[GRAPHIC OMITTED]

---

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the
Agreement), effective as of this 5th day of June, 2007, is entered into by
Palatin Technologies, Inc., a Delaware corporation with its principal place of business at
4C Cedar Brook Drive, Cranbury, NJ, 08512 (the Company), and Carl Spana
(Employee).

The Company desires to continue
employing the Employee, and the Employee desires to continue to be employed by the
Company. In consideration of the mutual covenants and promises contained herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the parties agree that the following terms of this
Employment Agreement shall supersede in all respects any prior agreements governing
employment between the parties:

|1.0 |  | Term of Employment. The Company hereby agrees to continue employing the Employee, and the
Employee hereby accepts the continuation of employment with the Company, upon the terms
set forth in this Agreement, for the period commencing on June 5, 2007 (the
Commencement Date) and ending on June 30, 2010 unless sooner terminated in
accordance with the provisions of Section 4 (the Employment Period).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.0 |  | Position
Title & Capacity.
|--- |  | --------------------------

| | 2.1 |  | The
Employee shall serve as Chief Executive Officer and President, with responsibilities
consistent with this position and as the Companys Board of Directors (the Board)
may determine from time to time, with powers and duties as may be determined, from time
to time, by the Board, consistent with the Employees position. The Employee shall
report to the Companys Board of Directors. The Employee shall be based at the
Companys corporate headquarters, which is based in Cranbury, New Jersey. The
Employee shall also be available for travel at such times and to such places as may be
reasonably necessary in connection with the performance of his duties hereunder.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 1 of 16

---

| | 2.2 |  | The
Employee may serve as an employee director on the Board as determined and approved by the
Board during the Employment Period and for no additional compensation; however, upon
termination of employment for any reason, the Employee will no longer serve as a member
of the Companys Board of Directors and will take any and all actions necessary to
effectuate such resignation as may be reasonably requested by the Company.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.3 |  | The
Employee hereby accepts such employment and agrees to undertake the duties and
responsibilities inherent in such position and such other duties and responsibilities as
the Board shall from time to time reasonably assign to him. The Employee agrees to devote
substantially all of his business time, attention and energies to the business and
interests of the Company during the Employment Period. The Employee agrees to abide by
the rules, regulations, instructions, personnel practices and policies of the Company and
any changes therein which may be adopted from time to time by the Company. The Employee
acknowledges receipt of copies of all such rules and policies committed to writing as of
the date of this Agreement.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.4 |  | The
Employee specifically covenants, warrants and represents to the Company that he has the
full, complete and entire right and authority to enter into this Agreement, that he has
no agreement, duty, commitment or responsibility of any kind or nature whatsoever with
any corporation, partnership, firm, company, joint venture or other entity or other
person which would conflict in any manner whatsoever with any of his duties, obligations
or responsibilities to the Company pursuant to this Agreement, that he is not in
possession of any document or other tangible property of any corporation, partnership,
firm, company, joint venture or other entity or other person of a confidential or
proprietary nature which would conflict in any manner whatsoever with any of his duties,
obligations or responsibilities to the Company pursuant to his Agreement, and that he is
fully ready, willing and able to perform each and all of his duties, obligations and
responsibilities to the Company pursuant to this Agreement.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.0 |  | Compensation and Benefits. During the Employment Period, unless sooner terminated in
accordance with the provisions of Section 4, the Employee shall receive the following
compensation and benefits:
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 2 of 16

---

| | 3.1 |  | Salary.
The Company shall pay the Employee, in equal semi-monthly installments or otherwise in
accordance with the Companys standard payroll policies as such policies may exist
from time to time, an annual base salary of $390,000, effective July 1, 2007. Such salary
shall be subject to review, as determined by the Companys Compensation Committee
and approved by the Board, on an annual basis, but the Board shall not decrease the
Employees annual base salary at any such annual review.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 |  | Cash
Performance Bonus. The Employee will be included in the Companys annual
discretionary bonus compensation program based on a June 30th year end in an amount to be
decided by the Companys Compensation Committee and approved by the Board, payable
no later than September 30th of each year during the Employment Period.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.3 |  | Stock
Options. As additional compensation for services rendered, the Company has granted to the
Employee the right and option to purchase shares of the Companys Common Stock and
in the future may grant additional options to purchase shares of the Companys
Common Stock to the Employee in accordance with the terms of the Companys stock
plan then in effect. Notwithstanding any option certificate or agreement to the contrary,
the following provisions apply to all options granted to the Employee either prior to or
after the Commencement Date:
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (a) |  | All
such options that are not vested as of the Date of Termination (as defined
in Section 6) shall immediately vest and become fully exercisable as
of the Date of Termination, except in the case of termination: (i)
for Cause (as defined in Section 6) or (ii) at the election of the
Employee pursuant to Section 4.6. Notwithstanding the foregoing if
upon a Change in Control as defined in Section 6.5 (c) or (d), any of
the options are terminated in connection with the Change in Control,
then all such options that are not vested as of the date of the
Change in Control shall immediately vest and become fully exercisable
immediately prior to the Change in Control; and
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | All
of such options that are vested as of the Date of Termination shall expire on the first
to occur of: (i) 24 months following the Employees retirement; (ii) 24 months
following
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 3 of 16

---

| | the
Employees Date of Termination other than (A) for Cause (as defined in Section 6),
or (B) termination at the election of the Employee pursuant to Section 4.6; (iii) the
expiration date of the option as set forth in the applicable option certificate or
agreement; or (iv) as otherwise provided in the applicable option plan in the event of
the dissolution or liquidation of the Company, or a merger, reorganization or
consolidation in which the Company is not the surviving corporation. For purposes of this
subsection, retirement requires that the Employee not render services of any
nature for any entity as a regular employee, and not render services of any nature for
any entity for more than an average of twenty (20) hours per week as a consultant or term
employee.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Nothing
 in this Section 3.3 shall apply to or affect any equity award that is not either an
incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended
(the Code) or a non-qualified stock option.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.4 |  | Fringe-Benefits.
The Employee shall be entitled to participate in all benefit programs that the Company
establishes and makes available to its employees, if any, to the extent that the Employees
position, tenure, salary, age, health and other qualifications make him eligible to
participate. The Employee shall also be entitled to holidays and annual vacation leave in
accordance with the Companys policy as it exists from time to time.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.5 |  | Reimbursement
of Expenses. The Company shall reimburse the Employee for all reasonable travel,
entertainment and other expenses incurred or paid by the Employee in connection with, or
related to, the performance of his duties, responsibilities or services under this
Agreement, upon presentation by the Employee of documentation, expense statements,
vouchers and/or such other supporting information as the Company may request, provided
however, that the amount available for such travel, entertainment and other expenses may
be fixed in advance by the Board.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.6 |  | Insurance.
The Employee will be covered under the Companys Directors and Officers liability
insurance to the same extent the Companys directors and other officers are covered.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 4 of 16

---

|4.0 |  | Employment
Termination. The employment of the Employee by the Company pursuant to this Agreement
shall terminate upon the occurrence of any of the following:
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.1 |  | Expiration
of the Employment Period in accordance with Section 1, unless the Company and Employee
agree to extend the Agreement term or otherwise continue Employees employment on
mutually agreeable terms.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.2 |  | At
the election of the Company, for Cause (as defined in Section 6), immediately upon
written notice by the Company to the Employee, which notice of termination shall have
been approved by a majority of the Board.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.3 |  | Immediately
upon the death or determination of Disability (as defined in Section 6) of the Employee.
| | --- |  | ----------------------------------------------------------------------------------------------------

| | 4.4 |  | At
the election of the Employee, for Good Reason (as defined in Section 6), immediately upon
written notice of not less than sixty (60) days prior to termination by the Employee to
the Company.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.5 |  | At
theelectionof theCompanyupon or withintwelve(12)monthsfollowing a Change
in Control (as defined in Section 6), or at the election of the Employee for Good Reason
(as defined in Section 6) upon or within twelve (12) months following a Change in Control
(as defined in Section 6), immediately upon written notice of termination.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.6 |  | At
the election of either party, upon written notice of termination.
| | --- |  | --------------------------------------------------------------------

|5.0 |  | Effect
of Termination.
|--- |  | ----------------------

| | 5.1 |  | Compensation
& Benefits.
| | --- |  | ------------------------

| |  | (a) |  | As
referenced in this section, compensation following the Employees
termination shall be in the form of severance. Severance will be
based on the employees base salary in effect as of the employees
last day of employment, and will be paid in installments in
accordance with the Companys regular payroll schedule in effect
on the Date of Termination (provided that such installments shall be
made at least monthly) except as set forth in subparagraph (e) below.
| |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 5 of 16

---

| |  | (b) |  | Severance
is not considered compensation for purposes of employee and employer
matching contributions under the 401(k) plan.
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | As
referenced in this section, upon termination of the Employees
employment with the Company, medical and dental benefits will be
available to the Employee, at his election, solely pursuant to the
provisions of COBRA with the Company paying the full cost of COBRA
coverage for a period up to 24 months if employment is terminated for
any reason except an Employee resignation without Good Reason (as
defined in Section 6) and a Company discharge for Cause (as defined
in Section 6). If the Employee is discharged for Cause or the
Employee resigns without Good Reason, the Employee will be required
to remit the COBRA cost (102% of total benefit cost) of coverage.
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (d) |  | Upon
termination of the Employees employment with the Company, apart from
the Employees election under COBRA to continue medical and
dental benefits (as described in Section 5.1(c)), the Employee will
cease to be eligible for participation in the Companys health
and welfare insurance and any other fringe benefit programs that
pursuant to their contracts or Company policy require an active
employee status.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (e) |  | Notwithstanding
any other provision with respect to the timing of severance payments under this
Agreement, if, on the Date of Termination, the Employee is deemed to be a specified
employee (within the meaning of Section 409A(a)(2)(B)(i) of the Code, and any
successor statute, regulation and guidance thereto, hereafter, Section 409A)
limited only to the extent necessary to comply with the requirements of Section 409A, any
severance payments to which the Employee may become entitled under this Agreement which
are subject to Section 409A (and not otherwise exempt from its application) will be
withheld until the first business day of the seventh month following the Date of
Termination, at which time the Employee shall be paid an aggregate amount equal to the
accumulated, but unpaid, six months of payments otherwise due to the Employee. After the
first business day of the seventh month following the Date of Termination and
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 6 of 16

---

| | continuing
each month thereafter, the Employee shall be paid the regular payments otherwise due to
the Employee in accordance with the terms of this Agreement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.2 |  | Termination
By The Company or at Election of the Employee (other than for Good Reason).
| | --- |  | ---------------------------------------------------------------------------------------

| |  | (a) |  | If
the Employee elects to terminate his employment(other than for Good Reason)pursuant
to Section 4.6, no severance and/or benefits shall be paid, and the Employee shall be
entitled only to receive payment of his earned but unpaid salary, and accrued vacation,
as of his last day of actual employment by the Company;
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | If
the Company elects to terminate the Employee (other than for Cause) pursuant
to Section 4.6, or, within sixty (60) days prior to the expiration of
this Agreement, the Company and Executive fail to agree to extend
this Agreement or otherwise reach a mutually acceptable agreement to
continue Executives employment, the Company shall pay to the
Employee his salary in effect on the Date of Termination for a
twenty-four (24) month period following the Date of Termination, plus
medical and dental benefits (as described in Section 5.1(c));
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | If
the Company terminates the Employee for Cause pursuant to Section 4.2, no
severance and/or benefits shall be paid, and the Employee shall be
entitled only to receive payment of his earned but unpaid salary, and
accrued vacation, as of the Date of Termination. Employee may elect
COBRA medical and dental benefits, in which case the Employee will be
required to remit the COBRA cost (102% of total benefit cost) of
coverage.
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.3 |  | Termination
By Employee Election For Good Reason. If the Employee terminates employment at his
election for Good Reason pursuant to Section 4.4, other than as provided for in Section
5.4, the Company shall pay to the Employee his salary in effect at that time for a
twenty-four (24) month period following the Date of Termination plus medical and dental
benefits (as described in Section 5.1(c)).
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.4 |  | Termination
Following a Change In Control. If the Company terminates the employment relationship upon
or following a Change In Control pursuant to Section 4.5, or if the Employee
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 7 of 16

---

| | terminates employment at his election for Good Reason upon or following a Change in Control pursuant
to Section 4.5:
| | --------------------------------------------------------------------------------------------------------------------

| |  | (a) |  | The
Company shall pay to the Employee his annual salary in effect at that time
in a lump sum amount, calculated at two (2.0) times such annual
salary, within ten (10) business days following the Date of
Termination plus medical/dental care benefits (as described in
Section 5.1(c)); and
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | For
a six (6) month period after the Date of Termination, the Company shall
reimburse the Employee for reasonable fees and expenses incurred by
him for the purpose of locating employment in an amount, not to
exceed $25,000, mutually agreed upon by and between the Employee and
the Company, including the fees and expenses of consultants and other
persons retained by him for such purpose, promptly, within ten days,
receipt by the Company of satisfactory evidence of payment of such
fees and expenses.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.5 |  | Termination
by Reason of the Employees Death or Disability. If, prior to the expiration
of the Employment Period, the Employees employment is terminated by the Employees
death or Disability pursuant to Section 4.3, the Company shall pay to the Employee, or in
the case of the Employees death, to the estate of the Employee, his salary in
effect at that time for a twenty-four (24) month period following the Date of Termination
plus medical and dental benefits (as described in Section 5.1(c)).
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.6 |  | Withholding
and Deductions.
| | --- |  | ---------------------------

| |  | (a) |  | All
payments hereunder shall be subject to withholding and to such other
deductions as shall at the time of such payment be required pursuant
to any income tax or other law, whether of the United States or any
other jurisdiction, and, in the case of payments to the executors or
administrators to the Employees estate, the delivery to the
Company of all necessary tax waivers and other documents.
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | In
the event the Employee is required pursuant to Section 4999 of the Code to pay (through
withholding or otherwise) an excise tax on excess parachute payments (as
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 8 of 16

---

| | defined
in Section 280G(b) of the Code) made by the Company pursuant to Section 5.4 of this
Agreement, the Company shall pay the Employee within thirty (30) days of the Change in
Control, such additional amounts as are necessary to place the Employee in the same after
tax financial position that he would have been in if he had not incurred any tax
liability under Section 4999 of the Code.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | In
the event the Employee is required to pay any federal, state or local income
taxes as a result of the Companys payment of the Employees
COBRA premiums under this Section 5, the Company shall pay the
Employee not later than the end of the year after the year in which
the taxes are paid such additional amounts as are necessary to place
the Employee in the same after-tax financial position that he would
have been in if he had not incurred any such tax liability.
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.7 |  | Release
of Claims. The Employees entitlement to severance, payment of COBRA
premiums, and accelerated vesting of options, is contingent upon the Employees
execution of a general release of claims in a form prepared by the Company and presented
to the Employee upon termination of his employment hereunder, as well as the Employees
compliance with the provisions of Section 7 hereof.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.8 |  | No
Requirement to Mitigate. The Employee shall not be required to mitigate the
amount of any payment provided for in this Section 5 by seeking other employment or
otherwise.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6.0 |  | Definitions.
For purposes of this Agreement the following definitions apply:
|--- |  | ----------------------------------------------------------------------------

| | 6.1 |  | "Cause"
shall mean the occurrence of any of the following circumstances:
| | --- |  | ------------------------------------------------------------------------

| |  | (a) |  | (i)
the Employees material breach of, or habitual neglect or failure to perform the
material duties which he is required to perform under, the terms of this Agreement; (ii)
the Employees material failure to follow the reasonable directives or policies
established by or at the direction of the Board; or (iii) the Employees engaging in
conduct that is materially detrimental to the interests of the Company such that the
Company sustains a material loss or injury as a result thereof, provided that the breach
or failure of
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 9 of 16

---

| | performance
by the Employee under subparagraphs (i) through (iii) hereof is not cured, to the extent
cure is possible, within ten (10) days of the delivery to the Employee of written notice
thereof;
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | the
willful breach by the Employee of Section 7 of this Agreement or any
provision of any confidentiality, invention and non-disclosure,
non-competition or similar agreement between the Employee and the
Company; or
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | the
conviction of the Employee of, or the entry of a pleading of guilty or nolo
contendere by the Employee to, any crime involving moral turpitude or
any felony.
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6.2 |  | Date
of Termination shall mean the Employees last day of actual employment by the
Company (or its successor) for any reason including death or Disability.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6.3 |  | Disability shall
mean the inability of the Employee, by reason of illness, accident or other physical or
mental disability, for a period of 120 days, whether or not consecutive, during any
360-day period, to perform the services contemplated under this Agreement. A
determination of disability shall be made by a physician satisfactory to both the
Employee and the Company; provided, however, that if the Employee and the Company do not
agree on a physician, the Employee and the Company shall each select a physician and
these two together shall select a third physician, whose determination as to disability
shall be binding on all parties.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6.4 |  | Good
Reason shall mean the occurrence of any of the following circumstances, and the
Companys failure to cure such circumstances within thirty (30) days of the delivery
to the Company of written notice by the Employee of such circumstances:
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (a) |  | any
material adverse change in the Employees duties, authority or
responsibilities as described in Section 2.1 hereof which causes the
Employees position with the Company to become of significantly
less responsibility or assignment of duties and responsibilities
inconsistent with the Employees position;
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | a
material reduction in the Employees salary as in effect on the
Commencement Date or as the same may be increased from time to time;
| |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------

Page 10 of 16

---

| |  | (c) |  | the
failure of the Company to continue in effect any material compensation or
benefit plan in which the Employee participates as in effect on the
Commencement Date, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue the Employees
participation therein (or in such substitute or alternative plan) on
a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Employees participation
relative to other participants, as in effect on the Commencement
Date;
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (d) |  | the
failure by the Company to continue to provide the Employee with benefits
substantially similar to those enjoyed by the Employee under any of
the Companys health and welfare insurance, retirement and other
fringe-benefit plans insurance, which the Employee was participating
as in effect on the Commencement Date, the taking of any action by
the Company which would directly or indirectly materially reduce any
of such benefits, or the failure by the Company to provide the
Employee with the number of paid vacation days to which he is
entitled in accordance with the Companys normal vacation policy in
effect on the Commencement Date or in accordance with any agreement
between the Employee and the Company existing at that time; or
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (e) |  | the
relocation of the Employee to a location which is a material distance from
Cranbury, New Jersey. (f) For purposes of this Agreement, Good
Reason shall be interpreted in a manner, and limited to the
extent necessary, so that it will not cause adverse tax consequences
for either party with respect to Section 409A, and any successor
statute, regulation and guidance thereto.
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6.5 |  | "Change
in Control" shall mean the occurrence of any of the following events:
| | --- |  | -----------------------------------------------------------------------------

| |  | (a) |  | any
person, as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the Exchange Act) (other than the Company,
any trustee or
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 11 of 16

---

| | other
fiduciary holding securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company) becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing more than 50% of the combined
voting power of the Companys then outstanding securities;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | the
date the individuals who, during any twelve month period, constitute the
Board (the Incumbent Board) cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director during the twelve month period whose election, or
nomination for election by the Companys stockholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a
member of the Incumbent Board;
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | a
merger or consolidation of the Company approved by the stockholders of the
Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) 50% or less of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to implement
a re-capitalization of the Company (or similar transaction) in which
no person (as defined in Section 6.4(a)) acquires more
than 50% of the combined voting power of the Companys then
outstanding securities; or
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 12 of 16

---

| |  | (d) |  | a
sale of all or substantially all of the assets of the Company.
| |  | --- |  | ----------------------------------------------------------------

|7.0 |  | Restrictive
Covenants.
|--- |  | ----------------------

| |  | (a) |  | For
the purposes of this Agreement:
| |  | --- |  | -----------------------------------

| |  |  | (i) |  | Competing
Products means any products or processes of any person or
organization other than the Company in existence or under
development, which are substantially the same, may be substituted
for, or applied to substantially the same end use as the products or
processes that the Company is developing or has developed or
commercialized during the time of the Employees employment with
the Company.
| |  |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | (ii) |  | Competing
Organization means any person or organization engaged in, or
with definitive plans to become engaged in, research or development,
production, distribution, marketing or selling of a Competing
Product.
| |  |  | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | The
Employee acknowledges that he has, on or prior to the date of the Agreement,
executed and delivered to the Company an Employee Agreement on
Confidentiality, Intellectual Property, Debarment Certification and
Conflict of Interest (the Confidentiality Agreement) and
the Employee hereby affirms and ratifies his obligations thereunder;
and the Employee agrees that after termination by the Company for
Cause pursuant to Section 4.2 (except in the case where such
termination occurs within 12 months following a Change in Control),
by the Employee pursuant to Section 4.6, or by either party upon
expiration of the Employment Period, he will not render services of
any nature, directly or indirectly, to any Competing Organization in
connection with any Competing Product within any geographical
territory as the Company and such Competing Organization are or would
be in actual competition, for a period of twenty-four (24) months,
commencing on the Date of Termination.
| |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | The
Employee agrees that he will not, during the Employment Period and for a period of nine
(9) months commencing on the Date of Termination, directly or indirectly employ,
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 13 of 16

---

| | solicit
for employment, or advise or recommend to any other person that they employ or solicit
for employment, any person whom he knows to be an employee of the Company or any parent,
subsidiary or affiliate of the Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (d) |  | In
the event a court of competent jurisdiction should find any provision in this
Section 7 to be unfair or unreasonable, such finding shall not render
such provision unenforceable, but, rather, this provision shall be
modified as to subject matter, time and geographic area so as to
render the entire section valid and enforceable.
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8.0 |  | Notices. All notices required or permitted under this Agreement shall be in writing and
shall be deemed effective upon either: (a) personal delivery; or (b) three (3) days
following deposit with the United States Postal Service for delivery by registered or
certified mail, postage prepaid, or one (1) day following deposit with a reputable
overnight courier service, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in accordance
with this Section 8.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9.0 |  | Pronouns. Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular forms of
nouns and pronouns shall include the plural, and vice versa.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.0 |  | Entire Agreement. This Agreement, together with the Confidentiality Agreement, constitutes
the entire agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of this Agreement.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11.0 |  | Amendment. This Agreement may be amended or modified only by a written instrument executed
by both the Company and the Employee. Any such amendment shall comply with the
requirements of Section 409A, if applicable.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12.0 |  | Governing
Law. This Agreement shall be construed,interpreted and enforced in accordance with
the laws of New Jersey, without regard to its principles of conflict of laws.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13.0 |  | Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of both
parties and their respective successors and assigns, including any corporation with which
or into which the Company
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 14 of 16

---

| | may be merged or which may succeed to its assets or business; provided, however, that the
obligations of the Employee are unique and personal and shall not be assigned by him.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14.0 |  | Waiver
of Breach.
|---- |  | -----------------

| | 14.1 |  | Waiver
by the Company. No delay or omission by the Company in exercising any right under this
Agreement shall operate as a waiver of that or any other right. A waiver or consent given
by the Company on any one occasion shall be effective only in that instance and shall not
be construed as a bar or waiver of any right on any other occasion. No waiver by the
Company shall be valid unless in writing signed by an authorized officer of the Company
and approved by a majority of the Board.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 14.2 |  | Waiver
by the Employee. No delay or omission by the Employee in exercising any right under this
Agreement shall operate as a waiver of that or any other right. A waiver or consent given
by the Employee on any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other occasion. No waiver by the
Employee shall be valid unless in a writing signed by the Employee.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15.0 |  | Miscellaneous.
|---- |  | --------------

| | 15.1 |  | The
captions of the sections of this Agreement are for convenience of reference only and in
no way define, limit or affect the scope or substance of any section of this Agreement.
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 15.2 |  | In
case any provision of this Agreement shall be invalid, illegal or otherwise
unenforceable, the validity, legality and enforceability of the remaining provisions
shall in no way be affected or impaired thereby.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16.0 |  | Survival.
 The provisions of Sections 3.3, 5, 6, 7 and 8 shall survive the termination of this
Agreement.
|---- |  | ---------------------------------------------------------------------------------------------------------

|17.0 |  | Attorney's
Fees. The Company shall reimburse the Employee for all legal fees and expenses
associated with the negotiation and drafting of this Agreement, upon reasonable
documentation thereof, up to a maximum of $5,000.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 15 of 16

---

|18.0 |  | Timing of Reimbursements. All reimbursements made by the Company pursuant to this
Agreement will be made within 30 days from the date the Employee submits documentation of
the expenses. Employee will submit documentation substantiating expenses within 30 days
from the date the expenses are incurred.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties
hereto have executed this Agreement as an instrument under seal effective as of the day
and year set forth above.

|                                                                                              |  |                                                 | 
|--------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | 
|PALATIN TECHNOLOGIES, INC.                                                                    |  | EMPLOYEE                                        | 
|                                                                                             
|                                                                                             
|By:                                                                                           |  | By:                                             | 
|Name: Stephen T. WillsTitle: Executive V.P. of Operations and
        Chief Financial Officer |  | Carl SpanaChief Executive Officer and President | 

|      |  |  |       |  | 
|----- |  |  | ----- |  | 
|Date: |  |  | Date: |  | 

Page 16 of 16