|
PALATIN TECHNOLOGIES, INC. 2007
CHANGE IN CONTROL SEVERANCE PLAN
1. Introduction . Palatin
Technologies, Inc. (the “Company”), on its own behalf
and on behalf of its affiliated entities with any of the operations
covered hereunder, does hereby establish and adopt the Palatin
Technologies, Inc. Change in Control Severance Plan (the
“Plan”), effective December 7, 2007 (the
“Effective Date”). The Plan is an “employee
welfare benefit plan” within the meaning of Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), intended to provide specified Change in
Control severance benefits to eligible employees whose employment
with the Company or its successor is involuntarily terminated in
connection with a Change in Control or by reason of his or her
Constructive Discharge.
This document
constitutes both the Plan document and the summary plan description
and is provided to you as required by ERISA. Your ERISA rights are
described at the end of this document. You should keep it for
future reference.
2. Important Terms . To help you
understand how this Plan works, it is important to know the
following terms:
2.1 “
Administrator ”means the person(s) or committee
appointed by the Board (or its delegate) to oversee the
administration of the Plan. The term “Administrator”
will also include any person or subcommittee to whom the
Administrator has delegated any authority or responsibility
pursuant to Section 7, but only to the extent of such
delegation.
2.2 "Base
Salary" means an employee's base pay, as in effect from time to
time.
2.3 "Board"
means the Company's Board of Directors.
2.4 “
Cause ” means: (A) a material breach of, or habitual
neglect or failure to perform the material duties which an employee
is required to perform by the Company; (B) the material failure to
follow the reasonable directives or policies established by
employee’s supervisor or the Company’s Board of
Directors; or (C) engaging in conduct that is materially
detrimental to the interests of the Company such that the Company
sustains a material loss or injury as a result thereof, provided
that the breach or failure of performance by the Employee under
subparagraphs (A) through (C) hereof is not cured, to the extent
cure is possible, within ten (10) days of the delivery to the
Employee of written notice thereof.
2.5 "Change in
Control" means the occurrence of any of the following
events:
(a) Any
“Person,” as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan
of the Company, or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company) becoming the
“beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of
securities
of the Company representing more than 50% of the combined voting
power of the Company’s then outstanding
securities;
(b) the
date the individuals who, during any twelve month period,
constitute the Board (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Board, provided
that any person becoming a director during the twelve month period
whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company,
as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered
as though such person were a member of the Incumbent
Board;
(c) a
merger or consolidation of the Company approved by the stockholders
of the Company with any other corporation, other than (i) a merger
or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) 50% or more of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to
implement a re-capitalization of the Company (or similar
transaction) in which no “person” (as defined in
Section 6.4(a)) acquires more than 50% of the combined voting power
of the Company’s then outstanding securities; or
(d) a
sale of all or substantially all of the assets of the
Company.
2.6 “
Change in Control Date ” means the date on which a
Change in Control is effective, as determined by the Administrator
in his sole discretion.
2.7 "Code"
means the Internal Revenue Code of 1986, as amended.
2.8 "Company"
means Palatin Technologies, Inc., a Delaware corporation and any
successor by merger, acquisition, consolidation, or otherwise that
assumes the obligations of the Company under the Plan.
2.9 “
Constructive Discharge ” means (A) a material
diminution in the employee’s Base Salary as in effect
immediately prior to a Change in Control; (B) a material diminution
or adverse change, in the Company’s reasonable determination,
in the employee’s position, status or circumstance of
employment or the assignment to the employee of any duties or
responsibilities which result in any material diminution or adverse
change in the employee’s position, status or circumstances of
employment; or (C) change in an employee’s principal work
location to a location more than thirty five (35) miles from his or
her principal work location immediately prior to the Change in
Control Date.
2.10 "ERISA"
means the Employee Retirement Income Security Act of 1974, as
amended.
2.11 "Plan"
means the Palatin Technologies, Inc. 2007 Change in Control
Severance Plan, as set forth in this document, and as hereafter
amended from time to time.
2
2.12 “
Severance Benefit ” means the “Change in Control
severance benefit” that an Eligible Employee may receive
pursuant to Section 5.
2.13
"Termination Date" means the effective date of an Eligible
Employee's termination of employment with the Company.
3. Eligibility .
3.1 In order
for you to be considered an "Eligible Employee," each of the
following requirements must be satisfied:
(a) Except
as otherwise provided in Section 4.2 below, you must be an
“Employee” of the Company on the date immediately
preceding the Change in Control Date. The term
“Employee” means a current, full-time or part-time
employee of the Company who is regularly scheduled to work twenty
(20) or more hours per work, but the term “Employee”
shall exclude for all purposes any individual who is classified by
the Company as a former employee, a temporary or leased employee, a
seasonal employee, an intern, a consultant, a vendor or an
independent contractor; and
(b) Except
as otherwise provided in Section 4.2 below, your employment with
the Company must, within twelve (12) months following a Change in
Control, be (i) involuntarily terminated by the Company without
Cause; or (ii) voluntarily terminated by you in circumstances that
would qualify as a Constructive Discharge.
3.2 The
Administrator will determine, in his sole discretion, which persons
who provide services to, for or on behalf of the Company are
excluded from participating in the Plan, and such determinations by
the Administrator will be final and binding on all persons for
purposes of the Plan.
3.3 If an
Employee and the Company have entered into a written agreement
which expressly provides for severance benefits or which provides
for other payments, benefits or contractual arrangements, the
payment of which is conditioned upon his or her termination of
employment with the Company in connection with a Change in Control
or other similar circumstances (other than the written release
described in Section 4.1(c) above), the Employee shall not be
considered an Eligible Employee under this Plan.
4. Conditions for Payment of
Benefits .
4.1
Notwithstanding any other provision of this Plan, Severance
Benefits are payable to an otherwise Eligible Employee only
if:
(a) The
Eligible Employee’s employment with the Company is not
terminated by death or permanent disability or for Cause prior to
the Change in Control Date;
(b) Except
as otherwise provided in Section 4.2, the Eligible Employee does
not voluntarily terminate his or her employment prior to the Change
in Control Date; and
3
(c) The
Eligible Employee executes a general waiver and release in
substantially the form attached hereto as Exhibit B , that
becomes effective in accordance with its terms. Unless a Change in
Control has occurred, the Administrator, in his sole discretion,
may modify the form of the required release to comply with
applicable law and shall determine the form of the required
release, which may be incorporated into a termination agreement or
other agreement with the Eligible Employee.
4.2
Notwithstanding anything in this Plan to the contrary, if, after
the Effective Date and within six (6) months prior to the date on
which a Change in Control occurs, an Eligible Employee’s
employment with the Company is terminated by the Company other than
by reason of the Eligible Employee’s death, permanent
disability or circumstances that would constitute Cause, or the
terms and conditions of the Eligible Employee’s employment
are adversely changed in a manner that would constitute grounds for
a termination of employment by the Eligible Employee by reason of a
Constructive Discharge, and it is reasonably demonstrated that such
termination of employment or adverse change (i) was at the request
of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (ii) otherwise arose in connection
with or in anticipation of the Change in Control, then for all
purposes of this Plan such termination of employment shall be
deemed to have occurred immediately after the Change in Control and
shall be considered either termination of the Eligible
Employee’s employment without Cause by the Company or
termination of the Eligible Employee’s employment by the
Eligible Employee by reason of a Constructive Discharge, as the
case may be, entitling the Eligible Employee to the benefits under
Section 5 below.
5. Amount of Benefits
.
5.1 An Eligible
Employee who becomes entitled to Severance Benefits under Section 3
and who is not precluded from receiving such benefits under Section
4 shall be eligible to receive the Severance Benefits described in
Exhibit A , as modified by the Company (or its delegate)
from time to time.
5.2 Severance
Benefits for an Eligible Employee who is working on a part-time
schedule (provided such schedule provides for at least 20 hours per
week of employment) shall be pro-rated based on his or her
scheduled workweek at the time of his or her Termination
Date.
6. Method of Payment
.
6.1 Any
Severance Benefits provided for in Sections 3 and 5 above will be
paid in a lump sum payment, minus applicable withholdings as
required by law, within sixty (60) days following an
Employee’s Termination Date, provided however, any Severance
Benefits provided for in Sections 4.2 and 5 above will be paid in a
lump sum payment upon the Change in Control. All payments under the
Plan will be made in the form of a check and will be mailed via
first class mail to the address on file. Cash reimbursements or
subsidies for COBRA premiums shall be made as and when provided in
the applicable Company health plan.
6.2 If an
Eligible Employee is indebted to the Company at his or her
termination date, the Administrator reserves the right to offset
any severance payments under the Plan by the amount of such
indebtedness. In no event shall payment of any Plan benefit be made
prior to the
4
Eligible
Employee’s Termination Date or prior to the effective date of
the release described in Section 4.1(c).
7.
Administration .
7.1 The Plan is
administered by the Administrator. The Administrator will have full
discretionary authority to administer the Plan in all of its
details, subject, however, to the requirements of ERISA. For this
purpose the Administrator’s power will include, but will not
be limited to, the following authority:
(a) to
make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan or required
to comply with applicable law;
(b) subject
to the Company’s delegation of authority, to amend the terms
of the Plan;
(c) to
interpret the Plan, its interpretation thereof in good faith to be
final and conclusive on any employee, former employee, and
beneficiary;
(d) to
decide all questions concerning the Plan and the eligibility of any
person to participate in the Plan;
(e) to
compute the amount of benefits which will be payable to any
Eligible Employee, former Eligible Employee, or beneficiary in
accordance with the provisions of the Plan, and to determine the
person or persons to whom such benefits will be paid;
(f) to
authorize the payment of benefits;
(g) to
keep such records and submit such filings, elections, applications,
returns or other documents or forms as may be required under the
Code, ERISA, and applicable regulations, or under state or local
law and regulations;
(h) to
appoint such agents, counsel, accountants and consultants as may be
required to assist in administering the Plan; and
(i) by
written instrument, to allocate and delegate its fiduciary
responsibilities in accordance with Section 405 of
ERISA.
8. Amendment and Termination
.
8.1 The Company
reserves the right to amend or terminate this Plan at any time;
provided, however, that the Board may delegate its authority to
approve Plan amendments to the Administrator. Notwithstanding the
foregoing, on or after the Change in Control Date, or following or
in connection with the approval by the Board of a Change in Control
(unless such Change in Control is not reasonably expected to
occur), this Plan cannot be amended, altered, suspended or
terminated in a manner that adversely affects an Eligible Employee,
except upon six (6) months’ prior written notice by the
Company (or its delegate) to the affected Eligible Employee;
provided, however, that no such amendment, alteration, suspension
or termination
5
shall affect
the right to any unpaid benefit of any Eligible Employee whose
Termination Date has occurred prior to amendment, alteration,
suspension or termination of the Plan. In addition, if a Change in
Control occurs within the six (6) month period following the
effective date of an amendment to terminate the Plan or otherwise
reduce the amount (or alter the terms) of any severance benefit
under the Plan, such amendment (or portion of such amendment) will
become null and void upon the Change in Control Date. Upon the
Change in Control, the Plan will automatically revert to the terms
in effect prior to the adoption of said amendment.
8.2 The
authorization of an amendment to the Plan must be evidenced by one
of the following: (1) a resolution of the Board; (2) execution of
the amendment by the Company’s chief executive officer,
president or secretary; (3) ratification of the amendment by either
a resolution of the Board or written confirmation of ratification
by the chief executive officer, president or secretary; or (4) in
the event the Board delegates its authority to amend the Plan to
the Administrator, formal written confirmation of the
Administrator’s ratification of the amendment. Notice of any
amendment must be provided to or made available to the
Administrator. All amendments and modifications must be in writing
and signed as provided above to be effective; oral amendments and
modifications of this Plan are not effective.
8.3
Notwithstanding the foregoing limitations, the Plan may be amended
at any time (and such amendment will be given effect) if such
amendment is required to bring the Plan into compliance with
applicable law, including but not limited to Section 409A of the
Code.
9. Claims and Appeals Procedures
.
9.1 An Eligible
Employee does not have to file a claim for Severance Benefits.
However, if an Eligible Employee believes his or her Severance
Benefits have been incorrectly determined, he or she may file a
written notice with the Administrator at the address listed below
to request a review of the determination. If the claim is denied
(in full or in part), the claimant shall be provided a written or
electronic response from the Administrator. The
Administrator’s response shall include the following
information:
(a) The
specific reason(s) for the denial;
(b) Reference
to the specific Plan provision(s) upon which the denial was
based;
(c) A
description of any additional or material information that is
necessary for the appeal of the denied claim to be successful, and
an explanation of why this information is necessary;
(d) A
description of any voluntary appeal procedures available under the
Plan and your right to receive information about them;
(e) An
explanation of the review procedure summarized below, including the
time limits applicable to the review procedures and the
claimant’s rights to submit written comments and have them
considered, the claimant’s right to review (upon request and
at no charge) relevant documents and other information;
and
6
(f) A
statement that the claimant has a right to bring a civil action
under Section 502(a) of the Employee Retirement Income Security Act
of 1974, as amended (ERISA) following a denial of an appeal of the
claim.
(g) If
the Administrator relied on an internal rule, guideline, protocol,
or other similar criterion in denying the claim, then the
Administrator either will provide the claimant with a copy of the
criterion or will notify the claimant that it relied on such a
criterion and inform the claimant that he or she may request a copy
of the criterion free of charge.
9.2 A notice of
denial shall be furnished to the claimant no later than ninety (90)
days after receipt of the claim by the Administrator, unless the
Administrator determines that special circumstances require an
extension of time for processing the claim. If the Administrator
determines than an extension of time for processing is required,
then notice of the extension shall be furnished to the
cla
| 
