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Royalty Repurchase Agreement

Royalty Agreement

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 This Royalty Agreement involves

TITAN PHARMACEUTICALS INC | Deerfield Private Design Fund II, LP | Deerfield Special Situations Fund, LP | Design Fund II, DSS, Deerfield TTNP Corporation | J E Flynn Capital LLC | Titan Pharmaceuticals, Inc

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Title: ROYALTY REPURCHASE AGREEMENT
Governing Law: New York     Date: 3/18/2011
Industry: Biotechnology and Drugs     Law Firm: Loeb Loeb;Robinson Bradshaw     Sector: Healthcare

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Exhibit 10.5

ROYALTY REPURCHASE AGREEMENT

This Royalty Repurchase Agreement (this “ Agreement ”), dated March 15, 2011, is made by and between Deerfield Private Design Fund II, L.P. , a Delaware limited partnership (“ Design Fund II ”), Deerfield Special Situations Fund, L.P. , a Delaware limited partnership (“ DSS ” and together with Design Fund II, “ Deerfield ”) and Titan Pharmaceuticals, Inc. , a Delaware corporation (“ Titan ”).

Background Statement

Design Fund II, DSS, Deerfield TTNP Corporation , a Delaware corporation (“ DTTNP ”) and Titan are parties to a Royalty Agreement, dated as of the date hereof (the “ Royalty Agreement ”), pursuant to which Titan has agreed to pay a Royalty (as defined in the Royalty Agreement) to Design Fund II, DSS and DTTNP. The parties hereto are entering into this Agreement for the purpose of giving Titan the right to repurchase the portion of the Royalty (as defined in the Royalty Agreement) owed by Titan to Design Fund II and DSS.

Statement of Agreement

In consideration of the covenants and obligations expressed herein, and intending to be legally bound, the parties hereto agree as follows:

1. Definitions . Capitalized terms shall have the meaning set forth in this section. Unless the context requires otherwise, words in the singular include the plural, words in the plural include the singular, and words importing any gender shall be applicable to all genders. If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).

Accrued Royalty ” shall mean, as of the Closing Date, the amount of accrued but unpaid Royalty and other amounts, if any, owed by Titan under the Royalty Agreement.

Business Day ” means any day other than Saturday, Sunday or a day on which banks in the City of New York are authorized or required to be closed.

Closing Date ” means the date on which the Estimated Royalty Repurchase Price is paid.

DSSI ” means Deerfield Special Situations Fund International, Limited, a British Virgin Islands company limited by shares.

Equity Option Agreement ” means that certain Equity Option Agreement dated as of the date hereof by and between DTTNP, PDI II, DSSI and Titan.

Estimated Accrued Royalty ” means an estimate of the Accrued Royalty determined as follows:

 

 

(i)

for all periods of time for which Titan has publicly disclosed Net Sales or such other data as may be relevant to the computation of the Royalty


 

(“ Royalty Information ”), the Estimated Accrued Royalty shall be determined based upon such publicly reported Royalty Information;

 

 

(ii)

for all time periods subsequent to the most recent period prior to the Closing Date for which Titan has publicly disclosed Royalty Information (the “ Interim Period ”), the Royalty Information shall be deemed to be the same, on an average daily basis, as the most recent complete fiscal quarter prior to the Interim Period for which Titan has publicly disclosed Royalty Information.

Estimated Royalty Repurchase Price ” means the Royalty Repurchase Price determined using the Estimated Accrued Royalty.

Equity Purchase Right ” means the right to purchase all of the capital stock of DTTNP pursuant to the Equity Option Agreement.

Interim Period ” has the meaning set forth in the definition of Estimated Accrued Royalty.

Legal Requirement ” has the meaning given such term in the Royalty Agreement.

Net Sales ” has the meaning given such term in the Royalty Agreement.

Party ” means any one of Design Fund II, DSS, DTTNP and Titan, and “ Parties ” means all of them collectively.

PDI II ” means Deerfield Private Design International, II, L.P. , a British Virgin Islands limited partnership.

Royalty ” has the meaning given such term in the Royalty Agreement.

Royalty Agreement ” has the meaning set forth in the Background Statement.

Royalty Information ” has the meaning set forth in the definition of Estimated Accrued Royalty.

Royalty Repurchase Price ” means, as of the Closing Date:

 

 

(i)

$18,032,000 plus

 

 

(ii)

45.08% of the Accrued Royalty.

Royalty Repurchase Notice ” has the meaning set forth in Section 2(b) .

Royalty Repurchase Right ” has the meaning set forth in Section 2(a) .

Royalty Term ” has the meaning given such term in the Royalty Agreement.

2. Royalty Repurchase Right .

 

 

(a)

Grant of Royalty Repurchase Right . At any time prior to the expiration of the Royalty Term, Titan shall have the right (the “ Royalty Repurchase Right ”) to

 

2


 

repurchase all of Deerfield’s right, title and interest in and to the Royalty under the Royalty Agreement in consideration of (i) paying the Royalty Repurchase Price to Deerfield, and (ii) exercising and closing the Equity Purchase Right.

 

 

(b)

Exercise of Royalty Repurchase Right . Titan may exercise the Royalty Repurchase Right by delivering to Deerfield a written notice of exercise (the “ Royalty Repurchase Notice ”); provided , that the Royalty Repurchase Notice shall not be effective unless Titan shall have simultaneously delivered an Equity Purchase Notice (as defined in the Equity Option Agreement) in accordance with the Equity Option Agreement.

 

 

(c)

Closing of the Royalty Repurchase Right . The closing of the Royalty Repurchase Right shall take place thirty (30) days after Deerfield has received the Royalty Repurchase Notice and PDI II and DSSI have received the Equity Purchase Notice, or such earlier date as may be agreed upon by Titan and Deerfield. Payment of the Estimated Royalty Repurchase Price shall be made at closing by wire transfer of immediately available funds to an account or accounts designated by Deerfield prior to such date. Unless otherwise agreed by all Parties, payment of the Estimated Royalty Repurchase Price shall be allocated and paid 82.70% to Design Fund II and 17.30% to DSS, in each case rounded to the nearest cent ($0.01).

3. Determination of Accrued Royalty; Dispute Resolution.

(a) Determination of Accrued Royalty . Not later than the earlier of (i) seven (7) days following public disclosure of the Royalty Information and (ii) one hundred twenty (120) days after the Closing Date, Titan shall deliver to Deerfield Titan’s calculation of the Accrued Royalty, including the Royalty Information underlying its calculation. Unless within fifteen (15) days of the date it receives Titan’s calculation of the Accrued Royalty Deerfield shall have notified Titan in writing that it disagrees with such calculation, the Accrued Royalty calculated by Titan shall constitute the Accrued Royalty and shall be used to determine the Royalty Repurchase Price. If Deerfield timely delivers a written notice of disagreement with Titan’s calculation of the Accrued Royalty, Deerfield and Titan shall, during the ten (10) day period following such notice of disagreement, negotiate in good faith in an effort to agree on the amount of the Accrued Royalty. If at the end of such ten (10) day period Titan and Deerfield shall have been unable to reach agreement, the dispute shall be resolved in accordance with Section 3(b) .

(b) Dispute Resolution by Independent Accounting Firm . If any dispute is referred, in accordance with this Agreement, for resolution pursuant to this Section 3(b) , Titan shall promptly engage an independent accounting firm with national recognition that does not and has not performed any services for Titan and is reasonably acceptable to Deerfield to determine, to the extent disputed, the Royalty Repurchase Price. If Titan fails to engage an accounting firm within fifteen (15) days after a dispute has become subject to resolution under this Section 3(b) (other than due to Deerfield unreasonably rejecting an independent accounting firm selected by Titan), then Deerfield may engage an independent accounting firm with national recognition that does not and has not performed any services for Deerfield. The accounting firm so engaged shall make its own determination of the disputed Royalty Repurchase Price and communicate such determination to each of Titan and Deerfield in writing, together with a report describing in

 

3


reasonable detail the procedures used and assumptions relied upon in making such determination. Such determination shall be binding on Titan and Deerfield. The costs of the accounting firm shall be paid 50% by Titan and 50% by Deerfield.

4. Final Payment . Within ten (10) days after the earlier to occur of (i) Titan and Deerfield agreeing upon the amount of the Royalty Repurchase Price and (ii) the accounting firm’s determination pursuant to Section 3(b) of the Royalty Repurchase Price, (A) Deerfield shall pay to Titan the amount by which the Estimated Royalty Repurchase Price exceeds the Royalty Repurchase Price or (B) Titan shall pay to Design Fund II and DSS (in the percentages set forth in Section 2(c) ) the amount by which the Royalty Repurchase Price exceeds the Estimated Royalty Repurchase Price. Such payment shall be made by wire transfer of immediately available funds to such account(s) as the recipient of any such amounts s


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