Document:

exv10w1

 

Exhibit 10.1

Subscription Terms

Avanir Pharmaceuticals

101 Enterprise, Suite 300

Aliso Viejo, California 92656

Ladies and Gentlemen:

The undersigned (the “Investor”) hereby confirms and agrees with you as follows:

1. The subscription terms set forth herein (the “Subscription”) are made as of the date set forth
below between Avanir Pharmaceuticals, a California corporation (the “Company”), and the Investor.

2. The Company has authorized the sale and issuance of (i) up to 34,972,678 shares (the “Shares”)
of the Company’s Class A common stock, no par value per share (the “Common Stock”), and (ii)
warrants to purchase up to 12,240,437 shares of Common Stock (the “Warrants” and together with the
Shares, the “Securities”) for a purchase price of $1.14375 per unit, with each unit consisting of
one Share and 0.35 Warrants (the “Offering”). The Offering and issuance of Securities are being
made pursuant to the Registration Statements and the Prospectus (as such terms are defined below).
The Investor acknowledges that the Company intends to enter into subscriptions in substantially the
same form as this Subscription with certain other third party investors.

3. As of the Closing (as defined below) and subject to the terms and conditions hereof, the Company
and the Investor agree that the Investor will purchase from the Company and the Company will issue
and sell to the Investor, such number of Shares and Warrants as is set forth on the signature page
hereto (the “Signature Page”). The Investor acknowledges that the offering is not a firm
commitment underwriting and that there is no minimum offering amount.

4. The completion of the purchase and sale of the Securities shall occur at a closing (the
“Closing”) that, in accordance with Rule 15c6-1 promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), is expected to occur on or about April 4, 2008. At the
Closing, (a) the Company shall cause its transfer agent to release to the Investor the number of
Shares being purchased by the Investor, (b) the Company shall deliver to the Investor the Warrants
being purchased by the Investor and (c) the aggregate purchase price for the Securities being
purchased by the Investor will be delivered by or on behalf of the Investor to the Company.
Physical certificates representing the Shares purchased by the Investor will not be issued to the
Investor; instead, such Shares will be credited to the Investor using customary procedures for DWAC
transfers through the facilities of The Depository Trust Company (“DTC”). The Warrants will be
issued by the Company, and delivered to the Investor, in physical form. The provisions set forth
in Exhibit A hereto shall be incorporated herein by reference as if set forth fully herein.

5. The Company has filed or will file with the Securities and Exchange Commission (the
“Commission”) (i) a prospectus dated August 3, 2005 (the “First Base Prospectus”), (ii) a
prospectus dated February 19, 2008 (the “Second Base Prospectus” and together with the First Base
Prospectus, the “Base Prospectuses”), (iii) if applicable, a preliminary prospectus related to the
Offering (together with the Base Prospectuses, the “Statutory Prospectus”), and (iv) if applicable,
any issuer free writing prospectus as defined in Rule 433 under the Securities Act of 1933, as
amended (the “Securities Act”), relating to the Securities and delivered to the Investor on or
prior to the date hereof (the “Issuer Free Writing Prospectus”), and will file with the Commission
a final prospectus supplement (together with the

 

 

Base Prospectuses, the “Prospectus”) with respect to the registration statements on Form S-3 (File
Nos. 333-149125 and 333-125979) (the “Registration Statements”) reflecting the Offering, including
all amendments thereto, the exhibits and any schedules thereto, the documents otherwise deemed to
be a part thereof or included therein by the rules and regulations of the Commission (the “Rules
and Regulations”) and any registration statement relating to the Offering and filed pursuant to
Rule 462(b) under the Rules and Regulations (collectively, the “Registration Statements”), in
conformity with the Securities Act, including Rule 424(b) thereunder. The Base Prospectuses, any
Statutory Prospectus, any Issuer Free Writing Prospectus and the pricing information contained in
this Subscription are collectively the “Disclosure Package”. The Investor hereby confirms that it
has had full access to the Disclosure Package, including the Company’s periodic reports and other
information incorporated by reference therein, and was able to read, review, download and print
such materials.

6. The Company has entered into a Placement Agency Agreement (the “Placement Agreement”), dated
March 26, 2008 with Piper Jaffray & Co. (the “Placement Agent”), which will act as the Company’s
exclusive placement agent with respect to the Offering and receive a fee in connection with the
sale of the Securities. The Placement Agreement contains certain representations and warranties of
the Company. The Company acknowledges and agrees that the Investor may rely on the representations
and warranties made by it to the Placement Agent in Section 2 of the Placement Agreement to the
same extent as if such representations and warranties had been incorporated in full herein and made
directly to the Investor. Capitalized terms used, but not otherwise defined, herein shall have the
meanings ascribed to such terms in the Placement Agreement.

7. The obligations of the Company and the Investor to complete the transactions contemplated by
this Subscription shall be subject to the following:

     a. The Company’s obligation to issue and sell the Securities to the Investor shall be subject
to: (i) the receipt by the Company of the purchase price for the Shares and Warrants being
purchased hereunder as set forth on the Signature Page and (ii) the accuracy of the representations
and warranties made by the Investor and the fulfillment of those undertakings of the Investor to be
fulfilled prior to the Closing Date.

     b. The Investor’s obligation to purchase the Securities will be subject to the condition that
the Placement Agent shall not have: (i) terminated the Placement Agreement pursuant to the terms
thereof or (ii) determined that the conditions to closing in the Placement Agreement have not been
satisfied. The Investor’s obligations are expressly not conditioned on the purchase by any or all
of the other investors of the Securities that they have agreed to purchase from the Company.

8. The Company hereby makes the following representations, warranties and covenants to the
Investor:

     a. The Company has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by this Subscription and otherwise to carry out its obligations
hereunder. The execution and delivery of this Subscription by the Company and the consummation by
it of the transactions contemplated hereunder have been duly authorized by all necessary action on
the part of the Company. This Subscription has been duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except as may be limited
by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws affecting the enforcement of creditors’ and contracting parties’ rights generally or by
general principles of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

-2-

 

     b. The Company shall (i) before the opening of trading on the Nasdaq Global Market on the next
trading day after the date hereof, issue a press release, disclosing all material aspects of the
transactions contemplated hereby and (ii) make such other filings and notices in the manner and
time required by the Commission with respect to the transactions contemplated hereby. The Company
shall not identify the Investor by name in any press release or public filing, or otherwise
publicly disclose the Investor’s name, without the Investor’s prior written consent, unless
required by law or the rules and regulations of any self-regulatory organization which the Company
or its securities are subject.

     c. The Securities are being offered and sold to the Investor pursuant to the Registration
Statements and the offering and sale of the Securities is in compliance with the General
Instructions to Form S-3.

     d. The offering and sale of the Securities does not, and will not, require the approval of the
Company’s shareholders.

     e. Following the closing of the offering and sale of the Securities, the Company will propose
to the FDA that it will amend the design of the Company’s ongoing Phase III STAR trial to add an
additional 36 patients to the targeted patient enrollment. Subject to FDA consent, the Company will
expand the trial consistent with this proposal.

9. The Investor hereby makes the following representations, warranties and covenants to the
Company:

     a. The Investor represents that (i) it has had full access to the Disclosure Package,
including the Company’s periodic reports and other information incorporated by reference therein,
prior to or in connection with its receipt of this Subscription, (ii) it is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions with respect to
investments in securities representing an investment decision like that involved in the purchase of
the Securities, and (iii) it is acquiring the Securities for its own account, or an account over
which it has investment discretion, and does not have any agreement or understanding, directly or
indirectly, with any person or entity to distribute any of the Securities.

     b. The Investor has the requisite power and authority to enter into this Subscription and to
consummate the transactions contemplated hereby. The execution and delivery of this Subscription
by the Investor and the consummation by it of the transactions contemplated hereunder have been
duly authorized by all necessary action on the part of the Investor. This Subscription has been
executed by the Investor and, when delivered in accordance with the terms hereof, will constitute a
valid and binding obligation of the Investor enforceable against the Investor in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights
generally and except as enforceability may be subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at law).

     c. The Investor understands that nothing in this Subscription or any other materials presented
to the Investor in connection with the purchase and sale of the Securities constitutes legal, tax
or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in
its sole discretion, has deemed necessary or appropriate in connection with its purchase of
Securities.

     d. Neither the Investor nor any Person acting on behalf of, or pursuant to any understanding
with or based upon any information received from, the Investor has, directly or indirectly, as of
the date of this Subscription, engaged in any transactions in the securities of the Company
(including, without

-3-

 

limitation, any Short Sales involving the Company’s securities) since the time that the
Investor was first contacted by the Placement Agent or the Company with respect to the transactions
contemplated hereby. “Short Sales” include, without limitation, all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act. The Investor covenants that
neither it, nor any Person acting on behalf of, or pursuant to any understanding with or based upon
any information received from, the Investor will engage in any transactions in the securities of
the Company (including, without limitation, Short Sales) prior to the time that the transactions
contemplated by this Subscription are publicly disclosed. The Investor agrees that it will not use
any of the Securities acquired pursuant to this Subscription to cover any short position in the
Common Stock if doing so would be in violation of applicable securities laws.

     e. The Investor represents that, except as set forth below, (i) it has had no position, office
or other material relationship within the past three years with the Company or persons known to it
to be affiliates of the Company, (ii) it is not a, and it has no direct or indirect affiliation or
association with any, FINRA member or an Associated Person (as such term is defined under FINRA
Membership and Registration Rules Section 1011) as of the date hereof, and (iii) neither it nor any
group of investors (as identified in a public filing made with the Commission) of which it is a
member, acquired, or obtained the right to acquire, 20% or more of the Common Stock (or securities
convertible or exercisable for Common Stock) or the voting power of the Company on a
post-transaction basis.

Exceptions:

 

(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)

10. No offer by the Investor to buy Securities will be accepted and no part of the aggregate
purchase price will be delivered to the Company until the Investor has received the Disclosure
Package and the Company has accepted such offer by countersigning a copy of this Subscription, and
any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any
time prior to the Company (or the Placement Agent on behalf of the Company) sending (orally, in
writing or by electronic mail) notice of its acceptance of such offer. This Subscription will
constitute only an indication of interest, involving no obligation or commitment of any kind, until
the Disclosure Package has been delivered or made available to the Investor and this Subscription
is accepted and countersigned by or on behalf of the Company.

11. Notwithstanding any investigation made by any party to this Subscription, all covenants,
agreements, representations and warranties made by the Company and the Investor herein will survive
the execution of this Subscription, the delivery to the Investor of the Securities being purchased
and the payment therefor.

12. This Subscription may not be modified or amended except pursuant to an instrument in writing
signed by the Company and the Investor.

13. In case any provision contained in this Subscription should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining provisions
contained herein will not in any way be affected or impaired thereby.

14. This Subscription will be governed by, and construed in accordance with, the internal laws of
the State of New York, without giving effect to the principles of conflicts of law that would
require the application of the laws of any other jurisdiction.

-4-

 

15. This Subscription may be executed in one or more counterparts, each of which will constitute an
original, but all of which, when taken together, will constitute but one instrument, and will
become effective when one or more counterparts have been signed by each party hereto and delivered
to the other parties.

16. The Investor acknowledges and agrees that the Investor’s receipt of the Company’s counterpart
to this Subscription shall constitute written confirmation of the Company’s sale of Securities to
such Investor.

17. In the event that the Placement Agreement is terminated by the Placement Agent pursuant to the
terms thereof, this Subscription shall terminate without any further action on the part of the
parties hereto.

-5-

 

INVESTOR SIGNATURE PAGE

Number of Shares: 798,906                                 Maximum Percent:*                    

Number of Warrants: 279,618                    

(such number equal to 35% of the number of Shares being purchased by the Investor)

Purchase Price Per Unit: $ 1.14375

Aggregate Purchase Price: $ 913,748.74                    

 

(* if applicable, insert limit on total percentage of Company shares outstanding after the offering
that Investor will hold, in which case the foregoing share, warrant and purchase values will be
adjusted down if necessary to keep total purchase under this limit)

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the
space provided below for that purpose.

Dated as of: March 26, 2008

Caduceus Private Investments II (QP), LP

INVESTOR

	 	 	 	 	 	 	 
	By: /s/ Eric A. Bittelman	 	 
	 	 
	 
	 	 
	Print Name: Eric A. Bittelman	 	 
	Title: CFO, OrbiMed Advisors, LLC	 	 
	 

	 

	 	 

Name that Securities are to be registered:                                                             

	 	 	 	 	 
	Mailing Address:
	 	 	 	 
	 

	 	 

	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

Taxpayer Identification Number:                                                             

Manner of Settlement: DWAC (see Exhibit A for explanation and instructions)

-6-

 

INVESTOR SIGNATURE PAGE

Number of Shares: 2,133,715                                 Maximum Percent:*                    

Number of Warrants: 746,800                    

(such number equal to 35% of the number of Shares being purchased by the Investor)

Purchase Price Per Unit: $ 1.14375                    

Aggregate Purchase Price: $ 2,440,436.53                    

 

(* if applicable, insert limit on total percentage of Company shares outstanding after the offering
that Investor will hold, in which case the foregoing share, warrant and purchase values will be
adjusted down if necessary to keep total purchase under this limit)

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the
space provided below for that purpose.

Dated as of: March 26, 2008

Caduceus Private Investments II, LP

INVESTOR

	 	 	 	 	 	 	 
	By: /s/ Eric A. Bittelman	 	 
	 	 
	 
	 	 
	Print Name: Eric A. Bittelman	 	 
	Title: CFO, OrbiMed Advisors, LLC	 	 
	 
	 

	 	 

Name that Securities are to be registered:                                                             

	 	 	 	 	 
	Mailing Address:
	 	 	 	 
	 

	 	 

	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

Taxpayer Identification Number:                                                             

Manner of Settlement: DWAC (see Exhibit A for explanation and instructions)

-6-

 

INVESTOR SIGNATURE PAGE

Number of Shares: 15,557,318                      Maximum Percent:* 19.90

Number of Warrants:  5,445,061          

(such number equal to 35% of the number of Shares being purchased by the Investor)

Purchase Price Per Unit: $ 1.14375

Aggregate Purchase Price: $ 17,793,682.46          

 

(* if applicable, insert limit on total percentage of Company shares outstanding after the offering
that Investor will hold, in which case the foregoing share, warrant and purchase values will be
adjusted down if necessary to keep total purchase under this limit)

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the
space provided below for that purpose.

Dated as of: March 26, 2008

Clarus Lifesciences I, L.P.

INVESTOR

By: Clarus Lifesiences I, L.P.

By: Clarus Ventures I, G.P., L.P., its General Partner

By: Clarus Ventures I, LLC, its General Partner

	 	 	 	 	 	 	 
	By:	  /s/ Nick Simon	 	 
	 	 	 	 
	Print Name:  Nick Simon	 	 
	 

	 	 	 	 

	 	 
	Title: Managing Director	 	 
	 

	 	 	 	 

	 	 

Name that Securities are to be registered: Clarus Lifesciences I, L.P.

	 	 	 
	Mailing Address:

	 	Clarus Ventures
	 

	 	Attn: Danielle Bechard, Controller
	 

	 	One Memorial Drive, Suite 1230
	 

	 	Cambridge, MA 02142

Taxpayer Identification Number:                                              

Manner of Settlement: DWAC (see Exhibit A for explanation and instructions)

-6-

 

INVESTOR SIGNATURE PAGE

Number of Shares: 7,739,570                                Maximum Percent:*  9.9                    

Number of Warrants:  2,708,849                     

(such number equal to 35% of the number of Shares being purchased by the Investor)

Purchase Price Per Unit: $ 1.14375

Aggregate Purchase Price: $ 8,852,133.19                    

 

(* if applicable, insert limit on total percentage of Company shares outstanding after the offering
that Investor will hold, in which case the foregoing share, warrant and purchase values will be
adjusted down if necessary to keep total purchase under this limit)

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the
space provided below for that purpose.

Dated as of: March 26, 2008

ProQuest Investments IV, L.P.

INVESTOR

	 	 	 	 	 	 	 
	By:	 /s/ Pasquale
DeAngelis	 	 
	 	 	 	 
	Print Name:	 	Pasquale DeAngelis	 	 
	Title: Managing Member of the General Partner

Name that Securities are to be registered: ProQuest Investments IV, L.P.

	 	 	 
	Mailing Address:

	 	90 Nassau Street, 5th Floor
	 

	 	Princeton, NJ 08542

Taxpayer Identification Number:                                                             

Manner of Settlement: DWAC (see Exhibit A for explanation and instructions)

-6-

 

INVESTOR SIGNATURE PAGE

Number of Shares: 8,679,582                     Maximum Percent:*                    

Number of Warrants: 3,037,854          

(such number equal to 35% of the number of Shares being purchased by the Investor)

Purchase Price Per Unit: $ 1.14375

Aggregate Purchase Price: $ 9,927,271.91          

 

(* if applicable, insert limit on total percentage of Company shares outstanding after the offering
that Investor will hold, in which case the foregoing share, warrant and purchase values will be
adjusted down if necessary to keep total purchase under this limit)

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the
space provided below for that purpose.

Dated as of: March 26, 2008

Vivo Ventures Fund VI, L.P.

INVESTOR

	 	 	 	 	 	 	 
	By: /s/ Albert Cha	 	 
	 	 	 	 
	Print Name: 	Albert Cha 	 	 
	 

	 	 	 

	 	 
	Title:  Managing Member of Vivo Ventures VI, LLC, its General Partner 	 	 
	 

	 

	 	 

Name that Securities are to be registered:  Vivo Ventures Fund VI, L.P.

	 	 
	Mailing Address: 

	575 High Street, #201
	 

	Palo Alto, CA 94301

Taxpayer Identification Number:                                                             

Manner of Settlement: DWAC (see Exhibit A for explanation and instructions)

-6-

 

INVESTOR SIGNATURE PAGE

Number of Shares: 63,589                     Maximum Percent:*                    

Number of Warrants:  22,255          

(such number equal to 35% of the number of Shares being purchased by the Investor)

Purchase Price Per Unit: $ 1.14375

Aggregate Purchase Price: $ 72,727.63                    

 

(* if applicable, insert limit on total percentage of Company shares outstanding after the offering
that Investor will hold, in which case the foregoing share, warrant and purchase values will be
adjusted down if necessary to keep total purchase under this limit)

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the
space provided below for that purpose.

Dated as of: March 26, 2008

Vivo Ventures VI Affiliates Fund, L.P.

INVESTOR

	 	 	 	 	 	 	 
	By:	 	/s/ Albert Cha	 	 
	 	 	 	 	 
	Print Name: Albert Cha	 	 
	 

	 	 	 	 

	 	 
	Title:  Managing Member of Vivo Ventures VI, LLC, its General Partner 	 	 
	 

	 	 	 	 

	 	 

Name that Securities are to be registered:  Vivo Ventures VI Affiliates Fund, L.P.

	 	 	 
	Mailing Address:

	 	575 High Street, #201
	 

	 	Palo Alto, CA 94301

Taxpayer Identification Number:                                                             

Manner of
Settlement: DWAC (see Exhibit A for explanation and instructions)

-6-

 

Agreed and Accepted this 26th day of March 2008:

AVANIR PHARMACEUTICALS

	 	 	 
	/s/ Keith Katkin
 

	 	 
	By: Keith Katkin 

Title: Chief Executive Officer
	 	 

Sales of the Securities purchased hereunder were made pursuant to a registration statement(s) or in
a transaction in which a final prospectus would have been required to have been delivered in the
absence of Rule 172 promulgated under the Securities Act.

-7-exv10w2

 

Exhibit 10.2

Warrant No. 08-__

AVANIR PHARMACEUTICALS

CLASS A COMMON STOCK WARRANT

     This certifies that ___ (the “Holder”), or assigns, for value received, is entitled
to purchase from Avanir Pharmaceuticals (the “Company”), subject to the terms set forth below, a
maximum of ___ fully-paid and non-assessable shares (subject to adjustment as provided
herein) of the Company’s Class A Common Stock, no par value, (the “Warrant Shares”) for cash at a
price of $1.43 per share (the “Exercise Price”) (subject to adjustment as provided herein) at any
time or from time to time on or after April 4, 2008 (the “Initial Exercise Date”) and up to and
including 5:00 p.m. (New York City Time) on April 4, 2013 (the “Expiration Date”) upon surrender to
the Company at its principal office (or at such other location as the Company may advise the Holder
in writing) of this Warrant properly endorsed with the Notice of Subscription attached hereto duly
completed and signed and upon payment in cash or by check of the aggregate Exercise Price for the
number of shares for which this Warrant is being exercised determined in accordance with the
provisions hereof. The Exercise Price is subject to adjustment as provided in Section 4 of this
Warrant. This Warrant is issued subject to the following terms and conditions:

     1. Exercise, Issuance of Certificates. The Holder may exercise this Warrant at any
time or from time to time on or after the Initial Exercise Date and on or prior to the Expiration
Date, for all or any part of the Warrant Shares (but not for a fraction of a share) which may be
purchased hereunder, as that number may be adjusted pursuant to Section 4 of this Warrant. The
Company agrees that the Warrant Shares purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such Warrant Shares as of the close of business
on the date on which this Warrant shall have been surrendered, properly endorsed, the completed and
executed Notice of Subscription delivered, and payment made for such Warrant Shares (such date, a
“Date of Exercise”). Certificates for the Warrant Shares so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company’s expense as soon as practicable after
the rights represented by this Warrant have been so exercised, but in any event not later than the
third trading day following the Date of Exercise. In case of a purchase of less than all the
Warrant Shares which may be purchased under this Warrant, the Company shall cancel this Warrant and
execute and deliver to the Holder hereof within a reasonable time a new Warrant or Warrants of like
tenor for the balance of the Warrant Shares purchasable under the Warrant surrendered upon such
purchase. Each stock certificate so delivered shall be registered in the name of such Holder and
issued with or without legends in accordance with the Subscription Agreement pursuant to which this
Warrant was originally issued (the “Subscription Agreement”).

     2. Cashless Exercise during Restrictive Event.

 

 

          2.1. Cashless Exercise. If a “Restrictive Event” (as defined below) exists at a time
when this Warrant is exercised, then the Warrant shall be exercised at such time only by means of a
“cashless exercise” in which the Holder shall be entitled to receive a certificate for the number
of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

	 	(A)	 	= the closing price of the Company’s Class A Common Stock (the
“Common Stock”) on the business day immediately prior to the Exercise Date (the
“Fair Market Value”);
	 
	 	(B)	 	= the Exercise Price of the Warrants, as adjusted; and
	 
	 	(X)	 	= the number of Warrant Shares issuable upon exercise of the
Warrants in accordance with the terms of this Warrant.

          2.2. Company-Elected Conversion. The Company shall provide to the Holder prompt
written notice of any time that the Company is unable to issue Warrant Shares because (a) the
Securities and Exchange Commission (the “Commission”) has issued a stop order with respect to the
Registration Statement (as defined in the Subscription Agreement), (b) the Commission otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, (c) the Company has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently or (d) for any other reason (each, a “Restrictive
Event”). To the extent that a Restrictive Event occurs after the Holder has exercised this Warrant
in accordance with Section 1 but prior to the delivery of the Warrant Shares, the Company shall (i)
if the Fair Market Value of the Warrant Shares is greater than the Exercise Price, provide written
notice to the Holder that the Company will deliver that number of Warrant Shares to the Holder as
should be delivered in a “cashless exercise” in accordance with Section 2.1, and return to the
Holder all consideration paid to the Company in connection with the Holder’s attempted exercise of
this Warrant pursuant to Section 1 (a “Company-Elected Conversion”), or (ii) at the election of
the Holder to be given within five (5) days of receipt of notice of a Company-Elected Conversion,
the Holder shall be entitled to rescind the previously submitted Notice of Exercise and the Company
shall return all consideration paid by Holder for such shares upon such rescission.

     3. Shares to be Fully Paid; Reservation of Shares. The Company covenants and agrees
that all Warrant Shares, will, upon issuance and, if applicable, payment of the applicable Exercise
Price, be duly authorized, validly issued, fully paid and non-assessable, and free of all
preemptive rights, liens and encumbrances, except for restrictions on transfer provided for herein.
The Company shall at all times reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all
Warrant Shares granted pursuant to this Warrant, such number of shares of Common Stock as shall,
from time to time, be sufficient therefor.

     4. Adjustment of Exercise Price and Number of Shares. The Exercise Price and the
total number of Warrant Shares shall be subject to adjustment from time to time upon the occurrence
of certain events described in this Section 4. Upon each adjustment of the Exercise Price, the
Holder of this Warrant shall thereafter be entitled to purchase, at the Exercise Price

2

 

resulting from such adjustment, the number of shares obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment, and dividing the product thereof by the Exercise Price
resulting from such adjustment.

          4.1. Subdivision or Combination of Stock. In the event the outstanding shares of the
Company’s Common Stock shall be increased by a stock dividend payable in Common Stock, stock split,
subdivision, or other similar transaction occurring after the date hereof into a greater number of
shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares issuable hereunder proportionately
increased. Conversely, in the event the outstanding shares of the Company’s Common Stock shall be
decreased by reverse stock split, combination, consolidation, or other similar transaction
occurring after the date hereof into a lesser number of shares of Common Stock, the Exercise Price
in effect immediately prior to such combination shall be proportionately increased and the number
of Warrant Shares issuable hereunder proportionately decreased.

          4.2. Reclassification. If any reclassification of the capital stock of the Company or
any reorganization, consolidation, merger, or any sale, lease, license, exchange or other transfer
(in one transaction or a series of related transactions) of all or substantially all, of the
business and/or assets of the Company (each, a “Reclassification Event”) shall be effected in such
a way that holders of Common Stock shall be entitled to receive stock, securities, or other assets
or property, then, as a condition of such Reclassification Event lawful and adequate provisions
shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in
lieu of the shares of Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of stock, securities, or
other assets or property as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights represented hereby. In any
Reclassification Event, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number of Warrant Shares),
shall thereafter be applicable, as nearly as may be, in relation to any shares of stock,
securities, or assets thereafter deliverable upon the exercise hereof.

          4.3. Notice of Adjustment. Upon any adjustment of the Exercise Price or any increase
or decrease in the number of Warrant Shares, the Company shall give written notice thereof at the
address of such Holder as shown on the books of the Company. The notice shall be prepared and
signed by the Company’s Chief Executive Officer or Chief Financial Officer and shall state the
Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number
of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is based.

     5. Redemption.

3

 

          5.1. Subject to the provisions of this Section 5, at any time after the Initial Exercise Date,
if (i) the last reported sale price of the Common Stock on the principal stock exchange or
quotation service on which the Common Stock trades is greater than 400% of the Exercise Price (as
the same may be adjusted pursuant to Section 4 hereof) for at least twenty (20) trading days during
any consecutive sixty (60)-day period and (ii) the Company has fully honored, in accordance with
the terms of this Warrant, all Notices of Subscription delivered prior to 5:00 p.m. (New York City
time) on the Call Date (as defined below), then the Company may redeem this Warrant at a price of
$1.00 (the “Redemption Price”). To exercise this right, the Company shall, not less than thirty
(30) days prior to the Call Date, deliver to the Holder an irrevocable written notice (the “Call
Notice”) informing the Holder that the Common Stock has traded at the required levels for the
specified time periods and specifying the date on which the Company shall redeem this Warrant in
accordance with this Section 5 (the “Call Date”). If the Warrant is not exercised on or before the
Call Date, then this Warrant shall be cancelled at 5:00 p.m. (New York City time) on the Call Date,
and the Company shall thereafter deliver the Redemption Price to such Holder at its address of
record. The Company covenants and agrees that it will honor all Notices of Subscription with
respect to Warrant Shares that are tendered from the time of delivery of the Call Notice through
5:00 p.m. (New York City time) on the Call Date. For the avoidance of doubt, the Company’s
delivery to Holder of the Redemption Price of $1.00 shall be effective to redeem this Warrant in
its entirety pursuant to this Section 5.

          5.2. If (A) the Holder timely delivers to the Company a notice of exercise and tenders the
applicable purchase price on or before the Call Date, and (B) the Company is unable to issue the
full number of Warrant Shares potentially issuable as of the Call Date solely due to the
limitations in Section 6.1 regarding the Holder’s acquisition of more than 19.99% of the Company’s
issued and outstanding Common Stock (without regard to any potential lowering of the Maximum
Percentage as permitted in Section 6.3), then in such instance, the Company shall honor the
exercise only to the extent allowed under Section 6.1 based on the total shares outstanding at the
close of business on the Call Date and shall promptly return that portion of the exercise price not
applied to the purchase of Warrant Shares. The Warrant Shares that cannot be acquired as of the
Call Date shall remain issuable hereunder and the Warrant shall not be redeemed with respect to
those Warrant Shares.

     6. Limitation on Exercise.

          6.1. Holder’s 20% Restrictions. The Company shall not effect any exercise of this
Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, to the
extent that as a result of giving effect to such exercise, such Holder (together with such Holder’s
affiliates, and any other person or entity acting as a group together with such Holder or any of
such Holder’s affiliates) would beneficially own in excess of 19.99% (the “Maximum Percentage”) of
the shares of Common Stock outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially
owned (directly or indirectly through Warrant Shares or otherwise) by such Holder and its
affiliates shall include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such sentence is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Holder or any of its affiliates and
(B) exercise or conversion of the unexercised or unconverted

4

 

portion of any other securities of the Company (including, without limitation, any other
preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by such Holder or any of its affiliates. The
limitations contained in this Section 6.1 shall apply only to the extent required under NASDAQ
Marketplace Rule 4350(i)(1)(B). The provisions of this paragraph shall be implemented in a manner
otherwise than in strict conformity with the terms of this Section 6.1 to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage
herein contained or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this Section 6.1 shall apply to a successor
Holder of this Warrant.

          6.2. Calculation of Ownership. Except as set forth in the preceding Section, for
purposes of this Section 6, beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to such Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and such Holder is solely
responsible for any schedules required to be filed in accordance therewith. To the extent that the
limitation contained in this Section 6 applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder) and of which a portion of this
Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a
Notice of Subscription shall be deemed to be such Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder) and of which portion of this
Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the
Company shall have no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 6, in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected
in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent
public announcement by the Company or (z) any other notice by the Company or the Company’s transfer
agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral
request of the Holder, the Company shall within two trading days confirm orally and in writing to
such Holder the number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by such Holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock was reported.

          6.3. Reductions to Maximum Percentage. The Holder may, at any time and upon providing
the Company with written notice, lower the Maximum Percentage to any percentage below 19.99% (such
amount being the “Adjusted Maximum Percentage”). Upon providing the Company with at least 61 days
prior written notice, the Holder may increase the Adjusted Maximum Percentage, up to 19.99% of the
shares of Common Stock outstanding immediately after giving effect to such exercise.

          6.4. Liquidation Event. Notwithstanding the limitations set forth in this Section 6,
but subject to NASDAQ Marketplace Rule 4350(i)(1)(B), this Warrant shall be fully

5

 

exercisable upon a Liquidation Event (defined below). For purposes of this Section 6.4,
“Liquidation Event” shall mean the consummation of any of the following transactions: (a) a merger
or consolidation in which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in the shareholders of
the Company), (b) the sale of all or substantially all of the assets of the Company, or (c) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction.

     7. No Voting or Dividend Rights. Nothing contained in this Warrant shall be construed
as conferring upon the holder hereof the right to vote or to consent to receive notice as a
shareholder of the Company on any other matters or any rights whatsoever as a shareholder of the
Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the
interest represented hereby or the shares purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised.

     8. Compliance with Securities Act. The Holder of this Warrant, by acceptance hereof,
agrees that this Warrant is being acquired for Holder’s own account and not for any other person or
persons, for investment purposes and that it will not offer, sell, or otherwise dispose of this
Warrant except under circumstances which will not result in a violation of the Securities Act of
1933 or any applicable state securities laws.

     9. Modification and Waiver. This Warrant and any provision hereof may be changed,
waived, discharged, or terminated only by an instrument in writing signed by the party against whom
enforcement of the same is sought.

     10. Notices. Any notice, request, or other document required or permitted to be given
or delivered to the Holder hereof or the Company shall be delivered by hand or messenger or shall
be sent by certified mail, postage prepaid, or by overnight courier to each such Holder at its
address as shown on the books of the Company or to the Company at its principal place of business
or such other address as either may from time to time provide to the other. Each such notice or
other communication shall be treated as effective or having been given: (i) when delivered if
delivered personally, (ii) if sent by registered or certified mail, at the earlier of its receipt
or three business days after the same has been registered or certified as aforesaid, (iii) if sent
by overnight courier, on the next business day after the same has been deposited with a nationally
recognized courier service, or (iv) the date of transmission, if such notice or communication is
delivered via facsimile prior to 5:00 p.m. (New York City time) on a trading day at a facsimile
number as either may from time to time provide to the other and a confirming copy of such notice is
sent the same day by first class mail.

     11. Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of this Warrant and the transactions herein contemplated (“Proceedings”)
(whether brought against a party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of

6

 

New York (the “Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any Court, or that such Proceeding has been commenced in an improper or
inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Warrant or the
transactions contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of this Warrant, then the prevailing party in such Proceeding shall be reimbursed by the
other party for its reasonable attorney’s fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.

     12. Lost or Stolen Warrant. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or
in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company,
at its expense, will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

     13. Fractional Shares. No fractional shares shall be issued upon exercise of this
Warrant. The Company shall, in lieu of issuing any fractional share, pay the Holder entitled to
such fraction a sum in cash equal to such fraction (calculated to the nearest 1/100th of a share)
multiplied by the then effective Exercise Price on the date the Notice of Subscription is received
by the Company.

     14. Acknowledgement. Upon the request of the Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to
Holder, the continued validity of this Warrant and the Company’s obligations hereunder.

     15. Successors and Assigns. This Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the successors and assigns
of the Holder. The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant, and shall be enforceable by any such Holder.

     16. Severability of Provisions. In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby
and the parties will attempt in good faith to agree upon a valid and enforceable provision which
shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate
such substitute provision in this Warrant.

7

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officer,
thereunto duly authorized on this ___ day of April 2008.

	 	 	 	 	 
	 	Avanir Pharmaceuticals,

a California corporation

 	 
	 	By:  	 	 
	 	 	Keith A. Katkin 	 
	 	 	President and Chief Executive Officer 	 

 

 

	 	 	 	 	 

NOTICE OF SUBSCRIPTION

(To be signed only upon exercise of Warrant)

To:      Avanir Pharmaceuticals

     The undersigned, the holder of the attached Class A Common Stock Warrant, hereby elects to
exercise the purchase right represented by such Warrant for, and to purchase thereunder,
                                        1 shares of Class A Common Stock of Avanir
Pharmaceuticals and either (check one):

                          makes payment of $                     therefor; or

                          makes a “cashless exercise” as required by Section 2 of the Warrant.

     By its delivery of this Notice of Subscription, the undersigned represents and warrants to the
Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own
in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934) permitted to be owned under Warrant to which this notice
relates.

	 	 	 	 	 	 	 	 	 
	The undersigned requests that certificates for such shares be issued in the name of, and delivered
	to:
	 	 	 	 	 	 	 	 
	 	 	   
	whose address is:                                                                   
                                                                             
                         
 .

	 	 	 	 	 	 	 
	DATED:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	(Signature must conform in all respects to name of Holder
as specified on the face of the Warrant)
	 
	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

 

			
	1	 	Insert here the number of shares called for on the face
of the Warrant (or, in the case of a partial exercise, the portion thereof as
to which the Warrant is being exercised), in either case without making any
adjustment for any stock or other securities or property or cash which,
pursuant to the adjustment provisions of the Warrant, may be deliverable upon
exercise.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]