Palatin Technologies Inc PRE 14A, filed Apr 15, 2021
Palatin Technologies Inc (PTN)
PRE 14A
2021-04-15
For: 2021-06-08
View Original
Added on
October 21, 2026
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No.
__)
Filed by the
Registrant ☑
Filed by a Party
other than the Registrant ☐
Check the
appropriate box:
☑ Preliminary
Proxy Statement
☐
Confidential, For Use of the Commission Only (As Permitted by Rule
14a-6(e)(2))
☐ Definitive
Proxy Statement
☐ Definitive
Additional Materials
☐ Soliciting
Material under Rule 14a-12
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PALATIN TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing
Fee (Check the appropriate box):
☑ No fee
required
☐ Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each
class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
(3) Per unit price
or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it
was determined):
(4) Proposed
maximum aggregate value of transaction:
(5) Total fee
paid:
☐ Fee paid
previously with preliminary materials.
☐ Check box
if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
(1) Amount
Previously Paid:
(2) Form, Schedule
or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
PRELIMINARY COPY – SUBJECT TO COMPLETION
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4B
CEDAR BROOK DRIVE
CRANBURY, NJ
08512
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April [
∙ ], 2021
Dear
fellow Stockholder,
We are
pleased to invite you to Palatin’s Annual Meeting of
Stockholders, which will be held virtually via live audio webcast
on Tuesday, June 8, 2021, at 9:00 a.m., Eastern Daylight
Time.
Details
regarding the virtual meeting, including how you can access and
participate in the meeting, are described in the accompanying
Notice and Proxy Statement.
In
addition to the customary election of directors, ratification of
auditors and say-on-pay, the key proposal that we ask stockholders
to approve is an increase in the authorized number of common shares
we can issue from a total of 300,000,000 to 400,000,000 shares. We
believe that the proposed increase in shares is the minimum
increase amount that will allow us to raise capital to, among other
things, continue with aggressive new product development and, in
the case of Vyleesi® (bremelanotide injection), necessary
marketing and distribution activities.
Discovery
and development of innovative new drugs, including obtaining Food
and Drug Administration (FDA) approval and commercialization, is a
lengthy and expensive endeavor. We are fortunate to have multiple
drugs in development with the potential to dramatically impact the
lives of patients suffering from inflammatory and autoimmune
conditions. Our PL9643 treatment for dry eye disease will begin the
final stages of clinical trials required for FDA approval this
year. We also intend to start a Phase 2 trial with PL9643 for a new
front of the eye indication later this year. In addition, we are
planning proof-of-mechanism studies for diabetic retinopathy and
ulcerative colitis.
We
ended our last fiscal year (June 30, 2020) with $82.9 million in
cash and cash equivalents and $72.2 million in cash and cash
equivalents on December 31, 2020. We are in good shape financially
for the near-term. But completing the clinical trials we have
planned, which we believe will significantly increase stockholder
value, will require more money than we have. To succeed we require
financial flexibility to support our innovative and potentially
life-changing drug development programs.
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Sincerely,
Carl
Spana
President and Chief
Executive Officer
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If you
have additional questions, need assistance in submitting your proxy
or voting your shares, or need additional copies of the proxy
statement or other materials, please contact Alliance Advisors
LLC:
Alliance Advisors LLC
200
Broadacres Drive, 3rd Floor
Bloomfield,
NJ 07003
855-600-8101
PRELIMINARY COPY – SUBJECT TO COMPLETION
NOTICE OF VIRTUAL ANNUAL MEETING OF
STOCKHOLDERS
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By
order of the board of directors,
Stephen T. Wills, Secretary
April [
∙ ], 2021
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This
proxy statement, proxy card and annual report, including our annual
report on Form 10-K for the fiscal year ended June 30, 2020, are
being mailed to our stockholders on or about April [∙], 2021.
The proxy statement, proxy card and annual report will also be
available to our stockholders on www.proxyvote.com on that same
date.
PRELIMINARY COPY – SUBJECT TO COMPLETION
Important Notice Regarding the Availability of Proxy Materials: We
have elected to utilize the “full set delivery” option
and are delivering paper copies to all stockholders of all proxy
materials, as well as providing access to those proxy materials on
a publicly accessible website. The proxy statement, proxy card and
annual report to security holders, including our annual report on
Form 10-K for the fiscal year ended June 30, 2020, are available to
holders of our common stock at www.proxyvote.com.
PALATIN TECHNOLOGIES, INC.
2021 ANNUAL MEETING
Table of Contents
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PRELIMINARY COPY – SUBJECT TO COMPLETION
4B Cedar Brook Drive
Cranbury, New Jersey 08512
(609) 495-2200
PROXY STATEMENT FOR THE VIRTUAL ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON JUNE 8, 2021
VOTING PROCEDURES AND
SOLICITATION
Important Notice Regarding the Availability of Proxy
Materials
for the Stockholder Meeting to Be Held on June 8,
2021:
The proxy statement, proxy card and annual report to security
holders, including our annual report on Form 10-K for the fiscal
year ended June 30, 2020, are available at
www.proxyvote.com.
3
YOUR VOTE IS IMPORTANT
Whether
or not you plan to attend the virtual meeting, please act as soon
as possible to vote your shares. Your prompt voting may save us the
expense of following up with a second mailing. Beginning on or
about April [ ∙ ], 2021, we are sending proxy materials to
stockholders of record and beneficial owners at the close of
business on April 13, 2021. If your shares are registered directly
in your name with our transfer agent, American Stock Transfer &
Trust Company, LLC, you are considered, with respect to those
shares, the “stockholder of record.” If your shares are
held in a stock brokerage account or by a bank or other holder of
record (a “brokerage firm”), you are considered the
“beneficial owner” of the shares held in street
name.
GENERAL INFORMATION
Why
am I receiving these materials? The
Board of Directors of Palatin Technologies, Inc., or the board, has
made these materials available to you over the Internet and has
delivered printed versions of these materials to you by mail, in
connection with the board’s solicitation of proxies for use
at the virtual-only 2021 annual meeting of stockholders, or the virtual
annual meeting. The virtual annual meeting is scheduled to be held
on Tuesday, June 8, 2021, at 9:00 a.m., Eastern Daylight Time, via
live webcast through the website link below. You will need the
16‐digit control number provided on your proxy card or on the
instructions that accompanied your proxy materials. This
solicitation is for proxies for use at the virtual annual meeting
or at any reconvened meeting after an adjournment or postponement
of the virtual annual meeting.
How
can I vote my shares and participate in the virtual annual
meeting? This year’s
virtual annual meeting will be held entirely online and you will
not be able to attend the meeting in person. This will allow
greater participation, particularly because we do not know whether,
in light of ongoing public health concerns surrounding COVID-19, an
in-person meeting would be permissible or advisable. Shareholders
may participate in the virtual annual meeting by visiting the
following website:
http://www.virtualshareholdermeeting.com/PTN2021. To participate in
the virtual annual meeting, you will need the 16‐digit
control number included on your proxy card or on the instructions
that accompanied your proxy materials. Shares held in your name as
the shareholder of record may be voted electronically during the
virtual annual meeting. Shares for which you are the beneficial
owner but not the shareholder of record also may be voted
electronically during the virtual annual meeting. However, even if
you plan to participate in the virtual annual meeting, we recommend
that you vote your shares in advance, so that your vote will be
counted if you later decide not to participate in the virtual
annual meeting. For beneficial owners who do not have a control
number, please contact your brokerage firm as soon as possible so
that you can be provided with a control number to gain access to
the meeting.
How
can I vote my shares without participating in the virtual annual
meeting? To vote your shares
without participating in the meeting, please follow the
instructions for Internet or telephone voting in this proxy
statement. You may also vote by signing and submitting your proxy
card and returning it by mail, if you are the stockholder of
record, or by signing the voter instruction form provided by your
bank or broker and returning it by mail, if you are the beneficial
owner but not the stockholder of record. This way your shares will
be represented whether or not you are able to participate in the
meeting.
4
What
will I need in order to participate in the virtual annual
meeting? You are entitled to
participate in the virtual annual meeting only if you were a
stockholder of record as of the record date for the virtual annual
meeting, or April 13, 2021 (the “Record Date”), or you
hold a valid proxy for the virtual annual meeting. You may
participate in the virtual annual meeting, vote, and submit a
question during the virtual annual meeting by visiting
http://www.virtualshareholdermeeting.com/PTN2021 and using your
16‐digit control number to enter the meeting. If you are not
a stockholder of record but hold shares as a beneficial owner in
street name, you may use your 16‐digit control number on the
instructions that accompany your proxy materials to enter the
meeting. If you do not use your 16-digit control number, you may be
required to provide proof of beneficial ownership, such as your
most recent account statement as of the Record Date, a copy of the
voting instruction form provided by your broker, bank, trustee, or
nominee, or other similar evidence of ownership. If you do not
comply with the procedures outlined above, you will not be admitted
to the virtual annual meeting.
METHODS OF VOTING
If you
are a beneficial owner, you may be eligible to vote your shares
electronically over the Internet or by telephone. Many brokerage
firms participate in the Broadridge Investor Communications
Services online program. This program provides eligible
stockholders that hold shares in street name the opportunity to
vote via the Internet or by telephone. Whether or not your
brokerage firm is participating in Broadridge’s program, your
proxy materials will contain voting instructions. If you are a
stockholder of record or if you are a beneficial owner whose
brokerage firm participates in Broadridge’s program, there
are three ways to vote before the meeting:
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By Internet – www.proxyvote.com.
If you have Internet access, you may transmit your voting
instructions up until 11:59 p.m., Eastern Daylight Time, the day
before the meeting date, that is, June 7, 2021. Go to
www.proxyvote.com. You must have your proxy card or instructions in
hand when you access the web site and follow the instructions to
obtain your records and to create an electronic voting instruction
form.
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By telephone – 1-800-690-6903. You
may vote using any touch-tone telephone to transmit your voting
instructions up until 11:59 p.m., Eastern Daylight Time, the day
before the meeting date, that is, June 7, 2021. Call 1-800-690-6903
toll free. You must have your proxy card or instructions in hand
when you call this number and then follow the
instructions.
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By mail – Mark, sign, and date
your proxy card and return it in the postage-paid envelope we have
provided.
If you
voted by Internet or telephone or sent in a proxy card and are also
participating in the virtual annual meeting, the proxy holders will
vote your shares as you previously instructed unless you inform the
Secretary during the meeting that you wish to vote your shares
electronically at the virtual annual meeting.
If you
have additional questions, need assistance in submitting your proxy
or voting your shares, or need additional copies of the proxy
statement or other materials, please contact Alliance Advisors
LLC:
Alliance Advisors LLC
200
Broadacres Drive, 3rd Floor
Bloomfield,
NJ 07003
(855)
600-8101
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REVOKING OR CHANGING A PROXY
You may
revoke your proxy or change your vote by
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voting again by
proxy over the Internet or by telephone until 11:59 p.m., Eastern
Daylight Time, on June 7, 2021 (only your last Internet or
telephone vote will be counted);
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signing and
returning another proxy card on a later date;
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sending written
notice of revocation or change to the Secretary at our offices, 4B
Cedar Brook Drive, Cranbury, New Jersey 08512; or
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informing the
Secretary and voting your shares electronically at the virtual
annual meeting.
To be
effective, a later-dated proxy or written revocation or change must
arrive at our corporate offices before the start of the
meeting.
If you
are a beneficial owner, you may submit new voting instructions by
following the instructions from the brokerage firm that holds your
shares, or by obtaining a legal proxy from the brokerage firm that
holds your shares giving you the right to vote the shares. You may
vote your shares electronically at the virtual annual meeting only
if you are the stockholder of record or if you are a beneficial
owner and have obtained a legal proxy from the brokerage firm that
holds your shares.
PROXY SOLICITATION
We are
soliciting proxies on behalf of the board, and we will pay all
costs of preparing, printing, and mailing the proxy materials. In
addition to mailing proxy materials, our officers and employees may
solicit proxies by telephone, fax, e-mail, or Internet, without
receiving any additional compensation for their services. We have
requested brokers, banks, and other fiduciaries to forward proxy
materials to the beneficial owners of our stock and will pay for
their reasonable expenses in forwarding proxy materials to such
beneficial owners. We have engaged Alliance Advisors, LLC to assist
in the solicitation of proxies and provide related advice and
informational support for a service fee of $12,500 and plus
out-of-pocket expenses and customary disbursements.
Proxies
and ballots will be received and tabulated by Broadridge Financial
Solutions, Inc. (“Broadridge”), and Broadridge or its
designee will serve as our Inspector of Election.
HOW PROXIES ARE VOTED
The
proxy holders are Carl Spana, Ph.D., our chief executive officer,
president and a director, and Stephen T. Wills, our chief financial
officer, chief operating officer, executive vice president,
secretary, and treasurer. The proxy holders will vote your shares
according to your instructions on the proxy card or on the
instructions that accompanied your proxy materials. If a signed
proxy card does not contain instructions, the proxy holders will
vote the shares FOR the election of the director nominees listed on
the card or on the instructions that accompanied your proxy
materials; FOR ratifying the appointment of KPMG LLP as our
independent registered public accounting firm for the fiscal year
ending June 30, 2021; FOR an amendment to our Certificate of
Incorporation to increase authorized common stock from 300,000,000
shares to 400,000,000 shares; and FOR approval, on an advisory,
non-binding basis, of the compensation of our named executive
officers.
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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 April 13, 2021 are entitled to vote
at the meeting:
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Common stock:
230,049,691 shares outstanding, one vote per share;
and
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Series A preferred
stock: 4,030 shares outstanding with approximately 16 votes per
share, a total of 66,059 votes.
There
are no rights of appraisal or similar rights of dissenters with
respect to the items of business at this meeting.
QUORUM AND VOTES REQUIRED
A
majority of the votes of shares of common stock and Series A
preferred stock, collectively outstanding on April 13, 2021, the
Record Date, with the Series A preferred stock counted on an as if
converted to common stock basis, represented virtually at the
meeting or by proxy, constitutes a quorum for the transaction of
business at the annual meeting. Abstentions and broker non-votes
will count towards the establishment of a quorum for the
transaction of business at the annual meeting. If your shares are
held in street name and you do not provide voting instructions to
the brokerage firm that holds your shares, the brokerage firm can,
in its discretion, vote your uninstructed shares on matters on
which it is permitted to exercise discretionary authority
(“routine” matters). A broker non-vote occurs when a
broker, bank or other nominee that is the holder of record of
shares for a beneficial owner does not vote on a particular
proposal because it 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 items of business listed on the
proxy card or on the instructions that accompanied your proxy
materials. However, the approval of Item Three also requires the
affirmative vote of a majority of the outstanding shares of common
stock entitled to vote thereon, voting as a separate class. The
votes required are as follows:
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Item One: Directors are elected
by a plurality of votes cast, so the seven 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 their
authority to vote in the manner provided on the proxy card or on
the instructions that accompanied your proxy materials. Banks,
brokers, and other nominees holding shares of record for a
beneficial owner do not have the discretionary authority to vote
shares as to which they have not received instructions for the
election of directors. As a result, any shares as to which a
beneficial owner whose shares are held of record by a bank, broker,
or other nominee on the election of directors will be treated as
broker non-votes. Such broker non-votes as well as any votes that
are withheld from voting on the election of directors will have no
effect on the outcome of the election of directors.
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Item Two: Ratifying the
appointment of our independent registered public accounting firm
for the fiscal year ending June 30, 2021 requires a majority of the
votes cast on that item. Banks, brokers, and other nominees holding
shares of record for a beneficial owner have the discretionary
authority to vote shares held in street name as to which they have
not received instructions from the beneficial owner on this
proposal. If, however, any broker, bank, or other nominee fails to
exercise its discretion to vote any such shares on the proposal,
the shares will not count as votes cast for or against the
proposal. In addition, abstentions will not count as votes cast for
or against the proposal.
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Item Three: Approval of the
amendment of our restated Certificate of Incorporation to effect an
increase in the number of authorized shares of common stock
requires a majority in voting power of all outstanding stock,
consisting of common stock and Series A preferred stock on an as if
converted to common stock basis, entitled to vote on such
amendment, and a majority of outstanding common stock entitled to
vote thereon, voting as a separate class. Banks, brokers, and other
nominees holding shares of record for a beneficial owner have the
discretionary authority to vote shares held in street name as to
which they have not received instructions from the beneficial owner
on this proposal. If any bank, broker, or other nominee fails to
exercise its discretion to vote any such shares on the proposal,
the shares will count as votes against the proposal. In addition,
abstentions will count as votes against the proposal.
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Item Four: Advisory approval of
say-on-pay for named executive officers (yes or no) will be
determined based on which of the two choices receives the most
votes. Banks, brokers, and other nominees holding shares of record
for a beneficial owner do not have the discretionary authority to
vote shares held in street name as to which they have not received
instructions from the beneficial owner on this proposal. Assuming a
quorum has been established, abstentions and broker non-votes will
have no effect on the outcome of the proposal.
WHAT IS THE EFFECT OF NOT CASTING YOUR VOTE?
If
shares are held in street name by a bank, broker, or other nominee,
it is critical that you give instructions to your bank, broker or
nominee as to how you wish your shares to be voted. If you hold
your shares in street name and you fail to provide instructions to
your bank, broker or nominee with respect to the election of
directors in Item One, your shares will not be counted for the
election of directors in Item One, since your bank, broker or
nominee will not have discretionary authority to vote for election
of directors in Item One. Assuming a quorum has been established,
the failure of your bank, broker, or nominee to vote any shares as
to which you have not provided voting instructions, however, will
have no outcome of the election of directors.
Your
bank, broker or nominee firm cannot vote your uninstructed shares
in their discretion on any other matter unless it is considered
“routine.” Item Two, ratifying the appointment of our
independent registered public accounting firm, is a routine
proposal, and your bank, broker or nominee firm will have
discretionary authority to vote any shares as to which you have not
provided voting instructions on Item Two. If you hold your shares
in street name and you do not instruct your bank, broker, or other
nominee as to how to vote your shares, your bank, broker, or
nominee may vote your shares in its discretion on Item
Two.
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We
believe that Item Three, amendment of our restated Certificate of
Incorporation to effect an increase in the number of shares of
authorized common stock, will be considered a routine proposal. If
it is considered a routine proposal, and if you hold your shares in
street name, your bank, broker, or other nominee will have
discretionary authority to vote your shares as to which you have
not provided voting instructions on Item Three. If you hold your
shares in street name and you do not instruct your bank, broker, or
other nominee as to how to vote your shares, your bank, broker, or
nominee may vote your shares in its discretion on Item Three.
However, we understand that certain banks, brokers, or other
nominee firms have elected not to exercise their discretionary
authority to vote shares as to which they have not received
instructions on certain “routine” matters such as the
amendment of our restated Certificate of Incorporation. If your
bank, broker, or other nominee firm fails to exercise its
discretion to vote your shares on Item Three, your shares will
count as votes against the approval of Item Three. Accordingly, we
urge you to provide instructions to your bank, broker, or other
nominee as to how to vote your shares to ensure that your shares
will be voted on Item Three in accordance with your wishes at the
virtual annual meeting.
We
believe that Item Four, the advisory approval on say-on-pay for our
named executive officers, will not be considered routine. If your
shares are held in street name, your bank, broker, or other nominee
will not have discretionary authority to vote your shares on Item
Four without your instructions. If you hold your shares in street
name and you do not provide instructions to your bank, broker, or
other nominee as to how to vote, then no vote will be cast with
respect to your shares on Item Four. Assuming a quorum has been
established, the failure of your bank, broker, or nominee to vote
any shares as to which you have not provided voting instructions
will have no effect on the outcome of Item Four.
If you
are a stockholder of record and you do not cast your vote, no votes
will be cast on your behalf on any of the items of business at the
virtual annual meeting.
IS VOTING CONFIDENTIAL?
We will
keep all the proxies, ballots and voting tabulations private. We
only let Broadridge examine these documents. Management will not
know how you voted on a specific proposal unless it is necessary to
meet legal requirements. Broadridge will, however, forward to
management any written comments you make on the proxy
card.
HOUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS
To
reduce the expense of delivering duplicate proxy materials to
stockholders who may have more than one account holding our stock
who share the same address, we have adopted a procedure approved by
the Securities and Exchange Commission (“SEC”) called
“householding.” Under this procedure, a single set of
our annual report and proxy statement will be sent to any household
at which two or more of our stockholders reside, if we or your
broker believe that the stockholders are members of the same
family. Householding benefits both you and us. It reduces the
volume of duplicate information received at your household and
helps to reduce our expenses. The procedure applies to our annual
reports, proxy statements, other proxy materials and information
statements. Once you receive notice from your broker or from us
that communications to your address will be
“householded,” the practice will continue until you are
otherwise notified or until you revoke your consent to the
practice. Each stockholder will continue to have access to and
utilize separate proxy voting instructions.
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If you
do not wish to participate in “householding” and would
like to receive your own set of any or all of our annual disclosure
documents, or if you share an address with another Palatin
stockholder and together both of you would like to receive only a
single set of our annual disclosure documents, please contact
Broadridge Financial Solutions, Inc., either by calling toll-free
at (800) 542-1061, or by writing to Broadridge Financial Solutions,
Inc. Householding Department, 51 Mercedes Way, Edgewood, New York
11717. Alternatively, if your brokerage firm or other nominee holds
your Palatin shares, you may contact your broker or other nominee
directly and inform them of your request. Be sure to include your
name, the name of your brokerage firm and your account
number.
WHY ARE WE HOLDING A VIRTUAL ANNUAL MEETING?
Due to
the ongoing public health impact of COVID-19, and to support the
health and well-being of our stockholders, this year’s annual
meeting will be held in a virtual meeting format only. We have
designed our virtual format to enhance, rather than constrain,
stockholder access, participation, and communication. It is the
present expectation of the board of directors that future annual
meetings will have an in-person format.
WHAT HAPPENS IF THERE ARE TECHNICAL DIFFICULTIES DURING THE VIRTUAL
ANNUAL MEETING?
If you
encounter any difficulties accessing the virtual meeting during the
check-in or meeting time, please call the technical support number
that will be posted on the virtual annual meeting
website.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
ITEM ONE: ELECTION OF
DIRECTORS
The
board has nominated the following seven persons as directors to
serve until the next annual meeting and until their successors have
been duly elected. Each of the nominees is currently a director of
Palatin. The seven 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.
Unless
otherwise instructed, the proxy holders will vote the proxies
received by them for the seven nominees named below. If any nominee
is unable or declines to serve as director at the time of the
Annual Meeting, the proxies will be voted for any nominee who is
designated by our present board to fill the vacancy, or the board
may reduce the number of directors.
Nominees
for Election as Directors. The board unanimously adopted a
resolution proposing the nominees set forth below for election as
directors of Palatin for the next year.
THE NOMINEES
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Name
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Age
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Position with Palatin
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Carl
Spana, Ph.D.
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58
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Chief
Executive Officer, President and a Director
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John
K.A. Prendergast, Ph.D. (3)
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67
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Director, Chairman
of the Board of Directors
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Robert
K. deVeer, Jr. (1) (2)
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74
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Director
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J.
Stanley Hull (1) (2)
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68
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Director
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Alan W.
Dunton, M.D. (1) (2)
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66
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Director
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Arlene
M. Morris (2) (3)
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69
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Director
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Anthony
M. Manning, Ph.D. (3)
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59
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Director
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(1)
Member of the audit committee.
(2)
Member of the compensation committee.
(3)
Member of the nominating and corporate governance
committee.
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CARL
SPANA, Ph.D., co-founder of Palatin, has been our Chief Executive
Officer and President 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 technical 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. Through his work at Paramount Capital Investments and
The 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 held
pharmaceutical company, where he was involved in scientific
research in the field of immunology. Dr. Spana received his Ph.D.
in molecular biology from The Johns Hopkins University and his B.S.
in biochemistry from Rutgers University.
11
Dr.
Spana’s qualifications for our board include his scientific
expertise, leadership experience, business judgment, and industry
knowledge. As a senior executive of Palatin for over twenty years,
he provides in-depth knowledge of our company, our drug products
under development and the competitive and corporate partnering
landscape.
JOHN
K.A. PRENDERGAST, Ph.D., co-founder of Palatin, has served as the
non-executive Chairman of the board since June 14, 2000, and as a
director since August 1996. While Mr. Prendergast has served as a
member of the board, he does not, and has not, served in a
management or operational role with the company. Dr. Prendergast
has been president and sole stockholder of Summercloud Bay, Inc.,
an independent consulting firm providing services to the
biotechnology industry, since 1993. Dr. Prendergast is lead
director of Heat Biologics, Inc., a publicly traded clinical stage
immunotherapy company, and a director and non-executive chairman of
Recce Pharmaceuticals Ltd., a publicly traded Australian
pharmaceutical company developing antibiotic drugs. He was
previously a member of the board of the life science companies AVAX
Technologies, Inc., Avigen, Inc. and MediciNova, Inc. From October
1991 through December 1997, Dr. Prendergast was a managing director
of The Castle Group Ltd., a medical venture capital firm. 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.
Dr.
Prendergast brings a historical perspective to our board coupled
with extensive industry experience in corporate development and
finance in the life sciences field. His prior service on other
publicly traded company boards provides experience relevant to good
corporate governance practices.
ROBERT
K. deVEER, Jr. has been a director of Palatin since November 1998.
Since January 1997, Mr. deVeer has been the president of deVeer
Capital LLC, a private investment company. He was a director of
Solutia Inc., a publicly held chemical-based materials company,
until its merger with Eastman Chemical Company in July 2012. 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.
Mr.
deVeer has extensive experience in investment banking and corporate
finance, including the financing of life sciences companies, and
serves as the audit committee’s financial
expert.
12
J. STANLEY
HULL has been a director of Palatin since September 2005. Mr. Hull
has over three decades of experience in the field of sales,
marketing and drug development. Mr. Hull joined GlaxoSmithKline, a
research-based pharmaceutical company, in October 1987 and retired
as Senior Vice President, Pharmaceuticals – North America in
May 2010. Mr. Hull was responsible for all commercial activities
including sales, marketing, sales training, and office operations.
Previously Mr. Hull served in the R&D organization of Glaxo
Wellcome as Vice President and Worldwide Director of Therapeutic
Development and Product Strategy – Neurology and Psychiatry.
Prior to his service in the R&D organization he was Vice
President of Marketing – Infectious Diseases and
Gastroenterology for Glaxo Wellcome-U.S. Mr. Hull started his
career in the pharmaceutical industry with SmithKline and French
Laboratories in 1978. Mr. Hull received his B.S. in business
administration from the University of North Carolina at
Greensboro.
Mr.
Hull has extensive experience in commercial operations,
development, and marketing of pharmaceutical drugs and corporate
alliances between pharmaceutical companies and biotechnology
companies.
ALAN W.
DUNTON, M.D., has been a director of Palatin since June 2011. He
founded Danerius, LLC, a biotechnology consulting company, in 2006.
From November 2015 through March 2018, he was senior vice president
of research, development, and regulatory affairs for Purdue Pharma
L.P., with responsibilities for overall research strategy and
development programs. From January 2007 to March 2009, Dr. Dunton
served as president and chief executive officer of Panacos
Pharmaceuticals Inc. and he served as a managing director of
Panacos from March 2009 to January 2011. Dr. Dunton is currently a
member of the board of directors of the publicly traded companies
Recce Pharmaceuticals Ltd (ASX: RCE), CorMedix Inc. (NYSE: CRMD)
and Oragenics, Inc. (NYSE: OGEN). He previously served on the board
of directors of the publicly traded companies Targacept, Inc.,
EpiCept Corporation (as Non-Executive Chairman), Adams Respiratory
Therapeutics, Inc. (acquired by Reckitt Benckiser Group plc),
MediciNova, Inc. and Panacos Pharmaceuticals, Inc. Dr. Dunton has
served as a director or executive officer of various pharmaceutical
companies, and from 1994 to 2001, Dr. Dunton was a senior executive
in various capacities in the Pharmaceuticals Group of Johnson &
Johnson, including president and managing director of the Janssen
Research Foundation, the primary global R&D organization for
Johnson & Johnson. Dr. Dunton received his M.D. degree from New
York University School of Medicine, where he completed his
residency in internal medicine. He also was a Fellow in Clinical
Pharmacology at the New York Hospital/Cornell University Medical
Center.
Dr.
Dunton has extensive drug development, regulatory, and clinical
research experience, having played a key role in the development of
more than 20 products to regulatory approval, and also has
extensive experience as an executive and officer for both large
pharmaceutical companies and smaller biotechnology and
biopharmaceutical companies.
13
ARLENE
M. MORRIS has been a director of Palatin since June 2015. Since May
2015 she has served as the chief executive officer of Willow
Advisors, LLC. From April 2012 until May 2015, she was President
and Chief Executive Officer of Syndax Pharmaceuticals, Inc., a
privately held biopharmaceutical company focused on the development
and commercialization of an epigenetic therapy for
treatment-resistant cancers, and was a member of the board of
directors from May 2011 until May 2015. From 2003 to January 2011,
Ms. Morris served as the President, Chief Executive Officer and a
member of the board of directors of Affymax, Inc., a publicly
traded biotechnology company. Ms. Morris has also held various
management and executive positions at Clearview Projects, Inc., a
corporate advisory firm, Coulter Pharmaceutical, Inc., a publicly
traded pharmaceutical company, Scios Inc., a publicly traded
biopharmaceutical company, and Johnson & Johnson, a publicly
traded healthcare company. She is currently a member of the board
of directors of Viveve Medical, Inc., a publicly traded female
healthcare medical device company, Viridian Therapeutics, Inc., a
publicly traded microRNA therapeutics company, and Cogent
Biosciences, Inc., a publicly traded solid tumor cancer therapy
company, and was a director of Neovacs SA, a publicly traded French
company, Biodel Inc., a publicly traded specialty pharmaceutical
company, from 2015 until its merger with Albireo Limited in 2016,
and Dimension Therapeutics, Inc., a publicly traded gene therapy
company, until its acquisition by Ultragenyx Pharmaceutical Inc. in
2017. Ms. Morris received a B.A. in Biology and Chemistry from
Carlow College.
Ms.
Morris has extensive experience in the biotechnology industry,
including prior leadership positions, senior management, and board
service, and experience as chief executive officer of companies
with product candidates in phase 3 clinical trials.
ANTHONY
M. MANNING, Ph.D., has been a director of Palatin since September
2017. Since March 2021 Dr. Manning has been providing scientific
and strategic advice to biotechnology companies. From 2013
until March 2021, Dr. Manning was senior vice president of
research, and since 2018 was chief scientific officer, at Momenta
Pharmaceuticals, Inc., a publicly traded biopharmaceutical company
developing innovative therapeutics for rare immune-related diseases
which was acquired by Johnson & Johnson in October 2020. From
2011 to 2013, he was senior vice president of research and
development at Aileron Therapeutics, Inc., a publicly traded
biopharmaceutical company developing stapled peptide therapeutics
for cancers and other diseases. From 2007 to 2011, he was vice
president and head of inflammation and autoimmune diseases research
at Biogen, Inc., a publicly traded biopharmaceutical company
developing medicines for neurological and neurodegenerative
conditions. From 2002 to 2007, he was vice president and global
therapy area head for Inflammation, Autoimmunity and
Transplantation Research at Roche Pharmaceuticals, the
pharmaceutical division of Roche Holding AG, and from 2000 to 2002
he was vice president of Pharmacia, a global pharmaceutical company
acquired by Pfizer in 2002. Dr. Manning received his Ph.D., M.Sc.
and B.Sc. from the University of Otago, Dunedin, New
Zealand.
Dr.
Manning has extensive experience in translational research and
development of new pharmaceutical products, and in pharmaceutical
and biotechnology research, development, and business
strategy.
14
RECOMMENDATION
OF THE BOARD
The board recommends a vote FOR the election of the seven nominees
listed above.
Board Composition and Nominating Process
The
nominating and corporate governance committee conducts an annual
director performance evaluation process and proposes nominees for
election as directors. Nominees must be well-regarded and
experienced participants in their field(s) of specialty, familiar
with our business, willing to devote the time and attention
necessary to deepen and refine their understanding of Palatin and
the issues we face and must have an understanding of the demands
and responsibilities of service on a public company board of
directors. The committee considers individual merits, such as
personal integrity and sound judgment, business and professional
skills and experience, independence, knowledge of the industry in
which we operate, possible conflicts of interest, diversity, the
extent to which the candidate would fill a present need on the
board and concern for the long-term interests of the stockholders.
While we do not have a formal diversity policy, to ensure that the
board of directors benefit from diverse perspectives, the committee
seeks qualified nominees from a variety of backgrounds, including
candidates of gender and ethnic diversity. The committee also
considers each candidate in relation to existing or other potential
members of the board, with a view to establishing a well-rounded,
diverse, knowledgeable, and experienced board.
The
board amended its written charter for the nominating and corporate
governance committee effective October 1, 2013 to provide that
directors will not be nominated for election to the board after
their 75th
birthday, although the full board, upon the recommendation of the
committee, may nominate candidates over 75 years of age in special
circumstances. There are no nominees for director who when
nominated were over 75 years of age.
The
committee will consider stockholder recommendations of nominees if
they are accompanied by a comprehensive written resume of the
recommended nominee’s business experience and background, and
a signed consent from the recommended nominee stating that he or
she is willing to be considered as a nominee and, if nominated and
elected, will serve as a director. The committee will consider
candidates recommended by stockholders on the same basis as
candidates from other sources. The committee may retain outside
consultants to assist in identifying suitable director candidates.
Stockholders may send their written recommendations with the
required documentation to our executive offices at 4B Cedar Brook
Drive, Cranbury, NJ 08512, Attention: Secretary.
Director Independence
The
board of directors has determined that all the directors and
nominees (including Ms. Rossetti until her resignation as a
director effective December 17, 2020), except for Dr. Spana (our
Chief Executive Officer and President), are independent directors,
as defined in the listing standards of the NYSE American, on which
our common stock is listed, and under Rule 10A-3 of the Securities
Exchange Act of 1934, as amended.
15
The Board and Its Committees
Committees and meetings. The board has
an audit committee, a compensation committee and a nominating and
corporate governance committee. During the fiscal year ended June
30, 2020 (“fiscal 2020”), the board met six times, the
audit committee met four times, the compensation committee met two
times and the nominating and corporate governance committee met two
times. Each director attended at least 75% of the total number of
meetings of the board and committees of the board on which he or
she served (during the period in which he or she was a director).
The independent directors meet in executive sessions at least
annually, following the annual board meeting. With the exception of
Drs. Prendergast and Spana, the directors did not attend the annual
meeting of stockholders held on June 25, 2020, and no director
attended the adjourned meeting of stockholders held on July 23,
2020. We do not have a policy requiring our directors to attend
stockholder meetings.
Audit committee. The audit committee
reviews the engagement of the independent registered public
accounting firm and reviews the independence of the independent
registered public accounting firm. The audit committee also reviews
the audit and non-audit fees of the independent registered public
accounting firm and the adequacy of our internal control
procedures. The audit committee is currently composed of three
independent directors, Mr. deVeer (chair), Dr. Dunton and Mr. Hull.
Until her resignation as a director effective December 17, 2020,
Angela Rossetti also served on the audit committee. The board has
determined that the members of the audit committee are, or were,
independent, as defined in the listing standards of the NYSE
American, and satisfied the requirements of the NYSE American as to
financial literacy and expertise. The board has determined that at
least one member of the committee, Mr. deVeer, is the audit
committee financial expert as defined by Item 407 of Regulation
S-K. The responsibilities of the audit committee are set forth in a
written charter adopted by the board and updated as of October 1,
2013, a copy of which is available on our web site at
www.palatin.com.
Compensation committee. The
compensation committee reviews and recommends to the board on an
annual basis employment agreements and compensation for our
officers, directors and some employees, and administers our 2011
Plan and the options still outstanding which were granted under
previous stock option plans. The compensation committee is composed
of Dr. Dunton (chair), Ms. Morris and Messrs. deVeer and Hull. The
board has determined that the members of the compensation committee
are independent, as defined in the listing standards of the NYSE
American. Our Chief Executive Officer aids the compensation
committee by providing annual recommendations regarding the
compensation of all executive officers, other than himself. Our
Chief Financial Officer supports the committee in its work by
gathering, analyzing, and presenting data on our compensation
arrangements and compensation in the marketplace.
The
responsibilities of the compensation committee are set forth in a
written charter adopted by the board effective October 1, 2013, a
copy of which is available on our web site at www.palatin.com. The
committee administers our 2011 Plan, under which it has delegated
to an officer its authority to grant stock options to employees and
to a single-member committee of the board its authority to grant
restricted stock units to officers and to grant options and
restricted stock units to our consultants, but in either instance
not to grant options or restricted stock units to themselves, any
member of the board or officer, or any person subject to Section 16
of the Exchange Act.
16
Nominating and corporate governance
committee. The nominating and corporate governance committee
assists the board in recommending nominees for directors, and in
determining the composition of committees. It also reviews,
assesses, and makes recommendations to the board concerning
policies and guidelines for corporate governance, including
relationships of the board, the stockholders and management in
determining our direction and performance. The responsibilities of
the nominating and corporate governance committee are set forth in
a written charter adopted by the board and updated as of October 1,
2013, a copy of which is available on our web site at
www.palatin.com. The nominating and corporate governance committee
is composed of Dr. Prendergast (chair), Ms. Morris and Dr. Manning,
each of whom meets the independence requirements established by the
NYSE American, and until her resignation as a director effective
December 17, 2020, also included Ms. Angela Rossetti.
Duration of Office. Unless a director
resigns, all directors hold office until the next annual meeting of
stockholders or until their successors have been elected and
qualified. Directors serve as members of committees as the board
determines from time to time.
Communicating with Directors
Generally,
stockholders or other interested parties who have questions or
concerns should contact Stephen T. Wills, Secretary, Palatin
Technologies, Inc., 4B Cedar Brook Drive, Cranbury, NJ 08512.
However, any stockholder or other interested party who wishes to
address questions regarding our business directly to the board of
directors, or any individual director, including the Chairman or
non-management directors as a group, can direct questions to the
board members or a director by regular mail to the Secretary at the
address above or by e-mail at boardofdirectors@palatin.com.
Stockholders or other interested parties may also submit their
concerns anonymously or confidentially by postal mail.
Communications are
distributed to the board, or to any individual directors as
appropriate, depending on the facts and circumstances outlined in
the communication, unless the Secretary determines that the
communication is unrelated to the duties and responsibilities of
the board, such as product inquiries, resumes, advertisements, or
other promotional material. Communications that are unduly hostile,
threatening, illegal, or similarly unsuitable will also not be
distributed to the board or any director. All communications
excluded from distribution will be retained and made available to
any non-management director upon request.
Board Role in Risk Oversight
Our
board, as part of its overall responsibility to oversee the
management of our business, considers risks generally when
reviewing our strategic plan, financial results, business
development activities, legal and regulatory matters. The board
satisfies this responsibility through regular reports directly from
our officers responsible for oversight of particular risks. The
board’s risk management oversight also includes full and open
communications with management to review the adequacy and
functionality of the risk management processes used by management,
including, without limitation, the effects of the ongoing COVID-19
pandemic on our business. The board’s role in risk oversight
has no effect on the board’s leadership structure. In
addition, committees of the board assist in its risk oversight
responsibility, including:
●
The audit committee
assists the board in its oversight of the integrity of the
financial reporting and our compliance with applicable legal and
regulatory requirements. It also oversees our internal controls and
compliance activities and meets privately with representatives from
our independent registered public accounting firm.
●
The compensation
committee assists the board in its oversight of risk relating to
compensation policies and practices. The compensation committee
annually reviews our compensation policies, programs, and
procedures, including the incentives they create and mitigating
factors that may reduce the likelihood of excessive risk taking, to
determine whether they present a significant risk to our
company.
17
Board Leadership Structure
Since
2000, the roles of chairman of the board and chief executive
officer have been held by separate persons. John K.A. Prendergast,
Ph.D., a non-employee director, has served as Chairman of the board
since June 2000. Carl Spana, Ph.D., has been our Chief Executive
Officer and President since June 2000. Generally, the Chairman is
responsible for advising the Chief Executive Officer, assisting in
long-term strategic planning, and presiding over meetings of the
board, and the Chief Executive Officer, together with our Chief
Financial Officer and Chief Operating Officer, is responsible for
leading our day-to-day performance and operations. While we do not
have a written policy with respect to separation of the roles of
chairman of the board and chief executive officer, the board
believes that the existing leadership structure, with the
separation of these roles, provides several important advantages,
including: enhancing the accountability of the chief executive
officer to the board; strengthening the board’s independence
from management; assisting the board in reaching consensus on
particular strategies and policies; and facilitating robust
director, board, and executive officer evaluation
processes.
Code of Corporate Conduct and Ethics
We have
adopted a code of corporate conduct and ethics, updated as of March
8, 2021, that applies to all our directors, officers, and
employees, including our Chief Executive Officer and Chief
Financial Officer. You can view the code of corporate conduct and
ethics at our website, www.palatin.com. We will disclose any
amendments to, or waivers from, provisions of the code of corporate
conduct and ethics that apply to our directors, principal executive
officers, and financial officers in a current report on Form 8-K,
unless the rules of the NYSE American permit website posting of any
such amendments or waivers.
DIRECTOR COMPENSATION
The
following table sets forth the compensation we paid to all
directors during fiscal 2020, except for Dr. Spana, whose
compensation is set forth below in the Fiscal 2020 Summary
Compensation Table and related disclosure. Dr. Spana did not
receive any separate compensation for his services as a
director.
|
Name
|
Fees earned
or paid in
cash ($)
|
Stock
awards ($)
(1) (2)
|
Option
awards
($) (1) (2)
|
Total ($)
|
|
John
K.A. Prendergast, Ph.D.
|
97,500
|
57,400
|
57,400
|
212,300
|
|
Robert
K. deVeer, Jr.
|
66,250
|
42,300
|
42,400
|
150,950
|
|
J.
Stanley Hull
|
57,500
|
42,300
|
42,400
|
142,200
|
|
Alan W.
Dunton, M.D.
|
66,250
|
42,300
|
42,400
|
150,950
|
|
Angela
Rossetti (3)
|
53,750
|
42,300
|
42,400
|
138,450
|
|
Arlene
Morris
|
53,750
|
42,300
|
42,400
|
138,450
|
|
Anthony
Manning, Ph.D.
|
48,750
|
42,300
|
42,400
|
133,450
|
(1)
The aggregate
number of shares underlying option awards and stock awards
outstanding at June 30, 2020 for each director was:
18
|
|
Option awards
|
Stock awards
|
|
Dr.
Prendergast
|
808,250
|
259,000
|
|
Mr.
deVeer
|
365,500
|
153,000
|
|
Mr.
Hull
|
362,000
|
153,000
|
|
Dr.
Dunton
|
314,000
|
143,000
|
|
Ms.
Rossetti
|
266,500
|
133,000
|
|
Ms.
Morris
|
221,500
|
123,000
|
|
Dr.
Manning
|
149,000
|
115,000
|
(2)
Amounts in these
columns represent the aggregate grant date fair value for stock
awards and option awards. For a description of the assumptions we
used to calculate these amounts, see Note 14 to the consolidated
financial statements included in our annual report on Form 10-K for
the year ended June 30, 2020 (our “Annual Report”).
Amounts in this column include options granted on June 16, 2020 for
our current fiscal year ending June 30, 2021.
(3)
Angela Rossetti
resigned as a director effective December 17, 2020.
Our
director compensation program is designed to enhance our ability to
attract and retain highly qualified directors and to align their
interests with the long-term interests of our stockholders. The
program includes an equity component, which is designed to align
the interests of non-employee directors and stockholders, and a
cash component, which is designed to compensate non-employee
directors for their service on the board. Directors who are
employees of the Company receive no additional compensation for
their service on the board.
The
compensation committee annually reviews compensation paid to our
non-employee directors and makes recommendations for adjustments,
as appropriate, to the full board. As part of this annual review,
the compensation committee considers the significant time
commitment and skill level required by each non-employee director
in serving on the board and its various committees. The
compensation committee seeks to maintain a market competitive
director compensation program and, with the assistance of its
independent compensation consultant, Korn Ferry Hay Group,
benchmarks our director compensation program against the peer group
we use to evaluate our executive compensation program.
Non-Employee Directors’ Equity
Grants. Our non-employee directors receive an annual equity
grant at the board meeting closest to the beginning of each fiscal
year, or such other date as may be determined by the
board.
On June
16, 2020, the Chairman of the board received 99,000 restricted
stock units which vest on June 16, 2021 and an option to purchase
172,000 shares of common stock, and each other serving non-employee
director received 73,000 restricted stock units which vest on June
16, 2021 and an option to purchase 127,000 shares of common stock.
All of the options have an exercise price of $0.58 per share, the
closing price of our common stock on the business day immediately
preceding the date of grant, vest in twelve monthly installments
beginning July 31, 2020, expire ten years from the date of grant
and provide for accelerated vesting in the event of involuntary
termination as a director following a change in control, with
exercise permitted following accelerated vesting for up to the
earlier of one year after termination or the expiration date of the
option.
19
On June
24, 2019, the Chairman of the board received 84,000 restricted
stock units which vested on June 24, 2020, and an option to
purchase 70,000 shares of common stock, and each other serving
non-employee director received 32,000 restricted stock units which
vested on June 24, 2020, and an option to purchase 52,000 shares of
common stock. All of the options have an exercise price of $1.34
per share, the closing price of our common stock on the business
day immediately preceding the date of grant, vested in twelve
monthly installments beginning on July 31, 2019, expire ten years
from the date of grant and provide for accelerated vesting in the
event of involuntarily termination as a director following a change
in control, with exercise permitted following accelerated vesting
for up to the earlier of one year after termination or the
expiration date of the option.
Non-Employee Directors’ Cash
Compensation. Dr. Prendergast serves as Chairman of the
board and for fiscal 2020 received an annual retainer of $87,500,
payable quarterly. Other non-employee directors received an annual
base retainer of $40,000, payable on a quarterly basis. The
chairperson of the audit committee received an additional annual
retainer of $17,500, the chairperson of the compensation committee
received an additional annual retainer of $17,500 and the
chairperson of the corporate governance committee received an
additional annual retainer of $10,000. Members of the foregoing
committees, other than the non-employee Chairman, received an
additional retainer of one-half the retainer payable to the
committee chairperson. For the fiscal year ending June 30, 2021,
Dr. Prendergast serves as Chairman of the board and will received
an annual retainer of $87,500, payable quarterly. Other
non-employee directors will receive an annual base retainer of
$40,000, payable on a quarterly basis. The chairperson of the audit
committee will receive an additional annual retainer of $17,500,
the chairperson of the compensation committee will receive an
additional annual retainer of $17,500 and the chairperson of the
corporate governance committee will receive an additional annual
retainer of $10,000. Members of the foregoing committees, other
than the non-employee Chairman, receive an additional retainer of
one-half the retainer payable to the committee
chairperson.
The
board also formed a program development committee, charged with
reviewing new product opportunities and product development
strategy. The chairperson of the program development committee
receives $3,500 per day of service, and members of the committee
receive $2,500 per day of service.
Non-Employee Directors’ Expenses.
Non-employee directors 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.
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.
[END OF ITEM ONE]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
ITEM TWO: RATIFICATION OF APPOINTMENT OF
KPMG LLP
AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
recommend voting FOR the ratification of the appointment of KPMG
LLP (“KPMG”) as our independent registered public
accounting firm for the fiscal year ending June 30, 2021. KPMG
served as our independent registered public accounting firm for the
fiscal year ended June 30, 2020. We expect that a representative of
KPMG will participate in the virtual annual 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.
Audit Fees. For the fiscal year ended
June 30, 2020, fees for professional services rendered for the
audit of our annual consolidated financial statements, review of
our consolidated financial statements in our Forms 10-Q, and
services provided in connection with comfort letters were $329,000.
For the fiscal year ended June 30, 2019, fees for professional
services rendered for the audit of our annual consolidated
financial statements, the audit of internal control over financial
reporting as of June 30, 2019, review of our consolidated financial
statements in our Forms 10-Q, and services provided in connection
with regulatory filings and comfort letters were
$504,000.
Audit-Related Fees. For the fiscal
years ended June 30, 2020 and 2019, KPMG did not perform or bill us
for any audit-related services.
Tax Fees. For the fiscal year ended
June 30, 2020, KPMG billed us $23,600 for professional services
rendered for tax compliance services. For the fiscal year ended
June 30, 2019, KPMG billed us a total of $37,000 for professional
services rendered for tax compliance and consulting
services.
All Other Fees. KPMG did not perform or
bill us for any services other than those described above for the
fiscal years ended June 30, 2020 and 2019.
Policy on Audit Committee Pre-Approval of
Audit and Permissible Non-Audit Services of Independent
Auditors. Consistent with SEC policies regarding auditor
independence, the audit committee has responsibility for
appointing, setting compensation for and overseeing the work of the
independent registered public accounting firm. In recognition of
this responsibility, the audit committee has established a policy
to pre-approve all audit and permissible non-audit services
provided by the independent registered public accounting
firm.
Before
engaging the independent registered public accounting firm for the
next year’s audit, management will submit to the audit
committee for approval an estimate of fees for services expected to
be rendered during that year in each of four
categories:
1.
Audit services, including work that generally only our independent
registered public accounting firm can reasonably be expected to
provide, such as services provided in connection with regulatory
filings, statutory audits and attest services and consultation
regarding financial accounting and/or reporting
standards;
2.
Audit-related services, including assurance and related services
that are traditionally performed by the independent registered
public accounting firm, including due diligence related to mergers
and acquisitions, employee benefit plan audits and special
procedures required to meet certain regulatory
requirements;
3. Tax
services, including services performed by our independent
registered public accounting firm’s tax personnel except
those services specifically related to the audit of the
consolidated financial statements, including fees in the areas of
tax compliance, tax planning and tax advice; and
4. All
other services not described in the preceding categories. We
generally do not request other services from our independent
registered public accounting firm.
21
The
audit committee pre-approves fees for each category of service. The
fees are budgeted, and the audit committee requires the independent
registered public accounting firm and management to report actual
fees versus the budget periodically throughout the year by category
of service. During the year, circumstances may arise when it may
become necessary to engage the independent registered public
accounting firm for additional services not contemplated in the
original pre-approval. In those instances, the audit committee
requires specific pre-approval before engaging the independent
registered public accounting firm.
The
audit committee may delegate pre-approval authority to one or more
of its members. The member to whom such authority is delegated must
report, for informational purposes only, any pre-approval decisions
to the audit committee at its next scheduled meeting.
Although
stockholder approval of KPMG LLP’s appointment as our
independent registered public accounting firm is not required by
law or binding on the board or the audit committee, the board and
the audit committee believe that stockholders should have an
opportunity to express their views. In the event the stockholders
do not ratify the appointment of KPMG LLP as our independent
registered public accounting firm, the audit committee will
reconsider its appointment.
REPORT OF THE AUDIT
COMMITTEE
The
audit committee of the board of directors, which consists entirely
of directors who meet the independence and experience requirements
of the NYSE American, has furnished the following
report:
The
audit committee assists the board in overseeing and monitoring the
integrity of its financial reporting process, compliance with legal
and regulatory requirements and the quality of internal and
external audit processes. This committee reviews and reassesses our
charter annually and recommends any changes to the board for
approval. The audit committee is responsible for overseeing our
overall financial reporting process, and for the appointment,
compensation, retention, and oversight of the work of KPMG
LLP.
The
audit committee has reviewed and discussed the audited consolidated
financial statements for the fiscal year ended June 30, 2020 with
Palatin’s management and has discussed with KPMG LLP the
matters required to be discussed under Public Company Accounting
Oversight Board standards. In addition, the audit committee has
received from KPMG LLP the written disclosures and a letter from
KPMG LLP regarding its independence as required by applicable
requirements of the Public Company Accounting Oversight Board
regarding KPMG LLP communications with the audit committee, and the
audit committee further discussed with KPMG LLP its independence.
The audit committee also considered the status of pending
litigation, taxation matters and other areas of oversight relating
to the financial reporting and audit process, among other factors,
that the committee determined appropriate.
Based
on these reviews and discussions, we recommended to the board of
directors that the audited consolidated financial statements be
included in Palatin’s annual report on Form 10-K for the
fiscal year ended June 30, 2020.
The Audit Committee
Robert
K. deVeer, Jr., Chairman
Alan W.
Dunton, M.D.
J.
Stanley Hull
RECOMMENDATION OF THE BOARD
The board recommends a vote FOR the ratification of the appointment
of KPMG LLP as our independent registered public accounting firm
for the fiscal year ending June 30, 2021.
[END OF ITEM TWO]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
22
ITEM THREE: APPROVAL OF AN AMENDMENT
TO OUR RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
Increase in authorized capital resolution and
amendment. On March 23, 2021, the board of directors adopted
resolutions approving and declaring advisable an amendment to our
restated Certificate of Incorporation to increase our authorized
common stock, $0.01 par value per share, from 300,000,000 shares to
400,000,000 shares, and submitting the amendment to stockholders at
our annual meeting for their adoption. The additional common stock
to be authorized by adoption of this amendment would have rights
identical to our currently authorized and outstanding common
stock.
Text of the increase in authorized capital
resolution and amendment. The complete text of the increase
in authorized capital resolution and amendment is set forth as
Appendix A to this proxy statement. If this proposal is approved,
the amendment will become immediately effective upon its filing
with the Secretary of State of Delaware, which is expected to occur
promptly after the virtual annual meeting. Except as contemplated
by the amendment, the other provisions of the Certificate of
Incorporation will remain unchanged. If the proposed amendment is
not approved by stockholders, no amendment to the Certificate of
Incorporation with respect to an increase in the number of
authorized common stock will be filed and the proposal will not be
implemented.
Purpose and background of increase in
authorized capital. We have one pharmaceutical product that
is approved by the U.S. Food and Drug Administration (FDA),
Vyleesi® for hypoactive sexual desire disorder (HSDD) in
premenopausal women, which we are currently marketing in the United
States. We anticipate that Vyleesi will not be profitable for at
least the next year as we establish marketing, sales, and
distribution capability. We are developing new melanocortin agonist
products to treat inflammatory and autoimmune conditions which we
believe will have substantial market potential, including PL9643
for dry eye disease and other indications and PL8177 for
inflammatory bowel diseases. However, the cost is substantial to
advance and complete development work, including establishing
manufacturing capability, completing FDA required clinical trials,
and submitting a New Drug Application to FDA for product
approval.
We are
currently authorized to issue up to 300,000,000 shares of common
stock, and approximately 93% of our authorized common stock is now
issued, reserved for issuance on conversion of Series A preferred
stock, or reserved for issuance under existing warrants, options,
restricted stock units and stock incentive plans. The number of
authorized common stock is insufficient for future financings that
will be required to continue product development, certain actions
designed to increase value to stockholders, including, without
limitation, strategic acquisitions, or granting equity incentives
to key employees or contractors, such as through options, warrants
or other stock-based awards.
23
While
we have approximately $72.2 million in cash and cash equivalents as
of December 31, 2020, this is insufficient to complete development
of our clinical-stage products, such as PL9643 and PL8177, and to
establish marketing, sales, and distribution capability for
Vyleesi. If the authorized number of common stock is not increased,
we will have difficulty raising funds through common stock equity
offerings, and may be forced to raise funds through alternative
means, which may ultimately be detrimental to existing
stockholders. Such financings actions may include:
●
Issuance of
preferred stock which would have rights and preferences superior to
common stock, which may be more dilutive than issuing common
stock;
●
Entering into
license or similar agreements relating to one or more of our
products, which may require us to relinquish valuable rights to our
technologies or product candidates, or grant licenses on terms that
are not favorable to us, and ultimately raise less money than
through the issuance of common stock; and
●
Entering into debt
facilities and/or product-specific financing agreements with
financial or investment institutions, which may significantly
reduce prospective upfront license or similar payments and revenues
or royalties on the sale of our products.
The
alternative financing actions described above would not require
stockholder approval. For example, the board may set the terms for
and issue preferred stock without seeking approval from holders of
common stock. Such preferred stock may have conversion rights to
common stock contingent on an increase in the number of authorized
shares of common stock and may rank senior to our common stock in
terms of dividend priority or liquidation preference, and may be
entitled to more votes per share than our common stock. Similarly,
entering into license agreements, debt facilities and
product-specific financing agreements will not, in most instances,
require approval from holders of common stock.
Risks of Non-Approval. If we are unable
to issue common stock to raise the additional capital required to
complete the development of our clinical-stage products, such as
PL9643 and PL8177, and to establish effective and successful
marketing, sales and distribution capability for Vyleesi, we may be
required to materially and significantly curtail product
development and reduce or eliminate marketing, sales and/or
distribution activities and capability for Vyleesi. This will most
likely adversely affect our perceived market value and stock price
of our common stock, to the detriment of our stockholders. We
believe that having the option and ability to raise additional
capital through sales of our authorized but unissued shares of
common stock is necessary to enhance value for our stockholders,
including providing means for future financings required to advance
our development programs and realize stockholder
value.
For the
reasons described above and discussed in further detail below, the
board and management believe it is in the best interests of Palatin
and its stockholders to increase the number of authorized common
stock.
The
following table shows our common stock outstanding and issuable or
reserved for issuance as of April 23, 2021.
|
|
Common Stock
Outstanding or
Reserved
|
|
Common
stock outstanding
|
230,049,691
|
|
Shares
of common stock issuable upon conversion of Series A preferred
stock
|
66,059
|
|
Shares
of common stock issuable upon exercise of outstanding
warrants
|
12,639,495
|
|
Shares
of common stock issuable upon exercise or vesting of outstanding
stock options and restricted stock units under all
plans
|
31,455,236
|
|
Shares
of common stock available for issuance under our 2011 Stock
Incentive Plan
|
6,006,843
|
|
Total
|
280,217,324
|
24
The
board of directors believes it is in the best interests of Palatin
and its stockholders to have sufficient additional authorized but
unissued shares of common stock available in order to provide
flexibility for corporate action in the future. Management believes
that the availability of additional authorized shares of common
stock for issuance from time to time in the board’s
discretion, such as in connection with stock options and rights,
including our 2011 Stock Incentive Plan, future financings to
ensure the advancement of our development programs, incentives for
key contractors, possible acquisitions of other product assets or
companies, investment opportunities or for other corporate
purposes, is desirable to allow Palatin to enter into such
transactions in a timely way.
We
currently have no specific understandings, arrangements,
agreements, or other plans to issue, in connection with future
financings, acquisitions or otherwise, any of the additional
authorized but unissued shares of common stock that would be
available as a result of the proposed increase in the number of
authorized shares of our common stock. However, the board believes
that the currently unissued shares do not provide sufficient
flexibility for corporate action in the future, including future
financings.
The
board believes that the proposed increase in authorized shares of
common stock, from 300,000,000 to 400,000,000 shares, is the
minimum that will be sufficient to complete the development of our
proposed new melanocortin agonist products to treat inflammatory
and autoimmune conditions, to provide flexibility in entering into
financing transactions that the board believes are in the best
interests of the company and its stockholders, including strategic
acquisitions, and to provide equity incentives to key employees and
contractors.
An
increase in the number of authorized shares of our common stock
could have the effect of making it more difficult to, or
discouraging an attempt to, obtain control of Palatin by means of a
takeover bid that our board determines is not in our best interests
and the best interests of our stockholders. However, our board does
not intend or view the proposed increase in authorized common stock
as an anti-takeover measure and is not proposing the increase in
response to any attempt or plan to obtain control of
Palatin.
If the
increase in the number of authorized shares of common stock is
approved, we will not solicit further authorization by vote of the
stockholders for issuance of the additional shares of common stock
or securities convertible into or exercisable for shares of common
stock, except as required by law, regulatory authorities, the rules
of the NYSE American or any other stock exchange on which our
shares may then be listed. The issuance of additional shares of
common stock could have the effect of diluting existing stockholder
earnings per share, book value per share and voting power. Our
stockholders do not have any preemptive right to purchase or
subscribe for any part of any new or additional issuance of our
securities.
RECOMMENDATION OF THE BOARD
The board recommends that stockholders vote FOR the amendment to
our certificate of incorporation to increase the number of our
authorized shares of common stock.
[END OF ITEM THREE]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
ITEM FOUR: ADVISORY APPROVAL OF THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
As
required by Section 14A of the Securities Exchange Act of 1934, as
amended, we are seeking an advisory, non-binding stockholder vote
with respect to the compensation of our named executive officers
listed in the Summary Compensation Table in the “Executive
Compensation” section of this proxy statement (sometimes
referred to as the “NEOs”) for fiscal 2020, as
disclosed in this proxy statement pursuant to Item 402 of
Regulation S-K. This vote is not intended to address any specific
item of compensation, but rather the overall compensation of our
NEOs and the philosophy, policies and practices described in this
proxy statement. This vote is commonly known as a
“say-on-pay” advisory vote.
The
board of directors, consistent with the advisory vote of the
stockholders at the 2019 annual meeting, has adopted an annual
frequency for a say-on-pay advisory vote.
Our
executive compensation program is based on pay for performance. Our
NEOs are compensated based on advancing our product candidates,
developing partnerships with pharmaceutical companies that add
value to our product candidates, and seeking financing to support
our development programs. We believe that our NEO compensation
program aligns incentive compensation with the long-term interests
of our stockholders. The board encourages you to review the
Executive Compensation section of this proxy statement, including
the Compensation Discussion and Analysis, for additional details of
our executive compensation program.
Discussions with
investors who responded to our outreach efforts (and others with
whom we had discussions) touched on several themes, including
stockholders’ desires that a meaningful portion of long-term
incentives be allocated to performance-based equity based on
achieving longer-term performance goals closely linked to our
business strategy. Consistent with discussions with investors both
this past year and last year, changes to our executive compensation
that were implemented in the last two fiscal years included a
performance-based component.
We
believe that NEO compensation for the fiscal year ended June 30,
2020 was effective in retaining and motivating our NEOs to work
toward our annual and long-term goals, and well within the range of
normal practices for companies of our size and in our industry. See
“Compensation Discussion and Analysis” under the
Executive Compensation section below. Our NEOs are compensated in
accordance with three-year employment agreements that are designed
to motivate our NEOs to achieve both annual and long-term
financial, operational, and strategic objectives. See
“Employment Agreements” under the Executive
Compensation section below Accordingly, we ask for our stockholders
to indicate their support for the compensation paid to our NEOs by
voting FOR the following non-binding resolution at the
meeting:
RESOLVED, that the
stockholders approve the compensation of the named executive
officers for the fiscal year ended June 30, 2020 listed in the
Summary Compensation Table in the Executive Compensation section of
the proxy statement, as disclosed pursuant to Item 402 of
Regulation S-K, including the compensation tables and narrative
discussion.
RECOMMENDATION OF THE BOARD
The board recommends a vote FOR the approval of the compensation of
the NEOs, as stated in the above non-binding
resolution.
[END OF ITEM FOUR]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following compensation discussion and analysis contains
statements regarding future individual and corporate performance
targets and goals. These targets and goals are disclosed and
discussed in the context of Palatin’s compensation programs
and should not be understood to be statements of management’s
expectations or guidance.
This
Compensation Discussion and Analysis describes the compensation
program for our NEOs. During fiscal 2020 our NEOs
were:
●
Carl Spana, Ph.D.,
our President and Chief Executive Officer (our “CEO”);
and
●
Stephen T. Wills,
our Chief Financial Officer and Chief Operating Officer (our
“CFO/COO”).
The
material elements of our executive compensation program during
fiscal 2020 are also described in this Compensation Discussion and
Analysis, as well as an overview of our executive compensation
philosophy and our related policies and practices.
Our Company
We are
a specialized biopharmaceutical company developing first-in-class
medicines based on molecules that modulate the activity of the
melanocortin and natriuretic peptide receptor systems.
Vyleesi®, the trade name for bremelanotide, a peptide
melanocortin receptor 4 (MC4r) agonist, was approved by the U.S.
Food and Drug Administration (“FDA”) in June 2019 for
the treatment of premenopausal women with acquired, generalized
hypoactive sexual desire disorder (“HSDD”), which is a
type of female sexual disorder (“FSD”), defined as low
desire with associated distress or interpersonal difficulty. Our
product candidates are targeted, receptor-specific therapeutics for
the treatment of diseases with significant unmet medical need and
commercial potential.
Vyleesi. Vyleesi is a subcutaneous
injectable product for the treatment of HSDD in premenopausal
women. Vyleesi is a synthetic peptide analog of the naturally
occurring hormone alpha-MSH (melanocyte-stimulating hormone). In
January 2020, our North American licensee for Vyleesi, AMAG
Pharmaceuticals, Inc. (“AMAG”), announced that it had
completed a strategic review of its product portfolio and business
strategy, and was pursuing options to divest its female health
products, including Vyleesi. On July 27, 2020, Palatin and AMAG
announced that they had mutually terminated the license agreement
for Vyleesi effective July 24, 2020, and that we had assumed
responsibility for manufacturing, marketing, and distribution of
Vyleesi in the United States.
We have
licensed rights to Vyleesi for the People’s Republic of
China, Taiwan, Hong Kong S.A.R. and Macau S.A.R. (collectively, the
“Chinese Territories”) and the Republic of Korea
(“Korea”) and retain worldwide rights for Vyleesi for
HSDD and all other indications outside Korea and the Chinese
Territories. We are actively seeking potential partners for
marketing and commercialization rights for Vyleesi for HSDD outside
the licensed territories. However, we may not be able to enter into
suitable agreements with potential partners on acceptable terms, if
at all.
27
Melanocortin Receptor Systems. There are
five melanocortin receptors, MC1r through MC5r. Modulation of these
receptors, through use of receptor-specific agonists, which
activate receptor function, or receptor-specific antagonists, which
block receptor function, can have significant pharmacological
effects. Our new product development activities primarily focus on
MC1r agonists, with potential to treat inflammatory and autoimmune
diseases such as dry eye disease, also known as
keratoconjunctivitis sicca, uveitis, diabetic retinopathy, and
inflammatory bowel disease. We believe that MC1r agonists,
including the MC1r agonist peptides we are developing, have broad
anti-inflammatory effects and appear to utilize mechanisms engaged
by the endogenous melanocortin system in regulation of the immune
system and resolution of inflammatory responses. We are also
developing peptides that are active at more than one melanocortin
receptor, and MC4r agonists, with potential utility in certain
obesity and metabolic-related disorders, including rare disease and
orphan indications.
●
PL9643, a
pan-melanocortin receptor peptide agonist, is a development
candidate for treating ocular inflammation, including dry eye
disease. We completed the exploratory Phase 2 human clinical trials
for treatment of dry eye disease in 2020, which provided data
supporting moving into Phase 3 registration studies, with excellent
ocular safety and tolerability and statistically significant signs
and symptom data in the moderate to severe patient population. We
intend to initiate further studies this year.
●
We have ongoing
development programs for other ocular indications, including
diabetic retinopathy and macular edema, and intend to initiate
further studies this year.
●
PL8177, a selective
MC1r agonist peptide, has received orphan drug designation for
non-infectious uveitis, and is ready for Phase 2 proof-of-concept
studies.
●
PL8177 in an oral,
intestinal delivery formulation is our lead clinical development
candidate for inflammatory bowel diseases. We intend to initiate
Phase 2 studies this year.
Natriuretic Peptide Receptor Systems.
The natriuretic peptide receptor (“NPR”) system has
numerous cardiovascular functions, and therapeutic agents
modulating this system may be useful in treatment of cardiovascular
diseases, including reducing cardiac hypertrophy and fibrosis,
heart failure, acute asthma, other pulmonary diseases, and
hypertension. We have designed and are developing potential NPR
candidate drugs that are selective for one or more different
natriuretic peptide receptors, including natriuretic peptide
receptor-A (“NPR-A and natriuretic peptide receptor C
(“NPR-C”).
●
PL3994 is an NPR-A
agonist we developed which has completed Phase 1 clinical safety
studies. In conjunction with clinicians at a major research
institution, PL3994 entered a Phase 2A clinical trial supported by
a grant from the American Heart Association in 2020.
28
The
following chart illustrates the status of our drug development
programs.
Financial Highlights
●
Revenue – Generated revenue of
$117,989 for fiscal 2020, compared to revenue of $60.3 million for
the fiscal year ended June 30, 2019 (“fiscal
2019”).
●
Net (Loss) Income – Reported net
loss of $(22.4) million for fiscal 2020, compared to net income of
$35.8 million for fiscal 2019.
●
Net (Loss) Income Per Share –
Recorded net loss per share (basic and diluted) of $(0.10) for
fiscal 2020, compared to net income per share of $0.17, basic and
$0.16, diluted for fiscal 2019.
●
Cash at End of Fiscal 2020 – Cash
and cash equivalents were $82.9 million at June 30, 2020, compared
to $43.5 million with accounts receivable of $60.3 million at June
30, 2019.
Executive Compensation Highlights
Advisory Vote to Approve Named Executive
Officer Compensation. At our last annual meeting of
stockholders in June 2020, our non-binding stockholder advisory
vote to approve the compensation of our NEOs (commonly known as a
“Say-on-Pay” vote) was supported by approximately 70%
of the votes cast for or against advisory approval. We continue to
evaluate our executive compensation program and solicit input from
our largest investors. Following is a summary of our current
compensation practices and policies.
●
Stockholder
Engagement. We attend investor conferences in the
biotechnology and pharmaceutical industries and meet with our
institutional and other investors at those conferences. We also
held teleconference meetings, led by our Chief Financial Officer,
with stockholders seeking to engage with us. We intend to continue
engaging with our stockholders on a regular basis. Elements of our
executive compensation program which we have addressed over the
past several years are disclosed below.
29
|
What We Heard
|
Our Response
|
|
We
would like more disclosure, and more accessible disclosure, on
compensation practices.
|
We have
revised our proxy disclosure this year and included more disclosure
on what we have done and how our compensation process works. We
have expanded disclosure on the work of our independent
compensation advisor.
|
|
We
would like increased disclosure on metrics used for bonuses and
incentive compensation.
|
We have
increased our disclosure. Annual bonuses are tied to specific
performance metrics for the fiscal year, such as advancing clinical
and regulatory development of our product candidates, entering into
licensing and related agreements, and our financial
condition.
|
|
We
would like at least half of long-term incentives to be
performance-based.
|
We
incorporated performance-based elements into our long-term
incentive program for 2019 and 2020 and intend to structure the
2021 long-term incentive program so that half of the awards will be
subject to the achievement of pre-established performance
goals.
|
|
A
formal policy on stock ownership by NEOs and board members should
be adopted.
|
We have
adopted a stock ownership policy that requires our NEOs, as well as
our board members, to maintain a minimum ownership level of our
common stock. As of June 30, 2020, the most recent
“Determination Date” under the stock ownership policy,
all current NEOs and board members meet the target ownership levels
of shares with a value equal to at least five times the annual base
salary of NEOs and at least two times the annual retainer for board
members. Our stock ownership policy is available on our website at
www.palatin.com/about/corporate-governance/. In addition, both
time-based and performance-based restricted stock unit awards
contain deferred delivery provisions providing for delivery of the
common stock after the grantee’s separation from service or a
defined changed in control.
|
|
A
formal “clawback” policy should be
adopted.
|
We have
adopted a clawback policy allowing Palatin to recover related
compensation should the board determine that compensation paid to
NEOs resulted from material noncompliance with financial reporting
requirements under federal securities law. Our clawback policy is
available on our website at
www.palatin.com/about/corporate-governance/.
|
|
Elimination
of “golden parachute” gross-up provisions in NEO
employment agreements.
|
Prior
to July 1, 2019, our employment agreements for the NEOs provided
that they were entitled to a tax gross-up for any golden parachute
excise tax imposed on payments received in connection with a change
in control. Most investors disfavor this type of tax gross-up
benefit. In response to stockholder feedback, effective with new
employment agreements for our NEOs commencing July 1, 2019, we
removed all golden parachute excise tax gross-up provisions. As a
result, the company no longer provides tax gross-ups for NEOs or
any other employees in the event they are subject to golden
parachute excise taxes on payments received in connection with a
change in control.
|
●
Retain
an Independent Compensation Advisor. The compensation
committee engaged Korn Ferry Hay Group (“Hay Group”), a
nationally recognized global human resources consulting firm, as
its independent compensation advisor in May 2019. Hay Group
principally provided analysis, advice and recommendations on NEO
and non-employee director compensation. The compensation committee
intends to conduct an independent compensation advisor review every
fiscal year, with the most recent reviews by our independent
compensation advisor made for awards in June 2020 for the fiscal
year ending June 30, 2021 and June 2019 for the fiscal year ending
June 30, 2020.
●
Compensation
at Risk. Our executive compensation program is designed so
that a significant portion of compensation is “at risk”
based on our performance, as well as short-term cash and long-term
equity incentives to align the interests of our executive officers
and stockholders. Long-term equity incentives will be no less than
base salaries, with at least half of long-term equity incentives
being performance-based.
●
Use a
Pay-for-Performance Philosophy. The compensation committee
employs a mixture of compensation elements designed to balance
short-term goals with longer-term performance. Our executive
compensation program includes these principal
elements:
o
Base salary, which
targets the comparable position median salary for our peer
group;
o
An annual incentive
compensation opportunity, with a target bonus payout, effective for
fiscal 2020, of no less than 60% of base salary; and,
o
A long-term
incentive program consisting of stock option and restricted stock
unit awards. In fiscal 2020, approximately 50% of all long-term
incentive awards were performance-based, with 50% of stock options
and 50% of restricted share units performance-based, and the
balance time-based.
30
The
compensation committee and board also reviewed our existing
compensation practices, and intend to continue the following
policies and practices:
●
Maintain
an Independent Compensation Committee. The compensation
committee consists entirely of independent directors.
●
Annual
Executive Compensation Review. The compensation committee
conducts an annual review and approval of our compensation
strategy, utilizing an independent compensation advisor at least
every other year. This review, including a peer group review, is
intended to ensure that our compensation programs appropriately
reward corporate growth without encouraging excessive or
inappropriate risk-taking.
●
“Double
Trigger” Feature for Acceleration of CEO and CFO/COO Equity
Awards. Under employment agreements with our NEOs,
outstanding equity awards granted to our NEOs provide that, upon a
change in control of Palatin, the vesting of such awards will
accelerate only in the event of a subsequent involuntary
termination of employment (a “double-trigger”
provision).
●
No
Stock Option Re-pricing. Our 2011 Stock Incentive Plan does
not permit options to purchase shares of our common stock to be
repriced to a lower exercise or strike price without the approval
of our stockholders.
●
No
Dividends or Dividend Equivalents Payable on Unvested or
Undelivered Equity Awards. Under our restricted share unit
agreements, we do not pay dividends or dividend equivalents on
unvested RSU awards or vested RSU awards subject to delayed
delivery.
●
No
Executive Retirement Plans. We do not offer pension
arrangements or retirement plans or arrangements to our executive
officers that are different from or in addition to those offered to
our other employees.
●
No
Special Welfare or Health Benefits. Our executive officers
participate in broad-based Company-sponsored health and welfare
benefit programs on the same basis as our other full-time, salaried
employees.
●
Anti-Hedging
Policy. Under our Insider Trading and Securities Law
Compliance Policy, employees, directors, and officers may not
engage in hedging, monetization or pledging transactions of our
securities.
31
Independent Compensation Advisor –
Competitive Positioning. A competitive assessment of both
our NEOs and our non-employee directors was conducted in May and
June 2019, prior to setting salaries, equity award and bonus
targets and objectives for the fiscal year starting July 1, 2019.
The compensation committee engaged Hay Group to assess total
compensation and compensation elements for both NEOs and directors,
including a comparison against a compensation peer group consisting
of the following companies:
|
AcelRx
Pharmaceuticals, Inc.
|
MEI
Pharma, Inc.
|
|
Ardelyx,
Inc.
|
Protagonist
Therapeutics, Inc.
|
|
ArQule,
Inc.
|
Rigel
Pharmaceuticals, Inc.
|
|
Calithera
Biosciences, Inc.
|
Savara
Inc.
|
|
ChemoCentryx,
Inc.
|
Stemline
Therapeutics, Inc.
|
|
Cytokinetics,
Inc.
|
Sutro
Biopharma, Inc.
|
|
Geron
Corporation
|
Syndax
Pharmaceuticals, Inc.
|
|
ImmunoGen,
Inc.
|
Verastem,
Inc.
|
|
La
Jolla Pharmaceutical
|
The
peer group was designed to reflect the industry and sector in which
Palatin competes, as well as companies comparable to Palatin in
terms of company life cycle, phase of development of potential
products, market capitalization and talent market. We anticipate
engaging an independent compensation advisor for a review for
awards to be made in June 2021 for the fiscal year ending June 30,
2022, including utilization of a compensation peer
group.
EXECUTIVE OFFICERS
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 current executive officers hold office
under employment agreements.
|
Name
|
Age
|
Position with Palatin
|
|
Carl
Spana, Ph.D.
|
58
|
Chief
Executive Officer, President and Director
|
|
Stephen
T. Wills, MST, CPA
|
64
|
Chief
Financial Officer, Chief Operating Officer, Executive Vice
President, Secretary and Treasurer
|
Additional
information about Dr. Spana is included above under the heading
“Item One: Election of Directors.”
32
STEPHEN
T. WILLS, CPA, MST, currently serves as the Chief Financial Officer
(since 1997), Chief Operating Officer (since 2011), Treasurer and
Secretary of Palatin. Mr. Wills has served on the board of
directors of MediWound Ltd. (Nasdaq: MDWD), a biopharmaceutical
company focused on treatment in the fields of severe burns, chronic
and other hard to heal wounds, since April 2017, and as Chairman
since January 2018, and also has served on the board of directors
of Gamida Cell Ltd. (Nasdaq: GMDA), a leading cellular and immune
therapeutics company, since March 2019 (audit, compensation, and
finance committee member), and of Amryt Pharma, a biopharmaceutical
company focused on developing and delivering treatments to help
improve the lives of patients with rare and orphan diseases, since
September 2019 (chairman of audit committee and member of the
compensation and finance committee). Mr. Wills also serves on the
board of trustees and executive committee of The Hun School of
Princeton, a college preparatory day and boarding school, since
2013, and as its Chairman since June 2018. Mr. Wills served as
Executive Chairman and Interim Principal Executive Officer of Derma
Sciences, Inc., a provider of advanced wound care products, from
December 2015 to February 2017, when Derma Sciences was acquired by
Integra Lifesciences (Nasdaq: IART). Previously, Mr. Wills served
on the board of directors of Derma Sciences as the lead director
and chairman of the audit committee from June 2000 to December
2015. Mr. Wills served as the Chief Financial Officer of Derma
Sciences from 1997 to 2000. Mr. Wills served as the President and
Chief Operating Officer of Wills, Owens & Baker, P.C., a public
accounting firm, from 1991 to 2000. Mr. Wills, a certified public
accountant, earned his Bachelor of Science in accounting from West
Chester University, and a Master of Science in taxation from Temple
University.
Fiscal 2020 Summary Compensation Table
The
following table summarizes the compensation earned by or paid to
our principal executive officer and our principal financial
officer, who constitute all of our executive officers, for fiscal
2020 and fiscal 2019. We have no defined benefit or actuarial
pension plan, and no deferred compensation plan.
|
Name and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Stock
awards (1) ($)
|
Option
awards (1) ($)
|
Nonequity incentive plan compensation (2) ($)
|
All
other
compensation
(3) ($)
|
Total
($)
|
|
Carl
Spana, Ph.D., Chief Executive Officer and President
|
2020
|
600,000
|
712,443
|
712,559
|
252,000
|
15,615
|
2,292,617
|
|
2019
|
505,400
|
616,668
|
632,225
|
506,000
|
14,118
|
2,274,411
|
|
|
Stephen
T. Wills, MST, CPA, Chief Financial Officer, Chief Operating
Officer and Executive Vice President
|
2020
|
550,000
|
613,814
|
613,805
|
231,000
|
16,207
|
2,024,826
|
|
2019
|
461,700
|
527,826
|
542,151
|
462,000
|
14,085
|
2,007,762
|
|
|
|
|
|
|
|
|
|
(1)
Amounts in these
columns represent the aggregate grant date fair value for stock
awards and option awards computed using either the Black-Scholes
model or a multifactor Monte Carlo simulation. The aggregate grant
date fair value of the performance-based stock options and
performance-based restricted stock units granted in fiscal 2020,
assuming that the highest level of performance would be achieved,
was as follows: for Dr. Spana, $337,500 for performance-based stock
options and $337,500 for performance-based restricted stock units;
and for Mr. Wills, $290,750 for performance-based stock options and
$290,750 for performance-based restricted stock units. The
aggregate grant date fair value of the performance-based restricted
stock units granted in fiscal 2019, assuming that the highest level
of performance would be achieved, was $300,428 for Dr. Spana and
$257,146 for Mr. Wills. There were no performance-based stock
options granted in fiscal 2019. For a description of the
assumptions we used to calculate these amounts, see Note 14 to the
consolidated financial statements included in our Annual Report for
fiscal 2020.
(2)
Annual incentive
amounts.
(3)
Consists of
matching contributions to 401(k) plan.
33
Base Salary
The
salary for each NEO is based, among other factors, upon job
responsibilities, level of experience, individual performance,
comparisons to the salaries of executives in similar positions
obtained from market surveys, and internal comparisons. The
compensation committee considers changes in the base salaries of
our NEOs annually. In fiscal 2020, the compensation committee
approved increases in base salaries to $600,000 for Dr. Spana and
$550,000 for Mr. Wills in connection with entering into new
employment agreements with each officer.
Annual Incentive Program
We
provide annual incentive opportunities to our NEOs to promote the
achievement of annual performance objectives. Each year, the
compensation committee establishes the target annual incentive
opportunity for each NEO, which is based on a percentage of his
base salary. For fiscal 2020, the target annual incentive
opportunity for each NEO equaled 60% of his annual base salary, up
from 50% of base salary for fiscal 2019.
The
2020 annual incentive bonus for the NEOs was determined based on
corporate performance and individual achievements and performance,
as warranted. In determining the annual incentive bonus opportunity
for executives, the executive’s annual base salary is
multiplied by the target bonus percentage. The resulting amount is
then multiplied by the corporate performance percentage approved by
the compensation committee, which is dependent on the achievement
of corporate performance goals, and also potentially adjusted
upwards or downwards for individual executives based on their
individual contribution toward the corporate results during the
relevant year. The corporate objectives are established so that
target attainment is not assured. Instead, our executives are
required to demonstrate significant effort, dedication, and
achievement to attain payment for performance at target or
above.
The following table
briefly describes each category of corporate objectives, the
relative weighting of each objective, and the related achievement
level:
34
|
Corporate Objectives
Related to:
|
Weight
|
Achievement Level
|
Discretionary Adjustment*
|
Total Weighted Achievement
|
|
Vyleesi
(bremelanotide) FSD Program
|
20%
|
0%
|
0%
|
0%
|
|
Anti-Inflammatory
Programs
|
15%
|
0%
|
0%
|
0%
|
|
Ocular
Program
|
45%
|
77%
|
15%
|
40%
|
|
Corporate
|
20%
|
100%
|
50%
|
30%
|
|
Total
Payout
|
70%
|
|||
*
Discretionary adjustments for ocular programs were primarily
related to program advances for PL9643 for dry eye disease,
including management of clinical trial enrollment during the
COVID-19 pandemic; discretionary adjustments for other corporate
were primarily related to management of AMAG’s announced
divestiture of Vyleesi and management of corporate operations in
the light of the COVID-19 pandemic.
For
fiscal 2020, the compensation committee determined that our NEOs
achieved 70% of their target objectives. As a result, each NEO
received a payout under the 2020 annual incentive program equal to
70% of his target annual incentive opportunity, or $252,000 for Dr.
Spana and $231,000 for Mr. Wills (subject to rounding
conventions).
Long-Term Incentive Program
The
total direct compensation levels for our NEOs are heavily weighted
to long-term incentive opportunities. This structure is intended to
align executives’ interests with those of our stockholders,
enhance our retention incentives and focus our executives on
delivering sustainable performance over the
longer-term.
The
design of this program has evolved over the past several years to
reflect core performance metrics and an incentive structure the
compensation committee believes is necessary to drive our long-term
success and that reflects feedback received from investors during
our stockholder engagement process.
Each
year, the compensation committee establishes the target long-term
incentive opportunity for each NEO, which is based on a percentage
of his base salary. For fiscal 2020, the target long-term incentive
opportunity for each NEO equaled 250% of base salary for Dr. Spana
and 235% of base salary for Mr. Wills.
On June
24, 2019, as part of our 2020 long-term incentive program, we
granted 236,000 time-based restricted stock units and 236,000
performance-based restricted stock units to Dr. Spana, and 202,000
time-based restricted stock units and 202,000 performance-based
restricted stock units to Mr. Wills. The time-based restricted
stock units vest as to 25% of the number of shares granted at each
anniversary of the date of grant. The performance-based restricted
stock units vest on performance criteria relating to advancement of
MC1r programs, including initiation of clinical trials, and
licensing of Vyleesi in additional countries or
regions.
On June
24, 2019, we also granted 744,000 stock options to Dr. Spana and
638,000 stock options to Mr. Wills, which vest as to 25% of the
number of shares granted on each anniversary of the date of grant.
The options have an exercise price of $1.34, the fair market value
of the common stock on the business day immediately preceding the
date of grant, and they expire on June 24, 2029.
35
On June
16, 2020, as part of our 2021 long-term incentive program, we
granted 646,500 time-based restricted stock units and 646,500
performance-based restricted stock units to Dr. Spana, and 557,000
time-based restricted stock units and 557,000 performance-based
restricted stock units to Mr. Wills. The time-based restricted
stock units vest as to 25% of the number of shares granted at each
anniversary of the date of grant. The performance-based restricted
stock units vest on performance criteria relating to advancement of
MC1r programs, including initiation of clinical trials, and
licensing of Vyleesi in additional countries or
regions.
On June
16, 2020, we also granted 1,071,500 time-based options and
1,071,500 performance-based options to Dr. Spana, and 923,000
time-based options and 923,000 performance-based options to Mr.
Wills, a portion of which were contingent on increasing the shares
reserved for grant under the 2011 Stock Incentive Plan, which was
approved by the stockholders at a meeting on June 25, 2020. The
time-based options vest as to 25% of the number of shares granted
at each anniversary of the date of grant. The performance-based
options vest on performance criteria relating to advancement of
MC1r programs, including initiation of clinical trials, and
licensing of Vyleesi in additional countries or regions. The
options have an exercise price of $0.58, the fair market value of
the common stock on the business day immediately preceding the date
of grant, and they expire on June 16, 2030.
The
following table shows the allocation of performance and time-based
awards on a share basis for fiscal 2020 and fiscal 2019. Awards
included restricted stock unit awards and stock option
awards.
|
Name and Principal Position
|
Fiscal
Year
|
Time-based stock awards (RSUs) (1)
|
Performance-based stock awards (RSUs) (1)
|
Time-based option
awards (1)
|
Performance-based option awards (1)
|
|
Carl
Spana, Ph.D., Chief Executive Officer and President
|
2020
|
646,500
|
646,500
|
1,071,500
|
1,071,500
|
|
2019
|
236,000
|
236,000
|
744,000
|
-
|
|
|
Stephen
T. Wills, MST, CPA, Chief Financial Officer, Chief Operating
Officer and Executive Vice President
|
2020
|
557,000
|
557,000
|
923,000
|
923,000
|
|
2019
|
202,000
|
202,000
|
638,000
|
-
|
(1)
Amounts in these
columns represent the aggregate maximum number of shares obtainable
based on awards in the relevant fiscal year, and assuming all
awards ultimately vest.
Employment Agreements
Effective July 1,
2019, we entered into employment agreements with Dr. Spana and Mr.
Wills which continue through June 30, 2022 unless terminated
earlier. Under these agreements, which replaced substantially
similar agreements that expired on June 30, 2019, Dr. Spana is
serving as Chief Executive Officer and President at a base salary
of $600,000 per year and Mr. Wills is serving as Chief Financial
Officer and Chief Operating Officer at a base salary of $550,000
per year. Each agreement also provides for:
●
annual
discretionary bonus compensation, in an amount to be decided by the
compensation committee and approved by the board, based on
achievement of yearly performance objectives; and
●
participation in
all benefit programs that we establish, to the extent the
executive’s position, tenure, salary, age, health, and other
qualifications make him eligible to participate.
Each
agreement allows us or the executive to terminate the agreement
upon written notice and contains other provisions for termination
by us 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 and set forth
below). Early termination may, in some circumstances, result in
severance pay at the salary then in effect, plus continuation of
medical and dental benefits then in effect for a period of two
years. In addition, the agreements provide that options and
restricted stock units granted to these officers accelerate upon
termination of employment except for voluntary resignation by the
officer or termination for cause. In the event of retirement,
termination by the officer for good reason, or termination by us
other than for “cause”, options may be exercised until
the earlier of twenty-four months following termination or
expiration of the option term. Arrangements with our NEOs in
connection with a termination following a change in control are
described below. Each agreement includes non-competition,
non-solicitation, and confidentiality covenants.
36
Outstanding Equity Awards at 2020 Fiscal Year-End
The
following table summarizes all of the outstanding equity-based
awards granted to our NEOs as of June 30, 2020, the end of our
fiscal year.
|
|
|
Option awards (1)
|
|
Stock awards (2)
|
|||||||
|
Name
|
Option or
stock
award
grant
date
|
Number of
securities
underlying
unexercised
options
(#)
exercisable
|
Number of
securities
underlying
unexercised
options
(#)
unexercisable
|
Equity incentive plan award: number of securities underlying
unexercised unearned options (#)
|
Option
exercise
price
($)
|
Option
expiration
date
|
|
Number of shares or units of stock that have not
vested
(#)
|
Market value of shares or units of stock that have not
vested
($) (3)
|
Equity incentive plan awards: number of unearned shares, unit or
other rights that have not vested (#)
|
Equity incentive plan awards: market or payout value of unearned
shares, units or other rights that have not vested
($)
|
|
Carl Spana
|
06/22/11
|
300,000
|
-
|
-
|
1.00
|
06/22/21
|
|
|
|
|
|
|
|
07/17/12
|
150,000
|
-
|
-
|
0.72
|
07/17/22
|
|
|
|
|
|
|
|
06/27/13
|
275,000
|
-
|
-
|
0.62
|
06/27/23
|
|
|
|
|
|
|
|
06/25/14
|
175,000
|
-
|
-
|
1.02
|
06/25/24
|
|
|
|
|
|
|
|
06/11/15
|
300,000
|
-
|
-
|
1.08
|
06/11/25
|
|
|
|
|
|
|
|
09/07/16
|
354,500
|
77,500
|
-
|
0.68
|
09/07/26
|
|
|
|
|
|
|
|
06/20/17
|
703,500
|
234,500
|
-
|
0.37
|
06/20/27
|
|
|
|
|
|
|
|
12/12/17
|
312,500
|
312,500
|
-
|
0.85
|
12/12/27
|
|
|
|
|
|
|
|
12/12/17
|
500,000
|
-
|
125,000
|
0.85
|
12/12/27
|
|
|
|
|
|
|
|
06/26/18
|
266,500
|
266,500
|
-
|
1.00
|
06/26/28
|
|
|
|
|
|
|
|
06/24/19
|
186,000
|
558,000
|
-
|
1.34
|
06/24/29
|
|
|
|
|
|
|
|
06/16/20
|
-
|
1,071,500
|
-
|
0.58
|
06/16/30
|
|
|
|
|
|
|
|
06/16/20
|
-
|
-
|
1,071,500
|
0.58
|
06/16/30
|
|
|
|
|
|
|
|
12/12/17
|
|
|
|
|
|
|
312,500
|
159,375
|
125,000
|
63,750
|
|
|
06/24/19
|
|
|
|
|
|
|
177,000
|
90,270
|
185,850
|
94,784
|
|
|
06/16/20
|
|
|
|
|
|
|
646,500
|
329,715
|
646,500
|
329,715
|
|
|
Total Stock
Awards
|
|
|
|
|
1,136,000
|
579,360
|
957,350
|
488,249
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen T.
Wills
|
06/22/11
|
250,000
|
-
|
-
|
1.00
|
06/22/21
|
|
|
|
|
|
|
|
07/17/12
|
135,000
|
-
|
-
|
0.72
|
07/17/22
|
|
|
|
|
|
|
|
06/27/13
|
250,000
|
-
|
-
|
0.62
|
06/27/23
|
|
|
|
|
|
|
|
06/25/14
|
150,000
|
-
|
-
|
1.02
|
06/25/24
|
|
|
|
|
|
|
|
06/11/15
|
270,000
|
-
|
-
|
1.08
|
06/11/25
|
|
|
|
|
|
|
|
09/07/16
|
324,750
|
71,250
|
-
|
0.68
|
09/07/26
|
|
|
|
|
|
|
|
06/20/17
|
644,250
|
214,750
|
-
|
0.37
|
06/20/27
|
|
|
|
|
|
|
|
12/12/17
|
287,500
|
287,500
|
-
|
0.85
|
12/12/27
|
|
|
|
|
|
|
|
12/12/17
|
372,500
|
-
|
95,000
|
0.85
|
12/12/27
|
|
|
|
|
|
|
|
06/26/18
|
227,000
|
227,000
|
-
|
1.00
|
06/26/18
|
|
|
|
|
|
|
|
06/24/19
|
159,500
|
478,500
|
-
|
1.34
|
06/24/29
|
|
|
|
|
|
|
|
06/16/20
|
-
|
923,000
|
-
|
0.58
|
06/16/30
|
|
|
|
|
|
|
|
06/16/20
|
-
|
-
|
923,000
|
0.58
|
06/16/30
|
|
|
|
|
|
|
|
12/12/17
|
|
|
|
|
|
|
287,500
|
146,625
|
95,000
|
48,450
|
|
|
06/24/19
|
|
|
|
|
|
|
151,500
|
77,265
|
159,075
|
81,128
|
|
|
06/16/20
|
|
|
|
|
|
|
557,000
|
284,070
|
557,000
|
284,070
|
|
|
Total Stock
Awards
|
|
|
|
|
996,000
|
507,960
|
811,075
|
413,648
|
||
(1)
Stock option
vesting schedules: all options granted on or before September 6,
2016 have fully vested. Options granted after September 6, 2016
vest over four years with 1/4 of the shares vesting per year
starting on the first anniversary of the grant date, provided that
the NEO remains an employee. See “Termination and
Change-In-Control Arrangements” below, except for
performance-based options granted on Granted on June 16, 2020,
which vest according to the terms of the grant described above, and
December 12, 2017, which vested as to 30% on June 26, 2018, upon
ratification by the Board of the compensation committee’s
determination that the FDA had accepted for filing an NDA for
Vyleesi for HSDD, and 50% on June 24, 2019, upon the compensation
committee’s determination that FDA had approved the NDA for
Vyleesi for HSDD. The remaining 20% did not vest during the
performance period ending December 31, 2020.
(2)
Time-based stock
award vesting schedule: restricted stock units granted on December
12, 2017, as to 625,000 shares for Dr. Spana and 575,000 shares for
Mr. Wills, which vest in equal amounts over a four year period,
provided that the NEO remains an employee; restricted stock units
granted on June 24, 2019 as to 236,000 shares for Dr. Spana and
202,000 shares for Mr. Wills and restricted stock units granted on
June 16, 2020 as to 646,500 shares for Dr. Spana and 557,000 shares
for Mr. Wills, which vest in equal amounts over a four year period,
provided that the NEO remains an employee. Both time-based and
performance-based restricted stock unit awards prior to fiscal 2019
contain deferred delivery provisions providing for delivery of the
common stock after the grantee’s separation from service or a
defined change in control. See “Stock Options and Restricted
Stock Unit Awards” above and “Termination and
Change-In-Control Arrangements” below.
(3)
Calculated by
multiplying the number of restricted stock units by $0.51, the
closing market price of our common stock on June 30, 2020, the last
trading day of our most recently completed fiscal
year.
37
Termination and Change-In-Control Arrangements
The
employment agreements, stock option agreements and restricted stock
unit agreements with Dr. Spana and Mr. Wills contain the following
provisions concerning severance compensation and the vesting of
stock options and restricted stock units upon termination of
employment or upon a change in control. The executive’s
entitlement to severance, payment of health benefits and
accelerated vesting of options is contingent on the executive
executing a general release of claims against us.
Termination Without Severance
Compensation. Regardless of whether there has been a change
in control, if we terminate employment for cause or the executive
terminates employment without good reason (as those terms are
defined in the employment agreement and set forth below), then the
executive will receive only his accrued salary and vacation
benefits through the date of termination. He may also elect to
receive medical and dental benefits pursuant to COBRA for up to two
years but must remit the cost of coverage to us. Under the terms of
our outstanding options and restricted stock units, all unvested
options and restricted stock units would terminate immediately, and
vested options would be exercisable for three months after
termination.
Severance Compensation After Death or
Disability. In the event of the executive’s death or
disability, we will provide lump sum severance pay equal to 24
months of base pay, as well as the opportunity for COBRA benefits
as described above under “Termination Without Severance
Compensation.”
Severance Compensation Without a Change in
Control. If we terminate or fail to extend the employment
agreement without cause, or the executive terminates employment
with good reason, then the executive will receive as severance pay
his salary then in effect, paid in a lump sum, plus medical and
dental benefits at our expense, for a period of two years after the
termination date. In addition, upon such event all unvested options
would immediately vest and be exercisable for two years after the
termination date or, if earlier, the expiration of the option term,
and all unvested restricted stock units would accelerate and become
fully vested.
Severance Compensation After a Change in
Control. If, within one year after a change in control, we
terminate employment or the executive terminates employment with
good reason, then the executive will receive as severance pay 200%
of his salary then in effect, paid in a lump sum, plus medical and
dental benefits at our expense, for a period of two years after the
termination date. We would also reimburse the executive for up to
$25,000 in fees and expenses during the six months following
termination, for locating employment. All unvested options would
immediately vest and be exercisable for two years after the
termination date or, if earlier, the expiration of the option term.
All unvested restricted stock units would vest upon a change in
control, without regard to whether the executive’s employment
is terminated.
Option and Restricted Stock Unit Vesting Upon
a Change in Control. Pursuant to the employment agreements,
options and restricted stock units granted under the 2011 Stock
Incentive Plan vest upon termination of the employee within twelve
months following a change in control. If any options granted under
the 2005 Stock Plan are to be terminated in connection with a
change in control, those options will vest in full immediately
before the change in control.
Definitions. Under the employment
agreements, a “change in control,” “cause”
and “good reason” are defined as follows:
A
“change in control” occurs when:
(a)
any person or
entity acquires more than 50% of the voting power of our
outstanding securities;
(b)
the individuals
who, during any twelve-month period, constitute our board of
directors cease to constitute at least a majority of the board of
directors;
(c)
the consummation of
a merger or consolidation; or
(d)
we sell
substantially all our assets.
38
The
term “cause” means:
(a)
the occurrence of
(i) the executive’s material breach of, or habitual neglect
or failure to perform the material duties which he is required to
perform under, the terms of his employment agreement; (ii) the
executive’s material failure to follow the reasonable
directives or policies established by or at the direction of our
board of directors; or (iii) the executive’s engaging in
conduct that is materially detrimental to our interests such that
we sustain a material loss or injury as a result thereof, provided
that the breach or failure of performance is not cured, to the
extent cure is possible, within ten days of the delivery to the
executive of written notice thereof;
(b)
the willful breach
by the executive of his obligations to us with respect to
confidentiality, invention and non-disclosure, non-competition or
non-solicitation; or
(c)
the conviction of
the executive of, or the entry of a pleading of guilty or nolo
contendere by the executive to, any crime involving moral turpitude
or any felony.
The
term “good reason” means the occurrence of any of the
following, with our failure to cure such circumstances within 30
days of the delivery to us of written notice by the executive of
such circumstances:
(a)
any material
adverse change in the executive’s duties, authority or
responsibilities, which causes the executive’s position with
us to become of significantly less responsibility, or assignment of
duties and responsibilities inconsistent with the executive’s
position;
(b)
a material
reduction in the executive’s salary;
(c)
our failure to
continue in effect any material compensation or benefit plan in
which the executive participates, unless an equitable arrangement
has been made with respect to such plan, or our failure to continue
the executive’s participation therein (or in a substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of the
executive’s participation relative to other
participants;
(d)
our failure to
continue to provide the executive with benefits substantially
similar to those enjoyed by the executive under any of our health
and welfare insurance, retirement and other fringe-benefit plans,
the taking of any action by us which would directly or indirectly
materially reduce any of such benefits, or our failure to provide
the executive with the number of paid vacation days to which he is
entitled; or
(e)
the relocation of
the executive to a location which is a material distance from
Cranbury, New Jersey.
BENEFICIAL OWNERSHIP OF MANAGEMENT AND
OTHERS
The
tables below show the beneficial stock ownership and voting power,
as of April [ ∙ ], 2021, of:
●
each director, each
nominee for director, each of the NEOs, and all current directors
and officers as a group; and
●
all persons who, to
our knowledge, beneficially own more than five percent of our
common stock or Series A preferred stock.
39
“Beneficial
ownership” here means direct or indirect voting or
dispositive power over outstanding stock and stock that a person
has the right to acquire now or within 60 days after April [
∙ ], 2021. See the footnotes for more detailed explanations
of the holdings. Except as noted, to our knowledge, the persons
named in the tables beneficially own and have sole voting and
dispositive power over all shares listed.
The
common stock has one vote per share and the Series A preferred
stock has approximately 16 votes per share of Series A preferred
stock. Voting power is calculated on the basis of the aggregate of
common stock and Series A preferred stock outstanding as of April [
∙ ], 2021, on which date [230,049,691] shares of common stock
and 4,030 shares of Series A preferred stock, convertible into
66,059 shares of common stock, were outstanding.
Under
our Insider Trading and Securities Law Compliance Policy,
employees, directors and officers may not engage in hedging,
monetization or pledging transactions of our securities. None of
the shares of our management and directors shown on the table below
are pledged.
The
address for all members of our management and directors is c/o
Palatin Technologies, Inc., 4B Cedar Brook Drive, Cranbury, NJ
08512. Addresses of other beneficial owners are in the applicable
table.
MANAGEMENT:
|
Class
|
Name of beneficial owner
|
Amount and nature of beneficial ownership
|
Percent of class
|
Percent of total voting power
|
|
Common
|
Carl
Spana, Ph.D.
|
8,163,868
(1)
|
3.4%
|
*
|
|
Common
|
Stephen
T. Wills
|
7,252,297
(2)
|
3.0%
|
*
|
|
Common
|
John
K.A. Prendergast, Ph.D.
|
1,441,683
(3)
|
*
|
*
|
|
Common
|
Robert
K. deVeer, Jr.
|
864,556
(4)
|
*
|
*
|
|
Common
|
J.
Stanley Hull
|
817,216
(5)
|
*
|
*
|
|
Common
|
Alan W.
Dunton, M.D.
|
777,768
(6)
|
*
|
*
|
|
Common
|
Arlene
M. Morris
|
644,416
(7)
|
*
|
*
|
|
Common
|
Anthony
M. Manning, Ph.D.
|
440,416
(8)
|
*
|
*
|
|
|
|
|
|
|
|
|
All
current directors and executive officers as a group (nine
persons)
|
20,402,220
(9)
|
8.2%
|
1.3%
|
*Less
than one percent.
40
(1)
Includes 4,259,125
shares of common stock underlying outstanding options and 3,021,375
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(2)
Includes 3,731,000
shares of common stock underlying outstanding options and 2,659,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(3)
Includes 787,916
shares of common stock underlying outstanding options and 259,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(4)
Includes 470,416
shares of common stock underlying outstanding options and 153,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(5)
Includes 470,416
shares of common stock underlying outstanding options and 153,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(6)
Includes 430,416
shares of common stock underlying outstanding options and 143,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
41
(7)
Consists of 337,916
shares of common stock underlying outstanding options and 123,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(8)
Consists of 251,916
shares of common stock underlying outstanding options and 88,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(9)
Includes 17,338,496
shares of common stock underlying outstanding options and
restricted stock units.
MORE THAN 5% BENEFICIAL OWNERS:
|
Class
|
Name and address of beneficial owner
|
Amount and nature of beneficial ownership (1)
|
Percent
of class
|
Percent of total voting
power
|
|
Series
A
Preferred
|
Steven
N. Ostrovsky
43
Nikki Ct.
Morganville,
NJ 07751
|
500
|
12.4%
|
*
|
|
Series
A
Preferred
|
Thomas
L. Cassidy IRA Rollover
38
Canaan Close
New
Canaan, CT 06840
|
500
|
12.4%
|
*
|
|
Series
A
Preferred
|
Jonathan
E. Rothschild
300
Mercer St., #28F
New
York, NY 10003
|
500
|
12.4%
|
*
|
|
Series
A
Preferred
|
Arthur
J. Nagle
19
Garden Avenue
Bronxville,
NY 10708
|
250
|
6.2%
|
*
|
|
Series
A
Preferred
|
Thomas
P. and Mary E. Heiser, JTWROS
10
Ridge Road
Hopkinton,
MA 01748
|
250
|
6.2%
|
*
|
|
Series
A
Preferred
|
Carl F.
Schwartz
31 West
87th St.
New
York, NY 10016
|
250
|
6.2%
|
*
|
42
|
Class
|
Name and address of beneficial owner
|
Amount and nature of beneficial ownership (1)
|
Percent
of class
|
Percent of total voting
power
|
|
Series
A
Preferred
|
Michael
J. Wrubel
3650 N.
36 Avenue, #39
Hollywood,
FL 33021
|
250
|
6.2%
|
*
|
|
Series
A
Preferred
|
Myron
M. Teitelbaum, M.D.
175
Burton Lane
Lawrence,
NY 11559
|
250
|
6.2%
|
*
|
|
Series
A
Preferred
|
Laura
Gold Galleries Ltd. Profit Sharing Trust Park South Gallery at
Carnegie Hall
154
West 57th Street, Suite 114
New
York, NY 10019
|
250
|
6.2%
|
*
|
|
Series
A
Preferred
|
Laura
Gold
180 W.
58th Street
New
York, NY 10019
|
250
|
6.2%
|
*
|
|
Series
A
Preferred
|
Nadji
T. Richmond
20 E.
Wedgewood Glen
The
Woodlands, TX 77381
|
230
|
5.7%
|
*
|
*Less
than one percent.
(1)
Unless otherwise indicated by footnote, all share amounts represent
outstanding shares of the class indicated, and all beneficial
owners listed have, to our knowledge, sole voting and dispositive
power over the shares listed.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
As a
condition of employment, we require all employees to disclose in
writing actual or potential conflicts of interest, including
related party transactions. Our code of corporate conduct and
ethics, which applies to employees, officers, and directors,
requires that the audit committee review and approve related party
transactions. Our code of corporate conduct and ethics is available
at our website, www.palatin.com. Since July 1, 2019, there
have been no transactions or proposed transactions in which we were
or are to be a participant, in which any related person had or will
have a direct or indirect material interest.
OTHER ITEMS OF BUSINESS
We are
not aware of any matters, other than the items of business
discussed in this proxy statement, which 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.
43
STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS FOR NEXT ANNUAL MEETING
Stockholders may
submit proposals on matters appropriate for stockholder action at
annual meetings for inclusion in our proxy statement in accordance
with regulations adopted by the SEC under Rule 14a-8 of the
Exchange Act. 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 no later than
[December 30, 2021].
Our
Amended and Restated Bylaws set an advance notice procedure for
proposals a stockholder wishes to present directly at an annual
meeting (rather than submitting for inclusion in our proxy
statement under Rule 14a-8) and for director nominations. To be
considered for presentation at the 2022 annual meeting, although
not included in the proxy statement, proposals and nominations
submitted through our advance notice procedure must be received no
earlier than February 8, 2022 and no later than March 10, 2022 and
must be accompanied by the specific information required under
Section 2.10 of our Amended and Restated Bylaws. Limited exceptions
apply to the advance notice deadlines if the date of the 2022
annual meeting is advanced by more than 30 days, or delayed by more
than 70 days, from the anniversary date of the 2021 annual meeting,
or, with respect to director nominations, we increase the number of
directors to be elected at the 2022 annual meeting and fail to make
a public announcement about the increase at least 100 calendar days
prior to the first year anniversary of 2021 annual
meeting.
Proposals or
nominations that are not received in a timely manner will not be
voted on at the 2022 annual meeting. If a proposal or nomination is
received on time, the proxies that management solicits for the
meeting may still exercise discretionary voting authority on the
proposal or nomination under circumstances consistent with the
proxy rules of the SEC. All stockholder proposals and nominations
should be marked for the attention of the Secretary at our
executive offices, 4B Cedar Brook Drive, Cranbury, NJ
08512.
|
|
By order of the
board of directors,
Stephen T. Wills, Secretary
April [
∙ ], 2021
|
44
PRELIMINARY COPY – SUBJECT TO COMPLETION
APPENDIX A
FORM OF CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
PALATIN TECHNOLOGIES, INC.
Palatin
Technologies, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, does hereby
certify:
FIRST:
The name of the corporation (hereinafter called the
“Corporation”) is Palatin Technologies,
Inc.
SECOND:
The date of filing of the Certificate of Incorporation of the
Corporation with the Secretary of State of the State of Delaware
was November 21, 1986 under the name Cinedco, Inc.
A Restated Certificate of Incorporation was filed on November
1, 1993 which contained a change of the name of the corporation to
Interfilm, Inc. Thereafter, a Certificate of Amendment was
filed on July 19, 1996, which changed the name of the Corporation
to Palatin Technologies, Inc., a Certificate of Amendment was filed
on September 5, 1997, a Certificate of Amendment was filed on May
4, 2005, a Certificate of Amendment was filed on July 23, 2010, a
Certificate of Amendment was filed on September 24, 2010, a
Certificate of Amendment was filed on May 12, 2011, a Certificate
of Amendment was filed on September 27, 2012, and a Certificate of
Amendment was filed on June 27, 2013.
THIRD:
That at a meeting of the board of directors of Palatin
Technologies, Inc., resolutions were duly adopted setting forth a
proposed amendment of the Restated Certificate of Incorporation, as
amended, of said Corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said
Corporation for consideration thereof.
FOURTH:
That this Certificate of Amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
of the State of Delaware by the board of directors and stockholders
of the Corporation.
FIFTH:
That the capital of the Corporation shall not be reduced under or
by reason of this Certificate of Amendment.
SIXTH:
That upon the effectiveness of this Certificate of Amendment,
Section 1 of the Article thereof numbered “IV” of the
Restated Certificate of Incorporation, as amended, is hereby
amended such that, as amended, said Section 1 shall read in its
entirety as follows:
Section
1. Authorized Capital Stock. The Corporation shall be authorized to
issue two classes of shares of capital stock to be designated,
respectively, “Preferred Stock” and “Common
Stock.” The total number of shares of capital stock which the
Corporation shall have the authority to issue is 410,000,000,
comprised of 400,000,000 shares of Common Stock, par value $.01 per
share, and 10,000,000 shares of Preferred Stock, par value $.01 per
share.
IN
WITNESS WHEREOF, said Corporation has caused this Certificate of
Amendment to be signed this ___ day of _______ 2021.
By:
_____________________
Name:
Stephen T. Wills
Title:
Executive Vice President, Chief
Financial Officer
and Chief Operating Officer
Appendix
A, Page 1
