Document:

EX-10.14  SUBLEASE AGREEMENT

 

Exhibit 10.14

SUBLEASE AGREEMENT

between

AVANIR PHARMACEUTICALS

as Sublandlord

and

SIRION THERAPEUTICS, INC.

as Subtenant

	 	 	 	 	 
	 

	 	Building Address:
	 	11408 Sorrento Valley Road
	 

	 	 	 	San Diego, California 92121

 

 

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	 

     (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.

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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. 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

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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 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

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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 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

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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 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.

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(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:

(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

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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.

(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

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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.

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,

12

 

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.

(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

13

 

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 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
	 

	 	C/O Chief Financial Officer
	 

	 	101 Enterprise, Suite 300
	 

	 	Aliso Viejo, CA 92656
	 
	 	 
	with a copy to:

	 	Heller Ehrman LLP
	 

	 	4350 La Jolla Village Dr., 7th Floor
	 

	 	San Diego, California 92122
	 

	 	Attention: Stephen Ferruolo

14

 

	 	 	 
	If to Subtenant:

	 	Sirion Therapeutics, Inc.
	 

	 	3110 Cherry Palm Drive, Suite 340
	 

	 	Tampa, Florida 33619
	 

	 	Attention: Chief Financial Officer
	 
	 	 
	with a copy to:

	 	Sirion Therapeutics, Inc.
	 

	 	11408 Sorrento Valley Road
	 

	 	San Diego, CA 92121

     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

15

 

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 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.

16

 

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.

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

17

 

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 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.

18

 

(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.

(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]

19

 

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

	 	 	 	 	 	 	 
	 	 	“SUBLANDLORD”:	 	 
	 
	 	 	 	 	 	 
	 	 	AVANIR PHARMACEUTICAL	 	 
	 	 	a California corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael J. Puntoriero	 	 
	 

	 	Name:
	 	Michael J. Puntoriero

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	CFO 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	“SUBTENANT”:	 	 
	 
	 	 	 	 	 	 
	 	 	SIRION THERAPEUTICS, INC.,	 	 
	 	 	a North Carolina corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Dawn E. Bennett
Johnson	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Dawn E. Bennett
Johnson 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Chief Financial Officer 	 	 
	 

	 	 	 	 	 	 

20

 

EXHIBIT A

MASTER LEASE

(see attached)

 

 

EXHIBIT A

MASTER LEASE

STANDARD INDUSTRIAL NET LEASE

	 	 	 
	CENTER NAME:

	 	SORRENTO PLAZA
	 
	 	 
	LANDLORD:

	 	SORRENTO PLAZA,
	 

	 	a California limited partnership
	 
	 	 
	TENANT:

	 	AVANIR PHARMACEUTICALS,
	 

	 	a California corporation

 

 

STANDARD INDUSTRIAL NET LEASE

This STANDARD INDUSTRIAL NET LEASE (“Lease” ), dated for reference purposes only May 20, 2002,
is entered into by SORRENTO PLAZA, a California limited partnership (“Landlord”), and AVANIR.
PHARMACEUTICALS, a California corporation (“Tenant”).

1. BASIC LEASE TERMS.

     The basic terms of the Lease set forth in this Article 1 shall be read in conjunction with the
other Articles of this Lease, which define and explain the basic terms.

	 	1.1	 	Address for Notice (see Section 24.19):

	 	 	 	 	 
	 

	 	Landlord:
	 	11750 Sorrento Valley Road, Suite 209
 San Diego, California 92121 
Attention: Sorrento
Plaza Property Management
	 
	 	 	 	 
	 

	 	Tenant:
	 	At the Premises, Attention: Gregory P. Hanson

	 	1.2	 	Description of Premises:

	 	 	 	 	 
	 

	 	Center:
	 	Sorrento Plaza
	 

	 	Address:
	 	11404 and 11408 Sorrento Valley Road
 San Diego, California 92121
	 
	 	 	 	 
	 	 	Approximate Rentable Square Footage: 26,770 (see Exhibit “A” and Section 2.2)

	 	1.3	 	Commencement Date: January 15, 2003.
	 
	 	1.4	 	Lease Term (see Article 3): Ten years and no months, beginning on the Commencement Date and
ending on August 31, 2012 (the “Expiration Date”).
	 
	 	1.5	 	Minimum Monthly Rent: The Minimum Monthly Rent shall be the following amounts for the
following periods (subject to adjustment pursuant to Section 2.2):

1

 

	 	 	 
	Period	 	Minimum Monthly Rent
	From the Commencement Date to and including 8/31/03

	 	$66,925 per month
	From 9/1/03 to and including 8/31/04

	 	$69,267 per month
	From 9/1/04 to and including 8/31/05

	 	$72,038 per month
	From 9/1/05 to and including 8/31/06

	 	$74,920 per month
	From 9/1/06 to and including 8/31/07

	 	$77,916 per month
	From 9/1/07 to and including 8/31/08

	 	$81,033 per month
	From 9/1/08 to and including 8/31/09

	 	$84,274 per month
	From 9/1/09 to and including 8/31/10

	 	$87,645 per month
	From 9/1/10 to and including 8/31/11

	 	$91,151 per month
	From 9/1/1 to and including 8/31/12

	 	$94,797 per month

	 	1.6	 	Security Deposit: Six Hundred Sixty-nine Thousand, Two Hundred Fifty Dollars
($669,250). Tenant’s obligations to deposit the Security Deposit may be satisfied in part by the
deposit of a letter of credit, and is subject to reduction on certain terms and conditions, all as
set forth in Article 5.
	 
	 	1.7	 	Tenant’s Pro Rata Share of Operating Costs (see Article 6): 86.12% (subject to adjustment
pursuant to Section 2.2).
	 
	 	1.8	 	Permitted Use (see Article 11): Life science research and related manufacturing and office
uses, and for no other use.
	 
	 	1.9	 	Tenant’s Parking Spaces (Unassigned) (see Section 11.6): 78
	 
	 	1.10	 	Tenant Improvement Allowance: Landlord shall provide a Tenant Improvement Allowance of Two
Million Seven Thousand Seven Hundred Fifty Dollars ($2,007,750) (subject to adjustment pursuant to
Section 2.2), in accordance with Exhibit “C”.
	 
	 	1.11	 	Exhibits: The following Exhibits are attached to and made a part of this Lease:

	 	 	 
	 

	 	Exhibit “A” — Description of Premises
	 

	 	Exhibit “B” — Rules and Regulations
	 

	 	Exhibit “C” — Sign Criteria
	 

	 	Exhibit “D” — Tenant Improvements

2

 

	 	 	 
	 

	 	Exhibit “E” — Approved Form of Letter of Credit

2. THE PREMISES.

     2.1 Lease of Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the premises (the “Premises”) described in Section 1.2, which are indicated on the
site/floor plan attached as Exhibit “A”. The Premises are part of the office or industrial center
identified in Section 1.2 (the “Center”). The approximate Rentable Square Footage identified in
Section 1.2 is a measurement of the net leasable floor area of the Premises, as determined by
Landlord and applied on a consistent basis throughout the Center.

     2.2 Relocation of Other Occupants; Adjustment of Premises Size.

     (a) A portion of the Premises that Tenant desires to lease is currently occupied by other
occupants. Immediately following the full execution and delivery of
this Lease, Landlord shall undertake good faith efforts to relocate such other occupants. If Landlord is unsuccessful in relocating any
such occupants and accordingly is unsuccessful in delivering the full Premises to Tenant for the
entire Premises, Tenant shall nevertheless take full occupancy of the maximum area of the Premises
that Landlord is able to deliver, and will continue to take occupancy of additional portions of the
Premises as and when any remaining of such other occupants are relocated. During such time that the
full amount of the Premises has not been delivered to Tenant, the Minimum Monthly Rent (Section
1.5), Tenant’s Pro Rata Share of Operating Costs (Section 1.7), parking spaces (Section 1.9), and
Tenant Improvement Allowance (Section 1.10) shall be proportionately reduced.

     (b) Tenant shall provide to Landlord relocation assistance for the occupants so relocated to pay
any actual out-of-pockets payments (including abated rent) expended by Landlord or its affiliates
in connection with any such relocation efforts. The amount of such reimbursement shall not exceed
Fifty Thousand Dollars ($50,000) in the aggregate. Tenant shall reimburse Landlord for such amounts
expended with fifteen (15) days of the presentation of invoices, copies of checks or other evidence
of payment.

     (c) Following the Commencement Date, Landlord shall undertake a renovation of the buildings of
which the Premises are a part, and a redesign of the Common Area, with a view towards creating a
campus-like site among the buildings occupied by Tenant in the Center and in the adjoining
property. As part of such renovation, Landlord anticipates renovating the exterior façade of the
building(s) of which the Premises are a part, which will add approximately one thousand four
hundred (1,400) rentable square feet to the Premises. Upon the completion of any such renovation of
the façade, Landlord’s architect shall remeasure the Premises and a proportionate adjustment in the
Minimum Monthly Rent and Tenant’s Pro Rata Share of Operating
Costs shall be made. Such a renovation and redesign are being undertaken as part of a consideration
to Tenant for the execution of this Lease and are being done at the request of Tenant. It is
anticipated that Landlord’s renovation of the exterior façade will be coordinated with the Tenant
Improvements that Tenant is installing pursuant to Exhibit “D”. Should any delay in Landlord
performing such renovation prevent or delay Tenant from occupying any portion of the Premises
affected by Landlord’s renovation, then Tenant shall be entitled to a partial abatement of rent
with respect to the portion of the Premises affected for the number of days of the Term that
possession thereof is so delayed.

     2.3 Right of First Offer on Adjacent Space. Provided that, at the time Tenant is entitled to
any benefit under this Section, there exists no Event of Default on the part of Tenant under this
Lease nor any condition that with the giving of notice or the passage of time or both would
constitute an Event of Default on the part of Tenant under this Lease, Landlord agrees that it will
offer to lease any unleased portion of

3

 

the building(s) of which the Premises are a part (the “Additional Space”) to Tenant prior to
offering the Additional Space to any other person. Tenant shall have ten (10) days after
receipt of such offer to accept or reject the same. Tenant’s failure to accept the same in writing
unconditionally and without change within such 10-day period shall constitute a rejection of such
offer. The rental rate and term of occupancy applicable to the Additional Space shall be as
determined by Landlord in its sole discretion. If Landlord’s offer is rejected or deemed rejected,
then Landlord shall be free to let the Additional Space to any person, on terms and conditions
determined by Landlord (which may be more or less advantageous than those offered to Tenant). If
Landlord has not received a proposal from a potential tenant that leads to the consummation of a
lease for the Additional Space within four (4) months of the date Tenant rejects or is deemed to
have rejected Landlord’s offer, then Landlord shall not let the Additional Space without
reoffering the same to Tenant pursuant to the terms of this Section. No brokerage commissions or
fees shall be payable by Landlord in connection with any such expansion. This Section shall not
apply (i) to any use or leasing of the Additional Space by Landlord or any affiliate of Landlord,
(ii) to the renewal or modification of the lease of any existing tenant, or (iii) the exercise of
any option to extend the term of any lease or the exercise of or any other right by any existing
tenant.

3. LEASE TERM.

     3.1 Commencement. The term of this Lease (the “Lease Term”) shall commence on the Commencement
Date stated in Section 1.3 and shall continue for the period stated in Section 1.4, unless sooner
terminated pursuant to any provision of this Lease.

     3.2 Early Occupancy. Landlord will deliver immediate occupancy of all unoccupied portions of
the Premises and adjoining Common Area for the purposes of allowing construction of the Tenant
Improvements, including me central HVAC plant. Such early occupancy shall be subject to all
provisions of this Lease, and shall not advance the Expiration Date. Tenant shall pay the cost of
all Utilities (see Article 10) consumed by Tenant and its Pro Rata Share of insurance costs (see
Article 9) during such early occupancy period.

4. RENT.

     4.1
Minimum Monthly Rent. Tenant shall pay minimum monthly rent (“Minimum Monthly Rent”) in the
initial amount stated in Section 1.5. The Minimum Monthly Rent shall be increased as set forth in
Section 1.5 and/or elsewhere in this Lease. Tenant shall pay the Minimum Monthly Rent on or before
the first day of each calendar month, in advance, at the office of Landlord or at such other place
designated by Landlord, without deduction, offset or prior demand. If the Commencement Date is not
the first day of a calendar month, the rent for the partial
month, at the beginning of the Lease Term shall be prorated on a per diem basis and shall be due on
the first day of such partial month. Upon execution of this Lease, and before the Commencement
Date, Tenant shall pay to Landlord the aggregate of the first month’s Minimum Monthly Rent, the
first month’s Monthly Impound Payment (see Section 4.5), and the Security Deposit (see Section 5).

     4.2 Lease Year. As used in this Lease, the term “Lease Year” means (i) the first period of
twelve (12) full calendar months following the Commencement Date (including, if the Commencement
Date is not the first day of a calendar month, the period between the Commencement Date and the
next first day of the month), (ii) each period of twelve (12) full calendar months thereafter, and
(iii) any remaining period at the end of the Lease Term of less than twelve (12) full calendar
months.

     4.3 Additional Rent. 
All charges payable by Tenant in addition to Minimum Monthly Rent shall
constitute Additional Rent to Landlord. All remedies available to Landlord for nonpayment of rent
shall

4

 

be available for nonpayment of any such Additional Rent. Unless this Lease provides otherwise, all
Additional Rent shall be paid by Tenant, without limitation or
offset, within fifteen (15) days
after Tenant’s receipt of a statement from Landlord. Additional Rent includes, without limitation,
Operating Costs (see Article 6), Maintenance and Repairs (see Article 7), Real Property Taxes (see
Article 8), insurance costs (see Article 9), Utilities (see Article 10), and attorneys’ fees and
costs (see Section 24.3). If any Minimum Monthly Rent is abated or waived pursuant to another
specific term of this Lease or in any separate agreement, it is understood that such abatement or
waiver shall apply only to the Minimum Monthly Rent, and Tenant shall be obligated to pay all
components of Additional Rent (including the applicable impounds thereof) during the periods of
abatement or waiver of Minimum Monthly Rent and throughout the Lease Term. All Minimum Monthly
Rent, Additional Rent, and all other charges and monetary amounts due Landlord from Tenant
hereunder shall constitute “rent.”

     4.4 Impounds. Landlord shall have the right, but not the obligation, to collect and impound, in
advance, any or all components of Operating Costs, Real Property Taxes and insurance costs based
upon Landlord’s reasonable estimate of Tenant’s future liability for such amounts under this Lease.
Landlord shall initially establish the monthly amount of such impound (“Monthly Impound Payments”),
based upon its estimate of one-twelfth of Tenant’s annual liability therefor, Landlord shall have
the right, at any time during the Lease Term, to adjust the amount of the Monthly Impound Payment
upon notice to Tenant in the exercise of its reasonable discretion. The Monthly Impound Payment
shall be due and payable on the first day of each month throughout the Lease Term. Any failure to
pay the Monthly Impound Payment when due shall be an Event of Default under this Lease and shall
entitle Landlord to exercise any or all of its remedies available in the same manner as for the
failure to pay rent, including the imposition of late charges and interest, and the right of
Landlord to require that future payment of the Monthly Impound Payments be made by cashier’s check.
Upon the occurrence of any Event of Default by Tenant hereunder, Landlord shall have the right to
apply all unapplied amounts of Monthly Impound Payments to Tenant’s default. Within ninety (90)
days after the end of each calendar year, Landlord shall deliver to Tenant an accounting of
Tenant’s actual Pro Rata Share of Operating Costs and the
estimated amounts paid by Tenant. Any
overpayment by Tenant shall be credited against next Monthly Impound Payments due hereunder, or, at
Landlord’s option, shall be remitted to Tenant. Tenant shall pay the amount of any underpayment
within fifteen (15) days after receipt of the accounting. Tenant acknowledges that the Monthly
Impound Payments are estimates only and not a representation of the amount of Tenant’s ultimate
liability for Operating Costs, Real Property Taxes and insurance costs.

5. SECURITY DEPOSIT.

     5.1 Cash. Upon execution of this Lease, Tenant shall deposit with Landlord the amount specified in
Section 1.6 (the “Security Deposit”), to be held by Landlord, without liability for interest, as
security for Tenant’s performance of its obligations
under this Lease. If such deposit is made in cash, Landlord shall not be required to keep the
Security Deposit separate from its other accounts. Landlord may apply all or a part of the Security
Deposit to any unpaid rent (including unpaid Additional Rent or Monthly Impound Payments), to
Tenant obligations in respect of the initial Tenant Improvements, or any other monetary payment due
from Tenant or to cure any other default of Tenant hereunder and to compensate Landlord for all
damage and expense sustained as a result of such default. If all or any portion of the Security
Deposit is so applied, Tenant shall deposit cash sufficient to restore the Security Deposit to its
original amount within fifteen (15) days after receipt of Landlord’s written demand. If Tenant
fully and faithfully performs each of its obligations under this Lease, the Security Deposit or any
balance thereof shall be

5

 

returned to Tenant within thirty (30) days of the later of the expiration or earlier termination of
this Lease or the vacation of the Premises by Tenant. At Landlord’s request, Tenant shall accompany
Landlord or Landlord’s representative on a “walk-through” of the Premises prior to Landlord’s
return of the Security Deposit.

     5.2 Optional Letter of Credit. Tenant shall have the right to substitute a Letter of Credit
for all but Two Hundred Thousand, Seven Hundred Seventy-five Dollars ($200,775) of the Cash
Security Deposit. Such Letter of Credit shall be issued by a financial institution in a form and
substance acceptable to Landlord (with the form attached hereto as
Exhibit “E” being acceptable). 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 Landlord by the issuing bank. The Letter
of Credit shall provide for partial draws. Tenant shall keep the Letter of Credit, at its expense,
in full force and effect throughout the term of this Lease. Upon the happening of any “Draw Event”
(as defined below), Landlord 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 Landlord or its assignee to be applied as a Security Deposit pursuant to the
provisions of Subsection 5.1 above. A “Draw Event” shall mean any of the following: (i) Tenant
becomes or is the subject of any bankruptcy, insolvency or similar proceeding or event, (ii) an
Event of Default occurs under the Lease; or (iii) the Letter of Credit is not extended within
thirty (30) days prior to its expiration.

     5.3 Reduction of Security Deposit Amount. The amount of the Security Deposit (and, if elected,
the Letter of Credit) shall be reduced at the end of the third Lease Year and the end of each Lease
Year thereafter by the amount of $66,925, provided that within the one (1) year prior to the time
of the reduction no Event of Default has occurred and that no
condition then exists that, with the
passage of time or the giving of notice or both would constitute an Event of Default, and provided
further that Tenant’s net worth at the time of reduction includes cash or cash equivalents that are
at least equal to the liabilities of Tenant reasonably projected for the following two (2) years.

6. OPERATING COSTS.

     6.1 Payment of Operating Costs by Tenant. Tenant shall pay its pro rata share of Operating
Costs for the Center, as defined herein. Tenant’s pro rata share shall be computed by Landlord on a
monthly or other periodic basis selected by Landlord. Tenant shall pay the amount of such pro rata
share to Landlord, to the extent such obligation exceeds any amount thereof impounded under Section
4.4, within fifteen (15) days after receipt of a statement from Landlord.

     6.2 Pro Rata Share of Operating Costs. Tenant’s pro rata share of Operating Costs is stated in
Section 1.7 and represents the ratio of the Rentable Square Footage of the
Premises (identified in Section 1.2) to the total Rentable Square Footage of the Center, as
determined by Landlord from time to time. Changes in Rentable Square Footage shall be effective on
the first day of the first calendar month following the change. Tenant’s share of Real Property
Taxes, insurance costs and other components of Additional Rent shall be computed on the same basis
as Tenant’s Pro Rata Share of Operating Costs, unless Landlord determines that some other basis
would be equitable.

     6.3 Operating Costs. “Operating Costs” includes all costs of operating, managing, repairing
and maintaining the Common Facilities, including without limitation: gardening and landscaping; the
cost of public liability and property damage insurance; Real Property Taxes, as defined in Section
8.2 but applicable to the Common Facilities; utilities; line painting and parking lot repairs; roof
repairs; lighting; trash and refuse removal; supplies; equipment; exterior painting; capital
improvements (including without limitation the costs

6

 

of roof, parking lot and underground utilities replacements); reasonable reserves for repairs and
replacements; the costs of altering, improving, renovating, upgrading or retrofitting any portion
of the Common Facilities to comply with all laws, regulations and governmental requirements
applicable to the building(s) of which the Premises are a part (including without limitation those
related to disabled persons, hazardous materials, lighting upgrades, sprinkler and energy-saving
retrofits); security service; property management costs and administrative fees; bookkeeping
services; labor; the cost of personnel to implement such services and to direct parking; and the
includable amount of Capital Costs (as provided in Section 6.4). With respect to Operating Costs
other than the includable amount of Capital Costs, in lieu of including the entire amount of any
such expense in Operating Costs in any one period, Landlord may spread the inclusion of, or may
amortize, any such expenses, or a reasonable reserve for anticipated expenses, in Operating Costs
over such multiple periods as Landlord shall determine and which approximate the life of the asset.

     6.4 Capital Costs. As used herein, “Capital Costs” shall mean any cost or expense for any
furniture, fixture, equipment or other physical improvement the amount of which exceeds $25,000 and
that is properly treated as a capitalized expense under generally accepted accounting principles.
Landlord may include in Operating Costs the amortized amount of such Capital Cost, amortized over
the useful life of the asset. Capital Costs shall not include items that do not reasonably serve
the Premises or the building(s) of which the Premises are a part, and shall not include any
improvement that results in additional space in the building from which Landlord will derive rental
income.

     6.5 Common Facilities. “Common Facilities” means all areas, facilities, utilities, equipment
and services provided by Landlord for the common use or benefit of the occupants of the Center and
their employees, agents, customers and other invitees, including without limitation, if the same
exist: building lobbies, common corridors and hallways, restrooms, pedestrian walkways, utility
yard, driveways and access roads, access facilities for disabled persons (including elevators),
truck serviceways, loading docks, garages, driveways, parking lots, landscaped areas, stairways,
elevators, retaining walls, all areas required to be maintained under the conditions of
governmental approvals for the Center, and other generally understood public or common areas.
Landlord reserves the right to relocate, alter, improve, or adjust the size and location of any
Common Facilities from time to time without liability to Tenant, so long as Tenant retains
sufficient access to the Premises and that Tenant’s use of the Common Area remains reasonably
equivalent.

7. MAINTENANCE AND REPAIRS.

     7.1 Tenant’s Obligations. Except as provided in Section 7.2, Tenant shall keep the Premises
in good order, condition and repair during the Lease Term, including without limitation: all
nonstructural interior areas; all heating, ventilating and air
conditioning systems and equipment exclusively serving the Premises; all glass, glazing, windows,
window moldings, partitions, doors and door hardware; all interior painting; all fixtures and
appurtenances in the Premises or exclusively serving the Premises including electrical, lighting
and plumbing fixtures; and all other portions of the Premises seen or unseen. Tenant shall promptly
replace at its sole cost and expense any of the systems, equipment and other portions of the
Premises for which it is responsible hereunder during the Lease Term if and when necessary,
regardless of whether the benefit of such replacement extends beyond the Lease Term. It is the
intention of Landlord and Tenant that Tenant shall maintain the Premises, at all times during the
Lease Term, in an attractive, first-class and fully operative condition, at Tenant’s expense.
Tenant shall additionally obtain and keep in force a preventive maintenance contract providing for
the regular (at least quarterly) inspection and maintenance

7

 

of the heating, ventilating and air conditioning system serving the Premises (including
leaks around ducts, pipes, vents, and other parts of the air conditioning) by a reputable licensed
heating, ventilating and air conditioning contractor acceptable to Landlord. Prior to April 1 of
each calendar year, Tenant shall deliver to Landlord written confirmation from such contractor
verifying that such a contract has been entered into and that the required service will be
provided. Notwithstanding the foregoing, Landlord shall have the right, upon written notice to
Tenant, to undertake the responsibility for preventive maintenance and repair of the heating,
ventilating and air conditioning system, at Tenant’s sole cost and expense provided services are
provided at market rates.

     7.2 Landlord’s Obligations. Landlord shall repair and maintain the Common Facilities, subject
to Tenant’s obligation to pay its Pro Rata Share of Operating
Costs, as provided in Article 6. Landlord shall maintain the roof, the foundations, structural portions, landscaping, parking lots
and other exterior areas of the Center, but Tenant shall pay (a) the full costs of such
maintenance, or an equitable share determined by Landlord if the Premises are part of a
multi-tenant building, (b) the full amount of any maintenance and repairs necessitated by any act,
omission, conduct or activity of, or breach of this lease by, Tenant or any of Tenant’s officers,
agents, customers or invitees (plus fifteen percent (15%) of the cost thereof for Landlord’s
overhead); and (c) any maintenance and repairs necessitated by breaking and entering of the
Premises. Tenant shall pay its share of such maintenance and repair costs incurred by Landlord, to
the extent such obligation exceeds any amount thereof impounded under Section 4.4, within fifteen
(15) days after receipt of a statement from Landlord. There shall be no abatement of rent, and no
liability of Landlord, by reason of any injury to or interference with Tenant’s business arising
from the making of any repairs, alterations, or improvements to any portion of the Premises
or the Center except to the extent caused by Landlord’s gross negligence or willful misconduct.
Except as provided in Article 16 (Damage and Destruction) and Article 17 (Condemnation), Landlord
shall have absolutely no other responsibility to repair, maintain or replace any portion of the
Premises at any time. Tenant waives the right to make repairs at Landlord’s expense under
California Civil Code Section 1942, or under any other law, statute or ordinance now or hereafter
in effect. Landlord’s obligations under this Section are not intended to alter or modify in any way
the provisions of Article 12.

     7.3 Performance By Landlord. If Tenant refuses or neglects to perform its maintenance
obligations hereunder to the reasonable satisfaction of Landlord, Landlord shall have the right
(but not the obligation), upon three (3) days’ prior notice to Tenant, to enter the Premises and
perform such repairs and maintenance on behalf of Tenant. Landlord shall also have the right (but
not the obligation), without prior notice to Tenant, to correct or remove any dangerous or
hazardous condition, to repair the heating, ventilating, air conditioning or plumbing systems, to
correct, repair or bring into legal compliance any fire or other life safety systems of the
Premises, and to repair or replace any broken glass or glazing, if Tenant fails to correct or
repair the same within twenty-four (24) hours after the need arises. Landlord shall not be liable
to Tenant for any loss or damage to Tenant’s merchandise, fixtures, or other property or to
Tenant’s business in connection with Landlord’s performance hereunder, and Tenant shall pay
Landlord’s costs plus fifteen percent (15%) of such amount for overhead, upon presentation of a
statement therefor, as Additional Rent. Tenant shall also pay interest at the rate provided in
Section 22.4 from the date of completion of repairs by Landlord to the date paid by Tenant.

8. REAL PROPERTY TAXES.

     8.1 Payment of Real Property Taxes by Tenant. Tenant shall pay all Real Property
Taxes applicable to the Premises during the Lease Term. If the Premises are not separately
assessed, a share of

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the tax bill that includes the Premises shall be allocated to the Premises. Such share shall
be equitably determined by Landlord based upon the Rentable Square Footage of the Premises
compared to the total Rentable Square Footage covered by the tax bill, the respective valuations
assigned in the assessor’s worksheet, or other reasonably available information. Tenant shall pay
its share of Real Property Taxes to Landlord, to the extent such obligation exceeds any amount
thereof impounded under Section 4.4, within fifteen (15) days after receipt of a statement from
Landlord.

     8.2 Real Property Taxes Defined. “Real Property Taxes” means all taxes, assessments, levies,
fees and other governmental charges levied on or attributable to the Premises or any part thereof,
including without limitation: (a) real property taxes and assessments levied with respect to all or
a portion of the Premises, (b) assessments, charges and fees charged by governmental agencies or
districts for services or facilities provided to the Premises, (c) transfer, transaction, rental,
gross receipts, license or similar taxes or charges measured by rent received by Landlord,
excluding any federal or state income, franchise, estate or inheritance taxes of Landlord, (d)
taxes based upon a reassessment of the Premises due to a transfer or change of ownership, and (e)
any assessment, charge or fee that is a substitute in whole or in part for any tax now or previously
included within the definition of Real Property Taxes. If Landlord elects to contest an assessment
of any Real Property Taxes, Landlord shall have the right to recover its actual costs of such
contest (including reasonable attorneys’ fees and costs) as part of Real Property Taxes, but only
to the extent such contest has resulted in a reduction of Real Property Taxes. Tenant shall not be
entitled to the benefit of any reduction, refund, rebate or credit accruing or payable to Landlord
prior to the commencement of or after the expiration or other termination of the Lease Term.

     8.3 Personal Property Taxes. Tenant shall pay prior to delinquency all taxes charged against
trade fixtures, furnishings, equipment or any other personal property belonging to Tenant. Tenant
shall attempt to have such personal property taxed separately from the Premises. If any such taxes
on Tenant’s personal property are levied against Landlord or the Premises, or if the assessed value
of the Premises is increased by inclusion of a value placed upon such personal property of Tenant,
then: (a) Landlord, after written notice to Tenant, shall have the right to pay the taxes levied
against Landlord, or the taxes based upon such increased valuation, but under protest if so
requested by Tenant in writing, and (b) Tenant shall pay to Landlord the taxes levied against
Landlord, or the taxes resulting from such increased valuation, within fifteen (15) days after
Tenant’s receipt of a written statement from Landlord.

9. INSURANCE.

     9.1 All Risk Coverage. During the Lease Term, Landlord shall maintain, at Tenant’s
expense, insurance covering loss or damage to the Premises (excluding Tenant’s Alterations,
fixtures, equipment and personal property), insuring against any or all risks of physical loss (and
including, at Landlord’s option, flood and earthquake coverage), with the scope and amounts of such
coverage as determined by Landlord. Said insurance shall provide for payment of loss thereunder to
Landlord or to the holder of a first mortgage or deed of trust on the Premises. Landlord may also
maintain during the Lease Term, at Tenant’s expense,
a policy of rental income insurance covering a period of one (1) year, with loss payable to
Landlord.

     9.2 Tenant’s Personal Property and Fixtures. Tenant shall at all times maintain, at Tenant’s
sole expense, insurance against any or all risks of physical loss in an amount adequate to cover
the cost of replacement of all of Tenant’s Alterations, trade fixtures, equipment and personal
property. Such policy shall be issued by an insurance company approved by Landlord, shall name
Landlord and Landlord’s lender as additional insureds, and shall provide that no cancellation or
reduction in coverage shall be effective until thirty (30) days after written notice to Landlord
and Landlord’s lender. Tenant shall deliver

9

 

a certificate evidencing such insurance to Landlord and a renewal or binder at least twenty
(20) days prior to expiration. Tenant acknowledges that Landlord’s insurance is not intended to
cover Tenant’s Alterations, trade fixtures, equipment, and personal property. Provided, however,
that at Landlord’s sole election, Landlord may obtain at Tenant’s expense any or all of the
insurance described in this Section.

     9.3 Tenant’s Liability Insurance. Tenant shall, at Tenant’s sole cost and expense, provide
comprehensive general liability insurance, fully covering and indemnifying Landlord and Landlord’s
officers, directors, shareholders, partners, members, principals, employees, agents,
representatives, and other related entities and individuals, and their respective successors and
assigns (together with, at Landlord’s election, Landlord’s lender), as additional insureds, against
any and all claims arising from personal injury, death, and/or property damage occurring in or
about the Premises or the Center during the period of Tenant’s possession (actual and/or
constructive) at the Premises. The initial limits of such insurance shall be at least $4,000,000
combined single liability limit. Such liability insurance limits shall be subject to periodic
increase, at Landlord’s election, based upon inflation, increased liability awards, lender
requirements, the recommendations of Landlord’s professional insurance advisors, and other relevant
factors. Tenant shall also, at its sole cost and expense, obtain workers’ compensation insurance
for the protection of its employees such as will relieve Landlord of all liability to such
employees for any and all accidents that may arise on or about the Premises or the Center. All
insurance required to be carried by Tenant shall be primary and noncontributory to any insurance
carried by Landlord, regardless of the absence of negligence or other fault of Tenant for alleged
injury, death and/or property damage. Each policy of insurance required to be carried by Tenant
hereunder shall: (a) contain cross-liability and contractual liability endorsements, (b) provide
that no cancellation or reduction in coverage shall be effective until thirty (30) days after
written notice to Landlord and Landlord’s lender, (c) be issued by an insurer licensed in
California and reasonably approved by Landlord, and (d) shall insure Tenant’s performance of the
indemnity provisions of Article 13, but the amount of such insurance shall not limit Tenant’s
liability nor relieve Tenant of any obligation hereunder. Prior to the Commencement Date, Tenant
shall deliver a certificate evidencing all such insurance to Landlord. Tenant shall deliver a
renewal or binder of such policy at least thirty (30) days prior to expiration thereof. Tenant
shall, at Tenant’s expense, maintain such other liability insurance as Tenant deems necessary to
protect Tenant. Tenant shall be in material breach of this Lease if Tenant fails to obtain the
insurance required under this Section, or if Tenant obtains insurance with terms, conditions and/or
exclusions that are inconsistent with the requirements and terms of this Lease.

     9.4 Payment of Insurance Premiums and Deductibles. Tenant shall pay directly all premiums for
its liability insurance required under Section 9.3, for its personal property insurance to be
carried by Tenant as required under this Article, and for all other insurance Tenant elects to
carry. Tenant shall pay the insurance premiums, or, where applicable, its share thereof as
equitably determined by Landlord, for the insurance policies carried or obtained by Landlord as
described in this Article. If the Lease Term expires before the expiration of any such insurance
policy, Tenant’s liability for premiums shall be prorated on an annual basis. Tenant shall pay such
insurance costs to Landlord, to the extent such obligation exceeds any amount thereof impounded
under Section 4.4, within fifteen (15) days after receipt of a statement from Landlord. If any
insurance policy maintained by Landlord covers improvements or real property other than the
Premises, Landlord shall reasonably determine the portion of the premiums applicable to the
Premises, and Tenant shall pay its share thereof as so determined. In addition, Tenant shall pay
the full amount of any deductible amount under Landlord’s insurance policies, or where applicable

10

 

its share thereof as equitably determined by Landlord, within fifteen (15) days after receipt of a
statement from Landlord.

     9.5 Waiver of Subrogation. Each party waives all rights of recovery against the other party
and its officers, directors, shareholders, partners, members, principals, employees, agents,
representatives, and other related entities and individuals, and their respective successors and
assigns, for any claims for loss or damage to person or property caused by or resulting from fire
or any other risks insured against under any insurance policy in force at the time of such loss or
damage. Each party shall cause each insurance policy obtained by it to provide that the insurer
waives all rights of recovery by way of subrogation against the other party in connection with any
damage covered by such policy.

     9.6 Tenant’s Use Not to Increase Premium. Tenant shall not keep, use, manufacture, assemble,
sell or offer for sale in or upon the Premises any article that may be prohibited by, or that might
invalidate, in whole or in part, the coverage afforded by, a standard form of fire or all risk
insurance policy. Tenant shall pay the entire amount of any increase in premiums that may be
charged during the Lease Term for the insurance that may be maintained by Landlord on the Premises
or the Center resulting from the type of materials or products stored, manufactured, assembled or
sold by Tenant in the Premises, whether or not Landlord has consented to the same. In determining
whether increased premiums are the result of Tenant’s use of the Premises, a schedule issued by the
entity making the insurance rate on the Premises showing the various components of such rate shall
be conclusive evidence of the items and charges that make up the fire insurance rate on the
Premises.

     9.7 Boiler and Machinery Insurance. If applicable, Landlord may maintain, at Tenant’s expense,
boiler broad form insurance, if applicable, in the amount of One Hundred Fifty Thousand Dollars
($150,000) in the name of Landlord. Tenant shall pay the premium therefor, or its share thereof
equitably determined by Landlord if the Premises are a part of a multi-tenant building.

10. UTILITIES.

     Tenant shall pay the cost of all water, gas, heat, light, power, sewer, telephone,
refuse disposal, and all other utilities and services supplied to the Premises. Tenant shall make
payments for all separately metered utilities, when due, directly to the appropriate supplier.
Landlord shall have the right to require Tenant to install, at Tenant’s sole expense, separate
meters (or other submeter, device or monitor for the measurement of utility usage) for any utility
for which a separate meter is not installed as of the Commencement Date. If any utilities or
services are not separately metered or monitored with respect to the Premises, Landlord shall
determine Tenant’s equitable share thereof, based on rentable square footage, intensity of use of
any Utility, hours of operation, and such other factors as Landlord deems relevant. Tenant shall
pay its equitable share of such utilities to Landlord, to the extent such obligation exceeds any
amount thereof impounded under Section 4.5, within fifteen (15) days after receipt of a statement
from Landlord. If at any time during the Lease Term, electrical power or any other utility is
available to the Premises from multiple sources, Landlord shall have the right at any time and
from time to time to contract for service from any company or companies providing electrical,
telecommunication, or other utility service to the building(s) of which the Premises are a part.
Tenant shall cooperate with Landlord and all providers of electrical, telecommunication, or other
utility service and, as reasonably necessary, allow Landlord and such providers reasonable access
to the Premises and to the electric lines, feeders, risers, wiring and any other machinery or
equipment within the Premises. Landlord shall in no way be liable or responsible for any loss,
damage or expense that Tenant 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 Premises.

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Landlord makes no representation or warranty as the suitability of the utility service for
Tenant’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 Tenant to any
abatement or diminution of rent, or relieve Tenant of any of its obligations under the Lease.
Landlord 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 Tenant to terminate this Lease or abate
the rent due hereunder.

11. USE.

     11.1 Permitted Use. The Premises shall be used and occupied only for the permitted uses
specified in Section 1.8. The Premises shall not be used or occupied for any other purposes without
the prior written consent of Landlord. Tenant shall provide such information about such proposed
use as may be reasonably requested by Landlord. Landlord shall not unreasonably withhold its
consent to any requested change of use, and shall have the right to impose reasonable restrictions
on such other use so long as such other use is consistent with the zoning for the Center and all
applicable provisions of law and this Lease. Factors that Landlord may take into account in
granting or withholding its consent shall include, without limitation: (a) whether the proposed use
is compatible with the character and tenant mix of the Center, (b) whether the proposed use poses
any increased risk to Landlord or any other occupant of the Center, (c) whether any proposed
Alterations to accommodate such proposed use might decrease the rental or sale value of the
Premises or the Center, and (d) whether Tenant has the requisite expertise and financial ability to
successfully operate in the Premises with the proposed use.

     11.2 Compliance with Law and Other Requirements. Tenant shall not do or permit anything to be
done in or about the Premises in conflict with all laws, ordinances, rules, regulations, orders,
requirements, and recorded covenants and restrictions applicable to the Premises, whether now in
force or hereafter in effect, including any requirement to make alterations or to install
additional facilities required by Tenant’s occupancy or the conduct of Tenant’s business, and
Tenant shall promptly comply with the same at its sole expense.

     11.3 Waste, Quiet Conduct. Tenant shall not use or permit the use of the Premises in any manner
that tends to create waste or a nuisance, that will cause objectionable noise or odors, or that may
disturb the quiet enjoyment of any other tenant in the Center.

     11.4 Rules and Regulations. Tenant shall comply with the Rules and Regulations for the Center
attached as Exhibit “B”, as the same may be amended by Landlord from time to time, upon notice to
Tenant.

     11.5 Signs. Tenant may, at Tenant’s sole cost, install signage at the building(s) of which the
Premises are a part. All signs must be fabricated by a contractor approved by Landlord. Prior to
construction of any such sign, a detailed drawing of the proposed sign shall be prepared by
Landlord’s contractor, at the sole expense of Tenant, and submitted to Landlord for written
approval, which approval Landlord may withhold in its sole discretion: All signs must comply in all
respects with all governmental laws rules and regulations in effect from time to time. No sign,
placard, pennant, flag, awning, canopy, or advertising matter of any kind shall be placed or
maintained on any exterior door, wall or window of the Premises or in any area outside the
Premises, and no decoration, lettering or advertising matter shall be placed or maintained on the
glass of any window or door, or that can be seen through the glass, of the Premises without first
obtaining Landlord’s written approval. All signs and sign cases shall be considered fixtures and
improvements and shall become the property of Landlord upon expiration or termination of the Lease.
Landlord shall have the right at any time to establish a sign criteria for the Center, and to
revise

12

 

the same from time to time. Within sixty (60) days after Tenant’s receipt of written notice of any
new sign criteria, Tenant shall, at Tenant’s expense, remove all existing exterior signs and
replace the same with new signs conforming to the new sign criteria.

     11.6
Parking. Tenant shall have the nonexclusive right, in common with others, to use the parking
areas of Center; provided, however, that Tenant shall not use more than the number of parking
spaces designated in Section 1.9, or if no number of such spaces is so indicated, Tenant shall not
use more than its reasonable share of parking spaces, as Landlord shall determine. Landlord
reserves the right, without liability to Tenant, to modify the parking areas, to designate the
specific location of the parking for Tenant and Tenant’s customers and employees, and to adopt
reasonable rules and regulations for use of the parking areas.

     11.7 Entry by Landlord. Tenant shall permit Landlord and Landlord’s agents to enter the
Premises at all reasonable times for any of the following purposes: (a) to inspect the Premises,
(b) to supply any services or to perform any maintenance obligations of Landlord, including the
erection and maintenance of such scaffolding, canopies, fences, and props as may be required, (c)
to make such improvements, replacements or additions to the Premises or the Center as Landlord
deems necessary or desirable, (d) to post notices of nonresponsibility, (e) to place any usual or
ordinary “for sale” signs, or (f) within six (6) months prior to the expiration of this Lease, to
place any usual or ordinary “for lease” signs. No such entry shall result in any rebate of rent or
any liability to Tenant for any loss of occupation or quiet enjoyment of the Premises. Landlord
shall give reasonable notice to Tenant prior to any entry except in an emergency or unless Tenant
consents at the time of entry. If Tenant is not personally present to open and permit an entry into
the Premises, at any time when for any reason an entry therein shall be necessary or permissible,
Landlord or Landlord’s agents may enter the same by a master key, or may forcibly enter the same
without rendering Landlord or such agents liable therefor, and without in any manner affecting the
obligations and covenants of this Lease. Nothing herein contained, however, shall be deemed or
construed to impose upon Landlord any obligation, responsibility or liability whatsoever for the
care, maintenance or repair of the Premises or any part thereof, except as otherwise specifically
provided herein.

     11.8
Utility Yard. In addition and as part of the Premises, Tenant shall have a revocable, non-exclusive license to use the Utility Yard depicted on the attached Exhibit “A” (the “Utility Yard”)
for the purpose of installing, maintaining and operating thereon (all at Tenant’s sole cost) a
central plant for heating, ventilating and air conditioning systems and equipment serving the
Premises. Prior to the installation of any equipment in the Utility Yard, Tenant shall provide to
Landlord a detailed listing and description of the equipment, together with a plat showing the
proposed location thereof. Tenant shall also describe in detail whether such equipment emits any
noise, vibrations, fumes, or other substances, or would otherwise cause any nuisance or disturbance
to Landlord or any other tenant. The types and locations of the equipment to be installed shall be
subject to Landlord’s approval, which approval may be granted, denied, withdrawn or modified in
Landlord’s sole discretion. Tenant shall screen, fence or otherwise enclose Tenant’s approved
equipment at its sole cost in accordance with any requirements of governmental agencies and/or the
reasonable requirements of Landlord. The Utility Yard forms a part of the Premises (except that
such area shall not count as Rentable Square Footage) and shall be governed and subject to all of
the restrictions, indemnification obligations, use requirements and other terms and provisions of
the Lease applicable to the Premises. Under no circumstances shall Tenant install any underground
storage tanks or other equipment utilizing Hazardous Materials without Landlord’s prior written
consent, and otherwise on the terms and conditions set forth in Article 14.

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12. ACCEPTANCE OF PREMISES; NONLIABILITY OF LANDLORD; DISCLAIMER.

     12.1 Acceptance of Premises. By taking possession hereunder, Tenant acknowledges that it
has examined the Premises and accepts the condition thereof. Tenant acknowledges and agrees that
Landlord has no obligation to improve the Premises other than as set forth specifically in this
Lease, if at all. In particular, Tenant acknowledges that any additional improvements or
alterations needed to accommodate Tenant’s intended use shall be made solely at Tenant’s sole cost
and expense, and strictly in accordance with the requirements of this Lease (including the
requirement to obtain Landlord’s consent thereto), unless such improvements and alterations are
specifically required of Landlord. Landlord shall have no responsibility to do any work required
under any building codes or other governmental requirements not in effect or applicable at the time
the Premises were constructed, including without limitation any requirements related to sprinkler
retrofitting, seismic structural requirements, accommodation of disabled persons, or hazardous
materials. Landlord shall be under no obligation to provide utility, telephone or other service or
access beyond that which exists at the Premises as of the date of this Lease, unless Landlord
specifically agrees in writing to provide the same. If it is anticipated that Tenant will be doing
any Alterations or installations prior to taking occupancy, any delays encountered by Tenant in
accomplishing such work or obtaining any required permits therefor shall not delay the Commencement
Date or the date that Tenant becomes liable to pay rent, or the date that Landlord may effectively
deliver possession of the Premises to Tenant. By taking possession hereunder, Tenant acknowledges
that it accepts the square footage of the Premises as delivered and as stated in this Lease. No
discovery or alleged discovery after such acceptance of any variance in such square footage as set
forth in this Lease (or in any proposal, advertisement or other description thereof) shall be
grounds for any adjustment in any element of the rent payable hereunder, unless such adjustment is
initiated by and implemented by Landlord in writing.

     12.2 Landlord’s Exemption From Liability. Landlord shall not be liable for injury to
Tenant’s business or loss of income therefrom, or for personal injury or property damage that may
be sustained by Tenant or any subtenant of Tenant, or their respective employees, invitees,
customers, agents or contractors or any other person in or about the Premises, caused by or
resulting from fire, flood, earthquake or other natural disaster, or from steam, electricity, gas,
water or rain, that may leak or flow from or into any part of the Premises, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air-conditioning, lighting fixtures or computer equipment or software, whether such damage or
injury results from conditions arising upon the Premises or upon other portions of the building(s)
of which the Premises are a part, or from other sources, and regardless of whether the cause of
such damage or injury or the means of repairing the same is
inaccessible to Tenant. Landlord shall
not be liable for any damages to property or for personal injury or loss of life arising from any
use, act or failure to act of any third parties (including other occupants of the Center) occurring
in, or about the Premises or in or about the Center (including without limitation the criminal acts
of any third parties). Landlord shall not be liable for any latent defect in the Premises or in the
building(s) of which the Premises are a part. All property of Tenant kept or stored on the Premises
shall be so kept or stored at the risk of Tenant only, and Tenant shall indemnify, protect, hold
harmless and defend Landlord and Landlord’s officers, directors, shareholders, partners, members,
principals, employees, agents, representatives, and other related entities and individuals, and their
respective successors and assigns, from and against any claims arising out of damage to the same,
including subrogation claims by Tenant’s insurance carriers. Provided, however, that the
indemnifications and waivers of Tenant set forth in this Section shall not apply to damage and
liability caused by the gross negligence or willful misconduct of Landlord.

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     12.3 No Warranties or Representations.

          (a) Neither Landlord nor Landlord’s agents make any warranty or representation with
respect to the suitability or fitness of the space for the conduct of Tenant’s
business, or for any other purpose.

          (b) Neither Landlord nor Landlord’s agents make any warranty or representation with respect to
any other tenants or users that may or may not construct improvements, occupy space or conduct
business within the Center, and Tenant hereby acknowledges and agrees that it is not relying on any
warranty or representation relating thereto in entering into this Lease.

          (c) Landlord specifically disavows any oral representations made by or on behalf of
its employees, agents and independent contractors, and Tenant hereby acknowledges and agrees that
it is not relying and has not relied on any oral representations in entering into this Lease.

          (d) Landlord has not made any promises or representations, expressed or implied, that
it will renew, extend or modify this Lease in favor of Tenant or any permitted transferee of
Tenant, except as may be specifically set forth herein or in a written instrument signed by both
parties amending this Lease.

          (e) Notwithstanding
that the rent payable to Landlord hereunder may at times include the
cost of guard service or
other security measures, it is specifically understood that Landlord does not represent, guarantee
or assume responsibility that Tenant will be secure from any damage, injury or loss of life because
of such guard service. Landlord shall have no obligation to hire, maintain or provide such
services, which may be withdrawn or changed at any time with or without notice to Tenant or any
other person and without liability to Landlord. To induce Landlord to provide such service if
Landlord elects in its sole discretion to do so, Tenant agrees that (i) Landlord shall not be
liable for any damage, injury or loss of life related to the provision or nonprovision of such
service, and (ii) Landlord shall have no responsibility to protect Tenant, or its employees or
agents, from the acts of any third parties (including other occupants of the Center) occurring in
or about the Premises or in or about the Center (including without limitation the criminal acts of
any third parties), whether or not the same could have been prevented by any such guard service or
other security measures.

     12.4 Keys. Tenant shall re-key the Premises at its sole cost upon taking possession
thereof. Tenant hereby acknowledges that various persons have had access to the keys to the
Premises as keyed prior to Tenant’s possession, and that Landlord disclaims all liability and responsibility for any unauthorized distribution or possession of such prior keys.

13. INDEMNIFICATION.

     Tenant shall indemnify, protect, hold harmless and defend Landlord and Landlord’s
officers, directors, shareholders, partners, members, principals, employees, agents,
representatives, and other related entities and individuals, and their respective successors and
assigns (collectively, “Landlord’s Related Entities”), from and against any and all claims,
actions, damages, liability, costs, and expenses, including reasonable attorneys’ fees and costs,
arising from personal injury, death, and/or property damage and arising from: (a) Tenant’s use or
occupation of the Premises or any work or activity done or permitted by Tenant in or about the
Premises (including without limitation any storage or display of materials or merchandise, or other
activity by Tenant in the Common Facilities), (b) any activity, condition or occurrence in the
Premises or other area under the control of Tenant, (c) any breach or failure to perform any
obligation imposed on Tenant under this Lease, or (d) any other act or omission of Tenant or its
assignees or subtenants or their respective agents, contractors, employees, customers, invitees or
licensees. Tenant’s obligation to indemnify, protect, hold harmless and defend shall include, but
not be limited to, claims based on duties, obligations, or liabilities imposed on Landlord or
Landlord’s Related Entities by statute, ordinance,

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regulation, or other law, such as claims based on theories of peculiar risk and nondelegable
duty, and to any and all other claims based on the negligent act or omission of Landlord or
Landlord’s Related Entities. The parties intend that this provision be interpreted as the
broadest Type I indemnity provision as defined in McDonald & Kruse, Inc. v. San Jose Steel
Co., 29 Cal. App. 3rd 413 (1972), and as allowed by law between a
landlord and a tenant. Upon
notice from Landlord, Tenant shall, at Tenant’s sole expense and by counsel reasonably
satisfactory to Landlord, defend any action or proceeding brought against Landlord or
Landlord’s Related Entities by reason of any such claim. If any person not a party to this
Lease shall institute any type of action against Tenant in which Landlord or any of Landlord’s
Related Entities is made a party defendant, then Tenant shall indemnify, protect, hold
harmless and defend Landlord and Landlord’s Related Entities from and against any and all
claims, actions, damages, liability, costs, expenses and reasonable attorneys’ fees and costs
incurred or paid in connection with such litigation. Tenant, as a material part of the
consideration to Landlord hereunder, assumes all risk of, and waives all claims against
Landlord for, personal injury or property damage in, upon or about the Premises, from any
cause whatsoever. Provided, however, that the indemnifications and waivers of Tenant set forth
in this Section shall not apply to damage and liability caused by the gross negligence or
willful misconduct of Landlord.

14. HAZARDOUS MATERIALS.

     14.1
Definitions. “Hazardous Materials Laws” means any and all federal, state or
local laws, ordinances, rules, decrees, orders, regulations or court decisions relating to
hazardous substances, hazardous materials, hazardous waste, toxic substances, environmental
conditions on, under or about the Premises, or soil and ground water conditions, including, but
not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. §9601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C.
§6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., the
California Hazardous Waste Control Act, Cal. Health and Safety Code §25100, et seq., the
Carpenter-Presley-Tanner Hazardous Substances Account Act, Cal. Health and Safely Code §25300, et
seq., the Safe Drinking Water and Toxic Enforcement Act, Cal. Health and Safety Code §25249.5, et
seq., the Porter-Cologne Water Quality Control Act, Cal. Water Code § 13000, et seq., any
amendments to the foregoing, and any similar federal, state or local laws, ordinances, rules,
decrees, orders or regulations. “Hazardous Materials” means any chemical, compound, material,
substance or other matter that: (a) is defined as a hazardous substance, hazardous material,
hazardous waste or toxic substance under any Hazardous Materials Law, (b) is controlled or
governed by any Hazardous Materials Law or gives rise to any reporting, notice or publication
requirements hereunder, or gives rise to any liability, responsibility or duty on the part of
Tenant or Landlord with respect to any third person hereunder; or (c) is flammable or explosive
material, oil, asbestos, urea formaldehyde, radioactive material, nuclear medicine material,
drug, vaccine, bacteria, virus, hazardous waste, toxic substance, or related injurious or
potentially injurious material (by itself or in combination with other materials).

     14.2
Use of Hazardous Materials. Tenant shall not allow any Hazardous Material to be
used, generated, manufactured, released, stored or disposed of on, under or about, or transported
from, the Premises, unless: (a) such use is specifically disclosed to and approved by Landlord in
writing prior to such use, and (b) such use is conducted in compliance with the provisions of this
Article. Landlord’s consent may be withheld in Landlord’s sole discretion and, if granted, may be
revoked at any time upon reasonable cause. Landlord may approve such use subject to reasonable
conditions to protect the Premises and Landlord’s interests. Landlord may withhold approval if
Landlord in good faith determines that such proposed use involves a material risk of a release or
discharge of Hazardous Materials or a violation of any

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Hazardous Materials Laws or that Tenant has not provided reasonably sufficient assurances of
its ability to remedy such a violation and fulfill its obligations under this Article.
Notwithstanding the foregoing, Landlord hereby consents to the use, storage or disposal of
Hazardous Materials necessary for the conduct of the business of Avanir Pharmaceuticals, in its
capacity as Tenant hereunder, so long as Tenant handles, uses, stores and disposes of the same in
compliance with all Hazardous Materials Laws, including, without limitation, (x)products containing
small amounts of Hazardous Materials that are of a type customarily found in offices and
households (such as aerosol cans containing insecticides, toner for copies, paints, paint remover
and similar items); (y) small quantities of radioactive material used in the life science research
activities of Tenant, but only to the extent necessary for such activities; and (z) animal-related
supplies used in the life science research activities of Tenant, but only to the extent necessary
for such activities.

     14.3
Compliance With Laws; Handling Hazardous Materials. Tenant shall strictly comply
with, and shall maintain the Premises in compliance with, all Hazardous Materials Laws. Tenant
shall obtain, maintain in effect and comply with the conditions of all permits, licenses and other
governmental approvals required for Tenant’s operations on the Premises under any Hazardous
Materials Laws, including, but not limited to, the discharge of appropriately treated Hazardous
Materials into or through any sanitary sewer serving the Premises. At Landlord’s request, Tenant
shall deliver copies of, or allow Landlord to inspect, all such permits, licenses and approvals.
All Hazardous Materials removed from the Premises shall be removed and transported by duly licensed
haulers to duly licensed disposal facilities, in compliance with all Hazardous Materials Laws.
Tenant shall perform any monitoring, testing, investigation, clean-up, removal, detoxification,
preparation of closure or other required plans and any other remedial
work required by any
governmental agency or lender, or recommended by Landlord’s environmental consultants, as a result
of any release or discharge or potential release or discharge of Hazardous Materials affecting the
Premises or the Center or any violation or potential violation of Hazardous Materials Laws by
Tenant or any assignee or subtenant of Tenant or their respective agents, contractors, employees,
licensees or invitees (collectively, “Remedial Work”). Landlord shall have the right to intervene
in any governmental action or proceeding involving any Remedial Work, and to approve performance of
the work, in order to protect Landlord’s interests. Tenant shall not enter into any settlement
agreement, consent decree or other compromise with respect to any claims relating to Hazardous
Materials without notifying Landlord and providing ample opportunity for Landlord to intervene.
Tenant shall additionally comply with the recommendations of Landlord’s and Tenant’s insurers based
upon National Fire Protection Association standards or other applicable guidelines regarding the
management and handling of Hazardous Materials. If any present or future law imposes any
requirement of reporting, survey, investigation or other compliance upon Landlord, Tenant, or the
Premises, and if such requirement is precipitated by a transaction involving the Lease (other than
the natural expiration thereof at the end of the lease term), including without limitation the
assignment or sublease, in whole or in part of Tenant’s interest in the Lease, or the change in the
ownership of Tenant, then Tenant shall fully comply with and pay all costs of compliance with such
requirement, including Landlord’s reasonable attorneys’ fees and costs.

     14.4
Notice; Reporting. Tenant shall notify Landlord, in writing, within three (3)
days after any of the following: (a) Tenant has knowledge, or has reasonable cause to believe,
that any Hazardous Material has been released, discharged or is located on, under or about the
Premises, whether or not the release or discharge is in quantities that would otherwise be
reportable to a public agency, (b) Tenant receives any order of a governmental agency requiring
any Remedial Work pursuant to any Hazardous Materials Laws, (c) Tenant receives any warning,
notice of inspection, notice of violation or alleged

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violation or Tenant receives notice or knowledge of any proceeding, investigation or
enforcement action, pursuant to any Hazardous Materials Laws; or (d) Tenant receives notice or
knowledge of any claims made or threatened by any third party against Tenant or the Premises
relating to any loss or injury resulting from Hazardous Materials. If the potential risk of any
of the foregoing events is material, Tenant shall deliver immediate verbal notice to Landlord, in
addition to written notice as set forth above. Tenant shall deliver to Landlord copies of all
test results, reports and business or management plans required to be filed with any governmental
agency pursuant to any Hazardous Materials Laws.

     14.5 Indemnity. Tenant shall indemnify, protect, hold harmless and defend
Landlord and Landlord’s officers, directors, shareholders, partners, members, principals,
employees, agents, representatives, and other related entities and individuals, and their
respective successors and assigns, from and against any and all liabilities, claims, suits,
judgments, actions, investigations, proceedings, costs and expenses (including reasonable
attorneys’ fees and costs) arising out of or in connection with any breach of any provisions of
this Article or directly or indirectly arising out of the use, generation, storage, release,
disposal or transportation of Hazardous Materials by Tenant, or any assignee or subtenant of
Tenant, or their respective agents, contractors, employees, licensees, or invitees, on, under or
about the Premises during the Lease Term or any other period of Tenant’s actual or constructive
occupancy of the Premises, including, but not limited to, all foreseeable and unforeseeable
consequential damages and the cost of any Remedial Work. Any defense of Tenant pursuant to this
Section shall be by counsel reasonably acceptable to Landlord. Neither the consent by Landlord to
the use, generation, storage, release, disposal or transportation of Hazardous Materials nor the
strict compliance with all Hazardous Materials Laws shall excuse Tenant from Tenant’s
indemnification obligations pursuant to this Article. The foregoing indemnity shall be in addition
to and not a limitation of the indemnification provisions of Article 13 of this Lease. Tenant’s
obligations pursuant to this Article shall survive the termination or expiration of this
Lease.

     14.6 Entry and Inspection; Cure. Landlord and its agents, employees and
contractors, shall have the right (but not the obligation) to enter the Premises at all reasonable
times to inspect the Premises and Tenant’s compliance with the terms and conditions of this
Article, or to conduct investigations and tests. No prior notice to Tenant shall be required in
the event of an emergency, or if Landlord has reasonable cause to believe that violations of this
Article have occurred, or if Tenant consents at the time of entry. In all other cases, Landlord
shall give at least twenty-four (24) hours’ prior notice to
Tenant. Landlord shall have the right
(but not the obligation) to remedy any violation by Tenant of the provisions of this Article
pursuant to Section 22.3 of this Lease or to perform any Remedial Work. Tenant shall pay, upon
demand, all costs incurred by Landlord in investigating any such violations or potential
violations or performing Remedial Work, plus interest thereon at the rate specified in this Lease
from the date of demand until the date paid by Tenant.

     14.7 Termination; Expiration. Upon termination or expiration of this Lease,
Tenant shall, at Tenant’s cost, remove any equipment, improvements or storage facilities
utilized in connection with any Hazardous Materials and shall clean up, detoxify, repair and
otherwise restore the Premises to a condition free of Hazardous Materials, to the extent such
condition is caused by Tenant or any assignee or subtenant of Tenant or their respective agents,
contractors, employees, licensees or invitees.

     14.8
Exit Assessment. No later than ten (10) days after the expiration or
earlier termination of this Lease, Tenant shall cause to be performed, at its sole expense,
an environmental assessment (the “Exit Assessment”) of the Premises. Landlord agrees to
allow Tenant access to the Premises for such purpose. The Exit Assessment must be performed
by a qualified environmental consultant acceptable to Landlord,

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and shall include without limitation the following, as applicable to the Premises and
Tenant’s activities: (a) inspection of all floors, walls, ceiling tiles, benches, cabinet
interiors, sinks, the roof and other surfaces for signs of contamination and/or deterioration
related to Hazardous Materials, (b) inspection of any and all ducts, hoods and exhaust systems
for signs of contamination, deterioration and/or leakage related or potentially related to
Hazardous Materials, (c) inspection of all readily accessible drain lines and other discharge
piping for signs of deterioration, loss of integrity and leakage, (d) Tenant interviews and
review of appropriate Tenant records to determine the uses to which Tenant has put the Premises
that involve or may have involved Hazardous Materials, and to determine if any known discharges
to the Premises or ground or soils from Tenant’s activities have occurred, (e) documentation in
detail of all observations, including dated photographs, (f) if applicable a certification that
all areas inspected are clean and free of any Hazardous Materials and that the investigation
conducted by the consultant does indicate that any release of any Hazardous Materials has
occurred in the Premises or the Center as a result of Tenant’s activities, (g) if applicable, a
detailed description of Hazardous Materials remaining in the Premises and of any contamination,
deterioration and/or leakage observed, together with detailed
recommendations for the removal,
repair or abatement of the same, and (h) if applicable, a detailed description of evidence of
possible or past releases of Hazardous Materials, together with
detailed recommendations for the prevention of the same in the future. Landlord shall have the
right to require additional evaluations or work in connection with the Exit Assessment based upon
Tenant’s use of the Premises, any actual or suspected Hazardous Materials issues, or other
reasonable factors. The original of the Exit Assessment shall be addressed to Landlord and shall
be provided to Landlord within twenty (20) days of the expiration or earlier termination of the
Lease. In addition to Tenant’s obligations under Section 14.7, Tenant agrees to fully implement
and address all recommended actions contained in the Exit Assessment, at its sole cost, within
thirty (30) days of the date thereof.

     14.9
Event of Default. The release or discharge of any Hazardous Material or the
violation of any Hazardous Materials Law by Tenant or any assignee or subtenant of Tenant shall be
a material Event of Default by Tenant under this Lease. In addition to or in lieu of the remedies
available under this Lease as a result of such Event of Default, Landlord shall have the right,
without terminating this Lease, to require Tenant to suspend its operations and activities on the
Premises until Landlord is satisfied that appropriate Remedial Work has been or is being
adequately performed; Landlord’s election of this remedy shall not constitute a waiver of
Landlord’s right thereafter to declare an Event of Default and pursue any other available remedy.

15.
ALTERATIONS; LIENS.

     15.1 Alterations by Tenant. Tenant shall not make any alterations, additions or
improvements (“Alterations”) to the Premises without Landlord’s prior written consent, except for
nonstructural Alterations that cost $5,000 or less and are not visible from the exterior of the
Premises. All Alterations installed by Tenant shall be new or completely reconditioned. Landlord
shall have the right to approve the contractor, the method of payment of the contractor, and the
plans and specifications for all proposed Alterations. Tenant shall obtain Landlord’s consent to
all proposed Alterations requiring Landlord’s consent prior to the commencement of any such
Alterations. Tenant’s request for consent shall be accompanied by information identifying the
contractor and method of payment and two (2) copies of the proposed plans and specifications. All
Alterations of whatever kind and nature shall become at once a part of the realty and shall be
surrendered with the Premises upon expiration or earlier termination of the Lease Term, unless
Landlord requires Tenant to remove the same as provided in Article 20. If Tenant demolishes or
removes

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any then-existing tenant improvements or other portions of the Premises or any building(s)
of which the Premises are a part (including without limitation any previously-installed
Alterations), Tenant shall promptly commence and diligently pursue to completion the
Alterations then under way or shall otherwise restore the Premises and any building(s) of which the Premises are a part to its
condition and state of improvement prior to such demolition or removal. During the Lease Term,
Tenant agrees to provide, at Tenant’s expense, a policy of insurance covering loss or damage to
Alterations made by Tenant, in an amount adequate to repair or replace the same, naming Landlord
as an additional insured. Provided, however, Tenant may install movable furniture, trade fixtures,
machinery or equipment in conformance with applicable governmental rules or ordinances and remove
the same upon expiration or earlier termination of this Lease as provided in Article 20.

     15.2 Permits and Governmental Requirements. Tenant shall obtain, at Tenant’s sole cost
and expense, all building permits and other permits of every kind and nature required by any
governmental agency having jurisdiction in connection with the Alterations. Tenant shall indemnify,
protect, hold harmless and defend Landlord and Landlord’s officers, directors, shareholders,
partners, members, principals, employees, agents, representatives, and other related entities and
individuals, and their respective successors and assigns, from and against any and all claims,
actions, damages, liability, costs, and expenses, including reasonable attorneys’ fees and costs,
arising out of any failure by Tenant or Tenant’s contractor or agents to obtain all required
permits, regardless of when such failure is discovered. Tenant shall do any and all additional
construction, alterations, improvements and retrofittings required to be made to the Premises
and/or the Center, or any other property of Landlord as a result of, or as may be triggered by,
Tenant’s Alterations. Landlord shall have the right to do such construction itself, but in all
instances Tenant shall pay all costs directly or indirectly related to such work and shall
indemnify, protect, hold harmless and defend Landlord and Landlord’s officers, directors,
shareholders, partners, members, principals, employees, agents, representatives, and other related
entities and individuals, and their respective successors and assigns, from and against any and all
claims, actions, damages, liability, costs, and expenses, including reasonable attorneys’ fees and
costs, arising out of any such additionally required work. All payment and indemnification
obligations under this Section shall survive the expiration or earlier termination of the Lease
Term.

     15.3 Liens. Tenant shall pay when due all claims for any work performed, materials furnished
or obligations incurred by or for Tenant, and Tenant shall keep the Premises free from any liens
arising with respect thereto. If Tenant fails to cause any such lien to be released within fifteen
(15) days after imposition, by payment or posting of a proper bond, Landlord shall have the right
(but not the obligation) to cause such release by such means as Landlord deems proper. Tenant shall
pay Landlord upon demand for all costs incurred by Landlord in connection therewith (including
reasonable attorneys’ fees and costs), with interest at the rate specified in Section 22.4 from the
date of payment by Landlord to the date of payment by Tenant. Tenant will notify Landlord in
writing thirty (30) days prior to commencing any alterations, additions, improvements or repairs in
order to allow Landlord time to file a notice of nonresponsibility.

16. DAMAGE AND DESTRUCTION.

     16.1 Partial Insured Damage. If the Premises or the building(s) of which the Premises
are a part are partially damaged or destroyed during the Lease Term, Landlord shall make the
necessary repairs, provided such repairs can reasonably be completed within sixty (60) days after
the date of the damage or destruction in accordance with applicable laws and regulations and
provided that Landlord receives

20

 

sufficient insurance proceeds to pay the cost of such repairs. In such event, this
Lease shall continue in full force and effect. If such repairs cannot reasonably be completed within
sixty (60) days after the date of the damage or destruction or if Landlord does not receive
sufficient insurance proceeds, then Landlord may, at its option, elect within forty-five (45) days
of the date of the damage or destruction to proceed with the necessary repairs, in which event this
Lease shall continue in full force and effect and Landlord shall complete the same within a
reasonable time. If Landlord does not so elect to make such repairs or if such repairs cannot be
made under applicable laws and regulations, this Lease may be terminated at the option of either
party within ninety (90) days of the occurrence of such damage or destruction.

     16.2 Insurance Deductible. If Landlord elects to repair any damage caused by an insured
casualty as provided in Section 16.1, Tenant shall, within fifteen (15) days after receipt of
written notice from Landlord, pay the amount of any deductible (or its share thereof) under any
insurance policy covering such damage or destruction, in accordance with Section 9.4 above.

     16.3 Uninsured Damage. In the event of any damage or destruction of the Premises or the
building(s) of which the Premises are a part by an uninsured casualty, Landlord shall have the right
to elect either to repair such damage or to terminate this Lease. Such election shall be exercised
by written notice to Tenant within forty-five (45) days of such damage or destruction.

     16.4 Total Destruction. A total destruction (including any destruction required by any
authorized public authority) of either the Premises or the building(s) of which the Premises are a
part shall terminate this Lease.

     16.5 Partial Destruction of Center. If fifty percent (50%) or more of the rentable area of the
Center is damaged or destroyed by fire or other cause, notwithstanding that the Premises may be
unaffected, Landlord shall have the right, to be exercised by notice in writing delivered to
Tenant within ninety (90) days after said occurrence, to elect to terminate this Lease.

     16.6 Tenant’s Obligations. Landlord shall not be required to repair any injury or damage by
fire or other cause, or to make any restoration or replacement of any Alterations, trade fixtures,
equipment or personal property placed or installed in the Premises by or on behalf of Tenant.
Unless this Lease is terminated pursuant to this Article, Tenant shall promptly repair, restore or
replace the same in the event of damage. Nothing contained in this Article shall be construed as a
limitation on Tenant’s liability for any damage or destruction if such liability otherwise exists.

     16.7
Rent Abatement. If Landlord repairs the Premises or the building(s) of which the Premises
are a part after damage or destruction as described in this Article 16, Minimum Monthly Rent
payable by Tenant hereunder from the date of damage until the repairs are completed shall be
equitably reduced, based upon the extent to which such repairs interfere with the business carried
on by Tenant in the Premises, but only to the extent Landlord receives proceeds from rental income
insurance paid for by Tenant. Landlord agrees to take reasonable steps to make a claim for and
collect any rental income insurance proceeds that might be available.

     16.8 Waiver of Inconsistent Statutes. The parties’ rights and obligations in the event of
damage or destruction shall be governed by the provisions of this Lease; accordingly, Tenant waives
the provisions of California Civil Code Sections 1932(2) and 1933(4), and any other statute, code
or judicial decisions that grants a tenant a right to terminate a lease in the event of damage or
destruction of a leased premises.

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17. CONDEMNATION.

     17.1 Condemnation of Premises. If any portion of the Premises is taken or condemned for a
public or quasi-public use (“Condemnation”), and a portion remains that is susceptible of
occupation, then this Lease shall terminate as to the portion so taken as of the date title
vests in the condemnor, but shall remain in full force and effect as to the remaining Premises.
Landlord shall, within a reasonable period of time, restore the remaining Premises as
nearly as practicable to the condition existing prior to the condemnation; provided, however, if
Landlord receives insufficient funds from the condemnor for such purpose, Landlord may elect to
terminate this Lease. If this Lease continues in effect, the Minimum Monthly Rent shall be
equitably adjusted, based upon the value of the Premises remaining after the Condemnation compared
to the value of the Premises prior to Condemnation. Provided, however, in the event of any such
partial condemnation, Landlord shall have the option to terminate this Lease entirely as of the
date title vests in the condemnor. If all the Premises are condemned, or such portion so that there
does not remain a portion that is susceptible of occupation, or if such a substantial portion of the
Center is condemned that it is no longer economically appropriate to lease the Premises on the
terms and conditions of this Lease, as reasonably determined by Landlord, then at the election of
Landlord this Lease shall terminate as of the date title vests in the condemnor.

     17.2 Condemnation of Parking Area. If all or any portion of the parking area in the Center is
condemned such that the ratio of the total square footage of parking and other Common Facilities
compared to the total rentable building square footage of the Center is reduced to a ratio below
two to one, then at the election of Landlord this Lease shall terminate as of the date title vests
in the condemnor.

     17.3 Condemnation Award. All compensation awarded upon any such partial or total Condemnation
shall be paid to Landlord and Tenant shall have no claim thereto, and Tenant hereby irrevocably
assigns and transfers to Landlord any right to compensation or damages by reason of any such
Condemnation. Provided, however, that Tenant shall have the right to claim and recover from the
condemning authority, but not from Landlord, such compensation as may be separately awarded or
recoverable by Tenant in Tenant’s own right on account of any damage to Tenant’s business by reason
of the Condemnation and on account of any cost that Tenant may incur in removing Tenant’s
merchandise, furniture, fixtures, leasehold improvements and equipment. If this Lease is terminated,
in whole or in part, in accordance with this Article as a result of a Condemnation, Tenant shall
have no claim for the value of any unexpired term of this Lease.

18. ASSIGNMENT AND SUBLETTING.

     18.1 Landlord’s Consent Required. Tenant shall not voluntarily or involuntarily
assign, sublease, mortgage, encumber, or otherwise transfer all or any portion of the Premises
or its interest in this Lease (collectively, “Transfer”) without Landlord’s prior written
consent, which consent Landlord shall not unreasonably withhold. Landlord may withhold its
consent until Tenant has complied with the provisions of Sections 18.2 and 18.3. Any attempted
Transfer without Landlord’s written consent shall be void and shall constitute a noncurable
Event of Default under this Lease. If Tenant is a corporation, any cumulative Transfer of more
man twenty percent (20%) of the voting stock of such corporation shall constitute a Transfer
requiring Landlord’s consent hereunder; provided, however, that this sentence shall not apply to
any corporation whose stock is publicly traded. If Tenant is a partnership, limited liability
company, trust or other entity, any cumulative Transfer of more than twenty percent (20%) of the
partnership, membership, beneficial or other ownership interests therein shall constitute a
Transfer requiring Landlord’s consent hereunder. Tenant shall not have the right to consummate a
Transfer or to request Landlord’s consent to

22

 

any Transfer if any Event of Default has occurred and is continuing or if Tenant or
any affiliate of Tenant is in default under any lease of any other real property owned or managed
(in whole or in part) by Landlord or any affiliate of Landlord.

     18.2 Landlord’s Election. Tenant’s request for consent to any Transfer shall be
accompanied by a written statement setting forth the details of the proposed Transfer, including
the name, business and financial condition of the prospective Transferee, financial details of the
proposed Transfer (e.g., the term and the rent and security deposit payable), and any other related
information that Landlord may reasonably require. Landlord shall have the right: (a) to withhold
consent to the Transfer, if reasonable, (b) to grant consent, (c) to terminate this Lease as to the
portion of the Premises affected by any proposed Transfer, in which event Landlord may enter into a
lease directly with the proposed Transferee, or (d) to consent on the condition that Landlord be
paid, as Additional Rent hereunder, fifty percent (50%) of all subrent or other consideration to be
paid to Tenant under the terms of the Transfer in excess of the total rent due hereunder
(including, if such Transfer is an assignment or if such Transfer is to occur directly or
indirectly in connection with the sale of any assets of Tenant, fifty percent (50%) of the amount
of the consideration attributable to the Transfer of the Lease, as reasonably determined by
Landlord). The grounds on which Landlord may reasonably withhold its consent to any requested
Transfer include, without limitation, that: (i) the proposed Transferee’s contemplated use of the
Premises following the proposed Transfer is not reasonably similar to the use of the Premises
permitted hereunder, (ii) in Landlord’s reasonable business judgment, the proposed Transferee lacks
sufficient business reputation or experience to operate a successful business of the type and
quality permitted under this Lease, (iii) in Landlord’s reasonable business judgment, the proposed
Transferee lacks sufficient net worth, working capital, anticipated cash flow and other indications
of financial strength to meet all of its obligations under this Lease, (iv) the proposed Transfer
would breach any covenant of Landlord respecting a radius restriction, location, use or
exclusivity in any other lease, financing agreement, or other agreement relating to the Center, and
(v) in Landlord’s reasonable business judgment, the possibility of a release of Hazardous Materials
is materially increased as a result of the Transfer or if Landlord does not receive sufficient
assurances that the proposed Transferee has the experience and financial ability to remedy a
violation of Hazardous Materials and to fulfill its obligations under Articles 13 and 14. In
connection with any such Transfer, Landlord shall have the right to require Tenant, at Tenant’s
sole cost, to cause environmental testing meeting the requirements of an Exit Assessment described
in Section 14.8 to be performed. Landlord need only respond to any request by Tenant hereunder
within a reasonable time of not less than ten (10) business days after receipt of all information
and other submission required in connection with such request.

     18.3 Costs; Transfer Fee. Tenant shall pay all costs and expenses in connection with any
permitted Transfer, including any real estate brokerage commissions due with respect to the
Transfer. Tenant shall pay all attorneys’ fees and costs incurred by Landlord and a fee of $500 to
reimburse Landlord for costs and expenses incurred in connection with any request by Tenant for
Landlord’s consent to a Transfer. Such fee shall be delivered to Landlord concurrently with
Tenant’s request for consent.

     18.4 Assumption; No Release of Tenant. Any permitted transferee shall assume in writing all
obligations of Tenant under this Lease, utilizing a form of assumption agreement provided or
approved by Landlord, and an executed copy of such assumption agreement shall be delivered to
Landlord within fifteen (15) days after the effective date of the Transfer. The taking of
possession of all or any part of the Premises by any such permitted assignee or subtenant shall
constitute an agreement by such person or entity to assume without limitation or qualification all
of the obligations of Tenant under this Lease, notwithstanding

23

 

any failure by such person to execute the assumption agreement required in the
immediately preceding sentence. No permitted Transfer shall release or change Tenant’s primary
liability to pay the rent and to perform all other obligations of Tenant under this Lease.
Landlord’s acceptance of rent from any other person is not a waiver of any provision of this
Article or a consent to Transfer. Consent to one Transfer shall not constitute a consent to any
subsequent Transfer. If any transferee defaults under this Lease, Landlord may proceed directly
against Tenant without pursuing remedies against the transferee. Landlord may consent to subsequent
Transfers or modifications of this Lease by Tenant’s transferee, without notifying Tenant or
obtaining its consent, and such action shall not relieve Tenant of its liability under this Lease.

     18.5 No Merger. No merger shall result from any Transfer pursuant to this Article, any
surrender by Tenant of its interest under this Lease, or any termination hereof in any other
manner. In any such event, Landlord may either terminate any or all subleases or succeed to the
interest of Tenant thereunder.

     18.6 Reasonable Restriction. Tenant acknowledges that the restrictions on Transfer contained
herein are reasonable restrictions for purposes of Section 22.2 of this Lease and California Civil
Code Section 1951.4.

19. SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATE.

     19.1 Subordination. This Lease is junior and subordinate to all ground leases,
mortgages, deeds of trust, and other security instruments now or hereafter affecting the real
property of which the Premises are a part, and to all advances made on the security thereof, and to
all renewals, modifications, consolidations, replacements and extensions thereof. If any mortgagee,
beneficiary under deed of trust or ground lessor shall elect to have this Lease prior to the lien
of its mortgage, deed of trust or ground lease, and gives written notice thereof to Tenant, this
Lease shall be deemed prior thereto. Tenant agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any such mortgage, deed of trust or
ground lease, as the case may be, and if Tenant this to do so within fifteen (15) days after
written demand, Tenant does hereby make, constitute and irrevocably appoint Landlord as Tenant’s
attorney-in-fact and in Tenant’s name, place and stead, to do so.

     19.2 Attornment. If Landlord sells, transfers, or conveys its interest in the Premises or this
Lease, or if the same is foreclosed judicially or nonjudcially, or is otherwise acquired, by a
mortgagee, beneficiary under deed of trust or ground lessor, upon the request and at the sole
election of Landlord’s lawful successor, Tenant shall attorn to said successor, provided said
successor accepts the Premises subject to this Lease. Tenant shall, upon request of Landlord or any
such mortgagee, beneficiary under deed of trust or ground lessor, execute an attornment agreement
confirming the same, in form and substance acceptable to Landlord. Such agreement shall provide,
among other things, that said successor shall not be (a) bound by any prepayment of more man one
(1) month’s rent, (ii) liable for the return of any Security Deposit not actually received by said
successor, or (iii) bound by any material amendment of this Lease made after the later of the
initial effective date of this Lease, or the date that such successor’s lien or interest first
arose, unless said successor shall have consented to such amendment.

     19.3 Estoppel Certificates. Within fifteen (15) days after written request from Landlord,
Tenant at Tenant’s sole cost shall execute, acknowledge and deliver to Landlord a written
certificate in favor of Landlord and any prospective lender on or purchaser of the Center or any
part thereof, (a) that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modifications and certifying that this Lease is in full force and effect
as so modified), (b) the amount of any rent paid in advance, and (c) that, to Tenant’s knowledge,
there are no uncured defaults on the part of Landlord, or specifying the nature of such defaults if
any are claimed. In addition to the foregoing, such certificate shall

24

 

include Tenant’s certification to such other matters, and be on such form, as Landlord or
such prospective lender or purchaser shall reasonably require. If
Tenant fails to deliver such
certificate within said 15-day period, Tenant shall be liable for the immediate payment of all
foreseeable and unforeseeable damages, penalties and reasonable attorneys’ fees and costs incurred
by Landlord as a result of such failure. Tenant’s failure to deliver such certificate within said
15-day period shall constitute a conclusive acknowledgment by Tenant: (i) that this Lease is in
full force and effect without modification except as may be represented by Landlord, (ii) that not
more than one month’s rent has been paid in advance, and (iii) that there are no uncured defaults
in Landlord’s performance.

20. SURRENDER OF PREMISES.

     20.1 Condition of Premises. Upon the expiration or earlier termination of this Lease, Tenant
shall surrender the Premises to Landlord, broom clean and in the same condition and state of repair
as at the commencement of the Lease Term, except for ordinary wear and tear that Tenant is not
otherwise obligated to remedy under the provisions of this Lease. Tenant shall deliver all keys to
the Premises and the building(s) of which the Premises are a part to Landlord. Upon Tenant’s
vacation of the Premises, Tenant shall remove all portable furniture, trade fixtures, machinery,
equipment, signs and other items of personal property (unless prohibited from doing the same under
Section 20.2), and shall remove any Alterations (whether or not made with Landlord’s consent) that
Landlord may require Tenant to remove. Tenant shall repair all damage to the Premises caused by
such removal and shall restore the Premises to its prior condition, all at Tenant’s expense. Such
repairs shall be performed in a manner satisfactory to Landlord and shall include, but are not
limited to, the following: capping all plumbing, capping all electrical wiring, repairing all holes
in walls, restoring damaged floor and/or ceiling tiles, and thorough cleaning of the Premises. If
Tenant fails to remove any items that Tenant has an obligation to remove under this Section when
required by Landlord or otherwise, such items shall, at Landlord’s option, become the property of
Landlord and Landlord shall have the right to remove and retain or dispose of the same in any
manner, without any obligation to account to Tenant for the proceeds thereof. Tenant waives all
claims against Landlord for any damages to Tenant resulting from Landlord’s retention or
disposition of such Alterations or personal property, Tenant shall be liable to Landlord for
Landlord’s costs of removing, storing and disposing of such items.

     20.2 Removal of Certain Alterations, Fixtures and Equipment Prohibited. All Alterations,
fixtures (whether or not trade fixtures), machinery, equipment, signs and other items of personal
property that Landlord has not required Tenant to remove under Section 20.1 shall become Landlord’s
property and shall be surrendered to Landlord with the Premises, regardless of who paid for the
same. In particular and without limiting the foregoing, Tenant shall not remove any of the
following materials or equipment without Landlord’s prior written consent, regardless of who paid
for the same and regardless of whether the same are permanently attached to the Premises: power
wiring and power panels; piping for industrial gasses or liquids; laboratory benches, sinks,
cabinets and casework; fume hoods or specialized air-handling and evacuation systems; drains or
other equipment for the handling of waste water or hazardous materials; computer, telephone and
telecommunications wiring, panels and equipment; lighting and lighting fixtures; wall coverings;
drapes, blinds and other window coverings; carpets and other floor coverings; heaters, air
conditioners and other heating or air conditioning equipment; fencing; security gates and systems;
and other building operating equipment and decorations.

     20.3 Surrender Plan. At least sixty (60) days prior to the expiration of the Term (or such
earlier time that Tenant intends to remove any furnishings, fixtures or equipment from the
Premises), Tenant shall

25

 

provide to Landlord a detailed list and narrative description of its plan of surrender (“Surrender
Plan”) that implements the terms of Sections 20.1 and 20.2, including a detailed listing and
description of the items in the Premises that Tenant intends to remove. Landlord shall have the
right to make reasonable objections to or modifications of such Surrender Plan, and Tenant shall
satisfy Landlord’s objections at least thirty (30) days prior to the expiration of the Term (or
any earlier date that Tenant intends to begin removing items). Tenant’s surrender of the Premises
and removal and repair thereof shall follow in all respects the Surrender Plan, as the same may have
been modified to satisfy Landlord, and on all of the other terms and conditions of this Lease.
Landlord shall have the right to have a representative observe all aspects of Tenant’s vacation of
the Premises to ensure compliance with this Lease and the Surrender Plan.

     20.4 Holding Over. Tenant shall vacate the Premises upon the expiration or earlier termination
of this Lease, and Tenant shall indemnify, protect, hold harmless and defend Landlord against all
liabilities, damages and expenses incurred by Landlord as a result of any delay by Tenant in
vacating the Premises. If Tenant remains in possession of the Premises or any part thereof after
the expiration of the Lease Term with Landlord’s written permission, Tenant’s occupancy shall be a
tenancy from month-to-month only, and not a renewal or extension hereof. All provisions of this
Lease (other than those relating to the term) shall apply to such month-to-month tenancy, except
that the Minimum Monthly Rent shall be increased to 200% of the Minimum Monthly Rent in effect
during the last month of the Lease Term. No acceptance of rent, negotiation of rent checks or other
act or omission of Landlord or its agents shall extend the Expiration Date of this Lease other than
a writing executed by Landlord giving Tenant permission to remain in occupancy beyond the
Expiration Date under the terms of the immediately preceding sentence.

21. DEFAULT BY TENANT.

     The occurrence of any of the following shall constitute an “Event of Default” under this Lease
by Tenant:

          (a) Failure to pay when due the rent or any other monetary sums required hereunder, if such
failure continues for five (5) days after written notice by Landlord to Tenant. Landlord’s notice
described herein is intended to satisfy, and is not in addition to, any and all legal notices
required prior to commencement of an unlawful detainer action, including without limitation the
notice requirements of California Code of Civil Procedure
Sections 1161 et seq.

          (b) Failure to perform any other agreement or obligation of Tenant hereunder, if such failure
continues for thirty (30) days after written notice by Landlord to Tenant, except as to those
Events of Default that are noncurable, in which case no such grace period shall apply. Landlord’s
notice described herein is intended to satisfy, and is not in addition to, any and all legal
notices required prior to commencement of an unlawful detainer action, including without limitation
the notice requirements of California Code of Civil Procedure
Sections 1161 et seq.

          (c) Abandonment or vacation of the Premises by Tenant, or failure to occupy the Premises for a
period of ten (10) consecutive days.

          (d) If any of the following occurs: (i) a petition is filed for an order of relief under the
federal Bankruptcy Code or for an order or decree of insolvency or
reorganization or rearrangement under any state or federal law, and such petition is not
dismissed within thirty (30) days after the filing thereof; (ii) Tenant makes a general assignment
for the benefit of creditors; (iii) a receiver or trustee is appointed to take possession of any
substantial part of Tenant’s assets, unless such appointment is vacated within thirty (30) days
after the date thereof; (iv) Tenant consents to or suffers an attachment, execution or other
judicial seizure of any substantial part of its assets or its interest under this Lease, unless
such process is released

26

 

or satisfied within thirty (30) days after the occurrence thereof; or (v) Tenant’s net worth,
determined in accordance with generally accepted accounting principles consistently applied,
decreases, at any time during the Lease Term, below Five Million Dollars ($5,000,000) in
shareholder’s equity. If a court of competent jurisdiction determines that any of the foregoing
events is not a default under this Lease, and a trustee is appointed to take possession (or if
Tenant remains a debtor in possession), and such trustee or Tenant transfers Tenant’s interest
hereunder, then Landlord shall receive, as Additional Rent, the difference between the rent (or
other consideration) paid in connection with such transfer and the rent payable by Tenant
hereunder. Any assignee pursuant to the provisions of any bankruptcy law shall be deemed without
further act to have assumed all of the obligations of the Tenant hereunder arising on or after the
date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an
instrument confirming such assumption.

          (e) The occurrence of any other event that is deemed to be an Event of Default under any other
provision of this Lease.

22. REMEDIES.

     Upon the occurrence of any Event of Default by Tenant, Landlord shall have the following
remedies, each of which shall be cumulative and in addition to any other remedies now or hereafter
available at law or in equity:

     22.1 Termination of Lease. Landlord can terminate this Lease and Tenant’s right to possession of
the Premises by giving written notice of termination, and then re-enter the Premises and take
possession thereof. No act by Landlord other than giving written notice to Tenant of such
termination shall terminate this Lease. Upon termination, Landlord has the right to recover all
damages incurred by Landlord as a result of Tenant’s default, including:

          (a) The worth at the time of award of any unpaid rent that had been earned at the time of such
termination; plus

          (b) The worth at the time of award of the amount by which the unpaid rent that would have been
earned after the date of termination until the time of award exceeds the amount of the loss of rent
that Tenant proves could have been reasonably avoided; plus

          (c) The worth at the time of award of the amount by which the unpaid rent for the balance of
the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided; plus

          (d) Any other amount necessary to compensate Landlord for all the detriment proximately caused
by Tenant’s default, including, but not limited to (i) expenses for cleaning, repairing or
restoring the Premises, (ii) expenses for altering, remodeling or otherwise improving the Premises
for the purpose of reletting, (iii) brokers’ fees and commissions, advertising costs and other
expenses of reletting the Premises, (iv) costs of carrying the Premises, such as taxes, insurance
premiums, utilities and security precautions, (v) expenses in retaking possession of the Premises,
(vi) attorneys’ fees and costs, (vii) any unearned brokerage commissions paid in connection with
this Lease, and (viii) reimbursement of any previously waived or
abated Minimum Monthly Rent and/or Additional Rent; plus

          (e) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as
may be permitted from time to time under applicable law. As used in paragraphs (a) and (b) above,
the “worth at the time of award” shall be computed by allowing interest at the maximum permissible
legal rate. As used in paragraph (c) above, the “worth at the time of award” shall be computed by
discounting such amount

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at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).

     22.2 Continuation of Lease. Landlord has the remedy described in California Civil Code Section
1951.4 (Landlord may continue the Lease in effect after Tenant’s breach and abandonment and recover
rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable
limitations), as follows:

          (a) Landlord can continue this Lease in full force and effect without terminating Tenant’s right of
possession, and Landlord shall have the right to collect rent and other monetary charges when due
and to enforce all other obligations of Tenant hereunder. Landlord shall have the right to enter
the Premises to do acts of maintenance and preservation of the Premises, to make alterations and
repairs in order to relet the Premises, and/or to undertake other efforts to relet the Premises.
Landlord may also remove personal property from the Premises and store the same in a public
warehouse at Tenant’s expense and risk. No act by Landlord permitted under this paragraph shall
terminate this Lease unless a written notice of termination is given by Landlord to Tenant or
unless the termination is decreed by a court of competent jurisdiction.

          (b) In furtherance of the remedy set forth in this Section, Landlord may relet the Premises or
any part thereof for Tenant’s account, for such term (which may extend beyond the Lease Term), at
such rent, and on such other terms and conditions as Landlord may deem advisable in its sole
discretion Tenant shall be liable immediately to Landlord for all costs Landlord incurs in
reletting the Premises. Any rents received by Landlord from such reletting shall be applied to the
payment of: (i) any indebtedness other than rent due hereunder from Tenant to Landlord, (ii) the
costs of such reletting, including brokerage and reasonable attorneys’ fees and costs, and the cost
of any alterations and repairs to the Premises, and (iii) the payment of rent due and unpaid
hereunder, including any previously waived or abated rent. Any remainder shall be held by Landlord
and applied in payment of future amounts as the same become due and payable hereunder. In no event
shall Tenant be entitled to any excess rent received by Landlord after an Event of Default by
Tenant and the exercise of Landlord’s remedies hereunder. If the rent from such reletting during
any month is less than the rent payable hereunder, Tenant shall pay such deficiency to Landlord
upon demand.

          (c) Landlord shall not, by any re-entry or other act, be deemed to have accepted any surrender
by Tenant of the Premises or Tenant’s interest therein, or be deemed to have terminated this Lease
or Tenant’s right to possession of the Premises or the liability of Tenant to pay rent accruing
thereafter or Tenant’s liability for damages under any of the provisions hereof, unless Landlord
shall have given Tenant notice in writing that it has so elected to terminate this Lease.

          (d) Tenant
acknowledges and agrees that the restrictions on the Transfer of the Lease set forth
in Article 18 of this Lease constitute reasonable restrictions on such transfer for purposes of
this Section and California Civil Code Section 1951.4.

     22.3 Performance By Landlord. If Tenant fails to pay any sum of money or perform any other act
to be performed by Tenant hereunder, and such failure continues for fifteen (15) days after notice
by Landlord, Landlord shall have the right (but not the obligation) to make such payment or perform
such other act without waiving or releasing Tenant from its obligations. All sums so paid by
Landlord and all necessary incidental costs, together with interest thereon at the rate specified
in Section 22.4, shall be payable to Landlord on demand. Landlord shall have the same rights and
remedies in the event of nonpayment by Tenant as in the case of default by Tenant in the payment of
the rent.

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     22.4 Late Charge; Interest on Overdue Payments. The parties acknowledge that late
payment by Tenant of Minimum Monthly Rent or any Additional Rent will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be extremely difficult
and impractical to determine, including, but not limited to,
processing and accounting charges, administrative expenses, and additional interest
expenses or late charges that Landlord maybe required to pay as a result of late payment on
Landlord’s obligations. Therefore, if any installment of Minimum Monthly Rent or
Additional Rent is not received by Landlord on the due date, and without regard to whether
Landlord gives Tenant notice of such failure or exercises any of its remedies upon an Event
of Default, Tenant shall pay a late charge equal to the greater of five percent (5%) of the
overdue amount or One Hundred Dollars ($100), as Additional Rent hereunder. The parties
hereby agree that such late charge represents a fair and reasonable estimate of the damages
Landlord will incur by reason of late payment by Tenant. In addition, any amount due from
Tenant that is not paid when due shall bear interest at a rate equal to two percent (2%) over
the then current Bank of America prime or reference rate or ten percent (10%) per annum,
whichever is greater, but not in excess of the maximum permissible legal rate, from the date
such payment is due until the date paid by Tenant. Landlord’s acceptance of any interest or
late charge shall not constitute a waiver of Tenant’s default or prevent Landlord from
exercising any other rights or remedies available to Landlord.

     22.5 Landlord’s Right to Require Advance Payment of Rent; Cashier’s Checks. If Tenant is
late in paying any component of rent more than three (3) times during the Lease Term,
Landlord shall have the right, upon notice to Tenant, to require that all rent be paid three
(3) months in advance. Additionally, if any of Tenant’s checks are returned for nonsufficient
funds, or if Landlord at any time serves upon Tenant a Three Day Notice to Pay Rent or Quit
(pursuant to California Civil Code Sections 1161 et seq. or any successor or similar
unlawful detainer statutes), Landlord may, at its option, require that all future rent
(including any sums demanded in any subsequent three (3) day notice) be paid exclusively by
money order or cashier’s check.

23. DEFAULT BY LANDLORD.

     23.1
Notice to Landlord. Landlord shall not be in default under this Lease unless
Landlord fails to perform an obligation required of Landlord within a reasonable time, but in
no event later than thirty (30) days after written notice by Tenant to Landlord and to each
Mortgagee as provided in Section 23.2, specifying the nature of the alleged default;
provided, however, that if the nature of the obligation is such that more than thirty (30)
business days are required for performance, then Landlord shall not be in default if Landlord
commences performance within such 30-day period and thereafter diligently prosecutes the same
to completion.

     23.2 Notice to Mortgagees. Tenant agrees to give each mortgagee or trust deed holder on
the Premises or the Center (“Mortgagee”), by registered mail, a copy of any notice of default
served upon Landlord, provided that Tenant has been previously notified in writing of the
address of such Mortgagee. Tenant further agrees that if Landlord fails to cure such default
within the time provided for in this Lease, then the Mortgagees shall have an additional
thirty (30) days within which to cure such default, or if such default cannot reasonably be
cured within that time, then such additional time as may be necessary if, within said 30-day
period, any Mortgagee has commenced and is diligently pursuing the remedies necessary to cure
the default (including but not limited to commencement of foreclosure proceedings if
necessary to affect such cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.

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     23.3 Limitations on Remedies Against Landlord. In the event Tenant has any claim or cause of
action against Landlord: (a) Tenant’s sole and exclusive remedy shall be against Landlord’s
interest in the building(s) of which the Premises are a part, and neither Landlord nor any partner
of Landlord nor any other property of Landlord shall be liable for any deficiency, (b) no partner
of Landlord shall be sued or named as a party in any suit or action (except as may be necessary to
secure jurisdiction over Landlord), (c) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction over the partnership), and no such
partner shall be required to answer or otherwise plead to any service of process, (d) no judgment
shall be taken against any partner of Landlord and any judgment taken against any partner of
Landlord may be vacated and set aside at anytime, and (e) no writ of execution will ever be levied
against the assets of any partner of Landlord. The covenants and agreements set forth in this
Section shall be enforceable by Landlord and/or by any partner of
Landlord. If Landlord fails to give
any consent that a court later holds Landlord was required to give under the terms of this Lease,
Tenant shall be entitled solely to specific performance and such other remedies as may be
specifically reserved to Tenant under this Lease, but in no event shall Landlord be responsible
for monetary damages (including incidental and consequential damages) for such failure to give
consent.

24.
GENERAL PROVISIONS.

     24.1 Action or Defense by Tenant. Any claim, demand or right of defense of any kind by Tenant
that is based upon or arises in any connection with the Lease or negotiations prior to its
execution shall be barred unless Tenant commences an action thereon or initiates a legal proceeding
or defense by reason thereof within six (6) months after the date of the occurrence of the event,
act or omission to which the claim, demand or right of defense relates. Tenant acknowledges and
understands that, after having had an opportunity to consult with legal counsel, the purpose of
this paragraph is to shorten the time period within which Tenant would otherwise have to raise such
claims, demands or rights of defense.

     24.2 Arbitration and Mediation; Waiver of Jury Trial. Except as provided in this Section, if
any dispute ensues between Landlord and Tenant arising out of or concerning this Lease, and if said
dispute cannot be settled through direct discussions between the parties, the parties shall first
to attempt to settle the dispute through mediation before a mutually acceptable mediator. The cost
of mediation shall be divided equally between the parties. Thereafter, any remaining, unresolved
disputes or claims shall be resolved by binding arbitration in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the arbitrator maybe
entered in any court of competent jurisdiction. The prevailing party in any such arbitration shall
be entitled to recover reasonable costs and attorneys’ fees and costs as determined by the
arbitrator; provided, however, that the foregoing provisions regarding mediation and arbitration
shall not apply to (a) any issue or claim that might properly be adjudicated in an unlawful
detainer proceeding, or (b) to any issue or claim that Landlord elects not to have resolved through
arbitration and with respect to which Landlord commences an action in law or equity to determine
the same. Without limiting the foregoing, Landlord and Tenant hereby waive trial by jury in any
action, proceeding or counterclaim (including any claim of injury or damage and any emergency and
other statutory remedy in respect thereof) brought by either against the other on any matter
arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant’s use or occupancy of the Premises.

     24.3 Attorneys’ Fees. If either party brings any legal action or proceeding, declaratory or
otherwise, arising out of this Lease, including any suit by Landlord to
recover rent or possession of the Premises or to otherwise enforce this Lease, the losing
party shall pay the prevailing party’s costs and

30

 

attorneys’ fees and costs incurred in such proceeding. If Landlord issues notice(s) to pay
rent, notice(s) to perform covenant, notice(s) of abandonment, or comparable documents as a result
of Tenant’s default under this Lease, and if Tenant cures such default, Tenant shall pay to
Landlord the reasonable costs incurred by Landlord, including Landlord’s reasonable attorneys’
fees and costs, of preparation and delivery of same.

     24.4 Authority of Tenant. Tenant represents and warrants that it has full power and authority
to execute and fully perform its obligations under this Lease pursuant to its governing
instruments, without the need for any further action, and that the person(s) executing this
Agreement on behalf of Tenant are the duly designated agents of Tenant and are authorized to do so.
Prior to execution of this Lease, Tenant shall supply Landlord with such evidence as Landlord may
request regarding the authority of Tenant to enter into this Lease. Any actual or constructive
taking of possession of the Premises by Tenant shall constitute a ratification of this Lease by
Tenant.

     24.5 Binding Effect. Subject to the provision of Article 18 restricting transfers by Tenant
and subject to Section 24.27 regarding transfer of Landlord’s interest, all of the provisions of
this Lease shall bind and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.

     24.6 Brokers. Tenant warrants that it has had no dealings with any real estate broker or agent
in connection with the negotiation of this transaction, and it knows of no real estate broker or
agent who is entitled to a commission in connection with this transaction. Tenant agrees to
indemnify, protect, hold harmless and defend Landlord from and against any obligation or liability
to pay any commission or compensation to any other party arising from the act or agreement of
Tenant. Tenant acknowledges that certain partners, affiliates or members of Landlord, or their
respective officers, directors, shareholders or employees, may hold real estate sales person or
broker licenses, and additionally may be employees of Asset Management Group and as such may have
negotiated, or may have a financial interest in, this transaction.

     24.7 Construction. The headings and captions used in this Lease are for convenience only and
are not a part of the terms and provisions of this Lease. In any provision relating to the conduct,
acts or omissions of Tenant, the term “Tenant” shall include Tenant, its subtenants and assigns and
their respective agents, employees, contractors, and invitees, and any others using the Premises
with Tenant’s express or implied permission. Any use in this Lease, or in any addendum, amendment
or other document related hereto, of the terms “lessor” or “lessee” to refer to a party to this
Lease shall be deemed to be references to Landlord and Tenant, respectively.

     24.8 Counterparts. This Lease may be executed in multiple copies, each of which shall be
deemed an original, but all of which shall constitute one Lease binding on all parties after all
parties have signed such a counterpart.

     24.9 Covenants and Conditions. Each provision to be performed by Tenant shall be deemed to be
both a covenant and a condition.

     24.10 Entire Agreement. This Lease, together with any and all exhibits, schedules and addenda
attached or referred to herein, constitutes the entire agreement between the parties with respect
to the subject matter hereof. There are no oral or written agreements or representations between
the parties hereto affecting this Lease, and this Lease supersedes, cancels, merges any and all
previous verbal or written negotiations, arrangements, representations, brochures, displays,
models, photographs, renderings, floorplans, elevations, projections, estimates, agreements and
understandings if any, made by or between

31

 

Landlord and Tenant and their agents, with respect to the subject matter, and none thereof shall
be used to interpret, construe, supplement or contradict this Lease. This Lease and all
amendments thereto is and shall be considered to be the only agreement between the parties hereto
and their representatives and agents. There are no other representations or warranties between
the parties, and all reliance with respect to representations is solely based upon the
representations and agreements contained in this Lease.

     24.11 Exhibits. All exhibits, schedules and addenda attached or referred to herein are hereby
incorporated herein by reference.

     24.12 Financial Statements. Within ten (10) days after written request from Landlord, Tenant shall
deliver to Landlord such financial statements as are reasonably requested by Landlord to verify the
net worth of Tenant, or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any proposed or actual lender or purchaser of the Premises designated by Landlord any
financial statements required by such party to facilitate the sale, financing or refinancing of the
Premises, including the past three (3) years’ financial statements. Tenant represents and warrants
to Landlord that each such financial statement is a true and accurate statement as of the date of
such statement. Landlord shall take reasonable precautions to protect the confidentiality of such
financial statements. Tenant hereby irrevocably authorizes Landlord to conduct credit checks and
other investigations into Tenant’s financial affairs.

     24.13 Force Majeure. If Landlord is delayed in performing any of its obligations hereunder due
to strikes, labor problems, inability to procure utilities, materials, equipment or transportation,
governmental regulations, weather conditions, riots, insurrection, or war, or other events beyond
Landlord’s control, then the time for performance of such obligation shall be extended to the
extent reasonably necessary as a result of such event.

     24.14 Governing Law. This Lease shall be governed, construed and enforced in accordance with
the laws of the State of California.

     24.15 Joint and Several Liability. If more than one person or entity executes this Lease as
Tenant, each of them is jointly and severally liable for all of the obligations of Tenant
hereunder.

     24.16 Modification. The provisions of this Lease may not be modified or amended, except by a
written instrument signed by all parties.

     24.17 Modification for Lender. If, in connection with obtaining financing or refinancing for
the Premises or the Center, Landlord’s lender requests reasonable modifications to this Lease,
Tenant will not unreasonably withhold or delay its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or materially and adversely
affect Tenant’s rights hereunder.

     24.18 Nondiscrimination. Tenant for itself and its officers, directors, shareholders,
partners, members, principals, employees, agents, representatives, and other related entities and
individuals, and their respective successors and assigns, agrees to comply fully with any and all
laws and other requirements prohibiting discrimination against any person or group of persons on
account of race, color, religion, creed, sex, marital status, sexual orientation, national origin,
ancestry, age, physical handicap or medical condition, in the use occupancy or patronage of the
Premises and/or of Tenant’s business. Tenant shall indemnify, protect, hold harmless and defend
Landlord and Landlord’s officers, directors, shareholders, partners, members, principals,
employees, agents, representatives, and other related entities and individuals, and their
respective successors and assigns, from and against all damage and liability incurred by Landlord
in the event of any violation of the foregoing covenant or because of any event of or practice of
discrimination against any such persons or group of persons by Tenant or its officers, directors,
shareholders, partners,

32

 

members, principals, employees, agents, representatives, and other related entities and
individuals, and their respective successors and assigns, in accordance with the
indemnification provisions of Article 13.

     24.19 Notice. Any and all notices to either party shall be personally delivered or sent
by certified mail, return receipt requested, postage prepaid, addressed to the party to be notified
at the address specified in Section 1.1, or at such other address as such party may from time to
time designate in writing. Notice shall be deemed delivered on the date of personal delivery or
three (3) business days after deposit in the U.S. Mail, certified, return receipt requested.
Provided, however, that any notice to Tenant required pursuant to the terms of California Code of
Civil Procedure Sections 1161 et seq. may be given in the manner provided in such sections.

     24.20 Partial Invalidity. If any provision of this Lease is determined by a court of competent
jurisdiction to be invalid or unenforceable, the remainder of this Lease shall not be affected
thereby. Each provision shall be valid and enforceable to the fullest extent permitted by law.

     24.21 Quiet Enjoyment. Landlord agrees that Tenant, upon paying the rent and performing the
terms, covenants and conditions of this Lease, may quietly have, hold and enjoy the Premises from
and after Landlord’s delivery of the Premises to Tenant and until the end of the Lease Term;
subject, however, to the lien and provisions of any mortgage or deed of trust to which this Lease is or becomes
subordinate.

     24.22 Recording. Tenant shall not record this Lease or any memorandum hereof without
Landlord’s prior written consent.

     24.23 Relationship of the Parties. Nothing contained in this Lease shall be deemed or
construed as creating a partnership, joint venture, principal-agent, or employer-employee
relationship between Landlord and any other person or entity (including, without limitation,
Tenant) or as causing Landlord to be responsible in any way for the debts or obligations of such
other person or entity.

     24.24 Relocation of Tenant. In the event Landlord requires the Premises, or a portion thereof,
for use in conjunction with other premises or for other reasons related to the planning program for
the Center, Landlord, upon delivering written notice to Tenant (the “Relocation Notice”), shall
have the right to relocate all or a portion of Tenant’s occupancy to other space in the Center, at
Landlord’s sole cost and expense, and the terms and conditions of the original Lease shall remain
in full force and effect, except that the Premises will be in a new location. However, if the new
space does not meet with Tenant’s reasonable approval, Tenant shall have the right to terminate
this Lease upon delivering notice to Landlord within fifteen (15) days after Tenant’s receipt of
the Relocation Notice. If Tenant elects to terminate the Lease pursuant to this Section, the
termination shall be effective on the effective date of the proposed relocation of Tenant as
indicated in the Relocation Notice.

     24.25 Rights of Redemption Waived. Tenant hereby expressly waives any and all rights of
redemption under any present or future laws in the event Tenant is evicted or dispossessed for any
cause, or in the event Landlord obtains possession of the Premises by reason of Tenant’s violation
of any of the covenants and conditions of this Lease or otherwise.

     24.26 Time of the Essence. Time is of the essence of each and every provision of this Lease.

     24.27 Transfer of Landlord’s Interest. In the event of a sale, assignment, exchange or other
disposition of Landlord’s interest in the Premises, other than a transfer for security purposes
only, Landlord shall be relieved of all obligations and liabilities accruing hereunder after the
effective date of said sale, assignment, exchange or other disposition, provided that any Security
Deposit or other funds then held by Landlord in which Tenant has an interest are delivered to
Landlord’s successor. The obligations to be

33

 

performed by Landlord hereunder shall be binding on Landlord’s successors and assigns only
during their respective periods of ownership.

     24.28 Waiver. No provision of this Lease or the breach thereof shall be deemed waived,
except by written consent of the party against whom the waiver is claimed. A waiver of any such
breach shall not be deemed a waiver of any preceding or succeeding breach of the same or any other
provision. No delay or omission by Landlord in exercising any of its remedies shall impair or be
construed as a waiver thereof, unless such waiver is expressly set forth in a writing signed by
Landlord. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver
of any preceding breach by Tenant, other than the failure of Tenant to pay the particular rental so
accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of
such rent.

THE SUBMISSION OF THIS LEASE FOR EXAMINATION AND/OR SIGNATURE BY TENANT IS NOT A
COMMITMENT BY LANDLORD OR ITS AGENTS TO RESERVE THE PREMISES OR TO LEASE THE PREMISES TO
TENANT. THIS LEASE SHALL BECOME EFFECTIVE AND LEGALLY BINDING ONLY UPON FULL EXECUTION AND
DELIVERY BY BOTH LANDLORD AND TENANT. UNTIL LANDLORD DELIVERS A FULLY EXECUTED COUNTERPART HEREOF TO TENANT,
LANDLORD HAS THE RIGHT TO OFFER AND TO LEASE THE PREMISES TO ANY OTHER PERSON TO THE
EXCLUSION OF TENANT.

EXECUTED, by Landlord and Tenant as of the date first written above.

	 	 	 	 	 	 	 	 	 	 	 
	LANDLORD:	 	 	 	TENANT:
	 
	 	 	 	 	 	 	 	 	 	 
	SORRENTO PLAZA,	 	 	 	AVANIR PHARMACEUTICALS,
	a California limited partnership	 	 	 	a California corporation
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	COLLINS DEVELOPMENT COMPANY,	 	 	 	By:	 	/s/ Gerald J. Yakatan
	 

	 	 	 	 	 	 	 	 	 	 
	 	 	a California corporation, General Partner	 	 	 	Print Name: GERALD J. YAKATAN
	 	 	 	 	 	 	 	 	Title: President / CEO
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert F. Petersen
	 	 	 	By:
	 	/s/ Gregory P. Hanson
	 

	 	 	 	 
	 	 	 	 	 	 
	 	 	Print Name: ROBERT F. PETERSEN	 	 	 	Print Name: GREGORY P. HANSON
	 	 	Title: S.V. P.	 	 	 	Title: VP / CFO

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EXHIBIT “B”

RULES AND REGULATIONS

The following Rules and Regulations shall apply to the Center. Tenant agrees to comply with the
same and to require its agents, employees, contractors, customers and invitees to comply with
the same. Landlord shall have the right from time to time to amend or supplement these Rules and
Regulations, and Tenant agrees to comply, and to require its agents, employees, contractors,
customers and invitees to comply, with such amended or supplemented Rules and Regulations, provided
that (a) notice of such amended or supplemental Rules and Regulations is given to Tenant, and (b)
such amended or supplemental Rules and Regulations apply uniformly to all tenants of the Center. If
Tenant or its subtenants, employees, agents, or invitees violate any of these Rules and
Regulations, resulting in any damage to the Center or increased costs of maintenance of the Center,
or causing Landlord to incur expenses to enforce the Rules and Regulations, Tenant shall pay all
such costs to Landlord as Additional Rent. In the event of any conflict between the Lease and these
or any amended or supplemental Rules and Regulations, the provisions of the Lease shall control.

	1.	 	Tenant shall be responsible at its sole cost for the removal of all of Tenant’s refuse or
rubbish. All garbage and refuse shall be disposed of outside of the Premises, shall be placed
in the kind of container specified by Landlord, and shall be prepared for collection in the
manner and at the times and places specified by Landlord. If Landlord provides or designates a
service for picking up refuse and garbage, Tenant shall use the same at Tenant’s sole cost.
Tenant shall not burn any trash or garbage of any kind in or about the Premises. If Landlord
supplies janitorial services to the Premises, Tenant shall not, without Landlord’s prior
written consent, employ any person or persons other than Landlord’s janitorial service to
clean the Premises.

	2.	 	No aerial, satellite dish, transceiver, or other electronic communication equipment shall be
erected on the roof or exterior walls of the Premises, or in any other part of the Center,
without Landlord’s prior written consent. Any aerial, satellite dish, transceiver, or other
electronic communication equipment so installed without Landlord’s prior written consent shall
be subject to removal by Landlord without notice at any time and without liability to
Landlord.

	3.	 	No loudspeakers, televisions, phonographs, radios, or other devices shall be used in a manner
so as to be heard or seen outside of the Premises without Landlord’s prior written consent.
Tenant shall conduct its business in a quiet and orderly manner so as not to create
unnecessary or unreasonable noise. Tenant shall not cause or permit any obnoxious or foul
odors that disturb the public or other occupants of the Center. If Tenant operates any
machinery or mechanical equipment that causes noise or vibration that is transmitted to the
structure of the building(s) of which the Premises are a part, or to other parts of the
Center, to such a degree as to be objectionable to Landlord or to any other occupant of the
Center, Tenant shall install and maintain, at Tenant’s expense, such vibration eliminators or
other devices sufficient to eliminate the objectionable noise or vibration.

	4.	 	Tenant shall keep the outside areas immediately adjoining the Premises clean and free from
dirt, rubbish, pallets and other debris to the satisfaction of Landlord. If Tenant fails to
cause such outside

B-1 

 

	 	 	areas to be maintained as required within twelve (12) hours after verbal notice that the
same do not so comply, Tenant shall pay a fee equal to the greater of Fifty Dollars ($50,00) or
the costs incurred by Landlord to clean up such outside areas.

	5.	 	Tenant shall not store any merchandise, inventory, equipment, supplies, finished or
semi-finished products, raw materials, or other articles of any nature outside the Premises
(or the building constructed thereon if the Premises includes any outside areas) without
Landlord’s prior written consent.

	6.	 	Tenant and Tenant’s subtenants, employees, agents, or invitees shall park only the number of
cars allowed under the Lease and only in those portions of the parking area designated for
that purpose by Landlord. Upon request by Landlord, Tenant shall provide the license plate
numbers of the cars of Tenant and Tenant’s employees in order to facilitate enforcement of
this regulation. Tenant and Tenant’s employees shall not store vehicles or equipment in the
parking areas, or park in such a manner as to block any of the accessways serving the Center
and its occupants.

	7.	 	The Premises shall not be used for lodging, sleeping,
cooking (other than microwave or toaster oven),
or for any immoral or
illegal purposes, or for any purpose that will damage the Premises or the reputation thereof.
Landlord reserves the right to expel from the Building any person who is intoxicated or under
the influence of liquor or drugs or who shall act in violation of any of these Rules and
Regulations. Tenant shall not conduct or permit any sale by auction on the Premises without
the prior written consent of the Landlord. No video, pinball, or similar electronic game
machines of any description shall be installed, maintained or operated upon the Premises
without the prior written consent of Landlord.

	8.	 	Neither Tenant nor Tenant’s employees or agents shall disturb, solicit, or canvas any occupant
of the Center, and Tenant shall take reasonable steps to discourage others from doing the
same.

	9.	 	Except as otherwise permitted in the Lease, Tenant shall not keep in, or allow to be brought
into, the Premises or Building any pet, bird or other animal, other than (i) “seeing-eye” dogs
or other animals under the control of and specifically assisting any disabled person, or (ii)
animals used in the life science research activities of Tenant, but only to the extent
necessary for such activities.

	10.	 	The plumbing facilities shall not be used for any other purpose than that for which they are
constructed, and no foreign substance of any kind shall be disposed of therein. The expense of
any breakage, stoppage, or damage resulting from a violation of this provision shall be borne
by Tenant. Tenant shall not waste or use any excessive or unusual amount of water.

	11.	 	Tenant shall use, at Tenant’s cost, such pest extermination contractor as Landlord may direct
and at such intervals as Landlord may require.

B-2 

 

	12.	 	Tenant will protect the carpeting from undue wear by
providing carpet protectors under chairs with
casters, and by providing protective
covering in carpeted areas where spillage or excessive wear may occur.

	13.	 	Tenant shall be responsible for repair of any damage caused by the moving of freight,
furniture or other objects into, within, or out of the Premises or the Center. No heavy
objects (such as safes, furniture, equipment, freight, etc.) shall be placed upon any floor
without Landlord’s prior written approval as to the adequacy of the allowable floor loading at
the point where the objects are intended to be moved or stored. Landlord may specify the time
of moving to minimize any inconvenience to other occupants of the Center. If the building(s)
of which the Premises are a part is equipped with a freight elevator, all deliveries to and
from the Premises shall be made using the freight elevator during the time periods specified
by Landlord, subject to such reasonable scheduling as Landlord in its discretion shall deem
appropriate.

	14.	 	Without Landlord’s prior written consent, no drapes or sunscreens of any nature shall be
installed in the Premises and the sash doors, sashes, windows, glass doors, lights and
skylights that reflect or admit light into the building shall not be covered or obstructed.
Landlord shall have the right to specify the type of window coverings that may be installed,
at Tenant’s expense. Tenant shall not mark, drive nails, screw or drill into, paint, or in any
way deface any surface or part of the building. Notwithstanding the foregoing, Tenant may hang
pictures, blackboards, or similar objects, provided Tenant repairs and repaints any nail or
screw holes, and otherwise returns the premises to the condition required under the Lease and
the expiration or earlier termination of the Lease Term. The expense of repairing any
breakage, stoppage, or damage resulting from a violation of this rule shall be borne by
Tenant.

	15.	 	No electrical wiring, electrical apparatus, or additional electrical outlets shall be
installed in the Premises without Landlord’s prior written approval. Any such installation not
so approved by Landlord may be removed by Landlord at Tenant’s expense. Tenant may not alter
any existing electrical outlets or overburden them beyond their designed capacity. Landlord
reserves the right to enter the Premises, with reasonable notice to Tenant, for the purpose of
installing additional electrical wiring and other utilities for the benefit of Tenant or
adjoining tenants. Landlord will direct electricians as to where and how telephone and affixed
wires are to be installed in the Premises. The location of telephones, call boxes, and other
equipment affixed to the Premises shall be subject to the prior written approval of Landlord.

	16.	 	If Tenant’s use of the Premises involves the sale and/or preparation of food, Tenant shall at
all times maintain a health department rating of “A” (or such other highest health department
or similar rating as is available). Any failure by Tenant to maintain such “A” rating twice in
any twelve (12) month period shall, at the election of Landlord, constitute a noncurable Event
of Default under the Lease.

	17.	 	Tenant shall comply with all safety, fire protection and evacuation procedures and
regulations established by Landlord or any governmental agency.

B-3 

 

	18.	 	Tenant assumes any and all responsibility for protecting its Premises from theft, robbery
and pilferage, which includes keeping doors locked and other means of entry to the Premises
closed.

	19.	 	If Tenant occupies any air-conditioned space, Tenant shall keep entry doors opening onto
corridors, lobby or courtyard closed at all times. All truck and loading doors shall be closed
at all times when not in use.

	20.	 	Tenant shall not paint any floor of the Premises without Landlord’s prior written consent.
Prior to surrendering the Premises upon expiration or termination of the Lease, Tenant shall
remove any paint or sealer therefrom (whether or not previously permitted by Landlord) and
restore the floor to its original condition as of the Commencement Date, reasonable wear and
tear excepted. Tenant shall not affix any floor covering to the floor of the Premises in any
manner except as approved by Landlord.

	 	 	 
	 

	 	 
	 

	 	 
	 

	 	Tenant’s Initials

B-4 

 

EXHIBIT A

 

 

EXHIBIT “D”

TENANT IMPROVEMENTS

          This Exhibit sets forth terms and provisions related to the construction of the
initial Tenant Improvements in the Premises. In general, Landlord shall be responsible for
constructing such Tenant Improvements, and paying for the same up to the amount of the Tenant
Improvement Allowance. Tenant is to be responsible for the cost of the Tenant Improvements that
exceed the Tenant Improvement Allowance.

          1. Definitions. The following terms shall have the following meanings in the Exhibit. Unless
otherwise defined herein, capitalized terms used in this Exhibit shall have the same meanings
ascribed to them in the Lease.

     (a) “Tenant Improvement Allowance” is the amount that Landlord will pay for the construction
of the Tenant Improvements and for related design, permitting, supervision and other “soft” costs.
The amount of the Tenant Improvements is Two Million Seven Thousand Seven Hundred Fifty Dollars
($2,007,750) (subject to adjustment pursuant to Section 2.2).

     (b) “Budget” shall mean the budget of construction, design, approval and related costs for
the construction of the Tenant Improvements.

     (c) “Construction Documents” are the plans, specifications, agreements, construction schedule
and other descriptions of the Tenant Improvements, as approved pursuant to Section 2 below. The
Construction Documents shall provide for corridors, lobbies, bathrooms, mechanical and electrical
systems, and fire exits which are designed for Tenant’s use during the Term of this Lease, but that
are also designed to accommodate multi-tenant configurations in the building(s) of which the
Premises are a part (including, without limitation separate metering for utilities), elevators, and
mechanical, plumbing and electrical equipment.

     (d) “Tenant Deposit” is the amount by which the estimated cost to complete the Tenant
Improvements exceeds the Tenant Improvement Allowance. Tenant shall deposit the Tenant
Deposit with Landlord in cash prior to the commencement of construction. If and to the extent that
the estimated cost to complete the Tenant Improvements changes, the amount of the Tenant Deposit
shall be appropriately adjusted.

     (e) “Tenant Delay” shall include any delay in the Substantial Completion of the Tenant
Improvements attributable to, without limitation, any of the following: (i) the wrongful or
negligent acts or failures to act, of Tenant or its agents or employees; (ii) any Change Order,
(iii) Tenant’s failure to timely submit any items required hereunder or any mutually-agreed
schedule, including, without limitation, information, authorizations or approvals, or deposit of
additional Tenant Deposit moneys; (iv) the time needed by

D-1 

 

Landlord to review, approve and construct Change Orders; and (v) Tenant’s failure to comply with
any other provision of this Lease.

     (f) “Substantial Completion” of the Tenant Improvements means the completion of the
improvements suitable for Tenant’s use thereof and issuance by the City of San Diego of a
certificate of occupancy, final building inspection report or similar approval, subject only to
minor clean-up or punch list items. The punch list items shall be completed within 30 days after
the substantial completion of the improvements.

          2. Production and Approval of Construction Documents, Budget and Other Items. Promptly after the full execution and delivery of this Lease, Landlord shall prepare and provide
to Tenant for Tenant’s reasonable approval the Construction Documents, the Budget, the approximate
Usable Area of file Premises and the consequent exact amount of the Tenant Improvement Allowance
and Tenant’s Deposit. Upon approval of the such items, Landlord and Tenant shall execute a letter
or other memorandum of such approval.

          3. Construction. Upon approval of the Construction Documents, Tenant shall diligently pursue
the completion of the Tenant Improvements. Landlord shall, from time to time, at the request of
Tenant, make progress payments to the contractors and subcontractors with respect to the Tenant
Improvements utilizing both the Tenant Improvement Allowance and the Tenant Deposit. Landlord shall
disburse the Tenant Improvement Allowance and the Tenant Deposit in proportion to the respective
amounts thereof then remaining to be disbursed. Such progress payments shall be made only after
satisfaction of the following:

          (a) Each progress payment shall be in accordance with the Construction Documents and within
the Budget;

          (b) Each progress payment shall be subject to a ten percent (10%) holdback;

          (c) Landlord or Landlord’s architect or agent shall have confirmed that the construction for
which the progress payment is requested has been fully completed; and

          (d) Landlord shall have received such proper lien releases, building permits, approvals,
documentation and other matters reasonably required by Landlord for such progress payment.

Landlord shall also withhold the last ten percent (10%) of the Tenant Improvement Allowance and
the Tenant Deposit until the lien-free expiration of the time for the filing of any mechanics’
liens claimed or which might be filed on account of any work ordered by Tenant as relates to the
completion of the Tenant Improvements. In the event the cost of construction of the Tenant
Improvements exceeds the available amount of the Tenant Improvement Allowance, Tenant shall be
obligated to pay such excess cost.

D-2 

 

          4. Change Orders. If Tenant requests or approves in writing any changes to the Construction
Documents (each, a “Change Order”), Tenant shall simultaneously submit to Landlord a sufficiently
detailed description of the requested changes or additions, and, if reasonably requested by
Landlord, a set of working drawings for such requested changes or additions. Landlord shall not
unreasonably withhold its consent to any such Change Order, provided that (i) such Change Order
meets Landlord’s original criteria for approving the work originally set forth in the Construction
Documents, (ii) in the Landlord’s good faith judgment, the requested changes or additions will not
have an adverse effect on the value of the Premises for re-letting, and (iii) the Change Order does
not materially affect the building(s) of which the Premises are a part’s structure or exterior
appearance and does not result in the use of materials in the construction of the Tenant
Improvements of a materially lesser quality than the materials approved by Landlord in connection
with the Construction Documents. Landlord shall respond to any request for approval of any Change
Order within three (3) business days, with the failure to respond to be deemed disapproval of such
Change Order. If such Change Orders, as approved by Landlord, increase the cost of completing the
Tenant Improvements, Tenant shall pay all such increased costs as part of its responsibility to pay
for all costs of the Tenant Improvements that exceed the amount of the Tenant Improvement
Allowance. Tenant shall be given credit for any change orders which, on a net basis, reduce the
cost of completing the Tenant Improvements.

          5. Return of Tenant Deposit. Upon completion of the Tenant Improvements and acceptance of the
same by Tenant, and upon the receipt by Landlord of final unconditional lien releases from all
contractors, subcontractors and materialmen, any amounts remaining of the Tenant Deposit shall be
returned to Tenant by Landlord. The Tenant Deposit shall not earn interest during the time it is on
deposit with Landlord. Any amount Tenant owes with respect to the Tenant Improvements in excess of
the Tenant Improvement Allowance and the Tenant Deposit shall be paid directly by Tenant, after
taking into account any remaining balance of Tenant Deposit, the final cost of the Tenant
Improvements, then Tenant shall pay the full amount of such shortfall to Landlord upon demand.

          6. Ownership of Tenant Improvements. All Tenant Improvements paid for by Landlord shall be
deemed to be owned by Landlord.

D-3 

 

EXHIBIT “E”

APPROVED FORM OF LETTER OF CREDIT

We hereby establish in your favor our irrevocable standby letter of credit number                     -which is
available with [Approved Bank] by payment against presentation of the original of this letter of
credit and your drafts at sight drawn on [Approved Bank], accompanied by the documents detailed
below:

A letter signed by a purported authorized representative of the Beneficiary certifying that
Beneficiary is entitled to draw on this Letter of Credit pursuant to that Standard Industrial Net
Lease between BC Sorrento, LLC, a California limited liability company (“Beneficiary”), and Avanir
Pharmaceuticals, a California corporation (“Avanir”) for the space located at 11404 and 11408
Sorrento Valley Road, San Diego, California 92121, as the same may be amended form time to time.
This letter of credit is irrevocable.

Special conditions:

This letter of credit shall automatically renew without amendment for an additional one year period
from the current or for any future expiration date, unless we shall notify you in writing by
certified mail, return receipt requested or overnight courier at least 60 days prior to the then
current expiration date that this letter of credit will not be renewed. Following such notification
and prior to the expiration of this letter of credit, you may draw upon this letter of credit by
presentation of the sight draft(s) mentioned above and Beneficiary signed statement certifying that
Avanir has failed to provide substitute letter of credit in the same principal amount, or such
reduced principal amount as may be permitted by Section 1 of the Lease, and on the same terms as
this letter of credit from an issuer reasonably satisfactory to you.

This letter of credit is transferable. Transfer of this letter of credit is subject to our consent
and our receipt of Beneficiary’s instructions in the form attached as Exhibit A, accompanied by the
original letter of credit and amendment(s) if any. All cost or expenses of such transfer shall be
for the account of the Beneficiary.

Partial draws are allowed under this letter of credit.

In no event will this letter of credit be extended beyond a full and final expiration date of
December 31, 2008.

 

 

FIRST AMENDMENT TO STANDARD INDUSTRIAL NET LEASE

(Avanir — Sorrento Plaza)

          This FIRST AMENDMENT TO STANDARD INDUSTRIAL NET LEASE is executed as of August 1, 2002, by and
between SORRENTO PLAZA, a California limited partnership (“Landlord”), and AVANIR PHARMACEUTICALS,
a California corporation (“Tenant”), with reference to the following facts:

RECITALS

          A. Landlord and Tenant have heretofore entered into that certain Standard Industrial Net Lease
dated May 20,2002 (the “Lease”), for the lease of premises located at 11404 and 11408 Sorrento
Valley Road, San Diego, California 92121.

          B. Landlord and Tenant desire to amend the Lease on the terms and conditions set forth herein.

          C. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the
Lease.

AMENDMENT

          NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Lease is hereby amended as follows:

          1. Lease Term. The Lease Term (Section 1.4) is hereby revised to be Ten years and no months,
beginning on the Commencement Date and ending on January 14, 2013 (the “Expiration Date”).

          2. Minimum Monthly Rent. The Minimum Monthly Rent (Section 1.5) is hereby revised to be the
following amounts for the following periods:

	 	 	 	 	 
	Period	 	Minimum Monthly Rent
	From the Commencement Date to and including 8/31/03
	 	$66,925 per month
	From 9/1/03 to and including 8/31/04
	 	$69,267 per month
	From 9/1/04 to and including 8/31/05
	 	$72,038 per month

1

 

	 	 	 	 	 
	Period	 	Minimum Monthly Rent
	From 9/1/05 to and including 8/31/06
	 	$74,920 per month
	From 9/1/06 to and including 8/31/07
	 	$77,916 per month
	From 9/1/07 to and including 8/31/08
	 	$81,033 per month
	From 9/1/08 to and including 8/31/09
	 	$84,274 per month
	From 9/1/09 to and including 8/31/10
	 	$87,645 per month
	From 9/1/10 to and including 8/31/11 .
	 	$91,151 per month
	From 9/1/11 to and including 1/14/13
	 	$94,797 per month

          3. No Other Change. Except as otherwise expressly set forth in this Amendment, all of the terms and
conditions of the Lease remain unchanged and in full force and effect.

          IN WITNESS WHEREOF, this First Amendment to Standard Industrial Net Lease is executed as of the
date first above written.

	 	 	 	 	 	 	 	 	 
	LANDLORD:	 	TENANT:	 	 
	 
	 	 	 	 	 	 	 	 
	SORRENTO PLAZA,	 	AVANIR PHARMACEUTICALS, 	 	 
	a California limited partnership	 	a California corporation	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	COLLINS DEVELOPMENT COMPANY,
	 	By:
	 	/s/ Gregory P. Hanson	 	 
	 

	 	 	 	 	 	 	 	 
	 	 	a California corporation, General Partner	 	Print Name: Gregory P. Hanson	 	 
	 	 	 	 	Title V. P. & C.F.O.	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	   	 	 	 	 	 	 	 	 
	 	 	Print Name:	 	 	 	 	 	By:	 	 /s/ J. David Hansen	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 	Title:	 	 	 	 	 	Print Name: J. David Hansen	 	 
	 	 	 	 	   	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Print Name:	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Title:	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 

2

 

Minutes Of Special Meeting

Of The Board Of Directors Of

Avanir Pharmaceuticals

May 2, 2002

     A special meeting of the Board of Directors (the “Board”) of AVANIR Pharmaceuticals, a California
corporation (the “Company”), was held telephonically on Thursday, May 2, 2002, at 4:00 p.m., Pacific
time, pursuant to call and notice.

     The following directors were present and participated at the meeting:

Dennis J. Carlo, Ph.D.

Michael W. George

James B. Glavin

Charles Mathews

Kenneth E. Olson

Gerald J. Yakatan, Ph.D.

     Also present at the meeting were Gregory P. Hanson, Vice President of Finance, Chief Financial
Officer and Secretary of the Company, and Alan Jacobs of Heller Ehrman White & McAuliffe, LLP,
legal counsel to the Company.

     Absent from the meeting were Edward L. Hennessy, Jr., Susan Golding, and Harold F. Oberkfell.

     Mr. Glavin acted as Chairman at the meeting and Mr. Hanson acted as Secretary at the meeting. The
Chairman confirmed that all participants could hear and be heard by the other participants at the
meeting and then announced that a quorum was present and called the meeting to order.

Approval of Real Estate Lease

     The Chairman stated that the purpose of the meeting was to consider a proposed real estate lease
(the “Lease”) between the Company and Asset Management Group for approximately 26,770 square feet
of office space. Mr. Hanson explained that the Lease is for office space in the same business park
where the Company’s current offices are located. Mr. Hanson then reviewed the material terms of the
lease as set forth in the letter of intent attached hereto as Exhibit A, including, the base rental
rate, the term of the lease, the tenant improvement allowance and the upfront costs to the Company.

     Mr. Hanson reviewed the Company’s projected space requirements for the next several years and then
explained that the proposed rental rate under the Lease is less than the current average rental
rates for office space in the nearby Torrey Pines and UTC areas of San Diego. Mr. Hanson then
entertained questions from the directors regarding the proposed terms of the Lease.

 

 

     A discussion then ensued among the directors and, upon motion duly made, seconded and unanimously
carried, the following resolutions were adopted:

RESOLVED, that the material terms of the Lease, in substantially the form presented to the Board
and attached hereto as Exhibit A, be, and they hereby are, in all respects, approved and adopted,
subject to such changes therein and additions thereto as the Chief Financial Officer, with the
advice of counsel, shall approve, such approval to be conclusively evidenced by the execution of
the Lease by such officer of the Company;

RESOLVED, FURTHER, that the Chief Financial Officer of the Company be, and he hereby is,
authorized, empowered and directed, in the name and on behalf of the Company, to execute and
deliver the Lease; and

RESOLVED, FURTHER, that the proper officers of the Company be, and each of them hereby is,
authorized, empowered and directed, in the name and on behalf of the Company, to take such further
action and to execute and deliver such further documents and instruments, as such officers, or any
of them, in their sole discretion, shall deem necessary or advisable to carry out fully the intent
and purposes of the preceding resolutions.

Other Business

     Mr. Hanson then updated the Board on the Company’s financial results of operations for the fiscal
year to date and discussed certain financing plans for the remainder of fiscal year 2002.

     Dr. Yakatan next informed the Board about a lawsuit filed in San Francisco Superior Court by
Intervention, Inc. against the Company, James E. Berg and GlaxoSmithKline. After presenting the
allegations contained in the lawsuit, Dr. Yakatan entertained questions from the directors and a
discussion ensued.

     There being no further business to come before the meeting, upon motion duly made, seconded and
unanimously carried, the meeting was adjourned at 4:55 p.m., Pacific time.

	 	 	 	 	 
	 

	 	/s/ Gregory P. Hanson
	 	 
	 

	 	 	 	 
	 

	 	Gregory P. Hanson	 	 
	 

	 	Corporate Secretary	 	 

2

 

SECOND AMENDMENT TO STANDARD INDUSTRIAL NET LEASE

(Avanir — Sorrento Plaza)

          This SECOND AMENDMENT TO STANDARD INDUSTRIAL NET LEASE is executed as of April 2, 2003, by and
between SORRENTO PLAZA, a California limited partnership (“Landlord”), and AVANIR PHARMACEUTICALS,
a California corporation (“Tenant”), with reference to the following facts:

RECITALS

          A. Landlord and Tenant have heretofore entered into that certain Standard Industrial Net Lease
dated May 20, 2002, as amended by the First Amendment to Standard Industrial Net Lease dated August
1, 2002 (collectively, the “Lease”), for the lease of premises located at 11404 and 11408 Sorrento
Valley Road, San Diego, California 92121.

          B. Landlord and Tenant desire to amend the Lease on the terms and conditions set forth herein.

          C. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the
Lease.

AMENDMENT

          NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained
herein, and for other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Lease is hereby amended as follows:

          1. Revision and Expansion of Premises.

               (a) Commencing on the Expansion Date, as defined below, the Premises shall be expanded to include
approximately 3,600 square feet in the building at 11408 Sorrento Valley Road (the “First Expansion
Space”). The Expansion Space is depicted on the attached Exhibit “A”.

               (b) On and after the Expansion Date, all references in the Lease and this Amendment to the
“Premises” shall include references to the First Expansion Space. As a result of such expansion, on
and after the Expansion Date, the Premises will contain approximately 30,370 total square feet. The
Premises, as so expanded, is depicted on the attached Exhibit “A”.

1

 

          2. Minimum Monthly Rent. The Minimum Monthly Rent (Section 1.5) is hereby revised to be the
following amounts for the following periods:

	 	 	 	 	 	 	 	 	 
	 	 	First Expansion	 	Total
	Period	 	Space Component	 	Minimum Monthly Rent
	From the Commencement
Date to and including the
Expansion Date
	 	 	n/a	 	 	$66,925 per month
	From the Expansion Date
to and including 8/31/03
	 	$	5,000	 	 	$71,925 per month
	From 9/1/03 to and
including 8/31/04
	 	$	5,175	 	 	$74,442 per month
	From 9/1/04 to and
including 8/31/05
	 	$	5,382	 	 	$77,420 per month
	From 9/1/05 to and
including 8/31/06
	 	$	5,597	 	 	$80,516 per month
	From 9/1/06 to and
including 8/31/07
	 	$	5,821	 	 	$83,737 per month
	From 9/1/07 to and
including 8/31/08
	 	$	6,054	 	 	$87,087 per month
	From 9/1/08 to and
including 8/31/09
	 	$	6,296	 	 	$90,570 per month
	From 9/1/09 to and
including 8/31/10
	 	$	6,548	 	 	$94,193 per month
	From 9/1/10 to and
including 8/31/11
	 	$	6,810	 	 	$97,961 per month
	From 9/1/11 to and
including 1/14/13
	 	$	7,082	 	 	$101,879 per month

          3. Pro Rate Share. As of the Expansion Date, Tenant’s Pro Rata Share of Operating Costs (Section
1.6) shall be ninety-seven and seven-tenths percent (97.7%).

          4. Parking Spaces. As of the Expansion Date, Tenant shall be entitled to use all of the parking
spaces in the Center other that the three (3) that are reserved to the remaining other occupant of
the Building (currently a delicatessen).

          5. Relocation of Current Occupant; Delivery of First Expansion Space; Expansion Date.

               (a) The parties acknowledge that the First Expansion Space is currently occupied by another
occupant (the “Current Occupant”). Landlord is currently working to arrange the vacation of the
First Expansion Space by the Current Occupant. Following the vacation of the First Expansion Space
and the surrender the possession thereof by the Current Occupant, Landlord

2

 

shall deliver the First Expansion Space to Tenant in a broom clean condition with all of the
Current Occupant’s trade fixtures removed, but otherwise in “as is, where is” condition. The date
of such delivery shall be the “Expansion Date” as set forth in this Amendment. Notwithstanding the
foregoing, if the Expansion Date has not occurred by July 31, 2003 (except as set forth below), then
this Amendment shall become null and void and of no further force and effect, Landlord shall
immediately refund to Tenant the Expansion Payment, and neither Landlord nor Tenant shall have any
further obligations to the other with regard to the subject matter of this Amendment; provided,
however that if Landlord has filed an unlawful detainer action to recover possession of the First
Expansion Premises prior to July 31, 2003, then such July 31, 2003 deadline shall be extended for so
long as Landlord is diligently pursuing such action, but not beyond September 30, 2003.

               (b) This Amendment is contingent upon the Current Occupant vacating and surrendering possession of
the First Expansion Space. If Landlord gives Tenant notice that it is unable to recover possession
of the First Expansion Space and deliver the same to Tenant, then this Amendment shall terminate.
Upon any such termination, this Amendment (other than Section 6) shall be of no further force or
effect, and Landlord shall immediately refund the Expansion Payment to Tenant.

               (c) As a material inducement for Landlord to execute this Amendment, Tenant shall pay Landlord
Twenty Thousand Dollars ($20,000) (the “Expansion Payment”) upon execution hereof, which amount
represents a partial reimbursement to Landlord of the relocation payment that Landlord is required
to make to the Current Occupant as consideration for the Current Occupant vacating the First
Expansion Space. If Landlord is obligated to refund the Expansion Payment to Tenant pursuant to
this Section 5, but fails to do so within three (3) days after Landlord’s obligation to refund the
Expansion Payment first arises, then Tenant may offset the Expansion Payment against the Minimum
Monthly Rent next coming due.

          6. No Brokers. Tenant warrants that it has had no dealings with any real estate broker or agent in
connection with the negotiation of this Amendment and any related transaction, and that it knows of
no other real estate broker or agent who is entitled to a commission in connection with this
Amendment and any related transaction. Tenant agrees to indemnify, defend and hold Landlord
harmless from and against any obligation or liability to pay any commission or compensation to any
other party arising from the act or agreement of Tenant.

3

 

          7. No Other Change. Except as otherwise expressly set forth in this Amendment, all of the terms and
conditions of the Lease remain unchanged and in full force and effect.

          IN WITNESS WHEREOF, this Second Amendment to Standard Industrial Net Lease is executed as of the
date first above written.

	 	 	 	 	 	 	 
	 	 	LANDLORD:	 	 
	 
	 	 	 	 	 	 
	 	 	SORRENTO PLAZA,

a California limited partnership	 	 
	 
	 	 	 	 	 	 
	 	 	By: COLLINS DEVELOPMENT COMPANY,

a California corporation, General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ William A. Tribolet
 

	 	 
	 	 	Print Name: WILLIAM A. TRIBOLET	 	 
	 	 	Title: EXEC. VP	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert E. Petersen	 	 
	 

	 	 	 	 	 	 
	 	 	Print Name: ROBERT E. PETERSEN	 	 
	 	 	Title: PRESIDENT	 	 
	 
	 	 	 	 	 	 
	 

	 	TENANT:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	AVANIR PHARMACEUTICALS,

a California corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gerald J. Yakatan	 	 
	 

	 	 	 	 	 	 
	 	 	Print Name: GERALD J. YAKATAN	 	 
	 	 	Title: PRESIDENT & CEO	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregory P. Hanson	 	 
	 

	 	 	 	 	 	 
	 	 	Print Name: Gregory P. Hanson	 	 
	 	 	Title: VP & CFO	 	 

4

 

EXHIBIT A

Tenant space shall include the entire buildingEX-10.15  FORM OF EXECUTIVE EMPLOYMENT AGREEMENTS

 

Exhibit 10.15

TENBY PHARMA INC.

FORM OF AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EXECUTIVE EMPLOYEE AGREEMENT (“Agreement”) is entered into as of
this ___  day of September, 2006, (the “Effective Date”), by and among [EXECUTIVE] (“Executive”),
SIRION THERAPEUTICS INC., a North Carolina corporation (“Sirion”), and TENBY PHARMA, INC., a
Delaware corporation (“Tenby” and together with Sirion, the “Company”).

     WHEREAS, Executive and Sirion entered into that certain Executive Employment by and between
the Sirion and Executive dated July 1, 2006 (the “Original Employment Agreement”);

     WHEREAS, pursuant to that certain Contribution Agreement by and among Sirion, Tenby, and each
shareholder of Sirion, all the shareholders of Sirion will contribute all their capital stock in
Sirion to Tenby, a publicly traded shell company, in return for capital stock of Tenby;

     WHEREAS, the Company desires to continue to employ Executive to provide personal services to
the Company, and wishes to provide Executive with certain compensation and benefits in return for
these services;

     WHEREAS, Executive wishes to continue to be employed by the Company and provide personal
services to the Company in return for certain compensation and benefits, including the benefits
provided under this Agreement; and

     WHEREAS, the Executive, Sirion and Tenby desire to amend and restate, in its entirety, the
Original Employment Agreement in order to add Tenby as a party and to make additional changes as
reflected in this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is
hereby agreed by and among the parties hereto as follows:

     1. EMPLOYMENT BY THE COMPANY.

          1.1 Scope of Employment. Subject to the terms set forth herein, the Company agrees to employ
Executive to render full time services as Sirion’s [POSITION] and Tenby’s [POSITION] and in such
other capacities as Tenby’s Board of Directors (“Board”) may reasonably assign. Executive hereby
accepts employment based on the terms and conditions set forth herein effective as of the Effective
Date. In this position, Executive shall perform such duties as are assigned by the Board. During
Executive’s employment with the Company, Executive will devote Executive’s best efforts and
substantially all of Executive’s business time and attention to the business of the Company.
Executive shall abide by the general employment policies and procedures of the Company, except that
wherever the terms of this

1

 

Agreement may differ from or are in conflict with the Company’s general employment policies or
procedures, this Agreement shall control.

          1.2 Effective Time; Original Employment Agreement. The time as of which Executive’s
employment hereunder commences shall be on the date of, but immediately following the consummation
of, the Contribution, and the effectiveness of this Agreement shall be contingent upon the
consummation of the Contribution. The Original Employment Agreement shall remain in effect until
the consummation of the Contribution and shall terminate thereupon. Unless and until the
Contribution is consummate, the Original Employment Agreement shall remain in effect in accordance
with its terms.

     2. COMPENSATION.

          2.1 Salary. For services to be rendered hereunder, Executive shall receive a base annual
salary as set forth in Section 1 of the Compensation and Severance Terms Schedule, attached hereto
as Exhibit A. Executive will be considered annually for increases in base salary. Any
such increases will be subject to review and approval by the Compensation Committee of the Board
and/or the Board, as appropriate.

          2.2 Bonus. Executive shall be eligible to participate in any and all Company bonus plans at
the executive level. Notwithstanding the foregoing, no bonus is guaranteed to Executive. The
Company shall have the sole discretion to determine whether Executive is entitled to any such bonus
and to determine the amount of the bonus. Any bonus is subject to the approval of the Compensation
Committee of the Board and/or the Board, as appropriate. The current target level of such
discretionary bonus for Executive is set forth in Section 2 of Exhibit A attached hereto.
The Company retains the authority to review, grant, deny or revise any bonus or target level in its
sole discretion.

          2.3 Vacation, Holiday Pay and Sick Leave. Executive shall be entitled to four (4) weeks of
paid vacation each year. Any earned but unused vacation shall be accrued and may be used by
Executive in any subsequent year. Upon termination of Executive’s employment for any reason,
Executive shall receive vacation pay of all earned but unused vacation, calculated at his base
salary rate in effect at the time of termination. The Company shall also provide Executive with
holiday pay and paid sick leave as provided by the Company to its other executive employees of
comparable stature. Any earned but unused sick leave shall be accrued and may be used by Executive
in any subsequent year; provided that, upon termination of Executive’s employment for any reason,
Executive shall receive no pay or other compensation for any accrued but unused sick leave.
Notwithstanding the foregoing, vacation, holiday pay and sick leave do not accrue while Executive
is on unpaid leave.

          2.4 Standard Company Benefits. Executive shall receive all other employment benefits for
which Executive is eligible under the terms and conditions of the standard Company benefits plans
(e.g., health and disability insurance, 401(k) retirement plan, etc.) and other benefits and
incentives which may be in effect from time to time and provided by the Company to employees at
levels similar to Executive. Employment benefits, including but

2

 

not limited to vacation, holiday pay, sick leave, paid insurance premiums, and other benefits
do not accrue or continue during an unpaid leave, unless otherwise required by law.

     3. PROPRIETARY INFORMATION.

          3.1 Proprietary Information. Executive agrees that, during the Term and at all times
following termination of this Agreement, for whatever reason, Executive shall: (i) take all steps
necessary to hold the Proprietary Information in trust and confidence; (ii) not use such
Proprietary Information in any manner or for any purpose except as expressly set forth in this
Agreement; and (iii) not disclose any such Proprietary Information to any third party without first
obtaining the Company’s express written consent on a case-by-case basis; provided,
however, that nothing in this Section 4.1 shall prohibit Executive from making any
disclosures to the extent legally required by a valid subpoena or order of a court or other
governmental body having jurisdiction, provided that Executive notifies the Company in advance of
any such required disclosure and uses commercially reasonable efforts to obtain, or to assist the
Company in obtaining, a protective order preventing or limiting the disclosure and/or requiring
that the Proprietary Information so disclosed be used only for the purposes for which the law or
regulation required, or for which the order was issued.

          For purposes hereof, “Proprietary Information” means, without limitation, all of the following
pertaining to the Company: (i) data or trade secrets, including policies, processes, techniques,
formulas or other technical data; (ii) production and servicing methods; (iii) supplier lists; (iv)
personnel lists; (v) customer and prospect lists; (vi) other proprietary information; (vii)
financial or corporate records; (viii) operational, sales, promotional and marketing methods and
techniques; (ix) development ideas, acquisition strategies and plans; (x) financial information and
records; (xi) “know-how” and methods of doing business; and (xii) computer programs, including
source codes and/or object codes and other proprietary, competition-sensitive or technical
information or secrets developed with or without the help of Executive; but excluding information
in the public domain, information already in the possession of Executive, and information obtain
from third-parties through lawful means and otherwise not through a breach by such third-party of
any obligations to the Company or another third party. Executive acknowledges that any such
information or data he may acquire, produce, develop or learn of, was done so by reason of his
relationship to the Company and with an expectation of confidentiality by the Company, and that all
rights of use, ownership and possession of all such information lies solely with the Company.

          3.2 Third-Party Information. Executive understands that the Company has received and will in
the future receive from third parties certain confidential or proprietary information relating to
such third parties (collectively, “Third-Party Information”), subject to duties on the Company’s
part to maintain the confidentiality of such Third-Party Information and to use such Third-Party
Information only for certain limited purposes. Executive agrees to hold all Third-Party
Information in confidence to the same extent as required of the Company and not to disclose to
anyone (other than personnel of the Company) or to use, except in connection with Executive’s
performance of Executive’s duties under this Agreement, any Third-Party Information.

3

 

     4. OUTSIDE ACTIVITIES.

          4.1 Activities. Except with the prior written consent of the Board, Executive will not during
Executive’s employment with the Company undertake or engage in any other employment,
self-employment, occupation, consulting, or other business enterprise, other than ones in which
Executive is a passive investor. Without limiting the foregoing, Executive may not serve as a
member of the board of directors of any public or private for-profit company, except with the prior
written consent of the Board. Executive’s board memberships as of the Effective Date disclosed in
writing by Executive to the Board are hereby approved. Executive may engage in civic and
not-for-profit activities so long as such activities do not materially interfere with the
performance of Executive’s duties hereunder. Neither party will during Executive’s employment with
the Company or thereafter publicly or privately disparage the other party (or in the case of the
Company, any of its subsidiaries, or its or their respective past or present products, officers,
directors, employees, agents or customers).

          4.2 Investments and Interests. During Executive’s employment by the Company, Executive agrees
not to acquire, assume or participate in, directly or indirectly, any position, investment or
interest which is adverse to or in conflict with the interests of the Company, its current and
anticipated business or prospects, financial or otherwise. By way of clarification, nothing
contained in this Agreement shall prevent Executive from holding, for investment purposes only, no
more than one percent (1%) of the capital stock of any publicly traded company.

          4.3 Non-Competition. During Executive’s employment by the Company, except on behalf of the
Company, Executive will not directly or indirectly, whether as an officer, director, employee,
stockholder, partner, proprietor, associate, representative, consultant, contractor, or in any
other capacity whatsoever engage in, become financially interested in, be employed by or have any
business connection with any other person, corporation, firm, partnership or other entity
whatsoever that competes with the Company, anywhere in the world, in any line of business engaged
in (or planned to be engaged in) by the Company.

     5. OTHER AGREEMENTS.

     Executive represents and warrants that Executive’s employment by the Company will not conflict
with and will not be constrained by any prior agreement or relationship with any third party.
Executive represents and warrants that Executive will not disclose to the Company or use on behalf
of the Company any trade secrets or other confidential information of any third party in accordance
with an agreement between the Company and any such third party. During Executive’s employment by
the Company, Executive may use, in the performance of Executive’s duties, all information generally
known and used by persons with training and experience comparable to Executive’s own and all
information which is common knowledge in the industry or otherwise legally in the public domain.

     6. TERMINATION OF EMPLOYMENT.

          6.1 At Will Employment. Executive’s relationship with the Company is at will. The Company
shall have the right to terminate Executive’s employment with the Company

4

 

at any time with or without Cause and with or without advance notice.

          6.2 Termination by Company for Cause. The Company may terminate Executive’s employment for
Cause at any time effective on written notice to Executive in the event of a termination for Cause,
the Company’s sole obligation and liability to Executive shall be to pay Executive any unpaid
salary, together with any unused vacation accrued to the effective date of such termination.
Executive will not be entitled to severance benefits or any other compensation of any kind
resulting from Executive’s termination for Cause. For purposes of this Agreement, “Cause” shall
mean any of the following events, as determined by Company: (i) Executive’s conviction of any
felony; (ii) Executive’s deliberate attempt to do injury to the Company; (iii) dishonest or
fraudulent conduct by Executive; or (iv) Executive’s misconduct, gross negligence, material
violation of Company policy, or material breach of this Agreement, which material breach Executive
fails to correct within thirty (30) days after Executive is given written notice by the Board.

          6.3 Termination by Company Without Cause and Termination by Executive for Good Reason. The
Company shall be entitled at any time to terminate Executive’s employment without Cause, effective
upon written notice to Executive. The Executive shall be entitled to terminate Executive’s
employment for Good Reason, effective upon written notice to the Company, provided that Executive
tenders his resignation within sixty (60) days after the occurrence of the event which forms the
basis for Executive’s termination for Good Reason. For purposes of this Agreement, “Good Reason”
shall mean any one of the following events: (i) any reduction of Executive’s then existing annual
base salary; (ii) any reduction in the package of benefits and incentives, taken as a whole,
provided to Executive (except that employee contributions may be raised to the extent of any cost
increases imposed by third parties and that are applied to all Company employees) or any action by
the Company which would adversely affect Executive’s participation or reduce Executive’s benefits
under any such plans, except to the extent that such benefits and incentives of all other executive
officers of the Company are similarly reduced (however, by no more than twenty-five percent (25%));
(iii) any material diminution of Executive’s duties, responsibilities, title, or reporting
requirements, excluding for this purpose an isolated, insubstantial or inadvertent action not taken
in bad faith which is remedied by the Company immediately after such notice thereof is given by
Executive; (iv) any material breach by the Company of its obligations under this Agreement; (v) any
failure by the Company to obtain the express, written assumption of this Agreement by any successor
or assign of the Company; or (vi) any requirement that Executive relocate to a work site that would
increase Executive’s one-way commute distance by more than twenty-five (25) miles from Executive’s
then principal residence, unless Executive accepts such relocation opportunity. If the Company
terminates Executive’s employment at any time without Cause, or if Executive terminates his
employment at any time for Good Reason, Executive shall be entitled to those severance benefits
specifically set forth in Section 4 of the Compensation and Severance Terms Schedule, attached
hereto as Exhibit A, and such other payments and benefits as may be provided elsewhere in
this Agreement (e.g., payment for unpaid salary, accrued vacation, etc.).

          6.4 Executive’s Voluntary Resignation. Executive may terminate Executive’s employment with
the Company at any time. In the event Executive voluntarily terminates Executive’s employment
other than for Good Reason involving a Change in Control

5

 

Termination as provided in Section 7, the Company’s sole obligation and liability to Executive
shall be to pay Executive any unpaid salary, together with any accrued, unused vacation, through
the effective day of resignation. Executive will not be entitled to severance benefits or any
other compensation of any kind resulting from Executive’s voluntary termination.

          6.5 Termination for Death or Disability. Executive’s employment with the Company will be
terminated in the event of Executive’s death, or any illness, injury, disability or other
incapacity that renders Executive physically or mentally unable to perform the essential duties of
Executive’s job for more than 90 days. The Company acknowledges its obligations under all leave of
absence laws, including the federal Family and Medical Leave Act, and, to the extent provided by
these and other applicable laws, will provide reasonable accommodation for any known disability of
an otherwise qualified employee, unless undue hardship would result. In the event that Executive’s
employment with the Company is terminated for death or disability as described in this Section 6.5,
Executive or Executive’s heirs, successors, and assigns shall not receive any severance benefits or
other compensation other than payment of accrued salary and vacation and such other benefits as may
be expressly required in such event by applicable law or the terms of applicable benefit plans.

          6.6 Cessation of Severance Benefits. If Executive violates any provision of Sections 3 or 4
of this Agreement, then, notwithstanding anything herein to the contrary, the Company shall have
the right upon written notice to Executive to immediately cease payment of any severance benefits
being provided to Executive, and Executive will not be entitled to any further compensation from
the Company.

     7. CHANGE IN CONTROL

          7.1 Definition of “Change in Control.” For purposes of this Agreement, “Change in Control”
shall mean the occurrence of any of the following events:

               (a) The acquisition, directly or indirectly, in one transaction or a series of related
transactions, by any person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of the beneficial ownership of securities of Tenby or Sirion possessing more than
fifty percent (50%) of the total combined voting power of all outstanding securities of Tenby or
Sirion.

               (b) A merger or consolidation of Tenby or Sirion with any other entity, whether or not Tenby
or Sirion, as applicable, is the surviving entity in such transaction, except for a transaction in
which the holders of the outstanding voting securities of Tenby or Sirion, as applicable,
immediately prior to such merger or consolidation hold as a result of holding Tenby or Sirion
securities, as applicable, prior to such transaction, in the aggregate, securities possessing more
than fifty percent (50%) of the total combined voting power of all outstanding voting securities of
Tenby or Sirion, as applicable, or of the surviving entity (or the parent of the surviving entity)
immediately after such merger or consolidation.

               (c) The sale, transfer or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of Tenby or Sirion; or

6

 

               (d) The approval by the stockholders of a plan or proposal for the liquidation or dissolution
of Tenby.

               Notwithstanding the foregoing, the parties expressly agree that the following transactions
shall not qualify as a “Change of Control” for purposes hereof:

               (e) The contribution of shares by the current shareholders of the Company (“Contribution”) to
Tenby Pharma, Inc., a Delaware publicly shell corporation, or any other public shell corporation,
as currently being contemplated by the shareholders of the Company.; or

               (f) The financing transaction between North Sound and Tenby Pharma, Inc. (or otherwise the
parent corporation of the Company immediately following the Contribution as contemplated above).

          7.2 Termination After a Change in Control. In the event Executive’s employment with the
Company is terminated without Cause, or Executive resigns for Good Reason, within twenty-four (24)
months following a Change in Control (a “Change in Control Termination”), then Executive shall be
eligible for severance benefits as set forth in Section 3.2 of Exhibit A, attached hereto.
Executive may resign Executive’s employment for Good Reason so long as Executive tenders his
resignation to the Company within sixty (60) days after the occurrence of the event which forms the
basis for Executive’s termination for Good Reason.

          7.3 Termination Within Six-Months Preceding a Change in Control. In the event Executive’s
employment with the Company is terminated without Cause or Executive resigns for Good Reason within
six (6) months immediately preceding a Change in Control (a “Pre-Change in Control Termination”),
then Executive shall be eligible for severance benefits such that Executive receives the same
benefits as he would have otherwise received if the Change in Control had occurred as of the date
of termination. Executive may resign Executive’s employment for Good Reason so long as Executive
tenders his resignation to the Company within sixty (60) days after the occurrence of the event
which forms the basis for Executive’s termination for Good Reason.

          7.4 Parachute Payments. In the event that the severance, acceleration of Equity Awards (as
defined in Exhibit A) and other benefits provided for in this Agreement (“Agreement
Benefits”), together with benefits otherwise payable to Executive, (i) constitute a “parachute
payment” within the meaning of Section 280G (as it may be amended or replaced) of the Internal
Revenue Code of 1986, as amended or replaced (the “Code”) and (ii) but for this Section 7.3, would
be subject to the excise tax imposed by Section 4999 (as it may be amended or replaced) of the Code
(the “Excise Tax”), then Executive’s Agreement Benefits shall be either:

               (a) provided to Executive in full, or

               (b) provided to Executive only as to such lesser extent that would

7

 

result in no portion of such Agreement Benefits being subject to the Excise Tax.

whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive, on an after-tax basis, of the
greatest amount of benefits, notwithstanding that all or some portion of such Agreement Benefits
may be taxable under the Excise Tax.

Unless the Company and Executive otherwise agree in writing, any determination required under this
Section 7.3 shall be made in writing in good faith by the Company’s independent certified public
accounting firm or such other nationally or regionally recognized accounting firm selected by the
Company (the “Accountants”), whose determination shall be conclusive and binding upon the Executive
and the Company for all purposes. In the event of a reduction in benefits hereunder, Executive
shall be given the choice, subject to approval by the Company, of which benefits to reduce;
provided that such reduction achieves the result specified in clause (b) of this Section 7.3. For
purposes of making the calculations required by this Section 7.3, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable,
good faith interpretations concerning the application of the Code. The Company and Executive shall
furnish to the Accountants such information and documents as the Accountants may reasonably request
in order to make a determination under this Section 7.3. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations contemplated by this Section
7.3.

     8. RELEASE. In exchange for the severance benefits referenced in this Agreement and in
Exhibit A attached hereto to which Executive would not otherwise be entitled, in the event
of a termination without Cause or a Change in Control Termination, Executive shall execute and
enter in to a release of claims against the Company in the form provided by the Company (the
“Release”) upon Executive’s termination of employment. Unless the Release is executed by Executive
and delivered to the Company within the time limits specified in the Release, then notwithstanding
anything herein to the contrary, Executive shall not receive any of the severance compensation or
benefits provided under this Agreement; acceleration, if any, of Executive’s Equity Awards as
provided in this Agreement shall not apply; and Executive’s Equity Awards in such event may be
exercised following the date of Executive’s termination only to the extent provided under their
original terms in accordance with the applicable equity plans and Equity Award agreements.

     9. GENERAL PROVISIONS.

          9.1 Notices. Any notices provided hereunder must be in writing and shall be deemed effective
upon personal delivery (including, personal delivery by facsimile transmission) or the third day
after mailing by first class mail, to the Company at its primary office location and to Executive
at Executive’s address as listed on the Company payroll (which address may be changed by written
notice).

          9.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid or unenforceable in any respect under any

8

 

applicable law or rule in any jurisdiction, such invalidity or unenforceability will not
affect any other provision or any other jurisdiction, and such invalid or unenforceable provision
shall be reformed, construed and enforced in such jurisdiction so as to render it valid and
enforceable consistent with the intent of the parties insofar as possible.

          9.3 Waiver. If either party should waive any breach of any provisions of this Agreement, he
or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or
any other provision of this Agreement.

          9.4 Counterparts. This Agreement may be executed in separate counterparts, any one of which
need not contain signatures of more than one party, but all of which taken together will constitute
one and the same Agreement.

          9.5 Headings. The headings of the sections hereof are inserted for convenience only and shall
not be deemed to constitute a part hereof nor to affect the meaning thereof.

          9.6 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of
and be enforceable by Executive, the Company and their respective successors, assigns, heirs,
executors and administrators, except that Executive may not assign any of Executive’s duties or
rights hereunder, without the written consent of the Company.

          9.7 Arbitration. To provide a mechanism for rapid and economical dispute resolution,
Executive and the Company agree that any controversy, claim or misunderstanding arising out of, or
relating to including, but not limited to, any alleged breach of, default, compliance with or
interpretation of any terms or provisions of this Agreement, shall be settled by arbitration. The
arbitration proceedings shall take place in Tampa, Florida and shall be conducted, except as
otherwise expressly set forth in this Agreement, in accordance with the rules, procedures and
standards of the American Arbitration Association. The parties to the dispute may select one
arbitrator if such parties can agree on a single arbitrator; otherwise each opposing party shall be
entitled to select one arbitrator. These two arbitrators shall, in turn, select a third
arbitrator. The first two arbitrators shall be chosen within twenty days after the party seeking
arbitration delivers notice of same to the other party. If one of the parties fails to timely
select an arbitrator, the arbitrator that was timely selected shall be the sole arbitrator, no
others being appointed. If neither party selects an arbitrator within the twenty day time period,
the first arbitrator selected thereafter shall be the sole arbitrator, no others being appointed.
Where the parties each have properly and timely selected an arbitrator, such arbitrators shall have
ten days from the end of the initial twenty day selection period to select a third arbitrator. In
the event the arbitrators are unable to agree to a third arbitrator within such ten day period,
either party may, upon the expiration of such period, petition the Senior Judge of the Thirteenth
Judicial Circuit of Hillsborough County, Florida, or appointment of the third arbitrator. The
arbitration shall proceed in accordance with any private rules of arbitration specified by the
arbitrators, except that a vote of a majority of the arbitrators shall control. The arbitrators
shall have all the power permitted arbitrators under the laws of the State of Florida and a
judgment or award rendered by the arbitrators may be entered in any court having competent
jurisdiction thereof. Any cost of arbitration shall be shared equally by the parties. The
expenses of presenting each party’s case, including depositions, attorneys’ fees and witness fees

9

 

shall be the sole cost of such party not subject to award by the arbitration. Executive
understands that final and binding arbitration will be the sole and exclusive remedy for any such
claim or dispute between him and the Company and its parent, subsidiary or affiliated companies or
entities, and each of its and/or their employees, offices, directors or agents, and that, by
agreeing to use arbitration to resolve such claims or disputes, both the Company and Executive
agree to forego any right each may have had to a jury trial. Notwithstanding the foregoing,
nothing in this Section 9.7 or in this Agreement shall prevent either Executive or the Company from
seeking and obtaining injunctive relief in any court to prevent irreparable harm from any breach or
threatened breach of the provisions of Sections 3 or 4 of this Agreement pending resolution of any
arbitration hereunder. The provisions of this Section 9.7 shall survive the termination or
expiration of this Agreement and termination of Executive’s employment and shall remain in full
force and effect thereafter.

          9.8 Remedies. Executive’s duties under Sections 3 and 4.3 of this Agreement shall survive
termination or expiration of this Agreement and termination of Executive’s employment with the
Company. Executive acknowledges that a remedy at law for any breach or threatened breach by
Executive of the provisions of these Sections would be inadequate, and that such a breach would
cause irreparable harm to the Company; and Executive therefore agrees that the Company shall be
entitled to injunctive relief in case of any such breach or threatened breach.

          9.9 Governing Law. All questions concerning the construction, validity and interpretation of
this Agreement will be governed by the law of the State of Florida as applied to contracts made and
to be performed entirely within Florida.

     10. TERM OF AGREEMENT. This Agreement shall become effective as of the Effective Date,
provided however, that the term of employment hereunder shall not commence until the Effective Time
(as provided in Section 1.2 hereof) and shall remain in effect through the period ending on the
third anniversary of the Effective Date (the “Initial Term”) and shall automatically renew for
successive one (1) year periods (the “Extended Term”) unless the Company, in its sole discretion
with or without reason, provides written notice to Executive of non-renewal (a “Non-renewal
Notice”) no later than sixty (60) days before the expiration date of the Initial Term or any
Extended Term, in which case this Agreement shall expire upon such expiration date. As used
herein, the “Term” shall mean the Initial Term and any Extended Term. Notwithstanding the
foregoing, in the event a Change in Control occurs during the Term then the Term of this Agreement
shall continue and may not be terminated by the Company (or any successor) until the expiration of
twenty-four (24) months after the Change in Control (notwithstanding any Non-renewal Notice) unless
consented to in writing by Executive and the Company. Expiration or termination of the Term of
this Agreement shall not relieve the parties of any obligation accruing prior to such expiration or
termination, including but not limited to any obligation of the Company to pay the severance and
other benefits to Executive hereunder for any termination without Cause or a Change in Control
Termination which occurs prior to the expiration or termination of the Term of this Agreement. By
way of clarification, a Non-renewal Notice shall not constitute a notice of termination of
Executive’s employment and termination or expiration of the Term of this Agreement shall not
constitute termination of Executive’s employment resulting in any obligation of the Company to
provide the severance benefits

10

 

hereunder. The Company has no obligation to pay severance benefits to Executive hereunder arising
from any termination of Executive’s employment after the expiration or termination the Term of this
Agreement in accordance with and pursuant to this Section 10. The provisions of Sections 3, 4, 9,
10 and 11 of this Agreement shall survive the expiration or termination of the Term of this
Agreement.

     11. ENTIRE AGREEMENT. This Agreement, together with Exhibit A attached hereto,
constitute the final, complete, and exclusive embodiment of the entire agreement between Executive
and the Company regarding the subject matter hereof and supersede any prior agreement, promise,
representation, or statement, written or otherwise, between Executive and the Company with regard
to this subject matter. Without limiting the foregoing, the parties hereby terminate each and all
currently effective severance and employment agreements and Executive hereby releases and forever
waives any rights Executive may have against the Company under any such prior agreements. This
Agreement is entered into without reliance on any promise, representation, statement or agreement
other than those expressly contained or incorporated herein, and it cannot be modified or amended
except in a writing signed by Executive and a duly authorized officer of the Company.

     12. RESIGNATION OF OTHER COMPANY POSITIONS. In the event of any termination of Executive’s
employment with the Company, unless otherwise agreed to in writing by Executive and the Board,
Executive shall be deemed to have resigned as of the date of such termination as an officer and/or
director of the Company and any of its subsidiaries or affiliated companies for which Executive was
serving in such capacities at the time of such termination. At the Company’s request, Executive
agrees to execute concerning one or more such positions so held resignation letter(s) in the form
provided by the Company evidencing the foregoing.

11

 

     IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the Effective
Date above written.

	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	SIRION THERAPEUTICS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	TENBY PHARMA INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	[EXECUTIVE]	 	 

12

 

EXHIBIT A

COMPENSATION AND SEVERANCE TERMS SCHEDULE

     1. BASE SALARY

     For services to be rendered under this Agreement, Executive shall receive an annual gross base
salary of                                         , payable in accordance with the Company’s standard payroll
practices, and subject to adjustment as set forth in the Agreement.

     2. BONUS

     Executive’s annual bonus, if granted, shall be at a target level of up to fifty percent (50%)
of Executive’s then current base salary.

     3. SEVERANCE BENEFITS

          a. Termination by Company Without Cause. If the Company terminates Executive’s employment at
any time without Cause as defined by Section 6.3 of this Agreement, the Company shall provide the
following severance compensation and benefits to Executive after the effective date of the Release
referenced in Section 8 of the Agreement:

               (i) A severance payment equal to the sum of twelve (12) months of Executive’s then current
base salary, payable (subject to Section 4 below of this Exhibit A) by the Company in a
lump sum, less legally required withholdings, within thirty (30) days after the effective date of
the release referenced in Section 8 of the Agreement;

               (ii) Health insurance premiums payable by the Company for continued health insurance coverage
for Executive and all then currently insured dependents for up to twelve (12) months after the
termination date of Executive’s employment, provided that Executive makes a timely election to
continue such coverage under COBRA; and provided further that, the Company’s obligation to pay the
monthly health insurance premiums for continued group medical insurance shall end when Executive
becomes eligible for health insurance with a new employer, and Executive agrees to promptly notify
the company in writing of any such eligibility.

               (iii) Outplacement services for one year, at the Company’s expense up to a maximum amount of
twenty-five thousand dollar ($25,000.00) with a nationally recognized service selected by the
Company.

Executive understands that Executive’s receipt of the severance compensation and benefits specified
in this Section 3.1 is conditioned upon Executive’s execution of the Release referenced in Section
8 of the Agreement, and further understands that the above lists the only severance compensation
and benefits to which Executive is entitled. Executive shall be entitled to all severance benefits
set forth herein notwithstanding any subsequent employment.

1

 

          b. Change in Control of Termination. In the event of a Change in Control Termination as
defined in Section 7.2 of the Agreement, the Company shall provide the following severance
compensation and benefits to the Executive after the effective date of the Release referenced in
Section 8 of this Agreement.

               (i) A severance payment equal to the sum of (i) twenty-four (24) months of Executive’s then
current base salary and (ii) two (2) times Executive’s target bonus to be earned for the year in
which termination occurs or two (2) times the bonus amount paid to Executive in the prior year,
whichever is greater, payable (subject to Section 4 below of Exhibit A) by the Company in a
lump sum, less legally required withholdings, within thirty (30) days after the effective date of
the Release referenced in Section 8 of the Agreement.

               (ii) Health insurance premiums payable by the Company for continued health insurance coverage
for Executive and all then currently insured dependents for up to twenty-four (24) months after the
termination date of Executive’s employment, provided that Executive makes a timely election to
continue such coverage under COBRA; and provided further that, the Company’s obligation to pay the
monthly health insurance premiums for continued group medical insurance shall end when Executive
becomes eligible for health insurance with a new employer, and Executive agrees to promptly notify
the Company in writing of any such event of eligibility; and

               (iii) Outplacement services for one year, at the Company’s expense up to a maximum amount of
twenty-five thousand dollars ($25,000.00), with a nationally recognized service selected by the
Company; and.

               (iv) Any unvested and outstanding stock options, stock appreciation rights, phantom stock,
restricted stock or other equity based compensation awards (collectively, “Equity Awards”) held by
Executive shall become one hundred percent (100%) vested as of the termination date of Executive’s
employment and any repurchase rights or other rights or restrictions of the Company shall
immediately terminate. To the extent necessary to effect the intent of this Agreement with respect
to the Equity Awards, the applicable provision of this Agreement and this Exhibit A shall
be deemed an amendment to each agreement evidencing an Equity Award held by Executive.

Executive understands that Executive’s receipt of the severance compensation and benefits specified
in this Section 3.2 is conditioned upon Executive’s execution of the Release referenced in Section
8 of the Agreement, and further understands that the above lists the only severance compensation
and benefits to which Executive is entitled.

     4. SECTION 409A: DEFERRED COMPENSATION PLANS

          a. Key Employee. Notwithstanding any other provision of the Agreement and this Exhibit
A, as determined in the sole discretion of the Company, if Executive is a “Key Employee” within
the meaning of Section 416(i)(1) of the Code in the calendar year of Executive’s termination of
employment with the Company, then the severance payment under Section 3.1(a) or Section 3.2(a) , as
applicable, shall be payable no sooner than one hundred

2

 

eighty-three (183) calendar days following the effective date of Executive’s termination.

          b. Section 409A Compliance. The intent of Executive and the Company is that the severance and
other benefits payable to Executive under this Agreement not be deemed “deferred compensation”
under Section 409A of the Code. Executive and the Company agree to use reasonable best efforts to
amend the terms of this Agreement from time to time as may be necessary to avoid the material
imposition of penalties and additional taxes under Section 409A(a)(1) of the Code; provided,
however, any such amendment will provide Executive substantially equivalent economic payments and
benefits as set forth herein and will not in the aggregate, materially increase the cost to, or
liability of, the Company hereunder.

3

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