Document:

Exhibit 10.9

 

EXHIBIT 10.9

SUBLEASE AGREEMENT

between

AVANIR PHARMACEUTICALS

as Sublandlord

and

SIRION THERAPEUTICS, INC.

as Subtenant

	 	 	 
	Building Address:

	 	11408 Sorrento Valley Road
	 

	 	San Diego, California 92121

 

 

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.

8. Use.

     Subtenant shall use and occupy the Sublease Premises only for the purposes permitted under,
and in a manner consistent with, the provisions of the Master Lease.

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Subtenant will pay for any damage to any part of the Sublease Premises, Building or Center,
subject to any applicable waiver of subrogation provision, if (i) caused by any act or omission by
Subtenant or Subtenant’s employees, agents, licensees, contractors or invitees and (ii) Sublandlord
would be required to pay for such damage under the Master Lease. Subtenant will comply with
applicable provisions of the Master Lease and the Center’s Rules and Regulations and will not cause
anywhere in the Center, Building or permit in the Sublease Premises, (i) any activity or thing
contrary to applicable law, ordinance, regulation, restrictive covenant, or insurance regulation;
or which is in any way immoral or extra hazardous or could jeopardize the coverage of normal
insurance policies or increase their cost; (ii) waste or nuisance, or any activity causing odors
perceptible outside the Sublease Premises; or (iii) overloading the floors or the structural or
mechanical systems of the Building. Subtenant shall not erect or place any item in or upon the
areas outside the Sublease Premises, except as expressly provided in this Sublease. Subtenant
shall not erect or place any item (including, without limitation, signs) in, upon or visible from
the exterior of the Building without the consent of Master Landlord and Sublandlord, except as
expressly provided in this Sublease. Subtenant shall at Subtenant’s sole cost and expense
faithfully observe and promptly comply with all local, state and federal laws, statutes, ordinances
and governmental resolutions, orders, rules, regulations and requirements now in force or which may
hereafter be in force with respect to Subtenant’s use, occupancy or possession of the Sublease
Premises and Subtenant’s business conducted in the Sublease Premises and with the requirements of
any board of fire underwriters or other similar body now or hereafter constituted relating to or
affecting the condition, use or occupancy of the Sublease Premises. Subtenant shall also comply
with any covenant, condition or restriction affecting the Building. Subtenant’s obligations under
this Paragraph 8 will survive the termination of this Sublease.

9. Contract Vivarium Services.

     Sublandlord and Subtenant shall enter into a contract for Sublandlord to provide vivarium
space and services to Subtenant which shall be memorialized in a separate agreement.

10. Operating Costs/Real Estate Taxes/Utilities.

(a) Commencing on the Sublease Commencement Date, Subtenant shall pay its pro rata share of
Operating Costs (as defined in the Master Lease) for the Building and Center incurred by
Sublandlord under the Master Lease. Subtenant’s pro rata share of Operating Costs is thirty
percent (30%) of the Operating Costs incurred by Sublandlord under the Master Lease, which
represents the ratio of the Rentable Square Footage of the Sublease Premises to the Rentable
Square Footage of the Master Lease Premises (“Subtenant’s Pro Rata Share”).
Subtenant’s pro rata share shall be computed by Sublandlord on a monthly or other periodic
basis

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selected by Sublandlord. Subtenant’s shall pay the amount of such pro rata share within ten
(10) business days after receipt of a statement from Sublandlord.

(b) Subtenant’s share of real property taxes, insurance costs and other components of
additional rent shall be computed on the same basis as Subtenant’s pro rata share of
Operating Costs.

(c) To the extent not separately metered or monitored with respect to the Sublease Premises,
Sublandlord shall provide the following utilities to the Sublease Premises, including but
not limited to, electricity, water, HVAC, emergency generator, deionized water and
janitorial services (the “Utilities”). Subtenant shall be responsible for its pro
rata share of Sublandlord’s cost of Utilities. Subtenant’s pro rata share shall be computed
on the same basis as Subtenant’s pro rata share of Operating Costs, except for janitorial
services whereby Subtenant’s pro rata share shall be sixteen (16%) of the costs incurred by
Sublandlord, which represents the ratio of Rentable Square Footage of the Sublease Premises
to the Rentable Square Footage of the total area leased by Sublandlord within the Center
(57,000 square feet). Sublandlord shall in no way be liable or responsible for any loss,
damage or expense the Subtenant may sustain or incur by reason of any change, failure,
interruption, interference or defect in the supply or character of the electricity or other
utilities supplied to the Sublease Premises. Sublandlord makes no representation or
warranty as the suitability of the utility service for Subtenant’s requirements, and no such
change, failure, defect, unavailability or unsuitability shall constitute any actual or
constructive eviction, in whole or in part, or entitle Subtenant to any abatement or
diminution of rent, or relieve Subtenant of any of its obligations under this Sublease.
Sublandlord shall not be liable in damages or otherwise for any failure or interruption of
any utility service, and no such failure or interruption shall entitle Subtenant to
terminate this Sublease or abate the rent due hereunder.

(d) Sublandlord shall provide security services, access control and process alarms
(“Security Services”) and Subtenant shall be responsible for its pro rata share of
Security Services. Subtenant’s pro rata share for such Security Services shall be computed
on the same basis as Subtenant’s pro rata share of janitorial services, but in no event will
Subtenant’s payment for such services be less than $750 per month. Sublandlord shall in no
way be liable or responsible for any loss, damage or expense the Subtenant may sustain or
incur by reason of any change, failure, interruption, interference or defect in the supply
or character of the Security Services supplied to the Sublease Premises. Sublandlord makes
no representation or warranty as the suitability of the Security Services for Subtenant’s
requirements, and no such change, failure, defect, unavailability or unsuitability shall
constitute any actual or constructive eviction, in whole or in part, or entitle Subtenant to
any abatement or diminution of rent, or relieve Subtenant of any of

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its obligations under this Sublease. Sublandlord shall not be liable in damages or
otherwise for any failure or interruption of any of the Security Services, and no such
failure or interruption shall entitle Subtenant to terminate this Sublease or abate the
rent due hereunder.

(e) Subtenant shall have the right to opt out of the use of janitorial services and Security
Services provided by Sublandlord upon thirty (30) days prior written notice to Sublandlord.

11. Subordination.

     Sublandlord and Subtenant confirm and agree that this Sublease is subject and subordinate to
all of the terms, covenants and conditions of the Master Lease and to the matters to which the
Master Lease shall be subordinate. Without limiting the generality of the foregoing, in the event
of termination of Sublandlord’s interest under the Master Lease for any reason (including, without
limitation, upon the occurrence of any casualty or condemnation pertaining to the Sublease
Premises) this Sublease shall terminate coincidentally therewith and Sublandlord shall return to
Subtenant the Security Deposit and any prepaid Subtenant’s Rent not applied to a default of
Subtenant within twenty (20) days of such termination. Sublandlord shall have no liability to
Subtenant in connection therewith, unless the termination of the Master Lease was caused by a
violation of Sublandlord’s covenants and agreements in Paragraph 12 below.

12. Incorporation of Master Lease Terms.

(a) The applicable terms, covenants and conditions contained in the Master Lease are hereby
incorporated herein and shall, as between Sublandlord and Subtenant, constitute additional
terms, covenants and conditions of this Sublease, except to the extent set forth below.
Except as provided in this Paragraph 12, all references in the Master Lease to
“Landlord”, “Tenant”, “Lease”, “Premises”, “Commencement Date” and “Rent” shall, for
purposes of incorporation thereof into this Sublease, mean and refer to “Sublandlord”,
“Subtenant”, “Sublease”, “Sublease Premises”, “Sublease Commencement Date” and “Subtenant’s
Rent”, respectively. As between the Parties hereto, (i) Sublandlord agrees to observe and
perform the terms, covenants and conditions on its part to be observed and performed
hereunder (and as Tenant under the Master Lease to the extent that such obligations are not
to be performed by Subtenant hereunder) (w) which would materially and adversely impact
Subtenant if not complied with, (x) which do not require for their performance possession of
the Sublease Premises, (y) which are not otherwise to be performed by Subtenant hereunder,
and (z) provided Subtenant complies with its obligations hereunder; and (ii) Subtenant
agrees to be bound by the provisions of the Master Lease incorporated herein and to keep,
observe and perform for the benefit of Master Landlord and Sublandlord each of the terms,
covenants and conditions on its part to be kept, observed and performed hereunder

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as well as those applicable terms, covenants and conditions to be observed and performed by
Sublandlord as Tenant under the Master Lease with respect to the Sublease Premises. Without
limiting the foregoing, Subtenant shall not commit or permit to be committed on the Sublease
Premises any act or omission which shall violate any term, covenant or condition of the
Master Lease. Subtenant shall under no circumstances have any rights with respect to the
Sublease Premises greater than Sublandlord’s rights as Tenant under the Master Lease.

(b) In the event of conflict between any provision of the Master Lease which is incorporated
herein as described above in this Paragraph 12 and any provision of this Sublease,
the provisions of this Sublease shall control. In determining whether to grant or withhold
any consent or approval hereunder, Sublandlord may expressly condition the same upon the
consent or approval of Master Landlord if such consent or approval is required under the
Master Lease.

(c) The following Sections and provisions of the Master Lease do not apply to, shall not be
a part of, and are not incorporated into this Sublease.

	 	 	 	 	 
	 	 	 	 	Specific Section Excluded
	Section	 	Subject Matter	 	(if not entire Section)
	Section 1

	 	Basic Lease Terms	 	 
	 
	 	 	 	 
	Section 2

	 	The Premises	 	 
	 
	 	 	 	 
	Section 3

	 	Lease Term
	 	
	 
	 	 	 	 
	Section 4

	 	Rent
	 	Section 4.1 (Minimum Monthly Rent);
Section 4.2 (Lease Year); Section 4.4
(Impounds)
	 
	 	 	 	 
	Section 5

	 	Security Deposit
	 	Section 5.3 (Reduction of Security  Deposit Amount)
	 
	 	 	 	 
	Section 21

	 	Default by Tenant
	 	Section 21(d)(v)

Exhibits B, C and E to the Master Lease shall be incorporated into this Sublease but all
other exhibits and references thereto shall be excluded.

(d) Sublandlord and Subtenant agree that Sublandlord shall not be responsible or liable to
Subtenant for the performance or nonperformance of any obligations of Master Landlord under
the Master Lease, and in furtherance thereof agree as follows:

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(i) Notwithstanding anything to the contrary contained in this Sublease, Sublandlord
shall not be required to (A) provide or perform any insurance and services or any
alterations, improvements, improvement allowances or other construction obligations
as to the Sublease Premises, (B) provide any utilities (including electricity) to
the Sublease Premises, (C) perform any maintenance or make any of the repairs to the
Sublease Premises, Building or the Center, (D) comply with any laws or requirements
of governmental authorities regarding the maintenance or operation of the Sublease
Premises after Subtenant takes possession of the Premises or prior thereto to the
extent required to be complied with by Master Landlord under the Master Lease, (E)
take any other action relating to the operation, maintenance, repair, alteration or
servicing of the Sublease Premises that Master Landlord may have agreed to provide,
furnish, make, comply with, or take, or cause to be provided, furnished, made,
complied with or taken under the Master Lease, or (F) provide Subtenant with any
rebate, credit, allowance or other concession required of Master Landlord for any
reason pursuant to the Master Lease unless Sublandlord receives a rent abatement
with respect to the Sublease Premises and Subtenant is not in default of its
obligations under the Sublease. Sublandlord makes no representation or warranty of
quiet enjoyment as to any persons claiming by, through or under Master Landlord, but
Sublandlord represents and warrants quiet enjoyment as against any person claiming
by, through or under Sublandlord.

(ii) Sublandlord agrees, upon request of Subtenant, to use due diligence, at
Subtenant’s sole cost and expense, to cause Master Landlord to provide, furnish, or
comply with any of Master Landlord’s obligations under the Master Lease or to
provide any required consents or approvals; provided, however, that
Sublandlord shall not be obligated to use such efforts or take any action which, in
Sublandlord’s reasonable judgment, might give rise to a default by Sublandlord under
the Master Lease. If Master Landlord shall default in the performance of any of its
obligations under the Master Lease or at law, Sublandlord shall, upon request and at
the expense of Subtenant, cooperate with Subtenant in the prosecution of any
reasonable action or proceeding, in order to have Master Landlord (A) make such
repairs, furnish such electricity, provide such services or comply with any other
obligation of Master Landlord under the Master Lease or as required by law, and/or
(B) compensate Subtenant for any earlier default by Master Landlord in the payment
or performance of its liabilities and obligations under the Master Lease during the
Sublease Term. The indemnity obligation of Subtenant as set forth in Paragraph
15 shall apply to any claims of Master Landlord arising from or in connection
with any such request, action or proceeding.

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(iii) Subtenant shall not make any claim against Sublandlord for any damage which
may arise by reason of: (i) the failure of Master Landlord to keep, observe or
perform any of its obligations under the Master Lease; or (ii) the acts or omissions
of Master Landlord or its employees, agents, licensees, contractors or invitees.

(iv) Subtenant agrees that any waiver of liability, waiver of subrogation rights, or
indemnification provisions in the Master Lease which are incorporated herein as
waivers or obligations of Subtenant (including, but not limited to, in Sections
9.5, 12.2, 13 and 14.5 of the Master Lease, to the
extent applicable to and incorporated in this Sublease), shall be deemed expanded so
as to provide for Subtenant to make such waivers and provide such indemnities not
only in favor of Sublandlord, but also in favor of Master Landlord, and the
respective affiliated employees, agents and the like of both Sublandlord and Master
Landlord as enumerated in such provisions.

(e) In the event that Sublandlord, as Tenant, is entitled to termination rights for all or a
portion of the Sublease Premises, including, without limitation, as a result of (i) damage
and destruction under Section 16 of the Master Lease, or (ii) a partial condemnation
under Section 17 of the Master Lease, then Subtenant shall be entitled to similar
termination rights with respect to the portion or all of the Sublease Premises affected,
regardless of whether or not Sublandlord seeks to enforce such termination rights under the
Master Lease.

(f) In the event that Sublandlord, as Tenant, receives a rent abatement for all or a portion
of the Sublease Premises, including, without limitation, as a result of (i) damage and
destruction under Section 16 of the Master Lease, or (ii) a partial condemnation
under Section 17 of the Master Lease, then Subtenant shall be entitled to similar
abatement of Subtenant’s Rent with respect to the portion or all of the Sublease Premises
affected.

(g) Sublandlord covenants and agrees to provide Subtenant with copies of any notices of
default under Master Lease (unless such default has already been cured), or notices that
could affect Subtenant’s rights and obligations under this Sublease within five (5) business
days after Sublandlord’s receipt thereof. Sublandlord shall obtain the prior written
consent of Subtenant prior to (i) amending or otherwise modifying the Master Lease, or (ii)
waiving, or allowing to lapse, any right of Sublandlord under the Master Lease, to extend
that any such action under (i) or (ii) above would have a material adverse effect on
Subtenant, its use and enjoyment of the Sublease Premises, or its rights under this
Sublease.

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13. Insurance.

     Subtenant shall comply at all times and in all respects with the provisions of Section
9 of the Master Lease with regard to the maintenance of insurance. Such insurance shall name,
as additional insureds, Master Landlord, Sublandlord and any other parties required to be named
under the terms of the Master Lease, and a policy or certificate thereof shall be provided to
Sublandlord not later than two (2) business days prior to the Sublease Commencement Date. The
maintenance of insurance coverage with respect to the Sublease Premises and any property of
Subtenant shall be the sole obligation of Subtenant. All insurance required to be maintained by
Subtenant shall provide for thirty (30) days prior written notice to Sublandlord and Master
Landlord in the event of any termination or reduction in coverage of such insurance. All property
insurance policies which either Party obtains affecting the Sublease Premises shall include a
clause or endorsement denying the insurer any rights of subrogation against the other Party or
Master Landlord. Sublandlord and Subtenant waive any rights of recovery against the other for any
actually insured injury or loss including all amounts within any deductible or self-insured
retention amount applicable to any such insured injury or loss.

14. Surrender of Sublease Premises; Holding Over.

(a) As soon as its right to possession ends, Subtenant shall surrender the Sublease Premises
to Sublandlord in as good repair and condition as when Subtenant first occupied, except for
reasonable wear and tear, and otherwise in accordance with the requirements of the Master
Lease. Subtenant will concurrently deliver to Sublandlord all keys to the Sublease
Premises, and restore any locks that it has changed to the system that existed at the
commencement of the Sublease Term. If possession is not immediately surrendered,
Sublandlord may enter upon and take possession of the Sublease Premises and expel or remove
Subtenant and any other person who may be occupying the Sublease Premises or any part
thereof.

(b) At the expiration or termination of the Sublease Term, Sublandlord may require the
removal of any or all furniture, personal property and equipment from the Sublease Premises,
and the restoration of the Sublease Premises to its prior condition, except for reasonable
wear and tear, at Subtenant’s expense. All of Subtenant’s furniture, personal property and
equipment on or about the Sublease Premises, shall be removed from the Sublease Premises by
Subtenant at the expiration or termination of the Sublease Term. All removals by Subtenant
will be accomplished in a good and workmanlike manner so as not to damage any portion of the
Center, Building or the Master Lease Premises and Subtenant will promptly repair and restore
all damage done except for normal wear and tear. If Subtenant does not so remove any
property which it has the right or duty to remove, Sublandlord may immediately either claim
it as abandoned property, or remove, store and dispose of it in any manner Sublandlord may
choose, at Subtenant’s cost and without liability to Subtenant or any other party.

12

 

(c) As a condition to this Sublease and to facilitate Sublandlord’s performance of its
obligations under the Master Lease, Subtenant agrees that Sublandlord shall be entitled to
enter the Sublease Premises, upon two (2) business days’ advance notice to Subtenant, at any
time during the ten (10) days preceding the Sublease Expiration Date for the purpose of
making any repairs or modifications or removing any alterations or other improvements
required under the terms of the Master Lease to the extent the same will not materially
interfere with Subtenant’s continuous use of the Sublease Premises. Sublandlord’s right to
enter the Sublease Premises under this Paragraph 14(c) shall not be exclusive of any
other right of entry Sublandlord may have under the terms of this Agreement.

(d) If Subtenant does not surrender the Sublease Premises as required and holds over after
its right to possession ends, Subtenant shall become a tenant at sufferance only, at a
monthly rental rate equal to the greater of (i) one hundred fifty percent (150%) of the
total Subtenant’s Rent payable in the last prior full month, or (ii) the amount payable by
Sublandlord as “Tenant” under the Master Lease as a result of such holdover, without
renewal, extension or expansion rights, and otherwise subject to the terms, covenants and
conditions herein specified, so far as applicable. Nothing other than a fully executed
written agreement of the Parties creates any other relationship. Subtenant will be liable
for Sublandlord’s loss, costs and damage from such holding over, including, without
limitation, those from Sublandlord’s delay in delivering possession to other parties. These
provisions are in addition to other rights of Sublandlord hereunder and as provided by law.

15. Waiver and Indemnification.

     The provisions of the Master Lease relating to waiver of liability, waiver of subrogation and
indemnification shall apply to this Sublease as described in Paragraph 12(d)(iv) hereof.

16. Hazardous Materials.

(a) Subtenant shall not, and Subtenant shall not permit any of its employees, agents,
licensees, contractors or invitees, or any other person to possess, store, handle, generate,
release, transport or use in any way in, on or about the Center, Building or Sublease
Premises any Toxic or Hazardous Materials of any kind whatsoever (excluding reasonable
amounts of ordinary office supplies and customary amounts of Hazardous Materials used in
connection with Subtenant’s business, as used in compliance with all applicable laws). For
purposes of this Paragraph 16, “Hazardous Materials” shall mean any product,
substance, chemical, material or waste whose presence, nature, quality and/or intensity or
existence, use, manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Sublease

13

 

Premises is either (i) potentially injurious to public health, safety or welfare, the
environment or the Sublease Premises; or (ii) regulated or monitored by any governmental
authority.

(b) Subtenant shall have no liability or obligation whatsoever for any Hazardous Materials
located in, on or about the Center, Building or Sublease Premises prior to the Sublease
Commencement Date or that migrate onto the property on which the Center is located or appear
within the Center, Building, or Sublease Premises, provided that neither Subtenant nor its
employees, agents, licensees, contractors or invitees was the cause or source of such
Hazardous Materials.

(c) To the extent required by law or for Subtenant’s use and occupancy of the Building and
Sublease Premises, Sublandlord shall cause, at its sole cost and expense, any and all such
Hazardous Materials discovered in, on or about the Building or Sublease Premises to be
removed or otherwise remediated. Sublandlord shall provide to Subtenant a Phase One
Environmental Analysis of the Building prior to entry and Subtenant shall provide the same
to Sublandlord upon termination of this Sublease.

17. Notices.

     All notices, demands, statements and other communications that may or are required to be given
by either Party to the other hereunder shall be in writing and shall be (i) personally delivered to
the address or addressee provided herein, or (ii) sent by certified mail, postage prepaid and
return receipt requested or (iii) delivered by a reputable messenger or overnight courier service
and, in any case, addressed as follows:

	 	 	 
	If to Sublandlord:

	 	Avanir Pharmaceuticals
	 
	 	 
	with a copy to:

	 	Heller Ehrman LLP
	 

	 	4350 La Jolla Village Dr., 7th Floor
	 

	 	San Diego, California 92122
	 

	 	Attention: Stephen Ferruolo
	 
	 	 
	If to Subtenant:

	 	Sirion Therapeutics, Inc.

14

 

     Any notice or document addressed to the Parties hereto at the respective addresses set forth
on this Sublease or at such other address as they may specify from time to time by written notice
delivered in accordance with this Paragraph shall be considered delivered (w) in the case of
personal delivery, at the time of delivery or refusal to accept delivery; (x) on the third day
after deposit in the United States mail, certified mail, postage prepaid; (y) in the case of
reputable messenger or overnight courier service, upon delivery or refusal to accept delivery; or
(z) in the event of failure of delivery by reason of changed address of which no notice was
delivered or refusal to accept delivery, as of the date of such failure or refusal. If any such
day of delivery is not a business day, the notice or document will be considered delivered on the
next business day.

18. Security Deposit.

     Concurrently with Subtenant’s execution of this Sublease, Subtenant shall provide Sublandlord
with a letter of credit for the full amount of the Security Deposit listed in Paragraph
1(a) (the “Letter of Credit”). Such Letter of Credit shall be issued by a financial
institution in a form and substance acceptable to Sublandlord. The Letter of Credit shall have an
original term of no less than one year with provisions for extensions unless sixty (60) days prior
notice is given to Sublandlord by the issuing bank. The Letter of Credit shall provide for partial
draws. Subtenant shall keep the Letter of Credit, at its expense, in full force and effect
throughout the term of this Sublease. Upon the happening of any “Draw Event” (as defined
below), Sublandlord or its assignee, at its option, may present its written demand for payment of
the entire face amount of the Letter of Credit and the funds so obtained shall become due and
payable to Sublandlord or its assignee to be applied as a Security Deposit pursuant to the
provisions of Section 5.1 of the Master Lease. A Draw Event shall mean any of the
following: (i) Subtenant becomes or is the subject of any bankruptcy, insolvency or similar
proceeding or event, (ii) a default occurs under the Sublease beyond all applicable notice and cure
periods; or (iii) the Letter of Credit is not extended within ten (10) business days prior to its
expiration.

19. Assignment and Subletting.

     Subject to the prior written consent of both Sublandlord (which shall not be unreasonably
withheld, conditioned or delayed) and Master Landlord, Subtenant shall have the same rights as
Sublandlord enjoys as Tenant under such portions of Section 18 of the Master Lease as are
incorporated herein, to assign this Sublease or sub-sublease the Sublease Premises. Except in
connection with a Permitted Transfer (as defined below), Sublandlord shall have the right to fifty
percent (50%) of all subrent or other consideration (net of Subtenant’s reasonable expenses in
connection with such assignment or sub-sublease, including, without limitation, brokerage
commissions, legal costs, and tenant improvement costs or allowances) to be paid to Subtenant under
the terms of any assignment or sub-sublease in excess of the total Subtenant’s Rent due hereunder.
Notwithstanding the foregoing provisions of this Paragraph 19, Sublandlord

15

 

shall not withhold approval of an assignment (deemed or actual) of this Sublease, or a sub
sublease of all or any part of the Sublease Premises, or any other Transfer (as defined in the
Master Lease), to an entity controlled by, controlling, or under common control with Subtenant or a
successor by way of merger, acquisition of all or substantially all of Subtenant’s assets,
corporate reorganization, contribution, or similar transaction (each, a “Permitted
Transfer”). However, Subtenant shall still be required to obtain consent of the Master
Landlord under the provisions of the Master Lease.

20. Interest on Subtenant’s Obligations.

     Any Subtenant’s Rent or other charge, expense or other sum due from Subtenant to Sublandlord
under this Sublease which is not paid on the date due, shall bear interest from the date such
payment is due until paid (computed on the basis of a 365-day-year) at the lesser of (a) the
maximum lawful rate per annum or (b) twelve percent (12%) per annum. The payment of such interest
shall not excuse or cure a default by Subtenant hereunder.

21. Authority.

     By delivering this Sublease, each Party hereby represents and warrants to the other that such
execution and delivery has been duly authorized by all necessary corporate or partnership action
and that the person(s) executing same have been duly authorized to do so.

22. Signage and Access.

     Subject to Master Landlord’s approval, Subtenant shall have the right to install signage at
the Center, Building and Sublease Premises, at its sole cost and expense, subject to, and in
compliance with, the provisions of the Master Lease. In addition, subject to Master Landlord’s
approval, Subtenant shall have the right, at its sole cost and expense, to install signage that is
visible from Sorrento Valley Road, subject to the provisions of the Master Lease. At its cost,
Subtenant shall remove any such signage at the expiration of the Sublease Term and repair any
damage caused thereby.

23. Captions.

     The captions in this Sublease are used for convenience and reference only and are not to be
taken as part of this Sublease or to be used in determining the intent of the Parties or otherwise
interpreting this Sublease.

24. Successors and Assigns.

     Subject to the restrictions on assignment set forth in this Sublease, this Sublease shall be
binding upon and inure to the benefit of Sublandlord and Subtenant and their respective successors
and assigns.

16

 

25. Parking.

     Subtenant shall have the non-exclusive right to use all parking areas available to Sublandlord
under the Master Lease, which are adjacent to 11404 and 11408 Sorrento Valley Road, provided
Subtenant shall not use more than twenty-six (26) spaces at any one time.

26. Master Landlord Consent.

     This Sublease shall not become effective and shall not be deemed to be an offer to sublease or
create any rights or obligations between Subtenant or Sublandlord unless and until Sublandlord and
Subtenant have executed and delivered the same, and Master Landlord has executed and delivered a
consent to this Sublease in a form reasonably acceptable to Sublandlord and Subtenant. If no such
consent to this Sublease is given or deemed given by Master Landlord within thirty (30) days after
the delivery of a copy of the fully executed Sublease to Master Landlord, then either Sublandlord
or Subtenant shall have the right, by written notice to the other, to terminate this Sublease at
any time prior to such consent from Master Landlord being given. By delivering this Sublease, each
Party hereby represents and warrants to the other that such execution and delivery has been duly
authorized by all necessary corporate or partnership action and that the person(s) executing same
have been duly authorized to do so.

27. Financial Statements.

     Subtenant represents, warrants and covenants that any financial statements heretofore
furnished to Sublandlord, in connection with this Sublease, are accurate and are not materially
misleading.

28. Furniture, Fixtures and Equipment.

     As of the Sublease Commencement Date, the furniture, fixtures and equipment described on
Exhibit C attached hereto shall be provided with possession of the Sublease Premises at no
additional cost or charge. The furniture, fixtures and equipment are provided by Sublandlord in
its then “as-is” condition. Sublandlord makes no, and Subtenant acknowledges it is not relying on
any, representation or warranty of any kind whatsoever, express or implied, as to any matters
concerning the furniture, fixtures and equipment including, without limitation, any warranties as
to title or implied warranties of merchantability or fitness for a particular purpose. Upon
termination of this Sublease, Subtenant shall deliver the furniture, fixtures and equipment
described on Exhibit C in good repair and condition along with its surrender of the
Sublease Premises.

29. Direct Lease.

     In the event the Master Lease is terminated prior to the expiration of the Sublease Term,
whether as a result of a voluntary termination by Sublandlord or a default on the

17

 

part of Sublandlord, this Sublease shall, upon notice from Master Landlord to Subtenant,
remain in full force and effect as a direct lease between Subtenant and Master Landlord (in which
event Subtenant shall attorn to Master Landlord).

30. Miscellaneous.

(a) Time is of the essence of each and every term of this Sublease.

(b) Subtenant waives any right it may now or hereafter have (i) for exemption of property
from liability for debt or for distress for rent or (ii) relating to notice or delay in levy
of execution in case of eviction for nonpayment of rent.

(c) If there is more than one party constituting Subtenant, their obligations are joint and
several, and Sublandlord need not first proceed against all of them before proceeding
against any or all of the others.

(d) Subtenant acquires no rights by implication from this Sublease, and is not a beneficiary
of any past, current or future agreements between Sublandlord and third parties.

(e) California law governs this Sublease. Neither Party may record this Sublease or a copy
or memorandum thereof. Submission of this Sublease to Subtenant is not an offer, and
Subtenant will have no rights hereunder until each Party executes a counterpart and delivers
it to the other Party.

(f) This Sublease cannot be changed or terminated orally. All informal understandings and
agreements, representation or warranties heretofore made between the Parties are merged in
this Sublease, which alone fully and completely expresses the agreement between Sublandlord
and Subtenant as to the subleasing of the Sublease Premises.

(g) Each and every indemnification obligation set forth in this Sublease, or incorporated
into this Sublease from the Master Lease, shall survive the expiration or earlier
termination of the term of this Sublease.

(h) If, for any reason, any suit be initiated between Sublandlord and Subtenant to interpret
or enforce any provision of this Sublease, the prevailing Party shall be entitled to recover
from the other Party its legal costs, expert witness expenses, and reasonable attorneys’
fees, as fixed by the court.

(i) The Parties mutually acknowledge that this Sublease has been negotiated at arm’s length.
The provisions of this Sublease shall be deemed to have been drafted by all of the Parties
and this Sublease shall not be interpreted or constructed against any Party solely by virtue
of the fact that such Party or its counsel was responsible for its preparation.

18

 

(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:  	/c/ Michael J. Puntoriero
 	 
	 	Name:  	Michael J. Puntoriero 	 
	 	Title:  	Senior VP of Finance & Chief Financial Officer 	 

	 	 	 	 	 
	 	“SUBTENANT”:

SIRION THERAPEUTICS, INC.,

a North Carolina corporation

 	 
	 	By:  	/c/ Dawn E. Bennett Johnson
 	 
	 	Name:  	Dawn E. Bennett Johnson 	 
	 	Title:  	Chief Financial Officer 	 
	 

20

 

EXHIBIT A

MASTER LEASE

Standard Industrial Net Lease by and between Avanir Pharmaceuticals (“Tenant”) and Sorrento
Plaza, a California Limited Partnership (“Landlord”)

Effective May 20, 2002

[Included as Exhibit 10.1 with the Registrant’s Current Report on Form 10-Q, filed August 13, 2002]

 

 

EXHIBIT B

FLOOR PLAN OF SUBLEASE PREMISES

[Graphic]

 

 

EXHIBIT C

FURNITURE, FIXTURES AND EQUIPMENT

11408 Sorrento Valley Rd.

List of Avanir’s Equipment to Remain During Lease Period

1.) Conference Room – conference table, 12 chairs (non-rolling), Proxima projector.

2.) Kitchenette —  Small fridge, microwave, R.O. water filtration system.

3.) Lab techs office area – 7 cubicle work stations, 7 rolling file drawers.

4.) Copy room – (no equipment left)

5.) Offices —  4 private offices each with building standard desk unit, under desk 2 drawer
lateral file cabinet, rolling file drawer unit, wall mounted bookcase.

6.) 1 Office with multi-person desk unit (covers 2 walls completely, accommodates up to 4 people,
each with his own overhanging wall mounted cabinet).

7.) 1 Lab area office with multi-person desk unit (same as #6 above).

8.) Cloning Lab —  Electric heated incubator (non-CO2 type).

9.) Equipment room – D.I. water skid, CO2 gas manifold w/automatic changeover, industrial hot
water heater, water softener unit, shaker incubator.

10.) Dark room —  (No equipment left).

11.) Washroom – Wash sink, drying racks, shelving, ice machine.

12.) PCR Lab – Refrigerator, -20 Freezer.

13.) Tissue Culture Lab —  1 bio-safety cabinets (1 Baker brand –hooked up to central vacuum
unit), 1 double stacked incubator unit w/house CO2 supply.

14.) Purification Lab – (No equipment left).

15.) Cold Room — Shelving

16.) Kinetics Lab —  flammable materials cabinet.

 

 

17.) Main Lab —  1 Bio-safety cabinet (6 ft. Baker w/ 2 house vacuum connections), 1 fume hood (6
ft. Genie), 1 double stacked incubator w/house CO2 connection, 1 refrigerator, 1 -20 freezer, 1
Milli-Q water filtration system.

18.) BSL3 Lab – 2 Bio-safety cabinets (Labconco, direct exhausted to a Bag In/ Bag Out filter
housing with lead/lag exhaust fans), 1 double stacked incubator w/house CO2, large pass-thru
w/interlocking doors autoclave, equipment required for a BSL3 lab.

19.) I.T. Room – Server rack, patch panels, UPS, V&D switches.Exhibit 10.21

 

Exhibit 10.21

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “***”. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE
EXCHANGE ACT OF 1934.

CONFIDENTIAL

DOCOSANOL DATA TRANSFER & PATENT LICENSE AGREEMENT

     THIS DOCOSANOL DATA TRANSFER & PATENT LICENSE AGREEMENT is made and entered into as of July
6, 2006 (“Effective Date”) between Avanir Pharmaceuticals, a California corporation
(“Avanir”) and Healthcare Brands International Limited of 56 Queen Anne Street, London
W1G 8LA (“HBI”).

BACKGROUND

     Avanir is the owner of certain data, know-how, trade secrets, confidential information,
inventions, technology, and patent rights and that (i) pertain to Docosanol, (ii) relate to use of
Docosanol in the treatment of viral infections and inflammations of skin and mucous membranes in
humans, and other medicinal uses, and (iii) include certain medicinal formulations and
manufacturing methods of products containing Docosanol.

     The United States Food and Drug Administration (“FDA”) has approved Avanir’s New
Drug Application in the United States of America (“USA”) and Avanir received approval of
its Marketing Authorization Application (“MAA”) from the Swedish Medical Products Agency
(“MPA”) under a Mutual Recognition Process (“MRP”) relating to products incorporating
Docosanol for topical, human use for the treatment of herpes labialis.

     HBI is interested in obtaining access to certain of Avanir’s proprietary data and know-how,
and Avanir is willing to grant such access on the terms and conditions of this Agreement.

     HBI is interested in obtaining from Avanir a license to Avanir’s patent rights relating to
the use of Docosanol and Avanir is willing to grant such license and access on the terms and
conditions of this Agreement.

     NOW, THEREFORE, in consideration of the monetary consideration set forth in this Agreement
and of the terms, conditions and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and adequacy of which are acknowledged, Avanir and HBI agree
as follows:

1

 

Article I. DEFINITIONS

Words and phrases used in this Agreement which are not otherwise defined will be interpreted in
accordance with the common usage for such term in English in the USA. Technical terms unless
otherwise defined will be interpreted consistent with their common usage in the relevant
scientific field. Some terms are defined in this Agreement parenthetically, and such terms will
have the meanings apparent from the context in which such terms are parenthetically defined. When
used in this Agreement, each of the following defined terms will have the meanings set forth in
this Section.

Section 1.01 “Additional Territories” means Italy, Greece, Cyprus, Turkey, Romania,
Sweden, Denmark, Norway and/or Finland.

Section 1.02 “Additional Rights” means Avanir’s Know-how and/or Intellectual Property in
so far as it relates to any of the Additional Territories, including without limitation those
rights set out in Schedule 1.12.

Section 1.03 “Affiliate(s)” means, with respect to each party, any organization,
corporation, company, firm, or other entity that controls, is controlled by, or is under common
control with such party. In this context “control” shall mean the ability to control the
management of a company, whether through ownership of voting rights, contract, ability to control
or appoint the board or otherwise.

Section 1.04 “Approval Date” has the meaning specified in Section 5.01.

Section 1.05 “Business Day” means any day other than a Saturday, Sunday or any other day
which is a public holiday in England.

Section 1.06 “Data” means any data, results, know-how, and information which Avanir owns,
controls or has a license (with a right to sublicense) and relating to Docosanol or that is
necessary or useful to the manufacture, use or sale of Products, including, without limitation,
data or information incorporated either in Avanir’s approved New Drug Application in the USA or
the MAA, chemical compositions of monomers, derivatives, designs, polymers, solvents, catalysts,
formulae, specifications, designs, chemical and physical data, clinical data, information
concerning concentrations, combinations, indications, dosage strengths and sizes or packaging,
preparations, synthesis, processes, formulations, administrations, applications, toxicity,
operations, regulatory affairs and marketing.

Section 1.07 “Docosanol” means docosanol ***and any other *** ***.

Section 1.08 “European Rights” means all of Avanir’s Know-how and Intellectual Property in
so far as it relates to the Territory, including without limitation those rights set out in
Schedule 1.13.

Section 1.09 “First Commercial Sale” means, in the Territory the first commercial sale,
where sale means ***, whichever comes first, of a Product by HBI, its Affiliates or sublicensees
to any person or entity other than HBI, its Affiliates or sublicensees following Territory
Registration.

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

2

 

Section 1.10 “Improvements” means any and all improvements, developments, alterations or
modifications to the Product made or developed by Avanir or HBI from time to time, solely to the
extent that the composition, manufacture or use of any such item would be dominated by the
Licensed Patents at the time when discovered or made or would require use of Know-how.

Section 1.11 “Intellectual Property” means all patents and patent applications (including
the Licensed Patents), registered and unregistered designs, design rights, copyright works or
other intellectual property rights from time to time owned by Avanir in relation to the creation,
manufacture, Registration, marketing, promotion, distribution and/or sale of the Products and/or
Docosanol, including any Improvements.

Section 1.12 “Know-how” means all of the Data, drawings, designs, specifications,
processes, knowledge, correspondence, technical information and expertise from time to time owned
or controlled by Avanir in relation to the creation, manufacture, Registration, marketing,
promotion, distribution and/or sale of the Products and/or Docosanol and its packaging, including
any Improvements.

Section 1.13 “Licensed Patents” means all (i) patents and patent applications in the
Territory which generally or specifically claim a Product, a process for manufacturing or
formulating a Product, an intermediate contained in a Product, or use of a Product and which are
owned or controlled by Avanir, including without limitation those listed in Schedule 1.13
and those owned by Avanir under Section 3.06; (ii) any divisionals, continuations, refilings, and
extensions of any of the foregoing patents and patent applications; and (iii) all substitutions,
reissues, renewals, reexaminations, patents of addition, and inventors’ certificates thereof,
patent term extensions, supplementary protection certificates and exclusivity extensions of the
foregoing patents.

Section 1.14 “Product(s)” means any finished or semi-finished product that contains
Docosanol (either as the sole ingredient or in combination with any other ingredient, substance or
compound, regardless of whether any other such ingredient, substance or compound is claimed as or
considered to be an “active ingredient” or not) in any and all concentrations, formulations,
preparations, administrations, combinations or dosage strengths and sizes thereof, together with
all expansions and Improvements thereon, the manufacturing, use or sale of which would, but for
the licenses granted hereunder, infringe any Licensed Patent or employ any Know-how.

Section 1.15 “Registration” means satisfaction of registration (including any duplicate
marketing authorizations) or notification requirements and receipt of approvals, licenses,
registrations or authorizations of any appropriate regulatory agency, department, bureau or other
government entity, necessary for the commercialization of the Product, including any manufacture,
use, storage, import, transport or sale of Products or the equivalent from the appropriate
governmental agency in any relevant country of the Territory or Additional Territory.

Section 1.16 “Territory” means Russia, the Ukraine and the nations of the European Union
as of the Effective Date, but not any of the following countries: Italy, Greece, Cyprus, Turkey,
Romania, Sweden, Denmark, Norway or Finland; provided, however, that if HBI has been granted a
license pursuant to Section 2.07 in respect of any Additional Territory, such Additional Territory
shall become part of the Territory and references to Territory shall thereafter be construed
accordingly. Other countries may be added to the Territory by the parties from time to time upon

3

 

 the mutual execution of an amendment to this Agreement adding such countries and upon the payment
of mutually agreed consideration therefor.

Section 1.17 “Third Party” or “Third Parties” means any person, organization,
corporation, company, firm, or other entity that is not a party hereto or an Affiliate of either
party.

Article II. DATA TRANSFER & PATENT LICENSE

Section 2.01 Data Transfer. In consideration for the fee paid by HBI and in order to
support HBI’s direct pursuit of applications for Registrations for marketing approval of Products
in the Territory, Avanir (A) hereby grants HBI the right to access and reference the Data, (B)
will execute such letters of authorization or consents as reasonably requested by HBI in
connection with the foregoing, (C) will make available the Data which is the entire contents of
the approved Swedish MAA regulatory submission for 10% docosanol cream in the treatment of herpes
labialis, and pre-clinical data relating to any Product, including, without limitation, copies of
all existing clinical data, documents, papers, protocols, results and analyses and all
correspondence relating to the Swedish approval, and (D) will transfer, or cause to be
transferred, to HBI all regulatory licenses for Products in the Territory existing as of the
Effective Date. This Data represents a significant investment on the part of Avanir, and is
considered proprietary to Avanir. HBI, therefore, agrees to retain control over this Data and not
to transfer Data to Third Parties other than to regulatory authorities in the Territory or to
regulatory consultants of HBI who are obligated in writing to maintain its confidentiality without
advance written approval of Avanir.

Section 2.02 Patent License Grant. Subject to all the terms, payments and limitations of
this Agreement, Avanir hereby grants to HBI an exclusive license under the European Rights to
make, have made, use, have used, offer to sell, sell, have sold through distributors and import
Products in the Territory, and to subcontract such rights as reasonably required to exercise the
rights granted hereunder and to grant sub-licenses of such rights upon approval by Avanir, not to
be unreasonably withheld or delayed, and subject to the terms set forth in Schedule 2.

For clarity, as a consequence of the exclusive license granted herein, Avanir will not carry on or
procure any Third Party to carry on any activities within the scope of such license. Accordingly,
Avanir shall not seek customers in the Territory and will not maintain a distribution depot in the
Territory for sales of Product to customers in the Territory. Notwithstanding the foregoing,
Avanir shall be entitled to manufacture Product in the Territory for the sole purpose of exporting
Product outside the Territory provided that Avanir shall not sell or supply Product to any Third
Party in the event Avanir believes or has reasonable cause to believe that such Third Party
intends to sell such Product into the Territory. HBI shall not seek customers outside the
Territory and will not maintain a distribution depot outside the Territory for sales of Product to
customers outside the Territory. Notwithstanding the foregoing, HBI shall be entitled to
manufacture Product outside the Territory for the sole purpose of exporting Product into the
Territory provided that HBI shall not sell or supply Product to any Third Party in the event that
HBI believes or has reasonable cause to believe that such Third Party intends to sell such Product
outside the Territory.

Section 2.03 Duty to Supplement the Data. Subject to any contractual prohibitions by
which Avanir is bound as of the Effective Date, in the event that Avanir receives any supplemental
Data or other Know-how or copies of correspondence with regulatory authorities outside the
Territory from any other licensees or any other source that relates to the Products, Avanir will
promptly

4

 

 provide such updates of Data and/or Know-how to HBI. Upon request of HBI, Avanir shall request
permission from other licensees of Products to share any such information which Avanir receives
with HBI, solely for use by HBI under the terms of this Agreement. Avanir will also make
available, upon request, content from the US NDA 20-941 to HBI for use in seeking and supporting
Product Registrations in the Territory. HBI shall be permitted to reference such US NDA and any
other regulatory filings made by Avanir or its licensees in the Additional Territories to the
extent reasonably necessary to obtain Registrations in the Territory.

Section 2.04 Data Transfer Fees. In consideration for the transfer of the Data as a
know-how and data transfer fee, HBI will pay to Avanir, (a) the sum of £750,000 within ten (10)
business days of the execution of this Agreement and (b) the sum of £750,000 within 30 days of
receipt of each of the first two grants in the Territory by the appropriate regulatory authorities
of the regulatory approvals necessary to commence sales, including Registration and pricing
approvals if required, in each case with respect to approvals which are received after the
Effective Date.

Section 2.05 Taxes. HBI will pay and bear the expense of local, state and/or federal
government license, sales and use, property and ad valorem taxes and any custom duties, fees or
charges which may be imposed or assessed on it with respect to manufacture or sales of Products in
the Territory under this Agreement.

Section 2.06 Deferred Compensation. In accordance with Schedule 2 and in further
consideration for the licenses granted pursuant to Section 2.02, for (a) sales or
sublicenses of Product rights, (b) sales of HBI and (c) initial public offerings, Licensee will
pay Avanir non-refundable amounts as calculated on Schedule 2. For clarity, no royalties
shall be due on sales of Products hereunder.

Section 2.07 “Additional Territories License”. Avanir grants HBI a right of first offer
to obtain a license under the terms set out in Section 2.02 of the relevant Additional Rights in
respect of each of the Additional Territories. This shall mean that before making any offer to
any Third Party of, or making direct use by Avanir following expiration, termination or
renegotiation of any existing license agreement relating to, any of the Additional Rights (or any
interest in any of them), directly or indirectly, Avanir shall first notify HBI in writing of the
of its offer of such Additional Rights and shall give HBI *** Business Days in which to
decide whether it wishes to acquire the rights which are the subject of such written offer. If
HBI wishes to acquire such Additional Rights, HBI and Avanir shall then negotiate terms to extend
the licenses hereunder to include such rights in good faith for a period of no more than 60 days
from the end of the first *** Business Day period. If such terms are agreed within such period,
and Avanir has as of such date obtained by reversion from an existing licensee, rights to any
Registrations relevant to the Product in such part of the Additional Territory as has become part
of the Territory pursuant to this Section 2.07, Avanir shall transfer such rights to HBI upon the
execution of the amendment adding such Additional Territory. If HBI and Avanir are not able to
agree on such terms within such additional 60 day period then Avanir may thereafter offer such
Additional Rights to any Third Party on financial terms which are substantially equivalent to the
terms that were last offered to HBI.

 

			
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Article III. INTELLECTUAL PROPERTY

Section 3.01 Patent Prosecution and Maintenance.

     (a) Discretionary Duty to Prosecute and Maintain: Avanir shall, at Avanir’s expense,
use all commercially reasonable efforts to prosecute or cause to be prosecuted or continue to
prosecute to allowance or final rejection in the Territory the patent applications included in the
Licensed Patents. Avanir shall, at Avanir’s expense use all commercially reasonable efforts to
maintain any issued patents described within the Licensed Patents. Avanir shall promptly provide
HBI with copies of all correspondence with patent offices relevant to the foregoing efforts. If,
subject to Avanir’s obligation to use all commercially reasonable efforts as provided herein,
Avanir fails to so file, prosecute, cause to be prosecuted, or maintain the Licensed Patents, HBI
may elect to do so.

     (b) HBI’s Right to Consult: Avanir shall furnish HBI with copies of all
correspondence relating to the Licensed Patents to and from patent offices in the Territory and
shall provide HBI a reasonable time to offer its comments thereon, provided that in the event that
delay would jeopardize any potential patent right, Avanir shall use all commercially reasonable
efforts to proceed without awaiting HBI’s comments on any patent application or correspondence.
HBI shall have the right to consult with Avanir regarding the content of the patent applications
included in the Licensed Patents in the Territory and to comment on any prosecution thereof.
Avanir shall consider all such comments offered by HBI in good faith, it being agreed, however,
that all final decisions respecting conduct of the prosecution of said patent applications shall
rest solely in the discretion of Avanir. Any legal fees or expenses incurred by HBI under this
Section 3.01 shall be the sole responsibility of HBI.

     (c) Abandonment of Prosecution: Avanir shall notify HBI in the event Avanir decides
at any time, subject to Avanir’s obligation to use all commercially reasonable efforts as provided
herein, to abandon or discontinue prosecution of any one or more of the patent applications
included in the Licensed Patents in the Territory, including any decisions to discontinue pursuit
of applications which have been finally rejected. Such notification will be given as early as
possible which in no event will be less than *** days prior to the date on which said
application(s) will become abandoned. HBI shall have the option, exercisable upon written
notification to Avanir, to assume full responsibility, at its discretion and expense, for the
prosecution of the affected patent application(s). Under no circumstances shall any such expense
paid by HBI be refundable to HBI by Avanir. Under no circumstance shall any such assumption of
responsibility on the part of HBI affect ownership of any such patent application or any patent
issuing thereon.

     (d) Abandonment of Opposition Contest: Should a priority or opposition contest
develop in any patent office or other forum within the Territory relating to a patent or patent
application within the Licensed Patents which Avanir does not believe it would be commercially
reasonable to defend, then HBI shall be given *** days notice in which to elect to continue
prosecuting and defending such patent or patent applications at HBI’s own expense. Otherwise, HBI
shall pursue and bear the cost of any such contest and shall have control of such contest. Avanir
shall provide HBI with all cooperation and available documents required by HBI to prosecute any
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or opposition contest not pursued by HBI, including cooperation of any licensor or
consultants of Avanir, at HBI’s expense. Avanir shall have the right to participate in any such
contest, or designate its own counsel to so participate, at Avanir’s own expense, throughout each
step of such priority or opposition contest. Under no circumstance shall any such expenses or fees
paid by HBI
be refundable to HBI by Avanir. Under no circumstances shall any such election on the part of HBI
affect ownership of any such patent or patent application, including any patent issuing thereon.

     (e) Patent Term Extension: In the event that applicable law in any country in the
Territory provides for the extension of the term of any patent included among Licensed Patents,
Avanir shall, upon request of HBI, apply for and use all commercially reasonable efforts to obtain
such an extension or, should the law require HBI to so apply, Avanir hereby gives permission to
HBI to do so. HBI and Avanir agree to cooperate with one another in obtaining such extension.
Avanir agrees to cooperate with HBI in the exercise of the authorization granted herein and will
execute such documents and take such additional action as HBI may reasonably request in connection
therewith.

Section 3.02 Enforcement of Patent Rights Against Third Parties. If either party becomes
aware of any product or activity of any Third Party that involves infringement or violation of any
of Avanir’s proprietary rights licensed to HBI hereunder, then such party will promptly notify the
other party in writing of such infringement or violation. Subject to Section 3.03, Avanir may in
its sole discretion take or not take whatever action it believes is appropriate in connection
with, and will have the right to initiate an infringement or other appropriate suit against, any
Third Party who is suspected of infringing or misappropriating any Licensed Patents, invention or
technology included in any Products or the Data in the Territory. If Avanir elects to take
action, HBI will fully cooperate therewith at Avanir’s expense. If Avanir initiates and
prosecutes any such action under this section, all legal expenses (including court costs and
attorneys’ fees) will be for Avanir’s account. All amounts awarded by way of judgment, settlement
or compromise and any such damages, royalties, settlement fees or other consideration received by
Avanir will be shared by the parties in proportion to the damages that each has suffered in
relation to such infringement. Avanir will have the sole and exclusive right to select counsel
for any such suit but shall consult with HBI in that regard. If necessary, HBI may be joined as a
party to the suit and will cooperate fully with respect to such suit and will offer such
assistance to Avanir as Avanir reasonably requests in connection therewith at no charge except for
reimbursement of reasonable out-of-pocket expenses (including attorneys’ fees) incurred in
rendering such assistance.

Section 3.03 Enforcement of Patent Rights Against Third Parties by HBI. If Avanir
declines to (or does not agree to) enforce or initiate an infringement or other appropriate suit
against an infringing Third Party in the Territory within *** Business Days of HBI
informing it of a claim, or, notwithstanding Section 3.02, to the extent such infringement relates
to the Territory, HBI will have the right to sue in respect of any such infringement in the
Territory and shall be entitled to all amounts awarded by way of judgment, settlement or
compromise, provided, however, that Avanir will be entitled to a *** percent (***%) share of any
damages or payments (other than for reimbursement of costs or expenses, including attorneys’ fees)
received by HBI from such Third Party(s). If HBI elects to take such action, Avanir will fully
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and will not itself take any conflicting action under
Section 3.02 (though it may take action in respect of countries which are not within the
Territory). HBI may in any event seek injunctive relief in appropriate cases without notice to or
consent from Avanir.

The parties shall keep one another informed of the status of and of their respective activities
regarding any litigation or settlement thereof concerning Product pursuant to this Section 3.03 or
Section 3.02, provided, however, that no settlement or consent judgment or other voluntary final
disposition of any suit defended or action brought by a party pursuant to this Article 3
may be entered into without the consent of the other party if such settlement would require the
other party to be subject to an injunction or to make a monetary payment or would otherwise
adversely affect the other party’s rights under this Agreement or the validity, scope or
enforceability of the Licensed Patents.

Section 3.04 Confidential Information. Each party to this Agreement acknowledges that in
order for Avanir and HBI to carry out their respective obligations under this Agreement, it may be
necessary for Avanir and HBI to disclose to each other certain non-public and valuable business
information (“Confidential Information”), which shall include without limitation
information exchanged or provided under Sections 2.01, 2.03 and 4.02 hereof. Each party to this
Agreement agrees: (a) not to reveal or make available any Confidential Information of the other to
any Third Party, (except (i) to agents engaged to obtain Registrations in the Territory who have
entered into confidentiality agreements in a form acceptable to Avanir or (ii) as such disclosure
may be specifically approved in writing by the party against whom such disclosure is sought and
except as such disclosure may be required by the receiving party’s compliance with legal
requirements and in any such case such party will promptly notify the other party of any such
legally required disclosure) and to ensure that it will treat such Confidential Information of the
other party in the same manner as it treats its own Confidential Information, such treatment to be
at least the degree that a reasonable person would perform under similar circumstances; (b) to
ensure that Affiliates, sublicensees, employees, agents, associates or other persons to whom such
disclosure may be made or who may otherwise have access to such Confidential Information of the
other have, directly or indirectly, agreed in writing to safeguard and maintain such Confidential
Information of the other and not to disclose or use such Confidential Information of the other
except as expressly provided herein; (c) to ensure that Confidential Information of the other is
not used for the receiving party’s benefit except as such benefits are expressly contemplated in
this Agreement; (d) to prohibit the Confidential Information of the other from being duplicated in
any manner; except as is reasonably necessary to perform the tasks and obligations contemplated
under this Agreement; and (e) to prohibit the Confidential Information of the other from being
published in any form without the express written consent from the disclosing party. The
obligations of this Section with respect to Confidential Information of the other Party will
continue during the term of this Agreement and for 10 years thereafter. For clarity, this
Section 3.04 shall not be deemed to prevent HBI from subcontracting or sublicensing under
Section 2.02 or either Party from making any permitted assignment under Section
7.03.

Section 3.05 Trademarks. HBI will have no right to use the Avanir trade name or any Avanir
trademark. HBI will solely own any trademark or trademarks selected by HBI for use in connection
with the sale of the Products in the Territory, together with any registrations or pending
registration applications or intent to use filings therefor, and HBI will be solely responsible
for use and registration of such trademarks and all related costs and expenses.

8

 

Section 3.06 Improvements. Each party will solely own any and all Improvements that each
such party invents, develops, discovers or creates, without any obligation to the other party with
respect thereto other than as expressly provided herein. Subject to mutual agreement on
applicable terms
and conditions, HBI will grant to Avanir a non-exclusive license outside the Territory to any
HBI-owned Improvements.

Article IV. REGULATORY MATTERS

Section 4.01 Additional Studies. HBI will be responsible for (a) conducting any
additional pre-clinical, clinical or non-clinical studies reasonably necessary or required to be
conducted in order to obtain or to maintain in effect Registrations of the Products in the
Territory and (b) all costs and expenses associated therewith.

Section 4.02 Registrations. Avanir hereby grants to HBI the right to communicate directly
with applicable government agencies. HBI will be solely responsible for, will manage, direct and
control the application process and will directly communicate with each applicable agency required
in order to prepare and submit an application for Registration with health care authorities in at
least *** countries in the Territory within *** months from the Effective Date. HBI
will directly bear all costs and expenses of, and will own, all applications for Registrations.
Avanir will assist HBI in the regulatory matters as appropriate, and HBI will compensate Avanir
for its personnel’s reasonable time and expenses *** man hours will be provided with Avanir’s
executive hours and non-executive hours to be charged to HBI at $***/hour and $***/hour
respectively, plus expenses). Each party will notify the other immediately by telephone (with
prompt, written follow-up) of any inquiry, contact or communication received from any governmental
regulatory agency or other official body which adversely relates to or impacts upon the Products
or any component or ingredient thereof (including, without limitation, any issuance of any
Registration administrative decree relating to a recall of the Products or the imposition of any
post marketing surveillance period), and will promptly furnish the other party with copies of all
written communications relating thereto sent to or received from such regulatory agency. HBI will
keep Avanir informed of the status of the Registration efforts on a current basis and will furnish
Avanir, upon Avanir’s reasonable request, copies of all of the documents, data and other
information supplied to or received from the government in the Territory or other any approval
authority in connection with the Registration. Avanir will have the right to be informed of, and
upon HBI’s request, will participate in and attend discussions regarding any Registration in the
Territory or any administrative decree. Upon receipt of the Registrations, HBI will promptly
furnish Avanir copies or other evidence thereof.

Section 4.03 Adverse Event Data Exchange. In the event that either party or its
Affiliates or licensees (or, in HBI’s case, sub-licensees) obtains, directly or indirectly,
information, data, inquiries complaints or reports on any Adverse Events (as defined in accordance
with ICH Guidelines) relevant to a Product during the development, marketing and distribution of
any of the Products, such party will disclose, as soon as reasonably practicable and, in
accordance with applicable laws, such information and data to the other party. In any event, each
party shall inform the other party of any Adverse Event of which it becomes aware in a timely
manner commensurate with the seriousness of the Adverse Event and in compliance with ICH
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responsible for reporting all Adverse Events to the appropriate
regulatory authorities in the countries in the Territory in accordance with the appropriate laws
and regulations of the relevant countries and authorities and Avanir or its other licensees will
be responsible for reporting all
Adverse Events to the appropriate regulatory authorities in the countries outside the Territory.
HBI will ensure that its Affiliates and sublicensees comply with all such reporting obligations,
and Avanir will use commercially reasonable efforts to ensure that its Affiliates and other
licensees comply with all such reporting obligations.

Section 4.04 Labeling. HBI agrees that (a) in any part of the Territory, the Product’s
packaging and all Product labeling will only be in the primary languages of the country(ies) where
the Product is being sold, and (b) in any country of the Territory where there is a Licensed
Patent, the word “patented” will appear on the Product’s packaging in a place determined by HBI in
its sole discretion, in each case to the extent practicable and permissible under any applicable
law.

Article V. ALLOCATIONS OF RESPONSIBILITIES AND RISKS.

Section 5.01 Commercialization & Manufacturing of Products. HBI will use all
commercially reasonable efforts to apply its marketing and sales expertise to maximize the sale of
the Products in the Territory as soon as is reasonably practical. Such efforts shall include that
the First Commercial Sale will occur no later than *** months after the receipt of all
regulatory approvals required to commence sales, including Registration and pricing approvals if
required, in each country, which approvals are received after the Effective Date (each such date,
an “Approval Date”). As between Avanir and HBI, throughout the term of this Agreement,
HBI will be solely responsible for and entitled to (and Avanir shall refrain from and shall not
assist or procure any Affiliate or Third Party unless at the request of HBI to): (a) manufacture
or have manufactured the Products for distribution and sale in the Territory and any related
packaging, (b) acquire or cause to be acquired all manufacturing equipment and licenses,
including, without limitation, plant, equipment and facilities licenses and approvals, necessary
to enable the manufacture and testing of the Products, (c) obtaining any required importation
licenses or approvals for importation of bulk Docosanol or fully manufactured Products into the
Territory, (d) report matters regarding the manufacture of Products to relevant regulatory
authorities and handle and respond to any appropriate governmental agency inspections with respect
to manufacturing of Products, all in accordance with applicable laws and regulations.

Section 5.02 WARRANTIES.

     (a) Avanir represents that it owns the Know-How and the Licensed Patents and has all power
and authority necessary to grant the licenses and rights to HBI under this Agreement.

     (b) Avanir further warrants and represents that there is nothing in any Third Party agreement
Avanir has entered into as of the Effective Date which, in any way, will limit Avanir’s ability to
perform all of the obligations undertaken by Avanir hereunder, and that it will not enter into any
Agreement after the Effective Date under which Avanir would incur any such limitations.

 

			
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(c) Nothing in this Agreement shall be construed as a warranty that Licensed Patents are
valid or enforceable as of the Effective Date, or that they will be so during the term of this
Agreement; provided, however, that Avanir hereby warrants and represents that it has no present
knowledge from which it can be inferred that Licensed Patents are invalid or that their exercise
would infringe patent rights of Third Parties, and that the Licensed Patents have been filed,
prosecuted and maintained in good faith to date. Avanir further warrants and represents that it
has no present knowledge from which it can be inferred that the use of or the process of
manufacturing Product, and all intermediates of such process, will infringe patent rights of Third
Parties in any country in the Territory.

     (d) Avanir warrants and represents that, it has furnished to HBI, or will, pursuant to
Article 2 hereof, furnish to HBI, copies of all clinical information and correspondence with
regulatory authorities in the Territory relevant to Products that are in the possession of Avanir
as of the Effective Date.

     (e) Avanir warrants and represents that the officers of Avanir have no present knowledge of
the existence of any pre-clinical or clinical results or findings concerning the Product which it
has not provided to HBI prior to the Effective Date and which results or findings in Avanir’s
reasonable opinion, evidences any issue of quality, toxicity, safety and/or efficacy that would
materially impair marketing and sale of the Product.

     (f) AVANIR EXPRESSLY DISCLAIMS ANY OTHER WARRANTY AND ESPECIALLY WITH RESPECT TO (A) THE
QUALITY, EFFICACY OR EFFICIENCY OF THE PRODUCTS, DATA OR OTHER INFORMATION TO BE DELIVERED UNDER
THIS AGREEMENT; AND (B) MERCHANTABILITY OF ANY DATA, PRODUCTS OR KNOW-HOW, OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO ANY AND ALL OF THE FOREGOING.

Section 5.03 Limitation of Liability. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NEITHER
HBI NOR AVANIR WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR COST OF PROCUREMENT OF SUBSTITUTE
GOODS, SERVICES, TECHNOLOGY OR RIGHTS OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES. NEITHER
AVANIR NOR HBI WILL BE LIABLE FOR ANY AMOUNTS AGGREGATING IN EXCESS OF THE AMOUNTS PAID TO IT (FOR
AVANIR) OR BY IT (FOR HBI) HEREUNDER, PROVIDED THAT THIS LIMITATION SHALL NOT APPLY TO THE
INDEMNITIES SET OUT IN SECTION 5.04.

Section 5.04 Indemnification.

     (a) Notice of Indemnified Claims. If during the term of this Agreement, either party
receives notice of or becomes aware of any Third Party claim against such party or its Affiliates
or sublicensees, which claim is subject to indemnification by the other party under this
Section 5.04 (an “Indemnified Claim”), such party seeking indemnification will
promptly inform the other party of such claim and all relevant and applicable facts relating
thereto in writing.

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(b) Defense of Indemnified Claims. Upon receiving a notification of an Indemnified
Claim, the indemnifying party will have sole discretion with respect to and will solely control,
at the indemnifying party’s expense, the defense of any such Indemnified Claim. The indemnifying
party will keep the indemnified party fully informed regarding the status of any negotiations or
suits relating to such Indemnified Claim. The indemnified party will cooperate fully with the
indemnifying party and will offer such assistance to the indemnifying party as the indemnifying
party requests in connection with the defense of any such Indemnified Claim at no charge to the
indemnifying party, except for reimbursement of reasonable out-of-pocket expenses incurred in
rendering such assistance. The indemnifying party will have the right to join the indemnified
party as a party to any lawsuit relating to such Indemnified Claim at the indemnifying party’s
expense and the indemnified party will have the right to be represented therein by legal counsel
of its own choice at the indemnified party’s expense. The indemnifying party will not settle any
such suit if such settlement would have an affect on the rights of the indemnified party without
obtaining the prior written consent of the indemnified party, which consent will not be
unreasonably withheld. The indemnifying party’s obligation to indemnify under this Section
5.04 will not apply to the extent that the party seeking indemnification (i) failed to comply
with the obligations under this Section 5.04; or (ii) contributed to such loss, damage,
injury, liability or claim by any act, or by an omission to perform some duty imposed by law, this
Agreement or other contract between the parties, on the indemnified party. The indemnification
rights of either party under this Section 5.04 will be the sole remedy for any claims for
which either such party seeks indemnification under this Section 5.04.

     (c) Indemnification of Avanir by HBI. HBI will defend, indemnify and hold harmless
Avanir, its successors, assigns, officers, directors, employees and agents from any and all
claims, causes of action, losses, liabilities and expenses (including, but not limited to,
reasonable attorneys’ fees) to Third Parties (including Avanir’s employees and any sublicensee)
arising out of any personal injury, death, environmental damage or property damage resulting from
HBI’s creation, manufacture, Registration, marketing, promotion, distribution and/or sale of
Docosanol or Products or any other of HBI’s acts or omissions in relation to (i) any defects in
design, materials or workmanship of any kind or (ii) failure to comply with any applicable laws or
misappropriation of any Third Party rights related to the manufacture, labeling, marketing,
advertising, distribution, transportation, sale and use of the Docosanol or Products by HBI or its
Affiliates or sublicensees or by any Third Party acting under any contract with HBI or with HBI’s
knowledge, consent or approval, or (c) claims that any HBI trademark used by it in relation to the
Products infringes any trademark rights owned by a Third Party.

     (d) Indemnification of HBI by Avanir. Avanir will defend, indemnify and hold
harmless HBI, its successors, assigns, officers, directors, employees and agents from any and all
claims, causes of action, losses, liabilities and expenses (including, but not limited to,
reasonable attorneys’ fees) to Third Parties (including HBI’s employees and any sublicensee)
arising out of any personal injury, death, environmental damage or property damage resulting from
Avanir’s failure to comply with any applicable laws, or claims that HBI’s approved use or sale of
Products infringes any patent or similar right owned by a Third Party in the Territory. If an
action is commenced by a Third Party against HBI seeking a preliminary or permanent injunction
with respect to the use of the Products by HBI and Avanir is unable to either obtain a written
opinion of patent counsel that HBI is not infringing the third-party’s patent, or that such patent
is invalid, or a license to such Third Party’s patent, despite use of best efforts, then HBI will
cease any such infringement or misappropriation unless it will release Avanir from any
indemnification

12

 

obligations arising out of subsequent infringement by HBI. Avanir shall further
defend, indemnify and hold harmless HBI, its successors, assigns, officers, directors, employees
and agents from any and all claims, causes of action, losses, liabilities and expenses (including,
but not limited to, reasonable attorneys’ fees) to Third Parties (including Avanir’s employees and
any sublicensee) arising out of any personal injury, death, environmental damage or property
damage resulting from Avanir’s creation, manufacture, Registration, marketing, promotion,
distribution and/or sale of Docosanol or Products outside of the Territory, including in relation
to (i) any defects in design,
materials or workmanship of any kind or (ii) failure to comply with any applicable laws or
misappropriation of any Third Party rights, related to the manufacture, labeling, marketing,
advertising, distribution, transportation, sale and use of the Products by Avanir or its
Affiliates or sublicensees or by any Third Party acting under any contract with Avanir or with
Avanir’s knowledge, consent or approval, or (c) claims that any Avanir trademark infringes any
trademark rights owned by a Third Party.

Section 5.05 Insurance. To provide each indemnified party under this Agreement with
adequate assurance of indemnification, for the term of this Agreement and for a period of five
years after the expiration of this Agreement or its earlier termination, each party will obtain
and maintain, at its sole cost and expense, product liability insurance in amounts, which are
reasonable and customary in the local pharmaceutical industry considering the respective size and
activities of the two parties. Such product liability insurance will insure against all
liability, including liability for personal injury, physical injury and property damage. Each
party will provide written proof of the existence of such insurance to the other party upon
request.

Section 5.06 Compliance with Export and Other Laws. Each party to this Agreement hereby
covenants to comply with, and the performance of the terms of this Agreement will be subject to
all applicable treaties, laws, statutes, rules and regulations of any federal, state or local
governmental entity or instrumentality, including without limitation, the provisions of the USA
Export Administration Act of 1969, as amended.

Article VI. TERM & TERMINATION

Section 6.01 Term. Unless otherwise terminated as set forth below, the term of this
Agreement will commence on the date of this Agreement and will continue until and automatically
expire, on a country by country basis upon the later to occur of (a) the 15th anniversary of the
First Commercial Sale in each respective country of the Territory or (b) the date the last claim
of any Licensed Patent licensed under this Agreement expires or is invalidated that covers sales
of Products in each such country of the Territory. Upon expiration of the term of this Agreement
in each such country of the Territory, HBI will thereafter retain a fully paid-up perpetual,
irrevocable, royalty-free, exclusive license under the Intellectual Property and Know-how in such
country.

Section 6.02 Material Breach by HBI. If HBI materially breaches, materially defaults or
otherwise materially fails to perform under the terms of this Agreement, Avanir may terminate this
Agreement by giving *** days advanced written notice, unless HBI will cure such breach,
default or failure of performance within such *** day period or (where it is not reasonably
possible to cure within such period) within such longer period as may be reasonable in all the
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provided that HBI is continuing to use its reasonable endeavors to cure such breach.
For the avoidance of doubt, a failure of HBI to (i) prepare and file the application for
Registration in at least *** countries of the Territory within *** months after the Effective Date
or (ii) complete the First Commercial Sale of Products in each country by the *** month
anniversary of the relevant Approval Date will each be considered a breach of this Agreement,
entitling Avanir to terminate the Agreement as provided herein but, in the case of (ii), only with
respect to the relevant country. For clarity, the parties agree that in the event that HBI in
good faith disputes the existence of a
material breach by HBI, the dispute shall be resolved pursuant to Section 7.06 prior to any
termination pursuant to this Section 6.02 becoming effective, and that during the pendency of any
such proceedings, the parties shall remain bound by the terms and conditions of this Agreement.

Section 6.03 Lack of Funding. Notwithstanding anything else in this Agreement to the
contrary, in the event that HBI fails to close a transaction providing funding to HBI in at least
the amount of *** million within *** days of the Effective Date, Avanir will have the
right to terminate this Agreement and the licenses granted herein upon *** days notice, unless HBI
closes such financing within such second ***-day period.

Section 6.04 Material Breach by Avanir. If Avanir materially breaches, materially
defaults or otherwise materially fails to perform under the terms of this Agreement, HBI may
terminate this Agreement by giving *** days advanced written notice to Avanir, unless Avanir cures
such breach, default or failure of performance within such *** day period.

Section 6.05 Continuing Obligations. Termination of this Agreement by either party for any
reason under the terms and conditions of this Agreement will not affect obligations of either
party incurred prior to termination or the right of either party to recover damages from any
breach thereof or affect HBI’s obligations to pay Avanir any fees, milestones, or other payments
that have accrued as of the date of such termination. In the event Avanir terminates this
Agreement for non-payment of fees under Section 5 by HBI, all amounts then owing by HBI
will immediately become due and payable.

Section 6.06 Remedies. Upon termination of this Agreement by either party for any reason
under the terms and conditions of this Agreement, neither party will incur any liability
whatsoever for any damage, loss or expenses of any kind suffered or incurred by the other arising
directly and solely from or incident to any termination of this Agreement (or any part thereof) by
such party (whether or not such party is aware of any such damage, loss or expenses) so long as
such party’s termination complies with the terms of the Agreement. Termination is not the sole
remedy under this Agreement and, whether or not termination is effected, all other remedies will
remain available.

Section 6.07 Consequences of Termination. Upon termination of this Agreement by either
party prior to the expiration of this Agreement set forth in Section 6.01:

     (a) Licenses. The licenses granted under Section 2.02 will terminate, and
HBI will permanently discontinue all advertising with respect to Products, although HBI may, to
the extent permitted by applicable law, continue to sell Products which it has in inventory at the
time of

 

			
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14

 

termination; provided, however, that any such sale will (i) be made at prices and under
terms generally consistent with previous sales of the Products by HBI and (ii) be conducted in a
manner so as not to be harmful to Avanir or the market for the Products. Notwithstanding the
above, HBI may not sell the Products more than *** days after the effective date of termination.
At Avanir’s option, remaining stocks of Products may be bought by Avanir at HBI’s standard sale
price. HBI will deliver such stocks at Avanir’s direction and expense.

     (b) Confidential Information. HBI will return all copies of all of Avanir’s
Confidential Information and any other Data relating to the Products.

Article VII. MISCELLANEOUS

Section 7.01 Publicity. The parties to this Agreement understand that Avanir is a public
company and agree that Avanir may disclose certain matters pertaining to this Agreement as to
enable it to fully comply with USA or Territory securities laws or regulations, which disclosure
may be in the form of public statements, whether oral or written, including, but not limited to,
shareholder reports, communications with stock market analysts, press releases or other
communications with the media. Notwithstanding the foregoing, any press release or other
announcement pertaining to this Agreement by either party will be provided to the other party in
advance for review and approval with such approval not to be unreasonably withheld or delayed.

Section 7.02 Publications. Neither HBI nor its agents, collaborators or subcontractors
will publish the results of any clinical studies of any Products without the prior approval of
Avanir, which approval of Avanir may not be unreasonably withheld or delayed.

Section 7.03 Rights to Assign. Neither party will have the right to assign or delegate
this Agreement, or any of its rights or obligations under this Agreement (except for Avanir’s
rights to payments pursuant to this Agreement) without the other’s express written consent, and
such assignment or delegation without such consent will be null and void for all purposes. Avanir
shall not unreasonably withhold its consent to any partial assignment of HBI’s rights hereunder
for which payment would accrue in accordance with Section 2.06. Notwithstanding anything to the
contrary in this Agreement, either Avanir or HBI may assign its entire interest in this Agreement
without any prior consent provided that such assignment is to a wholly-owned Affiliate or part of
the sale or transfer of substantially all of Avanir’s or HBI’s business related to the Product, or
pursuant to a merger, corporate division, corporate separation or de-merger, as the case may be,
and subject only to HBI’s compliance with Section 2.06.

Section 7.04 Notices/Reports. Any reports, notices or other communications required or
permitted to be given by either party to this Agreement will be given in writing by personal
delivery, overnight courier service or facsimile, or by registered or certified air mail, postage
prepaid, return receipt requested, addressed to each respective party at the address shown below.

If to Avanir:

Avanir Pharmaceuticals, Inc.

11388 Sorrento Valley Road, Suite 200

San Diego, California 92121

Attention: Chief Financial Officer

Facsimile No: (858)-658-7455

15

 

If to HBI:

Healthcare Brands International Limited

6 Queen Anne Street

London W1G 8LA

England.

Attention: CEO

Facsimile No.: 011-44-2073173106

or to such other address as either party may indicate by proper notice to the other in the same
manner as provided in this Agreement. All notices are deemed effective on the date of receipt or,
if delivery is not accepted, five days after placement with the addressee, an overnight courier
service or a post office, as applicable.

Section 7.05 Severability. If any provision of this Agreement is determined to be
invalid, void, or unenforceable, then any such provision will be ineffective to the extent
invalid, void or unenforceable, and the remaining provisions of this Agreement will continue in
full force and effect without being impaired or invalidated in any way.

Section 7.06 Dispute Resolution. As a required precondition to terminating the Agreement
or any license granted pursuant to this Agreement or to initiating any legal action, any dispute,
controversy, or claim arising out of this Agreement or its interpretation, performance, breach,
enforcement or termination, or any other claim arising out of the respective rights and duties of
the parties (hereinafter, a “Dispute”), will be resolved, to the exclusion of a court of
law, by binding arbitration conducted in accordance with the Arbitration Rules of the United
Nations Commission on International Trade Law (UNCITRAL), in effect as of the date hereof. Unless
the parties agree in writing on the appointment of a single arbitrator, the matter will be
referred to three arbitrators; one to be appointed by each party, and the third, who will act as
Chairman, being nominated by the two so selected by the parties. The arbitration decision or
award will be final and binding on the parties, and the parties agree to be bound thereby and to
act accordingly. The arbitration award is to be given by a majority decision; however, if there
be no majority in favor of a single decision or award, the award will be made by the Chairman
alone. The arbitrators will be empowered to award relief which is legal and/or equitable in
nature, as appropriate. The expenses of the proceeding will initially be borne equally by the
parties to the dispute, but the prevailing party in such proceeding will be entitled to recover,
in addition to reasonable attorneys’ fees and all other expenses, its contribution for the
reasonable fees and expenses of the arbitrator as an item of damage and/or recoverable expenses.
The place of arbitration will be London. The language of such arbitration will be English.
Judgment on the award rendered by the arbitrators may be entered in any court of competent
jurisdiction, or application may be made to such court for judicial acceptance of the award and/or
an order of enforcement as the case may be. The arbitration will be conducted confidentially and
any award may be made public only with the prior written consent of the parties.

16

 

Section 7.07 Governing Law. This Agreement will be construed in accordance with the laws
of New York, USA, without giving any effect to the principles of conflict of laws thereof and
without regard to the United Nations Convention on Contracts for the International Sale of Goods.

Section 7.08 Entire Agreement. This Agreement (together with its Exhibits and Schedules)
contains the entire agreement of the parties regarding the subject matter of this Agreement and
supersedes all prior agreements, understandings and negotiations regarding the same. This
Agreement may not be changed, modified, amended or supplemented except by a written instrument
signed by both parties.

Section 7.09 Waiver. The waiver by either party of a breach of any provisions contained
in this Agreement will be in writing and will in no way be construed as a waiver of any succeeding
breach of such provision of the waiver of the provision itself.

Section 7.10 Relationship of the Parties. The relationship between Avanir and HBI under
this Agreement is that of parties to an arms-length negotiated contract. Nothing in this
Agreement is intended or is to be construed so as to create between Avanir and HBI, respectively,
the relationship of partners, or joint venturers, or to establish either party to this Agreement
as the employee or agent of the other party to this Agreement. Neither party to this Agreement
has an express or implied right or authority under this Agreement to make any statement or
commitments of any kind or to assume or to create any obligations on behalf of or in the name of
the other party to this Agreement, or to bind the other party to any contract, agreement or
undertaking with any Third Party.

Section 7.11 Certain Construction Rules. The Article and Section headings used in this
Agreement are for convenience of reference only and in no way define, limit, extend or describe
the scope or intent of any provisions hereof. In addition, as used in this Agreement, unless
otherwise expressly stated to the contrary, (a) all references to days, months or years are
references to calendar days, months or years and (b) any reference to a “Section,” “Article,”
“Exhibit,” or “Schedule” is a reference to a Section or Article of this Agreement or an Exhibit or
Schedule attached to this Agreement. Any reference to a “person” means any individual,
corporation, partnership, joint venture, association, trust or any other entity or organization of
any kind or character, including a governmental agency.

Section 7.12 Counterparts. This Agreement may be executed in several counterparts, each
of which will be an original, but all of which, when taken together, will constitute one and the
same instrument.

Section 7.13 Further Assurances. Each party agrees to execute, acknowledge and deliver
such further instruments, and do such other acts, as may be necessary and appropriate in order to
carry out the purposes and intent of this Agreement.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

17

 

IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement as of the day and
year first written above.

	 	 	 	 	 	 	 	 	 	 	 
	HEALTHCARE BRANDS	 	 	 	AVANIR PHARMACEUTICALS	 	 
	INTERNATIONAL LIMITED	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

[SIGNATURE PAGE TO DOCOSANOL DATA TRANSFER &

PATENT LICENSE AGREEMENT]

18

 

SCHEDULE 1.13

Licensed Patents [table follows]

19

 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Patent /	 	 
	 	 	 	 	 	 	Filing	 	Application	 	Issue
	Patent title	 	Territory	 	Status	 	date	 	Number	 	date
	Use of C-20 to C-26
Aliphatic Alcohols
in the Treatment of
Viral Infections

	 	EP
	 	Issued
	 	4/16/90
	 	0469064	 	 	9/29/93
	 
	Use of C-27 to C-32
Aliphatic Alcohols
in Antiviral
Treatment

	 	EP
	 	Issued
	 	4/16/90
	 	0428642	 	 	9/29/93
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	Viral inhibition by
long-chain
alcohols, alkanes,
fatty acids and
amides

	 	EP
	 	Issued
	 	09/10/97
	 	1001759	 	 	7/20/05
	 
	Viral inhibition by
long-chain
alcohols, alkanes,
fatty acids and
amides

	 	Poland
	 	Issued
	 	9/10/97
	 	189618	 	 	1/5/05
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	Synergistic
inhibition of viral
replication by
long-chain
hydrocarbons and
nucleoside analogs

	 	Russian Federation
	 	Issued
	 	3/8/2000
	 	2251415	 	 	5/10/05
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***	 	 	***

 

			
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1

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Patent /	 	 
	 	 	 	 	 	 	Filing	 	Application	 	Issue
	Patent title	 	Territory	 	Status	 	date	 	Number	 	date
	***

	 	***
	 	***
	 	***
	 	***
	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***
	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***
	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***
	 	***
	 
	***

	 	***
	 	***
	 	***
	 	***
	 	***

 

			
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2

 

SCHEDULE 2

DEFERRED COMPENSATION

With respect to any transaction resulting in an Event listed in the table below which commences
during the term of this Agreement (a “Transaction”), HBI shall pay to Avanir compensation
according to the formula set forth below.

After the first such Event of the kind listed in 3 or 4 below, or of the kind listed in 1 or 2
below if all rights to the Product in all countries in the Territory then controlled by HBI are
sold, no subsequent Event of any kind shall be deemed to trigger any such payment obligation to
Avanir. If Event 1 or 2 occurs in part, but not all of the Territory, or with respect to some,
but not all of HBI’s rights to the Product hereunder, and after such sale HBI retains any rights
to the Product in any part of the Territory, any subsequent Event 1 or 2, either in another
country or countries in the Territory, or with respect to other rights to a Product, shall trigger
a payment obligation but only with respect to such other country(ies) and rights, and only if it
occurs prior to an Event listed in 3 or 4 below.

	 	 	 	 	 
	No.	 	Event	 	Formula
	1

	 	The sale to a Third Party of
HBI’s rights to Products
only
	 	***% x ***
	 
	 	 	 	 
	2

	 	The sale to a Third Party of
HBI’s rights to multiple
products, including the
Product,
	 	***% X *** X (*** /***)
	 
	 	 	 	 
	3

	 	First Sale or Merger of HBI
with a Third Party
	 	***% X *** X (*** /***)
	 
	 	 	 	 
	4

	 	IPO of HBI
	 	Issuance of Shares of HBI to
Avanir in a Dollar value = ***% of
the ***-money valuation (i.e.,
post-IPO) x (*** /***)

Notwithstanding the foregoing, in the event that HBI grants a sublicense of, but does not assign/
sell outright, rights to the Products in all or part of the Territory, HBI shall pay to Avanir
***% of all relevant *** received The payment by HBI of the compensation provided in the table
above resulting from any subsequent assignment of all rights to the Product in the relevant
country, or the sale, merger or IPO of HBI under any of the Events above will terminate HBI’s
obligation under this paragraph to pay Avanir any subsequent portion of the ***.

For the avoidance of doubt, the parties acknowledge and agree that HBI’s use of distributors or
sales or marketing agents shall be neither a sublicense nor a sale of Product rights for purposes
hereof, and thus does not constitute any of the Events described in the table above.

 

			
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1

 

Examples:

Case 1:

	 	•	 	HBI sells all rights to Product alone in France, Germany and Spain. HBI pays
***% of *** to Avanir.
	 
	 	•	 	HBI is then acquired. HBI pays ***% of *** X (***/***) to Avanir.
	 
	 	•	 	No further payment obligations to Avanir.

Case 2:

	 	•	 	HBI sells all rights to Product in Germany and France. HBI pays ***% of *** to
Avanir.
	 
	 	•	 	HBI then sells all remaining rights to Product in rest of Territory in subsequent
transaction. HBI pays ***% of *** to Avanir.
	 
	 	•	 	No further payment obligation to Avanir, even upon Sale of HBI or IPO of HBI.

Case 3:

	 	•	 	HBI sublicenses rights to Product in Germany and France but retains rights in rest of
the Territory. HBI pays ***% of *** to Avanir.
	 
	 	•	 	HBI then sells all remaining rights to Product (but not the Germany and France
rights). HBI pays ***% of *** to Avanir. HBI continues to pay ***% of *** to Avanir.

Case 4:

	 	•	 	HBI sublicenses rights to Product in Germany and France but retains rights in rest of
the Territory. HBI pays ***% of *** to Avanir.
	 
	 	•	 	HBI then is sold or merged (as an Event 3) or goes public (as an Event 4) HBI pays
Avanir as shown on the table for Events 3 or 4, as relevant. HBI (including any
successor to HBI) is no longer required to pay ***% of *** to Avanir.

Case 5:

	 	•	 	HBI sublicenses rights to Product in Germany and France but retains rights in rest of
the Territory. HBI pays ***% of *** to Avanir.

 

			
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2

 

	 	•	 	HBI then sells all remaining rights (including Germany and France rights) to Product.
HBI pays ***% of *** Proceeds to Avanir. HBI (including any assignee of HBI) is no
longer required to pay ***% of *** to Avanir.

Definitions:

“Net Product Sales” means gross revenues from sales by or on behalf of HBI of Products to third
parties in the relevant Territory, less ***, *** and *** and ***, in the twelve
calendar months ended prior to the closing of the relevant Transaction.

“License Receipts” means the total of any ***, *** or *** received from a sublicensee as
consideration for the grant of a sublicense to the Product.

“Net Total Sales” means Net Product Sales *** sales by or on behalf of HBI of *** not licensed
under this Agreement, in the twelve calendar months ended prior to the closing of the relevant
Transaction.

“M&A Proceeds” means the gross amount of any consideration, in any form or kind, received by HBI
or HBI’s shareholders in connection with the sale, merger or change of control of HBI, net of
reasonable out-of-pocket legal fees, finders fees and broker fees paid (but not in any event to
exceed ***% of such gross amount of consideration), as evidenced by HBI in reasonable detail;
provided that the compensation paid to Avanir shall be comprised of the same cash or
non-cash type and ratio of consideration payable to HBI or HBI’s shareholders generally, and shall
be paid at the same time or times as received. In the event that the M&A Proceeds is not in the
form of cash or publicly traded securities, then if the parties cannot agree on the value of M&A
Proceeds, they will engage a mutually agreeable Third Party to determine such valuation.

“Sale Proceeds” means the gross amount of any consideration, in any form or kind, received by HBI
as consideration for the sale of the Product rights to a Third Party, net of reasonable
out-of-pocket legal fees, finders fees and broker fees (but not in any event to exceed ***% of
such gross amount of consideration), as evidenced by HBI in reasonable detail; provided
that the compensation paid to Avanir shall be comprised of the same cash or non-cash type and
ratio of consideration payable to HBI generally, and shall be paid at the same time or times as
received. .

PROCESS

	1.1	 	HBI shall submit its draft determination of the amount payable pursuant to the above formula
to Avanir within *** Business Days of completion of the relevant Transaction, following which
Avanir shall have *** Business Days within which to submit a written notification of its
acceptance or non-acceptance of the amount. If Avanir does not so notify HBI within ***
Business Days of delivery of the draft determination, or if Avanir notifies HBI that it
accepts the draft determination, then Avanir will be deemed to have accepted the draft
determination with respect to such Transaction.

 

			
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3

 

	1.2	 	If Avanir notifies HBI of any objection then:
	 
	1.2.1	 	Avanir will set out in reasonable detail their reasons for such non-acceptance and specify
the adjustments that in its opinion should be made to the draft determination and provide
supporting evidence for each such adjustment;
	 
	1.2.2	 	Avanir will provide the HBI with access to all such documents and working papers relating to
its preparation of the reasons for non-acceptance and proposed adjustments to the draft
determination; and
	 
	1.2.3	 	HBI and Avanir will respectively use all reasonable endeavors to reach agreement upon the
adjustments needed to meet the objections of Avanir.
	 
	1.3	 	If Avanir and HBI do not reach agreement within *** Business Days after service of
the notice to HBI of non-acceptance, then the matter(s) in dispute will be referred to the
decision of a single independent chartered accountant or an independent firm of chartered
accountants (in either case, the “Independent Accountant”) that is mutually agreeable to both
parties. The Independent Accountant (whose costs will be shared equally by the parties) will
act as expert (and not as arbitrator) and the decision of the Independent Accountant shall (in
the absence of manifest error) be final and binding on the parties. It is the parties’
intention that the Independent Accountant will perform his task within *** Business Days if
practicable and they shall encourage him to do so.
	 
	1.4	 	Avanir and HBI will use all reasonable endeavors to provide all such working papers,
documents and other information as is requested by the Independent Accountant and will procure
that the Independent Accountant is requested to state, when giving his decision on the
matter(s) referred to him, what adjustments (if any) need to be made to the draft
determination.
	 
	1.5	 	If Avanir and HBI reach agreement on (or Avanir is deemed to have accepted) the draft
determination or if a revised determination is finally determined at any stage in the
procedure, the determination as so agreed or determined will provide the amount payable to
Avanir (as applicable) within *** Business Days upon reaching agreement and shall be final and
binding on Avanir and HBI.
	 
	1.6	 	Avanir and HBI will pay their own costs and expenses in connection with the preparation and
agreement of the draft determination or any objections thereto including, where applicable,
any costs associated with presentation of their cases to the Independent Accountant.

 

			
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4

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