EXHIBIT 10.9
SUBLEASE AGREEMENT
between
AVANIR PHARMACEUTICALS
as Sublandlord
and
SIRION THERAPEUTICS, INC.
as Subtenant

     
Building Address:
  11408 Sorrento Valley Road
 
  San Diego, California 92121

 

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SUBLEASE AGREEMENT
     THIS SUBLEASE AGREEMENT (“Sublease”) is made as of this 5th day of
September, 2006 (the “Effective Date”), by and between AVANIR PHARMACEUTICALS, a
California corporation (“Sublandlord”) and SIRION THERAPEUTICS, INC., a North
Carolina corporation (“Subtenant”), with Sublandlord and Subtenant hereinafter
sometimes referred to collectively as the “Parties” and individually as a
“Party”).
WITNESSETH:
     WHEREAS, Sorrento Plaza, a California limited partnership (“Master
Landlord”) and Sublandlord, are parties to a certain Standard Industrial Net
Lease, dated as of May 20, 2002, as amended on August 1, 2002 and April 2, 2003
(the “Master Lease”), a copy of which is attached hereto as Exhibit A;
     WHEREAS, pursuant to the terms of the Master Lease, Master Landlord has
leased to Sublandlord, a portion of the premises (the “Master Lease Premises”)
which are part of an office industrial center located at 11404 and 11408
Sorrento Valley Road, San Diego, California 92121 (the “Center”). (Initially
capitalized terms not otherwise defined in this Sublease shall have the meanings
attributed to such terms in the Master Lease, and unless otherwise expressly
provided herein, all references in this Sublease to “Section” shall refer to the
respective “Section” of the Master Lease and all references to “Paragraph” in
this Sublease shall refer to the respective “Paragraph” of this Sublease.);
     WHEREAS, Sublandlord now desires to sublease to Subtenant and Subtenant now
desires to sublease from Sublandlord the Sublease Premises (as defined below),
on the terms, covenants and conditions hereinafter provided.
     NOW, THEREFORE, Sublandlord and Subtenant covenant and agree as follows:
1. Summary and Definitions: The following definitions apply in this Sublease:
(a) Base Rent: Base Rent shall be as follows:

                  Period During         Sublease Term   Monthly Base Rent  
Annual Base Rent
Sublease Commencement Date through and including the day immediately preceding
the first anniversary of the Sublease Commencement Date
  $ 21,150.00     $ 253,800.00  
 
               
First anniversary of Sublease Commencement Date through and including the day
immediately preceding the second anniversary of the Sublease Commencement Date
  $ 21,784.50     $ 261,414.00  
 
               
Second anniversary of Sublease Commencement Date through and including the day
immediately preceding the third anniversary of the Sublease Commencement Date
  $ 22,438.00     $ 269,256.42  

 

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(b) Security Deposit: $84,600.00.
(c) Sublease Premises: A portion of the Master Lease Premises constituting
approximately nine thousand (9,000) rentable square feet at 11408 Sorrento
Valley Road, San Diego, California 92121 (the “Building”), as depicted on
Exhibit B attached hereto.
(d) Term:
(i) The term of this Sublease (“Sublease Term”) shall commence on the date upon
which Sublandlord shall have obtained the consent of Master Landlord to this
sublease in form acceptable to Sublandlord and shall have delivered possession
of the Sublease Premises to Subtenant (“Sublease Commencement Date”). The
Sublease Term shall expire on the third anniversary of the Sublease Commencement
Date, or such earlier date on which this Sublease may be terminated in
accordance with the provisions hereof or the provisions of the Master Lease
(“Sublease Expiration Date”), in which case Sublandlord shall promptly provide
Subtenant with prior written notice of such termination. In no event shall
Subtenant conduct Subtenant’s business operations from the Sublease Premises
prior to the Sublease Commencement Date. Subtenant shall have the right to enter
the Sublease Premises upon execution of the Sublease for any purposes other than
to conduct its business operations, including but not limited to monitoring
construction, installing furniture, networks, telecommunication equipment and
fiber and any other personal property, provided, however that any waiver and
indemnity provisions as described in Paragraph 15 shall be binding on Subtenant
as soon as Subtenant enters the Sublease Premises for the purposes listed above
and any other permissible purposes.

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(ii) Provided that Subtenant shall not be default of any obligation under this
Sublease, beyond all applicable notice and cure periods, either on the date that
it is required to give notice or on the effective date of such extension period,
Subtenant shall have an option to extend the term of the Sublease to expire on
January 14, 2013 which is the Master Lease Expiration Date. If such option is
exercised, Base Rent will be increased to the greater on one hundred and five
percent (105%) of the last month’s Base Rent, or the then current market rate
for like product in Sorrento Valley, as mutually determined in good faith by
Sublandlord and Subtenant. If Subtenant elects to extend the term of the
Sublease, it shall provide written notice to Sublandlord no less than one
hundred eighty (180) days prior to the Sublease Expiration Date.
2. Sublease.
     Sublandlord hereby subleases to Subtenant, and Subtenant hereby subleases
from Sublandlord, the Sublease Premises, together with all appurtenances thereto
as provided in the Master Lease, for the Sublease Term and on the terms and
conditions contained in this Sublease. Subtenant’s sublease of the Sublease
Premises is subject to the terms and conditions of the Master Lease as provided
further in this Sublease.
3. Condition of Sublease Premises.
(a) In entering into this Sublease, Subtenant acknowledges that, except as
expressly set forth in this Sublease, Subtenant has not relied upon or been
induced by any statements or representations of Sublandlord or any other parties
or persons with respect to the physical condition of the Sublease Premises or
with respect to any other matter affecting the Sublease Premises, that might be
pertinent in considering the leasing of the Sublease Premises or the execution
of this Sublease. Subtenant has, on the contrary, relied solely on such
investigations, examinations and inspections as Subtenant has chosen to make or
have made on its behalf. Upon taking possession of the Sublease Premises,
Subtenant shall be deemed to have accepted the Sublease Premises in its then
“as-is” “where-is” condition.
(b) By taking possession of the Sublease Premises, Subtenant shall conclusively
evidence that the Sublease Premises are fully completed and are suitable for
Subtenant’s purposes, that the Building and the Sublease Premises are in good
and satisfactory condition, and that Subtenant waives any defect therein.
4. Base Rent.
     During the Sublease Term Subtenant shall pay Sublandlord, as rent for the
Sublease Premises, the Base Rent, without set-off or deduction whatsoever,
except as otherwise provided herein. Base Rent shall be due and payable by
Subtenant in

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immediately available funds, in advance on or before the first day of each
calendar month without notice or demand.
5. Additional Rent.
     In addition to the Base Rent under Paragraph 4 above, any and all other
charges, expenses or other sums Subtenant is required to pay under the terms of
this Sublease shall be deemed additional rent (“Additional Rent”, and together
with Base Rent, “Subtenant’s Rent”). Sublandlord shall have the same rights and
remedies with respect to payment of Additional Rent as Sublandlord shall have
with respect to the Base Rent. Subtenant shall remain responsible for
Subtenant’s Rent and any other charges, expenses or other sums which first
arise, accrue or are invoiced at any time during or after the expiration of the
Sublease Term, whether by Sublandlord or Master Landlord, to the extent they
arise or accrue with respect to any period during the Sublease Term from any
liabilities or obligations of Subtenant under the provisions of this Sublease
(including any obligations under the Master Lease which are incorporated herein
as liabilities or obligations of Subtenant).
6. Rent Payments.
(a) Subtenant’s Rent and all other charges, expenses or other sums Subtenant is
required to pay to Sublandlord hereunder shall be due and payable without
billing or demand, and without deduction, set-off or counterclaim, except as
otherwise provided herein, in lawful money of the United States of America, at
Sublandlord’s address for notices in Paragraph 17 hereof or to such other person
or at such other place as Sublandlord may from time to time designate in
writing, and shall be due and payable by Subtenant to Sublandlord on or before
the date specified in this Sublease, provided that if no date is specified as to
the applicable payment, then on or before (i) three (3) business days prior to
the corresponding date provided in the Master Lease for payment of the same by
Sublandlord to Master Landlord (provided that in no event shall such period be
shortened to a duration of less than two (2) business days) or (ii) if there is
no corresponding date provided in the Master Lease for payment of the same by
Sublandlord to Master Landlord, then ten (10) business days after written
request from Sublandlord to Subtenant. The failure of Subtenant to make payment
in full of Subtenant’s Rent or any other charges, expenses or other sums
Subtenant is required to pay to Sublandlord hereunder by the due date provided
herein for such payment, shall potentially subject Subtenant to the obligation
to pay to Sublandlord (y) interest in accordance with the provisions of
Paragraph 20 and (z) a late charge in accordance with the provisions of
Paragraph 7.
(b) If the Sublease Term commences on a day other than the first day of a
calendar month or ends on a day other than the last day of a calendar month,
then

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Subtenant’s Rent for the first and last fractional months of the Sublease Term
shall be appropriately prorated.
(c) Sublandlord may upon reasonable prior written notice from time to time
(which notice shall include Master Landlord’s address and Master Landlord’s
acknowledgement of such notice) instruct Subtenant to make any payment of
Subtenant’s Rent directly to Master Landlord, in which event Subtenant shall
timely make all such payments so instructed directly to Master Landlord (with a
copy of the check to be contemporaneously forwarded by Subtenant to Sublandlord
at the time of making of each such payment), and in such event Sublandlord shall
have no responsibility to Subtenant for the payment of any such amount, and
Subtenant shall be solely responsible for any interest or late charges that may
be imposed as a result of any failure of Subtenant to have timely and properly
made any such payment to Master Landlord. Any payment made directly by Subtenant
to Master Landlord at the request of Sublandlord shall be credited against any
of Subtenant’s Rent due under this Sublease as and when received by Master
Landlord.
7. Late Charges.
     SUBTENANT ACKNOWLEDGES THAT LATE PAYMENT BY SUBTENANT TO SUBLANDLORD OF ALL
OR ANY PORTION OF SUBTENANT’S RENT AND OTHER CHARGES, EXPENSES OR OTHER SUMS
PROVIDED FOR UNDER THIS SUBLEASE WILL CAUSE SUBLANDLORD TO INCUR COSTS NOT
CONTEMPLATED BY THIS SUBLEASE, THE EXACT AMOUNT OF SUCH COSTS BEING EXTREMELY
DIFFICULT OR IMPRACTICABLE TO FIX. THEREFORE, IF ALL OR ANY PORTION OF ANY
INSTALLMENT OF SUBTENANT’S RENT OR ANY OTHER CHARGES, EXPENSES OR OTHER SUMS DUE
FROM SUBTENANT IS NOT RECEIVED BY SUBLANDLORD WITHIN FIVE (5) DAYS OF THE DATE
DUE, SUBTENANT SHALL PAY TO SUBLANDLORD AN ADDITIONAL SUM EQUAL TO FIVE PERCENT
(5%) OF THE AMOUNT OVERDUE AS A LATE CHARGE. THE PARTIES AGREE THAT THIS LATE
CHARGE REPRESENTS A FAIR AND REASONABLE ESTIMATE OF THE COSTS THAT SUBLANDLORD
WILL INCUR BY REASON OF THE LATE PAYMENT BY SUBTENANT. SUCH LATE CHARGE SHALL BE
DEEMED ADDITIONAL RENT FOR ALL PURPOSES UNDER THIS SUBLEASE AND SHALL BE IN
ADDITION TO, AND NOT IN LIEU OF, ANY INTEREST THAT MAY ACCRUE ON ANY SUCH
OVERDUE AMOUNT PURSUANT TO THE PROVISIONS OF THIS SUBLEASE.
8. Use.
     Subtenant shall use and occupy the Sublease Premises only for the purposes
permitted under, and in a manner consistent with, the provisions of the Master
Lease.

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Subtenant will pay for any damage to any part of the Sublease Premises, Building
or Center, subject to any applicable waiver of subrogation provision, if
(i) caused by any act or omission by Subtenant or Subtenant’s employees, agents,
licensees, contractors or invitees and (ii) Sublandlord would be required to pay
for such damage under the Master Lease. Subtenant will comply with applicable
provisions of the Master Lease and the Center’s Rules and Regulations and will
not cause anywhere in the Center, Building or permit in the Sublease Premises,
(i) any activity or thing contrary to applicable law, ordinance, regulation,
restrictive covenant, or insurance regulation; or which is in any way immoral or
extra hazardous or could jeopardize the coverage of normal insurance policies or
increase their cost; (ii) waste or nuisance, or any activity causing odors
perceptible outside the Sublease Premises; or (iii) overloading the floors or
the structural or mechanical systems of the Building. Subtenant shall not erect
or place any item in or upon the areas outside the Sublease Premises, except as
expressly provided in this Sublease. Subtenant shall not erect or place any item
(including, without limitation, signs) in, upon or visible from the exterior of
the Building without the consent of Master Landlord and Sublandlord, except as
expressly provided in this Sublease. Subtenant shall at Subtenant’s sole cost
and expense faithfully observe and promptly comply with all local, state and
federal laws, statutes, ordinances and governmental resolutions, orders, rules,
regulations and requirements now in force or which may hereafter be in force
with respect to Subtenant’s use, occupancy or possession of the Sublease
Premises and Subtenant’s business conducted in the Sublease Premises and with
the requirements of any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Sublease Premises. Subtenant shall also comply with any covenant,
condition or restriction affecting the Building. Subtenant’s obligations under
this Paragraph 8 will survive the termination of this Sublease.
9. Contract Vivarium Services.
     Sublandlord and Subtenant shall enter into a contract for Sublandlord to
provide vivarium space and services to Subtenant which shall be memorialized in
a separate agreement.
10. Operating Costs/Real Estate Taxes/Utilities.
(a) Commencing on the Sublease Commencement Date, Subtenant shall pay its pro
rata share of Operating Costs (as defined in the Master Lease) for the Building
and Center incurred by Sublandlord under the Master Lease. Subtenant’s pro rata
share of Operating Costs is thirty percent (30%) of the Operating Costs incurred
by Sublandlord under the Master Lease, which represents the ratio of the
Rentable Square Footage of the Sublease Premises to the Rentable Square Footage
of the Master Lease Premises (“Subtenant’s Pro Rata Share”). Subtenant’s pro
rata share shall be computed by Sublandlord on a monthly or other periodic basis

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selected by Sublandlord. Subtenant’s shall pay the amount of such pro rata share
within ten (10) business days after receipt of a statement from Sublandlord.
(b) Subtenant’s share of real property taxes, insurance costs and other
components of additional rent shall be computed on the same basis as Subtenant’s
pro rata share of Operating Costs.
(c) To the extent not separately metered or monitored with respect to the
Sublease Premises, Sublandlord shall provide the following utilities to the
Sublease Premises, including but not limited to, electricity, water, HVAC,
emergency generator, deionized water and janitorial services (the “Utilities”).
Subtenant shall be responsible for its pro rata share of Sublandlord’s cost of
Utilities. Subtenant’s pro rata share shall be computed on the same basis as
Subtenant’s pro rata share of Operating Costs, except for janitorial services
whereby Subtenant’s pro rata share shall be sixteen (16%) of the costs incurred
by Sublandlord, which represents the ratio of Rentable Square Footage of the
Sublease Premises to the Rentable Square Footage of the total area leased by
Sublandlord within the Center (57,000 square feet). Sublandlord shall in no way
be liable or responsible for any loss, damage or expense the Subtenant may
sustain or incur by reason of any change, failure, interruption, interference or
defect in the supply or character of the electricity or other utilities supplied
to the Sublease Premises. Sublandlord makes no representation or warranty as the
suitability of the utility service for Subtenant’s requirements, and no such
change, failure, defect, unavailability or unsuitability shall constitute any
actual or constructive eviction, in whole or in part, or entitle Subtenant to
any abatement or diminution of rent, or relieve Subtenant of any of its
obligations under this Sublease. Sublandlord shall not be liable in damages or
otherwise for any failure or interruption of any utility service, and no such
failure or interruption shall entitle Subtenant to terminate this Sublease or
abate the rent due hereunder.
(d) Sublandlord shall provide security services, access control and process
alarms (“Security Services”) and Subtenant shall be responsible for its pro rata
share of Security Services. Subtenant’s pro rata share for such Security
Services shall be computed on the same basis as Subtenant’s pro rata share of
janitorial services, but in no event will Subtenant’s payment for such services
be less than $750 per month. Sublandlord shall in no way be liable or
responsible for any loss, damage or expense the Subtenant may sustain or incur
by reason of any change, failure, interruption, interference or defect in the
supply or character of the Security Services supplied to the Sublease Premises.
Sublandlord makes no representation or warranty as the suitability of the
Security Services for Subtenant’s requirements, and no such change, failure,
defect, unavailability or unsuitability shall constitute any actual or
constructive eviction, in whole or in part, or entitle Subtenant to any
abatement or diminution of rent, or relieve Subtenant of any of

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its obligations under this Sublease. Sublandlord shall not be liable in damages
or otherwise for any failure or interruption of any of the Security Services,
and no such failure or interruption shall entitle Subtenant to terminate this
Sublease or abate the rent due hereunder.
(e) Subtenant shall have the right to opt out of the use of janitorial services
and Security Services provided by Sublandlord upon thirty (30) days prior
written notice to Sublandlord.
11. Subordination.
     Sublandlord and Subtenant confirm and agree that this Sublease is subject
and subordinate to all of the terms, covenants and conditions of the Master
Lease and to the matters to which the Master Lease shall be subordinate. Without
limiting the generality of the foregoing, in the event of termination of
Sublandlord’s interest under the Master Lease for any reason (including, without
limitation, upon the occurrence of any casualty or condemnation pertaining to
the Sublease Premises) this Sublease shall terminate coincidentally therewith
and Sublandlord shall return to Subtenant the Security Deposit and any prepaid
Subtenant’s Rent not applied to a default of Subtenant within twenty (20) days
of such termination. Sublandlord shall have no liability to Subtenant in
connection therewith, unless the termination of the Master Lease was caused by a
violation of Sublandlord’s covenants and agreements in Paragraph 12 below.
12. Incorporation of Master Lease Terms.
(a) The applicable terms, covenants and conditions contained in the Master Lease
are hereby incorporated herein and shall, as between Sublandlord and Subtenant,
constitute additional terms, covenants and conditions of this Sublease, except
to the extent set forth below. Except as provided in this Paragraph 12, all
references in the Master Lease to “Landlord”, “Tenant”, “Lease”, “Premises”,
“Commencement Date” and “Rent” shall, for purposes of incorporation thereof into
this Sublease, mean and refer to “Sublandlord”, “Subtenant”, “Sublease”,
“Sublease Premises”, “Sublease Commencement Date” and “Subtenant’s Rent”,
respectively. As between the Parties hereto, (i) Sublandlord agrees to observe
and perform the terms, covenants and conditions on its part to be observed and
performed hereunder (and as Tenant under the Master Lease to the extent that
such obligations are not to be performed by Subtenant hereunder) (w) which would
materially and adversely impact Subtenant if not complied with, (x) which do not
require for their performance possession of the Sublease Premises, (y) which are
not otherwise to be performed by Subtenant hereunder, and (z) provided Subtenant
complies with its obligations hereunder; and (ii) Subtenant agrees to be bound
by the provisions of the Master Lease incorporated herein and to keep, observe
and perform for the benefit of Master Landlord and Sublandlord each of the
terms, covenants and conditions on its part to be kept, observed and performed
hereunder

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as well as those applicable terms, covenants and conditions to be observed and
performed by Sublandlord as Tenant under the Master Lease with respect to the
Sublease Premises. Without limiting the foregoing, Subtenant shall not commit or
permit to be committed on the Sublease Premises any act or omission which shall
violate any term, covenant or condition of the Master Lease. Subtenant shall
under no circumstances have any rights with respect to the Sublease Premises
greater than Sublandlord’s rights as Tenant under the Master Lease.
(b) In the event of conflict between any provision of the Master Lease which is
incorporated herein as described above in this Paragraph 12 and any provision of
this Sublease, the provisions of this Sublease shall control. In determining
whether to grant or withhold any consent or approval hereunder, Sublandlord may
expressly condition the same upon the consent or approval of Master Landlord if
such consent or approval is required under the Master Lease.
(c) The following Sections and provisions of the Master Lease do not apply to,
shall not be a part of, and are not incorporated into this Sublease.

                  Specific Section Excluded Section   Subject Matter   (if not
entire Section)
Section 1
  Basic Lease Terms    
 
       
Section 2
  The Premises    
 
       
Section 3
  Lease Term  
 
       
Section 4
  Rent   Section 4.1 (Minimum Monthly Rent); Section 4.2 (Lease Year);
Section 4.4 (Impounds)
 
       
Section 5
  Security Deposit   Section 5.3 (Reduction of Security Deposit Amount)
 
       
Section 21
  Default by Tenant   Section 21(d)(v)

Exhibits B, C and E to the Master Lease shall be incorporated into this Sublease
but all other exhibits and references thereto shall be excluded.
(d) Sublandlord and Subtenant agree that Sublandlord shall not be responsible or
liable to Subtenant for the performance or nonperformance of any obligations of
Master Landlord under the Master Lease, and in furtherance thereof agree as
follows:

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(i) Notwithstanding anything to the contrary contained in this Sublease,
Sublandlord shall not be required to (A) provide or perform any insurance and
services or any alterations, improvements, improvement allowances or other
construction obligations as to the Sublease Premises, (B) provide any utilities
(including electricity) to the Sublease Premises, (C) perform any maintenance or
make any of the repairs to the Sublease Premises, Building or the Center,
(D) comply with any laws or requirements of governmental authorities regarding
the maintenance or operation of the Sublease Premises after Subtenant takes
possession of the Premises or prior thereto to the extent required to be
complied with by Master Landlord under the Master Lease, (E) take any other
action relating to the operation, maintenance, repair, alteration or servicing
of the Sublease Premises that Master Landlord may have agreed to provide,
furnish, make, comply with, or take, or cause to be provided, furnished, made,
complied with or taken under the Master Lease, or (F) provide Subtenant with any
rebate, credit, allowance or other concession required of Master Landlord for
any reason pursuant to the Master Lease unless Sublandlord receives a rent
abatement with respect to the Sublease Premises and Subtenant is not in default
of its obligations under the Sublease. Sublandlord makes no representation or
warranty of quiet enjoyment as to any persons claiming by, through or under
Master Landlord, but Sublandlord represents and warrants quiet enjoyment as
against any person claiming by, through or under Sublandlord.
(ii) Sublandlord agrees, upon request of Subtenant, to use due diligence, at
Subtenant’s sole cost and expense, to cause Master Landlord to provide, furnish,
or comply with any of Master Landlord’s obligations under the Master Lease or to
provide any required consents or approvals; provided, however, that Sublandlord
shall not be obligated to use such efforts or take any action which, in
Sublandlord’s reasonable judgment, might give rise to a default by Sublandlord
under the Master Lease. If Master Landlord shall default in the performance of
any of its obligations under the Master Lease or at law, Sublandlord shall, upon
request and at the expense of Subtenant, cooperate with Subtenant in the
prosecution of any reasonable action or proceeding, in order to have Master
Landlord (A) make such repairs, furnish such electricity, provide such services
or comply with any other obligation of Master Landlord under the Master Lease or
as required by law, and/or (B) compensate Subtenant for any earlier default by
Master Landlord in the payment or performance of its liabilities and obligations
under the Master Lease during the Sublease Term. The indemnity obligation of
Subtenant as set forth in Paragraph 15 shall apply to any claims of Master
Landlord arising from or in connection with any such request, action or
proceeding.

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(iii) Subtenant shall not make any claim against Sublandlord for any damage
which may arise by reason of: (i) the failure of Master Landlord to keep,
observe or perform any of its obligations under the Master Lease; or (ii) the
acts or omissions of Master Landlord or its employees, agents, licensees,
contractors or invitees.
(iv) Subtenant agrees that any waiver of liability, waiver of subrogation
rights, or indemnification provisions in the Master Lease which are incorporated
herein as waivers or obligations of Subtenant (including, but not limited to, in
Sections 9.5, 12.2, 13 and 14.5 of the Master Lease, to the extent applicable to
and incorporated in this Sublease), shall be deemed expanded so as to provide
for Subtenant to make such waivers and provide such indemnities not only in
favor of Sublandlord, but also in favor of Master Landlord, and the respective
affiliated employees, agents and the like of both Sublandlord and Master
Landlord as enumerated in such provisions.
(e) In the event that Sublandlord, as Tenant, is entitled to termination rights
for all or a portion of the Sublease Premises, including, without limitation, as
a result of (i) damage and destruction under Section 16 of the Master Lease, or
(ii) a partial condemnation under Section 17 of the Master Lease, then Subtenant
shall be entitled to similar termination rights with respect to the portion or
all of the Sublease Premises affected, regardless of whether or not Sublandlord
seeks to enforce such termination rights under the Master Lease.
(f) In the event that Sublandlord, as Tenant, receives a rent abatement for all
or a portion of the Sublease Premises, including, without limitation, as a
result of (i) damage and destruction under Section 16 of the Master Lease, or
(ii) a partial condemnation under Section 17 of the Master Lease, then Subtenant
shall be entitled to similar abatement of Subtenant’s Rent with respect to the
portion or all of the Sublease Premises affected.
(g) Sublandlord covenants and agrees to provide Subtenant with copies of any
notices of default under Master Lease (unless such default has already been
cured), or notices that could affect Subtenant’s rights and obligations under
this Sublease within five (5) business days after Sublandlord’s receipt thereof.
Sublandlord shall obtain the prior written consent of Subtenant prior to
(i) amending or otherwise modifying the Master Lease, or (ii) waiving, or
allowing to lapse, any right of Sublandlord under the Master Lease, to extend
that any such action under (i) or (ii) above would have a material adverse
effect on Subtenant, its use and enjoyment of the Sublease Premises, or its
rights under this Sublease.

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13. Insurance.
     Subtenant shall comply at all times and in all respects with the provisions
of Section 9 of the Master Lease with regard to the maintenance of insurance.
Such insurance shall name, as additional insureds, Master Landlord, Sublandlord
and any other parties required to be named under the terms of the Master Lease,
and a policy or certificate thereof shall be provided to Sublandlord not later
than two (2) business days prior to the Sublease Commencement Date. The
maintenance of insurance coverage with respect to the Sublease Premises and any
property of Subtenant shall be the sole obligation of Subtenant. All insurance
required to be maintained by Subtenant shall provide for thirty (30) days prior
written notice to Sublandlord and Master Landlord in the event of any
termination or reduction in coverage of such insurance. All property insurance
policies which either Party obtains affecting the Sublease Premises shall
include a clause or endorsement denying the insurer any rights of subrogation
against the other Party or Master Landlord. Sublandlord and Subtenant waive any
rights of recovery against the other for any actually insured injury or loss
including all amounts within any deductible or self-insured retention amount
applicable to any such insured injury or loss.
14. Surrender of Sublease Premises; Holding Over.
(a) As soon as its right to possession ends, Subtenant shall surrender the
Sublease Premises to Sublandlord in as good repair and condition as when
Subtenant first occupied, except for reasonable wear and tear, and otherwise in
accordance with the requirements of the Master Lease. Subtenant will
concurrently deliver to Sublandlord all keys to the Sublease Premises, and
restore any locks that it has changed to the system that existed at the
commencement of the Sublease Term. If possession is not immediately surrendered,
Sublandlord may enter upon and take possession of the Sublease Premises and
expel or remove Subtenant and any other person who may be occupying the Sublease
Premises or any part thereof.
(b) At the expiration or termination of the Sublease Term, Sublandlord may
require the removal of any or all furniture, personal property and equipment
from the Sublease Premises, and the restoration of the Sublease Premises to its
prior condition, except for reasonable wear and tear, at Subtenant’s expense.
All of Subtenant’s furniture, personal property and equipment on or about the
Sublease Premises, shall be removed from the Sublease Premises by Subtenant at
the expiration or termination of the Sublease Term. All removals by Subtenant
will be accomplished in a good and workmanlike manner so as not to damage any
portion of the Center, Building or the Master Lease Premises and Subtenant will
promptly repair and restore all damage done except for normal wear and tear. If
Subtenant does not so remove any property which it has the right or duty to
remove, Sublandlord may immediately either claim it as abandoned property, or
remove, store and dispose of it in any manner Sublandlord may choose, at
Subtenant’s cost and without liability to Subtenant or any other party.

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(c) As a condition to this Sublease and to facilitate Sublandlord’s performance
of its obligations under the Master Lease, Subtenant agrees that Sublandlord
shall be entitled to enter the Sublease Premises, upon two (2) business days’
advance notice to Subtenant, at any time during the ten (10) days preceding the
Sublease Expiration Date for the purpose of making any repairs or modifications
or removing any alterations or other improvements required under the terms of
the Master Lease to the extent the same will not materially interfere with
Subtenant’s continuous use of the Sublease Premises. Sublandlord’s right to
enter the Sublease Premises under this Paragraph 14(c) shall not be exclusive of
any other right of entry Sublandlord may have under the terms of this Agreement.
(d) If Subtenant does not surrender the Sublease Premises as required and holds
over after its right to possession ends, Subtenant shall become a tenant at
sufferance only, at a monthly rental rate equal to the greater of (i) one
hundred fifty percent (150%) of the total Subtenant’s Rent payable in the last
prior full month, or (ii) the amount payable by Sublandlord as “Tenant” under
the Master Lease as a result of such holdover, without renewal, extension or
expansion rights, and otherwise subject to the terms, covenants and conditions
herein specified, so far as applicable. Nothing other than a fully executed
written agreement of the Parties creates any other relationship. Subtenant will
be liable for Sublandlord’s loss, costs and damage from such holding over,
including, without limitation, those from Sublandlord’s delay in delivering
possession to other parties. These provisions are in addition to other rights of
Sublandlord hereunder and as provided by law.
15. Waiver and Indemnification.
     The provisions of the Master Lease relating to waiver of liability, waiver
of subrogation and indemnification shall apply to this Sublease as described in
Paragraph 12(d)(iv) hereof.
16. Hazardous Materials.
(a) Subtenant shall not, and Subtenant shall not permit any of its employees,
agents, licensees, contractors or invitees, or any other person to possess,
store, handle, generate, release, transport or use in any way in, on or about
the Center, Building or Sublease Premises any Toxic or Hazardous Materials of
any kind whatsoever (excluding reasonable amounts of ordinary office supplies
and customary amounts of Hazardous Materials used in connection with Subtenant’s
business, as used in compliance with all applicable laws). For purposes of this
Paragraph 16, “Hazardous Materials” shall mean any product, substance, chemical,
material or waste whose presence, nature, quality and/or intensity or existence,
use, manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Sublease

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Premises is either (i) potentially injurious to public health, safety or
welfare, the environment or the Sublease Premises; or (ii) regulated or
monitored by any governmental authority.
(b) Subtenant shall have no liability or obligation whatsoever for any Hazardous
Materials located in, on or about the Center, Building or Sublease Premises
prior to the Sublease Commencement Date or that migrate onto the property on
which the Center is located or appear within the Center, Building, or Sublease
Premises, provided that neither Subtenant nor its employees, agents, licensees,
contractors or invitees was the cause or source of such Hazardous Materials.
(c) To the extent required by law or for Subtenant’s use and occupancy of the
Building and Sublease Premises, Sublandlord shall cause, at its sole cost and
expense, any and all such Hazardous Materials discovered in, on or about the
Building or Sublease Premises to be removed or otherwise remediated. Sublandlord
shall provide to Subtenant a Phase One Environmental Analysis of the Building
prior to entry and Subtenant shall provide the same to Sublandlord upon
termination of this Sublease.
17. Notices.
     All notices, demands, statements and other communications that may or are
required to be given by either Party to the other hereunder shall be in writing
and shall be (i) personally delivered to the address or addressee provided
herein, or (ii) sent by certified mail, postage prepaid and return receipt
requested or (iii) delivered by a reputable messenger or overnight courier
service and, in any case, addressed as follows:

     
If to Sublandlord:
  Avanir Pharmaceuticals
 
   
with a copy to:
  Heller Ehrman LLP
 
  4350 La Jolla Village Dr., 7th Floor
 
  San Diego, California 92122
 
  Attention: Stephen Ferruolo
 
   
If to Subtenant:
  Sirion Therapeutics, Inc.

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     Any notice or document addressed to the Parties hereto at the respective
addresses set forth on this Sublease or at such other address as they may
specify from time to time by written notice delivered in accordance with this
Paragraph shall be considered delivered (w) in the case of personal delivery, at
the time of delivery or refusal to accept delivery; (x) on the third day after
deposit in the United States mail, certified mail, postage prepaid; (y) in the
case of reputable messenger or overnight courier service, upon delivery or
refusal to accept delivery; or (z) in the event of failure of delivery by reason
of changed address of which no notice was delivered or refusal to accept
delivery, as of the date of such failure or refusal. If any such day of delivery
is not a business day, the notice or document will be considered delivered on
the next business day.
18. Security Deposit.
     Concurrently with Subtenant’s execution of this Sublease, Subtenant shall
provide Sublandlord with a letter of credit for the full amount of the Security
Deposit listed in Paragraph 1(a) (the “Letter of Credit”). Such Letter of Credit
shall be issued by a financial institution in a form and substance acceptable to
Sublandlord. The Letter of Credit shall have an original term of no less than
one year with provisions for extensions unless sixty (60) days prior notice is
given to Sublandlord by the issuing bank. The Letter of Credit shall provide for
partial draws. Subtenant shall keep the Letter of Credit, at its expense, in
full force and effect throughout the term of this Sublease. Upon the happening
of any “Draw Event” (as defined below), Sublandlord or its assignee, at its
option, may present its written demand for payment of the entire face amount of
the Letter of Credit and the funds so obtained shall become due and payable to
Sublandlord or its assignee to be applied as a Security Deposit pursuant to the
provisions of Section 5.1 of the Master Lease. A Draw Event shall mean any of
the following: (i) Subtenant becomes or is the subject of any bankruptcy,
insolvency or similar proceeding or event, (ii) a default occurs under the
Sublease beyond all applicable notice and cure periods; or (iii) the Letter of
Credit is not extended within ten (10) business days prior to its expiration.
19. Assignment and Subletting.
     Subject to the prior written consent of both Sublandlord (which shall not
be unreasonably withheld, conditioned or delayed) and Master Landlord, Subtenant
shall have the same rights as Sublandlord enjoys as Tenant under such portions
of Section 18 of the Master Lease as are incorporated herein, to assign this
Sublease or sub-sublease the Sublease Premises. Except in connection with a
Permitted Transfer (as defined below), Sublandlord shall have the right to fifty
percent (50%) of all subrent or other consideration (net of Subtenant’s
reasonable expenses in connection with such assignment or sub-sublease,
including, without limitation, brokerage commissions, legal costs, and tenant
improvement costs or allowances) to be paid to Subtenant under the terms of any
assignment or sub-sublease in excess of the total Subtenant’s Rent due
hereunder. Notwithstanding the foregoing provisions of this Paragraph 19,
Sublandlord

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shall not withhold approval of an assignment (deemed or actual) of this
Sublease, or a sub sublease of all or any part of the Sublease Premises, or any
other Transfer (as defined in the Master Lease), to an entity controlled by,
controlling, or under common control with Subtenant or a successor by way of
merger, acquisition of all or substantially all of Subtenant’s assets, corporate
reorganization, contribution, or similar transaction (each, a “Permitted
Transfer”). However, Subtenant shall still be required to obtain consent of the
Master Landlord under the provisions of the Master Lease.
20. Interest on Subtenant’s Obligations.
     Any Subtenant’s Rent or other charge, expense or other sum due from
Subtenant to Sublandlord under this Sublease which is not paid on the date due,
shall bear interest from the date such payment is due until paid (computed on
the basis of a 365-day-year) at the lesser of (a) the maximum lawful rate per
annum or (b) twelve percent (12%) per annum. The payment of such interest shall
not excuse or cure a default by Subtenant hereunder.
21. Authority.
     By delivering this Sublease, each Party hereby represents and warrants to
the other that such execution and delivery has been duly authorized by all
necessary corporate or partnership action and that the person(s) executing same
have been duly authorized to do so.
22. Signage and Access.
     Subject to Master Landlord’s approval, Subtenant shall have the right to
install signage at the Center, Building and Sublease Premises, at its sole cost
and expense, subject to, and in compliance with, the provisions of the Master
Lease. In addition, subject to Master Landlord’s approval, Subtenant shall have
the right, at its sole cost and expense, to install signage that is visible from
Sorrento Valley Road, subject to the provisions of the Master Lease. At its
cost, Subtenant shall remove any such signage at the expiration of the Sublease
Term and repair any damage caused thereby.
23. Captions.
     The captions in this Sublease are used for convenience and reference only
and are not to be taken as part of this Sublease or to be used in determining
the intent of the Parties or otherwise interpreting this Sublease.
24. Successors and Assigns.
     Subject to the restrictions on assignment set forth in this Sublease, this
Sublease shall be binding upon and inure to the benefit of Sublandlord and
Subtenant and their respective successors and assigns.

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25. Parking.
     Subtenant shall have the non-exclusive right to use all parking areas
available to Sublandlord under the Master Lease, which are adjacent to 11404 and
11408 Sorrento Valley Road, provided Subtenant shall not use more than
twenty-six (26) spaces at any one time.
26. Master Landlord Consent.
     This Sublease shall not become effective and shall not be deemed to be an
offer to sublease or create any rights or obligations between Subtenant or
Sublandlord unless and until Sublandlord and Subtenant have executed and
delivered the same, and Master Landlord has executed and delivered a consent to
this Sublease in a form reasonably acceptable to Sublandlord and Subtenant. If
no such consent to this Sublease is given or deemed given by Master Landlord
within thirty (30) days after the delivery of a copy of the fully executed
Sublease to Master Landlord, then either Sublandlord or Subtenant shall have the
right, by written notice to the other, to terminate this Sublease at any time
prior to such consent from Master Landlord being given. By delivering this
Sublease, each Party hereby represents and warrants to the other that such
execution and delivery has been duly authorized by all necessary corporate or
partnership action and that the person(s) executing same have been duly
authorized to do so.
27. Financial Statements.
     Subtenant represents, warrants and covenants that any financial statements
heretofore furnished to Sublandlord, in connection with this Sublease, are
accurate and are not materially misleading.
28. Furniture, Fixtures and Equipment.
     As of the Sublease Commencement Date, the furniture, fixtures and equipment
described on Exhibit C attached hereto shall be provided with possession of the
Sublease Premises at no additional cost or charge. The furniture, fixtures and
equipment are provided by Sublandlord in its then “as-is” condition. Sublandlord
makes no, and Subtenant acknowledges it is not relying on any, representation or
warranty of any kind whatsoever, express or implied, as to any matters
concerning the furniture, fixtures and equipment including, without limitation,
any warranties as to title or implied warranties of merchantability or fitness
for a particular purpose. Upon termination of this Sublease, Subtenant shall
deliver the furniture, fixtures and equipment described on Exhibit C in good
repair and condition along with its surrender of the Sublease Premises.
29. Direct Lease.
     In the event the Master Lease is terminated prior to the expiration of the
Sublease Term, whether as a result of a voluntary termination by Sublandlord or
a default on the

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part of Sublandlord, this Sublease shall, upon notice from Master Landlord to
Subtenant, remain in full force and effect as a direct lease between Subtenant
and Master Landlord (in which event Subtenant shall attorn to Master Landlord).
30. Miscellaneous.
(a) Time is of the essence of each and every term of this Sublease.
(b) Subtenant waives any right it may now or hereafter have (i) for exemption of
property from liability for debt or for distress for rent or (ii) relating to
notice or delay in levy of execution in case of eviction for nonpayment of rent.
(c) If there is more than one party constituting Subtenant, their obligations
are joint and several, and Sublandlord need not first proceed against all of
them before proceeding against any or all of the others.
(d) Subtenant acquires no rights by implication from this Sublease, and is not a
beneficiary of any past, current or future agreements between Sublandlord and
third parties.
(e) California law governs this Sublease. Neither Party may record this Sublease
or a copy or memorandum thereof. Submission of this Sublease to Subtenant is not
an offer, and Subtenant will have no rights hereunder until each Party executes
a counterpart and delivers it to the other Party.
(f) This Sublease cannot be changed or terminated orally. All informal
understandings and agreements, representation or warranties heretofore made
between the Parties are merged in this Sublease, which alone fully and
completely expresses the agreement between Sublandlord and Subtenant as to the
subleasing of the Sublease Premises.
(g) Each and every indemnification obligation set forth in this Sublease, or
incorporated into this Sublease from the Master Lease, shall survive the
expiration or earlier termination of the term of this Sublease.
(h) If, for any reason, any suit be initiated between Sublandlord and Subtenant
to interpret or enforce any provision of this Sublease, the prevailing Party
shall be entitled to recover from the other Party its legal costs, expert
witness expenses, and reasonable attorneys’ fees, as fixed by the court.
(i) The Parties mutually acknowledge that this Sublease has been negotiated at
arm’s length. The provisions of this Sublease shall be deemed to have been
drafted by all of the Parties and this Sublease shall not be interpreted or
constructed against any Party solely by virtue of the fact that such Party or
its counsel was responsible for its preparation.

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(j) This Sublease may be executed in counterparts, each of which shall be deemed
an original, but all of which together shall constitute one instrument.
(k) Sublandlord hereby represents that the Master Lease is in full force and
effect and that Sublandlord has no actual knowledge of any defaults under the
Master Lease.
[remainder of page intentionally blank]

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     IN WITNESS WHEREOF, this Sublease has been executed as of the day and year
first above written.

            “SUBLANDLORD”:

AVANIR PHARMACEUTICAL
a California corporation
      By:   /c/ Michael J. Puntoriero       Name:   Michael J. Puntoriero     
Title:   Senior VP of Finance & Chief Financial Officer   

            “SUBTENANT”:

SIRION THERAPEUTICS, INC.,
a North Carolina corporation
      By:   /c/ Dawn E. Bennett Johnson       Name:   Dawn E. Bennett Johnson   
  Title:   Chief Financial Officer     

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EXHIBIT A
MASTER LEASE
Standard Industrial Net Lease by and between Avanir Pharmaceuticals (“Tenant”)
and Sorrento Plaza, a California Limited Partnership (“Landlord”)
Effective May 20, 2002
[Included as Exhibit 10.1 with the Registrant’s Current Report on Form 10-Q,
filed August 13, 2002]

 

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EXHIBIT B
FLOOR PLAN OF SUBLEASE PREMISES
[Graphic]

 

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EXHIBIT C
FURNITURE, FIXTURES AND EQUIPMENT
11408 Sorrento Valley Rd.
List of Avanir’s Equipment to Remain During Lease Period
1.) Conference Room – conference table, 12 chairs (non-rolling), Proxima
projector.
2.) Kitchenette — Small fridge, microwave, R.O. water filtration system.
3.) Lab techs office area – 7 cubicle work stations, 7 rolling file drawers.
4.) Copy room – (no equipment left)
5.) Offices — 4 private offices each with building standard desk unit, under
desk 2 drawer lateral file cabinet, rolling file drawer unit, wall mounted
bookcase.
6.) 1 Office with multi-person desk unit (covers 2 walls completely,
accommodates up to 4 people, each with his own overhanging wall mounted
cabinet).
7.) 1 Lab area office with multi-person desk unit (same as #6 above).
8.) Cloning Lab — Electric heated incubator (non-CO2 type).
9.) Equipment room – D.I. water skid, CO2 gas manifold w/automatic changeover,
industrial hot water heater, water softener unit, shaker incubator.
10.) Dark room — (No equipment left).
11.) Washroom – Wash sink, drying racks, shelving, ice machine.
12.) PCR Lab – Refrigerator, -20 Freezer.
13.) Tissue Culture Lab — 1 bio-safety cabinets (1 Baker brand –hooked up to
central vacuum unit), 1 double stacked incubator unit w/house CO2 supply.
14.) Purification Lab – (No equipment left).
15.) Cold Room — Shelving
16.) Kinetics Lab — flammable materials cabinet.

 

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17.) Main Lab — 1 Bio-safety cabinet (6 ft. Baker w/ 2 house vacuum
connections), 1 fume hood (6 ft. Genie), 1 double stacked incubator w/house CO2
connection, 1 refrigerator, 1 -20 freezer, 1 Milli-Q water filtration system.
18.) BSL3 Lab – 2 Bio-safety cabinets (Labconco, direct exhausted to a Bag In/
Bag Out filter housing with lead/lag exhaust fans), 1 double stacked incubator
w/house CO2, large pass-thru w/interlocking doors autoclave, equipment required
for a BSL3 lab.
19.) I.T. Room – Server rack, patch panels, UPS, V&D switches.