EX-10.2 COLLABORATIVE DEVELOPMENT AND MARKETING AGREEMENT

 

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                                                                  EXHIBIT 10.2

 

 

 

               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.

 

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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 (1st) day, unless

the first (1st) 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 (1st) day, unless the first (1st)

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 ss. 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.

 

 

 

                                       20

 

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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.

 

 

 

                                       21

 

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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.]

 

 

                                       22

 

 

<PAGE>

 

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.

 

 

                                       24

 

 

<PAGE>

 

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.

 

 

                                       25

 

<PAGE>

 

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.

 

 

 

                                       26

 

<PAGE>

 

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 or compromised in a manner that best

protects the interests of the Parties in accordance with Section 2.8. In

addition, the Parties will procure and maintain product liability insurance with

first-class carriers in coverages and amounts and with deductibles not less than

those as determined by the JDMC and, in any event, sufficient to cover the

Parties' respective indemnification obligations hereunder. All costs incurred by

a Party in connection with a product liability claim after the date hereof,

including costs for insurance coverage required by the JDMC, shall be deemed

Collaboration Costs,except to the extent that such costs are indemnifiable

pursuant to or payable by a Party pursuant to Section 13 or attributable to

products of a Party other than a Product.

 

5.5 CHANGE OF CONTROL.

 

5.5.1 In the event of a Change of Control of a Party (the "Target Party") (i) in

which a Party shall not be the surviving entity in the event of a merger, the

proposed surviving entity (the "Surviving Entity"), (ii) in which there is an

acquisition, lease, exchange or other transfer of all or substantially all of

the assets of a Party, or in which there is an acquisition of the rights

hereunder upon a liquidation or dissolution of a Party, in each case, the

acquiror, or (iii) in which there is a permitted assignment pursuant to Section

15.10, the assignee, shall, prior to such Change of Control, agree in writing to

assume all of the existing and future obligations, rights, title and interest of

every nature in, to and under this Agreement of the Party in which it is

entering into such Change of Control transaction; provided, however, that if the

Surviving Entity, the acquiror or the assignee, as the case may be, does not

assume the same in writing prior to such Change of Control, this Agreement shall

be deemed to have been materially breached just prior to the consummation of the

Change of Control by the Target Party.

 

 

 

                                       27

 

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5.5.2 In the event that a Change of Control is contingent upon or results in the

Target Party or Surviving Entity being required by a court, governmental

authority or a regulatory authority to sell or otherwise dispose or divest

itself of its assets, rights or obligations relating to the Collaboration or

this Agreement (the "Assets"), the Target Party shall provide written notice of

the proposed divestiture to the other Party (the "Non-Target Party") promptly

following the Target Party's receipt from such court, government authority or

Regulatory Authority of all details with respect to such disposition or

divestiture. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER

RULE 24B-2.] If the Non-Target Party does not make a written offer, then the

Target Party may sell the Assets without any further obligations under this

Section 5.5.2. If the Non-Target Party makes a written offer [INFORMATION

OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.] the Target

Party may accept such offer or solicit bona fide written offers from Third

Parties; [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER

RULE 24B-2.]. In the event the Target Party receives a bona fide written offer

from a Third Party, then the Non-Target Party shall have the right to match any

bona fide written offer of such Third Party to purchase the Assets [INFORMATION

OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.] following

the Non-Target Party's receipt of written notice from the Target Party

identifying all relevant details of such Third Party offer.

 

6. CLOSING, INITIAL PAYMENTS, COLLABORATION COST AND COLLABORATION REVENUE

SHARING

 

6.1 CLOSING.

 

6.1.1 COVENANTS PENDING CLOSING.

(a) Reasonable Efforts. Subject to the terms and conditions of this Agreement,

each of the Parties agrees to use all reasonable efforts to take, or cause to be

taken, all reasonable actions and to do, or cause to be done, all things

necessary and appropriate to satisfy all conditions of and to consummate the

transactions contemplated by this Agreement, including the satisfaction of the

applicable conditions set forth in Section 6.1.2 below and the Closing.

(b) Filings. The Parties shall cooperate with one another in the preparation,

execution and filing of all documents that are required or permitted to be filed

on or before the Closing, including, without limitation, filings pursuant to the

HSR Act and will promptly file the same after the Effective Date. The related

filing fees incurred by each Party shall be paid by King.

 

6.1.2 CLOSING. As promptly as practicable after the Effective Date and after the

satisfaction by each Party or, if permissible, waiver of the conditions set

forth in Sections 6.1.3(a) and (b), the parties hereto shall cause the Closing

to occur on the Closing Date. The Closing shall be held at the offices of Mintz

Levin Cohn Ferris Glovsky and Popeo PC, The Chrysler Center, 666 Third Avenue,

New York, New York 10017, or such other place as the parties shall agree, for

the purpose of confirming the satisfaction or waiver, as the case may be, of the

conditions set forth in Sections 6.1.3(a) and (b).

 

 

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6.1.3 CONDITIONS TO CLOSING.

 

(a)       The obligation of Palatin to close shall be subject to the satisfaction

         on or before the Closing Date of the following conditions, any or all

         of which may be waived in whole or in part by Palatin:

 

(i)       the expiration or termination of all applicable waiting periods under

         the HSR Act, unless a joint determination is made by Palatin and King

         (by certification from Palatin and King to each other) that

         notification under the HSR Act is not required;

 

(ii)      the representations and warranties made by King in Article 12 shall be

         true and correct in all material respects as of the Effective Date and

         as of the Closing Date with the same force and effect as if they had

         been made as of the Closing Date, and King shall have performed all

         obligations and conditions herein required to be performed or observed

         by it on or prior to Closing;

 

(iii)     the provision by King to Palatin of an officer's certificate certifying

         that (i) and (ii) above are true and correct as of the Closing Date;

 

(iv)      the payment to Palatin of the Collaboration License Fee, the Expense

         Payment and the Initial Share Payment by King; and

 

(v)       the execution and delivery of the Securities Purchase Agreement by

         King.

 

(b)       The obligation of King to close shall be subject to the satisfaction on

         or before the Closing Date of the following conditions any or all of

         which may be waived in whole or in part by King:

 

(i)       the expiration or termination of all applicable waiting periods under

         the HSR Act, unless a joint determination is made by Palatin and King

         (by certification from Palatin and King to each other) that

         notification under the HSR Act is not required;

 

(ii)      the representations and warranties made by Palatin in Article 12 shall

         be true and correct in all material respects as of the Effective Date

         and as of the Closing Date with the same force and effect as if they

         had been made as of the Closing Date, and Palatin shall have performed

         all obligations and conditions herein required to be performed or

         observed by it on or prior to Closing;

 

(iii)     the provision by Palatin to King of an officer's certificate certifying

         that (i) and (ii) above are true and correct as of the Closing Date;

         and

 

 

 

                                        29

 

<PAGE>

 

 

(iv)      the execution and delivery of the Securities Purchase Agreement and

         Warrant by Palatin.

 

6.2 INITIAL PAYMENTS AND EQUITY PURCHASE.

 

6.2.1 COLLABORATION LICENSE FEE. Simultaneous with the Closing, King shall pay

to Palatin a one-time, fully-earned, nonrefundable license fee in the amount of

Ten Million Dollars ($10,000,000) (the "Collaboration License Fee"),

[INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE

24B-2.]. The Collaboration License Fee shall be paid by King in U.S. Dollars by

wire to an account designated by Palatin.

 

6.2.2 REIMBURSEMENT OF EXPENSES. Simultaneous with the Closing, King shall pay

to Palatin a one-time, fully-earned, nonrefundable payment for partial

reimbursement of expenses attributable to preclinical, clinical development, and

CMC costs for Product incurred by Palatin prior to the date hereof in the amount

of Five Million Dollars ($5,000,000) (the "Expense Payment"). The Expense

Payment shall be paid by King in U.S. Dollars by wire to an account designated

by Palatin.

 

6.2.3 INITIAL PURCHASE OF EQUITY. Simultaneous with the Closing, and in partial

consideration of the preclinical, clinical, and CMC costs for Product incurred

by Palatin prior to the date hereof and in consideration of the rights granted

to King pursuant to Sections 2.9, 3.5, 3.6 and 3.7 and subject to the terms and

conditions of the Securities Purchase Agreement dated the date hereof, King

shall purchase from Palatin, and Palatin shall issue and sell to King, shares of

Palatin's common stock par value $0.01 per share (the "Initial Shares") for an

aggregate purchase price of Five Million Dollars ($5,000,000) (the "Initial

Share Payment") in accordance with the terms and conditions of the Securities

Purchase Agreement.

 

6.2.4 ISSUANCE OF WARRANT. In partial consideration of the Initial Share Payment

and the first equity purchase ED Product milestone indicated below, Palatin

agrees to issue to King, pursuant to the terms of the Securities Purchase

Agreement, warrants to purchase Palatin common stock in the form set forth in

Exhibit I hereto.

 

6.3 MILESTONE PAYMENTS.

 

6.3.1 DEVELOPMENT MILESTONES. King will make the following nonrefundable,

noncreditable payments to and purchases of equity from Palatin within ten (10)

days after the determination of the first achievement of each of the milestones

set forth below. Each of the following milestone payments shall only be payable

once.

 

<TABLE>

<CAPTION>

 

------------------------------------------------------------------------------------------

                      ED PRODUCT                      FSD PRODUCT

------------------------------------------------------------------------------------------

Milestone          Cash            Equity            Cash             Equity         Total

------------------------------------------------------------------------------------------

<S>                <C>             <C>             <C>              <C>             <C>

------------------------------------------------------------------------------------------

[*]                  [*]            [*]             [*]              [*]            [*]

------------------------------------------------------------------------------------------

[*]                  [*]            [*]             [*]              [*]            [*]

------------------------------------------------------------------------------------------

[*]                  [*]            [*]             [*]              [*]            [*]

------------------------------------------------------------------------------------------

[*]                  [*]            [*]             [*]              [*]            [*]

------------------------------------------------------------------------------------------

[*]                  [*]             [*]             [*]              [*]            [*]

------------------------------------------------------------------------------------------

[*]                  [*]            [*]             [*]              [*]            [*]

------------------------------------------------------------------------------------------

 

------------------------------------------------------------------------------------------

Total Development

  Milestones          [*]             [*]            [*]              [*]             $100 Million

------------------------------------------------------------------------------------------

 

</TABLE>

 

[*] INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE

24B-2.

 

 

                                       30

 

<PAGE>

 

 

6.3.2 DEVELOPMENT MILESTONE EQUITY PURCHASES. All equity purchases to be made by

King in connection with the development milestones set forth in Section 6.3.1

above, shall be made pursuant to the terms of the Securities Purchase Agreement;

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

 

6.3.3 SALES MILESTONES. King will make the following nonrefundable,

noncreditable payments to Palatin within ten (10) days after the determination

of the first achievement of each of the milestones set forth below. Each of the

following milestone payments shall only be payable once. In the event that more

than one milestone is reached in any given Calendar Year, each such milestone

shall be due and payable.

 

<TABLE>

<CAPTION>

--------------------------------------------------------------------------------

Total Net Sales in a Single Calendar Year Total Cash Payment for Such Calendar

Year for all Products in the Territory

 

<S>                                         <C>

--------------------------------------------------------------------------------

[*]                                           [*]

--------------------------------------------------------------------------------

[*]                                           [*]

--------------------------------------------------------------------------------

[*]                                           [*]

--------------------------------------------------------------------------------

[*]                                           [*]

--------------------------------------------------------------------------------

[*]                                           [*]

--------------------------------------------------------------------------------

[*]                                           [*]

--------------------------------------------------------------------------------

[*]                                           [*]

--------------------------------------------------------------------------------

Total Sales Milestones                        $130 Million

--------------------------------------------------------------------------------

</TABLE>

 

[*] INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE

24B-2.

 

6.3.4 DETERMINATION THAT PAYMENTS ARE DUE.

 

(a) The Party having control or oversight over achievement of a particular

milestone shall provide the JDMC with prompt written notice upon its achievement

of each of the milestones set forth above. In the event that, notwithstanding

the fact that such Party has not given any such notice, the other Party believes

any such milestone payment is due, it shall so notify such Party and the JDMC in

writing, and shall provide to such Party and the JDMC the data and information

demonstrating that the conditions for payment have been achieved. Within ten

(10) days of its receipt of such notice, the JDMC shall review the data and

information and shall certify in writing whether or not the conditions for

payment have been achieved. Any negative determination shall be accompanied by a

detailed explanation of the reasons therefor. If the JDMC does not take action

within such ten (10) day period (or such other period as the Parties shall

mutually agree to be reasonable), the conditions for payment shall be deemed to

have been achieved (unless the JDMC did not take action because a Party did not

participate in meetings of the JDMC). King shall have the right to dispute in

good faith the obligation to make a milestone payment pursuant to this Section

6.3.

 

 

                                       31

 

<PAGE>

 

 

(b) Notwithstanding anything to the contrary contained herein, any dispute under

this Section that relates to whether or not a milestone has been achieved shall

not be subject to final determination of either Party but shall be resolved

pursuant to Section 2.10.

 

6.4 COLLABORATION COSTS AND COLLABORATION REVENUE.

 

6.4.1 ALLOCATION. All Collaboration Costs incurred and Collaboration Revenue

received by a Party on and after the Effective Date shall be allocated between

the Parties according to the percentages set forth below. For the avoidance of

doubt, (i) a single percentage allocation shall ultimately be applied to all

Collaboration Costs incurred and all Collaboration Revenues received in a given

Calendar Year, based on an end-of-year determination of aggregate Collaboration

Revenues for such Calendar Year, [INFORMATION OMITTED AND FILED SEPARATELY WITH

THE COMMISSION UNDER RULE 24B-2.]

 

<TABLE>

<CAPTION>

 

------------------------------------------------------------------------------------------------------

                    COLLABORATION COSTS AND COLLABORATION REVENUE ALLOCATION

------------------------------------------------------------------------------------------------------

                          Aggregate Collaboration Revenue in a     Aggregate Collaboration

                          Calendar Year Reaches Up to, but         Revenue in a Calendar Year Exceeds

    Region                 Does Not Exceed, [*] in Region           [*] in Region

------------------------------------------------------------------------------------------------------

<S>                       <C>                                       <C>

   Territory               [*]                                       [*]

------------------------

                          [*]                                        [*]

------------------------------------------------------------------------------------------------------

      ROW                  [*]                                       [*]

------------------------

                          [*]                                        [*]

-------------------------------------------------------------------------------------------------------

</TABLE>

 

[*] INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE

24B-2.

 

6.4.2 DETERMINATION AND ALLOCATION OF COLLABORATION COSTS. Within ten (10) days

following the end of each Calendar Quarter, Palatin and King shall submit to the

Accounting and Finance Committee an accounting of all Collaboration Costs

incurred by it with respect to all Products and the Collaboration, allocated

between the Territory and ROW, in the relevant time period. Within ten (10) days

thereafter, the Accounting and Finance Committee shall produce a report setting

forth the calculation of Collaboration Costs and its allocation between the

Parties in accordance with Section 6.4.1 above, [INFORMATION OMITTED AND FILED

SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.]

 

6.4.3 DETERMINATION AND ALLOCATION OF COLLABORATION REVENUE. Within ten (10)

days following the end of each Calendar Quarter commencing on and after the date

of First Commercial Sale of each Product or the date on which a Party received

Collaboration Revenue, Palatin and King shall submit to the Accounting and

Finance Committee an accounting of all Collaboration Revenue received by it with

respect to all Products and the Collaboration, allocated between the Territory

and ROW. Within ten (10) days thereafter, the Accounting and Finance Committee

shall produce a report setting forth the calculation of Collaboration Revenue

and its allocation between the Parties in accordance with Section 6.4.1.

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

 

 

 

                                       32

 

<PAGE>

 

6.4.4 ADVANCE PAYMENTS AND OFFSET. Each of the Parties shall fund projected

Collaboration Costs on a monthly, prospective basis, such that all anticipated

Collaboration Costs identified in the Accounting and Finance Plan for a given

month, or that are otherwise determined by the Accounting and Finance Committee

to be reasonably likely to be incurred in such month, shall be allocated between

the Parties according to the appropriate percentage set forth in Section 6.4.1,

as determined by the Accounting and Finance Committee by reference to

anticipated Collaboration Revenues for the relevant Calendar Year. At the end of

each Calendar Quarter, the Parties shall reconcile their respective funding

payments pursuant to Section 6.4.2 hereof, and, at the discretion of the Party

who has funded an amount greater than the Collaboration Costs allocable to such

Party for the relevant Calendar Quarter shall be reimbursed by the other Party

within ten (10) days after the end of such Calendar Quarter or, at its

discretion, shall receive a credit against Collaboration Costs payable by that

Party in the subsequent Calendar Quarter(s), which credit amount shall be

carried forward until fully credited.

 

6.4.5 CURRENCY CONVERSION. All Collaboration Costs incurred and Collaboration

Revenue received in currencies other than U.S. Dollars shall be converted to

U.S. Dollars using the method agreed by the Parties and set forth in the

Accounting and Finance Plan.

 

6.4.6 RECORDS. Each Party shall maintain, for three (3) years from the date of

each quarterly reconciliation of Collaboration Costs, complete and accurate

records of the same for a Party, its Affiliates and Sublicensees, in sufficient

detail to allow calculation and verification of Collaboration Costs and

Collaboration Revenue. Each Party shall have the right for a period of three (3)

years after receiving any report or statement with respect to Collaboration

Costs or Collaboration Revenue to appoint at its expense an independent

certified public accountant reasonably acceptable to the other Party to inspect

the relevant records of such other Party and its Affiliates and Sublicensees to

verify such report or statement. Such other Party, its Affiliates and

Sublicensees shall each make its records available for inspection by such

independent certified public accountant (who agree to confidentiality provisions

consistent with Article 10) during regular business hours at such place or

places where such records are customarily kept, upon reasonable notice from the

auditing Party, solely to verify the accuracy of the reports and payments. Such

inspection right shall not be exercised more than once in any Calendar Year and

not more than once with respect to sales of any Product in any given period.

Palatin agrees to hold in strict confidence all information concerning such

payments and reports, and all information learned in the course of any audit or

inspection, except to the extent necessary for Palatin to reveal such

information in order to enforce its rights under this Agreement or if disclosure

is required by law. The results of each inspection, if any, shall be binding on

both Parties. In the event that any such inspection shall conclude that

Collaboration Costs were overstated or Collaboration Revenue underreported by up

to three percent (3%) in any given Calendar Year,

 

 

                                        33

 

<PAGE>

 

the inspected Party shall pay for one-half of the reasonable costs of the

inspecting Party incurred in respect of the inspection, as well as make any

payments required to remedy the overstatement or underreporting. In the event

that any such inspection shall conclude that Collaboration Costs were overstated

or Collaboration Revenue underreported by more than three percent (3%) in any

give Calendar Year, the inspected Party shall pay for all the reasonable costs

of the inspecting Party incurred in respect of the inspection, as well as make

any payments required to remedy the overstatement or underreporting. Any dispute

regarding the results of any such inspection hereunder shall be subject to the

dispute resolution provisions of Section 2.10 hereof, provided that if the

non-paying party is the party with final decision-making authority over the

subject matter in dispute, and the CEO's are unable to reach agreement even

after good faith discussions in accordance with Section 2.10, then the dispute

shall not be subject to the sole discretion of either party.

 

6.4.7 OVERDUE PAYMENTS. All overdue payments, not subject to a bona fide

dispute, due and payable pursuant to this Agreement shall bear interest at a

rate of one percent (1%) per month from the due date until paid in full.

 

6.4.8 WITHHOLDING TAXES. All payments made by a Party hereunder shall be made to

the other Party free and clear of any taxes, duties, levies, fees or charges,

except for withholding taxes (to the extent applicable). The Party making the

withholding payment shall make any applicable withholding payments due on behalf

of other Party and shall promptly provide the other Party with written

documentation of any such payment sufficient to satisfy the requirements of the

United States Internal Revenue Service relating to an application by such other

Party for a foreign tax credit for such payment. If by law, regulations or

fiscal policy of a particular country in the Territory, remittance of

Collaboration Revenue payments in United States Dollars is restricted or

forbidden, written notice thereof shall promptly be given by the selling Party

to the other Party, and such payment shall be made by the deposit thereof in

local currency to the credit of such other Party in a recognized banking

institution designated by the other Party. When in any country in the Territory

the law or regulations prohibit both the transmittal and the deposit of

Collaboration Revenue payments, such payments shall be suspended for as long as

such prohibition is in effect and as soon as such prohibition ceases to be in

effect, all Collaboration Revenue payments that the selling Party would have

been under an obligation to transmit or deposit but for the prohibition shall

forthwith be deposited or transmitted, to the extent allowable.

 

7. LICENSES AND CT LICENSE AGREEMENT

 

7.1 LICENSE TO KING. Subject to the terms and conditions of this Agreement,

beginning on the Closing Date and thereafter during the Term, Palatin hereby

grants to King a co-exclusive (with Palatin only) license, limited to the Field,

with the right to grant sublicenses only as explicitly permitted hereunder in

furtherance of the Collaboration, under Palatin Technology and Palatin Patent

Rights and under Palatin's ownership interest in Joint Technology and Joint

Patent Rights, to develop, have developed, make, have made, use, sell,

distribute for sale, have distributed for sale, offer for sale, have sold,

import and have imported Products in the Territory, which license shall be

exercisable by King only as part of the Collaboration and for the conduct of the

activities required in the performance of its obligations or exercise of its

rights hereunder.

 

 

                                       34

<PAGE>

 

 

7.2 LICENSE TO PALATIN. Subject to the terms and conditions of this Agreement,

beginning on the Closing Date and thereafter during the Term, King hereby grants

to Palatin a co-exclusive (with King only) license, limited to the Field, with

the right to grant sublicenses only as explicitly permitted hereunder in

furtherance of the Collaboration, under King Technology and King Patent Rights

and under King's ownership interest in Joint Technology and Joint Patent Rights

to develop, have developed, make, have made, use, sell, distribute for sale,

have distributed for sale, offer for sale, have sold, import and have imported

Products in the Territory. The foregoing license to Palatin shall be exercisable

by Palatin only as part of the Collaboration and for the conduct of the

activities required in the performance of its obligations or exercise of its

rights hereunder. For the avoidance of doubt, Palatin shall have no right to

sell, distribute for sale, have distributed for sale, offer for sale, or have

sold Products in the Territory except and to the extent (a) permitted in the

Marketing Plans or otherwise expressly first agreed to by King in writing or (b)

set forth in Section 5.1 hereof.

 

7.3 RIGHT TO DEVELOP AND MARKET IN ROW. Subject to the terms and conditions of

this Agreement, beginning on the Closing Date and thereafter during the Term of

this Agreement, Palatin hereby grants to King the exclusive right, and King

agrees, to collaborate equally with Palatin (including the sharing of

Collaboration Costs and Collaboration Revenues relating to the same as set forth

in Section 6.4 and decision making as set forth herein) in licensing or

sublicensing to or collaboration with one or more Third Parties with respect to

the right to Develop and Market Products in the ROW. Neither Palatin nor King

shall have the right to grant, or shall grant, any rights to any Palatin

Technology, King Technology, Palatin Patent Rights, King Patent Rights, Joint

Technology or Joint Patent Rights to any third party in the ROW without the

consent and participation of the other Party, except as set forth in Section

3.11 hereof.

 

7.4 FULFILLMENT AND OBSERVANCE OF CERTAIN OBLIGATIONS. In furtherance of the

grant of rights set forth in Section 7.1, Palatin acknowledges that it is

responsible for the fulfillment of its obligations under the CT License

Agreement and agrees to use its commercially reasonable efforts to fulfill same,

and King hereby agrees to abide by the provisions of the CT License Agreement

and not to knowingly cause Palatin to be in breach of or under the same. Palatin

shall not amend, terminate or cause to be terminated the CT License Agreement,

if such amendment or termination would alter the rights of the parties to the CT

License Agreement in such a way as to alter the rights of King under this

Agreement (it being expressly understood and agreed that any modification to any

of the financial provisions of the CT License Agreement shall be deemed to alter

the rights of King under this Agreement), or exercise or fail to exercise any of

Palatin's material rights or obligations under the CT License Agreement, in each

case without the prior written consent of King, not to be unreasonably withheld.

 

7.5 NO OTHER RIGHTS. King shall receive no rights to utilize Palatin Technology,

Palatin Patent Rights, or Palatin Proprietary Materials except as expressly set

forth herein. Palatin shall receive no rights to utilize King Technology, King

Patent Rights or King Proprietary Materials except as expressly set forth

herein. Notwithstanding their joint ownership interest in Joint Technology and

Joint Patent Rights, each Party hereby agrees that it shall have no right to use

same except as expressly set forth herein.

 

 

 

                                       35

 

<PAGE>

 

 

7.6 LIMITATION ON DEVELOPMENT AND MARKETING. [INFORMATION OMITTED AND FILED

SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.]

 

7.7 RIGHTS OUTSIDE THE FIELD. The co-exclusive rights of the Parties hereunder

will extend to all indications outside the Field with respect to PT-141,

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. In the

event King or Palatin make any invention or discovery with respect to PT-141

outside the Field, such new invention or discovery shall be part of the

Collaboration and the rights of the Parties with respect thereto shall be

subject to the terms and conditions hereof. Any activities of the Parties with

respect to PT-141 outside the Field shall only be undertaken by the Parties

pursuant to their mutual consent and pursuant to the framework established by

the Collaboration and this Agreement. Neither Party shall have any right to, and

neither Party shall, undertake any research, development, manufacture or

commercialization of PT-141 outside the Field outside the Collaboration, either

on its own or with any third party.

 

8. INTELLECTUAL PROPERTY RIGHTS

 

8.1 INVENTIONS DISCLOSURE AND GENERALLY. Each Party shall promptly provide the

JDMC with written notice concerning all Technology that is conceived, made or

developed in the course of carrying out the Development and Marketing Program by

employees or Consultants of either of them or their Affiliates, alone or jointly

with employees or Consultants of the other Party or its Affiliates. Such notice

shall be treated as the Confidential Information of both parties hereunder. The

provisions of this Section 8 shall apply to rights in the Technology conceived,

made or developed by Palatin or King, or both, during the course of carrying out

the Development and Marketing Program.

 

8.2 OWNERSHIP.

 

8.2.1 PALATIN INTELLECTUAL PROPERTY RIGHTS. Palatin shall have sole and

exclusive ownership of all right, title and interest on a worldwide basis in and

to any and all Palatin Technology and Palatin Patent Rights, with full rights to

license or sublicense, subject to the obligations to King as set forth herein.

Without limiting the foregoing, and except as expressly set forth in this

Agreement, Palatin shall be the sole owner of all Patent Rights, all trade

secret rights, all know-how and any other intellectual property rights in the

Palatin Technology and Palatin Patent Rights, including the sole and exclusive

right to exclude others from making, using, selling, offering for sale or

importing the Palatin Technology and Palatin Patent Rights