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                                                                    EXHIBIT 10.2


                             AVANIR PHARMACEUTICALS
                  AMENDED AND RESTATED 1998 STOCK OPTION PLAN
                       (as amended on September 11, 2001)

SECTION 1. ESTABLISHMENT AND PURPOSE.

       This Plan was established in 1998 to offer selected Employees, directors,
advisors and Consultants an opportunity to acquire a proprietary interest in the
success of AVANIR Pharmaceuticals, a California corporation (the "Company"), or
to increase such interest, by purchasing Shares of the Company's common stock.
This Plan provides for the grant of Options to purchase Shares. Options granted
under this Plan may include Nonstatutory Options as well as ISOs intended to
qualify under Section 422 of the Code. This Plan is intended to comply in all
respects with Rule 16b-3 (or its successor) under the Exchange Act.

SECTION 2. DEFINITIONS.

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

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

       (c) "Committee" shall mean a committee of the Board of Directors,
consisting of Nonemployee Directors as appointed by the Board of Directors from
time to time, or, if no such committee is appointed, all members of the Board of
Directors described in Section 3(a) of this Plan.

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

       (e) "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.

       (f) "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.

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



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

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

              (1) If Stock was traded over-the-counter on the date in question
but 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 NASDAQ system for such date;

              (2) If Stock was traded over-the-counter 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 for such
date;

              (3) If Stock was traded on a 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 Options 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.

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

       (k) "Nonemployee Director" shall mean a member of the Board of Directors
who (i) is not currently an officer or Employee of the Company or a parent or
Subsidiary of the Company, (ii) has not received compensation for serving as a
Consultant or in any other non-director capacity or had an interest in any
transaction with the Company or a parent or Subsidiary of the Company that would
exceed the $60,000 threshold for which disclosure would be required under Item
404(a) of Regulation S-K, or (iii) has not been engaged through another party in
a business relationship with the Company which would be disclosable under Item
404(b) of Regulation S-K. If the Board of Directors determines that compliance
with Section 162(m) of the Code is desirable, then the term




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"Nonemployee Director" shall also be interpreted to satisfy the definition of
"outside director" under Section 162(m) and applicable regulations issued
pursuant thereto.

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

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

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

       (o) "Plan" shall mean the 1998 Stock Option Plan of the Company, as
amended.

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

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

       (r) "Stock" shall mean the Common Stock of the Company.

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

       (t) "Stock Purchase Agreement" shall mean the Notice of Exercise and
Stock Purchase Agreement to be delivered by an Optionee to the Company upon
exercise of an Option.

       (u) "Subsidiary" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding 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.

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

       (w) "Total and Permanent Disability" shall mean that the Optionee 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.

SECTION 3. ADMINISTRATION.




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<PAGE>


       (a) Committee Membership. This Plan shall be administered by the
Committee. The Committee shall be comprised either (i) solely of Nonemployee
Directors of the Company and shall have at least two members or (ii) of the
entire Board of Directors if no such committee is appointed. The Committee shall
meet such other requirements as may be established from time to time by the
Securities and Exchange Commission for plans intended to qualify for exemption
under Rule 16b-3 (or its successor) under the Exchange Act. The Board of
Directors 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 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, may grant Options under this Plan to such persons and may determine the
timing, number of Shares subject to such Options 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.

       (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 Options are to be granted under this Plan;

              (5) To select the Optionees;

              (6) To determine the number of Shares to be made subject to each
Option;

              (7) To prescribe the terms and conditions of each Option,
including, without limitation, the Exercise Price, to determine whether such
Option is to be classified as an ISO or as a Nonstatutory Option, and to specify
the provisions of the Stock Option Agreement relating to such Option;




                                       4
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              (8) To amend any outstanding Stock Option Agreement, subject to
applicable legal restrictions and to the consent of the Optionee who entered
into such agreement;

              (9) To accelerate or defer, with the consent of the Optionee, the
exercise date of any Option;

              (10) With the consent of the Optionee, to reprice, cancel and
regrant, or otherwise adjust the Exercise Price of an Option previously granted
by the Committee;

              (11) To prescribe the consideration for the grant of each Option
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 Optionees, and all persons deriving their rights from an
Optionee. 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
Option, or any other right to acquire Shares under this Plan.

SECTION 4. ELIGIBILITY.

       (a) General Rule. Employees and Consultants shall be eligible to receive
Options. 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




                                       5
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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.

SECTION 5. STOCK SUBJECT TO THIS PLAN.

        (a) Basic Limitation. Shares subject to Options 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 Options or other rights to
acquire Shares) shall not exceed 1,875,000 Shares, subject to adjustment
pursuant to Section 8 of this Plan. The number of Shares which is subject to
Options 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 or other
right 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
Options shall be granted to any single Optionee shall not exceed 500,000 Shares.

SECTION 6. TERMS AND CONDITIONS OF OPTIONS.

       (a) Stock Option Agreement. 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.

       (b) 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.




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<PAGE>

       (c) 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.

       (d) Withholding Taxes. The Company's obligation to deliver Shares or cash
upon the exercise of Options 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 Option
or the disposition of Shares pursuant to the exercise of an Option
(collectively, the "Taxes"), the Optionee or any person succeeding to the rights
of the Optionee, 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(d) 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 Options, that the Optionee
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(d) and such supplemental rules as the Committee
may from time to time adopt, provide any or all Optionees holding Nonstatutory
Options with the 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 Optionees in connection with the exercise of their Options (the "Taxes").
The Optionee holding a Nonstatutory Option may be provided with the election to
have the Company withhold, from the Shares otherwise issuable upon the exercise
of such Nonstatutory Option, a portion of such Shares with an aggregate Fair
Market Value equal to the designated percentage (up to 100% as specified by the
Optionee) of the applicable Taxes. Any such withholding election shall be
subject to the following terms and conditions:


                                       7
<PAGE>

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

                     (ii) The election shall be irrevocable.

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

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

                     (v) In no event may the number of Shares requested to be
withheld exceed in value the dollar amount of Taxes incurred by the Optionee in
connection with the exercise of the Nonstatutory Option.

                     (vi) If the withholding election is to be made by an
Optionee 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(d), shall also be applicable:

                            (A) 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 Nonstatutory Option 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.

                            (B) 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 Nonstatutory Option 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.

                            (C) The six month period specified in clauses (A)
and (B) shall not be applicable in the event of the Optionee's death or
disability.





                                       8
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       (e) 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 Stock 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 the
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 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.

       (f) 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.

       (g) 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:



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              (1) The expiration date determined pursuant to Subsection (e)
above;

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

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

       (h) The Optionee may exercise all or part of his or her Option(s) at any
time before the expiration of such Option(s) under the preceding sentence, 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 Optionee'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(g),
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.

       (i) Leaves of Absence. For purposes of Subsection (g) above, Service
shall be deemed to continue while the Optionee is on military leave, sick leave
or other 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.

       (j) 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:

              (1) The expiration date determined pursuant to Subsection (e)
above; or

              (2) The date which 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




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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.

       (k) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder 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.

       (l) 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.

       (m) Restrictions on Transfer of Shares. Any Shares issued upon exercise
of an Option shall be subject to such transfer restrictions as the Committee
shall determine so long as such restrictions do not unfairly prejudice the
opportunity of the Optionee to receive the fair value of the applicable Shares
under applicable law, in addition to any general restrictions that may apply to
all holders of Stock. Options may not be transferred or assigned in any manner
other than by will or by the laws of descent or distribution.

       (n) Rule 16b-3. Options granted to persons who are subject to Section 16
of the Exchange Act shall comply with the applicable provisions of Rule 16b-3
promulgated thereunder and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to this Plan's transactions.

SECTION 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




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<PAGE>


              (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.

SECTION 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 spinoff 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 Option or (iii) the Exercise Price under each outstanding
Option.

       (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




                                       12
<PAGE>




              (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 the 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 the 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 the 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 the 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 the 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.

       (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



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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.

SECTION 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.

SECTION 10. NO EMPLOYMENT RIGHTS.

       No provision of this Plan, nor any right or Option 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.

SECTION 11. DURATION AND AMENDMENTS.

       (a) Term of this Plan. This Plan, as set forth herein, shall become
effective December 1, 1998, the date when the Board of Directors adopted this
Plan. Notwithstanding the foregoing, no Option 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 the date
which is ten (10) years after its initial adoption by the Board of Directors,
November 20, 2008, 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




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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 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 Option
granted prior to such termination. The termination of this Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under this Plan.

SECTION 12. EXECUTION.

       To record the adoption of this Plan by the Board of Directors, as amended
on September 11, 2001, the Company has caused its authorized officer to execute
the same.



                                    AVANIR PHARMACEUTICALS,
                                    a California corporation

                                    By: /s/ Gregory P. Hanson
                                       --------------------------------
                                       Gregory P. Hanson, Secretary




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