AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), is entered into as of
November 11, 1999, by and among PALATIN TECHNOLOGIES, INC., a Delaware
corporation ("Palatin"), EVERGREEN MERGER CORPORATION, a newly-formed Delaware
corporation and a wholly-owned subsidiary of Palatin ("Merger Subsidiary"), and
MOLECULAR BIOSYSTEMS, INC., a Delaware corporation ("MBI").
BACKGROUND
A. The respective Boards of Directors of Palatin, Merger Subsidiary and MBI
have approved this Agreement, and deem it advisable and in the best interests of
their respective stockholders to consummate the merger of Merger Subsidiary with
and into MBI on the terms and conditions set forth herein (the "Merger").
B. For United States federal income tax purposes, it is intended that the
Merger shall qualify as a "reorganization" within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder.
C. For accounting purposes, it is intended that the Merger shall be
accounted for as a "purchase" under United States generally accepted accounting
principles ("GAAP").
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, on the Effective Date (as defined in Section 1.2), Merger Subsidiary
shall be merged with and into MBI and the separate existence of Merger
Subsidiary shall thereupon cease, and MBI, as the surviving corporation in the
Merger (the "Surviving Corporation"), shall by virtue of the Merger continue its
corporate existence under the laws of the State of Delaware.
1.2 EFFECTIVE DATE OF THE MERGER. The Merger shall become effective at the
date and time when a properly executed Certificate of Merger substantially in
the form attached hereto as Exhibit A is duly filed with the Secretary of State
of the State of Delaware (the "Effective Date"). This filing shall be made as
soon as practicable following fulfillment of the conditions set forth in Article
8, or at such time thereafter as is provided in such Certificate. The Surviving
Corporation may at any time after the Effective Date take any action (including
executing and delivering any document ) in the name and on behalf of MBI or
Merger Subsidiary in order to carry out and effectuate the transactions
contemplated by this Agreement.
ARTICLE 2
THE SURVIVING CORPORATION
2.1 CERTIFICATES OF INCORPORATION. The Certificate of Incorporation of the
Surviving Corporation shall be amended and restated at and as of the Effective
Date to read as did the Certificate of Incorporation of Merger Subsidiary
immediately prior to the Effective Date.
2.2 BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of the Surviving
Corporation shall be amended and restated at and as of the Effective Date to
read as did the Bylaws of Merger Subsidiary immediately prior to the Effective
Date.
2.3 BOARD OF DIRECTORS OF THE SURVIVING CORPORATION. From the Effective
Date and for three (3) fiscal years beginning after the Effective Date, Palatin
shall cause the Board of Directors of the Surviving Corporation to be composed
of two Palatin Directors (as defined below) and one (1) MBI Director (as defined
below).
2.4 BOARD OF DIRECTORS OF PALATIN. At the Effective Date, the Board of
Directors of Palatin shall consist of the following: (i) four (4) individuals
whom the President and Chief Executive Officer of Palatin or his designee shall
select (which initial selection shall be from the members of the Board of
Directors of Palatin on the date hereof) (the "Palatin Directors") and (ii) two
(2) individuals whom the President and Chief Executive Officer of MBI or his
designee shall select (which initial selection shall be from the members of the
Board of Directors of MBI on the date hereof ) (the "MBI Directors"). Subject to
the fiduciary duties of Palatin's Board of Directors, for three (3) fiscal years
beginning after the Effective Date, further selection of (y) potential MBI
Directors shall be made by the incumbent MBI Directors and (z) potential Palatin
Directors shall be made by the incumbent Palatin Directors. Subject to the
fiduciary duties of its Board of Directors, Palatin shall cause four (4) Palatin
Directors and two (2) MBI Directors (and no other persons except as permitted in
this Section) to be nominated for election to Palatin's Board of Directors for
each of the three (3) fiscal years beginning after the Effective Date. Except
with respect to vacancies occurring as a result of removal by the stockholders
of Palatin, vacancies occurring from the Effective Date and for the three (3)
fiscal years beginning after the Effective Date among either the Palatin
Directors or the MBI Directors, shall be filled by a person selected by the
respective Palatin Directors or MBI Directors.
2.5 AMENDMENT TO CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION.
At the Effective Date, Palatin shall cause the Surviving Corporation to file a
Certificate of Merger with the Delaware Secretary of State.
2.6 EFFECTS OF MERGER. The Merger shall have the effects set forth in
Section 259 of the Delaware General Corporation Law (the "DGCL"). The corporate
existence of MBI, with all its purposes, powers and objects, shall continue
unaffected and unimpaired by the Merger and, as the Surviving Corporation, it
shall be governed by the laws of the State of Delaware and succeed to all
rights, assets, liabilities and obligations of Merger Subsidiary in accordance
with Section 259(a) of the DGCL.
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ARTICLE 3
CONVERSION OF SHARES
3.1 EXCHANGE RATIO. On the Effective Date, by virtue of the Merger and
without any action on the part of any holder of any common stock, par value
$0.01 per share, of MBI ("MBI Common Stock"):
(a) All shares of MBI Common Stock which are held by MBI or any wholly
owned subsidiary of MBI shall be canceled and retired and shall cease to
exist and no capital stock of Palatin or other consideration shall be
delivered in exchange therefor;
(b) Each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Date shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation;
(c) Subject to Sections 3.1(d) and 3.4, each remaining outstanding
share of MBI Common Stock shall be converted into the right to receive
0.5250 (the "Exchange Ratio"), fully paid and nonassessable shares of the
common stock, par value $0.01 per share, of Palatin ("Palatin Common
Stock") (the "Merger Consideration");
(d) In the event of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares with respect to, or
rights issued in respect of, Palatin Common Stock or MBI Common Stock after
the date hereof and prior to the Effective Date, the Exchange Ratio shall
be adjusted accordingly; and
(e) Notwithstanding anything in this Agreement to the contrary, shares
(the "Dissenting Shares") of MBI Common Stock that are outstanding
immediately prior to the Effective Date and that are held by persons who
are entitled to demand and properly demand appraisal of such Dissenting
Shares pursuant to, and who comply in all respects with, Section 262 of the
DGCL ("Section 262") shall not be converted into the Merger Consideration
as provided in Section 3.1(c), but rather the holders of Dissenting Shares
shall be entitled to payment of the fair market value of such shares in
accordance with Section 262; provided, however, that if any holder of
Dissenting Shares shall fail to perfect or otherwise shall waive, withdraw
or lose the right to appraisal under Section 262, then the right of such
holder to be paid the fair value of such holder's Dissenting Shares shall
cease and such Dissenting Shares shall be treated as if they had been
converted as of the Effective Date into the Merger Consideration as
provided in Section 3.1(c). MBI shall serve prompt notice to Palatin and
Merger Subsidiary of any demands received by MBI for appraisal of any
shares of MBI Common Stock, and Palatin shall have the right to participate
in and direct all negotiations and proceedings with respect to such
demands. MBI shall not, except with the prior written consent of Palatin
and Merger Subsidiary, make any payment with respect to, or settle or offer
to settle, any such demands, or agree to do any of the foregoing.
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3.2 PALATIN TO MAKE CERTIFICATES AVAILABLE.
(a) Prior to the Closing (as defined in Section 3.10), Palatin shall
appoint American Stock Transfer and Trust Company or such other person or
persons reasonably satisfactory to Palatin and MBI to act as Exchange Agent
for the Merger (the "Exchange Agent"). As soon as practicable after the
Effective Date, Palatin shall make available, and each holder of MBI Common
Stock shall be entitled to receive, upon surrender to the Exchange Agent of
one or more certificates ("Certificates") representing such stock for
cancellation and such other documents reasonably requested by the Exchange
Agent, certificates representing the number of shares of Palatin Common
Stock into which such shares of MBI Common Stock are converted in the
Merger and cash in consideration of fractional shares as provided in
Section 3.4. Palatin Common Stock into which MBI Common Stock shall be
converted in the Merger shall be deemed to have been issued on the
Effective Date (the "Share Consideration").
(b) Any holder of shares of MBI Common Stock who has not exchanged his
or her shares for Palatin Common Stock in accordance with Section 3.2(a)
within twelve (12) months after the Effective Date shall have no further
claim upon the Exchange Agent and shall thereafter look only to Palatin for
payment in respect of his or her shares of MBI Common Stock. Until so
surrendered, Certificates representing MBI Common Stock shall represent
solely the right to receive the Share Consideration. If any Certificates
representing shares of MBI Common Stock entitled to payment pursuant to
Section 3.1 shall not have been surrendered for such payment prior to such
date on which any payment in respect thereof would otherwise escheat to or
become the property of any governmental agency or other governmental
entity, such shares of MBI Common Stock shall, to the extent permitted by
applicable law, be deemed to be canceled and no money or other property
will be due to the holder thereof.
3.3 DIVIDENDS; TRANSFER TAXES. No dividends or other distributions that are
declared or made on Palatin Common Stock will be paid to persons entitled to
receive certificates representing Palatin Common Stock pursuant to this
Agreement until such persons surrender their Certificates representing MBI
Common Stock. Upon such surrender, there shall be paid to the person in whose
name the certificates representing such Palatin Common Stock shall be issued any
dividends or other distributions which shall have become payable with respect to
such Palatin Common Stock in respect of a record date after the Effective Date.
In no event shall the person entitled to receive such dividends be entitled to
receive interest on such dividends. In the event that any certificates for any
shares of Palatin Common Stock are to be issued in a name other than that in
which the Certificates representing shares of MBI Common Stock surrendered in
exchange therefor are registered, it shall be a condition of such exchange that
the Certificate or Certificates so surrendered shall be properly endorsed or be
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such shares of Palatin Common Stock
in a name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a holder of
shares of MBI Common Stock for any shares of Palatin Common Stock or dividends
thereon delivered to a public official pursuant to any applicable escheat laws.
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3.4 NO FRACTIONAL SHARES. No certificates or scrip representing less than
one (1) share of Palatin Common Stock shall be issued upon the surrender for
exchange of Certificates representing MBI Common Stock pursuant to Section
3.1(b). In lieu of any such fractional share, each holder of MBI Common Stock
who would otherwise have been entitled to a fraction of a share of Palatin
Common Stock upon surrender of a Certificate for exchange pursuant to Section
3.1 (b) shall be paid upon such surrender cash (without interest) in an amount
equal to such holder's proportionate interest in the net proceeds from the sale
or sales in the open market by the Exchange Agent, on behalf of all such
holders, of the aggregate fractional Palatin Common Stock issued pursuant to
this Section 3.4. As soon as practicable following the Effective Date, the
Exchange Agent shall determine the excess of (i) the number of full shares of
Palatin Common Stock delivered to the Exchange Agent by Palatin over (ii) the
aggregate number of full shares of Palatin Common Stock to be distributed to
holders of MBI Common Stock (such excess being herein called the "Excess
Shares"), and the Exchange Agent, as agent for the former holders of MBI Common
Stock, shall sell the Excess Shares at the prevailing prices on the Nasdaq
National Market (the "NMS") or such other exchange or automated quotation
system, as the case may be. The sale of the Excess Shares by the Exchange Agent
shall be executed on the NMS through one or more member firms of the NMS or such
other exchange or automated quotation system and shall be executed in round lots
to the extent practicable. The Exchange Agent shall deduct from the proceeds of
the sale of the Excess Shares all commissions, transfer taxes and other
out-of-pocket transaction costs, including, but not limited to, the expenses and
compensation of the Exchange Agent, incurred in connection with such sale of
Excess Shares. Until the net proceeds of such sale have been distributed to the
former stockholders of MBI, the Exchange Agent will hold such proceeds in trust
for such former stockholders (the "Fractional Securities Fund"). As soon as
practicable after the determination of the amount of cash to be paid to former
stockholders of MBI in lieu of any fractional interests, the Exchange Agent
shall make available in accordance with this Agreement such amounts to such
former stockholders. Any amounts remaining unclaimed by holders of shares of MBI
Common Stock three (3) years after the Effective Date (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of Palatin free and clear of any claims or
interest of any person previously entitled thereto.
3.5 STOCK OPTIONS. At or prior to the Effective Date, Palatin and MBI shall
take all action necessary to cause the assumption by Palatin as of the Effective
Date of all outstanding options as of the Effective Date (the "Outstanding
Options") to purchase MBI Common Stock, whether vested or unvested, issued under
MBI's Pre-1984 Stock Option Plan, 1984 Stock Option Plan, 1993 Stock Option
Plan, , 1993 Outside Director's Stock Option Plan, 1997 Outside Directors Stock
Option Plan and 1998 Stock Option Plan (the "MBI Stock Option Plans") or
pursuant to separate option agreements, all of which are listed in Section 3.5
of the MBI Disclosure Schedule (as defined below). Each of the Outstanding
Options shall be converted without any action on the part of the holder thereof
into an option to purchase shares of Palatin Common Stock as of the Effective
Date. The number of shares of Palatin Common Stock that the holder of an assumed
Outstanding Option shall be entitled to receive upon the exercise of such option
shall be a number of whole and fractional shares determined by multiplying the
number of shares of MBI Common Stock subject to such option, determined
immediately before the Effective Date, by the Exchange Ratio. The exercise price
of each share of Palatin Common Stock subject to an assumed Outstanding Option
shall be the amount (rounded up to the nearest
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whole cent) obtained by dividing the exercise price per share of MBI Common
Stock at which such option is exercisable immediately before the Effective Date
by the Exchange Ratio. Except as specified in Section 3.5 of the MBI Disclosure
Schedule, the assumption and substitution of options as provided in this Section
shall not give the holders of such options additional benefits or additional
vesting rights which they did not have immediately prior to the Effective Date
or relieve the holders of any obligations or restrictions applicable to their
options or the shares obtainable upon exercise of the options. Only whole shares
of Palatin Common Stock shall be issued upon exercise of any Outstanding Option,
and in lieu of receiving any fractional share of Palatin Common Stock, the
holder of such option shall receive in cash the Prior Day Market Price (as
defined below) of the fractional share, net of the applicable exercise price of
the fractional share and applicable withholding taxes. After the Effective Date,
the MBI Stock Option Plans and any Outstanding Options issued outside the scope
of the MBI Stock Option Plans shall be continued in effect by the Surviving
Corporation subject to amendment, modification, suspension, abandonment or
termination as provided therein, and the Stock Option Plans as so continued (i)
shall relate solely to Outstanding Options, (ii) thereafter shall relate only to
the issuance of Palatin Common Stock as provided in this Section and (iii) shall
continue to provide for equitable adjustment in the terms of Outstanding Options
in the event of certain corporate events which alter the capital structure of
the Surviving Corporation. For purposes of this Agreement, the term "Prior Day
Market Price" with respect to shares of either Palatin Common Stock or MBI
Common Stock, as applicable, shall mean the last reported sale price or, if not
so reported, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the applicable exchange or automated
quotation system on which such stock trades for the day immediately preceding
the day for which the Prior Day Market Price is being determined.
3.6 LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of any affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Share
Consideration to be paid in respect of the MBI Common Stock represented by such
Certificates as contemplated by this Article.
3.7 STOCKHOLDERS' MEETINGS.
(a) MBI shall take all action necessary, in accordance with applicable
law and its Certificate of Incorporation and Bylaws, to convene a special
meeting of the stockholders of MBI (the "MBI Meeting") as promptly as
practicable for the purpose of considering and taking action to authorize
this Agreement and the transactions contemplated hereby (the "MBI Share
Proposal"). Subject to its fiduciary duties and as advised by outside
counsel in connection with the receipt by MBI of a Business Combination
Proposal (as defined in Section 7.10) that the Board of Directors of MBI
reasonably believes will result in a Superior Proposal (as defined in
Section 7.10), the Board of Directors of MBI will recommend that holders of
MBI Common Stock vote in favor of and approve the Merger and the adoption
of this Agreement at the MBI Meeting.
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(b) Palatin shall take all action necessary, in accordance with
applicable law and its Certificate of Incorporation and Bylaws, to convene
a meeting of the stockholders of Palatin (the "Palatin Meeting") as
promptly as practicable for the purpose of considering and taking action to
authorize, among other items, this Agreement and the transactions
contemplated hereby (the "Palatin Share Proposal"). Subject to its
fiduciary duties and as advised by outside counsel in connection with the
receipt by Palatin of a Business Combination Proposal (as defined in
Section 7.10) that the Board of Directors of Palatin reasonably believes
will result in a Superior Proposal (as defined in Section 7.10), the Board
of Directors of Palatin will recommend that holders of Palatin Common Stock
vote in favor of and approve the Palatin Share Proposal at the Palatin
Meeting.
3.8 CLOSING OF MBI'S TRANSFER BOOKS. At the Effective Date, the stock
transfer books of MBI shall be closed and no transfer of shares of MBI Common
Stock shall be made thereafter. In the event that, after the Effective Date,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for Palatin Common Stock and/or cash as provided in Sections
3.1(b) and 3.4.
3.9 ASSISTANCE IN CONSUMMATION OF THE MERGER. Palatin and MBI shall provide
all reasonable assistance to, and shall cooperate with, one another to bring
about the consummation of the Merger as soon as possible in accordance with the
terms and conditions of this Agreement.
3.10 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place (i) at the offices of Palatin, 000
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxxxx 00000, at 9:00 A.M. local time
on the day which is at least one business day and no more than three business
days after the day on which the last of the conditions set forth in Article 8 is
fulfilled or waived or (ii) at such other time and place as Palatin and MBI
shall agree in writing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MBI
MBI represents and warrants to Palatin and the Merger Subsidiary that the
statements contained in this Article 4 are true and correct, except as set forth
in the Disclosure Schedule delivered by MBI to Palatin and the Merger Subsidiary
concurrently herewith and identified as the "MBI Disclosure Schedule."
4.1 ORGANIZATION AND QUALIFICATION. MBI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to carry on its business as it is now
being conducted and currently proposed to be conducted, and to own and use its
properties currently owned and used by it. MBI is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified will not, individually or in the aggregate, have an MBI Material
Adverse Effect (as defined below). Complete and correct copies as of the date
hereof of the Certificate of Incorporation, Bylaws and Certificates of
Qualification to do Business (for each applicable jurisdiction) of MBI and each
of its subsidiaries
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have been delivered to Palatin as part of the MBI Disclosure Schedule. For
purposes of this Agreement, an "MBI Material Adverse Effect" shall mean a
material adverse effect on the business (as now conducted or as proposed to be
conducted until the Effective Date), properties, assets, condition (financial or
otherwise), liabilities, operations or results of operations of MBI and its
subsidiaries taken as a whole.
4.2 CAPITALIZATION. The authorized capital stock of MBI consists of
40,000,000 shares of MBI Common Stock. As of September 30, 1999, 18,727,017
shares of MBI Common Stock were validly issued and outstanding, fully paid, and
nonassessable, and there has been no material change in this number through the
date hereof. As of the date hereof, there are no bonds, debentures, notes or
other evidences of indebtedness having the right to vote on any matters on which
MBI's stockholders may vote ("MBI Voting Debt") issued or outstanding. As of
September 30, 1999, options to acquire 3,979,716 shares of MBI Common Stock were
outstanding, and there has been no material change in this number through the
date hereof. Except for these options, and except as set forth in Section 4.2 of
the MBI Disclosure Schedule, there are no options, warrants, calls or other
rights, agreements or commitments outstanding obligating MBI to issue, deliver
or sell shares of its capital stock or debt securities, or obligating MBI to
grant, extend or enter into any such option, warrant, call or other such right,
agreement or commitment. Assuming the conversion of all securities of MBI that
are convertible on the date hereof into MBI Common Stock and the exercise of all
options and warrants to acquire MBI Common Stock, MBI would have 18,749,292
shares of MBI Common Stock issued and outstanding.
4.3 SUBSIDIARIES. Except as set forth in Section 4.3 of the MBI Disclosure
Schedule, MBI has no Significant Subsidiaries (as such term is defined in Rule
1-02 of Regulation S-X of the Securities and Exchange Commission (the
"Commission")) ("Significant Subsidiaries"). MBI does not directly or indirectly
own any interest in any other corporation, partnership, joint venture or other
business association or entity.
4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. MBI has the corporate power to
enter into this Agreement and, subject to approval of the MBI Share Proposal by
the holders of MBI Common Stock to consummate the Merger, to perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by MBI's Board of Directors. This Agreement constitutes a valid and legally
binding obligation of MBI enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought. Except for the approval of the holders of MBI Common Stock described in
Section 3.7(a), no other corporate proceedings on the part of MBI are necessary
to authorize this Agreement and the transactions contemplated hereby. Except as
disclosed in the MBI SEC Reports (as defined below) or in Section 4.4 of the MBI
Disclosure Schedule, MBI is not subject to or obligated under (i) any charter,
bylaw, indenture or other loan document provision or (ii) any other contract,
license, franchise, permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation applicable to MBI or any
of its subsidiaries or their respective properties or assets, which would be
breached or violated, or under which there would be a default (with or without
notice or lapse of time, or
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both), or under which there would arise a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit, by its
executing and carrying out this Agreement other than, in the case of clause (ii)
only, (A) any breaches, violations, defaults, terminations, cancellations,
accelerations or losses which, either singly or in the aggregate, will not have
an MBI Material Adverse Effect or prevent the consummation of the transactions
contemplated hereby and (B) the laws and regulations referred to in the next
sentence. Except in connection, or in compliance, with the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the corporation,
securities or blue sky laws or regulations of the various states, no filing or
registration with, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by MBI of the Merger or the other
transactions contemplated by this Agreement, other than filings, registrations,
authorizations, consents or approvals the failure of which to make or obtain
would not have an MBI Material Adverse Effect or prevent the consummation of the
transactions contemplated hereby.
4.5 REPORTS AND FINANCIAL STATEMENTS. MBI has previously furnished Palatin
with true and complete copies of all documents required to be filed with the
Commission for the period beginning on April 1, 1996 and ending on the date
hereof (together with all exhibits thereto, the "MBI SEC Reports"). MBI has
filed with the Commission all documents it is required by the Commission to file
as of the date hereof. As of their respective dates, the MBI SEC Reports
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the
Commission thereunder applicable to such MBI SEC Reports. Without limiting the
generality of the foregoing sentence, the MBI SEC Reports include as exhibits
all documents required to be filed as exhibits to the MBI SEC Reports pursuant
to the rules and regulations of the Commission. As of their respective dates,
the MBI SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of MBI included in the MBI SEC Reports
comply as to form in all material respects with applicable accounting
requirements of the Securities Act and with the published rules and regulations
of the Commission with respect thereto. The financial statements included in the
MBI SEC Reports (i) have been prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated therein or in the notes thereto),
(ii) present fairly, in all material respects, the financial position of MBI and
its subsidiaries as at the dates thereof and the results of their operations and
cash flows for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments, any other
adjustments described therein and the fact that certain information and notes
have been condensed or omitted in accordance with the Exchange Act and the rules
promulgated thereunder, and (iii) are in all material respects, in accordance
with the books of account and records of MBI and its subsidiaries.
4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the MBI SEC Reports
or set forth in Section 4.6 of the MBI Disclosure Schedule, since March 31,
1999, MBI and its subsidiaries have conducted their business in the ordinary
course in good faith and consistent with past practice or as permitted by this
Agreement and there has not been:
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(a) any event, occurrence or development or a state of circumstances
or facts which has had or reasonably would be expected to have,
individually or in the aggregate, an MBI Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of MBI;
(c) any amendment of any term of any outstanding security of MBI or
any of its subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) MBI or
any of its subsidiaries relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by MBI or
any of its subsidiaries of any contract or other right, in either case,
material to MBI and its subsidiaries taken as a whole;
(e) any change in any method of accounting or accounting practice
(other than any change for tax purposes) by MBI or any of its subsidiaries,
except for any such change which is not significant or which is required by
reason of a concurrent change in GAAP; or
(f) any (i) grant of any severance or termination pay to (or amendment
to any such existing arrangement with) any director, officer or employee of
MBI or any of its subsidiaries, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any
such existing agreement) with any director, officer or employee of MBI or
any of its subsidiaries, (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, or
(iv) increase in (or amendments to the terms of) compensation, bonus or
other benefits payable to directors, officers or employees of MBI or any of
its subsidiaries.
4.7 LITIGATION. Except as disclosed in the MBI SEC Reports or as disclosed
in Section 4.7 of the MBI Disclosure Schedule, there is no suit, action or
proceeding pending or, to the knowledge of MBI, threatened against MBI or any of
its subsidiaries which, either individually or in the aggregate, could
reasonably be expected to have an MBI Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against MBI or any of its subsidiaries having, or which in the future could
reasonably be expected to have, either individually or in the aggregate, an MBI
Material Adverse Effect.
4.8 INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENTS, ETC. None
of the information supplied by MBI to be included or incorporated by reference
in (i) the Registration Statement to be filed with the Commission by Palatin on
Form S-4 under the Securities Act for the purpose of registering the shares of
Palatin Common Stock to be issued in the Merger (the "Registration Statement")
and (ii) the joint prospectus/proxy statement of Palatin and MBI (the "Proxy
Statement") required to be mailed to the stockholders of Palatin and MBI in
connection with the Merger will, in the case of the Proxy Statement or any
amendments or
10
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the MBI Meeting to be held
in connection with the Merger, or, in the case of the Registration Statement, at
the time it becomes effective and at the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading; provided, however,
that this provision shall not apply to statements or omissions in the
Registration Statement or Proxy Statement based upon information furnished by or
on behalf of Palatin for use therein. No representation or warranty made by MBI
in this Agreement and no statement contained in any schedule, certificate, list,
exhibit or other instrument specified in this Agreement, including without
limitation the MBI Disclosure Schedule, contains any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
4.9 EMPLOYEE BENEFIT PLANS. Except as disclosed in the MBI SEC Reports or
as disclosed in Section 4.9 of the MBI Disclosure Schedule, there are no
material employee benefit or compensation plans, agreements or arrangements,
including "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and including, but
not limited to, plans, agreements or arrangements relating to former employees,
including retiree medical plans, maintained by MBI or any of its subsidiaries or
any entity which is under "common control" with MBI within the meaning of
Section 4001 of ERISA ("Controlled Entity") or material collective bargaining
agreements to which MBI or any of its subsidiaries is a party (together, the
"Benefit Plans"). To MBI's best knowledge, no default exists with respect to the
obligations of MBI or any of its subsidiaries under any such Benefit Plan, which
default, either alone or in the aggregate, would have an MBI Material Adverse
Effect. Since January 1, 1999, there have been no disputes or grievances subject
to any grievance procedure, unfair labor practice proceedings, arbitration or
litigation under such MBI Benefit Plans, which have not been finally resolved,
settled or otherwise disposed of, nor is there any default, or any condition
which, with notice or lapse of time or both, would constitute such a default,
under any such MBI Benefit Plans, by MBI or its subsidiaries or, to MBI's best
knowledge, any other party thereto, which failure to resolve, settle or
otherwise dispose of or default, either alone or in the aggregate, would have an
MBI Material Adverse Effect. Since January 1, 1999, there have been no strikes,
lockouts or work stoppages or slowdowns, or to the best knowledge of MBI,
jurisdictional disputes or organizing activity occurring or threatened with
respect to the business or operations of MBI or its subsidiaries which have had
or would have an MBI Material Adverse Effect. MBI has made available to Palatin
true, complete and correct copies of (i) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Benefit Plan,
(ii) the most recent summary plan description for each Benefit Plan for which
such summary plan description is required and (iii) each plan document, trust
agreement and group annuity or insurance contract related to any Benefit Plan.
4.10 ERISA. All MBI Benefit Plans have been administered in accordance
with, and are in compliance with, its terms and the applicable provisions of
ERISA and any other applicable law, except where such failures to administer or
comply would not have an MBI Material Adverse Effect. Each of the Benefit Plans
which is intended to meet the requirements of Section 401(a) of the Code has
been determined by the Internal Revenue Service to be "qualified," within the
meaning of such section of the Code, and MBI knows of no fact which is likely to
have an adverse effect on the qualified status of such plans. None of the
Benefit Plans is
11
a defined benefit pension plan. To MBI's knowledge, there are not now nor have
there been any nonexempt "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving MBI's Benefit Plans
which could subject MBI or any of its subsidiaries to the penalty or tax imposed
under Section 502(i) of ERISA or Section 4975 of the Code. Neither MBI nor any
of its subsidiaries has incurred any liability for any tax, excise tax, penalty
or fee with respect to any Benefit Plan, including, but not limited to, taxes
arising under Sections 4971 through 4980B of the Code, and no event has occurred
and no circumstance has existed that could give rise to any such liability. No
Benefit Plan which is subject to Title IV of ERISA has been completely or
partially terminated; no proceedings to completely or partially terminate any
Benefit Plan have been instituted within the meaning of Subtitle C of said Title
IV of ERISA; no accumulated funding deficiency within the meaning of Section 412
of the Code or Section 302 of ERISA, whether or not waived, has occurred with
respect to any Benefit Plan; and no reportable event within the meaning of
Section 4043(b) of Subtitle C of ERISA has occurred with respect to any Benefit
Plan. Neither the MBI nor any of its subsidiaries nor any Controlled Entity has
made a complete or partial withdrawal, within the meaning of Section 4201 of
ERISA, from any multiemployer plan which has resulted in, or is reasonably
expected to result in, any withdrawal liability to MBI or any of its
subsidiaries except for any such liability which would not have an MBI Material
Adverse Effect. Neither MBI nor any of its subsidiaries nor any Controlled
Entity has engaged in any transaction described in Section 4069 of ERISA or
ceased operations at any facility or withdrawn from any Benefit Plan in a manner
which could subject it to liability under Section 4062, 5063 or 4064 of ERISA
except for any such transaction which would not have an MBI Material Adverse
Effect. No Benefit Plan maintained by MBI or any of its subsidiaries or any
related trust or other funding medium thereunder or any fiduciary thereof is, to
the knowledge of MBI, the direct or indirect subject of a material audit,
investigation or examination by a governmental or quasi-governmental agency.
Except as set forth in Section 4.10 of the MBI Disclosure Schedule, the
execution of, and performance of the transactions contemplated by, this
Agreement will not (either along or upon the occurrence of any additional or
subsequent events) constitute an event under any Benefit Plan or agreement that
will or may reasonably be expected to result in any payment (whether severance
pay or otherwise), accelerated vesting or increase in benefits with respect to
any employee, former employee or director of MBI, or its subsidiaries, whether
or not any such payment would be an "excess parachute payment" within the
meaning of Section 280G of the Code.
4.11 TAKEOVER PROVISIONS INAPPLICABLE. The Board of Directors of MBI have
taken the necessary action to make inapplicable to the Merger, and any other
transactions contemplated hereby, the restrictions set forth in Section 203 of
the DGCL, and any other applicable antitakeover or similar statute or
regulations.
4.12 MBI ACTION. The Board of Directors of MBI (at a meeting duly called
and held) has by the requisite vote of all directors present (i) determined that
the MBI Share Proposal is advisable and in the best interests of MBI and its
stockholders, (ii) approved the Merger in accordance with the provisions of
Section 251 of the DGCL, (iii) recommended the approval of the MBI Share
Proposal by the holders of MBI Common Stock and directed that the MBI Share
Proposal be submitted for consideration by MBI's stockholders at the MBI
Meeting, (iv) taken any necessary steps to render the restrictions set forth in
Section 203 of the DGCL inapplicable to the Merger and the transactions
contemplated by this Agreement, and (v) adopted a resolution having the effect
of causing MBI not to be subject, to the extent permitted by applicable law, to
12
any state takeover law that may purport to be applicable to the Merger and the
transactions contemplated by this Agreement. MBI does not own, beneficially or
otherwise, and, to the knowledge of MBI, no stockholder of MBI owns,
beneficially or otherwise, any outstanding Palatin Common Stock as of the date
hereof.
4.13 FAIRNESS OPINION. MBI has received the written opinion of Prudential
Securities Incorporated ("Prudential Securities"), financial advisors to MBI,
dated the date hereof and a copy of which has been delivered to Palatin, to the
effect that the Exchange Ratio is fair to the stockholders of MBI from a
financial point of view and, as of the date hereof, such opinion has not been
withdrawn.
4.14 FINANCIAL ADVISOR. MBI represents and warrants that (i) except for
Prudential Vector Healthcare Group, a unit of Prudential Securities ("Prudential
Vector"), no broker, finder or investment banker or other intermediary is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of MBI, and (ii) the fees and commissions
payable to Prudential Vector as contemplated by this Section 4.14 will not
exceed the aggregate amount set forth in that certain letter, dated August 19,
1999 from Prudential Vector to MBI.
4.15 COMPLIANCE WITH APPLICABLE LAWS. MBI and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all courts,
administrative agencies or commissions or other governmental authorities or
instrumentalities, domestic or foreign (each, a "Governmental Entity") to carry
on their respective businesses as currently conducted, including, without
limitation, applicable state insurance and health commissions, except for such
permits, licenses, variances, exemptions, orders and approvals the failure of
which to hold would not have an MBI Material Adverse Effect (the "MBI Permits").
MBI and its subsidiaries are in compliance with the terms of the MBI Permits,
except for such failure to comply, which individually or in the aggregate, would
not have an MBI Material Adverse Effect. Except as disclosed in the MBI SEC
Reports filed prior to the date of this Agreement, the businesses of MBI and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations which
individually or in the aggregate do not and would not have a MBI Material
Adverse Effect. Except as disclosed in Section 4.15 of the MBI Disclosure
Schedule, no investigation or review by any Governmental Entity with respect to
MBI or any of its subsidiaries is pending, or, to MBI's knowledge, threatened,
nor has any Governmental Entity indicated an intention to conduct the same,
other than those the outcome of which would not have an MBI Material Adverse
Effect.
4.16 LIABILITIES. Except as set forth in Section 4.16 of the MBI Disclosure
Schedule, as of June 30, 1999, neither MBI nor any of its subsidiaries has any
liabilities or obligations (absolute, accrued, contingent or otherwise) which
are material, individually or in the aggregate, to MBI and its subsidiaries and
which are not disclosed or provided for in the most recent MBI SEC Reports. To
the knowledge of MBI, there is no basis for any claim or liability of any nature
against MBI or its subsidiaries, whether absolute, accrued, contingent or
otherwise, which is or would have an MBI Material Adverse Effect and which was
not reflected in the MBI SEC Reports or disclosed in Section 4.16 of the MBI
Disclosure Schedule.
13
4.17 TAXES. Each of MBI and its subsidiaries has timely filed (including
extensions of time as allowed by law) all Tax Returns required to be filed by
any of them and has paid (or MBI has paid on its behalf), or has set up an
adequate reserve for the payment of, all Taxes required to be paid in respect of
the periods covered by such returns (except where the failure to pay would not
have an MBI Material Adverse Effect). The information contained in such Tax
Returns is true, complete and accurate in all material respects except where the
failure to be so would not have an MBI Material Adverse Effect. Neither MBI nor
any subsidiary of MBI is delinquent in the payment of any Tax, assessment or
governmental charge except where the delinquency would not have an MBI Material
Adverse Effect. The charges, accruals and reserves for Taxes with respect to MBI
and its subsidiaries reflected on the unaudited balance sheet of MBI dated June
30, 1999 are adequate under GAAP to cover the Tax liabilities accruing through
the date thereof. There is no action, suit, proceeding, audit or claim now
proposed or pending against or with respect to MBI or any of its subsidiaries in
respect of any Tax where there is a reasonable possibility of an adverse
determination. No deficiencies for any Taxes have been proposed, asserted or
assessed against MBI or any of its subsidiaries that have not been finally
settled or paid in full which would have an MBI Material Adverse Effect, and no
requests for waivers of the time to assess any such Tax are pending. For
purposes of this Agreement, "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, all net income,
gross income, gross receipts, excise, stamp, real or personal property, ad
valorem, withholding, social security (or similar), unemployment, occupation,
use, service, service use, license, net worth, payroll, franchise, severance,
transfer, recording, employment, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
profits, disability, sales, registration, value added, alternative or add-on
minimum, estimated or other taxes, assessments or charges imposed by any
federal, state, local or foreign governmental entity and any interest,
penalties, or additions to tax attributable thereto. For purposes of this
Agreement, "Tax Returns" shall mean any return, report, form or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax. For purposes of this
Agreement, the term "subsidiary" of a specified person means an entity more than
50% of whose outstanding voting securities are directly or indirectly owned by
such person.
4.18 CERTAIN AGREEMENTS. Neither MBI nor any of its subsidiaries is in
default (or would be in default with or without notice or lapse of time, or
both) under any agreement or instrument filed as an exhibit to or incorporated
by reference in any of the MBI SEC Reports, whether or not such default has been
waived, which default, either individually or in the aggregate with other such
defaults, would have an MBI Material Adverse Effect.
4.19 INTELLECTUAL PROPERTY.
(a) Section 4.19 of the MBI Disclosure Schedule lists all Patents,
Patent applications, registered and applied for Trademarks and material
unregistered Trademarks, service marks and trade names owned by (or
registered in the name of) MBI or any of its subsidiaries that are
considered by MBI to be material to its business as currently conducted.
Section 4.19 of the MBI Disclosure Schedule includes as to each Patent or
Trademark or Patent and Trademark applications listed thereon: a Patent
number or Patent application number, a Trademark registration number or
Trademark application number, as applicable for each listed Trademark and
non-U.S. Patent, and a docket or Patent number or Patent application number
for each listed U.S. Patent; the country or countries in which each
14
Patent or Trademark is issued, registered or applied for, as applicable;
the application date or registration date for each listed Trademark and the
docket number or issue date for each listed Patent, as applicable; and the
owner of such Patent or Trademark. Except as disclosed therein, all Patents
and Trademarks listed on Section 4.19 of the MBI Disclosure Schedule exist
and have been maintained in good standing, including without limitation,
the timely payment of any maintenance fees and annuities thereon. Except as
disclosed in Section 4.19 of the MBI Disclosure Schedule or as would not
have an MBI Material Adverse Effect, MBI has taken all actions which it
considers commercially reasonable and made all applications and filings
which it considers commercially reasonable pursuant to applicable laws to
secure, perfect and protect its rights in the Intellectual Property, for
the conduct of its business as presently conducted; and, to MBI's
knowledge, neither MBI, its subsidiaries nor any of their respective agents
have practiced inequitable conduct under the Patent laws or other
applicable laws with respect to any of the foregoing. Except as would not
have an MBI Material Adverse Effect, MBI and each of its subsidiaries has
taken all steps which it considers commercially reasonable (including
without limitation entering into appropriate confidentiality,
non-disclosure and non-competition agreements with all officers, directors
and employees of MBI and its subsidiaries with access to or knowledge of
the Intellectual Property of MBI or its subsidiaries (and the products and
technology of MBI and its subsidiaries)) to safeguard and maintain the
secrecy and confidentiality of, and to assign to MBI or its subsidiaries,
as applicable, all of such employee's rights in all such Intellectual
Property invented or developed by such employee within the scope of such
employee's employment and relating to MBI's business. All key full-time
employees of MBI and substantially all other full-time employees of MBI and
its subsidiaries have signed a confidentiality and invention assignment
agreement for the benefit of MBI or one of its subsidiaries to assign such
employee's rights in Intellectual Property to MBI or one of its
subsidiaries.
(b) Except as set forth in the MBI SEC Reports or in Section 4.19 of
the MBI Disclosure Schedule or as would not have an MBI Material Adverse
Effect, MBI and its subsidiaries own, are duly licensed or otherwise have
the right to use all of the Intellectual Property used or believed by MBI
to be required for use in connection with the business of MBI and its
subsidiaries as presently conducted and, to MBI's knowledge, as proposed to
be conducted through the Effective Date; and, MBI has no reason to believe
that such Intellectual Property is not valid and enforceable against third
parties. Except as set forth in the MBI SEC Reports or in Section 4.19 of
the MBI Disclosure Schedule or as would not have an MBI Material Adverse
Effect, to MBI's knowledge, MBI and its subsidiaries own, on an exclusive
basis, free and clear of any Liens, and have the unrestricted right to use,
license, sell or dispose of, and the right to bring infringement actions
with respect to all the Intellectual Property owned by MBI and its
subsidiaries. Except as set forth in the MBI SEC Reports or in Section 4.19
of the MBI Disclosure Schedule or as would not have an MBI Material Adverse
Effect, to MBI's knowledge, MBI and its subsidiaries do not pay, and have
no obligation (whether absolute or contingent) to pay, royalties,
honoraria, fees or other payments to any person by reason of the ownership,
use, license, sale or disposition of any Intellectual Property by MBI or
its subsidiaries. Except as set forth in the MBI SEC Reports or in Section
4.19 of the MBI Disclosure Schedule, to MBI's knowledge, neither MBI nor
any of its subsidiaries has received notice (written or oral) of any claim
of any person asserting rights in, or a conflict with, the Intellectual
Property used or required for use in connection with the business of MBI
and its subsidiaries as presently conducted and as proposed to be conducted
(including without
15
limitation the Patents and Trademarks listed in Section 4.19 of the MBI
Disclosure Schedule) and MBI has not been informed of any reasonable basis
for such a claim. Except for Intellectual Property not related to MBI's
business as currently conducted or as proposed to be conducted through the
Effective Date, and without limiting the foregoing, to MBI's knowledge, no
other person has claimed the right to use in connection with substantially
similar or closely related goods and in the same geographic area any
Trademark which is identical or confusingly similar to any Trademark used
by MBI or its subsidiaries, except pursuant to written agreements with MBI
or its subsidiaries which are listed in the MBI SEC Reports or Section 4.19
of the MBI Disclosure Schedule. Except for Intellectual Property not
related to MBI's business as currently conducted, to MBI's knowledge,
neither MBI nor any of its subsidiaries has provided notice (written or
oral) to any person of infringement of any Intellectual Property right held
by MBI or its subsidiaries; and MBI has not been informed of any reasonable
basis for such a claim. There is no agreement, arrangement or understanding
(written or oral) between MBI or any of its subsidiaries and another person
which would prevent or restrict MBI and its subsidiaries after the Merger
from using, selling, licensing or disposing of any material Intellectual
Property of MBI and its subsidiaries on substantially the same terms and
conditions applicable to MBI and its subsidiaries immediately prior to the
Merger.
(c) Except as would not have an MBI Material Adverse Effect, MBI
represents that the entry by MBI into this Agreement will not require the
consent of any third party (other than consents that have been obtained by
MBI and provided to Palatin) who is a party to an agreement, arrangement or
understanding described in Section 4.19(b) of the MBI Disclosure Schedule
and that entry by MBI into this Agreement will not otherwise adversely
affect the validity of any such agreement, arrangement or understanding,
nor adversely affect the benefit that inures to MBI from such agreement,
arrangement or understanding. Except as disclosed in the MBI SEC Reports or
as would not have an MBI Material Adverse Effect, Section 4.19 of the MBI
Disclosure Schedule lists all material agreements, arrangements or
understandings (whether written or oral, and if oral, Section 4.19 of the
MBI Disclosure Schedule contains a brief description of the principal terms
thereof) pursuant to which MBI or its subsidiaries has either purchased,
sold, licensed, secured or disposed of rights in Intellectual Property
(except for Intellectual Property not related to MBI's business as
currently conducted or proposed to be conducted through the Effective Date)
from or to another person or agreed to do any of the foregoing (other than
licenses to commercially available off-the-shelf computer software acquired
or entered into by MBI or its subsidiaries in the ordinary course of
business) ("Intellectual Property Agreements"). Except as disclosed in the
MBI SEC Reports or as would not have an MBI Material Adverse Effect, to
MBI's belief, each of the parties thereto have performed, in all material
respects, all obligations under each Intellectual Property Agreement which
are required to be performed by such party, and there is no default (or
event which with notice or lapse of time would constitute a default)
thereunder. To MBI's belief, each Intellectual Property Agreement is
enforceable against each of the parties thereto pursuant to its terms.
(d) Except as disclosed in the MBI SEC Reports, to MBI's belief, the
operation of the business of MBI and its subsidiaries as presently
conducted and, as proposed to be conducted through the Effective Date
(including without limitation the manufacture, sale, use, trade dress,
packaging, license, or other exploitation of products and technology
currently marketed or in development) does not and will not infringe,
trespass or otherwise violate the valid Intellectual Property rights of any
person, the result of which would be an MBI Material
16
Adverse Effect. Without limiting the foregoing, to MBI's knowledge and
except as disclosed in the MBI SEC Reports, neither MBI nor any of its
subsidiaries has received any notice (written or oral) of any material
infringement of any Intellectual Property right held by another person;
and, to MBI's knowledge, there is no reasonable basis for such a claim.
Except as set forth in the Intellectual Property Agreements, neither MBI
nor any of its subsidiaries is obligated to indemnify any person for any
material liability, cost or expense arising from such person's use, sale,
licensing or disposition of any Intellectual Property or such person's
manufacture, use, sale, license or other exploitation of any product or
technology.
(e) As used herein, the following capitalized terms shall have the
meanings ascribed to them as set forth below: "Intellectual Property" shall
mean any and all intellectual or proprietary property, including without
limitation Patents, Trademarks, Copyrights, Trade Secrets and Know-How.
"Patents" shall mean patents, including U.S. and foreign patents, pending
patent applications and counterparts (whether original, reissue, reexamine,
division, continuation, continuation-in-part, or extension thereof), patent
disclosures and invention disclosures. "Trademarks" shall mean trademarks,
trade names, trade dress, domain names, service marks, or copyrights (in
each case, whether registered or not) as well as any application therefor
or registration thereof and all goodwill associated therewith. "Know-How"
shall mean any research and development records and results, stability
data, clinical data, cell lines, DNA sequences, raw data and lab journals,
technology, processes and methods, technical information, trade secrets,
manufacturing and other know-how (including without limitation proprietary
know-how and use and application know-how), formulas, formulations,
production records and specifications, raw material specifications,
manufacturing processes, procedures and records, test procedures, quality
control records and data, product specifications, algorithms, adverse drug
experience information and complaints, marketing and competition analysis,
customer and supplier lists or proprietary information.
4.20 ACCOUNTING MATTERS. Neither MBI nor, to its knowledge, any of its
affiliates, has through the date hereof, taken or agreed to take any action that
would prevent MBI or Palatin from accounting for the business combination to be
effected by the Merger as (i) a purchase, or (ii) as a "reorganization" within
Section 368 of the Code.
4.21 NO MBI MATERIAL ADVERSE EFFECT. Except as disclosed in the MBI SEC
Reports or in the MBI Disclosure Schedule, there does not exist any fact or
circumstance which, either individually or together with another fact or
circumstance, could reasonably be expected to result in an MBI Material Adverse
Effect.
4.22 INVESTMENT COMPANY ACT. MBI is not an "investment company" within the
meaning of the Investment Company Act of 1940.
4.23 FDA. Except as disclosed in the MBI SEC Reports or in Section 4.23 of
the MBI Disclosure Schedule:
(a) To MBI's knowledge, as to each drug of MBI or any of its
subsidiaries for which a new drug application ("NDA") or abbreviated new
drug application ("ANDA") has been approved by the U.S. Food and Drug
Administration ("FDA"), which drugs are described in the MBI SEC Reports or
the MBI Disclosure Schedule, and such NDAs and
17
ANDAs are exclusively owned by MBI or one of its subsidiaries, and the
applicant and all persons performing operations covered by the application
are not in violation of, in any material respect, and are in material
compliance with, 21 U.S.C. (S)(S) 355, 21 C.F.R. Parts 314 et seq.,
respectively, and all terms and conditions of the application.
(b) To MBI's knowledge, all manufacturing operations conducted by or
for the benefit of MBI and its subsidiaries are not in violation of, in any
material respect, and have been and are being conducted in material
compliance with, the good manufacturing practice regulations "GMP" set
forth in 21 C.F.R. Parts 210 and 211.
(c) To MBI's knowledge, neither MBI and its subsidiaries nor their
respective officers, employees, or agents have made an untrue statement of
material fact or fraudulent statement to the FDA, failed to disclose a
material fact required to be disclosed to the FDA, or committed an act,
made a statement, or failed to make a statement that could reasonably be
expected to provide a basis for the FDA to invoke its policy respecting
"Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities," set forth in 56 Fed. Reg 46191 (September 10, 1991) and any
amendments thereto.
(d) No reports of inspection observations, establishment inspection
reports or warning letters have been received from or issued by the FDA in
connection with any approved product within the last three years that
allege material lack of compliance with the FDA regulatory requirements by
MBI, its subsidiaries or, to MBI's knowledge, persons covered by product
applications or otherwise performing services for the benefit of MBI or its
subsidiaries.
(e) Neither MBI nor its subsidiaries have received any written notice
or has knowledge that the FDA has commenced or threatened to initiate, any
action to withdraw its approval or request the recall of any product of MBI
or its subsidiaries or commenced or threatened to initiate, any action to
enjoin production of any facility owned or used by MBI or its subsidiaries
or any facility at which any of MBI's or its subsidiaries' products are
manufactured, processed, packaged, labeled, stored, distributed, tested or
otherwise handled (the "Manufacturing Locations").
(f) To MBI's knowledge, as to each article of drug or consumer product
currently manufactured and/or distributed by MBI or its subsidiaries, which
products are described in Section 4.23 of the MBI Disclosure Schedule, such
article is not adulterated or misbranded within the meaning of the FDCA, 21
U.S.C. (S)(S) 342 and 343, respectively.
(g) Neither MBI, its subsidiaries, nor, to the knowledge of MBI, their
respective officers, employees, agents or affiliates, has been convicted of
any crime or engaged in any conduct for which debarment is mandated by 21
U.S.C. (S) 335a(a) or authorized by 21 U.S.C. (S) 335a(b).
(h) As to each NDA or ANDA submitted to, but not approved by, the FDA,
and not withdrawn by MBI or its subsidiaries, or applicants acting on its
behalf as of the date of this Agreement, MBI and its subsidiaries have
complied, in all material respects, and are in material compliance with,
the requirements of 21 U.S.C. (S) 355 and 21 C.F.R. Parts 312 and
18
314 et. seq. and has provided all additional information and taken all
additional action reasonably requested by the FDA in connection with the
application.
(i) In MBI's Good Faith Opinion, there are no facts or circumstances
that would reasonably be expected to delay, in any material respect,
outside the ordinary course of business, or prevent approval of any pending
NDAs or ANDAs, or any amendments and/or supplements thereto.
(j) To MBI's knowledge, there are no lawsuits, actions, arbitrations
or legal or administrative or regulatory proceedings, charges, complaints,
or investigations by the FDA or any other Governmental Entity pending
against MBI or any of its subsidiaries. To MBI's knowledge, there are no
proceedings pending with respect to violation by MBI or any subsidiary of
the Food, Drug and Cosmetic Act, FDA regulations adopted thereunder, or any
other legislation or regulation promulgated by any other Governmental
Entity which might result in the revocation, cancellation, suspension,
limitation or adverse modification of any permit, application or approval.
(k) Neither MBI nor any of its subsidiaries have been served with any
complaint or received any other notices of lawsuits, arbitrations, legal or
administrative or regulatory proceedings, charges, complaints or
investigations by any federal, state or foreign regulatory agency
threatened or pending against or relating to MBI or any of its subsidiaries
or any permit, application or approval of MBI or any of its subsidiaries.
There have been no product recalls by MBI or any of its subsidiaries since
January 1, 1994.
(l) To MBI's knowledge, MBI and each of its subsidiaries are not in
violation of, in any material respect, and are in material compliance with,
all application laws and regulations regarding the conduct of pre-clinical
and clinical investigations, including, but not limited to, good laboratory
practices, investigational new drug requirements, and requirements
regarding informed consent and Institutional Review Boards designed to
ensure the protection of the rights and welfare of human subjects,
including, but not limited to, the requirements provided in 21 C.F.R. Parts
50, 56, 58 and 312.
(m) To MBI's knowledge, the MBI Disclosure Schedule identifies all the
countries in which MBI's or its subsidiaries' products have been or are
being registered and/or approved for manufacturing, marketing or sale and
the products approved in each respective country. To MBI's knowledge, MBI
or its subsidiaries are authorized to sell products in each of the
countries in which such products are currently being sold and all Permits
necessary for such sale are held by MBI or one of its subsidiaries or
licensees. The Disclosure Schedule describes the owners of the approvals or
registrations for the manufacture, marketing or sale of MBI's or its
subsidiaries' products.
4.24 INVENTORY. To MBI's knowledge, all inventory of MBI, or any of its
subsidiaries, which is held for sale or resale, including raw materials, work in
process and finished goods (collectively, "Inventory"), consists of items usable
and/or commercially saleable in the normal course of business.
19
4.25 BANK ACCOUNTS. Section 4.25 of the MBI Disclosure Schedule contains a
list showing: (a) the name of each bank, safe deposit company or other financial
institution in which MBI or any of its subsidiaries has an account, lock box or
safe deposit box; and (b) the names of all persons authorized to draw thereon or
to have access thereto and the names of all persons, if any, holding powers of
attorney from MBI or any of its subsidiaries.
4.26 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the term "Environmental Laws"
means any federal, state, local and foreign statutes, laws (including,
without limitation, common law), judicial decisions, regulations,
ordinances, rules, judgments, orders, codes, injunctions, permits,
governmental agreements or governmental restrictions relating to human
health and safety, the environment or to pollutants, contaminants,
radioactive materials, wastes, or chemicals.
(b) Except as set forth in the MBI SEC Reports filed prior to the date
hereof and with such exceptions as, individually or in the aggregate, have
not had, and would not reasonably be expected to have, an MBI Material
Adverse Effect, (i) no notice, notification, demand, request for
information, citation, summons, complaint or order has been received by,
and no investigation, action, claim, suit, proceeding or review is pending
or, to the knowledge of MBI or any of its subsidiaries, threatened by any
person against, MBI or any of its subsidiaries, and no penalty has been
assessed against MBI or any of its subsidiaries, in each case, with respect
to any matters relating to or arising out of any Environmental Law; (ii)
MBI and its subsidiaries are and have been in compliance with all
Environmental Laws; (iii) there are no liabilities of or relating to MBI or
any of its subsidiaries relating to or arising out of any Environmental Law
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or
set of circumstances which could reasonably be expected to result in such a
liability; and (iv) there has been no environmental investigation, study,
audit, test, review or other analysis conducted of which MBI has knowledge
in relation to the current or prior business of MBI or any of its
subsidiaries or any property or facility now or previously owned, leased or
operated by MBI or any of its subsidiaries which has not been delivered to
Palatin at least five days prior to the date hereof.
4.27 INSURANCE. There are no insurance policies maintained by or on behalf
of MBI or any of its subsidiaries in effect on the Effective Date except as set
forth on Section 4.27 of the MBI Disclosure Schedule.
4.28 TANGIBLE ASSETS. MBI and its subsidiaries own or lease all buildings,
machinery, equipment, and other tangible assets that are required for or used in
the operation or conduct of its business as presently operated or conducted (the
"Tangible Assets"). The Tangible Assets, taken as a whole, are free from
material defects (patent or latent), have been maintained in accordance with
normal industry practice, are in good operating condition and repair (subject to
normal wear and tear), and are suitable for the purposes for which each of them
is presently used. Except as set forth on Section 4.28 of the MBI Disclosure
Schedule, the Tangible Assets are free and clear of liens, claims of third
parties, security interests, and any other encumbrances whatsoever.
20
4.29 YEAR 2000 COMPLIANCE. MBI and each of its subsidiaries have conducted
a commercially reasonable inventory of the hardware and software (the "Computer
Systems") used by MBI and its subsidiaries in its business, in order to
determine which parts of the Computer Systems are not Year 2000 compliant (as
defined below) and to estimate the cost of rendering such Computer Systems Year
2000 compliant prior to January 1, 2000 or such earlier date on which the
Computer Systems may shut down (a "hard crash") or produce incorrect
calculations or otherwise malfunction without becoming totally inoperable (a
"soft crash"). Each project that has or will be implemented by MBI with respect
to Year 2000 compliance, and the status of each such project, is listed on
Section 4.29 of the MBI Disclosure Schedule. For purposes of this Agreement,
"Year 2000 compliant" means that all of the hardware and software comprising the
Computer Systems will correctly differentiate between years, in different
centuries that end in the same two digits, and will accurately process date/time
data (including, but not limited to, calculating, comparing, and sequencing)
from, into and between the twentieth and twenty-first centuries, including leap
year calculations, including all equipment or devices incorporating imbedded
software or microcode.
4.30 SIGNIFICANT CUSTOMERS, SUPPLIERS, JOINT VENTURE PARTNERS AND
EMPLOYEES. The MBI SEC Reports or Section 4.30 of the MBI Disclosure Schedule
sets forth an accurate list of MBI Significant Customers, MBI Significant
Suppliers, MBI Joint Venture Partners and MBI Significant Employees. MBI or any
of its subsidiaries have no knowledge nor have they received any notice of any
intention by an (a) MBI Significant Customer to terminate its business
relationship with MBI or its subsidiaries or to limit or alter its business
relationship with MBI or its subsidiaries in any material respect; (b) MBI
Significant Supplier to terminate its business relationship with MBI or its
subsidiaries or to limit or alter its business relationship with MBI or its
subsidiaries in any material respect; (c) MBI Joint Venture Partner to terminate
its business relationship with MBI or its subsidiaries or to limit or alter its
business relationship with MBI or its subsidiaries in any material respect; or
(d) MBI Significant Employee intending to terminate his employment with MBI or
its subsidiaries. As used in this Article, (w) "MBI Significant Customer" means
the 10 largest customers of MBI and its subsidiaries, taken as a whole,
including distributors of MBI's products, measured in terms of sales volume in
dollars for the years ended March 31, 1998 and 1999 and for the nine month
period ending September 30, 1999, (x) "MBI Significant Supplier" means any
supplier of MBI and its subsidiaries from whom MBI or its subsidiaries has
purchased $50,000 or more of goods during the years ended March 31, 1998 and
1999 or $50,000 or more goods during the six (6) month period ending September
30, 1999, for use in MBI's or its subsidiaries' respective businesses; (y) "MBI
Joint Venture Partner" means any person that has entered into an agreement with
MBI or its subsidiaries relating to the purchase, development, distribution,
manufacture and/or sale of any of MBI's or its subsidiaries' products or
technologies; and (z) "MBI Significant Employee" means the Chief Executive
Officer, the President, the Senior Director of Research and Development or any
Vice President of MBI or its subsidiaries or any Executive Officer as defined in
the Exchange Act.
21
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PALATIN AND MERGER SUBSIDIARY
Palatin and Merger Subsidiary represent and warrant to MBI that the
statements contained in this Article 5 are true and correct, except as set forth
in the disclosure schedule delivered by Palatin and Merger Subsidiary to MBI
concurrently herewith and identified as the "Palatin Disclosure Schedule."
5.1 ORGANIZATION AND QUALIFICATION.
(a) Palatin is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to carry on its business as it is now being conducted
and currently proposed to be conducted, and to own and use its properties
currently owned and used by it. Palatin is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the
nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not have a Palatin Material Adverse
Effect (as defined below). Complete and correct copies as of the date
hereof of the Certificate of Incorporation and Bylaws of Palatin and
Certificates of Qualification to do Business (for each applicable
jurisdiction) and each of its subsidiaries have been delivered to MBI as
part of the Palatin Disclosure Schedule. For the purposes of this Agreement
a "Palatin Material Adverse Effect" shall mean a material adverse effect on
the business (as now conducted or as proposed to be conducted until the
Effective Date), properties, assets, condition (financial or otherwise),
liabilities, operations or results of operations of Palatin and its
subsidiaries taken as a whole.
(b) Merger Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has the corporate power and authority to carry on its business as it is now
being conducted and currently proposed to be conducted, and to own and use
its properties currently owned and used by it. Complete and correct copies
as of the date hereof of the Certificate of Incorporation and Bylaws of
Merger Subsidiary have been delivered to MBI as part of the Palatin
Disclosure Schedule.
5.2 CAPITALIZATION.
(a) The authorized capital stock of Palatin consists of 75,000,000
shares of common stock, par value $0.01 per share, and 10,000,000 shares of
preferred stock, of which 264,000 shares have been designated Series A
Convertible Preferred Stock, par value $0.01 per share, 18,875 shares have
been designated Series B Convertible Preferred Stock, par value $0.01 per
share, and 1,400,000 shares have been designated Series C Convertible
Preferred Stock, par value $0.01 per share. As of October 7, 1999,
7,240,329 (includes shares of stock issuable upon surrender of RhoMed
(defined below) Common Stock and Preferred Stock and upon surrender of
outstanding Common Stock of Interfilm, Inc. and surrender of certificates
representing shares of Palatin Common Stock outstanding prior to September
5, 1997) shares of Palatin Common Stock, 38,936 shares of Series A
Convertible Preferred Stock, 12,875 shares of Series B Convertible
Preferred Stock and 700,000 shares of Series C Convertible Preferred Stock
22
were validly issued and outstanding, fully paid and nonassessable; and
there have been no material changes in these numbers through the date
hereof. As of the date hereof, there are no bonds, debentures, notes or
other evidences of indebtedness having the right to vote on any matters on
which Palatin's stockholders may vote ("Palatin Voting Debt") issued or
outstanding. As of October 7, 1999, options and warrants to acquire
2,849,158 shares and 2,572,679 shares, respectively, of Palatin Common
Stock were outstanding, and there has been no material change in these
numbers through the date hereof. Except for those options and warrants and
shares of Palatin Common Stock issuable upon conversion of the Series A, B
and C Convertible Preferred Stock, there are no options, warrants, calls or
other rights, agreements or commitments outstanding obligating Palatin to
issue, deliver or sell shares of its capital stock or debt securities, or
obligating Palatin to grant, extend or enter into any such option, warrant,
call or other such right, agreement or commitment. All of the shares of
Palatin Common Stock issuable in accordance with this Agreement in exchange
for MBI Common Stock at the Effective Date will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable, and shall be
delivered free and clear of all liens, claims, charges and encumbrances of
any kind or nature whatsoever.
(b) Assuming the conversion of all securities of Palatin that are
convertible as of the date hereof (including the pro forma effect of the
issuance of the Merger Consideration) into Palatin Common Stock and the
exercise of all options and warrants to acquire Palatin Common Stock,
Palatin would have 9,943,992 shares of Palatin Common Stock issued and
outstanding (the "Diluted Share Total") calculated as set forth in Section
5.2 of the Disclosure Schedule.
(c) The authorized capital stock of Merger Subsidiary consists of 1000
shares of common stock, par value $.01 per share, of which 100 shares are
issued and outstanding and owned by Palatin.
5.3 OTHER SUBSIDIARIES. Other than Merger Subsidiary, RhoMed Incorporated
("RhoMed") and Interfilm Technologies, Inc. ("Interfilm") are Palatin's only
Significant Subsidiaries.
(a) RhoMed is a corporation duly organized, validly existing and in
good standing under the laws of New Mexico and has the corporate power to
carry on its business as it is now being conducted and currently proposed
to be conducted. RhoMed is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary except where the failure to be so
qualified will not have a Palatin Material Adverse Effect. All the
outstanding shares of capital stock of RhoMed are validly issued, fully
paid and nonassessable and are owned by Palatin or by another subsidiary of
Palatin free and clear of any liens, claims or encumbrances.
(b) Interfilm is a corporation duly organized, validly existing and in
good standing under the laws of New York and has the corporate power to
carry on its business as it is now being conducted and currently proposed
to be conducted. Interfilm is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such
23
qualification necessary except where the failure to be so qualified will
not have a Palatin Material Adverse Effect. All the outstanding shares of
capital stock of Interfilm are validly issued, fully paid and nonassessable
and are owned by Palatin or by another subsidiary of the Palatin free and
clear of any liens, claims or encumbrances.
(c) Except as disclosed in the Palatin SEC Reports or as disclosed in
Section 5.3 of the Palatin Disclosure Schedule, (i) there are no existing
options, warrants, calls or other rights, agreements or commitments of any
character relating to the issued or unissued capital stock or other
securities of RhoMed, and (ii) Palatin does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or other
business association or entity.
5.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Palatin and Merger Subsidiary
have the corporate power to enter into this Agreement and, subject to approval
of this Agreement by the holders of Palatin Common Stock and Series A
Convertible Preferred Stock and by the holder of all of Merger Subsidiary's
issued and outstanding common stock (the "Sole Shareholder"), to consummate the
Merger and to perform its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by Palatin's and Merger Subsidiary's Board of Directors.
This Agreement constitutes a valid and legally binding obligation of Palatin and
Merger Subsidiary enforceable in accordance with its terms except as enforcement
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought. Except for the
approval of the holders of Palatin Common Stock and the holders of the Palatin
Series A Convertible Preferred Stock, each described in Section 3.7(b), and the
approval of the Sole Shareholder, no other corporate proceedings on the part of
Palatin and Merger Subsidiary are necessary to authorize this Agreement and the
transactions contemplated hereby. Except as set forth in Section 5.4 of the
Palatin Disclosure Schedule or the Palatin SEC Reports, Palatin and Merger
Subsidiary are not subject to or obligated under (i) any charter, bylaw,
indenture or other loan document provision or (ii) any other contract, license,
franchise, permit, order, decree, concession, lease, instrument, judgment,
statute, law, ordinance, rule or regulation applicable to Palatin or any of its
subsidiaries or their respective properties or assets which would be breached or
violated, or under which there would be a default (with or without notice or
lapse of time, or both), or under which there would arise a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit, by its executing and carrying out this Agreement, other than,
in the case of clause (ii) only, (A) any breaches, violations, defaults,
terminations, cancellations, accelerations or losses which, either singly or in
the aggregate, will not have a Palatin Material Adverse Effect or prevent the
consummation of the transactions contemplated hereby and (B) the laws and
regulations referred to in the next sentence. Except as disclosed in Section 5.4
of Palatin Disclosure Schedule or, in connection, or in compliance, with the
provisions of the Securities Act, the Exchange Act, and the corporation,
securities or blue sky laws or regulations of the various states, no filing or
registration with, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Palatin and Merger Subsidiary of
the Merger or the other transactions contemplated hereby, other than filings,
registrations, authorizations, consents or approvals the failure of which to
make or obtain would not have a
24
Palatin Material Adverse Effect or prevent the consummation of the transactions
contemplated hereby.
5.5 REPORTS AND FINANCIAL STATEMENTS. Palatin has previously furnished MBI
with true and complete copies of all documents required to be filed with the
Commission for the period beginning July 1, 1996 and ending on the date hereof.
Palatin has filed with the Commission all documents it is required by the
Commission to file as of the date hereof (together with all exhibits thereto,
the "Palatin SEC Reports"). As of their respective dates, the Palatin SEC
Reports complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such Palatin SEC Reports.
As of their respective dates, the Palatin SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
Palatin included in the Palatin SEC Reports comply as to form in all material
respects with applicable accounting requirements of the Securities Act and with
the published rules and regulations of the Commission with respect thereto. The
financial statements included in the Palatin SEC Reports (i) have been prepared
in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes thereto), (ii) present fairly, in all material
respects, the financial position of Palatin and its subsidiaries as at the dates
thereof and the results of their operations and cash flow for the periods then
ended subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments and any other adjustments described therein
and the fact that certain information and notes have been condensed or omitted
in accordance with the Exchange Act and the rules promulgated thereunder, and
(iii) are in all material respects in accordance with the books of account and
records of Palatin and its subsidiaries.
5.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Palatin SEC
Reports or as set forth in Section 5.6 of the Palatin Disclosure Schedule, since
June 30, 1999, Palatin and its subsidiaries have conducted their business in the
ordinary course in good faith consistent with past practice and there has not
been:
(a) any event, occurrence or development of a state of circumstances
or facts which has had or reasonably would be expected to have,
individually or in the aggregate, a Palatin Material Adverse Effect.
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Palatin;
(c) any amendment of any term of any outstanding security of Palatin
or any of its subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting)
Palatin or any of its subsidiaries relating to its assets or business
(including the acquisition or disposition of any assets) or any
relinquishment by Palatin or any of its subsidiaries of any contract or
other right, in either case, material to Palatin and its subsidiaries taken
as a whole;
25
(e) any change in any method of accounting or accounting practice
(other than any change for tax purposes) by Palatin or any of its
subsidiaries, except for any such change which is not significant or which
is required by reason of a concurrent change in GAAP; or
(f) any (i) grant of any severance or termination pay to (or amendment
to any such existing arrangement with) any director, officer or employee of
Palatin or any of its subsidiaries, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any
such existing agreement) with any director, officer or employee of Palatin
or any of its subsidiaries, (iii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, or
(iv) increase in (or amendments to the terms of) compensation, bonus or
other benefits payable to directors, officers or employees of Palatin or
any of its subsidiaries.
5.7 LITIGATION. Except as disclosed in the Palatin SEC Reports or as
disclosed in Section 5.7 of the Palatin Disclosure Schedule, there is no suit,
action or proceeding pending or, to the knowledge of Palatin, threatened against
Palatin or any of its subsidiaries which, either individually or in the
aggregate, could reasonably be expected to have a Palatin Material Adverse
Effect, nor is there any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against Palatin or any of its subsidiaries having, or
which in the future could reasonably be expected to have, either individually or
in the aggregate, a Palatin Material Adverse Effect.
5.8 INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENTS, ETC. None
of the information with respect to Palatin or its subsidiaries to be included or
incorporated by reference in the Proxy Statement or the Registration Statement
will, in the case of the Proxy Statement or any amendments or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, at the time of the Palatin Meeting to be held in connection
with the Merger, or, in the case of the Registration Statement, at the time it
becomes effective and at the Effective Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
this provision shall not apply to statements or omissions in the Registration
Statement or Proxy Statement based upon information furnished by or on behalf of
MBI for use therein. No representation or warranty made by Palatin contained in
this Agreement and no statement contained in any certificate, list, exhibit or
other instrument specified in this Agreement, including without limitation the
Palatin Disclosure Schedule, contains any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
5.9 EMPLOYEE BENEFIT PLANS. Except as disclosed in the Palatin SEC Reports
or as disclosed in Section 5.9 of the Palatin Disclosure Schedule, there are no
material employee benefit or compensation plans, agreements or arrangements,
including "employee benefit plans," as defined in Section 3(3) of ERISA, and
including, but not limited to, plans, agreements or arrangements relating to
former employees, including, but not limited to, retiree medical plans,
maintained by Palatin or any of its subsidiaries or any entity which is under
"common control"
26
with Palatin within the meaning of Section 4001 of ERISA ("Controlled Entity")
or material collective bargaining agreements to which Palatin or any of its
subsidiaries is a party (together, the "Palatin Benefit Plans"). To Palatin's
knowledge, no default exists with respect to the obligations of Palatin or any
of its subsidiaries under any such Palatin Benefit Plan, which default, either
alone or in the aggregate, would have a Palatin Material Adverse Effect. Since
January 1, 1998, there have been no disputes or grievances subject to any
grievance procedure, unfair labor practice proceedings, arbitration or
litigation under such Palatin Benefit Plans, which have not been finally
resolved, settled or otherwise disposed of, nor is there any default, or any
condition which, with notice or lapse of time or both, would constitute such a
default, under any such Palatin Benefit Plans, by Palatin or its subsidiaries
or, to the knowledge of Palatin and its subsidiaries, any other party thereto,
which failure to resolve, settle or otherwise dispose of or default, either
alone or in the aggregate, would have a Palatin Material Adverse Effect. Since
January 1, 1998 there have been no strikes, lockouts or work stoppages or
slowdowns, or to the best knowledge of Palatin and its subsidiaries,
jurisdictional disputes or organizing activity occurring or threatened with
respect to the business or operations of Palatin or its subsidiaries which have
had or would have a Palatin Material Adverse Effect. Palatin has made available
to MBI true, complete and correct copies of (i) the most recent annual report on
Form 5500 filed with the Internal Revenue Service with respect to each Benefit
Plan, (ii) the most recent summary plan description for each Benefit Plan for
which such summary plan description is required and (iii) each plan document,
trust agreement and group annuity or insurance contract related to any Benefit
Plan.
5.10 ERISA. All Palatin Benefit Plans have been administered in accordance
with, and are in compliance with, its terms and the applicable provisions of
ERISA and any other applicable law, except where such failures to administer or
comply would not have a Palatin Material Adverse Effect. Except as disclosed in
Section 5.10 of the Palatin Disclosure Schedule, each Palatin Benefit Plan which
is intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to be "qualified," within the meaning
of such section of the Code, and Palatin knows of no fact which is likely to
have an adverse effect on the qualified status of such plans. None of the
Palatin Benefit Plans is a defined benefit pension plan. To Palatin's knowledge,
there are not now nor have there been any nonexempt "prohibited transactions,"
as such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving Palatin's Benefit Plans which could subject Palatin or its
subsidiaries to the penalty or tax imposed under Section 502(i) of ERISA or
Section 4975 of the Code. Neither Palatin nor any of its subsidiaries has
incurred any liability for any tax, excise tax, penalty or fee with respect to
any Benefit Plan, including, but not limited to, taxes arising under Sections
4971 through 4980B of the Code, and no event has occurred and no circumstance
has existed that could give rise to any such liability. No Palatin Benefit Plan
which is subject to Title IV of ERISA has been completely or partially
terminated; no proceedings to completely or partially terminate any Palatin
Benefit Plan have been instituted within the meaning of Subtitle C of said Title
IV of ERISA; no accumulated funding deficiency within the meaning of Section 412
of the Code or Section 302 of ERISA, whether or not waived, has occurred with
respect to any Benefit Plan; and no reportable event within the meaning of
Section 4043(b) of Subtitle C of ERISA has occurred with respect to any Palatin
Benefit Plan. Neither Palatin nor any of its subsidiaries nor any Controlled
Entity has made a complete or partial withdrawal, within the meaning of Section
4201 of ERISA. from any multiemployer plan which has resulted in, or is
reasonably expected to result in, any withdrawal liability to Palatin or any of
its subsidiaries except for any such liability
27
which would not have a Palatin Material Adverse Effect. Neither Palatin nor any
of its subsidiaries nor any Controlled Entity has engaged in any transaction
described in Section 4069 of ERISA or ceased operations at any facility or
withdrawn from any Benefit Plan in a manner which could subject it to liability
under Section 4062, 4063 or 4064 of ERISA except for any such transaction which
would not have a Palatin Material Adverse Effect. No Benefit Plan maintained by
Palatin or any of its subsidiaries or any related trust or other funding medium
thereunder or any fiduciary thereof is, to the knowledge of Palatin, the direct
or indirect subject of a material audit, investigation or examination by a
governmental or quasi-governmental agency. Except as set forth in Section 5.10
of the Palatin Disclosure Schedule, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either along or upon the
occurrence of any additional or subsequent events) constitute an event under any
Benefit Plan or agreement that will or may reasonably be expected to result in
any payment (whether severance pay or otherwise), accelerated vesting or
increase in benefits with respect to any employee, former employee or director
of Palatin, or its subsidiaries, whether or not any such payment would be an
"excess parachute payment" within the meaning of Section 280G of the Code.
5.11 TAKEOVER PROVISIONS INAPPLICABLE. The Board of Directors of Palatin
have taken the necessary action to make inapplicable to the Merger, and any
other transactions contemplated hereby, the restrictions set forth in Section
203 of the DGCL, and any other applicable antitakeover or similar statute or
regulations.
5.12 PALATIN ACTION. The Board of Directors of Palatin (at a meeting duly
called and held) has by the requisite vote of all directors present (i)
determined that the Merger is advisable and in the best interests of Palatin and
its stockholders, (ii) approved the Merger in accordance with the provisions of
Section 251 of the DGCL, (iii) recommended the approval of the Palatin Share
Proposal by the holders of Palatin Common Stock and directed that the Merger be
submitted for consideration by Palatin's stockholders at the Palatin Meeting,
(iv) taken all necessary steps to render the restrictions set forth in Section
203 of the DGCL inapplicable to the Merger and the transactions contemplated by
this Agreement, and (v) adopted a resolution having the effect of causing
Palatin not to be subject, to the extent permitted by applicable law, to any
state takeover law that may purport to be applicable to the Merger and the
transactions contemplated by this Agreement. Palatin does not own, beneficially
or otherwise, and to the knowledge of Palatin, no stockholder of Palatin owns,
beneficially or otherwise, any outstanding MBI Common Stock on the date hereof.
5.13 FAIRNESS OPINION. Palatin has received the written opinion of
Xxxxxxxxx & Xxxxx, financial advisors to Palatin, dated the date hereof and a
copy of which has been delivered to MBI, to the effect that the Exchange Ratio
is fair to the stockholders of Palatin from a financial point of view and, as of
the date hereof, such opinion has not been withdrawn.
5.14 FINANCIAL ADVISOR. Palatin represents and warrants that (i) except for
Xxxxxxxxx & Xxxxx, no broker, finder or investment banker or other intermediary
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Palatin, and (ii) the fees and commissions
payable to Xxxxxxxxx & Xxxxx as contemplated by this Section
28
5.14 will not exceed the aggregate amount set forth in that certain letter,
dated [DATE] from Xxxxxxxxx & Xxxxx to Palatin.
5.15 COMPLIANCE WITH APPLICABLE LAWS. Palatin and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities to carry on their respective businesses as currently
conducted, including, without limitation, applicable state insurance and health
commissions, except for such permits, licenses, variances, exemptions, orders
and approvals the failure of which to hold would not have a Palatin Material
Adverse Effect (the "Palatin Permits"). Palatin and its subsidiaries are in
compliance with the terms of Palatin Permits, except for such failures to
comply, which singly or in the aggregate, would not have a Palatin Material
Adverse Effect. Except as disclosed in the Palatin SEC Reports filed prior to
the date of this Agreement or in Section 5.15 of the Palatin Disclosure
Schedule, the businesses of Palatin and its subsidiaries are not being conducted
in violation of any law, ordinance or regulation of any Governmental Entity,
except for possible violations which individually or in the aggregate do not and
would not have a Palatin Material Adverse Effect. Except as disclosed in Section
5.15 of the Palatin Disclosure Schedule, no investigation or review by any
Governmental Entity with respect to Palatin or any of its subsidiaries is
pending, or, to Palatin's knowledge, threatened, nor has any Governmental Entity
indicated an intention to conduct the same, other than those the outcome of
which would not have a Palatin Material Adverse Effect.
5.16 LIABILITIES. Except as disclosed in Section 5.16 of Palatin Disclosure
Schedule, as of June 30, 1999, neither Palatin nor any of its subsidiaries has
any liabilities or obligations (absolute, accrued, contingent or otherwise)
which are material, individually or in the aggregate, to Palatin and its
subsidiaries and which are not disclosed or provided for in the most recent
Palatin SEC Reports. To the knowledge of Palatin, there was no basis, as of June
30, 1999, for any claim or liability of any nature against Palatin or its
subsidiaries, whether absolute, accrued, contingent or otherwise, which is or
would have a Palatin Material Adverse Effect, not reflected in Palatin SEC
Reports or in Section 5.16 of the Palatin Disclosure Schedule.
5.17 TAXES. Each of Palatin and its subsidiaries has timely filed
(including extensions of time allowed by law) all Tax Returns required to be
filed by any of them and has paid (or Palatin has paid on its behalf), or has
set up an adequate reserve for the payment of, all Taxes required to be paid in
respect of the periods covered by such returns (except where the failure to pay
would not have a Palatin Material Adverse Effect). The information contained in
such Tax Returns is true, complete and accurate in all material respects, except
where a failure to be so would not have a Palatin Material Adverse Effect.
Except as disclosed in Section 5.17 of the Palatin Disclosure Schedule, neither
Palatin nor any subsidiary of Palatin is delinquent in the payment of any Tax,
assessment or governmental charge, except where such delinquency would not have
a Palatin Material Adverse Effect. The charges, accruals and reserves for Taxes
with respect to Palatin and its subsidiaries reflected on the audited financials
of Palatin dated June 30, 1999 are adequate under GAAP to cover the Tax
liabilities accruing through the date thereof. There is no action, suit,
proceeding, audit or claim now proposed or pending against or with respect to
Palatin or any of its subsidiaries in respect of any Tax where there is a
reasonable possibility of an adverse determination. No deficiencies for any
Taxes have been proposed, asserted or assessed against Palatin or any of its
subsidiaries that have not been finally settled or
29
paid in full, which would have a Palatin Material Adverse Effect, and no
requests for waivers of the time to assess any such tax are pending.
5.18 CERTAIN AGREEMENTS. Neither Palatin nor any of its subsidiaries is in
default (or would be in default with notice or lapse of time, or both) under any
agreement or instrument filed as an exhibit to or incorporated by reference in
any of the Palatin SEC Reports, whether or not such default has been waived,
which default, individually or in the aggregate with other such defaults, would
have a Palatin Material Adverse Effect.
5.19 INTELLECTUAL PROPERTY.
(a) Section 5.19 of the Palatin Disclosure Schedule lists all Patents,
Patent applications, registered and applied for Trademarks and material
unregistered trademarks, service marks and trade names owned by (or
registered in the name of) Palatin or any of its subsidiaries that are
considered by Palatin to be material to its business as currently conducted
or as proposed to be conducted. Section 5.19 of the Palatin Disclosure
Schedule includes as to each Patent or Trademark or Patent and Trademark
applications listed thereon: a Patent number or Patent application number a
Trademark registration number or Trademark application number, as
applicable for each listed Trademark and non-U.S. Patent, and a docket or
Patent number or Patent application number for each listed U.S. Patent; the
country or countries in which each Patent or Trademark is issued,
registered or applied for, as applicable; the application date or
registration date for each listed Trademark and the docket number or issue
date for each listed Patent, as applicable; and the owner of such Patent or
Trademark. Except as disclosed therein, all Patents and Trademarks listed
on Section 5.19 of the Palatin Disclosure Schedule exist and have been
maintained in good standing, including without limitation, the timely
payment of any maintenance fees and annuities thereon. Except as disclosed
in Section 5.19 of the Palatin Disclosure Schedule or as would not have a
Palatin Material Adverse Effect, Palatin has taken all actions which it
considers commercially reasonable and made all applications and filings
which it considers commercially reasonable pursuant to applicable laws to
secure, perfect and protect its rights in the Intellectual Property, for
the conduct of its business as presently conducted and, to Palatin's
knowledge, as proposed to be conducted, and, to Palatin's knowledge,
neither Palatin, its subsidiaries nor any of their respective agents have
practiced inequitable conduct under the Patent laws or other applicable
laws with respect to any of the foregoing. Except as would not have a
Palatin Material Adverse Effect, Palatin and each of its subsidiaries has
taken all steps which it considers commercially reasonable (including
without limitation entering into appropriate confidentiality,
non-disclosure and non-competition agreements with all officers, directors
and employees of Palatin and its subsidiaries with access to or knowledge
of the Intellectual Property of Palatin or its subsidiaries (and the
products and technology of Palatin and its subsidiaries)) to safeguard and
maintain the secrecy and confidentiality of, and to assign to Palatin or
its subsidiaries, as applicable, all of such employee's rights in all such
Intellectual Property invented or developed by such employee within the
scope of such employee's employment and relating to Palatin's business. All
key full-time employees of Palatin and substantially all other full-time
employees of Palatin and its subsidiaries have signed a confidentiality and
invention assignment agreement for the benefit of Palatin or one of its
subsidiaries to assign such employee's rights in Intellectual Property to
Palatin or one of its subsidiaries.
(b) Except as set forth in the Palatin SEC Reports or in Section 5.19
of the Palatin Disclosure Schedule Schedule or as would not have a Palatin
Material Adverse
30
effect, Palatin and its subsidiaries own, are duly licensed or otherwise
have the right to use all of the Intellectual Property used or believed by
Palatin to be required for use in connection with the business of Palatin
and its subsidiaries as presently conducted and, to Palatin's knowledge, as
proposed to be conducted through the Effective Date; and, Palatin has no
reason to believe that such Intellectual Property is not valid and
enforceable against third parties. Except as set forth in the Palatin SEC
Reports or in Section 5.19 of the Palatin Disclosure Schedule, to Palatin's
knowledge, Palatin and its subsidiaries own, on an exclusive basis, free
and clear of any Liens, and have the unrestricted right to use, license,
sell or dispose of, and the right to bring infringement actions with
respect to all the Intellectual Property owned by Palatin and its
subsidiaries. Except as set forth in the Palatin SEC Reports or in Section
5.19 of the Palatin Disclosure Schedule or as would not have a Palatin
Material Adverse Effect, to Palatin's knowledge, Palatin and its
subsidiaries do not pay, and have no obligation (whether absolute or
contingent) to pay, royalties, honoraria, fees or other payments to any
person by reason of the ownership, use, license, sale or disposition of any
Intellectual Property by Palatin or its subsidiaries. Except as set forth
in the Palatin SEC Reports or in Section 5.19 of the Palatin Disclosure
Schedule, to Palatin's knowledge, neither Palatin nor any of its
subsidiaries has received notice (written or oral) of any claim of any
person asserting rights in, or a conflict with, the Intellectual Property
used or required for use in connection with the business of Palatin and its
subsidiaries as presently conducted and as proposed to be conducted through
the Effective Date (including without limitation the Patents and Trademarks
listed in Section 5.19 of the Palatin Disclosure Schedule); and Palatin has
not been informed of any reasonable basis for such a claim. Except for
Intellectual Property not related to Palatin's business as currently
conducted or as proposed to be conducted through the Effective Date, and
without limiting the foregoing, to Palatin's knowledge, no other person has
claimed the right to use in connection with substantially similar or
closely related goods and in the same geographic area any Trademark which
is identical or confusingly similar to any Trademark used by Palatin or its
subsidiaries, except pursuant to written agreements with Palatin or its
subsidiaries which are listed in the Palatin SEC Reports or Section 5.19 of
the Palatin Disclosure Schedule. Except for Intellectual Property not
related to Palatin's business as currently conducted, to Palatin's
knowledge, neither Palatin nor any of its subsidiaries has provided notice
(written or oral) to any Person of infringement of any Intellectual
Property right held by Palatin or its subsidiaries; and Palatin has not
been informed of any reasonable basis for such a claim. There is no
agreement, arrangement or understanding (written or oral) between Palatin
or any of its subsidiaries and another person which would prevent or
restrict Palatin and its subsidiaries after the Merger from using, selling,
licensing or disposing of any material Intellectual Property of Palatin and
its subsidiaries on substantially the same terms and conditions applicable
to Palatin and its subsidiaries immediately prior to the Merger.
(c) Execept as would not have a Palatin Material Adverse Effect,
Palatin represents that the entry by Palatin into this Agreement will not
require the consent of any third party (other than consents that have been
obtained by Palatin and provided to MBI) who is a party to an agreement,
arrangement or understanding described in Section 5.19(b) of the Palatin
Disclosure Schedule and that entry by Palatin into this Agreement will not
otherwise adversely affect the validity of any such agreement, arrangement
or understanding, nor adversely affect the benefit that inures to Palatin
from such agreement, arrangement or understanding. Except as disclosed in
the Palatin SEC Reports or as would not have a Palatin Material Adverse
Effect, Section 5.19 of the Palatin Disclosure Schedule lists all material
agreements,
31
arrangements or understandings (whether written or oral, and if oral,
Section 5.19 of the Palatin Disclosure Schedule contains a brief
description of the principal terms thereof) pursuant to which Palatin or
its subsidiaries has either purchased, sold, licensed, secured or disposed
of rights in Intellectual Property (except for Intellectual Property not
related to Palatin's business as currently conducted or proposed to be
conducted through the Effective Date) from or to another person or agreed
to do any of the foregoing (other than licenses to commercially available
off-the-shelf computer software acquired or entered into by Palatin or its
subsidiaries in the ordinary course of business ) ("Intellectual Property
Agreements"). Except as disclosed in the Palatin SEC Reports or as would
not have a Palatin Material Adverse Effect, to Palatin's belief, each of
the parties thereto have performed, in all material respects, all
obligations under each Intellectual Property Agreement which are required
to be performed by such party, and there is no default (or event which with
notice or lapse of time would constitute a default) thereunder. To
Palatin's belief, each Intellectual Property Agreement is enforceable
against each of the parties thereto pursuant to its terms.
(d) Except as disclosed in the Palatin SEC Reports, to Palatin's
belief, the operation of the business of Palatin and its subsidiaries as
presently conducted and as proposed to be conducted through the Effective
Date (including without limitation the manufacture, sale, use, trade dress,
packaging, license, or other exploitation of products and technology
currently marketed or in development) does not and will not infringe,
trespass or otherwise violate the valid Intellectual Property rights of any
person, the result of which would be a Palatin Material Adverse Effect.
Without limiting the foregoing, to Palatin's knowledge and except as
disclosed in the Palatin SEC Reports, neither Palatin nor any of its
subsidiaries has received any notice (written or oral) of any material
infringement of any Intellectual Property right held by another person;
and, to Palatin's knowledge, there is no reasonable basis for such a claim.
Except as set forth in the Intellectual Property Agreements, neither
Palatin nor any of its subsidiaries is obligated to indemnify any person
for any material liability, cost or expense arising from such person's use,
sale, licensing or disposition of any Intellectual Property or such
person's manufacture, use, sale, license or other exploitation of any
product or technology.
5.20 ACCOUNTING MATTERS. Neither Palatin nor, to its knowledge, any of its
affiliates, has through the date hereof, taken or agreed to take any action that
would prevent Palatin from accounting for the business combination to be
effected by the Merger as (i) a purchase and (ii) as a "reorganization" within
Section 368 of the Code.
5.21 NO PALATIN MATERIAL ADVERSE EFFECT. Except as disclosed in the Palatin
SEC Reports filed prior to the date hereof or in the Palatin Disclosure
Schedule, there does not exist any fact or circumstance which, individually or
together with another fact or circumstance, could reasonably be expected to
result in a Palatin Material Adverse Effect.
5.22 INVESTMENT COMPANY ACT. Palatin is not an "investment company" within
the meaning of the Investment Company Act of 1940.
5.23 FDA. Except as disclosed in the Palatin SEC Reports or in Section 5.23
of the Palatin Disclosure Schedule:
32
(a) To Palatin's knowledge, as to each drug of Palatin or any of its
subsidiaries for which a Biologic License Application ("BLA") and ANDA has
been approved by the FDA, which drugs are described in the Palatin SEC
Reports or in the Palatin Disclosure Schedule and such BLAs and ANDAs are
exclusively owned by Palatin or one of its subsidiaries and the applicant
and all persons performing operations covered by the application are not in
violation of, in any material respect, and are in material compliance with,
21 U.S.C. (S)(S) 355, 21 C.F.R. Parts 314 et seq., respectively, and all
terms and conditions of the application.
(b) To Palatin's knowledge, all manufacturing operations conducted by
or for the benefit of Palatin and its subsidiaries are not in violation of,
in any material respect, and have been and are being conducted in material
compliance with, the good manufacturing practice regulations set forth in
21 C.F.R. Parts 210 and 211.
(c) To Palatin's knowledge, neither Palatin and its subsidiaries nor
their respective officers, employees, or agents have made an untrue
statement of material fact or fraudulent statement to the FDA, failed to
disclose a material fact required to be disclosed to the FDA, or committed
an act, made a statement, or failed to make a statement that could
reasonably be expected to provide a basis for the FDA to invoke its policy
respecting "Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities," set forth in 56 Fed. Reg 46191 (September 10, 1991)
and any amendments thereto.
(d) No reports of inspection observations, establishment inspection
reports or warning letters have been received from or issued by the FDA in
connection with any approved product within the last three years that
allege material lack of compliance with the FDA regulatory requirements by
Palatin, its subsidiaries or, to Palatin's knowledge, persons covered by
product applications or otherwise performing services for the benefit of
Palatin or its subsidiaries.
(e) Neither Palatin nor its subsidiaries have received any written
notice or has knowledge that the FDA has commenced or threatened to
initiate, any action to withdraw its approval or request the recall of any
product of Palatin or its subsidiaries or commenced or threatened to
initiate, any action to enjoin production of any facility owned or used by
Palatin or its subsidiaries or any facility at which any of Palatin's or
its subsidiaries' Manufacturing Locations.
(f) Neither Palatin and its subsidiaries, nor, to the knowledge of
Palatin, their respective officers, employees, agents or affiliates, has
been convicted of any crime or engaged in any conduct for which debarment
is mandated by 21 U.S.C. (S) 335a(a) or authorized by 21 U.S.C. (S)
335a(b).
(g) To Palatin's knowledge, there are no lawsuits, actions,
arbitrations or legal or administrative or regulatory proceedings, charges,
complaints, or investigations by the FDA or any other Governmental Entity
pending against Palatin or any of its subsidiaries. To Palatin's knowledge,
there are no proceedings pending with respect to violation by Palatin or
any subsidiary of the Food, Drug and Cosmetic Act, FDA regulations adopted
thereunder, or any other legislation or regulation promulgated by any other
Governmental Entity which might result
33
in the revocation, cancellation, suspension, limitation or adverse
modification of any permit, application or approval.
(h) Neither Palatin nor any of its subsidiaries have been served with
any complaint or received any other notices of lawsuits, arbitrations,
legal or administrative or regulatory proceedings, charges, complaints or
investigations by any federal, state or foreign regulatory agency
threatened or pending against or relating to Palatin or any of its
subsidiaries or any permit, application or approval of Palatin or any of
its subsidiaries. There have been no product recalls by Palatin or any of
its subsidiaries since January 1, 1994.
(i) To Palatin's knowledge, Palatin and each of its subsidiaries are
not in violation of, in any material respect, and are in material
compliance with, all application laws and regulations regarding the conduct
of pre-clinical and clinical investigations, including, but not limited to,
good laboratory practices, investigational new drug requirements, and
requirements regarding informed consent and Institutional Review Boards
designed to ensure the protection of the rights and welfare of human
subjects, including, but not limited to, the requirements provided in 21
C.F.R. Parts 50, 56, 58 and 312.
(j) To Palatin's knowledge, the Disclosure Schedule identifies all the
countries in which Palatin's or its subsidiaries' products have been or are
being registered and/or approved for manufacturing, marketing or sale and
the products approved in each respective country. To Palatin's knowledge,
Palatin or its subsidiaries are authorized to sell products in each of the
countries in which such products are currently being sold and all Permits
necessary for such sale are held by Palatin or one of its subsidiaries. The
Disclosure Schedule describes the owners of the approvals or registrations
for the manufacture, marketing or sale of Palatin's or its subsidiaries'
products.
5.24 BANK ACCOUNTS. Section 5.24 of the Palatin Disclosure Schedule
contains a list showing: (a) the name of each bank, safe deposit company or
other financial institution in which Palatin or any of its subsidiaries has an
account, lock box or safe deposit box; and (b) the names of all persons
authorized to draw thereon or to have access thereto and the names of all
persons, if any, holding powers of attorney from Palatin or any of its
subsidiaries.
5.25 ENVIRONMENTAL MATTERS. Except as set forth in the Palatin SEC Reports
and with such exceptions as, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Palatin Material Adverse Effect, (i)
no notice, notification, demand, request for information, citation, summons,
complaint or order has been received by, and no investigation, action, claim,
suit, proceeding or review is pending or, to the knowledge of Palatin or any of
its subsidiaries, threatened by any person against, Palatin or any of its
subsidiaries, and no penalty has been assessed against Palatin or any of its
subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) Palatin and its subsidiaries are and have
been in compliance with all Environmental Laws; (iii) there are no liabilities
of or relating to Palatin or any of its subsidiaries relating to or arising out
of any Environmental Law of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability; and (iv) there has been no environmental
investigation, study, audit, test, review or other analysis conducted of which
34
Palatin has knowledge in relation to the current or prior business of Palatin or
any of its subsidiaries or any property or facility now or previously owned,
leased or operated by Palatin or any of its subsidiaries which has not been
delivered to Palatin at least five days prior to the date hereof.
5.26 INSURANCE. There are no insurance policies maintained by or on behalf
of Palatin or any of its subsidiaries in effect on the Effective Date except as
set forth on Section 5.26 of the Palatin Disclosure Schedule.
5.27 TANGIBLE ASSETS. Palatin and its subsidiaries own or lease Tangible
Assets. The Tangible Assets, taken as a whole, are free from material defects
(patent or latent), have been maintained in accordance with normal industry
practice, are in good operating condition and repair (subject to normal wear and
tear), and are suitable for the purposes for which each of them is presently
used. Except as set forth in Section 5.27 of the Palatin Disclosure Schedule,
the Tangible Assets are free and clear of liens, claims of third parties,
security interests, and any other encumbrances whatsoever.
5.28 YEAR 2000 COMPLIANCE. Palatin and each of its subsidiaries have
conducted a commercially reasonable inventory of the Computer Systems used by
Palatin and its subsidiaries in its business, in order to determine which parts
of the Computer Systems are not Year 2000 compliant (as defined in Section 4.29)
and to estimate the cost of rendering such Computer Systems Year 2000 compliant
prior to January 1, 2000 or such earlier date on which the Computer Systems may
hard crash or soft crash. Each project that has or will be implemented by
Palatin with respect to Year 2000 compliance, and the status of each such
project, is listed on Section 5.28 of the Palatin Disclosure Schedule.
5.29 SIGNIFICANT CUSTOMERS, SUPPLIERS, JOINT VENTURE PARTNERS AND
EMPLOYEES. The Palatin SEC Reports or Section 5.29 of the Palatin Disclosure
Schedule sets forth an accurate list of Palatin Significant Customers (as
defined herein), Palatin Significant Suppliers (as defined herein), Palatin
Joint Venture Partners (as defined herein) and Palatin Significant Employees (as
defined herein). Palatin or any of its subsidiaries have no knowledge nor have
they received any notice of any intention by a (a) Palatin Significant Customer
to terminate its business relationship with Palatin or its subsidiaries or to
limit or alter its business relationship with Palatin or its subsidiaries in any
material respect; (b) Palatin Significant Supplier to terminate its business
relationship with Palatin or its subsidiaries or to limit or alter its business
relationship with Palatin or its subsidiaries in any material respect; (c)
Palatin Joint Venture Partner to terminate its business relationship with
Palatin or its subsidiaries or to limit or alter its business relationship with
Palatin or its subsidiaries in any material respect; or (d) Palatin Significant
Employee intending to terminate his employment with Palatin or its subsidiaries.
As used in this Article, (w) "Palatin Significant Customer" means the 10 largest
customers of Palatin and its subsidiaries, taken as a whole, including
distributors of Palatin's products, measured in terms of sales volume in dollars
for the years ended June 30, 1998 and 1999 and for the three month period ending
September 30, 1999, (x) "Palatin Significant Supplier" means any supplier of
Palatin and its subsidiaries from whom Palatin or its subsidiaries has purchased
$50,000 or more of goods during the years ended June 30, 1998 and 1999 or
$50,000 or more goods during the three (3) month period ending September 30,
1999, for use in Palatin's or its subsidiaries' respective businesses; (y)
"Palatin Joint Venture Partner" means any person that has
35
entered into an agreement with Palatin or its subsidiaries relating to the
purchase, development, distribution, manufacture and/or sale of any of Palatin's
or its subsidiaries' products or technologies; and (z) "Palatin Significant
Employee" means the Chief Executive Officer, the President, the Senior Director
of Research and Development or any Vice President of Palatin or its subsidiaries
or any Executive Officer as defined in The Exchange Act.
ARTICLE 6
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 CONDUCT OF BUSINESS BY MBI, PALATIN AND MERGER SUBSIDIARY. Prior to the
Effective Date, each party shall, and shall cause its subsidiaries to, conduct
its business in the ordinary course consistent with past practice and shall use
its commercially reasonable efforts to preserve intact its business
organizations and relationships with third parties. Without limiting the
generality of the foregoing, and except with the prior written consent of the
other party, from the date hereof until the Effective Date:
(a) each party shall, and shall cause any of its subsidiaries to, use
their respective commercially reasonable efforts to keep available the
services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business dealings
with them to the end that their goodwill and ongoing businesses shall be
unimpaired at the Effective Date, except such impairment as would not have
either an MBI Material Adverse Effect or Palatin Material Adverse Effect,
as the case may be. Each party shall, and shall cause its subsidiaries to,
(A) maintain insurance coverages and its books, accounts and records in a
manner consistent with prior practices, (B) comply in all material respects
with all laws, ordinances and regulations of Governmental Entities
applicable to such party and its subsidiaries, (C) maintain and keep its
properties and equipment in good repair, working order and condition,
ordinary wear and tear excepted, and (D) perform in all material respects
its obligations under all contracts and commitments to which it is a party
or by which it is bound;
(b) neither party shall, nor shall it propose to, nor shall it permit
any of its subsidiaries to, except as required by this Agreement, (A) sell
or pledge or agree to sell or pledge any capital stock owned by it in any
of its subsidiaries, (B) amend its Certificate of Incorporation or Bylaws,
(C) split, combine or reclassify its outstanding capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of the capital stock, or declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property, or (D) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of its
capital stock, except pursuant to (A) the exercise of rights granted to
such party to repurchase shares of its capital stock from employees upon
termination of employment or (B) contractual obligations arising under
agreements existing on the date hereof and disclosed in the MBI Disclosure
Schedule, in the case of MBI, or in the Palatin Disclosure Schedule, in the
case of Palatin;
(c) neither party shall, nor shall it permit any of its subsidiaries
to, (A) except as required by this Agreement, issue, deliver or sell or
agree to issue, deliver or sell any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class, any Palatin
Voting Debt or MBI Voting Debt, as the case may be, or any option, rights
or
36
warrants to acquire, or securities convertible into, shares of capital
stock other than (x) issuances of MBI Common Stock or Palatin Common Stock,
as the case may be, pursuant to the exercise of warrants or stock options
outstanding on the date hereof, or (y) the grant of employee stock options
and the issuance of MBI Common Stock or Palatin Common Stock upon exercise
thereof, at fair market value at the time of grant of the options, to new
employees in connection with the commencement of their employment, in each
case in the ordinary course of business and consistent with past practice,
(B) acquire, lease or dispose or agree to acquire, lease or dispose of any
capital assets or any other assets other than in the ordinary course of
business, (C) incur additional indebtedness or encumber or grant a security
interest in any asset or enter into any other material transaction other
than in each case in the ordinary course of business, (D) acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
equity interest in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof, in each case in this clause (D) which are material,
individually or in the aggregate to such party and its subsidiaries taken
as a whole, except that such party may create new wholly owned subsidiaries
in the ordinary course of business, or (E) adopt, enter into, amend or
terminate any contract, agreement, commitment or arrangement with respect
to any of the foregoing other than in each case in the ordinary course of
business;
(d) neither party shall, nor shall it permit, any of its subsidiaries
to, except as required to comply with applicable law and except as provided
in Section 7.5, (A) adopt, enter into, terminate or amend any bonus, profit
sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other MBI Benefit Plan or
Palatin Benefit Plan, as the case may be, agreement, trust, fund or other
arrangement for the benefit or welfare of any director, officer or current
or former employee, (B) increase in any manner the compensation or fringe
benefits of any director, officer or employee (except for normal increases
in the ordinary course of business that are consistent with past practice
and that, in the aggregate, do not result in a material increase in
benefits or compensation expense to such party and its subsidiaries
relative to the level in effect prior to such increase), (C) pay any
benefit not provided under any existing plan or arrangement, (D) grant any
awards under any bonus, incentive, performance or other compensation plan
or arrangement or MBI Benefit Plan or Palatin Benefit Plan (including,
without limitation, the grant of stock options, stock appreciation rights,
stock based or stock related awards, performance units or restricted stock,
or the removal of existing restrictions in any benefit plans or agreements
or awards made thereunder) except for (x) payment of year-end bonuses to
employees, (y) making of matching contributions to 401(k) plans and (z) the
grant of employee stock options and the issuance of MBI Common Stock or
Palatin Common Stock, as the case may be, upon exercise thereof, at fair
market value at the time of grant of the options, to new employees in
connection with the commencement of their employment, in each case in the
ordinary course of business and consistent with past practice, (E) take any
action to fund or in any other way secure the payment of compensation or
benefits under any employee plan, agreement, contract or arrangement or MBI
Benefit Plan or Palatin Benefit Plan, as the case may be, other than in the
ordinary course of business consistent with past practice, or (F) adopt,
enter into, amend or terminate any contract, agreement, commitment or
arrangement to do any of the foregoing;
(e) neither party shall, nor shall it permit any of its subsidiaries
to, make any investments in non-investment grade securities;
37
(f) each party shall use its commercially reasonable efforts to ensure
that neither it nor any of its subsidiaries takes or causes to be taken any
action which would disqualify the Merger as a "reorganization" under
Section 368 of the Code;
(g) each party shall use its commercially reasonable efforts to
refrain from taking, nor shall it permit any of its subsidiaries to take,
any action that would, or reasonably might be expected to, result in any of
its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger set forth in Article 8 not being satisfied, or (unless such action
is required by applicable law) which would adversely affect the ability of
any of them to obtain any of the regulatory approvals required to
consummate the Merger; and
(h) MBI shall not, nor shall it permit any of its subsidiaries to,
settle any claim of any other party against MBI, or any of its
subsidiaries, related to any material litigation without the express
written consent of Palatin to such settlement, which consent shall not be
unreasonably withheld.
6.2 OBLIGATIONS OF MERGER SUBSIDIARY. Palatin shall take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
6.3 NOTICE OF BREACH. Each party shall promptly give written notice to the
other party upon becoming aware of the occurrence or, to its knowledge,
impending or threatened occurrence, of any event which would cause any of its
representations or warranties to be untrue on the Effective Date or cause a
breach of any covenant contained or referenced in this Agreement and will use
its commercially reasonable efforts to prevent or promptly remedy the same. Any
such notification shall not be deemed an amendment of the MBI Disclosure
Schedule or the Palatin Disclosure Schedule.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 ACCESS AND INFORMATION. Palatin and MBI and their respective
subsidiaries shall afford to the other and to the other's accountants, counsel
and other representatives full access during normal business hours (and at such
other times as the parties may mutually agree) throughout the period prior to
the Effective Date to all of its properties, books, contracts, commitments,
records and personnel and, during such period, each shall furnish promptly to
the other (i) a copy of each report, schedule and other document filed or
received by it pursuant to the requirements of federal or state securities laws,
and (ii) all other information concerning its business, properties and personnel
as the other may reasonably request. Palatin and MBI shall hold, and shall cause
their respective employees and agents to hold, in confidence all such
information in accordance with the terms of the Confidentiality Agreement, dated
as of July 16, 1999, between Palatin and MBI (the "Confidentiality Agreement").
38
7.2 REGISTRATION STATEMENT/PROXY STATEMENT.
(a) As promptly as practicable after the execution of this Agreement,
Palatin and MBI shall prepare and file with the Commission preliminary
proxy materials which shall constitute the preliminary Proxy Statement and
a preliminary prospectus with respect to the Palatin Common Stock to be
issued in connection with the Merger on a confidential basis. As promptly
as practicable after comments are received from the Commission with respect
to such preliminary proxy materials and after the furnishing by MBI and
Palatin of all information required to be contained therein, Palatin and
MBI shall file with the Commission the definitive Proxy Statement and the
Registration Statement and MBI and Palatin shall use their commercially
reasonable efforts to cause the Registration Statement to become effective
as soon thereafter as practicable. On the approval of the other party,
which shall not be unreasonably withheld, either party hereto shall, prior
to the mailing of the definitive Proxy Statement, make such changes to the
Proxy Statement as such party in its discretion deems necessary or
advisable to ensure that such party's representations in Section 4.8 or
Section 5.8, as the case may be, are true in all material respects as of
the mailing of the definitive Proxy Statement, and each of the parties
hereto shall, following the mailing of the definitive Proxy Statement and
prior to the date of the MBI Meeting or the Palatin Meeting, as the case
may be, provide such amended or additional proxy solicitation material to
its stockholders as such party in its discretion deems necessary or
advisable to ensure that such party's representations in Section 4.8 or
Section 5.8, as the case may be, are true in all material respects as of
the date of the MBI Meeting or the Palatin Meeting, as the case may be.
Palatin will advise MBI, promptly after it receives notice thereof, of the
time when the Registration Statement has become effective or any supplement
or amendment has been filed, the issuance of any stop order, the suspension
of the qualification of the Palatin Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or any request by
the SEC for amendment of the Proxy Statement or the Registration Statement
or comments thereon and responses thereto or requests by the SEC for
additional information and Palatin and MBI shall use commercially
reasonable efforts to promptly resolve any such stop order, suspension or
qualification.
(b) Palatin shall make all necessary filings applicable to it with
respect to the Merger and the Palatin Share Proposal under the Securities
Act and the Exchange Act and the rules and regulations thereunder and under
applicable blue sky or similar securities laws and shall use its
commercially reasonable efforts to obtain required approvals and clearances
with respect thereto. MBI shall have the opportunity to review and approve
all such filings, which approval shall not be unreasonably withheld.
7.3 AFFILIATES.
(a) Prior to the Effective Date, MBI shall cause to be delivered to
Palatin a certificate of an officer of MBI on its behalf identifying all
persons who were, in MBI's view at the time of the MBI Meeting convened in
accordance with Section 3.6(a), "affiliates" of MBI as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "MBI
Affiliates "). Prior to the Effective Date, Palatin shall cause to be
delivered to MBI a certificate of an officer of Palatin on its behalf
identifying all persons who were, in Palatin's view, at the time of the
Palatin Meeting convened in accordance with Section 3.6(b), "affiliates"
39
of Palatin as that term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act (the "Palatin Affiliates," and, together with the MBI
Affiliates, the "Affiliates").
(b) MBI shall use its commercially reasonable efforts to obtain a
written agreement from each person who is identified as an MBI Affiliate in
the certificate referred to in Section 7.3(a), in the form previously
approved by the parties, that he or she will not sell, offer to sell, or
otherwise dispose of any of the Palatin Common Stock issued to him or her
pursuant to the Merger, except in compliance with Rule 145 or other
exemption from the registration requirements of the Securities Act. MBI
shall deliver such written agreements to Palatin on or prior to the
Effective Date.
7.4 LISTING FOR QUOTATION. Palatin shall use its commercially reasonable
efforts to list on the American Stock Exchange (the "AMEX"), upon official
notice of issuance, the Palatin Common Stock to be issued to holders of MBI
Common Stock in connection with the Merger, as well as all other Palatin Common
Stock and shares of Palatin Common Stock issued upon exercise of Outstanding
Options.
7.5 EMPLOYEE MATTERS. Palatin shall take all actions necessary or
appropriate to permit the employees of MBI and its subsidiaries on the Effective
Date ("Affected Employees") to participate after the Effective Date in Palatin's
employee benefit programs. Palatin shall give each Affected Employee full credit
for service with MBI for purposes of eligibility to participate in, vesting and
payment of benefits under, amounts of and eligibility for any subsidized benefit
provided under, any Palatin employee benefit plan.
7.6 CERTAIN OFFERS OF EMPLOYMENT. Before the Effective Date, Palatin shall
require as a condition of continued employment of Xxxxxx X. Xxxxxx, Xxxx Xxxxx,
Xxxxxxx X. Xxxxx and Xxxxxxx Xxxxxx that their employment agreements be amended
to include those terms contemplated by Section 8.3(i) hereof, the failure to
require such condition shall be a material breach of this Agreement; provided,
however, in the event that Palatin terminates any such employment agreement
(which termination shall satisfy is obligation under this Section 7.6), Palatin
may, in its sole discretion, retain any person terminated pursuant to this
Section 7.6 to perform consulting or other services to Palatin for a period of
up to six (6) months after the Effective Date. Agreements relating to such
consulting or other services may grant, in the aggregate, up to 25,000 shares of
Palatin Common Stock as compensation, such shares not to be included as part of
the Diluted Share Total for the purposes of Section 10.1 hereof. All shares
granted hereunder in excess of 25,000 shall be included as part of the Diluted
Share Total for the purposes of Section 10.1 hereof.
7.7 REGISTRATION OF EMPLOYEE SECURITIES. Palatin promptly and in no event
later than twenty (20) days following the Effective Date shall prepare and file
with the Commission such registration statement under the Securities Act as
shall be required to register the shares of Palatin Common Stock issuable to
officers, employees, or consultants of MBI upon exercise of the Outstanding
Options pursuant to the provisions of Section 3.5 (the "Employee Shares
Registration Statement"). Subsequent to the Effective Date, Palatin shall use
its commercially reasonable efforts to (i) cause the Employee Shares
Registration Statement to become effective and (ii) to the extent required by
law, keep the Employee Shares Registration Statement current and effective under
the Securities Act.
40
7.8 INDEMNIFICATION.
(a) Palatin agrees that all rights to indemnification existing in
favor of the directors, officers or employees of MBI as provided in MBI's
Certificate of Incorporation, Bylaws or existing indemnification agreements
as in effect as of the date hereof, with respect to matters occurring
through the Effective Date, shall survive the Merger and shall continue in
full force and effect for a period of six (6) years from the Effective
Date, and Palatin shall guaranty the obligations of MBI in respect thereof.
MBI represents and warrants that it has disclosed to Palatin all such
indemnification agreements prior to the date hereof. Palatin agrees to
maintain in effect for six (6) years after the Effective Date the current
policies of directors' and officers' liability insurance maintained by MBI
with respect to matters occurring prior to the Effective Date; provided,
however, that (i) Palatin may substitute therefor policies of at least the
same coverage (with carriers comparable to MBI's existing carriers)
containing terms and conditions which are no less advantageous to the
Indemnified Parties and (ii) notwithstanding the foregoing, Palatin shall
not be required to pay an annual premium for such insurance in excess of
one and one-half times the last annual premium paid prior to the date
hereof, but in such case Palatin shall purchase as much coverage as
possible for such amount. Copies of the indemnification insurance policies,
policy numbers 000-00-00 (National Union) and YXB001537 (Genesis), which
constitute all the insurance policies currently maintained by MBI in
connection with the indemnification of its directors, officers and
employees (the "Indemnification Policies"), have been provided to Palatin.
MBI represents that the current aggregate annual premium for the
Indemnification Policies is $240,000.
(b) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated by this Agreement is
commenced, whether before or after the Effective Date, the parties hereto
agree to cooperate and use their respective commercially reasonable efforts
to vigorously defend against and respond thereto.
7.9 ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions herein provided and subject to
each party's fiduciary duties as advised by outside counsel in connection
with the receipt by such party of a Business Combination Proposal that the
Board of Directors of such party has reasonably determined will result in a
Superior Proposal, each of the parties hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using its
commercially reasonable efforts to obtain all necessary waivers, consents
and approvals, to effect all necessary registrations and filings
(including, but not limited to, filings with all applicable Governmental
Entities) and to lift any injunction or other legal bar to the Merger (and,
in such case, to proceed with the Merger as expeditiously as possible),
subject, however, in the case of the Merger, to the appropriate vote of the
stockholders of Palatin and MBI. Notwithstanding the foregoing, a party's
obligation to use its commercially reasonable efforts pursuant to this
Agreement shall not obligate such party to take any action to consummate
and make effective the transactions contemplated by this Agreement if such
action, either individually or together with another action, would result
in a Palatin Material Adverse Effect or an MBI Material Adverse Effect, as
the case may be.
41
(b) In case at any time after the Effective Date any further action is
necessary or desirable to carry out the purposes of this Agreement, the
Surviving Corporation shall take all such necessary action.
7.10 NO SOLICITATION.
(a) Except as contemplated by this Agreement (including as
contemplated in Section 8.3(f)), neither party nor any of its subsidiaries
shall, directly or indirectly, take (nor shall such party authorize or
permit its subsidiaries, officers, directors, employees, representatives,
investment bankers, attorneys, accountants or other agents or affiliates,
to take) any action to (i) encourage, solicit or initiate the submission of
any Business Combination Proposal (as defined below), (ii) enter into any
agreement with respect to any Business Combination Proposal or (iii)
participate in any way in discussions or negotiations with, or furnish any
information to, any person in connection with, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Business Combination Proposal;
provided, however, that (i) each party may participate in discussions or
negotiations with or furnish information to any third party which makes a
proposal, which was neither encouraged nor solicited by such party, of a
transaction which the Board of Directors of such party reasonably believes
will result in a Superior Proposal (as defined below) and (ii) such party
may recommend to its stockholders a Business Combination Proposal which it
has reasonably determined will result in a Superior Proposal. Any actions
permitted under, and taken in compliance with this Section 7.10, shall not
be deemed a breach of any other covenant or agreement of such party
contained in this Agreement. For purposes of this Agreement, "Business
Combination Proposal" shall mean, with respect to each party, any tender or
exchange offer, proposal for a merger, consolidation or other business
combination involving such party or any Significant Subsidiary of such
party or any other proposal or offer to enter into an MBI Third Party
Business Combination (as defined in Section 10.3(d)) or a Palatin Third
Party Business Combination (as defined in Section 10.3(d)), as the case may
be, and "Superior Proposal" shall mean, with respect to each party, any
bona fide Business Combination Proposal which the Board of Directors of
such party reasonably determines, based on all relevant considerations
applicable in strategic business combinations, will be more favorable to
such party and its stockholders than the Merger.
(b) In addition to the obligations of each party set forth in Section
7.10(a), each party shall promptly advise the other of any request for
information or of any Business Combination Proposal, or any inquiry with
respect to or which appears to be intended to or could reasonably be
expected to lead to any Business Combination Proposal, the material terms
and conditions of such request, Business Combination Proposal or inquiry,
and the identity of the person making any such request, Business
Combination Proposal or inquiry. Such party shall keep the other fully
informed of the status and details of any such request, Business
Combination Proposal or inquiry, except to the extent that compliance with
this sentence would be contrary to law.
7.11 CERTAIN POST CLOSING EMPLOYMENT MATTERS. Each Relocating Manager or
Relocating Employee shall be offered relocation benefits consistent with MBI's
past policy and practice. Each offer of employment to a potential Relocating
Manager or Relocating Employee shall be made in Palatin's sole discretion and
shall be subject to the approval of the Chief
42
Executive Officer of Palatin. In the event that a Relocating Manager is
terminated within two years of the Effective Date, such Relocating Manager shall
be entitled to receive change of control benefits to the extent that such
benefits are provided for in the relevant Relocating Manager's employment
agreement. Any Relocating Employee that is terminated within two years of the
Effective Date, shall be entitled to receive benefits commensurate with those
currently offered terminated employees of MBI. For the purposes of this
Agreement, "Relocating Manager" shall mean a person who is an MBI employee
before the Effective Date, in the position of director or executive director,
vice president, or executive vice president, other than each Executive or
Consulting Employee as defined below, who accepts an offer of employment from
the Surviving Company or Palatin, such employment to begin on or after the
Effective Date, and "Relocating Employee" shall mean a person who is an MBI
employee before the Effective Date, in any position below the level of director,
who accepts an offer of employment from the Surviving Company or Palatin, such
employment to begin on or after the Effective Date.
7.12 AT THE EFFECTIVE DATE. Palatin shall either (i) assume the rights and
obligations of or (ii) guaranty the obligations of the Surviving Corporation
under the Second Amended and Restated License and Distribution Agreement ("XXXX
XX") dated as of September 30, 1999 by and between MBI and Mallinckrodt, Inc.
("Mallinckrodt").
ARTICLE 8
CONDITIONS PRECEDENT
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the following conditions,
any one or more of which may be waived in a writing executed by Palatin or MBI,
as the case may be, subject to and in accordance with Section 9.4:
(a) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the holders of MBI
Common Stock in accordance with DGCL and The New York Stock Exchange.
(b) This Agreement and the transactions contemplated hereby shall have
been approved by the requisite vote of the holders of Palatin Common Stock
in accordance with DGCL and the Nasdaq SmallCap MarketSM.
(c) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall be in
effect and no proceedings for such purpose shall be pending or threatened
by the Commissioner.
(d) No preliminary or permanent injunction or other order by any
federal or state court in the United States which prevents the consummation
of the Merger shall have been issued and remain in effect (each party
agreeing to use its commercially reasonable efforts to have any such
injunction lifted).
43
8.2 CONDITIONS TO OBLIGATION OF PALATIN TO EFFECT THE MERGER. The
obligation of Palatin to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Date of the additional following conditions, unless
waived in writing by Palatin in accordance with Section 9.4:
(a) The number of Dissenting Shares shall not exceed 5% of outstanding
MBI Common Stock.
(b) MBI shall have performed in all material respects its agreements
in this Agreement required to be performed on or prior to the Effective
Date, and MBI's representations and warranties in this Agreement shall be
true in all material respects when made and on and as of the Effective Date
as if made on and as of such date (except to the extent they relate to the
date of this Agreement or any other particular date), and Palatin shall
have received a certificate of the President and Chief Executive Officer or
a Vice President of MBI to that effect.
(c) The Palatin Common Stock issuable in the Merger shall have been
authorized for quotation on an interdealer quotation system or listed on an
exchange upon official notice of issuance.
(d) Palatin shall have received a letter from Xxxxxx Xxxxxxxx LLP,
Palatin's independent auditors, dated a date within two business days
before the date on which the Registration Statement shall become effective
and addressed to Palatin, in form and substance reasonably satisfactory to
MBI and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
(e) Palatin shall have received a written opinion from Xxxxxx & Xxxxx
LLP substantially similar to the opinion provided by Xxxxxxx and Colmar
pursuant to Section 8.3(d), to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368 of the Code.
(f) All permits, consents, authorizations, approvals, registrations,
qualifications, designations and declarations described in Section 5.4 of
Palatin Disclosure Schedule shall have been obtained, and, to the extent
required to be submitted prior to the Effective Date, all filings and
notices described in Section 5.4 of the Palatin Disclosure Schedule shall
have been submitted by Palatin.
(g) Neither MBI's Board of Directors nor any committee thereof shall
have amended, modified, rescinded or repealed the recommendation of the
Board of Directors to the stockholders of MBI to approve the MBI Share
Proposal.
(h) Palatin shall have received a written opinion from Xxxxxxx and
Colmar, dated the Closing Date, in form and substance reasonably
satisfactory to Palatin.
(i) With respect to the employment agreements (each, an "Employment
Agreement") attached as Exhibit B hereto,
44
(i) Palatin shall not have received from Xxxxxx X. Xxxxxxxx or
Xxxxxx Xxxxxxx (each, an "Executive") or from MBI notice of either
Executive's intent not to honor the terms of their Employment
Agreement and
(ii) no event shall have occurred that would render performance
by either Employee of their respective Employment Agreement
impossible.
(j) With respect to the consulting agreement (the "Consulting
Agreement") attached as Exhibit C hereto,
(i) Palatin shall not have received from Xxxxx Xxxxxxxxxx (the
"Consulting Employee") or from MBI notice of the Consulting Employee's
intent not to honor the terms of the Consulting Agreement and
(ii) no event shall have occurred that would render performance
by the Consulting Employee of the Consulting Agreement impossible.
(k) The terms of the marketing and development agreement between MBI
and Chugai Pharmaceutical Co., Ltd. dated March 31, 1998, shall not have
been terminated, amended, modified or altered in a manner materially
adverse to MBI.
(l) MBI shall have received a written waiver from Mallinckrodt in form
and substance acceptable to Palatin with regard to XXXX XX, the Investment
Agreement (the "1988 Agreement") dated as of December 7, 1988, as amended
or supplemented, and the Investment Agreement (the "1995 Agreement") dated
as of September 7, 1995, as amended or supplemented, wherein Mallinckrodt:
(i) acknowledges that the proposed merger does not violate XXXX
XX;
(ii) waives its rights, if any with respect to the following
sections of the 1988 and 1995 Investment Agreements, respectively,
solely as they relate to the contemplated merger:
(1) Section 6.01 ("Antidilution Rights") and
(2) Section 6.07 ("Receipt of Offer to Acquire Control");
and
(iii) addresses other matters mutually agreed upon by the parties
hereto.
(m) MBI shall have taken all necessary actions required of it in order
to ensure the successful transfer of the ownership of its mortgage to
AMRESCO Services, L.P. to Palatin at the Effective Date.
8.3 CONDITIONS TO OBLIGATION OF MBI TO EFFECT THE MERGER. The obligation of
MBI to effect the Merger shall be subject to the fulfillment at or prior to the
Effective Date of the
45
additional following conditions, unless waived in writing by MBI in accordance
with Section 9.4:
(a) Palatin shall have performed in all material respects its
agreements in this Agreement required to be performed on or prior to the
Effective Date, and Palatin's representations and warranties in this
Agreement shall be true in all material respects when made and on and as of
the Effective Date as if made on and as of such date (except to the extent
they relate to the date of this Agreement or any other particular date),
except as contemplated or permitted by this Agreement, and MBI shall have
received a certificate of the President and Chief Executive Officer or a
Vice President of Palatin to that effect.
(b) MBI shall have received a letter from Xxxxxx Xxxxxxxx LLP, MBI's
independent auditors, dated a date within two business days before the date
on which the Registration Statement shall become effective and addressed to
Palatin, in form and substance reasonably satisfactory to Palatin and
customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to
the Registration Statement.
(c) The Palatin Common Stock issuable in the Merger shall have been
authorized for quotation on an interdealer quotation system or listed on an
exchange upon official notice of issuance.
(d) MBI shall have received a written opinion from Xxxxxxx and Colmar,
substantially similar to the opinion provided by Xxxxxx & Xxxxx LLP,
pursuant to Section 8.2(c), to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368 of the Code.
(e) All permits, consents, authorizations, approvals, registrations,
qualifications, designations and declarations described in Section 4.4 of
the MBI Disclosure Schedule shall have been obtained and, to the extent
required to be submitted prior to the Effective Date, all filings and
notices described in Section 4.4 of the MBI Disclosure Schedule shall have
been submitted by MBI.
(f) Neither Palatin's Board of Directors nor any committee thereof
shall have amended, modified, rescinded or repealed the recommendation of
the Board of Directors to the stockholders of Palatin to approve the
Palatin Share Proposal.
(g) MBI shall have received a written opinion from Xxxxxx & Xxxxx LLP,
dated the Closing Date, in form and substance reasonably satisfactory to
MBI.
(h) MBI shall have received a written waiver from Mallinckrodt with
regard to XXXX XX, the 1988 Agreement, and the 1995 Agreement, wherein
Mallinckrodt:
(i) acknowledges that the proposed merger does not violate XXXX
XX and
46
(ii) waives its rights, if any with respect to the following
sections of the 1988 and 1995 Investment Agreements, respectively,
solely as they relate to the contemplated merger:
(1) Section 6.01 ("Antidilution Rights") and
(2) Section 6.07 ("Receipt of Offer to Acquire Control").
(i) Employment agreements or amendments to existing employment
agreements by and between Palatin and each of the following individuals
shall have been entered into (i) on terms no less favorable than those in
each person's existing employment agreement, except as set forth on Exhibit
D hereto and (ii) for employment in a job position substantially similar as
each person's current position; provided, however, this provision is not
intended by the parties to guarantee any individual's appointment as an
officer or director of Palatin:
(i) Xxxxxx X. Xxxxxx;
(ii) Xxxx Xxxxx;
(iii) Xxxxxxx X. Xxxxx; and
(iv) Xxxxxxx Xxxxxx.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Date, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of Palatin or MBI:
(a) by mutual consent of the Board of Directors of Palatin and the
Board of Directors of MBI;
(b) by either Palatin or MBI if the Merger shall not have been
consummated on or before March 31, 2000 (provided the terminating party is
not otherwise in material breach of its representations, warranties,
covenants or agreements under this Agreement);
(c) by Palatin if any of the conditions specified in Sections 8.1 or
8.2 have not been met or waived by Palatin at such time as such condition
is no longer capable of satisfaction, including the failure to obtain any
required approval of its stockholders or the stockholders of MBI at a duly
held meeting of stockholders or at an adjournment thereof (provided that
Palatin is not otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement);
(d) by MBI if any of the conditions specified in Sections 8.1 or 8.3
have not been met or waived by MBI at such time as such condition is no
longer capable of
47
satisfaction, including the failure to obtain any required approval of its
stockholders or the stockholders of Palatin at a duly held meeting of
stockholders or at an adjournment thereof (provided that MBI is not
otherwise in material breach of its representations, warranties covenants
or agreements under this Agreement);
(e) by either Palatin or MBI if there has been a material breach on
the part of the other of any representation, warranty, covenant or
agreement set forth in this Agreement, which breach, has not been cured
within 15 business days following receipt by the breaching party of written
notice of such breach;
(f) by either Palatin or MBI upon written notice to the other party if
any Governmental Entity of competent jurisdiction shall have issued a final
permanent order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and in any such case the time
for appeal or petition for reconsideration of such order shall have expired
without such appeal or petition being granted;
(g) by either Palatin or MBI if the Board of Directors of such party
reasonably determines that a Business Combination Proposal will result in a
Superior Proposal; provided, however, that termination of this Agreement
under this Section 9.1 (g) shall not be effective unless and until (i)
simultaneously with such termination the terminating party enters into a
definitive agreement to effect the Business Combination Proposal and (ii)
the terminating party has made payment in full of the fee required in
Section 10.3(d);
(h) notwithstanding anything contained in this Section 9.1, by Palatin
if the Board of Directors of MBI shall have failed to recommend or has
withdrawn or modified or changed in a manner adverse to Palatin its
approval of the Merger or its recommendation to the stockholders of MBI to
approve the MBI Share Proposal; or
(i) notwithstanding anything contained in this Section 9.1, by MBI if
the Board of Directors of Palatin shall have failed to recommend or has
withdrawn or modified or changed in a manner adverse to MBI its approval of
the Merger or its recommendation to the stockholders of Palatin to approve
the Palatin Share Proposal
9.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by
either Palatin or MBI as provided in Section 9.1, this Agreement shall forthwith
become void and (except for termination of this Agreement pursuant to Section
9.1(e) or except as otherwise provided in Section 10.3), there shall be no
liability on the part of either Palatin or MBI or their respective officers or
directors; provided that Sections 4.14 and 5.14, the last sentence of Section
7.1, this Section 9.2, and Sections 10.3, 10.6 and 10.10 shall survive the
termination.
9.3 AMENDMENT. This Agreement may be amended by the parties hereto, by or
pursuant to action taken by their respective Boards of Directors, at any time
before or after approval hereof by the stockholders of Palatin and MBI; but
after such approval no amendment shall be made which changes the ratios at which
MBI Common Stock is to be converted into Palatin Common Stock as provided in
Section 3.1, or which in any way materially adversely affects the rights of such
stockholders, without the further approval of such stockholders. This
48
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.4 WAIVER. At any time prior to the Effective Date, the parties hereto, by
or pursuant to action taken by their respective Boards of Directors, may (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any documents delivered
pursuant hereto by any other party, and (iii) waive compliance with any of the
agreements or conditions contained herein; provided, however, that no such
waiver shall materially adversely affect the rights of the stockholders of
Palatin or MBI, as the case may be. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 10
GENERAL PROVISIONS
10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except with respect to Palatin's representation as to the Diluted
Share Total set forth in Section 5.2(b) hereof, which shall survive for one
(1) year after the Effective Date, all representations and warranties set
forth in this Agreement shall terminate at the earlier of (i) the Effective
Date or (ii) termination of this Agreement in accordance with Article 9.
All covenants and agreements set forth in this Agreement shall survive the
Effective Date in accordance with their terms.
(b) In the event of an understatement by Palatin of the Diluted Share
Total by more than 1%, Palatin shall distribute pro-rata to all MBI
stockholders who received Certificates for Palatin Common Stock under
Section 3.2 hereof the number of shares of Palatin Common Stock to which
they would have entitled hereunder had the Diluted Share Total been
accurate. The remedy contained in this subsection shall be the sole and
exclusive remedy available in the event of a material breach by Palatin of
its representations contained in Section 5.2(b) hereof.
10.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by telecopy, cable, telegram, telex
or other standard form of telecommunications, or by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to Palatin:
Palatin Technologies, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxx
President and Chief Executive Officer
Telecopier: (000) 000-0000
49
with a copy to:
Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
If to MBI:
Molecular Biosystems, Inc.
00000 Xxxxxx Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx Venkatadri
President and Chief Executive Officer
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxx and Colmar
000 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 10.2.
10.3 EXPENSES; TERMINATION FEES.
(a) If (i) the Merger is consummated or (ii) this Agreement is
terminated in accordance with Section 9.1(a), 9.1(b), 9.1(c), 9.1(d) or
9.1(f), all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring such expense, except that expenses (other than legal and
accounting expenses) incurred in connection with the preparation, filing,
printing and mailing of the preliminary and definitive Proxy Statement and
the Registration Statement (not including investment banking fees) shall be
shared equally by Palatin and MBI. If this Agreement is terminated in
accordance with Section 9.1(e), 9.1(g), 9.1(h), or 9.1(i), all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be promptly paid within five business days after
receipt of a written request therefor, in same day funds, to the other
party hereto by the breaching party (in the case of Section 9.1(e)), by the
terminating party (in the case of Section 9.1(g)), and by the party having
altered its recommendation (in the case of Sections 9.1(h) and 9.1(i)).
(b) If this Agreement is terminated as a result of a material breach
of Section 7.10, the party that causes the breach shall pay to the other
party within five business
50
days after receipt of a written request therefor, in same day funds, One
Million Dollars ($1,000,000) (the "Termination Fee").
(c) If this Agreement is terminated as provided in Section 9.1(e), the
party that causes the breach shall pay to the other party within five
business days after receipt of a written request therefor, in same day
funds, the Termination Fee.
(d) If (i) MBI has had contact before the date hereof with any person
or any agent for such person (such person together with any affiliate of
such person, an "MBI Offeror") or has contact after the date hereof and
prior to the Effective Date with an MBI Offeror concerning a Business
Combination Proposal with the MBI Offeror (regardless of whether such
Business Combination Proposal was encouraged or solicited by MBI in
violation of Section 7.10 hereof) and (ii) within one year after the
termination of this Agreement, either (1) MBI or any MBI subsidiary enters
into an agreement with such MBI Offeror which provides for (a) transfer or
issuance of securities representing 40% or more of the equity or voting
interests in MBI, (b) a merger, consolidation, recapitalization or other
transaction resulting in the issuance of cash or securities of such MBI
Offeror (excluding any reincorporation or a holding company merger that
results in the MBI stockholders owning all of the equity interests in the
surviving corporation) to MBI stockholders in exchange for 40% or more of
the equity or voting interests in MBI, or (c) transfer of assets,
securities or ownership interests representing 40% or more of the
consolidated assets or earning power of MBI, or (2) the MBI Offeror
commences a tender offer that results in the acquisition by the person
making the tender offer of a majority of the MBI Common Stock (the
transactions described in clauses (1) and (2) above, an "MBI Third Party
Business Combination"), then MBI shall pay to Palatin the Termination Fee.
(e) If (i) Palatin has had contact before the date hereof with any
person or any agent for such person (such person together with any
affiliate of such person, an "Palatin Offeror") or has contact after the
date hereof and prior to the Effective Date with a Palatin Offeror
concerning a Business Combination Proposal with the Palatin Offeror
(regardless of whether such Business Combination Proposal was encouraged or
solicited by Palatin in violation of Section 7.10 hereof) and (ii) within
one year after the termination of this Agreement, either (1) Palatin or any
Palatin subsidiary enters into an agreement with such Palatin Offeror which
provides for (a) transfer or issuance of securities representing 40% or
more of the equity or voting interests in Palatin, (b) a merger,
consolidation, recapitalization or other transaction resulting in the
issuance of cash or securities of such Palatin Offeror (excluding any
reincorporation or a holding company merger that results in the Palatin
stockholders owning all of the equity interests in the surviving
corporation) to Palatin stockholders in exchange for 40% or more of the
equity or voting interests in Palatin, or (c) transfer of assets,
securities or ownership interests representing 40% or more of the
consolidated assets or earning power of Palatin, or (2) the Palatin Offeror
commences a tender offer that results in the acquisition by the person
making the tender offer of a majority of the Palatin Common Stock (the
transactions described in clauses (1) and (2) above, a "Palatin Third Party
Business Combination"), then Palatin shall pay to MBI the Termination Fee.
(f) In no event shall any party hereto be required by the terms of
this Agreement to pay more than one Termination Fee.
51
10.4 PUBLICITY. No party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior
written approval of the other parties; provided, however, that any party may
make any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing party will use its best efforts to
advise the other party prior to making the disclosure). The commencement of
litigation relating to this Agreement or the transactions contemplated hereby or
any proceedings in connection therewith shall not be deemed a violation of this
Section 10.4.
10.5 INTERPRETATION. The headings and captions in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.6 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto, their
respective successors and permitted assigns; provided, however, that the
provisions of Sections 7.5, 7.8 and 7.11 hereof are intended for the benefit of
those persons specified therein.
10.7 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements, or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
10.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.9 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
10.10 GOVERNING LAW; JURISDICTION. This Agreement (including all documents
and instruments referred to herein) shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Delaware
(without giving effect to the provisions thereof relating to conflicts of law).
Any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby may be brought in any federal or state court
located in the State of Delaware, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extend permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 10.01
shall be deemed effective service of process on such party.
52
10.11 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.12 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
10.13 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
(including, among others, the MBI Disclosure Schedule and the Palatin Disclosure
Schedule) identified in this Agreement are incorporated herein by reference and
made a part hereof.
53
In Witness Whereof, Palatin and MBI have caused this Agreement to be
signed by their respective duly authorized officers.
PALATIN TECHNOLOGIES, INC.
By: Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
EVERGREEN MERGER CORPORATION
By: Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
MOLECULAR BIOSYSTEMS, INC.
By: Xxxxx Xxxxxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: President and Chief Executive Officer
54
EXHIBIT A
CERTIFICATE OF MERGER
EXHIBIT A TO
THE MERGER AGREEMENT
CERTIFICATE OF MERGER
MERGING
EVERGREEN MERGER CORPORATION
WITH AND INTO
MOLECULAR BIOSYSTEMS, INC.
Pursuant to Section 251 of the
Delaware General Corporation Law
The undersigned, being the President of Molecular Biosystems, Inc., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware ("Molecular"), DOES HEREBY CERTIFY AS
FOLLOWS:
FIRST: That the name of and the state of incorporation of each of the
constituent corporations in the merger are as follows:
Name State of Incorporation
Evergreen Merger Corporation Delaware
Molecular Biosystems, Inc. Delaware
SECOND: That an Agreement and Plan of Merger dated as of November __, 1999
(the "Merger Agreement") between Evergreen Merger Corporation ("Evergreen") and
Molecular has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with Section 251 of the
General Corporation Law of the State of Delaware.
THIRD: That Molecular shall be the surviving corporation (the "Surviving
Corporation").
FOURTH: That an executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at the following
address:
000 Xxxxxxxx Xxxxxx - Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
FIFTH:That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request, and without cost, to any stockholder of any
constituent corporation.
IN WITNESS WHEREOF, Molecular has caused this Certificate of Merger to be
signed by _____________________, its [Title of Officer], and attested by
_________________, its [Assistant] Secretary, this _______ day of
_______________ , 1999.
MOLECULAR BIOSYSTEMS, INC.
By:______________________
Title:
ATTEST:
______________________
[Assistant] Secretary
2
EXHIBIT B
EMPLOYMENT AGREEMENTS OF XXXXXXXX AND XXXXXXX
EMPLOYMENT AGREEMENT
This is an EMPLOYMENT AGREEMENT ("Agreement") between XXXXXX XXXXXXXX, M.D.
an individual ("Employee"), and PALATIN TECHNOLOGIES, INC., a Delaware
corporation ("the Company").
1. Effective Date. This Agreement is contingent on the closing of Molecular
Biosystems, Inc.'s merger with, or acquisition by, Palatin Technologies, Inc. on
or before March 31, 2000, and is effective on the closing date of such merger or
acquisition (the "Effective Date").
2. Employment.
a. Position. The Company agrees to employ Employee as its Executive
Vice President and Chief Medical Officer (the "Employment"). A proposed
organizational chart is attached as Exhibit A.
b. Obligations to Company. Employee shall diligently, and to the best
of his ability, perform all such duties incident to his position and other
duties as may be assigned by the Company's President and Chief Executive
Officer. The Company shall be entitled to all of the benefits and profits
arising from or incident to the work, services and advice rendered by the
Employee relating to the work performed for the Company. The Employee shall
make all information available to the Company that relates to the Company's
business of which he has any knowledge and shall not use any such
information or the benefits of any such information for his personal profit
or that of any third party. The Employee agrees to use his best efforts to
promote the interests of the Company including, where appropriate, the
publication of articles in medical and scientific journals and the
participation in medical and scientific seminars and symposiums relating to
the business and affairs of the Company and/or his efforts performed for
and on behalf of the Company. A list of Employee's initial job duties is
attached as Exhibit B.
c. Time to be Devoted to Employment. Employee shall devote his full
time and energy to the business of the Company and shall not be engaged in
any competitive business activity without the express written consent of
the Company. However, it is understood and agreed that Employee will
perform his duties from his current residence in California or by
travelling as needed. Employee is also entitled to at least ten paid days
off each year to attend any continuing medical education classes or courses
that he chooses. In addition, Employee will be entitled to at least one
half paid day off each week for purposes of carrying out clinical
activities at the University of California, San Diego hospitals and clinics
as part of his status as a clinical professor of medicine. Employee hereby
represents that he is not a party to any agreement which would be an
impediment to entering into this Employment Agreement and that he is
permitted to enter into this Employment Agreement and perform the
obligations hereunder.
3. Compensation and Benefits.
a. Annual Salary. In consideration of and as compensation for the
services agreed to be performed by Employee hereunder, the Company agrees
to pay Employee
an annualized base salary not less than Employee's annual Base Salary paid
by Molecular Biosystems, Inc. immediately prior to the Effective Date of
the Agreement. Thereafter, Employee's annual Base Salary is subject to
being increased as part of the Company's annual salary review process. If
Employee is an Officer of the Company, changes to Base Salary must be
approved by the Board of Directors of the Company (the "Board").
b. Bonus. The Employee shall be eligible to be considered for an
annual bonus based on objective or subjective criteria approved by the
Company's Board of Directors (the "Board"). Such bonus shall be contingent
upon Employee's continued employment through the end of the bonus period
and Employee shall have no right to any pro rata portion of the bonus. The
determinations of the President and CEO with respect to such bonus shall be
final and binding.
c. Option Grant. Employee shall be eligible for stock option awards at
the discretion of the Board of Directors. Vesting and exercise periods
would be in accordance with the Company's stock option plans.
(1) Effect of Change of Control. In the event of a Change of
Control (whether or not followed by termination of Employee's
employment), all stock options under any Company stock option plan
which Employee holds at the time of such Change of Control shall
become fully "vested" (i.e., immediately exercisable).
d. Participation in Benefit Plans. Employee shall be entitled to
participate in any vacation or other benefit plan, to the extent eligible,
that is generally available to the other employees of the Company at the
same level as Employee. The Company reserves the right to amend, modify or
terminate any employee benefits at any time for any reason.
e. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee on behalf of the
Company provided that: (i) such reasonable expenses are ordinary and
necessary business expenses incurred on behalf of the Company, and (ii)
Employee provides the Company with itemized accounts, receipts and other
documentation for such reasonable expenses as are reasonably required by
the Company. In addition, the Company will pay on Employee's behalf the
following professional license fees and memberships: California Physician
and Surgeon, Drug Enforcement Agency ("DEA"), American College of
Cardiology, American Heart Association, American Society of
Echocardiography, American College of Medicine, and the American Medical
Association (local, state and national).
f. Educational Assistance Benefit. The Company agrees to pay on behalf
of the Employee reasonable tuition, fees and similar expenses for a general
management skills development course. The Company must approve all such
expenses in advance. The Employee development/training course should
require no more than a two-week period away from the job.
4. Relocation Benefits. The Company will provide the Employee with full
relocation assistance, consistent with the past executive relocation practice of
Molecular Biosystems, Inc., if the Company requires Employee to relocate his
regular place of employment more than 35 miles from his current residence in
California. Relocation benefits would include,
2
but are not limited to, the payment of all closing costs on the sale of
Employee's current home and purchase of a new home in new location. The Company
also will pay for the packing and unpacking of his household goods, relocation
of his household goods, the transport of a maximum of two (2) automobiles (or
reimbursement for miles traveled between old and new location for no more than
two (2) automobiles at prevailing IRS rates), and two (2) house-hunting trips
for Employee and his spouse, if applicable. The Company also will pay the
reasonable costs of Employee's temporary housing and living expenses until such
time as the Employee permanently relocates. The Employee shall present
appropriate supporting documentation of such costs in accordance with the
Company's generally applicable policies.
5. Definitions. The following definitions shall apply with respect to this
agreement.
a. Base Salary means the Employee's annual salary; it shall not
include overtime pay, commissions or any other benefits and special
allowances for which the Employee is eligible (e.g., bonuses). If
Employee's annual salary is adjusted at any time following the Effective
Date of this Agreement, the adjusted annual salary would then represent
Employee's Base Salary. "Weekly Salary" shall mean the Base Salary divided
by fifty-two. "Monthly Salary" shall mean Base Salary divided by 12.
b. Change of Control means the occurrence of any of the following
events:
(1) any "person," as such term is used in Sections 13 (d) and 14
(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportion as their ownership of
stock of the Company) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 40% or more of the combined
voting power of the company's then outstanding securities; or
(2) individuals who, as of the Commencement Date, constitute the
board (as of the Commencement Date, the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the Commencement
Date whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are
used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall
be, for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board; or
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
3
(A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no "person" (as hereinabove defined) acquires more than 50% of
the combined voting power of the Company's then outstanding
securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the company of all or substantially all of the Company's assets.
c. Constructive Termination shall occur if Employee resigns his
employment within thirty (30) days of the occurrence of any of the
following events: (i) any reduction in the Base Salary of the Employee;
(ii) a demand for relocation by the Company or an expectation for
relocation by the Company to a location more than thirty-five (35) miles
from Employee's current residence in California, without Employee's written
consent; or (iii) a significant or material reduction in Employee's job
duties or level of responsibility.
d. Termination for Cause means a termination of Employee's employment
by the Company due to the Employee's:
(1) Misconduct that has a material adverse effect on the Company's
operations, prospects, reputation or business;
(2) Conviction of a felony or any crime involving moral turpitude; or
(3) Act of fraud against, or theft of property belonging to, the
Company.
e. Termination Without Cause means a termination of Employee's
employment by the Company for any reason other than those specified in
subsections 5(b)(1) through (3) above.
f. Disability means that as a result of any physical or mental injury
or disability, Employee is unable to perform the essential functions of his
job, with or without reasonable accommodation. A notice will be issued when
the Company has reasonably determined that Employee has become unable to
perform substantially his services and duties hereunder with or without
reasonable accommodation because of any physical or mental injury or
disability, and that it is reasonably likely that he will not be able to
resume substantially performing his services and duties on substantially
the terms and conditions as set forth in this Employment Agreement.
4
6. Employment Term.
a. Employment Term. The "Employment Term" means the period commencing
on the Effective Date and terminating on the earlier of three (3) years
from the Effective Date or as set forth in Section 6(c).
b. Notice of Renewal. No less than sixty (60) days prior to the
natural expiration of the initial Employment Term of this Employment
Agreement, the Company shall give Employee written notice of whether the
Company will be seeking an extension of Employee's services beyond the
initial Employment Term.
c. Termination of Employment. The Company may terminate the Employee's
Employment at any time and for any reason (or no reason), and with "Cause"
or "Without Cause," by giving the Employee notice in writing, subject to
the severance payment provisions set forth in Section 7. The Employee may
terminate his Employment by giving the Company 14 days' advance notice in
writing. The Employee's Employment shall terminate automatically in the
event of his death or on the date the Company provides notice of its
reasonable determination of Employee's Disability.
d. Termination of Agreement. This Agreement shall terminate when all
obligations of the parties hereunder have been satisfied. The termination
of this Agreement shall not limit or otherwise affect any of the Employee's
obligations under Sections 9 through 17 of this Agreement.
7. Termination Benefits.
a. Agreement Supersedes Previous Severance Provisions. The provisions
of this Section 7 supersede the severance payment and severance benefits
provisions set forth in paragraphs 14 and 16 of Employee's January 21, 1999
Employment Agreement with Molecular Biosystems, Inc., but this Section 7
does not supersede or limit the effect of paragraph 15 of that agreement
which provides as follows:
Acceleration of Stock Options in the Event of a Change of
Control. In the event of a Change of Control (whether or not
followed by termination of Employee's employment), all stock
options under any Company [Molecular Biosystems, Inc.] stock
option plan which Employee holds at the time of such Change of
Control shall become fully "vested" (i.e., immediately
exercisable). The Company [Molecular Biosystems, Inc.] shall
also extend the period of exercisability of those stock
options to the maximum of four years, or the natural
expiration of the stock options, whichever is earlier.
b. Effect of Termination for "Cause," Death or Disability. During the
Employment Term, upon (i) the termination of Employee's Employment for
"Cause;" or (ii) Employee's death or Disability pursuant to subsection 5(d)
of this Agreement, the Company shall pay (i) Employee's Base Salary through
the effective date of the termination of Employee's Employment; (ii) all of
Employee's accrued but unused vacation time; and (iii) Employee's
5
group health coverage, including e.g., eligible medical, dental and vision
insurance, through the last day of the calendar month during which the
termination occurs (group health coverage after such date being governed by
COBRA), but Employee otherwise shall not be entitled to any severance
benefits or severance payments under any provision of this Agreement or
under any other plan.
c. Effect of Employee's Resignation Prior to One Year Anniversary.
During the Employment Term, in the event that Employee resigns or voluntary
departs the Company for any reason (except in the event of Constructive
Termination) prior to the one (1) year anniversary of the Effective Date
the Company shall pay: (i) Employee's Base Salary through the effective
date of the termination of Employee's Employment; (ii) all of Employee's
accrued but unused vacation time; and (iii) Employee's group health
coverage, including e.g., eligible medical, dental and vision insurance,
through the last day of the calendar month during which the termination
occurs (group health coverage after such date being governed by COBRA), but
Employee otherwise shall not be entitled to any severance benefits or
severance payments under any provision of this Agreement or under any other
plan.
d. Effect of Termination Without Cause, Constructive Termination, or
Employee's Resignation After One Year Anniversary. During the Employment
Term, in the event that (i) the Company terminates Employee's employment
with the Company "Without Cause," (ii) there is a Constructive Termination,
or (iii) Employee resigns or voluntary departs the Company for any reason
on or after the one (1) year anniversary of the Effective Date:
(1) The Company shall make the following payments to Employee:
(A) Accrued Salary and Benefits. The Company shall pay
Employee's Base Salary through the effective date of termination
of Employee's Employment. In addition to the Severance Payments
payable to an eligible employee as described below, such employee
shall receive the following: (i) payment for accrued but unused
vacation time; and (ii) group health coverage, including e.g.,
eligible medical, dental and vision insurance, through the last
day of the calendar month during which the termination occurs
(group health coverage after such date being governed by COBRA.)
(B) Severance Payments. The Company shall pay to Employee an
amount equal to two (2) times the sum of the following: (a)
Employee's annualized Base Salary in effect immediately prior to
the termination of employment, plus (b) the higher of (i) 100% of
Employee's annual target bonus as determined under the Company's
incentive compensation plan or (ii) an average of the last three
actual bonuses accorded to Employee. If the Company has not
adopted an incentive compensation plan as referred to in the
foregoing sentence, then the amount determined under (ii) shall
govern.
(C) Manner of Payment. Severance Payments may be paid in
accordance with regular payroll periods, in a single lump sum
payment, or any combination thereof, as deemed appropriate by the
Company. Taxes and other appropriate deductions will be withheld;
however, 401k contributions will not be allowed.
6
(2) The Company shall provide the following benefits to Employee:
(A) COBRA Premiums. An eligible Employee's existing coverage
under the Company's group health plan (and, if applicable, the
existing group health coverage for eligible dependents) will end
on the last day of the month in which the eligible Employee's
employment terminates. The eligible Employee and his eligible
dependents may then be eligible to elect temporary continuation
coverage under the Company's group health plan in accordance with
the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"). The eligible Employee (and, if applicable, his
eligible dependents) will be provided with a COBRA election form
and notice which describe his rights to continuation coverage
under COBRA. If an eligible Employee elects COBRA continuation
coverage, then the Company will pay for COBRA coverage (such
payments shall not include COBRA coverage with respect to the
Company's Section 125 health care reimbursement plan) for (i)
eighteen (18) months, or (ii) the maximum period permitted under
COBRA guidelines, but not to exceed 24 months. If Employee does
exhaust the COBRA period, the Company will reimburse Employee for
the cost of an individual health insurance policy in an amount
not to exceed the amount of the monthly COBRA premium previously
paid by the Company pursuant to this paragraph for the remainder
of the two year period following Employee's termination of
employment. After such period of Company-paid coverage, the
eligible employee (and, if applicable, his eligible dependents)
may continue coverage at his own expense in accordance with COBRA
or other applicable laws. No provision of this agreement will
affect the continuation coverage rules under COBRA. Therefore,
the period during which the eligible employee must elect to
continue the Company's group health plan coverage under COBRA,
the length of time during which COBRA coverage will be made
available to the eligible employee, and all the eligible
employee's other rights and obligations under COBRA will be
applied in the same manner that such rules would apply in the
absence of this Plan. In the event, however, an Employee becomes
eligible for benefits under another plan prior to the expiration
of the period in which the Company is paying benefit premiums,
the Company shall no longer be obligated to pay such benefit
premiums. The Employee is required to notify the Company of
eligibility for benefits under another plan and is expected to
enroll in the new group plan at the first eligible opportunity
unless Employee chooses, at Employee's sole expense, to continue
COBRA benefits through the Company. If Employee fails to notify
the Company of Employee's eligibility for alternative benefits,
the Company shall have the right to discontinue payment of COBRA
premiums upon thirty (30) days notice to Employee. In no event
shall a cash payment be made to Employee in lieu of the payment
of COBRA premiums. The payment of COBRA premiums by the Company
shall not extend the maximum eligible COBRA coverage period.
(B) Outplacement Services. The Company will make available
to Employee, upon his/her request, outplacement services provided
by a reputable outplacement counselor selected by the Company for
a period of nine months following termination. The Company will
assume the cost of all such outplacement services. In no event
will a cash payment be made in lieu of outplacement benefits.
e. Resignation as an Officer and Director. In the event Employee's
employment with the Company terminates for any reason, Employee agrees to
immediately resign as an officer and/or director of the Company, if
applicable.
7
8. Severance Limitations. The Severance Payments referred to herein shall
be reduced as necessary so that the present value, as determined in accordance
ss. 280G(d)(4) of the Internal Revenue Code, of the sum of (i) the Severance
Payments and (ii) all other payments, if any, that must be taken into account
for purposes of computation under ss.280G(b)(2)(A)(ii) of the Internal Revenue
Code in respect of Employee does not exceed 2.99 times Employee's base amount,
as "base amount" is defined in ss. 280G(b)(3) of the Internal Revenue Code.
9. Disclosures. Employee shall promptly disclose in writing to the
officials designated by the Company to receive such disclosures, complete
information concerning each and every invention, discovery, improvement, device,
design, apparatus, practice, process, method or product (hereinafter referred to
as "Inventions"), whether Employee considers them patentable or not, made,
developed, perfected, devised, conceived or reduced to practice by Employee,
either solely or in collaboration with others, during the period of Employee's
employment by the Company, and up to and including a period of twelve (12)
months after termination of employment, whether or not during regular working
hours, relating either directly or indirectly to the business, products,
practices or techniques of the Company or to the Company's actual or
demonstrably anticipated research or development, or resulting from any work
performed by Employee for the Company or with the equipment, supplies,
facilities or confidential information of the Company.
10. Confidentiality. Employee recognizes that his/her employment with the
Company will involve contact with information of substantial value to the
Company, which is not generally known in the trade and which gives the Company
an advantage over its competitors who do not know or use it, including but not
limited to techniques, designs, drawings, processes, inventions, developments,
equipment, prototypes, sales and customer information, and business and
financial information, relating to the business, products, practices or
techniques of the Company (hereinafter referred to as "Confidential
Information"). Employee shall at all times regard and preserve as confidential
such Confidential Information obtained by Employee from whatever source and
shall not, either during Employee's employment or thereafter, publish or
disclose any part of such Confidential Information in any manner, or use the
same except on behalf of the Company, without the prior written consent of the
Company. Further, Employee shall, during his/her employment and thereafter,
refrain from any acts or omissions that would reduce the value of such
Confidential Information to the Company.
11. Assignment of Rights. Employee hereby agrees that any Inventions made,
developed, perfected, devised, conceived or reduced to practice by Employee
during the period of his/her employment by the Company, and any other Inventions
made, developed, perfected, devised, conceived or reduced to practice by
Employee during said period of twelve (12) months after termination of his/her
employment if based upon the Confidential Information of the Company, relating
either directly or indirectly to the business, products, practices or techniques
of the Company or to the Company's actual or demonstrably anticipated research
or development, or resulting from any work performed by Employee for the Company
or with the equipment, supplies, facilities or Confidential Information of the
Company, are the sole property of the Company, and hereby assigns and agrees to
assign to the Company, its successors and assigns, all of my right, title and
interest in and to said Inventions, and any patent applications or Letters
Patent thereon.
8
NOTIFICATION
This Agreement does not apply to an invention for which no equipment,
supplies, facility, or trade secret information of the Company was used and
which was developed entirely on Employee's own time, and (a) which does not
relate (1) to the business of the Company or (2) to the Company's actual or
demonstrably anticipated research or development, or (b) which does not result
from any work performed by Employee for the Company, as defined and provided by
Section 2870 of the California Labor Code.
12. Covenant of Cooperation. Employee shall, at any time during employment
or for a period of twelve (12) months thereafter, upon request and without
further compensation therefor, but with all reasonable expenses incurred by
Employee to be reimbursed, do all lawful acts, including but not limited to the
execution of papers and oaths, the giving of testimony, and the obtaining of
evidence that in the opinion of the Company, its successors or assigns, may be
necessary or desirable for obtaining, sustaining, reissuing or enforcing Letters
Patent in the United States and throughout the world for said Inventions, and
for perfecting, recording or maintaining the title of the Company, its
successors and assigns, to said Inventions and to any patent applications made
and any Letters Patent granted for said Inventions in the United States and
throughout the world. This covenant shall not apply if such cooperation would
directly interfere or conflict with Employee's duties or obligations pursuant to
Employee's subsequent employment.
13. Patent Enforcement. The Company shall have the sole discretion whether
to obtain, maintain, modify or enforce any domestic or foreign patent for said
Inventions assigned to the Company pursuant to this Agreement. The Company is
free to enter into any licensing or assignment agreement with any third party or
to use whatever means it deems best to develop, promote or market said
Inventions assigned to the Company pursuant to this Agreement or any domestic or
foreign patent thereof.
14. Claims by Third Party. As to any Inventions which were made, developed,
perfected, devised, conceived or reduced to practice by Employee during the
period of his/her employment by the Company, and up to and including a period of
twelve (12) months after termination of his/her employment, but which are
claimed for any reason to belong to an entity or person other than the Company,
Employee will promptly disclose the same in writing to the Company and shall not
disclose the same to others if the Company, within twenty (20) days thereafter,
shall claim ownership of such Inventions under the terms of this Agreement.
15. Record Keeping. Employee shall keep complete, accurate and authentic
accounts, notes, data and records of any and all of said Inventions in the
manner and form requested by the Company. Such accounts, notes, data and
records, including all copies thereof, shall be the property of the Company, and
upon its request, Employee will promptly surrender the same to it, or if not
previously surrendered, Employee will promptly surrender the same to the Company
at the conclusion of his/her employment.
16. Records Are Property of Company. Employee agrees that all accounts,
notes, data sketches, drawings and other documents and records, and all material
and physical items of
9
any kind, including all reproductions and copies thereof, which relate in any
way to the business, products, practices or techniques of the Company or contain
Confidential Information, made by Employee or that come into Employee's
possession by reason of his/her employment are the property of the Company and
shall be promptly surrendered to the Company at the conclusion of Employee's
employment.
17. Non-solicitation. During Employee's employment with the Company and for
one (1) year thereafter, Employee will not solicit any employee of the Company
to leave the Company for any reason or to accept employment with any other
company. However, this obligation shall not affect any responsibility Employee
may have as an employee of the Company with respect to the bona fide hiring and
firing of Company personnel.
18. Retention Bonus Program. Employee shall continue to participate in, and
the Company agrees to assume, the Retention Package bonus program under the same
terms as explained in the memorandum to Employee dated December 3, 1998 from
Molecular Biosystems, Inc.
19. Retention Bonus. Employee has been paid a retention bonus by Molecular
Biosystems, Inc. in the amount of $62,500. This payment has not yet been earned
by the Employee and will not be earned unless and until Employee remains
employed through December 31, 2000. If Employee resigns his employment for any
reason (other than as a result of a Constructive Termination) or there is a
Termination for Cause, either of which occurs prior to December 31, 2000, then
Employee will repay the full $62,500 within thirty days of the date of
termination of his employment; in all other circumstances, the entire retention
bonus will be forgiven.
20. Prohibition Against Assignment. Employee agrees that this Agreement and
the rights, interests and benefits hereunder shall not be assigned, transferred,
pledged or hypothecated in any way by Employee or any executor, administrator,
heir, legatee, distributee or any other person claiming under Employee by virtue
of this Agreement and shall not be subject to execution, attachment or similar
process. Any attempt to assign, transfer, pledge or hypothecate or otherwise
dispose of this Agreement or of such rights, interests and benefits contrary to
the foregoing provisions, or the levy of any attachment or similar process
thereon shall be null and void and without effect and shall relieve the Company
of any and all liability hereunder.
21. Notice. Any and all notices, designations, consents, offers,
acceptances or any other communication provided for herein shall be given in
writing by registered or certified mail, return receipt requested, which shall
be addressed, in the case of the Company, to its office in Princeton, New
Jersey, and in Employee's case to his/her last known place of residence as
reflected on the Company's records.
22. Entire Agreement. This Agreement, and any stock option or stock
purchase agreements between by the Employee and the Company or its predecessors,
constitute the entire agreement between Employee and the Company and contains
all of the agreements between the parties with respect to the subject matter
hereof; except as provided herein and except for the obligations set forth in
paragraphs 5 through 13 of Employee's January 21, 1999 Employment
10
Agreement with Molecular Biosystems, Inc., this Agreement supersedes any and all
other agreements, either oral or in writing, between the parties with respect to
the subject matter hereof.
23. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Employee and the Company and their respective heirs, legal
representatives, executors, administrators, and successors.
24. No other Agreements. Employee affirms that Employee has no agreement
with any other party that would preclude his/her compliance with his/her
obligations under this Agreement as set forth above.
25. Governing Law. This Agreement shall be subject to and governed by the
laws of the State of California.
26. Amendment of Agreement. No change or modification of this Agreement
shall be valid unless the same is in writing and signed by Employee and the
Company. No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the person or party to be charged.
27. Severability. If any portion or portions of this Agreement shall be,
for any reason, deemed to be invalid or unenforceable, the remaining portion or
portions shall nevertheless be valid, enforceable and carried into effect,
unless to do so would clearly violate the present legal and valid intention of
the parties hereto.
28. Breach. In the event either party breaches this Agreement and the other
party prevails in an action to enforce the terms of this Agreement, the losing
party agrees to pay to the prevailing party all reasonable attorneys' fees and
costs incurred by the prevailing party in prosecuting such action, and all
damages suffered by the prevailing party.
29. Headings. The headings of this Agreement are inserted for convenience
only and are not to be considered in construction of the provisions hereof.
30. Waiver or Breach. The waiver by either of the parties hereto of any
breach of any provision hereof shall not be construed to be a waiver of any
succeeding breach of that provision or a waiver of any other provision of this
Agreement.
31. Arbitration of Disputes. Any controversy, dispute and/or claim in any
manner arising out of or relating to this Agreement; any claim, including but
not limited to any claim of race, age, national origin, religion, sex,
pregnancy, family leave, harassment, sexual orientation, or disability
discrimination; defamation; infliction of emotional distress; breach of
contract; violation of public policy or statute; or wrongful termination arising
out of the voluntary or involuntary termination of the Employment, shall be
settled solely by final and binding arbitration in accordance with the
Employment Dispute Resolution Regulations of the American Arbitration
Association. Any arbitration proceeding shall take place in the city of the
Employee's residence. Judgment on any decision rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The Employee and the Company
shall each pay the fees of his or its own attorneys, the expenses of his or its
witnesses and all other expenses connected with presenting his or its case in
arbitration. All other costs of the arbitration shall be determined
11
by the arbitrator. The arbitrator who hears and decides any controversy between
the Employee and the Company, shall in determining a remedy, have jurisdiction
and authority to issue any order or award available in a court of law.
32. Generic Drug Enforcement Act Certification. The undersigned, certifies
that he (1) has never been charged with or convicted of a federal felony for
conduct relating to the development, approval, or regulation of any drug product
or device regulated by the United States Food and Drug Administration, and (2)
has never been debarred or subject to a debarment proceeding under the Generic
Drug Enforcement Act of 1992.
WHEREAS, the parties have executed this Agreement as of the dates set
forth below.
Dated: 11/11/99 PALATIN TECHNOLOGIES, INC.
By: Xxxxxx X. Xxxxxx
-------------------------------------
Officer of Palatin Technologies, Inc.
Dated: 11/11/99 "EMPLOYEE"
By: Xxxxxx Xxxxxxxx, M.D.
-------------------------------------
Xxxxxx Xxxxxxxx, M.D.
12
EMPLOYMENT AGREEMENT
This is an EMPLOYMENT AGREEMENT ("Agreement") between Xxxxxx Xxxxxxx, an
individual ("Employee"), and PALATIN TECHNOLOGIES, INC., a Delaware corporation
("the Company").
1. Effective Date. This Agreement is contingent on the closing of Molecular
Biosystems, Inc.'s merger with, or acquisition by, Palatin Technologies, Inc. on
or before March 31, 2000, and is effective on the closing date of such merger or
acquisition (the "Effective Date").
2. Employment.
a. Position. The Company agrees to employ Employee as its Vice
President of Marketing (the "Employment").
b. Obligations to Company. Employee shall diligently, and to the best
of his ability, perform all such duties incident to his position and other
duties as may be assigned by the Company's President and Chief Executive
Officer. The Company shall be entitled to all of the benefits and profits
arising from or incident to the work, services and advice rendered by the
Employee relating to the work performed for the Company. The Employee shall
make all information available to the Company that relates to the Company's
business of which he has any knowledge and shall not use any such
information or the benefits of any such information for his personal profit
or that of any third party. The Employee agrees to use his best efforts to
promote the interests of the Company including, where appropriate, the
publication of articles in medical and scientific journals and the
participation in medical, scientific, and marketing seminars and symposiums
relating to the business and affairs of the Company and/or his efforts
performed for and on behalf of the Company.
c. Time to be Devoted to Employment. Employee shall devote his full
time and energy to the business of the Company and shall not be engaged in
any competitive business activity without the express written consent of
the Company. Employee hereby represents that he is not a party to any
agreement which would be an impediment to entering into this Employment
Agreement and that he is permitted to enter into this Employment Agreement
and perform the obligations hereunder.
3. Compensation and Benefits.
a. Annual Salary. In consideration of and as compensation for the
services agreed to be performed by Employee hereunder, the Company agrees
to pay Employee an annualized Base Salary not less than Employee's annual
Base Salary paid by Molecular Biosystems, Inc immediately prior to the
Effective Date of the Agreement. The Company also agrees Employee's annual
salary will be increased immediately following the Effective Date of this
Agreement commensurate with market data regarding similarly situated
employees. Thereafter, Employee's annual salary is subject to being
increased as part of the Company's annual salary review process.
b. Bonus. The Employee shall be eligible to be considered for an
annual bonus based on objective or subjective criteria approved by the
Company's Board of Directors (the "Board"). Such bonus shall be contingent
upon Employee's continued employment through the end of the bonus period
and Employee shall have no right to any pro rata portion of the bonus. The
determinations of the President and CEO with respect to such bonus shall be
final and binding.
c. Option Grant. Employee shall be eligible for stock option awards at
the discretion of the President and Chief Executive Officer. Vesting and
exercise periods would be in accordance with the Company's stock option
plan.
(1) Effect of Change of Control. In the event of a Change of
Control (whether or not followed by termination of Employee's
employment), all stock options under any Company stock option plan
which Employee holds at the time of such Change of Control shall
become fully "vested" (i.e., immediately exercisable).
d. Participation in Benefit Plans. Employee shall be entitled to
participate in any vacation or other benefit plan, to the extent eligible,
that is generally available to the other employees of the Company at the
same level as Employee. The Company reserves the right to amend, modify or
terminate any employee benefits at any time for any reason.
e. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable business expenses incurred by Employee on behalf of the
Company provided that: (i) such reasonable expenses are ordinary and
necessary business expenses incurred on behalf of the Company, and (ii)
Employee provides the Company with itemized accounts, receipts and other
documentation for such reasonable expenses as are reasonably required by
the Company.
4. Relocation Benefits. The Company will provide the Employee with full
relocation assistance consistent with the past executive relocation practice of
Molecular Biosystems, Inc., if the Company requires Employee to relocate his
regular place of employment more than 35 miles from his current residence in
California. Relocation benefits would include, but are not limited to, the
payment of all closing costs on the sale of Employee's current home and purchase
of a new home in new location. The Company also will pay for the packing and
unpacking of his household goods, relocation of his household goods, the
transport of a maximum of two (2) automobiles (or reimbursement for miles
traveled between old and new location for no more than two (2) automobiles at
prevailing IRS rates), and two (2) house-hunting trips for Employee and his
spouse, if applicable. The Company also will pay the reasonable costs of
Employee's temporary housing and living expenses until such time as the Employee
permanently relocates. The Employee shall present appropriate supporting
documentation of such costs in accordance with the Company's generally
applicable policies.
5. Definitions. The following definitions shall apply with respect to this
agreement.
a. Base Salary means the Employee's annual salary; it shall not
include overtime pay, commissions or any other benefits and special
allowances for which
2
the Employee is eligible (e.g., bonuses). If Employee's annual salary is
adjusted at any time following the Effective Date of this Agreement, the
adjusted annual salary would then represent Employee's Base Salary. "Weekly
Salary" shall mean the Base Salary divided by fifty-two. "Monthly Salary"
shall mean Base Salary divided by 12.
b. Change of Control means the occurrence of any of the following
events:
(1) any "person," as such term is used in Sections 13 (d) and 14
(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportion as their ownership of
stock of the Company) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 40% or more of the combined
voting power of the company's then outstanding securities; or
(2) individuals who, as of the Commencement Date, constitute the
board (as of the Commencement Date, the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the Commencement
Date whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are
used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall
be, for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board; or
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no "person" (as hereinabove defined) acquires more than 50% of
the combined voting power of the Company's then outstanding
securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the company of all or substantially all of the Company's assets.
c. Constructive Termination shall occur if Employee resigns his
employment within thirty (30) days of the occurrence of any of the
following events: (i) any
3
reduction in the Base Salary of the Employee; (ii) a relocation (or demand
for relocation) of Employee's place of employment to a location more than
thirty-five (35) miles from Employee's current place of employment without
Employee's written consent; or (iii) a significant or material reduction in
Employee's job duties or level of responsibility.
d. Termination for Cause means a termination of Employee's employment
by the Company due to the Employee's:
(1) Misconduct that has a significant material adverse effect on
the Company's operations, prospects, reputation or business and as
communicated to Employee in writing prior to termination;
(2) Conviction of a felony or any crime involving moral
turpitude; or
(3) Act of fraud against, or theft of property belonging to, the
Company.
e. Termination Without Cause means a termination of Employee's
employment by the Company for any reason other than those specified in
subsections 5(b)(1) through (3) above.
f. Disability means that as a result of any physical or mental injury
or disability, Employee is unable to perform the essential functions of his
job, with or without reasonable accommodation. A notice will be issued when
the Company has reasonably determined that Employee has become unable to
perform substantially his services and duties hereunder with or without
reasonable accommodation because of any physical or mental injury or
disability, and that it is reasonably likely that he will not be able to
resume substantially performing his services and duties on substantially
the terms and conditions as set forth in this Employment Agreement.
6. Employment Term.
a. Employment Term. The "Employment Term" means the period commencing
on the Effective Date and terminating on the earlier of three (3) years
from the Effective Date or as set forth in Section 6(c).
b. Notice of Renewal. No less than sixty (60) days prior to the
natural expiration of the initial Employment Term of this Employment
Agreement, the Company shall give Employee written notice of whether the
Company will be seeking an extension of Employee's services beyond the
initial Employment Term.
c. Termination of Employment. The Company may terminate the Employee's
Employment at any time and for any reason (or no reason), and with "Cause"
or "Without Cause," by giving the Employee notice in writing, subject to
the severance payment provisions set forth in Section 7. The Employee may
terminate his Employment by giving the Company 14 days' advance notice in
writing. The Employee's Employment shall terminate
4
automatically in the event of his death or on the date the Company provides
notice of its reasonable determination of Employee's Disability.
d. Termination of Agreement. This Agreement shall terminate when all
obligations of the parties hereunder have been satisfied. The termination
of this Agreement shall not limit or otherwise affect any of the Employee's
obligations under Sections 9 through 17 of this Agreement.
7. Termination Benefits.
a. Agreement Supersedes Previous Severance Provisions. The provisions
of this Section 7 supersede the severance payment and severance benefits
provisions set forth in paragraphs 14 and 16 of Employee's January 21, 1999
Employment Agreement with Molecular BioSystems, Inc., but this Section 7
does not supersede or limit the effect of paragraph 15 of that agreement
which provides as follows:
Acceleration of Stock Options in the Event of a Change of
Control. In the event of a Change of Control (whether or not
followed by termination of Employee's employment), all stock
options under any Company [Molecular Biosystems, Inc.] stock
option plan which Employee holds at the time of such Change of
Control shall become fully "vested" (i.e., immediately
exercisable). The Company [Molecular Biosystems, Inc.] shall
also extend the period of exercisability of those stock
options to the maximum of four years, or the natural
expiration of the stock options, whichever is earlier.
b. Effect of Termination for "Cause," Death or Disability. During the
Employment Term, upon (i) the termination of Employee's Employment for
"Cause;" or (ii) Employee's death or Disability pursuant to subsection 5(d)
of this Agreement, the Company shall pay (i) Employee's Base Salary through
the effective date of the termination of Employee's Employment; (ii) all of
Employee's accrued but unused vacation time; and (iii) Employee's group
health coverage, including e.g., eligible medical, dental and vision
insurance, through the last day of the calendar month during which the
termination occurs (group health coverage after such date being governed by
COBRA), but Employee otherwise shall not be entitled to any severance
benefits or severance payments under any provision of this Agreement or
under any other plan.
c. Effect of Employee's Resignation Prior to One Year Anniversary.
During the Employment Term, in the event that Employee resigns or voluntary
departs the Company for any reason (except in the event of Constructive
Termination) prior to the one (1) year anniversary of the Effective Date
the Company shall pay: (i) Employee's Base Salary through the effective
date of the termination of Employee's Employment; (ii) all of Employee's
accrued but unused vacation time; and (iii) Employee's group health
coverage, including e.g., eligible medical, dental and vision insurance,
through the last day of the calendar month during which the termination
occurs (group health coverage after such date being governed by
5
COBRA), but Employee otherwise shall not be entitled to any severance
benefits or severance payments under any provision of this Agreement or
under any other plan.
d. Effect of Termination Without Cause, Constructive Termination, or
Employee's Resignation After One Year Anniversary. During the Employment
Term, in the event that (i) the Company terminates Employee's employment
with the Company "Without Cause," (ii) there is a Constructive Termination,
or (iii) Employee resigns or voluntary departs the Company for any reason
on or after the one (1) year anniversary of the Effective Date:
(1) The Company shall make the following payments to Employee:
(A) Accrued Salary and Benefits. The Company shall pay
Employee's Base Salary through the effective date of termination
of Employee's Employment. In addition to the Severance Payments
payable to an eligible employee as described below, such employee
shall receive the following: (i) payment for accrued but unused
vacation time; and (ii) group health coverage, including e.g.,
eligible medical, dental and vision insurance, through the last
day of the calendar month during which the termination occurs
(group health coverage after such date being governed by COBRA.)
(B) Severance Payments. The Company shall pay to Employee an
amount equal to 1.5 times the sum of the following: (a)
Employee's annualized Base Salary in effect immediately prior to
the termination of employment, plus (b) the higher of (i)
Employee's annual target bonus as determined under the Company's
incentive compensation plan or (ii) an average of the last three
actual bonuses accorded to Employee. If the Company has not
adopted an incentive compensation plan as referred to in the
foregoing sentence, then the amount determined under (ii) shall
govern.
(C) Manner of Payment. Severance Payments may be paid in
accordance with regular payroll periods, in a single lump sum
payment, or any combination thereof, as deemed appropriate by the
Company. Taxes and other appropriate deductions will be withheld;
however, 401k contributions will not be allowed.
(2) The Company shall provide the following benefits to Employee:
(A) COBRA Premiums. An eligible Employee's existing coverage
under the Company's group health plan (and, if applicable, the
existing group health coverage for eligible dependents) will end
on the last day of the month in which the eligible Employee's
employment terminates. The eligible Employee and his or her
eligible dependents may then be eligible to elect temporary
continuation coverage under the Company's group health plan in
accordance with the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"). The eligible Employee (and, if
applicable, his or her eligible dependents) will be provided with
a COBRA election form and notice which describe his or her rights
to continuation coverage under COBRA. If an eligible Employee
elects COBRA continuation coverage, then the Company will pay for
COBRA coverage (such payments shall not include COBRA coverage
with respect to the Company's Section 125 health care
6
reimbursement plan) for eighteen (18) months. After such period
of Company-paid coverage, the eligible Employee (and, if
applicable, his or her eligible dependents) may continue COBRA
coverage at his or her own expense in accordance with COBRA. No
provision of this agreement will affect the continuation coverage
rules under COBRA. Therefore, the period during which the
eligible Employee must elect to continue the Company's group
health plan coverage under COBRA, the length of time during which
COBRA coverage will be made available to the eligible Employee,
and all the eligible Employee's other rights and obligations
under COBRA will be applied in the same manner that such rules
would apply in the absence of this Agreement. In the event,
however, an Employee becomes eligible for benefits under another
plan prior to the expiration of the period in which the Company
is paying benefit premiums, the Company shall no longer be
obligated to pay such benefit premiums. The Employee is required
to notify the Company of eligibility for benefits under another
plan and is expected to enroll in the new group plan at the first
eligible opportunity unless Employee chooses, at Employee's sole
expense, to continue COBRA benefits through the Company. If
Employee fails to notify the Company of Employee's eligibility
for alternative benefits, the Company shall have the right to
discontinue payment of COBRA premiums upon thirty (30) days
notice to Employee. In no event shall a cash payment be made to
Employee in lieu of the payment of COBRA premiums. The payment of
COBRA premiums by the Company shall not extend the maximum
eligible COBRA coverage period.
(B) Outplacement Services. The Company will make available
to Employee, upon his/her request, outplacement services provided
by a reputable outplacement counselor selected by the Company for
a period of six months following termination. The Company will
assume the cost of all such outplacement services. In no event
will a cash payment be made in lieu of outplacement benefits.
8. Severance Limitations. The Severance Payments referred to herein shall
be reduced as necessary so that the present value, as determined in accordance
S. 280G(d)(4) of the Internal Revenue Code, of the sum of (i) the Severance
Payments and (ii) all other payments, if any, that must be taken into account
for purposes of computation under S.280G(b)(2)(A)(ii) of the Internal Revenue
Code in respect of Employee does not exceed 2.99 times Employee's base amount,
as "base amount" is defined in S. 280G(b)(3) of the Internal Revenue Code.
9. Disclosures. Employee shall promptly disclose in writing to the
officials designated by the Company to receive such disclosures, complete
information concerning each and every invention, discovery, improvement, device,
design, apparatus, practice, process, method or product (hereinafter referred to
as "Inventions"), whether Employee considers them patentable or not, made,
developed, perfected, devised, conceived or reduced to practice by Employee,
either solely or in collaboration with others, during the period of Employee's
employment by the Company, and up to and including a period of twelve (12)
months after termination of employment, whether or not during regular working
hours, relating either directly or indirectly to the business, products,
practices or techniques of the Company or to the Company's actual or
demonstrably anticipated research or development, or resulting from any work
performed by Employee for the Company or with the equipment, supplies,
facilities or confidential information of the Company.
7
10. Confidentiality. Employee recognizes that his/her employment with the
Company will involve contact with information of substantial value to the
Company, which is not generally known in the trade and which gives the Company
an advantage over its competitors who do not know or use it, including but not
limited to techniques, designs, drawings, processes, inventions, developments,
equipment, prototypes, sales and customer information, and business and
financial information, relating to the business, products, practices or
techniques of the Company (hereinafter referred to as "Confidential
Information"). Employee shall at all times regard and preserve as confidential
such Confidential Information obtained by Employee from whatever source and
shall not, either during Employee's employment or thereafter, publish or
disclose any part of such Confidential Information in any manner, or use the
same except on behalf of the Company, without the prior written consent of the
Company. Further, Employee shall, during his/her employment and thereafter,
refrain from any acts or omissions that would reduce the value of such
Confidential Information to the Company.
11. Assignment of Rights. Employee hereby agrees that any Inventions made,
developed, perfected, devised, conceived or reduced to practice by Employee
during the period of his/her employment by the Company, and any other Inventions
made, developed, perfected, devised, conceived or reduced to practice by
Employee during said period of twelve (12) months after termination of his/her
employment if based upon the Confidential Information of the Company, relating
either directly or indirectly to the business, products, practices or techniques
of the Company or to the Company's actual or demonstrably anticipated research
or development, or resulting from any work performed by Employee for the Company
or with the equipment, supplies, facilities or Confidential Information of the
Company, are the sole property of the Company, and hereby assigns and agrees to
assign to the Company, its successors and assigns, all of my right, title and
interest in and to said Inventions, and any patent applications or Letters
Patent thereon.
NOTIFICATION
This Agreement does not apply to an invention for which no equipment,
supplies, facility, or trade secret information of the Company was used and
which was developed entirely on Employee's own time, and (a) which does not
relate (1) to the business of the Company or (2) to the Company's actual or
demonstrably anticipated research or development, or (b) which does not result
from any work performed by Employee for the Company, as defined and provided by
Section 2870 of the California Labor Code.
12. Covenant of Cooperation. Employee shall, at any time during employment
or a period of twelve (12) months thereafter, upon request and without further
compensation therefor, but with all reasonable expenses incurred by Employee to
be reimbursed, do all lawful acts, including but not limited to the execution of
papers and oaths, the giving of testimony, and the obtaining of evidence that in
the opinion of the Company, its successors or assigns, may be necessary or
desirable for obtaining, sustaining, reissuing or enforcing Letters Patent in
the United States and throughout the world for said Inventions, and for
perfecting, recording or maintaining the title of the Company, its successors
and assigns, to said Inventions and to any patent applications made and any
Letters Patent granted for said Inventions in the United States and throughout
the world.
8
13. Patent Enforcement. The Company shall have the sole discretion whether
to obtain, maintain, modify or enforce any domestic or foreign patent for said
Inventions assigned to the Company pursuant to this Agreement. The Company is
free to enter into any licensing or assignment agreement with any third party or
to use whatever means it deems best to develop, promote or market said
Inventions assigned to the Company pursuant to this Agreement or any domestic or
foreign patent thereof.
14. Claims by Third Party. As to any Inventions which were made, developed,
perfected, devised, conceived or reduced to practice by Employee during the
period of his/her employment by the Company, and up to and including a period of
twelve (12) months after termination of his/her employment, but which are
claimed for any reason to belong to an entity or person other than the Company,
Employee will promptly disclose the same in writing to the Company and shall not
disclose the same to others if the Company, within twenty (20) days thereafter,
shall claim ownership of such Inventions under the terms of this Agreement.
15. Record Keeping. Employee shall keep complete, accurate and authentic
accounts, notes, data and records of any and all of said Inventions in the
manner and form requested by the Company. Such accounts, notes, data and
records, including all copies thereof, shall be the property of the Company, and
upon its request, Employee will promptly surrender the same to it, or if not
previously surrendered, Employee will promptly surrender the same to the Company
at the conclusion of his/her employment.
16. Records Are Property of Company. Employee agrees that all accounts,
notes, data sketches, drawings and other documents and records, and all material
and physical items of any kind, including all reproductions and copies thereof,
which relate in any way to the business, products, practices or techniques of
the Company or contain Confidential Information, made by Employee or that come
into Employee's possession by reason of his/her employment are the property of
the Company and shall be promptly surrendered to the Company at the conclusion
of Employee's employment.
17. Non-solicitation. During Employee's employment with the Company and for
one (1) year thereafter, Employee will not solicit any employee of the Company
to leave the Company for any reason or to accept employment with any other
company. However, this obligation shall not affect any responsibility Employee
may have as an employee of the Company with respect to the bona fide hiring and
firing of Company personnel.
18. Retention Bonus Program. Employee shall continue to participate in, and
the Company agrees to assume, the Retention Package bonus program under the same
terms as explained in the memorandum to Employee dated November 11, 1998 from
Molecular Biosystems, Inc.
19. Prohibition Against Assignment. Employee agrees that this Agreement and
the rights, interests and benefits hereunder shall not be assigned, transferred,
pledged or hypothecated in any way by Employee or any executor, administrator,
heir, legatee, distributee or any other person claiming under Employee by virtue
of this Agreement and shall not be subject to execution, attachment or similar
process. Any attempt to assign, transfer, pledge or hypothecate or otherwise
dispose of this Agreement or of such rights, interests and benefits
9
contrary to the foregoing provisions, or the levy of any attachment or similar
process thereon shall be null and void and without effect and shall relieve the
Company of any and all liability hereunder.
20. Notice. Any and all notices, designations, consents, offers,
acceptances or any other communication provided for herein shall be given in
writing by registered or certified mail, return receipt requested, which shall
be addressed, in the case of the Company, to its office in Princeton, New
Jersey, and in Employee's case to his/her last known place of residence as
reflected on the Company's records.
21. Entire Agreement. This Agreement, and any stock option or stock
purchase agreements between by the Employee and the Company or its predecessors,
constitute the entire agreement between Employee and the Company and contains
all of the agreements between the parties with respect to the subject matter
hereof; except as provided herein and except for the obligations set forth in
paragraphs 5 through 13 of Employee's January 21, 1999 Employment Agreement with
Molecular Biosystems, Inc., this Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to the
subject matter hereof.
22. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Employee and the Company and their respective heirs, legal
representatives, executors, administrators, and successors.
23. No other Agreements. Employee affirms that Employee has no agreement
with any other party that would preclude his/her compliance with his/her
obligations under this Agreement as set forth above.
24. Governing Law. This Agreement shall be subject to and governed by the
laws of the State of California.
25. Amendment of Agreement. No change or modification of this Agreement
shall be valid unless the same is in writing and signed by Employee and the
Company. No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the person or party to be charged.
26. Severability. If any portion or portions of this Agreement shall be,
for any reason, deemed to be invalid or unenforceable, the remaining portion or
portions shall nevertheless be valid, enforceable and carried into effect,
unless to do so would clearly violate the present legal and valid intention of
the parties hereto.
27. Breach. In the event either party breaches this Agreement and the other
party prevails in an action to enforce the terms of this Agreement, the losing
party agrees to pay to the prevailing party all reasonable attorneys' fees and
costs incurred by the prevailing party in prosecuting such action, and all
damages suffered by the prevailing party.
28. Headings. The headings of this Agreement are inserted for convenience
only and are not to be considered in construction of the provisions hereof.
10
29. Waiver or Breach. The waiver by either of the parties hereto of any
breach of any provision hereof shall not be construed to be a waiver of any
succeeding breach of that provision or a waiver of any other provision of this
Agreement. 30. Arbitration of Disputes. Any controversy, dispute and/or claim in
any manner arising out of or relating to this Agreement; any claim, including
but not limited to any claim of race, age, national origin, religion, sex,
pregnancy, family leave, harassment, sexual orientation, or disability
discrimination; defamation; infliction of emotional distress; breach of
contract; violation of public policy or statute; or wrongful termination arising
out of the voluntary or involuntary termination of the Employment, shall be
settled solely by final and binding arbitration in accordance with the
Employment Dispute Resolution Regulations of the American Arbitration
Association. Any arbitration proceeding shall take place in the city of the
Employee's residence. Judgment on any decision rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The Employee and the Company
shall each pay the fees of his or its own attorneys, the expenses of his or its
witnesses and all other expenses connected with presenting his or its case in
arbitration. All other costs of the arbitration shall be determined by the
arbitrator. The arbitrator who hears and decides any controversy between the
Employee and the Company, shall in determining a remedy, have jurisdiction and
authority to issue any order or award available in a court of law.
31. Generic Drug Enforcement Act Certification. The undersigned, certifies
that he (1) has never been charged with or convicted of a federal felony for
conduct relating to the development, approval, or regulation of any drug product
or device regulated by the United States Food and Drug Administration, and (2)
has never been debarred or subject to a debarment proceeding under the Generic
Drug Enforcement Act of 1992.
WHEREAS, the parties have executed this Agreement as of the
dates set forth below.
Dated: 11/11/99 PALATIN TECHNOLOGIES, INC.
By: Xxxxxx X. Xxxxxx
------------------------------------
Officer of Palatin Technologies, Inc.
Dated: 11/11/99 "EMPLOYEE"
By: Xxxxxx X. Xxxxxxx
----------------------------------
Xxxxxx Xxxxxxx
11
EXHIBIT C
VENKATADRI CONSULTING AGREEMENT
CONSULTING AGREEMENT
This is a CONSULTING AGREEMENT ("Agreement") between XXXXX XXXXXXXXXX, an
individual ("Consultant"), and PALATIN TECHNOLOGIES, INC., a Delaware
corporation ("the Company").
WHEREAS, Consultant is currently the Chief Executive Officer of Molecular
Biosystems, Inc. ("MBI") pursuant to the terms of that certain Employment
Agreement (the "Employment Agreement") dated on or before January 21, 1999;
WHEREAS, on the date hereof, MBI has entered into that certain Merger
Agreement by and between MBI, the Company and Evergreen Merger Corporation (the
"Merger Agreement") whereby the parties have agreed that Evergreen will merge
with and into MBI;
WHEREAS, in connection with the merger contemplated by the Merger Agreement
the parties wish to terminate Consultant's existing employment agreement with
MBI, with certain provisions identified herein surviving, and to enter into a
new Consulting Agreement with Consultant pursuant to which Consultant shall have
certain responsibilities identified by the Chief Executive Officer of Palatin;
NOW THEREFORE, in consideration of the foregoing and of the material
promises and conditions contained in this Agreement the parties agree as
follows:
1. Effective Date. This Agreement is contingent on the closing of Molecular
Biosystems, Inc.'s merger with, or acquisition by, Palatin Technologies, Inc. on
or before March 31, 2000, and is effective on the closing date of such merger or
acquisition (the "Effective Date").
2. Employment.
a. Position. Consultant shall, perform assigned duties as set forth in
Exhibit A (the "Employment").
b. Obligations to Company. Consultant shall diligently, and to the
best of his ability, perform all such duties as may be assigned at the
direction, and in the sole discretion, of the Company's Chief Executive
Officer (the "CEO"). The Company shall be entitled to all of the benefits
and profits arising from or incident to the work, services and advice
rendered by the Consultant relating to the work performed for the Company.
The Consultant shall make all information available to the Company that
relates to the Company's business of which he has any knowledge and shall
not use any such information or the benefits of any such information for
his personal profit or that of any third party.
c. Time to be Devoted to Employment. Consultant shall not be engaged
in any competitive business activity without the express written consent of
the Company except Consultant may serve on the Board of Directors of no
more than two (2) other corporations with the prior written approval of the
CEO. Consultant hereby represents that he is not a party to any
agreement which would be an impediment to entering into this Consulting
Agreement and that he is permitted to enter into this Consulting Agreement
and perform the obligations hereunder. During the term of this Agreement,
and following his employment with the Company,.
3. Compensation and Benefits.
a. Annual Salary. In consideration of and as compensation for the
services agreed to be performed by Consultant hereunder, the Company agrees
to pay Consultant an annualized base salary not less than $336,000.
Thereafter, Consultant's annual Base Salary is subject to being increased
as part of the Company's annual salary review process. Changes to Base
Salary must be approved by the Board of Directors of the Company (the
"Board").
b. Bonus. Consultant will be eligible to receive an annual bonus to be
determined by the Board based on Consultant's performance, the Company's
performance, and any other reasonable factors determined by the Board of
Directors.
c. Stock Options. Consultant shall be eligible for stock option awards
at the discretion of the Board of Directors. Vesting and exercise periods
would be in accordance with the Company's stock option plan.
(1) Effect of Change of Control In the event of a Change of
Control (whether or not followed by termination of Consultant's
employment), all stock options under any Company stock option plan
which Consultant holds at the time of such Change of Control shall
become fully "vested" (i.e., immediately exercisable).
d. Participation in Benefit Plans. Consultant shall be eligible for
family medical, dental, short and long term disability, life insurance
coverage, eligibility in the Corporation's 401(k) plan, vacation and any
other such benefits as are made available to the employees of the
Corporation, all on such terms and conditions (including, where applicable,
cost-sharing with the Consultant) as are applicable to participants
generally. The Company reserves the right to amend, modify or terminate any
Consultant benefits at any time for any reason. In the event Consultant
does not qualify, or becomes ineligible, for Company's medical, dental,
vision, short or long term disability or other health insurance coverage,
the Company agrees to provide equivalent coverage, as would normally be
provided to employees, through an individual policy(s) or the equivalent,
as mutually agreed upon by the Consultant and the Company.
e. Reimbursement of Expenses. The Company shall reimburse Consultant
for all reasonable business expenses incurred by Consultant on behalf of
the Company provided that: (i) such reasonable expenses are ordinary and
necessary business expenses incurred on behalf of the Company, and (ii)
Consultant provides the Company with itemized accounts, receipts and other
documentation for such reasonable expenses as are reasonably required by
the Company.
4. Definitions. The following definitions shall apply with respect to this
agreement.
2
a. Base Salary means the Consultant's annual salary; it shall not
include any other benefits and special allowances for which the Consultant
may be eligible (e.g., bonuses). If Consultant's annual salary is adjusted
at any time following the Effective Date of this Agreement, the adjusted
annual salary would then represent Consultant's Base Salary. "Weekly
Salary" shall mean the Base Salary divided by fifty-two. "Monthly Salary"
shall mean Base Salary divided by 12.
b. Change of Control means the occurrence of any of the following
events:
(1) any "person," as such term is used in Sections 13 (d) and 14
(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the company, any trustee or other fiduciary holding
securities under an Consultant benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportion as their ownership of
stock of the Company) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 40% or more of the combined
voting power of the company's then outstanding securities; or
(2) individuals who, as of the Commencement Date, constitute the
board (as of the Commencement Date, the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the Commencement
Date whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are
used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall
be, for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board; or
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no "person" (as hereinabove defined) acquires more than 50% of
the combined voting power of the Company's then outstanding
securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the company of all or substantially all of the Company's assets.
3
c. Constructive Termination shall occur if Consultant resigns his
employment within ninety (90) days of the occurrence of any of the
following events: (i) any reduction in the Base Salary of the Consultant;
(ii) a relocation (or demand for relocation) of Consultant's place of
employment to a location more than thirty-five (35) miles from Consultant's
current place of residence in the State of California without Consultant's
written consent; or (iii) a significant or material reduction in
Consultant's job duties or level of responsibility or the imposition of
significant or material limitations on Consultant's autonomy in his
position..
d. Termination for Cause means a termination of Consultant's
employment by the Company due to the Consultant's:
(1) Willful misconduct that has a material adverse effect on the
Company's operations, prospects, reputation or business;
(2) Conviction of a felony or any crime involving moral
turpitude; or
(3) Act of fraud against, or theft of property belonging to, the
Company.
e. Termination Without Cause means a termination of Consultant's
employment by the Company for any reason other than those specified in
subsections 4(d)(1) through (3) above.
f. Disability means that as a result of any physical or mental injury
or disability, Consultant is, in the sole opinion of the Company's Board of
Directors, unable to perform the essential functions of his job, with or
without reasonable accommodation for a period of more than ninety (90) days
in the aggregate in any twelve (12) month period. A notice will be issued
when the Company has reasonably determined that Consultant has become
unable to perform substantially his services and duties hereunder with or
without reasonable accommodation because of any physical or mental injury
or disability, and that it is reasonably likely that he will not be able to
resume substantially performing his services and duties on substantially
the terms and conditions as set forth in this Employment Agreement.
5. Employment Term.
a. Employment Term. The "Employment Term" means the period commencing
on the Effective Date and terminating on the earlier of one (1) year from
the Effective Date or as set forth in Section 5(c).
b. Notice of Renewal. No less than sixty (60) days prior to the
natural expiration of the initial Employment Term of this Consulting
Agreement, and no less than sixty (60) days prior to each one year
anniversary thereafter, if applicable, the Company shall give Consultant
written notice of whether the Company will be seeking a one-year extension
4
of Consultant's services beyond the initial Employment Term or subsequent
one-year period, if applicable.
c. Termination of Employment. During the initial Employment Term, the
Company may terminate Consultant's Employment only for "Cause;" thereafter,
the Company may terminate the Consultant's Employment at any time and for
any reason (or no reason), and with "Cause" or "Without Cause," by giving
the Consultant notice in writing, subject to the severance payment
provisions set forth in Section 6. During the Employment Term, the
Consultant may terminate his Employment by giving the Company 30 days'
advance notice in writing. The Consultant's Employment shall terminate
automatically in the event of his death or on the date the Company provides
notice of its reasonable determination of Consultant's Disability.
6. Termination Benefits.
a. Agreement Supersedes Previous Severance Provisions. The provisions
of this Section 7 supersede the severance payment and severance benefits
provisions set forth in paragraphs 14 and 16 of Consultant's January 21,
1999 Employment Agreement with Molecular BioSystems, Inc., but this Section
6 does not supersede or limit the effect of paragraph 15 of that agreement
which provides as follows:
Acceleration of Stock Options in the Event of a Change of
Control. In the event of a Change of Control (whether or not
followed by termination of Consultant's employment), all
stock options under any Company [Molecular Biosystems, Inc.]
stock option plan which Consultant holds at the time of such
Change of Control shall become fully "vested" (i.e.,
immediately exercisable). The Company [Molecular Biosystems,
Inc.] shall also extend the period of exercisability of
those stock options to the maximum of four years, or the
natural expiration of the stock options, whichever is
earlier.
b. Effect of Termination for "Cause," Death or Disability. During the
Employment Term, upon (i) the termination of Consultant's Employment for
"Cause;" or (ii) Consultant's death or Disability pursuant to subsection
4(e) of this Agreement, the Company shall pay (i) Consultant's Base Salary
through the effective date of the termination of Consultant's Employment;
(ii) all of Consultant's accrued but unused vacation time; and (iii)
Consultant's group health coverage, including e.g., eligible medical,
dental and vision insurance, through the last day of the calendar month
during which the termination occurs (group health coverage after such date
being governed by COBRA), but Consultant otherwise shall not be entitled to
any severance benefits or severance payments under any provision of this
Agreement or under any other plan.
c. Effect of Non-renewal of Agreement for Successive Term, or
Constructive Termination. In the event that (i) the Company does not offer
to renew this Agreement for a successive one-year (or greater) term prior
to the expiration of the Employment Term; (ii) Consultant declines the
Company's offer to renew this Agreement for a successive
5
term; (iii) the Company terminates Consultant's employment "Without Cause";
(iv) the Consultant elects to terminate his employment during the initial
Employment Term; or (v) there is a Constructive Termination:
(1) The Company shall make the following payments to Consultant
(or his estate):
(A) Accrued Salary and Benefits. The Company shall pay
Consultant's Base Salary through the effective date of
termination of Consultant's Employment. In addition to the
Severance Payments payable to a Consultant as described below, he
shall receive the following: (i) payment for accrued but unused
vacation time; and (ii) group health coverage, including e.g.,
eligible medical, dental and vision insurance, through the last
day of the calendar month during which the termination occurs
(group health coverage after such date being governed by COBRA.)
(B) Severance Payments. The Company shall pay to Consultant
an amount equal to three (3) times the sum of the following: (a)
Consultant's annualized Base Salary in effect immediately prior
to the termination of employment, plus (b) the higher of (i) 100%
of Consultant's annual target bonus as determined under the
Company's incentive compensation plan or (ii) an average of the
last three actual bonuses accorded to Consultant by MBI. If the
Company has not adopted an incentive compensation plan as
referred to in the foregoing sentence, then the amount determined
under (ii) shall govern.
(C) Manner of Payment. Severance Payments may be paid in
accordance with regular payroll periods, in a single lump sum
payment, or any combination thereof, as deemed appropriate by the
Company. Taxes and other appropriate deductions will be withheld;
however, 401k contributions will not be allowed.
(2) The Company shall provide the following benefits to
Consultant:
(A) COBRA Premiums. Assuming that the Consultant is eligible
under the Company's group health plan (and, if applicable, the
existing group health coverage for eligible dependents), such
coverage will end on the last day of the month in which the
Consultant's employment terminates. In the event Consultant does
not qualify, or becomes ineligible, for Company's medical,
dental, vision, short or long term disability or other health
insurance coverage, the Company agrees to provide equivalent
continuing medical coverage (for Consultant and any eligible
dependents), as outlined herein this section, through an
individual policy(s) or the equivalent, as mutually agreed upon
by the Consultant and the Company. The eligible Consultant and
his eligible dependents may then be eligible to elect temporary
continuation coverage under the Company's group health plan in
accordance with the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"). The eligible Consultant (and,
if applicable, his eligible dependents) will be provided with a
COBRA election form and notice which describe his rights to
continuation coverage under COBRA. If an eligible Consultant
elects COBRA continuation coverage, then the Company will pay for
COBRA coverage (such payments shall not include COBRA coverage
with respect to the Company's Section 125 health care
reimbursement plan) for (i) eighteen (18) months, or (ii) the
6
maximum period permitted under COBRA. If Consultant does exhaust
the applicable COBRA period, the Company will reimburse
Consultant for the cost of an individual health insurance policy
in an amount not to exceed the amount of the monthly COBRA
premium previously paid by the Company pursuant to this paragraph
for the remainder of the three year period following Consultant's
termination of employment. After such period of Company-paid
coverage, the eligible Consultant (and, if applicable, his
eligible dependents) may continue coverage at his own expense in
accordance with COBRA or other applicable laws. No provision of
this agreement will affect the continuation coverage rules under
COBRA. Therefore, the period during which the eligible Consultant
must elect to continue the Company's group health plan coverage
under COBRA, the length of time during which COBRA coverage will
be made available to the eligible Consultant, and all the
eligible Consultant's other rights and obligations under COBRA
will be applied in the same manner that such rules would apply in
the absence of this Plan. In the event, however, Consultant
becomes eligible for benefits under another plan prior to the
expiration of the period in which the Company is paying benefit
premiums, the Company shall no longer be obligated to pay such
benefit premiums. The Consultant is required to notify the
Company of eligibility for benefits under another plan and is
expected to enroll in the new group plan at the first eligible
opportunity unless Consultant chooses, at Consultant's sole
expense, to continue COBRA benefits through the Company. If
Consultant fails to notify the Company of Consultant's
eligibility for alternative benefits, the Company shall have the
right to discontinue payment of COBRA premiums upon thirty (30)
days notice to Consultant. In no event shall a cash payment be
made to Consultant in lieu of the payment of COBRA premiums. The
payment of COBRA premiums by the Company shall not extend the
maximum eligible COBRA coverage period.
(B) Outplacement Services. The Company will make available
to Consultant, upon his/her request, outplacement services
provided by a reputable outplacement counselor selected by the
Company for a period of nine months following termination. The
Company will assume the cost of all such outplacement services.
In no event will a cash payment be made in lieu of outplacement
benefits
7. Severance Limitations. The Severance Payments referred to herein shall
be reduced as necessary so that the present value, as determined in accordance
S. 280G(d)(4) of the Internal Revenue Code, of the sum of (i) the Severance
Payments and (ii) all other payments, if any, that must be taken into account
for purposes of computation under S. 280G(b)(2)(A)(ii) of the Internal Revenue
Code in respect of Consultant does not exceed 2.99 times Consultant's base
amount, as "base amount" is defined in S. 280G(b)(3) of the Internal Revenue
Code.
8. Proprietary Rights and Confidentiality. As a condition of performing
services under this Agreement, Consult shall execute the "Proprietary Rights and
Confidentiality Agreement," attached hereto as Exhibit B and made a part hereof
by this reference.
9. Retention Bonus Program. Consultant shall continue to participate in,
and the Company agrees to assume, the Retention Package bonus program under the
same terms as explained in the memorandum to Consultant dated December 3, 1998
from Molecular Biosystems, Inc.
7
10. Real Estate. Consultant and MBI jointly own Consultant's principal
residence as tenants in common with respective percentage undivided interests
determined as follows: MBI's interest shall be calculated by dividing $300,000
by the purchase price of the Property, the result to be expressed as a
percentage; Consultant's interest shall be 100 percent minus MBI's interest.
These respective percentage interests shall remain constant unless otherwise
agreed by the Surviving Corporation (as defined in the Merger Agreement) and
Consultant or unless recalculated as provided below. Notwithstanding the
foregoing, (1) Consultant shall maintain the Property and pay all expenses
associated with the Property, including but not limited to all mortgage
payments; upkeep; taxes; insurance; homeowner association fees, if any; repairs
and improvements (improvements shall be at Consultant's option), and utilities;
and (2) Consultant shall not alienate his interest in the Property without the
Surviving Corporation's consent. If the Consultant fails or refuses for any
reason to perform the obligations and make the payments called for in clause (1)
of the foregoing sentence, the Surviving Corporation may cause the obligations
to be performed and/or make the payments and, at is option, (x) deduct any
expenditures from the payment of any compensation to Consultant called for by
this Agreement on any reasonable basis, or (y) add the full amount of any
expenditures directly to its $300,000 initial equity and, using the sum as the
new numerator, recalculate the respective percentage undivided interests of the
parties using as a denominator the same purchase price of the property.
Consultant shall execute and cooperate in the recording of all documents
necessary to evidence the parties' agreement contained in this paragraph.
Within 30 days of termination of Consultant's employment for any reason,
the parties shall agree on a valuation of the Property. If they cannot agree
within that time, each party shall select a certified appraiser to perform an
appraisal of the property at each selecting party's expense, and the appraisal
shall be the average of the two appraisals. The valuation reached by either
method shall be called the Agreed Valuation. Within (a) three years from the
date of termination of Consultant's employment due to death or Disability or (b)
two years from the date of termination of Consultant's employment in the event
of a Termination With or Without Cause or resignation (including resignation as
a result of a Constructive Termination), Consultant (or his estate) shall take
such actions as are necessary to purchase the Surviving Corporation's interest
in the Property for a purchase price equal to MBI' percentage interest in the
property at the date of appraisal times the Agreed Valuation. MBI shall
cooperate with Consultant to sell the Property under such circumstances if the
Consultant is unwilling or unable to purchase the Surviving Corporation's
interest, and Consultant shall be deemed to have complied with his purchase
obligation under this Subparagraph if a purchasing third party pays MBI the
purchase price.
If the Consultant is deemed to receive taxable income for any payment or
reimbursement under this subparagraph, such payments will be grossed up to
account for all applicable income taxes.
11. Prohibition Against Assignment. Consultant agrees that this Agreement
and the rights, interests and benefits hereunder shall not be assigned,
transferred, pledged or hypothecated in any way by Consultant or any executor,
administrator, heir, legatee, distributee or any other person claiming under
Consultant by virtue of this Agreement and shall not be subject to execution,
attachment or similar process. Any attempt by Consultant to assign, transfer,
pledge or hypothecate or otherwise dispose of this Agreement or of such rights,
interests
8
and benefits contrary to the foregoing provisions, or the levy of any attachment
or similar process thereon shall be null and void and without effect and shall
relieve the Company of any and all liability hereunder.
12. Notice. Any and all notices, designations, consents, offers,
acceptances or any other communication provided for herein shall be given in
writing by registered or certified mail, return receipt requested, which shall
be addressed, in the case of the Company, to its office in Princeton, New
Jersey, and in Consultant's case to his/her last known place of residence as
reflected on the Company's records.
13. Entire Agreement. This Agreement constitutes the entire agreement
between Consultant and the Company and contains all of the agreements between
the parties with respect to the subject matter hereof; except as provided herein
and except for the obligations set forth in paragraphs 5 through 13 of
Consultant's January 21, 1999 Employment Agreement with MBI, this Agreement
supersedes any and all other agreements, either oral or in writing, between the
parties with respect to the subject matter hereof.
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Consultant and the Company and their respective heirs, legal
representatives, executors, administrators, and successors.
15. No other Agreements. Consultant affirms that Consultant has no
agreement with any other party that would preclude his/her compliance with
his/her obligations under this Agreement as set forth above.
16. Governing Law. This Agreement shall be subject to and governed by the
laws of the State of California.
17. Amendment of Agreement. No change or modification of this Agreement
shall be valid unless the same is in writing and signed by Consultant and the
Company. No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the person or party to be charged.
18. Severability. If any portion or portions of this Agreement shall be,
for any reason, deemed to be invalid or unenforceable, the remaining portion or
portions shall nevertheless be valid, enforceable and carried into effect,
unless to do so would clearly violate the present legal and valid intention of
the parties hereto.
19. Breach. In the event either party breaches this Agreement and the other
party prevails in an action to enforce the terms of this Agreement, the losing
party agrees to pay to the prevailing party all reasonable attorneys' fees and
costs incurred by the prevailing party in prosecuting such action, and all
damages suffered by the prevailing party.
20. Headings. The headings of this Agreement are inserted for convenience
only and are not to be considered in construction of the provisions hereof.
9
21. Waiver or Breach. The waiver by either of the parties hereto of any
breach of any provision hereof shall not be construed to be a waiver of any
succeeding breach of that provision or a waiver of any other provision of this
Agreement.
22. Arbitration of Disputes. Any controversy, dispute and/or claim in any
manner arising out of or relating to this Agreement; any claim, including but
not limited to any claim of race, age, national origin, religion, sex,
pregnancy, family leave, harassment, sexual orientation, or disability
discrimination; defamation; infliction of emotional distress; breach of
contract; violation of public policy or statute; or wrongful termination arising
out of the voluntary or involuntary termination of the Employment, shall be
settled solely by final and binding arbitration in accordance with the
Employment Dispute Resolution Regulations of the American Arbitration
Association. Any arbitration proceeding shall take place in the city of the
Employee's residence. Judgment on any decision rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The Employee and the Company
shall each pay the fees of his or its own attorneys, the expenses of his or its
witnesses and all other expenses connected with presenting his or its case in
arbitration. All other costs of the arbitration shall be determined by the
arbitrator. The arbitrator who hears and decides any controversy between the
Consultant and the Company, shall in determining a remedy, have jurisdiction and
authority to issue any order or award avaliable in a court of law.
23. Generic Drug Enforcement Act Certification. The undersigned, certifies
that he (1) has never been charged with or convicted of a federal felony for
conduct relating to the development, approval, or regulation of any drug product
or device regulated by the United States Food and Drug Administration, and (2)
has never been debarred or subject to a debarment proceeding under the Generic
Drug Enforcement Act of 1992.
10
WHEREAS, the parties have executed this Agreement as of the dates set forth
below.
Dated: 11/11/99 PALATIN TECHNOLOGIES, INC.
By: Xxxxxx X. Xxxxxx
-----------------------------
Name:
Title:
Dated: 11/11/99 "CONSULTANT"
By: Xxxxx Xxxxxxxxxx
-----------------------------
Xxxxx Xxxxxxxxxx
11
Exhibit A
o In the event that he is chosen to be an MBI Director (as defined in the
Merger Agreement) participate in Company Board and Annual Meetings.
o Works on successful integration of MBI (as surviving corporation) as a
wholly owned subsidiary of Palatin.
o Assist the Company with respect to negotiating settlements and defending
litigations involving MBI.
o Identify company and product opportunities for MBI (as surviving
corporation) and work closely with the CEO and corporate development to
evaluate and pursue.
o Utilize international experience to assist company in European and Asian
partnering opportunities (including, among others, the Chugai
relationship).
12
Exhibit B
PROPRIETARY RIGHTS AND CONFIDENTIALITY AGREEMENT
In return for new or continued employment by Company, Consultant
acknowledges and agrees as follows:
1. For the purposes of this Agreement:
a. "Information" shall mean any and all discoveries, ideas, facts, or
any other information relating to the operation of the Company's business,
of whatever type and in whatever form, which is disclosed or otherwise made
available to Consultant by Company in confidence, including, but not
limited to, all information relating to personnel, sales, customers and
financial and scientific matters of Company, and any other discoveries,
ideas, business plans, or facts relating to any of the foregoing, whether
developed by Consultant or by others. Except that "Information" does not
include information that is generally known by the public or with in the
industry of the Company through no wrongful act of the Consultant;
b. "Trade Secret" shall mean any and all Information that derives
independent economic value, actual or potential, from not being generally
known to persons who can obtain economic value from its disclosure or use,
and that is the subject of reasonable efforts by Company to maintain its
secrecy.
c. "Inventions" shall mean designs, trademarks, discoveries, formulae,
processes, manufacturing techniques, Trade Secrets, Information,
improvements, ideas, inventions or copyrightable works.
2. Consultant understands that any and all Information and Trade Secrets
are received or developed by Consultant and are disclosed to Consultant in
confidence, and are to be used only for the purposes for which they are
provided. During the term of Consultant's employment with Company or thereafter,
Consultant shall not, directly or indirectly, except as required by the normal
business of Company or expressly consented to in writing by the Board of
Directors of Company:
a. disclose, publish or make available any Information or Trade
Secrets, other than to a Consultant, officer or director of Company who, in
the reasonable exercise of Consultant's judgment, needs to know such
Information or Trade Secrets in order to perform his or her duties to
Company;
b. sell, transfer or otherwise use or exploit or permit the sale,
transfer, use or exploitation of the Information or Trade Secrets for any
purposes other than those for which they were provided;
c. remove from Company's premises or retain upon termination any
Information or Trade Secrets, any copies thereof or any tangible or
retrievable materials containing or constituting Information or Trade
Secrets.
13
3. Upon termination of Consultant's employment or upon request by Company,
Consultant shall return to Company all tangible forms of Information and Trade
Secrets.
4. Consultant agrees that the Company has invested substantial time, effort
and money in attracting and developing a customer base and assembling Company's
staff of personnel. Accordingly, Consultant agrees that all customers of
Company, which Consultant now or hereafter services during Consultant's
employment by Company and all prospective customers from whom Consultant has
solicited business while in the employ of Company, shall be solely the customers
of Company. Consultant agrees that Consultant shall not, for a period of one
year immediately following the termination of employment with Company, either
directly or indirectly, solicit business, as to products or services competitive
with those of the Company, from any of the Company's customers and shall not
seek to induce any of the Company's customers to cease using Company's products
or services. Consultant also agrees that during employment and for one year
after termination of employment, Consultant shall not directly or indirectly
induce or solicit any of the Company's employees to leave their employment with
Company.
5. Consultant agrees to disclose promptly to the Company any and all
Inventions, whether or not patentable and whether or not reduced to practice,
conceived or learned by Consultant during the period of employee's employment,
either alone or jointly with others, which relate to or result from the actual
or anticipated business, work, research or investigations of the Company, or
which result, to any extent, from use of the Company's premises or property.
Consultant agrees to deliver to Company any drawn, written or computer-generated
materials and any models relating to Inventions, to cooperate fully during and
after employment in the securing of patent or copyright protection or other
similar rights in any countries and in giving evidence and testimony and in
executing related papers as requested by Company. Consultant understands that
Company is the sole owner of any and all property rights in Inventions,
including, but not limited to, the right to use, sell, license or otherwise
transfer or exploit the Inventions, and the right to make such changes in them
and the uses thereof as Company may from time to time determine. Consultant
agrees to disclose and assign to Company, without further consideration,
Consultant's entire right, title, and interest (throughout the United States and
in all foreign countries) free and clear of all liens and encumbrances, in and
to all Inventions, which shall be the sole property of Company, whether or not
patentable. Consultant also agrees to cooperate with Company both during and
after employment in obtaining and enforcing patents, copyrights, and other
protection of Company's rights in Inventions. As provided in section 2870 of the
California Labor Code, this Section 4 does not apply to any Inventions:
a. for which no equipment, supplies, facility, or Trade Secrets of
Company were used;
14
b. which were developed entirely on Consultant's own time; and
c. which do not relate at the time of conception or reduction to
practice to Company's current business or its actual or demonstrably
anticipated research or development, or which do not result from any work
performed by Consultant for Company.
6. Consultant certifies that Consultant has no continuing obligations with
respect to the assignment of Inventions or rights to Inventions, nor does
Consultant claim any previous, unpublished Inventions within the scope of this
Agreement as Consultant's own, except for the Inventions, if any, which
Consultant has listed in Appendix A to this Agreement.
7. Consultant certifies that there is no other contract or duty on
Consultant's part that would interfere with Consultant's ability to provide
services to Company. Consultant agrees that, in performing work for Company,
Consultant will not knowingly use any patented inventions, trade secrets,
confidential information or proprietary information obtained from third parties,
including any prior employer or any other organization or individual. Consultant
agrees not to use copyrighted materials, nor any portion thereof, of any other
company or person while writing computer programs, manuals or any other
materials for Company, and that Consultant will not bring onto the premises of
Company any unpublished document or other property containing proprietary
information or trade secrets belonging to Consultant's former or concurrent
employers or companies, unless consented to in writing by said employers or
companies.
8. This Agreement does not constitute a contract of employment and does not
in any way restrict Consultant's right or the right of Company to terminate
Consultant's employment.
9. If any provision of this Proprietary Rights and Confidentiality
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall, nevertheless, continue in full
force and effect without being impaired or invalidated in any way.
10. This Proprietary Rights and Confidentiality Agreement constitutes the
entire agreement between Company and Consultant pertaining to the protection of
Information and Trade Secrets and the assignment of Inventions, and supersedes
all prior or contemporaneous written or verbal agreements and understandings
with Consultant in connection with the subject matter hereof. Any modification
of this Agreement will be effective only if it is in writing and signed by the
parties to be bound thereby.
11. Consultant shall, at any time during employment or thereafter, upon
request and without further compensation therefor, but with all reasonable
expenses incurred by Consultant to be reimbursed, do all lawful acts, including
but not limited to the execution of papers and oaths, the giving of testimony,
and the obtaining of evidence that in the opinion of the Company, its successors
or assigns, may be necessary or desirable for obtaining, sustaining, reissuing
or enforcing Letters Patent in the United States and throughout the world for
said Inventions, and for perfecting, recording or maintaining the title of the
Company, its successors
15
and assigns, to said Inventions and to any patent applications made and any
Letters Patent granted for said Inventions in the United States and throughout
the world.
12. The Company shall have the sole discretion whether to obtain, maintain,
modify or enforce any domestic or foreign patent for said Inventions assigned to
the Company pursuant to this Agreement. The Company is free to enter into any
licensing or assignment agreement with any third party or to use whatever means
it deems best to develop, promote or market said Inventions assigned to the
Company pursuant to this Agreement or any domestic or foreign patent thereof.
13. As to any Inventions which were made, developed, perfected, devised,
conceived or reduced to practice by Consultant during the period of his/her
employment by the Company, and up to and including a period of twelve (12)
months after termination of his/her employment, but which are claimed for any
reason to belong to an entity or person other than the Company, Consultant will
promptly disclose the same in writing to the Company and shall not disclose the
same to others if the Company, within twenty (20) days thereafter, shall claim
ownership of such Inventions under the terms of this Agreement.
14. Consultant shall keep complete, accurate and authentic accounts, notes,
data and records of any and all of said Inventions in the manner and form
requested by the Company. Such accounts, notes, data and records, including all
copies thereof, shall be the property of the Company, and upon its request,
Consultant will promptly surrender the same to it, or if not previously
surrendered, Consultant will promptly surrender the same to the Company at the
conclusion of his/her employment.
15. Consultant agrees that all accounts, notes, data sketches, drawings and
other documents and records, and all material and physical items of any kind,
including all reproductions and copies thereof, which relate in any way to the
business, products, practices or techniques of the Company or contain
Confidential Information, made by Consultant or that come into Consultant's
possession by reason of his/her employment are the property of the Company and
shall be promptly surrendered to the Company at the conclusion of Consultant's
employment.
Dated:____________________ ______________________________
Consultant
16
Appendix A
I have made or improved the following Inventions and claim sole right to
them. I include below the names of co-inventors or employers to whom I owe a
continuing obligation with respect to these Inventions.
Dated:____________________ ______________________________
Consultant
17
EXHIBIT D
MATERIAL TERMS OF CERTAIN AMENDMENTS TO PALATIN EMPLOYMENT
AGREEMENTS
EXHIBIT D
MATERIAL TERMS OF AMENDMENTS TO EMPLOYMENT AGREEMENTS
Palatin currently has employment agreements with Messrs. Quilty, Spana,
Xxxxx and Xxxxxx. These agreements will each be amended to reflect the following
changed terms:
QUILTY
Base Salary not less than current salary with appropriate annual merit increases
as determined by Palatin Board of Directors.
Anti-dilution provisions will be permanently waived
Change of control provisions as they relate to the instant transaction will be
waived
Change of control provisions will be amended to reflect that if at the end of
the one year anniversary of the Effective Date, but before the end of the third
(3) year with Palatin, he chooses to terminate his employment, he shall be
entitled to a three-year severance package (Change of Control). If Palatin
terminates his employment at any time between the Effective Date and three years
from the Effective Date, he shall be entitled to his three year severance
package (Change of Control).
If revised change of control provisions become applicable, all options
accelerate and vest and he will have four years to exercise.
Employee will devote as much time as is reasonably necessary to adequately
perform his duties at Palatin. Any employment outside of Palatin (other than
acting as Chairman or director of an entity, so long as doing so does not
involve significant time commitment and does not involve participation in day to
day activities of such entity) will be terminated by December 31, 2000.
All other material terms of existing employment agreement will remain the same
SPANA
Base Salary not less than current salary with appropriate annual merit increases
as determined by Palatin Board of Directors.
Anti-dilution provisions will be permanently waived
Change of control provisions as they relate to the instant transaction will be
waived
Change of control provisions will be amended to reflect that if at the end of
the one year anniversary of the Effective Date, but before the end of the third
(3) year with Palatin, he chooses to terminate his employment, he shall be
entitled to a two-year severance package (Change of Control). If Palatin
terminates his employment at any time between the Effective Date and three years
from the Effective Date, he shall be entitled to his two-year severance package
(Change of Control).
If revised change of control provisions become applicable, all options
accelerate and vest and he will have four years to exercise.
All other material terms of existing employment agreement will remain the same
XXXXX
Base salary will increase to an amount not less than $180,000 with appropriate
annual merit increases as determined by Palatin Board of Directors
Anti-dilution provisions will be permanently waived
Change of control provisions as they relate to the instant transaction will be
waived
Change of control provisions will be amended to reflect that if at the end of
the one year anniversary of the Effective Date, but before the end of the third
(3) year with Palatin, he chooses to terminate his employment, he shall be
entitled to a two-year severance package (Change of Control). If Palatin
terminates his employment at any time between the Effective Date and three years
from the Effective Date, he shall be entitled to his two year severance package
(Change of Control).
If revised change of control provisions become applicable, all options
accelerate and vest and he will have four years to exercise.
Employee will devote as much time as is reasonably necessary to adequately
perform his duties at Palatin. Any employment outside of Palatin (other than
acting as Chairman or director of an entity, so long as doing so does not
involve significant time commitment and does not involve participation in day to
day activities of such entity) will be terminated by December 31, 2000.
All other material terms of existing employment agreement will remain the same
XXXXXX
Base Salary not less than current salary with appropriate annual merit increases
as determined by Palatin Board of Directors.
Anti-dilution provisions will be permanently waived
2
Change of control provisions as they relate to the instant transaction will be
waived
Change of control provisions will be amended to reflect that if at the end of
the one year anniversary of the Effective Date, but before the end of the third
(3) year with Palatin, he chooses to terminate his employment, he shall be
entitled to a two-year severance package (Change of Control). If Palatin
terminates his employment at any time between the Effective Date and three years
from the Effective Date, he shall be entitled to his two year severance package
(Change of Control).
If revised change of control provisions become applicable, all options
accelerate and vest and he will have four years to exercise.
All other material terms of existing employment agreement will remain the same
3
