# SECURITIES PURCHASE
AGREEMENT

This
Securities Purchase Agreement (this Agreement) is made effective as of
August 18, 2004 (the Effective Date) by and between Palatin
Technologies, Inc. a Delaware corporation, with its principal place of business at Cedar
Brook Corporate Center, 4C Cedar Brook Drive, Cranbury, New Jersey 08512 (the
Company), and King Pharmaceuticals, Inc., a Tennessee corporation with
a place of business at 501 Fifth Street, Bristol, Tennessee 37620 (the
Purchaser). The Company and the Purchaser are sometimes hereafter
referred to individually as a Party and together as the Parties.
Capitalized terms not defined in this Agreement shall have the meaning given to them in
the Collaborative Development and Marketing Agreement by and between the Company and the
Purchaser, dated August 12, 2004 (the Collaboration Agreement).

WHEREAS,
the Company and the Purchaser have previously entered into the Collaboration Agreement for
the purpose of developing and marketing Products derived from Palatin Technology, Palatin
Patent Rights, and Proprietary Materials; and

WHEREAS,
the Company desires to issue and sell to the Purchaser, from time to time,and the Purchaser desires to acquire, from time to time, on the terms and
subject to the conditions set forth in this Agreement, shares of the Companys common
stock, par value $0.01 per share (the Common Stock), and warrants to
purchase shares of Common Stock for an aggregate purchase price of up to [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] (the
Purchase Price) in a private placement basis pursuant to an exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended (the
Securities Act), as provided in this Agreement and the
Collaboration Agreement.

NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained in this
Agreement, the Parties hereto agree as follows:

# ARTICLE 1 PURCHASE AND
SALE OF THE COMMON STOCK AND WARRANT

1.1 Initial Closing.
Subject to the terms and conditions set forth in this Agreement, and in reliance on the
representations and warranties set forth in this Agreement, the Company hereby issues and
sells to the Purchaser, and the Purchaser hereby purchases from the Company on the date
hereof (i) One Million, One Hundred and Seventy Six Thousand, One Hundred and Twenty
Five (1,176,125) shares of Common Stock (the Initial Common Stock) and
(ii) a three (3) year warrant to purchase Two Hundred Thirty Five Thousand, Two
Hundred and Twenty Five (235,225) shares of the Companys Common Stock at an exercise
price of $4.25 per share, for an aggregate purchase price of $5 million. The warrant shall
be in the form attached to the Collaboration Agreement as Exhibit I, (the
Warrant). The closing of the purchase and sale of the Initial Common
Stock and Warrant (the Initial Closing) shall take place at the offices
of Mintz Levin Cohn Ferris Glovsky and Popeo PC, 666 Third Ave., New York, NY 10017
at 10:00 a.m. on the date hereof, or at such time and date thereafter as the
Purchaser and the Company may agree (the Initial Closing Date). At the
Initial Closing, the Company will execute, issue, and deliver to the Purchaser (i) a
certificate in the name of the Purchaser for the number of shares of Initial Common Stock
being purchased against delivery by such Purchaser to the Company of the applicable
portion of the Purchase Price by wire transfer or other method acceptable to the Company
and (ii) the Warrant.

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1.2 Subsequent
Closings. In accordance with Section 6.3 of the Collaboration Agreement, and
subject to Article 7 hereof, upon achievement of the development milestones as determined
and identified in Section 6.3 of the Collaboration Agreement, additional closings (each a
Subsequent Closing) of the issuance of Common Stock
(Additional Common Stock) and the issuance of an additional Warrant
(the Additional Warrant) shall take place at the offices of Mintz Levin
Cohn Ferris Glovsky and Popeo PC, 666 Third Ave., New York, NY 10017 on the date that is
within ten (10) days after the determination of the first achievement of each such
development milestone, or at such time and date thereafter as the Purchaser and the
Company may agree (each a Subsequent ClosingDate), but in no event
later than the date milestone payments are made pursuant to Section 6.3.1 of the
Collaboration Agreement. At each Subsequent Closing, the Company will execute, issue and
deliver to the Purchaser a certificate in the name of the Purchaser for the number of
shares of Additional Common Stock being purchased against delivery by such Purchaser to
the Company of the applicable portion of the purchase price by wire transfer or other
method acceptable to the Company. In addition, at the Subsequent Closing that occurs in
connection with the milestone identified in Section 1.2(a) below, the Company will
execute, issue and deliver to the Purchaser the Additional Warrant. Subject to the terms
and conditions set forth in this Agreement, and in reliance on the representations and
warranties as shall be made on each Subsequent Closing Date, the Company agrees to issue
to the Purchaser at the applicable Subsequent Closing, such number of shares of Additional
Common Stock, and the Company further agrees to issue to the Purchaser the Additional
Warrant upon completion of the milestone identified in (a) below, in each case as shall be
determined as follows:

(a)    
          upon [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE
          24b-2.] for ED Product, as determined in accordance with Section 6.3.4 of
          the Collaboration Agreement, by dividing [INFORMATION OMITTED AND FILED
          SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] (the aggregate Purchase
          Price to be paid by the Purchaser for the number of shares to be issued pursuant
          to this Section 1.2(a)) by the product of (i) one and one-fourth
          (1.25) and (ii) the average closing price of the Companys common
          stock as listed on the American Stock Exchange (AMEX) (or, if
          not listed on AMEX, such other principal national securities exchange or market
          system on which the shares are listed)) for the twenty (20) trading day period
          (the 20 Day Average) immediately preceding the date of
          achievement of such development milestone;

(b)    
          upon [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE
          24b-2.] for ED Product, as determined in accordance with Section 6.3.4 of
          the Collaboration Agreement, by dividing [INFORMATION OMITTED AND FILED
          SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] (the aggregate Purchase
          Price to be paid by the Purchaser for the number of shares to be issued pursuant
          to this Section 1.2(b)) by the product of (i) one and one-fourth
          (1.25) and (ii) the 20 Day Average for the period immediately preceding the
          date of achievement of such development milestone;

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(c)    
          upon [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE
          24b-2.] for FSD Product, as determined in accordance with Section 6.3.4 of
          the Collaboration Agreement, by dividing [INFORMATION OMITTED AND FILED
          SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.](the aggregate Purchase
          Price to be paid by the Purchaser for the number of shares to be issued pursuant
          to this Section 1.2(c)) by the product of (i) one and one-fourth
          (1.25) and (ii) the 20 Day Average for the period immediately preceding the
          date of achievement of such development milestone;

(d)    
          upon [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE
          24b-2.] for ED Product, as determined in accordance with Section 6.3.4 of
          the Collaboration Agreement, by dividing [INFORMATION OMITTED AND FILED
          SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] (the aggregate Purchase
          Price to be paid by the Purchaser for the number of shares to be issued pursuant
          to this Section 1.2(d)) by the product of (i) one and one-fourth
          (1.25) and (ii) the 20 Day Average for the period immediately preceding the
          date of achievement of such development milestone; and

(e)    
          upon [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE
          24b-2.] for FSD Product, as determined in accordance with Section 6.3.4 of
          the Collaboration Agreement, by dividing [INFORMATION OMITTED AND FILED
          SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] (the aggregate purchase
          price to be paid by the Purchaser for the number of shares to be issued pursuant
          to this Section 1.2(d)) by the product of (i) one and one-fourth
          (1.25) and (ii) the 20 Day Average for the period immediately preceding the
          date of achievement of such development milestone;

provided; however that, if the
purchase of Additional Common Stock pursuant to any or all of the foregoing clauses would
result in the Purchaser becoming the beneficial owner (as defined in Rule
13d-3 of the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the Exchange Act)) of 5% or greater of the total
shares of Common Stock outstanding on such Subsequent Closing Date, then the Purchaser
shall have the right to, at its sole option, make a nonrefundable, noncreditable cash
milestone payment to the Company pursuant to Section 6.3.1 of the Collaboration Agreement
in lieu of purchasing Additional Common Stock.

Notwithstanding the foregoing, on any
Subsequent Closing Date, the Purchaser may, at its sole option, elect to make a
nonrefundable, noncreditable cash milestone payment to the Company pursuant to Section
6.3.1 of the Collaboration Agreement in lieu of purchasing Additional Common Stock and, in
the case of Section 1.2(a), the Additional Warrant. [INFORMATION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

If at any time following the Initial
Closing or any Subsequent Closing the Company takes any actions that would result in the
Common Stock beneficially owned by the Purchaser representing 5% or greater of the then
outstanding Common Stock of the Company, the Company shall be obligated, at the written
request of the Purchaser, to purchase an amount of Common Stock from the Purchaser, within
5 business days of the Purchasers written request, in an aggregate amount such that
following such purchase by the Company, the Purchaser will be the beneficial owner of less
than 5% of the then outstanding Common Stock. The price to be paid by the Company for such
purchase shall be the 20 Day Average for the period immediately preceding such purchase.
The purchase price shall be paid by wire transfer or other method acceptable to the
Purchaser and the Purchaser shall deliver to the Company the certificate(s) representing
the shares of Common Stock purchased by the Company.

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In the event fractional shares result
from the calculations identified in this Section 1.2, such fractional share shall be
rounded down to the nearest whole number of shares.

The shares of Common Stock underlying
each of the Warrant and the Additional Warrant shall be referred to herein as the
Warrant Shares and the form of Warrant attached to the Collaboration Agreement
as Exhibit I shall be the form for each of the Warrant and the Additional Warrant with the
date of issuance, the number of shares, the exercise price and the expiration date, being
the only differences between the two warrants, unless otherwise agreed to in writing by
the Company and the Purchaser.

# ARTICLE 2 THE
COMPANYS REPRESENTATIONS AND WARRANTIES

In
order to induce the Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, and except as set forth on the Company Disclosure
schedule attached hereto as Exhibit A, if any, the Company represents and warrants
to the Purchaser as follows:

2.1 Incorporation, Standing
and Qualification of the Company. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware. The Company
has the requisite power and authority to own, lease and operate its properties and assets
and to carry on its business as now being conducted and to the extent described in the
Companys SEC Filings (as defined below). The Company is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each jurisdiction in
which the failure to be so qualified would have a material adverse effect on the assets,
properties, condition, financial or otherwise, or in the results of operations or
prospects of the Company or its subsidiaries considered as a whole (a Material
Adverse Effect).

2.2 Corporate Power and
Authority. The Company has the requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder, including the authorization,
issuance and delivery of the Warrant and the Initial Common Stock at the Initial Closing,
the Additional Common Stock, and the Additional Warrant, as applicable, at each of the
Subsequent Closings, if any, and the Warrant Shares upon the valid exercise of the Warrant
and the Additional Warrant, as applicable, and to engage in the transactions contemplated
hereby. The Company has taken all requisite corporate action to make all the provisions of
this Agreement the valid and enforceable obligations they purport to be. No consent of any
stockholder of the Company is required for the valid execution, issuance and delivery by
the Company of the Agreement, the Initial Common Stock, the Warrant, the Additional
Warrant, the Warrant Shares or, to the Companys knowledge, the Additional Common
Stock. Upon the execution and delivery hereof and thereof, this Agreement and the Warrant
will be the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, subject to laws of general application
from time to time in effect affecting creditors rights and the exercise of judicial
discretion in accordance with general equitable principles.

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2.3 Capitalization. The
authorized capital stock of the Company consists of 75,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock, par value $0.01 per share, of which 264,000 shares
have been designated Series A Convertible Preferred Stock (Series A Preferred
Stock).  The Company has adopted its 1996 Stock Option Plan (the
Plan) under which 5,000,000 shares of Common Stock are reserved for
issuance.  As of August 10, 2004, there were (i) 52,804,381 shares of Common Stock
issued and outstanding, (ii) 11,697 shares of Series A Preferred Stock issued and
outstanding, which are convertible into 444,752 shares of Common Stock, (iii) 308 shares
of Common Stock reserved for issuance to previous holders of Series A Preferred Stock due
to a retroactive conversion price adjustment, (iv) 4,392,775 shares of Common Stock
reserved for issuance on exercise of outstanding options, and (v) 8,019,300 shares of
Common Stock reserved for issuance on exercise of outstanding warrants.  The Company
has delivered to its stockholders a proxy statement in connection with a special meeting
in order to increase the authorized common stock from 75,000,000 to 150,000,000 shares and
to increase the number of shares available for issuance under the Plan from 5,000,000 to
10,000,000. If the stockholders approve both the proposed increase in authorized common
stock and the proposed increase in shares available for issuance under the Plan, then
options to purchase 906,200 shares under the Plan, granted subject to stockholder approval
of the increases, will become effective and outstanding. Except as described above, there
are no subscriptions, options, warrants or other rights (contingent or otherwise) to
purchase or otherwise acquire shares of capital stock or other securities of the Company
authorized, issued or outstanding, nor is the Company obligated in any other manner to
issue shares of its capital stock, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of any of its equity
securities any evidence of indebtedness or asset.  No holder of any security of the
Company is entitled to preemptive, first refusal or similar statutory, contractual or
other rights, either arising pursuant to any agreement or instrument to which the Company
is a party, or which are otherwise binding upon the Company, or to the Companys
knowledge, to which any other person is a party.

2.4 No Violation.
Neither the Company nor any of its subsidiaries is in violation of any term or provision
of their respective charter or by-laws or of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation, where the consequences of such violation would
result in a Material Adverse Effect.

2.5 No Default. Neither
the execution, delivery and performance of this Agreement or the Collaboration Agreement
by the Company nor the consummation of any of the transactions contemplated hereby or
thereby (including, without limitation, the issuance and sale by the Company of the shares
of Initial Common Stock and Additional Common Stock and the issuance of the Warrant, the
Additional Warrant and the Warrant Shares) will give rise to a right to terminate or
accelerate the due date of any payment due under, accelerate the share issuance under, or
conflict with or result in the breach of any term or provision of, or constitute a default
(or an event which with notice or lapse of time or both would constitute a default) under,
or require any consent or waiver under, or result in the execution or imposition of any
lien, charge or encumbrance upon any properties or assets of the Company or its
subsidiaries pursuant to the terms of, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of its subsidiaries is a party or by
which either the Company or its subsidiaries or any of their properties or businesses is
bound, or any franchise, license, permit, judgment, decree, order, statute, rule or
regulation applicable to the Company or any of its subsidiaries in each case, that would
result in a Material Adverse Effect or that would violate any provision of the charter or
by-laws of the Company or any of its subsidiaries.

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2.6 Valid Issuance;
Securities Laws. The Initial Common Stock and the Warrant, upon the Initial Closing
and the Additional Warrant and Additional Common Stock, if any, when issued upon each of
the Subsequent Closings sold and delivered in accordance with the terms hereof for the
consideration set forth herein, will be duly and validly authorized and issued, fully paid
and non-assessable and, assuming the representations and warranties of the Purchaser
contained in Article 3 of this Agreement are and will be true and correct, will be issued
in compliance with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the securities at the Initial Closing and each Subsequent
Closing. Assuming the proper and valid exercise of the Warrant and Additional Warrant, if
any, in accordance with their terms, the Warrant Shares, will be validly issued, fully
paid and non-assessable. The Initial Common Stock, the Additional Common Stock and the
Warrant Shares will be free of transfer restrictions other than the restrictions set forth
in Article 5 hereof and the transfer restrictions imposed by any federal or state
securities laws.

2.7 Governmental
Consents. All consents, approvals, orders, authorizations or registrations,
qualifications, designations, declarations or filings with any federal, state or local
governmental authority on the part of the Company required in connection with the
consummation of the issuance of the securities contemplated herein shall have been
obtained prior to and be effective as of the Initial Closing and each Subsequent Closing,
including any securities or blue sky filings in connection with the purchase and sale of
the securities at the Initial Closing and each of the Subsequent Closings, if any.

2.8 SEC Filings. The
Company has timely filed with the Securities and Exchange Commission (the
SEC) all reports, registration statements and other documents required
to be filed by it since July 1, 2003 (the SEC Filings) under the
Securities Act and the Exchange Act. The SEC Filings were prepared in accordance and, as
of the date on which each such SEC Filing was filed with the SEC, complied in all material
respects with the applicable requirements of the Securities Act or the Exchange Act, as
the case may be. None of such SEC Filings, including, without limitation, any financial
statements, exhibits or schedules included therein or documents incorporated therein by
reference, at the time filed, declared effective or mailed, as the case may be, contained
an untrue statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent information
contained in any of the SEC Filings has been revised, corrected, superseded or updated by
a later filing of any such form, report or document, none of the SEC Filings currently
contains an untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

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2.9 Litigation. Except
and to the extent disclosed in the Companys SEC Filings, there is no action,
litigation or proceeding pending or, to the Companys knowledge, threatened against
or involving the Company in any court or before or by any agency or regulatory body which
could result in a judgment or liability against the Company or which would result in a
Material Adverse Effect.

2.10 Brokers and
Finders. No person or entity will have, as a result of the transactions contemplated
by this Agreement or the Collaboration Agreement, any right, interest or valid claims
against or upon the Company or the Purchaser for any commission, fee or other compensation
as a finder or broker because of any act or omission by the Company or its agents.

2.11 Independent
Accountants. KPMG LLP, whose reports are included as a part of the SEC Filings, are
and, during the periods covered by their reports, were independent public accountants as
required by the Securities Act, and the rules and regulations of the SEC thereunder.

2.12 AMEX Compliance;
Listing. The Company is in compliance with the requirements of the AMEX for continued
listing of the Common Stock thereon and has not received any notification that, and has no
knowledge that, the AMEX is contemplating terminating such listing nor, to the
Companys knowledge, is there any basis therefor. The transactions contemplated by
this Agreement do not and will not contravene the rules and regulations of the AMEX.

2.13 Solicitation; Other
Issuances of Securities. Neither the Company nor any of its subsidiaries or
affiliates, nor any Person acting on its or their behalf, (i) has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of the Common Stock, the Warrant or
the Warrant Shares, (ii) has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under any circumstances that would
require registration of the Common Stock or the Warrants, under the Securities Act or
(iii) has issued any shares of Common Stock or shares of any series of preferred stock or
other securities or instruments convertible into, exchangeable for or otherwise entitling
the holder thereof to acquire shares of Common Stock which would be integrated with the
sale of the Initial Common Stock, Additional Common Stock, the Warrant, the Additional
Warrant or the Warrant Shares to such Purchaser for purposes of the Securities Act or of
any applicable stockholder approval provisions, including, without limitation, under the
rules and regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated, nor will the Company or any of its
subsidiaries or affiliates take any action or steps that would require registration of any
of the Initial Common Stock, Additional Common Stock, the Warrant, the Additional Warrant
or the Warrant Shares under the Securities Act or cause the offering of the Initial Common
Stock, Additional Common Stock, the Warrant, the Additional Warrant or the Warrant Shares
to be integrated with other offerings. Assuming the accuracy of the representations and
warranties of Purchasers, the offer and sale of the Initial Common Stock, the Additional
Common Stock, the Warrant, the Additional Warrant or the Warrant Shares by the Company to
the Purchaser pursuant to this Agreement will be exempt from the registration requirements
of the Securities Act.

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2.14 Investment
Company. The Company is not and, after giving effect to the offering and sale of the
Common Stock, the Warrant, the Additional Warrant or the Warrant Shares as contemplated by
this Agreement, will not be an investment company within the meaning of the
Investment Company Act of 1940, as amended.

# ARTICLE 3 THE
PURCHASERS REPRESENTATIONS AND WARRANTIES

The
Purchaser represents and warrants to the Company as follows:

3.1 Investment
Representations. The Purchasers present intention is to acquire the
InitialCommon Stock and the Warrant at the Initial Closing and the
Additional Common Stock at each Subsequent Closing, if any, and the Warrant Shares upon
exercise of the Warrant, for its own account and for the purpose of investment, and not
with a view to distribution or resale thereof. The Purchaser acknowledges that it
possesses such knowledge, sophistication and experience in financial and business matters
as to be able to evaluate the merit and risks of an investment in such securities and that
it can bear the economic risk of its investment.

3.2 Legends on Stock
Certificates. The Purchaser further represents that it understands and agrees that all
certificates evidencing the Warrant, the Additional Warrant, the Warrant Shares and any of
the Common Stock issued at the Initial Closing and the Subsequent Closings, if any, shall
bear a legend, prominently stamped or printed thereon, reading substantially as follows:

| | THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE ACT), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE
AND SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT COVERING THE SALE OF SUCH SECURITIES OR UNLESS SUCH SALE,
PLEDGE, HYPOTHECATION OR TRANSFER IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, UNLESS THE HOLDER SHALL HAVE OBTAINED A WRITTEN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH SALE OR OTHER TRANSFER. | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

| | THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET
FORTH IN THE SECURITIES PURCHASE AGREEMENT, DATED AUGUST 18, 2004 BETWEEN THE COMPANY AND
THE REGISTERED OWNER OF SUCH SECURITIES (OR SUCH OWNERS PREDECESSOR IN INTEREST).
THE COMPANY WILL FURNISH A COPY OF SUCH AGREEMENT WITHOUT CHARGE UPON WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE. | 
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

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3.3 Access to
Information. The Purchaser acknowledges that it has had (i) the opportunity to
ask questions as it has deemed necessary of, and to receive answers from, representatives
of the Company concerning the terms and conditions of the sale and issuance of the
securities contemplated herein, (ii) access to information about the Company and its
financial condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment, and (iii) the opportunity to
obtain such additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment decision
with respect to such investment. The foregoing, however, does not limit or modify the
representation and warranties of the Company in Section 2 of the Agreement or the
right of the Purchaser to rely thereon.

3.4 Accredited Investor
Status. The Purchaser is an accredited investor as that term is defined in
Rule 501 of Regulation D promulgated under the Securities Act.

3.5 Transfer Restrictions
Imposed By Securities Laws. The Purchaser understands that none of the Warrant, the
Additional Warrant, the Warrant Shares, the shares of Common Stock issued at the Initial
Closing or each Subsequent Closing, if any, have been registered under the Securities Act
or any other applicable securities laws, and, therefore, cannot be resold unless they are
subsequently registered under the Securities Act and other applicable securities laws or
unless an exemption from such registration is available. The Purchaser agrees not to
resell or otherwise dispose of all or any part of such Common Stock, except as permitted
by law, including, without limitation, any regulations under the Securities Act and other
applicable securities laws; except as otherwise required herein, the Company does not have
any present intention and is under no obligation to register the securities issued at the
Initial Closing and each Subsequent Closing, if any under the Securities Act and other
applicable securities laws. Accordingly, Purchaser acknowledges it may be required to hold
such securities and bear the economic risk of its investment for an indefinite period of
time.

3.6 Brokers and
Finders. No person or entity will have, as a result of the transactions contemplated
by this Agreement or the Collaboration Agreement, any right, interest or valid claims
against or upon the Company or the Purchaser for any commission, fee or other compensation
as a finder or broker because of any act or omission by the Purchaser or its agents.

# ARTICLE 4 CLOSING
CONDITIONS

4.1 Conditions to the
Purchasers Obligations at the Initial Closing and the Subsequent Closings. The
Purchasers obligation to purchase and pay for the securities to be purchased by it
at the Initial Closing and each Subsequent Closing, if any, is subject to the satisfaction
by the Company, on or before the date hereof, in the case of the Initial Closing, or on or
before therelevant Subsequent Closing Date, in the case of a
Subsequent Closing, of the following conditions:

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|(a) |  | Representations and Warranties. The Companys representations and
               warranties contained in Article 2 shall be true and correct in all material
               respects on and as of the date hereof and on the relevant Subsequent Closing
               Date with the same effect as made on and as of such date.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Performance of Obligations. The Company shall have performed and complied
               with all agreements, obligations and conditions contained in this Agreement in
               all material respects that are required to be performed or complied with by it
               on or before the Initial Closing Date or the relevant Subsequent Closing Date,
               as the case may be.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | Officers Certificate. The Purchaser shall have received a
               certificate signed by the President and Chief Executive Officer of the Company
               attesting as to satisfaction of the conditions in Section 4.1(a) and (b) hereof.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) |  | Secretarys Certificate.  The Company shall have delivered to
               the Purchaser a certificate of the secretary of the Company dated as of the
               Initial Closing Date, certifying that (A) attached thereto is a true and
               complete copy of the by-laws of the Company as in effect on the date of such
               certification; (B) that attached thereto is a true and complete copy of all
               resolutions adopted by the Board of Directors of the Company authorizing the
               execution, delivery and performance of this Agreement, the issuance, sale and
               delivery of the Common Stock, the Warrant, the Additional Warrant and the
               Warrant Shares and that all resolutions are in full force and effect and are all
               the resolutions adopted in connection with the transactions contemplated hereby;
               (C) that attached thereto is a true and complete copy of the Companys
               Certificate of Incorporation as in effect on the date of such certification; and
               (D) to the incumbency and specimen signature of certain officers of the Company.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) |  | Good Standing Certificate. The Company shall have delivered to the
               Purchaser a good standing certificate with respect to the Company from the
               Secretary of State of the State of Delaware dated no more than 15 days
               prior to the Initial Closing Date or the relevant Subsequent Closing Date, as
               the case may be.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) |  | Consents and Waivers. The Company shall have obtained any and all
               consents and waivers necessary or appropriate for consummation of the
               transactions contemplated by this Agreement or the Collaboration Agreement.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) |  | Listing. The Company will file a Listing of Additional Shares Application
               with AMEX, as applicable, with respect to the shares of Common Stock that may be
               issued at the Initial Closing, the Additional Common Stock that may be issued at
               each Subsequent Closing and the Warrant Shares.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(g) |  | Legal Opinion. The Company shall have delivered to the Purchaser a Legal
               Opinion, dated as of the Subsequent Closing, from Mintz Levin Cohn Ferris
               Glovsky and Popeo, PC, counsel to the Company, in the form attached as
               Annex A hereto.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(h) |  | Milestone Achievement. The relevant milestone with respect to the
               applicable Subsequent Closing identified in Section 1.2 shall have been achieved
               as determined and identified in Section 6.3 of the Collaboration Agreement.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.2 Conditions to the
Companys Obligations at the Initial Closing and the Subsequent Closings. The
Companys obligation to issue to the Purchaser the securities at the Initial Closing
and each Subsequent Closing, if any, is subject to the satisfaction by the Purchaser, on
or before such applicable closing, of the following conditions:

|(a) |  | Representations and Warranties. The representations and warranties of the
               Purchaser contained in Article 3 shall be true and correct in all material
               respects on and as of the date hereof and on and as of the relevant Subsequent
               Closing Date with the same effect as made on and as of such date.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Performance of Obligations. The Purchaser shall have performed and
               complied with all agreements, obligations and conditions contained in this
               Agreement in all material respects that are required to be performed or complied
               with by it on or before the Initial Closing Date or the
               relevant Subsequent Closing Date, as the case may be.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | Officers Certificate. The Company shall have received a certificate
               signed by the President and Chief Executive Officer of the Purchaser attesting
               as to satisfaction of the conditions in Section 4.2(a) and (b) hereof.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) |  | Payment of Purchase Price. The Purchaser shall have delivered to the
               Company and the Company shall have received payment in full of the purchase
               price relating to the securities to be purchased by such Purchaser at the
               Initial Closing Date and such relevant Subsequent Closing in accordance with
               Sections 1.1 and 1.2, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) |  | Consents and Waivers. The Purchaser shall have obtained any and all
               consents and waivers necessary or appropriate for consummation of the
               transactions contemplated by this Agreement and the Collaboration Agreement.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) |  | Milestone Achievement. The relevant milestone with respect to the
               applicable Subsequent Closing identified in Section 1.2 shall have been achieved
               as determined and identified in Section 6.3 of the Collaboration Agreement.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# ARTICLE 5 FURTHER
AGREEMENTS

5.1 Agreement Not To
Sell. Except as otherwise contemplated by this Agreement, notwithstanding the
provisions of Article 6, the Purchaser hereby agrees that for a one (1) year period
commencing from (i) the date of the Initial Closing with respect to the securities issued
at the Initial Closing and (ii) the dates of each of the Subsequent Closings, if any, with
respect to the securities issued at each Subsequent Closing, the Purchaser shall not sell,
contract to sell, or otherwise sell, dispose of, loan, pledge or grant any rights
(collectively, a Disposition) with respect to the securities issued
pursuant at the Initial Closing and the Subsequent Closings, if any, as well as the Common
Stock underlying the Warrant and the Additional Warrant, if any, or any other securities
of the Company issued in respect of the Warrant, the Additional Warrant or the Common
Stock underlying the Warrant or the Additional Warrant (by way of stock split, stock
dividend or other distribution, recapitalization or otherwise) (for purposes of this
Section 5.1, collectively, the Securities), otherwise than with the
prior written consent of the Company. The foregoing restriction has been expressly agreed
to preclude the holder of the Securities from engaging in any hedging or other transaction
that is designed to or reasonably expected to lead to or result in a Disposition of
Securities during the applicable restricted period, even if such Securities would be
disposed of by someone other than such holder. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any Securities or with respect to any security (other than
a broad-based market basket or index) that includes, relates to or derives any significant
part of its value from the Securities. The Purchaser also agrees and consents to the entry
of stop transfer instructions with the Companys transfer agent against the transfer
of Securities held by the Purchaser except in compliance with the foregoing restrictions.

5.2 20 Day Average
Adjustments. The Company hereby agrees that if during any of the twenty (20) day
periods that are used to calculate the 20 Day Average under Sections 1.2(a)  (e),
the Company undertakes a stock split or combination that causes an immediate adjustment to
the market price of its common stock during such twenty (20) day period, then the closing
prices used to calculate the 20 Day Average that were unaffected by such split or
combination shall be adjusted as if such split or combination had occurred prior to the
calculation of the 20 Day Average.

# ARTICLE 6 REGISTRATION
RIGHTS

# 6.1 Demand Registration.

(a)At any time following the one (1) year anniversary of the Initial Closing
          Date (or such earlier date if the Company waives in writing the transfer
          restrictions contained in Article 5 hereof) if there is no registration
          statement in effect pursuant to Section 6.2 hereof, the Purchaser may make two
          (2) written requests for registration under the Securities Act covering the
          resale of the Initial Common Stock, the Warrant Shares and the Additional Common
          Stock, if any (all of them, together with any shares of capital stock issued or
          issuable, from time to time, upon any reclassification, share combination, share
          subdivision, stock split, share dividend, merger, consolidation or similar
          transaction or event or otherwise as a distribution on, in exchange for or with
          respect to any of the foregoing, in each case held at the relevant time by the
          Purchaser, the Registrable Securities) by the Purchaser
          (each, a Demand Registration), it being understood that the
          Purchaser shall not be able to exercise its second right for a Demand
          Registration until after the achievement of the development milestone set forth
          in Section 1.2(e) hereof. Any such request will specify the number of shares of
          Registrable Securities proposed to be offered for sale by the Purchaser and will
          also specify the intended method of disposition thereof. Any Registration
          Statement filed pursuant to this Section 6.1 is referred to as a Demand
          Registration Statement.

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(b)       
          If the Purchaser elects, the offering of the Registrable Securities pursuant to
          such Demand Registration Statement will be in the form of an underwritten
          offering. Subject to the reasonable approval of the Company (not to be
          unreasonably withheld or delayed), the Purchaser will select the managing
          underwriter and any additional underwriters in connection with the offering. If,
          in connection with any Demand Registration that is to be an underwritten
          offering, the Company or any other stockholders also desire to sell shares of
          Common Stock and the managing underwriter of an underwritten public offering
          determines and advises in writing that the inclusion of all Registrable
          Securities proposed to be included in the underwritten public offering, together
          with any shares proposed to be sold by the Company for its own account and any
          other issued and outstanding shares of Common Stock or other securities proposed
          to be included therein by holders other than the holders of Registrable
          Securities (such other holders shares hereinafter collectively referred to
          as the Other Shares), would interfere with the successful
          marketing of the securities proposed to be included in the underwritten public
          offering, including the price at which such securities can be sold, then the
          Company will include in such registration (i) first, the Registrable
          Securities requested to be included by the Purchaser so that the total number of
          Registrable Securities to be included in such offering for the account of the
          Purchaser will not exceed the number recommended by such managing underwriter,
          (ii) second, the shares of Common Stock the Company proposes to offer for
          sale, which number of shares to be registered will be reduced to the extent
          necessary to reduce the total number of shares to be included in such offering
          to the number recommended by such managing underwriter and (iii) third,
          such number of Other Shares as the holders thereof desire to offer for sale and
          the Company and the managing underwriter recommend be included in such offering.
          The Purchaser shall be permitted to remove all or any part of the Registrable
          Securities held by it from any Demand Registration Statement at any time prior
          to the effective date of the registration statement covering such Registrable
          Securities.

6.2 Piggyback
Registration.If the Company at any time proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (except with respect to (i) any universal
shelf registration statement on Form S-3 filed or which may be filed by the Company
for its own account, (ii) registration statements on Forms S-4, S-8 or their
successors, or any other form for a similar limited purpose, (iii) any registration
statement covering only securities proposed to be issued in exchange for securities or
assets of another corporation or (iv) another form not available for registering the
Registrable Securities for sale to the public), each such time it will promptly
give written notice to the Purchaser of its intention to do
so. Upon the written request of the Purchaser, received by the Company within 20 days
after the giving of any such notice by the Company (or such longer period as set forth in
the Companys notice), to register any of its RegistrableSecurities, the
Company will use its best efforts to cause the Registrable Securities as to which
registration shall have been so requested to be included in the securities to be covered
by the registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by the Purchaser of the Registrable
Securities. In the event that any registration pursuant to this Section 6.2 shall be, in
whole or in part, an underwritten public offering of Common Stock, the Purchasers
participation in such underwriting shall be on the terms set forth herein. Notwithstanding
the foregoing, if the managing underwriter of an

13



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underwritten public offering determines
and advises in writing that the inclusion of all Registrable Securities proposed to be
included in the underwritten public offering, together with any shares proposed to be sold
by the Company for its own account and any Other Shares held by other holders would
interfere with the successful marketing of the securities proposed to be included
in the underwritten public offering, including the price at which such securities can be
sold, then the Company will include in such registration (i) first, the Common Stock
requested to be included by the Company so that the total number of shares of Common Stock
included in the offering will not exceed the number recommended by the managing
underwriter (ii) second, the Registrable Securities requested to be included by the
Purchaser so that the total number of Registrable Securities to be included in such
offering for the account of the Purchaser will not exceed the number recommended by such
managing underwriter, and (iii) third, such number of Other Shares of Common Stock as the
holders thereof desire to offer for sale and the Company and the managing underwriter
recommend be included in such offering.

Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement referred to in this
Section 6.2 without thereby incurring any liability to the Purchaser. The Purchaser may
elect, in writing, no less than five (5) business days prior to the anticipated effective
date of a Registration Statement, not to register any of its Registrable Securities.
Notwithstanding anything to the contrary contained herein, the Purchaser shall not have
the right to include all or any portion of the Registrable Securities in a registration
statement, pursuant to this Section 6.2, if all of the Registrable Securities then held by
the Purchaser becomes eligible for sale in any three (3) month period pursuant to Rule 144
under the Securities Act or any successor rule.

6.3 Registration
Procedures. If and whenever the Company is under an obligation pursuant to the
provisions of this Article 6 to effect the registration of any Registrable Securities, the
Company shall use its best efforts to:

(a)    
          (i) prepare and file with the SEC a registration statement with respect to such
          Registrable Securities, using such form of available registration statement as
          is reasonablyselected by the Company (unless otherwise
          specified herein), and (ii) to cause such registration statement to become
          effective within ninety (90) days of the filing date;

(b)    
          prepare and file with the SEC such amendments and supplements to the
          registration statement and the prospectus used in connection therewith as may be
          necessary to keep the registration statement continuously effective until the
          earlier (x) up to ninety (90) days or (y) the date that all Registrable
          Securities then held by the Purchaser becomes eligible for sale in any three (3)
          month period pursuant to Rule 144 under the Securities Act or any successor
          rule;

(c)    
          so long as a registration statement is effective covering the resale of
          Registrable Securities owned by the Purchaser, furnish to the Purchaser with
          respect to the Registrable Securities registered under such registration
          statement (and to each underwriter, if any, of such Registrable Securities) such
          reasonable number of copies of prospectuses and such other documents as the
          Purchaser may reasonably request in order to facilitate the public sale or
          otherdisposition of all or any of the Registrable
          Securities by the Purchaser;

14



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(d)    
          to register and qualify the securities covered by such registration statement
          under such other securities or Blue Sky laws of such jurisdictions as shall be
          reasonably requested by the Purchaser as may be legally required, provided that
          the Company shall not be required in connection therewith or as a condition
          thereto to qualify to do business or to file a general consent to service of
          process in any such states or jurisdictions;

(e)    
          at any time when a prospectus covered by a registration statement is required to
          be delivered under the Securities Act, notify the Purchaser of the happening of
          any event as a result of which the prospectus included in such registration
          statement, as then in effect, includes an untrue statement of a material fact or
          omits to state a material fact required to be stated therein or necessary to
          make the statements therein not misleading in the light of the circumstances
          then existing and, at the request of the Purchaser prepare, file and furnish to
          the Purchaser a reasonable number of copies of a supplement to or an amendment
          of such prospectus as may be necessary so that, as thereafter delivered to the
          purchasers of such shares, such prospectus shall not include an untrue statement
          of a material fact or omit to state a material fact required to be stated
          therein or necessary to make the statement therein not misleading in the light
          of the circumstances then existing. The Company may delay amending or
          supplementing the prospectus for a period of up to 30 business days in any 365
          day period if the Company is then engaged in negotiations regarding a material
          transaction that has not been publicly disclosed, and the Purchaser shall
          suspend their sale of Registrable Securities until an appropriate supplement or
          prospectus has been forwarded to them or the proposed transaction is abandoned;

(f)    
          in the event of any underwritten public offering, enter into and perform its
          obligations under an underwriting agreement, in usual and customary form, with
          the managing underwriter(s) of such offering (it being understood and agreed
          that, as a condition to the Companys obligations under this Article
          6, the Purchaser participating in such underwriting shall also enter into and
          perform its obligations under such an agreement);

(g)    
          use commercially reasonable efforts to prevent the issuanceofany
          stop order or other order suspending the effectiveness of such registration
          statement and, if such an order issued, to obtain the withdrawal thereof at the
          earliest possible time and to notify the Purchaser of the issuance of such order
          and the resolution thereof;

(h)    
          permit counsel for the Purchaser to review and reasonably approve the
          Registration Statement and all amendments and supplements thereto, and any
          comments made by the staff of the SEC and the Companys responses thereto,
          within a reasonable period of time prior to the filing thereof with the SEC (or,
          in the case of comments made by the staff of the SEC, within a reasonable period
          of time following the receipt thereof by the Company).

6.4 Furnish Information.It shall be a condition precedent to the obligations of the Company to take any action
pursuant to this Section 6 that the Purchaser shall furnish to the Company such
information as the Company shall reasonably request regarding itself, the Registrable
Securities held by it and the intended method of disposition of such securities as shall
be required to timely effect the registration of its Registrable Securities.

6.5 Expenses. All
expenses incurred in connection with a registration pursuant to Section 6.1
(excluding underwriters and brokers discounts and commissions incurred by the
Purchaser), including, without limitation all federal and blue sky
registration and qualification fees, printers and accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company.

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6.6 Indemnification. In
the event any Registrable Securities are included in a registration statement under
Section 6.1 hereof:

6.6.1
By the Company. To the extent permitted by applicable law, the Company will
indemnify and hold harmless the Purchaser, each of its officers and directors and any
person, if any, who controls the Purchaser within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended, (the Exchange Act)
(collectively, the Purchaser Indemnitees), against any losses, claims,
damages, expenses or liabilities (joint or several) to which they may become subject under
the Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations (collectively a
Violation):

|(i) |  | any untrue statement or alleged untrue statement of a material fact contained in
                    such registration statement, including any preliminary prospectus or final
                    prospectus contained therein or any amendments or supplements thereto;
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) |  | any omission or alleged omission to state therein a material fact required to be
                    stated therein, or necessary to make the statements therein not misleading; or
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) |  | any violation or alleged violation by the Company of the Securities Act, the
                    Exchange Act, any federal or state securities law or any rule or regulation
                    promulgated under the Securities Act, the Exchange Act or any federal or state
                    securities law in connection with the offering covered by such registration
                    statement;
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

and the Company will reimburse each
Purchaser Indemnitee for any legal or other expenses reasonably incurred by them, as
incurred, in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement
contained in this Section 6.6.1 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in reliance
upon and in conformity with written information furnished expressly for use in connection
with such registration by the Purchaser Indemnitees.

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6.6.2
By the Purchaser. To the extent permitted by applicable law, Purchaser will
indemnify and hold harmless the Company, each of its directors and officers who have
signed the registration statement, and any person, if any, who controls the Company within
the meaning of the Securities Act or Exchange Act (collectively, the Company
Indemnitees), against any losses, claims, damages, expenses or liabilities
(joint or several) to which they become subject under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by the Purchaser expressly for use in
connection with such registration; and Purchaser will reimburse any legal or other
expenses reasonably incurred by the Company Indemnitees in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 6.6.2 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Purchaser, which consent shall
not be unreasonably withheld; and provided further, that the total amounts
payable in indemnity by the Purchaser under this Section 6.6.2 in respect of any Violation
shall not exceed the Purchase Price paid on the Initial Closing Date or any Subsequent
Closing Date by the Purchaser out of which such Violation arises.

6.6.3
Notice. Promptly after receipt by an indemnified party under this Section 6.6 of
notice of the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6.6, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties in their reasonable discretion; provided,
however, that an indemnified party shall have the right to retain its own counsel,
with the fees and expenses to be paid by the indemnifying party, but only if
representation of such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party under this
Section 6.6, but the omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party otherwise than
under this Section 6.6.

6.6.4
Defect Eliminated in Final Prospectus. The foregoing indemnity agreements of the
Company and Purchaser are subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the
Final Prospectus), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus (i) was furnished to the
indemnified party and (ii) was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by the
Securities Act.

# ARTICLE 7 TERMINATION
AND NO CROSS DEFAULT

7.1 Termination by the
Purchaser. The Purchaser may terminate its obligation to purchase Additional Common
Stock at any Subsequent Closing under this Agreement if the Purchasers obligations
to make development milestone payments under Section 6.3.1 of the Collaboration Agreement
are terminated in accordance with Article 11 of the Collaboration Agreement.

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7.2 No Cross
Default.Notwithstanding anything contained herein, the Parties hereby agree
that a breach by either of the Parties under this Agreement shall not be and shall not be
deemed to be a breach under the Collaboration Agreement.

# ARTICLE 8 MISCELLANEOUS

8.1 Notices. All
notices and communications shall be in writing, mailed via certified mail, return receipt
requested, courier, facsimile transmission or e-mail with acknowledgment of receipt by
overnight courier addressed as follows, or to such other address as may be designated from
time to time:

| | If to King:
                                                                     501 Fifth Street
                                                                     Bristol, Tennessee  37620
                                                                     Tel: (423) 989-8000
                                                                     Fax:
                                                                     Attention: General Counsel
                                                                     With a copy to:
                                                                     501 Fifth Street
                                                                     Bristol, Tennessee  37620
                                                                     Tel: (423) 989-8000
                                                                     Fax:
                                                                     Attention: Business Development |  | If to Palatin:
                                                                     Palatin Technologies, Inc.
                                                                     Cedar Brook Corporate Centre
                                                                     4-C Cedar Brook Drive
                                                                     Cranbury, New Jersey 08512
                                                                     Tel: (609) 495-2200
                                                                     Fax: (609) 495-2203
                                                                     Attention: Carl Spana, Ph.D.
                                                                     With a copy to:
                                                                     Stephen T. Wills
                                                                     Palatin Technologies, Inc.
                                                                     Cedar Brook Corporate Centre
                                                                     4-C Cedar Brook Drive
                                                                     Cranbury, New Jersey  08512
                                                                     Tel: (609) 495-2200
                                                                     Fax: (609) 495-2203
                                                                     And a copy to:
                                                                     Mintz Levin Cohn Ferris Glovsky and Popeo PC
                                                                     666 Third Avenue
                                                                     New York, New York 10017
                                                                     Tel: (212) 935-3000
                                                                     Fax: (212) 983-3115
                                                                     Attention: Faith L. Charles, Esq.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Except
as otherwise expressly provided in this Agreement or in writing by both Parties, any
notice, communication or payment required to be given or made shall be deemed given or
made and effective when received.

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8.2 Governing Law. This Agreement will be construed,
interpreted and applied in accordance with the laws of the State of New York (excluding its body of law controlling conflicts of
law).

8.3 Amendment; Waiver.
This Agreement may be amended, modified, superseded or canceled, and any of the terms may
be waived, only by a written instrument executed by each Party or, in the case of waiver,
by the Party or Parties waiving compliance. The delay or failure of any Party at any time
or times to require performance of any provisions shall in no manner affect the rights at
a later time to enforce the same. No waiver by any Party of any condition or of the breach
of any term contained in this Agreement, whether by conduct, or otherwise, in any one or
more instances, shall be deemed to be, or considered as, a further or continuing waiver of
any such condition or of the breach of such term or any other term of this Agreement.

8.4 Headings. Section
and subsection headings are inserted for convenience of reference only and do not form
part of this Agreement.

8.5 Performance by
Affiliates. Each Party shall have the right to direct its wholly-owned Affiliates to
act in satisfaction of such Partys or Affiliates obligations hereunder,
provided that such Party shall remain liable for and unconditionally guarantee to the
other Party the performance of such Affiliate hereunder. Notwithstanding the foregoing,
the Company shall not have the right to direct a wholly-owned Affiliate, if any, to act in
satisfaction of its obligations under Sections 1.1 and 1.2.

8.6 Assignment and
Successors. Neither this Agreement nor any obligation of a Party hereunder may be
assigned by either Party without the consent of the other which shall not be unreasonably
withheld, except that each Party may assign this Agreement and the rights, obligations and
interests of such Party, in whole or in part, to any purchaser of all of its assets and/or
all of its assets to which this Agreement relates or to any successor corporation
resulting from any merger or consolidation of such Party with or into such corporation.
Any attempted assignment in violation of this Section 8.5 shall be null, void and of no
effect.

8.7 Force Majeure. In
the event of the occurrence of a Force Majeure, the Parties shall not be deemed in breach
of their obligations to the extent of the Force Majeure. The Party affected thereby shall
use reasonable efforts to cure or overcome the same and resume performance of its
obligations hereunder.

8.8 Interpretation. The
Parties hereto acknowledge and agree that: (i) each Party and its counsel reviewed
and negotiated the terms and provisions of this Agreement and have contributed to its
revision, (ii) the rule of construction to the effect that any ambiguities are
resolved against the drafting Party shall not be employed in the interpretation of this
Agreement, and (iii) the terms and provisions of this Agreement shall be construed
fairly as to all Parties hereto and not in favor of or against any Party, regardless of
which Party was generally responsible for the preparation of this Agreement. In addition,
in the event conflicting terms exist between this Agreement and the Collaboration
Agreement, the substance and interpretation of such terms shall be determined pursuant to
the Collaboration Agreement.

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8.9 Integration;
Severability. This Agreement, the Warrant and the Collaboration Agreement are the sole
agreements with respect to the subject matter hereof and supersede all other agreements
and understandings between the Parties with respect to the same. If any provision of this
Agreement is or becomes invalid or is ruled invalid by any court of competent jurisdiction
or is deemed unenforceable, it is the intention of the Parties that the remainder of the
Agreement shall not be affected.

8.10 Further
Assurances. Each of the Company and Purchaser agrees to duly execute and deliver, or
cause to be duly executed and delivered, such further instruments and do and cause to be
done such further acts and things, including, without limitation, the filing of such
agreements, documents and instruments, that may be necessary or as the other Party hereto
may at any time and from time to time reasonably request in connection with this Agreement
or to carry out more effectively the provisions and purposes of, or to better assure and
confirm unto such other Party its rights and remedies under, this Agreement.

8.11 Counterparts. This
Agreement may be executed simultaneously in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same
instrument.

8.12 Publicity. Neither
Party may publicly disclose the existence or terms of this Agreement without the prior
written consent of the other Party; provided, however, that either Party may
make such a disclosure (a) to the extent required by law or by the requirements of
any nationally recognized securities exchange, quotation system or over-the-counter market
on which such Party has its securities listed or traded or (b) to any investors,
prospective investors, lenders and other potential financing sources who are obligated to
keep such information confidential for at least as long as either Party has obligations to
keep such information confidential under this Agreement. In the event that such disclosure
is required as aforesaid, the disclosing Party shall make reasonable efforts to provide
the other Party with notice beforehand and to coordinate with the other Party with respect
to the wording and timing of any such disclosure. The Parties, upon the execution of this
Agreement, will mutually agree to a press release with respect to the Collaboration
Agreement for publication. Once such press release or any other written statement is
approved for disclosure by both Parties, either Party may make subsequent public
disclosure of the contents of such statement without the further approval of the other
Party.

8.13 Expenses. Except
as set forth herein, each Party shall bear its own costs and expenses, including legal
fees, in connection with the sale and issuance of the securities contemplated by this
Agreement.

8.14 Arbitration. Any
dispute, controversy or claim initiated by either Party arising out of, resulting from or
relating to this Agreement, shall be resolved by binding arbitration in accordance with
the provisions of Section 14 of the Collaboration Agreement.

# [THE REMAINDER OF THE
PAGE IS INTENTIONALLY LEFT BLANK]

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IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement or caused this Agreement
to be executed by their duly authorized representatives, as of the date first written
above.

| | PALATIN TECHNOLOGIES, INC.,          
| | -------------------------------------
| |                                      
| |                                      
| | By:_________________________         
| | Dr. Carl Spana                       
| | President and Chief Executive Officer

| | KING PHARMACEUTICALS, INC., 
| | ----------------------------
| |                             
| |                             
| | By:_________________________
| | Name:                       
| | Title:                      

[Signature Page to
Securities Purchase Agreement]

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