Document:

Exhibit 10.22

 

Exhibit 10.22

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “***”. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE
EXCHANGE ACT OF 1934.

 

DEVELOPMENT

AND

LICENSE AGREEMENT

between

Eurand, Inc.

and

Avanir Pharmaceuticals, Inc.

For a Controlled Release Neurodex® Capsule

 

CONFIDENTIAL

 

 

DEVELOPMENT AND LICENSE AGREEMENT

PREAMBLE

     THIS DEVELOPMENT AND LICENSE AGREEMENT (the “Agreement”, as hereinafter defined) dated as of
August 7, 2006 (the “Effective Date”), is by and between Eurand, Inc., incorporated in Nevada with
its principal offices at 845 Center Dr., Vandalia, Ohio 45377 (“EURAND”) and Avanir
Pharmaceuticals, Inc. incorporated in California with its principal offices at 11388 Sorrento
Valley Road, Suite 200, San Diego, CA 92121 (“AVANIR”).

RECITALS:

     A. EURAND is the owner or licensee of certain technology including processes, patents, trade
secrets, trademarks and know-how for the development and manufacture of orally administered
pharmaceutical formulations, including controlled release technologies.

     B. AVANIR desires that EURAND undertake a development project (“Program”, as hereinafter
defined) directed towards developing a pharmaceutical product (“Product”, as hereinafter defined).

     C. AVANIR also desires to receive a license from EURAND to use, sell and offer for sale the
Product in the Territory (as hereinafter defined).

     D. EURAND is willing to undertake such a Program and to grant such a license on the terms and
conditions set forth hereinafter.

     E. EURAND and AVANIR also desire to enter into a related agreement pursuant to which EURAND
will exclusively manufacture and supply the Product to AVANIR and/or its sublicensees in the
Territory.

     NOW, THEREFORE, in consideration of the agreements and covenants hereinafter set forth and
intending to be legally bound hereby, EURAND and AVANIR hereto agree as follows:

1. DEFINITIONS. The following capitalized terms shall have the following meanings when
used in this Agreement and all terms defined in the singular will have the same meanings when used
in the plural (and vice versa), unless otherwise specified. Further, the word “including”
or any variation thereof means “including without limitation” and the word “including” or
any variation thereof will not be construed to limit any general statement which it follows to the
specific or similar items or matters immediately following it.

     1.1 “AAA” shall have the meaning set forth in Section 13.15(a).

     1.2 “Act” means the United States Federal Food, Drug and Cosmetic Act, as amended from
time to time.

     1.3 “Action” shall have the meaning set forth in Section 8.7(b).

     1.4 “Affiliate” means, with reference to any Entity, any other Entity, directly or
indirectly controlling, controlled by or under common control with such Entity and, for purposes of
this Section 1.4

 

 

only, “control” means (a) in the case of corporate Entities direct or indirect beneficial
ownership of more than fifty percent (50%) of the voting stock or shares entitled to vote for the
election of directors, (b) in the case of non-corporate Entities direct or indirect ownership of
more than fifty percent (50%) of the equity interest with the power to direct the management and
policies of such non-corporate Entities and (c) in the case of any other Entity, the right or power
to appoint more than one-half of the Board of Directors or senior management of an Entity or
otherwise having effective control of the Entity.

     1.5 “Agreement” means this Development and License Agreement, together with all
exhibits annexed hereto.

     1.6 “API” or “APIs” means the active pharmaceutical ingredient
dextromethorphan hydrobromide (Chemical Abstracts Registry #125-69-9) or quinidine sulfate
(Chemical Abstracts Registry #56-54-2) separately, or dextromethorphan hydrobromide and quinidine
sulfate together.

     1.7 “Applicable Laws” means the applicable provisions of all laws, treaties,
ordinances, judgments, decrees, directives, injunctions, orders of any court, arbitrator or
governmental agency or authority, rules, regulations, interpretations, authorizations and
Applicable Permits of any international, national, regional, local or other governmental body,
agency, authority, court or Entity having jurisdiction over or related to the development,
registration, manufacture, pricing, sale and use of the Product, as may be in effect from time to
time.

     1.8 “Applicable Permits” means all waivers, exemptions, variances, permits, licenses
or similar approvals, including, without limitation, pricing clearances and registrations by health
or other government entities, required to be obtained or maintained under Applicable Laws in
connection with the development, registration, manufacture, pricing, marketing, sale and use of the
Product.

     1.9 “Approval Date” means the date on which Regulatory Approval is granted for the
Product on a country by country basis in the Territory.

     1.10 “AVANIR Development Activities” shall have the meaning set forth in Section
2.1(f).

     1.11 “AVANIR Intellectual Property Rights” means those intellectual property rights of
AVANIR or any of its Affiliates, including the Patent Rights relating to the Drug Combination that
are used in connection with or embodied in the Product including the patents and applications set
forth in Exhibit C hereto.

     1.12 “Business Day” means any day other than a day which is a Saturday, a Sunday or
any day banks are authorized or required to be closed in Ohio, California, or Italy.

     1.13 “Calendar Day” means any day, including Saturdays, Sundays and holidays.

     1.14 “Calendar Quarter” means each of the consecutive three (3) month periods ending
March 31, June 30, September 30, and December 31; provided, however, that the first
(1st) Calendar Quarter under this Agreement will be the period beginning on the
Effective Date and ending on the end of the Calendar Quarter in which the Effective Date is
encompassed.

     1.15 “Calendar Year” means, for the first Calendar Year, the period beginning on the
Effective Date and ending December 31, 2006, and for each Calendar Year thereafter, each successive
period beginning on January 1 and ending twelve (12) consecutive calendar months later on December
31; provided, however, that the last Calendar Year of the Term will be the period beginning on
January 1 and ending on the effective date of expiration or termination of the Term.

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     1.16 “cGMP” or “GMP” means FDA current Good Manufacturing Practices as in
effect at any given time, based on statutory authority and presently set forth as regulations in
Parts 210 and 211 of the United States Code of Federal Regulations and all applicable FDA rules,
regulations, guides and guidances, as amended from time to time and in effect during the Term.

     1.17 “Clinical Studies” means any testing, use or administration of the CTM or Product
in animals or humans in preparation for obtaining Regulatory Approval to commercialize Product in
the Territory, including, but not limited to, bioequivalence studies, pharmacokinetic studies,
and/or clinical efficacy studies.

     1.18 “Combination Product(s)” shall have the meaning set forth in Section 1.44.

     1.19 “Commercially Reasonable Efforts” or “Commercially Reasonable” means,
with respect to either Party, the efforts, resources, and criteria which would be used by that
Party consistent with prevailing pharmaceutical industry standards for a company of similar size
and scope to such Party with respect to a product or potential product at a similar stage in its
development or product life and of similar market potential taking into account efficacy, safety,
the anticipated regulatory authority approved labeling, the competitiveness of alternative products
in the market place or under development, the patent and other proprietary position of the Product
and of Third Parties, the likelihood of obtaining all Applicable Permits, and the commercial value
of the Product and other relevant factors.

     1.20 “Commercial Supply Agreement” means that agreement to be negotiated and entered
by the Parties pursuant to Section 3.3.

     1.21 “Competitive Product” means any ***  which is not ***.

     1.22 “Confidential Information” shall have the meaning set forth in Section 13.2.

     1.23 “CTM” (i.e., “clinical trial material”) means presentations and quantities of the
Product that meet the Specifications and have been produced under cGMP conditions for use in
Clinical Studies.

     1.24 “Cure Period” shall have the meaning set forth in Section 11.6(a).

     1.25 “Data” means all data resulting from AVANIR’s in vitro testing or Clinical Studies.

     1.26 “Development Milestones” means the events defined in Section 6.3.

     1.27 “Development Payments” means the payments due EURAND upon achieving the
Development Milestones under Section 6.3.

     1.28 “DMF” means the Drug Master File developed and filed with the FDA by EURAND which
relates to and describes the composition and manufacture of the Product (including all
manufacturing batch records, stability information, quality control and assurance assays and
procedures for the Product that are reasonably necessary for the chemistry and manufacturing
controls section of an NDA.

     1.29 “Drug Combination” means any combination of the APIs.

 

			
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     1.30 “Effective Date” shall have the meaning set forth in the Preamble.

     1.31 “Entity” or “Entities” means any individual, partnership, association,
joint venture, limited liability company, corporation or other business entity.

     1.32 “EURAND Development Activities” means those activities to be carried out by
EURAND in connection with the Program.

     1.33 “EURAND Intellectual Property Rights” means those intellectual property rights
which are *** or *** to ***, or any of *** on and as of the Effective Date,
*** the *** and ***, that are *** or *** in the *** and its *** the *** and ***.

     1.34 “EURAND Trademark License” shall have the meaning set forth in Section 7.6.

     1.35 “EURAND Trademarks” shall have the meaning set forth in Section 7.6.

     1.36 “FDA” means the United States Food and Drug Administration, and corresponding
governmental regulatory agencies in other countries within the Territory.

     1.37 “First Commercial Sale” means the first bona fide sale, in the normal course of
business, of the Product for use or consumption by the general public after the Approval Date.

     1.38 “Force Majeure” means any cause or causes which wholly or partially prevent or
delay the performance of obligations arising under this Agreement. and which are not reasonably
within the control of the non-performing Party and cannot be prevented by applying due care and
economically appropriate means, including but not limited to, fire, floods, explosions, embargoes,
epidemics, war, acts of war (whether war is declared or not), insurrections, riots, civil
commotions, terrorism, the existence or administration of any laws, rules or regulations, strikes,
lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other Party.

     1.39 “Formulation” means both (i) the identification and selection of ingredients,
including the Drug Combination, *** , and (ii) the EURAND Patent Rights and Know-How solely related
to the Product and improvements thereto. For the avoidance of doubt, the definition of Formulation
herein does not include (i) any AVANIR Intellectual Property Rights or (ii) any EURAND Intellectual
Property Rights that existed prior to the Effective Date, or methods, conditions, or batch records
related to the manufacture of the Product. As between EURAND and AVANIR, EURAND shall own the
Formulation, *** the ***, *** and *** EURAND shall have no rights in the Drug Combination standing
alone.

     1.40 “GAAP” means either Generally Accepted Accounting Principles in the United
States, International Financial Reporting Standards or an alternative set of internationally
recognized accounting standards mutually acceptable to both Parties.

     1.41 “IP” shall have the meaning set forth in Section 13.7.

     1.42 “Know-How” means proprietary and confidential know-how, trade secrets, patented
and unpatented inventions, data, formulations, methods, technology and information of a Party.
“Know-How” shall include, without limitation, ideas, designs, processes, techniques, innovations,
discoveries,

 

			
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improvements, and/or analytical methodology used in development, testing, analysis,
manufacture and/or medical, clinical, toxicological testing as well as other scientific data.

     1.43 “NDA” means a New Drug Application under the Act in the United States.

     1.44 “Net Sales” means the aggregate gross sales of the Product invoiced directly by
AVANIR, its Affiliates or sublicensees on a country by country basis, in each case on an
arms-length basis, less:

          (a) ***;

          (b) ***;

          (c) ***;

          (d) ***;

          (e) ***;

          (f) ***;

          (g) ***;

          (h) ***;

          (i) ***, *** and *** in connection with the *** of the Product to *** and to the extent such
*** are remitted to the ***; and

          (j) *** to the extent included in the invoice price and separately identified on the invoice
or other documentation maintained in the ordinary course of business; each of the above, as
determined in accordance with GAAP.

In the event that AVANIR, its Affiliates or their sublicensees sell a Product together with any
other distinct product or active ingredient that does not comprise a Product (“Combination
Product(s)”) pursuant to an agreement with an independent customer specifying (i) a
single price, (ii) other terms of purchase not separately identifying either a price for the
Product or the discounts, allowances, credits and similar adjustments applicable to a sale of the
Product or (iii) a price for the Product which is discounted below the average sale price per unit
of the Product not sold as a Combination Product during the applicable Calendar Quarter in a
particular country more than the amount that all other products are discounted below such other
product’s average sale price per unit not sold as a Combination Product during the applicable
Calendar Quarter in a particular country, the Net Sales of the Product, for the purposes of
determining the Royalty, shall be determined by multiplying the Net Sales of the Combination
Product by the fraction, A/(A+B), where A is the average sale price per unit of the Product during
the applicable Calendar Quarter in a particular country when sold separately in finished form and B
is the average sale price per unit of the other product(s) during the applicable Calendar Quarter
in that same country sold separately in finished form. In the event that such average sale price
per unit cannot be determined for both the Product and the other product(s) in combination, Net
Sales for purposes of determining the Royalty shall be agreed by the Parties based on the relative
value contributed by each

 

			
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component, such agreement not to be unreasonably withheld nor shall such agreement have the effect
of reducing the Net Sales of the Product by more than fifty percent (50%). Failing agreement on
such relative value contribution within ***  Calendar Days from written notice
from one Party to the other, the dispute resolution procedures set forth in this Agreement shall be
employed.

     1.45 “***” means a *** and the *** to the current ***.

     1.46 “Nonparticipating Party” shall have the meaning set forth in Section 8.7(d).

     1.47 “Party” means either EURAND or AVANIR, or their successors as the case may be,
and “Parties” means EURAND and AVANIR, collectively.

     1.48 “Patent Rights” means patents and applications for patents including
continuations, divisionals, reissues, re-examinations, and patents issuing from these and any
foreign counterparts thereof.

     1.49 “Pilot Clinical Study” means the first Clinical Study whereby AVANIR is seeking
to *** of the Product.

     1.50 “Pivotal Clinical Study” means a Clinical Study whereby AVANIR is seeking to ***
the *** of the Product.

     1.51 “PK Profile” shall have the meaning set forth in Section 2.1(d).

     1.52 “Pre-Registration Activities” means those activities that are necessary
prerequisites to the preparation and filing of the NDA for the Product with the FDA consisting of:
(i) filing and/or updating the DMF, (ii) completing stability studies as necessary for such NDA
filing, and (iii) conducting Clinical Studies.

     1.53 “Product” means the ***.

     1.54 “Product Rights” shall have the meaning set forth in Section 7.4.

     1.55 “Program” means the development work conducted by both Parties under this
Agreement as specified in the Proposal and such other work as mutually agreed upon by the Parties
from time to time during the Term, including, without limitation, any additional work associated
with changes agreed under Section 2.2.

     1.56 “Program Initiation” means the initiation of the EURAND Development Activities
within five (5) Business Days of August 21, 2006.

     1.57 “Proposal” shall have the meaning set forth in Section 2.1(b).

     1.58 “Regulatory Approval” means granting of all the Applicable Permits necessary for
the commercialization of the Product including, but not limited to pricing, in a country of the
Territory.

 

			
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     1.59 “Regulatory Filings” means any filing under the Act in the United States, or a
corresponding filing required in other countries of the Territory, in which AVANIR, or its
sublicensee, is seeking Applicable Permits, including any NDA.

     1.60 “Royalty” means the royalties due EURAND on Net Sales of the Product by or on
behalf of AVANIR, its Affiliates or any sublicensee in accordance with Section 10.

     1.61 “Sales Milestones” means the events defined in Section 6.4.

     1.62 “Specifications” means the specifications for the Product as agreed upon in
writing and as amended from time to time by the Parties.

     1.63 “Stage” means the subsections under the EURAND Development Activities as outlined
in the Proposal.

     1.64 “Sublicensing Revenue” means with respect to Product only, any fees, including
without limitation, up-front, milestone, or other license, marketing, development, or technology
access payments or other consideration received by AVANIR or its Affiliates,
*** , from a sublicensee, or acquirer in the event of a divestment pursuant to
Section 7.4, in conjunction with any sublicense or commercialization agreement regarding the
Product. For the avoidance of doubt, Sublicensing Revenue (i) shall not include *** (ii) shall
include ***, and (iii) shall not include *** provided ***.

     1.65 “Term” shall have the meaning set forth in Section 11.1.

     1.66 “Territory” means the world.

     1.67 “Third Party” means any Entity other than EURAND or AVANIR or their respective
Affiliates.

     1.68 “Third Party Infringement” shall have the meaning set forth in Section 8.7(a).

     1.69 “Third Party Payments” shall have the meaning set forth in Section 10.1(c).

     1.70 “Trademark” means trademarks, trade names, brand names, copyrights, logo types,
symbols, service marks, designs, domain names and URLs, including, without limitation,
registrations and applications for registrations thereof and all renewals, modifications and
extensions thereof.

     1.71 “United States” means the United States of America, its territories, possessions,
and jurisdictions in commonwealth with it.

     1.72 “***” means means (i) *** in an *** and *** within the *** , (ii) a *** in *** to *** to
*** , or (iii) any *** in *** that is *** or *** to *** that has ***; in each case provided that
such *** (a) *** or *** not ***, (b) ***, or *** or *** in a *** of a *** or *** that is *** or ***
the *** for *** and (c) has ***.

2. PROGRAM

     2.1 General.

 

			
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          (a) AVANIR hereby engages EURAND, and EURAND hereby agrees to conduct the EURAND Development
Activities in accordance with the Program, the Specifications, and the terms and conditions of this
Agreement.

          (b) The EURAND Development Activities will be conducted as initially set forth in the product
development proposal (attached as Exhibit A (“Proposal”)). EURAND shall assign
professionally qualified personnel to perform the EURAND Development Activities and shall perform
the EURAND Development Activities in compliance with the requirements of Applicable Laws, including
cGMPs when appropriate. EURAND may delegate all or any portion of the EURAND Development
Activities to one or more of EURAND’s Affiliates, provided that any such Affiliate will be bound by
the terms and conditions of this Agreement, and that EURAND shall remain responsible for its
obligations under this Agreement.

          (c) EURAND shall initiate the EURAND Development Activities promptly after the Effective Date,
and EURAND shall carry out the EURAND Development Activities in accordance with the proposed
timelines. AVANIR shall cooperate with EURAND in carrying out the Program. Each Party shall make
available such of its scientific, regulatory, clinical, engineering, manufacturing and other
personnel necessary to perform its respective responsibilities in accordance with the terms hereof.

          (d) Prior to the completion of Stage 1 of the Proposal the Parties shall meet and agree in
writing on the pharmacokinetic profile (the “PK Profile”) and reasonable acceptance criteria (e.g.,
including the acceptable deviation from the agreed upon PK Profile) to be pursued in the Pilot
Clinical Study.

          (e) With the exception of ***  activities, EURAND shall *** pertaining to
an *** the Proposal without *** . AVANIR shall not be liable for any costs or expenses incurred by
EURAND or any other payments set forth in this Agreement in respect of *** conducted in ***.

          (f) AVANIR, at its sole discretion and expense, will be solely responsible for, conducting all
aspects of the development of the Program other than the EURAND Development Activities (the “AVANIR
Development Activities”), including, without limitation, determining the clinical and regulatory
strategy for the Product, the conduct of any and all Clinical Studies, and the filing and
maintenance of all Regulatory Filings, with the exception of the filing and maintenance of the DMF.

          (g) The Parties shall use prudence and reasonable care in the use, handling, storage,
transportation, disposition and containment of the APIs, Formulation, CTM, and Product resulting
from the EURAND Development Activities. The Parties agree that the APIs, Formulation, CTM, and
Product will be used in compliance with all applicable statues and regulations, including without
limitation those governing disposal of hazardous materials.

          (h) In connection with the EURAND Development Activities, AVANIR shall procure and supply to
EURAND, such quantities of the APIs which EURAND may reasonably require, or as otherwise agreed in
writing between the Parties. ***. Prior to receipt by EURAND of the APIs, AVANIR shall provide
EURAND with all material information in AVANIR’s possession pertaining to procedures and warnings
for the safe handling and use of the APIs, including, without limitation, material data safety
sheets, and update the same during the course of the Agreement. AVANIR shall provide the APIs to
EURAND at no cost to EURAND and such APIs shall meet AVANIR’s established specifications for the
APIs. AVANIR shall deliver to EURAND with each such shipment of API a

 

			
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certificate
of analysis stating that the API meets its specifications and has been
manufactured in accordance with cGMP. Title and risk of loss for all APIs supplied to EURAND by
AVANIR in accordance herewith, other than due to EURAND’s negligence, shall be and remain at all
times with AVANIR. For the purposes of initiating the EURAND Development Activities, AVANIR shall
provide EURAND with *** of each API.

     2.2 Program Changes. The Parties acknowledge that the nature of the development
process is such that modifications to the Program (including modifications relating to the
acquisition of additional equipment and materials) may be desirable or reasonably necessary at
certain times for regulatory, legal, commercial or other reasons. In the event that either of the
Parties believes that changes to the Program are required, that Party shall promptly notify the
other Party in writing of the exact nature of such changes and the specific reasons therefor. The
Parties shall then meet promptly to discuss the changes that may be needed. If the Parties agree
that changes in the Program are required, the Parties shall amend the Program to reflect the
necessary changes, and also to set out any appropriate change in cost or time necessary to
fulfill the Program. Any mutually agreed increase in cost due to expansion of the Program shall be
borne wholly by AVANIR ***.

3. SUPPLY OF CLINICAL AND COMMERCIAL MATERIAL

     3.1 Clinical Supply.

          (a) The Parties will mutually define specific quantities and timing for the manufacture and
delivery of CTM for any and all Clinical Studies required during the Program and for purposes of
obtaining all Applicable Permits.

          (b) Each shipment of CTM shall be sampled and analyzed by EURAND to determine if the shipment
meets the Specifications. EURAND shall deliver to AVANIR with each such shipment of CTM a
certificate of analysis stating that the CTM meets the Specifications and has been manufactured in
accordance with cGMP and Applicable Laws.

          (c) AVANIR may conduct its own analyses on each shipment of the CTM delivered to AVANIR
pursuant to this Agreement. AVANIR shall notify EURAND within *** Business Days after delivery of
such CTM if there are shortages, or within *** Calendar Days if the same does not meet the
Specifications or terms and conditions of this Agreement, or is adulterated or misbranded within
the meaning of the Act. Unless AVANIR advises EURAND that a shipment is unsatisfactory within ***
Calendar Days of its receipt, or if AVANIR uses such CTM in a Clinical Study, such shipment shall
be deemed accepted.

          (d) In the event any dispute arises between EURAND and AVANIR concerning the acceptability of
any shipment of CTM, the Parties agree to cooperate in good faith to resolve any disputes arising
therefrom and, in the event that the Parties shall be unable to resolve such dispute within ***
Calendar Days from the date of AVANIR’s notice pursuant to this Section 3.1, then if the dispute
involves whether or not the CTM meets the Specifications, the Parties shall submit such dispute to
a mutually agreed-to independent laboratory. The determination by such laboratory shall be final
and binding on the Parties and the costs therefor shall be borne by the non-prevailing Party.
AVANIR shall not dispose of any CTM claimed by it not to comply with the terms and conditions
hereof until resolution

 

			
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of any dispute with respect thereto. EURAND shall supply retained samples to such independent
laboratory for testing. If the dispute concerning the acceptability of any shipment does not
relate to whether the CTM meets the Specifications, the dispute shall be settled in accordance with
Section 13.15 hereof.

          (e) EURAND shall replace, ***  any CTM delivered hereunder that is
rejected in good faith by AVANIR and agreed to by EURAND or that fails to satisfy the
representations and warranties set forth herein, unless subject to a dispute under Section 3.1(d).
EURAND’S LIABILITY UNDER SUCH WARRANTY IS LIMITED TO THE REPLACEMENT OF SUCH CTM, PROVIDED *** AND
***.

          (f) Unless otherwise agreed upon by the Parties, EURAND is not responsible for the conduct,
costs and/or expenses of the Clinical Studies and/or the preparation, filing, and prosecution of
the Regulatory Filings, with the exception of the DMF.

          (g) EURAND shall retain sole responsibility for releasing the CTM to AVANIR or to the clinical
sites if clinical sites have been designated for receipt of the CTM by AVANIR.

     3.2 Delivery. All CTM and Product shall be shipped FCA (Incoterms 2000) EURAND’s
manufacturing facility in the ***, currently located in ***, at AVANIR’s expense via a carrier
identified by AVANIR. Delivery shall occur, and title and risk of loss of such quantities of the
CTM and Product shall pass to AVANIR, upon delivery of such material to such common carrier.
AVANIR shall be responsible for freight and insurance charges.

     3.3 Commercial Supply Agreement. Promptly following the delivery of CTM for the first
Pivotal Clinical Study as indicated by the payment by AVANIR of the Development Payment pursuant to
Section 6.3(e), the Parties shall enter good faith negotiations for the purpose of executing a
Commercial Supply Agreement under which EURAND will exclusively manufacture the Product. Such
Commercial Supply Agreement will include reasonable and customary terms pursuant to which EURAND
will supply the Product at *** to be set initially when the final Specifications for the Product
have been agreed upon by the Parties. Such initial transfer pricing shall *** $*** (for a Product
***). The *** of the Effective Date and is subject to the following assumptions being met: (i)
that the *** of the Product is no later than the end of Calendar Year *** and (ii) that the
Formulation of the Product is not materially different than that which is proposed in the Proposal.
The Parties acknowledge that the *** validation and prior to the Approval Date of the NDA by the
FDA. The Parties further acknowledge that AVANIR’s initial good faith *** for the Product is ***.
The price expressed above shall include all costs for *** or other ***. The Commercial Supply
Agreement shall include provisions under which adjustments to the initial price and subsequent
annual prices may be made by EURAND, including but not limited to, increases in raw material costs,
changes to the Formulation or manufacturing process requested by AVANIR, or changes in Applicable
Laws or practice dictated by *** or the FDA, ***, which *** or ***. The Commercial Supply
Agreement additionally shall assign roles and responsibilities for *** the Product, and include
provisions and circumstances under which EURAND, pursuant to Section 7.2, shall provide ***. Those
circumstances include (i) *** of EURAND, (ii) ***, or (iii)***.

4. REGULATORY

     4.1 During the Program, to the extent required by the FDA to conduct Clinical Studies or to
receive Applicable Permits in the United States, EURAND shall prepare a DMF and submit the DMF to

 

			
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the FDA. EURAND will provide AVANIR with an authorization letter such that AVANIR can
reference the DMF in its Regulatory Filings. *** , and *** a *** and *** but
*** and ***. In the event that a *** hold on the Program or material delay in a regulatory process
is due to the negligence of EURAND in the preparation or submission of the DMF or results in
material deficiencies in the DMF noted by the FDA, *** or *** the ***. The cost of EURAND
personnel associated with resolving such deficiencies shall be solely borne by EURAND. EURAND
shall notify AVANIR of the submission date for the DMF, or any subsequent revisions or amendments
thereto, at least *** Business Days prior to each such submission, and notify AVANIR within ***
Business Days regarding any material issues with respect to the filing or maintenance of the DMF.

     4.2 The Parties shall cooperate fully with each other so as to diligently complete the
Pre-Registration Activities, and shall inform each other regularly *** of the progress of all
Pre-Registration Activities.

     4.3 Following completion of the Pre-Registration Activities, ***, and ***, AVANIR shall ***
submit an NDA for the Product in the United States. EURAND shall have the right to review and
comment upon the portions of proposed protocols and investigator brochures for any Clinical Studies
solely relating to the EURAND Intellectual Property Rights and EURAND’s Confidential Information.
AVANIR shall consider such changes suggested by EURAND in good faith to the extent they are
Commercially Reasonable and comply with Applicable Laws. With exception of the DMF, it is
understood that the Parties’ intentions are to have AVANIR prepare and make all other necessary
filings with the FDA required to seek Regulatory Approval in the United States. EURAND agrees,
upon written request from AVANIR, to promptly provide AVANIR with such information as AVANIR may
reasonably require to complete any and all such regulatory filings and submissions, unless such
information is contained in the DMF in which case the information will be filed with the DMF.
AVANIR shall own and be the holder of the NDA and the Applicable Permits and EURAND
shall own the DMF with AVANIR, its Affiliates, and sublicensees having full rights to reference
such DMF as necessary for Regulatory Filings worldwide.

     4.4 AVANIR shall notify EURAND of the submission date of each Regulatory Filing at least ***
Business Days prior to such submission, and notify EURAND of the Approval Dates not later than ***
Business Days after each such date. After submitting the Regulatory Filings, AVANIR shall use
Commercially Reasonable Efforts in diligently prosecuting the Regulatory Filings before the FDA so
as to obtain the Applicable Permits for the sale of the Product throughout the Territory as quickly
as feasible. AVANIR shall update EURAND on the status of all Regulatory Filings and Applicable
Permits in the Territory every Calendar Quarter following completion of the Pre-Registration
Activities and thereafter on the status of its progress toward making the First Commercial Sale of
the Product in the United States and throughout the Territory. AVANIR shall notify EURAND within
*** Business Days of the date of First Commercial Sale in each country of the Territory.

     4.5 EURAND and AVANIR shall cooperate with respect to preparing, prosecuting, and maintaining
necessary Regulatory Filings and Applicable Permits.

     4.6 EURAND shall give AVANIR reasonable notice of any impending governmental or Third Party
audit of EURAND that directly relates to the manufacture or testing of the Product or CTM supplied
to AVANIR pursuant to this Agreement or which are of general impact which could reasonably be
expected to materially interfere with EURAND’s ability to perform under this Agreement, and *** or
***. In the event that any such audit involves an inspection of a EURAND facility, then EURAND
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provide AVANIR the opportunity to be on-site during such inspection, provided that AVANIR
acknowledges that EURAND does not control the timing of such inspections and, as such, cannot
guarantee timing that will permit AVANIR’s attendance. AVANIR’s participation in any such audit
shall be limited to that of being an observer. EURAND shall also provide AVANIR the opportunity to
***  Business Days *** or *** or *** and shall *** AVANIR with the results of
*** following its conclusion which are directly related to the Product or CTM; however, while
EURAND will give any comments or suggestions of AVANIR good faith consideration, EURAND shall have
the final discretion in responding to any such audit. EURAND agrees that AVANIR shall have the
right from time to time during the term of this Agreement to carry out an audit of EURAND’s ***
facility for conformance with cGMPs, but not more than once per Calendar Year, unless an audit
results in adverse findings in which case AVANIR shall be entitled to re-audit EURAND with respect
to such adverse findings pursuant to this Section 4.6 without reference to the once per Calendar
Year limitation. AVANIR must provide advanced written notice at least *** Business Days prior to
such audits and audits may only be scheduled at the consent and approval of EURAND, such approval
not to be unreasonably delayed or withheld.

     4.7 Within *** Business Days EURAND shall provide AVANIR with notification of its receipt of
any of the following related to the manufacture or testing of the Product or CTM or that would
materially impair its ability to perform under this Agreement: a copy of any list of observations
(Form FD 483), warning letter, information letter, regulatory letter or the like issued by the FDA
as well as provide AVANIR an opportunity to review any written response and shall consider any
comments by AVANIR in good faith prior to submission to the issuing agency. However, EURAND shall
have sole discretion regarding the resolution of any matter pertaining to such inspections and
submissions.

     5. INFORMATION AND USE.

     5.1 EURAND shall furnish AVANIR with reports summarizing the progress of the Program as
described in the Proposal during the course of the Program, and as requested by AVANIR and mutually
agreed upon by the Parties from time to time.

     5.2 AVANIR shall expressly not analyze, nor have analyzed, the Product or CTM for the purpose
of reverse engineering the EURAND Intellectual Property Rights.

     5.3 AVANIR shall own all Data and shall provide EURAND with the Data. Except pursuant to
Section 5.4 or as otherwise agreed between the Parties in writing, EURAND shall only use the Data
to complete the EURAND Development Activities. EURAND shall *** or *** except in the performance
of this Agreement.

     5.4 For the purposes of demonstrating to Third Parties the benefits of the EURAND Intellectual
Property Rights, EURAND is entitled to disclose to Third Parties the numerical values underlying
the results obtained by or provided to AVANIR and/or the Data, provided that (i) EURAND first
provides such materials to AVANIR for approval, such approval not to be unreasonably withheld, and
(ii) AVANIR’s name, the name of the Drug Combination, or information by which a Third Party could
reasonably determine the identity of the Drug Combination or AVANIR shall not be disclosed.

 

			
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6. COMPENSATION

     6.1 Development Fees.

          (a) EURAND shall invoice AVANIR on or after the last Business Day of each calendar month for
its personnel time, costs and expenses incurred in performance of the Program pursuant to this
Agreement. AVANIR shall also reimburse EURAND for all out-of-pocket expenses associated directly
with the performance of the Program, provided they are disclosed to and approved by AVANIR in
writing in advance.

          (b) EURAND’s monthly invoice shall reflect an ***  $*** until ***; such
rate may be adjusted *** each Calendar Year thereafter by EURAND to reflect reasonable and
customary changes to its billing rates, ***. EURAND’s invoiced personnel time shall *** percent
(***%), unless attributable to changes under Section 2.2, or an additional expense under Section
6.2, or as otherwise agreed to in advance and in writing by AVANIR.

     6.2 Additional Expenses. In addition to the cost estimates set forth in Exhibit
A hereto, AVANIR shall be responsible for the following additional costs and/or expenses:

          (a) the cost of any additional development work performed by EURAND in accordance with Section
2.2;

          (b) the cost of any CTM required for the conduct of additional Clinical Studies not already
included in the Proposal, provided that the manufacture of such material is approved in advance by
AVANIR;

          (c) the cost of any external contract research;

          (d) the packaging of CTM;

          (e) the cost of the APIs; and

          (f) the cost of any dedicated, project-specific consumables or other equipment, if approved in
advance by AVANIR in writing.

     6.3 Development Payments. In consideration of EURAND’s performance of the EURAND
Development Activities, AVANIR shall pay EURAND the following non-refundable Development Payments
in United States dollars upon achievement of the following events (“Development Milestones”):

          (a) $*** upon Program Initiation.

          (b) $*** upon delivery of a *** pursuant to *** of the Proposal *** Calendar Days of ***. In
the event that the ***, or *** as otherwise agreed upon in writing between the Parties, are not
delivered by this date, this payment will be *** $*** and shall be due upon delivery of the ***;
provided, however, if such delivery shall not have occurred *** Calendar Days following Program
Initiation, *** and ***. In the event that AVANIR requires a material change to the requirements
for any of the ***

 

			
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described in this Section 6.3(b), then the Parties shall agree in writing on an appropriate
time extension for delivery of the *** .

          (c) $*** upon delivery of *** of each of *** Formulations of the CTM, or as otherwise agreed
by the Parties in writing, for the Pilot Clinical Study within *** Calendar Days following the
latter of (i) written approval by AVANIR to proceed with CTM *** following the *** pursuant to
Section 6.3(b), or (ii) the date of delivery to EURAND of the APIs necessary for conducting the
EURAND Development Activities pursuant to *** of the Proposal, amounts to be agreed by the Parties
during Stage 1. In the event that the delivery of CTM for the Pilot Clinical Study is not
delivered by this date, this payment will be reduced to $*** and will be due when such CTM is
delivered; provided, however, if such delivery shall not have occurred within *** Calendar Days of
the later to occur of the events set forth in clauses (i) and (ii) of the preceding sentence, ***
and ***. In the event that AVANIR requires a material change to the requirements for any of the
*** selected to be produced as CTM pursuant to this Section 6.3(c), then the Parties shall agree in
writing on an appropriate time extension for delivery of the ***.

          (d) $*** upon achieving the ***, in the Pilot Clinical Study, or any subsequent Clinical
Study. AVANIR shall notify EURAND within *** Business Days of the *** being achieved.

          (e) $*** upon delivery of the CTM for the first Pivotal Clinical Study. Such CTM shall be ***
at a *** that is equal to *** percent (***%) of the *** required for *** of the Product, whichever
is greater.

          (f) $*** upon *** for the Product with the United States FDA.

          (g) $*** upon completion of the ***, which shall be considered complete upon receipt by AVANIR
of the *** of the Product.

          (h) $*** upon the first Approval Date for the Product in the United States.

     6.4 Sales Milestones. AVANIR shall pay EURAND the *** described in subsections
(a)-(c) below (“Sales Milestones”) in United States dollars within *** Calendar Days of achievement
of the corresponding events:

          (a) $*** upon first achieving U.S. $*** in Net Sales of the Product in the *** in any Calendar
Year during the Term.

          (b) $*** upon first achieving U.S. $*** in Net Sales of the Product in the *** in any Calendar
Year during the Term.

          (c) $*** upon first achieving U.S. $*** in Net Sales of the Product in the *** in any Calendar
Year during the Term.

          (d) Each Sales Milestone shall be made only one time and in no event shall more than *** in
this Section 6.4 ***. The highest applicable ***.

 

			
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          (e) If a higher Sales Milestone is paid in lieu of a lower Sales Milestone pursuant to Section
6.4(d) above, then the lower Sales Milestone shall be paid in a subsequent Calendar Year if the
corresponding event is achieved in such subsequent Calendar Year for such lower Sales Milestone.

     6.5 Payments. All payments to EURAND under this Section 6 shall be paid by wire
transfer in U.S. Dollars according to the wire transfer instructions provided by EURAND. AVANIR
shall make payments to EURAND for amounts due under this Section 6 within *** 
Calendar Days of the receipt of the invoice from EURAND. In the event AVANIR fails to pay the
amounts due as set out above within the time agreed, EURAND shall at its discretion impose a late
payment fee on AVANIR equivalent to *** percent (***%) of the outstanding amount due per month,
unless such payment is subject to a good faith dispute between the Parties. EURAND shall submit
invoices to:

Avanir Pharmaceuticals, Inc.

101 Enterprise, Suite 300

Aliso Viejo, CA 92656

Attention: Chief Financial Officer

Fax: (949) 643-6800

7. LICENSE

     7.1 Research License Grant. Subject to the terms of this Agreement, EURAND hereby
grants AVANIR an *** license under the EURAND Intellectual Property Rights and the Formulation, in
the Territory to use the CTM manufactured by EURAND to conduct the Clinical Studies required to
file and maintain the Regulatory Filings.

     7.2 Commercial License Grant. Subject to the terms of this Agreement, EURAND hereby
grants AVANIR an exclusive, royalty-bearing license under the EURAND Intellectual Property Rights
in the Territory to use, offer for sale, import and sell the Product. EURAND hereby grants AVANIR
a license under the EURAND Intellectual Property Rights, in the Territory to make, and have made,
the Product to the extent permitted under the Commercial Supply Agreement.

     7.3 Right to Sublicense. The license grant under Section 7.2, subject to Section 10,
includes the right to grant sublicenses in the Territory by AVANIR provided that:

          (a) AVANIR ***;

          (b) AVANIR pays EURAND the Royalty and Sublicensing Revenue due EURAND under section 10.1; and

          (c) the sublicensee agrees to be bound by all the applicable obligations of this Agreement,
with the exception of the payment of the Royalty and the payment of Sublicensing Revenue pursuant
to Section 10.1(both of which shall be the responsibility of AVANIR); and

          (d) Within *** Business Days of the end of every Calendar Quarter following the First
Commercial Sale, AVANIR shall notify EURAND of any sublicensees that are in default with respect to
the payment of any Sublicensing Revenue. AVANIR shall use commercially reasonable efforts to
collect the Sublicensing Revenue promptly from any sublicensee that is in default. In the event
that the

 

			
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sublicensee fails to pay the Sublicensing Revenue within ***  Calendar
Days of the date the Sublicensing Revenue was originally due for payment, AVANIR shall, upon
EURAND’s request, terminate the sublicense agreement and/or bring and diligently prosecute an
action against the sublicensee for payment. Additionally, nothing under this agreement nor any
sublicense agreement shall obligate EURAND to supply Product to any sublicensee that is in default
with respect to the payment of any Sublicensing Revenue and EURAND shall have the right to
terminate the sale of Product to any sublicensee that is in default until such time as the
sublicensee cures the default.

          (e) For the avoidance of doubt, EURAND shall be the exclusive manufacturer for all of AVANIR
sublicensees’ commercial requirements for the Product pursuant to the Commercial Supply Agreement.

     7.4 Divestment of Product. The license grant under Sections 7.2 and 7.6 includes the
right to transfer Applicable Permits and other intangibles for the Product, and rights under this
Agreement, (“Product Rights”) in the Territory to a Third Party by AVANIR provided that: (i) ***,
(ii) *** (iii) *** and (iv) *** and *** Net Sales of the *** acquirer (or provision is otherwise
made by AVANIR for full payment of such ***). For the purpose of this Agreement, any and all
compensation received by AVANIR as a result of such sale or divestment of the Product Rights shall
be considered Sublicensing Revenue and subject to Section 10.1(d). In the event that AVANIR
receives consideration other than cash for the Product Rights, the compensation payable to EURAND
shall be based on the fair market value thereof, as determined in good faith by the Chief
Commercial Officer of EURAND (or his designee) and the Chief Financial Officer of AVANIR (or his
designee). This Section 7.4 shall only apply to the commercial divestment of the Product Rights by
AVANIR, and shall not apply to (i) any transfer of Applicable Permits to a Third Party solely to
meet governmental or regulatory requirements, so long as commercial sales remain for the benefit of
AVANIR, its Affiliates, or any sublicensees, or (ii) the sale of all, or substantially all, of the
business of AVANIR, whether by merger or otherwise. A sale of all, or substantially all, of the
business of AVANIR, whether by merger or otherwise, shall instead be subject to Section 13.1
hereof. For the avoidance of doubt, the sale of AVANIR or of all or substantially all of its
assets in a merger or acquisition transaction shall not be deemed to be a sale of Product Rights.
AVANIR is hereby expressly permitted to assign the Commercial Supply Agreement to an acquirer of
the Product Rights and such agreement shall contain a provision expressly permitting such
assignment.

     7.5 Retained Rights. Subject to the terms and conditions of this Agreement, EURAND
retains the right to use and/or license others to use the EURAND Intellectual Property Rights for
every purpose or use except for those uses exclusively licensed to AVANIR in Sections 7.1 and 7.2.
Unless and until the Parties agree otherwise EURAND retains all rights to manufacture the Product.

     7.6 Use of EURAND’s Trademark by AVANIR. AVANIR may market the Product under a
Trademark of its choosing. In addition, AVANIR, except where prohibited by Applicable Laws, will
refer to EURAND’s *** (the “EURAND Trademarks”) on the pack, internal leaflet and promotional
material of the Product. For this purpose, EURAND hereby grants AVANIR a non-exclusive license to
use, and sublicense the right to use, the EURAND Trademarks (the “EURAND Trademark License”) in the
sale and marketing of the Product provided the Product has been manufactured by, on behalf of, or
under a license from EURAND. Prior to printing materials containing the EURAND Trademarks, AVANIR
shall use Commercially Reasonable Efforts to send EURAND, not less than *** Business Days prior to
their distribution, a sample of such materials (in final or substantially final form) for prior
approval, which approval shall not be unreasonably withheld or delayed; provided, however, that
AVANIR may make subsequent changes to such materials other than changes to the EURAND

 

			
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Trademarks without subsequent approval from EURAND. AVANIR covenants that its use of the
EURAND Trademarks shall be strictly in accordance with the terms of this Agreement and that all
rights to and ownership of the EURAND Trademarks shall remain with EURAND. The EURAND Trademark
License shall not extend to the sale or marketing of any product which is not manufactured by
EURAND or that is otherwise not in accordance with this Section 7.6.

     7.7 EURAND License. AVANIR hereby grants Eurand a royalty-free license under the
AVANIR Intellectual Property Rights to the extent necessary to enable EURAND to perform the EURAND
Development Activities under the Program and to manufacture and supply CTM and Product in
accordance with this Agreement.

8. INTELLECTUAL PROPERTY

     8.1 Data. AVANIR shall exclusively own the Data, provided that EURAND may use the
Data subject to and in accordance with Sections 5.3 and 5.4.

     8.2 Formulation. EURAND shall exclusively own the Formulation, subject to the
licenses to AVANIR in accordance with Section 7. Upon receipt by EURAND of
***  shall ***. For the avoidance of doubt, *** under this Section 8.2 shall
not include, by implication or any other theory, any ownership rights under the EURAND Intellectual
Property Rights. Accordingly, ***, AVANIR shall be entitled to enforce its rights in the *** to
prevent Third Parties from making, having made, using, or selling the Product but, absent the
licenses granted under Sections 7.1 and 7.2 above, AVANIR shall not have the right to use, sell, or
offer for sale the Product itself.

     8.3 Know-How.

          (a) Know-How developed by either Party or jointly by the Parties during the course of the
performance of this Agreement, including any Patent Rights related thereto, shall be:

               (i) ***

               (ii) ***.

          (b) Each Party shall be free to use and practice such Know-How owned by it without the consent
of the other and without an obligation to notify the other Party of such intended use or to pay
royalties or other compensation to the other by reason of such use, provided such use, disclosure
or license does not conflict with the rights granted to the other Party under this Agreement.

     8.4 Patents.

          (a) Each Party shall be responsible, at its own expense, for filing and prosecuting patent
applications with respect to the Patent Rights owned by it, as it deems appropriate, and for paying
maintenance fees on any patents issuing therefrom during the Term. Each Party shall promptly
render all necessary assistance reasonably requested by the other Party, at such other Party’s
expense, in applying for and prosecuting patent applications based on Know-How owned by such other
Party under this Agreement.

 

			
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          (b) With respect to the Patent Rights included in the Formulation, EURAND shall prepare, file,
prosecute, maintain and extend any and all Patent Rights related to the Formulation in the United
States, the United Kingdom, France, Germany, Spain, Italy, Japan and such other countries as the
Parties may mutually agree. EURAND’s right and obligation shall ***  hereof
until such time as the patents issue. Upon ***, EURAND’s prosecution of the Patent Rights included
in the Formulation shall be at AVANIR’s expense. Notwithstanding the foregoing, EURAND will
provide copies of all such applications and all material correspondence relating thereto to AVANIR
and AVANIR shall have the right to review the same and to make recommendations to EURAND concerning
them and their prosecution, which recommendations EURAND shall consider in good faith. In the
event that EURAND desires to file and prosecute Patent Rights relating to the Formulation in a
country in which AVANIR does not desire to prosecute such Patent Rights, EURAND may do so at its
own expense and the foreign application will, from its inception, be treated as an application
owned by EURAND under Section 8.4(f) below. At any time EURAND may elect to relinquish its rights
with respect to the filing, prosecution and maintenance of the Patent Rights relating to the
Formulation to AVANIR, provided that EURAND gives AVANIR sufficient advance notice in writing and
that in relinquishing such rights EURAND does not jeopardize or prejudice the Patent Rights
relating to the Formulation in any material way.

          (c) Any information contained in a patent filing by a Party under this Agreement shall be
subject to the confidentiality provisions of Section 13.2, and the Confidential Information of a
Party may not be used by the other Party in a patent filing without the express written consent of
such first Party.

          (d) Each Party represents and warrants that each of its employees, Affiliate’s employees,
consultants or agents who will have responsibilities and will conduct activities under this
Agreement have entered into an agreement that provides for assignment to such Party of all
inventions made by such person during the course of his or her performance of responsibilities and
activities under the Agreement.

          (e) Each Party shall keep the other Party advised as to all material developments with respect
to all filing, prosecution and maintenance of Patent Rights arising under this Section 8.4 by
providing to such other Party a copy of all patent applications and material written
communications, relating thereto, received from or sent to the patent and trademark offices within
the Territory, within *** Calendar Days of the date on which such communications are received or
sent by such first Party.

          (f) If EURAND decides to discontinue the prosecution or maintenance of any of the Patent
Rights it owns per Sections 8.2 or 8.3(a)(i) of this Agreement, EURAND shall provide written notice
to AVANIR at least *** Calendar Days prior to any patent bar date or any due date for payment or
any other action, and AVANIR shall then be free to file or to continue the prosecution or
maintenance of any such application, and to maintain any patent issuing thereon in the U.S. and in
any foreign country at its sole expense. Any such patents shall then become the property of AVANIR
at no additional consideration (except, for the avoidance of doubt, the obligation to pay EURAND
the Royalty or percentage of Sublicensing Revenue pursuant to Section 10.1, the Development
Payments pursuant to Section 6.3, and the Sales Milestones pursuant to Section 6.4) and EURAND will
execute and deliver such patent assignment and other documents to effect such transfer as
reasonably requested by AVANIR.

          (g) If AVANIR decides to discontinue the prosecution or maintenance in the United States, the
United Kingdom, France, Germany, Spain, Italy or Japan of any of the Patent Rights pertaining to
the Formulation, AVANIR shall give EURAND written notice of at least *** calendar days prior to

 

			
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any patent bar date or any due date for payment or any other action, and EURAND shall then be
free to file or to continue the prosecution or maintenance of any such application, and to maintain
any patent issuing thereon in the United States, the United Kingdom, France, Germany, Spain, Italy
or Japan at its sole expense. Any such patents shall then become the property of EURAND at no
additional consideration and AVANIR will execute and deliver such patent assignment and other
documents to affect such transfer as reasonably requested by EURAND. AVANIR shall continue to
possess the licenses granted pursuant to this Agreement in respect of any such Patent Rights and
shall be obligated to continue to pay any Royalties or Sublicensing Revenue due.

     8.5 Infringement. In the event that a claim of infringement of a Third Party’s Patent
Rights is made or brought against either Party, the Party receiving such claim shall promptly
inform the other Party, and the Parties shall consult with each other in order to develop a
strategy for addressing the alleged infringement. Each Party shall reasonably cooperate with the
other in any investigations undertaken to determine any potential infringement. To the extent the
alleged infringement relates solely to the use of the EURAND Intellectual Property Rights, EURAND
shall take one or more of the following actions at *** :

          (a) ***

          (b) ***

          (c) ***.

     8.6 To the extent the alleged infringement (a) does not relate to the EURAND Intellectual
Property Rights or (b) arises under 35 USC Section 271(e)(2), AVANIR shall, at its sole cost and
expense, defend the claim and indemnify and hold EURAND harmless.

     8.7 Third Party Infringement of Patents.

          (a) To the extent related to or involving any Competitive Product, each Party shall promptly
report in writing to the other Party during the Term any (i) known infringement or suspected
infringement of any of the patented inventions in the *** or the ***, (ii) unauthorized use or
misappropriation of Confidential Information or *** by a Third Party, or (iii) known infringement
or suspected infringement relating to either the Formulation or Product (in each case, “Third Party
Infringement”) of which it becomes aware, and shall provide the other Party with all available
evidence indicative of said infringement, suspected infringement or unauthorized use or
misappropriation.

          (b) In the event of a report of a Third Party Infringement under Section 8.7(a), EURAND and
AVANIR shall consult with each other in order to develop a strategy for addressing the Third Party
Infringement. Pursuant to such strategy, *** shall have the right, but not the obligation, to
commence and control any Action against Third Party Infringement at its own expense. An “Action”
for purposes of this Section 8.7 shall be any legal action or proceeding, or the filing of any
counterclaim. In the event that *** elects not to bring an Action or fails to do so within ***
Calendar Days after the consultation contemplated by this Section 8.7, *** shall have the right to
do so jointly with ***, or if *** is not agreeable to bringing the action jointly, *** shall have
the right to bring the Action alone, but only if it pertains solely to infringement of *** or
misappropriation of ***.

 

			
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          (c) In any Action pursuant to Section 8.7(b), any damages or other recovery, including
compensatory and other non-compensatory damages or recovery actually received from a Third Party,
shall be allocated first to reimburse the costs and expenses, including reasonable attorneys’ fees
and expert witness fees, of the Party commencing such Action and then to reimburse the other Party,
if any, for such costs and expenses. If the Parties pursued such Action jointly, they shall be
reimbursed pari passu. Reimbursement shall be made first from any compensatory damages including
attorneys’ fees and costs recovered. If any balance remains of the damages or other recovery made
from the Third Party after such reimbursement, the balance shall be shared *** 
percent (***%) to AVANIR and *** percent (***%) to EURAND. If EURAND pursues such Action pursuant
to Section 8.7(b) alone, then EURAND shall retain the entire balance of the damages received from
such Third Party.

          (d) In the event that a Party (the “Nonparticipating Party”) does not desire to participate in
an Action, ***, if necessary, but such *** shall be under no obligation to *** except to the extent
that such *** is *** as the *** of ***. The Nonparticipating Party shall also offer reasonable
assistance in connection therewith at no charge to the other Party except for reimbursement of
reasonable out-of-pocket expenses. If either Party desires to retain counsel independently, at its
own expense, the Party may do so, but it shall not relieve the Party of its obligations under this
section.

9. REPRESENTATIONS AND WARRANTIES

     9.1 By Both Parties.

          (a) Each Party represents and warrants to the other that it is authorized to enter into and to
perform its obligations under this Agreement.

          (b) Each Party represents and warrants to the other that its obligations created under this
Agreement do not conflict in any manner with any of its previous obligations.

          (c) Neither Party warrants that the performance of the Program will result in a commercially
viable Formulation or Product.

     9.2 By EURAND.

          (a) Subject to Section 8.4(f), EURAND covenants, in good faith, to prosecute and maintain the
Patent Rights included in the *** in the Territory and with respect to the rights in *** that arise
under *** from others, EURAND covenants to maintain those *** in full force and effect.

          (b) EURAND represents that to the best of its knowledge as of the Effective Date there are no
pending or threatened claims or legal actions asserting that the patents included in the EURAND
Intellectual Property Rights are invalid or unenforceable in the Territory or infringe Third Party
rights.

          (c) EURAND shall not, during the Term, ***, ***, ***, or *** or ***. For the avoidance of
doubt, the foregoing provision shall not be construed to prevent EURAND from *** or *** or *** or
***, or ***.

 

			
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          (d) EURAND warrants that the CTM supplied to AVANIR will as appropriate: (i) meet the
Specifications; (ii) be manufactured in accordance with the DMF (if applicable), (iii) be produced
in a facility and in a manner compliant with cGMP and all other Applicable Laws, rules,
regulations, guides and guidances of other jurisdictions as in effect from time to time where
Product manufactured pursuant to this Agreement is destined for use or sale; and (iv) when shipped,
shall not be adulterated or misbranded within the meaning of the Act.

          (e) EURAND warrants with respect to the Formulation (excluding the Drug Combination) that as
of the Effective Date EURAND is not aware of any quality, toxicity, safety, or efficacy issues that
would impair the approval of commercial sale of the Product.

          (f) EURAND represents and warrants that it will not use in any capacity, in connection with
the services or activities to be performed under this Agreement, any person who has been debarred
pursuant to Section 306 of the Act, or who is the subject of a conviction described in such
section. EURAND agrees to inform AVANIR in writing promptly if it or any person who is performing
services hereunder is debarred or is the subject of a conviction described in Section 306, or if
any action, suit, claim, investigation or legal or administrative proceeding is pending or is
threatened, relating to the debarment or conviction of such Party or any person performing services
hereunder.

          (g) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, EURAND EXPRESSLY
DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ALL WARRANTIES
WITH RESPECT TO THE EURAND INTELLECTUAL PROPERTY RIGHTS, THE FORMULATION, THE CTM OR THE PRODUCT,
WHETHER AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER MATTER.

     9.3 By AVANIR.

          (a) Subject to Section 8.4(g), AVANIR covenants, in good faith, to maintain in the United
States, the United Kingdom, France, Germany, Spain, Italy and Japan any of the issued claims
included within the Patent Rights, to the extent they relate to ***  pursuant
to Section ***.

          (b) AVANIR represents that to the best of its knowledge as of the Effective Date there
are no pending or threatened claims or legal actions asserting its use of the Drug Combination
under this Agreement will, in the Territory, constitute an infringement of any patents, trade
secrets, or other industrial or intellectual property rights.

          (c) AVANIR shall not, during the Term, develop, manufacture, market, or assist any Third Party
in developing, manufacturing or marketing a Competitive Product, nor any extended release product
containing any combination of dextromethorphan hydrobromide with any metabolism inhibitor, nor any
extended release version of dextromethorphan hydrobromide or quinidine sulfate.

          (d) AVANIR will not and will cause its Affiliates and sublicensees not to analyze any of the
samples, prototypes or CTM provided hereunder for the purpose of reverse engineering the EURAND
Intellectual Property Rights.

          (e) AVANIR warrants that the API supplied to EURAND will as appropriate: (i) meet the
Specifications; (ii) be produced in a facility and in a manner compliant with cGMP and all other

 

			
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Applicable Laws; and (iii) when shipped, shall not be adulterated or misbranded within the
meaning of the Act.

          (f) AVANIR represents and warrants that it will not knowingly use in connection with the
conduct of clinical trials of the Product, any person who has been debarred pursuant to Section 306
of the Act, or who is the subject of a conviction described in such section. AVANIR agrees to
inform EURAND in writing promptly if it or any person who is performing such services hereunder is
debarred or is the subject of a conviction described in Section 306, or if any action, suit, claim,
investigation or legal or administrative proceeding is pending or is threatened, relating to the
debarment or conviction of such Party or any person performing services in connection with the
conduct of clinical trials on the Product.

          (g) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, AVANIR EXPRESSLY DISCLAIMS ALL
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ALL WARRANTIES WITH RESPECT TO
THE AVANIR INTELLECTUAL PROPERTY RIGHTS, THE DRUG COMBINATION, THE API, AND THE PRODUCT, WHETHER AS
TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER MATTER.

10. ROYALTY 

     10.1 Payment.

          (a) AVANIR shall pay EURAND a Royalty of ***  percent ***%) of the Net
Sales of the Product sold by AVANIR, its Affiliates, and their sublicensees in the *** for the Term
of the Agreement; provided that any such payment shall be made ***. AVANIR shall pay EURAND a
Royalty of *** percent (***%) of the Net Sales of the Product sold by AVANIR, its Affiliates, and
their sublicensees in the *** for *** years from the ***; in the event that *** is in effect.

          (b) In the event that a court or a governmental agency of competent jurisdiction requires
AVANIR, its Affiliates or any of their sublicensees to grant a compulsory license to a Third Party
permitting such Third Party to sell the Product in the United States, then for the purposes of
calculating the Royalty for the Product, if any, the applicable royalty rate shall be reduced to
that applicable to the compulsory license, if lower.

          (c) The statements in Sections 9.2(b) and 9.3(b) notwithstanding, the Parties acknowledge
that, during the Term, *** or *** may be *** from *** or *** and ***. Subject first to EURAND’s
rights and obligations under Section 8.5, ***. If EURAND is unable to effect any of the actions
described in Section 8.5, and as a result of AVANIR *** (collectively, “***”) solely in order for
AVANIR to practice the EURAND Intellectual Property Rights granted in Sections 7.2 and 7.6 without
infringing such Third Party’s rights, ***, other than *** as described in Section 6.1 or the ***
for Product *** EURAND. Any ***. AVANIR shall be entitled to *** (i) to the extent ***, and (ii)
only with respect to ***. For the avoidance of doubt, EURAND will have no obligation to make any
payments to either AVANIR or to such Third Party under this Section 10.1(c) in order for AVANIR to
practice its rights under the EURAND Intellectual Property Rights.

 

			
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          (d) AVANIR shall pay EURAND a portion of any and all Sublicensing Revenue received by AVANIR
or its Affiliates from sublicensees in respect of rights to sell and sales of the Product outside
the United States in the following manner: (i) ***  percent (***%) if AVANIR
does not have an obligation to pay The Center for Neurological Studies in San Diego, CA a portion
of the Sublicensing Revenue equal to *** percent (***%) or ***, or (ii) *** percent (***%) if
AVANIR does have an obligation to pay The Center for Neurological Studies in San Diego, CA a
portion of the Sublicensing Revenue equal to *** percent (***%) or ***. Sublicensing Revenue
received by AVANIR or its Affiliates in currencies other than U.S. Dollars shall be converted to
U.S. Dollars using the rate of exchange prevailing at the Chemical Bank, New York, NY (or such bank
as EURAND and AVANIR mutually agree from time to time), for the last Business Day of the applicable
period.

          (e) In any jurisdiction outside the United States where AVANIR sells Product on its own behalf
or through Affiliates, AVANIR shall pay to EURAND, in lieu of the payments due pursuant to Section
10.1(d), a Royalty on such Net Sales at a rate that bears the same percentage relationship to the
applicable rate paid in the United States pursuant to Section 10.1(a), as the *** of the Product in
such jurisdiction during the applicable Calendar Quarter *** in the United States during the
applicable Calendar Quarter. Notwithstanding the foregoing, the royalty rate effective pursuant to
this Section 10.1(e) shall not be reduced below a minimum royalty rate of *** percent (***%).

          (f) No later than *** Calendar Days after the end of each Calendar Quarter, AVANIR shall
report to EURAND the following:

               (i) the Net Sales of the Product and the Royalty in the previous Calendar Quarter, including a
complete and detailed accounting of AVANIR’s, its Affiliates’, and its sublicensees’ gross sales
and deductions thereto made to arrive at Net Sales in sufficient detail (including but not limited
to discounts, allowances, rebates, fees; and of units sold, samples distributed, and units disposed
of other than by sale) to enable EURAND to determine the amounts due under this Agreement; and

               (ii) the ***.

          (g) Payment by AVANIR to EURAND under this Section 10 shall be in U.S. Dollars and shall be
made within *** Calendar Days after the end of each Calendar Quarter. Payment shall be made via
wire transfer to a bank designated by EURAND. AVANIR shall keep true and accurate books of account
and shall keep and maintain all records and documents necessary for EURAND to ascertain the Royalty
and Sublicensing Revenue due under this Agreement for a period of *** years after the underlying
sales were made.

          (h) In the event of a late payment, AVANIR shall pay to EURAND interest calculated on a daily
basis on the overdue payment from the date such payment was due to the date such payment is
received by EURAND at a rate of *** percent (***%) per calendar month.

     10.2 Taxes. If taxes, assessments, fees or other charges are required to be withheld
from payments to EURAND, AVANIR shall make such payments to the applicable taxing authority as
required to fulfill such requirement and pay to EURAND the net amount due. Receipts, if available,
for all such withholdings shall be provided to EURAND. AVANIR shall be responsible for
establishing its right to claim any exemption to such charges or to its withholding, shall keep
EURAND advised in writing of the basis and status of all such exemption claims, and shall be liable
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assessment against EURAND for failing to pay or withhold such charges in reliance on any such
exemption claim.

     10.3 Audit Right. After the first anniversary of the date of First Commercial Sale of
the Product and upon the provision of reasonable notice, EURAND shall have the right to designate a
firm of independent accountants to inspect AVANIR’s books of account, records, documents and
instruments directly relating to Net Sales of the Product and payment of the Royalty pursuant to
Section 10.1 and receipt of the Sublicense Revenue for up to the previous ***
Calendar Years, and to make copies thereof, at any time during AVANIR’s regular business hours
during the Term, but no more than once per Calendar Year, and for a period of *** years after
termination of this Agreement, to ascertain the accuracy of such report. The expense of such audit
shall be EURAND’s unless the audit shall demonstrate an underreporting discrepancy greater than ***
percent (***%) between Royalty and Sublicensing Revenue reported and paid and those which were
actually due, in which event the reasonable expenses of audit shall be borne by AVANIR. Regardless
of the amount, absent manifest error, all discrepancies shall be due and payable within ***
Calendar Days from the date the independent accounting firm notifies AVANIR in writing of any
discrepancy, such notice to include copies of the audit work papers and conclusions in form and
content satisfactory to AVANIR in its reasonable discretion. Such independent accountants shall
enter into a confidentiality agreement with AVANIR in form and substance reasonably satisfactory to
AVANIR. Such independent accountants may only disclose to EURAND the results of its audit.

11. TERM AND TERMINATION

     11.1 Term. This Agreement shall become effective on the Effective Date, and will
remain in effect *** for the longer of *** years after First Commercial Sale or the life of any
EURAND patent, or any patent resulting from the Program, which would be infringed by a Third
Party’s sale, use or manufacture of a Competitive Product (the “Term”), unless earlier terminated
in accordance with this Section 11. Upon the expiration of this Agreement, AVANIR ***.

     11.2 Program Related Termination.

          (a) Following *** Calendar Days after the Effective Date and prior to the First Commercial
Sale of the Product, AVANIR may terminate this Agreement at any time and *** Calendar Days prior
written notice to EURAND, or in the event of any response by the FDA to AVANIR’s NDA for either the
*** or the *** that is not an unconditional approval, AVANIR may terminate this Agreement at any
time upon *** Calendar Days prior written notice to EURAND. In either case, AVANIR shall pay
EURAND for all expenses incurred and due hereunder prior to such termination, for noncancellable
commitments, and raw materials not previously paid for by AVANIR (which shall become AVANIR
property). After the First Commercial Sale of the Product, AVANIR may not terminate the Agreement
under this Section 11.2(a).

          (b) EURAND may terminate this Agreement in the event that: (i) AVANIR, prior to the First
Commercial Sale, suspends conducting any AVANIR Development Activities over any period of ***
continuous months, or (ii) AVANIR fails to submit an NDA within *** months of completion of the
Pre-Registration Activities, or (iii) AVANIR fails to obtain Regulatory Approval for the Product in
the United States within *** years of NDA filing, or (iv) AVANIR fails to make the First
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in the United States within one (1) year of the Approval Date, or (v) AVANIR discontinues
selling the Product in the United States unless such discontinuation is due to a Force Majeure,
supply disruption, regulatory issues or EURAND’s breach of this Agreement or the Commercial Supply
Agreement. The provisions of this paragraph shall operate independently of and shall not be
subject to the Cure Period in Section 11.6(a).

          (c) Either Party may terminate this Agreement if the Parties are unable to conclude a
Commercial Supply Agreement in spite of their exercise of Commercially Reasonable Efforts within
***  Calendar Days after entering good faith negotiations pursuant to Section
3.3.

          (d) Either Party may terminate this Agreement upon *** days written notice to the other Party,
if the Parties are unable to reasonably agree upon *** pursuant to Section ***.

     11.3 Termination Due to Infringement. In the event EURAND is unable to effectuate the
actions described in Section 8.5 above within *** Calendar Days of service of notice of such claim
under Section 8.5, then either Party may terminate this Agreement.

     11.4 Default. If a Party shall be in default pursuant to Section 11.6, the Party not
in default may terminate this Agreement in whole, or only with regard to the provision which has
given rise to the event of default, and pursue any other remedies provided under this Agreement or
available at law or equity.

     11.5 Force Majeure. Each of the Parties shall be excused from the performance or
delay in performance of its obligations under this Agreement in the event such performance is
prevented by Force Majeure and such performance shall be excused as long as the condition
constituting such Force Majeure continues plus an additional *** Calendar Days after termination of
such condition; provided, that the non-performing Party shall provide prompt notice to the other
Party of the particulars of the occurrence constituting Force Majeure and of its cessation and
shall make diligent efforts to mitigate the adverse consequences of such non-performance or delays
in performance. If the Force Majeure exceeds *** Calendar Days then the Party who is owed
performance as a result of such Force Majeure may terminate this agreement.

     11.6 Events of Default. An event of default under this Agreement shall be deemed to
exist upon the occurrence of any one or more of the following events:

          (a) failure by either Party hereto to perform fully any material provision of this Agreement
and such failure continues for a period of *** Calendar Days after notice of such non-performance
without (i) providing a written explanation reasonably satisfactory to the non-defaulting Party
that a default has not occurred or (ii) commencing to cure the default within *** Calendar Days of
such notice and thereafter curing such default within *** Calendar Days of such notice (“Cure
Period”); provided, however, in the event that the Party in default provides a written explanation
to the non-defaulting Party and there is a dispute regarding whether the explanation is reasonably
satisfactory, the dispute shall be resolved in accordance with Section 13.15 and the Cure Period
shall be extended during the pendency of the resolution of the dispute;

          (b) failure of AVANIR to pay any amount due to EURAND, which failure continues for a period of
*** Calendar Days after ***; unless, however, such non-payment is due to a good faith dispute
concerning the amount owed;

 

			
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          (c) a Party ceases to function as a going concern, or makes an assignment for the benefit of
creditors, or any proceeding under any federal or state bankruptcy, receivership or insolvency laws
is instituted against such Party and continues in effect for ***  Calendar Days
or more or is instituted by such Party, or the liquidation or dissolution of a Party occurs, or an
application for a receiver or trustee for such Party or any of the assets or property of such Party
is made against such Party and is granted or continues unstayed for *** Calendar Days or more or is
made by such Party; or

          (d) a Party is prevented from performing its obligations hereunder by any law, governmental or
other action and has not resumed such performance in compliance with all applicable laws within ***
Calendar Days following the date which performance was prevented.

     11.7 Effects of Termination.

          (a) The expiration or termination of this Agreement for any reason shall not relieve the
Parties of any obligation that accrued prior to such expiration or termination. Upon termination by
either Party, AVANIR shall be responsible to pay to EURAND all amounts then unpaid and due EURAND
in accordance herewith through the effective date of such termination including all expenses and
non-cancelable costs incurred by EURAND, including costs associated with concluding any in-process
testing and providing any final reports.

          (b) *** to EURAND pursuant to this Agreement *** to AVANIR pursuant to this Agreement shall
survive *** (i) under Section *** by either Party, or (ii) under Section *** by AVANIR pursuant to
Section ***, ***, or ***, or (iii) under *** by AVANIR.

          (c) *** to AVANIR and to EURAND pursuant to this Agreement *** (i) under Section *** by either
Party, or (ii) under Section *** by EURAND pursuant to Section ***, or (iii) under Section *** by
EURAND.

     11.8 Survival. The provisions of Section 1 in its entirety; Sections 3.1(d), (e) and
(g), 5.2 through 5.4 inclusive, 6.1(a) and (b), 6.2, and 6.5 (for purposes of receiving payments
thereunder to which EURAND was entitled in respect of activities prior to the effectiveness of
termination), 8.1, 8.2, 8.3, 8.4(c), 8.7(c), 9.2(g), 9.3(d) and (g), 10.1 (f), (g) and (h), 10.2,
10.3, 11.7, 11.8, 12.1 through 12.5 inclusive, and Article 13 with the exception of Section 13.3
shall survive any expiration or other termination of this Agreement. Any claims by either EURAND
or AVANIR which have accrued prior to termination or expiration of this Agreement shall survive
such termination or expiration.

12. INDEMNIFICATION AND INSURANCE

     12.1 Indemnification of AVANIR. EURAND and its Affiliates shall indemnify and hold
AVANIR harmless from and against all damages, losses, expenses, claims (including wrongful death),
demands, suits, penalties, judgments or administrative and judicial orders and liabilities
(including, but not limited to, reasonable counsel fees and expenses) incurred, assessed or
sustained by AVANIR, its Affiliates, or any of their officers, directors, or employees with respect
to, involving, or arising out of (i) EURAND’s negligence or willful misconduct, (ii) EURAND’s
breach of any representation, warranty, obligation or covenant of this Agreement, (iii) EURAND’s
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infringement as set forth in Section 8.5, or (iv) the handling or storage of the CTM or
Product by EURAND.

     12.2 Indemnification of EURAND. AVANIR and its Affiliates shall indemnify and hold
EURAND and its Affiliates harmless from and against all damages, losses, expenses, claims
(including wrongful death and product liability), demands, suits, penalties, judgments or
administrative and judicial orders and liabilities (including, but not limited to, reasonable
counsel fees and expenses) incurred, assessed or sustained by EURAND, its Affiliates, or any of
their officers, directors, or employees with respect to, involving, or arising out of (i) AVANIR’s
negligence or willful misconduct, (ii) AVANIR’s breach of any representation, warranty, obligation
or covenant of this Agreement, (iii) AVANIR’s defense of any claim of Third Party infringement as
set forth in Section 8.6, or (iv) the sale, packaging, labeling, handling, advertising,
distribution, design, consumption or use of the CTM or Product; except to the extent such claim
arises from an event for which EURAND has an obligation to indemnify AVANIR under Section 12.1 or
pursuant to the Commercial Supply Agreement.

     12.3 Notice and Legal Defense. Promptly after receipt by a Party hereunder of any
claim or notice of the commencement of any action, administrative or legal proceeding, or
investigation as to which the indemnity provided for in Section 12.1 and 12.2 hereof may apply, the
Party seeking indemnification shall notify the indemnifying Party of such fact. The indemnifying
Party shall assume the defense thereof, provided, however, that if the defendants in any such
action include both the Party seeking indemnification and the indemnifying Party and the Party
seeking indemnification shall reasonably conclude that there may be legal defenses available to it
which are different from or additional to, or inconsistent with, those available to the
indemnifying Party, the Party seeking indemnification shall have the right to select separate
counsel (reasonably acceptable to the indemnifying Party) to participate in the defense of such
action on behalf of such Party seeking indemnification, at the indemnified Party’s own expense.

     12.4 Consequential Damages. IN NO EVENT, SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF, OR
AS THE RESULT OF, THE SALE, DELIVERY, NON-DELIVERY, SERVICING, USE OR LOSS OF USE OF ANY CTM OR
PRODUCT, REGARDLESS OF WHETHER SUCH CLAIM IS BASED UPON BREACH OF WARRANTY, BREACH OF CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR ANY OTHER LEGAL THEORY.

     12.5 Insurance. Each Party at its own cost shall carry commercial general liability
insurance, including clinical trial and product liability insurance covering such Party, which
coverage shall have limits of liability which are commercially reasonable but shall not be less
than $ *** per loss occurrence. Such coverage shall be maintained for not less
than *** years following expiration or termination of this Agreement or if such coverage is of the
“claims made” type, for *** years following expiration or termination of this Agreement. Upon
written request from a Party, the other Party shall promptly provide written evidence (e.g.,
certificates) of such insurance that is reasonably satisfactory to the first Party.

13. MISCELLANEOUS

 

			
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     13.1 Assignment. Neither this Agreement nor any interest herein may be assigned, in
whole or in part, by either Party hereto without the prior written consent of the other Party
hereto, provided that either Party shall have the right to assign all or part of its rights,
interest and obligations to an Affiliate, *** , or to a successor to
substantially all the assets of the business to which this Agreement relates. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and
their respective permitted successors and assigns.

     13.2 Confidentiality.

          (a) Any and all information provided by one Party to the other pursuant to this Agreement, or
the Confidentiality Agreement signed between the Parties on December 21, 2005, shall be deemed to
be confidential information (“Confidential Information”). The obligations of confidentiality
present in this Agreement supersede those contained in the Confidentiality Agreement. Each Party
will hold Confidential Information in complete confidence and will not, without the prior written
consent of the other, use or disclose it in whole or in part to any Entity other than for the
purposes set forth in this Agreement during the term of this Agreement and for the *** years
immediately following expiration or termination of this Agreement. Each Party will be entitled to
disclose any such Confidential Information to such of its professional advisers, directors,
officers and senior employees who are directly concerned with this Agreement and its implementation
and whose knowledge of such information in the opinion of the disclosing Party is necessary for
these purposes. Each Party will use its reasonable efforts to ensure that each individual to whom
such a disclosure is made adheres to the terms of this undertaking as if he or she were a party
hereto, including without limitation, having such individuals execute similar agreements.

          (b) As used herein, the term Confidential Information shall not include information:

               (i) which at the time of disclosure to the other is in the public domain; or

               (ii) which, after disclosure, becomes generally available to Third Parties from a source other
than the disclosing Party; provided that such source is not bound by a confidentiality or other
similar agreement with the discloser or by any other legal, contractual or fiduciary obligation
which prohibits the disclosure of such Confidential Information; or

               (iii) which was lawfully in possession of the recipient prior to disclosure, as evidenced by
written records and which was not acquired directly or indirectly from the discloser; or

               (iv) which was independently developed by the recipient without reference to any Confidential
Information as established by appropriate documentation; or

               (v) which the recipient is required to disclose under law or under the regulations of any
governmental entity or agency having jurisdiction and lawfully requesting the same, or by any court
of competent jurisdiction acting pursuant to its powers, provided however, that in such case the
receiving shall immediately give as much advance notice as feasible to the disclosing Party so that
the disclosing Party may seek a protective order or other remedy. In any event, the recipient
shall disclose only that portion of the Confidential Information that, in the opinion of its legal
counsel, is legally required to be disclosed and will exercise reasonable efforts to ensure that
any such information so disclosed will be accorded confidential treatment.

 

			
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     13.3 Exchange of Information. Each Party will timely report to the other any
information concerning any side effect, injury, toxicity or sensitivity reaction associated with
Clinical Studies, investigations or tests of the APIs, the Drug Combination, the Formulation or the
Product. In reporting such incidents, the reporting Party will use reasonable efforts to indicate
whether, in its judgment, any of them are unexpected or unusual in type, incidence or severity.

     13.4 No Implied Waiver. Failure by either Party hereto on one or more occasions to
avail itself of a right conferred by this Agreement shall in no event be construed as a waiver of
such Party’s right to enforce said right in the future.

     13.5 Choice of Law. This Agreement and all rights and obligations hereunder,
including matters of construction, validity and performance, shall be exclusively governed by and
construed in accordance with the laws of the State of New York.

     13.6 Notices. Any notice and other communication required or permitted to be given
hereunder shall be in writing and shall be deemed given when delivered personally, telecopied or
received by registered mail, return receipt requested, to the Parties at the following addresses:

If to EURAND, to:

Eurand, Inc.

845 Center Drive

Vandalia, OH 45377

Attention: Office of Business Development

Fax: (937) 898-1093

If to AVANIR, to:

Avanir Pharmaceuticals, Inc.

101 Enterprise, Suite 300

Aliso Viejo, CA 92656

Attention: Chief Financial Officer

Fax: (949) 643-6800

or at such other addresses as the Parties may designate by notice sent in accordance with this
Section 13.6.

     13.7 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by EURAND are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the
U.S. Bankruptcy Code or analogous provisions of Applicable Law outside the United States, licenses
of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code or
analogous provisions of Applicable Law outside the United States (hereinafter “IP”). The Parties
agree that AVANIR, as licensee of such rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the U.S. Bankruptcy Code or any other provisions of
Applicable Law outside the United States that provide similar protection for IP. The Parties
further agree that, in the event of the commencement of a bankruptcy proceeding by or against
EURAND under the U.S. Bankruptcy Code or analogous provisions of Applicable Law outside the United
States, AVANIR shall be entitled to a complete duplicate of (or complete access to, as appropriate)
any such IP and all embodiments of such IP, which, if not already in AVANIR’s possession, shall be
promptly delivered to it upon AVANIR’s written request therefor. Notwithstanding the foregoing,
this Section 13.7 does not grant AVANIR any rights

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that are not otherwise expressly set forth in this Agreement and mandated by the United States
Bankruptcy Code or analogous provisions of Applicable Law outside the United States.

     13.8 Execution of Additional Documents. Each Party hereto agrees to execute such
further documents or agreements as may be reasonably necessary or desirable to affect the purpose
of this Agreement and carry out its provisions.

     13.9 Severability. In the event that any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate
or render unenforceable any other provision hereof.

     13.10 Captions. The article and section captions in this Agreement have been inserted
as a matter of convenience and are not part of this Agreement.

     13.11 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Agreement and all of which together shall
constitute one and the same instrument.

     13.12 Independent Relationship. Nothing herein contained shall be deemed to create an
employment, agency, joint venture or partnership relationship between the Parties hereto or any of
their agents or employees, or any other legal arrangement that would impose liability upon one
Party for the act or failure to act of the other Party. Neither Party shall have any power to
enter into any contracts or commitments or to incur any liabilities in the name of, or on behalf
of, the other or to bind the other Party in any respect whatsoever. All activities undertaken by
EURAND hereunder shall be that of an independent contractor.

     13.13 Entire Agreement. This Agreement contains the entire agreement between the
Parties related to subject matter hereof, and this Agreement cannot be amended, varied or abridged
in any manner except by amendment in writing duly signed by the Parties. This Agreement takes the
place of any existing agreement, arrangements or discussions between the Parties relating to the
subject matter hereof, whether oral or written.

     13.14 Publicity. Except for such disclosure as is deemed necessary in the reasonable
judgment of a Party to comply with Applicable Laws, no public announcement, news release,
statement, publication, or presentation relating to the existence of this Agreement, the subject
matter hereof, or either Party’s performance hereunder will be made without the other Party’s prior
written approval, which approval shall not be unreasonably withheld or delayed. Notwithstanding
the foregoing, (i) the Parties agree to each issue a press release promptly after the Effective
Date, and subsequent press releases upon the achievement of significant Development Milestones, the
form and content of such releases shall be agreed in writing in advance by both Parties, (ii)
either Party may publish and republish, in whole or in part, any publicity release and/or make any
statement to communication media, financial analysts or others that is the same or substantially
similar to a publicity release or statement that has been previously approved by the other Party in
accordance with the terms hereof, without obtaining the prior approval of such other Party, and
(iii) either Party may upon notice to the other make any disclosure in filings with regulatory
agencies or exchanges or as required by law or applicable court order; provided that the other
Party shall have the opportunity to consult on such disclosures and filings.

     13.15 Resolution of Disputes.

          (a) Any dispute relating to this Agreement; the making, performance, nonperformance or
termination thereof; or any transaction in that connection out of this Agreement shall

CONFIDENTIAL

30

 

be resolved in the following manner. The dispute shall first be submitted to the Chief
Commercial Officer of EURAND (or his designee) and the Chief Executive Officer of AVANIR (or his
designee), who shall meet and attempt to resolve the matter. If the dispute cannot be resolved per
the preceding sentence within ***  Calendar Days of its submission, either
Party may submit the matter to arbitration conducted in New York, New York in accordance with the
Commercial Arbitration rules of the American Arbitration Association (“AAA”). The award of
such arbitration shall be final, binding and non-appealable, except to the extent provided for in
the rules of the AAA. The arbitrator(s) will have the discretion to impose the cost of the
arbitration upon the losing Party or divide it between the Parties upon any terms which he/they
deem appropriate; provided, however, that (i) each Party shall bear its own legal fees and costs.
A judgment upon an award rendered by the arbitrator(s) may be entered in any court of competent
jurisdiction, or application may be made to such court for confirmation of such award or a judicial
acceptance of such award, and for an order of enforcement or other legal remedy.

          (b) If the total aggregate amount at issue in a dispute to be arbitrated is less than $***,
the number of arbitrators shall be one (1). The arbitrator shall be selected by the AAA. If the
total aggregate amount at issue in a dispute to be arbitrated is equal to or greater than $***, the
number of arbitrators shall be three (3). Each Party shall select one (1) arbitrator from among a
list of qualified arbitrators compiled by the AAA. The two arbitrators so selected shall select a
third qualified arbitrator, who shall act as president of the tribunal. If the two arbitrators
selected by the Parties fail to agree on the third arbitrator within thirty (30) Calendar Days of
the selection of the second arbitrator, the third qualified arbitrator shall be designated in
accordance with the rules of the of the AAA. In addition to the qualification criteria for
arbitrators established by the rules of the AAA, each arbitrator shall meet the following
additional criteria: (i) the arbitrator shall be experienced in resolving the type of dispute(s)
at issue; and (ii) the arbitrator shall have a technical or intellectual property related
background and/or knowledge relevant to the dispute.

          (c) Notwithstanding the foregoing, either Party may seek interim relief from any court of
competent jurisdiction (including, without limitation, injunctive relief) pending the outcome of
any dispute resolution procedure set forth in this Section 13.15.

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly
authorized representatives as of the Effective Date.

	 	 	 	 	 	 	 	 	 	 	 
	EURAND, INC.	 	 	 	AVANIR PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	

Name:

	 	 

John Fraher
	 	 
	 	

Name:
	 	 

Eric Brandt
	 	 
	 
	Title:

	 	President
	 	 	 	Title:
	 	Chief Executive Officer	 	 
	 
	Date:

	 	August 7, 2006
	 	 	 	Date:
	 	August 7, 2006	 	 

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

CONFIDENTIAL

31

 

EXHIBIT A:

PRODUCT DEVELOPMENT PROPOSAL

***

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

CONFIDENTIAL

32

 

EXHIBIT B

EURAND Patent Rights

***

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

 

 

EXHIBIT C

AVANIR Patent Rights

***

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.Exhibit 10.34

 

Exhibit 10.34

Award No.                     

AVANIR PHARMACEUTICALS

Restricted Stock Unit Grant Agreement

     This Restricted Stock Unit Grant Agreement (the “Agreement”) is dated as of [                    ] and
is entered into between Avanir Pharmaceuticals, a California corporation (the “Company”), and
[                    ] (the “Awardee”). Capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Plan.

RECITALS

     A. The Company’s [2003] [2005] Equity Incentive Plan (the “Plan”) provides that the Company
may issue stock awards, including awards of restricted stock units.

     B. On [                    ], the Board of Directors, acting directly or through its Compensation
Committee, approved the grant of the following restricted stock units, representing the right to
receive shares of Class A common stock of the Company upon the vesting schedule set forth below in
Section 2 (the “Restricted Stock Units”).

AGREEMENT

     In consideration of the mutual promises set forth below, the parties hereto agree as
follows:

     1. Award of Restricted Stock Units. Subject to the terms and conditions of this
Agreement and the Plan (the terms of which are incorporated herein by reference) and effective as
of the date set forth above, the Company hereby grants to the Awardee [___] Restricted Stock
Units.

     2. Vesting. The Restricted Stock Units shall vest [with respect to one-quarter of
the underlying shares on the first anniversary of the grant date and then with respect to the
remaining shares quarterly thereafter over the next three years.]

     3. Effect of Termination. Following the Termination of a Awardee’s service, the
unvested portions of the Restricted Stock Units, if any, as of the date of Termination shall be
forfeited.

     4. Distribution. Stock certificates evidencing a one-for-one conversion (adjusted
as provided in the Plan) of vested Restricted Stock Units into Shares (the “Certificate”) shall be
issued and registered in the Awardee’s name as promptly as practicable following a particular
Vesting Date. Notwithstanding the foregoing, the distribution of the shares and the issuance of
the Certificates may, for directors and officers of the Company, be deferred beyond the vesting
date if such director or officer executes and delivers a deferral election form, which is available
from Secretary of the Company. In the case of Awardee’s death, Certificates shall be delivered to
the Awardee’s beneficiary or estate as soon as practicable.

     5. Dividends. Participants holding Restricted Stock Units shall not be entitled to
receive cash payments equal to any cash dividends and other distributions paid with respect to a

 

 

corresponding number of Shares until the underlying Shares have been delivered in accordance with
this Agreement.

     6. Tax Withholding Obligations. In circumstances in which tax withholding is
applicable, to meet any such obligations of the Company and Awardee that might arise with respect
to any withholding taxes, FICA contributions, or the like under any federal, state, or local
statute, ordinance, rule, or regulation in or connection with the award, deferral, or settlement of
the Restricted Stock Units, the Awardee shall remit to the Company an amount of cash sufficient to
meet the withholding requirements and/or, withhold the required amounts from the Awardee’s pay
during the pay periods next following the date on which any such applicable tax liability otherwise
arises. Notwithstanding the foregoing, the Committee may, in its sole discretion, allow Awardee to
satisfy such withholding obligations upon settlement of the Restricted Stock Units by the
withholding a number of Shares having a Fair Market Value equal to the Company’s statutory
withholding obligations. The Company shall not deliver any of the Certificates until and unless the
Awardee has made the payment(s) required herein or proper provision for required withholding has
been made. The Awardee hereby consents to any action reasonably taken by the Company to meet the
withholding obligations.

     7. Restriction on Transferability. Until distribution, the Restricted Stock Units
may not be sold, transferred, pledged, assigned, or otherwise alienated at any time. Any attempt to
do so contrary to the provisions hereof shall be null and void. Notwithstanding the above,
distribution can be made pursuant to will, the laws of descent and distribution, intra-family
transfer instruments or to an inter vivos trust.

     8. Rights as Shareholder. The Awardee shall not have voting or any other rights as
a shareholder of the Company with respect to the Restricted Stock Units. Upon settlement of the
Restricted Stock Units into Shares, the Awardee will obtain full voting and other rights as a
shareholder of the Company.

     9. Administration. The Committee shall have the power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation, and application of
the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken
and all interpretations and determinations made by the Committee shall be final and binding upon
the Awardee, the Company, and all other interested persons. No member of the Committee shall be
personally liable for any action, determination, or interpretation made in good faith with respect
to the Plan or this Agreement.

     10. Effect on Other Employee Benefit Plans. The value of the Restricted Stock Units
granted pursuant to this Agreement shall not be included as compensation, earnings, salaries, or
other similar terms used when calculating the Awardee’s benefits under any Awardee or other benefit
plan sponsored by the Company or any Affiliate except as such plan otherwise expressly provides.
The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or
any Affiliate’s employee benefit plans.

     11. Effect on Service. The award of the Restricted Stock Units pursuant to this
Agreement shall not give the Awardee any right to remain in the service of the Company or any
Affiliate. The award is completely within the discretion of the Company. It is not made as a part
of any

2

 

ongoing element of compensation or something that the Awardee should expect to receive
annually or on any other periodic basis. It does not constitute part of the Awardee’s compensation
for purposes of determining any post-employment payment or severance.

     12. Amendment. This Agreement may be amended only by a writing executed by the
Company and the Awardee which specifically states that it is amending this Agreement.
Notwithstanding the foregoing, this Agreement may be amended solely by the Committee by a writing
which specifically states that it is amending this Agreement, so long as a copy of such amendment
is delivered to the Awardee, and provided that no such amendment adversely affects the rights of
the Awardee (but limiting the foregoing, the Committee reserves the right to change, by written
notice to the Awardee, the provisions of the Restricted Stock Units or this Agreement in any way it
may deem necessary or advisable to carry out the purpose of the grant as a result of any change in
applicable laws or regulations or any future law, regulation, ruling, or judicial decision,
provided that any such change shall be applicable only to Restricted Stock Units which are then
subject to restrictions as provided herein).

     13. Notices. Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Secretary of the Company. Any notice to be given to the Awardee
shall be addressed to the Awardee at the address listed in the Company’s records. By a notice given
pursuant to this Section, either party may designate a different address for notices. Any notice
shall have been deemed given when actually delivered.

     14. Severability. If all or any part of this Agreement or the Plan is declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity
shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or
invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to the terms of such
Section or part of a Section to the fullest extent possible while remaining lawful and valid.

     15. Construction. The Restricted Stock Units are being issued pursuant the Plan and
are subject to the terms of the Plan, the terms of which are incorporated herein by reference. A
copy of the Plan has been given to the Awardee, and additional copies of the Plan are available
upon request during normal business hours at the principal executive offices of the Company. To the
extent that any provision of this Agreement violates or is inconsistent with an express provision
of the Plan, the Plan provision shall govern and any inconsistent provision in this Agreement shall
be of no force or effect.

     16. Miscellaneous.

          (a) The Board may terminate, amend, or modify the Plan; provided, however, that no such
termination, amendment, or modification of the Plan may in any way adversely affect the
Participant’s rights under this Agreement, without the Participant’s written approval.

          (b) This Agreement shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as may be required.

3

 

          (c) All obligations of the Company under the Plan and this Agreement, with respect to the
Restricted Stock Units, shall be binding on any successor to the Company, whether the existence of
such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise,
of all or substantially all of the business and/or assets of the Company.

          (d) By signing this Agreement, the Awardee acknowledges that his or her personal employment
information regarding participation in the Plan and information necessary to determine and pay, if
applicable, benefits under the Plan must be shared with other entities, including companies related
to the Company and persons responsible for certain acts in the administration of the Plan. By
signing this Agreement the Awardee consents to such transmission of personal data as the Company
believes is appropriate to administer the Plan.

          (e) To the extent not preempted by federal law, this Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.

     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement effective as of the
day and year first above written.

	 	 	 	 	 
	AWARDEE	 	AVANIR PHARMACEUTICALS
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 
	 	 
	Signature

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	 

	 	 
	 	 
	Print Name
	 	 	 	 

4

 

EXHIBIT A

	 	 	 
	Award No.
	 	 
	 

	 	 
	Award Date:
	 	 
	 

	 	 
	No. Shares:
	 	 
	 

	 	 

 

DIRECTOR AND OFFICER

RSU DEFERRAL ELECTION

The following constitutes an election by the undersigned director or officer of Avanir
Pharmaceuticals to defer payment of vested benefits pursuant to the Restricted Stock Unit award
referred to above granted to the undersigned under the Avanir [2003] [2005] Equity Incentive Plan
(“Plan”).

	 	1.	 	Election: The undersigned hereby elects to receive the distribution (in Company
Shares) of Avanir Class A common stock underlying vested Restricted Stock Units as follows
(please select one of the three distribution choices below):

	 	€	 	In one lump sum upon termination of my service (as defined in the Plan) (such
event being, a “Termination of Service”); or
	 
	 	€	 	In one lump sum on ___(but not before my Termination of Service); or
	 
	 	€	 	In ___equal annual installments, starting on ___(but not before my
Termination of Service).

In the event of death, Disability (as determined under the Plan) or a Change in Control as defined
in the Plan, distribution on vested Restricted Stock Units shall be made immediately in one lump
sum.

	 	2.	 	Change of Election: I hereby acknowledge that I may not change the date of the
distribution as elected above unless I do so at least twelve months prior to the date the
first distribution is due under the election above and at least twelve months prior to the
date my new election is scheduled to take effect. I also acknowledge that if I change my
distribution date elected above, the first date I may receive any distribution with respect
to Shares covered by this election is not earlier then five years after the date payment
would otherwise have been made pursuant to the election above. Such change must be timely
filed in writing with the Company’s stock option administrator. The Company shall have sole
discretion to revise the terms of this election or any change, or the procedures with
respect to making this election or any change, to the extent the Company deems it helpful
or appropriate to comply with applicable law.

	 	 	 
	 
	 	 
	 

	 	 
	Awardee Signature

	 	Date
	 
	 	 
	 
	 	 
	Print Name
	 	 

5

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