**Exhibit 10.38**

 

**MERGER AGREEMENT**

 

This MergerAgreement (this “Agreement”) is dated October 15, 2003 (the “EffectiveDate”), and is by and among Developmental Therapeutics, Inc., a companyduly organized and existing under the laws of the State of Delaware, having aplace of business located at 801 Brickell Avenue, Suite 942, Miami, Florida33131 (hereinafter referred to as “DTI”), Titan Pharmaceuticals, Inc., acompany 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, SouthSan Francisco, CA 94080 (hereinafter referred to as “Titan”),Developmental Therapeutics Acquisition Corp., a company duly organized andexisting under the laws of the State of Delaware, having a place of businesslocated at 400 Oyster Point Blvd., Suite 505, South San Francisco, CA 94080(hereinafter referred to “Acquisition Sub”), and Steve H. Kanzer andNicholas Stergis (each a “Founder” and collectively, the “Founders”).

** **

**RECITALS**

 

WHEREAS, the respectiveBoards of Directors of each of Titan, Acquisition Sub and DTI have determinedthat it is in the best interests of their respective companies and stockholdersthat Acquisition Sub merge with and into DTI (the “Merger”) with DTIbeing the surviving corporation;

 

WHEREAS, Titan, asthe sole stockholder of Acquisition Sub, has approved this Agreement, theMerger and the transactions contemplated by this Agreement pursuant to actiontaken by written consent in accordance with the requirements of the DelawareGeneral Corporation Law (“DGCL”) and the Bylaws of Acquisition Sub;

 

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

 

WHEREAS, pursuantto the Merger, among other things, the outstanding shares of common stock andpreferred stock of DTI shall be converted into the right to receive uponClosing (as hereinafter defined) and thereafter, the Merger Consideration (ashereinafter defined); and

 

WHEREAS, as acondition to entering into this Agreement and consummating the Merger, Titanand Acquisition Sub require that no DTI Convertible Securities be outstandingat the Effective Time (as hereinafter defined).

 

WHEREAS, theparties 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, asamended (the “Code”), and that Titan, Acquisition Sub and DTI will eachbe a “party to a reorganization,” within the meaning of Section 368(b) of theCode, with respect to the Merger.

 

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NOW THEREFORE, theparties hereto hereby agree as follows:

# ** **

# **ARTICLE 1.**

# **THE MERGER**

 

## 1.1.                              TheMerger. Upon the terms and subject to the conditions set forth in thisAgreement, and in accordance with the DGCL, Acquisition Sub shall be mergedwith and into DTI at the Effective Time (as defined in Section 1.3). Followingthe Effective Time, DTI shall be the surviving corporation (the “SurvivingCorporation”) and shall succeed to and assume all the rights andobligations of DTI and Acquisition Sub in accordance with the DGCL.

 

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

##  

## 1.3.                              TheEffective Time.  As soon as ispracticable following the signing of this Agreement, the parties shall file acopy of the Certificate of Merger executed in accordance with the relevantprovisions of the DGCL and shall make all other filings or recordings requiredunder the DGCL.  The Merger shall becomeeffective at such time as the Certificate of Merger is duly filed with theDelaware Secretary of State (the time the Merger becomes effective beinghereinafter referred to as the “Effective Time”).

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## 1.4.                              TheMerger Consideration.  As of theEffective Time, as a result of the Merger and without any other action on thepart of the stockholders, all of the outstanding shares of common stock, $0.001par 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 outstandingimmediately prior to the Effective Time shall, at the Effective Time, by virtueof the Merger and without any action on the part of the stockholders, beautomatically converted into the First Shares (as hereinafter defined) and,subject to achievement of a Trigger Event (as hereinafter defined), theContingent Shares (as hereinafter defined) (collectively, the “MergerConsideration”) by virtue of the Merger and without any action on the partof the DTI Stockholders, and be converted into the right of the DTIStockholders and the Arizona Board of Regents on behalf of the University ofArizona (“UA”) to receive that portion of the Merger Consideration setforth across from their names in Appendix A. Fractional shares shall be rounded up or down to the nearest wholenumber.

 

The MergerConsideration shall be:

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

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

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### (c)                                  Anaggregate of seven hundred twelve thousand five hundred (712,500) unregisterednewly 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 SecondClosing (as defined below), to be issued and 

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### delivered to the DTIStockholders in accordance with Appendix A within thirty (30) days after thefirst of the following events (each, a “Trigger Event”): (i) PositiveScientific Results from a Pivotal Clinical Trial incorporating the DITPAProduct, (ii) Titan, Survivor Corporation or an assignee thereof entering intoan exclusive, semi-exclusive or non-exclusive agreement with a third party tomarket or sell the DITPA Product in a Major Territory, (iii) the acceptance ofan NDA filing with any regulatory agency of any country incorporating the DITPAProduct or (iv) a change of control of Titan or the Surviving Corporation, anassignee or successor thereof, or any entity having rights to the DITPAProduct, in which a single entity or group of related entities, acquires, or gainsthe 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 bereferred to herein as the “Second Closing”); provided, however, that ifno Trigger Event occurs on or prior to the fifth anniversary of the EffectiveTime, the DTI Stockholders shall have no right to receive the ContingentShares;

 

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

 

## 1.5.                              RegistrationRights.  Titan shall, at its ownexpense (excluding underwriting commissions and discounts), file within onehundred and eighty (180) days after the Effective Time with the Securities andExchange Commission (“SEC”) pursuant to the Securities Act of 1933, asamended (the “1933 Act”), registering the First Shares for public resaleand shall use its best efforts to cause such registration statement to bedeclared effective by the SEC within sixty (60) days thereafter.  Within ninety (90) days following theachievement of a Trigger Event (provided the Trigger Event occurs on or priorto the fifth anniversary of the Effective Time), Titan shall file aregistration statement with the SEC covering the Contingent Shares. Titan shalluse its best efforts to keep each of such registration statements effective fora period not exceeding the earlier of (i) the second anniversary of the date onwhich such registration statement is declared effective by the SEC, (ii) thedate on which the First Shares or the Contingent Shares, as applicable, may besold without restriction by the volume limitations of Rule 144(e) of the 1933Act or (iii) such time as all of the First Shares or the Contingent Shares, asapplicable, included in such registration statement have been sold pursuantthereto. The registration rights under this Section 1.5 shall not be assignableexcept to family trusts or controlled affiliates.

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

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## 1.7.                              Legendsand Restrictions.  The stockcertificates for the Titan Common Stock to be issued to the DTI Stockholdersshall be imprinted with a conspicuous legend in substantially the followingform (unless otherwise permitted under this Agreement):

 

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

 

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

 

## 1.8.                              TaxIntent of the Parties.  It is theintention of the parties that the Merger be treated as a reorganizationqualifying under Section 368(a) of the Internal Revenue Code of 1986, asamended.  The parties shall use theirbest efforts to take all reasonable actions necessary to cause the Merger toqualify as a reorganization pursuant to such section and shall treat the Mergeraccordingly on their respective tax returns.

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

 

# **ARTICLE 2.**

# **REPRESENTATIONS ANDWARRANTIES OF THE FOUNDERS**

 

Each of theFounders jointly and severally represent and warrant to Titan and AcquisitionSub that to his actual present knowledge, except as otherwise disclosed on aSchedule attached hereto:

 

## 2.1.                              DTIAssets. Subject to the terms of this Agreement, at the Closing (ashereinafter defined), DTI has good and proper title free and clear of any Liensand to the following list of assets owned by DTI, which constitutesubstantially all of DTI’s assets (collectively, the “DTI Assets”):

 

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

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### (b)                                 ConsultingAgreement dated July 22, 2003 between Eugene Morkin, M.D. and DTI previouslydelivered to Titan;

 

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### (c)                                  ConsultingAgreement dated July 29, 2003 between Steven Goldman, M.D. and DTI previouslydelivered to Titan;

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

 

### (e)                                  ScientificAdvisory Board Agreement dated September 4, 2003 between Jay N. Cohn and DTIpreviously delivered to Titan.

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## 2.2.                              Organization;Qualification.  DTI is a corporationduly organized, validly existing and in good standing under the laws of theState of Delaware with full corporate power and authority to own all of itsproperties and assets and carry on its business as it is currently beingconducted. DTI is duly qualified to do business and is in good standing in eachjurisdiction in which the nature of the business conducted by it or theproperty it owns, leases or operates requires it to so qualify, except wherethe failure to be so qualified or in good standing in such jurisdiction wouldnot have a Material Adverse Effect on DTI. As used in this Agreement, “MaterialAdverse Effect,” with respect to DTI or Titan, means a material adverseeffect on the business, properties, assets, operations, condition (financial orotherwise) of such entity taken as a whole, or on the authority or ability ofDTI 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 ofDTI 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 powerand authority, corporate or otherwise, to execute and deliver this Agreementand to consummate the transactions contemplated hereby.  The execution and delivery of this Agreementand the consummation of the transactions contemplated hereby by DTI have beenduly authorized by the board of directors of DTI and all of the DTIStockholders and no other proceedings on the part of DTI are necessary withrespect thereto.  Assuming that Titan hasduly authorized the execution and delivery of this Agreement, this Agreementconstitutes the legal, valid and binding obligation of DTI and the Founders,enforceable in accordance with its terms, except as enforceability may belimited by (a) any applicable bankruptcy, insolvency, reorganization,moratorium or similar Law affecting creditors’ rights generally or (b) generalprinciples of equity, whether considered in a proceeding in equity or at law.

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## 2.4.                              Consentsand Approvals.  Except for the filingof the Certificate of Merger with the Secretary of State of the State ofDelaware, neither DTI nor either Founder is required to obtain any materialpermit, make any filing with, or obtain the consent of any GovernmentalAuthority, any party to any DTI Contract, or any other Person in connectionwith the execution and delivery of this Agreement and the consummation of thetransactions contemplated hereby.

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## 2.5.                              Capitalization.  The authorized, issued and outstandingcapital stock of the Company is as set forth in Schedule 2.5 attached hereto.Except as set forth in Schedule 2.5****there are nooutstanding subscriptions, options, rights, warrants, convertible securities orother agreements (other than this Agreement) or calls, demands or commitmentsof any kind relating to the issuance, sale or transfer of any capital stock orother equity securities of DTI, whether directly or upon the exercise orconversion of other securities.

 

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## 2.6.                              NoViolations.  DTI’s execution anddelivery of this Agreement and performance by DTI of its obligations under thisAgreement do not (a) violate any provision of the certificate of incorporationor by-laws of DTI, (b) conflict with, result in a breach of, constitute a defaultunder (or an event that, with notice or lapse of time or both, would constitutea default under), accelerate the performance required by, result in thecreation of any Lien upon any of the properties or assets of DTI under, orcreate in any party the right to accelerate, terminate, modify, or cancel, orrequire any notice under or adversely affect the rights or obligations ofSurviving Corporation under, any contract to which either DTI or a Founder is aparty 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 issubject, in each case where such conflict, breach or violation would have aMaterial Adverse Effect on DTI.

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

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

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2.9.          IntellectualProperty Rights.

 

### (a)                                  Setforth 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 applicationsand registrations and (ii) all material agreements to which DTI is a partygranting or obtaining any rights under, or by their terms expressly restrictingDTI’s rights to use, any intellectual property, other than generic or standardagreements (including agreements for commercially-available, off-the-shelfsoftware) pursuant to which any such intellectual property is licensed to DTI(collectively, the “DTI Intellectual Property”). No written claim ofinvalidity or ownership with respect to any DTI Intellectual Property has beenmade by a third party, and such DTI Intellectual Property is not the subject ofany threatened or pending legal proceeding. No individual or entity has asserted in writing that, with respect tothe DTI Intellectual Property, DTI or a licensee of DTI is infringing or hasinfringed any United States or foreign patent, trademark, service mark, tradename, copyright or other intellectual property right of any third party, or hasmisappropriated or improperly used or disclosed any trade secret, confidentialinformation or know-how of any third party. The use of the DTI IntellectualProperty by DTI does not infringe in any material respect any United States orforeign patent, trademark, service mark, trade name, copyright or otherintellectual property right of any third party, and does not involve themisappropriation 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, DTIhas not taken any action that would result in the voiding or invalidation ofany of the DTI Intellectual Property.

 

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### (b)                                 DTIis the exclusive licensee of the licensed subject matter under the UA Agreement(the “Licensed IP”) and has not entered into any sublicense orassignment agreement with respect to, or otherwise directly or indirectlyconveyed to any Person any interest in any of, the Licensed IP. Neither DTI norany DTI Stockholder has assigned, transferred, conveyed or otherwise encumberedits right, title and interest in the UA Agreement or any Licensed IP orIntellectual Property or entered into any agreement with any Third Party with respect to the UA Agreement or anyLicensed IP which is in conflict with this Agreement. There is no current eventof default or other breach or default, and no event which with the giving ofnotice or the lapse of time or both would constitute an event of default orother breach or default, on the part of DTI under the UA agreement, whichdefault or breach would reasonably be expected to have a Material AdverseEffect on DTI.

 

## 2.10.                        ComplianceWith FDA and FDCA.

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### (a)                                  DTIholds all material Licenses (as hereinafter defined) from, and has submittednotices to, all governmental entities (including, without limitation, allauthorizations under the Federal Food, Drug and Cosmetic Act of 1938, asamended (the “FDCA”), and all regulations of the United States Food andDrug Administration (the “FDA”)) necessary for the lawful conduct of itsbusiness, and has complied with and is not in default in any material respectunder any applicable law, statute, order, rule, regulation, policy and/orguideline of any Governmental Authority relating to DTI (other than where suchdefault or noncompliance will not result in a Material Adverse Effect) and DTIhas not received written notice of violation of, and does not know of anyviolations of, any of the above. Titan acknowledges that the IND relating tothe DIPTA Product is not in the name or under the control of DTI.

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### (b)                                 DTIhas not received any written notice from the FDA or any other governmentalentity that all biological and drug products being manufactured, distributed ordeveloped by DTI or any preclinical or clinical trial conducted to date by oron behalf of DTI fails to meet the protocols requested by the FDA or otherwisenecessary for inclusion as part of any IND or NDA submission to the FDA. DTIhas made available to Titan all correspondence between DTI and the FDA throughthe date of this Agreement and shall make available to Titan any additionalcorrespondence sent or received through the Effective Time.

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### (c)                                  DTIhas not committed any act, made any statement or failed to make any statementthat would reasonably be expected to provide a basis for the FDA to invoke itspolicy 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 DTIhas been convicted of any crime or engaged in any conduct that would reasonablybe expected to result in (i) debarment under 21 U.S.C. Section 335a or anysimilar state Law or regulation or (ii) exclusion under 42 U.S.C. Section1320a-7 or any similar state Law or regulation.

 

For purposes ofthis Agreement, “Licenses” means all licenses, permits, certificates ofauthority, authorizations, approvals, registrations, franchises, clearances andsimilar consents granted or issued by any governmental or regulatory authority.

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## 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,

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## properties or assets,including, without limitation, an Action to enjoin, in whole or in part, theMerger.

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## 2.12.                        NoBrokers or Finders. The Founders and DTI have not, and their respective Affiliates,officers, directors or employees have not, employed any broker or finder orincurred any liability for any brokerage or finder’s fee or commissions orsimilar payment in connection with the Merger.

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## 2.13.                        InvestmentRepresentations.

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

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### (b)                                 EachDTI Stockholder is acquiring the shares of Titan Common Stock for his or herown account as principal, and not as nominee or agent, for investment purposesand not with a view to or for sale in connection with any distribution thereofexcept for any distribution in compliance with the registration provisions ofthe 1933 Act.

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### (c)                                  EachDTI Stockholder understands that the shares of Titan Common Stock beingacquired by him or her have not been registered for sale under the 1933 Act orqualified under any other applicable federal or state securities laws and thatthe shares of Titan Common Stock being acquired by him or her are being offeredand sold to him or her pursuant to one or more exemptions from the registrationor qualification requirements of such securities laws and that therepresentations and warranties contained in this Section 2.13 are given withthe intention that Titan may rely thereon for purposes of claiming suchexemptions.

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### (d)                                 EachDTI Stockholder owns of record and beneficially all of his or her shares of DTICommon Stock free and clear of all Liens.

 

# **ARTICLE 3.**

# **REPRESENTATIONS OF TITANAND ACQUISITION SUB**

 

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

 

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

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

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## authorized by the boardof directors of Titan and Acquisition Sub, respectively, and no otherproceedings on the part of Titan or Acquisition Sub are necessary with respectthereto.  Assuming that DTI has dulyauthorized the execution and delivery of this Agreement, this Agreementconstitutes the valid and binding obligation of Titan and Acquisition Sub,enforceable in accordance with its terms, except as enforceability may belimited by (a) any applicable bankruptcy, insolvency, reorganization,moratorium or similar Law affecting creditors’ rights generally or (b) generalprinciples of equity, whether considered in a proceeding in equity or at law.

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## 3.3.                              Consentsand Approvals.  Neither Titan norAcquisition Sub are required to obtain any permit, make any filing with, orobtain the consent of any Governmental Authority or any other Person inconnection with the execution and delivery of this Agreement and theconsummation of the transactions contemplated hereby.

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## 3.4.                              NoViolations.  Assuming the accuracy ofthe representations of the DTI Stockholders set forth herein, Titan andAcquisition Sub’s execution and delivery of this Agreement and performance byit of its obligations under this Agreement do not (a) violate any provision ofthe 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 eventthat, 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 uponany of the properties or assets of Titan or Acquisition Sub under, or create inany party the right to accelerate, terminate, modify, or cancel, or require anynotice under, any Contract to which Titan or Acquisition Sub is a party or bywhich 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 Subis subject, in each case where such conflict, breach or violation would have aMaterial Adverse Effect on Titan or Acquisition Sub.

 

# **ARTICLE 4.**

# **INDEMNIFICATION**

 

## 4.1.                              Indemnification.  Subject to thelimitations of Sections 4.2 and 4.3 hereof:

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### (a)                                  TheFounders jointly and severally agree to indemnify, defend and hold Titan andits Affiliates, subsidiaries (including the Surviving Corporation), officers,directors, employees or agents thereof (collectively, the “Titan IndemnifiedParties”) harmless from and against and in respect of any and allout-of-pocket loss, cost, expense, liability or claim (including reasonableattorneys’ fees and other costs and expenses) (all of the foregoingcollectively, “Losses”), resulting from or arising in connection withany material misrepresentation or material breach of warranty on the part ofDTI or the Founders under the terms of this Agreement. For purposes of thisAgreement, Losses shall specifically exclude any special, incidental, indirect,consequential or similar damages (including but not limited to damages forindirect loss of profits, loss of business reputation or the like).

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### (b)                                 Titanagrees to indemnify, defend and hold the Founders and DTI (the “DTIIndemnified Parties”) harmless from and against any and all Lossesresulting from any misrepresentation or breach of warranty or covenant on thepart of Titan or Acquisition Sub under the terms of this Agreement or in anycertificate delivered hereunder or pursuant hereto or non-fulfillment of anyagreement on the part of Titan under the terms of this Agreement.

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## 4.2.                              Limitationon Liability and Recourse.

 

### (a)                                  Withrespect to any claim for indemnification under this Agreement, neither theFounders, on the one hand, nor Titan, on the other hand, shall be liable to theother for indemnification unless the aggregate amount of the damages incurredby the other as a result of such breach exceeds the sum of $100,000 (whereuponsuch Party shall be liable for the amount of such damages in excess of$100,000).

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

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### (c)                                  Notwithstandinganything contained herein to the contrary, the Founders’ aggregate liability toall Titan Indemnified Parties for all indemnity obligations hereunder shall notexceed $3,425,000 ($5,480,000 if the Contingent Shares have been issued), whichliability shall be satisfied, at the option of the Founders, by the delivery tothe Titan Indemnified Parties of cash and/or such number of First Shares orContingent Shares which shall equal such liability (which First Shares shall bevalued, for purposes hereof, at the closing price of Titan Common Stock asreported on the American Stock Exchange (the “Closing Price”) on thedate of the First Closing and which Contingent Shares shall be valued at thehigher of (x) the Closing Price on the date of the First Closing (y) theClosing Price on the date of the Second Closing). Titan shall have no right, inequity or otherwise, to set off, withhold, reacquire or limit thetransferability of the First Shares under this Agreement.

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

 

### (a)                                  thepreceding clause (i) shall survive the expiration of such period until suchclaims are finally resolved and any obligations with respect thereto are fullysatisfied; and

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### (b)                                 thepreceding clause (ii) shall terminate on such date that is 24 months after theEffective Time.

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## 4.4.                              ThirdParty Claims.

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### (a)                                  Inthe case of any claim asserted by a Third Party against a Party entitled toindemnification under this Agreement (the “Indemnified Party”), noticeshall be given by the Indemnified Party to the Party required to provideindemnification (the “Indemnifying Party”) promptly after suchIndemnified Party has actual knowledge of any claim as to which indemnity maybe sought, and the Indemnified Party shall permit the Indemnifying Party (atthe expense of

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### 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 thedefense of such claim or litigation shall be reasonably satisfactory to theIndemnified Party, (ii) the Indemnified Party may participate in such defenseat such Indemnified Party’s expense, and (iii) the omission by any IndemnifiedParty to give notice as provided herein shall not relieve the IndemnifyingParty of its indemnification obligation under this Agreement except to theextent that such Indemnifying Party is materially damaged as a result of suchfailure to give notice.  After noticefrom the Indemnifying Party to such Indemnified Party of its election so toassume the defense of the claim or litigation, the Indemnifying Party shall notbe liable to such Indemnified Party under Section 4.1(a) or 4.1(b) for any feesof other counsel or any other expenses, in each case subsequently incurred bysuch Indemnified Party in connection with the defense thereof, other thanreasonable costs of investigation.  If anIndemnifying Party assumes the defense of such an action, (i) no compromise orsettlement thereof may be effected by the Indemnifying Party without theIndemnified Party’s consent (which shall not be unreasonably withheld) unless(x) there is no finding or admission of any violation of law or any violationof the rights of any person and no effect on any other claims that may be madeagainst the Indemnified Party and (y) the sole relief provided is monetarydamages that are paid in full by the Indemnifying Party and (ii) theIndemnifying Party shall have no liability with respect to any compromise orsettlement thereof effected without its consent (which shall not beunreasonably withheld).  If notice isgiven to an Indemnifying Party of the commencement of any action and it doesnot, within 30 days after the Indemnified Party’s notice is given, give noticeto the Indemnified Party of its election to assume the defense thereof, theIndemnifying Party shall be bound by any determination made in such action orany compromise or settlement thereof effected by the Indemnified Party.  Pending notification from the IndemnifyingParty as to whether it will assume the defense of a claim, the IndemnifiedParty will not incur or agree to incur expenses (whether of investigation,defense or otherwise) with respect to such claim in excess of $5,000 withoutgiving the Indemnifying Party ten (10) days prior notice of such incurrence oragreement.

###  

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

###  

### (c)                                  TheIndemnifying Party and the Indemnified Party shall cooperate in the defense ofany claim or litigation subject to this Section 4.4 and the records of eachshall be available to the other with respect to such defense.

# ** **

# **ARTICLE 5.**

# **MISCELLANEOUS**

 

## 5.1.                              Definitionof Certain Terms. When used in this Agreement, the following terms shallhave the following meanings:

 

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

 

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

 

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

 

“GAAP”****means generally accepted accounting principles in theUnited States.

 

“GovernmentalAuthority” means any governmental or regulatory body, or politicalsubdivision thereof, whether federal, state, local or foreign, or any agency,instrumentality or authority.

 

“Law” meansany laws, statutes, ordinances, regulations, rules, and orders of anyGovernmental Authority.

 

“Liability”means any direct or indirect liability, indebtedness, obligation, commitment,expense, claim, deficiency, guaranty or endorsement of or by any Person of anytype, 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 thenature thereof.

 

“Order”means any award, decision, injunction, judgment, order, ruling, subpoena, orverdict 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 theFounders.

 

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

 

“PivotalClinical 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 releaseas “pivotal” or (iii) a trial that the FDA has indicated may potentially serveas one of two pivotal studies or the sole pivotal study for submission of anNDA.

 

“PositiveScientific Results” means achievement of a clinical trial’s primaryendpoint as evidenced by a p value of .05 or less.

 

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“MajorTerritory” means any of the following: the United States, Japan or anycountry within the European Union.

 

“NDA” meansa New Drug Application filed with the FDA or foreign equivalent relating to anyuse of DITPA.

 

“Third Party” means a Person who or which isneither a Party nor an Affiliate of a Party.

##  

## 5.2.                              Severability.If any provision of this Agreement is held in any jurisdiction to be prohibitedor unenforceable for any reason, that provision will, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions of this Agreement, and any suchprohibition or unenforceability in any jurisdiction will not invalidate orrender unenforceable that provision in any other jurisdiction.

##  

## 5.3.                              Notices.

###  

### (a)                                  Everynotice or other communication required or contemplated by this Agreement mustbe in writing and sent by one of the following methods:  (a) personal delivery, in which case deliveryis deemed to occur the day of delivery; (b) certified or registered mail,postage prepaid, return receipt requested, in which case delivery is deemed tooccur the day it is officially recorded by the U.S. Postal Service as deliveredto the intended recipient; or (c) next-day delivery to a U.S. address byrecognized overnight delivery service such as Federal Express, in which casedelivery is deemed to occur one business day after being sent.  In each case, a notice or other communicationsent 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, CA94080

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:

 

DevelopmentalTherapeutics Acquisition Corp.

c/o TitanPharmaceuticals, Inc.

400 Oyster Point Blvd.,Suite 505

South San Francisco, CA94080

Attention: Louis R.Bucalo, M.D.

 

If to DTI, to:

 

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DevelopmentalTherapeutics, 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, FL33301-4215

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)                                 Noticenot given in writing shall be effective only if acknowledged in writing by aduly authorized representative of the party to whom it was given.

##  

## 5.4.                              EntireAgreement.  This Agreement, togetherwith all exhibits and schedules, and the Agreement constitute the entireagreement among the parties pertaining to the subject matter hereof andsupersede all prior agreements, understandings, negotiations and discussions,whether oral or written, of the parties pertaining to the subject matterhereof.

##  

## 5.5.                              Amendmentsand Waivers.  This Agreement may notbe amended except by an instrument in writing signed on behalf of each of theparties.  No waiver by any party of anydefault, breach or misrepresentation under this Agreement will be deemed toextend to any prior or subsequent default, breach or misrepresentation oraffect in any way any rights arising by virtue of any prior or subsequent suchoccurrence.

##  

## 5.6.                              Counterparts.  This Agreement may be executed in severalcounterparts, each of which is deemed an original and all of which togetherconstitute one and the same instrument.

##  

## 5.7.                              GoverningLaw. 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 extentthat it is mandatory that the DGCL be applicable .

##  

## 5.8.                              BindingEffect.  This Agreement is bindingupon 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 freelyassign any of their rights (but not their obligations) under this Agreementwithout the prior written consent of the

##  

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

 

## 5.10.                        DisputeResolution. The Parties agree to attempt initially to solve all claims,disputes, or controversies arising under, out of, or in connection with thisAgreement by conducting good faith negotiations.  If the Parties are unable to settle thematter between themselves, the matter shall thereafter be resolved byalternative dispute resolution, starting with mediation and including, if necessary,a final and binding arbitration. Whenever a Party shall decide to institute arbitration proceedings, itshall give written notice to that effect to the other Party.  The Party giving such notice shall refrainfrom instituting the arbitration proceedings for a period of sixty (60) days followingsuch notice.  During such period, theParties shall make good faith efforts to amicably resolve the dispute withoutarbitration.  Any arbitration hereundershall be conducted in accordance with the Commercial Arbitration Rules of theAmerican Arbitration Association.  Eachsuch arbitration shall be conducted by a panel of three arbitrators:  One arbitrator shall be appointed by each ofTitan and the Founders, and the third shall be appointed by the two arbitratorsso chosen.  Each arbitrator shall be anattorney whose primary practice area comprises mergers and acquisitions,including within the biotechnology and pharmaceutical industries, with at leastfifteen (15) years practice experience. Any such arbitration shall be held in New York City.  The arbitrators shall have the authority togrant specific performance.  Judgmentupon the award so rendered may be entered in any court having jurisdiction orapplication may be made to such court for judicial acceptance of any award andan order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date wheninstitution of a legal or equitable proceeding based on such claim, dispute orother matter in question would be barred by the applicable statute of limitations.

 

*(Remainder of Page Intentionally Left Blank)*

* *

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IN WITNESS HEREOF, DTI,the Founders, Titan and Acquisition Sub hereby execute this Agreement as of thedate 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                      |

 

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**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                | ** ** | ** **          | ** ** | ** **                                | ** ** | ** **                                | ** ** |

 

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