COLLABORATIVE DEVELOPMENT AND MARKETING AGREEMENT

        This COLLABORATIVE DEVELOPMENT AND MARKETING AGREEMENT is entered into as of August 12, 2004 (the “Effective Date”), by and between PALATIN TECHNOLOGIES, INC., a Delaware corporation having an address of Cedar Brook Corporate Center, 4C Cedar Brook Drive, Cranbury, New Jersey 08512 (“Palatin”) and KING PHARMACEUTICALS, INC., a Tennessee corporation having an address of 501 Fifth Avenue, Bristol, Tennessee 37620, (“King”). Each of King and Palatin is sometimes referred to individually herein as a “Party” and collectively as the “Parties”.

        WHEREAS, Palatin Controls and develops certain Technology and/or Proprietary Materials related to its proprietary treatment for sexual dysfunction; and

        WHEREAS, King is engaged in the development and marketing of human therapeutics; and

        WHEREAS, the Parties desire to enter into a collaboration for the purpose of Developing and Marketing Products derived from Palatin Technology and Proprietary Materials; and

        WHEREAS, King has also agreed to make, simultaneous with the Closing and upon the occurrence of certain milestones specified herein, equity investments in Palatin common stock, such investments to be made pursuant to the terms of the Securities Purchase Agreement, in the form attached hereto as Exhibit H (the “Securities Purchase Agreement”), dated as of the date of the Closing, which Securities Purchase Agreement requires the issuance by Palatin of Warrants pursuant to Section 6.2.4 hereof.

        NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration the receipt and sufficiency of which are acknowledged by the Parties, the Parties hereto, intending to be legally bound, agree as follows.

1. DEFINITIONS

        Whenever used in this Agreement with an initial capital letter, the terms defined in this Section 1 shall have the meanings specified.

1.1 “Accounting and Finance Plans” means the written plans (which shall include a detailed strategy, budget, proposed timelines and all Collaboration Costs) describing the financial plans to be carried out by each Party during each Calendar Year pursuant to this Agreement which, with respect to Palatin, shall include the activities for which responsibility has been allocated to Palatin and, with respect to King, shall include the activities for which responsibility has been allocated to King. In addition, the Accounting and Finance Plan shall include all budgets for the Collaboration, including budgets for the overall Development and Marketing Program and each of the Program Plans. After the date hereof, each Accounting and Finance Plan will be set forth in a written document prepared by the Parties and approved by the JDMC and annexed as an amendment to Exhibit G. The Accounting and Finance Plans shall not create an obligation on the Parties to coordinate their accounting methods or undertake any sort of joint accounting, except to the extent specified in the definition of Collaboration Costs.

1.2 “Action" has the meaning set forth in Section 12.5.

1.3 “Adverse Event” means any life-threatening drug experience, serious adverse drug experience, unexpected adverse drug experience, expected drug experience or non-serious drug experience, all as defined in ICH Guidance ICH E2A or in any provision of the Food and Drug Act, any law, rule or regulation promulgated thereunder, or any foreign equivalent, or other similar experience in a human who is administered a Product, whether or not considered Product related, including, without limitation, any undesirable sign (including abnormal laboratory findings of clinical concern), symptom or disease associated with the use, abuse, or withdrawal of or from such Product.

1.4 “Affiliate” means any corporation, firm, partnership or other entity which directly or indirectly controls or is controlled by or is under common control with a Party to this Agreement. For purposes of this definition, (x) “control” means ownership, directly or through one or more Affiliates, of (a) fifty percent (50%) or more of the shares or voting rights in case of a corporation or limited company, (b) fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, (c) fifty percent (50%) or more of the equity or controlling interests in the case of any other type of legal entity (including, without limitation, joint ventures) or status as a general partner in any partnership, or (d) any other arrangement whereby a Party controls or has the right to control the Board of Directors or equivalent governing body of an entity, and (y) following the Merger, shall exclude Somerset Pharmaceuticals, Inc.

1.5 “Agreement” means this Collaborative Development and Marketing Agreement, including all attached exhibits, as well as all amendments, supplements and/or restatements thereof.

1.6 “API” means, with respect to a Product, the active pharmaceutical ingredient used in the Product.

1.7 “Applicable Law” means applicable U.S. and foreign laws, rules, regulations, guidelines and standards, including but not limited to those of the FDA and comparable foreign Regulatory Authorities.

1.8 “Assets” has the meaning set forth in Section 5.5.2.

1.9 “Bankruptcy Code” means the U.S. Bankruptcy Code, 11 U.S.C.ss.ss. 101 et seq.

1.10 “Calendar Quarter” means, with respect to the first such Calendar Quarter, the period beginning on the Effective Date and ending on the last day of the calendar quarter within which the Effective Date falls and, thereafter, each successive period of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31. In the event that the termination of this Agreement does not fall on the last day of a Calendar Quarter, the “Final Calendar Quarter” shall mean the period from the last day of the most recent Calendar Quarter through the applicable date of termination of this Agreement.

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1.11 “Calendar Year” means each successive twelve (12) month period commencing on January 1 and ending on December 31. The first Calendar Year of this Collaboration shall begin on the Effective Date and end on December 31, 2004. In the event that the termination of this Agreement does not fall on the last day of a Calendar Year, the “Final Calendar Year” shall mean the period from the last day of the most recent Calendar Year through the applicable date of termination of this Agreement.

1.12 “Chairman” has the meaning set forth in Section 2.2.

1.13 “Change of Control” means that any of the following events, to the extent permitted hereunder, has occurred: (i) any person (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a Party, any employee benefit plan of a Party or any entity organized, appointed or established by a Party for or pursuant to the terms of any such plan, together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Exchange Act) becomes the beneficial owner or owners (as defined in Rule 13d-3 and 13d-5 promulgated under the Exchange Act), directly or indirectly, of more than 50% of the outstanding equity securities of the Party, or otherwise becomes entitled, directly or indirectly, to vote more than 50% of the voting power entitled to be cast at elections for directors (“Voting Power”) of the Party; (ii) a consolidation or merger (in one transaction or a series of related transactions) of a Party pursuant to which the holders of a Party’s equity securities immediately prior to such transaction or series of related transactions would not be the holders, directly or indirectly, immediately after such transaction or series of related transactions of more than 50% of the Voting Power of the entity surviving such transaction or series of related transactions; (iii) the sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of a Party; (iv) the liquidation or dissolution of a Party or a Party ceasing to do business; and (v) a permitted assignment pursuant to Section 15.10.

1.14 “Clinical Plans” means the written plans (which shall include a detailed strategy, budget and proposed timelines) describing the clinical Development activities to be carried out by each Party during each Calendar Year pursuant to this Agreement which, with respect to Palatin, shall include the activities for which responsibility has been allocated to Palatin and, with respect to King, shall include the activities for which responsibility has been allocated to King. After the date hereof, each Clinical Plan will be set forth in a written document prepared by the Parties and approved by the JDMC and annexed as an amendment to Exhibit C.

1.15 “Closing” shall mean, subject to the satisfaction or waiver of the conditions set forth in Section 6.1.3, the closing of the transactions contemplated by this Agreement.

1.16 “Closing Date” shall mean the earlier of: (i) the first (1^st) day, unless the first (1^st) day falls on a weekend or holiday, in which case it shall be the next business day, after the expiration or termination of all applicable waiting periods under the HSR Act or (ii) the first (1^st) day, unless the first (1^st) day falls on a weekend or holiday, in which case it shall be the next business day, after the joint determination (by certification from each Party to the other) that notification under the HSR Act is not required.

1.17 “CMC” means chemistry, manufacturing and controls activities related to Product and/or API for any Product.

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1.18 “Collaboration” means the association of Palatin and King established pursuant to this Agreement for the purpose of conducting the Development and Marketing Program so as to accomplish the objectives of the Development and Marketing Program, including the Marketing of Products.

1.19 “Collaboration Costs” means, to the extent approved by the JDMC, the sum of (a) Development Costs, (b) Manufacturing/CMC Costs, (c) Marketing Costs, (d) Regulatory and IP Costs, (e) product liability costs, as contemplated by Section 5.4, (f) any other cost or expense expressly stated to be a Collaboration Cost in this Agreement or under a Program Plan, (g) quantity, trade or cash discounts, chargebacks, returns, allowances, rebates (including without limitation any and all federal, state or local government rebates, such as Medicaid rebates) and costs incurred in connection with processing the foregoing and price adjustments, to the extent actually allowed in any invoice relating to Product (to the extent not already deducted as part of the calculation of Net Sales), (h) sales and other excise taxes and duties or similar governmental charges directly related to the sale of Product (to the extent not already deducted as part of the calculation of Net Sales), and (i) any other direct and allocable internal costs and direct and allocable external costs incurred in conducting the Development and Marketing Program, all calculated in accordance with GAAP and all approved by the JDMC. Except to the extent this Agreement expressly provides for payments that do not require JDMC approval, and except to the extent the JDMC has approved any payment hereunder, neither Party shall (y) be obligated to incur any costs or expend any funds that have not been approved by such Party or (z) have the authority to cause the other party to incur any costs or expend any funds that have not been approved by such other Party. Notwithstanding anything to the contrary contained herein, Collaboration Costs shall not include (i) indirect costs, overhead, general and administrative costs and other similar costs, (ii) any costs which relate to the business of a Party as a whole without specifically referencing a Product or (iii) costs required to be paid by Palatin under the CT License Agreement (which shall be the responsibility of Palatin), including without limitation pursuant to the indemnification provisions thereof except to the extent the same are the result of the acts or omissions of King. In calculating the Collaboration Costs, the following principles shall apply: (x) there shall be no double counting of any costs or expenses or of any revenues, and to the extent a cost or expense has been included in one category or sub-category, it shall not be included in another, and to the extent any revenue has been taken into account in one category or sub-category, it shall not be taken into account in another; (y) when allocating costs and expenses under this Agreement, each Party shall utilize the same policies and principles as it utilizes consistently within its group and business units when making internal cost allocations; and (z) all costs and expenses shall be determined, and all calculations shall be made, in accordance with GAAP.

1.20 “Collaboration License Fee” has the meaning set forth in Section 6.2.1.

1.21 “Collaboration Manager” has the meaning set forth in Section 2.5.

1.22 “Collaboration Revenue” means the sum of (a) Net Sales and (b) all other consideration or revenue paid to or received by or on the account of a Party in connection with this Agreement, the Collaboration or the Development and Marketing Program (including, without limitation, any and all Net Sales and all consideration and revenues resulting from Development and Marketing in the ROW).

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1.23 “Completion of Phase II Clinical Trials” means achievement of clinical endpoints agreed upon by the Clinical Committee for specific Phase II Clinical Trials for the relevant Product for a specific indication and the specific dosage strengths, which data enables the Parties to proceed with Phase III Clinical Trials, without any objection from the FDA that prevents proceeding with such Phase III Clinical Trials, as documented by FDA contact reports. For the avoidance of doubt, the “Completion of Phase II Clinical Trials” for FSD and for ED shall be independent events, and the conduct of additional Preclinical Plan and Clinical Plan activities for a given Product for a given indication (including, without limitation, additional Phase II Clinical Trials for such Product and such indication) subsequent to the first Completion of Phase II Clinical Trials for such Product shall not be deemed to and shall not be dispositive of the prior occurrence of the Completion of Phase II Clinical Trials for such Product and for such indication.

1.24 “Completion of Phase III Clinical Trials” means achievement of clinical endpoints agreed upon by the Clinical Committee for Phase III Clinical Trials, which data enables the Parties to file for Regulatory Approval on the relevant Product for the relevant indication.

1.25 “Confidential Information” means (a) all Technology produced or developed by either Party in the Development and Marketing Program, (b) all information exchanged by the Parties prior to the date hereof, and (c) with respect to a Party (the “Receiving Party”), all information, Technology and Proprietary Materials which are disclosed by the other Party (the “Disclosing Party”) to the Receiving Party hereunder or to any of its employees, Consultants, Affiliates or Sublicensees, except to the extent that any such information (i) as of the date of disclosure is demonstrably known to the Receiving Party or its Affiliates, as demonstrated by credible written documentation; (ii) as of the date of disclosure is in, or subsequently enters, the public domain, through no fault or omission of the Receiving Party; (iii) is obtained from a Third Party having a lawful right to make such disclosure free from any obligation of confidentiality to the Disclosing Party; or (iv) is independently developed by or for the Receiving Party without reference to or reliance upon any Confidential Information of the Disclosing Party as demonstrated by credible written documentation. All Palatin Technology, King Technology and Joint Technology that is used in or, in the judgment of the JDMC, reasonably likely to be used in the Development and Marketing Program shall be considered, during the Term and, if the Agreement terminates earlier pursuant to Article 11, for so long as any Product is being Developed or Marketed, Confidential Information of both Parties, regardless of which Party provided or developed same; provided, however, that (x) during the Term hereof, neither Party shall be restricted from using any of its own Confidential Information outside the Field, provided, and only to the extent, that such use outside the Field does not, and would not reasonably be expected to adversely impact any intellectual property rights or commercial interests of the Collaboration, including without limitation the Development and Marketing Program; and (y) after termination of this Agreement pursuant to Section 11.2, (i) the Party with the right to Develop and Market Product after termination shall be permitted to use any of either party’s Confidential Information as reasonably required in connection with such Development and Marketing and (ii) neither Party shall be restricted from using any of its own Confidential Information outside the Field, provided, and only to the extent, that such use outside the Field does not, and would not reasonably be expected to adversely impact any intellectual property rights or commercial interests of the Party with the right to Develop and Market Product after termination, with respect to such Development and Marketing.

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1.26 “Consultant” means a third party who has entered into or hereafter enters into a written agreement with Palatin or King or both to provide consulting services that are material or are reasonably likely, in the judgment of the JDMC, to become material to the Development and Marketing Program, which written agreement, (a) includes an assignment of all right, title and interest in and to all work product and all inventions arising from the performance of such agreement, and all intellectual property rights attaching thereto, to Palatin or King, as applicable and (b) binds the relevant third party by obligations of confidentiality and non-use with respect to all such work product, inventions, Confidential Information and intellectual property rights that are at least as stringent as those set forth herein.

1.27 “Control” or “Controlled” means (a) with respect to Technology (other than Proprietary Materials) and/or Patent Rights, the possession by a Party of the ability to grant a license or sublicense of such Technology and/or Patent Rights as provided herein without the payment of additional consideration (other than any additional consideration to be paid pursuant to the CT License Agreement) and/or without violating the terms of any agreement or arrangement between such Party and any Third Party and (b) with respect to Proprietary Materials, the possession by a Party of the ability to supply such Proprietary Materials to the other Party as provided herein without the payment of additional consideration and without violating the terms of any agreement or arrangement between such Party and any Third Party.

1.28 “Copromote” or “Copromotion” means the right of Palatin, consistent with the allocation of responsibilities under the Marketing Plan, to the extent amended pursuant to Section 5.1, to copromote with King, Product in any legal manner in the Territory to the urology specialty only.

1.29 “Copromotion Option” has the meaning set forth in Section 5.1.

1.30 “CT License Agreement” means the License Agreement dated as of March 31, 1998 by and between Palatin and Competitive Technologies, Inc. (“CT”), a copy of which has been provided to King, as it may be amended from time to time hereafter, with the consent of King, to the extent required pursuant to Section 7.4.

1.31 “CTM” or “Clinical Trial Materials” means any Product manufactured, packaged and labeled as required by Applicable Law to be used as investigational drug or placebo for use in the conduct of clinical trials in humans.

1.32 “Default” means (a) a material breach, default or violation, (b) the occurrence of an event that with or without the passage of time or the giving of notice, or both, would constitute a material breach, default or violation or cause any material mortgages, liens, security interests, charges, covenants, options, claims, restrictions and encumbrances of any kind to arise, or (c) respect to a contract, the occurrence of an event that with or without the passage of time or the giving of notice, or both, would give rise to a right of termination, renegotiation or acceleration or a material right to receive damages or a payment of material monies or penalties of or under such contract by a party other than a Party.

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1.33 “Defaulting Party” has the meaning set forth in Section 3.10.

1.34 “Developing Party” has the meaning set forth in Section 11.2.2(d).

1.35 “Development” or “Develop” means, with respect to a Product, all research, preclinical, pharmaceutical and clinical activities and other activities undertaken in order to obtain Regulatory Approval of such Product in accordance with this Agreement prior to Regulatory Approval of such Product. These activities shall include preclinical and clinical drug development activities, including, among other things: research, test method development and stability testing, toxicology, animal studies, statistical analysis and report writing, clinical trial design and performance prior to obtaining Regulatory Approvals, obtaining Regulatory Approvals, and regulatory affairs related to the foregoing. “Development” shall also include relevant formulation, process development, manufacturing, manufacturing scale-up, CMC, development-stage manufacturing, quality assurance, and quality control development. All of the items in the immediately preceding sentence shall be subject to King’s final decision-making authority to the extent set forth in Section 2.10.2 hereof, notwithstanding the inclusion of any or all of the foregoing activities in the Preclinical Plans or Clinical Plans.

1.36 “Development and Marketing Program” means the collaborative development and marketing program in the Field commencing on the date hereof and conducted by Palatin and King pursuant to this Agreement and the Preclinical Plans, Clinical Plans, Manufacturing/CMC Plans, Regulatory Plans, Marketing Plans, and Accounting and Finance Plans.

1.37 “Development Costs” means, with respect to a Product, all costs incurred by a Party directly attributable to Development of such Product, but not including applicable Manufacturing/CMC Costs and Regulatory Costs.

1.38 “Discretionary Funding” has the meaning set forth in Section 2.8.2.

1.39 “ED” means erectile dysfunction and all related sub-indications.

1.40 “Effective Date” has the meaning set forth in the first paragraph of this Agreement.

1.41 “Event of Bankruptcy” has the meaning set forth in Section 11.2.4.

1.42 “Expense Payment” has the meaning set forth in Section 6.2.2.

1.43 “FAMC” means the fully absorbed manufacturing costs which includes direct costs and allocated costs, but not indirect and overhead costs.

1.44 “FDA” means the United States Food and Drug Administration or any successor agency.

1.45 “Field” means the palliative, prophylactic or therapeutic treatment of human sexual dysfunction, including ED and FSD.

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1.46 “Filing Party” has the meaning set forth in Section 9.1.2.

1.47 “First Commercial Sale” means, with respect to any Product, the first sale for end-use or consumption, including any sale to a wholesaler or distributor, of such Product in a country after the applicable Regulatory Authority has granted Regulatory Approval. For purposes of this definition, any sale to an Affiliate or Sublicensee will not constitute a First Commercial Sale.

1.48 “Force Majeure” means an event beyond the reasonable control of a Party that prevents the performance, in whole or in part, by the Party of any of its obligations hereunder, including by reason of any act of God, flood, fire, explosion, earthquake, breakdown of plant, shortage of critical equipment, loss or unavailability of manufacturing facilities or material, strike, lockout, labor dispute, casualty or accident, or war, terrorist act, revolution, civil commotion, acts of public enemies, blockage or embargo, or any injunction, law, order, proclamation, regulation, ordinance, demand or requirement of any government or of any subdivision, authority or representative of any such government, if and only if the Party affected shall have used commercially reasonable efforts to avoid the effects of such occurrence and to remedy it promptly if it has occurred.

1.49 “FSD” means female sexual dysfunction and all related subindications.

1.50 [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

1.51 [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

1.52 “GAAP” means United States generally accepted accounting principles.

1.53 “Good Clinical Practices” means the international ethical and scientific quality standards for designing, conducting, recording, and reporting trials that involve the participation of human subjects. Good Clinical Practices are established through FDA guidances (including but not limited to ICH E6).

1.54 “Good Laboratory Practices” means the minimum standards for conducting nonclinical laboratory studies that support or are intended to support applications for research or marketing permits for products regulated by the FDA, including food and color additives, animal food additives, human and animal drugs, medical devices for human use, biological products, and electronic products. Good Laboratory Practices are established through FDA regulations (including but not limited to 21 CFR Part 58), FDA guidances, FDA current review and inspection standards and current industry standards.

1.55 “Good Manufacturing Practices” means the minimum standards for methods to be used in, and the facilities or controls to be used for, the manufacture, processing, packing, or holding of a drug to assure that such drug meets the requirements of the Federal Food, Drug and Cosmetic Act of 1938, as amended, as to safety, and has the identity and strength and meets the quality and purity characteristics that it purports or is represented to possess. Good Manufacturing Practices are established through FDA regulations (including but not limited to 21 CFR Parts 210-211), FDA guidance and FDA current review and inspection standards and current industry standards.

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1.56 “HSR Act” means the Hart-Scott-Rodino Act of 1976, as amended.

1.57 “IND” means (a) an Investigational New Drug Application (as defined in 21 CFR § 312.3) that is required to be filed with the FDA before beginning clinical testing of a Product in human subjects, or any successor application or procedure or (b) any counterpart of a U.S. Investigational New Drug Application that is required in any other country or region in the Territory before beginning clinical testing of a Product in human subjects in such country or region.

1.58 “Indemnified Party” has the meaning set forth in Section 13.3.

1.59 “Indemnifying Party” has the meaning set forth in Section 13.3.

1.60 “Infringement” has the meaning set forth in Section 9.2.1.

1.61 “Infringement Notice” has the meaning set forth in Section 9.2.1.

1.62 “Initial Share Payment” has the meaning set forth in Section 6.2.3.

1.63 “Initial Shares” has the meaning set forth in Section 6.2.3.

1.64 “IRB” has the meaning set forth in Section 12.8.

1.65 “Joint Decision” means any decision which must be made by the JDMC after appropriate consultations with, and discussions concerning the same by, the JDMC representatives of Palatin and King. Joint Decisions shall include any decisions expressly identified as such hereunder and any other decisions not specifically reserved to either Party hereunder.

1.66 “Joint Development and Marketing Committee” or “JDMC” means the committee of Palatin and King representatives established pursuant to Section 2.1 to administer the affairs of the Collaboration.

1.67 “Joint Patent Rights” means Patent Rights claiming Joint Technology.

1.68 “Joint Technology” means any Technology or Proprietary Materials (a) jointly developed or conceived by employees of King or Palatin, or Consultants to both King and Palatin, during the conduct of the Development and Marketing Program or (b) developed or conceived by one Party during the conduct of the Development and Marketing Program as a result of its material use of the Technology or Proprietary Materials of the other Party.

1.69 “King Activities” means those activities to be performed by King pursuant to this Agreement or the Program Plans.

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1.70 “King Background Technology” means any Technology useful in the Field that is (a) Controlled by King as of the Closing Date or (b) developed or conceived by employees of, or Consultants to, King on and after the Closing Date in the conduct of activities outside the Development and Marketing Program and without the material use of any Palatin Technology, Palatin Proprietary Materials or Joint Technology.

1.71 “King Indemnitees” has the meaning set forth in Section 13.1.

1.72 “King Patent Rights” means all Patent Rights claiming King Technology.

1.73 “King Program Technology” means any Technology developed or conceived by employees of, or Consultants to, King, alone or jointly with Third Parties, in the conduct of the Development and Marketing Program without the material use of any Palatin Technology, Palatin Proprietary Materials or Joint Technology.

1.74 “King Proprietary Materials” means any Proprietary Materials that are useful in the Field that are (a) Controlled by King as of the Closing Date or (b) developed or conceived by employees of, or Consultants to, King on and after the Closing Date in the conduct of activities outside the Development and Marketing Program and without the material use of any Palatin Technology, Palatin Proprietary Materials or Joint Technology.

1.75 “King Technology” means, collectively, King Background Technology and King Program Technology. 1.76 “License Fees” means all upfront payments, milestone payments, license fees, royalties or other payments, payable to any Third Party by either Party under any Third Party license agreement or other similar agreement or arrangement (including the existing Third Party agreements utilized as part of the Collaboration, other than the CT License Agreement which shall be the sole responsibility of Palatin) to the extent such payments are attributable to the Development or Marketing of Product. If the rights under any Third Party license agreement are also attributable to products other than Products, then only an equitable portion of any amounts payable under it shall be allocated to Products as License Fees.

1.77 “Losses” has the meaning set forth in Section 13.1.

1.78 “Manufacturing/CMC Costs” means FAMC attributable to the manufacture of a Product and consistent with the Manufacturing/CMC Plan and includes, without limitation, the costs of all Third Party manufacturing, direct material, direct labor, direct services costs and manufacturing overhead consumed (including depreciation), provided or procured by manufacturing facilities in the manufacture of a Product and any other direct and/or allocated costs of all goods manufactured.

1.79 “Manufacturing/CMC Plans” means the written plans (which shall include a detailed strategy, budget and proposed timelines) describing the API, synthesis, choice of Manufacturers and third party suppliers, expected manufacturing scale-up, manufacture, formulation, process development, development-stage manufacture, quality assurance/quality control development, filling and/or shipping requirements for each Product (in accordance with customary standards for a product of comparable market potential), including all CMC, and the activities to be carried out by each Party during the applicable Calendar Year which, with respect to Palatin, shall include the activities for which responsibility has been allocated to Palatin and, with respect to King, shall include the activities for which responsibility has been allocated to King. After the date hereof, each Manufacturing/CMC Plan will be set forth in a written document prepared by the Parties and approved by the JDMC and annexed as an amendment to Exhibit D.

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1.80 “Manufacturing Party” has the meaning set forth in Section 11.2.2(d).

1.81 “Market” or “Marketing” means any and all activities directed to the marketing, detailing and promotion of a Product for commercial sale and shall include pre-launch and post-launch marketing, promoting, detailing, distributing, offering to sell and selling a Product, importing a Product for sale, and any and all clinical and marketing studies conducted after obtaining marketing approval for any Product (but not including any preclinical studies), including, without limitation, all Phase IV trials that are not performed as a condition to obtaining any Regulatory Approval for a Product (which Phase IV trials shall be Development activities), and interacting with Regulatory Authorities regarding the foregoing. If a Phase IV trial is performed as a condition to obtaining any Regulatory Approval for a Product, such trial shall be considered a Development activity.

1.82 “Marketing Costs” means the sum of (a) all reasonable out-of-pocket costs and expenses incurred by a Party directly attributable to the following functions for the sale, promotion and marketing of a Product in the Territory: (i) market research on such Product or relevant indications, (ii) marketing communications, (iii) corporate accounts, (iv) managed care, (v) sales force training, (vi) product hotlines, (vii) reimbursement support, (viii) contracting, (ix) pricing, (x) telemarketing services, (xi) distribution costs, including freight, insurance, warehousing, order entry and billing, (xii) the cost of Product detailing of a Party’s sales force plus reasonable out-of-pocket costs and expenses paid to Third Parties for product details provided by such Third Parties, (xiii) patient registries, if required, (xiv) the cost of Product samples, and (xv) all reasonable out-of-pocket costs and expenses incurred by a Party and directly attributable to the promotion of a Product in the Territory and (b) Personnel Costs incurred by a Party directly attributable to marketing personnel and support staff working (either full time or part of the time) on the Marketing of Products in the Territory. Examples of functions that would be included in the marketing headcount cost are: Marketing, marketing communications, clinical research and educational managers, clinical support managers, corporate accounts, managed care, product hotlines, sales forecasting, reimbursement support (government economic managers), marketing research, contracting and pricing.

1.83 “Marketing Plans” means the written plans (which shall include a detailed strategy, budget and proposed timelines and the pre-launch and launch activities to be undertaken) describing the Marketing activities to be carried out by each Party during each applicable Calendar Year pursuant to this Agreement which, with respect to Palatin, shall include the activities for which responsibility has been allocated to Palatin and, with respect to King, shall include the activities for which responsibility has been allocated to King. After the date hereof, each Marketing Plan will be set forth in a written document prepared by the Parties and approved by the JDMC and annexed hereto as an amendment to Exhibit F.

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1.84 “Merger” means the merger contemplated by the Agreement and Plan of Merger by and among Mylan Laboratories Inc., Summit Merger Corporation and King, dated as of July 23, 2004.

1.85 “NA” means the countries and jurisdictions in North America, including Canada, Mexico, and Puerto Rico, and any other US protectorates, territories and possessions.

1.86 “NDA” means a New Drug Application to market the Product in the Territory or similar application submitted to the FDA, or its foreign equivalent submitted to any Regulatory Authority in the ROW, and all supplements and amendments thereto.

1.87 “Net Sales” means the gross amount invoiced to non-Affiliate Third Parties for sale of Products, less, to the extent deducted from or on such invoice consistent with GAAP, the following items: (i) quantity, trade or cash discounts, chargebacks, returns, allowances, rebates (including without limitation any and all federal, state or local government rebates, such as Medicaid rebates) and price adjustments, to the extent actually allowed; (ii) sales and other excise taxes and duties or similar governmental charges directly related to such sale, to the extent such items are included in the gross invoice price; (iii) amounts actually refunded due to rejected, spoiled, damaged, outdated or returned Product; and (iv) freight, shipment and insurance costs actually incurred in transporting Product to a Third Party purchaser. If any Products are sold to Third Parties in transactions that are not at arm’s length between the buyer and seller, then the gross amount to be included in the calculation of Net Sales for such sales shall be the amount that would have been invoiced had the transaction been conducted at arm’s length, which amount shall be determined, whenever possible, by reference to the average selling price of the relevant Product in arm’s-length transactions in the country of sale at the time of sale. If any Products are sold to Third Parties for consideration other than cash or for consideration that is not readily ascertainable, then the gross amount to be included in the calculation of Net Sales for such sales shall be determined based on the reasonable value of the consideration given, taking into account the average selling price of the relevant Product in arm’s-length transactions in the country of sale at the time of sale. Any goods or services provided in exchange of the supply, disposal of Product for, or use of Product, in clinical or preclinical trials or as free samples (such samples to be in quantities common in the industry for this sort of Product) shall not give rise to any deemed sale under this Section.

1.88 “Non-Defaulting Party” has the meaning set forth in Section 3.10.

1.89 “Non-Proceeding Party” has the meaning set forth in Section 11.2.3(g).

1.90 “Non-Target Party” has the meaning set forth in Section 5.5.2.

1.91 “Palatin Activities” means those activities to be performed by Palatin pursuant to this Agreement and the Program Plans.

1.92 “Palatin Background Technology” means any Technology that is used or useful in the Field and that is (a) Controlled by Palatin as of the Closing Date or (b) developed, acquired or conceived by employees of, or Consultants to, Palatin on and after the Closing Date in the conduct of activities outside the Development and Marketing Program and without the material use of any King Technology, King Proprietary Materials, Joint Technology or Palatin Program Technology.

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1.93 “Palatin Indemnitees” has the meaning set forth in Section 13.2.

1.94 “Palatin Patent Rights” means all Patent Rights claiming Palatin Technology. For the avoidance of doubt, the Palatin Patent Rights are understood to include, without limitation, United States Patent No. 6,579,968 and United States Patent Application Nos. 10/040,547 and 10/638,071, including any patents issuing from such applications, along with all patent rights included in the CT License Agreement.

1.95 “Palatin Program Technology” means any Technology developed or conceived by employees of, or Consultants to, Palatin, alone or jointly with Third Parties, in the conduct of the Development and Marketing Program, without the material use of any King Technology, King Proprietary Materials or Joint Technology.

1.96 “Palatin Proprietary Materials” means any Proprietary Materials that are useful in the Field and that are (a) Controlled by Palatin as of the Closing Date or (b) developed or conceived by employees of, or Consultants to, Palatin on and after the Closing Date in the conduct of activities outside the Development and Marketing Program and without the material use of any King Technology, King Proprietary Materials, or Joint Technology.

1.97 “Palatin Technology” means, collectively, Palatin Background Technology and Palatin Program Technology.

1.98 “Patent Coordinator” has the meaning set forth in Section 8.3.

1.99 “Patent Rights” means the rights and interests in and to issued patents and pending patent applications (which for purposes of this Agreement shall be deemed to include certificates of invention and applications for certificates of invention and priority rights) in any country, including all provisional applications, substitutions, continuations, continuations-in-part, divisions, and renewals, all letters patent granted thereon, and all reissues, reexaminations and extensions thereof, Controlled by a Party.

1.100 “Personnel Costs” means the reasonable costs of employment of personnel employed by or under contract to a Party, including, but not limited to, salaries, benefits (including the costs of cars or allowances therefor), travel, lodging, meals and office and computing supplies.

1.101 “Phase II Clinical Trial” means a human clinical trial in any country that is intended to evaluate the effectiveness of the drug for a particular indication or indications in patients with the disease or condition under study and to determine the common short-term side effects and risks associated with the drug or that would otherwise meet the definition of 21 CFR 312.21(b), or its foreign equivalent.

1.102 “Phase III Clinical Trial” means a human clinical trial in any country that would otherwise meet the definition of 21 CFR 312.21(c), or its foreign equivalent.

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1.103 “Preclinical Plans” means the written plans (which shall include a detailed strategy, budget and proposed timelines) describing the preclinical Development activities to be carried out by each Party during each Calendar Year pursuant to this Agreement which, with respect to Palatin, shall include the activities for which responsibility has been allocated to Palatin and, with respect to King, shall include the activities for which responsibility has been allocated to King. After the date hereof, each Preclinical Plan will be set forth in a written document prepared by the Parties and approved by the JDMC and annexed as an amendment to Exhibit B.

1.104 “Proceeding Party” has the meaning set forth in Section 11.2.3(g).

1.105 “Product” means (1) any product for use in the Field (including without limitation, any composition of matter, procedure, process or method) (a) the manufacture, use or sale of which infringes any claim included within the Palatin Patent Rights, (b) which incorporates, is discovered as a result of the use of, or is otherwise derived from, PT-141 or any fragment or variant thereof or any analog thereof or, to the extent applicable, any pro-drug, metabolite, isomer, enantiomer, salt or ester thereof or any combination of any of the foregoing, including the use of PT-141 in combination with one or more other actives and in any formulation including, without limitation, in any delivery method, or (c) which incorporates, is derived from or is discovered as a result of the use of melanocortin agonists and (2) any other product the JDMC agrees to Develop or Market pursuant to this Agreement and (3) any device containing any of the foregoing.

1.106 “Product Trademark(s)” means any trademarks and trade names, whether or not registered, and any trademark applications, renewals, extensions or modifications thereto in the Territory together with all goodwill associated therewith, trade dress and packaging which are applied to or used with Products, and any promotional materials relating thereto.

1.107 “Program Plans” means the Preclinical Plans, the Clinical Plans, the Manufacturing/CMC Plans, the Regulatory Plans, the Marketing Plans, and the Accounting and Finance Plans.

1.108 “Proprietary Materials” means any tangible chemical, biological or physical research materials that are furnished by or on behalf of one Party to the other Party in connection with this Agreement, regardless of whether such materials are specifically designated as proprietary by the transferring Party.

1.109 “PT-141” means the peptide sequence Ac-Nle-cyclo(-Asp-His-D-Phe-Arg-Trp-Lys)-OH.

1.110 “Recipient” has the meaning set forth in Section 3.9.

1.111 “Regulatory Approval” means approval by the FDA or other Regulatory Authority to market a Product in a regulatory jurisdiction.

1.112 “Regulatory Authority” means the FDA or any counterpart of the FDA outside the United States, or other national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity with authority over the distribution, importation, exportation, manufacture, production, use, storage, transport or clinical testing, pricing and/or sale of a Product, including any device incorporating the Product.

1.113 “Regulatory Filings” means, collectively, any and all INDs and drug master files (DMFs), NDAs, applications for any device incorporating the Product, applications for designation of a Product as an “Orphan Product(s)” under the Orphan Drug Act or any other similar filings (including any foreign equivalents and further including any related correspondence and discussions), and all data contained therein, as may be required by or submitted to any Regulatory Authority for the Regulatory Approval.

1.114 “Regulatory and IP Costs” means Personnel Costs, reasonable out-of-pocket costs and expenses (e.g., filing fees, user fees, annual product and facility registration fees, permit fees and the like) incurred by a Party directly attributable (i) to obtaining or maintaining Regulatory Approvals for a Product (including any device incorporating the Product) (including, for example, communications and meetings with Regulatory Authorities) and satisfying all registration and other requirements of Regulatory Authorities within the Territory (including, for example, adverse event reporting and Product pricing approvals) in connection with each Party’s activities under the Development and Marketing Program, and (ii) to preparing, filing, prosecuting, maintaining, enforcing and defending Patent Rights or Technology as contemplated in Section 9 hereof.

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1.115 “Regulatory Plans” means the written plans (which shall include a detailed strategy, budget and proposed timelines) describing the regulatory activities, including the timing and conduct of meetings, discussions and correspondence with Regulatory Authorities, to be carried out by each Party during the applicable Calendar Year which, with respect to Palatin, shall include the activities for which responsibility has been allocated to Palatin and, with respect to King, shall include the activities for which responsibility has been allocated to King, and the expected Regulatory Filings to be completed and maintained by the Collaboration, for each Product. After the date hereof, each Regulatory Plan will be set forth in a written document prepared by the Parties and approved by the JDMC and annexed as an amendment to Exhibit E.

1.116 “ROW” means all countries and jurisdictions in the world, other than NA.

1.117 “Securities Purchase Agreement” has the meaning set forth in the recitals to this Agreement.

1.118 “Sublicensee” means any Third Party (other than an Affiliate) to which a Party or both Parties grant a sublicense of some or all of the rights granted to one another under this Agreement as permitted by this Agreement.

1.119 “Supply” has the meaning set forth in Section 11.2.2(d).

1.120 “Surviving Entity” has the meaning set forth in Section 5.5.1.

1.121 “Target Party” has the meaning set forth in Section 5.5.1.

1.122 “Technology” means and includes all inventions, discoveries, improvements, trade secrets and proprietary methods and materials, whether or not patentable, relating to the Field, including but not limited to (a) samples of, methods of production or use of, and structural and functional information pertaining to, chemical compounds, proteins or other biological substances and (b) data, formulations, techniques and know-how (including any negative results).

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1.123 “Term” means the term of this Agreement as set forth in Section 11.1.

1.124 “Terminated Region” has the meaning set forth in Section 11.2.

1.125 “Territory” means NA.

1.126 “Third Party” means any person or entity other than King and Palatin and their respective Affiliates.

1.127 “Third Party Agreements” has the meaning set forth in Section 3.10.

1.128 “Transferor” has the meaning set forth in Section 3.9.

1.129 “Vice Chairman” has the meaning set forth in Section 2.2.

2. ADMINISTRATION OF THE COLLABORATION

2.1 Establishment and Function of JDMC. Palatin and King shall establish the JDMC within thirty (30) days of the Closing Date to plan, administer and monitor the Development and Marketing Program, including all activities set forth in the Program Plans. In particular, the JDMC shall review and approve, or recommend revisions to, the Program Plans, review and monitor the progress of the Development and Marketing Program and recommend necessary adjustment to the Development and Marketing Program. In planning, administering and monitoring the Development and Marketing Program, the JDMC shall allocate tasks and responsibilities, taking into account each Party’s respective specific research and development capacities and expertise in order to avoid duplication and to enhance synergies, as well as comply with the requirements of this Agreement.

2.2 Membership. Each Party shall appoint, in its sole discretion, three (3) members to the JDMC (which members shall be employees of such Party). Unless otherwise agreed by the members of the JDMC, the chairmanship and vice chairmanship of the JDMC shall rotate between the Parties. The first appointment period shall begin on the date hereof and end on December 31, 2005. For such period, in light of the fact that Palatin has solely developed the Product prior to the date hereof, Palatin shall designate the chairman (the “Chairman”) and King shall designate the vice chairman (the “Vice Chairman”). Thereafter, appointments of Chairman and Vice Chairman shall rotate on a Calendar Year basis. Each Party shall have the right at any time to substitute individuals, on a permanent or temporary basis, for any of its previously designated representatives to the JDMC, by giving written notice thereof to the other Party.

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2.3 Committees. The JDMC will appoint an Accounting and Finance Committee Preclinical Committee, Clinical Committee, Manufacturing/CMC Committee and the Marketing Committee pursuant to Section 2.4 (each of whose members shall be employees of such Party). Otherwise, the JDMC shall have the right and power to appoint and delegate its responsibilities to other committees as reasonably needed to accomplish their work and the composition and eligibility requirements for the same shall be agreed by the members of the JDMC. Such committees may include, for the oversight and administration of each Program Plan, the Regulatory Committee. Except as otherwise mandated by the JDMC in its minutes, each committee established by the JDMC shall be governed by the rules and guidelines applicable to the JDMC set forth in this Agreement. The JDMC shall set forth clearly each such committee’s decision making responsibilities that have been delegated to it by the JDMC. Any member of a committee may send a designee to observe a committee if such member is unable to attend, but such observer shall not vote in such member’s place unless given a written proxy from such member of the committee. Each Party shall have the right at any time to substitute individuals, on a permanent or temporary basis, for any of its previously designated representatives to any committee, by giving written notice thereof to the other Party. If an issue to be addressed by a committee appears to fall within the oversight and administration of more than one committee, such committees shall confer with each other to determine which committee shall oversee and administer such issue.

2.4 Appointment of Committees.

2.4.1 Accounting and Finance Committee. Promptly after the appointment of the JDMC, the JDMC will appoint an Accounting and Finance Committee composed of two (2) members designated by each Party, both of whom shall be employees of the relevant Party. The JDMC shall delegate to the Accounting and Finance Committee its responsibility for making all decisions, subject to final JDMC review and approval, relating to accounting, budgets, Collaboration Cost allocation, Collaboration Revenue allocation and all other matters related to accounting and finance. Except as otherwise mandated by the JDMC in its minutes, the Accounting and Finance Committee shall otherwise be governed by the rules and guidelines applicable to the JDMC set forth in this Agreement.

2.4.2 Preclinical Committee. Promptly after the appointment of the JDMC, the JDMC will appoint a Preclinical Committee comprised of two (2) members designated by each Party, both of whom shall be employees of the relevant Party. The JDMC shall delegate to the Preclinical Committee its responsibility for making all decisions, subject to final JDMC review and approval, relating to the Preclinical Plans. Except as otherwise mandated by the JDMC in its minutes, the Preclinical Committee shall otherwise be governed by the rules and guidelines applicable to the JDMC set forth in this Agreement.

2.4.3 Clinical Committee. Promptly after the appointment of the JDMC, the JDMC will appoint a Clinical Committee comprised of two (2) members designated by each Party, both of whom shall be employees of the relevant Party. The JDMC shall delegate to the Clinical Committee its responsibility for making all decisions, subject to final JDMC review and approval, relating to the Clinical Plans. Except as otherwise mandated by the JDMC in its minutes, the Clinical Committee shall otherwise be governed by the rules and guidelines applicable to the JDMC set forth in this Agreement. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

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2.4.4 Manufacturing/CMC Committee. Promptly after the appointment of the JDMC, the JDMC will appoint a Manufacturing/CMC Committee comprised of two (2) members designated by each Party, both of whom shall be employees of the relevant Party. The JDMC shall delegate to the Manufacturing/CMC Committee its responsibility for making all decisions, subject to final JDMC review and approval, relating to the Manufacturing/CMC Plans. Except as otherwise mandated by the JDMC in its minutes, the Manufacturing/CMC Committee shall otherwise be governed by the rules and guidelines applicable to the JDMC set forth in this Agreement.

2.4.5 Marketing Committee. Promptly after the appointment of the JDMC, the JDMC will appoint a Marketing Committee comprised of two (2) members designated by each Party, both of whom shall be employees of the relevant Party. The JDMC shall delegate to the Marketing Committee its responsibility for making all decisions, subject to final JDMC review and approval, relating to the Marketing Plans. Except as otherwise mandated by the JDMC in its minutes, the Marketing Committee shall otherwise be governed by the rules and guidelines applicable to the JDMC set forth in this Agreement.

2.5 Collaboration Manager. Promptly after the Effective Date, each Party shall appoint a collaboration manager (the “Collaboration Manager”). The Collaboration Managers shall be the primary contact between the JDMC and all committees appointed by the JDMC. The Collaboration Managers shall regularly consult with the heads of each such committee and each Party will cause each such committee head to cooperate fully with each Collaboration Manager. The Collaboration Managers shall timely address all issues and concerns raised by any member of the JDMC or any committee, as well as collect and provide to the JDMC or to any committee all information requested by the JDMC or such committee concerning any aspect of the Development and Marketing Program. Each Party shall have the right, upon prior written notice to the other Party, to substitute for its current Collaboration Manager another of its employees, on a permanent or temporary basis.

2.6 Meetings.

2.6.1 Schedule of Meetings. The JDMC shall establish a schedule of times for meetings, taking into account, without limitation, the planning needs of the Development and Marketing Program and the need of the JDMC to consult and/or render decisions with respect to any Joint Decisions. Meetings shall also be convened upon the determination of any member, by prior written notice thereof of not less than three (3) business days to the remaining members of the JDMC, that a meeting of the JDMC is required to discuss and/or resolve any matter or matters with respect to the Collaboration. In no event shall the JDMC meet less frequently than quarterly. Meetings shall alternate between the respective offices of the Parties in Cranbury, New Jersey; Bristol, Tennessee; Princeton, New Jersey, or Cary, North Carolina; or another mutually agreed upon location; provided, however, that the Parties may mutually agree to meet by teleconference or video conference or may act by a written memorandum executed by the members of the JDMC.

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2.6.2 Quorum; Voting; Decisions. At each JDMC meeting, one member designated by each Party shall constitute a quorum. Each Party’s JDMC members present at any meeting shall together have one vote on all matters before the JDMC. All decisions of the JDMC shall be made by unanimous vote. Whenever any action by the JDMC is called for hereunder during a time period in which the JDMC is not scheduled to meet, the Chairman shall cause the JDMC to take the action in the requested time period by calling a special meeting or by causing the JDMC to take such action without a formal meeting by written memorandum, as provided in Section 2.6.1. The Chairman shall provide prior written notice of not less than three (3) business days of the same to all JDMC members. Representatives of each Party or of its Affiliates who are not members of the JDMC, may attend JDMC meetings or committee meetings as non-voting observers at the invitation of either Party with the prior approval of the other Party, which approval shall not be unreasonably withheld. In the event that the JDMC is unable to resolve any matter before it, such matter shall be resolved as set forth in Section 2.10 hereof.

2.6.3 Agenda and Minutes. An agenda for each JDMC meeting shall be circulated no less than three (3) days prior to the meeting, to the extent practicable. The JDMC shall keep accurate minutes of its deliberations which record all proposed decisions and all actions recommended or taken. Drafts of the minutes shall be delivered to the members of the JDMC within a reasonable time, not to exceed ten (10) days after the meeting. The Party not filling the Chairmanship of the JDMC shall have responsibility for the preparation and circulation of the draft minutes. Draft minutes shall be then be edited by the Chairman and Vice Chairman and shall be issued in final form within a reasonable time not to exceed fourteen (14) days after the meeting.

2.6.4 Expenses. Palatin and King shall each bear all expenses of their respective JDMC members related to their participation on the JDMC and attendance at JDMC meetings.

2.7 Decision-Making Responsibilities. The JDMC shall be solely responsible for making all decisions specified as Joint Decisions hereunder and all decisions not specifically reserved to either Party hereunder, including, but not limited to, decisions with respect to the following matters:

2.7.1 the definition, review, approval and amendment (not less than annually) of each Program Plan and all related strategy and objectives (but not the actual conduct of such plans);

2.7.2 definition, review and approval of and changes to the strategy and objectives (but not the actual conduct) of the Collaboration;

2.7.3 management and allocation of resources of the Collaboration;

2.7.4 management and oversight of all Patent Rights and Technology used in connection with Product;

2.7.5 proposal of all budgets for the Collaboration;

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2.7.6 review and approval of all subcontracts, sublicenses and Third Party licenses (other than the CT License Agreement and expressly including, without limitation, any and all supply and manufacturing agreements) and other agreements required or entered into in connection with the Collaboration, and any and all amendments thereto, including without limitation a determination, with respect to each such subcontract, sublicense, license or agreement, regarding whether it is appropriate to require the inclusion of the bankruptcy-protection provision set forth in Section 3.10 hereof;

2.7.7 performance of such other functions as appropriate to further the purposes of this Agreement and the Collaboration as determined from time to time by the Parties.

2.8 Collaboration Costs Overruns and Additional Expenditures.

2.8.1 The Accounting and Finance Plans shall set forth a budget with respect to all material tasks required to be conducted by the Parties pursuant to the other Program Plans. Each Party shall use commercially reasonable efforts to complete all tasks assigned to it pursuant to the Program Plans in accordance with the funding allocated to such tasks in the Accounting and Finance Plans. In the event either Party anticipates or becomes aware that the actual costs of any given task assigned to it may or will likely exceed the funds allocated to such task, such Party shall promptly notify the JDMC. The Accounting and Finance Committee, and the committee charged with primary oversight responsibility for the task in question, shall work together in good faith for up to thirty (30) days to determine whether to readjust the budget to allocate additional funds to such task, to revise the scope of such task to permit satisfactory completion at the then-budgeted funding level, or both. In the event no decision is reached, the matter shall be subject to the provisions of Section 2.10 hereof.

2.8.2 Notwithstanding the foregoing, either Party may, in its discretion, spend additional amounts above and beyond those allocated in the Accounting and Finance Plans (“Discretionary Funding”) on any task assigned to such Party pursuant to the other Program Plans or on any other task the JDMC has approved. In such event, the Party wishing to expend Discretionary Funding shall first inform the other Party of its intent to do so. If such other Party consents to such Discretionary Funding being deemed a Collaboration Cost, such Discretionary Funding shall constitute a Collaboration Cost, and the rights and obligations of the Parties with respect to such Collaboration Costs, and any Collaboration Revenues and intellectual property, regulatory or other intangible rights derived from or generated by such Discretionary Funding, shall be determined in accordance with the terms and conditions of this Agreement as they apply to the Collaboration. If such other Party does not consent, then such Discretionary Funding shall not constitute a Collaboration Cost, but shall be borne solely by the Party undertaking the Discretionary Funding, and the Parties shall negotiate in good faith, prior to the expenditure of the Discretionary Funding, the rights and obligations of the Parties with respect to such Discretionary Funding and any Collaboration Revenues and intellectual property, regulatory or other intangible rights derived therefrom or generated thereby.

2.8.3 Except to the extent this Agreement expressly provides for payments that do not require JDMC approval, and except to the extent the JDMC has approved any payment hereunder, neither Party shall (i) be obligated to incur any costs or expend any funds that have not been approved by such Party or (ii) have the authority to cause the other party to incur any costs or expend any funds that have not been approved by such other Party.

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2.9 Interests of the Parties. Notwithstanding any other provisions of this Agreement, all decisions made and all actions taken by the JDMC, by Palatin or by King with respect to any Collaboration matter, shall be made or taken in the best interest of the Collaboration, subject in all respects to the fiduciary duties of the Parties to their respective shareholders.

2.10 Dispute Resolution.

2.10.1 In the event any committee shall not be able to reach a decision or take an action appointed to it, then such decision or matter shall first be referred for resolution to the JDMC. In the event that the JDMC shall not be able to reach a decision or take an action on any matter referred by a committee, any Joint Decision or any other matter which is reserved to the JDMC or the Accounting and Finance Committee or any other committee delegated decision-making authority by the JDMC hereunder, then such Joint Decisions or such other unresolved matters shall first be referred for resolution to the Chief Executive Officer of each Party for attempted resolution by good faith negotiation. Such good faith negotiation may include the appointment by either Party of an unaffiliated Consultant, who shall be a scientific expert chosen based on such person’s experience and expertise in the particular type of issue which is unresolved to advise such officers on the matter.

2.10.2 If such officers are unable to resolve the matter within ten (10) days, then

(a)     [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

(b)     [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

(c)     [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

(d)     [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

(e)     [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

(f)     [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.     DEVELOPMENT AND MARKETING PROGRAM

3.1 Objectives of the Development and Marketing Program. The objectives of the Development and Marketing Program shall be the Development, manufacture and Marketing of Products within the Field in the Territory and the joint licensing of the rights under this Agreement to Third Parties for development and marketing of Product in the ROW.

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3.2 Program Plans Generally. In consultation with the JDMC and in accordance with the strategy and objectives of the Program Plans, each Party shall be primarily responsible for those tasks assigned it as set forth on each Program Plan attached hereto and such obligations set forth in this Agreement. Unless otherwise set forth in any Program Plan, Palatin shall have the sole right and responsibility to conduct all Palatin Activities and King shall have the sole right and responsibility to conduct all King Activities. Annexed hereto as Exhibit A is a preliminary plan for the Development and Marketing Program. Within thirty (30) days after the Effective Date and after consideration of the Exhibit A, the JDMC shall take such actions necessary to define, generate and approve each Program Plan for the first Calendar Year, which Program Plans shall supplant Exhibit A as operational documents for the conduct of the Development and Marketing Program. The JDMC shall ensure that the Program Plans, including without limitation all timelines set forth therein, are consistent with each other and accurately reflect the objectives set forth in the Development and Marketing Plan. Each Program Plan for such first Calendar Year will then be attached hereto as Exhibit B (Preclinical Plan), Exhibit C (Clinical Plan), Exhibit D (Manufacturing/CMC Plan), Exhibit E (Regulatory Plan), Exhibit F (Marketing Plan), and Exhibit G (Accounting and Finance Plan). For each year of the Development and Marketing Program commencing with the second Calendar Year, the Program Plans shall be amended and updated by Palatin and King and approved by the JDMC as directed by the JDMC no later than thirty (30) days prior to the end of the prior Calendar Year and shall be attached hereto as Exhibits B-1, C-1, D-1, E-1, etc. Each Program Plan shall be in writing and shall set forth, with reasonable specificity, research objectives and tasks to be performed by each of the Parties for the period covered by the Program Plan as agreed by the JDMC and as specifically set forth in this Agreement. Any Program Plan may be amended by the JDMC at any time upon the unanimous request of the representatives of the applicable committee. Except to the extent specifically directed by the JDMC in each Program Plan, the decisions as to how to perform the tasks assigned to Palatin and King in any Program Plan shall be Palatin decisions and King decisions, respectively. Although not specifically a part of a Program Plan, all issues and activities relating to Patent Rights and Technology used in connection with a Product shall be subject to oversight of the JDMC.

3.3 Preclinical Plans. Unless and until otherwise agreed by the JDMC, the following terms and conditions are hereby incorporated into each Preclinical Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.4 Clinical Plans. Unless and until otherwise agreed by the JDMC, the following terms and conditions are hereby incorporated into each Clinical Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.5 Manufacturing/CMC Plans. Unless and until otherwise agreed by the JDMC, the following terms and conditions are hereby incorporated into each Manufacturing/CMC Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.6 Regulatory Plans. Unless and until otherwise agreed by the JDMC, the following terms and conditions are hereby incorporated into each Regulatory Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

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3.7 Marketing Plans.

3.7.1 Unless and until otherwise agreed by the JDMC, the following terms and conditions are hereby incorporated into each Marketing Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE

24b-2.]

3.7.2 With respect to King’s activities under the Marketing Plan, King shall use commercially reasonable efforts to Develop and Market the Product commensurate with industry standards in accordance with Section 3.13 hereof. With respect to King’s activities under the Marketing Plan, King hereby agrees, as part of any Marketing Plan and in a manner consistent with Section 3.13 hereof, to establish and maintain its infrastructure and staffing and otherwise maintain its expertise for Marketing Product at levels (i) commensurate with industry standards for products of similar market potential and at a similar stage in development as the applicable Product, taking into account the competitiveness of the marketplace, the proprietary position of the Product, and the efforts and resources available to a company having a comparable market capitalization (taking King and its Affiliates together) and (ii) customary and reasonable in light of then-current market conditions. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.8 Accounting and Finance Plans. Unless and until otherwise agreed by the JDMC, the following terms and conditions are hereby incorporated into each Accounting and Finance Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.9 Supply of Proprietary Materials. From time to time during the Term of this Agreement, either Party (the “Transferor”) may supply the other Party (the “Recipient”) with its Proprietary Materials to the extent the parties, the JDMC or the relevant committee reasonably believe that such Proprietary Materials would be useful in the Development and Marketing Program or to the extent such Proprietary Materials are required to be so provided pursuant to any Program Plan. In connection therewith, the Recipient hereby agrees that (a) it shall not use Proprietary Materials for any purpose other than exercising any rights or fulfilling any obligations granted to it or reserved by it hereunder; (b) it shall use the Proprietary Materials only in compliance with all applicable, federal, state, and local laws and regulations; (c) it shall not transfer any Proprietary Materials to any Third Party for use without the prior written consent of the Transferor, except as expressly permitted hereby; (d) the Transferor shall retain full ownership of all such Proprietary Materials; and (e) upon the expiration or termination of this Agreement, the Recipient shall at the instruction of the Transferor either destroy or return any Proprietary Materials which are not the subject of the grant of a continuing license hereunder. In addition, each of Palatin and King agrees that, during the Development and Marketing Program neither Party shall transfer to any Third Party, without the approval of the other Party, any Joint Technology, including without limitation any tangible embodiments thereof.

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3.10 Third Party Licenses and Collaborations. Subject to Section 2.7.6, King, Palatin or both may enter into such Third Party licenses, collaborations, and supply and manufacturing agreements and, solely with respect to the ROW, sublicenses as are reasonably necessary in the judgment of the JDMC to accomplish the objectives and purposes of the Collaboration. Each such agreement shall (a) if only one Party is a party to the agreement, name the other Party as a third party beneficiary to such agreement, (b) include an assignment of all right, title and interest in and to all work product and all inventions arising from the performance of such agreement, and all intellectual property rights attaching thereto to the contracting Party, and (c) bind the relevant third party by obligations of confidentiality and non-use with respect to all such work product, inventions, and intellectual property rights that are at least as stringent as those set forth herein. In order to ensure the ability of a Party (“Non-Defaulting Party”) to proceed with the Development and Marketing Program notwithstanding the occurrence of any Default or Event of Bankruptcy on behalf of the other Party (“Defaulting Party”), the JDMC shall, in its discretion, require the inclusion, in those subcontracts, sublicenses, licenses and other agreements (including manufacturing and supply agreements) entered into in connection with the Collaboration and subject to the JDMC’s approval pursuant to Section 2.7.6 hereof (“Third Party Agreements”) that are or are likely to become material to the conduct of the Development and Marketing Program, of an enforceable provision granting to the Non-Defaulting Party hereto an automatic assignment, contingent upon an Event of Bankruptcy of the Defaulting Party or a Default by the Defaulting Party of that Third Party Agreement, pursuant to which all of the Defaulting Party’s rights and obligations under such Third Party Agreement shall automatically and without any acts of any Party hereto or thereto be assigned to the Non-Defaulting Party, who hereby agrees to assume such obligations.

3.11 Option to Perform. In the event that a Party does not perform a task or tasks assigned to it by the JDMC under a Program Plan, including, without limitation, due to a dispute as to the budget or scope of such task, and the omission of performance or initiation of performance of such task could reasonably be expected to have a material adverse effect on the Collaboration, the other Party has the right but not the obligation, to perform such task or tasks. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.12 Collaborative Efforts and Reports. The Parties hereby acknowledge and agree that the successful execution of the Development and Marketing Program will require the collaborative use of both Parties’ areas of expertise. Each Party shall, through their Collaboration Manager, keep the JDMC fully informed about the status of the portions of the Development and Marketing Program it performs separately and/or jointly with the other Party by providing to their Collaboration Manager for submission to the JDMC a written report describing the progress of the separate and joint work done by it under the Development and Marketing Program in reasonable detail, at least fifteen (15) days prior to each quarterly meeting of the JDMC, and promptly upon the occurrence of any material event relevant to the Development and Marketing Program, including activities assigned to that Party.

3.13 Diligence. Each Party will exercise its commercially reasonable efforts and diligence (i) in Developing, Marketing, manufacturing and seeking Regulatory Approval in accordance with its business, legal, medical and scientific judgment, and in undertaking investigations and actions required to obtain appropriate Regulatory Approvals necessary to market Products in the Field in the Territory and (ii) to meet its obligations (including without limitation its financial obligations) hereunder. For purposes of this Section, such commercially reasonable efforts and diligence shall be in accordance with the efforts and resources a company having a comparable market capitalization (when taken together with its Affiliates) in the biotechnology and pharmaceutical industry would devote to a compound owned by it or to which it has rights, which is of similar market potential and at a similar stage in development as the applicable Product, taking into account the competitiveness of the marketplace, the proprietary position of the Product, the relative potential safety and efficacy of the Product, the regulatory requirements involved in its Development and Marketing, and the cost of goods and availability of capacity to manufacture and supply the Product at commercial scale.

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4. INFORMATION EXCHANGE

4.1 Records.

4.1.1 Record Keeping. Palatin and King shall each maintain records in sufficient detail and in accordance with Good Laboratory Practice, Good Clinical Practice and Good Manufacturing Practice, and as will properly reflect and document, in a manner appropriate for purposes of supporting the filing of potential patent applications and Regulatory Filings, all work done and results achieved in the performance of the Development and Marketing Program (including all data in the form required under any Applicable Law); provided however, prior to Completion of Phase II Clinical Trials, Palatin is responsible for maintaining master files in accordance with Good Clinical Practices, Good Laboratory Practices and Good Manufacturing Practices, to the extent applicable, and provided, further, if Palatin elects not to maintain such records upon Completion of Phase II Clinical Trials, Palatin shall transfer such records to King. Subject to Section 6.4.6 hereof, Palatin and King each hereby provides the other the right to inspect and copy such records to the extent reasonably required for the performance of its obligations or exercise of its rights under this Agreement, and neither Party shall use such records or information except to the extent otherwise permitted by this Agreement.

4.1.2 Technical Reports. Each Party shall keep the JDMC fully informed about the status of the Development and Marketing Program including, without limitation, furnishing the JDMC with copies of all reports which relate to the Development and Marketing Program. In particular, without limitation, each Party shall (a) provide periodic reports in reasonable detail to the JDMC as requested from time to time by the JDMC; (b) provide the other Party with access to all Technology and information employed in or arising out of the Development and Marketing Program solely for the purpose of conducting their respective roles hereunder; and (c) provide the other Party with information concerning the Development and Marketing Program as such other Party shall reasonably request.

4.1.3 Information Exchange. Subject to any confidentiality obligations to Third Parties, Palatin and King shall cooperate in the performance of the Collaboration, including in the performance of the Development and Marketing Program, and shall exchange information and materials (including without limitation financial statements) as necessary to carry out the Collaboration, including to carry out the Development and Marketing Program. The Parties expect that such exchange of information and materials may involve short-term on-site visits by scientists of one Party to the facilities of the other Party. Such visits will have defined purposes, include a reasonable number of participants and be scheduled reasonably in advance.

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4.2 Updates; Adverse Event Information.

4.2.1 Updates and Reports. Each Party shall keep the JDMC regularly informed of the progress of the Party’s efforts to Develop and Market Products in the Field in the Territory and ROW through periodic progress reports related to the Program Plans as provided in this Section 4.2.1 by providing the JDMC with written updates to the Program Plans, as the case may be, no less frequently than each Calendar Quarter during the Term (commencing on the second Calendar Quarter during the Term) and promptly upon the occurrence of any material event relevant to the Development and Marketing Program, including activities assigned to that Party. Such updates shall (a) summarize the Party’s efforts to Develop and Market all Products hereunder, (b) identify the Regulatory Filings with respect to any Product that have been filed, sought or obtained by the Party during the proceeding Calendar Quarter and any they reasonably expect to make, seek or attempt to obtain in the following twelve (12)-month period and (c) summarize all preclinical and clinical data generated by the Party with respect to Products. In addition, the Party (or its Sublicensees) shall provide the JDMC with prompt written notice of the occurrence of any event giving rise to an obligation to make a milestone payment to Palatin under Section 6.3, and shall provide the JDMC with prompt written notice of the occurrence of the First Commercial Sale of any Product. Thereafter, all updates shall include updates as to the sales and Marketing efforts for Products.

4.2.2 Adverse Event Reports. In addition to the updates described in Section 4.2.1 above, each Party shall provide the JDMC with all Adverse Event information and product complaint information relating to Products as compiled and prepared in the normal course of business in connection with the Development, Marketing or sale of any Product, within time frames consistent with reporting obligations under Applicable Law.

4.2.3 Confidential Information. Except as otherwise required in connection with disclosures to Regulatory Authorities required by Applicable Law, all reports, updates, Adverse Event or product complaint and other information provided by a Party under this Agreement (including under this Section 4.2.3), shall be considered Confidential Information of both Parties, regardless of who provided the same, and shall be subject to the terms of Section 10.

5. COPROMOTION; [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.]; AND CERTAIN OTHER PROVISIONS

5.1 Exercise of Option. Provided the JDMC approves the Marketing of Products to the urology specialty, Palatin shall have the option (the “Copromotion Option”), but not the obligation, to Copromote each Product in the Territory. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] If Palatin duly exercises its Copromotion Option with respect to any Product, the Marketing Plan with respect to such Product shall be updated to reflect the same. All reasonable marketing costs and expenses of Palatin and King related to the copromotion pursuant hereto shall be Marketing Costs. Palatin shall keep the JDMC informed as to its Copromotion efforts in order to permit the JDMC to coordinate and direct the sales and marketing activities of each of the Parties in the Territory.

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Palatin shall have no right to market, offer for sale, sell or distribute any Product in the Territory, unless and until Palatin has duly exercised its Copromotion Option. Within one hundred eighty days of the Effective Date, the Marketing Committee shall prepare and submit to the JDMC for approval a copromotion schedule, to be attached hereto as an amendment to the Marketing Plan, which will set forth the size of Palatin’s permitted sales force in the event Palatin exercises its Copromotion Option (which, if King deploys a sales force in connection with the Copromotion, shall in no event be greater than twenty percent (20%) of the total urology sales force of King and Palatin combined) along with such other specifics concerning Palatin’s copromotion rights as the Marketing Committee determines are appropriate.

5.2 Copromotion Rights. If Palatin elects to Copromote a Product as permitted in Section 5.1, Palatin shall ensure that such Copromotion is executed, in all material respects, in a manner consistent with the decisions of the JDMC and the Marketing Plan, as amended pursuant to the copromotion schedule identified in Section 5.1.

5.3 [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

5.4 Product Liability Costs. The Parties understand and agree that, because of the nature of the collaborative effort set forth in this Agreement, should any Third Party claims be asserted against either Party or both Parties or any of their Affiliates, agents or representatives that are in the nature of product liability claims, the Parties will cooperate through the JDMC to ensure that such claims are defended and settled