Document:

fy2008ex_10-1.htm

    TEGAL
      CORPORATION

     

    
2007
      INCENTIVE AWARD PLAN

     

    

    STOCK
      OPTION GRANT NOTICE AND

     

    STOCK
      OPTION AGREEMENT

     

     

    Tegal
      Corporation, a Delaware corporation (the “Company”),
      pursuant to its 2007 Incentive Award Plan (the
“Plan”), hereby grants to the holder listed below
      (“Participant”), an option to purchase the number of
      shares of the Company’s common stock, par value $0.01
      (“Stock”), set forth below (the
“Option”).  This Option is subject
      to all of
      the terms and conditions set forth herein and in the Stock Option Agreement
      attached hereto as Exhibit A (the “Stock Option
      Agreement”) and the Plan, which are incorporated herein by
      reference.  Unless otherwise defined herein, the terms defined in the
      Plan shall have the same defined meanings in this Grant Notice and the Stock
      Option Agreement.

     

    
      	
              Participant:

            	  
              
	
              Grant
                Date:

            	  
              
	
              Vesting
                Commencement Date:

            	  
              
	
              Exercise
                Price per Share:

            	
              $                                                                       

            
	
              Total
                Exercise Price:

            	
              $                                                                         

            
	
              Total
                Number of Shares Subject to the Option:

            	
                
                

            
	
              Expiration
                Date:

            	  
              

    

    

     

    Type
      of
      Option:                                                                         
o Incentive
      Stock
      Option                                                                      x  Non-Qualified
      Stock Option

    

    
      	
               

               

            	
               

              Vesting
                Schedule: [The Option shall vest with respect to twenty-five
                percent (25%) of the total number of Shares subject to the Option
                on each
                of the first and second anniversaries of the Vesting Commencement
                Date,
                and with respect to an additional 1/48th of the total number of Shares
                subject to the Option on the last day of each month thereafter, subject
                to
                Participant’s continued status as a service provider as an Employee,
                Director or Consultant on each applicable vesting date, such that
                all
                Shares subject to the Option shall be fully vested on the fourth
                anniversary of the Vesting Commencement
                Date.]

            

    

     

     

    By
      his or
      her signature, the Participant agrees to be bound by the terms and conditions
      of
      the Plan, the Stock Option Agreement and this Grant Notice.  The
      Participant has reviewed the Stock Option Agreement, the Plan and this Grant
      Notice in their entirety, has had an opportunity to obtain the advice of counsel
      prior to executing this Grant Notice and fully understands all provisions of
      this Grant Notice, the Stock Option Agreement and the
      Plan.  Participant hereby agrees to accept as binding, conclusive and
      final all decisions or interpretations of the Committee upon any questions
      arising under the Plan or relating to the Option.

     

    
      	
              TEGAL
                CORPORATION

            	 	
              PARTICIPANT

            
	
              By:

            	
                

            	 	
              By:

            	 
	
              Print
                Name:

            	 	 	
              Print
                Name:

            	 
	
              Title:

            	 	 	 	 
	
              Address:

            	 	 	
              Address:

            	 
	 	 	 	 	 

    

    
      
              

                  
      
      

                
    

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    

     

    TO
      STOCK OPTION GRANT NOTICE

     

    

     

    STOCK
      OPTION AGREEMENT

     

    Pursuant
      to the Stock Option Grant Notice (the “Grant Notice”)
      to which this Stock Option Agreement (this
“Agreement”) is attached, Tegal Corporation, a
      Delaware corporation (the “Company”), has granted to
      the Participant an option under the Company’s 2007 Incentive Award Plan (the
“Plan”) to purchase the number of shares of Stock
      indicated in the Grant Notice.

     

    ARTICLE
      I.

    GENERAL

    1.1  Defined
      Terms.  Wherever the following terms are used in this Agreement
      they shall have the meanings specified below, unless the context clearly
      indicates otherwise.  Capitalized terms not specifically defined
      herein shall have the meanings specified in the Plan and the Grant
      Notice.

     

    (a)  “Administrator”
      shall mean the Board or the Committee responsible for conducting the general
      administration of the Plan in accordance with Article 13 of the Plan; provided
      that if the Participant is an Independent Director, “Administrator” shall mean
      the Board.

     

    (b)  “Termination
      of Consultancy” shall mean the time when the engagement of the
      Participant as a Consultant to the Company or a Subsidiary is terminated for
      any
      reason, with or without cause, including, but not by way of limitation, by
      resignation, discharge, death or retirement, but excluding:  (a)
      terminations where there is a simultaneous employment or continuing employment
      of the Participant by the Company or any Subsidiary, and (b) terminations where
      there is a simultaneous re-establishment of a consulting relationship or
      continuing consulting relationship between the Participant and the Company
      or
      any Subsidiary.  The Administrator, in its absolute discretion, shall
      determine the effect of all matters and questions relating to Termination of
      Consultancy, including, but not by way of limitation, the question of whether
      a
      particular leave of absence constitutes a Termination of
      Consultancy.  Notwithstanding any other provision of the Plan, the
      Company or any Subsidiary has an absolute and unrestricted right to terminate
      a
      Consultant’s service at any time for any reason whatsoever, with or without
      cause, except to the extent expressly provided otherwise in
      writing.

     

    (c)  “Termination
      of Directorship” shall mean the time when the Participant, if he
      or she is or becomes an Independent Director, ceases to be a Director for any
      reason, including, but not by way of limitation, a termination by resignation,
      failure to be elected, death or retirement.  The Board, in its sole
      and absolute discretion, shall determine the effect of all matters and questions
      relating to Termination of Directorship with respect to Independent
      Directors.

     

    (d)  “Termination
      of Employment” shall mean the time when the employee-employer
      relationship between the Participant and the Company or any Subsidiary is
      terminated for any reason, with or without cause, including, but not by way
      of
      limitation, a termination by resignation, discharge, death, disability or
      retirement; but excluding:  (a) terminations where there is a
      simultaneous reemployment or continuing employment of the Participant by the
      Company or any Subsidiary, and (b) terminations where there is a simultaneous
      establishment of a consulting relationship or continuing consulting relationship
      between the Participant and the Company or any Subsidiary.  The
      Administrator, in its absolute discretion, shall determine the effect of all
      matters and questions relating to Termination of Employment, including, but
      not
      by way of limitation, the question of whether a particular leave of absence
      constitutes a Termination of Employment.

     

    (e)  “Termination
      of Services” shall mean the last to
      occur of a Participant’s Termination of Consultancy, Termination of Directorship
      or Termination of Employment, as applicable.  A Participant shall not
      be deemed to have a Termination of Services merely because of a change in the
      capacity in which the Participant renders service to the Company or any
      Subsidiary (i.e., a Participant who is an Employee becomes a Consultant) or
      a
      change in the entity for which the Participant renders such service (i.e.,
      an
      Employee of the Company becomes an Employee of a Subsidiary), unless following
      such change in capacity or service the Participant is no longer serving as
      an
      Employee, Director or Consultant of the Company or any Subsidiary.

     

    1.2  Incorporation
      of Terms of Plan.  The Option is subject to the terms and
      conditions of the Plan which are incorporated herein by reference.  In
      the event of any inconsistency between the Plan and this Agreement, the terms
      of
      the Plan shall control.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      II.

    GRANT
      OF OPTION

    2.1  Grant
      of Option.  In consideration of the Participant’s past and/or
      continued employment with or service to the Company or a Subsidiary and for
      other good and valuable consideration, effective as of the Grant Date set forth
      in the Grant Notice (the “Grant Date”), the Company
      irrevocably grants to the Participant the Option to purchase any part or all
      of
      an aggregate of the number of shares of Stock set forth in the Grant Notice,
      upon the terms and conditions set forth in the Plan and this
      Agreement.  Unless designated as a Non-Qualified Stock Option in the
      Grant Notice, the Option shall be an Incentive Stock Option to the maximum
      extent permitted by law.

     

    2.2  Exercise
      Price.  The exercise price of the shares of Stock subject to the
      Option shall be as set forth in the Grant Notice, without commission or other
      charge; provided, however, that the price per share of the
      shares of Stock subject to the Option shall not be less than 100% of the Fair
      Market Value of a share of Stock on the Grant Date.  Notwithstanding
      the foregoing, if this Option is designated as an Incentive Stock Option and
      the
      Participant owns (within the meaning of Section 424(d) of the Code) more than
      10% of the total combined voting power of all classes of stock of the Company
      or
      any “subsidiary corporation” of the Company or any “parent corporation” of the
      Company (each within the meaning of Section 424 of the Code), the price per
      share of the shares of Stock subject to the Option shall not be less than 110%
      of the Fair Market Value of a share of Stock on the Grant Date.

     

    2.3  Consideration
      to the Company.  In consideration of the grant of the Option by
      the Company, the Participant agrees to render faithful and efficient
      services to the Company or any Subsidiary.  Nothing in the Plan or
      this Agreement shall confer upon the Participant any right to continue in the
      employ or service of the Company or any Subsidiary or shall interfere with
      or
      restrict in any way the rights of the Company and its Subsidiaries, which rights
      are hereby expressly reserved, to discharge or terminate the services of the
      Participant at any time for any reason whatsoever, with or without cause, except
      to the extent expressly provided otherwise in a written agreement between the
      Company or a Subsidiary and the Participant.

     

    ARTICLE
      III.

    PERIOD
      OF EXERCISABILITY

    3.1  Commencement
      of Exercisability.

     

    (a)  Subject
      to Sections 3.2, 3.3, 5.8 and 5.10 hereof, the Option shall become vested and
      exercisable in such amounts and at such times as are set forth in the Grant
      Notice.

     

    (b)  No
      portion of the Option which has not become vested and exercisable at the date
      of
      the Participant’s Termination of Service shall thereafter become vested and
      exercisable, except as may be otherwise provided in this Agreement, by the
      Administrator or as set forth in a written agreement between the Company and
      the
      Participant.

     

    (c)  Notwithstanding
      anything in this Sections 3.1, pursuant to Section 12.2 of the Plan, the Option
      shall become fully vested and exercisable in the event of a Change in Control,
      in connection with which the successor corporation does not assume the Option
      or
      substitute an equivalent right for the Option.  Should the successor
      corporation assume the Option or substitute an equivalent right, then no such
      acceleration shall apply.

     

    3.2  Duration
      of Exercisability.  The installments provided for in the vesting
      schedule set forth in the Grant Notice are cumulative.  Each such
      installment which becomes vested and exercisable pursuant to the vesting
      schedule set forth in the Grant Notice shall remain vested and exercisable
      until
      it becomes unexercisable under Section 3.3 hereof.

     

    3.3  Expiration
      of Option.  The Option may not be exercised to any extent by
      anyone after the first to occur of the following events:

     

    (a)  The
      expiration of ten years from the Grant Date;

     

    (b)  If
      this
      Option is designated as an Incentive Stock Option and the Participant owned
      (within the meaning of Section 424(d) of the Code), at the time the Option
      was granted, more than 10% of the total combined voting power of all classes
      of
      stock of the Company or any “subsidiary corporation” of the Company or any
“parent corporation” of the Company (each within the meaning of Section 424 of
      the Code), the expiration of five years from the Grant Date;

     

    (c)  The
      expiration of three months from the date of the Participant’s Termination of
      Services, unless such termination occurs by reason of the Participant’s death or
      Disability; or

     

    (d)  The
      expiration of one year from the date of the Participant’s Termination of
      Services by reason of the Participant’s death or Disability.

     

    The
      Participant acknowledges that an Incentive Stock Option exercised more that
      three months after the Participant’s Termination of Employment, other than by
      reason of death or Disability, will be taxed as a Non-Qualified Stock
      Option.

     

    3.4  Special
      Tax Consequences.  The Participant acknowledges that, to the
      extent that the aggregate Fair Market Value (determined as of the time the
      Option is granted) of all shares of Stock with respect to which Incentive Stock
      Options, including the Option, are exercisable for the first time by the
      Participant in any calendar year exceeds $100,000, the Option and such other
      options shall be Non-Qualified Stock Options to the extent necessary to comply
      with the limitations imposed by Section 422(d) of the Code.  The
      Participant further acknowledges that the rule set forth in the preceding
      sentence shall be applied by taking the Option and other “incentive stock
      options” into account in the order in which they were granted, as determined
      under Section 422(d) of the Code and the Treasury Regulations
      thereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      IV.

    EXERCISE
      OF OPTION

    4.1  Person
      Eligible to Exercise.  Except as provided in Sections 5.2(b) and
      5.2(c) hereof, during the lifetime of the Participant, only the Participant
      may
      exercise the Option or any portion thereof.  After the death of the
      Participant, any exercisable portion of the Option may, prior to the time when
      the Option becomes unexercisable under Section 3.3 hereof, be exercised by
      the
      Participant’s personal representative or by any person empowered to do so under
      the deceased the Participant’s will or under the then applicable laws of descent
      and distribution.

     

    4.2  Partial
      Exercise.  Any exercisable portion of the Option or the entire
      Option, if then wholly exercisable, may be exercised in whole or in part at
      any
      time prior to the time when the Option or portion thereof becomes unexercisable
      under Section 3.3 hereof.

     

    4.3  Manner
      of Exercise.  The Option, or any exercisable portion thereof, may
      be exercised solely by delivery to the Secretary of the Company (or any third
      party administrator or other person or entity designated by the Company) of
      all
      of the following prior to the time when the Option or such portion thereof
      becomes unexercisable under Section 3.3 hereof:

     

    (a)  An
      Exercise Notice in a form specified by the Administrator, stating that the
      Option or portion thereof is thereby exercised, such notice complying with
      all
      applicable rules established by the Administrator;

     

    (b)  The
      receipt by the Company of full payment for the shares of Stock with respect
      to
      which the Option or portion thereof is exercised, including payment of any
      applicable withholding tax, which may be in one or more of the forms of
      consideration permitted under Section 4.4 hereof;

     

    (c)  Any
      other
      written representations as may be required in the Administrator’s reasonable
      discretion to evidence compliance with the Securities Act or any other
      applicable law rule, or regulation; and

     

    (d)  In
      the
      event the Option or portion thereof shall be exercised pursuant to
      Section 4.1 hereof by any person or persons other than the Participant,
      appropriate proof of the right of such person or persons to exercise the
      Option.

     

    Notwithstanding
      any of the foregoing, the Company shall have the right to specify all conditions
      of the manner of exercise, which conditions may vary by country and which may
      be
      subject to change from time to time.

     

    4.4  Method
      of Payment.  Payment of the exercise price shall be by any of the
      following, or a combination thereof, at the election of the
      Participant:

     

    (a)  Cash;

     

    (b)  Check;

     

    (c)  Delivery
      of a notice that the Participant has placed a market sell order with a broker
      with respect to shares of Stock then issuable upon exercise of the Option,
      and
      that the broker has been directed to pay a sufficient portion of the net
      proceeds of the sale to the Company in satisfaction of the aggregate exercise
      price; provided, that payment of such proceeds is then made to the
      Company upon settlement of such sale;

     

    (d)  With
      the
      consent of the Administrator, surrender of other shares of Stock which (A)
      in
      the case of shares of Stock acquired from the Company, have been owned by the
      Participant for more than six (6) months on the date of surrender, and (B)
      have
      a Fair Market Value on the date of surrender equal to the aggregate exercise
      price of the shares of Stock with respect to which the Option or portion thereof
      is being exercised;

     

    (e)  With
      the
      consent of the Administrator, surrendered shares of Stock issuable upon the
      exercise of the Option having a Fair Market Value on the date of exercise equal
      to the aggregate exercise price of the shares of Stock with respect to which
      the
      Option or portion thereof is being exercised; or

     

    (f)  With
      the
      consent of the Administrator, property of any kind which constitutes good and
      valuable consideration.

     

    4.5  Conditions
      to Issuance of Stock Certificates.  The shares of Stock
      deliverable upon the exercise of the Option, or any portion thereof, may be
      either previously authorized but unissued shares of Stock or issued shares
      of
      Stock which have then been reacquired by the Company.  Such shares of
      Stock shall be fully paid and nonassessable.  The Company shall not be
      required to issue or deliver any shares of Stock purchased upon the exercise
      of
      the Option or portion thereof prior to fulfillment of all of the following
      conditions:

     

    (a)  The
      admission of such shares of Stock to listing on all stock exchanges on which
      such Stock is then listed;

     

    (b)  The
      completion of any registration or other qualification of such shares of Stock
      under any state or federal law or under rulings or regulations of the Securities
      and Exchange Commission or of any other governmental regulatory body, which
      the
      Administrator shall, in its absolute discretion, deem necessary or
      advisable;

     

    (c)  The
      obtaining of any approval or other clearance from any state or federal
      governmental agency which the Administrator shall, in its absolute discretion,
      determine to be necessary or advisable;

     

    (d)  The
      receipt by the Company of full payment for such shares of Stock, including
      payment of any applicable withholding tax, which may be in one or more of the
      forms of consideration permitted under Section 4.4 hereof; and

     

    (e)  The
      lapse
      of such reasonable period of time following the exercise of the Option as the
      Administrator may from time to time establish for reasons of administrative
      convenience.

     

    4.6  Rights
      as Stockholder.  The holder of the Option shall not be, nor have
      any of the rights or privileges of, a stockholder of the Company in respect
      of
      any shares of Stock purchasable upon the exercise of any part of the Option
      unless and until such shares of Stock shall have been issued by the Company
      to
      such holder (as evidenced by the appropriate entry on the books of the Company
      or of a duly authorized transfer agent of the Company).  No adjustment
      will be made for a dividend or other right for which the record date is prior
      to
      the date the shares of Stock are issued, except as provided in Section 12.1
      of
      the Plan.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      V.

    OTHER
      PROVISIONS

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

     

    5.2  Option
      Not Transferable.

     

    (a)  Subject
      to Section 5.2(b) hereof, the Option
      may
      not be sold, pledged, assigned or transferred in any manner other than by will
      or the laws of descent and distribution, unless and until the shares of Stock
      underlying the Option have been issued, and all restrictions applicable to
      such
      shares of Stock have lapsed.  Neither the Option nor any interest or
      right therein shall be liable for the debts, contracts or engagements of
      Participant or his or her successors in interest or shall be subject to
      disposition by transfer, alienation, anticipation, pledge, encumbrance,
      assignment or any other means whether such disposition be voluntary or
      involuntary or by operation of law by judgment, levy, attachment, garnishment
      or
      any other legal or equitable proceedings (including bankruptcy), and any
      attempted disposition thereof shall be null and void and of no effect, except
      to
      the extent that such disposition is permitted by the preceding
      sentence.

     

    (b)  Notwithstanding
      any other provision in this Agreement, with the consent of the Administrator
      and
      to the extent the Option is not intended to qualify as an Incentive Stock
      Option, the Participant may transfer the Option (or any portion thereof) to
      any
      one or more Permitted Transferees (as defined below), subject to the following
      terms and conditions:  (i) any portion of the Option transferred to a
      Permitted Transferee shall not be assignable or transferable by the Permitted
      Transferee other than by will or the laws of descent and distribution or to
      another Permitted Transferee; (ii) any portion of the Option which is
      transferred to a Permitted Transferee shall continue to be subject to all the
      terms and conditions of the Option as applicable to the Participant (other
      than
      the ability to further transfer the Option); and (iii) the Participant and
      the
      Permitted Transferee shall execute any and all documents requested by the
      Administrator, including, without limitation documents to (A) confirm the status
      of the transferee as a Permitted Transferee, (B) satisfy any requirements for
      an
      exemption for the transfer under applicable federal and state securities laws
      and (C) evidence the transfer.  For purposes of this Section 5.2(b),
“Permitted Transferee” shall mean, with respect to a
      Participant, any child, stepchild, grandchild, parent, stepparent, grandparent,
      spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
      son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
      adoptive relationships, any person sharing the Participant’s household (other
      than a tenant or employee), a trust in which these persons (or the Participant)
      control the management of assets, and any other entity in which these persons
      (or the Participant) own more than fifty percent of the voting interests, or
      any
      other transferee specifically approved by the Administrator after taking into
      account any state or federal tax or securities laws applicable to transferable
      Options.

     

    (c)  Unless
      transferred to a Permitted Transferee in accordance with Section 5.2(b) hereof,
      during the lifetime of Participant, only Participant may exercise the Option
      or
      any portion thereof.  Subject to such conditions and procedures as the
      Administrator may require, a Permitted Transferee may exercise the Option or
      any
      portion thereof during Participant’s lifetime.  After the death of
      Participant, any exercisable portion of the Option may, prior to the time when
      the Option becomes unexercisable under Section 3.3 hereof, be exercised by
      Participant’s personal representative or by any person empowered to do so under
      the deceased Participant’s will or under the then applicable laws of descent and
      distribution.

     

    5.3  Adjustments.  The
      Participant acknowledges that the Option is subject to modification and
      termination in certain events as provided in this Agreement and Article 12
      of
      the Plan.

     

    5.4  Notices.  Any
      notice to be given under the terms of this Agreement to the Company shall be
      addressed to the Company in care of the Secretary of the Company at the
      address given beneath the signature of the Company’s authorized officer on the
      Grant Notice, and any notice to be given to Participant shall be addressed
      to
      Participant at the address given beneath Participant’s signature on the Grant
      Notice.  By a notice given pursuant to this Section 5.4, either party
      may hereafter designate a different address for notices to be given to that
      party.  Any notice which is required to be given to Participant shall,
      if Participant is then deceased, be given to the person entitled to exercise
      his
      or her Option pursuant to Section 4.1 hereof by written notice under this
      Section 5.4.  Any notice shall be deemed duly given when sent via
      email or when sent by certified mail (return receipt requested) and deposited
      (with postage prepaid) in a post office or branch post office regularly
      maintained by the United States Postal Service.

     

    5.5  Titles.  Titles
      are provided herein for convenience only and are not to serve as a basis for
      interpretation or construction of this Agreement.

     

    5.6  Governing
      Law; Severability.  The laws of the State of Delaware shall govern
      the interpretation, validity, administration, enforcement and performance of
      the
      terms of this Agreement regardless of the law that might be applied under
      principles of conflicts of laws.

     

    5.7  Conformity
      to Securities Laws.  The Participant acknowledges that the Plan
      and this Agreement are intended to conform to the extent necessary with all
      provisions of the Securities Act and the Exchange Act and any and all
      regulations and rules promulgated by the Securities and Exchange Commission
      thereunder, and state securities laws and regulations.  Notwithstanding
      anything herein to the contrary, the Plan shall be administered, and the Option
      is granted and may be exercised, only in such a manner as to conform to such
      laws, rules and regulations.  To the extent permitted by applicable law,
      the Plan and this Agreement shall be deemed amended to the extent necessary
      to
      conform to such laws, rules and regulations.

     

    5.8  Amendments, Suspension
      and Termination.  To the extent permitted by the Plan,
      this Agreement may be wholly or partially amended or otherwise modified,
      suspended or terminated at any time or from time to time by the Committee or
      the
      Board, provided, that, except as may otherwise be provided by the Plan,
      no amendment, modification, suspension or termination of this Agreement shall
      adversely effect the Option in any material way without the prior written
      consent of the Participant.  

     

    5.9  Successors
      and Assigns.  The Company may assign any of its rights under this
      Agreement to single or multiple assignees, and this Agreement shall inure to
      the
      benefit of the successors and assigns of the Company.  Subject to the
      restrictions on transfer herein set forth in Section 5.2 hereof, this Agreement
      shall be binding upon Participant and his or her heirs, executors,
      administrators, successors and assigns.

     

    5.10  Notification
      of Disposition.  If this Option is designated as an Incentive
      Stock Option, Participant shall give prompt notice to the Company of any
      disposition or other transfer of any shares of Stock acquired under this
      Agreement if such disposition or transfer is made (a) within two years from
      the
      Grant Date with respect to such shares of Stock or (b) within one year after
      the
      transfer of such shares of Stock to the Participant.  Such notice
      shall specify the date of such disposition or other transfer and the amount
      realized, in cash, other property, assumption of indebtedness or other
      consideration, by Participant in such disposition or other
      transfer.

     

    5.11  Limitations
      Applicable to Section 16 Persons.  Notwithstanding any other
      provision of the Plan or this Agreement, if Participant is subject to Section
      16
      of the Exchange Act, the Plan, the Option and this Agreement shall be subject
      to
      any additional limitations set forth in any applicable exemptive rule under
      Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the
      Exchange Act) that are requirements for the application of such exemptive
      rule.  To the extent permitted by applicable law, this Agreement shall
      be deemed amended to the extent necessary to conform to such applicable
      exemptive rule.

     

    5.12  Not
      a
      Contract of Employment.  Nothing in this Agreement or in the Plan
      shall confer upon the Participant any right to continue to serve as an employee
      or other service provider of the Company or any of its
      Subsidiaries.

     

    5.13  Entire
      Agreement.  The Plan, the Grant Notice and this Agreement
      (including all Exhibits thereto) constitute the entire agreement of the parties
      and supersede in their entirety all prior undertakings and agreements of the
      Company and Participant with respect to the subject matter hereof.

     

    5.14  Section
      409A.  Notwithstanding any other provision of the Plan,
      this Agreement or the Grant Notice, the Plan, this Agreement and
      the Grant Notice shall be interpreted in accordance with, and incorporate
      the terms and conditions required by, Section 409A of the U.S. Internal Revenue
      Code of 1986, as amended (together with any Department of Treasury regulations
      and other interpretive guidance issued thereunder, including without limitation
      any such regulations or other guidance that may be issued after the date hereof,
      “Section 409A”).  The Committee may, in its
      discretion, adopt such amendments to the Plan, this Agreement or
      the Grant Notice or adopt other policies and procedures (including
      amendments, policies and procedures with retroactive effect), or take any other
      actions, as the Committee determines are necessary or appropriate to comply
      with
      the requirements of Section 409A.exv4w8

 

Exhibit 4.8

AVANIR PHARMACEUTICALS

CLASS A COMMON STOCK WARRANT

     This certifies that _____________ (the “Holder”), or assigns, for value received, is entitled
to purchase from Avanir Pharmaceuticals (the “Company”), subject to the terms set forth below, a
maximum of ________ fully-paid and nonassessable shares (subject to adjustment as provided
herein) of the Company’s Class A Common Stock, no par value, (the “Warrant Shares”) for cash at a
price of $3.30 per share (the “Exercise Price”) (subject to adjustment as provided herein) at any
time or from time to time on or after May ___, 2007 (the “Initial Exercise Date”) and up to and
including 5:00 p.m. (New York City Time) on November ___, 2007 (the “Expiration Date”) upon
surrender to the Company at its principal office (or at such other location as the Company may
advise the Holder in writing) of this Warrant properly endorsed with the Form of Subscription
attached hereto duly completed and signed and upon payment in cash or by check of the aggregate
Exercise Price for the number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Exercise Price is subject to adjustment as provided in
Section 3 of this Warrant. This Warrant is issued subject to the following terms and conditions:

     1. Exercise, Issuance of Certificates. The Holder may exercise this Warrant at any
time or from time to time on or after the Initial Exercise Date and on or prior to the Expiration
Date, for all or any part of the Warrant Shares (but not for a fraction of a share) which may be
purchased hereunder, as that number may be adjusted pursuant to Section 3 of this Warrant. The
Company agrees that the Warrant Shares purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such Warrant Shares as of the close of business
on the date on which this Warrant shall have been surrendered, properly endorsed, the completed and
executed Form of Subscription delivered, and payment made for such Warrant Shares (such date, a
“Date of Exercise”). Certificates for the Warrant Shares so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company’s expense as soon as practicable after
the rights represented by this Warrant have been so exercised, but in any event not later than the
third trading day following the Date of Exercise (“Warrant Share Delivery Date”). In case of a
purchase of less than all the Warrant Shares which may be purchased under this Warrant, the Company
shall cancel this Warrant and execute and deliver to the Holder hereof within a reasonable time a
new Warrant or Warrants of like tenor for the balance of the Warrant Shares purchasable under the
Warrant surrendered upon such purchase. Each stock certificate so delivered shall be registered in
the name of such Holder and issued without legend if there is an effective registration statement
covering such Warrant Shares or if exercised via cashless exercise pursuant to the terms set forth
below and such Warrant Shares shall be transmitted by the transfer agent of the Company to the
Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company
through its Deposit Withdrawal Agent Commission (“DWAC”) system. If this Warrant is exercised for
cash at a time when there is no effective Registration Statement, the Warrant Shares may be issued
with a restrictive legend.

          If, but only if, there is no effective Registration Statement covering the Warrant Shares at
the time of exercise, this Warrant may also be exercised at such time by means of a

 

 

“cashless exercise” in which the Holder shall be entitled to receive a certificate for the
number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

	 	(A)	 	= the VWAP on the trading day preceding the date of such
election;
	 
	 	(B)	 	= the Exercise Price of the Warrants, as adjusted; and
	 
	 	(X)	 	= the number of Warrant Shares issuable upon exercise of the
Warrants in accordance with the terms of this Warrant.

     As used herein, “VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the common stock of the Company (the “Common Stock”) is then listed or
quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern
Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then listed or quoted on a Trading
Market and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the volume
weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and
if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets
LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most
recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined in good faith by the Company’s Board of
Directors.

     2. Holder’s Restrictions. The Company shall not effect any exercise of this Warrant,
and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section
1 or otherwise, to the extent that after giving effect to such issuance after exercise, such Holder
(together with such Holder’s affiliates, and any other person or entity acting as a group together
with such Holder or any of such Holder’s affiliates), as set forth on the applicable Form of
Subscription, would beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially
owned by such Holder and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such sentence is being
made, but shall exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant beneficially owned by such Holder
or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion
of any other securities of the Company (including, without limitation, any other Warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained herein beneficially
owned by such Holder or any of its affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 2, beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by a Holder that the Company is not representing to such Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and such Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the extent that the limitation
contained in this Section 2 applies, the determination of whether this Warrant is exercisable (in
relation to other securities owned by

2

 

such Holder) and of which a portion of this Warrant is exercisable shall be in the sole
discretion of a Holder, and the submission of a Form of Subscription shall be deemed to be each
Holder’s determination of whether this Warrant is exercisable (in relation to other securities
owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to
such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm
the accuracy of such determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder. The “Beneficial Ownership Limitation” shall be 4.99%
of the number of shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this Warrant. The provisions of this
paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of
this Section 2 to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such limitation. The limitations
contained in this paragraph shall apply to a successor holder of this Warrant.

     3. (a) Rescission Rights. If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to
Section 1 by the 2nd business day following the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise.

          (b) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.
In addition to any other rights available to the Holder, if the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the Warrant Shares
pursuant to an exercise on or before the 2nd trading day following the Warrant Share
Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares
that the Company was required to deliver to the Holder in connection with the exercise at issue
times (B) the price at which the sell order giving rise to such purchase obligation was executed,
and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company timely complied with
its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of
shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the Company shall be required to
pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely

3

 

deliver certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

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

     5. Adjustment of Exercise Price and Number of Shares. The Exercise Price and the
total number of Warrant Shares shall be subject to adjustment from time to time upon the occurrence
of certain events described in this Section 3. Upon each adjustment of the Exercise Price, the
Holder of this Warrant shall thereafter be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of shares obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the Exercise Price
resulting from such adjustment.

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

          5.2. Reclassification. If any reclassification of the capital stock of the Company or
any reorganization, consolidation, merger, or any sale, lease, license, exchange or other transfer
(in one transaction or a series of related transactions) of all or substantially all, of the
business and/or assets of the Company (the “Reclassification Events”) shall be effected in such a
way that holders of Common Stock shall be entitled to receive stock, securities, or other assets or
property, then, as a condition of such Reclassification Event lawful and adequate provisions shall
be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu
of the shares of Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock, securities, or other
assets or property as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights represented hereby. In any
Reclassification Event, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions

4

 

hereof (including, without limitation, provisions for adjustments of the Exercise Price and of
the number of Warrant Shares), shall thereafter be applicable, as nearly as may be, in relation to
any shares of stock, securities, or assets thereafter deliverable upon the exercise hereof.

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

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

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

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

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

5

 

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

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

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

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

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

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

6

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officer,
thereunto duly authorized on this ___ day of November 2006.

	 	 	 	 	 
	 	Avanir Pharmaceuticals,

a California corporation

 	 
	 	By:  	 	 
	 	 	Gregory P. Hanson, CMA 	 
	 	 	Vice President and Chief Accounting Officer 	 

7

 

	 	 	 	 	 

FORM OF SUBSCRIPTION

(To be signed only upon exercise of Warrant)

	To:	 	 Avanir Pharmaceuticals

     The undersigned, the holder of the attached Class A Common Stock Warrant, hereby elects to
exercise the purchase right represented by such Warrant for, and to purchase thereunder,                                         1 shares of Class A Common Stock of Avanir
Pharmaceuticals and makes payment of $                                therefor.

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

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

DATED:                                         

	 	 	 	 	 
	 	 	 	 
	 	 	(Signature must conform in all respects to name of Holder

as specified on the face of the Warrant)	 
	 	 	 	 	 
	 	 	Name: 	 	 
	 	 	Title: 	 	 
	 

 

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

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