Exhibit 10.50**SETTLEMENT AGREEMENT**     This Settlement Agreement (“Settlement Agreement”) is entered into as of July 2, 2007 (the“Effective Date”) by and between Dr. Neal R. Cutler, an individual (“Cutler”), and AvanirPharmaceuticals, a California corporation (“Avanir”), together with its affiliates and subsidiaries(Avanir and Cutler are each referred to as a “Party” or collectively as the “Parties”).     WHEREAS, Cutler and Avanir are each party to that certain Unit Purchase Agreement by andbetween Avanir, Cutler and certain other parties listed therein, dated as of May 22, 2006 (the“Alamo Purchase Agreement”) relating to the sale of all outstanding ownership interests in AlamoPharmaceuticals, LLC, a California limited liability company (“Alamo”), to Avanir;     WHEREAS, unless separately defined within this Settlement Agreement or otherwise indicated,all capitalized terms used herein shall have the meaning given to such terms in the Alamo PurchaseAgreement;     WHEREAS, the consideration Avanir paid to acquire Alamo included three Buyer Notes in theaggregate principal amount of $25,075,000 issued at the closing of the transactions contemplated bythe Alamo Purchase Agreement and an Alternate Contingent Note 1 in the aggregate principal amountof $2,000,000, issued subsequent to such closing;     WHEREAS, Avanir may be required to issue an Alternate Contingent Note 2, subject to and inaccordance with the terms of the Alamo Purchase Agreement (the Buyer Notes, Alternate ContingentNote 1 and Alternate Contingent Note 2 may be referred to collectively herein as the “Notes”);     WHEREAS, Avanir is actively engaged in an effort to sell the business activities andoperations of Avanir and its subsidiaries involving the development, formulation, testing,production, licensing, commercialization and distribution, including assets, inventory, contracts,permits and intellectual property associated therewith of: (i) FazaClo (the “FazaClo Business”),(ii) certain compounds that are not currently commercialized for the potential treatment ofcardiovascular disease, (iii) Xenerex antibody technology and (iv) the orally active drug moleculeAVP-13358 — Selective Cytokine Inhibitor currently in clinical trial; for purposes of thisAgreement, “Business” means (a) the FazaClo Business and (b) if the aggregate cumulativeConsideration (as defined below) with respect to the businesses described in clauses “(ii)”,"(iii)” and “(iv)” does not exceed $8 million in the aggregate for all such businesses, thebusinesses described in clauses “(ii)”, “(iii)” and “(iv)”, collectively, it being understood andagreed that if the Consideration with respect to such businesses exceeds $8,000,000 in theaggregate for all such businesses at any time, the term “Business” shall be limited to the FazaCloBusiness and shall not include such businesses for all purposes of this Settlement Agreement; forpurposes of this Agreement, “Consideration” means with respect to any business (x) the amount ofcash and the fair market value of non-cash consideration paid
 

 
at the closing of the sale of such business and (y) the amount of cash and the fair market value ofnon-cash consideration paid within six months of such closing; and     WHEREAS, the Parties wish to settle a dispute between them regarding whether a sale of theBusiness would cause the Notes to become due and payable (the “Dispute”).     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which ishereby acknowledged, the Parties hereby agree as follows:     1. Payment to Cutler Upon Sale of the FazaClo Business. Upon the consummation of asale of all or substantially all of the FazaClo Business by Avanir, either directly or through itssubsidiaries, to any party that is not a wholly-owned subsidiary of Avanir, Avanir shall pay$11,000,000 to Cutler (the “Sale Payment”). The Sale Payment shall be made in immediatelyavailable funds pursuant to wire transfer instructions to be provided by Cutler.     2. Effect of Sale Payment on Avanir Payment Obligations Under the Notes. Upon makingthe Sale Payment, the payment obligations set forth in the Notes shall be affected as follows:     (a) Application of Sale Payment. The Sale Payment shall be applied first toreduce the outstanding principal of, and interest on, Buyer Note 1 until such note is paidin full, second to reduce the outstanding principal of, and interest on, Buyer Note 2 andthereafter to reduce the outstanding principal of, and interest on, the other Notes in anorder to be specified by Avanir.     (b) Credit Against Obligation To Make Financing Prepayments. Upon Avanirmaking the Sale Payment to Cutler (the date of such payment, the “Payment Date”), Avanirshall not be obligated to make any payment against the Notes in connection with FinancingTransactions (as such term is defined in the Notes) consummated on or after the PaymentDate until such time as Avanir and/or its subsidiaries shall have received aggregate netproceeds from all Financing Transactions consummated on and after the Payment Date of$55,000,000 (the “Financing Threshold”). Upon reaching the Financing Threshold, Avanir’sobligations to make payments against the Notes in connection with Financing Transactions(or a portion thereof to the extent net proceeds therefrom exceeds $55,000,000 in the caseof the Financing Transaction that results in the Financing Threshold being exceeded) shallresume with respect to the net proceeds of Financing Transactions that are in excess of theFinancing Threshold. Until the Financing Threshold has been achieved, promptly followingthe consummation of any Financing Transaction, Avanir shall provide Cutler with a reportindicating the net proceeds that Avanir and/or any of its subsidiaries realized from theFinancing Transaction at issue. Such notice(s) shall be sent to Cutler as set forth inSection 10.05 of the Alamo Purchase Agreement.
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     (c) All Other Payment Obligations Under the Alamo Purchase Agreement Remain inFull Force and Effect. Except as expressly set forth in Sections 1, 2(a), 2(b) and 3of this Settlement Agreement, all obligations set forth in the Alamo Purchase Agreement andthe Notes shall remain in full force and effect and Cutler retains all rights that existunder the Alamo Purchase Agreement and the Notes.     3. Conditional Waiver of Right To Full Payment Upon Sale of the Business. Conditionedupon Avanir making the Sale Payment, Cutler on his own behalf and on behalf of his predecessors,successors, assigns and Affiliates (as such term is defined below), hereby consents to a sale ofthe Business and waives any rights he or they may have to assert and further agrees that he andthey will not assert, that a sale of the Business in one or a series of transactions, by itself,will cause the Notes to become due and payable or assert that any of the underlying bases thatwould result in the Notes becoming due and payable as a result of such sale have occurred as aresult of such sale (this waiver shall be referred to hereafter as the “Limited Waiver andAgreement”). The Limited Waiver and Agreement applies **only**to a sale of the Business by itself inone or a series of transactions, and does not preclude Cutler from asserting that sales of otherassets, before or contemporaneous with any sale of the Business constitutes a sale of substantiallyall of Avanir’s assets.     4. Releases.          (a) Each Party, on behalf of itself and on behalf of its predecessors, successors, assigns andpersons or entities that control it or that are controlled by it (“Affiliates”), hereby generallyrelease and forever discharge the other Party, and each of the other Party’s respective past andpresent agents, representatives, shareholders, officers, directors, managers, attorneys, employers,employees, servants, assigns, subsidiaries, divisions, affiliates, partners, partnerships, bondingcompanies, related companies, parent companies, immediate family members, spouses, insurers, andpredecessor or successor companies, and the officers, directors, employees, agents, heirs,executors, administrators, and assigns of each of these, from any and all claims, demands, rights,suits, liens, obligations, damages, liabilities, and causes of action, known or unknown, suspectedor unsuspected, from the beginning of time through the date this Settlement Agreement is fullyexecuted, that arise out of, are connected with, relate to, or are incidental to the Dispute. TheParties acknowledge that they may hereafter discover facts different from or in addition to thosenow known or believed to be true and agree that this Settlement Agreement shall remain in fullforce and effect, notwithstanding the potential existence of such different or additional facts.          (b) The Parties acknowledge that they have been advised regarding the effect of CaliforniaCivil Code Section 1542, which provides as follows:“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW ORSUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
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     WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THEDEBTOR.”          The Parties having been so advised, agree that the provisions of California Civil Code section1542 and all similar federal or state laws, rights, rules and legal principles of any otherjurisdiction or political subdivision which may be applicable hereto, to the extent they apply toany of the matters relating to the Dispute released herein, ARE KNOWINGLY AND VOLUNTARILY WAIVEDAND RELINQUISHED BY THE PARTIES, in each and every capacity, to the fullest extent possible, andthe Parties FURTHER AGREE AND ACKNOWLEDGE that this waiver is an essential term of the releases setforth in this Agreement, without which the other Party would not have entered into this Agreement.          (c) Each Party hereby agrees to indemnify the other Party, and defend and hold the other Partyharmless, from and against any liability, loss, cost, and expense whatsoever (including attorneys’fees) incurred as a direct or indirect result of any lawsuit or other proceeding commenced on anyclaim released pursuant to this Agreement.     5. Limitation. Notwithstanding anything to the contrary herein, the Limited Waiverand Agreement set forth in Section 3 and the release set forth in Section 4 shall be null and voidif both (i) a sale of all or substantially all of the FazaClo Business shall not have occurredprior to the 12-month anniversary of the date hereof and (ii) at the time of any sale of all orsubstantially all of the FazaClo Business, there has been a material diminution in the value ofAvanir’s assets not primarily used in the FazaClo Business from the value of such assets as of thedate hereof.     6. Assignment. Neither this Settlement Agreement nor any of the rights or obligationshereunder may be assigned by a Party to any third party unless specifically agreed to in writing bythe other Party.     7. Waiver. The failure or delay by any Party to exercise any rights under thisSettlement Agreement shall not operate as a waiver of any rights under this Settlement Agreement.The Parties may affirmatively waive rights under this Settlement Agreement, but to be effective,such waiver must be in writing and signed by the Party to be bound thereby.     8. Governing Law. This Settlement Agreement and any claim or controversy arising outof or relating to this Settlement Agreement, shall be governed by the law of the State ofCalifornia without regard to conflict of law principles that would result in the application of anylaw other than the State of California.     9. Currency. All payments made pursuant to this Settlement Agreement shall be in U.S.dollars.
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     10. Cumulative Remedies. All rights and remedies of either Party are cumulative ofeach other and of every other right or remedy such Party may otherwise have at law or in equity,and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent orsubsequent exercise of other rights or remedies.     11. Representation by Counsel. The Parties hereto acknowledge that they are eachrepresented by counsel of their choice and that have had adequate opportunity to consult withcounsel prior to signing this Settlement Agreement. The Parties have carefully reviewed the termsof this Settlement Agreement and fully understand its contents. The Parties agree that thisSettlement Agreement shall be treated as having been drafted by both Parties, with no presumptionor interpretation against either Party as the drafter of this Settlement Agreement.     12. Representations and Warranties. Each of the Parties represents, warrants, andagrees as follows:          (a) Such Party has all requisite power and authority to enter into this Settlement Agreementand to perform its obligations hereunder.          (b) All action on the part of such Party necessary for the authorization, execution anddelivery of this Settlement Agreement and the consummation of the transactions contemplated hereby,have been duly taken. This Settlement Agreement constitutes the legal, valid and bindingobligation of such Party, enforceable against such Party in accordance with its terms.          (c) There has been no assignment or other transfer of any interest in any Claims which suchParty has or may have had against the other, or any of them.          (d) Such Party has received prior independent legal advice from legal counsel of such Party’schoice with respect to the advisability of making the settlement provided for in this SettlementAgreement and with respect to the advisability of executing this Settlement Agreement. SuchParty’s attorney has reviewed this Settlement Agreement at length and made any desired changes.          (e) In executing this Settlement Agreement such Party has relied solely on the statementsexpressly set forth herein. Such Party further represents, warrants, and agrees that in executingthis Agreement it has placed no reliance whatsoever on any statement, representation or promise ofany other Party or any other person or entity, not expressly set forth herein, or upon the failureof any other Party or any other person or entity to make any statement, representation ordisclosure of anything whatsoever.          (f) Such Party has read this Settlement Agreement carefully, knows and understands thecontents of this Settlement Agreement, and has made such investigation of the facts pertaining tothe settlement and this Settlement Agreement as such Party deems necessary or desirable.
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          13. Settlement of Claims. The Parties acknowledge and covenant that this SettlementAgreement represents a settlement and compromise of disputed claims, and that by entering into thisSettlement Agreement, no Party admits or acknowledges the existence of any liability or wrongdoing,all such liability or wrongdoing being expressly denied. No provision of this Settlement Agreementshall be construed as an admission or concession of any factual conclusion, status, or liability onthe part of any Party or any liability or wrongdoing or of any preexisting liability or wrongdoingof any Party. The terms of this Settlement Agreement are contractual, not a mere recital, and arethe result of negotiations between the Parties.     14. Confidentiality. The Parties agree that, unless required to be disclosed by law,strict confidentiality of the financial and other terms of this Settlement Agreement is of theessence. The Parties represent that prior to the execution of this Settlement Agreement, they havenot disclosed the terms of content of this Settlement Agreement, including any monetary figuresdiscussed by the Parties in settlement negotiations, to any person, organization, or entity otherthan legal counsel to such Party, accountants and tax or financial advisors to such Party oremployees of such Party. Except as required by law or in any legal, administrative or regulatoryproceeding, the parties shall maintain in strict confidence and shall not disclose to anyone thecontents of this Settlement Agreement (including the consideration received hereunder) or publiclydiscuss any aspect of the dispute between the parties which led up to this Settlement Agreement orthe nature of the dispute. Notwithstanding the foregoing, such information may be disclosed in alegal action or proceeding to approve, interpret, or enforce this Settlement Agreement; by order ofa court of competent jurisdiction; and to the parties’ respective spouses, employees, accountants,tax or financial advisors, lenders, potential lenders, insurers, and with respect to suchprofessionals only to the extent necessary to permit such individuals or entities to performrequired tax, accounting, financial, legal, or administrative tasks or services, which individualsshall be directed to refrain from disclosing the information. The Parties may disclose, withoutproviding any details of the terms of this Settlement Agreement, that this matter has settled.     15. Attorneys’ Fees. In the event that a Party files an action or proceeding toenforce or interpret or for breach of this Agreement, the prevailing Party in that action orproceeding shall be entitled to recover its costs and expenses (including reasonable attorneys’fees).     16. Execution and Counterparts. This Settlement Agreement may be executed in two ormore counterparts, each of which when executed shall be deemed an original and all of whichtogether shall constitute a single instrument. The Parties agree that facsimile signatures shallbe deemed effective as original signatures.
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     IN WITNESS WHEREOF, each of the parties, individually or by its duly authorizedrepresentative, has entered into this Settlement Agreement as of the date first above written.       **AVANIR PHARMACEUTICALS**              /s/ Keith A. Katkin         By: Keith Katkin    Its: President and Chief Executive Officer         **DR. NEAL R. CUTLER**              /s/ Neal R. Cutler       [Signature Page to Settlement Agreement]