# COLLABORATIVE
DEVELOPMENT AND MARKETING AGREEMENT

This
COLLABORATIVE DEVELOPMENT AND MARKETING AGREEMENT is entered into as of August 12, 2004
(the Effective Date), by and between PALATIN TECHNOLOGIES, INC., a
Delaware corporation having an address of Cedar Brook Corporate Center, 4C Cedar Brook
Drive, Cranbury, New Jersey 08512 (Palatin) and KING PHARMACEUTICALS,
INC., a Tennessee corporation having an address of 501 Fifth Avenue, Bristol, Tennessee
37620, (King). Each of King and Palatin is sometimes referred to
individually herein as a Party and collectively as the
Parties.

WHEREAS,
Palatin Controls and develops certain Technology and/or Proprietary Materials related to
its proprietary treatment for sexual dysfunction; and

WHEREAS,
King is engaged in the development and marketing of human therapeutics; and

WHEREAS, the
Parties desire to enter into a collaboration for the purpose of Developing and Marketing
Products derived from Palatin Technology and Proprietary Materials; and

WHEREAS,
King has also agreed to make, simultaneous with the Closing and upon the occurrence of
certain milestones specified herein, equity investments in Palatin common stock, such
investments to be made pursuant to the terms of the Securities Purchase Agreement, in the
form attached hereto as Exhibit H (the Securities Purchase
Agreement), dated as of the date of the Closing, which Securities Purchase
Agreement requires the issuance by Palatin of Warrants pursuant to Section 6.2.4 hereof.

NOW,
THEREFORE, in consideration of the mutual covenants contained herein, and for other good
and valuable consideration the receipt and sufficiency of which are acknowledged by the
Parties, the Parties hereto, intending to be legally bound, agree as follows.

# 1. DEFINITIONS

Whenever
used in this Agreement with an initial capital letter, the terms defined in this Section 1
shall have the meanings specified.

1.1 Accounting and
Finance Plans means the written plans (which shall include a detailed
strategy, budget, proposed timelines and all Collaboration Costs) describing the financial
plans to be carried out by each Party during each Calendar Year pursuant to this Agreement
which, with respect to Palatin, shall include the activities for which responsibility has
been allocated to Palatin and, with respect to King, shall include the activities for
which responsibility has been allocated to King. In addition, the Accounting and Finance
Plan shall include all budgets for the Collaboration, including budgets for the overall
Development and Marketing Program and each of the Program Plans.After the date
hereof, each Accounting and Finance Plan will be set forth in a written document prepared
by the Parties and approved by the JDMC and annexed as an amendment to Exhibit G.
The Accounting and Finance Plans shall not create an obligation on the Parties to
coordinate their accounting methods or undertake any sort of joint accounting, except to
the extent specified in the definition of Collaboration Costs.

1.2 Action" has the meaning set forth in Section 12.5.

1.3 Adverse
Event means any life-threatening drug experience, serious adverse
drug experience, unexpected adverse drug experience, expected drug experience or
non-serious drug experience, all as defined in ICH Guidance ICH E2A or in any provision of
the Food and Drug Act, any law, rule or regulation promulgated thereunder, or any foreign
equivalent, or other similar experience in a human who is administered a Product, whether
or not considered Product related, including, without limitation, any undesirable sign
(including abnormal laboratory findings of clinical concern), symptom or disease
associated with the use, abuse, or withdrawal of or from such Product.

1.4
Affiliate means any corporation, firm, partnership or
other entity which directly or indirectly controls or is controlled by or is under common
control with a Party to this Agreement. For purposes of this definition, (x)
control means ownership, directly or through one or more Affiliates, of (a)
fifty percent (50%) or more of the shares or voting rights in case of a corporation or
limited company, (b) fifty percent (50%) or more of the shares of stock entitled to vote
for the election of directors, in the case of a corporation, (c) fifty percent (50%) or
more of the equity or controlling interests in the case of any other type of legal entity
(including, without limitation, joint ventures) or status as a general partner in any
partnership, or (d) any other arrangement whereby a Party controls or has the right to
control the Board of Directors or equivalent governing body of an entity, and (y)
following the Merger, shall exclude Somerset Pharmaceuticals, Inc.

1.5
Agreement means this Collaborative Development and
Marketing Agreement, including all attached exhibits, as well as all amendments,
supplements and/or restatements thereof.

1.6 API means, with respect to a Product, the
active pharmaceutical ingredient used in the Product.

1.7 Applicable
Law means applicable U.S. and foreign laws, rules, regulations,
guidelines and standards, including but not limited to those of the FDA and comparable
foreign Regulatory Authorities.

1.8 Assets has the meaning set forth in Section
5.5.2.

1.9 Bankruptcy Code means the U.S. Bankruptcy Code,
11 U.S.C.ss.ss. 101 et seq.

1.10 Calendar
Quarter means, with respect to the first such Calendar Quarter, the
period beginning on the Effective Date and ending on the last day of the calendar quarter
within which the Effective Date falls and, thereafter, each successive period of three (3)
consecutive calendar months ending on March 31, June 30, September 30 or December 31. In
the event that the termination of this Agreement does not fall on the last day of a
Calendar Quarter, the Final Calendar Quarter shall mean
the period from the last day of the most recent Calendar Quarter through the applicable
date of termination of this Agreement.

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1.11 Calendar
Year means each successive twelve (12) month period commencing on
January 1 and ending on December 31. The first Calendar Year of this Collaboration shall
begin on the Effective Date and end on December 31, 2004. In the event that the
termination of this Agreement does not fall on the last day of a Calendar Year, the
Final Calendar Year shall mean the period from the last
day of the most recent Calendar Year through the applicable date of termination of this
Agreement.

1.12 Chairman has the meaning set forth in Section
2.2.

1.13 Change of
Control means that any of the following events, to the extent
permitted hereunder, has occurred: (i) any person (as such term is used in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the Exchange Act)),
other than a Party, any employee benefit plan of a Party or any entity organized,
appointed or established by a Party for or pursuant to the terms of any such plan,
together with all affiliates and associates (as such terms are
defined in Rule 12b-2 under the Exchange Act) becomes the beneficial owner or owners (as
defined in Rule 13d-3 and 13d-5 promulgated under the Exchange Act), directly or
indirectly, of more than 50% of the outstanding equity securities of the Party, or
otherwise becomes entitled, directly or indirectly, to vote more than 50% of the voting
power entitled to be cast at elections for directors (Voting Power) of
the Party; (ii) a consolidation or merger (in one transaction or a series of related
transactions) of a Party pursuant to which the holders of a Partys equity securities
immediately prior to such transaction or series of related transactions would not be the
holders, directly or indirectly, immediately after such transaction or series of related
transactions of more than 50% of the Voting Power of the entity surviving such transaction
or series of related transactions; (iii) the sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all or substantially all of the
assets of a Party; (iv) the liquidation or dissolution of a Party or a Party ceasing to do
business; and (v) a permitted assignment pursuant to Section 15.10.

1.14 Clinical
Plans means the written plans (which shall include a detailed
strategy, budget and proposed timelines) describing the clinical Development activities to
be carried out by each Party during each Calendar Year pursuant to this Agreement which,
with respect to Palatin, shall include the activities for which responsibility has been
allocated to Palatin and, with respect to King, shall include the activities for which
responsibility has been allocated to King. After the date hereof, each Clinical Plan will
be set forth in a written document prepared by the Parties and approved by the JDMC and
annexed as an amendment to Exhibit C.

1.15
Closing shall mean, subject to the satisfaction or waiver
of the conditions set forth in Section 6.1.3, the closing of the transactions contemplated
by this Agreement.

1.16 Closing
Date shall mean the earlier of: (i) the first (1st) day,
unless the first (1st) day falls on a weekend or holiday, in which case it
shall be the next business day, after the expiration or termination of all applicable
waiting periods under the HSR Act or (ii) the first (1st) day, unless the first
(1st) day falls on a weekend or holiday, in which case it shall be the next
business day, after the joint determination (by certification from each Party to the
other) that notification under the HSR Act is not required.

1.17
CMC means chemistry, manufacturing and controls
activities related to Product and/or API for any Product.

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1.18
Collaboration means the association of Palatin and King
established pursuant to this Agreement for the purpose of conducting the Development and
Marketing Program so as to accomplish the objectives of the Development and Marketing
Program, including the Marketing of Products.

1.19 Collaboration
Costs means, to the extent approved by the JDMC, the sum of (a)
Development Costs, (b) Manufacturing/CMC Costs, (c) Marketing Costs, (d) Regulatory and IP
Costs, (e) product liability costs, as contemplated by Section 5.4, (f) any other
cost or expense expressly stated to be a Collaboration Cost in this Agreement or under a
Program Plan, (g) quantity, trade or cash discounts, chargebacks, returns, allowances,
rebates (including without limitation any and all federal, state or local government
rebates, such as Medicaid rebates) and costs incurred in connection with processing the
foregoing and price adjustments, to the extent actually allowed in any invoice relating to
Product (to the extent not already deducted as part of the calculation of Net Sales), (h)
sales and other excise taxes and duties or similar governmental charges directly related
to the sale of Product (to the extent not already deducted as part of the calculation of
Net Sales), and (i) any other direct and allocable internal costs and direct and allocable
external costs incurred in conducting the Development and Marketing Program, all
calculated in accordance with GAAP and all approved by the JDMC. Except to the extent this
Agreement expressly provides for payments that do not require JDMC approval, and except to
the extent the JDMC has approved any payment hereunder, neither Party shall (y) be
obligated to incur any costs or expend any funds that have not been approved by such Party
or (z) have the authority to cause the other party to incur any costs or expend any funds
that have not been approved by such other Party. Notwithstanding anything to the contrary
contained herein, Collaboration Costs shall not include (i) indirect costs, overhead,
general and administrative costs and other similar costs, (ii) any costs which relate to
the business of a Party as a whole without specifically referencing a Product or (iii)
costs required to be paid by Palatin under the CT License Agreement (which shall be the
responsibility of Palatin), including without limitation pursuant to the indemnification
provisions thereof except to the extent the same are the result of the acts or omissions
of King. In calculating the Collaboration Costs, the following principles shall apply: (x)
there shall be no double counting of any costs or expenses or of any revenues, and to the
extent a cost or expense has been included in one category or sub-category, it shall not
be included in another, and to the extent any revenue has been taken into account in one
category or sub-category, it shall not be taken into account in another; (y) when
allocating costs and expenses under this Agreement, each Party shall utilize the same
policies and principles as it utilizes consistently within its group and business units
when making internal cost allocations; and (z) all costs and expenses shall be determined,
and all calculations shall be made, in accordance with GAAP.

1.20 Collaboration License Fee has the meaning set
forth in Section 6.2.1.

1.21 Collaboration Manager has the meaning set
forth in Section 2.5.

1.22 Collaboration
Revenue means the sum of (a) Net Sales and (b) all other
consideration or revenue paid to or received by or on the account of a Party in connection
with this Agreement, the Collaboration or the Development and Marketing Program
(including, without limitation, any and all Net Sales and all consideration and revenues
resulting from Development and Marketing in the ROW).

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1.23 Completion of Phase
II Clinical Trials means achievement of clinical endpoints agreed
upon by the Clinical Committee for specific Phase II Clinical Trials for the relevant
Product for a specific indication and the specific dosage strengths, which data enables
the Parties to proceed with Phase III Clinical Trials, without any objection from the FDA
that prevents proceeding with such Phase III Clinical Trials, as documented by FDA contact
reports. For the avoidance of doubt, the Completion of Phase II Clinical
Trials for FSD and for ED shall be independent events, and the conduct of additional
Preclinical Plan and Clinical Plan activities for a given Product for a given indication
(including, without limitation, additional Phase II Clinical Trials for such Product and
such indication) subsequent to the first Completion of Phase II Clinical Trials for such
Product shall not be deemed to and shall not be dispositive of the prior occurrence of the
Completion of Phase II Clinical Trials for such Product and for such indication.

1.24 Completion of Phase
III Clinical Trials means achievement of clinical endpoints agreed
upon by the Clinical Committee for Phase III Clinical Trials, which data enables the
Parties to file for Regulatory Approval on the relevant Product for the relevant
indication.

1.25 Confidential
Information means (a) all Technology produced or developed by either
Party in the Development and Marketing Program, (b) all information exchanged by the
Parties prior to the date hereof, and (c) with respect to a Party (the Receiving
Party), all information, Technology and Proprietary Materials which are
disclosed by the other Party (the Disclosing Party) to the Receiving
Party hereunder or to any of its employees, Consultants, Affiliates or Sublicensees,
except to the extent that any such information (i) as of the date of disclosure is
demonstrably known to the Receiving Party or its Affiliates, as demonstrated by credible
written documentation; (ii) as of the date of disclosure is in, or subsequently enters,
the public domain, through no fault or omission of the Receiving Party; (iii) is obtained
from a Third Party having a lawful right to make such disclosure free from any obligation
of confidentiality to the Disclosing Party; or (iv) is independently developed by or for
the Receiving Party without reference to or reliance upon any Confidential Information of
the Disclosing Party as demonstrated by credible written documentation. All Palatin
Technology, King Technology and Joint Technology that is used in or, in the judgment of
the JDMC, reasonably likely to be used in the Development and Marketing Program shall be
considered, during the Term and, if the Agreement terminates earlier pursuant to Article
11, for so long as any Product is being Developed or Marketed, Confidential Information of
both Parties, regardless of which Party provided or developed same; provided,
however, that (x) during the Term hereof, neither Party shall be restricted from
using any of its own Confidential Information outside the Field, provided, and only to the
extent, that such use outside the Field does not, and would not reasonably be expected to
adversely impact any intellectual property rights or commercial interests of the
Collaboration, including without limitation the Development and Marketing Program; and (y)
after termination of this Agreement pursuant to Section 11.2, (i) the Party with the right
to Develop and Market Product after termination shall be permitted to use any of either
partys Confidential Information as reasonably required in connection with such
Development and Marketing and (ii) neither Party shall be restricted from using any of its
own Confidential Information outside the Field, provided, and only to the extent, that
such use outside the Field does not, and would not reasonably be expected to adversely
impact any intellectual property rights or commercial interests of the Party with the
right to Develop and Market Product after termination, with respect to such Development
and Marketing.

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1.26
Consultant means a third party who has entered into or
hereafter enters into a written agreement with Palatin or King or both to provide
consulting services that are material or are reasonably likely, in the judgment of the
JDMC, to become material to the Development and Marketing Program, which written
agreement, (a) includes an assignment of all right, title and interest in and to all work
product and all inventions arising from the performance of such agreement, and all
intellectual property rights attaching thereto, to Palatin or King, as applicable and (b)
binds the relevant third party by obligations of confidentiality and non-use with respect
to all such work product, inventions, Confidential Information and intellectual property
rights that are at least as stringent as those set forth herein.

1.27
Control or Controlled
means (a) with respect to Technology (other than Proprietary Materials) and/or Patent
Rights, the possession by a Party of the ability to grant a license or sublicense of such
Technology and/or Patent Rights as provided herein without the payment of additional
consideration (other than any additional consideration to be paid pursuant to the CT
License Agreement) and/or without violating the terms of any agreement or arrangement
between such Party and any Third Party and (b) with respect to Proprietary Materials, the
possession by a Party of the ability to supply such Proprietary Materials to the other
Party as provided herein without the payment of additional consideration and without
violating the terms of any agreement or arrangement between such Party and any Third
Party.

1.28
Copromote or Copromotion
means the right of Palatin, consistent with the allocation of responsibilities under the
Marketing Plan, to the extent amended pursuant to Section 5.1, to copromote with King,
Product in any legal manner in the Territory to the urology specialty only.

1.29 Copromotion Option has the meaning set forth
in Section 5.1.

1.30 CT License
Agreement means the License Agreement dated as of March 31, 1998 by
and between Palatin and Competitive Technologies, Inc. (CT), a
copy of which has been provided to King, as it may be amended from time to time hereafter,
with the consent of King, to the extent required pursuant to Section 7.4.

1.31 CTMor
Clinical Trial Materials means any Product manufactured,
packaged and labeled as required by Applicable Law to be used as investigational drug or
placebo for use in the conduct of clinical trials in humans.

1.32
Default means (a) a material breach, default or
violation, (b) the occurrence of an event that with or without the passage of time or the
giving of notice, or both, would constitute a material breach, default or violation or
cause any material mortgages, liens, security interests, charges, covenants, options,
claims, restrictions and encumbrances of any kind to arise, or (c) respect to a contract,
the occurrence of an event that with or without the passage of time or the giving of
notice, or both, would give rise to a right of termination, renegotiation or acceleration
or a material right to receive damages or a payment of material monies or penalties of or
under such contract by a party other than a Party.

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1.33 Defaulting Party has the meaning set forth in
Section 3.10.

1.34 Developing Party has the meaning set forth in
Section 11.2.2(d).

1.35
Development or Develop
means, with respect to a Product, all research, preclinical, pharmaceutical and clinical
activities and other activities undertaken in order to obtain Regulatory Approval of such
Product in accordance with this Agreement prior to Regulatory Approval of such Product.
These activities shall include preclinical and clinical drug development activities,
including, among other things: research, test method development and stability testing,
toxicology, animal studies, statistical analysis and report writing, clinical trial design
and performance prior to obtaining Regulatory Approvals, obtaining Regulatory Approvals,
and regulatory affairs related to the foregoing. Development shall also
include relevant formulation, process development, manufacturing, manufacturing scale-up,
CMC, development-stage manufacturing, quality assurance, and quality control development.
All of the items in the immediately preceding sentence shall be subject to Kings
final decision-making authority to the extent set forth in Section 2.10.2 hereof,
notwithstanding the inclusion of any or all of the foregoing activities in the Preclinical
Plans or Clinical Plans.

1.36 Development and
Marketing Program means the collaborative development and marketing
program in the Field commencing on the date hereof and conducted by Palatin and King
pursuant to this Agreement and the Preclinical Plans, Clinical Plans, Manufacturing/CMC
Plans, Regulatory Plans, Marketing Plans, and Accounting and Finance Plans.

1.37 Development
Costs means, with respect to a Product, all costs incurred by a Party
directly attributable to Development of such Product, but not including applicable
Manufacturing/CMC Costs and Regulatory Costs.

1.38 Discretionary Funding has the meaning set
forth in Section 2.8.2.

1.39 ED means erectile dysfunction and all related
sub-indications.

1.40 Effective Date has the meaning set forth in
the first paragraph of this Agreement.

1.41 Event of Bankruptcy has the meaning set forth
in Section 11.2.4.

1.42 Expense Payment has the meaning set forth in
Section 6.2.2.

1.43
FAMC means the fully absorbed manufacturing costs which
includes direct costs and allocated costs, but not indirect and overhead costs.

1.44 FDA means the United States Food and Drug
Administration or any successor agency.

1.45
Field means the palliative, prophylactic or therapeutic
treatment of human sexual dysfunction, including ED and FSD.

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1.46 Filing Party has the meaning set forth in
Section 9.1.2.

1.47 First Commercial
Sale means, with respect to any Product, the first sale for end-use
or consumption, including any sale to a wholesaler or distributor, of such Product in a
country after the applicable Regulatory Authority has granted Regulatory Approval. For
purposes of this definition, any sale to an Affiliate or Sublicensee will not constitute a
First Commercial Sale.

1.48 Force
Majeure means an event beyond the reasonable control of a Party that
prevents the performance, in whole or in part, by the Party of any of its obligations
hereunder, including by reason of any act of God, flood, fire, explosion, earthquake,
breakdown of plant, shortage of critical equipment, loss or unavailability of
manufacturing facilities or material, strike, lockout, labor dispute, casualty or
accident, or war, terrorist act, revolution, civil commotion, acts of public enemies,
blockage or embargo, or any injunction, law, order, proclamation, regulation, ordinance,
demand or requirement of any government or of any subdivision, authority or representative
of any such government, if and only if the Party affected shall have used commercially
reasonable efforts to avoid the effects of such occurrence and to remedy it promptly if it
has occurred.

1.49 FSD means female sexual dysfunction and all
related subindications.

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

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

1.52 GAAP means United States generally accepted
accounting principles.

1.53 Good Clinical
Practices means the international ethical and scientific quality
standards for designing, conducting, recording, and reporting trials that involve the
participation of human subjects. Good Clinical Practices are established through FDA
guidances (including but not limited to ICH E6).

1.54 Good Laboratory
Practices means the minimum standards for conducting nonclinical
laboratory studies that support or are intended to support applications for research or
marketing permits for products regulated by the FDA, including food and color additives,
animal food additives, human and animal drugs, medical devices for human use, biological
products, and electronic products. Good Laboratory Practices are established through FDA
regulations (including but not limited to 21 CFR Part 58), FDA guidances, FDA current
review and inspection standards and current industry standards.

1.55 Good Manufacturing
Practices means the minimum standards for methods to be used in, and
the facilities or controls to be used for, the manufacture, processing, packing, or
holding of a drug to assure that such drug meets the requirements of the Federal Food,
Drug and Cosmetic Act of 1938, as amended, as to safety, and has the identity and strength
and meets the quality and purity characteristics that it purports or is represented to
possess. Good Manufacturing Practices are established through FDA regulations (including
but not limited to 21 CFR Parts 210-211), FDA guidance and FDA current review and
inspection standards and current industry standards.

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1.56 HSR Act means the Hart-Scott-Rodino Act of
1976, as amended.

1.57
IND means (a) an Investigational New Drug Application (as
defined in 21 CFR § 312.3) that is required to be filed with the FDA before
beginning clinical testing of a Product in human subjects, or any successor application or
procedure or (b) any counterpart of a U.S. Investigational New Drug Application that is
required in any other country or region in the Territory before beginning clinical testing
of a Product in human subjects in such country or region.

1.58 Indemnified Party has the meaning set forth in
Section 13.3.

1.59 Indemnifying Party has the meaning set forth
in Section 13.3.

1.60 Infringement has the meaning set forth in
Section 9.2.1.

1.61 Infringement Notice has the meaning set forth
in Section 9.2.1.

1.62 Initial Share Payment has the meaning set
forth in Section 6.2.3.

1.63 Initial Shares has the meaning set forth in
Section 6.2.3.

1.64 IRB has the meaning set forth in Section 12.8.

1.65 Joint
Decision means any decision which must be made by the JDMC after
appropriate consultations with, and discussions concerning the same by, the JDMC
representatives of Palatin and King. Joint Decisions shall include any decisions expressly
identified as such hereunder and any other decisions not specifically reserved to either
Party hereunder.

1.66 Joint Development
and Marketing Committee or JDMC
means the committee of Palatin and King representatives established pursuant to Section
2.1to administer the affairs of the Collaboration.

1.67 Joint Patent Rights means Patent Rights
claiming Joint Technology.

1.68 Joint
Technology means any Technology or Proprietary Materials (a) jointly
developed or conceived by employees of King or Palatin, or Consultants to both King and
Palatin, during the conduct of the Development and Marketing Program or (b) developed or
conceived by one Party during the conduct of the Development and Marketing Program as a
result of its material use of the Technology or Proprietary Materials of the other Party.

1.69 King
Activities means those activities to be performed by King pursuant to
this Agreement or the Program Plans.

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1.70 King Background
Technology means any Technology useful in the Field that is (a)
Controlled by King as of the Closing Date or (b) developed or conceived by employees of,
or Consultants to, King on and after the Closing Date in the conduct of activities outside
the Development and Marketing Program and without the material use of any Palatin
Technology, Palatin Proprietary Materials or Joint Technology.

1.71 King Indemnitees has the meaning set forth in
Section 13.1.

1.72 King Patent Rights means all Patent Rights
claiming King Technology.

1.73 King Program
Technology means any Technology developed or conceived by employees
of, or Consultants to, King, alone or jointly with Third Parties, in the conduct of the
Development and Marketing Program without the material use of any Palatin Technology,
Palatin Proprietary Materials or Joint Technology.

1.74 King Proprietary
Materials means any Proprietary Materials that are useful in the
Field that are (a) Controlled by King as of the Closing Date or (b) developed or conceived
by employees of, or Consultants to, King on and after the Closing Date in the conduct of
activities outside the Development and Marketing Program and without the material use of
any Palatin Technology, Palatin Proprietary Materials or Joint Technology.

1.75 King
Technology means, collectively, King Background Technology and King
Program Technology. 1.76 License Fees means all upfront
payments, milestone payments, license fees, royalties or other payments, payable to any
Third Party by either Party under any Third Party license agreement or other similar
agreement or arrangement (including the existing Third Party agreements utilized as part
of the Collaboration, other than the CT License Agreement which shall be the sole
responsibility of Palatin) to the extent such payments are attributable to the Development
or Marketing of Product. If the rights under any Third Party license agreement are also
attributable to products other than Products, then only an equitable portion of any
amounts payable under it shall be allocated to Products as License Fees.

1.77 Losses has the meaning set forth in Section
13.1.

1.78 Manufacturing/CMC
Costs means FAMC attributable to the manufacture of a Product and
consistent with the Manufacturing/CMC Plan and includes, without limitation, the costs of
all Third Party manufacturing, direct material, direct labor, direct services costs and
manufacturing overhead consumed (including depreciation), provided or procured by
manufacturing facilities in the manufacture of a Product and any other direct and/or
allocated costs of all goods manufactured.

1.79 Manufacturing/CMC
Plans means the written plans (which shall include a detailed
strategy, budget and proposed timelines) describing the API, synthesis, choice of
Manufacturers and third party suppliers, expected manufacturing scale-up, manufacture,
formulation, process development, development-stage manufacture, quality assurance/quality
control development, filling and/or shipping requirements for each Product (in accordance
with customary standards for a product of comparable market potential), including all CMC,
and the activities to be carried out by each Party during the applicable Calendar Year
which, with respect to Palatin, shall include the activities for which responsibility has
been allocated to Palatin and, with respect to King, shall include the activities for
which responsibility has been allocated to King. After the date hereof, each
Manufacturing/CMC Plan will be set forth in a written document prepared by the Parties and
approved by the JDMC and annexed as an amendment to Exhibit D.

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1.80 Manufacturing Party has the meaning set forth
in Section 11.2.2(d).

1.81
Market or Marketing
means any and all activities directed to the marketing, detailing and promotion of a
Product for commercial sale and shall include pre-launch and post-launch marketing,
promoting, detailing, distributing, offering to sell and selling a Product, importing a
Product for sale, and any and all clinical and marketing studies conducted after obtaining
marketing approval for any Product (but not including any preclinical studies), including,
without limitation, all Phase IV trials that are not performed as a condition to obtaining
any Regulatory Approval for a Product (which Phase IV trials shall be Development
activities), and interacting with Regulatory Authorities regarding the foregoing. If a
Phase IV trial is performed as a condition to obtaining any Regulatory Approval for a
Product, such trial shall be considered a Development activity.

1.82 Marketing
Costsmeans the sum of (a) all reasonable out-of-pocket costs
and expenses incurred by a Party directly attributable to the following functions for the
sale, promotion and marketing of a Product in the Territory: (i) market research on such
Product or relevant indications, (ii) marketing communications, (iii) corporate accounts,
(iv) managed care, (v) sales force training, (vi) product hotlines, (vii) reimbursement
support, (viii) contracting, (ix) pricing, (x) telemarketing services, (xi) distribution
costs, including freight, insurance, warehousing, order entry and billing, (xii) the cost
of Product detailing of a Partys sales force plus reasonable out-of-pocket costs and
expenses paid to Third Parties for product details provided by such Third Parties, (xiii)
patient registries, if required, (xiv) the cost of Product samples, and (xv) all
reasonable out-of-pocket costs and expenses incurred by a Party and directly attributable
to the promotion of a Product in the Territory and (b) Personnel Costs incurred by a Party
directly attributable to marketing personnel and support staff working (either full time
or part of the time) on the Marketing of Products in the Territory. Examples of functions
that would be included in the marketing headcount cost are: Marketing, marketing
communications, clinical research and educational managers, clinical support managers,
corporate accounts, managed care, product hotlines, sales forecasting, reimbursement
support (government economic managers), marketing research, contracting and pricing.

1.83 Marketing
Plans means the written plans (which shall include a detailed
strategy, budget and proposed timelines and the pre-launch and launch activities to be
undertaken) describing the Marketing activities to be carried out by each Party during
each applicable Calendar Year pursuant to this Agreement which, with respect to Palatin,
shall include the activities for which responsibility has been allocated to Palatin and,
with respect to King, shall include the activities for which responsibility has been
allocated to King. After the date hereof, each Marketing Plan will be set forth in a
written document prepared by the Parties and approved by the JDMC and annexed hereto as an
amendment to Exhibit F.

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1.84
Merger means the merger contemplated by the Agreement and
Plan of Merger by and among Mylan Laboratories Inc., Summit Merger Corporation and King,
dated as of July 23, 2004.

1.85
NA means the countries and jurisdictions in North
America, including Canada, Mexico, and Puerto Rico, and any other US protectorates,
territories and possessions.

1.86
NDA means a New Drug Application to market the Product in
the Territory or similar application submitted to the FDA, or its foreign equivalent
submitted to any Regulatory Authority in the ROW, and all supplements and amendments
thereto.

1.87 Net
Sales means the gross amount invoiced to non-Affiliate Third Parties for
sale of Products, less, to the extent deducted from or on such invoice consistent with
GAAP, the following items: (i) quantity, trade or cash discounts, chargebacks, returns,
allowances, rebates (including without limitation any and all federal, state or local
government rebates, such as Medicaid rebates) and price adjustments, to the extent
actually allowed; (ii) sales and other excise taxes and duties or similar governmental
charges directly related to such sale, to the extent such items are included in the gross
invoice price; (iii) amounts actually refunded due to rejected, spoiled, damaged, outdated
or returned Product; and (iv) freight, shipment and insurance costs actually incurred in
transporting Product to a Third Party purchaser. If any Products are sold to Third Parties
in transactions that are not at arms length between the buyer and seller, then the
gross amount to be included in the calculation of Net Sales for such sales shall be the
amount that would have been invoiced had the transaction been conducted at arms
length, which amount shall be determined, whenever possible, by reference to the average
selling price of the relevant Product in arms-length transactions in the country of
sale at the time of sale. If any Products are sold to Third Parties for consideration
other than cash or for consideration that is not readily ascertainable, then the gross
amount to be included in the calculation of Net Sales for such sales shall be determined
based on the reasonable value of the consideration given, taking into account the average
selling price of the relevant Product in arms-length transactions in the country of
sale at the time of sale. Any goods or services provided in exchange of the supply,
disposal of Product for, or use of Product, in clinical or preclinical trials or as free
samples (such samples to be in quantities common in the industry for this sort of Product)
shall not give rise to any deemed sale under this Section.

1.88 Non-Defaulting Party has the meaning set forth
in Section 3.10.

1.89 Non-Proceeding Party has the meaning set forth
in Section 11.2.3(g).

1.90 Non-Target Party has the meaning set forth in
Section 5.5.2.

1.91 Palatin Activities means those activities to
be performed by Palatin pursuant to this Agreement and the Program Plans.

1.92 Palatin Background
Technology means any Technology that is used or useful in the Field
and that is (a) Controlled by Palatin as of the Closing Date or (b) developed, acquired or
conceived by employees of, or Consultants to, Palatin on and after the Closing Date in the
conduct of activities outside the Development and Marketing Program and without the
materialuse of any King Technology, King Proprietary Materials, Joint Technology
or Palatin Program Technology.

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1.93 Palatin Indemnitees has the meaning set forth
in Section 13.2.

1.94 Palatin Patent
Rights means all Patent Rights claiming Palatin Technology. For the
avoidance of doubt, the Palatin Patent Rights are understood to include, without
limitation, United States Patent No. 6,579,968 and United States Patent Application Nos.
10/040,547 and 10/638,071, including any patents issuing from such applications, along
with all patent rights included in the CT License Agreement.

1.95 Palatin Program
Technology means any Technology developed or conceived by employees
of, or Consultants to, Palatin, alone or jointly with Third Parties, in the conduct of the
Development and Marketing Program, without the material use of any King Technology, King
Proprietary Materials or Joint Technology.

1.96 Palatin Proprietary
Materials means any Proprietary Materials that are useful in the
Field and that are (a) Controlled by Palatin as of the Closing Date or (b) developed or
conceived by employees of, or Consultants to, Palatin on and after the Closing Date in the
conduct of activities outside the Development and Marketing Program and without the
materialuse of any King Technology, King Proprietary Materials, or Joint
Technology.

1.97 Palatin Technology means, collectively,
Palatin Background Technology and Palatin Program Technology.

1.98 Patent Coordinator has the meaning set forth
in Section 8.3.

1.99 Patent
Rights means the rights and interests in and to issued patents and
pending patent applications (which for purposes of this Agreement shall be deemed to
include certificates of invention and applications for certificates of invention and
priority rights) in any country, including all provisional applications, substitutions,
continuations, continuations-in-part, divisions, and renewals, all letters patent granted
thereon, and all reissues, reexaminations and extensions thereof, Controlled by a Party.

1.100 Personnel
Costs means the reasonable costs of employment of personnel employed
by or under contract to a Party, including, but not limited to, salaries, benefits
(including the costs of cars or allowances therefor), travel, lodging, meals and office
and computing supplies.

1.101 Phase II Clinical
Trial means a human clinical trial in any country that is intended to
evaluate the effectiveness of the drug for a particular indication or indications in
patients with the disease or condition under study and to determine the common short-term
side effects and risks associated with the drug or that would otherwise meet the
definition of 21 CFR 312.21(b), or its foreign equivalent.

1.102 Phase III Clinical
Trial means a human clinical trial in any country that would
otherwise meet the definition of 21 CFR 312.21(c), or its foreign equivalent.

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1.103 Preclinical
Plans means the written plans (which shall include a detailed
strategy, budget and proposed timelines) describing the preclinical Development activities
to be carried out by each Party during each Calendar Year pursuant to this Agreement
which, with respect to Palatin, shall include the activities for which responsibility has
been allocated to Palatin and, with respect to King, shall include the activities for
which responsibility has been allocated to King. After the date hereof, each Preclinical
Plan will be set forth in a written document prepared by the Parties and approved by the
JDMC and annexed as an amendment to Exhibit B.

1.104 Proceeding Party has the meaning set forth in
Section 11.2.3(g).

1.105
Product means (1) any product for use in the Field
(including without limitation, any composition of matter, procedure, process or method)
(a) the manufacture, use or sale of which infringes any claim included within the Palatin
Patent Rights, (b) which incorporates, is discovered as a result of the use of, or is
otherwise derived from, PT-141 or any fragment or variant thereof or any analog thereof
or, to the extent applicable, any pro-drug, metabolite, isomer, enantiomer, salt or ester
thereof or any combination of any of the foregoing, including the use of PT-141 in
combination with one or more other actives and in any formulation including, without
limitation, in any delivery method, or (c) which incorporates, is derived from or is
discovered as a result of the use of melanocortin agonists and (2) any other product the
JDMC agrees to Develop or Market pursuant to this Agreement and (3) any device containing
any of the foregoing.

1.106 Product
Trademark(s) means any trademarks and trade names, whether or not
registered, and any trademark applications, renewals, extensions or modifications thereto
in the Territory together with all goodwill associated therewith, trade dress and
packaging which are applied to or used with Products, and any promotional materials
relating thereto.

1.107 Program
Plans means the Preclinical Plans, the Clinical Plans, the
Manufacturing/CMC Plans, the Regulatory Plans, the Marketing Plans, and the Accounting and
Finance Plans.

1.108 Proprietary
Materials means any tangible chemical, biological or physical
research materials that are furnished by or on behalf of one Party to the other Party in
connection with this Agreement, regardless of whether such materials are specifically
designated as proprietary by the transferring Party.

1.109 PT-141 means the peptide sequence
Ac-Nle-cyclo(-Asp-His-D-Phe-Arg-Trp-Lys)-OH.

1.110 Recipient has the meaning set forth in
Section 3.9.

1.111 Regulatory
Approval means approval by the FDA or other Regulatory Authority to
market a Product in a regulatory jurisdiction.

1.112 Regulatory
Authority means the FDA or any counterpart of the FDA outside the
United States, or other national, supra-national, regional, state or local regulatory
agency, department, bureau, commission, council or other governmental entity with
authority over the distribution, importation, exportation, manufacture, production, use,
storage, transport or clinical testing, pricing and/or sale of a Product, including any
device incorporating the Product.

1.113 Regulatory
Filings means, collectively, any and all INDs and drug master files
(DMFs), NDAs, applications for any device incorporating the Product,
applications for designation of a Product as an Orphan Product(s) under
the Orphan Drug Act or any other similar filings (including any foreign equivalents and
further including any related correspondence and discussions), and all data contained
therein, as may be required by or submitted to any Regulatory Authority for the Regulatory
Approval.

1.114 Regulatory and IP
Costsmeans Personnel Costs, reasonable out-of-pocket costs
and expenses (e.g., filing fees, user fees, annual product and facility registration fees,
permit fees and the like) incurred by a Party directly attributable (i) to obtaining or
maintaining Regulatory Approvals for a Product (including any device incorporating the
Product) (including, for example, communications and meetings with Regulatory Authorities)
and satisfying all registration and other requirements of Regulatory Authorities within
the Territory (including, for example, adverse event reporting and Product pricing
approvals) in connection with each Partys activities under the Development and
Marketing Program, and (ii) to preparing, filing, prosecuting, maintaining, enforcing and
defending Patent Rights or Technology as contemplated in Section 9 hereof.

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1.115 Regulatory
Plans means the written plans (which shall include a detailed
strategy, budget and proposed timelines) describing the regulatory activities, including
the timing and conduct of meetings, discussions and correspondence with Regulatory
Authorities, to be carried out by each Party during the applicable Calendar Year which,
with respect to Palatin, shall include the activities for which responsibility has been
allocated to Palatin and, with respect to King, shall include the activities for which
responsibility has been allocated to King, and the expected Regulatory Filings to be
completed and maintained by the Collaboration, for each Product. After the date hereof,
each Regulatory Plan will be set forth in a written document prepared by the Parties and
approved by the JDMC and annexed as an amendment to Exhibit E.

1.116 ROW means all countries and jurisdictions in
the world, other than NA.

1.117 Securities Purchase Agreement has the meaning
set forth in the recitals to this Agreement.

1.118
Sublicensee means any Third Party (other than an
Affiliate) to which a Party or both Parties grant a sublicense of some or all of the
rights granted to one another under this Agreement as permitted by this Agreement.

1.119 Supply has the meaning set forth in Section
11.2.2(d).

1.120 Surviving Entity has the meaning set forth in
Section 5.5.1.

1.121 Target Party has the meaning set forth in
Section 5.5.1.

1.122
Technology means and includes all inventions,
discoveries, improvements, trade secrets and proprietary methods and materials, whether or
not patentable, relating to the Field, including but not limited to (a) samples of,
methods of production or use of, and structural and functional information pertaining to,
chemical compounds, proteins or other biological substances and (b) data, formulations,
techniques and know-how (including any negative results).

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1.123 Term means the term of this Agreement as set
forth in Section 11.1.

1.124 Terminated Region has the meaning set forth
in Section 11.2.

1.125
Territory means NA.

1.126 Third
Party means any person or entity other than King and Palatin and
their respective Affiliates.

1.127 Third Party Agreements has the meaning set
forth in Section 3.10.

1.128 Transferor has the meaning set forth in
Section 3.9.

1.129 Vice Chairman has the meaning set forth in
Section 2.2.

# 2. ADMINISTRATION OF THE
COLLABORATION

2.1 Establishment and Function
of JDMC. Palatin and King shall establish the JDMC within thirty (30) days
of the Closing Date to plan, administer and monitor the Development and Marketing Program,
including all activities set forth in the Program Plans. In particular, the JDMC shall
review and approve, or recommend revisions to, the Program Plans, review and monitor the
progress of the Development and Marketing Program and recommend necessary adjustment to
the Development and Marketing Program. In planning, administering and monitoring the
Development and Marketing Program, the JDMC shall allocate tasks and responsibilities,
taking into account each Partys respective specific research and development
capacities and expertise in order to avoid duplication and to enhance synergies, as well
as comply with the requirements of this Agreement.

2.2 Membership.
Each Party shall appoint, in its sole discretion, three (3) members to the JDMC (which
members shall be employees of such Party). Unless otherwise agreed by the members of the
JDMC, the chairmanship and vice chairmanship of the JDMC shall rotate between the Parties.
The first appointment period shall begin on the date hereof and end on December 31, 2005.
For such period, in light of the fact that Palatin has solely developed the Product prior
to the date hereof, Palatin shall designate the chairman (the Chairman)
and King shall designate the vice chairman (the Vice Chairman).Thereafter, appointments of Chairman and Vice Chairman shall rotate on a Calendar Year
basis. Each Party shall have the right at any time to substitute individuals, on a
permanent or temporary basis, for any of its previously designated representatives to the
JDMC, by giving written notice thereof to the other Party.

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2.3 Committees.The
JDMC will appoint an Accounting and Finance Committee Preclinical Committee, Clinical
Committee, Manufacturing/CMC Committee and the Marketing Committee pursuant to Section 2.4
(each of whose members shall be employees of such Party). Otherwise, the JDMC shall have
the right and power to appoint and delegate its responsibilities to other committees as
reasonably needed to accomplish their work and the composition and eligibility
requirements for the same shall be agreed by the members of the JDMC. Such committees may
include, for the oversight and administration of each Program Plan, the Regulatory
Committee. Except as otherwise mandated by the JDMC in its minutes, each committee
established by the JDMC shall be governed by the rules and guidelines applicable to the
JDMC set forth in this Agreement. The JDMC shall set forth clearly each such
committees decision making responsibilities that have been delegated to it by the
JDMC. Any member of a committee may send a designee to observe a committee if such member
is unable to attend, but such observer shall not vote in such members place unless
given a written proxy from such member of the committee. Each Party shall have the right
at any time to substitute individuals, on a permanent or temporary basis, for any of its
previously designated representatives to any committee, by giving written notice thereof
to the other Party. If an issue to be addressed by a committee appears to fall within the
oversight and administration of more than one committee, such committees shall confer with
each other to determine which committee shall oversee and administer such issue.

# 2.4 Appointment of
Committees.

2.4.1 Accounting and Finance
Committee. Promptly after the appointment of the JDMC, the JDMC will appoint an
Accounting and Finance Committee composed of two (2) members designated by each Party,
both of whom shall be employees of the relevant Party. The JDMC shall delegate to the
Accounting and Finance Committee its responsibility for making all decisions, subject to
final JDMC review and approval, relating to accounting, budgets, Collaboration Cost
allocation, Collaboration Revenue allocation and all other matters related to accounting
and finance. Except as otherwise mandated by the JDMC in its minutes, the Accounting and
Finance Committee shall otherwise be governed by the rules and guidelines applicable to
the JDMC set forth in this Agreement.

2.4.2 Preclinical Committee.
Promptly after the appointment of the JDMC, the JDMC will appoint a Preclinical Committee
comprised of two (2) members designated by each Party, both of whom shall be employees of
the relevant Party. The JDMC shall delegate to the Preclinical Committee its
responsibility for making all decisions, subject to final JDMC review and approval,
relating to the Preclinical Plans. Except as otherwise mandated by the JDMC in its
minutes, the Preclinical Committee shall otherwise be governed by the rules and guidelines
applicable to the JDMC set forth in this Agreement.

2.4.3 Clinical Committee.
Promptly after the appointment of the JDMC, the JDMC will appoint a Clinical Committee
comprised of two (2) members designated by each Party, both of whom shall be employees of
the relevant Party. The JDMC shall delegate to the Clinical Committee its responsibility
for making all decisions, subject to final JDMC review and approval, relating to the
Clinical Plans. Except as otherwise mandated by the JDMC in its minutes, the Clinical
Committee shall otherwise be governed by the rules and guidelines applicable to the JDMC
set forth in this Agreement. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2.]

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2.4.4 Manufacturing/CMC
Committee. Promptly after the appointment of the JDMC, the JDMC will appoint a
Manufacturing/CMC Committee comprised of two (2) members designated by each Party, both of
whom shall be employees of the relevant Party. The JDMC shall delegate to the
Manufacturing/CMC Committee its responsibility for making all decisions, subject to final
JDMC review and approval, relating to the Manufacturing/CMC Plans. Except as otherwise
mandated by the JDMC in its minutes, the Manufacturing/CMC Committee shall otherwise be
governed by the rules and guidelines applicable to the JDMC set forth in this Agreement.

2.4.5 Marketing Committee.
Promptly after the appointment of the JDMC, the JDMC will appoint a Marketing Committee
comprised of two (2) members designated by each Party, both of whom shall be employees of
the relevant Party. The JDMC shall delegate to the Marketing Committee its responsibility
for making all decisions, subject to final JDMC review and approval, relating to the
Marketing Plans. Except as otherwise mandated by the JDMC in its minutes, the Marketing
Committee shall otherwise be governed by the rules and guidelines applicable to the JDMC
set forth in this Agreement.

2.5 Collaboration
Manager. Promptly after the Effective Date, each Party shall appoint a
collaboration manager (the Collaboration Manager). The Collaboration
Managers shall be the primary contact between the JDMC and all committees appointed by the
JDMC. The Collaboration Managers shall regularly consult with the heads of each such
committee and each Party will cause each such committee head to cooperate fully with each
Collaboration Manager. The Collaboration Managers shall timely address all issues and
concerns raised by any member of the JDMC or any committee, as well as collect and provide
to the JDMC or to any committee all information requested by the JDMC or such committee
concerning any aspect of the Development and Marketing Program. Each Party shall have the
right, upon prior written notice to the other Party, to substitute for its current
Collaboration Manager another of its employees, on a permanent or temporary basis.

2.6 Meetings.

2.6.1 Schedule of
Meetings. The JDMC shall establish a schedule of times for meetings, taking
into account, without limitation, the planning needs of the Development and Marketing
Program and the need of the JDMC to consult and/or render decisions with respect to any
Joint Decisions. Meetings shall also be convened upon the determination of any member, by
prior written notice thereof of not less than three (3) business days to the remaining
members of the JDMC, that a meeting of the JDMC is required to discuss and/or resolve any
matter or matters with respect to the Collaboration. In no event shall the JDMC meet less
frequently than quarterly. Meetings shall alternate between the respective offices of the
Parties in Cranbury, New Jersey; Bristol, Tennessee; Princeton, New Jersey, or Cary, North
Carolina; or another mutually agreed upon location; provided, however, that the Parties
may mutually agree to meet by teleconference or video conference or may act by a written
memorandum executed by the members of the JDMC.

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2.6.2 Quorum; Voting;
Decisions. At each JDMC meeting, one member designated by each Party shall
constitute a quorum. Each Partys JDMC members present at any meeting shall together
have one vote on all matters before the JDMC. All decisions of the JDMC shall be made by
unanimous vote. Whenever any action by the JDMC is called for hereunder during a time
period in which the JDMC is not scheduled to meet, the Chairman shall cause the JDMC to
take the action in the requested time period by calling a special meeting or by causing
the JDMC to take such action without a formal meeting by written memorandum, as provided
in Section 2.6.1. The Chairman shall provide prior written notice of not less than three
(3) business days of the same to all JDMC members. Representatives of each Party or of its
Affiliates who are not members of the JDMC, may attend JDMC meetings or committee meetings
as non-voting observers at the invitation of either Party with the prior approval of the
other Party, which approval shall not be unreasonably withheld. In the event that the JDMC
is unable to resolve any matter before it, such matter shall be resolved as set forth in
Section 2.10hereof.

2.6.3 Agenda and
Minutes. An agenda for each JDMC meeting shall be circulated no less than
three (3) days prior to the meeting, to the extent practicable. The JDMC shall keep
accurate minutes of its deliberations which record all proposed decisions and all actions
recommended or taken. Drafts of the minutes shall be delivered to the members of the JDMC
within a reasonable time, not to exceed ten (10) days after the meeting. The Party not
filling the Chairmanship of the JDMC shall have responsibility for the preparation and
circulation of the draft minutes. Draft minutes shall be then be edited by the Chairman
and Vice Chairman and shall be issued in final form within a reasonable time not to exceed
fourteen (14) days after the meeting.

2.6.4 Expenses.
Palatin and King shall each bear all expenses of their respective JDMC members related to
their participation on the JDMC and attendance at JDMC meetings.

2.7 Decision-Making
Responsibilities. The JDMC shall be solely responsible for making all
decisions specified as Joint Decisions hereunder and all decisions not specifically
reserved to either Party hereunder, including, but not limited to, decisions with respect
to the following matters:

2.7.1 the definition, review,
approval and amendment (not less than annually) of each Program Plan and all related
strategy and objectives (but not the actual conduct of such plans);

2.7.2 definition, review and approval
of and changes to the strategy and objectives (but not the actual conduct) of the
Collaboration;

2.7.3 management and allocation of resources of the Collaboration;

2.7.4 management and oversight of all Patent Rights and Technology used in
connection with Product;

2.7.5 proposal of all budgets for the Collaboration;

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2.7.6 review and approval of all
subcontracts, sublicenses and Third Party licenses (other than the CT License Agreement
and expressly including, without limitation, any and all supply and manufacturing
agreements) and other agreements required or entered into in connection with the
Collaboration, and any and all amendments thereto, including without limitation a
determination, with respect to each such subcontract, sublicense, license or agreement,
regarding whether it is appropriate to require the inclusion of the bankruptcy-protection
provision set forth in Section 3.10 hereof;

2.7.7 performance of such other
functions as appropriate to further the purposes of this Agreement and the Collaboration
as determined from time to time by the Parties.

# 2.8 Collaboration Costs
Overruns and Additional Expenditures.

2.8.1 The Accounting and Finance
Plans shall set forth a budget with respect to all material tasks required to be conducted
by the Parties pursuant to the other Program Plans. Each Party shall use commercially
reasonable efforts to complete all tasks assigned to it pursuant to the Program Plans in
accordance with the funding allocated to such tasks in the Accounting and Finance Plans.
In the event either Party anticipates or becomes aware that the actual costs of any given
task assigned to it may or will likely exceed the funds allocated to such task, such Party
shall promptly notify the JDMC. The Accounting and Finance Committee, and the committee
charged with primary oversight responsibility for the task in question, shall work
together in good faith for up to thirty (30) days to determine whether to readjust the
budget to allocate additional funds to such task, to revise the scope of such task to
permit satisfactory completion at the then-budgeted funding level, or both. In the event
no decision is reached, the matter shall be subject to the provisions of Section 2.10
hereof.

2.8.2 Notwithstanding the foregoing,
either Party may, in its discretion, spend additional amounts above and beyond those
allocated in the Accounting and Finance Plans (Discretionary Funding)
on any task assigned to such Party pursuant to the other Program Plans or on any other
task the JDMC has approved. In such event, the Party wishing to expend Discretionary
Funding shall first inform the other Party of its intent to do so. If such other Party
consents to such Discretionary Funding being deemed a Collaboration Cost, such
Discretionary Funding shall constitute a Collaboration Cost, and the rights and
obligations of the Parties with respect to such Collaboration Costs, and any Collaboration
Revenues and intellectual property, regulatory or other intangible rights derived from or
generated by such Discretionary Funding, shall be determined in accordance with the terms
and conditions of this Agreement as they apply to the Collaboration. If such other Party
does not consent, then such Discretionary Funding shall not constitute a Collaboration
Cost, but shall be borne solely by the Party undertaking the Discretionary Funding, and
the Parties shall negotiate in good faith, prior to the expenditure of the Discretionary
Funding, the rights and obligations of the Parties with respect to such Discretionary
Funding and any Collaboration Revenues and intellectual property, regulatory or other
intangible rights derived therefrom or generated thereby.

2.8.3 Except to the extent this
Agreement expressly provides for payments that do not require JDMC approval, and except to
the extent the JDMC has approved any payment hereunder, neither Party shall (i) be
obligated to incur any costs or expend any funds that have not been approved by such Party
or (ii) have the authority to cause the other party to incur any costs or expend any funds
that have not been approved by such other Party.

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2.9 Interests of the
Parties. Notwithstanding any other provisions of this Agreement, all
decisions made and all actions taken by the JDMC, by Palatin or by King with respect to
any Collaboration matter, shall be made or taken in the best interest of the
Collaboration, subject in all respects to the fiduciary duties of the Parties to their
respective shareholders.

# 2.10 Dispute Resolution.

2.10.1 In the event any committee
shall not be able to reach a decision or take an action appointed to it, then such
decision or matter shall first be referred for resolution to the JDMC. In the event that
the JDMC shall not be able to reach a decision or take an action on any matter referred by
a committee, any Joint Decision or any other matter which is reserved to the JDMC or the
Accounting and Finance Committee or any other committee delegated decision-making
authority by the JDMC hereunder, then such Joint Decisions or such other unresolved
matters shall first be referred for resolution to the Chief Executive Officer of each
Party for attempted resolution by good faith negotiation. Such good faith negotiation may
include the appointment by either Party of an unaffiliated Consultant, who shall be a
scientific expert chosen based on such persons experience and expertise in the
particular type of issue which is unresolved to advise such officers on the matter.

2.10.2 If such officers are unable to resolve the matter within ten (10)
days, then

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

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

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

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

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

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

3.    
          DEVELOPMENT AND MARKETING PROGRAM

3.1 Objectives of the
Development and Marketing Program. The objectives of the Development and
Marketing Program shall be the Development, manufacture and Marketing of Products within
the Field in the Territory and the joint licensing of the rights under this Agreement to
Third Parties for development and marketing of Product in the ROW.

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3.2 Program Plans
Generally. In consultation with the JDMC and in accordance with the
strategy and objectives of the Program Plans, each Party shall be primarily responsible
for those tasks assigned it as set forth on each Program Plan attached hereto and such
obligations set forth in this Agreement. Unless otherwise set forth in any Program Plan,
Palatin shall have the sole right and responsibility to conduct all Palatin Activities and
King shall have the sole right and responsibility to conduct all King Activities. Annexed
hereto as Exhibit A is a preliminary plan for the Development and Marketing
Program. Within thirty (30) days after the Effective Date and after consideration of the
Exhibit A, the JDMC shall take such actions necessary to define, generate and
approve each Program Plan for the first Calendar Year, which Program Plans shall supplant
Exhibit Aas operational documents for the conduct of the Development and Marketing
Program. The JDMC shall ensure that the Program Plans, including without limitation all
timelines set forth therein, are consistent with each other and accurately reflect the
objectives set forth in the Development and Marketing Plan. Each Program Plan for such
first Calendar Year will then be attached hereto as Exhibit B (Preclinical Plan),
Exhibit C (Clinical Plan), Exhibit D (Manufacturing/CMC Plan), Exhibit
E (Regulatory Plan), Exhibit F (Marketing Plan), and Exhibit G(Accounting and Finance Plan). For each year of the Development and Marketing Program
commencing with the second Calendar Year, the Program Plans shall be amended and updated
by Palatin and King and approved by the JDMC as directed by the JDMC no later than thirty
(30) days prior to the end of the prior Calendar Year and shall be attached hereto as
Exhibits B-1, C-1, D-1, E-1, etc. Each Program Plan shall be in writing and shall
set forth, with reasonable specificity, research objectives and tasks to be performed by
each of the Parties for the period covered by the Program Plan as agreed by the JDMC and
as specifically set forth in this Agreement. Any Program Plan may be amended by the JDMC
at any time upon the unanimous request of the representatives of the applicable committee.
Except to the extent specifically directed by the JDMC in each Program Plan, the decisions
as to how to perform the tasks assigned to Palatin and King in any Program Plan shall be
Palatin decisions and King decisions, respectively. Although not specifically a part of a
Program Plan, all issues and activities relating to Patent Rights and Technology used in
connection with a Product shall be subject to oversight of the JDMC.

3.3 Preclinical Plans. Unless and until otherwise agreed by the JDMC, the
following terms and conditions are hereby incorporated into each Preclinical Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION UNDER RULE 24b-2.]

3.4 Clinical Plans. Unless and until otherwise agreed by the JDMC, the
following terms and conditions are hereby incorporated into each Clinical Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH
THE COMMISSION UNDER RULE 24b-2.]

3.5 Manufacturing/CMC
Plans. Unless and until otherwise agreed by the JDMC, the following terms and
conditions are hereby incorporated into each Manufacturing/CMC Plan. [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

# 

3.6 Regulatory Plans. Unless and until otherwise agreed by the
JDMC, the following terms and conditions are hereby incorporated into each Regulatory Plan. [INFORMATION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

22



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# 3.7 Marketing Plans.

3.7.1 Unless and until otherwise
agreed by the JDMC, the following terms and conditions are hereby incorporated into each
Marketing Plan. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER
RULE

# 24b-2.]

3.7.2 With respect to Kings
activities under the Marketing Plan, King shall use commercially reasonable efforts to
Develop and Market the Product commensurate with industry standards in accordance with
Section 3.13 hereof. With respect to Kings activities under the Marketing Plan, King
hereby agrees, as part of any Marketing Plan and in a manner consistent with Section 3.13
hereof, to establish and maintain its infrastructure and staffing and otherwise maintain
its expertise for Marketing Product at levels (i) commensurate with industry standards for
products of similar market potential and at a similar stage in development as the
applicable Product, taking into account the competitiveness of the marketplace, the
proprietary position of the Product, and the efforts and resources available to a company
having a comparable market capitalization (taking King and its Affiliates together) and
(ii) customary and reasonable in light of then-current market conditions. [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.8 Accounting and Finance Plans. Unless and until otherwise agreed by the
JDMC, the following terms and conditions are hereby incorporated into each Accounting and Finance Plan. [INFORMATION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.9 Supply of Proprietary
Materials. From time to time during the Term of this Agreement, either
Party (the Transferor) may supply the other Party (the
Recipient) with its Proprietary Materials to the extent the parties,
the JDMC or the relevant committee reasonably believe that such Proprietary Materials
would be useful in the Development and Marketing Program or to the extent such Proprietary
Materials are required to be so provided pursuant to any Program Plan. In connection
therewith, the Recipient hereby agrees that (a) it shall not use Proprietary Materials for
any purpose other than exercising any rights or fulfilling any obligations granted to it
or reserved by it hereunder; (b) it shall use the Proprietary Materials only in compliance
with all applicable, federal, state, and local laws and regulations; (c) it shall not
transfer any Proprietary Materials to any Third Party for use without the prior written
consent of the Transferor, except as expressly permitted hereby; (d) the Transferor shall
retain full ownership of all such Proprietary Materials; and (e) upon the expiration or
termination of this Agreement, the Recipient shall at the instruction of the Transferor
either destroy or return any Proprietary Materials which are not the subject of the grant
of a continuing license hereunder. In addition, each of Palatin and King agrees that,
during the Development and Marketing Program neither Party shall transfer to any Third
Party, without the approval of the other Party, any Joint Technology, including without
limitation any tangible embodiments thereof.

23



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3.10 Third Party Licenses and
Collaborations. Subject to Section 2.7.6, King, Palatin or both may enter
into such Third Party licenses, collaborations, and supply and manufacturing agreements
and, solely with respect to the ROW, sublicenses as are reasonably necessary in the
judgment of the JDMC to accomplish the objectives and purposes of the Collaboration. Each
such agreement shall (a) if only one Party is a party to the agreement, name the other
Party as a third party beneficiary to such agreement, (b) include an assignment of all
right, title and interest in and to all work product and all inventions arising from the
performance of such agreement, and all intellectual property rights attaching thereto to
the contracting Party, and (c) bind the relevant third party by obligations of
confidentiality and non-use with respect to all such work product, inventions, and
intellectual property rights that are at least as stringent as those set forth herein. In
order to ensure the ability of a Party (Non-Defaulting Party) to
proceed with the Development and Marketing Program notwithstanding the occurrence of any
Default or Event of Bankruptcy on behalf of the other Party (Defaulting
Party), the JDMC shall, in its discretion, require the inclusion, in those
subcontracts, sublicenses, licenses and other agreements (including manufacturing and
supply agreements) entered into in connection with the Collaboration and subject to the
JDMCs approval pursuant to Section 2.7.6 hereof (Third Party
Agreements) that are or are likely to become material to the conduct of the
Development and Marketing Program, of an enforceable provision granting to the
Non-Defaulting Party hereto an automatic assignment, contingent upon an Event of
Bankruptcy of the Defaulting Party or a Default by the Defaulting Party of that Third
Party Agreement, pursuant to which all of the Defaulting Partys rights and
obligations under such Third Party Agreement shall automatically and without any acts of
any Party hereto or thereto be assigned to the Non-Defaulting Party, who hereby agrees to
assume such obligations.

3.11 Option to Perform.In the event that a Party does not perform a task or tasks assigned to it by the JDMC
under a Program Plan, including, without limitation, due to a dispute as to the budget or
scope of such task, and the omission of performance or initiation of performance of such
task could reasonably be expected to have a material adverse effect on the Collaboration,
the other Party has the right but not the obligation, to perform such task or tasks.
[INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

3.12 Collaborative Efforts and
Reports. The Parties hereby acknowledge and agree that the successful
execution of the Development and Marketing Program will require the collaborative use of
both Parties areas of expertise. Each Party shall, through their Collaboration
Manager, keep the JDMC fully informed about the status of the portions of the Development
and Marketing Program it performs separately and/or jointly with the other Party by
providing to their Collaboration Manager for submission to the JDMC a written report
describing the progress of the separate and joint work done by it under the Development
and Marketing Program in reasonable detail, at least fifteen (15) days prior to each
quarterly meeting of the JDMC, and promptly upon the occurrence of any material event
relevant to the Development and Marketing Program, including activities assigned to that
Party.

3.13 Diligence.
Each Party will exercise its commercially reasonable efforts and diligence (i) in
Developing, Marketing, manufacturing and seeking Regulatory Approval in accordance with
its business, legal, medical and scientific judgment, and in undertaking investigations
and actions required to obtain appropriate Regulatory Approvals necessary to market
Products in the Field in the Territory and (ii) to meet its obligations (including without
limitation its financial obligations) hereunder. For purposes of this Section, such
commercially reasonable efforts and diligence shall be in accordance with the efforts and
resources a company having a comparable market capitalization (when taken together with
its Affiliates) in the biotechnology and pharmaceutical industry would devote to a
compound owned by it or to which it has rights, which is of similar market potential and
at a similar stage in development as the applicable Product, taking into account the
competitiveness of the marketplace, the proprietary position of the Product, the relative
potential safety and efficacy of the Product, the regulatory requirements involved in its
Development and Marketing, and the cost of goods and availability of capacity to
manufacture and supply the Product at commercial scale.

24



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# 4. INFORMATION EXCHANGE

4.1 Records.

4.1.1 Record
Keeping. Palatin and King shall each maintain records in sufficient detail
and in accordance with Good Laboratory Practice, Good Clinical Practice and Good
Manufacturing Practice, and as will properly reflect and document, in a manner appropriate
for purposes of supporting the filing of potential patent applications and Regulatory
Filings, all work done and results achieved in the performance of the Development and
Marketing Program (including all data in the form required under any Applicable Law);
provided however, prior to Completion of Phase II Clinical Trials, Palatin is responsible
for maintaining master files in accordance with Good Clinical Practices, Good Laboratory
Practices and Good Manufacturing Practices, to the extent applicable, and provided,
further, if Palatin elects not to maintain such records upon Completion of Phase II
Clinical Trials, Palatin shall transfer such records to King. Subject to Section 6.4.6hereof, Palatin and King each hereby provides the other the right to inspect and copy
such records to the extent reasonably required for the performance of its obligations or
exercise of its rights under this Agreement, and neither Party shall use such records or
information except to the extent otherwise permitted by this Agreement.

4.1.2 Technical
Reports. Each Party shall keep the JDMC fully informed about the status of
the Development and Marketing Program including, without limitation, furnishing the JDMC
with copies of all reports which relate to the Development and Marketing Program. In
particular, without limitation, each Party shall (a) provide periodic reports in
reasonable detail to the JDMC as requested from time to time by the JDMC; (b) provide the
other Party with access to all Technology and information employed in or arising out of
the Development and Marketing Program solely for the purpose of conducting their
respective roles hereunder; and (c) provide the other Party with information concerning
the Development and Marketing Program as such other Party shall reasonably request.

4.1.3 Information
Exchange. Subject to any confidentiality obligations to Third Parties,
Palatin and King shall cooperate in the performance of the Collaboration, including in the
performance of the Development and Marketing Program, and shall exchange information and
materials (including without limitation financial statements) as necessary to carry out
the Collaboration, including to carry out the Development and Marketing Program. The
Parties expect that such exchange of information and materials may involve short-term
on-site visits by scientists of one Party to the facilities of the other Party. Such
visits will have defined purposes, include a reasonable number of participants and be
scheduled reasonably in advance.

25



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4.2 Updates; Adverse
Event Information.

4.2.1 Updates and
Reports. Each Party shall keep the JDMC regularly informed of the progress
of the Partys efforts to Develop and Market Products in the Field in the Territory
and ROW through periodic progress reports related to the Program Plans as provided in this
Section 4.2.1 by providing the JDMC with written updates to the Program Plans, as the case
may be, no less frequently than each Calendar Quarter during the Term (commencing on the
second Calendar Quarter during the Term) and promptly upon the occurrence of any material
event relevant to the Development and Marketing Program, including activities assigned to
that Party. Such updates shall (a) summarize the Partys efforts to Develop and
Market all Products hereunder, (b) identify the Regulatory Filings with respect to any
Product that have been filed, sought or obtained by the Party during the proceeding
Calendar Quarter and any they reasonably expect to make, seek or attempt to obtain in the
following twelve (12)-month period and (c) summarize all preclinical and clinical data
generated by the Party with respect to Products. In addition, the Party (or its
Sublicensees) shall provide the JDMC with prompt written notice of the occurrence of any
event giving rise to an obligation to make a milestone payment to Palatin under Section
6.3, and shall provide the JDMC with prompt written notice of the occurrence of the First
Commercial Sale of any Product. Thereafter, all updates shall include updates as to the
sales and Marketing efforts for Products.

4.2.2 Adverse Event
Reports. In addition to the updates described in Section 4.2.1above, each Party shall provide the JDMC with all Adverse Event information and
product complaint information relating to Products as compiled and prepared in the normal
course of business in connection with the Development, Marketing or sale of any Product,
within time frames consistent with reporting obligations under Applicable Law.

4.2.3 Confidential
Information. Except as otherwise required in connection with disclosures to
Regulatory Authorities required by Applicable Law, all reports, updates, Adverse Event or
product complaint and other information provided by a Party under this Agreement
(including under this Section 4.2.3), shall be considered Confidential Information of both
Parties, regardless of who provided the same, and shall be subject to the terms of Section
10.

5. COPROMOTION; [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE
24B-2.]; AND CERTAIN OTHER PROVISIONS

5.1 Exercise of Option.Provided the JDMC approves the Marketing of Products to the urology specialty, Palatin
shall have the option (the Copromotion Option), but not the obligation,
to Copromote each Product in the Territory. [INFORMATION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION UNDER RULE 24b-2.] If Palatin duly exercises its Copromotion
Option with respect to any Product, the Marketing Plan with respect to such Product shall
be updated to reflect the same. All reasonable marketing costs and expenses of Palatin and
King related to the copromotion pursuant hereto shall be Marketing Costs. Palatin shall
keep the JDMC informed as to its Copromotion efforts in order to permit the JDMC to
coordinate and direct the sales and marketing activities of each of the Parties in the
Territory.

26



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Palatin shall have no right to market, offer for sale, sell or distribute any
Product in the Territory, unless and until Palatin has duly exercised its Copromotion Option. Within one hundred eighty days of
the Effective Date, the Marketing Committee shall prepare and submit to the JDMC for approval a copromotion schedule, to be
attached hereto as an amendment to the Marketing Plan, which will set forth the size of Palatins permitted sales force in
the event Palatin exercises its Copromotion Option (which, if King deploys a sales force in connection with the Copromotion, shall
in no event be greater than twenty percent (20%) of the total urology sales force of King and Palatin combined) along with such
other specifics concerning Palatins copromotion rights as the Marketing Committee determines are appropriate.

5.2 Copromotion
Rights. If Palatin elects to Copromote a Product as permitted in Section
5.1, Palatin shall ensure that such Copromotion is executed, in all material respects, in
a manner consistent with the decisions of the JDMC and the Marketing Plan, as amended
pursuant to the copromotion schedule identified in Section 5.1.

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

5.4 Product Liability
Costs. The Parties understand and agree that, because of the nature of the
collaborative effort set forth in this Agreement, should any Third Party claims be
asserted against either Party or both Parties or any of their Affiliates, agents or
representatives that are in the nature of product liability claims, the Parties will
cooperate through the JDMC to ensure that such claims are defended and settled or
compromised in a manner that best protects the interests of the Parties in accordance with
Section 2.8. In addition, the Parties will procure and maintain product liability
insurance with first-class carriers in coverages and amounts and with deductibles not less
than those as determined by the JDMC and, in any event, sufficient to cover the
Parties respective indemnification obligations hereunder. All costs incurred by a
Party in connection with a product liability claim after the date hereof, including costs
for insurance coverage required by the JDMC, shall be deemed Collaboration Costs,except to the
extent that such costs are indemnifiable pursuant to or payable by a
Party pursuant to Section 13 or attributable to products of a Party other than a Product.

5.5 Change of Control.

5.5.1 In the event of a Change of
Control of a Party (the Target Party) (i) in which a Party shall not be
the surviving entity in the event of a merger, the proposed surviving entity (the
Surviving Entity), (ii) in which there is an acquisition, lease,
exchange or other transfer of all or substantially all of the assets of a Party, or in
which there is an acquisition of the rights hereunder upon a liquidation or dissolution of
a Party, in each case, the acquiror, or (iii) in which there is a permitted assignment
pursuant to Section 15.10, the assignee, shall, prior to such Change of Control, agree in
writing to assume all of the existing and future obligations, rights, title and interest
of every nature in, to and under this Agreement of the Party in which it is entering into
such Change of Control transaction; provided, however, that if the Surviving Entity, the
acquiror or the assignee, as the case may be, does not assume the same in writing prior to
such Change of Control, this Agreement shall be deemed to have been materially breached
just prior to the consummation of the Change of Control by the Target Party.

27



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5.5.2 In the event that a Change of
Control is contingent upon or results in the Target Party or Surviving Entity being
required by a court, governmental authority or a regulatory authority to sell or otherwise
dispose or divest itself of its assets, rights or obligations relating to the
Collaboration or this Agreement (the Assets), the Target Party shall provide
written notice of the proposed divestiture to the other Party (the Non-Target
Party) promptly following the Target Partys receipt from such court,
government authority or Regulatory Authority of all details with respect to such
disposition or divestiture. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2.] If the Non-Target Party does not make a written offer,
then the Target Party may sell the Assets without any further obligations under this
Section 5.5.2. If the Non-Target Party makes a written offer [INFORMATION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] the Target Party may accept
such offer or solicit bona fide written offers from Third Parties; [INFORMATION OMITTED
AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]. In the event the Target
Party receives a bona fide written offer from a Third Party, then the Non-Target Party
shall have the right to match any bona fide written offer of such Third Party to purchase
the Assets [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE
24b-2.] following the Non-Target Partys receipt of written notice from the
Target Party identifying all relevant details of such Third Party offer.

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

6.1 Closing.

6.1.1 Covenants Pending
Closing.

(a)    
          Reasonable Efforts. Subject to the terms and conditions of this
          Agreement, each of the Parties agrees to use all reasonable efforts to take, or
          cause to be taken, all reasonable actions and to do, or cause to be done, all
          things necessary and appropriate to satisfy all conditions of and to consummate
          the transactions contemplated by this Agreement, including the satisfaction of
          the applicable conditions set forth in Section 6.1.2 below and the Closing.

(b)    
          Filings. The Parties shall cooperate with one another in the preparation,
          execution and filing of all documents that are required or permitted to be filed
          on or before the Closing, including, without limitation, filings pursuant to the
          HSR Act and will promptly file the same after the Effective Date. The related
          filing fees incurred by each Party shall be paid by King.

6.1.2 Closing.
As promptly as practicable after the Effective Date and after the satisfaction by each
Party or, if permissible, waiver of the conditions set forth in Sections 6.1.3(a) and (b),
the parties hereto shall cause the Closing to occur on the Closing Date. The Closing shall
be held at the offices of Mintz Levin Cohn Ferris Glovsky and Popeo PC, The Chrysler
Center, 666 Third Avenue, New York, New York 10017, or such other place as the parties
shall agree, for the purpose of confirming the satisfaction or waiver, as the case may be,
of the conditions set forth in Sections 6.1.3(a) and (b).

28



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# 6.1.3 Conditions to
Closing.

|(a) | The obligation of Palatin to close shall be subject to the satisfaction on or
          before the Closing Date of the following conditions, any or all of which may be
          waived in whole or in part by Palatin:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(i) | the expiration or termination of all applicable waiting periods under the HSR
          Act, unless a joint determination is made by Palatin and King (by certification
          from Palatin and King to each other) that notification under the HSR Act is not
          required;
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | the representations and warranties made by King in Article 12 shall be true and
          correct in all material respects as of the Effective Date and as of the Closing
          Date with the same force and effect as if they had been made as of the Closing
          Date, and King shall have performed all obligations and conditions herein
          required to be performed or observed by it on or prior to Closing;
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) | the provision by King to Palatin of an officers certificate certifying
          that (i) and (ii) above are true and correct as of the Closing Date;
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|(iv) | the payment to Palatin of the Collaboration License Fee, the Expense Payment and
          the Initial Share Payment by King; and
|---- | ---------------------------------------------------------------------------------------------------------------------------------

|(v) | the execution and delivery of the Securities Purchase Agreement by King.
|--- | ------------------------------------------------------------------------

|(b) | The obligation of King to close shall be subject to the satisfaction on or
          before the Closing Date of the following conditions any or all of which may be
          waived in whole or in part by King:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(i) | the expiration or termination of all applicable waiting periods under the HSR
          Act, unless a joint determination is made by Palatin and King (by certification
          from Palatin and King to each other) that notification under the HSR Act is not
          required;
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | the representations and warranties made by Palatin in Article 12 shall be true
          and correct in all material respects as of the Effective Date and as of the
          Closing Date with the same force and effect as if they had been made as of the
          Closing Date, and Palatin shall have performed all obligations and conditions
          herein required to be performed or observed by it on or prior to Closing;
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) | the provision by Palatin to King of an officers certificate certifying
          that (i) and (ii) above are true and correct as of the Closing Date; and
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

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|(iv) | the execution and delivery of the Securities Purchase Agreement and Warrant by
          Palatin.
|---- | -------------------------------------------------------------------------------------------------

6.2 Initial Payments and
Equity Purchase.

6.2.1 Collaboration License
Fee. Simultaneous with the Closing, King shall pay to Palatin a one-time,
fully-earned, nonrefundable license fee in the amount of Ten Million Dollars ($10,000,000)
(the Collaboration License Fee), [INFORMATION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]. The Collaboration License Fee shall
be paid by King in U.S. Dollars by wire to an account designated by Palatin.

6.2.2 Reimbursement of
Expenses. Simultaneous with the Closing, King shall pay to Palatin a
one-time, fully-earned, nonrefundable payment for partial reimbursement of expenses
attributable to preclinical, clinical development, and CMC costs for Product incurred by
Palatin prior to the date hereof in the amount of Five Million Dollars ($5,000,000) (the
Expense Payment). The Expense Payment shall be paid by King in U.S.
Dollars by wire to an account designated by Palatin.

6.2.3 Initial Purchase of
Equity. Simultaneous with the Closing, and in partial consideration of the
preclinical, clinical, and CMC costs for Product incurred by Palatin prior to the date
hereof and in consideration of the rights granted to King pursuant to Sections 2.9, 3.5,
3.6 and 3.7 and subject to the terms and conditions of the Securities Purchase Agreement
dated the date hereof, King shall purchase from Palatin, and Palatin shall issue and sell
to King, shares of Palatins common stock par value $0.01 per share (the
Initial Shares) for an aggregate purchase price of Five Million Dollars
($5,000,000) (the Initial Share Payment) in accordance with the terms
and conditions of the Securities Purchase Agreement.

6.2.4 Issuance of
Warrant. In partial consideration of the Initial Share Payment and the
first equity purchase ED Product milestone indicated below, Palatin agrees to issue to
King, pursuant to the terms of the Securities Purchase Agreement, warrants to purchase
Palatin common stock in the form set forth in Exhibit Ihereto.

# 6.3 Milestone Payments.

6.3.1 Development
Milestones. King will make the following nonrefundable, noncreditable
payments to and purchases of equity from Palatin within ten (10) days after the
determination of the first achievement of each of the milestones set forth below. Each of
the following milestone payments shall only be payable once.

`------------------------------- ------------------------------ ------------------------------- ---------------
                                ED PRODUCT                     FSD PRODUCT
------------------------------- ------------------------------ ------------------------------- ---------------
Milestone                       Cash           Equity          Cash            Equity          Total
------------------------------- -------------- --------------- --------------- --------------- ---------------

------------------------------- -------------- --------------- --------------- --------------- ---------------
[*]                             [*]            [*]             [*]             [*]             [*]
------------------------------- -------------- --------------- --------------- --------------- ---------------
[*]                             [*]            [*]             [*]             [*]             [*]
------------------------------- -------------- --------------- --------------- --------------- ---------------
[*]                             [*]            [*]             [*]             [*]             [*]
------------------------------- -------------- --------------- --------------- --------------- ---------------
[*]                             [*]            [*]             [*]             [*]             [*]
------------------------------- -------------- --------------- --------------- --------------- ---------------
[*]                             [*]            [*]             [*]             [*]             [*]
------------------------------- -------------- --------------- --------------- --------------- ---------------
[*]                             [*]            [*]             [*]             [*]             [*]
------------------------------- -------------- --------------- --------------- --------------- ---------------

------------------------------- -------------- --------------- --------------- --------------- ---------------
Total Development Milestones    [*]            [*]             [*]             [*]             $100 Million
------------------------------- -------------- --------------- --------------- --------------- ---------------`

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

30



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6.3.2 Development Milestone
Equity Purchases.All equity purchases to be made by King in connection with the
development milestones set forth in Section 6.3.1 above, shall be made pursuant to the
terms of the Securities Purchase Agreement; [INFORMATION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION UNDER RULE 24b-2.]

6.3.3 Sales Milestones.King will make the following nonrefundable, noncreditable payments to Palatin within
ten (10) days after the determination of the first achievement of each of the milestones
set forth below. Each of the following milestone payments shall only be payable
once. In the event that more than one milestone is reached in any given Calendar Year,
each such milestone shall be due and payable.

`---------------------------------------------------------------------- -----------------
Total Net Sales in a Single  Calendar  Year   Total Cash Payment for Such Calendar Year
for all  Products  in the Territory
--------------------------------------------- ------------------------------------------
[*]                                           [*]
--------------------------------------------- ------------------------------------------
[*]                                           [*]
--------------------------------------------- ------------------------------------------
[*]                                           [*]
--------------------------------------------- ------------------------------------------
[*]                                           [*]
--------------------------------------------- ------------------------------------------
[*]                                           [*]
--------------------------------------------- ------------------------------------------
[*]                                           [*]
--------------------------------------------- ------------------------------------------
[*]                                           [*]
--------------------------------------------- ------------------------------------------
Total Sales Milestones                        $130 Million
--------------------------------------------- ------------------------------------------`

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

# 6.3.4 Determination That
Payments Are Due.

(a)    
          The Party having control or oversight over achievement of a particular milestone
          shall provide the JDMC with prompt written notice upon its achievement of each
          of the milestones set forth above. In the event that, notwithstanding the fact
          that such Party has not given any such notice, the other Party believes any such
          milestone payment is due, it shall so notify such Party and the JDMC in writing,
          and shall provide to such Party and the JDMC the data and information
          demonstrating that the conditions for payment have been achieved. Within ten
          (10) days of its receipt of such notice, the JDMC shall review the data and
          information and shall certify in writing whether or not the conditions for
          payment have been achieved. Any negative determination shall be accompanied by a
          detailed explanation of the reasons therefor. If the JDMC does not take action
          within such ten (10) day period (or such other period as the Parties shall
          mutually agree to be reasonable), the conditions for payment shall be deemed to
          have been achieved (unless the JDMC did not take action because a Party did not
          participate in meetings of the JDMC). King shall have the right to dispute in
          good faith the obligation to make a milestone payment pursuant to this Section
          6.3.

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(b)    
          Notwithstanding anything to the contrary contained herein, any dispute under
          this Section that relates to whether or not a milestone has been achieved shall
          not be subject to final determination of either Party but shall be resolved
          pursuant to Section 2.10.

# 6.4 Collaboration Costs
and Collaboration Revenue.

6.4.1
Allocation. All Collaboration Costs incurred and Collaboration
Revenue received by a Party on and after the Effective Date shall be allocated between the
Parties according to the percentages set forth below. For the avoidance of doubt, (i) a
single percentage allocation shall ultimately be applied to all Collaboration Costs
incurred and all Collaboration Revenues received in a given Calendar Year, based on an
end-of-year determination of aggregate Collaboration Revenues for such Calendar Year,
[INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

`------------------------------------------------------------------------------------------------------
                   COLLABORATION COSTS AND COLLABORATION REVENUE ALLOCATION
------------------------------------------------------------------------------------------------------
     Region              Aggregate Collaboration Revenue in a   Aggregate Collaboration Revenue in a
                           Calendar Year Reaches Up to, but      Calendar Year Exceeds [*] in Region
                            Does Not Exceed, [*] in Region
------------------------ -------------------------------------- --------------------------------------
   Territory             [*]                                    [*]
------------------------
                         [*]                                    [*]
------------------------ -------------------------------------- --------------------------------------
      ROW                [*]                                    [*]
------------------------
                         [*]                                    [*]
------------------------ -------------------------------------- --------------------------------------`

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

6.4.2 Determination and
Allocation of CollaborationCosts. Within ten (10) days following
the end of each Calendar Quarter, Palatin and King shall submit to the Accounting and
Finance Committee an accounting of all Collaboration Costs incurred by it with respect to
all Products and the Collaboration, allocated between the Territory and ROW, in the
relevant time period. Within ten (10) days thereafter, the Accounting and Finance
Committee shall produce a report setting forth the calculation of Collaboration Costs and
its allocation between the Parties in accordance with Section 6.4.1 above, [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

6.4.3 Determination and
Allocation of Collaboration Revenue. Within ten (10) days following the end
of each Calendar Quarter commencing on and after the date of First Commercial Sale of each
Product or the date on which a Party received Collaboration Revenue, Palatin and King
shall submit to the Accounting and Finance Committee an accounting of all Collaboration
Revenue received by it with respect to all Products and the Collaboration, allocated
between the Territory and ROW. Within ten (10) days thereafter, the Accounting and Finance
Committee shall produce a report setting forth the calculation of Collaboration Revenue
and its allocation between the Parties in accordance with Section 6.4.1. [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

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6.4.4 Advance Payments and
Offset. Each of the Parties shall fund projected Collaboration Costs on a
monthly, prospective basis, such that all anticipated Collaboration Costs identified in
the Accounting and Finance Plan for a given month, or that are otherwise determined by the
Accounting and Finance Committee to be reasonably likely to be incurred in such month,
shall be allocated between the Parties according to the appropriate percentage set forth
in Section 6.4.1, as determined by the Accounting and Finance Committee by reference to
anticipated Collaboration Revenues for the relevant Calendar Year. At the end of each
Calendar Quarter, the Parties shall reconcile their respective funding payments pursuant
to Section 6.4.2 hereof, and, at the discretion of the Party who has funded an amount
greater than the Collaboration Costs allocable to such Party for the relevant Calendar
Quarter shall be reimbursed by the other Party within ten (10) days after the end of such
Calendar Quarter or, at its discretion, shall receive a credit against Collaboration Costs
payable by that Party in the subsequent Calendar Quarter(s), which credit amount shall be
carried forward until fully credited.

6.4.5 Currency
Conversion. All Collaboration Costs incurred and Collaboration Revenue
received in currencies other than U.S. Dollars shall be converted to U.S. Dollars using
the method agreed by the Parties and set forth in the Accounting and Finance Plan.

6.4.6 Records.
Each Party shall maintain, for three (3) years from the date of each quarterly
reconciliation of Collaboration Costs, complete and accurate records of the same for a
Party, its Affiliates and Sublicensees, in sufficient detail to allow calculation and
verification of Collaboration Costs and Collaboration Revenue. Each Party shall have the
right for a period of three (3) years after receiving any report or statement with respect
to Collaboration Costs or Collaboration Revenue to appoint at its expense an independent
certified public accountant reasonably acceptable to the other Party to inspect the
relevant records of such other Party and its Affiliates and Sublicensees to verify such
report or statement. Such other Party, its Affiliates and Sublicensees shall each make its
records available for inspection by such independent certified public accountant (who
agree to confidentiality provisions consistent with Article 10) during regular business
hours at such place or places where such records are customarily kept, upon reasonable
notice from the auditing Party, solely to verify the accuracy of the reports and payments.
Such inspection right shall not be exercised more than once in any Calendar Year and not
more than once with respect to sales of any Product in any given period. Palatin agrees to
hold in strict confidence all information concerning such payments and reports, and all
information learned in the course of any audit or inspection, except to the extent
necessary for Palatin to reveal such information in order to enforce its rights under this
Agreement or if disclosure is required by law. The results of each inspection, if any,
shall be binding on both Parties. In the event that any such inspection shall conclude
that Collaboration Costs were overstated or Collaboration Revenue underreported by up to
three percent (3%) in any given Calendar Year,

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the inspected Party shall pay for one-half
of the reasonable costs of the inspecting Party incurred in respect of the inspection, as
well as make any payments required to remedy the overstatement or underreporting. In the
event that any such inspection shall conclude that Collaboration Costs were overstated or
Collaboration Revenue underreported by more than three percent (3%) in any give Calendar
Year, the inspected Party shall pay for all the reasonable costs of the inspecting Party
incurred in respect of the inspection, as well as make any payments required to remedy the
overstatement or underreporting. Any dispute regarding the results of any such inspection
hereunder shall be subject to the dispute resolution provisions of Section 2.10 hereof,
provided that if the non-paying party is the party with final decision-making authority
over the subject matter in dispute, and the CEOs are unable to reach agreement even
after good faith discussions in accordance with Section 2.10, then the dispute shall not
be subject to the sole discretion of either party.

6.4.7 Overdue
Payments. All overdue payments, not subject to a bona fide dispute, due and
payable pursuant to this Agreement shall bear interest at a rate of one percent (1%) per
month from the due date until paid in full.

6.4.8 Withholding
Taxes. All payments made by a Party hereunder shall be made to the other
Party free and clear of any taxes, duties, levies, fees or charges, except for withholding
taxes (to the extent applicable). The Party making the withholding payment shall make any
applicable withholding payments due on behalf of other Party and shall promptly provide
the other Party with written documentation of any such payment sufficient to satisfy the
requirements of the United States Internal Revenue Service relating to an application by
such other Party for a foreign tax credit for such payment. If by law, regulations or
fiscal policy of a particular country in the Territory, remittance of Collaboration
Revenue payments in United States Dollars is restricted or forbidden, written notice
thereof shall promptly be given by the selling Party to the other Party, and such payment
shall be made by the deposit thereof in local currency to the credit of such other Party
in a recognized banking institution designated by the other Party. When in any country in
the Territory the law or regulations prohibit both the transmittal and the deposit of
Collaboration Revenue payments, such payments shall be suspended for as long as such
prohibition is in effect and as soon as such prohibition ceases to be in effect, all
Collaboration Revenue payments that the selling Party would have been under an obligation
to transmit or deposit but for the prohibition shall forthwith be deposited or
transmitted, to the extent allowable.

# 7. LICENSES AND CT
LICENSE AGREEMENT

7.1 License to
King. Subject to the terms and conditions of this Agreement, beginning on
the Closing Date and thereafter during the Term, Palatin hereby grants to King a
co-exclusive (with Palatin only) license, limited to the Field, with the right to grant
sublicenses only as explicitly permitted hereunder in furtherance of the Collaboration,
under Palatin Technology and Palatin Patent Rights and under Palatins ownership
interest in Joint Technology and Joint Patent Rights, to develop, have developed, make,
have made, use, sell, distribute for sale, have distributed for sale, offer for sale, have
sold, import and have imported Products in the Territory, which license shall be
exercisable by King only as part of the Collaboration and for the conduct of the
activities required in the performance of its obligations or exercise of its rights
hereunder.

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7.2 License to
Palatin. Subject to the terms and conditions of this Agreement, beginning
on the Closing Date and thereafter during the Term, King hereby grants to Palatin a
co-exclusive (with King only) license, limited to the Field, with the right to grant
sublicenses only as explicitly permitted hereunder in furtherance of the Collaboration,
under King Technology and King Patent Rights and under Kings ownership interest in
Joint Technology and Joint Patent Rights to develop, have developed, make, have made, use,
sell, distribute for sale, have distributed for sale, offer for sale, have sold, import
and have imported Products in the Territory. The foregoing license to Palatin shall be
exercisable by Palatin only as part of the Collaboration and for the conduct of the
activities required in the performance of its obligations or exercise of its rights
hereunder. For the avoidance of doubt, Palatin shall have no right to sell, distribute for
sale, have distributed for sale, offer for sale, or have sold Products in the Territory
except and to the extent (a) permitted in the Marketing Plans or otherwise expressly first
agreed to by King in writing or (b) set forth in Section 5.1 hereof.

7.3 Right to Develop and Market
in ROW.Subject to the terms and conditions of this Agreement,
beginning on the Closing Date and thereafter during the Term of this Agreement, Palatin
hereby grants to King the exclusive right, and King agrees, to collaborate equally with
Palatin (including the sharing of Collaboration Costs and Collaboration Revenues relating
to the same as set forth in Section 6.4 and decision making as set forth herein) in
licensing or sublicensing to or collaboration with one or more Third Parties with respect
to the right to Develop and Market Products in the ROW. Neither Palatin nor King shall
have the right to grant, or shall grant, any rights to any Palatin Technology, King
Technology, Palatin Patent Rights, King Patent Rights, Joint Technology or Joint Patent
Rights to any third party in the ROW without the consent and participation of the other
Party, except as set forth in Section 3.11 hereof.

7.4 Fulfillment and Observance
of Certain Obligations. In furtherance of the grant of rights set forth in
Section 7.1, Palatin acknowledges that it is responsible for the fulfillment of its
obligations under the CT License Agreement and agrees to use its commercially reasonable
efforts to fulfill same, and King hereby agrees to abide by the provisions of the CT
License Agreement andnot to knowingly cause Palatin to be in breach of or under
the same. Palatin shall not amend, terminate or cause to be terminated the CT License
Agreement, if such amendment or termination would alter the rights of the parties to the
CT License Agreement in such a way as to alter the rights of King under this Agreement (it
being expressly understood and agreed that any modification to any of the financial
provisions of the CT License Agreement shall be deemed to alter the rights of King under
this Agreement), or exercise or fail to exercise any of Palatins material rights or
obligations under the CT License Agreement, in each case without the prior written consent
of King, not to be unreasonably withheld.

7.5 No Other
Rights. King shall receive no rights to utilize Palatin Technology, Palatin
Patent Rights, or Palatin Proprietary Materials except as expressly set forth herein.
Palatin shall receive no rights to utilize King Technology, King Patent Rights or King
Proprietary Materials except as expressly set forth herein. Notwithstanding their joint
ownership interest in Joint Technology and Joint Patent Rights, each Party hereby agrees
that it shall have no right to use same except as expressly set forth herein.

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7.6 Limitation on Development and Marketing. [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION

# UNDER RULE 24b-2.]

7.7 Rights Outside the
Field. The co-exclusive rights of the Parties hereunder will extend to all
indications outside the Field with respect to PT-141, including the use of PT-141 in
combination with one or more other actives and in any formulation including, without
limitation, in any delivery method. In the event King or Palatin make any invention or
discovery with respect to PT-141 outside the Field, such new invention or discovery shall
be part of the Collaboration and the rights of the Parties with respect thereto shall be
subject to the terms and conditions hereof. Any activities of the Parties with respect to
PT-141 outside the Field shall only be undertaken by the Parties pursuant to their mutual
consent and pursuant to the framework established by the Collaboration and this Agreement.
Neither Party shall have any right to, and neither Party shall, undertake any research,
development, manufacture or commercialization of PT-141 outside the Field outside the
Collaboration, either on its own or with any third party.

# 8. INTELLECTUAL PROPERTY
RIGHTS

8.1 Inventions Disclosure and
Generally. Each Party shall promptly provide the JDMC with written notice
concerning all Technology that is conceived, made or developed in the course of carrying
out the Development and Marketing Program by employees or Consultants of either of them or
their Affiliates, alone or jointly with employees or Consultants of the other Party or its
Affiliates. Such notice shall be treated as the Confidential Information of both parties
hereunder. The provisions of this Section 8 shall apply to rights in the Technology
conceived, made or developed by Palatin or King, or both, during the course of carrying
out the Development and Marketing Program.

8.2      Ownership.

8.2.1 Palatin Intellectual
Property Rights. Palatin shall have sole and exclusive ownership of all
right, title and interest on a worldwide basis in and to any and all Palatin Technology
and Palatin Patent Rights, with full rights to license or sublicense, subject to the
obligations to King as set forth herein. Without limiting the foregoing, and except as
expressly set forth in this Agreement, Palatin shall be the sole owner of all Patent
Rights, all trade secret rights, all know-how and any other intellectual property rights
in the Palatin Technology and Palatin Patent Rights, including the sole and exclusive
right to exclude others from making, using, selling, offering for sale or importing the
Palatin Technology and Palatin Patent Rights, or any products that infringe any Palatin
Technology and Palatin Patent Rights.

8.2.2 King Intellectual
Property Rights. King shall have sole and exclusive ownership of all right,
title and interest on a worldwide basis in and to any and all King Technology and King
Patent Rights, with full rights to license or sublicense, subject to the obligations to
Palatin as set forth herein. Without limiting the foregoing, and except as expressly set
forth in this Agreement, King shall be the sole owner of all Patent Rights, all trade
secret rights, all know-how and any other intellectual property rights in the King
Technology and King Patent Rights including the sole and exclusive right to exclude others
from making, using, selling, offering for sale or importing the King Technology and King
Patent Rights or any products that infringe any King Technology and King Patent Rights.

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8.2.3 Joint Technology
Rights. King and Palatin shall jointly own all Joint Technology and Joint
Patent Rights, subject to the rights of, and the licenses granted to, each Party
hereunder. The Parties hereby agree that as joint owners of such rights, each Party may
use or license or sublicense to any Affiliate or Third Party all such rights for any or
all purposes without restriction outside the Field; provided, that, each
Party agrees, prior to using, licensing or sublicensing any such Joint Technology for
commercial purposes, to first negotiate in good faith and agree with the other Party an
appropriate royalty to be paid to such other Party in connection with such activities.

8.3 Patent
Coordinators. Palatin and King shall each appoint a patent coordinator
(each, a Patent Coordinator and, collectively, the Patent
Coordinators), reasonably acceptable to the other Party, who shall serve as such
Partys primary liaison with the other Party on matters relating to patent filing,
prosecution, maintenance and enforcement. Each Party may replace its Patent Coordinator at
any time by notice in writing to the other Party.

8.4
Inventorship. The JDMC, with the advice of the Patent Coordinators
and, in the event of a dispute between the Parties, their legal counsel, shall determine
the inventorship of any patent rights arising hereunder. Solely for purposes of this
Agreement, and for determining inventorship and ownership of any Palatin Patent Rights,
King Patent Rights and Joint Patent Rights and the rights and obligations of the Parties
hereunder, the standards contained in United States patent law shall apply. For the
avoidance of doubt, the inventorship set forth in any particular patent application or
patent within the Palatin Patent Rights, King Patent Right or Joint Patent Right shall be
made, as a legal matter, in accordance with the patent laws of the relevant jurisdiction.
The JDMC, with the advice of the Patent Coordinators, shall also, in the case of dispute,
make the determination as to whether an invention is King Technology, Palatin Technology
or Joint Technology. All such determinations shall be treated as Joint Decisions
hereunder. If the JDMC cannot resolve the dispute, it shall be resolved by independent
patent counsel, not otherwise engaged by either of the Parties, selected by the Patent
Coordinators. The reasonable expenses of such independent patent counsel shall be
Collaborating Costs.

# 9. FILING, PROSECUTION
AND MAINTENANCE OF PATENT RIGHTS

9.1 Patent Filing,
Prosecution and Maintenance.

9.1.1 Patent Filing. During the Term of this Agreement, with
respect to any Patent Rights arising hereunder:

(a)    
          Palatin, acting through patent attorneys or agents of its choice, shall be
          responsible for the preparation, filing, prosecution and maintenance of all
          patents and patent applications claiming the Palatin Patent Rights. At
          Palatins request, King shall reasonably cooperate with and assist Palatin
          in connection with such activities.

(b)    
          King, acting through patent attorneys or agents of its choice, shall be
          responsible for the preparation, filing, prosecution and maintenance of all
          patents and patent applications claiming the King Patent Rights. At Kings
          request, Palatin shall reasonably cooperate with and assist King in connection
          with such activities.

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(c)    
          Except as expressly provided in Section 12, neither Party makes any warranty
          with respect to the validity, perfection or dominance of any patent or other
          proprietary right or with respect to the absence of rights in Third Parties
          which may be infringed by the manufacture or sale of any Product. Each Party
          agrees to bring to the attention of the JDMC any patent or patent application it
          discovers which relates to the rights of either Party under this Agreement.

(d)    
          King and Palatin will cooperate through their respective Patent Coordinators to
          jointly select outside patent counsel to handle the filing, prosecution and
          maintenance of patents and patent applications comprising the Joint Patent
          Rights. The Parties shall share equally, through the JDMC, the control related
          to patents and patent applications claiming inventions that are Joint
          Technology. Should one Party desire not to share in the control, filing,
          prosecution or maintenance of any such patent or patent applications, the other
          Party shall gain sole control of the filing, prosecution or maintenance of such
          patents or patent applications, and such patents or patent applications shall be
          deemed to be the Palatin Program Technology or King Program Technology, as
          applicable, and such Party shall have the sole right to file, prosecute and
          maintain same, at its own expense.

(e)    
          All reasonable fees and expenses of counsel and other reasonable costs and
          expenses of each Party attributable to the filing, prosecution and maintenance
          of Patent Rights or Technology used or reasonably expected, in the judgment of
          the JDMC to be used or useful in the Development and Marketing Program shall be
          deemed Regulatory and IP Costs.

9.1.2 Information and
Cooperation. Each Party responsible for Patent Rights described in this
Agreement (the Filing Party) shall keep the JDMC regularly informed of
the status of the Patent Rights for which it is responsible in accordance with this
Section 9.1.2. The Filing Party shall provide the JDMC with (a) copies of all filings and
correspondence with the patent offices, administrative boards or courts which the Filing
Party sends or receives in connection with filing, prosecution, maintenance and defense of
the Patent Rights for which it is responsible, and (b) copies of filings and
correspondence under subsection (a) sufficiently in advance of the due date so as to give
the other Party sufficient time to comment and shall give good faith consideration to the
other Partys comments and incorporate same to the extent not inconsistent with the
legal or commercial position of the Filing Party. The Filing Party shall carefully follow
the advice and direction of the JDMC with respect to strategy for the Patent Rights for
which it is responsible.

9.1.3
Abandonment. If a Filing Party decides to abandon or to allow to
lapse any of its Patent Rights described in this Agreement, the Filing Party shall inform
the other Party and the JDMC at least forty-five (45) days prior to the effective date of
such decision, and the JDMC shall decide what actions should be taken with respect to such
Patent Rights. If the JDMC has not reached a decision fifteen (15) days prior to such
effective date, then the non-Filing Party shall have the right to take any actions it
deems reasonably necessary and appropriate to prevent the abandonment or lapse of the
relevant Patent Rights, in the Filing Partys name, in order to maintain the status
quo. The Filing Party hereby authorizes the non-

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Filing Party to make, constitute, and
appoint any representative as such other Party may select, in its sole discretion, as the
true and lawful attorney-in-fact for the Filing Party, with power to endorse the Filing
Partys name on all applications, documents, papers, and instruments necessary or
desirable for the non-Filing Party to give effect to the provisions of this Section 9.13
and the intent of the parties hereto. This power of attorney is coupled with an interest
and is supported by the consideration set forth in this Agreement. The Filing Party hereby
ratifies all that such attorney-in-fact may lawfully do or cause to be done by virtue
hereof. This power of attorney is irrevocable until the earlier of the expiration of the
last to expire of the Palatin Patent Rights, King Patent Rights and Joint Patent Rights or
the termination of this Agreement. In rendering its determination, the JDMC shall decide
how to respond to the activities of such non-Filing Party, what the rights of the Parties
shall be with respect to the relevant Patent Rights, and how to allocate responsibility
for any costs incurred in connection with same.

9.2 Legal Action.

# 9.2.1 Actual or
Threatened Infringement.

(a)    
          In the event either Party becomes aware of any possible infringement or
          unauthorized possession, knowledge or use of any Patent Right which is the
          subject matter of this Agreement, including any Joint Technology (collectively,
          an Infringement), that Party shall promptly notify the JDMC
          and other Party and provide it with full details (an Infringement
          Notice). The JDMC shall decide which actions are to be taken with
          respect to such matters, subject to the provisions of this Section 9.2. All
          reasonable costs and expenses expended by a Party in connection herewith and
          monies or other assets recovered by a Party pursuant hereto shall be deemed
          Collaboration Costs and Collaboration Revenue, as the case may be, to the extent
          the same are related to a Product.

(b)    
          King shall have the first right and option, but not the obligation, to prosecute
          or prevent the Infringement of or relating to King Patent Rights. If King does
          not commence an action to prosecute, or otherwise take steps to prevent or
          terminate the Infringement within one hundred eighty (180) days from any
          Infringement Notice, expressly excluding any immaterial infringement, then
          Palatin shall have the right and option to take such action as Palatin will
          consider appropriate to prosecute or prevent such Infringement, but only if such
          Infringement is in the Field and only with respect to any King Patent Rights
          that are actually then being used in the Development and Marketing Program or
          are, in the judgment of the JDMC, reasonably likely to be used or useful in the
          Development or Marketing of any Products hereunder. If either Party determines
          that it is necessary or desirable for the other to join any such suit, action or
          proceeding, the other Party shall, upon written notice from the prosecuting
          Party, execute all papers and perform such other acts as may be reasonably
          required in the circumstances.

(c)    
          Palatin shall have the first right and option, but not obligation, to prosecute
          or prevent the Infringement of or relating to Palatin Patent Rights. If Palatin
          does not commence an action to prosecute, or otherwise take steps to prevent or
          terminate the Infringement within one hundred eighty (180) days from any
          Infringement Notice, expressly excluding any immaterial infringement, then King
          shall have the right and option to take such action as King will consider
          appropriate to prosecute or prevent such Infringement, but only if such
          Infringement is in the Field and only with respect to any Palatin Patent Rights
          that are actually then being used in the Development and Marketing Program or
          are, in the reasonable judgment of the JDMC, reasonably likely to be used or
          useful in the Development or Marketing of any Products hereunder. If either
          Party determines that it is necessary or desirable for the other to join any
          such suit, action or proceeding, the first Party shall, upon written notice from
          the prosecuting Party, execute all papers and perform such other acts as may be
          reasonably required in the circumstances.

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(d)    
          In the event of an Infringement of a Joint Patent Right, the JDMC shall
          determine whether and how to prosecute or prevent the Infringement.

(e)    
          Each Party shall always have the right to be represented by counsel of its own
          selection in any suit instituted under this Section by the other Party for
          Infringement. If either Party lacks standing and the other Party has standing to
          bring any such suit, action or proceeding, then such other Party shall bring
          such suit at the request of the first Party. No suit under this Section 9.2.1may be settled without the approval of the JDMC.

(f)    
          In any action under this Section, the Parties shall fully cooperate with and
          assist each other.

(g)    
          In the event that the scope of an action under this Section 9.2.1goes
          beyond the scope of the Field in that any aspect of the Infringement is
          predicated on activities outside the Field, then the JDMC shall determine what
          percentage of all costs incurred and all damages awarded or royalties granted in
          connection with such action represent activity inside the Field, which shall be
          treated as Collaboration Costs and Collaboration Revenues. All other costs,
          damages and royalties shall be the responsibility of, and shall belong to, the
          Party who owns the Patent Rights in suit.

9.2.2 Defense of Claims.

(a)    
          In the event that any action, suit or proceeding is brought against Palatin or
          King or any Affiliate or Sublicensee of either Party alleging the infringement
          of the Technology or intellectual property rights of a Third Party by reason of
          any Partys activities performed pursuant to this Agreement, the JDMC shall
          determine how the Parties will defend themselves in such action and, subject to
          Section 9.2.2(b) below. All costs related to the same shall be deemed Regulatory
          and IP Costs. Each Party shall have the right to separate counsel in any such
          action or proceeding. The Parties shall cooperate with each other in the defense
          of any such suit, action or proceeding. Subject to the foregoing, each Party
          shall have the option to assume control of the defense of any action, suit or
          proceeding which principally relates to the use of such Partys own
          Technology. The Parties will give each other prompt written notice of the
          commencement of any such suit, action or proceeding or claim of infringement and
          will furnish each other a copy of each communication relating to the alleged
          infringement. Neither Party shall compromise, litigate, settle or otherwise
          dispose of any such suit, action or proceeding which involves the use of the
          others Technology or Patent Rights without the other Partys advice
          and prior consent, provided that the Party not defending the suit shall not
          unreasonably withhold its consent to any settlement which does not have a
          material adverse effect on its business or business prospects. If the defending
          Party agrees that the other Party should institute or join any suit, action or
          proceeding pursuant to this Section, the defending Party may join the other
          Party as a Party to the suit, action or proceeding, and the Party so joined
          shall execute all documents and take all other actions, including giving
          testimony, which may reasonably be required in connection with the prosecution
          of such suit, action or proceeding.

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(b)    
          If as a consequence of such action, suit or proceeding by a Third Party claiming
          that the discovery, development, manufacture, use or sale of a Product infringes
          such Third Partys intellectual property rights, the Parties shall examine
          and discuss in good faith the consequences of such prohibition or restriction or
          other conditions on this Agreement and on possible modifications thereto.

9.3 Trademark
Prosecution. The JDMC will decide which Party shall be responsible (using
mutually acceptable outside counsel) for the filing, prosecution, defense and maintenance
before all trademark offices of the Product Trademarks and all related and reasonable
costs and expenses shall be deemed Regulatory and IP Costs.

# 10. TREATMENT OF
CONFIDENTIAL INFORMATION; PUBLICITY; NON-SOLICITATION.

10.1 Confidentiality.

10.1.1 Confidentiality
Obligations. Palatin and King each acknowledges and agrees that the other
Partys Confidential Information constitutes highly valuable and proprietary
confidential information and materials. Palatin and King each agrees that during the Term
of the Collaboration and for an additional five (5) years (or, in the case of any
Confidential Information identified as a trade secret by the Disclosing Party at the time
of disclosure, for so long as such trade secret Confidential Information is susceptible of
remaining a trade secret), it will use commercially reasonable efforts to keep
confidential, and will use commercially reasonable efforts to cause its employees,
Consultants, Affiliates, agents, advisors and Sublicensees to keep confidential, all
Confidential Information and Proprietary Materials of the other Party. Neither Palatin nor
King nor any of their respective employees, Consultants, Affiliates or Sublicensees shall
use Confidential Information or Proprietary Materials of the other Party for any purpose
whatsoever except as expressly permitted in this Agreement.

10.1.2 Limited
Disclosure. Palatin and King each agree that any disclosure of the other
Partys Confidential Information or any transfer of the other Partys
Proprietary Materials to any officer, employee, Consultant, agent or Affiliate of Palatin
or King, as the case may be, shall be made only if and to the extent necessary to carry
out its rights and responsibilities under this Agreement, shall be limited to the maximum
extent possible consistent with such rights and responsibilities, and shall only be made
to persons who are bound by written confidentiality obligations to maintain the
confidentiality thereof and not to use such Confidential Information or Proprietary
Materials except as expressly permitted by this Agreement. Palatin and King each further
agree not to disclose or transfer the other Partys Confidential Information or
Proprietary Materials to any Third Parties under any circumstance without the prior
written approval from the other Party (such approval not to be unreasonably withheld),
except as otherwise required by law, and except as otherwise expressly permitted by

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this
Agreement. Each Party shall take such action, and shall cause its Affiliates and
Sublicensees to take such action, to preserve the confidentiality of each others
Confidential Information and Proprietary Materials as it would customarily take to
preserve the confidentiality of its own Confidential Information and Proprietary
Materials, using a level of care that shall not under any circumstances be less than
reasonable and prudent care. If a court or other government authority orders that the
Receiving Party disclose Confidential Information, or proposes such an order, the
receiving party must notify the Disclosing Party immediately after learning of the order,
so as to provide the Disclosing Party an opportunity to protect the information, and the
Receiving Party must limit the disclosure to the minimum that will comply with the order.
Each Party, upon the request of the other Party, will return all the Proprietary
Information and Confidential Materials disclosed or transferred to it by the other Party
pursuant to this Agreement, including all copies and extracts of documents and all
manifestations in whatever form, within sixty (60) days of the request or, if earlier, the
termination or expiration of this Agreement; provided however, that a Party
may retain Confidential Information and Proprietary Materials of the other Party relating
to any license or right to use Technology which survives such termination and one copy of
all other Confidential Information may be retained in inactive archives solely for the
purpose of establishing the contents thereof.

10.1.3 Employees and
Consultants. Palatin and King each hereby agrees that all of its employees,
and all of the employees of its Affiliates, and any Consultants to such Party or its
Affiliates, in any case that participate in the activities of the Collaboration and who
shall have access to Confidential Information or Proprietary Materials of the other Party
shall be bound by written obligations to maintain the same in confidence and not to use
such information except as expressly permitted herein. Each Party agrees to enforce
confidentiality obligations to which its employees and Consultants (and those of its
Affiliates) are obligated.

10.1.4 Equitable
Relief. Each Party acknowledges that a breach by it of the provisions of this
Article 10 and Section 7.6 cannot reasonably or adequately be compensated in damages in an
action at law and that such a breach may cause the other Party irreparable injury and
damage. By reason thereof, each Party agrees that the other Party may be entitled to seek,
in addition to any other remedies it may have under this Agreement or otherwise,
preliminary and permanent injunctive and other equitable relief to prevent or curtail any
breach of this Article 10 by the other Party; provided, however, that no specification in
this Agreement of a specific legal or equitable remedy shall be construed as a waiver or
prohibition against the pursuing of other legal or equitable remedies in the event of such
a breach. Each Party agrees that the existence of any claim, demand, or cause of action of
it against the other Party, whether predicated upon this Agreement, or otherwise, shall
not constitute a defense to the enforcement by the other Party, or its successors or
assigns, of the covenants contained in this Article 10.

10.2 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. 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 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.

42



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10.3
Publication. It is expected that each Party may wish to publish the
results of its research under this Agreement. In order to safeguard patent rights and
other intellectual property, the Party wishing to publish or otherwise publicly disclose
the results of any research being conducted by the Parties in the Collaboration shall
first submit a draft of the proposed manuscript to the JDMC for review, comment and
consideration of appropriate patent action at least sixty (60) days prior to any
submission for publication or other public disclosure. Within thirty (30) days of receipt
of the prepublication materials, the JDMC, with the advice of the Patent Coordinators and
after consultation with the respective medical affairs or medical services departments or
professionals of each Party, will notify the Party seeking publication as to whether a
patent application shall be prepared and filed (in which case the Party seeking
publication shall delay submission until the first to occur of the filing of a patent
application and ninety (90) days from such notice provided by the JDMC) or whether such
publication must be revised to eliminate Confidential Information of a Party (in which
case the Party seeking publication shall delete from any proposed publication all such
Confidential Information contained therein).

10.4 Prohibition on
Solicitation. Without the written consent of the other Party, neither Party
nor its Affiliates shall, during the Term of this Agreement or for a period of one (1)
year following the expiration or termination of this Agreement, solicit (directly or
indirectly) any person who was employed by such Party or its Affiliates and participated
in the Development and Marketing Program at any time during the Term of this Agreement.
This provision shall not restrict either Party or its Affiliates from advertising
employment opportunities in any manner that does not directly target the other Party or
its Affiliates.

# 11. TERM AND TERMINATION

11.1 Term. This
Agreement shall commence on the Effective Date and shall continue for so long as any
Product is being Developed or Marketed, or, if later, the expiration of the last Patent
Right licensed or developed hereunder, unless earlier terminated in accordance with the
provisions of this Section 11(the Term).

11.2
Termination. This Agreement may be terminated as follows, in each
case in the Territory, in the ROW, or in both (in each case, the
Terminated Region). Termination in the Terminated
Region, under any provision of this Section 11.2, shall not impact the rights and
obligations of the Parties outside the Terminated Region, and this Agreement shall be
deemed amended, mutatis mutandis, to exclude the Terminated Region. [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]

43



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11.2.1 Mutual
Termination. The Parties may agree in writing to mutually terminate this
Agreement at any time. If a Party has given notice of termination of this Agreement
pursuant to Sections 11.2.2 or 11.2.3 hereof, the other Party may not invoke this Section
11.2.1 by agreeing to such termination. In the event of termination pursuant to this
Section 11.2.1 the Parties shall negotiate in good faith within thirty (30) days after the
date of such termination the terms and conditions of such termination. Such terms shall
include that each Party will make its personnel and other resources reasonably available
to the other Party as necessary to effect an orderly transition of responsibilities. In
addition, the Parties shall make reconciling payments due and payable for the Final
Calendar Year as required by Sections 6.3 and 6.4, as well as pay any other amounts due
and owing on the date of termination.

11.2.2 Termination At
Will. Either Party may terminate this Agreement in the Territory and ROW
(together, but not in one or the other) at any time, at will, (x) upon ninety (90) days
prior written notice to the other Party if such termination occurs prior to the Completion
of Phase II Clinical Trials and (y) upon one-hundred and eighty (180) days prior written
notice to the other Party if such termination occurs on or after the Completion of Phase
II Clinical Trials. In connection with a termination pursuant to this Section 11.2.2, the
following shall apply:

(a)    
          The terminating Party shall, at its own expense, execute and deliver to the
          other Party such documents, material, data, records, analyses and information
          and do such things as reasonably requested by the other Party in order to permit
          the other Party to Develop and Market Products in the Terminated Regions in the
          Field including the following, in each case only to the extent reasonably
          necessary or relevant to such Development and Marketing in the Terminated
          Regions in the Field: (i) the terminating Party shall use its commercially
          reasonable efforts to effect a smooth and orderly transition of any ongoing
          clinical studies, regulatory approval or pre-marketing efforts to the other
          Party (including all data and reports in the possession of the terminating
          Party), including without limitation the assignment of any relevant third party
          contracts and Regulatory Filings and the use of commercially reasonable efforts
          to cancel all cancelable costs already incurred and mitigate all other costs
          incurred in connection with the Development and Marketing Program; (ii) the
          terminating Party shall make its personnel and other resources reasonably
          available to the other Party as necessary to effect an orderly transition of
          development responsibilities, with the reasonable cost of such personnel and
          resources to be borne by the terminating Party after the effective date of
          termination; (iii) the terminating Party, for no additional consideration, shall
          pay its share of the costs for the completion of any of the ongoing clinical
          trials of Product, but only for such costs directly incurred for those patients
          already enrolled in the study at the time of giving the termination notice; (iv)
          all rights and licenses granted herein to the terminating Party in the
          Terminated Regions in the Field shall, for no additional consideration,
          immediately terminate with respect to the terminating Party, and thereafter, the
          non-terminating Party shall have the sole and exclusive right and license
          (exclusive even as to the terminating Party) to make, have made, use, sell,
          offer for sale and import Product in the Terminated Regions in the Field under
          the Palatin Technology, the Palatin Patent Rights, the King Technology and King
          Patent Rights and an exclusive right and license under the Joint Patent Rights
          and Joint Technology to make, have made, use, sell, offer for sale and import
          Product in the Terminated Regions in the Field; and (v) the terminating Party
          shall, within ten (10) days after the termination date, provide and assign to
          the other Party, at the terminating Partys expense, all clinical data,
          INDs, NDAs, Regulatory Approvals, Regulatory Filings and all other documentation
          reasonably useful in respect of Products in the Terminated Regions in the Field.

44



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(b)    
          In connection with any termination by Palatin pursuant to this Section 11.2.2,
          Palatin will use its commercially reasonable efforts to assign or transfer to
          King Palatins rights and benefits under the CT License Agreement (or
          otherwise provide to King the benefit of the same if assignment or transfer is
          not possible after using its commercially reasonable efforts) to the extent
          reasonably necessary for King to Develop and Market Product in the Terminated
          Regions in the Field, and King agrees to thereafter assume all subsequent
          responsibilities, liabilities, obligations (financial and otherwise) related
          thereto as of the relevant termination date, including any relating to a breach
          by King of the CT License Agreement, it being understood and agreed that King
          shall not be liable for, and Palatin shall remain liable for, any and all
          responsibilities, liabilities, breaches and obligations attributable to periods
          or accruing prior to or on such termination date. Should King not agree to
          assume such subsequent responsibilities, Palatin shall have no obligation to
          assign or transfer to King any of its rights or benefits under the CT License
          Agreement (or otherwise offer to King the benefit of the same if assignment or
          transfer is not possible after using its commercially reasonable efforts).

(c)    
          The Parties shall make reconciling payments due and payable for the Final
          Calendar Year as required by Sections 6.3 and 6.4, as well as pay any other
          amounts due and owing on the date of termination.

(d)    
          If the Party that is not proceeding with Development and Marketing of Products
          pursuant to this Section is responsible for supplying CTM, API, or Product for
          Development or Marketing (the Manufacturing Party), the
          Manufacturing Party shall agree to supply to the other Party (the
          Developing Party), at the Developing Partys election,
          all its requirements of such CTM, API or Product (the Supply)
          at [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE
          24b-2.] as is reasonably required by the Developing Party in order to
          Develop and Market Product for the shorter of (i) eighteen (18) months or (ii)
          as long as is reasonably required by the Developing Party to obtain Supply from
          a Third Party supplier or to manufacture such Supply on its own.

11.2.3 Termination for Material
Breach. In the event that either Party breaches any material term of this
Agreement that applies to it, the other Party shall have the right to terminate this
Agreement in the Territory and ROW (together, but not in one or the other) (x) by giving
thirty (30) days prior written notice to the breaching Party in the case of a breach
of any payment term of this Agreement and (y) by giving ninety (90) days prior
written notice to the breaching Party in the case of any other breach; provided,
however, that in the case of a breach capable of being cured, if the breaching
Party shall cure the breach within such notice period after notice shall have been given,
then such notice shall not be effective. For purposes of this Section 11.2.3, (i) the
failure to timely make any payment or fulfill any funding obligation under this Agreement
that is not subject to a bona fide dispute, (ii) the failure, after use of commercially
reasonable efforts, to timely supply API or finished Product in the quantities required,
and (iii) the commission of any act or the occurrence of any omission, in each case that
constitutes a breach of any material term of this Agreement and that has a material
adverse impact, or is reasonably likely, in the judgment of the JDMC, to have a material
adverse impact, on the ability of the Parties to timely Develop or Market a Product that
conforms with the Program Plans shall each constitute a material breach of this Agreement
(but the list set forth in clauses (i) through (iii) shall not be deemed an exhaustive
list of material breaches of this Agreement). In the event of a termination pursuant to
this Section 11.2.3, the following shall apply:

45



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(a)    
          The breaching Party shall, at its own expense, execute and deliver to the
          nonbreaching Party such documents, material, data, records, analyses and
          information and do such things as reasonably requested by the nonbreaching Party
          in order to permit the nonbreaching Party to Develop and Market of Product in
          the Terminated Regions in the Field, including the following, in each case only
          to the extent reasonably necessary or relevant to such Development and Marketing
          in the Terminated Regions in the Field: (i) the breaching Party shall use its
          commercially reasonable efforts to effect a smooth and orderly transition of any
          ongoing clinical studies, regulatory approval or pre-marketing efforts to the
          nonbreaching Party (including all data and reports in the possession of the
          breaching Party), including without limitation the assignment of any relevant
          third party contracts and Regulatory Filings; (ii) the breaching Party shall
          make its personnel and other resources reasonably available to the nonbreaching
          Party as necessary to effect an orderly transition of development
          responsibilities, with the reasonable cost of such personnel and resources to be
          borne by the breaching Party after the effective date of termination; (iii) the
          breaching Party, for no additional consideration, shall pay its share of the
          costs for the completion of any of the ongoing clinical trials of Product, but
          only for such costs directly incurred for those patients already enrolled in the
          study at the time of giving the termination notice; (iv) all rights and licenses
          granted herein to the breaching Party in the Terminated Regions in the Field
          shall, for no additional consideration, immediately terminate with respect to
          the breaching Party; thereafter, the nonbreaching Party shall have the sole and
          exclusive right and license (exclusive even as to the breaching Party) to make,
          have made, use, sell, offer for sale and import Product in the Terminated
          Regions in the Field under the Palatin Technology, the Palatin Patent Rights,
          the King Technology and King Patent Rights and an exclusive right and license
          under the Joint Patent Rights and Joint Technology to make, have made, use,
          sell, offer for sale and import Product in the Terminated Regions in the Field;
          and (v) the breaching Party shall, within ten (10) days after the date of
          termination, provide and assign to the nonbreaching Party, at the breaching
          Partys expense, all clinical data, INDs, NDAs, Regulatory Approvals,
          Regulatory Filings and all other documentation reasonably useful in respect of
          Product in the Terminated Regions in the Field.

(b)    
          In connection with any termination by King pursuant to this Section 11.2.3,
          Palatin will use its commercially reasonable efforts to assign or transfer to
          King Palatins rights and benefits under the CT License Agreement (or
          otherwise provide to King the benefit of the same if assignment or transfer is
          not possible after using its commercially reasonably efforts) to the extent
          reasonably necessary for King to Develop and Market Product in the Terminated
          Regions in the Field, and King agrees to thereafter assume all subsequent
          responsibilities, liabilities, obligations (financial and otherwise) related
          thereto as of the relevant termination date, including any relating to a breach
          by King of the CT License Agreement, it being understood and agreed that King
          shall not be liable for, and Palatin shall remain liable for, any and all
          responsibilities, liabilities, breaches and obligations attributable to periods
          or accruing prior to or on such termination date. Should King not agree to
          assume such subsequent responsibilities, Palatin shall have no obligation to
          assign or transfer to King any of its rights or benefits under the CT License
          Agreement (or otherwise offer to King the benefit of the same if assignment or
          transfer is not possible after using its commercially reasonably efforts).

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(c)    
          The Parties shall make reconciling payments due and payable for the Final
          Calendar Year as required by Sections 6.3 and 6.4, as well as pay any other
          amounts due and owing on the date of termination.

(d)    
          The Parties agree that the following royalties will be paid to the breaching
          Party in consideration of the monies paid to date by the breaching Party, the
          work completed to date by the breaching Party, and the licenses granted pursuant
          to this Section by the breaching Party.

With respect to royalties to be paid
by King to Palatin only:

`------------------------------- ---------------------------------------- --------------------------------------
Termination Date                Royalty Payable on Net Sales by King     Royalty Payable on Consideration
Occurs                          of Product in the Field or on            Received by King from Licensing or
                                Consideration Received by King from      Sublicensing of Product in the Field
                                Licensing or Sublicensing of Product     in ROW
                                in the Field in Territory
------------------------------- ---------------------------------------- --------------------------------------
Prior to the Closing Date       No Royalty                               No Royalty
------------------------------- ---------------------------------------- --------------------------------------
[*]                             [*]                                      [*]
------------------------------- ---------------------------------------- --------------------------------------
[*]                             [*]                                      [*]
------------------------------- ---------------------------------------- --------------------------------------
[*]                             [*]                                      [*]
------------------------------- ---------------------------------------- --------------------------------------
[*]                             [*]                                      [*]
------------------------------- ---------------------------------------- --------------------------------------
[*]                             [*]                                      [*]
------------------------------- ---------------------------------------- --------------------------------------`

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

Notwithstanding the foregoing, King
shall not be required to pay to Palatin any royalty or other payment based on
consideration paid to it as upfront licensing or sublicensing fees or license or
sublicense maintenance fees.

With respect to royalties to be paid
by Palatin to King only:

`--------------------------------- ----------------------------------- ----------------------------------------
Termination Date                  Royalty  Payable  on Net  Sales by  Royalty   Payable   on    Consideration
Occurs                            Palatin  of  Product  in the Field  Received by Palatin  from  Licensing or
                                  or on  Consideration  Received  by  Sublicensing  of  Product  in the Field
                                  Palatin    from    Licensing    or  in ROW
                                  Sublicensing  of  Product  in  the
                                  Field in Territory
--------------------------------- ----------------------------------- ----------------------------------------
Prior to the Closing Date         No Royalty                          No Royalty
--------------------------------- ----------------------------------- ----------------------------------------
[*]                               [*]                                 [*]
--------------------------------- ----------------------------------- ----------------------------------------
[*]                               [*]                                 [*]
--------------------------------- ----------------------------------- ----------------------------------------
[*]                               [*]                                 [*]
--------------------------------- ----------------------------------- ----------------------------------------
[*]                               [*]                                 [*]
--------------------------------- ----------------------------------- ----------------------------------------
[*]                               [*]                                 [*]
--------------------------------- ----------------------------------- ----------------------------------------`

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

Notwithstanding the foregoing,
Palatin shall not be required to pay to King (i) [INFORMATION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] and (ii) any royalty or other
payment based on consideration paid to it as upfront licensing or sublicensing fees or
license or sublicense maintenance fees.

47



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|(e) | If the Party that is not proceeding with Development and Marketing of Products
          pursuant to this Section is the Manufacturing Party, the Manufacturing Party
          shall agree to supply to the Developing Party, at the Developing Partys
          election, all its requirements of Supply at [INFORMATION OMITTED AND FILED
          SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] as is reasonably required
          by the Developing Party in order to Develop and Market Product for the shorter
          of (i) eighteen (18) months or (ii) as long as is reasonably required by the
          Developing Party to obtain Supply from a Third Party supplier or to manufacture
          such Supply on its own.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) | In the event of a termination pursuant to this Section 11.2.3, the parties shall
          negotiate in good faith customary royalty protection provisions that shall be
          applicable to the payment of royalties post-termination, including without
          limitation anti-stacking protections and reductions in royalties for generic
          competition and infringing third-party sales, provided that the royalty rates
          set forth herein shall remain in full force and effect.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(g) | Reporting. The Party that is proceeding with the Development and
          Marketing of the Product hereunder (Proceeding Party) shall
          keep, and shall require each of its Affiliates to keep, full and accurate books
          of account containing all particulars relevant to its sales of Products that may
          be necessary for the purpose of calculating all royalties payable to the other
          Party (Non-proceeding Party) hereunder. Such books of
          account, as well as all reasonably necessary supporting data, shall be kept at
          the principal place of business of the Proceeding Party and each Affiliate, as
          applicable, for the five (5) years next following the end of the Calendar Year
          to which each shall pertain, and shall be open for inspection by an independent
          certified public accountant reasonably acceptable to the Proceeding Party, upon
          reasonable notice during normal business hours at the Non-proceeding
          Partys expense, as the case may be, for the sole purpose of verifying
          royalty statements or compliance with this Agreement. In the event the
          inspection determines that royalties due Non-proceeding Party for any period
          have been underpaid by five percent (5%) or more, which underpayment has not
          since been remedied, then the Proceeding Party and/or its Affiliate, as
          applicable, shall pay for all costs of the inspection. All royalty payments set
          forth in this Agreement shall, if overdue, bear interest until payment at a per
          annum rate of two percent (2%) above the prime rate published in the Wall Street
          Journal, New York edition, on the due date. The payment of such interest shall
          not foreclose the Non-proceeding Party from exercising any other rights it may
          have as a consequence of the lateness of any payment. All information and data
          reviewed in the inspection shall be used only for the purpose of verifying
          royalties and shall be treated as the Proceeding Partys Confidential
          Information subject to the obligations of this Agreement. No audit shall be
          conducted hereunder more frequently than once during any twelve (12) month
          period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(h) | Quarterly Payments and Reports. In each year the amount of royalty due
          shall be calculated quarterly as of the end of each Calendar Quarter and shall
          be paid quarterly within the forty-five (45) days next following such date.
          Every such payment shall be supported by the accounting described herein. All
          royalties due hereunder are payable in United States dollars. When Products are
          sold for currency other than United States dollars, the earned royalties will
          first be determined in the foreign currency of the country in which such
          Products were sold and then converted into equivalent United States funds. The
          exchange rate will be that rate quoted in the Wall Street Journal, NY Edition on
          the last business day of the Calendar Quarter in which such sales were made.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(i) | Accounting Reports. With each quarterly payment, the Proceeding Party
          shall deliver to the Non-proceeding Party a full and accurate accounting to
          include at least the following information:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(i) | Quantity of Product subject to royalty manufactured and sold, by country, by the
          Proceeding Party and its Affiliates;
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(ii) | Total sales for each Product subject to royalty, by country and, to the extent
          used in any royalty calculations during such quarter, the exchange rate set
          forth herein;
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) | Deductions applicable as provided herein or as otherwise agreed by the parties
          and all Net Sales calculations;
|----- | ------------------------------------------------------------------------------------------------------------------------

|(iv) | Compensation on Products received from sublicensees hereunder; and
|---- | ------------------------------------------------------------------

|(v) | Total royalties and/or compensation payable to the Non-proceeding Party.
|--- | ------------------------------------------------------------------------

11.2.4 Termination for
Insolvency. In the event that either Party files for protection under
bankruptcy laws, makes an assignment for the benefit of creditors, appoints or suffers
appointment of a receiver or trustee over its property, files a petition under any
bankruptcy or insolvency act, has any such petition filed against it, or is unable to pay
its debts as they come due (each, an Event of
Bankruptcy), then the other Party may terminate this Agreement
effective immediately upon written notice to such Party. In the event of a termination
pursuant to this Section 11.2.4, the following shall apply:

(a)    
          The non-terminating Party shall (i) at the election of the terminating party,
          remain responsible to supply Product or API to the extent and in the same
          quantity it was obligated to supply at the time of such termination for a
          reasonable period of time to allow the other Party to find an alternate source
          of supply, or as otherwise required under a manufacturing and supply
          agreementbetween the Parties and (ii) make its personnel and other
          resources reasonably available to the other Party as necessary to effect an
          orderly transition of responsibilities, with the reasonable cost of such
          personnel and resources to be borne by the terminating Party after the effective
          date of termination.

(b)    
          The Parties shall make reconciling payments due and payable for the Final
          Calendar Quarter as required by Sections 6.3 and 6.4, as well as pay any other
          amounts due and owing on the date of termination. The Parties agree that the
          licensor under this Agreement shall retain and may fully exercise all of its
          rights and elections under the Bankruptcy Code in the event of a bankruptcy by
          the other Party. The Parties further agree that in the event of the commencement
          of a bankruptcy proceeding by or against one Party under the Bankruptcy Code,
          the other Party shall be entitled to complete access to any such intellectual
          property pertaining to the rights granted in the licenses hereunder of the Party
          by or against whom a bankruptcy proceeding has been commenced and all
          embodiments of such intellectual property.

49



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(c)    
          If the Party that is not proceeding with Development and Marketing of Products
          pursuant to this Section is the Manufacturing Party, the Manufacturing Party
          shall agree to supply to the Developing Party, at the Developing Partys
          election, all its requirements of Supply at FAMC plus ten percent (10%) as is
          reasonably required by the Developing Party in order to Develop and Market
          Product for the longer of (i) one (1) year or (ii) as long as is reasonably
          required by the Developing Party to obtain Supply from a Third Party supplier or
          to manufacture such Supply on its own.

11.2.5 Required
Assignments. If a Party is required by the terms of this Agreement to
assign or transfer to the other Party any agreement, document or right and such Party,
after utilizing the level of efforts required hereunder, is unable to do so as the result
of forces beyond its reasonable control, then the Party shall use its commercially
reasonable efforts to make available to the other Party the material benefits of such
agreement, document or right in lieu of such assignment or transfer.

11.3 Surviving Provisions. Termination and expiration of this
Agreement for any reason shall be without prejudice to:

(a)    
          the rights and obligations of the Parties under this Agreement, which by their
          nature should survive the termination or expiration of this Agreement, including
          those set forth in Sections 8.2, 10, 11, 13, 14, 15.1, and 15.2, which shall
          survive; and

(b)    
          any other rights or remedies provided at law or equity which either Party may
          otherwise have against the other. Nothing herein shall relieve any Party from
          liability from any breach of any covenant or agreement of such Party contained
          herein or any willful or intentional breach of any representation or warranty of
          such Party contained herein.

11.4 Treatment Under Bankruptcy
Code.All rights related to and licenses of intellectual property granted under
this Agreement by one Party to the other Party are, and shall otherwise be deemed to be,
for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to
intellectual property as defined under Section 101 (35A) of the Bankruptcy
Code. The Parties agree that this Agreement and the Patent Rights and Technology licensed
hereunder are considered by the Parties to be intellectual property subject to 11 U.S.C.
§ 365(n) of the Bankruptcy Code.

11.5 Damages; Relief.Termination of this Agreement shall not preclude any party from claiming any other
damages, compensation or legal or equitable relief that it may be entitled to upon such
termination.

# 12. REPRESENTATIONS AND
WARRANTIES

Palatin
and King each represents and warrants to the other as of the Effective Date as follows:

12.1
Organization. It is a corporation duly organized, validly existing
and is in good standing under the laws of the jurisdiction of its organization, is
qualified to do business and is in good standing as a foreign corporation in each
jurisdiction in which the performance of its obligations hereunder requires such
qualification and, except as would not have a material adverse effect on the ability of
the Party to perform its obligations hereunder, has all requisite power and authority,
corporate or otherwise, to conduct its business as now being conducted, to own, lease and
operate its properties and to execute, deliver and perform this Agreement.

50



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12.2 Authorization and Right to
Grant Licenses. The execution, delivery and performance by it of this
Agreement have been duly authorized by all necessary corporate action and does not and
will not (a) require any consent or approval of its stockholders or (b) violate any
provision of any agreement, law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to it or any
provision of its charter documents. Each Party has the right, power and authority to grant
licenses granted by it hereunder.

12.3 Binding
Agreement. This Agreement is a legal, valid and binding obligation of it
enforceable against it in accordance with its terms and conditions, except as
enforceability may be limited by bankruptcy, insolvency, or other laws affecting the
enforcement of creditors rights generally, and except that the availability of the
remedy of specific performance or other equitable relief is subject to the discretion of
the court before which any proceeding therefor may be brought.

12.4 No Inconsistent
Obligation. It is not under any obligation to any person, or entity,
contractual or otherwise, that is conflicting or inconsistent in any respect with the
terms of this Agreement or that would impede the diligent and complete fulfillment of its
obligations hereunder and that it has all power and authority under all instruments or
agreements to which it is a Party to enter into this Agreement and to perform its
obligations hereunder.

12.5 Absence of
Actions. It is not a party to or object of any litigation, suit, claim,
action, proceeding, judgment, settlement, or investigation (an Action)
pending or, to the knowledge of it, threatened against it, or any of its Affiliates, or
any of its properties or assets, before any governmental or regulatory authority that
might reasonably be expected to have a material adverse effect on its ability to
diligently and completely fulfill its obligations hereunder. A material breach of or
inaccuracy in this Section 12.5 with respect to a Party shall constitute a material breach
of this Agreement by such Party pursuant to Section 11.2.3.

12.6 Applicable
Law. It has complied with and shall continue to comply with and shall
perform all its duties and obligations hereunder in accordance with all Applicable Law.

12.7 Debarment.
As of the date hereof, neither it nor any of its respective employees or agents, in their
capacity as such, have been disqualified or debarred by the FDA, pursuant to 21 U.S.C.
§§ 335(a) or (b), or been charged with or convicted under United States Law for
conduct relating to the development or approval, or otherwise relating to the regulation
of any Product under the Generic Drug Enforcement Act of 1992, or any other relevant law,
rule or regulation or been disbarred, disqualified or convicted under or for any
equivalent or similar applicable foreign law, rule or regulation.

Palatin
further represents and warrants to King as of the Effective Date as follows:

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12.8 Clinical
Trials.All preclinical and clinical work, studies and trials
conducted, supervised or monitored by Palatin with respect to any Product have, to the
knowledge of Palatin, having made a reasonable inquiry, been conducted and/or performed in
compliance with Applicable Laws, including Good Laboratory Practice, Good Clinical
Practice and Good Manufacturing Practice requirements and ICH Guidelines. Palatin has, or,
as applicable, any third parties with whom Palatin has contracted to perform any clinical
trials or modifications thereto with respect to any Product has, to the knowledge of
Palatin, having made a reasonable inquiry, obtained and maintained any necessary
Institutional Review Board (IRB) approvals of clinical trials or
modifications thereto sponsored by Palatin. To the knowledge of Palatin, having made a
reasonable inquiry, in no clinical trial sponsored, conducted, supervised or monitored by
Palatin with respect to any Product has any IRB, ethics committee, or European competent
authority approval ever been suspended, terminated, put on clinical hold, or voluntarily
withdrawn.

12.9 Disclosure.
To Palatins knowledge, no employees or agents of Palatin have made an untrue
statement of material fact on behalf of Palatin to any Regulatory Authority with respect
to any Product or failed to disclose a material fact required to be disclosed to any
Regulatory Authority with respect to any Product.

12.10 Intellectual
Property. (a) There is no litigation or proceeding pending or, to the
actual knowledge of Palatin, having made a reasonable inquiry, threatened, concerning the
validity or enforceability of any Palatin Patent Rights; (b) to Palatins actual
knowledge, after having made a reasonable inquiry, each of the issued patents a part of
the Palatin Patent Rights is valid and enforceable; (c) Palatin is the sole and exclusive
owner of the entire and unencumbered right, title and interest in and to each of the
Palatin Patent Rights, free and clear of any liens, charges, encumbrances and adverse
claims, including pledges, assignments, licenses, registered user agreements and covenants
by Palatin not to sue third Persons; and (d) to the actual knowledge of Palatin, after
having made a reasonable inquiry, neither the manufacture, use, offer for sale, sale or
importation of Products currently being developed by Palatin, nor to the knowledge of
Palatin, the conduct of the Development and Marketing Program as set forth in the portion
of the Development and Marketing Plan set forth in Exhibit A provided by
Palatin,will infringe or misappropriate the intellectual property rights of any
third party.

12.11 The CT License
Agreement. Neither Palatin nor, to the knowledge of Palatin without the
obligation to perform due diligence, CT is in material breach of the CT Agreement and, to
the knowledge of Palatin without the obligation to perform due diligence, the CT License
Agreement is legal, valid, binding, enforceable and in full force and effect in all
material respects.

12.12 Government Funding.To the extent Palatin has obtained or used any government funding in connection with
the research or development of any Products or any subject matter disclosed in any Palatin
Patent Rights, including without limitation pursuant to any grants from the National
Institutes of Health, Palatin has complied in all material respects with the terms and
conditions of such funding agreements and grants, and with all Applicable Laws with
respect thereto.

King
further represents and warrants to Palatin as follows:

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12.13 Statements in Connection
with Investigations. Each communication by King or its representatives to
Palatin or its representatives, whether oral, written, electronic or otherwise, relating
to an investigation of Medicaid claims and the state and local equivalents thereof by the
SEC, the Office of Inspector General at the Department of Health & Human Services, the
Department of Justice, the Department of Veterans Affairs, and the Centers for Medicare
and Medicaid Services and all other governmental entities investigating any Medicaid
claims, did not when made, and does not, contain any untrue statement of material fact, or
omit to state a material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.

# 13. INDEMNIFICATION

13.1 Indemnification of King by
Palatin. Palatin shall indemnify, defend and hold harmless King, its
Affiliates and their respective directors, officers, employees, and agents (the
King Indemnitees), against any liability, damage, loss or expense
(including reasonable attorneys fees and expenses of litigation) (collectively,
Losses) incurred by or imposed upon the King Indemnitees, or any one of
them, in connection with any investigations, settlements, corporate integrity agreements
or other similar agreements, claims, causes of action, liabilities, suits, actions,
demands or judgments of third parties, including without limitation personal injury and
product liability matters and claims of suppliers and Palatin employees (except in cases
where such claims, suits, actions, demands or judgments result from a material breach of
this Agreement, negligence or willful misconduct, on the part of King) arising out of (a)
any act or omission of Palatin in the performance of the Development and Marketing
Program, (b) the breach of this Agreement, including the breach of any representation or
warranty of Palatin under Section 12hereof, (c) the negligence or willful
misconduct of Palatin, its Affiliates or their respective employees or agents in the
performance of any obligation under this Agreement, (d) acts or omissions of Palatin prior
to the Effective Date, irrespective of when the relevant claim, cause of action, etc. is
filed, (e) any government funding received by Palatin prior to the Effective Date in
connection with the research or development of any Products or any subject matter
disclosed in any Palatin Patent Rights, including without limitation pursuant to any
grants from the National Institutes of Health, and the failure of Palatin to comply in all
material respects with the terms and conditions of such funding agreements and grants, and
with all Applicable Laws with respect thereto, including without limitation to obtain any
necessary permits or waivers thereunder, and (f) any and all Marketing and Development of
Products by Palatin post-termination, as permitted pursuant to Section 11.2 hereof.

13.2 Indemnification of Palatin
by King. King shall indemnify, defend and hold harmless Palatin and its
Affiliates and their respective directors, officers, employees, and agents (the
Palatin Indemnitees), against any Losses incurred by or imposed upon
the Palatin Indemnitees, or any one of them, in connection with any investigations,
settlements, corporate integrity agreements or other similar agreements, claims, causes of
action, liabilities, suits, actions, demands or judgments of third parties, including
without limitation personal injury and product liability matters, government or regulatory
investigations, and claims of suppliers and King employees (except in cases where such
claims, suits, actions, demands or judgments result from a material breach of this
Agreement, negligence or willful misconduct on the part of Palatin), arising out of (a)
any act or omission of King in the performance of the Development and Marketing Program,
(b) the breach of this Agreement, including the breach of any representation or warranty
of King under Section 12hereof, (c) the negligence or willful misconduct of King,
its Affiliates or their respective employees or agents in the performance of any
obligation under this Agreement, (d) acts or omissions of King prior to the Effective
Date, irrespective of when the relevant claim, cause of action etc. is filed and (e) any
and all Marketing and Development of Products by King post-termination, as permitted
pursuant to Section 11.2 hereof.

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13.3 Conditions to
Indemnification. A Party seeking indemnification under this Section 13 (the
Indemnified Party) shall give prompt notice of the claim to the other
Party (the Indemnifying Party) and, provided that the Indemnifying
Party is not contesting the indemnity obligation, shall permit the Indemnifying Party to
control any litigation relating to such claim and disposition of any such claim. The
Indemnifying Party shall act reasonably and in good faith with respect to all matters
relating to the settlement or disposition of any claim as the settlement or disposition
relates to Parties being indemnified under this Section 13. The Indemnifying Party shall
not settle or otherwise resolve any claim without prior notice to the Indemnified Party
and the consent of the Indemnified Party (which consent shall not be unreasonably
withheld, conditioned or delayed) if such settlement involves anything other than the
payment of money by the Indemnifying Party. The Indemnified Party shall reasonably
cooperate with the Indemnifying Party in its defense of any claim for which
indemnification is sought under this Section 13and shall have the right to be
present in person or through counsel at all legal proceedings giving rise to the right of
indemnification.

13.4 Insurance.
In addition to the insurance coverages required by Section 5.4 hereof, each Party shall
obtain other insurance coverage from first class insurers in types and amounts
commensurate with industry standards for such Partys activities hereunder.

13.5 Warranty
Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS
OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH RESPECT TO ANY
AND ALL OF THE FOREGOING.

13.6 Limited
Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
NEITHER PALATIN NOR KING WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY FOR (I) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR (II) COST OF
PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.

# 14. REMEDIES

Subject
to the terms of this Agreement, the Parties are not excluded from exercising or seeking
any and all rights and remedies available, in law or in equity, under applicable law.

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# 15. MISCELLANEOUS

15.1 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.

15.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard to the application of principles of conflicts of
law.

15.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective legal representatives, successors and permitted assigns.

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

15.5 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an original.

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15.6 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.

15.7 No Third Party
Beneficiaries. No Third Party, including any employee of any Party to this
Agreement, shall have or acquire any rights by reason of this Agreement.

15.8 Purposes and
Scope. The Parties hereto understand and agree that this Collaboration is
limited solely to the Field in the Territory and in the ROW, and to the activities, rights
and obligations as set forth in this Agreement. Nothing in this Agreement shall be
construed (a) to create or imply a general partnership between the Parties, (b) to make
either Party the agent of the other for any purpose, (c) to alter, amend, supersede or
vitiate any other arrangements between the Parties with respect to any subject matters not
covered hereunder, (d) to give either Party the right to bind the other, (e) to create any
duties or obligations between the Parties except as expressly set forth herein, or (f) to
grant any direct or implied licenses or any other right other than as expressly set forth
herein.

15.9 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 or make an assignment to an Affiliate in accordance with Section 15.10, provided
that such Party shall remain liable and fully responsible for the performance of such
Affiliate hereunder.

15.10 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 of its Affiliates
(subject to Section 15.9), 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 15.10 shall be null, void and of no effect. This Agreement shall
be binding upon and inure to the benefit of all permitted successors-in-interest and
assigns.

15.11 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.

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15.12
Interpretation. The Parties hereto acknowledge and agree that: (a)
each Party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (b) 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 (c) the terms and provisions of this Agreement shall
be construed fairly as to all Parties hereto and not in a favor of or against any Party,
regardless of which Party was generally responsible for the preparation of this Agreement.

15.13 Integration;
Severability. This Agreement, the Securities Purchase Agreement, and the
Warrant are the sole agreements with respect to the subject matter hereof and supersedes
all other agreements and understandings between the Parties with respect to same. If any
provision of this Agreement (including without limitation the temporal and substantive
scope of the restrictions set forth in Section 7.6) is or becomes invalid or is ruled
invalid by any court of competent jurisdiction or is deemed unenforceable, such provision
or portion thereof will be modified or deleted in such a manner so as to make this
Agreement as modified legal and enforceable to the fullest extent permitted under
applicable law, and it is the intention of the Parties that the remainder of the Agreement
shall not be affected.

15.14 Further
Assurances. Each of Palatin and King 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
additional assignments, 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.

# [Remainder of page
intentionally left blank]

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IN
WITNESS WHEREOF, the Parties have caused this Collaborative Development and Marketing
Agreement to be executed by their duly authorized representatives as of the Effective
Date.

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

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

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