THRESHOLD PHARMACEUTICALS, INC. (NASDAQ:THLD) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive
Agreement.

Merger Agreement and Transaction

On March 16, 2017, Threshold Pharmaceuticals, Inc. (the Company)
entered into an Agreement and Plan of Merger and Reorganization
(the Merger Agreement) with Molecular Templates, Inc., a Delaware
corporation (Molecular Templates), a clinical-stage
biopharmaceutical company focused on the development and
commercialization of innovative therapeutics to treat cancer, and
Trojan Merger Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company (Merger Sub). Upon the terms and
subject to the satisfaction of the conditions described in the
Merger Agreement, including approval of the transaction by the
Companys stockholders and Molecular Templates stockholders,
Merger Sub will be merged with and into Molecular Templates (the
Merger), with Molecular Templates surviving the Merger as a
wholly-owned subsidiary of the Company. The Merger is intended to
qualify as a tax-free reorganization for U.S. federal income tax
purposes.

At the effective time of the Merger (the Effective Time): (a)
each share of Molecular Templates common stock outstanding
immediately prior to the Effective Time (excluding shares held by
the Company, Merger Sub or Molecular Templates and dissenting
shares, and after giving effect to the purchase or conversion
rights of Molecular Templates preferred stockholders,
warrantholders and noteholders) will be converted solely into the
right to receive a number of shares of Company Common Stock (the
Shares) equal to the exchange ratio described below, and (b) each
outstanding Molecular Templates stock option will be assumed by
the Company. Under the exchange ratio formula in the Merger
Agreement, the former Molecular Templates security holders
immediately before the Merger are expected to own approximately
65.6% of the aggregate number of the Shares, and the stockholders
of the Company immediately before the Merger are expected to own
approximately 34.4% of the aggregate number of the Shares,
subject to certain assumptions (on a fully diluted basis).
Further, this exchange ratio will be adjusted to the extent the
Companys net cash (as defined in the Merger Agreement) at closing
of the merger (the Closing) is greater than $17.5 million or less
than $12.5 million.

Following the Closing, Molecular Templates Chief Executive
Officer, Eric Poma, Ph.D., will become the Companys Chief
Executive Officer, and the Companys corporate headquarters will
be relocated Austin, Texas. Additionally, following the Closing,
the board of directors of the Company (the Company Board) will
consist of seven directors and will be comprised of (i) two
members designated by Molecular Templates, (ii) two members of
the current Company Board, including Harold E. Selick, who will
act as chairman, and (iii) three members mutually agreed upon by
Molecular Templates and the Company. In addition, following the
Closing, the Company will change its name to Molecular Templates,
Inc. and will change its NASDAQ symbol to MTEM.

The Merger Agreement contains customary representations,
warranties and covenants made by the Company and Molecular
Templates, including covenants relating to obtaining the
requisite approvals of the stockholders of the Company and
Molecular Templates, indemnification of directors and officers,
the Companys and Molecular Templates conduct of their respective
businesses between the date of signing of the Merger Agreement
and the Closing and to prepare and file a registration statement
on Form S-4 that will contain a proxy statement / prospectus /
information statement to register the Shares issued to the Merger
Agreement (the S-4).

In connection with the Merger and the S-4, the Company will be
seeking the approval of the Companys stockholders with respect to
certain actions, including the following:

The Closing is subject to satisfaction or waiver of certain
conditions including, among other things, (i) the expiration or
termination of any waiting period applicable to the consummation
of the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, (ii) the accuracy of the representations
and warranties, subject to certain materiality qualifications,
(iii) compliance by the parties with their respective covenants,
(iv) no law or order preventing the Merger and related
transactions, and (v) the effectiveness of the S-4. The Closing
is not contingent upon the completion of the Financing described
below.

The Merger Agreement also includes termination provisions for
both the Company and Molecular Templates. In connection with a
termination of the Merger Agreement under specified circumstances
involving competing transactions, a willful, intentional and
material breach of the non-solicitation obligations, a change in
the board of directors recommendation of the Merger to the
stockholders or other triggering events, either party may be
required to pay the other party a termination fee of $750,000,
plus reimbursement for certain fees and expenses.

In connection with execution of the Merger Agreement, the Company
will make a bridge loan to Molecular Templates to a note purchase
agreement and promissory notes (the Notes) up to an aggregate
principal amount of $4.0 million with an initial closing to be
held no later than the third business day following the execution
of the Merger Agreement for a principal amount of $2.0 million.
If the Merger Agreement is terminated prior to the to the
maturity date of the Notes, the outstanding principal of the
Notes plus all accrued and unpaid interest shall become due and
payable upon the earlier of (i) the consummation of a qualified
financing by Molecular Templates of at least $10.0 million, (ii)
the occurrence of a Molecular Templates liquidity event, or (iii)
the four-month anniversary of the termination of the Merger
Agreement, and such amounts shall be credited against any
termination fees owed by the Company to Molecular Templates to
the Merger Agreement.

Support Agreements

Concurrently with the execution of the Merger Agreement, officers
and directors of the Company entered into support agreements with
Molecular Templates relating to the Merger covering approximately
1.2% of the outstanding Shares, as of immediately prior to the
Merger (the Company Support Agreements). The Company Support
Agreements provide, among other things, that the stockholders to
the Company Support Agreement will vote all of the Shares held by
them in favor of the issuance of the Shares in connection with
the Merger and the amendments to the Companys certificate of
incorporation contemplated by the Merger Agreement.

Concurrently with the execution of the Merger Agreement,
officers, directors and certain stockholders of Molecular
Templates entered into support agreements with the Company
covering approximately 96.3% of the outstanding shares of
Molecular Templates (including shares of its preferred stock on
an as-converted to common stock basis) relating to the Merger
(the Molecular Templates Support Agreements, and together with
the Company Support Agreement, the Support Agreements). The
Molecular Templates Support Agreements provide, among other
things, that the officers and stockholders party to the Molecular
Templates Support Agreement will vote all of the shares of
Molecular Templates held by them in favor of the adoption of the
Merger Agreement, the approval of the Merger and the other
transactions contemplated by the Merger Agreement.

Lock-Up Agreements

Concurrently with the execution of the Merger Agreement, officers
and directors of the Company entered into lock-up agreements (the
Company Lock-Up Agreement), to which they accepted certain
restrictions on transfers of the Shares for the 180-day period
following the Effective Time.

Concurrently with the execution of the Merger Agreement,
officers, directors and certain stockholders of Molecular
Templates, have entered into lock-up agreements (the Molecular
Lock-Up Agreement, and together with the Company Lock-Up
Agreement, the Lock-Up Agreements), to which they accepted
certain restrictions on transfers of the Shares for the 180-day
period following the Effective Time.

The foregoing descriptions of the Merger Agreement, Company
Support Agreement, Molecular Templates Support Agreement, the
Company Lock-Up Agreement and the Molecular Lock-Up Agreement,
are not complete and are qualified in their entirety by reference
to those agreements, which are attached hereto as Exhibit 2.1,
10.1, 10.2, 10.3 and 10.4 respectively to this report and
incorporated herein by reference.

Equity Commitment Letter

On March16, 2017, the Company and Molecular Templates received
from Longitude Venture Partners III, L.P. (Longitude) an Equity
Commitment Letter (the Commitment Letter), to which, immediately
following the Closing of the Merger, Longitude will purchase $20
million of equity securities in the Company. Longitudes
investment is subject to certain conditions, including the
Closing of the Merger and the Company having secured commitments
from additional investors for the purchase of an additional $20
million of such securities (the Financing).

The Financing will be accomplished in a private placement exempt
from registration under Section4(a)(2) and Regulation D under the
Securities Act of 1933, as amended (the Securities Act), and the
rules promulgated thereunder. The securities to be sold in the
Financing have not been registered under the Securities Act, or
any state securities laws, and may not be offered or sold in the
United States except to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities
Act and applicable state securities laws.

This report shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of
the securities in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful.

The foregoing description of the Commitment Letter is not
complete and is qualified in its entirety by reference to the
Commitment Letter, a copy of which will be filed as an Exhibit to
the Companys Quarterly Report on Form 10-Q for the quarter ended
March 31, 2017.

Item5.02 Departure of Directors of
Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.

Resignation of Chief Executive Officer

On March 16, 2017, Dr. Selick, the Companys Chief Executive
Officer, resigned as the Companys Chief Executive Officer,
effective March 31, 2017. Dr. Selick will continue to serve as a
member of and Chairman of the Company Board.

Appointment of Interim Chief Executive
Officer

On March 16, 2017, the Company Board appointed Wilfred E. Jaeger,
M.D., currently serving as a member of the Company Board, to
serve as interim Chief Executive Officer of the Company,
effective April 1, 2017. In connection with his appointment as
interim Chief Executive Officer, Dr. Jaeger resigned from all
Company Board committees and the Company Board appointed George
G.C. Parker, an independent director, as a member of the Audit
Committee of the Company Board and to be Chairman of the
compensation committee of the Board. Mr. Jaeger will be paid a
monthly salary of $20,000 for his service as interim Chief
Executive Officer and, upon commencement of his service as
interim Chief Executive Officer, will no longer receive
compensation as a non-employee member of the Company Board. Other
than the foregoing, there were no new compensatory arrangements
or modifications to existing compensatory arrangements nor were
there any grants or awards made to Dr. Jaeger in connection with
his appointment as interim Chief Executive Officer of the
Company.

Dr. Jaeger, age 61, has served as a member of the Company Board
since 2001. He has been a Partner of Three Arch Partners, a
venture capital firm, since 1993. Dr. Jaeger serves as a Director
of a number of private companies. He received his B.S. from the
University of British Columbia, his M.D. from the University of
British Columbia School of Medicine and his M.B.A. from Stanford
University. For a description of certain transactions and
relationships Dr. Jaeger has with the Company, see Related
Party TransactionsRelated Party Transactions and Business
Relationships in the Companys definitive proxy statement on
Schedule 14A, filed with the U.S. Securities and Exchange
Commission (the SEC) on April 29, 2016.

Amendments to Change of Control Agreements; CEO
Severance Arrangement

On March 16, 2017, the Compensation Committee of the Company
Board approved entering into amendments to the Change of Control
Severance Agreements (such amendments, the Amendments) with
Tillman E. Pearce, M.D., the Companys Chief Medical Officer,
Charles Hart, Ph.D., the Companys Senior Vice President of
Biology, Joel Fernandes, the Companys Senior Vice President of
Finance and Controller, Eric Malek, the Companys Senior Vice
President of Corporate Development, Mark Hopkins, Ph.D., J.D. the
Companys Vice President of Intellectual Property and Assistant
General Counsel and Kristen Quigley, the Companys Vice President
of Clinical Operations. The Amendments will amend and restate the
Change of Control Agreements previously entered into with Drs.
Pearce, Hart and Hopkins, Misters Fernandes and Malek, and Ms.
Quigley (the Existing Agreements). The Existing Agreements, as
previously disclosed, provide for 12 months of base salary upon a
qualifying termination of employment and, if the termination
occurs within a specified period following a change of control,
certain enhanced benefits (pro rata bonus, medical coverage and
equity vesting). to the Amendments, a termination of employment
that would qualify the officer for the enhanced benefits, but for
the fact that the termination occurred during the four-month
period prior to the Merger rather than following the Merger, will
be treated as having occurred following the Merger and will
entitle the officer to the enhanced benefits. The Compensation
Committee may choose, in any particular Amendment or all in
Amendments, to reduce the salary portion of the severance
benefits by salary earned after such date as the Compensation
Committee may determine. In addition, upon the recommendation of
the Compensation Committee of the Company Board, the Company
Board has deemed Dr. Selicks resignation as Chief Executive
Officer effective March 31, 2017 to be a termination of
employment qualifying him for the enhanced payments and benefits
under the Amendment to his Change of Control Agreement, but only
if the Merger occurs within four months following March 31, 2017
and if he remains as Chairman of the Company Board through the
Closing of the Merger.

The Company expects to enter into the Amendments with the
foregoing persons in due course. The foregoing is only a brief
description of the material terms of the Amendments, does not
purport to be complete, and is qualified in its entirety by
reference to the Amendments that will be filed as an exhibit to
the Companys quarterly report on Form 10-Q for the quarter ending
March 31, 2017.

Item 8.01 Other Events.

Press Release

On March 17, 2017, the Company and Molecular Templates issued a
joint press release announcing the execution of the Merger
Agreement and the Commitment Letter. The press release contains
statements intended as forward-looking statements which are
subject to the cautionary statements about forward-looking
statements set forth therein. The press release is attached
hereto as Exhibit 99.1, and is incorporated herein by reference.

Evofosfamide Update

On March 16, 2017, the Company received a certified translation
of a notification from the Pharmaceutical and Medical Devices
Agency (PMDA) relating to the Companys consultation with the PMDA
indicating that the analysis of the data from the randomized
Phase III study, EMR200592-001, conducted under its original
Statistical Analysis Plan, did not provide adequate OS
prolongation to support the submission of a New Drug Application
(NDA) in Japan for evofosfamide. The PMDA indicated it will
reconsider its assessment after reviewing the Companys
development plan for an additional clinical study of evofosfamide
in Japanese patients. The Company has scheduled further
consultation with the PMDA to clarify the scope of the additional
clinical trial and the results of which that the PMDA may
consider supportive of the potential submission of a NDA for
evofosfamide in Japan.

Forward Looking Statements

This Current Report on Form 8-K contains forward-looking
statements, including, without limitation, statements related to
the anticipated consummation of the transactions contemplated by
the Merger Agreement, the Support Agreements and the Commitment
Letter, further consultations by the Company with the PMDA, the
potential submission of a NDA for evofosfamide in Japan, and
other statements that are not historical facts. Any statements
contained in this Current Report on Form 8-K that are not
statements of historical fact may be deemed to be forward-looking
statements. These forward-looking statements are based upon the
Companys current expectations. Forward-looking statements involve
risks and uncertainties. The Companys actual results and the
timing of events could differ materially from those anticipated
in such forward-looking statements as a result of these risks and
uncertainties, which include, without limitation, related to the
Companys ability to complete the Merger on the proposed terms and
schedule, including risks and uncertainties related to the
satisfaction of the closing conditions related to the Merger
Agreement; the Companys ability to complete the Financing on the
proposed terms and schedule, including risks and uncertainties
related to the satisfaction of the closing conditions related to
the Financing; the uncertain and time-consuming regulatory
approval process, including the risk that the Company may be
unable to reach agreement with the PMDA regarding an additional
clinical study of evofosfamide in Japanese patients and that such
study, even if commenced and completed, may not be sufficient to
support a potential NDA submission in Japan or support the
approval of evofosfamide for the treatment of patients with
pancreatic cancer in Japan; and the Companys need for and the
availability of resources to develop evofosfamide and to support
its operations. In addition, there can be no assurance that the
Company will be able to complete the transactions contemplated by
the Merger Agreement or the Commitment Letter on the anticipated
terms, or at all. Additional risks and uncertainties relating to
the Company and its business can be found under the caption Risk
Factors and elsewhere in the Companys SEC filings and reports,
including in the Companys Quarterly Report on Form 10-Q, filed
with the SEC on November 7, 2016. The Company expressly disclaims
any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein to
reflect any change in the Companys expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statements are based.

Additional Information and Where You Can Find
It

The Merger Agreement, the Support Agreements and the Lock-Up
Agreements (the Transaction Agreements), and the foregoing
description of the Transaction Agreements, have been included to
provide investors and stockholders with information regarding the
terms of the Transaction Agreements.

The assertions embodied in the representations and warranties
contained in the Merger Agreement are qualified by information in
confidential disclosure schedules delivered by the Company to
Molecular Templates in connection with the signing of the Merger
Agreement. Moreover, certain representations and warranties in
the Merger Agreement were made as of a specified date, may be
subject to a contractual standard of materiality different from
what might be viewed as material to stockholders, or may have
been used for the purpose of allocating risk between the parties
to the Merger Agreement. Accordingly, the representations and
warranties in the Merger Agreement should not be relied on by any
persons as characterizations of the actual state of facts and
circumstances of the Company at the time they were made and
should consider the information in the Merger Agreement in
conjunction with the entirety of the factual disclosure about the
Company in the Companys public reports filed with the SEC.
Information concerning the subject matter of the representations
and warranties may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in
the Companys public disclosures.

The Company will file with the SEC a registration statement
containing a proxy statement / prospectus / information statement
of the Company that will also constitute a prospectus of the
Company. The Company will mail the proxy statement / prospectus /
information statement to the Companys stockholders, and the
securities may not be sold or exchanged until the registration
statement becomes effective. The Company urges investors and
stockholders to read the proxy statement / prospectus /
information statement regarding the proposed transaction when it
becomes available, as well as other documents filed or that will
be filed with the SEC, because they contain or will contain
important information about the proposed transaction. This
communication is not a substitute for the registration statement,
definitive proxy statement / prospectus / information statement
or any other documents that the Company may file with the SEC or
send to the Companys stockholders in connection with the proposed
transaction. Before making any voting decision, investors and
security holders are urged to read the registration statement,
proxy statement / prospectus / information statement and all
other relevant documents filed or that will be filed with the SEC
in connection with the proposed transaction as they become
available because they will contain important information about
the proposed transaction and related matters.

You may obtain free copies of the registration statement, proxy
statement / prospectus / information statement and all other
documents filed or that will be filed with the SEC regarding the
proposed transaction at the website maintained by the SEC at
www.sec.gov. Once they are filed, copies of the registration
statement and proxy statement / prospectus / information
statement will be available free of charge on the Companys
website at www.thresholdpharm.com or by contacting the Companys
Investor Relations at 510.703.9491 or by email at Investor
Relations, [email protected].

Participants in Solicitation

The Company, Molecular Templates and their respective directors
and executive officers may be deemed to be participants in the
solicitation of proxies from the holders of the Companys common
stock in connection with the proposed transaction. Information
about the Companys directors and executive officers is set forth
in the Companys Definitive Proxy Statement for its 2016 Annual
meeting, which was filed with the SEC on April 29, 2016. Other
information regarding the interests of such individuals, as well
as information regarding Molecular Templates directors and
executive officers and other persons who may be deemed
participants in the proposed transaction, will be set forth in
the proxy statement / prospectus / information statement, which
will be included in the Companys registration statement when it
is filed with the SEC. You may obtain free copies of these
documents as described in the preceding paragraph.

Non-Solicitation

This report will not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer
to buy any securities, nor will there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction. No public offering
of securities will be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act of
1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

Date: March 17, 2017

THRESHOLD PHARMACEUTICALS, INC.

EXHIBIT INDEX

About THRESHOLD PHARMACEUTICALS, INC. (NASDAQ:THLD)

Threshold Pharmaceuticals, Inc. is a clinical-stage biotechnology company. The Company is engaged in the discovery and development of therapeutic and diagnostic agents that selectively target tumor cells for the treatment of patients living with cancer. It is developing two therapeutic product candidates based on hypoxia-activated prodrug technology: evofosfamide and tarloxotinib. Evofosfamide is designed as a prodrug that is activated under the extreme hypoxic conditions commonly found in tumors, but not in healthy tissues. Tarloxotinib is under investigation in two Phase II proof-of-concept trials: one for the treatment of patients with mutant EGFR-positive, T790M-negative advanced NSCLC progressing on an EGFR TKI, and the other for patients with recurrent or metastatic squamous cell carcinomas of the head and neck. [18F]-HX4 is an investigational Positron Emission Tomography imaging agent for hypoxia to identify and quantify the degree of hypoxia in tumors in vivo.

THRESHOLD PHARMACEUTICALS, INC. (NASDAQ:THLD) Recent Trading Information

THRESHOLD PHARMACEUTICALS, INC. (NASDAQ:THLD) closed its last trading session up +0.070 at 0.680 with 18,503,122 shares trading hands.