AVANIR PHARMACEUTICALS
EXHIBIT 10.1
<DOCUMENT>
<TYPE>EX-10.1
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<FILENAME>a90086exv10w1.txt
<DESCRIPTION>EXHIBIT 10.1
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                                                                    EXHIBIT 10.1

                             AVANIR PHARMACEUTICALS
                   AMENDED AND RESTATED 2000 STOCK OPTION PLAN
                           (as amended March 13, 2003)

1.       ESTABLISHMENT AND PURPOSE.

         This Plan was established to offer selected Employees, directors,
advisors and Consultants an opportunity to acquire a proprietary interest in
AVANIR Pharmaceuticals, a California corporation, or to increase such interest,
by purchasing shares of the Company's Class A Common Stock. This Plan provides
for the grant of Options and Stock Awards. Options granted under this Plan may
include Nonstatutory Options as well as ISOs intended to qualify under Section
422 of the Code.

2.       DEFINITIONS.

         (a)      "Award" means a Stock Award or Option granted in accordance
with the terms of this Plan.

         (b)      "Awardee" shall mean an individual who holds an Option or a
Stock Award.

         (c)      "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.

         (d)      "Code" shall mean the Internal Revenue Code of 1986, as
amended.

         (e)      "Committee" shall mean a committee of the Board of Directors,
consisting solely of two or more Nonemployee Directors, as appointed by the
Board of Directors from time to time.

         (f)      "Company" shall mean AVANIR Pharmaceuticals, a California
corporation.

         (g)      "Consultant" shall mean any individual who is (i) a member of
the Board of Directors but who is not an Employee, (ii) an affiliate of a member
of the Board of Directors, (iii) a member of the board of directors of a
Subsidiary or (iv) an independent contractor who performs services for the
Company or a Subsidiary.

         (h)      "Employee" shall include every individual performing Service
to the Company or its Subsidiaries if the relationship between such individual
and the Company or its Subsidiaries is the legal relationship of employer and
employee. This definition of "Employee" is qualified in its entirety and is
subject to the definition set forth in Section 3401(c) of the Code and the
applicable regulations thereunder.

         (i)      "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

         (j)      "Exercise Price" shall mean the amount for which one Share may
be purchased upon exercise of an Award, as specified by the Committee in the
applicable Stock Option Agreement or Stock Award.

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         (k)      "Fair Market Value" shall mean the market price of Stock,
determined by the Committee as follows:

                  1.       If Stock was traded over-the-counter (OTC) on either
the OTC Bulletin Board or the NASDAQ SmallCap Market on the date in question and
was not classified as a national market issue, then the Fair Market Value shall
be equal to the mean between the last reported representative bid and asked
prices quoted by the OTC Bulletin Board or the NASDAQ system for such date;

                  2.       If Stock was traded on a national market exchange on
the date in question and was classified as a national market issue, then the
Fair Market Value shall be equal to the last-transaction price quoted by the
NASDAQ system or the American Stock Exchange (AMEX) for such date;

                  3.       If Stock was traded on any other stock exchange on
the date in question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite-transaction report for such date; and

                  4.       If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Committee in good faith
and in accordance with Section 260.140.50, Title 10 of the California Code of
Regulations, or with respect to the determination of Fair Market Value in
connection with the exercise of any Awards granted to Nonemployee Directors
under Section 4(b) of this Plan, by an independent appraiser selected by the
Committee in its sole discretion.

In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.

         (l)      "ISO" shall mean an incentive stock option described in
Section 422(b) of the Code.

         (m)      "Nonemployee Director" shall have the meaning set forth in
Rule 16b-3 promulgated under the Exchange Act. If the Board of Directors
determines that compliance with Section 162(m) of the Code is desirable, then
the term "Nonemployee Director" shall also be interpreted to satisfy the
definition of "outside director" under Section 162(m) and applicable regulations
issued pursuant thereto.

         (n)      "Nonstatutory Option" shall mean a Stock Option not described
in Sections 422(b) or 423(b) of the Code.

         (o)      "Option" shall mean an ISO or Nonstatutory Option granted
under this Plan and entitling the holder to purchase Shares.

         (p)      "Optionee" shall mean an individual who holds an Option.

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         (q)      "Plan" shall mean this 2000 Stock Option Plan of the Company,
as amended.

         (r)      "Service" shall mean service as an Employee or Consultant.

         (s)      "Share" shall mean one share of Stock, as adjusted in
accordance with Section 8 of this Plan (if applicable).

         (t)      "Stock" shall mean the Class A Common Stock of the Company.

         (u)      "Stock Award" shall mean an offer by the Company to sell or
transfer Shares to an Awardee as described in Section 6(b).

         (v)      "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to his or her Option.

         (w)      "Stock Purchase Agreement" shall mean a notice of exercise and
purchase agreement to be delivered by an Awardee to the Company upon exercise of
a Stock Award.

         (x)      "Subsidiary" shall mean any corporation, if the Company and/or
one or more other Subsidiaries own at least 50 percent of the total combined
voting power of all classes of outstanding capital stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of this Plan shall be considered a Subsidiary commencing as of such date.

         (y)      "Taxes" shall mean the term defined in Section 6(c)(1) of this
Plan.

         (z)      "Total and Permanent Disability" shall mean that the Awardee
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted, or can be expected to last, for a
continuous period of not less than one year.

3.       ADMINISTRATION.

         (a)      General. The Committee shall administer this Plan or, in the
Committee's absence, the Plan shall be administered by the Board of Directors.
The Board of Directors or the Committee may appoint a separate committee of the
Board of Directors, comprised of two or more directors of the Company who need
not be Nonemployee Directors, who may: (i) administer this Plan with respect to
Employees or Consultants who are not officers or directors of the Company or
incoming new directors of the Company, (ii) grant Awards under this Plan to such
persons, and (iii) determine the vesting, number of Shares subject to such
Awards and other terms of such grants.

         (b)      Committee Procedures. The Committee shall designate one of its
members as chairman. The Committee may hold meetings at such times and places as
it shall determine. The acts of a majority of the Committee's members present at
meetings at which a quorum exists, or acts reduced to or approved in writing by
all of the Committee's members, shall be valid acts of the Committee.

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         (c)      Committee Responsibilities. Subject to the provisions of this
Plan, and without further approval of the Board of Directors, the Committee
shall have full authority and discretion to take the following actions:

                  1.       To interpret this Plan and to apply its provisions;

                  2.       To adopt, amend or rescind rules, procedures and
forms relating to this Plan;

                  3.       To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of this Plan;

                  4.       To determine when Awards are to be granted under this
Plan;

                  5.       To select Awardees from those eligible to participate
in this Plan;

                  6.       To determine the number of Shares to be made subject
to each Award;

                  7.       To prescribe the terms and conditions of each Award,
including, without limitation, the Exercise Price, vesting schedule, whether
such Option is an ISO or a Nonstatutory Option, and the terms and conditions of
each Stock Option Agreement or Stock Purchase Agreement relating to such Award;

                  8.       To amend any outstanding Stock Option Agreement or
Stock Purchase Agreement, subject to applicable legal restrictions and, if
required by the agreement, with the consent of the Awardee;

                  9.       To accelerate or defer, with the consent of the
Awardee if required by the agreement, the exercise date or vesting schedule of
any Award;

                  10.      To reprice, cancel and regrant, or otherwise adjust
the Exercise Price of an Option previously granted by the Committee, with the
consent of the Awardee if required by the agreement;

                  11.      To prescribe the consideration for the grant of each
Award or other right under this Plan and to determine the sufficiency of such
consideration; and

                  12.      To take any other actions deemed necessary or
advisable for the administration of this Plan.

All decisions, interpretations and other actions of the Committee shall be final
and binding on all Awardees, and all persons deriving their rights from an
Awardee. No member of the Committee shall be liable for any action that he or
she has taken or has failed to take in good faith with respect to this Plan, any
Award, or any other right to acquire Shares under this Plan.

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4.       ELIGIBILITY.

         (a)      General Rule. Employees and Consultants shall be eligible to
receive Awards. However, only Employees shall be eligible for the grant of ISOs.

         (b)      Ten-Percent Stockholders. An Employee who owns more than 10
percent of the total combined voting power of all classes of Outstanding Stock
of the Company or any of its Subsidiaries shall not be eligible for the grant of
an Option unless (i) the Exercise Price is at least 110 percent of the Fair
Market Value of the Shares underlying such Option on the date of grant of such
Option and (ii) if such Option is an ISO, such ISO is not exercisable after the
expiration of five years from the date of grant.

         (c)      Attribution Rules. For purposes of Subsection (b) above, in
determining Stock ownership, an Employee shall be deemed to own the Stock owned,
directly or indirectly, by or for such Employee's brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or for
a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which such Employee holds an Option shall be counted in the
determination of Stock ownership for purposes of the above Subsection (b).

         (d)      Outstanding Stock. For purposes of Subsection (b) above,
"Outstanding Stock" shall include all Stock actually issued and outstanding
immediately after the grant. "Outstanding Stock" shall not include Shares
authorized for issuance under outstanding Options held by the Employee or by any
other person.

5.       STOCK SUBJECT TO THIS PLAN.

         (a)      Basic Limitation. Shares subject to Awards granted under this
Plan shall be authorized but unissued Shares. The aggregate number of Shares
which may be issued under this Plan (upon exercise of Awards or other rights to
acquire Shares) shall not exceed 3,000,000 Shares, subject to adjustment
pursuant to Section 8 of this Plan. The number of Shares subject to Awards or
other rights outstanding at any time under this Plan shall not exceed the number
of Shares which then remain available for issuance under this Plan. The Company,
during the term of this Plan, shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of this Plan.

         (b)      Additional Shares. In the event that any outstanding Option
for any reason expires or is canceled or otherwise terminated, the Shares
allocable to the unexercised portion of such Option or other right shall again
be available for the purpose of this Plan.

         (c)      Limitation on Grants. The maximum number of Shares as to which
Awards may be granted to any single Optionee under this Plan shall not exceed
500,000 Shares.

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6.       TERMS AND CONDITIONS OF AWARDS.

         (a)      Options.

                  1.       General. Each grant of an Option under this Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
this Plan and may be subject to any other terms and conditions which are not
inconsistent with this Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under this Plan need not be identical.

                  2.       Number of Shares. Each Stock Option Agreement shall
specify the number of Shares that are subject to the Option and shall provide
for the adjustment of such number in accordance with Section 8 of this Plan. The
Stock Option Agreement shall also specify whether the Option is an ISO or a
Nonstatutory Option.

                  3.       Exercise Price. Each Stock Option Agreement shall
specify the Exercise Price. The Exercise Price of an ISO shall not be less than
100 percent of the Fair Market Value of a Share on the date of grant of the
Option, except as otherwise provided in Section 4(b) of this Plan. The Exercise
Price of a Nonstatutory Option shall not be less than 85 percent of the Fair
Market Value of a Share on the date of grant. Subject to the preceding two
sentences, the Exercise Price under any Option shall be determined by the
Committee in its sole discretion. The Exercise Price shall be payable in a form
described in Section 7 of this Plan.

                  4.       Exercisability and Term. Each Stock Option Agreement
shall specify the date when all or any installment of the Option is to become
exercisable. The vesting of any Option shall be determined by the Committee in
its sole discretion; provided, however, that the Optionee's right to exercise
the Option shall be at the rate of at least 20% per year over five years from
the date when the Option is granted. A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, Total and
Permanent Disability or retirement or other events determined from time to time
by the Committee. The Stock Option Agreement shall also specify the term of the
Option, which term shall not exceed ten years from the date of grant. Subject to
the preceding sentence, the Committee in its sole discretion shall determine
when an Option is to expire. An Option shall be deemed exercised when the
Company receives from the Optionee (i) an executed notice of exercise and
purchase agreement in accordance with the terms of the Option by the person
entitled to exercise the Option and (ii) full payment for the Shares with
respect to which the Option is exercised. Full payment may, as authorized by the
Committee, consist of any consideration and method of payment allowable under
Section 7 of this Plan. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder of the Company shall
exist with respect to such Shares, notwithstanding the exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date when the stock certificate is issued, except as
provided in Section 8 of this Plan. With respect to any ISOs granted under this
Plan, the aggregate Fair Market Value (determined as of the respective date or
dates of grant) of the Shares for which one or more

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Options granted to any Employee under this Plan (or any other option plan of the
Company or its parent or Subsidiary corporations) may for the first time become
exercisable as ISOs during any one calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000). To the extent the Employee holds two or
more such Options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability thereof as ISOs
shall be applied on the basis of the order in which such Options are granted. To
the extent such dollar limitation is exceeded in any one calendar year, the
Option shall nevertheless be exercisable for the excess number of Shares as a
Nonstatutory Option.

                  5.       Nontransferability. During an Optionee's lifetime,
such Optionee's Option(s) shall be exercisable only by him or her and shall not
be transferable. In the event of an Optionee's death, such Optionee's Option(s)
shall not be transferable other than by will or by the laws of descent and
distribution.

                  6.       Termination.

                           a.       Termination of Service (Except by Death). If
an Optionee's Service terminates for any reason other than such Optionee's
death, then such Optionee's Option(s) shall expire on the earliest of the
following occasions:

                                    i.       The expiration date set forth in
the applicable Option(s);

                                    ii.      The date which is thirty (30) days
after the termination of the Optionee's Service for any reason other than Death
or Total and Permanent Disability; or

                                    iii.     The date that is twelve (12) months
after the termination of the Optionee's Service by reason of Total and Permanent
Disability.

                           b.       The Optionee may exercise all or part of his
or her Option(s) at any time before the expiration of such Option(s) as set
forth in Subsection 6(a)(6), but only to the extent that such Option(s) had
become exercisable before the Optionee's Service terminated or became
exercisable as a result of the termination. The balance of such Option(s) shall
lapse when the Option's Service terminates. In the event that the Optionee dies
after the termination of the Optionee's Service but before the expiration of the
Optionee's Option(s), all or part of such Option(s) may be exercised (prior to
expiration) by the executors or administrators of the Optionee's estate or by
any person who has acquired such Option(s) directly from the Optionee by bequest
or inheritance, but only to the extent that such Option(s) had become
exercisable before the Optionee's Service terminated or became exercisable as a
result of the termination. For purposes of the foregoing provisions of this
Subsection 6(a)(6), the Optionee shall be deemed to be providing Service to the
Company for so long as the Optionee renders Service on a periodic basis to the
Company or a Subsidiary in the capacity of an Employee or Consultant. The
Optionee shall be considered to be an Employee for so long as the Optionee
remains in the employ of the Company or a Subsidiary.

                           c.       Leaves of Absence. For purposes of this
Subsection 6(a)(6), Service shall be deemed to continue while the Optionee is on
military leave, sick leave or other

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bona fide leave of absence (as determined by the Committee). The foregoing
notwithstanding, in the case of an ISO granted under this Plan, Service shall
not be deemed to continue beyond the first 90 days of such leave, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.

                           d.       Death of Optionee. If an Optionee dies while
he or she is providing Service to the Company, then such Optionee's Option(s)
shall expire on the earlier of the following dates:

                                    i.       The expiration date set forth in
the applicable Option(s) or Stock Option(s); or

                                    ii.      The date that is twelve (12) months
after the Optionee's death.

All or part of the Optionee's Option(s) may be exercised at any time before the
expiration of such Option(s) under the preceding sentence by the executors or
administrators of the Optionee's estate or by any person who has acquired such
Option(s) directly from the Optionee by bequest or inheritance, but only to the
extent that such Option(s) had become exercisable before the Optionee's death or
became exercisable as a result of the Optionee's death. The balance of such
Option(s) shall lapse when the Optionee dies.

                  7.       Rights as a Shareholder. An Optionee, or a transferee
of an Optionee, shall have no rights as a shareholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustments shall be made, except as provided in
Section 8 of this Plan. Optionees holding Shares acquired pursuant to a Stock
Option shall have all rights associated with holding such Shares.

                  8.       Modification, Extension and Renewal of Options.
Within the limitations of this Plan, the Committee may modify, extend or renew
outstanding Options or may accept the cancellation of outstanding Options (to
the extent not previously exercised) in return for the grant of new Options at
the same or a different Exercise Price. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee, impair
such Optionee's rights or increase his or her obligations under such Option.

         (b)      Stock Awards.

                  1.       General. The specific terms and conditions of a Stock
Award granted to any Awardee shall be provided for in a Stock Purchase Agreement
approved for use under the Plan by the Committee. The Stock Purchase Agreement
shall state the number of Shares that the Awardee shall be entitled to receive
or purchase, any restrictions on the transfer of Shares underlying the Award and
the terms and conditions on which such Shares shall vest, the price to be paid,
if any, and, if applicable, the time within which the Awardee must accept such
offer. The offer shall be accepted by execution of the Stock Purchase Agreement
and any payment due for Shares underlying a Stock Award shall be made in lawful
money of the United States of

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America. The grant or vesting of a Stock Award may be made contingent on
achievement of performance criteria established by the Committee.

                  2.       Right of Repurchase. If so provided in the Stock
Purchase Agreement, Shares acquired pursuant to a Stock Award may be subject to
a right of repurchase in favor of the Company that expires: (i) over a fixed
period of time, (ii) upon the occurrence of one or more events, or (iii) any
combination of (i) or (ii). The period(s) of time or event(s) upon which a right
of repurchase expires shall be determined by the Committee in its sole
discretion and shall be set forth in the Stock Purchase Agreement. The Committee
may provide for the partial or complete expiration of any such right of
repurchase in the event of the Awardee's death, Total and Permanent Disability,
retirement or other events determined from time to time by the Committee. The
Committee may require that all Shares subject to a right of repurchase be held
by the Company or in escrow until such repurchase right expires.

                  3.       Rights as a Shareholder. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
Shares underlying a Stock Award, no right to vote or receive dividends or any
other rights as a shareholder of the Company shall exist with respect to the
Shares, notwithstanding the execution and delivery of the Stock Purchase
Agreement by the Awardee. No adjustment in the number of Shares shall be made
for a dividend or other right for which the record date is prior to the date
when the stock certificate is issued, except as provided in Section 8 of this
Plan.

         (c)      Withholding Taxes. The Company's obligation to deliver Shares
or cash upon the exercise of any Award shall be subject to the satisfaction of
all applicable Federal, State and local income tax and employment tax
withholding requirements.

                  1.       In the event that the Company or a Subsidiary
determines that it is required to withhold Federal, state, foreign or local
taxes or social security/insurance amounts in connection with the grant or
exercise of an Award or the disposition of Shares pursuant to the exercise of an
Award (collectively, the "Taxes"), the Optionee or any person succeeding to the
rights of the Awardee, as a condition to such grant, exercise or disposition,
may be required to make arrangements satisfactory to the Company or such
Subsidiary to enable it to satisfy such withholding requirements. Alternatively,
at its discretion, the Company may issue or transfer Shares net of the number of
Shares sufficient to satisfy the withholding requirements, with such Shares
valued as of the date the withholding obligation is incurred.

                  2.       The Committee may also, in its discretion and
applying relevant law in accordance with the provisions of this Section 6(c) and
such supplemental rules as the Committee may from time to time adopt, require as
a condition of delivery of the Shares upon exercise of an Award, that the
Awardee remit to the Company an amount in cash or check sufficient to satisfy
the Taxes.

                  3.       The Committee may, in its discretion and in
accordance with the provisions of this Section 6(c) and such supplemental rules
as the Committee may from time to time adopt, provide any or all Awardees
holding Nonstatutory Options or Stock Awards with the

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<PAGE>

right to use Shares in satisfaction of all or part of the Federal, State and
local income tax and employment tax liabilities incurred by such Awardees in
connection with the exercise of such Awards (the "Taxes"). The Awardee holding a
Nonstatutory Option or Stock Award may be provided with the election to have the
Company withhold, from the Shares otherwise issuable upon the exercise of such
Award, a portion of such Shares with an aggregate Fair Market Value equal to the
designated percentage (up to 100% as specified by the Awardee) of the applicable
Taxes. Any such withholding election shall be subject to the following terms and
conditions:

                           a.       The election must be made on or before the
date the amount of the Taxes incurred by the Awardee in connection with the
exercise of the Award is determined (the "Tax Determination Date").

                           b.       The election shall be irrevocable.

                           c.       The election shall be subject to the
approval of the Committee and none of the Shares for which the Award is
exercised shall be withheld in satisfaction of the Taxes incurred by the Awardee
in connection with such exercise, except to the extent the election is approved
by the Committee.

                           d.       The Shares withheld pursuant to the election
shall be valued at Fair Market Value on the Tax Determination Date.

                           e.       In no event may the number of Shares
requested to be withheld exceed in value the dollar amount of Taxes incurred by
the Awardee in connection with the exercise of the Nonstatutory Option or Stock
Award.

                           f.       If the withholding election is to be made by
an Awardee who is at the time an officer or director of the Company subject to
the short-swing profit restrictions of Section 16(b) of the Exchange Act, then
the following limitations, in addition to the preceding provisions of this
Section 6(c), shall also be applicable:

                                    i.       The election shall not become
effective at any time prior to the expiration of the six month period measured
from the later of the grant date of the Award to which such election pertains or
the actual grant date of the withholding election, and no Shares shall
accordingly be withheld in connection with any Tax Determination Date which
occurs before the expiration of such six month period.

                                    ii.      The election must be effected in
accordance with either of the following guidelines: (1) the election must be
made six months or more prior to the Tax Determination Date, and (2) the
exercise of such election and the exercise of the Award to which such election
relates must occur concurrently within a quarterly "window" period. Quarterly
window periods shall begin on the third business day following the date of
public release of each quarterly or annual summary statement of the Company's
sales and earning and end on the earlier of the 12th business day following such
release date or the Tax Determination Date.

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<PAGE>

                                    iii.     The six-month period specified in
preceding clauses (i) and (ii) shall not be applicable in the event of the
Awardee's death or disability.

7.       PAYMENT FOR SHARES.

         (a)      General Rule. The entire Exercise Price of Shares issued under
this Plan shall be payable in lawful money of the United States of America at
the time when such Shares are purchased, except as follows:

                  1.       In the case of an ISO granted under this Plan,
payment shall be made only pursuant to the express provisions of the applicable
Stock Option Agreement. However, the Committee (in its sole discretion) may
specify in the Stock Option Agreement that payment may be made pursuant to
Subsections (b), (c) or (d) below; or

                  2.       In the case of a Nonstatutory Option granted under
this Plan, the Committee (in its sole discretion) may accept payment pursuant to
Subsections (b), (c) or (d) below.

         (b)      Surrender of Stock. To the extent that this Subsection (b) is
applicable, payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more than 12 months
and which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under this Plan.

         (c)      Exercise/Sale. To the extent that this Subsection (c) is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to a securities broker approved by the
Company to sell Shares and to deliver all or part of the sales proceeds to the
Company in payment of all or part of the Exercise Price and any Taxes.

         (d)      Exercise/Pledge. To the extent that this Subsection (d) is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Shares to a securities broker or
lender approved by the Company, as security for a loan, and to deliver all or
part of the loan proceeds to the Company in payment of all or part of the
Exercise Price and any Taxes.

8.       ADJUSTMENT OF SHARES.

         (a)      General. In the event of a subdivision of the outstanding
Stock, a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Stock in an amount that has a material
effect on the value of Stock, a combination or consolidation of the outstanding
Stock (by reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
appropriate adjustments in one or more of (i) the number of Shares available for
future grants under Section 5 of this Plan, (ii) the number of Shares covered by
each outstanding Award or (iii) the Exercise Price under each outstanding Award.

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         (b)      Reorganizations. In the event of any of the following
transactions (a "Corporate Transaction"):

                  1.       a merger or acquisition involving the Company in
which the Company is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Company's
incorporation,

                  2.       sale, transfer or other disposition of all or
substantially all of the assets of the Company or

                  3.       any other corporate reorganization or business
combination in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to different holders in a single transaction or a
series of related transactions,

then the exercisability of each Option outstanding under this Plan shall be
automatically accelerated so that each such Option shall immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of Shares purchasable under such
Option and may be exercised for all or any portion of such Shares. However, an
outstanding Option under this Plan shall not be so accelerated if (i) such
Option is, in connection with the Corporate Transaction, either to be assumed by
the successor corporation or parent thereof or be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation or
parent thereof, or (ii) such Option is to be replaced by a comparable cash
incentive program of the successor corporation based on the value of the option
at the time of the Corporate Transaction, or (iii) the acceleration of such
Option is subject to other applicable limitations imposed by the Committee at
the time of the grant. The determination of comparability under clauses (i) or
(ii) above shall be made by the Committee and its determination shall be final,
binding and conclusive. In connection with any such Corporate Transaction, the
exercisability as an incentive stock option under the federal tax laws of any
accelerated Options under this Plan shall remain subject to any applicable
dollar limitation of Section 6(e). Except as provided below in this Subsection
(b), upon the consummation of the Corporate Transaction, all outstanding Options
under this Plan shall, to the extent not previously exercised or assumed by the
successor corporation or its parent company, terminate and cease to be
outstanding. If the Company is the surviving entity in any Corporate Transaction
or the outstanding Options are to be assumed in connection with such Corporate
Transaction, then each Option shall, immediately after such Corporate
Transaction, be appropriately adjusted to apply and pertain to the number and
class of securities which would be issuable to the Optionee, upon consummation
of such Corporate Transaction if the Option were exercised immediately prior to
such Corporate Transaction. Appropriate adjustments shall also be made to the
Exercise Price payable per share, provided the aggregate Exercise Price payable
upon exercise of such Option shall remain the same. In addition, the class and
number of securities available for issuance under this Plan following the
consummation of such Corporate Transaction shall be appropriately adjusted. The
grant of Options under this Plan shall in no way affect the right of the Company
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.

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<PAGE>

         (c)      Reservation of Rights. Except as provided in this Section 8,
an Optionee shall have no rights by reason of any subdivision or consolidation
of Shares of Stock of any class, the payment of any dividend or any other
increase or decrease in the number of Shares of Stock of any class. Any issue by
the Company of Shares of Stock of any class, or securities convertible into
Shares of Stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or Exercise Price of Shares
subject to an Option. The grant of an Option pursuant to this Plan shall not
affect in any way the right or power of the Company to make adjustments,
reclassification, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.

9.       SECURITIES LAWS.

         Shares shall not be issued under this Plan unless the issuance and
delivery of such Shares comply with (or are exempt from) all applicable
requirements of law, including, without limitation, the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on which the
Company's securities may then be listed.

10.      NO EMPLOYMENT RIGHTS.

         No provision of this Plan, nor any right or Award granted under this
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee or Consultant or in any way to amend, modify, waive
or terminate the Company's (or any Subsidiary's) right to terminate any person's
Service at any time and for any reason.

11.      DURATION AND AMENDMENTS.

         (a)      Term of this Plan. This Plan, as set forth herein, shall
become effective December 2, 1999, the date when the Board of Directors adopted
this Plan. Notwithstanding the foregoing, no Award granted under this Plan shall
become exercisable unless and until this Plan shall have been approved by the
shareholders of the Company. This Plan shall terminate automatically on December
2, 2009, and may be terminated on any earlier date pursuant to Subsection (b)
below.

         (b)      Right to Amend or Terminate this Plan. The Board of Directors
may amend, suspend or terminate this Plan at any time and for any reason;
provided, however, that any amendment of this Plan which: (i) materially
increases the number of Shares available for issuance under this Plan (except as
provided in Section 8 of this Plan); (ii) materially changes the class of
persons who are eligible for the grant of ISOs; or (iii) if required by Rule
16b-3 (or any successor thereto) under the Exchange Act, would materially
increase the benefits accruing to participants under this Plan or would
materially modify the requirements as to eligibility for participation in this
Plan, shall be subject to the approval of the Company's shareholders by the
affirmative vote of the holders of a majority of the securities of the Company
present, or

                                       13

<PAGE>

represented and entitled to vote at a duly held shareholders' meeting.
Shareholder approval shall not be required for any other amendment of this Plan.

         (c)      Effect of Amendment or Termination. No Shares shall be issued
or sold under this Plan after the termination thereof, except upon exercise of
an Award granted prior to such termination. The termination of this Plan, or any
amendment thereof, shall not affect any Share previously issued or any Award
previously granted under this Plan.

                                      * * *

         To record the adoption of this Plan by the Board of Directors, as
amended on March 13, 2003, the Company has caused its authorized officer to
execute the same.

                                      AVANIR PHARMACEUTICALS,
                                      a California corporation

                                      By: ________________________
                                              Gregory P. Hanson
                                              Secretary

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</TEXT>
</DOCUMENT>
