Exhibit 10.38


 


MERGER AGREEMENT


 


This Merger
Agreement (this “Agreement”) is dated October 15, 2003 (the “Effective
Date”), and is by and among Developmental Therapeutics, Inc., a company
duly organized and existing under the laws of the State of Delaware, having a
place of business located at 801 Brickell Avenue, Suite 942, Miami, Florida
33131 (hereinafter referred to as “DTI”), Titan Pharmaceuticals, Inc., a
company duly organized and existing under the laws of the State of Delaware,
having a place of business located at 400 Oyster Point Blvd., Suite 505, South
San Francisco, CA 94080 (hereinafter referred to as “Titan”),
Developmental Therapeutics Acquisition Corp., a company duly organized and
existing under the laws of the State of Delaware, having a place of business
located at 400 Oyster Point Blvd., Suite 505, South San Francisco, CA 94080
(hereinafter referred to “Acquisition Sub”), and Steve H. Kanzer and
Nicholas Stergis (each a “Founder” and collectively, the “Founders”).


 


RECITALS


 


WHEREAS, the respective
Boards of Directors of each of Titan, Acquisition Sub and DTI have determined
that it is in the best interests of their respective companies and stockholders
that Acquisition Sub merge with and into DTI (the “Merger”) with DTI
being the surviving corporation;


 


WHEREAS, Titan, as
the sole stockholder of Acquisition Sub, has approved this Agreement, the
Merger and the transactions contemplated by this Agreement pursuant to action
taken by written consent in accordance with the requirements of the Delaware
General Corporation Law (“DGCL”) and the Bylaws of Acquisition Sub;


 


WHEREAS, the
Founders and the other individuals listed on Appendix A (collectively with the
Founders, the “DTI Stockholders”) as holders of 100% of the outstanding
capital stock of DTI on a fully-diluted basis giving effect to the exercise or
conversion of all outstanding options, warrants or other convertible securities
of DTI (the “DTI Convertible Securities”) have approved this Agreement,
the Merger and the transactions contemplated by this Agreement pursuant to
action taken by written consent in accordance with the requirements of DGCL and
the Bylaws of DTI;


 


WHEREAS, pursuant
to the Merger, among other things, the outstanding shares of common stock and
preferred stock of DTI shall be converted into the right to receive upon
Closing (as hereinafter defined) and thereafter, the Merger Consideration (as
hereinafter defined); and


 


WHEREAS, as a
condition to entering into this Agreement and consummating the Merger, Titan
and Acquisition Sub require that no DTI Convertible Securities be outstanding
at the Effective Time (as hereinafter defined).


 


WHEREAS, the
parties to this Agreement intend that the Merger qualify as a “reorganization,”
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the “Code”), and that Titan, Acquisition Sub and DTI will each
be a “party to a reorganization,” within the meaning of Section 368(b) of the
Code, with respect to the Merger.


 





















 


NOW THEREFORE, the
parties hereto hereby agree as follows:


 


ARTICLE 1.


THE MERGER


 


1.1.                              The
Merger. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL, Acquisition Sub shall be merged
with and into DTI at the Effective Time (as defined in Section 1.3). Following
the Effective Time, DTI shall be the surviving corporation (the “Surviving
Corporation”) and shall succeed to and assume all the rights and
obligations of DTI and Acquisition Sub in accordance with the DGCL.


 


1.2.                              The
Closing.  The closing of the Merger
(the “Closing”) shall occur contemporaneously with the filing of the
Certificate of Merger in the form attached as Exhibit A (the “Certificate of
Merger”) with the Secretary of State of Delaware.


 


1.3.                              The
Effective Time.  As soon as is
practicable following the signing of this Agreement, the parties shall file a
copy of the Certificate of Merger executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL.  The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Delaware Secretary of State (the time the Merger becomes effective being
hereinafter referred to as the “Effective Time”).


 


1.4.                              The
Merger Consideration.  As of the
Effective Time, as a result of the Merger and without any other action on the
part of the stockholders, all of the outstanding shares of common stock, $0.001
par value per share, of Acquisition Sub (the “Acquisition Sub Common Stock”)
shall be converted into shares of common stock of the Surviving Corporation
(the “DTI Common Stock”) and all of the shares of DTI outstanding
immediately prior to the Effective Time shall, at the Effective Time, by virtue
of the Merger and without any action on the part of the stockholders, be
automatically converted into the First Shares (as hereinafter defined) and,
subject to achievement of a Trigger Event (as hereinafter defined), the
Contingent Shares (as hereinafter defined) (collectively, the “Merger
Consideration”) by virtue of the Merger and without any action on the part
of the DTI Stockholders, and be converted into the right of the DTI
Stockholders and the Arizona Board of Regents on behalf of the University of
Arizona (“UA”) to receive that portion of the Merger Consideration set
forth across from their names in Appendix A. 
Fractional shares shall be rounded up or down to the nearest whole
number.


 


The Merger
Consideration shall be:


 


(a)                                  An
aggregate of one million one hundred eighty-seven thousand five hundred
(1,187,500) unregistered newly issued shares (the “First Shares”) of
Titan common stock, par value $.001 per share (“Titan Common Stock”), to
be issued and delivered to the DTI Stockholders at the Effective Time (the “First
Closing”) in accordance with Appendix A;


 


(b)                                 $171,250
to be issued and delivered to UA at the First Closing;


 


(c)                                  An
aggregate of seven hundred twelve thousand five hundred (712,500) unregistered
newly issued shares (the “Contingent Shares”) of Titan Common Stock,
subject to stock splits, stock dividends, reclassifications, recapitalizations,
reorganizations and other similar events between the date hereof and the Second
Closing (as defined below), to be issued and 


 


2





















 


delivered to the DTI
Stockholders in accordance with Appendix A within thirty (30) days after the
first of the following events (each, a “Trigger Event”): (i) Positive
Scientific Results from a Pivotal Clinical Trial incorporating the DITPA
Product, (ii) Titan, Survivor Corporation or an assignee thereof entering into
an exclusive, semi-exclusive or non-exclusive agreement with a third party to
market or sell the DITPA Product in a Major Territory, (iii) the acceptance of
an NDA filing with any regulatory agency of any country incorporating the DITPA
Product or (iv) a change of control of Titan or the Surviving Corporation, an
assignee or successor thereof, or any entity having rights to the DITPA
Product, in which a single entity or group of related entities, acquires, or gains
the right to acquire, directly or indirectly, an interest in DTI or Titan,
including their successors and affiliates, of greater than fifty percent (50%)
in either entity, directly or in the aggregate (the earlier such date shall be
referred to herein as the “Second Closing”); provided, however, that if
no Trigger Event occurs on or prior to the fifth anniversary of the Effective
Time, the DTI Stockholders shall have no right to receive the Contingent
Shares;


 


(d)                                 Either
$102,750 or thirty-seven thousand five hundred (37,500) shares of Titan Common
Stock (the “UA Shares”) to be issued and delivered to UA at the Second
Closing if a Trigger Event occurs on or prior to the fifth anniversary of the
Effective Time, the form of contingent merger consideration to be at the sole
discretion of UA. The term Contingent Shares as used herein shall include the
UA Shares if issued pursuant to this Section 1.4(d).


 


1.5.                              Registration
Rights.  Titan shall, at its own
expense (excluding underwriting commissions and discounts), file within one
hundred and eighty (180) days after the Effective Time with the Securities and
Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as
amended (the “1933 Act”), registering the First Shares for public resale
and shall use its best efforts to cause such registration statement to be
declared effective by the SEC within sixty (60) days thereafter.  Within ninety (90) days following the
achievement of a Trigger Event (provided the Trigger Event occurs on or prior
to the fifth anniversary of the Effective Time), Titan shall file a
registration statement with the SEC covering the Contingent Shares. Titan shall
use its best efforts to keep each of such registration statements effective for
a period not exceeding the earlier of (i) the second anniversary of the date on
which such registration statement is declared effective by the SEC, (ii) the
date on which the First Shares or the Contingent Shares, as applicable, may be
sold without restriction by the volume limitations of Rule 144(e) of the 1933
Act or (iii) such time as all of the First Shares or the Contingent Shares, as
applicable, included in such registration statement have been sold pursuant
thereto. The registration rights under this Section 1.5 shall not be assignable
except to family trusts or controlled affiliates.


 


1.6.                              The
Surviving Corporation.  The
Certificate of Incorporation and bylaws of Acquisition Sub as in effect at the
Effective Time shall be the Certificate of Incorporation and bylaws of the
Surviving Corporation until duly amended in accordance with applicable Law. The
officers and directors of Acquisition Sub shall be the officers and directors
of the Surviving Corporation until their successors are duly elected.  The Merger shall have the effects set forth
in Section 259 of the DGCL.


 


1.7.                              Legends
and Restrictions.  The stock
certificates for the Titan Common Stock to be issued to the DTI Stockholders
shall be imprinted with a conspicuous legend in substantially the following
form (unless otherwise permitted under this Agreement):


 


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THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS, AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED, OR ASSIGNED EXCEPT (i) PURSUANT TO
REGISTRATIONS UNDER APPLICABLE SECURITIES LAWS, OR (ii) IF, IN THE OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THE PROPOSED TRANSFER MAY BE
EFFECTED IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS WITHOUT REGISTRATION.


 


Upon
the request of a DTI Stockholder or any successor holder of Titan Common Stock,
accompanied by an opinion of counsel selected by the DTI Stockholder or
successor holder, which opinion and other counsel are reasonably satisfactory
to Titan, to the effect that a transfer by the holder will not violate the 1933
Act or applicable state or other securities laws, Titan shall remove the legend
from the Titan Common Stock held by the holder or shall issue to the holder a
new certificate for Titan Common Stock without the transfer legend. Titan
agrees that Edwards & Angell, LLP shall be acceptable counsel for the
purposes of this Section 1.7


 


1.8.                              Tax
Intent of the Parties.  It is the
intention of the parties that the Merger be treated as a reorganization
qualifying under Section 368(a) of the Internal Revenue Code of 1986, as
amended.  The parties shall use their
best efforts to take all reasonable actions necessary to cause the Merger to
qualify as a reorganization pursuant to such section and shall treat the Merger
accordingly on their respective tax returns.


 


1.9.                              Pivotal
Clinical Trial. Titan shall use its commercially reasonable efforts to
complete a Pivotal Clinical Trial within five years of the Effective Time.


 


ARTICLE 2.


REPRESENTATIONS AND
WARRANTIES OF THE FOUNDERS


 


Each of the
Founders jointly and severally represent and warrant to Titan and Acquisition
Sub that to his actual present knowledge, except as otherwise disclosed on a
Schedule attached hereto:


 


2.1.                              DTI
Assets. Subject to the terms of this Agreement, at the Closing (as
hereinafter defined), DTI has good and proper title free and clear of any Liens
and to the following list of assets owned by DTI, which constitute
substantially all of DTI’s assets (collectively, the “DTI Assets”):


 


(a)                                  Exclusive
License Agreement dated June 19, 2003 and as amended, between DTI and UA
relating to United States Patent No. 6,534,676 B2, issued March 18, 2003 and
United States Patent Application Serial Number 10/368,755, filed February 18,
2003 (the “UA License”) previously delivered to Titan;


 


(b)                                 Consulting
Agreement dated July 22, 2003 between Eugene Morkin, M.D. and DTI previously
delivered to Titan;


 


4





















 


(c)                                  Consulting
Agreement dated July 29, 2003 between Steven Goldman, M.D. and DTI previously
delivered to Titan;


(d)                                 Inventory
of the tangible assets owned by DTI and specifically listed in the schedule of
assets attached hereto as Exhibit B; and


 


(e)                                  Scientific
Advisory Board Agreement dated September 4, 2003 between Jay N. Cohn and DTI
previously delivered to Titan.


 


2.2.                              Organization;
Qualification.  DTI is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with full corporate power and authority to own all of its
properties and assets and carry on its business as it is currently being
conducted. DTI is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
property it owns, leases or operates requires it to so qualify, except where
the failure to be so qualified or in good standing in such jurisdiction would
not have a Material Adverse Effect on DTI. As used in this Agreement, “Material
Adverse Effect,” with respect to DTI or Titan, means a material adverse
effect on the business, properties, assets, operations, condition (financial or
otherwise) of such entity taken as a whole, or on the authority or ability of
DTI or Titan, as the case may be, to perform its obligations under this Agreement.
Complete and correct copies of the Certificate of Incorporation and by-laws of
DTI as currently in effect have been delivered to Titan.  DTI has no subsidiaries.   DTI has not assumed by merger, contract,
assignment or assumption any Liability of any other Person.


 


2.3.                              Authorization.  DTI and each Founder have all requisite power
and authority, corporate or otherwise, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by DTI have been
duly authorized by the board of directors of DTI and all of the DTI
Stockholders and no other proceedings on the part of DTI are necessary with
respect thereto.  Assuming that Titan has
duly authorized the execution and delivery of this Agreement, this Agreement
constitutes the legal, valid and binding obligation of DTI and the Founders,
enforceable in accordance with its terms, except as enforceability may be
limited by (a) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar Law affecting creditors’ rights generally or (b) general
principles of equity, whether considered in a proceeding in equity or at law.


 


2.4.                              Consents
and Approvals.  Except for the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware, neither DTI nor either Founder is required to obtain any material
permit, make any filing with, or obtain the consent of any Governmental
Authority, any party to any DTI Contract, or any other Person in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.


 


2.5.                              Capitalization.  The authorized, issued and outstanding
capital stock of the Company is as set forth in Schedule 2.5 attached hereto.
Except as set forth in Schedule 2.5 there are no
outstanding subscriptions, options, rights, warrants, convertible securities or
other agreements (other than this Agreement) or calls, demands or commitments
of any kind relating to the issuance, sale or transfer of any capital stock or
other equity securities of DTI, whether directly or upon the exercise or
conversion of other securities.


 


5





















 


2.6.                              No
Violations.  DTI’s execution and
delivery of this Agreement and performance by DTI of its obligations under this
Agreement do not (a) violate any provision of the certificate of incorporation
or by-laws of DTI, (b) conflict with, result in a breach of, constitute a default
under (or an event that, with notice or lapse of time or both, would constitute
a default under), accelerate the performance required by, result in the
creation of any Lien upon any of the properties or assets of DTI under, or
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under or adversely affect the rights or obligations of
Surviving Corporation under, any contract to which either DTI or a Founder is a
party or by which any properties or assets of DTI or a Founder are bound, or
(c) violate any Law or Order currently in effect to which DTI or a Founder is
subject, in each case where such conflict, breach or violation would have a
Material Adverse Effect on DTI.


 


2.7.                              Contracts.  DTI has made available to Titan a true
correct and complete copy of each DTI contract included as a DTI Asset (the “DTI
Contracts”), all of which contracts are set forth on Schedule 2.7
hereto.  Each DTI Contract is in full
force and effect and is valid and enforceable in accordance with its
terms.  DTI is not in default under any
DTI Contract, and no event or circumstance has occurred that would, with notice
or lapse of time or both, constitute an event of default under any DTI Contract
where such default would have a Material Adverse Effect on DTI.


 


2.8.                              Balance
Sheet.  DTI has delivered to Titan
the unaudited balance sheet of DTI as at October 15, 2003 (the “Balance
Sheet”). Except as set forth in the Balance Sheet, DTI does not have any
Liabilities of a nature and type required to be set forth on a balance sheet
prepared in accordance with GAAP or in the footnotes thereto.


 


2.9.          Intellectual
Property Rights.


 


(a)                                  Set
forth in Schedule 2.9 is a true and complete list of (i) all of DTI’s U.S.
patents, trademark registrations and applications, and copyright applications
and registrations and (ii) all material agreements to which DTI is a party
granting or obtaining any rights under, or by their terms expressly restricting
DTI’s rights to use, any intellectual property, other than generic or standard
agreements (including agreements for commercially-available, off-the-shelf
software) pursuant to which any such intellectual property is licensed to DTI
(collectively, the “DTI Intellectual Property”). No written claim of
invalidity or ownership with respect to any DTI Intellectual Property has been
made by a third party, and such DTI Intellectual Property is not the subject of
any threatened or pending legal proceeding. 
No individual or entity has asserted in writing that, with respect to
the DTI Intellectual Property, DTI or a licensee of DTI is infringing or has
infringed any United States or foreign patent, trademark, service mark, trade
name, copyright or other intellectual property right of any third party, or has
misappropriated or improperly used or disclosed any trade secret, confidential
information or know-how of any third party. The use of the DTI Intellectual
Property by DTI does not infringe in any material respect any United States or
foreign patent, trademark, service mark, trade name, copyright or other
intellectual property right of any third party, and does not involve the
misappropriation or improper use or disclosure of any trade secrets,
confidential information or know-how of any third party.  Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on DTI, DTI
has not taken any action that would result in the voiding or invalidation of
any of the DTI Intellectual Property.


 


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(b)                                 DTI
is the exclusive licensee of the licensed subject matter under the UA Agreement
(the “Licensed IP”) and has not entered into any sublicense or
assignment agreement with respect to, or otherwise directly or indirectly
conveyed to any Person any interest in any of, the Licensed IP. Neither DTI nor
any DTI Stockholder has assigned, transferred, conveyed or otherwise encumbered
its right, title and interest in the UA Agreement or any Licensed IP or
Intellectual Property or entered into any agreement with any Third Party with respect to the UA Agreement or any
Licensed IP which is in conflict with this Agreement. There is no current event
of default or other breach or default, and no event which with the giving of
notice or the lapse of time or both would constitute an event of default or
other breach or default, on the part of DTI under the UA agreement, which
default or breach would reasonably be expected to have a Material Adverse
Effect on DTI.


 


2.10.                        Compliance
With FDA and FDCA.


 


(a)                                  DTI
holds all material Licenses (as hereinafter defined) from, and has submitted
notices to, all governmental entities (including, without limitation, all
authorizations under the Federal Food, Drug and Cosmetic Act of 1938, as
amended (the “FDCA”), and all regulations of the United States Food and
Drug Administration (the “FDA”)) necessary for the lawful conduct of its
business, and has complied with and is not in default in any material respect
under any applicable law, statute, order, rule, regulation, policy and/or
guideline of any Governmental Authority relating to DTI (other than where such
default or noncompliance will not result in a Material Adverse Effect) and DTI
has not received written notice of violation of, and does not know of any
violations of, any of the above. Titan acknowledges that the IND relating to
the DIPTA Product is not in the name or under the control of DTI.


 


(b)                                 DTI
has not received any written notice from the FDA or any other governmental
entity that all biological and drug products being manufactured, distributed or
developed by DTI or any preclinical or clinical trial conducted to date by or
on behalf of DTI fails to meet the protocols requested by the FDA or otherwise
necessary for inclusion as part of any IND or NDA submission to the FDA. DTI
has made available to Titan all correspondence between DTI and the FDA through
the date of this Agreement and shall make available to Titan any additional
correspondence sent or received through the Effective Time.


 


(c)                                  DTI
has not committed any act, made any statement or failed to make any statement
that would reasonably be expected to provide a basis for the FDA to invoke its
policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery,
and Illegal Gratuities” set forth in 56 Fed. Reg. 46191 (September 10, 1991)
and any amendments thereto. Additionally, neither DTI nor any employee of DTI
has been convicted of any crime or engaged in any conduct that would reasonably
be expected to result in (i) debarment under 21 U.S.C. Section 335a or any
similar state Law or regulation or (ii) exclusion under 42 U.S.C. Section
1320a-7 or any similar state Law or regulation.


 


For purposes of
this Agreement, “Licenses” means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises, clearances and
similar consents granted or issued by any governmental or regulatory authority.


 


2.11.                        Litigation. There is no suit, claim, action, proceeding, hearing,
notice of violation, demand letter or investigation (each, an “Action”)
pending or threatened against DTI or any executive officer or director of DTI
(in their capacity as such) or their respective businesses,


 


7





















 


properties or assets,
including, without limitation, an Action to enjoin, in whole or in part, the
Merger.


 


2.12.                        No
Brokers or Finders. 
The Founders and DTI have not, and their respective Affiliates,
officers, directors or employees have not, employed any broker or finder or
incurred any liability for any brokerage or finder’s fee or commissions or
similar payment in connection with the Merger.


 


2.13.                        Investment
Representations.


 


(a)                                  Each
DTI Stockholder is an “accredited investor” within the meaning of Rule 501 of
Regulation D under the 1933 Act.  Each
DTI Stockholder has sufficient knowledge and experience in investing in
companies similar to Titan so as to be able to evaluate the risks and merits of
an investment in Titan Common Stock. 
Each DTI Stockholder is able to financially bear the risks of loss of
its entire investment in Titan Common Stock issuable hereunder.


 


(b)                                 Each
DTI Stockholder is acquiring the shares of Titan Common Stock for his or her
own account as principal, and not as nominee or agent, for investment purposes
and not with a view to or for sale in connection with any distribution thereof
except for any distribution in compliance with the registration provisions of
the 1933 Act.


 


(c)                                  Each
DTI Stockholder understands that the shares of Titan Common Stock being
acquired by him or her have not been registered for sale under the 1933 Act or
qualified under any other applicable federal or state securities laws and that
the shares of Titan Common Stock being acquired by him or her are being offered
and sold to him or her pursuant to one or more exemptions from the registration
or qualification requirements of such securities laws and that the
representations and warranties contained in this Section 2.13 are given with
the intention that Titan may rely thereon for purposes of claiming such
exemptions.


 


(d)                                 Each
DTI Stockholder owns of record and beneficially all of his or her shares of DTI
Common Stock free and clear of all Liens.


 


ARTICLE 3.


REPRESENTATIONS OF TITAN
AND ACQUISITION SUB


 


Titan and
Acquisition Sub each represent to DTI and the Founders as follows:


 


3.1.                              Organization;
Qualification.  Titan is a
corporation validly existing and in good standing under the laws of the State
of Delaware with full corporate power and authority to own all of its
properties and assets and carry on its business as it is currently being
conducted. Acquisition Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware with full
corporate power and authority to own all of its properties and assets and carry
on its business as it is currently being conducted.


 


3.2.                              Authorization.  Titan and Acquisition Sub each have the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Titan and
Acquisition Sub have each been duly


 


8





















 


authorized by the board
of directors of Titan and Acquisition Sub, respectively, and no other
proceedings on the part of Titan or Acquisition Sub are necessary with respect
thereto.  Assuming that DTI has duly
authorized the execution and delivery of this Agreement, this Agreement
constitutes the valid and binding obligation of Titan and Acquisition Sub,
enforceable in accordance with its terms, except as enforceability may be
limited by (a) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar Law affecting creditors’ rights generally or (b) general
principles of equity, whether considered in a proceeding in equity or at law.


 


3.3.                              Consents
and Approvals.  Neither Titan nor
Acquisition Sub are required to obtain any permit, make any filing with, or
obtain the consent of any Governmental Authority or any other Person in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.


 


3.4.                              No
Violations.  Assuming the accuracy of
the representations of the DTI Stockholders set forth herein, Titan and
Acquisition Sub’s execution and delivery of this Agreement and performance by
it of its obligations under this Agreement do not (a) violate any provision of
the certificate of incorporation or by-laws of Titan or Acquisition Sub, (b)
conflict with, result in a breach of, constitute a default under (or an event
that, with notice or lapse of time or both, would constitute a default under),
accelerate the performance required by, result in the creation of any Lien upon
any of the properties or assets of Titan or Acquisition Sub under, or create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under, any Contract to which Titan or Acquisition Sub is a party or by
which any properties or assets of Titan or Acquisition Sub are bound, or (c)
violate any Law or Order currently in effect to which Titan or Acquisition Sub
is subject, in each case where such conflict, breach or violation would have a
Material Adverse Effect on Titan or Acquisition Sub.


 


ARTICLE 4.


INDEMNIFICATION


 


4.1.                              Indemnification.  Subject to the
limitations of Sections 4.2 and 4.3 hereof:


 


(a)                                  The
Founders jointly and severally agree to indemnify, defend and hold Titan and
its Affiliates, subsidiaries (including the Surviving Corporation), officers,
directors, employees or agents thereof (collectively, the “Titan Indemnified
Parties”) harmless from and against and in respect of any and all
out-of-pocket loss, cost, expense, liability or claim (including reasonable
attorneys’ fees and other costs and expenses) (all of the foregoing
collectively, “Losses”), resulting from or arising in connection with
any material misrepresentation or material breach of warranty on the part of
DTI or the Founders under the terms of this Agreement. For purposes of this
Agreement, Losses shall specifically exclude any special, incidental, indirect,
consequential or similar damages (including but not limited to damages for
indirect loss of profits, loss of business reputation or the like).


 


(b)                                 Titan
agrees to indemnify, defend and hold the Founders and DTI (the “DTI
Indemnified Parties”) harmless from and against any and all Losses
resulting from any misrepresentation or breach of warranty or covenant on the
part of Titan or Acquisition Sub under the terms of this Agreement or in any
certificate delivered hereunder or pursuant hereto or non-fulfillment of any
agreement on the part of Titan under the terms of this Agreement.


 


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4.2.                              Limitation
on Liability and Recourse.


 


(a)                                  With
respect to any claim for indemnification under this Agreement, neither the
Founders, on the one hand, nor Titan, on the other hand, shall be liable to the
other for indemnification unless the aggregate amount of the damages incurred
by the other as a result of such breach exceeds the sum of $100,000 (whereupon
such Party shall be liable for the amount of such damages in excess of
$100,000).


 


(b)                                 Notwithstanding
anything contained herein to the contrary, the Founders’ shall not be liable to
the Titan Indemnified Parties for any breach of a representation or warranty
contained in this Agreement that was known or should have been known to Titan
prior to the First Closing. Titan shall be imputed with knowledge of a
misrepresentation or breach of warranty if the correct information is set forth
in any document delivered to Titan prior to the First Closing by any DTI
Stockholder, UA or any Person performing due diligence on DTI on behalf of
Titan.


 


(c)                                  Notwithstanding
anything contained herein to the contrary, the Founders’ aggregate liability to
all Titan Indemnified Parties for all indemnity obligations hereunder shall not
exceed $3,425,000 ($5,480,000 if the Contingent Shares have been issued), which
liability shall be satisfied, at the option of the Founders, by the delivery to
the Titan Indemnified Parties of cash and/or such number of First Shares or
Contingent Shares which shall equal such liability (which First Shares shall be
valued, for purposes hereof, at the closing price of Titan Common Stock as
reported on the American Stock Exchange (the “Closing Price”) on the
date of the First Closing and which Contingent Shares shall be valued at the
higher of (x) the Closing Price on the date of the First Closing (y) the
Closing Price on the date of the Second Closing). Titan shall have no right, in
equity or otherwise, to set off, withhold, reacquire or limit the
transferability of the First Shares under this Agreement.


 


4.3.                              Termination
of Indemnity Obligations. The indemnity obligations of the Founders under
Section 4.1(a) and of Titan under Section 4.1(b) shall terminate on such date
that is 12 months after the Closing except (i) as to matters as to which the
applicable indemnified party has made a claim for indemnification on or prior
to such date specifically addressing an actual claim or demand and (ii) with
respect to any fraudulent or intentional breach of a representation or warranty
contained in this Agreement or any Schedule attached hereto.  The obligation to indemnify referred to in:


 


(a)                                  the
preceding clause (i) shall survive the expiration of such period until such
claims are finally resolved and any obligations with respect thereto are fully
satisfied; and


 


(b)                                 the
preceding clause (ii) shall terminate on such date that is 24 months after the
Effective Time.


 


4.4.                              Third
Party Claims.


 


(a)                                  In
the case of any claim asserted by a Third Party against a Party entitled to
indemnification under this Agreement (the “Indemnified Party”), notice
shall be given by the Indemnified Party to the Party required to provide
indemnification (the “Indemnifying Party”) promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and the Indemnified Party shall permit the Indemnifying Party (at
the expense of


 


10





















 


such Indemnifying Party)
to assume the defense of any claim or any litigation resulting therefrom,
provided that (i) the counsel for the Indemnifying Party who shall conduct the
defense of such claim or litigation shall be reasonably satisfactory to the
Indemnified Party, (ii) the Indemnified Party may participate in such defense
at such Indemnified Party’s expense, and (iii) the omission by any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its indemnification obligation under this Agreement except to the
extent that such Indemnifying Party is materially damaged as a result of such
failure to give notice.  After notice
from the Indemnifying Party to such Indemnified Party of its election so to
assume the defense of the claim or litigation, the Indemnifying Party shall not
be liable to such Indemnified Party under Section 4.1(a) or 4.1(b) for any fees
of other counsel or any other expenses, in each case subsequently incurred by
such Indemnified Party in connection with the defense thereof, other than
reasonable costs of investigation.  If an
Indemnifying Party assumes the defense of such an action, (i) no compromise or
settlement thereof may be effected by the Indemnifying Party without the
Indemnified Party’s consent (which shall not be unreasonably withheld) unless
(x) there is no finding or admission of any violation of law or any violation
of the rights of any person and no effect on any other claims that may be made
against the Indemnified Party and (y) the sole relief provided is monetary
damages that are paid in full by the Indemnifying Party and (ii) the
Indemnifying Party shall have no liability with respect to any compromise or
settlement thereof effected without its consent (which shall not be
unreasonably withheld).  If notice is
given to an Indemnifying Party of the commencement of any action and it does
not, within 30 days after the Indemnified Party’s notice is given, give notice
to the Indemnified Party of its election to assume the defense thereof, the
Indemnifying Party shall be bound by any determination made in such action or
any compromise or settlement thereof effected by the Indemnified Party.  Pending notification from the Indemnifying
Party as to whether it will assume the defense of a claim, the Indemnified
Party will not incur or agree to incur expenses (whether of investigation,
defense or otherwise) with respect to such claim in excess of $5,000 without
giving the Indemnifying Party ten (10) days prior notice of such incurrence or
agreement.


 


(b)                                 Notwithstanding
the provisions of Section 4.4(a),  if in
the reasonable judgment of the Indemnified Party, based upon written advice of
counsel that there are one or more legal defenses available to it which are
different from or in addition to those available to the Indemnifying Party, a
conflict of interest may exist, such Indemnified Party may, by notice to the
Indemnifying Party, employ separate counsel at the Indemnified Party’s sole
cost and expense and may participate in the defense, compromise or settlement
of such action, but the Indemnifying Party shall not be bound by any compromise
or settlement thereof effected without its consent (which shall not be
unreasonably withheld).


 


(c)                                  The
Indemnifying Party and the Indemnified Party shall cooperate in the defense of
any claim or litigation subject to this Section 4.4 and the records of each
shall be available to the other with respect to such defense.


 


ARTICLE 5.


MISCELLANEOUS


 


5.1.                              Definition
of Certain Terms. When used in this Agreement, the following terms shall
have the following meanings:


 


11





















 


“Affiliate”
means an individual or entity controlled by or under common control with a
party.


 


“Know-how”
means all tangible information related to an DITPA Product and pharmacological,
toxicological, clinical, analytical, and quality control data, and regulatory
information, including but not limited to formulations, materials, data,
drawings and sketches, designs, testing and test results, and other regulatory
information of a like nature, owned by or licensed to DTI and which DTI has a
right to disclose.


 


“DITPA Product”
means a product containing (a) 3,5-Diiodothyropropionic Acid (DITPA), its
metabolites, or analog thereof, or (b) forms of once-daily DIPTA that are, or
that may be, described in patent application (included as an attachment to
Exhibit C hereto), as an active ingredient for any human or animal use.


 


“GAAP” means generally accepted accounting principles in the
United States.


 


“Governmental
Authority” means any governmental or regulatory body, or political
subdivision thereof, whether federal, state, local or foreign, or any agency,
instrumentality or authority.


 


“Law” means
any laws, statutes, ordinances, regulations, rules, and orders of any
Governmental Authority.


 


“Liability”
means any direct or indirect liability, indebtedness, obligation, commitment,
expense, claim, deficiency, guaranty or endorsement of or by any Person of any
type, whether accrued, absolute, contingent, matured or unmatured.


 


“Lien”
means, with respect to the assets or property of any Person, any claim, lien,
security interest, deed of trust, mortgage, encumbrance or charge of any kind,
excluding statutory liens for taxes not yet due, in favor of any other Person,
whether voluntarily incurred or arising by operation of law, and includes,
without limitation, any agreement to give any of the foregoing in the future,
and any contingent sale or other title retention agreement or lease in the
nature thereof.


 


“Order”
means any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, arbitral tribunal,
administrative agency, or other Governmental Authority.


 


“Party” means any of Titan, Acquisition Sub, DTI and each of the
Founders.


 


“Person”
means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Authority or other entity.


 


“Pivotal
Clinical Trial” means any of the following: (i) a Phase III clinical trial,
(ii) a trial or study identified by Titan in any public filing or press release
as “pivotal” or (iii) a trial that the FDA has indicated may potentially serve
as one of two pivotal studies or the sole pivotal study for submission of an
NDA.


 


“Positive
Scientific Results” means achievement of a clinical trial’s primary
endpoint as evidenced by a p value of .05 or less.


 


12





















 


“Major
Territory” means any of the following: the United States, Japan or any
country within the European Union.


 


“NDA” means
a New Drug Application filed with the FDA or foreign equivalent relating to any
use of DITPA.


 


“Third Party” means a Person who or which is
neither a Party nor an Affiliate of a Party.


 


5.2.                              Severability.
If any provision of this Agreement is held in any jurisdiction to be prohibited
or unenforceable for any reason, that provision will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable that provision in any other jurisdiction.


 


5.3.                              Notices.


 


(a)                                  Every
notice or other communication required or contemplated by this Agreement must
be in writing and sent by one of the following methods:  (a) personal delivery, in which case delivery
is deemed to occur the day of delivery; (b) certified or registered mail,
postage prepaid, return receipt requested, in which case delivery is deemed to
occur the day it is officially recorded by the U.S. Postal Service as delivered
to the intended recipient; or (c) next-day delivery to a U.S. address by
recognized overnight delivery service such as Federal Express, in which case
delivery is deemed to occur one business day after being sent.  In each case, a notice or other communication
sent to a Party must be directed to the address for that Party set forth below,
or to another address designated by that party by written notice:


 


If to Titan, to:


 


Titan Pharmaceuticals,
Inc.


400 Oyster Point Blvd.,
Suite 505


South San Francisco, CA
94080


Attention: Louis R.
Bucalo, M.D.


 


with a copy to: 


Loeb & Loeb LLP


345 Park Avenue


New York, NY 10154


Attention:  Fran M. Stoller, Esq.


 


If to Acquisition Sub:


 


Developmental
Therapeutics Acquisition Corp.


c/o Titan
Pharmaceuticals, Inc.


400 Oyster Point Blvd.,
Suite 505


South San Francisco, CA
94080


Attention: Louis R.
Bucalo, M.D.


 


If to DTI, to:


 


13





















 


Developmental
Therapeutics, Inc.


801 Brickell Avenue,
Suite 942


Miami, FL 33131


Attention: Steve H.
Kanzer


 


with a copy to: 


Edwards & Angell, LLP


350  East Las Olas Boulevard, Suite 1150


Fort Lauderdale, FL
33301-4215


Attention:  Leslie J. Croland, P.A.


 


If to the Founders, to:


 


Steve H. Kanzer


c/o Accredited Ventures,
Inc.


801 Brickell Avenue,
Suite 900


Miami, FL  33131


 


Nicholas Stergis


c/o Accredited Ventures,
Inc.


801 Brickell Avenue,
Suite 900


Miami, FL  33131


 


(b)                                 Notice
not given in writing shall be effective only if acknowledged in writing by a
duly authorized representative of the party to whom it was given.


 


5.4.                              Entire
Agreement.  This Agreement, together
with all exhibits and schedules, and the Agreement constitute the entire
agreement among the parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties pertaining to the subject matter
hereof.


 


5.5.                              Amendments
and Waivers.  This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties.  No waiver by any party of any
default, breach or misrepresentation under this Agreement will be deemed to
extend to any prior or subsequent default, breach or misrepresentation or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.


 


5.6.                              Counterparts.  This Agreement may be executed in several
counterparts, each of which is deemed an original and all of which together
constitute one and the same instrument.


 


5.7.                              Governing
Law. This Agreement is governed by the law of the State of New York,
without giving effect to the conflicts of laws provisions, except to the extent
that it is mandatory that the DGCL be applicable .


 


5.8.                              Binding
Effect.  This Agreement is binding
upon and inures to the benefit of the parties and their respective heirs,
successors and permitted assigns.


 


5.9.                              Assignment.  DTI and Titan and Acquisition Sub may freely
assign any of their rights (but not their obligations) under this Agreement
without the prior written consent of the


 


14





















 


other, but with an obligation of providing timely written notice to the
other of any such assignment.


 


5.10.                        Dispute
Resolution. The Parties agree to attempt initially to solve all claims,
disputes, or controversies arising under, out of, or in connection with this
Agreement by conducting good faith negotiations.  If the Parties are unable to settle the
matter between themselves, the matter shall thereafter be resolved by
alternative dispute resolution, starting with mediation and including, if necessary,
a final and binding arbitration. 
Whenever a Party shall decide to institute arbitration proceedings, it
shall give written notice to that effect to the other Party.  The Party giving such notice shall refrain
from instituting the arbitration proceedings for a period of sixty (60) days following
such notice.  During such period, the
Parties shall make good faith efforts to amicably resolve the dispute without
arbitration.  Any arbitration hereunder
shall be conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association.  Each
such arbitration shall be conducted by a panel of three arbitrators:  One arbitrator shall be appointed by each of
Titan and the Founders, and the third shall be appointed by the two arbitrators
so chosen.  Each arbitrator shall be an
attorney whose primary practice area comprises mergers and acquisitions,
including within the biotechnology and pharmaceutical industries, with at least
fifteen (15) years practice experience. 
Any such arbitration shall be held in New York City.  The arbitrators shall have the authority to
grant specific performance.  Judgment
upon the award so rendered may be entered in any court having jurisdiction or
application may be made to such court for judicial acceptance of any award and
an order of enforcement, as the case may be. 
In no event shall a demand for arbitration be made after the date when
institution of a legal or equitable proceeding based on such claim, dispute or
other matter in question would be barred by the applicable statute of limitations.


 


(Remainder of Page Intentionally Left Blank)


 


15





















 


IN WITNESS HEREOF, DTI,
the Founders, Titan and Acquisition Sub hereby execute this Agreement as of the
date stated in the first introductory clause of this Agreement.


 


	
   

  	
  DEVELOPMENTAL
  THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steve H.
  Kanzer

  	
   

  
	
   

  	
  Name:

  	
  Steve H. Kanzer

  
	
   

  	
  Title:

  	
  Chairman and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  TITAN
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Louis R.
  Bucalo

  	
   

  
	
   

  	
  Name:

  	
  Louis R. Bucalo,
  M.D.

  	
   

  
	
   

  	
  Title:

  	
  President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  DTI
  ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Louis R.
  Bucalo

  	
   

  
	
   

  	
  Name:

  	
  Louis R. Bucalo,
  M.D.

  	
   

  
	
   

  	
  Title:

  	
  President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  FOUNDERS

  
	
   

  	
   

  
	
   

  	
  /s/ Steve H.
  Kanzer

  	
   

  
	
   

  	
  Steve H. Kanzer

  
	
   

  	
   

  
	
   

  	
  /s/ Nicholas Stergis

  	
   

  
	
   

  	
  Nicholas Stergis

  



 


16





















 


Appendix A


 


	
  Stockholder Name

  	
   

  	
  Number of

  Shares

  	
   

  	
  DTI

  Percentage

  	
   

  	
  Number of Titan Shares

  (1st Closing)

  	
   

  	
  Number of Titan Shares

  (2nd Closing)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Steve H. Kanzer

  	
   

  	
  1,014,694

  	
   

  	
  75.66

  	
  %

  	
  898,416

  	
   

  	
  539,049

  	
   

  
	
  Nicholas Stergis

  	
   

  	
  250,000

  	
   

  	
  18.64

  	
  %

  	
  221,351

  	
   

  	
  132,811

  	
   

  
	
  Steven Goldman,
  M.D.

  	
   

  	
  25,000

  	
   

  	
  1.9

  	
  %

  	
  22,135

  	
   

  	
  13,281

  	
   

  
	
  Eugene Morkin,
  M.D.

  	
   

  	
  25,000

  	
   

  	
  1.9

  	
  %

  	
  22,135

  	
   

  	
  13,281

  	
   

  
	
  Milton Packer,
  M.D.

  	
   

  	
  15,000

  	
   

  	
  1.12

  	
  %

  	
  13,281

  	
   

  	
  7,969

  	
   

  
	
  Jay N. Cohn,
  M.D.

  	
   

  	
  10,000

  	
   

  	
  0.75

  	
  %

  	
  8,854

  	
   

  	
  5,312

  	
   

  
	
  Evan
  Myrianthoupoulos

  	
   

  	
  1,500

  	
   

  	
  0.11

  	
  %

  	
  1,328

  	
   

  	
  797

  	
   

  
	
  Total:

  	
   

  	
  1,341,194

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total
  Shares Outstanding (Fully Diluted)

  	
   

  	
  1,341,194

  	
   

  	
  100.00

  	
  %

  	
  1,187,500

  	
   

  	
  712,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  First Closing

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Titan Stock Price

  	
   

  	
  $

  	
  2.74

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Primary Merger
  Consideration

  	
   

  	
  1,250,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Value of Merger

  	
   

  	
  $

  	
  3,425,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  University of Arizona
  Payment (5%)

  	
   

  	
  $

  	
  171,250

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UA Payment Converted in
  Stock

  	
   

  	
  62,500

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Merger Consideration
  (less UA Payment)

  	
   

  	
  1,187,500

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exchange Ratio

  	
   

  	
  0.8854

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Second Closing

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Merger Consideration

  	
   

  	
  750,000 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Value of Merger

  	
   

  	
  $

  	
  2,055,000 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  University of Arizona
  Payment (5%)

  	
   

  	
  $

  	
  102,750 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UA Payment Converted in
  Stock

  	
   

  	
  37,500 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Merger Consideration
  (less UA Payment)

  	
   

  	
  712,500 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exchange Ratio

  	
   

  	
  0.5312