Document:

Exhibit 4.3

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 ACT AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.

 

WARRANT AGREEMENT

 

To Purchase Shares of the Series D Preferred Stock of

 

Merrimack Pharmaceuticals, Inc.

 

Dated as of April 6, 2005 (the “Effective Date”)

 

WHEREAS, Merrimack Pharmaceuticals, Inc., a Massachusetts corporation (the “Company”), has entered into a Senior Loan and Security Agreement of even date herewith (the “Loan Agreement”)  with Hercules Technology Growth Capital, Inc., a Maryland corporation (the “Warrantholder”);

 

WHEREAS, the Company desires to grant to Warrantholder, in consideration for, among other things, the financial accommodations provided for in the Loan Agreement, the right to purchase shares of its Series D Preferred Stock pursuant to this Warrant Agreement (the “Agreement”);

 

NOW, THEREFORE, in consideration of the Warrantholder executing and delivering the Loan Agreement and providing the financial accommodations contemplated therein, and in consideration of the mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:

 

1.             GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.

 

For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from the Company, 302,143 fully paid and non-assessable shares of the Preferred Stock (as defined below) at a purchase price of $3.50 per share (the “Exercise Price”).  The number and Exercise Price of such shares are subject to adjustment as provided in Section 8.  As used herein, the following terms shall have the following meanings:

 

“Act”  means the Securities Exchange Act of 1933, as amended.

 

“Charter”  means the Company’s Articles of Organization, as may be amended from time to time.

 

“Common Stock”  means the Company’s common stock;

 

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“Initial Public Offering”  means the initial underwritten public offering of the Company’s Common Stock pursuant to a registration statement under the Act, which public offering has been declared effective by the Securities and Exchange Commission (“SEC”);

 

“Merger Event”  means a merger or consolidation involving the Company in which the Company is not the surviving entity, or in which the outstanding shares of the Company’s capital stock are otherwise converted into or exchanged for shares of capital stock of another entity.

 

“Preferred Stock”  means the Series D Preferred Stock of the Company and any other stock into or for which the Series D Preferred Stock may be converted or exchanged, and upon and after the occurrence of an event which results in the automatic or voluntary conversion, redemption or retirement of all (but not less than all) of the outstanding shares of such Preferred Stock, including, without limitation, the consummation of an Initial Public Offering of the Common Stock in which such a conversion occurs, then from and after the date upon which such outstanding shares are so converted, redeemed or retired, “Preferred Stock” shall mean such Common Stock; and

 

“Purchase Price”  means, with respect to any exercise of this Agreement, an amount equal to the Exercise Price as of the relevant time multiplied by the number of shares of Preferred Stock requested to be exercised under this Agreement pursuant to such exercise.

 

2.             TERM OF THE AGREEMENT.

 

Except as otherwise provided for herein, the term of this Agreement and the right to purchase Preferred Stock as granted herein (the “Warrant) shall commence on the Effective Date and shall be exercisable for a period ending upon the latest to occur of (i) five (5) years from the Effective Date; or (ii) two (2) years after the Initial Public Offering.

 

3.             EXERCISE OF THE PURCHASE RIGHTS.

 

(a)           Exercise.  The purchase rights set forth in this Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”),  duly completed and executed.  Promptly upon receipt of the Notice of Exercise and the payment of the Purchase Price in accordance with the terms set forth below, and in no event later than three (3) business days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Preferred Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the “Acknowledgment of Exercise”)  indicating the number of shares which remain subject to future purchases, if any.

 

The Purchase Price may be paid at the Warrantholder’s election either (i) by cash or check, or (ii) by surrender of all or a portion of the Warrant for shares of Preferred Stock to be exercised under this Agreement and, if applicable, an amended Agreement representing the remaining number of shares purchasable hereunder, as determined below (“Net Issuance”).  If the Warrantholder elects the Net Issuance method, the Company will issue Preferred Stock in accordance with the following formula:

 

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X  =
    	
Y(A-B)
    
	
 
    	
 
    	
 
    	
   A
    
	
 
    	
 
    	
 
    
	
Where:
    	
X   =
    	
the   number of shares of Preferred Stock to be issued to the Warrantholder.
    
	
 
    	
 
    	
 
    
	
 
    	
Y   =
    	
the   number of shares of Preferred Stock requested to be exercised under this   Agreement.
    
	
 
    	
 
    	
 
    
	
 
    	
A   =
    	
the   fair market value of one (1) share of Preferred Stock at the time of   issuance of such shares of Preferred Stock.
    
	
 
    	
 
    	
 
    
	
 
    	
B   =
    	
the   Exercise Price.
    

 

For purposes of the above calculation, current fair market value of Preferred Stock shall mean with respect to each share of Preferred Stock:

 

(i)            if the exercise is in connection with an Initial Public Offering, and if the Company’s Registration Statement relating to such Initial Public Offering has been declared effective by the SEC, then the fair market value per share shall be the product of (x) the initial “Price to Public” of the Common Stock specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;

 

(ii)           if the exercise is after, and not in connection with, an Initial Public Offering, and:

 

(1)           if the Common Stock is traded on a securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a five (5) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; or

 

(2)           if the Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the ten (10) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise;

 

(iii)         if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ National Market or the over-the-counter market, the current fair market value of Preferred Stock shall be the product of (x) the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as most recently determined in good faith by its Board of Directors and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise, unless the Company shall become subject to a Merger Event pursuant to which the Company is not the surviving party, in which case the fair market value of Preferred Stock shall be deemed to be the

 

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per share value received by the holders of the Company’s Preferred Stock on a common equivalent basis pursuant to such Merger Event.

 

Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Agreement representing the remaining number of shares purchasable hereunder.  All other terms and conditions of such amended Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof.

 

(b)           Exercise Prior to Expiration.  To the extent this Agreement is not previously exercised as to all Preferred Stock subject hereto, and if the fair market value of one share of the Preferred Stock is greater than the Exercise Price then in effect, this Agreement shall be deemed automatically exercised pursuant to Section 3(a) (even if not surrendered) immediately before its expiration.  For purposes of such automatic exercise, the fair market value of one share of the Preferred Stock upon such expiration shall be determined pursuant to Section 3(a).  To the extent this Agreement or any portion thereof is deemed automatically exercised pursuant to this Section 3(b), the Company agrees to promptly notify the Warrantholder of the number of shares of Preferred Stock, if any, the Warrantholder is to receive by reason of such automatic exercise.

 

4.             RESERVATION OF SHARES.

 

During the term of this Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Preferred Stock to provide for the exercise of the rights to purchase Preferred Stock as provided for herein, and shall have authorized and reserved a sufficient number of shares of its Common Stock to provide for the conversion of the Preferred Shares available hereunder.

 

5.             NO FRACTIONAL SHARES OR SCRIP.

 

No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Agreement, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.

 

6.             NO RIGHTS AS SHAREHOLDER.

 

This Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of this Agreement.

 

7.             WARRANTHOLDER REGISTRY.

 

The Company shall maintain a registry showing the name and address of the registered holder of this Agreement.  Warrantholder’s initial address, for purposes of such registry, is set forth below Warrantholder’s signature on this Agreement.  Warrantholder may change such address by giving written notice of such changed address to the Company.

 

8.             ADJUSTMENT RIGHTS.

 

The Exercise Price and the number of shares of Preferred Stock purchasable hereunder are subject to adjustment, as follows:

 

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(a)           Merger Event.  If at any time there shall be Merger Event, then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of this Agreement, the number of shares of preferred stock or other securities or property of the successor corporation resulting from such Merger Event that would have been issuable if Warrantholder had exercised this Agreement immediately prior to the Merger Event.  In any such case, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Agreement with respect to the rights and interests of the Warrantholder after the Merger Event to the end that the provisions of this Agreement (including adjustments of the Exercise Price and number of shares of Preferred Stock purchasable) shall be applicable in their entirety, and to the greatest extent possible.   Without limiting the foregoing, in connection with any Merger Event, upon the closing thereof, the successor or surviving entity shall assume the obligations of this Agreement.

 

(b)           Reclassification of Shares.  Except as set forth in Section 8(a), if the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Agreement exist into the same or a different number of securities of any other class or classes, this Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change.

 

(c)           Subdivision or Combination of Shares.     If the Company at any time shall combine or subdivide its Preferred Stock, (i) in the case of a subdivision, the Exercise Price shall be proportionately decreased, and the number of shares of Preferred Stock issuable upon exercise of this Agreement shall be proportionately increased, or (ii) in the case of a combination, the Exercise Price shall be proportionately increased, and the number of shares of Preferred Stock issuable upon the exercise of this Agreement shall be proportionately decreased.

 

(d)           Stock Dividends.   If the Company at any time while this Warrant is outstanding and unexpired shall:

 

(i)            pay a dividend with respect to the Preferred Stock payable in Preferred Stock, then the Exercise Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Preferred Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Preferred Stock outstanding immediately after such dividend or distribution; or

 

(ii)           make any other distribution with respect to Preferred Stock (or stock into which the Preferred Stock is convertible), except any distribution specifically provided for in any other clause of this Section 8, then, in each such case, provision shall be made by the Company such that the Warrantholder shall receive upon exercise or conversion of this Warrant a proportionate share of any such distribution as though it were the holder of the Preferred Stock

 

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(or other stock for which the Preferred Stock is convertible) as of the record date fixed for the determination of the shareholders of the Company entitled to receive such distribution.

 

(e)           Antidilution Rights.  Additional antidilution rights applicable to the Preferred Stock purchasable hereunder are as set forth in the Company’s Charter and shall be applicable with respect to the Preferred Stock issuable hereunder.  The Company shall promptly provide the Warrantholder with any restatement, amendment, modification or waiver of the Charter that materially affects the rights of the Preferred Stock; provided, that no such amendment, modification or waiver shall impair or reduce the antidilution rights applicable to the Preferred Stock as of the date hereof unless such amendment, modification or waiver affects the rights of Warrantholder with respect to the Preferred Stock in the same manner as it affects all other holders of Preferred Stock.  For the avoidance of doubt, there shall be no duplicate anti-dilution adjustment pursuant to this subsection (f), the forgoing subsection (d) and the Company’s Charter.

 

(f)            Notice of Adjustments.    Whenever an adjustment to the Exercise Price or the number of shares of Preferred Stock issuable upon exercise of this Agreement is made pursuant to this Section 8, the Company shall send to the Warrantholder a notice setting forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of such adjustment, (iii) the method by which such adjustment was calculated, (iv) the adjusted Exercise Price (if the Exercise Price has been adjusted), and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall cause such notice to be mailed (by first class mail, postage prepaid, or by reputable overnight courier with all charges prepaid) within thirty (30) days of such adjustment addressed to the Warrantholder at the address for Warrantholder set forth in the registry referred to in Section 7.

 

9.             REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

(a)           Reservation of Preferred Stock.  The Preferred Stock issuable upon exercise of the Warrantholder’s rights has been duly and validly reserved and, when issued in accordance with the provisions of this Agreement, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided, that the Preferred Stock issuable pursuant to this Agreement may be subject to restrictions on transfer under state and/or federal securities laws and applicable agreements to which the Company or its security holders are parties.  The Company has made available to the Warrantholder true, correct and complete copies of its Charter and current bylaws.  The issuance of certificates for shares of Preferred Stock upon exercise of this Agreement shall be made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Preferred Stock; provided, that the Company shall not be required to pay any tax which may be payable in respect of any transfer and the issuance and delivery of any certificate in a name other than that of the Warrantholder.

 

(b)           Due Authority.   The execution and delivery by the Company of this Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Preferred Stock and the Common Stock into which it may be converted, have been duly authorized by all necessary corporate action on the

 

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part of the Company.  This Agreement:  (1) is not inconsistent with the Company’s Charter or current bylaws; (2) does not contravene any law or governmental rule, regulation or order applicable to it; and (3) does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound.  This Agreement constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its respective terms.

 

(c)           Consents and Approvals.  No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Agreement, except for the filing of notices pursuant to Regulation D under the Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby.

 

(d)           Issued  Securities.  All issued and outstanding shares of Common Stock, Preferred Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable.  All outstanding shares of Common Stock, Preferred Stock and any other securities were issued in full compliance with all federal and state securities laws.  In addition, as of the date immediately preceding the date of this Agreement:

 

(i)            The authorized capital of the Company consists of (A) 50,000,000 shares of Common Stock, of which 6,881,870 shares are issued and outstanding, (B) 86,000 shares of Series A Non-Convertible Redeemable Preferred Stock, of which 54,838 shares are issued and outstanding, (C) 6,000,000 shares of Series B Convertible Preferred Stock, of which 3,873,448 shares are issued and outstanding and are convertible into 5,978,461 shares of Common Stock, (D) 15,100,000 shares of Series C Convertible Preferred Stock, of which 15,077,604 shares are issued and outstanding and are convertible into 15,077,604 shares of Common Stock, and (E) 11,500,000 shares of Series D Convertible Preferred Stock, of which 5,720,925 shares are issued and outstanding and are convertible into 5,720,925 shares of Common Stock,.

 

(ii)           The Company has reserved 8,000,000 shares of Common Stock for issuance under its Stock Option Plan(s), under which 4,811,104 options are outstanding.  There are no other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company’s capital stock or other securities of the Company.

 

(iii)         In accordance with the Company’s Charter, no shareholder of the Company has preemptive right to purchase new issuances of the Company’s capital stock.

 

(e)           Other Commitments to Register Securities.  Except as set forth in this Agreement and that certain Amended and Restated Investor Rights Agreement by and between the Company and the parties named therein dated as of January 25, 2005, the Company is not, pursuant to the terms of any other agreement currently in existence, under any obligation to register under the Act any of its presently outstanding securities or any of its securities which may hereafter be issued.

 

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(f)            Exempt Transaction.  Subject to the accuracy of the Warrantholder’s representations in Section 10, the issuance of the Preferred Stock upon exercise of this Agreement, and the issuance of the Common Stock upon conversion of the Preferred Stock, will each constitute a transaction exempt from (i) the registration requirements of Section 5 of the Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.

 

(g)           Compliance with Rule 144.  If the Warrantholder proposes to sell Preferred Stock issuable upon the exercise of this Agreement, or the Common Stock into which it is convertible, in compliance with Rule 144 promulgated by the SEC, then, upon Warrantholder’s written request to the Company, the Company shall furnish to the Warrantholder, within ten days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements of the SEC as set forth in such Rule, as such Rule may be amended from time to time.

 

10.          REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.

 

This Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:

 

(a)           Investment Purpose.  The right to acquire Preferred Stock or the Preferred Stock issuable upon exercise of the Warrantholder’s rights contained herein will be acquired for investment and not with a view to the sale or distribution of any part thereof, and the Warrantholder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption.

 

(b)           Private Issue.  The Warrantholder understands (i) that the Preferred Stock issuable upon exercise of this Agreement is not registered under the Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this Agreement will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company’s reliance on such exemption is predicated on the representations set forth in this Section 10.

 

(c)           Disposition of Warrantholder’s Rights.  In no event will the Warrantholder make a disposition of any of its rights to acquire Preferred Stock or Preferred Stock issuable upon exercise of such rights unless and until (i) it shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, it shall have furnished the Company with an opinion of counsel (which counsel may either be inside or outside counsel to the Warrantholder) satisfactory to the Company and its counsel to the effect that (A) appropriate action necessary for compliance with the Act has been taken, or (B) an exemption from the registration requirements of the Act is available.  Notwithstanding the foregoing, the restrictions imposed upon the transferability of any of its rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of such rights do not apply to transfers from the beneficial owner of any of the aforementioned securities to its nominee or from such nominee to its beneficial owner, and shall terminate as to any particular share of Preferred Stock when (1) such security shall have been effectively registered under the Act and sold by the holder thereof in accordance with such registration or (2) such security shall have been sold without registration in compliance with

 

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Rule 144 under the Act, or (3) a letter shall have been issued to the Warrantholder at its request by the staff of the SEC or a ruling shall have been issued to the Warrantholder at its request by the SEC stating that no action shall be recommended by such staff or taken by the SEC, as the case may be, if such security is transferred without registration under the Act in accordance with the conditions set forth in such letter or ruling and such letter or ruling specifies that no subsequent restrictions on transfer are required.  Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Warrantholder or holder of a share of Preferred Stock then outstanding as to which such restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for this Agreement or for such shares of Preferred Stock not bearing any restrictive legend.

 

(d)           Financial Risk.  The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment.

 

(e)           Risk of No Registration.  The Warrantholder understands that if the Company does not register with the SEC pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “1934 Act”),  or file reports pursuant to Section 15(d) of the 1934 Act, or if a registration statement covering the securities under the Act is not in effect when it desires to sell the rights to purchase Preferred Stock pursuant to this Agreement or (ii) the Preferred Stock issuable upon exercise of the right to purchase, it may be required to hold such securities for an indefinite period.  The Warrantholder also understands that any sale of (A) its rights hereunder to purchase Preferred Stock or (B) Preferred Stock issued or issuable hereunder which might be made by it in reliance upon Rule 144 under the Act may be made only in accordance with the terms and conditions of that Rule.

 

(f)            Accredited Investor.  Warrantholder is an “accredited investor” within the meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in effect.

 

(g)           Diligence.  Warrantholder has had an opportunity to discuss the Company’s business, management and financial affairs with its management and an opportunity to review the Company’s facilities.

 

11.          TRANSFERS.

 

Subject to the terms and conditions contained in Section 10, this Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee, provided, that, prior to an Initial Public Offering, in no event shall the number of transfers of the rights and interests in this Agreement exceed three (3) transfers.  The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the “Transfer Notice”),  at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer.

 

12.          MISCELLANEOUS.

 

(a)           Effective Date.  The provisions of this Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof.  This Agreement shall be binding upon any successors or assigns of the Company.

 

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(b)           Remedies.  In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable.

 

(c)           No Impairment of Rights.  The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment.

 

(d)           Additional Documents.  The Company, upon execution of this Agreement, shall provide the Warrantholder with certified resolutions with respect to the representations, warranties and covenants set forth in Sections 9(a) through 9(d), 9(f) and 9(g).  The Company shall also supply such other documents as the Warrantholder may from time to time reasonably request.

 

(e)           Attorney’s Fees.  In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to reasonable attorneys’ fees and expenses and all costs of proceedings reasonably incurred in enforcing this Agreement.  For the purposes of this Section 12(e), attorneys’ fees shall include without limitation fees reasonably incurred in connection with the following:  (i) contempt proceedings; (ii) discovery; (iii) any motion, proceeding or other activity of any kind in connection with an insolvency proceeding; (iv) garnishment, levy, and debtor and third party examinations; and (v) post-judgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment.

 

(f)            Severability.  In the event any one or more of the provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.

 

(g)           Notices.  Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication that is required, contemplated, or permitted under this Agreement 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 first business day after transmission by facsimile or hand delivery or deposit with an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States mails, with proper first class postage prepaid (provided,  that any Advance Request shall not be deemed received until Lender’s actual receipt thereof), and shall be addressed to the party to be notified as follows:

 

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If to Warrantholder:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
HERCULES   TECHNOLOGY GROWTH CAPITAL, INC.
    
	
 
    	
 
    	
Legal   Department
    
	
 
    	
 
    	
Attention:   Chief Legal Officer
    
	
 
    	
 
    	
525   University Avenue
    
	
 
    	
 
    	
Suite 700
    
	
 
    	
 
    	
Palo   Alto, CA 9430
    
	
 
    	
 
    	
Facsimile:   650-473-9194
    
	
 
    	
 
    	
Telephone:   650-289-3060
    
	
 
    	
 
    	
 
    
	
 
    	
With a copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
HERCULES   TECHNOLOGY GROWTH CAPITAL, INC.
    
	
 
    	
 
    	
Attention:   Parag Shah
    
	
 
    	
 
    	
100   Federal Street, 28th Floor
    
	
 
    	
 
    	
Boston,   MA 02110
    
	
 
    	
 
    	
Facsimile:   617-330-9131
    
	
 
    	
 
    	
Telephone:   617-330-9100
    
	
 
    	
 
    	
 
    
	
 
    	
If to the Company:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Merrimack   Pharmaceuticals, Inc.
    
	
 
    	
 
    	
Attention:   James Scibetta, Chief Financial Officer
    
	
 
    	
 
    	
101   Binney Street
    
	
 
    	
 
    	
Cambridge,   MA 02142
    
	
 
    	
 
    	
Facsimile:   617-491-1386
    
	
 
    	
 
    	
Telephone:   617-441-1000
    
	
 
    	
 
    	
 
    
	
 
    	
With a copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
GOODWIN   PROCTER LLP
    
	
 
    	
 
    	
Attention:   Mark D. Smith
    
	
 
    	
 
    	
53   State Street
    
	
 
    	
 
    	
Boston,   MA 02109
    
	
 
    	
 
    	
Facsimile:   617-523-1231
    
	
 
    	
 
    	
Telephone:   617-570-1750
    

 

or to such other address as each party may designate for itself by like notice.  A notice delivered to the Company or Warrantholder shall be valid despite the failure to deliver a copy of such notice to any other person.

 

(h)           Entire Agreement; Amendments.  This Agreement constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof, 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 (including Lender’s proposal letter dated February 16, 2005.  None of the terms of this Agreement may be amended except by an instrument executed by each of the parties hereto.

 

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(i)            Headings.  The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof.

 

(j)            Advice of Counsel.  Each of the parties represents to each other party hereto that it has discussed (or had an opportunity to discuss) with its counsel this Agreement and, specifically, the provisions of Sections 12(n), 12(o) and 12(p).

 

(k)           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.

 

(l)            No Waiver.  No omission or delay by Warrantholder 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 the Company at any time designated, shall be a waiver of any such right or remedy to which Warrantholder is entitled, nor shall it in any way affect the right of Warrantholder to enforce such provisions thereafter.

 

(m)          Survival.  All agreements, representations and warranties contained in this Agreement or in any document delivered pursuant hereto shall be for the benefit of Warrantholder and shall survive the execution and delivery of this Agreement and the expiration or other termination of this Agreement.

 

(n)           Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Massachusetts, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

 

(o)           Consent to Jurisdiction and Venue.  All judicial proceedings arising in or under or related to this Agreement may be brought in any state or federal court of competent jurisdiction 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, California; (b) waives any objection as to jurisdiction or venue in Santa Clara County, 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.  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 12(g), and shall be deemed effective and received as set forth in Section 12(g).  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.

 

(p)           Mutual Waiver of Jury Trial.  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

 

12

 

applicable laws.  EACH OF THE COMPANY AND WARRANTHOLDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY THE COMPANY AGAINST WARRANTHOLDER OR ITS ASSIGNEE OR BY WARRANTHOLDER OR ITS ASSIGNEE AGAINST THE COMPANY.  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 the Company and Warrantholder; and any Claims for damages, breach of contract, specific performance, or any equitable or legal relief of any kind, arising out of this Agreement.  If this jury waiver is for any reason unenforceable, all disputes shall be resolved by binding arbitration conducted under the commercial arbitration rules of the American Arbitration Association in Palo Alto, California.

 

(q)           Specific Performance.  Warrantholder and Company agree that either may be irreparably damaged by any breach or threatened breach of this Agreement.  Upon a breach or threatened breach of the terms, covenants and/or conditions of this Agreement by Warrantholder or Company, the other party shall, in addition to all other remedies, be entitled to seek a temporary or permanent injunction and/or a decree for specific performance, in accordance with the provisions hereof.  Warrantholder and Company each waives the claim or defense that it has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

 

(r)           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.

 

[Remainder of Page Intentionally Left Blank]

 

13

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.

 

	
COMPANY:
    	
MERRIMACK   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Robert J. Mulroy
    
	
 
    	
 
    	
Robert   J. Mulroy
    
	
 
    	
Title:
    	
President &   CEO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Attn:   James Scibetta, Chief Financial Officer
    
	
 
    	
 
    	
101   Binney Street
    
	
 
    	
 
    	
Cambridge,   MA 02142
    
	
 
    	
 
    
	
 
    	
 
    
	
WARRANTHOLDER:
    	
HERCULES   TECHNOLOGY GROWTH CAPITAL, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Scott Harvey
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Chief   Legal Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Hercules   Technology Growth Capital, Inc.
    
	
 
    	
 
    	
Attn:   Parag Shah
    
	
 
    	
 
    	
100   Federal Street, 28th Floor
    
	
 
    	
 
    	
Boston,   MA 02110
    
	
 
    	
 
    	
Facsimile:   617-330-9131
    
	
 
    	
 
    	
Telephone:   617-330-9100
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
cc:
    	
Hercules   Technology Growth Capital, Inc.
    
	
 
    	
 
    	
Attn:   Chief Legal Officer
    
	
 
    	
 
    	
525   University Avenue
    
	
 
    	
 
    	
Suite 700
    
	
 
    	
 
    	
Palo   Alto, CA 94301
    
	
 
    	
 
    	
Facsimile:   650-473-9194
    
	
 
    	
 
    	
Telephone:   650-289-3060
    

 

14

 

EXHIBIT I

 

NOTICE OF EXERCISE

 

To:          Merrimack Pharmaceuticals, Inc.

 

(1)                                  The undersigned Warrantholder hereby elects to purchase [               ] shares of the Series D Preferred Stock of Merrimack Pharmaceuticals, Inc., pursuant to the terms of the Agreement dated the [  ] day of April, 2005 (the “Agreement”) between Merrimack Pharmaceuticals, Inc.  and the Warrantholder, and [CASH PAYMENT:  tenders herewith payment of the Purchase Price in full, together with all applicable transfer taxes, if any.] [NET ISSUANCE:  elects pursuant to Section 3 (a) of the Agreement to effect a Net Issuance.]

 

(2)                                  In exercising its rights to purchase the  Series D Preferred  Stock of Merrimack Pharmaceuticals, Inc., the undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 10 of the Agreement.

 

(3)                                  Please issue a certificate or certificates representing said shares of Series D Preferred Stock in the name of the undersigned or in such other name as is specified below.

 

 

	
 
    	
 
    
	
 
    	
(Name)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Address)
    
	
 
    	
 
    
	
 
    	
 
    
	
WARRANTHOLDER:
    	
HERCULES   TECHNOLOGY GROWTH CAPITAL, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
 
    

 

15

 

EXHIBIT II

 

ACKNOWLEDGMENT OF EXERCISE

 

The undersigned Merrimack Pharmaceuticals, Inc., hereby acknowledge receipt of the “Notice of Exercise” from Hercules Technology Growth Capital, Inc., to purchase [         ] shares of the Series D Preferred Stock of Merrimack Pharmaceuticals, Inc., pursuant to the terms of the Agreement, and further acknowledges that [            ] shares remain subject to purchase under the terms of the Agreement.

 

 

	
COMPANY:
    	
MERRIMACK   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
 
    

 

16Exhibit 4.4

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH SALE OR DISPOSTION.

 

WARRANT TO PURCHASE 1,033 SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK

 

	
 
    	
November 22,   2006
    

 

 

THIS CERTIFIES THAT, for value received, General Electric Capital Corporation (“Holder”) is entitled to subscribe for and purchase One Thousand Thirty Three (1,033) shares of the fully paid and nonassessable Series C Convertible Preferred Stock (the “Shares” or the “Preferred Stock”) of Merrimack Pharmaceuticals, Inc., a Massachusetts corporation (the “Company”), at the Warrant Price (as hereinafter defined), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, the term “Preferred Stock” shall mean the Company’s presently authorized Series C Convertible Preferred Stock and any stock into which such Series C Convertible Preferred Stock may hereafter be converted or exchanged.

 

1.     Warrant Price. The Warrant Price shall initially be One and 889/1000 dollars ($1.889) per share, subject to adjustment as provided in Section 7 below.

 

2.     Conditions to Exercise. The purchase right represented by this Warrant may be exercised at any time, or from time to time, in whole or in part during the term commencing on the date hereof and ending at 5:00 P.M. Pacific time on the fifth anniversary of the date of this Warrant.

 

3.     Method of Exercise; Payment; Issuance of Shares; Issuance of New Warrant.

 

(a)   Cash Exercise. Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised by the Holder hereof, in whole or in part, by the surrender of this Warrant (with a duly executed Notice of Exercise in the form attached hereto) at the principal office of the Company (as set forth in Section 18 below) and by payment to the Company, by check, of an amount equal to the then applicable Warrant Price per share multiplied by the number of shares then being purchased. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be in the name of, and delivered to, the Holder hereof, or as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder hereof of any applicable transfer taxes). Such delivery shall be made within 30 days after exercise of the Warrant and at the Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions

 

 

substantially identical to this Warrant and representing the portion of the Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to the Holder hereof within 30 days after exercise of the Warrant.

 

(b)   Net Issue Exercise. Holder may also elect to receive shares equal to the value of this Warrant (or of any portion thereof remaining unexercised) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to Holder the number of shares of the Company’s Preferred Stock computed using the following formula:

 

	
 
    	
X   = 
    	
Y (A-B)
    	
 
    
	
 
    	
 
    	
A
    	
 
    

 

Where X = the number of shares of Preferred Stock to be issued to Holder.

 

Y = the number of shares of Preferred Stock purchasable under this Warrant (at the date of such calculation).

 

A = the Fair Market Value of one share of the Company’s Preferred Stock (at the date of such calculation).

 

B = Warrant Price (as adjusted to the date of such calculation).

 

(c)   Fair Market Value. For purposes of this Section 3, Fair Market Value of one share of the Company’s Preferred Stock shall mean:

 

(i)            In the event of an exercise in connection with an Initial Public Offering, the per share Fair Market Value for the Preferred Stock shall be the Offering Price at which the underwriters initially sell Common Stock to the public multiplied by the number of shares of Common Stock into which each share of Preferred Stock is then convertible; or

 

(ii)           The average of the closing bid and asked prices of Common Stock quoted in the Over-The-Counter Market Summary, the last reported sale price quoted on the Nasdaq National Market (“NNM”) or on any exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of the Wall Street Journal for the ten (10) trading days prior to the date of determination of Fair Market Value, multiplied by the number of shares of Common Stock into which each share of Preferred Stock is then convertible; or

 

(iii)          In the event of an exercise in connection with a merger, acquisition or other consolidation in which the Company is not the surviving entity, the per share Fair Market Value for the Preferred Stock shall be the value to be received per share of Preferred Stock by all holders of the Preferred Stock in such transaction as determined by the Board of Directors; or

 

(iv)          In any other instance, the per share Fair Market Value for the Preferred Stock shall be as determined in good faith by the Company’s Board of Directors.  In the event of 3(c)(iii) above, the Company’s Board of Directors shall prepare a certificate, to be signed by an authorized officer of the Company, setting forth in reasonable detail the basis for and method of determination of the per share Fair Market Value of the Preferred Stock. The Board will also certify to the Holder that this per share Fair Market Value will be applicable to all holders of the Company’s Preferred Stock. Such certification must be made to Holder at least ten (10) business days prior to the

 

2

 

proposed effective date of the merger, consolidation, sale, or other triggering event as defined in 3(c)(iii).

 

(d)   Automatic Exercise. To the extent this Warrant is not previously exercised, it shall be automatically exercised in accordance with Sections 3(b) and 3(c) hereof (even if not surrendered) immediately before its expiration, involuntary termination or cancellation.

 

4.     Representations and Warranties of Holder and the Company

 

(a)   Representations and Warranties by Holder. The Holder represents and warrants to the Company with respect to this purchase as follows:

 

(i)            The Holder has substantial experience in evaluating and investing in private placement transactions of securities of companies similar to the Company so that the Holder is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its interests.

 

(ii)           Except for transfers to a Holder affiliate, the Holder is acquiring the Warrant and the Shares of Preferred Stock issuable upon exercise of the Warrant (collectively the “Securities”) for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof and with no present intention of offering or distributing such securities (or any portion thereof). The Holder understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”) by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein.

 

(iii)          The Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available. The Holder is aware of the provisions of Rule 144 promulgated under the Act.

 

(iv)          The Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

(v)           The Holder has had an opportunity to discuss the Company’s business, management and financial affairs with its management and an opportunity to review the Company’s facilities.

 

(b)   Company hereby represents and warrants to Holder that, [except as set forth in the schedule attached to this Warrant as Exhibit A (the “Disclosure Schedule”)], the statements in the following paragraphs of this Section 4(b) are true and correct (a) as of the date hereof and (b) except where any such representation and warranty relates specifically to an earlier date, as of the date of any exercise of this Warrant, provided that Company may, within ten (10) days of Holder providing notice of its intent to exercise this Warrant, update the Disclosure Schedule in writing, so long as the updates would have no material adverse effect on the value of the Securities (other than changes in value of the Securities that result from any future issuances by the Company of debt or equity securities) or the Holder’s ability to exercise its rights hereunder.

 

3

 

(i)            Corporate Organization and Authority. Company (a) is a corporation duly organized, validly existing, and in good standing in its jurisdiction of incorporation, (b) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted; and (c) is qualified as a foreign corporation in each jurisdiction where the failure to be so qualified would have or be reasonably expected to have a material adverse effect on the operations or financial condition of the Company.

 

(ii)           Corporate Power. Company has all requisite legal and corporate power and authority to execute, issue and deliver the Warrant, to issue the Preferred Stock issuable upon exercise or conversion of the Warrant, and to carry out and perform its obligations under the Warrant and any related agreements.

 

(iii)          Authorization; Enforceability. All corporate action on the part of Company, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of the Warrant and the Warrant Stock issuable upon exercise of the Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Company enforceable in accordance with its terms.

 

(iv)          Valid Issuance of Warrant and Preferred Stock. The Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. The Preferred Stock issuable upon conversion of this Warrant, when issued, sold and delivered in accordance with the terms of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Warrant and under applicable state and federal securities laws. Subject to applicable restrictions on transfer, the issuance and delivery of the Warrant and the Preferred Stock issuable upon conversion of the Warrant are not subject to any preemptive or other similar rights or any liens or encumbrances except as specifically set forth in Company’s Articles of Organization or this Warrant. The offer, sale and issuance of the Warrant and Preferred Stock, as contemplated by this Warrant, are exempt from the prospectus and registration requirements of applicable United States federal and state security laws, and neither Company nor any authorized agent acting on its behalf has or will take any action hereafter that would cause the loss of such exemption.

 

(v)           No Conflict with Other Instruments. The execution, delivery, and performance of this Warrant will not result in any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice (a) any provision of Company’s Articles of Organization or by-laws; (b) any provision of any judgment, decree, or order to which Company is a party or by which it is bound or an event which results in the creation of any material lien, charge or encumbrance upon any material assets of Company; (c) any contract, obligation, or commitment to which Company is a party or by which it is bound; or (d) any statute, rule, or governmental regulation applicable to Company.

 

(vi)          Capitalization. As of recent date, the authorized capital stock of Company consists of 70,000,000 shares of Common Stock, without par value, of which 6,172,272 were issued and outstanding, 86,000 shares of Series A

 

4

 

Convertible Preferred Stock, $10 par value, of which 0 shares were issued and outstanding, 6,000,000 shares of Series B Convertible Preferred Stock, without par value, of which 3,873,448 shares were issued and outstanding and 15,100,000 shares of Series C Convertible Preferred Stock, $.01 par value, of which 15,077,604 shares were issued and outstanding, 11,500,000 shares of Series D Convertible Preferred Stock, $.01 par value, of which 8,086,305 were issued and outstanding 15,000,000 shares of Series E Convertible Preferred Stock, $.01 par value, of which 14,444,444 shares were issued and outstanding. The outstanding shares have been duly authorized and validly issued (including, without limitation, issued in compliance with applicable federal and state securities laws), are fully paid and nonassessable. Company has reserved 43,586,814 shares of Common Stock for issuance upon conversion of the Preferred Stock. Except as set forth in Section 4(b) of the Disclosure Schedule, there are no outstanding warrants, options, conversion privileges, preemptive rights or other rights or agreements to purchase or otherwise acquire or issue any equity securities or Convertible Securities of Company, nor has the issuance of any of the aforesaid rights to acquire securities of Company been authorized.

 

(vii)         Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of Company is required in connection with the offer, sale or issuance of the Warrant, or the consummation of any other transaction contemplated hereby, except for the following: (a) the filing of a notice on Form D under the Act and b) the compliance with other applicable state securities laws, which compliance will have occurred within the appropriate time periods therefore. Based in part on the representations made by the Holder in Section 4(a) hereof, the offer, sale and issuance of the Warrant and the shares of Preferred Stock in conformity with the terms of this Warrant are exempt from the registration requirements of the Act and any applicable state laws.

 

5.     Legends.

 

(a)           Each certificate representing the Securities shall be endorsed with the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A “NO ACTION” LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

The Company need not enter into its stock records a transfer of Securities unless the conditions specified in the foregoing legend are satisfied. The Company may also instruct its transfer agent not to allow the transfer of any of the Shares unless the conditions specified in the foregoing legend are satisfied.

 

(b)   Removal of Legend and Transfer Restrictions. The legend relating to the Act endorsed on a certificate pursuant to paragraph 5(a) of this Warrant shall be removed and the Company shall

 

5

 

issue a certificate without such legend to the Holder of the Securities if (i) the Securities are registered under the Act and a prospectus meeting the requirements of Section 10 of the Act is available or (ii) the Holder provides to the Company an opinion of counsel for the Holder reasonably satisfactory to the Company, a no-action letter or interpretive opinion of the staff of the SEC reasonably satisfactory to the Company, or other evidence reasonably satisfactory to the Company, to the effect that public sale, transfer or assignment of the Securities may be made without registration and without compliance with any restriction such as Rule 144.

 

6.     Condition of Transfer or Exercise of Warrant. It shall be a condition to any transfer or exercise of this Warrant that at the time of such transfer or exercise, the Holder shall provide the Company with a representation in writing that the Holder or transferee is acquiring this Warrant and the shares of Preferred Stock to be issued upon exercise for investment purposes only and not with a view to any sale or distribution, or will provide the Company with a statement of pertinent facts covering any proposed distribution. As a further condition to any transfer of this Warrant or any or all of the shares of Preferred Stock issuable upon exercise of this Warrant, other than a transfer registered under the Act, the Company may request a legal opinion, in form and substance satisfactory to the Company and its counsel, reciting the pertinent circumstances surrounding the proposed transfer and stating that such transfer is exempt from the registration and prospectus delivery requirements of the Act. The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder. Each certificate evidencing the shares issued upon exercise of the Warrant or upon any transfer of the shares (other than a transfer registered under the Act or any subsequent transfer of shares so registered) shall, at the Company’s option, if the Shares are not freely saleable under Rule 144(k) under the Act, contain a legend in form and substance satisfactory to the Company and its counsel, restricting the transfer of the shares to sales or other dispositions exempt from the requirements of the Act. As further condition to each transfer, at the request of the Company, the Holder shall surrender this Warrant to the Company and the transferee shall receive and accept a Warrant, of like tenor and date, executed by the Company.

 

7.     Adjustment for Certain Events. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

 

(a) Reclassification or Merger. In case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant and other than a merger with another corporation that is a subsidiary of the Company for the purpose of relocating the Company’s jurisdiction of organization), or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the Holder a new Warrant (in form and substance satisfactory to the Holder of this Warrant), or the Company shall make appropriate provision without the issuance of a new Warrant, so that the Holder shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the

 

6

 

shares of Preferred Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change, merger or sale by a Holder of the number of shares of Preferred Stock then purchasable under this Warrant, or in the case of such a merger or sale in which the consideration paid consists all or in part of assets other than securities of the successor or purchasing corporation, at the option of the Holder, the securities of the successor or purchasing corporation having a value at the time of the transaction equivalent to the value of the Preferred Stock purchasable upon exercise of this Warrant at the time of the transaction. Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 7. The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers and transfers.

 

(b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Preferred Stock, the Warrant Price shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Warrant Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination.

 

(c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Preferred Stock payable in Preferred Stock, then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Preferred Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Preferred Stock outstanding immediately after such dividend or distribution; or (ii) make any other distribution with respect to Preferred Stock (except any distribution specifically provided for in Sections 7(a) and 7(b)), then, in each such case, provision shall be made by the Company such that the Holder of this Warrant shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were the Holder of the Preferred Stock (or Common Stock issuable upon conversion thereof) as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution.

 

(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter.

 

8.     Notice of Adjustments. Whenever any Warrant Price or the kind or number of securities issuable under this Warrant shall be adjusted pursuant to Section 7 hereof, the Company shall prepare a certificate signed by an officer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and number or kind of shares issuable upon

 

7

 

exercise of the Warrant after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by certified or registered mail, return receipt required, postage prepaid) within thirty (30) days of such adjustment to the Holder of this Warrant as set forth in Section 18 hereof.

 

9.     Transferability of Warrant. This Warrant is transferable on the books of the Company at its principal office by the registered Holder hereof upon surrender of this Warrant properly endorsed, subject to compliance with Section 6 and applicable federal and state securities laws. The Company shall issue and deliver to the transferee a new Warrant representing the Warrant so transferred. Upon any partial transfer, the Company will issue and deliver to Holder a new Warrant with respect to the Warrant not so transferred. Holder shall not have any right to transfer any portion of this Warrant to any direct competitor of the Company.

 

10.   Registration Rights. The Company grants registration rights to the Holder of this Warrant for any Common Stock of the Company obtained upon conversion of the Preferred Stock in parity to the registration rights granted to other holders of the Preferred Stock and agrees that the Holder of this Warrant shall be added as a party to that certain Investor Rights Agreement dated as of December 11, 2003 of the Company (the “Investor Rights Agreement”), and that the Shares shall be made “Registrable Shares” under the Investor Rights Agreement.

 

11.   No Fractional Shares. No fractional share of Preferred Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional share the Company shall make a cash payment therefor upon the basis of the Warrant Price then in effect.

 

12.   Charges, Taxes and Expenses. Issuance of certificates for shares of Preferred Stock upon the exercise of this Warrant shall be made without charge to the Holder for any United States or state of the United States documentary stamp tax or other incidental expense with respect to the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder.

 

13.   No Shareholder Rights Until Exercise. This Warrant does not entitle the Holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof.

 

14.   Registry of Warrant. The Company shall maintain a registry showing the name and address of the registered Holder of this Warrant. This Warrant may be surrendered for exchange or exercise, in accordance with its terms, at such office or agency of the Company, and the Company and Holder shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

 

15.   Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant, having terms and conditions substantially identical to this Warrant, in lieu hereof.

 

8

 

16.   Miscellaneous.

 

(a) Issue Date. The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by the Company on the date hereof.

 

(b) Successors. This Warrant shall be binding upon any successors or assigns of the Company.

 

(c) Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Connecticut.

 

(d) Headings. The headings used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant.

 

(e) Saturdays, Sundays, Holidays. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday in the State of Connecticut, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

 

(f) Waiver of Jury Trial. Each of the parties hereto hereby waives to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Warrant or the Shares.

 

(g) Attorney’s Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.

 

17.   No Impairment. The Company will not, by amendment of its Articles of Organization or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder hereof against impairment.

 

18.   Addresses. Any notice required or permitted hereunder shall be in writing and shall be mailed by overnight courier, registered or certified mail, return receipt required, and postage prepaid, or otherwise delivered by hand or by messenger, addressed as set forth below, or at such other address as the Company or the Holder hereof shall have furnished to the other party.

 

	
If   to the Company:
    	
 
    	
Merrimack   Pharmaceuticals, Inc.
    
	
 
    	
 
    	
One   Kendall Square, Bldge 700, 2nd Fl.
    
	
 
    	
 
    	
Cambridge,   MA 02139
    
	
 
    	
 
    	
Attn:
    
	
 
    	
 
    	
 
    
	
If   to the Holder.
    	
 
    	
General   Electric Capital Corporation
    
	
 
    	
 
    	
83   Wooster Heights Road
    
	
 
    	
 
    	
Danbury,   CT 06810
    
	
Attn:
    	
 
    	
Credit   Manager-Life Science Finance
    

 

9

 

IN WITNESS WHEREOF, Merrimack Pharmaceuticals, Inc. has caused this Warrant to be executed by its officers thereunto duly authorized.

 

	
Dated   as of November 22, 2006.
    	
By:
    	
/s/   Robert J. Mulroy
    
	
 
    	
Name:
    	
Robert   J. Mulroy
    
	
 
    	
Title:
    	
President &   CEO
    

 

10

 

NOTICE OF EXERCISE
 TO:

 

1.                                       The undersigned Warrantholder (“Holder”) elects to acquire shares of the Series C Convertible Preferred Stock (the “Preferred Stock”) of Merrimack Pharmaceuticals, Inc., (the “Company”), pursuant to the terms of the Stock Purchase Warrant dated              , 200  , (the “Warrant”).

 

2.             The Holder exercises its rights under the Warrant as set forth below:

 

(        )             The Holder elects to purchase              shares of Preferred Stock as provided in Section 3(a) and tenders herewith a check in the amount of $            as payment of the purchase price.

 

(        )             The Holder elects to convert the purchase rights into shares of Preferred Stock as provided in Section 3(b) of the Warrant.

 

3.             The Holder surrenders the Warrant with this Notice of Exercise.

 

The Holder represents that it is acquiring the aforesaid shares of Preferred Stock for investment and not with a view to or for resale in connection with distribution and that the Holder has no present intention of distributing or reselling the shares.

 

Please issue a certificate representing the shares of the Preferred Stock in the name of the Holder or in such other name as is specified below:

 

Name:

Address:

 

 

Taxpayer I.D.:

 

 

	
 
    	
 
    
	
 
    	
(Holder)
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Date:

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