Document:

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                                                                Exhibit 4.5

                          HARRY'S FARMERS MARKET, INC.

                                  CHARLES SAPP
                             Non-Employee Director
                      NON-QUALIFIED STOCK OPTION AGREEMENT

     THIS AGREEMENT is made and entered into this 5th day of February, 1999 (the
"Grant Date") by and between HARRY'S FARMERS MARKET, INC., a Georgia corporation
(the "Company"), and CHARLES SAPP ("Grantee").

                                   Background

     A.  Grantee is a non-employee director of the Company and is not at the
present time eligible to receive stock options, restricted stock and other
stock-based awards from the Company other than as currently set forth under the
terms of the Company's 1996 Director Stock Option Plan (the "Plan").  Although
granted outside of the Plan, the option represented by this Agreement is
intended to be generally consistent with the terms and conditions of the Plan.
Therefore, for purposes of reference only, and not to imply that the option
granted hereby is governed by or issued under the Plan, capitalized terms used
herein and not defined in context are defined in Section 6.11 hereof or in the
Plan.

     B.  The Company and Grantee wish to confirm herein the terms, conditions,
and restrictions of the option.

     C.  For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:

                                   Article 1
                          Grant and Exercise of Option

     1.1  Grant of Option.  Subject to the terms, restrictions, limitations, and
          ---------------
conditions stated herein, the Company hereby grants to Grantee a non-qualified
option (the "Option") to purchase all or any part of 10,000 shares of Class A
Common Stock, no par value per share (the "Option Shares").  This Option is
intended to be a non-qualified stock option.

     1.2  Exercise of Option.
          ------------------

          (a) Except as provided in Section 1.4 below, the Option may be
     exercised during the Option Period (as defined in Section 1.4) only to the
     extent of the number of Option Shares that are then vested ("Vested
     Shares") as determined pursuant to the vesting schedule attached hereto as
     Schedule I.
<PAGE>

          (b) The Option may be exercised with respect to all or any portion of
     the Vested Shares at any time during the Option Period by the delivery to
     the Company, at its principal place of business, of (i) a written notice of
     exercise, in substantially the form attached hereto as Exhibit A (or such
     other form as shall be required by the Board of Directors or as otherwise
     permitted by the Board of Directors), prior to the date upon which Grantee
     desires to exercise all or any portion of the Option (the "Exercise Date");
     (ii) payment in full of the amount of the Option Exercise Price multiplied
     by the number of Option Shares being purchased (the "Purchase Price") in
     any manner permitted under Section 1.2(c) below; and (iii) a certified or
     cashier's check payable to the Company in the amount of all withholding tax
     obligations, if any (whether federal, state or local), imposed on the
     Company by reason of the exercise of the Option.  Upon acceptance of such
     notice, receipt of payment in full, and receipt of payment of all
     withholding tax obligations, if any, the Company shall cause a certificate
     representing the shares of Common Stock purchased to be issued and
     delivered to Grantee.

          (c) The Purchase Price may be paid in any of the following methods:

               (i)   in cash

               (ii)  by certified or cashier's check or money order payable to
          the Company (or the equivalent thereof acceptable to the Board of
          Directors);

               (iii) with the consent of the Board of Directors in its sole
          discretion, by personal check (subject to collection), which may in
          the Board of Director's sole discretion be deemed conditional;

               (iv)  at the option of the Grantee, in Common Stock theretofore
          owned by the Grantee; provided; however, that if the Grantee acquired
          such stock to be surrendered directly or indirectly from the Company,
          he shall have owned such stock for six months prior to using such
          stock to exercise this Option and, provided, further, that such
          exercise transaction shall not result in a violation of Section 16 of
          the Securities Exchange Act of 1934, as amended (the "Exchange Act").
          For purposes of determining the amount, if any, of the exercise price
          satisfied by payment in Common Stock, such Common Stock shall be
          valued at its Fair Market Value on the date of exercise.  Any Common
          Stock delivered in satisfaction of all or a portion of the exercise
          price shall be appropriately endorsed for transfer and assignment to
          the Company; or

               (v)   any combination of the above.

                                      -2-
<PAGE>

     1.3  Option Exercise Price.  The price for each share of Common Stock for
          ---------------------
which the Option is exercised is US $1.04 (the "Option Exercise Price").

     1.4  Term and Termination of Option.
          ------------------------------

          (a) Except as otherwise provided herein, the period in which the
     Option may be exercised as to any Vested Shares (the "Option Period") shall
     commence on the date such shares become Vested Shares and terminate at 5:00
     p.m. Eastern Time on the date of the first to occur of the following
     events:

               (i)   February 5, 2004

               (ii)  If Grantee ceases to be a Director of the Company for any
          reason other than as provided in paragraph (iii) or (iv) below, the
          Option shall lapse, unless it is previously exercised, thirty (30)
          days after Grantee's position as a Director of the Company terminates.

               (iii) If Grantee ceases to be a Director of the Company by
          reason of his mental or physical disability determined by a medical
          doctor satisfactory to the Company, the Option shall lapse, unless it
          is previously exercised, within one year after the date that the
          Grantee's position as a Director of the Company terminates.

               (iv)  If Grantee dies while serving as a Director, or during the
          30-day period described in paragraph (ii) and before the Option
          otherwise lapses, the Option shall lapse one year after Grantee's
          death.  Upon Grantee's death, any exercisable Options may be exercised
          by Grantee's legal representative or representatives, by the person or
          persons entitled to do so under Grantee's last will and testament, or,
          if Grantee shall fail to make testamentary disposition of such Option
          or shall die intestate, by the person or persons entitled to receive
          such Option under the applicable laws of descent and distribution.

          If Grantee exercises the Option after the Grantee's position as a
     Director terminates, the Option may be exercised only with respect to the
     shares that were otherwise vested on the date that the Grantee's position
     as a Director of the Company terminates.  Upon the expiration of the Option
     Period, this Option, and all unexercised rights granted to Grantee
     hereunder, shall terminate as to all Vested Shares to which the Option
     Period relates, and thereafter be null and void.

          (b) The Board of Directors of the Company in its sole discretion may,
     by giving written notice to the Grantee ("Cancellation Notice"), cancel,
     effective upon the date of a Change in Control, any portion of the Option
     that remains

                                      -3-
<PAGE>

     unexercised on such date. Such Cancellation Notice shall be given to the
     Grantee at least ten (10) days prior to the date of cancellation.

     1.5  No Rights as Stockholder.  Grantee shall have no rights as a
          ------------------------
stockholder with respect to any Option Shares until the issuance of a stock
certificate to him for such shares.  Except as otherwise provided in Section 1.6
below, no adjustment shall be made for dividends, distributions or other rights
(whether ordinary or extraordinary, and whether in cash, securities or other
property) for which the record date is prior to the date such stock certificate
is issued.

     1.6  Changes in Capitalization.
          -------------------------

          (a) If at any time there shall be an increase or decrease in the
     number of issued an outstanding shares of Common Stock of the Company,
     through the declaration of a stock dividend or through any recapitalization
     resulting in a stock split-up, combination or exchange of shares of Common
     Stock, then appropriate proportional adjustment shall be made in the number
     of Option Shares (and, with respect to the Option Shares, the Option
     Exercise Price) subject to this Option still outstanding.

          (b) In the event of a merger, consolidation or other reorganization of
     the Company under the terms of which the Company is not the surviving
     corporation, but the surviving corporation elects to assume this Option,
     the Grantee shall be entitled to receive, upon the exercise of the Option,
     with respect to each Option Share: (i) the number of shares of stock of the
     surviving corporation (or equity interest in any other entity); and (ii)
     any other notes, evidences of indebtedness or other property, that the
     Grantee would have received in connection with such merger, consolidation
     or other reorganization had he exercised the Option immediately prior to
     such merger, consolidation or other reorganization.

          (c) Except as otherwise expressly provided herein, the issuance by the
     Company of shares of its capital stock of any class or securities
     convertible into shares of capital stock of any class, either in connection
     with direct sale or upon the exercise of rights or warrants to subscribe
     therefor, or upon conversion of shares or obligations of the Company
     convertible into such shares or other securities, shall not affect and no
     adjustment by reason thereof shall be made with respect to, the number of
     Option Shares then outstanding or the Option Exercise Price.

          (d) Without limiting the generality of the foregoing, the existence of
     outstanding Options under this Agreement shall not affect in any manner the
     right or power of the Company to make, authorize or consummate: (i) any or
     all adjustments, recapitalizations, reorganizations or other changes in the
     Company's

                                      -4-
<PAGE>

     capital structure or its business; (ii) any merger or consolidation of the
     Company; (iii) any issuance by the Company of debt securities or preferred
     stock that would rank above the Option Shares subject to outstanding
     Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
     transfer or assignment of all or any part of the assets or business of the
     Company; or (vi) any other corporate act or proceeding, whether of a
     similar character or otherwise.

                                   Article 2
                       Restriction on Transfer of Option

     The Option evidenced hereby is not assignable or otherwise transferable,
except to members of the Grantee's immediate family or by will or the laws of
descent and distribution.

                                   Article 3
                                    Legends

     3.1  Legends.  Each certificate representing the Option Shares purchased
          -------
upon exercise of this Option shall be endorsed with the following legend and
Grantee shall not make any transfer of the Option Shares without first complying
with the restrictions on transfer described in such legend:

     THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
     ASSIGNED, OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION
     UNDER SUCH ACT COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN
     COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER
     RECEIVES AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
     STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
     FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT.

     THE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON ONE OR MORE
     EXEMPTIONS FROM REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS, AND
     MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT
     UNDER SUCH LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
     SUCH LAWS.

     Grantee agrees that the Company may also endorse any other legends required
by applicable federal or state securities laws.

                                      -5-
<PAGE>

     The Company shall not be required to transfer on its books any Option
Shares that have been sold or transferred in violation of the provisions of this
Agreement (including the foregoing legends).

     3.2  Removal of Legend and Transfer Restrictions.
          -------------------------------------------

          (a) Any legend endorsed on a certificate pursuant to Section 3.1
     hereof and the stop transfer instructions with respect to the Option Shares
     shall be removed and the Company shall issue a certificate without such
     legend to the holder thereof if such Option Shares are registered under the
     Securities Act of 1933, as amended (the "Securities Act") and a prospectus
     meeting the requirements of Section 10 of the Securities Act is available.

          (b) The restrictions described in the second sentence of the legend
     set forth in Section 3.1 hereof may be removed at such time as permitted by
     Rule 144 promulgated under the Securities Act.

                                   Article 4
                            Purchase for Investment

     As a condition of any issuance of a stock certificate for the Option
Shares, the Board of Directors may obtain such agreements or undertakings, if
any, as it may deem necessary or advisable to assure compliance with any
provision of this Agreement or any law or regulation, including, but not limited
to, the following:

          (a) a representation and warranty by the Grantee to the Company, at
     the time this Option is exercised, that the Grantee is acquiring the Option
     Shares to be issued to him for investment and not with a view to, or for
     sale in connection with, the distribution of any such Option Shares; and

          (b) a representation, warranty or agreement to be bound by any legends
     that are, in the opinion of the Board of Directors, necessary or
     appropriate to comply with the provisions of any securities law deemed by
     the Board to be applicable to the issuance of the Option Shares and are
     endorsed upon the certificates representing the Option Shares.

                                   Article 5
                               General Provisions

     5.1  Governing Laws.  This Agreement shall be construed, administered and
          --------------
enforced according to the laws of the State of Georgia.

                                      -6-
<PAGE>

     5.2  Successors.  This Agreement shall be binding upon and inure to the
          ----------
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.

     5.3  Notice.  Except as otherwise specified herein, all notices and other
          ------
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered, if mailed by overnight delivery or if
sent by registered or certified United States mail, return receipt requested,
postage prepaid, addressed to the proposed recipient at the last known address
of the recipient.  In each case, each notice or other communication shall be
deemed to have been received on the earlier of the date of actual receipt or the
date that is three (3) days after the date on which such notice or other
communication was mailed or sent.  Any party may designate any other address to
which notices shall be sent by giving notice of the address to the other parties
in the same manner as provided herein.

     5.4  Severability.  In the event that any one or more of the provisions or
          ------------
portion thereof contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, the same shall not invalidate
or otherwise affect any other provisions of this Agreement, and this Agreement
shall be construed as if the invalid, illegal or unenforceable provision or
portion thereof had never been contained herein.

     5.5  Entire Agreement.  This Agreement expresses the entire understanding
          ----------------
and agreement of the parties with respect to the subject matter hereof.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
instrument.

     5.6  Violation.  Except as provided herein, any transfer, pledge, sale,
          ---------
assignment, or hypothecation of the Option or any portion thereof or of any
Option Shares issued upon exercise hereof shall be a violation of the terms of
this Agreement and shall be void and without effect.

     5.7  Headings.  Paragraph headings used herein are for convenience of
          --------
reference only and shall not be considered in construing this Agreement.

     5.8  Specific Performance.  In the event of any actual or threatened
          --------------------
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.

     5.9  No Rights to Continued Directorship.  The grant of the Option
          -----------------------------------
hereunder shall not be construed as giving Grantee the right to continue to
serve as a Director of the Company or any Affiliate of the Company.

                                      -7-
<PAGE>

     5.10 Certain Definitions.  The capitalized terms listed below are used
          -------------------
herein with the meaning thereafter ascribed:

          (a) "Change of Control" shall be deemed to have occurred if (i) a
     tender offer shall be made and consummated for the ownership of 25% or more
     of the outstanding voting securities of the Company, (ii) the Company shall
     be merged or consolidated with another corporation and as a result of such
     merger or consolidation less than 50% of the outstanding voting securities
     of the surviving  or resulting corporation shall be owned in the aggregate
     by the former shareholders of the Company, (iii) the Company shall sell at
     least 75% of its assets by value in a single transaction or in a series of
     transactions to another corporation which is not a wholly-owned subsidiary
     of the Company, or (iv) a person, within the meaning of Section 3(a)(9) or
     of Section 13(d)(3) (as in effect on the date hereof) of the Exchange Act,
     shall acquire 50% or more of the outstanding voting securities of the
     Company(whether directly, indirectly, beneficially or of record).  For
     purposes hereof, ownership of voting securities shall take into account and
     shall include ownership as determined by applying the provisions of Rule
     13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Exchange
     Act.

          (b) "Board of Directors" means the Board of Directors of the Company.

          (c) "Common Stock" means the Class A Common Stock, no par value per
     share, of the Company.

     IN WITNESS WHEREOF, the parties have executed and sealed this Agreement on
the day and year first set forth above.

                                         HARRY'S FARMERS MARKET, INC.

                                         By: /s/ Harry A. Blazer
                                             ------------------------
                                             Harry A. Blazer
                                         Title: President

                                         GRANTEE:

                                         /s/ Charles Sapp
                                         ------------------------
                                         Charles Sapp

                                      -8-
<PAGE>

                                   EXHIBIT A
                                       TO
                                  CHARLES SAPP
                             NON-EMPLOYEE DIRECTOR
                      NON-QUALIFIED STOCK OPTION AGREEMENT

                          HARRY'S FARMERS MARKET, INC.

                               Notice of Exercise
                               ------------------

               Name_____________________________________
               Address__________________________________
               _________________________________________

               Date_____________________________________

Harry's Farmers Market, Inc.
1180 Upper Hembree Road
Roswell, Georgia 30076

     Re:  Exercise of Stock Option

Gentlemen:

     I hereby give notice of my election to exercise options granted to me to
purchase ________ shares of Class A common stock (the "Common Stock") of Harry's
Farmers Market, Inc. (the "Company") under the Charles Sapp Non-Employee
Director Non-Qualified Stock Option Agreement dated February 5, 1999 (the
"Agreement").  The purchase shall take place as of ___________ (the "Exercise
Date").

     On or before the Exercise Date, I will present you with proper payment in
the form of _______________________ for $__________ for the full purchase price
payable to the order of the Company.

     I hereby represent, warrant, covenant, and agree with the Company as
follows:

          The shares of the Common Stock being acquired by me will be acquired
     for my own account without the participation of any other person, with the
     intent of holding the Common Stock for investment and without the intent of
     participating, directly or indirectly, in a distribution of the Common
     Stock and not with a view to, or for resale in connection with, any
     distribution of the Common Stock, nor am I aware of the existence of any
     distribution of the Common Stock;

          I am not acquiring the Common Stock based upon any representation,
     oral or written, by any person with respect to the future value of, or
     income from, the

           Exhibit A to Non-Qualified Stock Option Agreement-Page 1
<PAGE>

     Common Stock but rather upon an independent examination and judgment as to
     the prospects of the Company;

          The Common Stock was not offered to me by means of publicly
     disseminated advertisements or sales literature, nor am I aware of any
     offers made to other persons by such means;

          I am able to bear the economic risks of the investment in the Common
     Stock including the risk of a complete loss of my investment therein;

          I understand and agree that the Common Stock will be issued and sold
     to me without registration under any state law relating to the registration
     of securities for sale, and will be issued and sold in reliance on the
     exemptions from registration under the Securities Act of 1933 (the "1933
     Act"), provided by Sections 3(b) and/or 4(2) thereof and the rules and
     regulations promulgated thereunder;

          The Common Stock cannot be offered for sale, sold or transferred by me
     other than pursuant to: (A) an effective registration under the 1933 Act or
     in a transaction, otherwise in compliance with the 1933 Act; and (B)
     evidence satisfactory to the Company of compliance with the applicable
     securities laws of other jurisdictions.  The Company shall be entitled to
     rely upon an opinion of counsel satisfactory to it with respect to
     compliance with the above laws;

          The Company will be under no obligation to register the Common Stock
     or comply with any exemption available for sale of the Common Stock without
     registration or filing, and the information or conditions necessary to
     permit routine sale of securities of the Company under Rule 144 of the 1933
     Act are not now available and no assurance has been given that it or they
     will become available.  The Company is under no obligation to act in any
     manner so as to make Rule 144 available with respect to the Common Stock;

          I have and have had complete access to and the opportunity to review
     and make copies of all material documents related to the business of the
     Company, including, but not limited to, contracts, financial statements,
     tax returns, leases, deeds and other books and records.  I have examined
     such of these documents as I wished and am familiar with the business and
     affairs of the Company.  I realize that purchase of the Common Stock is a
     speculative investment and that any possible profit therefrom is uncertain;

          I have had the opportunity to ask questions of and receive answers
     from the Company and any person acting on its behalf and to obtain all
     material informal reasonably available with respect to the Company and its
     affairs.  I have received all information and data with respect to the
     Company which I have requested and which I have deemed relevant in
     connection with the evaluation of the merits and risks of investment in the
     Company;

           Exhibit A to Non-Qualified Stock Option Agreement-Page 2
<PAGE>

          I have such knowledge and experience in financial and business matters
     that I am capable of evaluating the merits and risks of the purchase of the
     Common Stock hereunder and I am able to bear the economic risk of such
     purchase; and

          The agreements, representations, warranties, and covenants made by me
     herein extend to and apply to all of the Common Stock of the Company issued
     to me pursuant to this Option.  Acceptance by me of the certificate
     representing such Common Stock shall constitute a confirmation by me that
     all such agreements, representations, warranties, and covenants made herein
     shall be true and correct at that time.

     I understand that the certificates representing the shares being purchased
by me in accordance with this notice shall bear a legend referring to the
foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.

                                            Very truly yours,

                                            ____________________________
AGREED TO AND ACCEPTED:

HARRY'S FARMERS MARKET, INC.

By:______________________

Title:___________________

Number of Shares
Exercised:_______________

Number of Shares
Remaining:_______________                   Date:_______________________

           Exhibit A to Non-Qualified Stock Option Agreement-Page 3
<PAGE>

                                   SCHEDULE 1
                        to Harry's Farmers Market, Inc.
                      Non-Qualified Stock Option Agreement
                               with Charles Sapp
                               for 10,000 Shares

                                Vesting Schedule
                                ----------------

                               No. of Option Shares        No. of Option Shares
        Vesting Date        Vested on the Vesting Date     Cumulatively Vested

Grant Date                            10,000                      10,000<PAGE>   1
*** Indicates text was omitted and filed separately. Confidential treatment
requested under SEC Rule 80(b)(4), 17 C.F.R. Section 200.80(b)(4).

                                                                    EXHIBIT 10.1
                                                CONFIDENTIAL TREATMENT REQUESTED

                                LICENSE AGREEMENT

                                     BETWEEN

                           SB PHARMCO PUERTO RICO INC.

                                       AND

                             AVANIR PHARMACEUTICALS

                                       1

<PAGE>   2

                                                CONFIDENTIAL TREATMENT REQUESTED

                                LICENSE AGREEMENT

THIS LICENSE AGREEMENT (hereinafter "AGREEMENT"), made as of the 31st day of
March, 2000 between SB PHARMCO PUERTO RICO INC., a corporation of the territory
of Puerto Rico having a principal place of business at Road 172, Rm9.1/Bo.,
Certenejas, Cidra Puerto Rico 00639 and AVANIR PHARMACEUTICALS, a corporation of
the state of California, having a principal place of business at 9393 Towne
Centre Drive, Suite 200, San Diego, California 92121.

                                WITNESSETH THAT:

        WHEREAS, AVANIR, as defined below, is the owner of all right, title and
interest in certain patents, identified in Appendix A hereto, and know-how
relating to a compound known as docosanol; and

        WHEREAS, SB, as defined below, desires to obtain certain licenses in
certain countries of the world from AVANIR to develop and commercialize
docosanol in such countries under the aforesaid patents and know-how, and AVANIR
is willing to grant to SB such licenses;

        NOW, THEREFORE, in consideration of the covenants and obligations
expressed herein, and intending to be legally bound, and otherwise to be bound
by proper and reasonable conduct, the parties agree as follows:

1.      DEFINITIONS

        1.01 "AFFILIATES" shall mean any corporation, firm, partnership or other
entity, whether de jure or de facto, which directly or indirectly owns, is owned
by or is under common ownership with a party to this AGREEMENT to the extent of
at least fifty percent (50%) of the equity (or such lesser percentage which is
the maximum allowed to be owned by a foreign corporation in a particular
jurisdiction) having the power to vote on or direct the affairs of the

                                       1
<PAGE>   3

                                                CONFIDENTIAL TREATMENT REQUESTED

entity and any person, firm, partnership, corporation or other entity actually
controlled by, controlling or under common control with such party.

        1.02 "AVANIR" shall mean Avanir Pharmaceuticals, a corporation of the
state of California, having a principal place of business at 9393 Towne Centre
Drive, Suite 200, San Diego, California 92121.

        1.03 "AVANIR FIELD" shall mean (i) the prescription use of PRODUCT in
the USA, or (ii) the NON-PRESCRIPTION USE of PRODUCT permitted by a regulatory
approval received by AVANIR from a competent regulatory authority after the date
of the OTC Approval (as defined in Paragraph 3.01(4)) (a "Later Approval")
authorizing the switch of a former prescription use of PRODUCT, *** to a
NON-PRESCRIPTION USE of PRODUCT provided always that such NON-PRESCRIPTION USE
of PRODUCT as permitted by such regulatory approval received by AVANIR may be
excluded from the AVANIR FIELD ***.

        1.04 "EFFECTIVE DATE" shall mean the date upon which this AGREEMENT is
effective and shall be the date of this AGREEMENT first written above.

        1.05 "FIELD" shall mean (i) the NON-PRESCRIPTION USE of PRODUCT in
humans, or (ii) in Canada, the prescription use of PRODUCT in humans during the
time that SB intends to seek or is seeking marketing approval from a competent
regulatory authority to switch such prescription use to a NON PRESCRIPTION USE.
FIELD shall not include AVANIR FIELD.

        1.06 "FORCE MAJEURE EVENT" shall mean any circumstances beyond the
reasonable control of SB or AVANIR including, but not limited to, government
legislation, fires, floods, explosions, epidemics, accidents, acts of God, wars
or riots, labor disputes or lockouts, or any order, agreement or direction or
any likely order, agreement or direction with or by any governmental agency that
directly prevents or, at SB's reasonable determination, is likely to directly
prevent the launch of PRODUCT by SB.

                                       2
<PAGE>   4

                                                CONFIDENTIAL TREATMENT REQUESTED

        1.07 "KNOW-HOW" shall mean all present and future technical information
and know-how in the FIELD which relates to PRODUCT and shall include, without
limitation, all biological, chemical, pharmacological, toxicological, clinical,
assay, control and manufacturing data and any other information relating to
PRODUCT and useful for the development and commercialization of PRODUCT.

        1.08 "NET SALES" shall mean the gross receipts representing sales of
PRODUCT in the TERRITORY under this AGREEMENT by SB, its AFFILIATES or its/their
PERMITTED SUBLICENSEES ("the Selling Party") to THIRD PARTIES in finished
product form (i.e., packaged and labeled for sale to the ultimate consumer) less
deductions for:

        (i) transportation charges, including insurance, for transporting
PRODUCT;

        (ii) trade, quantity and cash discounts allowed on PRODUCT; and

        (iii) allowances or credits to customers on account of rejection or
return of PRODUCT.

Sales between SB, its AFFILIATES and its or their PERMITTED SUBLICENSEES shall
be excluded from the computation of NET SALES and no royalties will be payable
on such sales.

        1.09 "NON-PRESCRIPTION USE" shall mean that a prescription from a
physician or other health care professional is not required by the regulatory
authorities in a country in which PRODUCT is purchased to enable consumers to
purchase PRODUCT.

        1.10 "PERMITTED SUBLICENSEES" shall mean THIRD PARTIES which have
entered into arrangements with SB or its AFFILIATES for the co-promotion or
co-marketing of PRODUCT as a means to augment SB's efforts in the
commercialization of PRODUCT, or other THIRD PARTIES in respect of which AVANIR
has given its prior written consent, such consent not to be unreasonably
withheld or delayed.

                                       3
<PAGE>   5

                                                CONFIDENTIAL TREATMENT REQUESTED

        1.11 "PATENTS" shall mean all patents and patent applications in the
FIELD which are or become owned by AVANIR, or to which AVANIR otherwise has, now
or in the future, the right to grant licenses, which generically or specifically
claim PRODUCT, a process for manufacturing or formulating PRODUCT, an
intermediate used in such process or a use of PRODUCT in the FIELD. Included
within the definition of PATENTS are all continuations, continuations-in-part,
divisions, patents of addition, reissues, renewals or extensions thereof. Also
included within the definition of PATENTS are any patents or patent applications
which generically or specifically claim any improvements on PRODUCT or
intermediates or manufacturing processes required or useful for production of
PRODUCT which are developed by AVANIR, or which AVANIR otherwise has the right
to grant licenses, now or in the future, during the term of this AGREEMENT. The
current list of patent applications and patents encompassed within PATENTS is
set forth in Appendix A attached hereto.

        1.12 "PRODUCT" shall mean a medicinal product including as an ingredient
the chemical compound known as docosanol, whose more specific chemical formula
is CH3 (CH2)20 - CH2OH and other aliphatic saturated straight chain monohydric
alcohols of chain length C20 - C28, its prodrugs and metabolites, and all
esters, salts, hydrates, solvates, polymorphs and isomers thereof, and shall
include compositions comprising such compound, prodrug or metabolites, or
esters, salts, hydrates, solvates, polymorphs and isomers or any product, the
manufacture, use, sale or import of which, but for the license granted under
this Agreement, infringes any PATENT or employs any KNOW-HOW in the FIELD.

        1.13 "SB" shall mean SB Pharmco Puerto Rico Inc., a corporation of the
territory of Puerto Rico, having its principal place of business at Road 172, Rm
9.1/Bo., Certenejas, Cidra Puerto Rico 00639.

        1.14 "TERRITORY" shall mean the USA and Canada. For the avoidance of
doubt, the parties agree that the "ship to" address of any THIRD PARTY will
determine whether such THIRD PARTY is in the TERRITORY.

                                       4
<PAGE>   6

                                                CONFIDENTIAL TREATMENT REQUESTED

        1.15 "THIRD PARTY(IES)" shall mean any party other than SB, AVANIR and
their respective AFFILIATES.

        1.16 "USA" shall mean the United States of America, including all of its
territories and possessions (including, but without limitation, Puerto Rico).

2.      GRANT, FIRST RIGHT TO NEGOTIATE AND OPTION

        2.01 AVANIR hereby grants to SB an exclusive license with the right to
grant sublicenses to its AFFILIATES and PERMITTED SUBLICENSEES under PATENTS and
KNOW-HOW to make, have made, use, sell, offer for sale, and import PRODUCT, in
the FIELD, in the TERRITORY, subject to the other terms and conditions of this
AGREEMENT and as limited by the AVANIR FIELD. The rights to make, have made,
use, sell, offer for sale and import shall include all activities concerning the
subject matter of PATENTS and KNOW-HOW which activities would, but for the
license herein granted, infringe AVANIR's intellectual property rights under
PATENTS or KNOW-HOW.

        2.02 AVANIR shall not seek customers in the FIELD and TERRITORY and will
not maintain a distribution depot in the TERRITORY for sales of PRODUCT to
customers in the FIELD and TERRITORY. Notwithstanding the foregoing, AVANIR
shall be entitled to manufacture PRODUCT in the TERRITORY for the sole purpose
of exporting PRODUCT outside of the TERRITORY provided that AVANIR shall not
sell or supply PRODUCT to any THIRD PARTY in the event that AVANIR believes or
has reasonable cause to believe that such THIRD PARTY intends to sell such
PRODUCT into the TERRITORY and FIELD. SB shall not seek customers outside the
TERRITORY or FIELD and will not maintain a distribution depot outside the
TERRITORY for sales of PRODUCT to customers outside the TERRITORY or FIELD.
Notwithstanding the foregoing, SB shall be entitled to manufacture PRODUCT
outside the TERRITORY for the sole purpose of exporting PRODUCT into the
TERRITORY provided that SB shall not sell or supply PRODUCT to any THIRD PARTY
in the event that SB believes

                                       5
<PAGE>   7

                                                CONFIDENTIAL TREATMENT REQUESTED

or has reasonable cause to believe that such THIRD PARTY intends to sell such
PRODUCT outside the FIELD or TERRITORY.

        2.03 AVANIR hereby grants to SB an exclusive option to enter into an
agreement with AVANIR for the exclusive right to make, have made, use, sell,
offer for sale, and import PRODUCT, in the FIELD, in additional countries
(excluding South Korea and Israel) outside the TERRITORY ("Exclusive Option").
*** Promptly after SB's written request during the Exclusive Option Period, SB
and AVANIR shall negotiate in good faith, taking into account the reasonable
commercial potential of PRODUCT in such country(ies), the terms and conditions
under which AVANIR shall grant SB exclusive rights under AVANIR's patent and
know-how rights in such country(ies) to make, have made, use, sell, offer for
sale and import PRODUCT in such country(ies), to the extent that AVANIR is
legally able to do so. *** The term `Exclusive Option Period' shall mean that
AVANIR will not, directly or indirectly, permit its directors, AFFILIATES,
representatives or agents to do any of the following: negotiate, undertake,
authorize, recommend, propose or enter into any transaction involving the
PATENTS and KNOW HOW in the FIELD ("Competing Transaction"); or facilitate,
encourage, solicit or initiate or in any way engage in any discussion,
negotiation or submission of a proposal or offer in respect of a Competing
Transaction; or furnish or cause to be furnished to any THIRD PARTY any
information concerning the PATENTS and KNOW HOW in connection with a Competing
Transaction; or otherwise cooperate in any way with or assist or participate in,
facilitate or encourage, any effort or attempt by any THIRD PARTY to do or seek
any of the foregoing. It is agreed that during the Exclusive Option Period
AVANIR will be entitled to utilize THIRD PARTY consultants to assist AVANIR with
an evaluation of the potential to commercialize PRODUCT in countries outside the
TERRITORY and that such interaction will not be considered to be a Competing
Transaction as defined in this Paragraph 2.03. Further, SB shall notify AVANIR
promptly in the event that SB decides that it does not wish to commercialize
PRODUCT in a particular country in which case AVANIR shall be free to negotiate
and enter into a Competing Transaction in respect of such country,
notwithstanding

                                       6
<PAGE>   8

                                                CONFIDENTIAL TREATMENT REQUESTED

that the Exclusive Option shall apply to all other countries outside the
TERRITORY during the Exclusive Option Period.

        2.04 AVANIR hereby grants to SB the first right to negotiate with AVANIR
to obtain an exclusive license, with the right to grant sublicenses to
AFFILIATES and PERMITTED SUBLICENSEES, under PATENTS and KNOW-HOW owned or
controlled by AVANIR to make, have made, use, sell, offer for sale, and import
PRODUCT for NON-PRESCRIPTION USE resulting directly from a Later Approval (as
defined in Paragraph 1.03) in the TERRITORY, upon terms to be mutually
negotiated by the parties in good faith. ***

3.      PAYMENTS AND ROYALTIES

        3.01 In consideration for SB's acquisition of exclusive rights under the
license concerning PATENTS and KNOW-HOW granted to SB in this AGREEMENT, SB
shall make the following payments to AVANIR, up to a maximum of twenty five
million US dollars (US$25,000,000) (exclusive of royalty payments) in respect
of the license grant to SB related to USA and Canada in the specified
incremental amounts, within ten (10) days after the occurrence of the milestones
set out in Paragraph 3.01(a) and 3.01(b) and within thirty (30) days after the
occurrence of the milestones set out in Paragraph 3.01(c), 3.01(d) and 3.01(e):

***

provided that:

        (1) each such payment shall be subject to the terms of Paragraph 11.01
and shall be made only one time regardless of how many times such milestones are
achieved and regardless of how many PRODUCTS achieve such milestones, and no
payment shall be owed for a milestone which is not reached;

        (2) ***

        (3) each such payment shall be non-refundable and non-creditable to SB;

                                       7
<PAGE>   9

                                                CONFIDENTIAL TREATMENT REQUESTED

        (4)

        ***

        3.02 As further consideration for the license under PATENTS and KNOW-HOW
granted to SB under this AGREEMENT, SB shall pay AVANIR

        ***

        3.04 SB's Patent Royalty obligations under Paragraph 3.02 shall become
effective in each country of the TERRITORY at such time as an issued and valid
PATENT is granted in such country claiming the PRODUCT sold. SB's Patent Royalty
obligations under Paragraph 3.02 will expire on a country by country basis upon
the expiration of the last remaining valid PATENT claiming the PRODUCT sold in
such country provided that such Patent Royalty obligations shall be subject, in
any event, to the provisions of Paragraph 3.05 to 3.07. Notwithstanding any
other provisions set out in this Paragraph 3.04, SB shall have no further
liability or obligation to make further Patent or Non-Patent Royalty payments to
AVANIR with respect to the TERRITORY after the later of ***

        3.05 In the event that any THIRD PARTY initiates any legal or
administrative proceeding challenging the validity, scope or enforceability of
all PATENT(S) claiming PRODUCT sold on the date of such a challenge in any
particular country of the TERRITORY, then the royalty obligation under Paragraph
3.02 in such country shall be amended during such challenge period *** If the
validity and enforceability of (i) any individual PATENTS claiming the PRODUCT
sold in such particular country is upheld by a court or other legal or
administrative tribunal from which no appeal is or can be taken, then SB and
AVANIR shall instruct the escrow agent to pay the Escrow

                                       8
<PAGE>   10

                                                CONFIDENTIAL TREATMENT REQUESTED

Payment plus all interest accruing to such Escrow Payment to AVANIR, or (ii) all
PATENTS claiming the PRODUCT sold in such particular country are not upheld by a
court or other legal or administrative tribunal from which no appeal is or can
be taken, then SB and AVANIR shall instruct the escrow agent to pay the Escrow
Payment plus all interest accruing to such Escrow Payment to SB less the costs
incurred in instructing the escrow agent concerned. In the event that the
validity and enforceability of all the PATENT(S) claiming the PRODUCT sold in a
particular country are not upheld by such court or other legal or administrative
tribunal, then SB shall retain the license granted herein in such country but
the future royalty to be paid by SB to AVANIR shall be limited to the Non-Patent
Royalty (as defined in Paragraph 3.02) for the remaining term of this AGREEMENT.

       ***

        3.07 Any filing, maintenance or prosecution costs (which shall include
any costs incurred by SB in exercising its rights under Paragraph 7.04) related
to PATENTS (which for the avoidance of doubt excludes patents solely or jointly
owned by SB) and which are incurred by SB under this Agreement shall be fully
creditable against any payments owed to AVANIR by SB under this Agreement.

        3.08 Any issued patent is valid until invalidated. Invalidation shall
mean a decision of a court of other governmental agency of competent
jurisdiction, unappealable or not appealed within the time allowed for appeal,
that all claims covering the PRODUCT in an unexpired PATENT are invalid or
unenforceable.

        3.09 All Supply Overage Payments (as defined in Paragraph 15.02) due and
payable by AVANIR to SB under Paragraph 15.02 shall be fully creditable against
any royalty payments owed to AVANIR by SB under this Agreement.

4.      COMPULSORY LICENSES AND THIRD PARTY LICENSES

        4.01 In the event that a governmental agency in any country or territory
grants or compels AVANIR to grant a license to any THIRD PARTY for PRODUCT, SB
shall have the benefit in such country or territory of the terms granted to such
THIRD PARTY to the extent that such terms are more favorable taken as a whole
than those of this AGREEMENT.

                                       9
<PAGE>   11

                                                CONFIDENTIAL TREATMENT REQUESTED

        4.02 If, during the term of this AGREEMENT, SB deems it necessary to
seek, exercise or execute a license from any THIRD PARTY in order to avoid
infringement during the exercise of the license herein granted, fifty percent
(50%) of any royalties or other fees paid to such THIRD PARTY under such license
("THIRD PARTY Fee") may be deducted from royalties otherwise due to AVANIR under
this AGREEMENT; provided that in no event shall the Patent Royalty paid to
AVANIR by SB be reduced below fifty percent (50%) of what would otherwise have
been paid by SB in the absence of such a THIRD PARTY license, and provided
further that SB shall be entitled to carry forward for the remainder of this
AGREEMENT any excess deduction to be fully credited against future SB royalty
payments to AVANIR until the full deduction of the THIRD PARTY Fee has been
effected. Prior to the commencement of SB crediting the THIRD PARTY Fee against
royalty payments made by SB to AVANIR, SB shall notify AVANIR of its intention
to seek or exercise or execute a license with a THIRD PARTY. In the event that
AVANIR believes that such a THIRD PARTY license is not required to avoid
infringement of THIRD PARTY patents, then AVANIR shall so notify SB in writing,
and the parties shall promptly submit such issue thereafter to a mutually
acceptable THIRD PARTY who has suitable expertise on the topic in question
("Unaffiliated Expert"), such Unaffiliated Expert to be chosen by SB and AVANIR
within ten (10) business days after AVANIR's notification. SB and AVANIR shall
request resolution within thirty (30) days after the date of such submission to
such Unaffiliated Expert, and SB shall be entitled to deduct the THIRD PARTY Fee
during the period of time that the Unaffiliated Expert is making a resolution of
the matter. The resolution of the Unaffiliated Expert shall be binding on both
SB and AVANIR. In the event that the Unaffiliated Expert resolves that such a
THIRD PARTY license is necessary to avoid infringement of THIRD PARTY patents,
then the costs of engaging such Unaffiliated Expert shall be borne by AVANIR. In
the event that the Unaffiliated Expert resolves that such a THIRD PARTY license
is not necessary to avoid infringement of THIRD PARTY patents, then the costs of
engaging such Unaffiliated Expert shall be borne by SB, any THIRD PARTY Fee
pertaining to the THIRD PARTY license in question and credited against royalty
payments made by SB to AVANIR shall be refunded in full to AVANIR and no further
deductions of the THIRD PARTY Fee shall be made by SB in respect of such THIRD
PARTY license.

                                       10
<PAGE>   12

                                                CONFIDENTIAL TREATMENT REQUESTED

5.      DEVELOPMENT OF PRODUCT

        5.01 As of the EFFECTIVE DATE, and during the term of the AGREEMENT, SB
shall have full control and authority, with full responsibility, subject to the
provisions of Article 5, over research, development, registration and
commercialization of PRODUCT in the FIELD and in the TERRITORY, and all such
activity shall be undertaken at SB's expense. SB will exercise its reasonable
efforts and diligence in developing and commercializing PRODUCT in accordance
with its business, legal, medical and scientific judgement and in undertaking
investigations and actions required to obtain appropriate governmental approvals
to market PRODUCT in the FIELD and in the TERRITORY. It is agreed that AVANIR
will control (unless and until otherwise notified by SB) for and on behalf of
SB, and at SB's expense, the obtaining of all necessary government approvals to
market PRODUCT in the FIELD in Canada, such approvals to be transferred to SB as
soon as reasonably practicable after AVANIR's receipt thereof. SB will undertake
the levels of marketing as set forth on Appendix C.

        5.02 (a) SB shall keep AVANIR informed of the progress of SB's efforts
to develop and commercialize PRODUCT on a quarterly basis for the first two
years of this AGREEMENT and semi-annually thereafter. Furthermore, at AVANIR's
option, SB and AVANIR shall meet in person for every other required progress
report

             (b) AVANIR shall provide SB with summaries of all protocols in
respect of preclinical and clinical studies concerning PRODUCT inside the FIELD
outside the TERRITORY and all studies outside the FIELD concerning topical and /
or mucosal application of PRODUCT *** to be conducted by AVANIR, its
sublicensees or other THIRD PARTIES acting on behalf of AVANIR subject to
AVANIR's obligation of confidentiality to its sublicensees.

        ***

        5.03 AVANIR shall provide to SB, at SB's request and expense, technical
assistance within its area of expertise concerning development, registration,
production and commercialization of PRODUCT. Provision of such technical
assistance shall include, but not

                                       11
<PAGE>   13

                                                CONFIDENTIAL TREATMENT REQUESTED

be limited to, visits by AVANIR personnel to SB, at SB's expense, and visits by
SB personnel to AVANIR, at SB's expense, at times and for periods of time upon
which the parties will agree, and supply of any KNOW-HOW that SB may require.

        5.04 Within three (3) days after receiving SB's written request, AVANIR
shall provide SB with a letter addressed to FDA authorizing and requesting that
the NDA owned by AVANIR and pertaining to PRODUCT in the TERRITORY be
transferred, in its entirety, to the name of SB, or its AFFILIATE, as SB may
elect. AVANIR shall provide SB with a copy of the letter and SB shall
immediately send a letter to FDA accepting the NDA. AVANIR will be entitled to
copy and reference the NDA outside the FIELD and inside the FIELD if outside the
TERRITORY freely as it determines. Each party will notify the other immediately
by telephone (with prompt written follow-up) of any inquiry, contact or
communication received from any governmental regulatory agency or other official
body (within or outside of the TERRITORY) which relates to the PRODUCT or any
component or ingredient thereof, and will promptly furnish the other party with
copies of all written communications relating thereto sent to or received from
such regulatory agency.

        5.05 A "Steering Committee" shall be created to monitor the development
and commercialization of the PRODUCT in the FIELD in the TERRITORY. The Steering
Committee shall consist of five voting members, with AVANIR having the right to
designate two voting members and SB having the right to designate the three
remaining voting members. The chairperson of the Steering Committee shall be
designated by SB from among those members of the Steering Committee appointed by
SB. The Steering Committee shall meet no less frequently than once each calendar
quarter. The chairperson of the Steering Committee may call special meetings of
the Steering committee from time-to-time. The duties of the Steering Committee
shall consist of overseeing the development and commercialization of the PRODUCT
in the FIELD in the TERRITORY, preliminarily mediating disputes, confirming
attainment of milestones and discussing the worldwide development of PRODUCT.
The decisions of the STEERING Committee shall be based upon the majority vote of
the voting members thereof. The purpose of Steering Committee meetings shall be
to review results, monitor and audit the

                                       12
<PAGE>   14

                                                CONFIDENTIAL TREATMENT REQUESTED

progress of the development and commercialization of the PRODUCT in the FIELD in
the TERRITORY and confirm the accomplishment of milestones. Quarterly
developmental progress reports, or at such other intervals as shall be deemed
appropriate by the Steering Committee, will be delivered by each party to the
other, consistent with each party's respective roles, no later than seven
business days after the conclusion of the applicable reporting period.

6.      EXCHANGE OF INFORMATION AND CONFIDENTIALITY

        6.01 Promptly after the EFFECTIVE DATE, AVANIR shall disclose and supply
to SB all KNOW-HOW within AVANIR's possession which was not already supplied to
SB prior to the EFFECTIVE DATE. Thereafter, AVANIR shall promptly disclose and
supply to SB any further KNOW-HOW that may become known to AVANIR.

        6.02 During the term of this AGREEMENT and for five (5) years
thereafter, irrespective of any termination earlier than the expiration of the
term of this AGREEMENT, AVANIR and SB shall not use or reveal or disclose to
THIRD PARTIES any confidential information received from the other party or
otherwise developed by either party in the performance of activities in
furtherance of this AGREEMENT without first obtaining the written consent of the
disclosing party, except as may be otherwise provided herein, or as may be
required for purposes of investigating, developing, manufacturing or marketing
PRODUCT or for securing essential or desirable authorizations, privileges or
rights from governmental agencies, or is required to be disclosed to a
governmental agency or is necessary to file or prosecute patent applications
concerning PRODUCT or to carry out any litigation concerning PRODUCT. This
confidentiality obligation shall not apply to such information which is or
becomes a matter of public knowledge, or is already in the possession of the
receiving party, or is disclosed to the receiving party by a THIRD PARTY having
the right to do so, or is subsequently and independently developed by employees
of the receiving party or AFFILIATES thereof who had no actual knowledge of the
confidential information disclosed, or is required by law to be disclosed. The
parties shall take reasonable measures to assure that no unauthorized use or
disclosure is made by others to whom access to such information is granted.

                                       13
<PAGE>   15

                                                CONFIDENTIAL TREATMENT REQUESTED

        6.03 Nothing herein shall be construed as preventing SB from disclosing
any information received from AVANIR hereunder to an AFFILIATE, PERMITTED
SUBLICENSEE or distributor of SB in furtherance of the objectives and
obligations of the parties under this AGREEMENT, provided, in the case of a
PERMITTED SUBLICENSEE or distributor, such PERMITTED SUBLICENSEE or distributor
has undertaken a similar obligation of confidentiality with respect to the
confidential information. Nothing herein shall be construed as preventing AVANIR
from disclosing any information received from SB hereunder to an AFFILIATE,
banker, investor or distributor of AVANIR, provided, in the case of a banker,
investor or distributor, such banker, investor or distributor has undertaken a
similar obligation of confidentiality with respect to the confidential
information. In no event shall AVANIR be permitted to disclose any confidential
information received from SB hereunder to a sublicensee of AVANIR or to any
other THIRD PARTY without obtaining SB's prior consent.

        6.04 All confidential information disclosed by one party to the other
shall remain the intellectual property of the disclosing party. In the event
that a court or other legal or administrative tribunal, directly or through an
appointed master, trustee or receiver, assumes partial or complete control over
the assets of a party to this AGREEMENT based on the insolvency or bankruptcy of
such party, the bankrupt or insolvent party shall promptly notify the court or
other tribunal (i) that confidential information received from the other party
under this AGREEMENT remains the property of the other party and (ii) of the
confidentiality obligations under this AGREEMENT. In addition, the bankrupt or
insolvent party shall, to the extent permitted by law, take all steps necessary
or desirable to maintain the confidentiality of the other party's confidential
information and to ensure that the court, other tribunal or appointee maintains
such information in confidence in accordance with the terms of this AGREEMENT.

        6.05 No public announcement or other disclosure to THIRD PARTIES
concerning the OTC Approval or the existence of or terms of this AGREEMENT shall
be made, either directly or indirectly, by any party to this AGREEMENT, except
and to the extent that such disclosure may be legally required or as may be
required for recording purposes, without first obtaining the approval of the
other party, not to be unreasonably withheld or delayed, and agreement upon the

                                       14
<PAGE>   16

                                                CONFIDENTIAL TREATMENT REQUESTED

nature and text of such announcement or disclosure. The party desiring to make
any such public announcement or other disclosure shall inform the other party of
the proposed announcement or disclosure at least three (3) business days prior
to public release, and shall provide the other party with a written copy
thereof, in order to allow such other party to comment upon such announcement or
disclosure. Each party agrees that it shall cooperate fully with the other with
respect to all disclosures regarding this AGREEMENT to the Securities Exchange
Commission and any other governmental or regulatory agencies, including requests
for confidential treatment of proprietary information of either party included
in any such disclosure.

        6.06 AVANIR shall not submit for written or oral publication any
manuscript, abstract or other publication which includes data or other
information generated and provided by SB without first obtaining the prior
written consent of SB. Further, AVANIR shall submit for SB's review, comment and
consent any other manuscript, abstract or the like relating to the PRODUCT no
later than thirty (30) days prior to AVANIR's submission of the same for
publication. In the event that SB declines to consent, such consent not to be
unreasonably withheld or delayed, to the publication of the same on the basis
that publication will or may damage SB's commercialization of PRODUCT in the
FIELD in the TERRITORY, then AVANIR may, in the event that AVANIR believes that
such studies will not and are not likely to damage SB's commercialization of
PRODUCT in the FIELD in the TERRITORY, so notify SB in writing, and the parties
shall promptly submit such issue thereafter to a mutually acceptable THIRD PARTY
who has suitable expertise on the topic in question ("Unaffiliated Expert"),
such Unaffiliated Expert to be chosen by SB and AVANIR within ten (10) business
days after AVANIR's notification. SB and AVANIR shall request resolution within
thirty (30) days after the date of such submission to such Unaffiliated Expert,
and AVANIR shall not submit for written or oral publication such manuscript,
abstract or other publication during the period of time that the Unaffiliated
Expert is making a resolution of the matter. The resolution of the Unaffiliated
Expert shall be binding on both SB and AVANIR. In the event that the
Unaffiliated Expert resolves that publication will or may damage SB's
commercialization of PRODUCT in the FIELD in the TERRITORY, then the costs of
engaging such Unaffiliated Expert shall be borne by AVANIR. In the event that
the Unaffiliated Expert resolves that publication will not or

                                       15
<PAGE>   17

                                                CONFIDENTIAL TREATMENT REQUESTED

is unlikely to damage SB's commercialization of PRODUCT in the FIELD in the
TERRITORY, then the costs of engaging such Unaffiliated Expert shall be borne by
SB and AVANIR shall be free to submit the said manuscript, abstract or other
publication for written or oral publication.

        6.07 AVANIR shall not submit the manuscript, abstract or the like for
publication until AVANIR has received SB's prior consent to publish the same or
until the Unaffiliated Expert has resolved that such publication will not or is
unlikely to damage SB's commercialization of the PRODUCT in the FIELD in the
TERRITORY. AVANIR shall use its diligent efforts to bind the clinical
investigators and other agents it utilizes for the development of PRODUCT to a
provision similar to this Paragraph, provided that it is understood that
AVANIR's inability to bind a clinical investigator to such a similar provision
shall not prohibit AVANIR from utilizing such clinical investigator.

        6.08 SB's contribution shall be noted in all publications or
presentations by acknowledgment or coauthorship, where appropriate.

        6.09 Nothing in this AGREEMENT shall be construed as preventing or in
any way inhibiting either party from complying with statutory and regulatory
requirements governing the development, manufacture, use and sale or other
distribution of PRODUCT in any manner which it reasonably deems appropriate,
including, for example, by disclosing to regulatory authorities confidential or
other information received from the other party or THIRD PARTIES.

        6.10 The reporting of adverse events related to PRODUCT to regulatory
authorities in the TERRITORY shall be performed in accordance with the
pharmacovigilance agreement attached to this AGREEMENT as Appendix B.

7.      PATENT PROSECUTION AND LITIGATION

        7.01 Each party shall have and retain sole and exclusive title to all
inventions, discoveries and know-how which are made, conceived, reduced to
practice or generated by its employees, agents, or other persons acting under
its authority in the course of or as a result of this AGREEMENT. Each party
shall own a fifty percent (50%) undivided interest in all such

                                       16
<PAGE>   18

                                                CONFIDENTIAL TREATMENT REQUESTED

inventions, discoveries and know-how made, conceived, reduced to practice or
generated jointly by employees, agents, or other persons acting under the
authority of both parties in the course of or as a result of this AGREEMENT.
Except as expressly provided in this AGREEMENT, each joint owner may make, use,
sell, keep, license, assign, or mortgage such jointly owned inventions,
discoveries and know-how, and otherwise undertake all activities a sole owner
might undertake with respect to such inventions, discoveries and know-how,
without the consent of and without accounting to the other joint owner.

        7.02 Each party shall promptly notify the other upon the making,
conceiving or reducing to practice of any invention or discovery under Paragraph
7.01 concerning PRODUCT. With respect to any such invention,

                      (i) SB shall have the first right, using in-house or
outside legal counsel selected at SB's sole discretion, to prepare, file,
prosecute, maintain and extend patent applications and patents concerning all
such inventions and discoveries related to PRODUCT owned in whole by SB or
jointly by SB and AVANIR with appropriate credit to AVANIR's representatives,
including the naming of such parties as inventors where appropriate and in
accordance with the relevant legal requirements, for which SB shall bear the
costs. SB shall solicit AVANIR's' advice and review of the nature and text of
such patent applications and important prosecution matters related thereto in
reasonably sufficient time prior to filing thereof, and SB shall take into
account AVANIR's reasonable comments related thereto.

                      (ii) AVANIR shall have the first right, using in-house or
outside legal counsel selected at AVANIR's sole discretion, to prepare, file,
prosecute, maintain and extend patent applications and patents concerning all
such inventions and discoveries related to PRODUCT owned in whole by AVANIR, for
which AVANIR shall bear the costs. AVANIR shall solicit SB's advice and review
of the nature and text of such patent applications and important prosecution
matters related thereto in reasonably sufficient time prior to filing thereof,
and AVANIR shall take into account SB's reasonable comments related thereto.

                                       17
<PAGE>   19

                                                CONFIDENTIAL TREATMENT REQUESTED

                      (iii) If SB, prior or subsequent to filing certain patent
applications on any inventions or discoveries which are owned in part by AVANIR,
elects not to file, prosecute, maintain or extend such patent applications or
ensuing patents or certain claims encompassed by such patent applications or
ensuing patents in any country of the TERRITORY, SB shall give AVANIR notice
thereof within a reasonable period prior to allowing such patent applications or
patents or such certain claims encompassed by such patent applications or
patents to lapse or become abandoned or unenforceable, and AVANIR shall
thereafter have the right, at its sole expense, to prepare, file, prosecute and
maintain patent applications and patents or divisional applications related to
such certain claims encompassed by such patent applications or patents
concerning all such inventions and discoveries in countries of its choice
throughout the world.

                      (iv) If AVANIR, prior or subsequent to filing certain
patent applications on any inventions or discoveries which are owned in whole by
AVANIR, elects not to file, prosecute, maintain or extend such patent
applications or ensuing patents or certain claims encompassed by such patent
applications or ensuing patents in any country of the TERRITORY, AVANIR shall
give SB notice thereof within a reasonable period prior to allowing such patent
applications or patents or such certain claims encompassed by such patent
applications or patents to lapse or become abandoned or unenforceable, and SB
shall thereafter have the right, at its sole expense but subject to the terms of
Paragraph 3.07, to prepare, file, prosecute and maintain patent applications and
patents or divisional applications related to such certain claims encompassed by
such patent applications or patents concerning all such inventions and
discoveries in countries of its choice throughout the world.

                      (v) The party filing patent applications for jointly owned
inventions and discoveries shall do so in the name of and on behalf of both SB
and AVANIR. Each of AVANIR and SB shall hold all information it presently knows
or acquires under this Paragraph which is related to all such patents and patent
applications as confidential subject to the provisions of Article 6.

        7.03 AVANIR warrants and represents that it has disclosed to SB the
complete texts of all patent applications filed by AVANIR as of the EFFECTIVE
DATE which relate to

                                       18
<PAGE>   20

                                                CONFIDENTIAL TREATMENT REQUESTED

PRODUCT in the FIELD and in the TERRITORY as well as all information received as
of the EFFECTIVE DATE concerning the institution or possible institution of any
interference, opposition, re-examination, reissue, revocation, nullification or
any official proceeding involving a PATENT anywhere in the TERRITORY. AVANIR
further warrants and represents that it will disclose to SB the complete texts
of all patent applications in the FIELD and in the TERRITORY filed by AVANIR
after the EFFECTIVE DATE which relate to PRODUCT in the TERRITORY as well as all
information received after the EFFECTIVE DATE concerning the institution or
possible institution of any interference, opposition, re-examination, reissue,
revocation, nullification or any official proceeding involving a PATENT anywhere
in the TERRITORY. In addition to SB's rights under Paragraph 7.02, SB shall have
the right to review all such pending applications and other proceedings and make
recommendations to AVANIR concerning them and their conduct. AVANIR agrees to
keep SB promptly and fully informed of the course of patent prosecution or other
proceedings including by providing SB with copies of substantive communications,
search reports and third party observations submitted to or received from patent
offices throughout the TERRITORY. SB shall provide such patent consultation to
AVANIR at no cost to AVANIR. SB shall hold all information disclosed to it under
this section as confidential subject to the provisions of Article 6.

        7.04 SB shall have the right, but not the obligation, to assume
responsibility for any PATENT or any part of a PATENT which AVANIR intends to
abandon or otherwise cause or allow to be forfeited. AVANIR shall give SB
reasonable written notice prior to abandonment or other forfeiture of any PATENT
or any part of a PATENT so as to permit SB to exercise its rights under this
Paragraph.

        7.05 In the event of the institution of any suit by a THIRD PARTY
against AVANIR, SB or its AFFILIATES, its or their PERMITTED SUBLICENSEES or
distributors for patent infringement involving the manufacture, use, sale,
distribution or marketing of PRODUCT anywhere in the TERRITORY, the party sued
shall promptly notify the other party in writing. SB shall have the right, but
not the obligation, to defend such suit at its own expense. AVANIR

                                       19
<PAGE>   21

                                                CONFIDENTIAL TREATMENT REQUESTED

and SB shall provide reasonable assistance to one another and reasonably
cooperate in any such litigation at the other's request without expense to the
requesting party.

        7.06 In the event that AVANIR or SB becomes aware of actual or
threatened infringement of a PATENT, that party shall promptly notify the other
party in writing. SB shall have the first right, but not the obligation, to
bring, at its own expense, an infringement action against any THIRD PARTY claim
in the FIELD in the TERRITORY and to use AVANIR's name in connection therewith
and to name AVANIR as a party thereto. If SB does not commence a particular
infringement action within ninety (90) days of receipt of the notice of
infringement, then AVANIR, after notifying SB in writing, shall be entitled to
bring such infringement action at its own expense. The party conducting such
action shall have full control over its conduct, including settlement thereof
subject to Paragraph 7.08. In any event, AVANIR and SB shall provide reasonable
assistance to one another and shall reasonably cooperate in any such litigation
at the other's request without expense to the requesting party. If SB becomes
aware of any suit or proceeding in a court or before a governmental authority by
any third party challenging the validity or enforceability of any PATENT, SB
shall inform AVANIR with respect thereto and offer AVANIR the right, at its sole
discretion and expense, to defend such suit or proceeding in a court or before a
governmental authority. In addition, SB agrees, upon reasonable notice, to
cooperate with and, to the extent necessary or desirable by AVANIR and at
AVANIR's expense, participate in any suit or proceeding with respect thereto.

        7.07 AVANIR and SB shall recover their respective actual out-of-pocket
expenses, or equitable proportions thereof, associated with any litigation or
settlement thereof from any recovery made by any party. Any excess amount
attributable to infringement of any PATENT claim in the FIELD and in the
TERRITORY shall be shared by the parties and distributed proportionately between
SB and AVANIR (calculated on the basis of the parties' respective financial
interest in the sales of PRODUCT that were the subject of the litigation had
such sales been made by SB, its AFFILIATES or its PERMITTED SUBLICENSEES under
this AGREEMENT), provided in no event shall AVANIR's share of the excess amount
exceed the royalties which would otherwise be due AVANIR for the sales of
PRODUCT that were the

                                       20
<PAGE>   22

                                                CONFIDENTIAL TREATMENT REQUESTED

subject of the litigation had such sales been made by SB, its AFFILIATES or its
or their PERMITTED SUBLICENSEES under this AGREEMENT. Further, any excess amount
attributable to an infringement of any PATENT claim outside the FIELD or
TERRITORY will a) belong to AVANIR in the event the relevant litigation and / or
settlement was undertaken solely at AVANIR's risk and expense; or, b) be shared
equally between AVANIR and SB in the event that the relevant litigation and / or
settlement was undertaken solely at SB's risk and expense; or, ***

        7.08 The parties shall keep one another informed of the status of and of
their respective activities regarding any litigation or settlement thereof
concerning PRODUCT, provided however that no settlement or consent judgment or
other voluntary final disposition of any suit defended or action brought by a
party pursuant to this Article 7 may be entered into without the consent of the
other party if such settlement would require the other party to be subject to an
injunction or to make a monetary payment or would otherwise adversely affect the
other party's rights under this AGREEMENT or the validity, scope or
enforceability of the PATENTS.

        7.09 AVANIR shall have the right within sixty (60) days of OTC Approval
but not the obligation to seek extensions of the terms of PATENTS. At AVANIR's
request, SB shall provide reasonable assistance therefor to AVANIR or shall
diligently seek to obtain such extensions, in either event, at AVANIR's expense.

8.      TRADEMARKS

        8.01 SB shall be responsible for the selection of all trademarks which
it employs in connection with PRODUCT in the TERRITORY. AVANIR shall assign to
SB free of charge the worldwide rights, title and interest in and to the
trademarks *** SB and AVANIR agree that AVANIR will, at SB's expense, promptly
abandon its application for the trademark *** in the TERRITORY and, in the event
that such abandonment has not been effected, AVANIR will promptly assign to SB,
at SB's request, all right, title and interest in and to the trademark *** in
the TERRITORY, such assignment to be affected using the form assignment set out
in Appendix

                                       21
<PAGE>   23

                                                CONFIDENTIAL TREATMENT REQUESTED

D. AVANIR shall assist SB, at SB's expense and request, in the prosecution and
registration of the assigned trademarks.

        8.02 AVANIR shall cooperate with and assist SB (at SB's expense) in
recording such trademark assignments at the appropriate trademarks offices and
in effecting a prompt transfer to SB of such domain names as are associated with
the trademarks with the relevant THIRD PARTY internet service provider.

9.      STATEMENTS AND REMITTANCES

        9.01 SB shall keep and require its AFFILIATES and PERMITTED SUBLICENSEES
to keep complete and accurate records of all sales of PRODUCT under the licenses
granted herein. AVANIR shall have the right, at AVANIR's expense, through an
independent certified public accountant or like person reasonably acceptable to
SB, to examine such records during regular business hours during the life of
this AGREEMENT and for six (6) months after its termination; provided, however,
that such examination shall not take place more often than once a year and shall
not cover such records for more than the preceding two (2) years and provided
further that such accountant shall report to AVANIR only as to the accuracy of
the royalty statements and payments, any applicable litigation or patent
maintenance expenses, and the expenditures set forth on Appendix C. AVANIR shall
bear the full cost and expense of any such audit unless a discrepancy in excess
of 5% in favor of SB for any quarter is discovered, in which event, SB shall
make AVANIR whole against such *** and will reimburse AVANIR against the cost
incurred in engaging such an independent certified public accountant or like
person to carry out the audit.

        9.02 Within thirty (30) days after the close of each calendar quarter,
SB shall provide a true accounting of all PRODUCT sold by SB, its AFFILIATES and
PERMITTED SUBLICENSEES during such calendar quarter. Such accounting shall show
sales on a country-by-country basis. Simultaneously with the submission of the
accounting, SB shall pay to AVANIR all the royalties due to AVANIR hereunder,
and shall submit to AVANIR, together

                                       22
<PAGE>   24

                                                CONFIDENTIAL TREATMENT REQUESTED

with each such royalty payment, a written royalty statement describing the
calculation of royalties and applicable exchange rates.

        9.03 All royalties or milestones due under this AGREEMENT shall be
payable in US Dollars.

        ***

        9.05 Monetary conversion from the currency of a foreign country, in
which PRODUCT is sold, into U.S. Dollars shall be calculated at the actual
average rates of exchange for the pertinent quarter as used by SB in producing
its quarterly accounts, as confirmed by SB's auditors, and provided such rates
of exchange are reasonably consistent with published rates for the same time
periods.

10.     TERM AND TERMINATION

        10.01 This AGREEMENT shall become effective on the EFFECTIVE DATE.
Patent Royalty obligations under Paragraph 3.02 in each country of the TERRITORY
shall expire in accordance with the terms of Paragraph 3.04. Expiration of SB's
Patent Royalty obligations under Paragraph 3.04 shall not preclude SB from
continuing to market such PRODUCT and to use KNOW-HOW in such country so long as
SB continues to pay the Non-Patent Royalties under Paragraph 3.02 provided that
no further Non-Patent Royalties will be payable by SB to AVANIR after the
expiration of this AGREEMENT. ***

        The expiration of this AGREEMENT shall result in a fully paid up license
of PATENTS and KNOW HOW for the benefit of SB.

        10.02 ***

        10.03 If either party fails or neglects to perform covenants or
provisions of this AGREEMENT and if such default is not corrected within sixty
(60) days after receiving written notice from the other party, or within ten
(10) business days of receiving written notice from AVANIR in the case of SB's
payment obligations under this AGREEMENT, with respect to

                                       23
<PAGE>   25

                                                CONFIDENTIAL TREATMENT REQUESTED

such default, such other party shall have the right to terminate this AGREEMENT
by giving written notice to the party in default provided the notice of
termination is given within six (6) months of the default and prior to
correction of the default.

        10.04 SB may terminate this AGREEMENT on a country by country basis, or
in its entirety a) by giving AVANIR at least sixty (60) days written notice
thereof at any time before the date of first commercial sale of PRODUCT in such
country based on a reasonable determination by SB, using the same standards SB
would use in assessing whether or not to continue development of a product of
its own making, that the patent, medical/scientific, technical, regulatory or
commercial profile of PRODUCT does not justify continued development of PRODUCT
in such country, or b) forthwith on notice of termination being served on AVANIR
by SB in the event of the occurrence of a FORCE MAJEURE EVENT prior to OTC
Launch ( as defined in Paragraph 3.01) of PRODUCT. After the date of first
commercial sale of PRODUCT, SB may terminate this AGREEMENT on a country by
country basis, or in its entirety, by giving AVANIR at least one hundred eighty
(180) days prior written notice thereof based on a reasonable determination by
SB, using the same standards SB would use in assessing whether or not to
continue development of a product of its own making, that the patent,
medical/scientific, technical, regulatory or commercial profile of PRODUCT does
not justify continued development of PRODUCT in such country. Termination of
this AGREEMENT in respect of the United States shall constitute a termination of
this AGREEMENT in its entirety.

        10.05 Either party may terminate this AGREEMENT if, at any time, the
other party shall file in any court or agency pursuant to any statute or
regulation of any state or country, a petition in bankruptcy or insolvency or
for reorganization or for an arrangement or for the appointment of a receiver or
trustee of the party or of its assets, or if the other party proposes a written
agreement of composition or extension of its debts, or if the other party shall
be served with an involuntary petition against it, filed in any insolvency
proceeding, and such petition shall not be dismissed with sixty (60) days after
the filing thereof, or if the other party shall propose or

                                       24
<PAGE>   26

                                                CONFIDENTIAL TREATMENT REQUESTED

be a party to any dissolution or liquidation, or if the other party shall make
an assignment for the benefit of creditors.

        10.06 Notwithstanding the bankruptcy of AVANIR, or the impairment of
performance by AVANIR of its obligations under this AGREEMENT as a result of
bankruptcy or insolvency of AVANIR, SB shall be entitled to retain the licenses
granted herein, subject to AVANIR's rights to terminate this AGREEMENT for
reasons other than bankruptcy or insolvency as expressly provided in this
AGREEMENT.

        10.07 All rights and distribution rights granted under or pursuant to
this AGREEMENT by AVANIR to SB are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to
"intellectual property" as defined under Section 101(52) of the U.S. Bankruptcy
Code. The parties agree that SB, as a 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, subject to performance by SB of its preexisting
obligations under this AGREEMENT. The parties further agree that, in the event
of the commencement of a bankruptcy proceeding by or against AVANIR under the
U.S. Bankruptcy Code, SB shall be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not already in its
possession, shall be promptly delivered to SB (a) upon any such commencement of
a bankruptcy proceeding upon written request therefor by SB, unless AVANIR
elects to continue to perform all of its obligations under this AGREEMENT, or
(b) if not delivered under (a) above, upon the rejection of this AGREEMENT by or
on behalf of AVANIR upon written request therefor by SB, provided, however, that
upon AVANIR's (or its successor's) written notification to SB that it is again
willing and able to perform all of its obligations under this AGREEMENT, SB
shall promptly return all such tangible materials to AVANIR, but only to the
extent that SB does not require continued access to such materials to enable SB
to perform its obligations under this AGREEMENT.

 11.    RIGHTS AND DUTIES UPON TERMINATION

                                       25
<PAGE>   27

                                                CONFIDENTIAL TREATMENT REQUESTED

        11.01 Upon termination of this AGREEMENT, AVANIR shall have the right to
retain any sums already paid by SB hereunder, and SB shall pay all sums accrued
hereunder which are then due (including all royalties and milestones that have
accrued as of the date of termination). Notwithstanding the foregoing, in the
event that SB terminates this AGREEMENT under Paragraph 10.04 (b), then SB's
obligation to make any further milestone payments will be extinguished forthwith
without further claim from or liability to AVANIR, including with regard to any
milestone payments that have become due and payable under Paragraph 3.01 but in
respect of which SB has not made payment to AVANIR as at the date of SB's notice
of termination.

        11.02 Upon termination of this AGREEMENT in its entirety or with respect
to PRODUCT in any country under Paragraphs 10.03 (except in the case of SB's
breach), 10.04, 10.06 SB shall notify AVANIR of the amount of PRODUCT SB, its
AFFILIATES, PERMITTED SUBLICENSEES and distributors then have on hand, the sale
of which would, but for the termination, be subject to royalty, and SB, its
AFFILIATES, PERMITTED SUBLICENSEES and distributors shall thereupon be permitted
to sell that amount of PRODUCT within an additional period of 180 days (unless
otherwise agreed by SB and AVANIR) of such termination provided that SB shall
pay the royalty thereon at the time herein provided for such an additional
period.

        11.03 Termination of this AGREEMENT shall terminate all outstanding
licenses, obligations and liabilities between the parties arising from this
AGREEMENT except those described in Paragraphs 1, 6.02, 6.04, 7.07, 9, 11,
12.05, 12.06 and 12.08, and any other obligations otherwise provided by this
AGREEMENT which have accrued. In addition, any other provision required to
interpret and enforce the parties' rights and obligations under this AGREEMENT
shall also survive, but only to the extent required for the full observation and
performance of this AGREEMENT.

        11.04 Termination of the AGREEMENT in accordance with the provisions
hereof shall not limit remedies which may be otherwise available in law or
equity.

                                       26
<PAGE>   28

                                                CONFIDENTIAL TREATMENT REQUESTED

        11.05 In the event of any termination of this AGREEMENT in its entirety
(a) SB shall within three days prepare and send an executed letter to FDA or
Health Canada authorizing the transfer of the PRODUCT marketing application to
AVANIR, and SB shall also transfer to AVANIR all regulatory documents, a
chronology of discussions with FDA or Health Canada, and other information
necessary to maintain compliance with the US, Canadian, and any other regulatory
authorities; (b) SB will continue to provide AVANIR with assistance ensuring the
orderly transition of the PRODUCT and its corresponding regulatory approvals to
AVANIR; (c) SB will transfer all manufacturing information (in so far as such
information is within SB's control and in so far as SB is legally able to
transfer the information) to AVANIR and will continue to manufacture AVANIR's or
its licensees' requirements of the PRODUCT until such time as a substitute
manufacturing source has been approved by the FDA and on such terms as shall be
agreed by the parties negotiating in good faith ***

12.     WARRANTIES AND REPRESENTATIONS

        12.01 AVANIR warrants and represents that it owns the entire right,
title and interest in the PATENTS listed in Appendix A, or filed by or on behalf
of AVANIR pursuant to Section 7, and the KNOW-HOW provided to SB under this
AGREEMENT, and that it otherwise has the right to enter into this AGREEMENT.
AVANIR further warrants and represents that there is nothing in any THIRD PARTY
agreement AVANIR has entered into as of the EFFECTIVE DATE which, in any way,
will limit AVANIR's ability to perform all of the obligations undertaken by
AVANIR hereunder, and that it will not enter into any AGREEMENT after the
EFFECTIVE DATE under which AVANIR would incur any such limitations.

        12.02 Nothing in this AGREEMENT shall be construed as a warranty that
PATENTS are valid or enforceable as of the EFFECTIVE DATE, or that they will be
so during the term of this AGREEMENT. AVANIR hereby warrants and represents that
it has no present knowledge from which it can be inferred that PATENTS are
invalid or that their exercise would infringe patent rights of THIRD PARTIES.
AVANIR further warrants and represents that it has no present knowledge from
which it can be inferred that the process of manufacturing PRODUCT,

                                       27
<PAGE>   29

                                                CONFIDENTIAL TREATMENT REQUESTED

and all intermediates of such process, will infringe patent rights of THIRD
PARTIES in both the country in which the PRODUCT is produced as well as all
countries of the TERRITORY.

        12.03 AVANIR warrants and represents that it has not, up through and
including the EFFECTIVE DATE, omitted to furnish SB with any information in its
possession concerning PRODUCT or the transactions contemplated by this
AGREEMENT, which has been requested by SB pursuant to this AGREEMENT or which so
far as AVANIR is aware may affect SB's decision to enter into this AGREEMENT and
to undertake the commitments and obligations set forth herein.

        12.04 AVANIR warrants and represents that it has no present knowledge of
the existence of any pre-clinical or clinical data or information concerning the
PRODUCT which it has not provided to SB prior to the EFFECTIVE DATE which
suggests that there may exist quality, toxicity, safety and/or efficacy concerns
which may materially impair the utility and/or safety of the PRODUCT.

        12.05 SB shall defend, indemnify and hold harmless AVANIR, its
AFFILIATES and its and their respective officers, directors, employees, agents,
successors and assigns from any loss, damage, or liability, including reasonable
attorney's fees, resulting from any claim, complaint, suit, proceeding or cause
of action against any of them alleging physical or other injury, including
death, arising out of the administration, utilization and/or ingestion of
PRODUCT manufactured, sold, supplied or otherwise provided to the injured party
directly or indirectly by SB, its AFFILIATES or its PERMITTED SUBLICENSEES
provided:

               (a) SB shall not be obligated under this Paragraph if it is shown
by evidence acceptable in a court of law having jurisdiction over the subject
matter and meeting the appropriate degree of proof for such action, that the
injury was the result of the negligence or willful misconduct of any employee or
agent of AVANIR or the breach of any warranty or representation made by AVANIR
in this AGREEMENT;

                                       28
<PAGE>   30

                                                CONFIDENTIAL TREATMENT REQUESTED

               (b) SB shall have no obligation under this Paragraph unless
AVANIR (i) gives SB prompt written notice of any claim or lawsuit or other
action for which it seeks to be indemnified under this AGREEMENT, (ii) SB is
granted full authority and control over the defense, including settlement,
against such claim or lawsuit or other action, and (iii) AVANIR cooperates fully
with SB and its agents in defense of the claims or lawsuit or other action; and

               (c) AVANIR shall have the right to participate in the defense of
any such claim, complaint, suit, proceeding or cause of action referred to in
this Paragraph utilizing attorneys of its choice, at its own expense, provided,
however, that SB shall have full authority and control to handle any such claim,
complaint, suit, proceeding or cause of action, including any settlement or
other disposition thereof, for which AVANIR seeks indemnification under this
Paragraph.

        12.06 AVANIR shall defend, indemnify and hold harmless SB, its
AFFILIATES, and its and their officers, directors, employees, agents,
successors, PERMITTED SUBLICENSEES and assigns from any loss, damage, or
liability, including reasonable attorney's fees, resulting from any claim,
complaint, suit, proceeding or cause of action against any of them alleging
physical or other injury, including death, rising out of the administration,
utilization and/or ingestion of PRODUCT manufactured, sold, supplied or
otherwise provided to the injured party by AVANIR, its AFFILIATES or any of
AVANIR's sublicensees provided:

               (a) AVANIR shall not be obligated under this Paragraph if it is
shown by evidence acceptable in a court of law having jurisdiction over the
subject matter and meeting the appropriate degree of proof for such action, that
the injury was the result of the negligence or willful misconduct of any
employee or agent of SB or the breach of any warranty or representation made by
SB in this AGREEMENT;

               (b) AVANIR shall have no obligation under this Paragraph unless
SB (i) gives AVANIR prompt written notice of any claim or lawsuit or other
action for which it seeks to be indemnified under this AGREEMENT, (ii) AVANIR is
granted full authority and control over the defense, including settlement,
against such claim or lawsuit or other action, and (iii) SB

                                       29
<PAGE>   31

                                                CONFIDENTIAL TREATMENT REQUESTED

cooperates fully with AVANIR and its agents in defense of the claims or lawsuit
or other action; and

               (c) SB shall have the right to participate in the defense of any
such claim, complaint, suit, proceeding or cause of action referred to in this
Paragraph utilizing attorneys of its choice, at its own expense, provided,
however, that AVANIR shall have full authority and control to handle any such
claim, complaint, suit, proceeding or cause of action, including any settlement
or other disposition thereof, for which SB seeks indemnification under this
Paragraph.

        12.07 For the term of this AGREEMENT and for a period of five (5) years
after the expiration of this AGREEMENT or earlier termination, each party shall
obtain and/or maintain, respectively, at its sole cost and expense, product
liability insurance in amounts, respectively, which are reasonable and customary
in the U.S. pharmaceutical industry considering the respective size and
activities of the two parties. Such product liability insurance shall insure
against all liability, including liability for personal injury, physical injury
and property damage. Each party shall provide written proof of the existence of
such insurance to the other party upon request.

        12.08 SB warrants and represents that SB shall have, at the time of the
NDA transfer from AVANIR to SB, the in-house expertise to comply in all material
respects with FDA requirements and to maintain this compliance throughout the
license term. Each party agrees to comply with all applicable laws and
governmental regulations and requirements.

13.     FORCE MAJEURE

        13.01 If the performance of any part of this AGREEMENT by either party,
or of any obligation under this AGREEMENT, is prevented, restricted, interfered
with or delayed by reason of a FORCE MAJEURE EVENT unless conclusive evidence to
the contrary is provided, the party so affected shall, upon giving written
notice to the other party, be excused from such performance to the extent of
such prevention, restriction, interference or delay, provided that the affected
party shall use its reasonable efforts to avoid or remove such causes of
non-performance and shall continue performance with the utmost dispatch whenever
such causes are removed.

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<PAGE>   32

                                                CONFIDENTIAL TREATMENT REQUESTED

When such circumstances arise, the parties shall discuss what, if any,
modification of the terms of this AGREEMENT may be required in order to arrive
at an equitable solution. It is agreed that the provisions of this Paragraph
13.01 will be subject in all respects to SB's termination rights under Paragraph
10.04.

14.     GOVERNING LAW AND DISPUTE RESOLUTION

        14.01 This AGREEMENT shall be governed by the laws of the Commonwealth
of Pennsylvania and its form, execution, validity, construction and effect shall
be determined in accordance with the same.

        14.02 Any dispute, controversy or claim arising out of or relating to
this AGREEMENT (hereinafter collectively referred to as "Dispute") shall be
attempted to be settled by the parties, in good faith, by submitting each such
Dispute to appropriate senior management representatives of each PARTY in an
effort to effect a mutually acceptable resolution thereof.

        14.03 In the event no mutually acceptable resolution of such Dispute is
achieved in accordance with Paragraph 14.02 within a reasonable period of time,
then either PARTY shall be entitled to seek final settlement of such Dispute by
any administrative or judicial mechanism which may be available. In the event
that either party elects to pursue a judicial mechanism, it is agreed that
proceedings will not be commenced in the territory of Puerto Rico.

15.     BULK PRODUCT AND SUPPLY

        15.01 Within ten (10) days of the EFFECTIVE DATE, SB shall purchase at
cost the bulk PRODUCT owned by AVANIR provided that such bulk PRODUCT conforms
to agreed specifications *** Further and at SB's election, AVANIR shall
cooperate with SB in effecting the transfer of such purchased bulk PRODUCT from
its current storage location to a site nominated by SB.

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<PAGE>   33

                                                CONFIDENTIAL TREATMENT REQUESTED

***

16.     WAIVER OF BREACH

        16.01 The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect its rights at a
later time to enforce the same. No waiver by either party of any condition or
term in any one or more instances shall be construed as a further or continuing
waiver of such condition or term or of another condition or term.

17.     SEPARABILITY

        17.01 In the event any portion of this AGREEMENT shall be held illegal,
void or ineffective, the remaining portions hereof shall remain in full force
and effect.

        17.02 If any of the terms or provisions of this AGREEMENT are in
conflict with any applicable statute or rule of law, then such terms or
provisions shall be deemed inoperative to the extent that they may conflict
therewith and shall be deemed to be modified to conform with such statute or
rule of law.

        17.03 In the event that the terms and conditions of this AGREEMENT are
materially altered as a result of Paragraphs 17.01 or 17.02, the parties will
attempt to renegotiate the terms and conditions of this AGREEMENT to resolve any
inequities.

18.     ENTIRE AGREEMENT

        18.01 This AGREEMENT, entered into as of the date written above,
constitutes the entire agreement between the parties relating to the subject
matter hereof and supersedes all previous writings and understandings. No terms
or provisions of this AGREEMENT shall be varied or modified by any prior or
subsequent statement, conduct or act of either of the parties, except that the
parties may amend this AGREEMENT by written instruments specifically referring
to and executed in the same manner as this AGREEMENT.

19.     NOTICES

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                                                CONFIDENTIAL TREATMENT REQUESTED

        19.01 Notices required or permitted under this AGREEMENT shall be in
writing and sent by prepaid registered or certified air mail or by overnight
express mail (e.g., FedEx), or by facsimile confirmed by prepaid registered or
certified air mail letter or by overnight express mail (e.g., FedEx), and shall
be deemed to have been properly served to the addressee upon receipt of such
written communication, to the following addresses of the parties:

               If to AVANIR:

               9393 Towne Centre Drive, Ste. 200
               San Diego, California  92121
               Attn: Chief Executive Officer
               Facsimile:  (858) 455-8059

               Copy to:      Heller Ehrman White & McAuliffe
                             4250 Executive Square, 7th Floor
                             La Jolla, California 92037-9103
                             Attn:  Randall K. Broberg, Esq.
                             Facsimile:  (858) 450-8499

               If to SB:     SB Pharmco Puerto Rico Inc
                             Road 172, Rm 9.1/Bo., Certenejas,
                             Cidra,
                             Puerto Rico 00639
                             Attention:  General Manager
                             Facsimile:  809-250-3894

               Copy to:      SmithKline Beecham Corporation
                             One Franklin Plaza (Mail Code FP2360)
                             P.O. Box 7929
                             Philadelphia, Pennsylvania 19101, U.S.A.
                             Attention:  Corporate Law-U.S.
                             Facsimile:  215-751-3935

20.     ASSIGNMENT

        20.01 This AGREEMENT and the licenses herein granted shall be binding
upon and inure to the benefit of the successors in interest of the respective
parties. Neither this AGREEMENT nor any interest hereunder shall be assignable
by either party without the written

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                                                CONFIDENTIAL TREATMENT REQUESTED

consent of the other, such consent not to be unreasonably withheld or delayed;
provided, however, that either party may assign this AGREEMENT or any part of
its rights and obligations hereunder to any AFFILIATE of such assigning party or
to any corporation with which such assigning party may merge or consolidate, or
to which it may transfer all or substantially all of its assets to which this
AGREEMENT relates without obtaining the consent of the other party hereto.

 21.    RECORDING

        21.01 SB shall have the right, at any time, to record, register, or
otherwise notify this AGREEMENT in appropriate governmental or regulatory
offices anywhere in the TERRITORY, and AVANIR shall provide reasonable
assistance to SB in effecting such recording, registering or notifying.

22.     EXECUTION IN COUNTERPARTS

        22.01 This AGREEMENT may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

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                                                CONFIDENTIAL TREATMENT REQUESTED

        IN WITNESS WHEREOF, the parties, through their authorized officers, have
executed this AGREEMENT as of the date first written above.

SB PHARMCO PUERTO RICO INC.

BY:     /s/ JOSE L. ROSADO
        ------------------

NAME:   Jose L. Rosado

TITLE:  President and General Manager

AVANIR PHARMACEUTICALS

BY:     /S/   GERALD J. YAKATAN
        -----------------------

NAME:   Gerald J. Yakatan

TITLE:  President and Chief Executive Officer

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                                                CONFIDENTIAL TREATMENT REQUESTED

                                LICENSE AGREEMENT

              SB PHARMCO PUERTO RICO INC. - AVANIR PHARMACEUTICALS

                                   APPENDIX A

                                     PATENTS

<TABLE>
<CAPTION>
===========================================================================================================
         Title            Country      Appl. No.   Appl. Date     Patent No.   Grant Date     Exp. Date
-----------------------------------------------------------------------------------------------------------
<S>                       <C>          <C>         <C>            <C>          <C>            <C>
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------

------------------------- ------------ ----------- -------------- ------------ -------------- -------------

===========================================================================================================
</TABLE>
***

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                                                CONFIDENTIAL TREATMENT REQUESTED

                                   APPENDIX B
                           PHARMACOVIGILANCE AGREEMENT

        PROCEDURE FOR EXCHANGE OF ADVERSE EVENT DATA FROM CLINICAL TRIALS AND
POSTMARKETING REPORTS

DEFINITIONS

The following definitions reflect and are consistent with FDA and International
Conference on Harmonization (ICH) regulations/guidelines.

-       ADVERSE EXPERIENCE/EVENT (AE)

        The ICH has defined an AE as "any untoward medical occurrence in a
        patient or clinical investigation subject administered a pharmaceutical
        product and which does not necessarily have to have a causal
        relationship with this treatment."

-       ADVERSE DRUG REACTION (ADR)

        In the pre-approval clinical experience or in other clinical trial
        experiences The ICH has defined an ADR in clinical trials as "all
        noxious and unintended responses to a medical product related to any
        dose". The phrase "responses to a medicinal product" means that a causal
        relationship between a medicinal product and an adverse event is at
        least a reasonable possibility, i.e. the relationship cannot be ruled
        out.

For marketed medical products

The ICH had defined an ADR in marketed medicinal products as "a response to a
drug which is noxious and unintended and which occurs at doses normally used in
man for prophylaxis, diagnosis or therapy of disease or for modification of
physiological function."

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                                                CONFIDENTIAL TREATMENT REQUESTED

-       UNEXPECTED ADR

        The ICH has defined an unexpected ADR as "an adverse reaction, the
        nature or severity of which is not consistent with the applicable
        product information (e.g. Investigator Brochure) for an unapproved
        investigational medicinal product.

        This definition includes an AE/adr of which the nature, specificity, or
        severity is inconsistent with the applicable product information. For an
        AE/ADR from a clinical trial, the reference document shall be the
        Investigator Brochure.

-       SERIOUS AE

        A serious AE is any untoward medical occurrence that:

        *   results in death

        *   is life-threatening

            NOTE: The term "life-threatening" in the definition of "serious"
            refers to an event in which the patient was at risk of death at the
            time of the event; it does not refer to an event which
            hypothetically might have caused death if it were more severe.

        *   requires inpatient hospitalization or prolongation of existing
            hospitalization

        *   results in persistent or significant disability/incapacity, or

        *   is a congenital anomaly/birth defect.

        Medical and scientific judgment should be exercised in deciding whether
        expedited reporting is appropriate in other situations, such as
        important medical events that may not be immediately life-threatening or
        result in death or hospitalization but may jeopardize the patient or may
        require intervention to prevent one of the other outcomes listed in the
        definition above. These should also usually be considered serious.
        (Examples of such events are intensive treatment in an emergency room or
        at home for allergic bronchospasm; blood dyscrasias or convulsions that
        do not result in hospitalization; or development of drug dependency or
        drug abuse.)

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                                                CONFIDENTIAL TREATMENT REQUESTED

-       NON-SERIOUS AE

        A non-serious AE is any experience which does not meet the definition of
        serious as defined above.

        Clinical trial experiences which are not considered "serious" include:
        hospitalization for a pre-planned/elective procedure for a medical
        condition present before treatment started; a pre-existing medical
        condition which does not increase in severity or frequency following
        treatment; or an experience which is simply a treatment failure
        according to the efficacy criteria for the study.

REPORTING

-       REPORTS OF PREGNANCY

        While such reports are not AEs as defined herein, reports of pregnancies
        should be followed up until the outcome of the pregnancy is known.

-       MINIMUM CRITERIA FOR REPORTING

        INITIAL REPORTS SHOULD BE SUBMITTED WITHIN THE AGREED TIMELINES AS LONG
        AS THE FOLLOWING MINIMUM CRITERIA ARE MET:

        an identifiable patient; a suspect medicinal product; an identifiable
        reporting source; and an event or outcome

-       FOLLOW-UP OF CASES

        The party who is the initial recipient of the AE report shall be
        responsible for appropriate follow-up of that AE report and timely
        transmission of relevant new information to the other party. Follow-up
        information should be actively sought by the party and submitted within
        the same timelines as an initial report.

POLICY

-       SB will hold the recognized worldwide safety database for PRODUCT

-       SB is responsible for regulatory reporting in the TERRITORY and AVANIR
        is responsible for regulatory reporting outside of the TERRITORY.

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                                                CONFIDENTIAL TREATMENT REQUESTED

-       If either party becomes aware of a safety issue they will immediately
        inform the other party.

-       Each party will inform the other party of any safety related queries
        from a regulatory authority.

-       This agreement will be updated periodically in response to regulatory
        changes, at the request of either party.

DATA EXCHANGE

-       Data will be transferred in English by fax or electronically.

-       AVANIR is responsible for receiving and forwarding reports to and from
        other AVANIR licensees (if applicable)

-       SB is responsible for receiving and forwarding reports to and from other
        SB sub-licensees (if applicable)

-       SB WILL SEND AVANIR WRITTEN NOTICE OF:

        *   Fatal and life-threatening events which are unexpected and
            considered possibly drug related by fax within 24 hours of receipt

        *   All other serious adverse events within 5 days

-       AVANIR WILL SEND TO SB WRITTEN NOTICE OF:

        *   Fatal and life-threatening events which are unexpected and
            considered possibly drug related by fax within 24 hours of receipt

        *   All other serious adverse events within 5 days

-       LITERATURE REPORTS:

        *   Each party shall be responsible for scanning and processing
            applicable AE reports in literature in the territory in which it
            holds registration rights as set forth in this agreement.

-       REGULATORY REPORTING:

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                                                CONFIDENTIAL TREATMENT REQUESTED

        *   Reporting of domestic or foreign cases to the local regulatory
            authorities is the responsibility of the local registration holder.

        *   SB and AVANIR shall be responsible for reporting of AE cases to the
            local regulatory authorities in those countries where they are
            respectably the local registration holder.

PHARMACOVIGILANCE CONTACTS IN EACH PARTY:

<TABLE>
<CAPTION>
FOR SB:                                                   CONTACT ADDRESS AND NUMBERS
--------------- ----------------------------------------- -----------------------------------
<S>             <C>                                       <C>
Primary:        Reinerio A. Deza, MD                      SmithKline Beecham Consumer
                Director, NA Medical Affairs              Healthcare
                & Safety                                  100 Beecham Drive
                                                          Pittsburgh, PA  15205   USA
                SmithKline Beecham Consumer               Tel:  (412) 928-1085
                Healthcare                                Fax:  (412) 928-6958

                E-mail:
                reinerio.deza@sb.com

UK Contact:     Bryan Shapiro, MD                         SBCH Research Centre
                Assoc. Dir., EU Medical Services          St. George's Avenue
                                                          Weybridge
                                                          Surrey KT13 ODE, UK
                                                          Tel. +44 932 82 2223
                                                          Fax  +44 932 82 2156
</TABLE>

FOR AVANIR                                     CONTACT ADDRESS AND NUMBERS:

                                       41
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                                                CONFIDENTIAL TREATMENT REQUESTED

                                   APPENDIX C

                                       ***

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                                                CONFIDENTIAL TREATMENT REQUESTED

APPENDIX D: FORM TRADEMARK ASSIGNMENT

ASSIGNMENT

WHEREAS, AVANIR PHARMACEUTICALS (HEREINAFTER "AVANIR"), A CALIFORNIA CORPORATION
WITH A BUSINESS ADDRESS OF 9393 TOWN CENTRE DRIVE, SUITE 200, SAN DIEGO,
CALIFORNIA 92121, IS THE OWNER OF THE TRADEMARKS AND TRADEMARK APPLICATIONS FOR
***; AND

WHEREAS, SB PHARMCO PUERTO RICO INC. (HEREINAFTER "SB"), A COMPANY OF THE
TERRITORY OF PUERTO RICO WITH A BUSINESS ADDRESS OF ROAD 172, RM 9.1/BO.,
CERTENEJAS, CIDRA PUERTO RICO 00639, THE SUCCESSOR OF THE PORTION OF THE ONGOING
AND EXISTING BUSINESS OF AVANIR TO WHICH THE MARKS PERTAIN, IS DESIROUS OF
ACQUIRING SAID TRADEMARKS AND THE PENDING INTENT TO USE APPLICATIONS THEREFOR;

NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS
HEREBY ACKNOWLEDGED, AVANIR DOES HEREBY ASSIGN TO SB ALL WORLDWIDE RIGHTS, TITLE
AND INTEREST IN AND TO THE TRADEMARKS *** AND THE INTENT TO USE APPLICATIONS FOR
THE MARKS AS PART OF THE PORTION OF THE BUSINESS TO WHICH THE MARKS PERTAIN,
TOGETHER WITH THE GOODWILL OF THE BUSINESS SYMBOLIZED THEREBY.

AVANIR PHARMACEUTICALS

BY:___________________________

TITLE:________________________

DATE:_________________________

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                                                CONFIDENTIAL TREATMENT REQUESTED

                            APPENDIX E: DOMAIN NAMES

                                       ***

                                       44

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