XXXXXXX X. XXXXXX STOCK OPTION AGREEMENT
Palatin Technologies, Inc., a Delaware corporation (the "Company") and
Xxxxxxx X. Xxxxxx ("Optionee") agree:
1. Recitals. As of the date hereof, the Stockholders of the Company
approved the grant of a nonqualified stock option to Optionee to purchase 74,196
shares of Palatin Common Stock (as defined in Section 2 below) at an exercise
price of $1.00 per share (the "New Option") for the purpose of providing
additional compensation to Optionee. This Xxxxxxx X. Xxxxxx Stock Option
Agreement (the "Agreement") sets forth the terms and conditions of such grant,
and is effective as of March 24, 1998.
On December 4, 1997, the Board of Directors of the Company adopted,
subject to stockholder approval, a resolution whereby certain options previously
granted to Optionee (the "Original Options") under plans of RhoMed Incorporated
("RhoMed") would be replaced by the New Option. Upon stockholder approval of the
New Option, the Original Options immediately terminated.
2. Definitions. In addition to capitalized terms defined in context, the
following capitalized terms have the following meanings in this Agreement:
"1995 EISOP" means RhoMed's 1995 Employee Incentive Stock Option Plan.
"1995 NQSOP" means RhoMed's 1995 Nonqualified Stock Option Plan.
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated under the Internal Revenue Code of 1986, as amended, or
any successor legislation and regulations.
"Committee" means the Compensation Committee of the Company's Board of
Directors, or if the Company's Board of Directors has not established a
Compensation Committee, then it is the Company's Board of Directors.
"Employee" means an employee, as determined in accordance with the
withholding tax rules under Code section 3401(c), of the Company, its parent, as
defined in Code section 424(e), or subsidiary, as defined in Code section
424(f).
"Option Price" means the number of shares of Option Stock as to which
the New Option is being exercised, multiplied by the Exercise Price per share.
"Option Stock" means Palatin Common Stock obtained upon exercise of the
New Option.
"Palatin Common Stock" means the $.01 par value common stock of the
Company, or any other stock issuable upon exercise of the New Option as adjusted
pursuant to this Agreement, or as substituted or assumed as permitted by this
Agreement.
3. Termination of Original Options. Effective as of March 24, 1998, the
following Original Options set forth below at the purchase price indicated are
terminated:
--------------------------------------------------------------------------------
RHOMED DATE OF EXERCISE PRICE EXERCISE PRICE
PLAN GRANT OPTION STOCK (AGGREGATE) (PER SHARE)
--------------------------------------------------------------------------------
1995 EISOP 6/21/96 73,732.99 $399,999.75 $5.42
--------------------------------------------------------------------------------
1995 NQSOP 6/21/96 464.84 $2,521.75 $5.42
--------------------------------------------------------------------------------
4. Grant of New Option. Effective as of March 24, 1998, the Company
grants a nonqualified stock option to Optionee to purchase 74,196 shares of
Palatin Common Stock of the Company at an exercise price of $1.00 per share (the
"Exercise Price").
5. Exercisability of New Option. The New Option is immediately
exercisable by Optionee as to one-third of the total number of shares, with an
additional one-third exercisable on June 21, 1998 and the remaining one-third
exercisable on June 21, 1999. The exercisability of the New Option is
cumulative, so that after any portion of the New Option becomes exercisable,
that portion will remain exercisable until the Final Expiration Date (as defined
in Section 7 below).
6. Exercise of Option; conditions on exercise. If the Company determines
that exercise of the New Option or issuance of Option Stock will violate any
tax, securities or other law or regulation, then the Optionee may not exercise
the New Option until the Company determines that the exercise or issuance will
comply with that law or regulation. Otherwise, the Optionee may exercise all or
any part of the exercisable portion of the New Option by delivering written
notice directed to the Vice President and Chief Financial Officer of the Company
at the Company's principal place of business (214 Xxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxx, Xxx Xxxxxx, 00000, or such other address as the Company may specify
in writing to the Optionee), stating the number of shares of Option Stock which
the Optionee intends to purchase, along with payment in immediately available
U.S. funds of the Option Price for the number of shares specified, and the entry
by the Optionee into such arrangements with the Company with respect to federal
income tax withholding as the Company may reasonably require. The Company will
issue and deliver the shares promptly upon exercise. In lieu of issuing
fractional shares of Palatin Common Stock, the Company will pay the Optionee
cash for any fraction of a share exercised, at the rate of the closing market
price per share of Palatin Common Stock on the date of exercise or last date
preceding exercise on which Palatin Common Stock was traded, as quoted on any
national securities exchange or automated quotation system, including the OTC
Electronic Bulletin Board, on which the Palatin Common Stock is traded.
7. Period for exercise of New Option. The New Option will be exercisable
until June 21, 2006 (the "Final Expiration Date"), subject to earlier
termination as set forth in Section 8 below.
2
8. Termination of employment and New Option. The granting of the New
Option does not grant any right to the Optionee to continue as an Employee. On
the date when the Optionee ceases to be an Employee for any reason, the New
Option will, to the extent that such New Option is not immediately exercisable,
terminate, and to the extent that such New Option is immediately exercisable,
terminate upon the earlier of 90 days after the date of termination of
employment and the Final Expiration Date.
9. Accelerated exercisability and early expiration of New Option in
certain corporate transactions. If the Company enters into an agreement to
engage in a transaction to which Code section 424(a) would apply if the Option
were an incentive option as defined in Code section 422 and the requirements of
Code sections 424(a)(1) and 424(a)(2) were met, and no corporation either
substitutes a new option for or assumes the New Option, or agrees in writing to
do so upon consummation of the transaction, then thirty days before the agreed
date of consummation of the transaction, the New Option will become exercisable
as to the entire amount of Option Stock and will expire on the earlier of (i)
consummation of the transaction or (ii) the New Option's original expiration
date. The Committee will give the Optionee written notice of the accelerated
exercisability and potential early expiration of the New Option at least thirty
days before its potential early expiration date.
10. Changes in Stock. If the Company's stockholders approve an amendment
to the Company's certificate of incorporation which effects a change in the
Palatin Common Stock or rights of Palatin Common Stock holders, or an exchange,
reclassification or cancellation of the Palatin Common Stock or rights of
Palatin Common Stock holders, then the Committee will immediately adjust the
amount and/or class of Option Stock and/or the Option Price so that the
New Option will be exercisable at the same aggregate curities which the Optionee
would have been entitled to receive had the Optionee exercised the New Option in
full before the amendment.
11. Transferability of New Option and Option Stock. The New Option is
not transferable otherwise than by will or the laws of descent and distribution,
and is exercisable, during the Optionee's lifetime, only by the Optionee. The
Company may restrict transferability of Option Stock issued upon exercise, in
order to comply, in the Company's judgment, with federal and state securities
laws and/or the requirements of any stock exchange on which the Palatin Common
Stock is then traded.
12. Purchase for investment and withholding. Unless the Option Shares to
be issued upon the exercise of the New Option shall be registered prior to the
issuance thereof under the Securities Act of 1933, as amended, the Optionee
will, as a condition of the Company's obligation to issue such Option Shares, be
required to give a representation in writing that he is acquiring such shares
for his own account as an investment and not with a view to, or for sale in
connection with, the distribution of any thereof.
3
13. Stockholder rights. Neither the Optionee nor the Optionee's
successor has any of the rights of a stockholder of the Company, with respect to
any Option Stock, until the Company has received payment in full of the Option
Price for that Option Stock upon exercise.
14. Miscellaneous. This Agreement benefits and is binding on the
parties, their successors and assigns, represents the entire agreement of the
parties as to its subject matter, may be modified only in writing signed by the
parties (except as permitted under paragraph 10 of this Agreement), and is
governed by the laws of the state of Delaware.
Dated as of March 24, 1998.
Palatin Technologies, Inc. Optionee:
by___________________________ ___________________________
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxxx
Vice President and
Chief Financial Officer
4
