SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss. 240.14a-12
Palatin Technologies, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
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<PAGE>
PALATIN TECHNOLOGIES, INC.
ANNUAL MEETING 2000
TABLE OF CONTENTS
---------
Notice of Meeting .............................................................1
Voting Procedures and Solicitation ............................................2
Item 1: Election of Directors ................................................4
The Nominees .........................................................4
The Board and Its Committees .........................................6
Compensation of Directors ............................................6
Item 2: Approval of Amendment to the 1996 Stock Option Plan ..................7
The Plan .............................................................7
Outstanding Options Table ............................................9
Increase In Plan Shares ..............................................9
Interest of Management in Share Increase ............................10
New Option Benefits Table ...........................................10
Text of Plan Amendment ..............................................11
Item 3: Ratification of Appointment of Arthur Andersen LLP as
Independent Public Accountants .............................11
Executive Officers ...........................................................12
Executive Compensation ..............................................12
Summary Compensation Table ..........................................13
Option Grants in Last Fiscal Year ...................................14
Aggregated Option Exercises and Fiscal Year-End Option Values .......15
Ten-Year Option Repricings ..........................................16
Employment Agreements ...............................................16
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions ..................................................18
Compensation Committee Report ................................................18
Stock Performance Graph ......................................................22
Stock Ownership Information ..................................................22
Section 16(a) Beneficial Ownership Reporting Compliance .............22
Beneficial Ownership of Management and Others .......................23
Certain Relationships and Related Transactions ...............................27
Other Items of Business ......................................................27
Stockholder Proposals For Next Annual Meeting ................................27
Annual Report on Form 10-K ...................................................28
<PAGE>
[GRAPHIC OMITTED]
PALATIN TECHNOLOGIES, INC.
103 Carnegie Center, Suite 200
Princeton, New Jersey 08540
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DATE Wednesday, November 15, 2000
TIME 9:30 a.m., Eastern time
PLACE Palatin's executive offices, 103 Carnegie Center, Suite 200,
Princeton, New Jersey 08540
RECORD DATE October 6, 2000
ITEMS OF (1) election of directors;
BUSINESS (2) approval of an amendment to our 1996 stock option plan;
(3) ratification of appointment of our independent public
accountants for the fiscal year ending June 30, 2001;
and
(4) any other matters properly brought before the meeting.
STOCKHOLDER A list of all stockholders entitled to vote at the meeting
LIST will be available for examination by any stockholder, for
any purpose germane to the meeting, during ordinary business
hours for 10 days before the meeting, at our executive
offices, 103 Carnegie Center, Suite 200, Princeton, New
Jersey 08540.
ANNUAL A copy of our annual report on Form 10-K for the year ended
REPORT June 30, 2000 accompanies this notice.
By order of the board of directors,
STEPHEN T. WILLS, Secretary
October 17, 2000
<PAGE>
PALATIN TECHNOLOGIES, INC.
ANNUAL MEETING 2000
PROXY STATEMENT
VOTING PROCEDURES AND SOLICITATION
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the meeting, please complete and return the
enclosed proxy card. Your prompt voting may save us the expense of following up
with a second mailing. We began sending out these proxy materials on
approximately October 19, 2000.
METHODS OF VOTING
You may vote by signing and returning the enclosed proxy card, or by voting in
person at the meeting. If you send in a proxy card, and also attend the meeting
in person, the proxy holders will vote your shares as you instructed on your
proxy card, unless you inform the Secretary at the meeting that you wish to vote
in person.
REVOKING A PROXY
You may revoke your proxy by:
o signing and returning another proxy card at a later date;
o sending written notice of revocation to the Secretary at our
executive offices, 103 Carnegie Center, Suite 200, Princeton,
New Jersey 08540; or
o informing the Secretary and voting in person at the meeting.
To be effective, a later-dated proxy or written revocation must arrive at our
corporate offices before the start of the meeting.
PROXY SOLICITATION
We are soliciting the enclosed proxy card on behalf of the board of directors,
and we will pay all costs of preparing, assembling and mailing the proxy
materials. In addition to mailing out proxy materials, our officers and
employees may solicit proxies by telephone or fax. We have requested brokers,
banks and other fiduciaries to forward proxy materials to the beneficial owners
of our stock.
PROXY STATEMENT, PAGE 2
<PAGE>
HOW PROXY CARDS ARE VOTED
The proxy holders named on the proxy card are Carl Spana, Ph.D., president,
chief executive officer and director, and Stephen T. Wills, executive vice
president, chief financial officer, secretary and treasurer. The proxy holders
will vote shares according the stockholder's instructions on the proxy card. If
a signed proxy card does not contain instructions, then the proxy holders will
vote the shares FOR the election of the director nominees listed on the card;
FOR the amendment to our 1996 stock option plan; FOR ratifying the appointment
of Arthur Andersen LLP as our independent public accountants for the fiscal year
ending June 30, 2001; and in their discretion on any other business which may
properly come before the meeting.
QUORUM AND VOTES REQUIRED
A majority of the votes of outstanding shares of common stock and Series A
preferred stock, represented at the meeting in person or by proxy, constitutes a
quorum. Abstentions and broker non-votes will count towards the quorum. A broker
non-vote occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power for that particular item, and has not received instructions from
the beneficial owner. Common stock and Series A preferred stock will vote
together as one class on the three items of business listed on the proxy card.
o Directors are elected by a plurality of votes cast, so the
five nominees receiving the most votes will be elected.
Stockholders who do not wish to vote for one or more of the
individual nominees may withhold authority in the space
provided on the proxy card. Abstentions and broker non-votes
will count neither for nor against election.
o Approving the amendment to the 1996 stock option plan requires
the affirmative vote of a majority of all shares represented
at the meeting. Abstentions and broker non-votes will
therefore count against approval of the amendments.
o Ratifying the appointment of the independent public
accountants for the fiscal year ending June 30, 2001 requires
a majority of the votes cast. Abstentions and broker non-votes
will count neither for nor against ratification.
VOTING RIGHTS, SHARES OUTSTANDING AND VOTES PER SHARE
Holders of common stock and of Series A preferred stock at the close of business
on the record date of October 6, 2000, are entitled to vote at the meeting.
Common stock: 10,022,924 shares outstanding, one vote per share
Series A preferred stock: 30,917 shares outstanding, 21.41 votes per share
PROXY STATEMENT, PAGE 3
<PAGE>
ITEM ONE: ELECTION OF DIRECTORS
We recommend voting FOR the five nominees listed on the proxy card.
At the meeting, the five nominees who receive the most votes will be elected as
directors to serve until the next annual meeting, or until their successors are
elected and qualified. Each of the nominees is currently a director. If any of
the nominees should become unavailable to serve on the board, the proxy holders
will vote your shares for a board-approved substitute, or the board may reduce
the number of directors.
THE NOMINEES
Name Age Position with Palatin
---- --- ---------------------
Carl Spana, Ph.D. 38 President, chief executive
officer and director
Charles L. Putnam 47 Executive vice president,
chief operating officer and
director
John K.A. Prendergast, Ph.D. (1) (2) 46 Director, chairman of the
board of directors
Robert K. deVeer, Jr. (1) (2) 54 Director
Kevin S. Flannery (1) (2) 55 Director
--------------------------------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
CARL SPANA, Ph.D., has been our president and chief executive officer since
June 14, 2000. He has been a director of Palatin since June 1996 and has been a
director of our wholly-owned subsidiary, RhoMed Incorporated, since July 1995.
From June 1996 through June 14, 2000, Dr. Spana served as an executive vice
president and our chief technology officer. From June 1993 to June 1996, Dr.
Spana was vice president of Paramount Capital Investments, LLC, a biotechnology
and biopharmaceutical merchant banking firm, and of The Castle Group Ltd., a
medical venture capital firm. At Paramount Capital Investments and at Castle
Group, Dr. Spana was responsible for discovering, evaluating, and
commercializing biotechnologies. Through his work at Paramount Capital
Investments and Castle Group, Dr. Spana co-founded and acquired several private
biotechnology firms. From July 1991 to June 1993, Dr. Spana was a Research
Associate at Bristol-Myers Squibb, a publicly traded pharmaceutical company,
where he was involved in scientific research in the field of immunology. Dr.
Spana is a director of and was interim president of AVAX Technologies, Inc., a
publicly traded medical technology company. Dr. Spana received his Ph.D. in
molecular biology from The Johns Hopkins University and his B.S. in biochemistry
from Rutgers University.
PROXY STATEMENT, PAGE 4
<PAGE>
CHARLES PUTNAM has been an executive vice president since June 1996,
chief operating officer since June 1998 and a director since December 1998. He
is responsible for operations, product development and regulatory and clinical
affairs. From July 1994 to May 1996, Mr. Putnam was executive vice president,
research and development, of MedChem Products, Inc., a publicly traded medical
device company, which in September 1995 was merged into C.R. Bard, Inc. At
MedChem, Mr. Putnam was responsible for product development, regulatory affairs,
clinical research and quality control. From March 1993 to July 1994, Mr. Putnam
was vice president of operations and research and development of Life Medical
Sciences, Inc., a publicly traded biotechnology company, where he was
responsible for all aspects of manufacturing, product development and regulatory
affairs for Life Medical Sciences' commercial product line. From March 1983 to
March 1993, Mr. Putnam was employed by American Cyanamid Corporation in a
variety of positions, including director of device development.
JOHN K. A. PRENDERGAST, Ph.D. has been chairman of the board since June 14,
2000, and a director since August 1996. Dr. Prendergast has served as president
and principal of Summercloud Bay, Inc., a biotechnology consulting firm, since
1993. He is a co-founder and/or a member of the board of Ingenex, Inc., Optex
Ophthamologics, Inc., Gemini Gene Therapies, Inc., Channel Therapeutics, Inc.,
Xenometrix, Inc., Avigen, Inc., and AVAX Technologies, Inc. From October 1991
through December 1997, Dr. Prendergast was a managing director of Paramount
Capital Investments, LLC and a managing director of The Castle Group Ltd. Dr.
Prendergast received his M.Sc. and Ph.D. from the University of New South Wales,
Sydney, Australia and a C.S.S. in administration and management from Harvard
University.
ROBERT K. deVEER, JR. has been a director since December 1998. Since
January 1997, Mr. deVeer has been the president of deVeer Capital LLC, a private
investment company. From 1995 until his retirement in 1996, Mr. deVeer served as
Managing Director, Head of Industrial Group at New York-based Lehman Brothers.
From 1973 to 1995, he held increasingly responsible positions at New York-based
CS First Boston, including Head of Project Finance, Head of Industrials and Head
of Natural Resources. He was a managing director, member of the investment
banking committee, and a trustee of the First Boston Foundation. He received a
B.A. in economics from Yale University and an M.B.A. in finance from Stanford
Graduate School of Business.
KEVIN S. FLANNERY has been a director since March 2000. Since 1992, Mr.
Flannery has served as president of Whelan Financial Corp., a consulting and
investment firm, and from 1994 to 1997 Mr. Flannery also served as president of
Whelan Securities Corp., an NASD member brokerage firm. From 1975 to 1992, Mr.
Flannery was senior managing director at Bear, Stearns & Co., Inc. where he was
the head of listed equity trading. From 1974 to 1975, Mr. Flannery was first
vice president at White, Weld & Co., Inc. where he was the head of the arbitrage
department and co-head of the equity trading department. Prior to this, Mr.
Flannery was a senior trader at Goldman, Sachs & Co. Mr. Flannery is a graduate
of Columbia University.
PROXY STATEMENT, PAGE 5
<PAGE>
All directors were elected at the annual stockholders' meeting on June 17,
1999, except Mr. Flannery, who was elected by the board on March 15, 2000.
Executive officers are appointed by the board and serve at the discretion of the
board. Each officer holds his position until his successor is appointed and
qualified. The three executive officers hold office under employment agreements,
all of which expire September 10, 2001.
THE BOARD AND ITS COMMITTEES
COMMITTEES AND MEETINGS. The board has an audit committee and a
compensation committee. The board does not have a nominating committee. The
board met eight times in the fiscal year ended June 30, 2000. The audit
committee met once in the last fiscal year and the compensation committee met
twice in the last fiscal year. Each director has attended at least 75% of the
total number of meetings of the board and committees of the board on which he
served.
AUDIT COMMITTEE. The audit committee reviews the engagement of the
independent accountants and reviews the independence of the accounting firm. The
audit committee also reviews the audit and non-audit fees of the independent
accountants and the adequacy of our internal control procedures. The audit
committee is composed of Dr. Prendergast, Mr. deVeer and Mr. Flannery.
COMPENSATION COMMITTEE. The compensation committee reviews and recommends
to the board remuneration arrangements, compensation plans and option grants for
our officers, key employees, directors and others, and administers our 1996
stock option plan. The compensation committee is composed of Dr. Prendergast,
Mr. deVeer and Mr. Flannery.
DURATION OF OFFICE. All directors hold office until the next annual meeting
of stockholders or until their successors have been elected and qualified.
DIRECTOR RESIGNATIONS. Edward J. Quilty resigned as a director effective
June 13, 2000. James T. O'Brien and Robert G. Moussa resigned as a directors
effective July 31, 2000.
COMPENSATION OF DIRECTORS
NON-EMPLOYEE DIRECTORS' INITIAL OPTION GRANTS. When a non-employee director
is first elected to the board, he receives an option to purchase an amount of
common stock determined by the board, up to 10,000 shares, at the market value
on the date of grant. Mr. deVeer and Mr. Flannery each received an option to
purchase 10,000 shares upon joining the board. These options vest as to 25% of
the option per year, starting one year after the date of grant, and expire 10
years from the date of grant.
NON-EMPLOYEE DIRECTORS' ANNUAL OPTION GRANTS. Each non-employee director
receives annually, at the first meeting of the board following the annual
stockholders' meeting, an option to purchase 10,000 shares of common stock at
the market price on the date of grant. These
PROXY STATEMENT, PAGE 6
<PAGE>
options vest as to 1/3 on the date of grant, and as to 1/3 on the two following
anniversaries of the date of grant. They expire 10 years from the date of grant.
NON-EMPLOYEE DIRECTORS' OPTIONS IN LIEU OF ANNUAL FEES. Starting June
13, 2000, board members receive no cash compensation for service as directors,
other than reimbursement of expenses. Beginning with calendar year 2001, in lieu
of cash fees, each non-employee director will receive annually an option to
purchase 15,000 shares of common stock at the lowest closing price between
December 1st and December 15th preceding the start of the calendar year. These
options will vest in 12 monthly installments, and expire 10 years from the date
of grant.
Before June 13, 2000, non-employee directors received a cash fee of
$12,000 per calender year, plus reimbursement of expenses, for services as a
director. In lieu of the $12,000 annual fee, a non-employee director could elect
to receive an option for the number of shares of common stock which would be
purchasable for $24,000, at the market price per share on December 12 preceding
the start of the calendar year. These options vest in 12 monthly installments
and expire 10 years from the date of grant. Mr. deVeer elected to receive
options to purchase 8,533 shares of common stock at $2.8125 per share (the
market price on the first trading day after December 12, 1999), in lieu of his
$12,000 fee for calendar year 2000. Mr. Flannery elected to receive an option to
purchase 7,111 shares of common stock at $2.8125, in lieu of his prorated fee
for the remainder of calendar year 2000 after his election to the board in March
2000.
EMPLOYEE DIRECTORS. Employee directors are not separately compensated
for services as directors, but are reimbursed for expenses incurred in
performing their duties as directors, including attending all meetings of the
board and any committees on which they serve.
ITEM 2: APPROVAL OF AN AMENDMENT TO THE
1996 STOCK OPTION PLAN
We recommend voting FOR the approval of the amendment to our 1996 stock
option plan described in this section. The purpose of the amendment is to
increase the number of shares available for issuance under the plan. The text of
the amendment is set forth at the end of this section of the proxy statement.
THE PLAN
The 1996 stock option plan, which the stockholders approved in August 1997,
is our only active stock option plan. Some options to purchase common stock are
still outstanding under other plans, but those plans are not available for
granting new options. The 1996 plan will terminate in August 2006. Its purpose
is to allow us to provide additional non-cash compensation and incentives, in
the form of options to purchase common stock, to our employees, non-employee
directors and consultants.
PROXY STATEMENT, PAGE 7
<PAGE>
TERMS OF OPTIONS. Recipients do not pay any consideration for the grant of
an option, but will pay us the exercise price for common stock purchasable under
an option if and when they choose to exercise the option. The exercise price per
share for stock underlying the option must be at least the market price of
common stock, as quoted on AMEX (or previously on NASDAQ or the OTC Bulletin
Board(R)), on the date of grant. The market price of common stock on October 10,
2000 was $5.6875 per share. The maximum period for exercise of any option under
the plan is 10 years from the date of grant. The vesting schedule of each option
is determined at the time of grant.
TAX CONSEQUENCES. Options granted under the plan may be either
tax-qualified employee incentive options or non-qualified options. Qualified
options can be granted only to employees, while non-qualified options can be
granted to employees, non-employee directors, and consultants.
o In the case of qualified options, neither grant nor exercise results
in compensation income to the employee or a compensation deduction for
the company. If the employee holds the stock issued on exercise for a
holding period of at least two years after the date of grant, or one
year after the exercise (whichever is longer), then upon subsequent
sale of the stock, the employee will recognize as capital gains income
(not compensation income) the difference between the sale price and
the exercise price. If the employee sells the stock before the
prescribed holding period has passed (a "disqualifying disposition"),
then the employee will recognize as compensation income the difference
between the exercise price and the fair market value of the stock at
the time of exercise. That compensation income will be added to the
basis of the option stock in determining the capital gain, if any, on
the disqualifying disposition.
o In the case of non-qualified options, the grant does not result in
compensation income for the option holder or a compensation deduction
for the company. The exercise of a non-qualified option results in the
option holder recognizing as compensation income the difference
between the exercise price and the fair market value of the stock at
the time of exercise. The company would have a compensation deduction
in the same amount.
ADMINISTRATION AND ELIGIBILITY. The plan is administered by the
compensation committee of the board or by the full board. We currently have 27
employees, including three executive officers, and three non-employee directors
who are eligible to receive options under the plan. Independent consultants may
also receive options.
OPTIONS GRANTED TO MANAGEMENT AND EMPLOYEES. The following table shows all
outstanding options, whether currently exercisable or not, granted under the
plan to current executive officers, directors and employees who are not
executive officers or directors. The figure for Dr. Prendergast includes options
granted to Summercloud Bay, Inc., a consulting firm of which he is president and
sole stockholder.
PROXY STATEMENT, PAGE 8
<PAGE>
OUTSTANDING OPTIONS TABLE
Number of
Name and Position Option Shares*
----------------- --------------
Carl Spana, Ph.D., president, chief executive officer, 380,000
chief technology officer and director
Charles L. Putnam, executive vice president, chief 405,000
operating officer and director
Stephen T. Wills, executive vice president and chief 396,250
financial officer, secretary and treasurer
John K.A. Prendergast, Ph.D., director and chairman 156,667
of the board
Robert K. deVeer, Jr., director 84,440
Kevin S. Flannery, director 17,111
THREE EXECUTIVE OFFICERS AS A GROUP: 1,181,250
THREE NON-EMPLOYEE DIRECTORS AS A GROUP: 258,218
NON-EXECUTIVE OFFICER EMPLOYEES AS A GROUP: 371,750
------------------------------------
*Outstanding on October 16, 2000, under the 1996 plan only. Dr. Spana and
Mr. Putnam also hold options to purchase 100,962 shares each, granted under
other plans. Non-executive officer employees hold options to purchase an
aggregate of 21,136 shares, granted under other plans.
INCREASE IN PLAN SHARES
The board has authorized an increase in the number of shares of common
stock available for issuance under the plan from 2,500,000 shares to 5,000,000
shares. Any increase in the number of shares available under the plan requires
stockholder approval. Options to purchase 2,432,645 shares are already
outstanding. Options to purchase 26,241 shares have been exercised. This leaves
only 41,114 shares available for future grants. The board has granted options to
purchase another 399,125 shares, subject to stockholder approval of the increase
in plan shares. These grants include options for 125,000 shares granted to
executive officers, for 150,000 shares to non-executive directors, and for
124,125 shares granted to other employees. After taking into account these
conditional grants for 399,125 shares, if the stockholders approve the increase,
2,141,989 shares will be available for future grants. The board believes that
our ability to continue providing non-cash compensation and incentives in the
form of stock options is crucial to our ability to attract, retain and motivate
talented employees, consultants and non-employee directors.
PROXY STATEMENT, PAGE 9
<PAGE>
INTEREST OF MANAGEMENT IN SHARE INCREASE
The grant of options for a total of 399,125 shares of common stock, subject
to stockholder approval of the increase in shares available under the plan,
includes options for a total of 275,000 shares granted to our executive officers
and non-employee directors, as shown in the "New Option Benefits Table" below.
The board granted these options as of August 1, 2000, and the exercise price for
all of these options is $5.125 per share. The figure for Dr. Prendergast
includes options granted to Summercloud Bay.
The vesting periods for these options vary from immediate vesting to
vesting over a four-year period starting one year from the date of grant. All of
these options expire 10 years from the date of grant. The dollar value of the
options is calculated for purposes of this table on the basis of a market price
per share on October 10, 2000, as quoted on AMEX, of $5.6875 per share. None of
the options will be exercisable unless and until the stockholders approve the
proposed increase in the shares available under the plan.
NEW OPTION BENEFITS TABLE
Number of
Name and Position Dollar Value Option Shares
----------------- ------------ -------------
Carl Spana, Ph.D., president, chief executive $56,250 100,000
officer and director
Stephen T. Wills, executive vice president $14,063 25,000
and chief financial officer, secretary
and treasurer
Charles L. Putnam, executive vice president, $0 0
chief operating officer and director
John K.A. Prendergast, Ph.D., director and $56,250 100,000
chairman
Robert K. deVeer, Jr., director $14,063 25,000
Kevin S. Flannery, director $14,063 25,000
THREE EXECUTIVE OFFICERS AS A GROUP: $70,313 125,000
THREE NON-EXECUTIVE DIRECTORS AS A GROUP: $84,375 150,000
NON-EXECUTIVE OFFICER EMPLOYEES AS A GROUP: $69,820 124,125
In the event that the stockholders do not approve the proposed increase in the
shares available under the plan, the options shown above will terminate. If the
stockholders do approve the increase, the options shown above will become
effective, and the balance of 2,141,989 shares available under the plan will
become available for further grants to directors and officers, as well as to
other employees and consultants.
PROXY STATEMENT, PAGE 10
<PAGE>
TEXT OF PLAN AMENDMENT
Section 3 of the plan will be amended to read as follows (changed language
is bracketed and struck through):
3. STOCK SUBJECT TO PLAN.
[2,500,000] 5,000,000 of the authorized but unissued shares of
the Common Stock, $0.01 par value, of the Company (the "Common Stock")
are hereby reserved for issue upon the exercise of Options granted
under the Plan; provided, however, that the number of shares so
reserved may from time to time be reduced to the extent that a
corresponding number of issued and outstanding shares of the Common
Stock are purchased by the Company and set aside for issue upon the
exercise of Options. If any Options expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject
thereto shall again be available for the purposes of the Plan.
ITEM 3: RATIFICATION OF APPOINTMENT OF
ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS
We recommend voting FOR the ratification of the appointment of Arthur
Andersen LLP as our independent public accountants for the fiscal year ending
June 30, 2001. Arthur Andersen has served as our independent public accountant
since July 9, 1996. We have requested that a representative of Arthur Andersen
attend the meeting. The representative will have an opportunity to make a
statement, if he or she desires, and will be available to respond to appropriate
questions from stockholders.
[remainder of page intentionally left blank]
PROXY STATEMENT, PAGE 11
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EXECUTIVE OFFICERS
Name Age Position with Palatin
---- --- ---------------------
Carl Spana, Ph.D. 38 President, chief executive officer and director
Stephen T. Wills 43 Executive vice president and chief financial
officer, secretary and treasurer
Charles Putnam 47 Executive vice president, chief operating
officer and director
Executive officers are appointed by the board and serve at the discretion of the
board. Each officer holds his position until his successor is appointed and
qualified. All of the current executive officers hold office under employment
agreements. The employment agreements with Dr. Spana, Mr. Wills and Mr. Putnam
all expire September 10, 2001.
Additional information about Dr. Spana and Mr. Putnam is included under
Item 1: Election of Directors.
STEPHEN T. WILLS has been a vice president and our chief financial officer
since November 1997. From July 1997 to August 2000, Mr. Wills was a vice
president and the chief financial officer of Derma Sciences, Inc., a publicly
held company which provides wound and skin care products, and currently serves
as a director of Derma. From 1991 to August 2000, he was the president and chief
operating officer of Golomb, Wills & Company, P.C., a public accounting firm.
Mr. Wills, a certified public accountant, received his B.S. in accounting from
West Chester University, and an M.S. in taxation from Temple University.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to our chief executive
officer, former chief executive officer, and the other named executive officers
for the last three fiscal years. With respect to the persons and periods covered
in the following table, we made no restricted stock awards, have no outstanding
stock appreciation rights ("SARs") and have no long-term incentive plan
("LTIP").
[TABLE APPEARS ON FOLLOWING PAGE]
PROXY STATEMENT, PAGE 12
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------------
Annual Compensation Awards
----------------------------------------------------------------------- ------------------
All other
Name and Option Compen-
Principal Position Year Salary Bonus Shares(1) sation
------------------ ---- ------ ----- --------- --------
<S> <C> <C> <C> <C> <C>
Carl Spana, Ph.D., chief 2000 $191,490 $55,000 225,000 --
executive officer 1999 $183,266 -- 100,000 --
1998 $160,298 $25,000 74,196(2) $87(3)
Stephen T. Wills, chief 2000 $154,725 $45,000 200,000 $7,111(4)
financial officer 1999 $40,417 -- 100,000 $48,198(5)
1998 -- -- 56,250 $42,144(5)
Charles Putnam, chief 2000 $221,763 $65,000 250,000 $8,401(4)
operating officer 1999 $207,626 -- 100,000 $7,025(4)
1998 $160,298 $30,000 74,196(6) $3,812(4)
Edward J. Quilty, former 2000 $355,006 $200,984 276,460 $8,401(4)
chief executive officer(7) 1999 $358,567 -- 100,000 $6,989(4)
1998 $334,395 $64,200 24,067(8) $3,812(4)
</TABLE>
----------------------------------
(1) The security underlying all options listed is common stock.
(2) Includes an option to purchase 74,196 shares of common stock at $1.00 per
share granted on March 24, 1998, under a stock option agreement with Dr.
Spana. The March 24, 1998 option replaced a canceled option to purchase the
same number of shares at $4.96 per share, included in the 1996 total.
Excluding that replacement option, Dr. Spana received no additional options
during fiscal 1998.
(3) Premiums paid for disability insurance policy.
(4) Premiums paid for health insurance policies.
PROXY STATEMENT, PAGE 13
<PAGE>
(5) Amounts paid to the accounting firm of Golomb, Wills & Co. for consulting
services.
(6) Includes an option to purchase 74,196 shares of common stock at $1.00 per
share granted on March 24, 1998, under a stock option agreement with Mr.
Putnam. The March 24, 1998 option replaced a canceled option to purchase
the same number of shares at $4.96 per share, included in the 1996 total.
Excluding that replacement option, Mr. Putnam received no additional
options during fiscal 1998.
(7) Mr. Quilty resigned effective June 13, 2000.
(8) Includes an anti-dilution option to purchase 7,803 shares of common stock
at $.20 per share granted on March 24, 1998, pursuant to the terms of Mr.
Quilty's employment agreement. The March 28, 1998 option replaced a
canceled option to purchase the same number of shares at $4.96 per share,
originally granted under the 1997 Executive Officers Stock Option Plan and
included in the 1997 total. Excluding that replacement option, Mr. Quilty
received options to purchase a total of 16,264 shares during fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows options granted to our three executive officers
and the former chief executive officer during the fiscal year ended June 30,
2000. All of the options listed were granted under our 1996 stock option plan,
and the underlying security is common stock. All options are fully vested unless
otherwise noted. The exercise price for each option is equal to the market price
of common stock on the date of grant, except for the option for 176,460 shares
granted to Edward J. Quilty under the terms of his employment agreement. We have
not granted any stock appreciation rights (" SARs").
[TABLE APPEARS ON FOLLOWING PAGE]
PROXY STATEMENT, PAGE 14
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------------------------|
| Potential Realizable
| Value at Assumed
Number of % of Total | Annual Rates of
Securities Options | Stock Price
Underlying Granted to Exercise | Appreciation for
Options Employees or Base | Option Term**
Granted in Fiscal Price Expiration | --------------------------------------
Name (#) Year ($/Sh) Date | 0%($) 5%($) 10%($)
---------------------- --------------- -------------- ----------- ------------|-------------------------------------------
<S> <C> <C> <C> <C> | <C> <C> <C>
Carl Spana, Ph.D. 75,000* 7.1% $4.8750 07/08/09 | $0 $229,950 $582,713
Carl Spana, Ph.D. 150,000 14.3% $3.0625 10/05/09 | $0 $288,900 $732,120
Stephen T. Wills 50,000* 4.8% $4.8750 07/08/09 | $0 $153,300 $388,475
Stephen T. Wills 150,000 14.3% $3.0625 10/05/09 | $0 $288,900 $732,120
Charles Putnam 100,000* 9.5% $4.8750 07/08/09 | $0 $306,600 $776,950
Charles Putnam 150,000 14.3% $3.0625 10/05/09 | $0 $288,900 $732,120
Edward J. Quilty 176,460 16.8% $0.2000 06/13/04 | $824,950 $1,365,977 $2,195,956
Edward J. Quilty 100,000 9.5% $3.1250 06/13/04 | $0 $196,530 $498,040
</TABLE>
-----------------------------------
* The option became exercisable as to 33% on July 8, 1999 and 2000, and
will become exercisable as to the remaining 34% on July 8, 2001.
** "Potential realizable value" is shown in response to SEC rules which
require the information, for illustration only. The values shown are
not representations or projections of future stock prices or the
future value of common stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
No current executive officer exercised any options during the fiscal year
ended June 30, 2000. We have not granted any SARs. Fiscal year-end values in the
following table are based on a last reported sale price for the common stock, as
reported on AMEX on June 30, 2000 of $7.00 per share.
[TABLE APPEARS ON FOLLOWING PAGE]
PROXY STATEMENT, PAGE 15
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of
Shares Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Fiscal Year End, Fiscal Year End,
on Value ---------------------------- -----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------------------- ----------- ----------- --------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Carl Spana, Ph.D. 0 $0.00 440,962 67,250 $1,435,247 $183,281
Charles Putnam 0 $0.00 465,962 84,000 $1,452,779 $218,875
Stephen T. Wills 0 $0.00 356,250 50,500 $966,125 $147,688
Edward J. Quilty 59,898 $237,825 562,541 0 $2,626,792 $0
</TABLE>
TEN-YEAR OPTION REPRICINGS
We did not adjust or amend the exercise price of any stock options during
the fiscal year ended June 30, 2000. We have not granted any SARs. The following
table shows all option repricings for all executive officers at any time during
the last 10 years, except for repricings which may have been effected before we
became a publicly held company in 1993:
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICINGS
Number of Market Length of
Securities Price of Exercise Original
Underlying Stock at Price at Option Term
Options Time of Time of New Remaining at
Repriced or Repricing or Repricing or Exercise Date of
Amended Amendment Amendment Price Repricing or
Name Date (#) ($) ($) ($) Amendment
---------------------- --------- --------------- -------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Carl Spana, Ph.D. 3/24/98 74,196 $6.25 $4.96 $1.00 8 years 3 months
Charles Putnam 3/24/98 74,196 $6.25 $4.96 $1.00 8 years 3 months
Edward J. Quilty 3/24/98 7,803 $6.25 $4.96 $0.20 9 years 2 months
Edward J. Quilty 9/27/96 70,257 $10.50 $5.42 $0.20 8 years 3 months
</TABLE>
EMPLOYMENT AGREEMENTS
CARL SPANA, PH.D., STEPHEN T. WILLS AND CHARLES PUTNAM. Dr. Spana, Mr.
Wills and Mr. Putnam have entered into employment agreements for a three-year
period commencing September 11, 1998. Dr. Spana is serving as president and
chief executive officer (formerly as an executive vice president and chief
technology officer), at a salary of $265,000 per year. Mr. Wills is serving as
an executive vice president, chief financial officer, secretary and treasurer,
at a
PROXY STATEMENT, PAGE 16
<PAGE>
salary of $205,000 per year. Mr. Putnam is serving as an executive vice
president and chief operating officer, at a salary of $242,500. Each is entitled
to receive annual bonus compensation of up to one year's base salary, in an
amount to be decided by the compensation committee based on their achievement of
yearly objectives. Each is also entitled to participate in all bonus and benefit
programs that we establish, to the extent his position, tenure, salary, age,
health and other qualifications make him eligible to participate.
Upon entering into their employment agreements, the three officers each
received an option to purchase 50,000 shares of common stock, at a price of
$2.50 per share (market value on the date of grant). The options vested in three
equal yearly installments starting on September 11, 1998 and expire September
11, 2008.
The agreements originally contained anti-dilution protections which
required us to issue additional options if, during the term of the employment
agreement, we sold securities which increased the outstanding common stock by
40% or more. The three officers have waived these anti-dilution protections.
Each agreement allows us or the employee to terminate the agreement on 30
days' notice, and contains other provisions for termination by the company for
"cause," or by the employee for "good reason" or due to a "change in control"
(as these terms are defined in the employment agreements). Early termination
may, in some circumstances, result in accelerated vesting of stock options
and/or severance pay for a one-year period at the rate of base salary, cash
bonus and benefits then in effect. Each agreement contains non-competition,
non-solicitation and confidentiality covenants.
EDWARD J. QUILTY. Mr. Quilty served as the president and chief executive
officer of Palatin and our wholly-owned subsidiary, RhoMed Incorporated, under
an employment agreement which commenced on November 16, 1995 and terminated with
Mr. Quilty's resignation on June 13, 2000.
Mr. Quilty's minimum base salary was $300,000 per year. At the time of his
resignation, his salary was $360,465 per year. We had agreed to reimburse Mr.
Quilty for premiums and other payments to maintain a $1,000,000 term life
insurance policy. Mr. Quilty could also participate in any benefit plans
available to the company's other senior executives, and in any directors' and
officers' liability insurance which we maintain.
Anti-dilution protections in the employment agreement required us to issue
options with an exercise price of $0.20 per share, so that during the term of
the agreement, Mr. Quilty always had options to purchase the number of shares of
common stock (together with shares already purchased on the exercise of such
options) equal to not less than 3.75% of our outstanding common stock on a fully
diluted basis. Mr. Quilty's employment agreement also contained provisions for
severance pay, non-competition, confidentiality and indemnification.
Mr. Quilty's employment agreement terminated on June 13, 2000 and we
entered into a separation agreement with Mr. Quilty which superceded all of the
terms of his employment agreement. We amended the separation agreement on
October 6, 2000. Under the separation agreement, Mr. Quilty will receive:
PROXY STATEMENT, PAGE 17
<PAGE>
o severance pay of $400,000 in 24 equal monthly installments;
o continued payment of premiums for health, life and disability
insurance for up to 24 months; and
o accelerated vesting of all outstanding stock options and extension of
the term of all options to June 13, 2004.
The separation agreement limits the amount of stock which Mr. Quilty can sell on
any one day. We will file a registration statement by December 31, 2000,
registering any unregistered shares of Mr. Quilty's common stock and common
stock issuable on exercise of options.
The separation agreement contains mutual waivers and releases of all
employment-related claims and mutual promises not to sue.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS.
During the fiscal year ended June 30, 2000, Dr. Prendergast and former
directors Quilty, O'Brien and Moussa served on the compensation committee.
Dr. Prendergast is the president and sole stockholder of Summercloud Bay,
Inc., a corporation with which we have had a consulting agreement since October
1997, to provide strategic and technology consulting services. Under the
agreement, we paid Summercloud Bay $54,000 per year for its services, and
granted Summercloud Bay a stock option under the 1996 stock option plan to
purchase 50,000 shares of common stock at $7.75 per share. That option is now
fully vested and expires in December 2007. Effective June 2000, we amended the
agreement with Summercloud Bay to provide that we will pay $116,000 per year for
its services, and issue an option to purchase 100,000 shares of common stock at
$5.125 per share.
Mr. Quilty served as the president and chief executive officer of Palatin
and RhoMed under an employment agreement which commenced on November 16, 1995
and terminated with Mr. Quilty's resignation on June 13, 2000. He was an ex
officio member of the compensation committee. We have described his employment
and separation agreements above, under the heading "Employment Agreements."
There are no compensation committee interlocks with other companies.
COMPENSATION COMMITTEE REPORT
The compensation committee of the board makes recommendations to the board
about compensation of executive officers. The committee also administers the
1996 stock option plan and may grant options to non-management employees and
consultants, but it is the board's policy to have the full board review and
approve all option grants which the committee recommends for executive officers
and directors. The committee also reviews and makes recommendations to the board
concerning proposed employment agreements with executive officers. For executive
officers, the committee evaluates performance and determines compensation
policies and levels.
PROXY STATEMENT, PAGE 18
<PAGE>
The members of the compensation committee are not, and have never been,
employees or executive officers of Palatin. Dr. Prendergast has served on the
committee since 1996. Mr. deVeer and Mr. Flannery have served on the committee
since August 2000.
EXECUTIVE COMPENSATION POLICY. Competition for qualified senior management
personnel in Palatin's industry is intense. In order to attract and retain
qualified personnel, Palatin must offer compensation which is both comparable to
similarly situated companies in current salary and benefits, and includes the
potential for substantial rewards if Palatin is successful over the long term.
Palatin's aim is to attract, retain and reward executive officers and other key
employees who contribute to its long-term success and to motivate those
individuals to enhance long-term stockholder value. It is Palatin's policy to
enter into employment agreements with executive officers, preferably with an
initial term of three years. To establish this relationship between executive
compensation and creation of stockholder value, the board has adopted a total
compensation package comprised of base salary, bonus and stock option awards.
Key elements of the compensation philosophy are:
o Palatin pays compensation at levels competitive with other
biotechnology companies with which Palatin competes for talent.
o Palatin maintains annual incentive opportunities sufficient to provide
motivation to achieve specific operating goals and to generate rewards
that bring total compensation to competitive levels.
o Palatin provides significant equity-based incentives for executives
and other key employees to ensure that they are motivated over the
long-term to respond to Palatin's business challenges and
opportunities as owners and not just as employees.
DETERMINING EXECUTIVE COMPENSATION. The committee usually meets twice per
year to review how well management compensation is serving Palatin's goals, to
make recommendations to the board for any adjustments, and to recommend annual
compensation for the coming year. Palatin's chief financial officer and human
resources manager gather and report on information about compensation levels in
comparable companies. We review the performance of each executive officer and
the financial condition of the company. We then consider the following major
components of executive compensation:
BASE SALARY. The employment agreement with each executive sets an initial
base salary, which is competitive in our industry, given the executive's
experience and qualifications, at the time we enter into the agreement. The
committee annually reviews each executive officer's base salary. Among the
factors taken into consideration are (1) individual and corporate
performance, (2) levels of responsibility, (3) prior experience, (4)
breadth of knowledge of the industry, and (5) competitive pay practices. If
salaries at comparable companies appear to have increased, we recommend
similar increases, but only if each executive's historical performance
warrants an increase and if the increase is prudent in view of Palatin's
financial condition.
PROXY STATEMENT, PAGE 19
<PAGE>
ANNUAL BONUS. In addition to the competitive base salary, we intend to
reward executives each year for the achievement of specific goals, which
may be financial, operational or technological. We consider objectively
measurable goals, such as obtaining new investment capital, negotiating
valuable contracts, or meeting regulatory requirements, and more subjective
goals, such as quality of management performance and consistency of effort.
Palatin's objectives consist of operating, strategic and financial goals
that the board considers to be critical to Palatin's overall goal: building
stockholder value. Our recommendations for cash bonuses also take into
account Palatin's liquidity and capital resources at the time. Until
Palatin's operations generate substantial income, we may recommend bonuses
which consist partly or mainly of stock options. Stock options granted as
part of bonus compensation will usually be immediately exercisable, or will
vest over a shorter time than other incentive options.
LONG-TERMINCENTIVES. At present, Palatin's only long-term incentive program
is its 1996 stock option plan. Palatin does not have a defined benefit
pension plan, and contributions to executives' accounts under Palatin's
401K plan are limited by federal tax regulations. Through option grants,
executives receive significant equity incentives to build long-term
stockholder value. The exercise price of options granted under the plan is
at least 100% of fair market value of the common stock on the date of
grant. Employees receive value from these grants only if the common stock
appreciates over the long-term. We determine the size of option grants
based on competitive practices at leading companies in the biotechnology
industry and Palatin's philosophy of significantly linking executive
compensation with stockholder interests.
FISCAL YEAR 2000 COMPENSATION. For the fiscal year ended June 30, 2000,
base salary increases for all of the executive officers reflected increases in
comparable salary figures for the industry, and overall progress toward
Palatin's corporate and product development goals. The increase in Mr. Wills'
total salary also reflects the fact that fiscal year 2000 was his first full
year as an employee of Palatin. Cash bonuses and stock option grants for the
executive officers similarly reflected achievement of corporate and development
goals, as well as sufficient liquidity to allow payment of substantial cash
bonuses. The higher level of option grants to executive officers in fiscal 2000
over fiscal 1999 was mainly to compensate for the lack of cash bonuses in fiscal
1999, which was due to the need to conserve cash at the time.
The base salary, bonus and grants of stock options for Edward Quilty, our
former CEO, were determined in accordance with the criteria described above
under "Determining executive compensation." Mr. Quilty's compensation reflects
the board's subjective assessment of (1) his performance, (2) his skills in
relation to other CEOs in Palatin's industry, and (3) the board's assessment of
Palatin's performance. Considering these factors, the committee set Mr. Quilty's
base annual salary through the fiscal year ending June 30, 2000 at $365,000. The
larger cash bonus paid to Mr. Quilty in fiscal 2000 also reflected the need to
conserve cash in fiscal 1999, when his 1999 cash bonus was deferred to fiscal
2000. The options granted to Mr. Quilty in fiscal 2000 included anti-dilution
options for 176,460 shares, as required by the terms of his individual
employment agreement.
PROXY STATEMENT, PAGE 20
<PAGE>
On June 15, 2000, the board named Dr. Spana as our president and CEO
(formerly executive vice president and chief technology officer). In
consideration of his new responsibilities and the board's confidence in his
ability to lead Palatin's continued development, the board increased Dr. Spana's
base salary from $205,000 to $265,000. Dr. Spana and the other executive
officers have waived anti-dilution option terms in their individual employment
agreements.
CERTAIN TAX CONSIDERATIONS. Section 162(m) of the Internal Revenue Code
limits the company to a deduction for federal income tax purposes of not more
than $1 million of compensation paid to certain executive officers in a taxable
year. Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code.
The committee believes that at the present time it is unlikely that the
compensation paid to any executive officer in a taxable year will exceed $1
million. Therefore, the board has not established a policy for determining which
forms of incentive compensation awarded to executive officers will be designed
to qualify as "performance based compensation."
Submitted by the Compensation Committee:
John K.A. Prendergast
Robert K. deVeer, Jr.
Kevin S. Flannery
STOCK PERFORMANCE GRAPH
The following graph compares the yearly change in the cumulative total
shareholder return on our common stock with the cumulative total return on the
Nasdaq Composite Index and the Nasdaq Biotechnology Index (SIC codes 2833-2836)
for our last five fiscal years. The graph assumes the investment of $100 in each
stock or index on December 29, 1995, and the reinvestment of any dividends (we
have never paid a dividend). Our fiscal year end changed from December 31 to
June 30 starting with the fiscal year ended June 30, 1996.
[GRAPH APPEARS ON FOLLOWING PAGE]
PROXY STATEMENT, PAGE 21
<PAGE>
[GRAPH WITH FOLLOWING DATA POINTS APPEARS HERE:]
<TABLE>
<CAPTION>
12/95 6/96 6/97 6/98 6/99 6/00
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Palatin common $100.00 $100.00 $31.25 $24.69 $22.81 $35.00
Nasdaq composite $100.00 $112.63 $137.07 $180.09 $255.31 $376.97
Nasdaq biotech $100.00 $96.85 $101.61 $104.24 $166.68 $399.84
</TABLE>
THE ABOVE GRAPH IS FOR HISTORICAL COMPARISON PURPOSES ONLY AND IS NOT A FORECAST
OR PROJECTION OF FUTURE STOCK PRICES OR SHAREHOLDER RETURNS.
STOCK OWNERSHIP INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the SEC (the Securities and Exchange Commission) require us to
disclose late filings of reports of stock ownership and changes in stock
ownership by our directors and executive officers. To the best of our knowledge,
all of the filings for our directors and executive officers were made on a
timely basis in fiscal 2000, except that Kevin Flannery failed to timely report
initial ownership on Form 3 for the month of March 2000, and Robert Moussa (a
former director) failed to timely report changes in ownership on Form 5 for the
fiscal year ended June 30, 2000. Mr. Flannery and Mr. Moussa each subsequently
reported the required information on Forms 5 for the fiscal year June 30, 2000.
We know of no other failure to file a required form.
PROXY STATEMENT, PAGE 22
<PAGE>
BENEFICIAL OWNERSHIP OF MANAGEMENT AND OTHERS
The tables below show the beneficial stock ownership and voting power, as
of October 6, 2000, of:
o each director, each of the named executive officers, our former CEO,
and all current directors and executive officers as a group; and
o all persons who, to our knowledge, beneficially own more than five
percent of the common stock or Series A preferred stock.
"Beneficial ownership" here means direct or indirect voting or investment power
over outstanding stock and stock which a person has the right to acquire now or
within 60 days after October 6, 2000.
Some beneficial owners are listed twice in the first table -- once to show
their common stock holdings, and once to show their Series A preferred stock
holdings. Please note that the common stock amounts shown in the table include
the common stock issuable on conversion of Series A preferred stock, so the
ownership percentages shown for any person who holds both types of stock should
not be added together. Also, share amounts may reflect indirect ownership of
shares which another person in the table owns directly. Therefore, the ownership
percentages of related persons should not be added together. Please see the
footnotes for more detailed explanations of the holdings. Except as otherwise
noted, to our knowledge, the persons named in the tables beneficially own and
have sole voting and investment power over all shares listed.
The common stock has one vote per share and the Series A preferred stock
has approximately 21.41 votes per share. Voting power is calculated on the basis
of the aggregate of common stock and Series A preferred stock outstanding as of
October 6, 2000, the record date for the annual meeting. On October 6, 2000,
10,022,924 shares of common stock and 30,917 shares of Series A preferred stock
were outstanding.
The address for all beneficial owners, unless otherwise noted, is c/o
Palatin Technologies, Inc., 103 Carnegie Center, Suite 200, Princeton, NJ 08540.
[TABLE APPEARS ON FOLLOWING PAGE]
PROXY STATEMENT, PAGE 23
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT:
Percent of
Percent of Voting
Class Name of Beneficial Owner Shares Class Power
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Carl Spana, Ph.D. 443,468(1) 4.2% *
Common Stephen T. Wills 355,583(3) 3.4% *
Common Charles L. Putnam 448,295(2) 4.3% *
Common John K.A. Prendergast, Ph.D. 141,673(4) 1.4% *
Common Robert K. deVeer, Jr. 71,228(5) * *
Common Kevin S. Flannery 6,399(6) * *
Common Edward J. Quilty (former CEO) 515,089(7) 4.9% *
All current directors and executive officers 1,466,646(8) 12.8% *
as a group (six persons)
</TABLE>
-------------------
*Less than one percent.
(1) Includes 428,795 shares which Dr. Spana has the right to acquire under
options. Does not include options for 100,000 shares granted subject to
stockholder approval of an increase in shares available under the 1996
plan. See "Interest of Management in Share Increase" starting on page 10
above.
(2) Includes 445,295 shares which Mr. Putnam has the right to acquire under
options.
(3) Includes 352,583 shares which Mr. Wills has the right to acquire under
options. Does not include options for 25,000 shares granted subject to
stockholder approval of an increase in shares available under the 1996
plan. See "Interest of Management in Share Increase" starting on page 10
above.
(4) Includes 130,000 shares which Dr. Prendergast has the right to acquire
under options. Does not include options for 100,000 shares granted subject
to stockholder approval of an increase in shares available under the 1996
plan. See "Interest of Management in Share Increase" starting on page 10
above.
(5) Includes 71,228 shares which Mr. deVeer has the right to acquire under
options. Does not include options for 25,000 shares granted subject to
stockholder approval of an increase in shares available under the 1996
plan. See "Interest of Management in Share Increase" starting on page 10
above.
PROXY STATEMENT, PAGE 24
<PAGE>
(6) Includes 6,399 shares which Mr. Flannery has the right to acquire under
options. Does not include options for 25,000 shares granted subject to
stockholder approval of an increase in shares available under the 1996
plan. See "Interest of Management in Share Increase" starting on page 10
above.
(7) Includes 455,191 shares which Mr. Quilty has the right to acquire under
options.
(8) Includes 1,428,957 shares which directors and officers have the right to
acquire under options. Does not include options for 275,000 shares granted
subject to stockholder approval of an increase in shares available under
the 1996 plan. See "Interest of Management in Share Increase" starting on
page 10 above.
<TABLE>
<CAPTION>
5% OR GREATER BENEFICIAL OWNERS:
Percent of
Name of Beneficial Owner Percent of Voting
Class Shares Class Power
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Pictet & Cie.(1) 1,680,000(2) 16.3% 13.1%
Common Lindsay A. Rosenwald, M.D.(3) 1,399,649(4) 13.3% 10.2%
Common Paramount Capital Asset Management, Inc.(3) 812,811(5) 7.9% 6.9%
Series A Lindsay A. Rosenwald, M.D.(3) 15,079(6) 41.9% 3.0%
Preferred
Series A Paramount Capital Asset Management, Inc.(3) 11,000(7) 34.5% 2.2%
Preferred
Series A The Aries Trust, a Cayman Islands trust(3) 7,150(8) 22.6% 1.4%
Preferred
Series A The Aries Domestic Fund(3) 3,850(9) 12.3% *
Preferred
</TABLE>
-----------------
*Less than one percent.
(1) Address is 29 Blvd. Georges-Favon, 1204 Geneva, Switzerland.
(2) Includes 280,000 shares which Pictet & Cie. has the right to acquire under
warrants.
(3) Address is c/o Paramount Capital, Inc., 787 Seventh Avenue, New York, NY
10019.
(4) Includes 309,595 shares which Dr. Rosenwald, or persons with whom he shares
voting and investment power, have the right to acquire under warrants. Dr.
Rosenwald shares voting and investment power as to 1,171,056 of the shares
shown in the table, with the following persons:
PROXY STATEMENT, PAGE 25
<PAGE>
o RAQ, LLC as to 358,245 shares;
o Paramount Capital Asset Management, Inc. as to 812,811 shares;
o The Aries Trust as to 478,186 shares;
o Aries Domestic Fund, L.P. as to 222,869 shares; and
o Aries Domestic Fund II, L.P. as to 111,756 shares.
These share amounts include common stock issuable on the conversion of
Series A preferred stock. Dr. Rosenwald is the president of RAQ, LLC, and
is the chairman and sole stockholder of Paramount Capital Asset Management,
Inc., which is the investment manager of The Aries Trust and the general
partner of Aries Domestic Fund and Aries Domestic Fund II. Dr. Rosenwald
and Paramount Capital Asset Management disclaim beneficial ownership of the
securities held by the three Aries funds, except to the extent of their
pecuniary interest, if any. The table does not include any shares owned or
issuable upon exercise of warrants held by employees of Paramount Capital,
Inc., of which Dr. Rosenwald is the president, or Paramount Capital
Investments, of which Dr. Rosenwald is the chairman and president.
(5) Includes 81,002 shares which Paramount Capital Asset Management, or persons
with whom it shares voting and investment power, have the right to acquire
under warrants. Paramount Capital Asset Management shares voting and
investment power as to all of the shares shown in the table, with the
following persons:
o Dr. Rosenwald as to 812,811 shares;
o The Aries Trust as to 478,186 shares;
o Aries Domestic Fund, L.P. as to 222,869 shares; and
o Aries Domestic Fund II, L.P. as to 111,756 shares.
All of the shares owned or purchasable by Paramount Capital Asset
Management are also included in the beneficial ownership of Dr. Rosenwald,
as explained in note (4) above.
(6) Includes 5,079 shares which Dr. Rosenwald, or persons with whom he shares
voting and investment power, have the right to acquire under warrants. Dr.
Rosenwald shares voting and investment power as to 10,000 outstanding
shares, and 1,000 shares issuable under warrants, with the following
persons, as described in note (4) above:
o Paramount Capital Asset Management as to 11,000 shares;
o The Aries Trust as to 7,150 shares;
o Aries Domestic Fund, L.P. as to 3,850 shares.
(7) Includes 1,000 shares which Paramount Capital Asset Management, or persons
with whom it shares voting and investment power, have the right to acquire
under warrants. Paramount Capital Asset Management shares voting and
investment power as to all of the shares shown in the table, with the
following persons:
o Dr. Rosenwald as to 11,000 shares;
o The Aries Trust as to 7,150 shares;
o Aries Domestic Fund, L.P. as to 3,850 shares
All of the shares owned or purchasable by Paramount Capital Asset
Management are also included in the beneficial ownership of Dr. Rosenwald,
as explained in note (4) above.
PROXY STATEMENT, PAGE 26
<PAGE>
(8) Includes 650 shares which The Aries Trust, or persons with whom it shares
voting and investment power, have the right to acquire under warrants. The
Aries Trust shares voting and investment power as to all of the shares
shown in the table, with Dr. Rosenwald and Paramount Capital Asset
Management. All of the shares owned or purchasable by The Aries Trust are
also included in the beneficial ownership of Dr. Rosenwald, as explained in
note (4) above.
(9) Includes 350 shares which Aries Domestic Fund, or persons with whom it
shares voting and investment power, have the right to acquire under
warrants. Aries Domestic Fund shares voting and investment power as to all
of the shares shown in the table, with Dr. Rosenwald and Paramount Capital
Asset Management. All of the shares owned or purchasable by Aries Domestic
Fund are also included in the beneficial ownership of Dr. Rosenwald, as
explained in note (4) above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
JOHN K. A. PRENDERGAST, PH.D. We have described our transactions with Dr.
Prendergast above, under the heading "Compensation Committee Interlocks and
Insider Participation in Compensation Decisions."
OTHER ITEMS OF BUSINESS
We are not aware of any matters, other than the items of business discussed
in this proxy statement, that may come before the meeting. If other items of
business properly come before the meeting, the proxy holders will vote shares in
accordance with their judgment.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at annual meetings in accordance with regulations adopted by the
Securities and Exchange Commission. To be considered for inclusion in the proxy
statement and form of proxy relating to the next annual meeting of stockholders,
such proposals must be received at our executive offices, 103 Carnegie Center,
Suite 200, Princeton, New Jersey 08540, not later than July 18, 2001. Proposals
should be directed to the attention of the Secretary.
Proposals submitted outside the processes established by the SEC for
inclusion of stockholder proposals in a company's proxy statement will be
considered untimely if submitted after September 4, 2001.
PROXY STATEMENT, PAGE 27
<PAGE>
ANNUAL REPORT ON FORM 10-K
Our annual report on Form 10-K for the fiscal year ended June 30, 2000,
including the financial statements and schedules but excluding exhibits, is
being sent with this proxy statement without charge to each person whose proxy
is being solicited.
INCORPORATION BY REFERENCE
Notwithstanding anything to the contrary set forth in any of our previous
or future filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934 that might incorporate this proxy statement in whole or in part, the
compensation committee report and the stock performance graph which follows the
report will not be deemed to be incorporated by reference into any such filing.
Your cooperation in giving this matter your immediate attention and
returning your proxy card is greatly appreciated.
By order of the board of directors,
STEPHEN T. WILLS, Secretary
October 17, 2000
PROXY STATEMENT, PAGE 28
<PAGE>
[face of proxy card]
PALATIN TECHNOLOGIES, INC.
103 CARNEGIE CENTER, SUITE 200, PRINCETON, NEW JERSEY 08540
ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 15, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Carl Spana, Ph.D. and Stephen T. Wills (each with
full power to act without the other) as proxy holders with full power of
substitution, to vote all shares of common stock and Series A Convertible
Preferred Stock of Palatin Technologies, Inc., a Delaware corporation, held of
record by the undersigned as of October 6, 2000, at Palatin's annual meeting of
stockholders to be held Wednesday, November 15, 2000, and at any postponement or
adjournment of the meeting.
(TO BE SIGNED ON REVERSE SIDE.)
<PAGE>
[reverse of proxy card]
[X] Please mark your votes as in this example.
1. ELECTION OF DIRECTORS.
FOR all nominees WITHHOLD Nominees:
listed at right AUTHORITY Carl Spana, Ph.D.
(except as indicated to vote for all the Charles L. Putnam
otherwise below) nominees listed at right John K.A. Prendergast, Ph.D.
Robert K. deVeer, Jr.
[ ] [ ] Kevin S. Flannery
(INSTRUCTION: To withhold authority to vote for
any individual nominee, print that nominee's name
on the line provided below.)
______________________________________________________
2. To approve the amendment to the 1996 stock option plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Arthur Andersen LLP as Palatin's independent
public accountants for the fiscal year ending June 30, 2001:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxy holders are authorized to vote upon such
other matters as may properly come before the meeting or any postponement
or adjournment of the meeting:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The proxy holders will vote the shares of the undersigned stockholder as
instructed above. If no choice is specified by the stockholder, the proxy
holders will vote the shares FOR proposals no. 1, 2 and 3 and on any other
matter coming before the meeting in the discretion of the proxy holders.
Theundersigned revokes any proxy previously given to vote or act with respect to
such shares and ratifies and confirms all actions which the proxy holders or
their substitutes may lawfully do in accordance with the instructions on this
proxy card.
Please complete, sign, date and return this proxy card in the enclosed envelope.
No postage is required if mailed in the United States.
SIGNATURE(S)_______________________ _____________________ DATE _________, 2000
NOTE: Please date this proxy card and sign your name exactly as it appears on
the label. When there is more than one owner, each should sign. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title. If executed by
a corporation, this proxy card should be signed by a duly authorized officer. If
a partnership, please sign in partnership name by an authorized person. Please
note any changes in your address alongside the address as it appears on the
proxy card.
<PAGE>
APPENDIX
FILED IN ELECTRONIC FORMAT PURSUANT TO
SCHEDULE 14A, ITEM 10, INSTRUCTION 3.
NOT DELIVERED TO SECURITY HOLDERS
________________
PALATIN TECHNOLOGIES, INC.
1996 STOCK OPTION PLAN
1. PURPOSE.
The purposes of the 1996 Stock Option Plan (the "Plan") are to induce
certain employees, consultants and directors to remain in the employ or service,
or to continue to serve as directors, of Palatin Technologies, Inc. (the
"Company") and its present and future subsidiary corporations (each a
"Subsidiary"), as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"), to attract new individuals to enter into such
employment or service and to encourage such individuals to secure or increase on
reasonable terms their stock ownership in the Company. The Board of Directors of
the Company (the "Board") believes that the granting of stock options (the
"Options") under the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who are
or may become primarily responsible for shaping and carrying out the long range
plans of the Company and securing its continued growth and financial success.
Options granted hereunder are intended to be either (a) "incentive stock
options" (which term, when used herein, shall have the meaning ascribed thereto
by the provisions of Section 422(b) of the Code) or (b) options which are not
incentive stock options ("non-incentive stock options") or (c) a combination
thereof, as determined by the Committee (the "Committee") referred to in Section
4 hereof at the time of the grant thereof.
2. EFFECTIVE DATE OF THE PLAN.
The Plan became effective on August 28, 1996, by action of the Board,
subject to ratification by stockholders of the Company.
3. STOCK SUBJECT TO PLAN.
2,500,000 of the authorized but unissued shares of the Common Stock, $0.01
par value, of the Company (the "Common Stock") are hereby reserved for issue
upon the exercise of Options granted under the Plan; provided, however, that the
number of shares so reserved may from time to time be reduced to the extent that
a corresponding number of issued and outstanding shares of the Common Stock are
purchased by the Company and set aside for issue upon the exercise of Options.
If any Options expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be available for the
purposes of the Plan.
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4. COMMITTEE.
The Committee shall consist of two or more members of the Board both or all
of whom shall be "non-employee directors" within the meaning of Rule
16b-3(b)(3)(i) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and "outside directors" within the contemplation of Section
162(m)(4)(C)(i) of the Code. The President of the Company shall also be a member
of the Committee, ex-officio, whether or not he or she is otherwise eligible to
be a member of the Committee. The Committee shall be appointed annually by the
Board, which may at any time and from time to time remove any members of the
Committee, with or without cause, appoint additional members to the Committee
and fill vacancies, however caused, in the Committee. In the event that no
Committee shall have been appointed, the Board shall serve as the Committee. A
majority of the members of the Committee shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members
present at a meeting duly called and held. Any decision or determination of the
Committee reduced to writing and signed by all of the members of the Committee
shall be fully as effective as if it had been made at a meeting duly called and
held.
5. ADMINISTRATION.
Subject to the express provisions of the Plan, the Committee shall have
complete authority, in its discretion, to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms
and provisions of the respective option agreements or certificates (which need
not be identical), to determine the individuals (each a "Participant") to whom
and the times and the prices at which Options shall be granted, the periods
during which each Option shall be exercisable, the number of shares of the
Common Stock to be subject to each Option and whether such Option shall be an
incentive stock option or a non-incentive stock option and to make all other
determinations necessary or advisable for the administration of the Plan. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective employees and consultants, their present
and potential contributions to the success of the Company and the Subsidiaries
and such other factors as the Committee in its discretion shall deem relevant.
The Committee's determination on the matters referred to in this Section 5 shall
be conclusive. Any dispute or disagreement which may arise under or as a result
of or with respect to any Option shall be determined by the Committee, in its
sole discretion, and any interpretations by the Committee of the terms of any
Option shall be final, binding and conclusive. The Board may, at any time,
exercise any of the powers of the Committee.
6. ELIGIBILITY.
A. An Option may be granted only to (i) an employee or consultant of the
Company or a Subsidiary, (ii) a director of the Company who is not employed by
the Company or any of the Subsidiaries (a "Non-Employee Director") and (iii)
employees of a corporation or other business enterprise which has been acquired
by the Company or a Subsidiary, whether by exchange or purchase of stock,
purchase of assets, merger or reverse merger or otherwise, who hold options
Page 2
<PAGE>
with respect to the stock of such corporation which the Company has agreed to
assume or for which the Company has agreed to provide substitute options.
B. (i) On August 28, 1996, each Non-Employee Director shall be granted an
Option (a "Non-Employee Director's Formula Option") to purchase 20,000 shares of
the Common Stock at the initial per share option price of $1.36 per share.
(ii) At the first meeting of the Board immediately following the annual
meeting of the Stockholders of the Company held following the effective date of
the Plan, and at the first meeting of the Board immediately following each
subsequent annual meeting of the Stockholders of the Company, each Non-Employee
Director shall be granted an Option (a "Non-Employee Director's Formula Option")
to purchase 10,000 shares (after giving effect to the reverse stock split
effected on September 5, 1997) of the Common Stock at the initial per share
option price equal to the fair market value of a share of the Common Stock on
the date of grant.
(iii) Each Non-Employee Director who becomes a director subsequent to the
adoption date of the Plan, shall be granted, as of a date determined by the
Board, which date shall be not earlier than the date he or she agrees to become
a director and not later than the date he or she becomes a director, an Option
(a "Non-Employee Director's Formula Option") to purchase the number of shares
(after giving effect to the reverse stock split effected on September 5, 1997)
of the Common Stock determined by the Board, but not more than 10,000 shares, at
the initial per share option price equal to the fair market value of a share of
the Common Stock on the date of grant.
(iv) A Non-Employee Director may not exercise a Non-Employee Director's
Formula Option during the period commencing on the date of the granting of such
Option to him or her and ending on the day next preceding the first anniversary
of such date. A Non-Employee Director may (i) during the period commencing on
the first anniversary of the date of the granting of a Non-Employee Director's
Formula Option to him or her and ending on the day next preceding the second
anniversary of such date, exercise such Option with respect to one-fourth of the
shares granted thereby, (ii) during the period commencing on such second
anniversary and ending on the day next preceding the third anniversary of the
date of the granting of such Option, exercise such Option with respect to
one-half of the shares granted thereby, (iii) during the period commencing on
such third anniversary and ending on the date next preceding the fourth
anniversary of the date of the granting of such Option, exercise such Option
with respect to three-fourths of the shares granted thereby and (iv) during the
period commencing on such fourth anniversary and ending on the date of the
expiration of such Option, exercise such Option with respect to all of the
shares granted thereby.
7. OPTION PRICES.
A. Except as otherwise provided in Sections 6 and 17, the initial per share
option price of any Option shall be the price determined by the Committee, but
not less than the fair market value of a share of the Common Stock on the date
of grant; provided, however, that, in the case of a Participant who owns (within
the meaning of Section 424(d) of the Code) more than 10% of the
Page 3
<PAGE>
total combined voting power of the Common Stock at the time an Option which is
an incentive stock option is granted to him or her, the initial per share option
price shall not be less than 110% of the fair market value of a share of the
Common Stock on the date of grant.
B. For all purposes of the Plan, the fair market value of a share of the
Common Stock on any date shall be determined by the Committee as follows:
(i) If the Common Stock is listed on the OTC Electronic Bulletin Board, its
fair market value shall be the closing selling price on such date for the Common
Stock as reported on the OTC Electronic Bulletin Board. If there are no sales of
the Common Stock on that date, then the reported closing selling price for the
Common Stock on the next preceding date for which such closing selling price is
quoted shall be determinative of fair market value; or,
(ii) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation, the Nasdaq National Market
System or the Nasdaq SmallCap Market System, its fair market value shall be the
reported closing selling price for the Common Stock on the principal securities
exchange or national market system on which the Common Stock is at such date
listed for trading. If there are no sales of Common Stock on that date, then the
reported closing selling price for the Common Stock on the next preceding day
for which such closing selling price is quoted shall be determinative of fair
market value; or,
(iii) If the Common Stock is not traded on the OTC Electronic Bulletin
Board, an exchange, or a national market system, its fair market value shall be
determined in good faith by the Committee, and such determination shall be
conclusive and binding on all persons.
8. OPTION TERM.
Participants shall be granted Options for such term as the Committee shall
determine, not in excess of ten years from the date of the granting thereof;
provided, however, that, except as otherwise provided in Section 17, in the case
of a Participant who owns (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of the Common Stock of the
Company at the time an Option which is an incentive stock option is granted to
him or her, the term with respect to such Option shall not be in excess of five
years from the date of the granting thereof; provided, further, however, that
the term of each Non-Employee Director's Formula Option shall be ten years from
the date of the granting thereof.
9. LIMITATIONS ON AMOUNT OF OPTIONS GRANTED.
A. Except as otherwise provided in Section 17, the aggregate fair market
value of the shares of the Common Stock for which any Participant may be granted
incentive stock options which are exercisable for the first time in any calendar
year (whether under the terms of the Plan or any other stock option plan of the
Company) shall not exceed $100,000.
Page 4
<PAGE>
B. Except as otherwise provided in Section 17, no Participant shall, during
any fiscal year of the Company, be granted Options to purchase more than 500,000
shares of the Common Stock.
10. EXERCISE OF OPTIONS.
A. Except as otherwise provided in Section 17 and except as otherwise
determined by the Committee at the time of the grant of an Option other than a
Non-Employee Director's Formula Option, a Participant may not exercise an Option
during the period commencing on the date of the granting of such Option to him
or her and ending on the day next preceding the first anniversary of such date.
Except as otherwise set forth in Sections 9A and 17 and in the preceding
sentence, a Participant may (i) during the period commencing on the first
anniversary of the date of the granting of an Option to him or her and ending on
the day next preceding the second anniversary of such date, exercise such Option
with respect to one-fourth of the shares granted thereby, (ii) during the period
commencing on such second anniversary and ending on the day next preceding the
third anniversary of the date of the granting of such Option, exercise such
Option with respect to one-half of the shares granted thereby, (iii) during the
period commencing on such third anniversary and ending on the date next
preceding the fourth anniversary of the date of the granting of such Option,
exercise such Option with respect to three-fourths of the shares granted thereby
and (iv) during the period commencing on such fourth anniversary and ending on
the date of the expiration of such Option, exercise such Option with respect to
all of the shares granted thereby.
B. Except as hereinbefore otherwise set forth, an Option may be exercised
either in whole at any time or in part from time to time.
C. An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of the Common
Stock and payment to the Company of the amount of the option price for the
number of shares of the Common Stock so specified.
D. Except in the case of a Non-Employee Director's Formula Option, the
Board may, in its discretion, permit any Option to be exercised, in whole or in
part, prior to the time when it would otherwise be exercisable.
E. Notwithstanding any other provision of the Plan to the contrary,
including, but not limited to, the provisions of Section 10D, if any Participant
shall have effected a "Hardship Withdrawal" from a "401(k) Plan" maintained by
the Company and/or one or more of the Subsidiaries, then, during the period of
one year commencing on the date of such Hardship Withdrawal, such Participant
may not exercise any Option. For the purpose of this paragraph E, a Hardship
Withdrawal shall mean a distribution to a Participant provided for in Reg. ss.
1.401(k)- 1(d)(1)(ii) promulgated under Section 401(k)(2)(B)(i)(iv) of the Code
and a 401(k) Plan shall mean a plan which is a "qualified plan" within the
contemplation of section 401(a) of the Code which contains a "qualified cash or
deferred arrangement" within the contemplation of section 401(k)(2) of the Code.
Page 5
<PAGE>
11. TRANSFERABILITY.
No Option shall be assignable or transferable except by will and/or by the
laws of descent and distribution and, during the life of any Participant, each
Option granted to him or her may be exercised only by him or her.
12. TERMINATION OF EMPLOYMENT.
A. Unless otherwise provided by the committee, in the event a Participant
leaves the employ of the Company and the Subsidiaries or ceases to serve as a
consultant to the Company and/or as a Non-Employee Director of the Company,
whether voluntarily or otherwise, each Option theretofore granted to him or her
which shall not have theretofore expired or otherwise been cancelled shall, to
the extent not theretofore exercised, terminate upon the earlier to occur of the
expiration of 90 days after the date of such Participant's termination of
employment or service and the date of termination specified in such Option.
Notwithstanding the foregoing, if a Participant's employment by the Company and
the Subsidiaries or service as a consultant and/or as a Non-Employee Director of
the Company is terminated for "cause" (as defined herein), each Option
theretofore granted to him or her which shall not have theretofore expired or
otherwise been cancelled shall, to the extent not theretofore exercised,
terminate forthwith.
B. For purposes of the foregoing, the term "cause" shall mean: (i) the
commission by a Participant of any act or omission that would constitute a crime
under federal, state or equivalent foreign law, (ii) the commission by a
Participant of any act of moral turpitude, (iii) fraud, dishonesty or other acts
or omissions that result in a breach of any fiduciary or other material duty to
the Company and/or the Subsidiaries or (iv) continued alcohol or other substance
abuse that renders a Participant incapable of performing his or her material
duties to the satisfaction of the Company and/or the Subsidiaries.
13. ADJUSTMENT OF NUMBER OF SHARES.
A. In the event that a dividend shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common Stock
then subject to any Option and the number of shares of the Common Stock reserved
for issuance in accordance with the provisions of the Plan but not yet covered
by an Option and the number of shares set forth in Sections 6B and 9B shall be
adjusted by adding to each share the number of shares which would be
distributable thereon if such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such stock dividend. In the
event that the outstanding shares of the Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, sale of assets, merger
or consolidation in which the Company is the surviving corporation, then, there
shall be substituted for each share of the Common Stock then subject to any
Option and for each share of the Common Stock reserved for issuance in
accordance with the provisions of the Plan but not yet
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covered by an Option and for each share of the Common Stock referred to in
Sections 6B and 9B, the number and kind of shares of stock or other securities
into which each outstanding share of the Common Stock shall be so changed or for
which each such share shall be exchanged.
B. In the event that there shall be any change, other than as specified in
Section 13, in the number or kind of outstanding shares of the Common Stock, or
of any stock or other securities into which the Common Stock shall have been
changed, or for which it shall have been exchanged, then, if the Committee
shall, in its sole discretion, determine that such change equitably requires an
adjustment in the number or kind of shares then subject to any Option and the
number or kind of shares reserved for issuance in accordance with the provisions
of the Plan but not yet covered by an Option and the number or kind of shares
referred to in Sections 6B and 9B, such adjustment shall be made by the
Committee and shall be effective and binding for all purposes of the Plan and of
each stock option agreement or certificate entered into in accordance with the
provisions of the Plan.
C. In the case of any substitution or adjustment in accordance with the
provisions of this Section 13, the option price in each stock option agreement
or certificate for each share covered thereby prior to such substitution or
adjustment shall be the option price for all shares of stock or other securities
which shall have been substituted for such share or to which such share shall
have been adjusted in accordance with the provisions of this Section 13.
D. No adjustment or substitution provided for in this Section 13 shall
require the Company to sell a fractional share under any stock option agreement
or certificate.
E. In the event of the dissolution or liquidation of the Company, or a
merger, reorganization or consolidation in which the Company is not the
surviving corporation, then, except as otherwise provided in the second sentence
of Section 13A, each Option, to the extent not theretofore exercised, shall
terminate forthwith.
14. PURCHASE FOR INVESTMENT, WITHHOLDING AND WAIVERS.
A. Unless the shares to be issued upon the exercise of an Option by a
Participant shall be registered prior to the issuance thereof under the
Securities Act of 1933, as amended, such Par ticipant will, as a condition of
the Company's obligation to issue such shares, be required to give a
representation in writing that he or she is acquiring such shares for his or her
own account as an investment and not with a view to, or for sale in connection
with, the distribution of any thereof.
B. In the event of the death of a Participant, a condition of exercising
any Option shall be the delivery to the Company of such tax waivers and other
documents as the Committee shall determine.
C. In the case of each non-incentive stock option, a condition of
exercising the same shall be the entry by the person exercising the same into
such arrangements with the Company with respect to withholding as the Committee
may determine.
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15. NO STOCKHOLDER STATUS.
Neither any Participant nor his or her legal representatives, legatees or
distributees shall be or be deemed to be the holder of any share of the Common
Stock covered by an Option unless and until a certificate for such share has
been issued. Upon payment of the purchase price thereof, a share issued upon
exercise of an Option shall be fully paid and non-assessable.
16. NO RESTRICTIONS ON CORPORATE ACTS.
Neither the existence of the Plan nor any Option shall in any way affect
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding whether
of a similar character or otherwise.
17. OPTIONS GRANTED IN CONNECTION WITH ACQUISITIONS.
In the event that the Committee determines that, in connection with the
acquisition by the Company or a Subsidiary of another corporation which will
become a Subsidiary or division of the Company or a Subsidiary (such corporation
being hereafter referred to as an "Acquired Subsidiary"), Options may be granted
hereunder to employees and other personnel of an Acquired Subsidiary in exchange
for then outstanding options to purchase securities of the Acquired Subsidiary.
Such Options may be granted at such option prices, may be exercisable
immediately or at any time or times either in whole or in part, and may contain
such other provisions not inconsistent with the Plan, or the requirements set
forth in Section 19 that certain amendments to the Plan be approved by the
stockholders of the Company, as the Committee, in its discretion, shall deem
appropriate at the time of the granting of such Options.
18. NO EMPLOYMENT OR SERVICE RIGHT.
Neither the existence of the Plan nor the grant of any Option shall require
the Company or any Subsidiary to continue any Participant in the employ of the
Company or such Subsidiary or require the Company to continue any Participant as
a director of the Company.
19. TERMINATION AND AMENDMENT OF THE PLAN.
The Board may at any time terminate the Plan or make such modifications of
the Plan as it shall deem advisable; provided, however, that the Board may not
without further approval of the holders of a majority of the shares of the
Common Stock present in person or by proxy at any special or annual meeting of
the stockholders, increase the number of shares as to which Options
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may be granted under the Plan (as adjusted in accordance with the provisions of
Section 13), or change the manner of determining the option prices, or extend
the period during which an Option may be granted or exercised; provided,
however, the provisions of the Plan governing the grant of Non-Employee
Director's Formula Options may not be amended except by the vote of a majority
of the members of the Board and by the vote of a majority of the members of the
Board who are employees of the Company or a Subsidiary and shall not be amended
more than once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act of 1974 or the Rules of the
Securities and Exchange Commission promulgated under Section 16 of the Exchange
Act. Except as otherwise provided in Section 13, no termination or amendment of
the Plan may, without the consent of the Participant to whom any Option shall
theretofore have been granted, adversely affect the rights of such Participant
under such Option.
20. EXPIRATION AND TERMINATION OF THE PLAN.
The Plan shall terminate on August 27, 2006 or at such earlier time as the
Board may determine. Options may be granted under the Plan at any time and from
time to time prior to its termination. Any Option outstanding under the Plan at
the time of the termination of the Plan shall remain in effect until such Option
shall have been exercised or shall have expired in accordance with its terms.
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