedness of another, including any such obligation guaranteed, endorsed,
co-made or discounted or sold with recourse by that Person, or in respect of
which that Person is otherwise directly or indirectly liable; (ii) any
obligations with respect to undrawn letters of credit, corporate credit cards or
merchant services issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term “Contingent Obligation” shall not include endorsements for
collection or deposit in the ordinary course of business.  The amount of any
Contingent Obligation shall be deemed to be an amount

 

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equal to the stated or determined amount of the primary obligation described in
clauses (i) and (ii) above in respect of which such Contingent Obligation is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith;
provided, however, that such amount shall not in any event exceed the maximum
amount of the obligations under the guarantee or other support arrangement.

 

“Copyright License” means any written agreement granting any right to use any
Copyright or Copyright registration, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.

 

“Copyrights” means all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States, any State thereof, or of any other
country.

 

“Deposit Accounts” means any “deposit accounts,” as such term is defined in the
UCC, and includes any checking account, savings account, or certificate of
deposit.

 

“Equity Event” is the sale or issuance, after the Closing Date but before the
first anniversary of the Closing Date, of Merrimack’s equity securities to
institutional accredited investors in a private financing exempt from
registration under the Securities Act of 1933, as amended, for the primary
purpose of raising capital; provided that in no event shall the issuance of
equity securities in connection with a transaction that includes a commercial
relationship (including joint ventures, marketing or distribution arrangements,
collaboration agreements or intellectual property license agreements) be
considered an Equity Event.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations, as amended and in effect from time to time.

 

“Event of Default” has the meaning given to it in Section 9.

 

“Excluded Subsidiary” means any entity, whether corporate, partnership, limited
liability company, joint venture or otherwise, which is designated by Merrimack
as an “Excluded Subsidiary” on Schedule 1 and from time to time after the
Closing Date.

 

“Facility Charge” means 0.75% of the Maximum Term Loan Amount.

 

“Financial Statements” has the meaning given to it in Section 7.1.

 

“GAAP” means generally accepted accounting principles in the United States of
America, as in effect from time to time, provided that the parties agree that
GAAP as in effect on the date of this Agreement shall be applicable for the
interpretation of “capital lease obligations” in the definition of
“Indebtedness”, unless the parties otherwise agree in writing.

 

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred
purchase price of property or services (excluding trade credit entered into in
the ordinary course of business due within ninety (90) days), including
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds,

 

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debentures or similar instruments, (c) all capital lease obligations, and (d)
all Contingent Obligations.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments of all or substantially all of a Person’s assets for the
benefit of creditors, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.

 

“Intellectual Property” means all of Borrower’s Copyrights; Trademarks; Patents;
Licenses; trade secrets, proprietary information (including pre-clinical,
clinical and other data) and inventions; mask works; Borrower’s applications
therefor and reissues, extensions, or renewals thereof; and Borrower’s goodwill
associated with any of the foregoing, together with Borrower’s rights to sue for
past, present and future infringement of Intellectual Property and the goodwill
associated therewith.

 

“Interest Rate” means for any day a per annum rate of interest equal to the
greater of (i) 10.55% plus the United States Prime Rate as reported in The Wall
Street Journal minus 5.25%, and (ii) 10.55%; provided, however, the Interest
Rate shall in no case exceed 12.55% per annum.

 

“Investment” means any beneficial ownership (including stock, partnership or
limited liability company interests) of or in any Person, or any loan, advance
or capital contribution to any Person or the acquisition of all, or
substantially all, of the assets of another Person.

 

“Joinder Agreements” means for each Subsidiary, a completed and executed Joinder
Agreement in substantially the form attached hereto as Exhibit F.

 

“Lender” has the meaning given to it in the preamble to this Agreement.

 

“License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests from a third party.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
against any property, any conditional sale or other title retention agreement,
and any lease in the nature of a security interest.

 

“Loan” means the Advances made under this Agreement.

 

“Loan Documents” means this Agreement, the Notes, the ACH Authorization, the
Account Control Agreements, the Joinder Agreements, all UCC Financing Statements
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated.

 

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“Material Adverse Effect” means an occurrence, on or after the date of the last
set of audited financials, that has a material adverse effect upon: (i) the
business, operations, properties, assets or condition (financial or otherwise)
of the Borrower and its Subsidiaries, taken as a whole; (ii) the ability of
Borrower to perform the Secured Obligations when due in accordance with the
terms of the Loan Documents, or the ability of Lender to enforce any of its
rights or remedies with respect to the Secured Obligations; or (iii) the
Collateral or Lender’s Liens on the Collateral or the priority of such Liens, in
each case, in the aggregate.  Notwithstanding the foregoing, a “Material Adverse
Effect” shall not include any of the following, each in and of itself: (a)
adverse results or delays in any nonclinical or clinical trial, including
without limitation the failure to demonstrate the desired safety or efficacy of
any biologic or drug; (b) the denial, delay or limitation of approval of, or
taking of any other regulatory action by, the United States Food and Drug
Administration or any other governmental entity with respect to any biologic or
drug; or (c) a change in or discontinuation of a strategic partnership or other
collaboration or license arrangement.

 

“Maturity Date” means May 1, 2016, provided Maturity Date will mean November 1,
2016 if the interest-only period is extended pursuant to Section 2.1(d).

 

“Maximum Term Loan Amount” means $40,000,000.

 

“Maximum Rate” shall have the meaning assigned to such term in Section 2.3.

 

“Merrimack” means Merrimack Pharmaceuticals, Inc.

 

“Merrimack Bermuda” means Merrimack Pharmaceuticals (Bermuda) Ltd.

 

“Note(s)” means a Term Note.

 

“OCB” means in the ordinary course of business and shall include (i)
collaboration or licensing transactions, or options to enter into collaboration
or licensing transactions, that are customary in Borrower’s industry, and (ii)
arrangements to use Borrower’s manufacturing capabilities to manufacture drug
product on behalf of third party pharmaceutical companies.

 

“Patent License” means any written agreement granting any right with respect to
any invention on which a Patent is in existence or a Patent application is
pending, in which agreement Borrower now holds or hereafter acquires any
interest.

 

“Patents” means all letters patent of, or rights corresponding thereto, in the
United States or in any other country, all registrations and recordings thereof,
and all applications for letters patent of, or rights corresponding thereto, in
the United States or any other country.

 

“Permitted Indebtedness” means: (i) Indebtedness of Borrower arising under this
Agreement or any other Loan Document; (ii) Indebtedness existing on the Closing
Date which is disclosed in Schedule 1A; (iii) Indebtedness in the principal
amount of up to $5,000,000 outstanding at any time secured by a lien described
in clause (vii) of the defined term “Permitted Liens”; (iv) Indebtedness to
trade creditors incurred in the ordinary course of business, including
Indebtedness incurred in the ordinary course of business with corporate credit
cards; (v)

 

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Indebtedness that also constitutes a Permitted Investment; (vi) Subordinated
Indebtedness; (vii) reimbursement obligations in connection with letters of
credit that are secured by cash or cash equivalents and issued on behalf of the
Borrower or a Subsidiary thereof in an amount not to exceed $1,000,000 at any
time outstanding; (viii) other Indebtedness in an amount not to exceed
$1,000,000 at any time outstanding; (ix) Contingent Obligations of up to
$200,000 described on clause (iii) of the definition of Contingent Obligations
entered into to mitigate risk and not for speculative purposes; (x) Indebtedness
among Borrowers or of Borrower to any non-Borrower Subsidiary; (xi) extensions,
refinancings and renewals of any items of Permitted Indebtedness, provided that
the principal amount is not increased or the terms modified to impose materially
more burdensome terms upon Borrower or its Subsidiary, as the case may be; and
(xii) guarantees of any items of Permitted Indebtedness in clauses (i) through
(xi) above.

 

“Permitted Investment” means: (i) Investments existing on the Closing Date which
are disclosed in Schedule 1B; (ii) (a) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within twenty four months from the date of acquisition
thereof, (b) commercial paper maturing no more than twenty four months from the
date of creation thereof and at the time of the Investment having a rating of at
least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors
Service, (c) certificates of deposit issued by any bank with assets of at least
$500,000,000 maturing no more than twenty four months from the date of
investment therein, (d) money market accounts; and (e) corporate debt
obligations maturing no more than 24 months from the date of acquisition thereof
and at the time of investment having a rating of at least A3 or A- from either
Standard & Poors or Moody’s Investor Service; (iii) repurchases of stock from
former employees, directors, or consultants of Borrower under agreements
approved by the Borrower’s board of directors in an aggregate amount not to
exceed $250,000 in any fiscal year, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases;
(iv) Investments accepted in connection with Permitted Transfers; (v)
Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of Borrower’s business; (vi) Investments
consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not affiliates, in the ordinary
course of business, provided that this subparagraph (vi) shall not apply to
Investments of Borrower in any Subsidiary; (vii) Investments consisting of loans
not involving the net transfer on a substantially contemporaneous basis of cash
proceeds to employees, officers or directors relating to the purchase of capital
stock of Borrower pursuant to employee stock purchase plans or other similar
agreements approved by Borrower’s Board of Directors; (viii) Investments
consisting of travel advances or moving expenses in the ordinary course of
business; (ix) Investments in existing or newly-formed Subsidiaries, provided
that such Subsidiaries enter into a Joinder Agreement and execute such other
documents as shall be reasonably requested by Lender in connection therewith;
(x) Investments in Excluded Subsidiaries not to exceed $5,000,000 at any time
outstanding, provided that fluctuations in the book value of an Investment based
upon non-cash earnings or losses of the applicable Excluded Subsidiary will not
be considered in determining such amount, and to the extent that the Borrower
has received dividends, distributions or payments in cash from any Excluded
Subsidiary in connection with any Investment or has net cash proceeds in
connection with the disposition of any Investment, the amount of such cash or
net cash proceeds may reduce the

 

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amount of Investments under this provision; (xi) Investments in Subsidiaries
organized outside of the United States approved in advance in writing by Lender;
(xii) Investments in Merrimack Bermuda to fund ordinary course operating
expenses and for any payments contemplated under that certain License Agreement,
dated as of September 26, 2005, by and between Merrimack and Merrimack Bermuda,
as amended on June 30, 2011, that certain Assignment, Sublicense and
Collaboration Agreement, dated as of May 5, 2011, by and between Merrimack
Bermuda and PharmaEngine, Inc., and that certain Agreement for Sharing Research
and Development Costs, dated as of June 30, 2011, by and between Merrimack and
Merrimack Bermuda, each as amended from time to time, provided that at no time
may Merrimack maintain in any Deposit Account of Merrimack Bermuda an amount
that exceeds the sum of (a) $100,000, plus (b) any ordinary course operating
expenses due within 30 days, plus (c) any payments contemplated to be made under
the agreements listed in this clause (xii) within 30 days; (xiii) licenses,
joint ventures, collaboration agreements, strategic alliances and similar
arrangements in the OCB; (xiv) Investments consisting of in-licensing of
technology or products in the OCB; (xv) Investments utilizing Borrower’s stock
as consideration that (a) do not result in a Change in Control, (b) do not
exceed $2,000,000 with respect to the market value of the stock issued as
consideration and (c) do not require the incurrence of any Indebtedness (other
than Permitted Indebtedness); (xvi) Permitted Indebtedness that also constitutes
Investments; (xvii) Investments made pursuant to any investment policy adopted
by Borrower’s Board of Directors; (xviii) Investments by Borrower in another
Borrower; and (xix) additional Investments that do not exceed $1,000,000 in the
aggregate per fiscal year.

 

“Permitted Liens” means any and all of the following: (i) Liens in favor of
Lender; (ii) Liens existing on the Closing Date which are disclosed in Schedule
1C; (iii) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by appropriate
proceedings; provided, that Borrower maintains adequate reserves therefor in
accordance with GAAP; (iv) Liens securing claims or demands of materialmen,
artisans, mechanics, carriers, warehousemen, landlords and other like Persons
arising in the ordinary course of Borrower’s business and imposed without action
of such parties; provided, that the payment thereof is not yet required; (v)
Liens arising from judgments, decrees or attachments in circumstances which do
not constitute an Event of Default hereunder; (vi) the following deposits, to
the extent made in the ordinary course of business:  deposits under worker’s
compensation, unemployment insurance, social security and other similar laws, or
to secure the performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure indemnity, performance or other
similar bonds for the performance of bids, tenders or contracts (other than for
the repayment of borrowed money) or to secure statutory obligations (other than
liens arising under ERISA or environmental liens) or surety or appeal bonds, or
to secure indemnity, performance or other similar bonds; (vii) Liens on
Equipment or software, other intellectual property, or other capital assets,
constituting purchase money liens and liens in connection with capital leases
securing Indebtedness permitted in clause (iii) of “Permitted Indebtedness”; 
(viii) Liens incurred in connection with Subordinated Indebtedness; (ix)
leasehold interests in leases or subleases and licenses granted in the OCB and
not interfering in any material respect with the business of the licensor; (x)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of custom duties that are promptly paid on or before the date
they become due; (xi) Liens on insurance proceeds securing the payment of
financed insurance premiums that are promptly paid on or before the date they
become due

 

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(provided that such Liens extend only to such insurance proceeds and not to any
other property or assets); (xii) statutory, common law and contractual rights of
set-off and other similar rights as to deposits of cash and securities in favor
of banks, other depository institutions and brokerage firms; (xiii) easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business so long as they do
not materially impair the value or marketability of the related property; (xiv)
Liens on cash or cash equivalents securing obligations permitted under clause
(vii) of the definition of Permitted Indebtedness; (xv) Liens in connection with
operating leases in the Equipment that is the subject of such leases; (xvi)
Permitted Transfers; and (xvii) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (i) through (xvi) above; provided, that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced (as may have been reduced by any payment thereon) does not
increase.

 

“Permitted Transfers” means (i) sales of Inventory in the normal course of
business, (ii) licenses, joint ventures, collaboration agreements, strategic
alliances and similar arrangements in the OCB providing for the licensing of
technology, Intellectual Property or Borrower Products, the development or
commercialization of technology, Intellectual Property or Borrower Products, the
assignment of ownership or co-ownership rights in connection with the foregoing,
or the providing of technical support, (iii) dispositions of worn-out, obsolete
or surplus Equipment in the ordinary course of business, (iv) Permitted
Investments, (v) Permitted Liens, (vi) dispositions of Copyright rights in
connection with publications in scientific journals, and (vii) other Transfers
of assets having a fair market value of not more than $1,000,000 in the
aggregate in any fiscal year.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, other entity or government.

 

“Preferred Stock” means at any given time any equity security issued by Borrower
that has any rights, preferences or privileges senior to Borrower’s common
stock.

 

“Receivables” means all of Borrower’s Accounts, Instruments, Documents, Chattel
Paper, Supporting Obligations, letters of credit, proceeds of any letter of
credit, and Letter of Credit Rights.

 

“Secured Obligations” means Borrower’s obligations under this Agreement and any
Loan Document, including any obligation to pay any amount now owing or later
arising.

 

“Subordinated Indebtedness” means Indebtedness subordinated to the Secured
Obligations in amounts and on terms and conditions satisfactory to Lender in its
sole discretion.

 

“Subsidiary” means an entity, whether corporate, partnership, limited liability
company, joint venture or otherwise, in which Borrower owns or controls more
than 50%  of the outstanding voting securities, including each entity listed on
Schedule 1 hereto, other than any Excluded Subsidiary.

 

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“Term Advance” means any Term Loan funds advanced under this Agreement.

 

“Term Note” means a Promissory Note in substantially the form of Exhibit B.

 

“Trademark License” means any written agreement granting any right to use any
Trademark or Trademark registration, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.

 

“Trademarks” means all trademarks (registered, common law or otherwise) and any
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof.

 

“UCC” means the Uniform Commercial Code as the same is, from time to time, in
effect in the State of California; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Lender’s Lien on any Collateral is
governed by the Uniform Commercial Code as the same is, from time to time, in
effect in a jurisdiction other than the State of California, then the term “UCC”
shall mean the Uniform Commercial Code as in effect, from time to time, in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.

 

Unless otherwise specified, all references in this Agreement or any Annex or
Schedule hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or “Schedule”
shall refer to the corresponding Section, subsection, Exhibit, Annex, or
Schedule in or to this Agreement.  Unless otherwise specifically provided
herein, any accounting term used in this Agreement or the other Loan Documents
shall have the meaning customarily given such term in accordance with GAAP, and
all financial computations hereunder shall be computed in accordance with GAAP,
consistently applied. Unless otherwise defined herein or in the other Loan
Documents, terms that are used herein or in the other Loan Documents and defined
in the UCC shall have the meanings given to them in the UCC.

 

SECTION 2.  THE LOAN

 

2.1                               Term Loan.

 

(a)                                 Advances.  Subject to the terms and
conditions of this Agreement, Lender will make, and Borrower agrees to draw, a
Term Advance of $25,000,000 (the “First Tranche”) on the Closing Date. Beginning
on the Closing Date, and continuing through December 15, 2012, Borrower may
request and the Lender shall make one additional Term Advance in an aggregate
amount up to $15,000,000 (the “Second Tranche”).  The aggregate outstanding Term
Advances may be up to the Maximum Term Loan Amount.

 

(b)                                 Advance Request.  To obtain a Term Advance,
Borrower shall complete, sign and deliver an Advance Request (which, as to the
Second Tranche, shall be at least five business days before the Advance Date)
and Term Note to Lender.  Lender shall fund the Term Advance in the manner
requested by the Advance Request provided that

 

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each of the conditions precedent in Section 4 of this Agreement applicable to
such Term Advance is satisfied as of the requested Advance Date.

 

(c)                                  Interest.  The principal balance of each
Term Advance shall bear interest thereon from such Advance Date at the Interest
Rate based on a year consisting of 360 days, with interest computed daily based
on the actual number of days elapsed.  The Interest Rate will float and change
on the day the Prime Rate changes from time to time.

 

(d)                                 Payment.  Borrower will pay interest on each
Term Advance in arrears on the first business day of each month, beginning the
month after the Advance Date and ending on the first anniversary of the Closing
Date (the “Interest Only Period”).  Borrower shall repay the aggregate Term Loan
principal balance that is outstanding on the first anniversary of the Closing
Date in 30 equal monthly installments of principal and interest beginning
December 1, 2013 and continuing on the first business day of each month
thereafter.  Notwithstanding the foregoing, Borrower may elect in its sole
discretion to postpone the date on which the first such installment is due until
June 1, 2014, (and the last payment date of the Interest Only Period shall be
May 1, 2014), provided Borrower has received the aggregate amount of at least
$75,000,000 in aggregate gross proceeds in one or more transactions after the
Closing Date and before December 1, 2013 (such transactions to include, without
limitation, equity financings, subordinated debt, milestone payments and other
payments from collaboration or other agreements that include a commercial
relationship). The entire Term Loan principal balance and all accrued but unpaid
interest hereunder, shall be due and payable on Maturity Date.  Borrower shall
make all payments under this Agreement without setoff, recoupment or deduction
and regardless of any counterclaim or defense. Lender will initiate debit
entries to the Borrower’s account as authorized on the ACH Authorization on each
payment date of all periodic obligations payable to Lender under each Term Note
or Term Advance.

 

2.2                               Maximum Interest.  Notwithstanding any
provision in this Agreement, the Notes, or any other Loan Document, it is the
parties’ intent not to contract for, charge or receive interest at a rate that
is greater than the maximum rate permissible by law that a court of competent
jurisdiction shall deem applicable hereto (which under the laws of the State of
California shall be deemed to be the laws relating to permissible rates of
interest on commercial loans) (the “Maximum Rate”).  If a court of competent
jurisdiction shall finally determine that Borrower has actually paid to Lender
an amount of interest in excess of the amount that would have been payable if
all of the Secured Obligations had at all times borne interest at the Maximum
Rate, then such excess interest actually paid by Borrower shall be applied as
follows:  first, to the payment of principal outstanding on the Notes; second,
after all principal is repaid, to the payment of Lender’s accrued interest,
costs, expenses, professional fees and any other Secured Obligations; and third,
after all Secured Obligations are repaid, the excess (if any) shall be refunded
to Borrower.

 

2.3                               Default Interest.  In the event of any payment
not being paid on the scheduled payment date (other than due to an ACH failure),
subject to applicable grace periods, an amount equal to two percent (2%) of the
past due amount shall be payable on

 

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demand.  Upon the occurrence and during the continuation of an Event of Default
hereunder, all Secured Obligations, including principal, interest, compounded
interest, and professional fees, shall bear interest at a rate per annum equal
to the rate set forth in Section 2.1(c) plus five percent (5%) per annum.  In
the event any interest is not paid when due hereunder, delinquent interest shall
be added to principal and shall bear interest on interest, compounded at the
rate set forth in Section 2.1(c).

 

2.4                               Prepayment.  Borrower may, at any time prior
to the Maturity Date, prepay all or any portion of the aggregate Loan principal
balance outstanding without penalty or additional charge.  Borrower shall
provide at least 10 days prior notice of prepayment to Lender.

 

2.5                               Final Payment.  On the soonest to occur of (i)
the Maturity Date, (ii) the date that Borrower prepays the entire principal
amount and accrued interest of the Loan, and (iii) the entire principal amount
and accrued interest become due, Borrower shall pay Lender a fee equal to
$1,200,000.

 

SECTION 3.  SECURITY INTEREST

 

3.1                               As security for the prompt and complete
payment when due (whether on the payment dates or otherwise) of all the Secured
Obligations, Borrower grants to Lender a security interest in all of Borrower’s
personal property now owned or hereafter acquired, including the following
(collectively, the “Collateral”):  (a) Receivables; (b) Equipment; (c) Fixtures;
(d) General Intangibles (other than Intellectual Property); (e) Inventory; (f)
Investment Property (but excluding thirty-five percent (35%) of the capital
stock of any foreign Subsidiary that constitutes a Permitted Investment); (g)
Deposit Accounts; (h) Cash; (i) Goods; and other tangible and intangible
personal property of Borrower whether now or hereafter owned or existing, or
acquired by, Borrower and wherever located; and, to the extent not otherwise
included, all Proceeds of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and products of each of
the foregoing.  Notwithstanding any of the foregoing, the Collateral shall not
under any circumstance include, and no security interest is granted in (i)
Borrower’s Intellectual Property, provided, however, that the Collateral shall
include all Accounts and General Intangibles that consist of rights to payment
and proceeds from the sale, licensing or disposition of all or any part, or
rights in, the Borrower’s Intellectual Property (the “Rights to Payment”); (ii)
any capital stock of any foreign subsidiary that constitutes a Permitted
Investment in excess of 65% of such capital stock, provided that Lender’s taking
a security interest in more than 65% of such stock would be reasonably expected
to cause Borrower to incur adverse tax consequences; (iii) any assets of
Borrower that both (x) consist of compounds and raw materials used to
manufacture biopharmaceuticals or which are used for preclinical testing or
clinical trials, and (y) are located outside of the United States, if and for so
long as the grant of such security interest is prohibited by or requires a
consent under any applicable requirement of law of a jurisdiction other than the
United States or any state or other subdivision thereof, provided that the
Borrower shall not be required to undertake any steps under the laws of any
applicable foreign jurisdiction with respect to the creation, perfection or
priority of the Secured Party’s security interests in such assets; (iv)
equipment

 

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financed by capital leases or purchase money financing and all Borrower’s books
and records relating to the foregoing, and any and all claims, rights and
interest in such assets and all substitutions for, additions, attachments,
accessories, accessions and improvements to and replacements, products, proceeds
and insurance proceeds of any or all of the foregoing, but only to the extent
and for so long as the agreements under which the equipment is financed prohibit
granting a security interest therein to Lender; and (v) any cash or cash
equivalents described in clause (vii) of the definition of Permitted
Indebtedness.  Notwithstanding the foregoing, if a judicial authority (including
a U.S. Bankruptcy Court) holds that a security interest in the underlying
Intellectual Property is necessary to have a security interest in the Rights to
Payment, then the Collateral shall automatically, and effective as of the date
of this Agreement, include the Intellectual Property to the extent necessary to
permit perfection of Lender’s security interest in the Rights to Payment, except
to the extent that such inclusion as Collateral would violate any enforceable
restriction in any agreement to which the Borrower is a party on the date hereof
or any agreement entered into in connection with a Permitted Transfer.

 

SECTION 4.  CONDITIONS PRECEDENT TO LOAN

 

The obligations of Lender to make the Loan hereunder are subject to the
satisfaction by Borrower of the following conditions:

 

4.1                               Initial Advance.  On or prior to the Closing
Date, Borrower shall have delivered to Lender the following:

 

(a)                                 executed originals of the Loan Documents,
Account Control Agreements, a legal opinion of Borrower’s counsel, and all other
documents and instruments reasonably required by Lender to effectuate the
transactions contemplated hereby or to create and perfect the Liens of Lender
with respect to all Collateral, in all cases in form and substance reasonably
acceptable to Lender;

 

(b)                                 certified copy of resolutions of Merrimack’s
board of directors evidencing approval of the Loan and other transactions
evidenced by the Loan Documents;

 

(c)                                  certified copies of the Certificate of
Incorporation and the Bylaws, as amended through the Closing Date, of Merrimack;

 

(d)                                 a certificate of good standing for Merrimack
from its state of incorporation and similar certificates from all other
jurisdictions in which it does business and where the failure to be qualified
would have a Material Adverse Effect;

 

(e)                                  payment of the Facility Charge and
reimbursement of Lender’s current expenses reimbursable pursuant to this
Agreement, to the extent Lender’s non-legal transaction costs and due diligence
expenses are not paid with the Commitment Fee, which amounts may be deducted
from the initial Advance; and

 

(f)                                   such other documents as Lender may
reasonably request.

 

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4.2                               All Advances.  On each Advance Date:

 

(a)                                 Lender shall have received an Advance
Request and a Note for the relevant Advance as required by Section 2.1(b), as
applicable, each duly executed by Borrower’s Chief Executive Officer or Chief
Financial Officer.

 

(b)                                 The representations and warranties set forth
in this Agreement and in Section 5 of this Agreement shall be true and correct
in all material respects on and as of the Advance Date with the same effect as
though made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date.

 

(c)                                  Borrower shall be in compliance in all
material respects with all the terms and provisions set forth herein and in each
other Loan Document on its part to be observed or performed, and at the time of
and immediately after such Advance no Event of Default shall have occurred and
be continuing.

 

(d)                                 Each Advance Request shall be deemed to
constitute a representation and warranty by Borrower on the relevant Advance
Date as to the matters specified in paragraphs (b) and (c) of this Section 4.2
and as to the matters set forth in the Advance Request.

 

4.3                               No Default.  As of the Closing Date and each
Advance Date, as applicable, (i) no fact or condition exists that would (or
would, with the passage of time, the giving of notice, or both) constitute an
Event of Default and (ii) no Material Adverse Effect has occurred and is
continuing.

 

SECTION 5.  REPRESENTATIONS AND WARRANTIES OF BORROWER

 

Borrower represents and warrants that:

 

5.1                               Corporate Status.  Merrimack is a corporation
duly organized, legally existing and in good standing under the laws of the
State of Delaware, and is duly qualified as a foreign corporation in all
jurisdictions in which the nature of its business or location of its properties
require such qualifications and where the failure to be qualified could
reasonably be expected to have a Material Adverse Effect.  Borrower’s present
name, former names (if any), owned and leased locations, place of formation, tax
identification number, organizational identification number and other
information are correctly set forth in Exhibit C, as may be updated by Borrower
in a written notice (including any Compliance Certificate) provided to Lender
after the Closing Date.

 

5.2                               Collateral.  Borrower owns its property, free
of all Liens, except for Permitted Liens.  Borrower has the corporate power and
authority to grant to Lender a Lien in the Collateral as security for the
Secured Obligations.

 

5.3                               Consents.  Borrower’s execution, delivery and
performance of the Notes, this Agreement and all other Loan Documents (i) have
been duly authorized by all

 

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necessary corporate action of Borrower, (ii) will not result in the creation or
imposition of any Lien upon the Collateral, other than Permitted Liens and the
Liens created by this Agreement and the other Loan Documents, (iii) do not
violate any provisions of Borrower’s Certificate of Incorporation, bylaws, or
any material law, regulation, order, injunction, judgment, decree or writ to
which Borrower is subject and (iv) except as described on Schedule 5.3, do not
violate any material contract or agreement or require the consent or approval of
any other Person that has not been obtained.  The individual or individuals
executing the Loan Documents on behalf of the Borrower are duly authorized to do
so.

 

5.4                               Material Adverse Effect.  No Material Adverse
Effect has occurred and is continuing.

 

5.5                               Actions Before Governmental Authorities. 
Except as described on Schedule 5.5, there are no actions, suits or proceedings
at law or in equity by or before any governmental authority now pending or, to
the knowledge of Borrower, threatened in writing against or affecting Borrower
or its property as to which there is a reasonable likelihood of an adverse
determination and which, if adversely determined, would reasonably be expected
to, individually or in the aggregate, result in a Material Adverse Effect.

 

5.6                               Laws; Agreements.  Borrower is not in
violation in any material respect of any material law, rule or regulation, or in
default with respect to any judgment, writ, injunction or decree of any
governmental authority, where such violation or default is or would reasonably
be expected to result in a Material Adverse Effect.  Borrower is not in default
in any material respect under any provision of any material agreement or
instrument evidencing Indebtedness, or any other material agreement to which it
is a party or by which it is bound, and which default would reasonably be
expected to have a Material Adverse Effect.

 

5.7                               Information Correct and Current.  No report,
Advance Request, financial statement, exhibit or schedule furnished, by or on
behalf of Borrower to Lender in connection with any Loan Document or included
therein or delivered pursuant thereto, when taken together with all such other
reports, statements or other documents or writings, contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading at the time such statement was made or deemed made. Additionally,
any and all financial or business projections provided by Borrower to Lender
shall be at the time delivered (i) provided in good faith and based on the most
current data and information available to Borrower, and (ii) the most current of
such projections provided to Borrower’s Board of Directors.

 

5.8                               Tax Matters.  Except as described on Schedule
5.8, (a) Borrower has filed all material federal, state and local tax returns
that it is required to file (or extensions thereof), (b) Borrower has duly paid
or fully reserved (if required under GAAP) for all material taxes or
installments thereof (including any interest or penalties) as and when due,

 

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which have or may become due pursuant to such returns, and (c) Borrower has paid
or fully reserved for any material tax assessment received by Borrower for the
three (3) years preceding the Closing Date, if any (including any taxes being
contested in good faith and by appropriate proceedings).

 

5.9                               Intellectual Property Claims.  Except for
Permitted Liens, Borrower is the sole owner of, or otherwise has the right to
use, the Intellectual Property material to its business.  Except as described on
Schedule 5.9, (i) to Borrower’s knowledge, each of the material issued
Copyrights, Trademarks and Patents is valid and enforceable, (ii) no material
Intellectual Property of Borrower has been judged by a decision of a court of
competent jurisdiction, invalid or unenforceable, in whole or in part, and (iii)
no claim has been made to Borrower in writing that any material Intellectual
Property of Borrower violates the material rights of any third party, except to
the extent such claim would not reasonably be expected to cause a Material
Adverse Effect.  Borrower has delivered to Lender by email a true, correct and
complete list of each of Borrower’s Patents, registered Trademarks, registered
Copyrights, and material agreements under which Borrower licenses Intellectual
Property from third parties (shrink-wrap software licenses and click on license
agreements, open source code and other licenses available to the public without
customization shall not be considered a material License or agreement), together
with application or registration numbers, as applicable, owned by Borrower or
any Subsidiary, in each case as of the Closing Date.  Borrower is not in
material breach of, nor has Borrower failed to perform any material obligations
under, any of the foregoing contracts, licenses or agreements and, to Borrower’s
knowledge, no third party to any such contract, license or agreement is in
material breach thereof or has failed to perform any material obligations
thereunder in each case which would reasonably be expected to have a Material
Adverse Effect.

 

5.10                        Intellectual Property.  Except as described on
Schedule 5.10, Borrower has, or in the case of any proposed business, will have,
all material rights with respect to Intellectual Property necessary in the
operation or conduct of Borrower’s business as currently conducted and proposed
to be conducted by Borrower. Without limiting the generality of the foregoing,
other than in connection with Permitted Transfers, and in the case of material
in-bound Licenses, except for restrictions that are unenforceable under Division
9 of the UCC, and except as provided in Schedule 5.10, Borrower has the right,
to the extent required to operate Borrower’s business as conducted on the
Closing Date, to freely transfer, license or assign Borrower’s owned
Intellectual Property without condition, restriction or payment of any kind
(other than payments in the ordinary course of business) to any third party, and
Borrower owns or has the right to use, pursuant to valid licenses, all material
software development tools, library functions, compilers and other third-party
software and other items that are necessary as of the Closing Date for the
design, development, promotion, sale, license, manufacture, import, export, use
or distribution of Borrower Products that are currently being clinically
developed, manufactured or sold by Borrower. For the avoidance of doubt,
shrink-wrap licenses, click on license agreements, open source code and other
licenses available to the public without customization shall not be considered a
material License.

 

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5.11                        Borrower Products.  Except as described on Schedule
5.11, no material Intellectual Property owned by Borrower or Borrower Product
has been or is subject to any actual or, to the knowledge of Borrower,
threatened (in writing) litigation, inter-party proceeding (including any
proceeding in the United States Patent and Trademark Office or any corresponding
foreign office or agency) or outstanding decree, order, judgment, settlement
agreement or stipulation that restricts in any material respect Borrower’s use,
transfer or licensing thereof or that may affect the validity, use or
enforceability thereof, in any event that would reasonably be expected to result
in a Material Adverse Effect. To Borrower’s knowledge, there is no decree,
order, judgment, agreement, stipulation, arbitral award or other provision
entered into in connection with any litigation or proceeding that obligates
Borrower to grant licenses or ownership interest in any future material
Intellectual Property related to the operation or conduct of the business of
Borrower or Borrower Products.  As of the Closing Date, except as described on
Schedule 5.11, Borrower has not received any written notice or claim challenging
Borrower’s ownership in any material Intellectual Property (or written notice of
any claim challenging the ownership in any material licensed Intellectual
Property of the owner thereof) or suggesting that any third party has any claim
of legal or beneficial ownership with respect thereto.  Except as described on
Schedule 5.11, to Borrower’s knowledge, neither Borrower’s use of its material
Intellectual Property nor the production and sale of Borrower Products infringes
in any material respect the Intellectual Property or other rights of others.

 

5.12                        Financial Accounts.  Exhibit D, as may be updated by
the Borrower in a written notice provided to Lender after the Closing Date, is a
true, correct and complete list of (a) all banks and other financial
institutions at which Borrower or any Subsidiary maintains Deposit Accounts and
(b) all institutions at which Borrower or any Subsidiary maintains an account
holding Investment Property, and such exhibit correctly identifies in all
material respects the name, address and telephone number of each bank or other
institution, the name in which the account is held, and the complete account
number therefor.

 

5.13                        Employee Loans.  Except as permitted as a Permitted
Investment, Borrower has no outstanding loans to any employee, officer or
director of the Borrower nor has Borrower guaranteed the payment of any loan
made to an employee, officer or director of the Borrower by a third party.

 

5.14                        Capitalization and Subsidiaries.  Borrower’s
capitalization as of September 30, 2012 is set forth on Schedule 5.14 annexed
hereto.  Borrower does not own any stock, partnership interest or other
securities of any Person, except for Permitted Investments.

 

SECTION 6.  INSURANCE; INDEMNIFICATION

 

6.1                               Coverage.  So long as there are any Secured
Obligations outstanding, Borrower shall cause to be carried and maintained
commercial general liability insurance, on an occurrence form, against risks
customarily insured against in Borrower’s line of business.  Such risks shall
include the risks of bodily injury, including death, property damage, personal
injury, advertising injury, and contractual liability.  Borrower must

 

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maintain a minimum of $2,000,000 of commercial general liability insurance
(including umbrella coverage) for each occurrence.  So long as there are any
Secured Obligations outstanding, Borrower shall also cause to be carried and
maintained insurance upon the Collateral, insuring against all risks of physical
loss or damage, in an amount not less than the full replacement cost of the
Collateral, provided that such insurance may be subject to standard exceptions
and deductibles.

 

6.2                               Certificates.  Borrower shall deliver to
Lender certificates of insurance that evidence Borrower’s compliance with its
insurance obligations in Section 6.1 and the obligations contained in this
Section 6.2.  Borrower’s insurance certificate shall state Lender is an
additional insured for commercial general liability and a loss payee for all
risk property damage insurance.  All certificates of insurance will endeavor to
provide for a minimum of thirty (30) days advance written notice to Lender of
cancellation (except for 10 days for non payment).  Any failure of Lender to
scrutinize such insurance certificates for compliance is not a waiver of any of
Lender’s rights, all of which are reserved.

 

6.3                               Indemnity.  Borrower agrees to indemnify and
hold Lender and its officers, directors, employees, agents, in-house attorneys,
representatives and shareholders harmless from and against any and all claims,
costs, expenses, damages and liabilities (including such claims, costs,
expenses, damages and liabilities based on liability in tort, including strict
liability in tort), including reasonable attorneys’ fees and disbursements and
other costs of investigation or defense (including those incurred upon any
appeal), that may be instituted or asserted against or incurred by Lender or any
such Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents or the
administration of such credit, or in connection with or arising out of the
transactions contemplated hereunder and thereunder, or any actions or failures
to act in connection therewith, or arising out of the disposition or utilization
of the Collateral, excluding in all cases claims resulting from Lender’s or any
indemnitee’s negligence or willful misconduct. Borrower agrees to pay, and to
save Lender harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all excise, sales or other similar taxes
(excluding taxes imposed on or measured by the net income of Lender) that may be
payable or determined to be payable with respect to any of the Collateral or
this Agreement; provided, however, that (i) with respect to such liabilities
imposed originally and independently on Lender, Lender shall notify a Borrower
of any such liabilities within 15 days of the initial date Lender had actual
knowledge of Lender’s direct exposure to such liabilities, and (ii) with respect
to all other such liabilities not described in subsection (i), Lender shall
notify Borrower of any such liabilities within 15 days of the initial date
Lender has actual knowledge of its direct exposure to such liabilities.

 

SECTION 7.  COVENANTS OF BORROWER

 

Borrower agrees as follows:

 

7.1                               Financial Reports.  Merrimack shall furnish to
Lender the financial statements and reports listed hereinafter (the “Financial
Statements”):

 

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(a)                                 as soon as practicable (and in any event
within thirty (30) days) after the end of each month, unaudited financial
statements as of the end of such month (prepared on a consolidated basis, if
applicable), including balance sheet and related statements of comprehensive
income and cash flows, together with a Compliance Certificate in the form of
Exhibit E signed on behalf of Borrower by Merrimack’s Chief Executive Officer or
Chief Financial Officer.

 

(b)                                 as soon as practicable (and in any event
within 45 days) after the end of each of the first three calendar quarters of
each year unaudited interim financial statements as of the end of such calendar
quarter (prepared on a consolidated basis, if applicable), including balance
sheet and related statements of comprehensive income and cash flows, together
with a Compliance Certificate in the form of Exhibit E signed on behalf of
Borrower by Merrimack’s Chief Executive Officer or Chief Financial Officer.

 

(c)                                  as soon as practicable (and in any event
within ninety (90) days) after the end of each fiscal year, audited financial
statements as of the end of such year (prepared on a consolidated basis, if
applicable), including balance sheet and related statements of comprehensive
income and cash flows, and setting forth in comparative form the corresponding
figures for the preceding fiscal year, accompanied by an audit report that is
unqualified as to scope of audit (other than a “going concern” qualification due
to a lack of liquidity) from PricewaterhouseCoopers LLP or another firm of
certified public accountants selected by Borrower and reasonably acceptable to
Lender, together with a Compliance Certificate in the form of Exhibit E signed
on behalf of Borrower by Merrimack’s Chief Executive Officer or Chief Financial
Officer;

 

(d)                                 promptly after the sending or filing
thereof, as the case may be, copies of any proxy statements, financial
statements or reports that Borrower has made available generally to its
stockholders and copies of any regular, periodic and special reports or
registration statements that Borrower files with the Securities and Exchange
Commission or any governmental authority that may be substituted therefor, or
any national securities exchange; and

 

(e)                                  financial and business projections promptly
following their approval by Borrower’s Board of Directors, as well as budgets,
operating plans and other information reasonably requested by Lender (other than
information that the Borrower determines in good faith and upon advice of
counsel constitutes confidential information).

 

Borrower shall not make any change in its fiscal years or fiscal quarters or,
without notice to Lender, any change in its accounting policies or reporting
practices. The fiscal year of Borrower shall end on December 31.

 

The executed Compliance Certificate may be sent via facsimile to Lender at (650)
473-9194 or via e-mail to bjadot@herculestech.com.  All Financial Statements
required to be delivered pursuant to clauses (a) — (e) shall be sent via e-mail
(which email may contain a link to such financial statements) to
financialstatements@herculestech.com with a copy to bjadot@herculestech.com
provided, that if e-mail is not available or sending such Financial

 

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Statements via e-mail is not possible, they shall be sent via facsimile to
Lender at: (866) 468-8916, attention Chief Credit Officer.

 

7.2                               Management Rights.  Borrower shall permit any
representative that Lender authorizes, including its attorneys and accountants,
to inspect the Collateral and examine and make copies and abstracts of the books
of account and records of Borrower at reasonable times and upon reasonable
notice during normal business hours (but in any event no more than once in any
12-month period unless an Event of Default has occurred and is continuing).  In
addition, any such representative shall have the right to meet with management
and officers of Borrower to discuss such books of account and records.  In
addition, Lender shall be entitled at reasonable times and intervals to consult
with and advise the management and officers of Borrower concerning significant
business issues affecting Borrower.  Such consultations shall not unreasonably
interfere with Borrower’s business operations.  The parties intend that the
rights granted Lender shall constitute “management rights” within the meaning of
29 C.F.R Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or
participation by Lender with respect to any business issues shall not be deemed
to give Lender, nor be deemed an exercise by Lender of, control over Borrower’s
management or policies.

 

7.3                               Further Assurances.  Borrower shall from time
to time execute, deliver and file, alone or with Lender, any financing
statements, security agreements, collateral assignments, notices, control
agreements, or other necessary documents to perfect or give to Lender a first
priority Lien on the Collateral (subject to Permitted Liens).  Borrower shall
from time to time procure any instruments or documents as may be reasonably
requested by Lender, and take all further action that may be necessary or
desirable, or that Lender may reasonably request, to perfect and protect the
Liens granted hereby and thereby.  In addition, and for such purposes only,
Borrower hereby authorizes Lender to execute and deliver on behalf of Borrower
and to file such financing statements, collateral assignments, notices, control
agreements, security agreements and other documents without the signature of
Borrower either in Lender’s name or in the name of Lender as agent and
attorney-in-fact for Borrower.  Borrower shall in its reasonable business
judgment protect and defend Borrower’s title to the Collateral and Lender’s Lien
thereon against all Persons claiming any interest adverse to Borrower or Lender
other than Permitted Liens.

 

7.4                               Indebtedness.  Borrower shall not create,
incur, assume, guarantee or be or remain liable with respect to any
Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness or prepay any Indebtedness or take any actions which impose on
Borrower an obligation to prepay any Indebtedness at any time before the
Maturity Date, except for the conversion of Indebtedness into equity securities
and the payment of cash in lieu of fractional shares in connection with such
conversion.

 

7.5                               Encumbrances.  Borrower shall at all times
keep its property free and clear from any Liens whatsoever (except for Permitted
Liens), and shall give Lender prompt written notice when the Borrower knows of
any legal process affecting such property, or any Liens thereon.  Borrower shall
cause its Subsidiaries to protect and defend such Subsidiary’s title to its
property from and against all Persons claiming any interest adverse to such
Subsidiary, and Borrower shall cause its Subsidiaries at all times to keep such
Subsidiary’s

 

19

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property free and clear from any Liens whatsoever (except for Permitted Liens),
and shall give Lender prompt written notice when the Borrower knows of any legal
process affecting such Subsidiary’s property. Borrower shall not enter into any
agreement with any Person other than Lender (other than in connection with
Permitted Liens and Permitted Transfers) that has the effect of restricting
Borrower from granting a Lien on its Intellectual Property to Lender.

 

7.6                               Investments.  Borrower shall not directly or
indirectly acquire or own, or make any Investment in or to any Person, or permit
any of its Subsidiaries so to do, other than Permitted Investments.

 

7.7                               Distributions.  Without Lender’s prior written
consent, not to be unreasonably withheld, Borrower shall not, and shall not
allow any Subsidiary to, (a) repurchase or redeem any class of stock or other
equity interest other than pursuant to employee, director or consultant
repurchase plans or other similar agreements, in an aggregate amount not to
exceed $250,000, (b) declare or pay any cash dividend or make a cash
distribution on any class of stock or other equity interest, except that a
Subsidiary may pay dividends or make distributions to Borrower, or (c) lend
money to any employees, officers or directors or guarantee the payment of any
such loans granted by a third party other than Permitted Investments.

 

7.8                               Transfers.  Except for Permitted Transfers,
Permitted Investments and Permitted Liens, without Lender’s prior written
consent, not to be unreasonably withheld, Borrower shall not voluntarily or
involuntarily transfer, sell, lease, license, lend or in any other manner convey
any equitable, beneficial or legal interest in any material portion of their
assets outside of the OCB.

 

7.9                               Mergers or Acquisitions.  Without Lender’s
prior written consent, not to be unreasonably withheld, (a) Borrower shall not
merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with or into any other business organization (other than mergers or
consolidations of a Subsidiary into another Subsidiary or into Borrower), (b)
Borrower shall not acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person other than
Permitted Investments, provided that, in each case, Borrower may make (i)
acquisitions utilizing cash as consideration that constitute Permitted
Investments and (ii) acquisitions utilizing Borrower’s stock as consideration
that constitute Permitted Investments.  Borrower may dissolve any Subsidiary as
long as the assets of that Subsidiary are promptly distributed to such
Subsidiary’s shareholder.

 

7.10                        Taxes.  Borrower and its Subsidiaries shall pay when
due all material taxes, fees or other charges of any nature whatsoever (together
with any related interest or penalties) now or hereafter imposed or assessed
against Borrower, Lender or the Collateral or upon Borrower’s ownership,
possession, use, operation or disposition thereof or upon Borrower’s rents,
receipts or earnings arising therefrom.  Borrower shall file on or before the
due date therefor all personal property tax returns (or extensions) in respect
of the Collateral.  Notwithstanding the foregoing, Borrower may contest, in good
faith and by

 

20

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appropriate proceedings, taxes for which Borrower maintains adequate reserves
therefor in accordance with GAAP.

 

7.11                        Corporate Changes.

 

(a)                                 Neither Borrower nor any Subsidiary shall
change its corporate name, legal form or jurisdiction of formation without
twenty (20) days’ prior written notice to Lender.

 

(b)                                 Without Lender’s prior written consent, not
to be unreasonably withheld, Borrower shall not suffer a Change in Control.

 

(c)                                  Neither Borrower nor any Subsidiary shall
relocate its chief executive office or its principal place of business unless:
(i) it has provided prior written notice to Lender; and (ii) such relocation
shall be within the continental United States.

 

(d)                                 Without Lender’s prior written consent, not
to be unreasonably withheld, neither Borrower nor any Subsidiary shall relocate
any item of Collateral (other than (v) Borrower Products, including compounds
and raw materials used to manufacture biopharmaceuticals or which are used for
preclinical testing or clinical trials, in the OCB, (w) Permitted Transfers, (x)
sales of Inventory in the ordinary course of business, (y) relocations of
Equipment having an aggregate value of up to $500,000 in any fiscal year, and
(z) relocations of Collateral from a location described on Exhibit C to another
location described on Exhibit C) unless (i) it has provided prompt written
notice to Lender, (ii) such relocation is within the continental United States
and, (iii) if such relocation is to a third party bailee, and the Collateral has
a value in excess of $500,000, it has delivered a bailee agreement in form and
substance reasonably acceptable to Lender.

 

7.12                        Deposit Accounts.  No Borrower shall maintain any
Deposit Accounts constituting Collateral, or accounts holding Investment
Property constituting Collateral, except with respect to which Lender has an
Account Control Agreement, if applicable.

 

7.13                        Subsidiaries.  Borrower shall notify Lender of each
Subsidiary formed subsequent to the Closing Date and, within 15 days of
formation, shall cause any such Subsidiary organized under the laws of any State
within the United States to execute and deliver to Lender a Joinder Agreement.

 

SECTION 8.  RIGHT TO INVEST

 

8.1                               Lender or its assignee or nominee shall have
the right, in its discretion, to purchase shares of Borrower’s securities having
an aggregate purchase price of up to One Million and No/100 Dollars
($1,000,000.00) in the Equity Event.  Such right shall be upon the same terms
and conditions afforded to other investors in such Equity Event.

 

21

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SECTION 9.  EVENTS OF DEFAULT

 

The occurrence of any one or more of the following events shall be an Event of
Default:

 

9.1                               Payments.  Borrower fails to pay any amount
due under this Agreement, the Notes or any of the other Loan Documents on the
due date, and in each case such default continues for more than three (3)
business days after the due date thereof; or

 

9.2                               Covenants.  Borrower breaches or defaults in
the performance of any covenant under any of the Loan Documents, and (a) with
respect to a default under any such covenant under this Agreement (other than
under Sections 6.1, 7.5, 7.6, 7.7, 7.8, 7.9 or 7.11) such default continues for
more than ten (10) business days after the earlier of the date on which (i)
Lender has given notice of such default to Borrower and (ii) Borrower has actual
knowledge of such default, (b) with respect to a default under any of Sections
6.1, 7.5, 7.6, 7.7, 7.8, 7.9 or 7.11, upon the earlier to occur of (x) Lender
giving written notice of such default to Borrower or (y) Borrower having actual
knowledge of such default; or

 

9.3                               Material Adverse Effect.  A circumstance has
occurred that would reasonably be expected to have a Material Adverse Effect; or

 

9.4                               Other Loan Documents.  The occurrence of any
material default under any Loan Document or any other agreement between Borrower
and Lender and such default continues for more than ten (10) business days after
the earlier of (a) Lender has given notice of such default to Borrower, or (b)
Borrower has actual knowledge of such default; or

 

9.5                               Representations.  Any representation or
warranty made by Borrower in any Loan Document shall have been false or
misleading in any material respect; or

 

9.6                               Insolvency.  Borrower (A) (i) shall make an
assignment for the benefit of creditors; or (ii) shall be unable to pay its
debts as they become due, or be unable to pay the Secured Obligations under the
Loan Documents, or shall become insolvent; or (iii) shall file a voluntary
petition in bankruptcy; or (iv) shall file any petition, answer, or document
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation pertinent to such circumstances; or (v) shall seek or consent
to or acquiesce in the appointment of any trustee, receiver, or liquidator of
Borrower or of all or any substantial part (i.e., 33-1/3% or more) of the assets
or property of Borrower; or (vi) shall cease operations of its business as its
business has normally been conducted for 3 consecutive business days, or
terminate substantially all of its employees; or (vii) Borrower or its directors
or majority shareholders shall take any action initiating any of the foregoing
actions described in clauses (i) through (vi); or (B) either (i) sixty (60) days
shall have expired after the commencement of an involuntary action against
Borrower seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, without such action being dismissed or all orders or
proceedings thereunder affecting the operations or the business of Borrower
being stayed; or (ii) a stay of any such order or proceedings shall thereafter
be set aside and the

 

22

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action setting it aside shall not be timely appealed; or (iii) Borrower shall
file any answer admitting or not contesting the material allegations of a
petition filed against Borrower in any such proceedings; or (iv) the court in
which such proceedings are pending shall enter a decree or order granting the
relief sought in any such proceedings; or (v) forty five (45) days shall have
expired after the appointment, without the consent or acquiescence of Borrower,
of any trustee, receiver or liquidator of Borrower or of all or any substantial
part of the properties of Borrower without such appointment being vacated; or

 

9.7                               Attachments; Judgments.  Any portion of
Borrower’s assets having a value in excess of $350,000 is attached or seized, or
a levy is filed against any such assets, or a judgment or judgments (not covered
by insurance as to which an insurer not affiliated with Borrower has
acknowledged coverage) is/are entered for the payment of money, individually or
in the aggregate, of at least $350,000, and remains unstayed, unbonded and
unsatisfied for more than 30 days, or Borrower is enjoined or in any way
prevented by court order from conducting any material part of its business; or

 

9.8                               Other Obligations.  The occurrence of any
default under any agreement or obligation of Borrower involving any Indebtedness
in excess of $1,000,000.

 

SECTION 10.  REMEDIES

 

10.1                        General.  Upon and during the continuance of any one
or more Events of Default, (i) Lender may, at its option, accelerate and demand
payment of all or any part of the Secured Obligations and declare them to be
immediately due and payable (provided, that upon the occurrence of an Event of
Default of the type described in Section 9.6, the Notes and all of the Secured
Obligations shall automatically be accelerated and made due and payable, in each
case without any further notice or act), and (ii) Lender may notify any of
Borrower’s account debtors to make payment directly to Lender, compromise the
amount of any such account on Borrower’s behalf and endorse Lender’s name
without recourse on any such payment for deposit directly to Lender’s account. 
Lender may exercise all rights and remedies with respect to the Collateral under
the Loan Documents or otherwise available to it under the UCC and other
applicable law, including the right to release, hold, sell, lease, liquidate,
collect, realize upon, or otherwise dispose of all or any part of the Collateral
and the right to occupy, utilize, process and commingle the Collateral.  All
Lender’s rights and remedies shall be cumulative and not exclusive.

 

10.2                        Collection; Foreclosure.  Upon the occurrence and
during the continuance of any Event of Default, Lender may, at any time or from
time to time, apply, collect, liquidate, sell in one or more sales, lease or
otherwise dispose of, any or all of the Collateral, in its then condition or
following any commercially reasonable preparation or processing, in such order
as Lender may elect and for its fair market value.  Any such sale may be made
either at public or private sale at its place of business or elsewhere. 
Borrower agrees that any such public or private sale may occur upon ten (10)
calendar days’ prior written notice to Borrower.  Lender may require Borrower to
assemble the Collateral and make it available to Lender at a place designated by
Lender that is reasonably convenient to

 

23

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Lender and Borrower.  The proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be applied by Lender in the
following order of priorities:

 

First, to Lender in an amount sufficient to pay in full Lender’s costs and
professionals’ and advisors’ fees and expenses as described in Section 11.11;

 

Second, to Lender in an amount equal to the then unpaid amount of the Secured
Obligations (including principal, interest, and the Default Rate interest), in
such order and priority as Lender may choose in its sole discretion; and

 

Finally, after the full and final payment in Cash of all of the Secured
Obligations, to any creditor holding a junior Lien on the Collateral, or to
Borrower or its representatives or as a court of competent jurisdiction may
direct.

 

Lender shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it complies with the obligations of a
secured party under the UCC.

 

10.3                        The Lender agrees not to issue a notice of exclusive
control or any other instruction under any Account Control Agreement unless an
Event of Default has occurred and is continuing.

 

10.4                        No Waiver.  Lender shall be under no obligation to
marshal any of the Collateral for the benefit of Borrower or any other Person,
and Borrower expressly waives all rights, if any, to require Lender to marshal
any Collateral.

 

10.5                        Cumulative Remedies.  The rights, powers and
remedies of Lender hereunder shall be in addition to all rights, powers and
remedies given by statute or rule of law and are cumulative.  The exercise of
any one or more of the rights, powers and remedies provided herein shall not be
construed as a waiver of or election of remedies with respect to any other
rights, powers and remedies of Lender.

 

SECTION 11.  MISCELLANEOUS

 

11.1                        Severability.  Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under such law, such provision shall be ineffective only to the
extent and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.

 

11.2                        Notice.  Except as otherwise provided herein, any
notice, demand, request, consent, approval, declaration, service of process or
other communication (including the delivery of Financial Statements) (a
“Notification”) that is required, contemplated, or permitted under the Loan
Documents or with respect to the subject matter hereof shall be in writing, and
shall be deemed to have been validly served, given, delivered, and received upon
the earlier of: (i) the day of transmission by facsimile or hand delivery or
delivery by an overnight express service or overnight mail delivery service; or
(ii) the third calendar

 

24

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day after deposit in the United States mails, with proper first class postage
prepaid, in each case addressed to the party to be notified as follows:

 

(a)                                 If to Lender:

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
Legal Department
Attention:  Chief Legal Officer and Bryan Jadot
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
Facsimile:  650-473-9194
Telephone:  650-289-3060

 

With a copy to:

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
31 St. James Ave., Suite 790
Boston, MA 02116
Attention:  Bryan Jadot
Telephone:  617-314-9992

 

(b)                                 If to Borrower:

 

MERRIMACK PHARMACEUTICALS, INC.
One Kendall Square, Suite B7201
Cambridge, MA 02139
Attention:  William A. Sullivan
Chief Financial Officer
Facsimile:  617-491-1386
Telephone:  617-441-1000

 

With a copy (that shall not constitute notice) to:

 

One Kendall Square, Suite B7201
Cambridge, MA 02139
Attention:  Jeff Munsie, Corporate Counsel
Facsimile:  617-812-8122
Telephone:  617-441-1000

 

and to:

 

Wilmer Cutler Pickering Hale and Dorr LLP.
60 State Street
Boston, MA 02446
Attention:  David E. Redlick
Facsimile:  617-526-5000
Telephone:  617-526-6000

 

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or to such other address as each party may designate for itself by like notice. 
Any notification delivered to a party to this Agreement in accordance with this
Section shall be valid notwithstanding any failure to deliver a copy thereof to
a Person not party to this Agreement.

 

11.3                        Entire Agreement; Amendments.  This Agreement, the
Notes, and the other Loan Documents constitute the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof and
thereof, and supersede and replace in their entirety any prior proposals, term
sheets, letters, negotiations or other documents or agreements, whether written
or oral, with respect to the subject matter hereof or thereof (including
Lender’s revised proposal letter dated October 1, 2012).  None of the terms of
this Agreement, the Notes or any of the other Loan Documents may be amended
except by an instrument executed by each of the parties hereto.

 

11.4                        No Strict Construction.  The parties hereto have
participated jointly in the negotiation and drafting of this Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.

 

11.5                        No Waiver.  The powers conferred upon Lender by this
Agreement are solely to protect its rights hereunder and under the other Loan
Documents and its interest in the Collateral and shall not impose any duty upon
Lender to exercise any such powers.  No omission or delay by Lender at any time
to enforce any right or remedy reserved to it, or to require performance of any
of the terms, covenants or provisions hereof by Borrower at any time designated,
shall be a waiver of any such right or remedy to which Lender is entitled, nor
shall it in any way affect the right of Lender to enforce such provisions
thereafter.

 

11.6                        Survival.  All agreements, representations and
warranties contained in this Agreement, the Notes and the other Loan Documents
or in any document delivered pursuant hereto or thereto shall be for the benefit
of Lender and shall survive the execution and delivery of this Agreement and
Section 6.3 and any provisions that, by their express terms are to survive the
expiration or other termination of this Agreement shall survive such expiration
or termination.  This Agreement shall terminate upon the payment in full of the
Secured Obligations.

 

11.7                        Successors and Assigns.  The provisions of this
Agreement and the other Loan Documents shall inure to the benefit of and be
binding on Borrower and its permitted assigns (if any).  Borrower shall not
assign its obligations under this Agreement, the Notes or any of the other Loan
Documents without Lender’s express prior written consent, and any such attempted
assignment shall be void and of no effect.  Lender may assign, transfer, or
endorse its rights hereunder (except for Section 8.1, which may not be assigned
without Borrower’s written consent) and under the other Loan Documents to an
Assignee (defined in Section 11.13) without prior notice to Borrower or
Borrower’s consent, and all of such rights shall inure to the benefit of
Lender’s successors and assigns.

 

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11.8                        Governing Law.  This Agreement, the Notes and the
other Loan Documents have been negotiated and delivered to Lender in the State
of California, and shall have been accepted by Lender in the State of
California.  Payment to Lender by Borrower of the Secured Obligations is due in
the State of California.  This Agreement, the Notes and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws of
the State of California, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.

 

11.9                        Consent to Jurisdiction and Venue.  All judicial
proceedings (to the extent that the reference requirement of Section 11.10 is
not applicable) arising in or under or related to this Agreement, the Notes or
any of the other Loan Documents may be brought in any state or federal court
located in the State of California.  By execution and delivery of this
Agreement, each party hereto generally and unconditionally: (a) consents to
personal jurisdiction in Santa Clara County, State of California; (b) waives any
objection as to jurisdiction or venue in California Superior Court, Santa Clara
County, State of California; (c) agrees not to assert any defense based on lack
of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Agreement, the
Notes or the other Loan Documents.  Service of process on any party hereto in
any action arising out of or relating to this Agreement shall be effective if
given in accordance with the requirements for notice set forth in Section 11.2,
and shall be deemed effective and received as set forth in Section 11.2. 
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of either party to bring proceedings
in the courts of any other jurisdiction.

 

11.10                 Mutual Waiver of Jury Trial / Judicial Reference.

 

(a)                                 Because disputes arising in connection with
complex financial transactions are most quickly and economically resolved by an
experienced and expert person and the parties wish applicable state and federal
laws to apply (rather than arbitration rules), the parties desire that their
disputes be resolved by a judge applying such applicable laws.  EACH OF BORROWER
AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY
CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY
OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER AGAINST LENDER OR ITS
ASSIGNEE OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER.  This waiver extends to
all such Claims, including Claims that involve Persons other than Borrower and
Lender; Claims that arise out of or are in any way connected to the relationship
between Borrower and Lender; and any Claims for damages, breach of contract,
tort, specific performance, or any equitable or legal relief of any kind,
arising out of this Agreement, any other Loan Document.

 

(b)                                 If the waiver of jury trial set forth in
Section 11.10(a) is ineffective or unenforceable, the parties agree that all
Claims shall be resolved by reference to a private judge sitting without a jury,
pursuant to Code of Civil Procedure Section 638, before a mutually acceptable
referee or, if the parties cannot agree, a referee selected by the

 

27

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Presiding Judge of the Santa Clara County, California.  Such proceeding shall be
conducted in Santa Clara County, California, with California rules of evidence
and discovery applicable to such proceeding.  In the event Claims are to be
resolved by judicial reference, either party may seek from a court identified in
Section 11.9, any prejudgment order, writ or other relief and have such
prejudgment order, writ or other relief enforced to the fullest extent permitted
by law notwithstanding that all Claims are otherwise subject to resolution by
judicial reference.

 

11.11                 Professional Fees.  Borrower promises to pay Lender’s fees
and expenses necessary to finalize the loan documentation, including but not
limited to reasonable attorneys fees, UCC searches, filing costs, and other
reasonable miscellaneous expenses.  In addition, Borrower promises to pay any
and all reasonable attorneys’ and other reasonable outside professionals’ fees
and expenses incurred by Lender after the Closing Date in connection with or
related to:  (a) the Loan; (b) the administration, collection, or enforcement of
the Loan; (c) the amendment or modification of the Loan Documents; (d) any
waiver, consent, release, or termination under the Loan Documents; (e) the
protection, preservation, sale, lease, liquidation, or disposition of Collateral
or the exercise of remedies with respect to the Collateral; (f) any legal,
litigation, administrative, arbitration, or out of court proceeding in
connection with or related to Borrower or the Collateral, and any appeal or
review thereof; and (g) any bankruptcy, restructuring, reorganization,
assignment for the benefit of creditors, workout, foreclosure, or other action
related to Borrower, the Collateral, the Loan Documents, including representing
Lender in any adversary proceeding or contested matter commenced or continued by
or on behalf of Borrower’s estate, and any appeal or review thereof.

 

11.12                 Confidentiality.  Lender acknowledges that certain items
of Collateral and information provided to Lender by Borrower are confidential or
proprietary information of Borrower, if and to the extent such information
either (x) is marked as confidential, proprietary or secret by Borrower at the
time of disclosure, or (y) should reasonably be understood to be confidential,
proprietary or secret (the “Confidential Information”).  Accordingly, Lender
agrees that any Confidential Information it may obtain in the course of
acquiring, administering, perfecting or enforcing Lender’s security interest in
the Collateral or otherwise shall not be disclosed to any other person or entity
in any manner whatsoever, in whole or in part, without the prior written consent
of Borrower, except that Lender may disclose any such information:  (a) to its
own directors, officers, employees, accountants, counsel and other professional
advisors and to its controlled affiliates if Lender in its sole discretion
determines that any such party should have access to such information in
connection with such party’s responsibilities in connection with the Loan or
this Agreement and, provided that such recipient of such Confidential
Information either (i) agrees to be bound by the confidentiality provisions of
this paragraph or (ii) is otherwise subject to confidentiality restrictions that
reasonably protect against the disclosure of Confidential Information; (b) if
such information is generally available to the public without any disclosure by
Lender or breach of this Section 11.12; (c) if required or appropriate in any
report, statement or testimony submitted to any governmental authority having or
claiming to have jurisdiction over Lender; (d) if required or appropriate in
response to any summons or subpoena or in connection with any litigation, to the
extent

 

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permitted or deemed advisable by Lender’s counsel; (e) to comply with any legal
requirement or law applicable to Lender; (f) to the extent reasonably necessary
in connection with the exercise of any right or remedy under any Loan Document,
including Lender’s sale, lease, or other disposition of Collateral during the
continuation of an Event of Default; (g) to any participant or assignee of
Lender or any prospective participant or assignee; provided, that such
participant or assignee or prospective participant or assignee agrees in writing
to be bound by this Section prior to disclosure; or (h) otherwise with the prior
written consent of Borrower; provided, that any disclosure made in violation of
this Agreement shall not affect the obligations of Borrower or any of its
affiliates or any guarantor under this Agreement or the other Loan Documents.

 

11.13                 Assignment of Rights.  Borrower acknowledges and
understands that Lender may sell and assign all or part of its interest
hereunder and under the Note(s) and Loan Documents (an “Assignment”) to any
person or entity provided that (a) no such Assignment shall be made to a
competitor of the Borrower, and (b) Lender will not make any Assignment to a
Person organized or resident outside the United States without Borrower’s
consent which shall not be unreasonably withheld (such assignee, an “Assignee”
or “assignee”).  After such assignment the term “Lender” as used in the Loan
Documents shall mean and include such Assignee, and such Assignee shall be
vested with all rights, powers and remedies of Lender hereunder with respect to
the interest so assigned; but with respect to any such interest not so
transferred, Lender shall retain all rights, powers and remedies hereby given. 
No such assignment by Lender shall relieve Borrower of any of its obligations
hereunder.  No such Assignment shall release the Lender from its obligations to
fund the Term Advance subject to the terms and conditions contained in Section
2.1 hereof.  Lender agrees that in the event of any transfer by it of the
Note(s), it will endorse thereon a notation as to the portion of the principal
of the Note(s), which shall have been paid at the time of such transfer and as
to the date to which interest shall have been last paid thereon.

 

11.14                 Revival of Secured Obligations.  This Agreement and the
Loan Documents shall remain in full force and effect and continue to be
effective if any petition is filed by or against Borrower for liquidation or
reorganization, if Borrower becomes insolvent or makes an assignment for the
benefit of creditors, if a receiver or trustee is appointed for all or any
significant part of Borrower’s assets, or if any payment or transfer of
Collateral is recovered from Lender.  The Loan Documents and the Secured
Obligations and Collateral security shall continue to be effective, or shall be
revived or reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations or any transfer of Collateral to Lender,
or any part thereof is rescinded, avoided or avoidable, reduced in amount, or
must otherwise be restored or returned by, or is recovered from, Lender or by
any obligee of the Secured Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment, performance,
or transfer of Collateral had not been made.  In the event that any payment, or
any part thereof, is rescinded, reduced, avoided, avoidable, restored, returned,
or recovered, the Loan Documents and the Secured Obligations shall be deemed,
without any further action or documentation, to have been revived and reinstated
except to the extent of the full, final, and indefeasible payment to Lender in
Cash.

 

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11.15                 Counterparts.  This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.

 

11.16                 No Third Party Beneficiaries.  No provisions of the Loan
Documents are intended, nor will be interpreted, to provide or create any
third-party beneficiary rights or any other rights of any kind in any person
other than Lender and Borrower unless specifically provided otherwise herein,
and, except as otherwise so provided, all provisions of the Loan Documents will
be personal and solely between the Lender and the Borrower.

 

11.17                 Publicity.  Subject to applicable law, Lender may use
Borrower’s name and logo, and include a brief description of the relationship
between Borrower and Lender, in Lender’s marketing materials, provided that the
Borrower shall have the right to review such use prior to publication.

 

(SIGNATURES TO FOLLOW)

 

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IN WITNESS WHEREOF, Borrower and Lender have duly executed and delivered this
Loan and Security Agreement as of the day and year first above written.

 

 

BORROWER:

 

 

 

MERRIMACK PHARMACEUTICALS, INC.

 

 

 

 

By:

/s/ William A. Sullivan

 

 

 

 

Name:

William A. Sullivan

 

 

 

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

LENDER:

 

 

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

 

 

 

 

By:

/s/ K. Nicholas Martitsch

 

 

 

 

Name:

K. Nicholas Martitsch

 

 

 

 

Title:

Associate General Counsel

 

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Table of Exhibits and Schedules

 

Exhibit A:

Advance Request

 

Attachment to Advance Request

 

 

Exhibit B:

Term Note

 

 

Exhibit C:

Name, Locations, and Other Information for Borrower

 

 

Exhibit D:

Borrower’s Deposit Accounts and Investment Accounts

 

 

Exhibit E:

Compliance Certificate

 

 

Exhibit F:

Joinder Agreement

 

 

Exhibit G:

ACH Debit Authorization Agreement

 

 

Schedule 1

Subsidiaries

Schedule 1A

Existing Permitted Indebtedness

Schedule 1B

Existing Permitted Investments

Schedule 1C

Existing Permitted Liens

Schedule 5.3

Consents, Etc.

Schedule 5.5

Actions Before Governmental Authorities

Schedule 5.8

Tax Matters

Schedule 5.9

Intellectual Property Claims

Schedule 5.10

Intellectual Property

Schedule 5.11

Borrower Products

Schedule 5.14

Capitalization

 

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EXHIBIT A

 

ADVANCE REQUEST

 

To:

Date:

, 2012

 

 

Hercules Technology Growth Capital, Inc.

400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301

Facsimile:  650-473-9194

Attn: Bryan Jadot

 

MERRIMACK PHARMACEUTICALS, INC. (“Borrower”) hereby requests from Hercules
Technology Growth Capital, Inc. (“Lender”) an Advance in the amount of
                                           Dollars
($                                ) on                             , 2012 (the
“Advance Date”) pursuant to the Loan and Security Agreement between Borrower and
Lender (the “Agreement”). Capitalized words and other terms used but not
otherwise defined herein are used with the same meanings as defined in the
Agreement.

 

Please:

 

(a)                                 Issue a check payable to
Borrower                                                       

 

or

 

(b)                                 Wire Funds to Borrower’s
account                                                       

 

Bank:           
                                                                      

Address:                   
                                                          

 

ABA Number:                                                                    

Account Number:                                                               

Account Name:

 

Borrower represents that the conditions precedent to the Advance set forth in
the Agreement are satisfied and shall be satisfied upon the making of such
Advance, including but not limited to: (i) that no Material Adverse Effect has
occurred and is continuing; (ii) that the representations and warranties set
forth in the Agreement are true and correct in all material respects on and as
of the Advance Date with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate to an
earlier date; (iii) that Borrower is in compliance in all material respects with
all the terms and provisions set forth in each Loan Document on its part to be
observed or performed; and (iv) that as of the Advance Date, no fact or
condition exists that constitutes (or would, with the passage of time, the
giving of notice, or both) constitute an Event of Default under the Loan
Documents.  Borrower understands and acknowledges that Lender has the right to
review the financial information supporting this representation and, based upon
such review in its sole discretion, Lender may decline to fund the requested
Advance if such representation is not true and correct in all material respects.

 

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Borrower hereby represents that the information described in Exhibit C to the
Loan Agreement have not changed since the date of the Agreement or, if the
Attachment to this Advance Request is completed, are as set forth in the
Attachment to this Advance Request.

 

Borrower agrees to notify Lender promptly before the funding of the Loan if any
of the matters which have been represented above shall not be true and correct
on the Borrowing Date and if Lender has received no such notice before the
Advance Date then the statements set forth above shall be deemed to have been
made and shall be deemed to be true and correct as of the Advance Date.

 

Executed as of                           , 2012.

 

 

BORROWER:

 

 

 

MERRIMACK PHARMACEUTICALS, INC.

 

 

 

SIGNATURE:

 

 

TITLE:

 

 

PRINT NAME:

 

 

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ATTACHMENT TO ADVANCE REQUEST

 

Dated:                          

 

Borrower hereby represents and warrants to Lender that Borrower’s current name
and organizational status is as follows:

 

Name:

MERRIMACK PHARMACEUTICALS, INC.

 

 

Type of organization:

Corporation

 

 

State of organization:

Delaware

 

 

Borrower hereby represents and warrants to Lender that the street addresses,
cities, states and postal codes of its current owned and leased locations are as
follows:

 

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EXHIBIT B

 

SECURED TERM PROMISSORY NOTE

 

$

Advance Date:                         , 201    

 

 

 

Maturity Date: May 1/ November 1, 2016

 

FOR VALUE RECEIVED, MERRIMACK PHARMACEUTICALS, INC., a Delaware corporation (the
“Borrower”) hereby promises to pay to the order of Hercules Technology Growth
Capital, Inc. or the holder of this Note (the “Lender”) at 400 Hamilton Avenue,
Suite 310, Palo Alto, CA 94301 or such other place of payment as the holder of
this Secured Term Promissory Note (this “Promissory Note”) may specify from time
to time in writing, in lawful money of the United States of America, the
principal amount of                                       
($                        ) or such other principal amount as Lender has
advanced to Borrower, together with interest at a floating rate equal to the
greater of (a) 10.55% per annum and (b) 10.55% plus the United States Prime Rate
as reported in The Wall Street Journal minus 5.25%, not in any case to exceed
12.55% per annum, based upon a year consisting of 360 days, with interest
computed daily based on the actual number of days in each month.

 

This Promissory Note is the Note referred to in, and is executed and delivered
in connection with, that certain Loan and Security Agreement dated November 8,
2012, by and between Borrower and Lender (as the same may from time to time be
amended, modified or supplemented in accordance with its terms, the “Loan
Agreement”), and is entitled to the benefit and security of the Loan Agreement
and the other Loan Documents (as defined in the Loan Agreement), to which
reference is made for a statement of all of the terms and conditions thereof. 
All payments shall be made in accordance with the Loan Agreement.  All terms
defined in the Loan Agreement shall have the same definitions when used herein,
unless otherwise defined herein.  An Event of Default under the Loan Agreement
shall constitute a default under this Promissory Note.

 

Borrower waives presentment and demand for payment, notice of dishonor, protest
and notice of protest under the UCC or any applicable law.  Borrower agrees to
make all payments under this Promissory Note without setoff, recoupment or
deduction and regardless of any counterclaim or defense.  This Promissory Note
has been negotiated and delivered to Lender and is payable in the State of
California.  This Promissory Note shall be governed by and construed and
enforced in accordance with, the laws of the State of California, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.

 

BORROWER:

MERRIMACK PHARMACEUTICALS, INC.

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

Title:

 

 

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EXHIBIT C

 

NAME, LOCATIONS, AND OTHER INFORMATION FOR BORROWER

 

1.  Borrower represents and warrants to Lender that Borrower’s current name and
organizational status as of the Closing Date is as follows:

 

Name:

MERRIMACK PHARMACEUTICALS, INC.

 

 

Type of organization:

Corporation

 

 

State of organization:

Delaware

 

 

Organization file number:

4833458

 

 

2.  Borrower represents and warrants to Lender that for two (2) years prior to
the Closing Date, Borrower did not do business under any other name or
organization or form except the following:

 

Name:  Merrimack Pharmaceuticals, Inc.
Used during dates of:  Two (2) years prior to the Closing
Type of Organization:  Corporation
State of organization:  Delaware
Organization file Number:  4833458
Borrower’s fiscal year ends on:  December 31
Borrower’s federal employer tax identification number is:  04-3210530

 

3.  Borrower represents and warrants to Lender that its chief executive office
is located at One Kendall Square, Suite B7201, Cambridge, MA 02139.

 

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EXHIBIT D

 

BORROWER’S DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS

 

Bank Name

 

Account Number

 

Branch Address

 

Company/Subsidiary

Cambridge Savings Bank

 

 

 

1374 Mass Avenue

Cambridge, MA 02138

(617) 520-5315

 

Merrimack Pharmaceuticals, Inc.

UBS

 

 

 

The UBS Tower

1 North Wacker Drive

25th Floor

Chicago, IL 60606

(800) 372-1993

 

Merrimack Pharmaceuticals, Inc.

 

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EXHIBIT E

 

COMPLIANCE CERTIFICATE

 

Hercules Technology Growth Capital, Inc.
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301

 

Reference is made to that certain Loan and Security Agreement dated November 8,
2012 and all ancillary documents entered into in connection with such Loan and
Security Agreement all as may be amended from time to time, (hereinafter
referred to collectively as the “Loan Agreement”) between Hercules Technology
Growth Capital, Inc. (“Hercules”) as Lender and MERRIMACK PHARMACEUTICALS, INC.
(the “Company”) as Borrower. All capitalized terms not defined herein shall have
the same meaning as defined in the Loan Agreement.

 

The undersigned is an Officer of the Company, knowledgeable of all Company
financial matters, and is authorized to provide certification of information
regarding the Company; hereby certifies, in such capacity, that in accordance
with the terms and conditions of the Loan Agreement, the Company is in
compliance in all material respects for the period ending                       
of all covenants, conditions and terms and hereby reaffirms that all
representations and warranties contained therein are true and correct in all
material respects on and as of the date of this Compliance Certificate, except
to the extent such representations and warranties expressly relate to an earlier
date, after giving effect in all cases to any standard(s) of materiality
contained in the Loan Agreement as to such representations and warranties. 
Attached are the required documents supporting the above certification.  The
undersigned further certifies on behalf of the Company that if the Financial
Statements being delivered herewith are being delivered pursuant to Section
7.1(b) or (c) of the Loan Agreement, such Financial Statements have been
prepared in accordance with GAAP, and are consistent from one period to the next
except as explained below.

 

REPORTING REQUIREMENT

REQUIRED

CHECK IF ATTACHED

 

 

 

Interim Financial Statements

Monthly within 30 days

 

 

 

 

Interim Financial Statements

Quarterly within 45 days

 

 

 

 

Audited Financial Statements

FYE within 90 days

 

 

 

 

Very Truly Yours,

 

 

 

MERRIMACK PHARMACEUTICALS, INC.

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Its:

 

 

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EXHIBIT F

 

FORM OF JOINDER AGREEMENT

 

This Joinder Agreement (the “Joinder Agreement”) is made and dated as of
                           , 201   , and is entered into by and
between                                    , a                       
corporation (“Subsidiary”), and Hercules Technology Growth Capital, Inc. as a
Lender.

 

RECITALS

 

A.  Subsidiary’s Affiliate, MERRIMACK PHARMACEUTICALS, INC. (“Company”) has
entered into that certain Loan and Security Agreement dated November 8, 2012,
with Lender, as such agreement may be amended (the “Loan Agreement”), together
with the other agreements executed and delivered in connection therewith;

 

B.  Subsidiary acknowledges and agrees that it will benefit both directly and
indirectly from Company’s execution of the Loan Agreement and the other
agreements executed and delivered in connection therewith;

 

AGREEMENT

 

NOW THEREFORE, Subsidiary and Lender agree as follows:

 

1.              The recitals set forth above are incorporated into and made part
of this Joinder Agreement.  Capitalized terms not defined herein shall have the
meaning provided in the Loan Agreement.

 

2.              By signing this Joinder Agreement, Subsidiary shall be bound by
the terms and conditions of the Loan Agreement the same as if it were the
Borrower (as defined in the Loan Agreement) under the Loan Agreement, mutatis
mutandis, provided however, that Lender shall have no duties, responsibilities
or obligations to Subsidiary arising under or related to the Loan Agreement or
the other agreements executed and delivered in connection therewith.  Rather, to
the extent that Lender has any duties, responsibilities or obligations arising
under or related to the Loan Agreement or the other agreements executed and
delivered in connection therewith, those duties, responsibilities or obligations
shall flow only to Company and not to Subsidiary or any other person or entity. 
By way of example (and not an exclusive list): (a) Lender’s providing notice to
Company in accordance with the Loan Agreement or as otherwise agreed between
Company and Lender shall be deemed provided to Subsidiary; (b) a Lender’s
providing an Advance to Company shall be deemed an Advance to Subsidiary; and
(c) Subsidiary shall have no right to request an Advance or make any other
demand on Lender.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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[SIGNATURE PAGE TO JOINDER AGREEMENT]

 

SUBSIDIARY:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

Telephone:

 

 

 

Facsimile:

 

 

 

 

 

 

LENDER:

 

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Its:

 

 

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EXHIBIT G

 

ACH DEBIT AUTHORIZATION AGREEMENT

 

Hercules Technology Growth Capital, Inc.
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301

 

Re:  Loan and Security Agreement dated November 8, 2012 between MERRIMACK
PHARMACEUTICALS, INC. (“Borrower”) and Hercules Technology Growth Capital, Inc.
(“Company”) (the “Agreement”)

 

In connection with the above referenced Agreement, the Borrower hereby
authorizes the Company to initiate debit entries for the periodic payments due
under the Agreement to the Borrower’s account indicated below.  The Borrower
authorizes the depository institution named below to debit to such account.

 

DEPOSITORY NAME:

BRANCH:

 

 

CITY:

STATE AND ZIP CODE:

 

 

TRANSIT/ABA NUMBER:

ACCOUNT NUMBER:

 

This authority will remain in full force and effect so long as any amounts are
due under the Agreement.

 

MERRIMACK PHARMACEUTICALS, INC.

 

 

 

 

 

By:

 

 

 

 

 

Date:

 

 

 

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