EXHIBIT 10.14
LEASE
THIS LEASE is made on the 2nd day of August, 1996, by and between Huettig &
Schromm/Heaton & Keyser (hereinafter called "Lessor") and Oratec Interventions
(hereinafter called "Lessee").
IN CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED, THE PARTIES AGREE AS
FOLLOWS:
1. Premises. Lessor leases to Lessee, and Lessee leases from Lessor, upon the
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terms and conditions herein set forth, those certain Premises ("Premises")
situated in the City of Menlo Park, County of San Mateo, California, as
outlined in Exhibit "A" attached hereto and described as follows: +/-15,440
square foot building commonly known as 3700 Haven Court, Menlo Park,
California. Lessee's pro-rata share of the building is 100%.
2. Term. The term of this Lease shall be for four (4) years, commencing on
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October 1, 1996, or on the later date on which Lessor delivers the Premises
with all tenant improvements to be installed by Lessor complete, and final
city approvals or approval necessary for lawful occupancy of the Premises
having been received, and ending on September 30, 2000, unless sooner
terminated pursuant to any provision hereof.
3. Rent. Lessee shall pay to Lessor rent for the Premises of Eighteen Thousand
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Five Hundred Twenty-Eight Dollars ($18,528.00) per month in lawful money of
the United States of America, subject to adjustment as provided in Section
A of this Paragraph. Rent shall be paid without deduction or offset, prior
notice, or demand, at such place as may be designated from time to time by
Lessor as follows: $18,528.00 shall be paid upon execution of the Lease by
both Lessor and Lessee, which sum represents the amount of the first
month's rent. A deposit of $18,528.00 as a Security Deposit shall be made
by Lessee and held by Lessor pursuant to Paragraph 5 of this Lease, and
shall be paid upon execution of the Lease by both Lessor and Lessee. If
Lessee is not in default of any provision of this Lease, this sum, without
interest thereon, shall be applied toward the rent due for the last month
of the term of this Lease or the extended term, pursuant to any extension
of the initial term in accordance with the provisions of this Lease.
Monthly rent shall be paid in advance on the first (1st) day of each
calendar month as follows:
Months Monthly Rent/NNN
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01-12 $18,528.00
13-24 $19,300.00
25-36 $20,072.00
37-48 $20,844.00
Rent for any period during the term hereof which is for less than one (1)
full month shall be a pro-rata portion of the monthly rent payment. Lessee
acknowledges that late payment by Lessee to Lessor of rent or any other
payment due Lessor will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing
and accounting charges, and late charges that may be imposed on Lessor by
the terms of any encumbrance and note secured by any encumbrance covering
the Premises. Therefore, if any installment of rent or other payment due
from Lessee is not received by Lessor within ten (10) days following the
date it is due and payable, Lessee shall pay to Lessor an additional sum of
ten percent (10%) of the overdue amount as a late charge. The parties agree
that this late charge represents a fair and reasonable estimate of the
costs that Lessor will incur by reason of late payment by Lessee.
Acceptance of any late charge shall not constitute a waiver of Lessee's
default with respect to the overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies available to Lessor.
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If, for any reason whatsoever, Lessor cannot deliver possession of the
Premises on the commencement date set forth in Paragraph 2 above, this Lease
shall not be void or voidable, nor shall Lessor be liable to Lessee for any loss
or damage resulting therefrom; but in such event, Lessee shall not be obligated
to pay rent until possession of the Premises is tendered to Lessee and the
commencement and termination dates of this Lease shall be revised to conform to
the date of Lessor's delivery of possession. In the event that Lessor shall
permit Lessee to occupy the Premises prior to the commencement date of the term,
such occupancy shall be subject to all of the provisions of this Lease,
including the obligation to pay rent at the same monthly rate as that prescribed
for the first month of the Lease term. Lessee shall have the right to enter the
Premises prior to commencement date to install fixtures and equipment, provided
Lessee shall not unreasonably interfere with construction of improvements by
Lessor's contractors.
A. Cost-of-Living Increase. Not applicable.
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B. All taxes, insurance premiums, Outside Area Charges, late charges,
costs and expenses which Lessee is required to pay hereunder, together
with all interest and penalties that may accrue thereon in the event
of Lessee's failure to pay such amounts, and all reasonable damages,
costs, and attorney's fees and expenses which Lessor may incur by
reason of any default of Lessee or failure on Lessee's part to comply
with the terms of this Lease, shall be deemed to be additional rent
(hereinafter, "Additional Rent"), and, in the event of non-payment by
Lessee, Lessor shall have all of the rights and remedies with respect
thereto as Lessor has for the non-payment of monthly installment of
rent.
4. Option to Extend Term.
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A. Lessee shall have the option to extend the term on all the provisions
contained in this Lease for one (1) three (3)-year periods ("extended
term(s)") at an adjusted rental calculated as provided in Subparagraph
B below on the condition that:
(i) Lessee has given to Lessor written notice of exercise of that
option ("option notice") at least six (6) months before
expiration of the initial term or extended term(s), as the case
may be.
(ii) Lessee is not in default in the performance of any of the terms
and conditions of the Lease on the date of giving the option
notice, and Lessee is not in default on the date that the
extended term is to commence, in each case beyond the grace
period provided herein.
B. Monthly rent for the extended term shall be the then prevailing market
rent for similar buildings in the area as agreed upon by the parties
within no more than thirty (30) days after exercise by Lessee of the
option described herein. If the parties are unable to agree on such
amount within that time period, Lessee may rescind its option exercise
or, by written notice to Lessor, request that the rent be determined
by an appraisal conducted in a manner reasonably acceptable to both
parties.
C. In no event shall the monthly rent for any extended term be less than
the monthly rent paid immediately prior to such extended term.
5. Security Deposit. Lessor acknowledges that Lessee has deposited with
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Lessor a Security Deposit in the sum of $18,528.00 to secure the full and
faithful performance by Lessee of each term, covenant, and condition of
this Lease. If Lessee shall at any time fail to make any payment or fail to
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keep or perform any term, covenant, or condition on its part to be made or
performed or kept under this Lease, Lessor may, but shall not be obligated
to and without waiving or releasing Lessee from any obligation under this
Lease, use, apply, or retain the whole or any part of said Security Deposit
(a) to the extent of any sum due to Lessor; or (b) to compensate Lessor for
any loss, damage, attorneys' fees or expense sustained by Lessor due to
Lessee's default. In such event, Lessee shall, within five (5) days of
written demand by Lessor, remit to Lessor sufficient funds to restore the
Security Deposit to its original sum. No interest shall accrue on the
Security Deposit. Should Lessee comply with all the terms, covenants, and
conditions of this Lease and, at the end of the term of this Lease, leave
the Premises in the condition required by this Lease, then said Security
Deposit or any balance thereof, less any sums owing to Lessor, shall be
returned to Lessee within fifteen (15) days after the termination of this
Lease and vacancy of the Premises by Lessee. Lessor can maintain the
Security Deposit separate and apart from Lessor's general funds, or can co-
mingle the Security Deposit with the Lessor's general and other funds.
6. Use of the Premises. The Premises shall be used exclusively for the purpose
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of research and development, storage, distribution, offices and marketing
of medical devices.
Lessee shall not use or permit the Premises, or any part thereof, to
be used for any purpose or purposes other than the purpose for which the
Premises are hereby leased; and no use shall be made or permitted to be
made of the Premises, nor acts done, which will increase the existing rate
of insurance upon the building in which the Premises are located, or cause
a cancellation of any insurance policy covering said building, or any part
thereof, nor shall Lessee sell or permit to be kept, used, or sold, in or
about the Premises, any article which may be prohibited by the standard
form of fire insurance policies. Lessee shall not commit or suffer to be
committed any waste upon the Premises or any public or private nuisance or
other act or thing which may disturb the quiet enjoyment of any other
tenant in the building in which the premises are located; nor, without
limiting the generality of the foregoing, shall Lessee allow the Premises
to be used for any improper, immoral, unlawful, or objectionable purpose.
Lessee shall not place any harmful liquids in the drainage system of
the Premises or of the building of which the Premises form a part. No waste
materials or refuse shall be dumped upon or permitted to remain upon any
part of the Premises outside of the building proper except in trash
containers placed inside exterior enclosures designated for that purpose by
Lessor, or inside the building proper where designated by Lessor. No
materials, supplies, equipment, finished or semi-finished products, raw
materials, or articles of any nature shall be stored upon or permitted to
remain on any portion of the Premises outside of the building proper.
Lessee shall comply with all the covenants, conditions, and/or restrictions
("C.C. & R.'s") affecting the Premises
Lessor represents and warrants to Lessee that an underground storage
tank has been removed from the property. Remedial action has been completed
and site closure has been received. Lessor represents and warrants to
Lessee that to the best of its knowledge there are no Toxic or Hazardous
materials present on, at or under the Premises, which shall be deemed to
include underlying land and groundwater, at the time of Lessee's occupancy.
Lessor shall indemnify, defend and hold harmless Lessee, its partners,
directors, officers, employees, lenders, and successors against all claims,
obligations, liabilities, demands, damages, judgements, and costs,
including reasonable attorneys' fees arising from or in connection with any
prior Toxic or Hazardous materials that existed prior to Lessee's occupancy
of the Premises. Lessee in turn represents to Lessor that it does not now
and will not in the future permit the use or storage on the Premises of
Toxic or Hazardous materials, excluding, however basic janitorial,
maintenance and office supplies, and materials commonly used in connection
with Lessee's business as described in paragraph 6 hereof. For purposes of
this paragraph 6 "Toxic or 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 leased premises, is either (i) potentially
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injurious to the public health, safety or welfare, the environment, or the
leased premises; (ii) regulated or monitored by any governmental authority;
or (iii) a basis for potential liability of Lessee and Lessor to any
governmental agency or third party under any applicable statute or common
law theory. "Toxic or Hazardous Materials" shall include, but not be
limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or
by-products thereof. Lessee hereunder shall be responsible for and
indemnify, and hold Lessor and its partners, directors, officers,
employees, lenders, successors and assigns harmless from all claims,
obligations, liabilities, demands, damages, judgments and costs, including
reasonable attorneys' fees arising at any time during or in connection with
Lessee's causing or permitting any materials referred to under any
governmental provisions or regulatory scheme as "hazardous" or "toxic" or
which contain petroleum, gasoline, or other petroleum product, to be
brought upon, stored, manufactured, generated, handled, disposed, or used
on, under or about the Premises. Lessee's and Lessor's obligations
hereunder shall survive the termination of this Lease.
If, at any time during the term of this Lease, Lessor suspects that
toxic waste, spillage, or other contaminants may be present on the
Premises, Lessor may order a soils report, or its equivalent. If Lessee has
breached the terms of this Section 6, Lessee shall pay the expense of
preparing the referenced report, and Lessee shall pay such costs within
fifteen (15) days from the date of the invoice by Lessor. If any such toxic
waste, spillage, or other contaminants are found upon the Premises, Lessee
shall deposit with Lessor, within fifteen (15) days of notice from Lessor
to Lessee to do so, the amount necessary to remove the substances and
remedy the problem.
Lessee shall abide by all laws, ordinances, and statutes, as they now
exist or may hereafter be enacted by legislative bodies having jurisdiction
thereof, relating to its use and occupancy of the Premises, provided
nothing herein will require Lessee to pay for or perform any of the
following: removal, remediation, investigation or clean up of any Hazardous
Substances the presence of which is not attributable to Lessee, its agents,
employees or contractors.
7. Improvements: Lessor will provide an allowance of $112,000 for improvements
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to the Premises as specified in Exhibit "B". Any costs in excess of said
allowance shall be the sole responsibility of Lessee. Lessee may either pay
such excess costs at the time of occupancy or may choose to have the excess
costs amortized as additional rent over a period of three years at a rate
of Bank of America's Prime Rate plus 3%. Lessor will make reasonable
efforts to complete such improvements prior to October 1, 1996. Possession
of the premises, pursuant to Paragraph 13 of this lease, shall be deemed
tendered upon receipt of final city approvals.
8. Taxes and Assessments.
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A. Lessee shall pay before delinquency any and all taxes, assessments,
license fees, and public charges levied, assessed, or imposed upon or
against Lessee's fixtures, equipment, furnishings, furniture, appliances,
and personal property installed or located on or within the Premises.
Lessee shall cause said fixtures, equipment, furnishings, furniture,
appliances, and personal property to be assessed and billed separately from
the real property of Lessor. If any of Lessee's said personal property
shall be assessed with Lessor's real property, Lessee shall pay to Lessor
the taxes attributable to Lessee within thirty (30) days before delinquency
and following timely receipt of a written statement from Lessor setting
forth the taxes applicable to Lessee's property.
B. All property taxes or assessments levied or assessed by or hereafter
levied or assessed by any governmental authority against the Premises or
any portion of such taxes or assessments which becomes due or accrued
during the term of this Lease shall be paid by Lessor. Lessee shall pay to
Lessor Lessee's proportionate share of such taxes or assessments within
thirty (30) days before delinquency and following timely receipt of
Lessor's invoice demanding such payment. Lessee's
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liability hereunder shall be prorated to reflect the commencement and
termination dates of this Lease.
9. Insurance.
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A. Indemnity. Lessee agrees to indemnify and defend Lessor against and
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hold Lessor harmless from any and all demands, claims, causes of action,
judgments, obligations, or liabilities, and all reasonable expenses
incurred in investigating or resisting the same (including reasonable
attorneys' fees) on account of, or arising out of, the use, or occupancy of
the Premises. This Lease is made on the express condition that Lessor shall
not be liable for, or suffer loss by reason of, injury to person or
property, from whatever cause, in any way connected with the condition,
use, or occupancy of the Premises, specifically including, without
limitation, any liability for injury to the person or property of Lessee,
its agents, officers, employees, licensees, and invitees occurring for any
reason other than gross negligence or willful misconduct of Lessor its
agents, employees or contractors, or a breach of the obligations of Lessor
hereunder.
B. Liability Insurance. Lessee shall obtain, and at all times during the
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term hereof, keep in force, at its own cost and expense, Commercial General
Liability insurance with limits of $1,000,000 combined single limit for
Bodily Injury and Property Damage per occurrence and in the aggregate.
Tenant's insurance shall name Lessor as additional insured as respects the
use and occupancy of the leased Premises and shall provide that Lessee's
insurance company shall endeavor to furnish Lessor with 30 days advance
notice of cancellation of Lessee's insurance policy. Lessee shall furnish
Lessor with a certificate of insurance to this effect.
C. Property Insurance. Lessor shall obtain and keep in force during the
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term of this Lease a policy or policies of insurance covering loss or
damage to the Premises in "all risk" extended coverage form, in the amount
of the full replacement value thereof. Lessee shall pay to Lessor its pro-
rata share of the cost of said insurance within ten (10) days of Lessee's
receipt of Lessor's invoice demanding such payment. Lessee acknowledges
that such insurance procured by Lessor shall contain a deductible which
reduces Lessee's cost for such insurance, and, in the event of loss or
damage, Lessee shall be required to pay to Lessor the amount of such
deductible, which payment shall not exceed Five Thousand Dollars ($5,000)
for any one occurrence.
Lessor does not currently carry earthquake insurance. However, Lessor
reserves the right to do so (and Lessee shall reimburse Lessor for said
cost) should it become available at commercially reasonable rates.
D. Lessee and Lessor hereby release each other and their respective
partners, officers, agents, employees, and servants, from any and all
claims, demands, loss, expense, or injury to the Premises or to the
furnishings, fixtures, equipment, inventory, or other property of the
releasing party in, about, or upon the Premises, which is caused by or
results from perils, events, or happenings which are the subject of
insurance in force at the time of such loss, however, that such waiver
shall be effective only to the extent permitted by the insurance covering
such loss..
10. Reimbursable Expenses and Utilities. Lessee shall pay for all water, gas,
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light, heat, power, electricity, telephone, trash removal, landscaping,
sewer charges, and all other services, including normal and customary
property management fees (not to exceed three percent (3%) of the base rent
payable hereunder), supplied to or consumed on the Premises. In the event
that any such services are billed directly to Lessor, then Lessee shall pay
Lessor for such expenses within ten (10) days of Lessee's receipt of
Lessor's invoice demanding payment.
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11. Repairs and Maintenance.
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A. Subject to provisions of paragraph 15, Lessor shall keep and maintain
in good order, condition and repair the structural elements of the Premises
including the roof, roof membrane, paving, floor slab, foundation, exterior
walls, landscaping, irrigation and elevators. Lessor shall make such
repairs, replacements, alterations or improvements as Lessor deems
reasonably necessary with respect to such structural elements and Lessee
shall pay to Lessor, within ten (10) business days of Lessor's invoice to
Lessee therefor, Lessee's pro-rata share of such repairs, replacements,
alterations or improvements; provided, however, that replacement and
improvement costs in excess of $5,000 per occurrence shall be amortized
over the useful life of such replacements or improvements, and Lessee shall
be obligated to pay, as additional rent, only the amount which coincides
with the remaining term of the Lease. Notwithstanding the foregoing, if the
reason for any repair, replacement, alteration or improvement is caused by
Lessee or arises because of a breach of Lessee's obligations under this
Lease, then Lessee shall pay 100% of the costs or expense to remedy the
same.
B. Except as expressly provided in Subparagraph A above, Lessee shall, at
its sole cost, keep and maintain the entire Premises and every part
thereof, including, without limitation, the windows, window frames, plate
glass, glazing, truck doors, doors, all door hardware, interior of the
Premises, interior walls and partitions, and electrical, plumbing,
lighting, heating, and air conditioning systems in good and sanitary order,
condition, and repair subject to the limitations set forth in Section 11A
above. Lessee shall, at all times during the Lease term and at his expense,
have in effect a service contract for the maintenance of the heating,
ventilating, and air-conditioning (HVAC) equipment with an HVAC repair and
maintenance contractor approved by Lessor which provides for periodic
inspection and servicing at least once every three (3) months during the
term hereof. Lessee shall further provide Lessor with a copy of such
contract and all periodic service reports.
Should Lessee fail to maintain the Premises or make repairs required
of Lessee hereunder forthwith upon notice from Lessor, Lessor, in addition
to all other remedies available hereunder or by law, and without waiving
any alternative remedies, may make the same, and in that event, Lessee
shall reimburse Lessor as additional rent for the cost of such maintenance
or repairs on the next date upon which rent becomes due.
Lessee hereby expressly waives the provision of Subsection 1 of
Section 1932, and Sections 1941 and 1942 of the Civil Code of California
and all rights to make repairs at the expense of Lessor, as provided in
Section 942 of said Civil Code.
12. Alterations and Additions. Lessee shall not make, or suffer to be made,
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any alterations, improvements, or additions in, on, or about, or to the
Premises or any part thereof, without prior written consent of Lessor,
which shall not be unreasonably withheld or delayed, and without a valid
building permit issued by the appropriate governmental authority. Lessor
retains, at his sole option, the right to retain a General Contractor of
his own choosing to perform all repairs, alterations, improvements, or
additions in, on, about, or to said Premises or any part thereof. As a
condition to giving such consent, Lessor may require that Lessee agree to
remove any such alterations, improvements, or additions at the termination
of this Lease, and to restore the Premises to their prior condition. Upon
Lessee's written request, Lessor shall designate, at the time that Lessor
consents to the installation of any such alteration, improvement or
addition, whether removal of any such alteration, improvement or addition
will be required. Any alteration, addition, or improvement to the Premises,
shall become the property of Lessor upon the expiration or earlier
termination of the Lease term (except with respect to those items which
have been installed at the sole expense of Lessee, which Lessee may remove,
provided that Lessee repairs any damage attributable to such
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removal), and shall remain upon and be surrendered with the Premises at the
termination of this Lease. Alterations and additions which are not to be
deemed as trade fixtures include heating, lighting, electrical systems, air
conditioning, partitioning, electrical signs, carpeting, or any other
installation which has become an integral part of the Premises. In the
event that Lessor consents to Lessee's making any alterations,
improvements, or additions, Lessee shall be responsible for the timely
posting of notices of non-responsibility on Lessor's behalf, which shall
remain posted until completion of the alterations, additions, or
improvements. Lessee's failure to post notices of non-responsibility as
required hereunder shall be a breach of this Lease.
Notwithstanding anything to the contrary herein, if, during the term
hereof, any alteration, addition, or change of any sort through all or any
portion of the Premises or of the building of which the Premises form a
part, is required by law, regulation, ordinance, or order of any public
agency, then if such legal requirement is not imposed because of Lessee's
specific use of the Premises and is not "triggered" by Lessee's alterations
or Lessee's application for a building permit or any other governmental
approval (in which instance Lessee shall be responsible for 100% of the
cost of such improvement), Lessor shall be responsible for constructing
such improvement and Lessee shall be responsible for its proportional share
of the cost for said improvement, amortized over the useful life of such
improvement that coincides with the remaining Lease term including any
extensions.
13. Acceptance of the Premises and Covenant to Surrender. By entry and taking
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possession of the Premises pursuant to this Lease, Lessee accepts the
Premises as being in good and sanitary order, condition, and repair, and
accepts the Premises in their condition existing as of date of such entry,
and Lessee further accepts any tenant improvements to be constructed by
Lessor, if any, as being completed in accordance with the plans and
specifications for such improvements, subject to items identified by Lessee
in one final punch list submitted to Lessor within thirty (30) days of
occupancy, which items Lessor shall promptly correct.
Lessee agrees on the last day of the term hereof, or on sooner
termination of this Lease, to surrender the Premises, together with all
alterations, additions, and improvements which may have been made in, to,
or on the Premises by Lessor or Lessee, unto Lessor in good and sanitary
order, condition, and repair, excepting for such wear and tear as would be
normal for the period of the Lessee's occupancy. Lessee, on or before the
end of the term or sooner termination of this Lease, shall remove all its
personal property and trade fixtures from the Premises, and all property
not so removed shall be deemed abandoned by Lessee. Lessee further agrees
that at the end of the term or sooner termination of this Lease, Lessee, at
its sole expense, shall have the carpets steam cleaned, the walls and
columns painted, the flooring waxed, any damaged ceiling tile replaced, the
windows cleaned, the drapes cleaned, and any damaged doors replaced, if
necessary to restore the Premises to its original condition, normal wear
and tear excepted.
If the Premises are not surrendered at the end of the term or sooner
termination of this Lease, Lessee shall indemnify Lessor against loss or
liability resulting from delay by Lessee in so surrendering the Premises,
including, without limitation, any claims made by any succeeding tenant
founded on such delay.
14. Default. In the event of any breach of this Lease by the Lessee, or an
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abandonment of the Premises by the Lessee, which is not cured within ten
(10) days after written notice thereof in the case of any monetary
obligation and which is not cured within ten (10) days after written notice
thereof in the case of any non-monetary obligation, the Lessor has the
option of (1.) removing all persons and property from the Premises and
repossessing the Premises, in which case any of the Lessee's property which
the Lessor removes from the Premises may be stored in a public warehouse or
elsewhere at the cost of, and for the account of, Lessee; or (2.) allowing
the Lessee to remain in full possession and control of the Premises. If the
Lessor chooses to repossess the Premises, the Lease will automatically
terminate in accordance with the provisions of the California Civil Code,
Section 1951.2. In the event of such termination of the Lease, the Lessor
may recover from the
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Lessee: (1.) the worth at the time of award of the unpaid rent which had
been earned at the time of termination, including interest at the maximum
rate an individual is permitted by law to charge; (2.) the worth at the
time of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that the Lessee proves could have been reasonably avoided,
including interest at the maximum rate an individual is permitted by law to
charge; (3.) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that the Lessee proves could be reasonably
avoided; and (4.) any other amount necessary to compensate the Lessor for
all the detriment proximately caused by the Lessee's failure to perform his
obligations under the Lease or which, in the ordinary course of things,
would be likely to result therefrom. "The worth at the time of award," as
used in (1.) and (2.) of this Paragraph, is to be computed by allowing
interest at the maximum rate an individual is permitted by law to charge.
"The worth at the time of award," as used in (3.) of this Paragraph, is to
be computed by discounting the amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award, plus one percent (1%).
If the Lessor chooses not to repossess the Premises, but allows the
Lessee to remain in full possession and control of the Premises, then, in
accordance with provisions of the California Civil Code, Section 1951.4,
the Lessor may treat the Lease as being in full force and effect, and may
collect from the Lessee all rents as they become due through the
termination date of the Lease, as specified in the Lease. For the purpose
of this paragraph, the following do not constitute a termination of
Lessee's right to possession: (1.) acts of maintenance or preservation, or
efforts to relet the property; (2.) the appointment of a receiver on the
initiative of the Lessor to protect his interest under this Lease.
Lessee shall be liable immediately to Lessor for all costs Lessor
incurs in reletting the Premises, including, without limitation, brokers'
commissions, reasonable expenses of remodeling the Premises required by the
reletting, and like costs. Reletting can be for a period shorter or longer
than the remaining term of this Lease. Lessee shall pay to Lessor the rent
due under this Lease on the dates the rent is due, less the rent Lessor
receives from any reletting. No act by Lessor allowed by this Section shall
terminate this Lease unless Lessor notifies Lessee that Lessor elects to
terminate this Lease. After Lessee's default and for as long as Lessor does
not terminate Lessee's right to possession of the Premises, if Lessee
obtains Lessor's consent, Lessee shall have the right to assign or sublet
its interest in this Lease, but Lessee shall not be released from
liability. Lessor's consent to a proposed assignment or subletting shall
not be unreasonably withheld.
If Lessor elects to relet the Premises as provided in this Paragraph,
rent that Lessor receives from reletting shall be applied to the payment
of: (1.) any indebtedness from Lessee to Lessor other than rent due from
Lessee; (2.) all costs, including for maintenance, incurred by Lessor in
reletting; (3.) rent due and unpaid under this Lease. After deducting the
payments referred to in this Paragraph, any sum remaining from the rent
Lessor receives from reletting shall be held by Lessor and applied in
payment of future rent as rent becomes due under this Lease. In no event
shall Lessee by entitled to any excess rent received by Lessor. If, on the
date rent is due under this Lease, the rent received from reletting is less
than the rent due on that date, Lessee shall pay to Lessor, in addition to
the remaining rent due, all costs, including for maintenance, Lessor
incurred in reletting that remain after applying the rent received from the
reletting, as provided in this Paragraph.
Lessor, at any time after Lessee commits a default, can cure the
default at Lessee's cost. If Lessor at any time, by reason of Lessee's
default, pays any sum or does any act that requires the payment of any sum,
the sum paid by Lessor shall be due immediately from Lessee to Lessor at
the time the sum is paid, and if paid at a later date shall bear interest
at the maximum rate an individual is permitted by law to charge from the
date the sum is paid by Lessor until Lessor is reimbursed by Lessee. The
sum, together with interest on it, shall be additional rent.
Rent not paid when due shall bear interest at the maximum rate an
individual is permitted by law to charge from the date due until paid.
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15. Destruction. In the event the Premises are destroyed in whole or in part
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from any cause, Lessor may, at its option, (1.) rebuild or restore the
Premises to their condition prior to the damage or destruction or (2.)
terminate the Lease.
If Lessor does not give Lessee notice in writing within thirty (30)
days from the destruction of the Premises of its election either to rebuild
and restore the Premises, or to terminate this Lease, Lessor shall be
deemed to have elected to rebuild or restore them, in which event Lessor
agrees, at its expense, promptly to rebuild or restore the Premises to its
condition prior to the damage or destruction. If Lessor does not complete
the rebuilding or restoration within one hundred eighty (180) days
following the date of destruction (such period of time to be extended for
delays caused by the fault or neglect of Lessee of because of acts of God,
acts of public agencies, labor disputes, strikes, fires, freight embargoes,
rainy or stormy weather, inability to obtain materials, supplies or fuels,
acts of contractors or subcontractors, or delay of the contractors or
subcontractors due to such causes or other contingencies beyond control of
Lessor), then Lessee shall have the right to terminate this Lease by giving
fifteen (15) days prior written notice to Lessor. Lessor's obligation to
rebuild or restore shall not include restoration of Lessee's trade
fixtures, equipment, merchandise, or any improvements, alterations, or
additions made by Lessee to the Premises. If Lessor reasonably estimates
that the restoration referenced herein will require 180 days or more, which
estimate shall be delivered to Lessee within nor more than thirty (30) days
after the occurrence of the casualty, Lessee shall be entitled to terminate
this Lease effective upon written notice of such election to Lessor,
provided Lessee is not the cause of said damage or destruction.
Unless this Lease is terminated pursuant to the foregoing provisions,
this Lease shall remain in full force and effect. Lessee hereby expressly
waives the provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, of the California Civil Code.
In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than fifty (50%) of the
replacement cost thereof, Lessor may elect to terminate this Lease, whether
the Premises be injured or not.
16. Condemnation. If any part of the Premises shall be taken for any public
------------
or quasi-public use, under any statute of by right of eminent domain, or
private purchase in lieu thereof, and a part thereof remains, which is
susceptible of occupation hereunder, this Lease shall, as to the part so
taken, terminate as of the date title shall vest in the condemnor or
purchaser, and the rent payable hereunder shall be adjusted so that the
Lessee shall be required to pay for the remainder of the term only such
portion of such rent as the value of the part remaining after taking such
bears to the value of the entire Premises prior to such taking. Lessor
shall have the option to terminate this Lease in the event that such taking
causes a reduction in rent payable hereunder by fifty percent (50%) or
more. If all of the Premises or such part thereof be taken so that there
does not remain a portion susceptible for occupation hereunder, as
reasonably necessary for Lessee's conduct of its business as contemplated
in this Lease, this Lease shall thereupon terminate. If a part of all of
the Premises be taken, all compensation awarded upon such taking shall go
to the Lessor, and the Lessee shall have no claim thereto, and the Lessee
hereby irrevocably assigns and transfers to the Lessor any right to
compensation or damages to which the Lessee may become entitled during the
term hereof by reason of the purchase or condemnation of all or a part of
the Premises, except that Lessee shall have the right to recover its share
of any award or consideration for (1.) moving expenses; (2.) loss or damage
to Lessee's trade fixtures, furnishings, equipment, and other personal
property; and (3.) business goodwill. Each party waives the provisions of
the Code of Civil Procedure, Section 1265.130, allowing either party to
petition the Superior Court to terminate this Lease in the event of a
partial taking of the Premises.
17. Free from Liens. Lessee shall (1.) pay for all labor and services
---------------
performed for materials used by or
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furnished to Lessee, or any contractor employed by Lessee with respect to
the Premises, and (2.) indemnify, defend, and hold Lessor and the Premises
harmless and free from any liens, claims, demands, encumbrances, or
judgments created or suffered by reason of any labor or services performed
for materials used by or furnished to Lessee or any contractor employed by
Lessee with respect to the Premises, and (3.) give notice to Lessor in
writing five (5) days prior to employing any laborer or contractor to
perform services related, or receiving materials for use upon the Premises,
and (4.) shall post, on behalf of Lessor, a notice of non-responsibility in
accordance with the statutory requirements of the California Civil Code,
Section 3904, or any amendment thereof. In the event an improvement bond
with a public agency in connection with the above is required to be posted,
Lessee agrees to include Lessor as an additional obligee.
18. Compliance with Laws. Lessee shall, at its own cost, comply with and
--------------------
observe all requirements of all municipal, county, state, and federal
authority now in force, or which may hereafter be in force, pertaining to
the use and occupancy of the Premises. Notwithstanding anything contained
in Paragraphs 11, 12 and 18 of Lease, if it becomes necessary to make
capital improvements required by laws enacted or legal requirements imposed
by governmental agency(ies), then if such legal requirement is not imposed
because of Lessee's specific use of the Premises and is not "triggered" by
Lessee's alterations or Lessee's application for a building permit or any
other governmental approval (in which instance Lessee shall be responsible
for 100% of the cost of such improvement), Lessor shall be responsible for
constructing such improvement and Lessee shall be responsible for its
proportional share of the cost for said improvement, amortized over the
useful life of such improvement that coincides with the remaining Lease
term and any extensions thereof.
19. Subordination. Lessee agrees that this Lease shall, at the option of
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Lessor, be subjected and subordinated to any mortgage, deed of trust, or
other instrument of security, which has been or shall be placed on the land
and building, or land or building of which the Premises form a part, and
this subordination is hereby made effective without any further act of
Lessee or Lessor. The Lessee shall, at any time hereinafter, on demand,
execute any instruments, releases, or other documents that may be required
by any mortgagee, mortgagor, trustor, or beneficiary under any deed of
trust, for the purpose of subjecting or subordinating this Lease to the
lien of any such mortgage, deed of trust, or other instrument of security.
If Lessee fails to execute and deliver any such documents or instruments,
Lessee irrevocably constitutes and appoints Lessor as Lessee's special
attorney-in-fact to execute and deliver any such documents or instruments.
20. Abandonment. Lessee shall not vacate or abandon the Premises at any time
-----------
during the term; and if Lessee shall abandon, vacate, or surrender said
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Lessee and left on the Premises shall be deemed to be
abandoned, at the option of Lessor, except such property as may be
mortgaged to Lessor; provided, however, that Lessee shall not be deemed to
have abandoned or vacated the Premises so long as Lessee continues to pay
all rents as and when due, and otherwise performs pursuant to the terms and
conditions of this Lease.
21. Assignment and Subletting. Lessee's interest in this Lease is not
-------------------------
assignable, by operation of law or otherwise, nor shall Lessee have the
right to sublet the Premises, transfer any interest of Lessee's therein, or
permit any use of the Premises by another party, without the prior written
consent of Lessor to such assignment, subletting, or transfer of use, which
consent shall not be unreasonably withheld or delayed.
If Lessee is a partnership, a withdrawal or change, voluntary,
involuntary, or by operation of law, of any partner (s) owning fifty
percent (50%) or more of the partnership, of the dissolution of the
partnership, shall be deemed as a voluntary assignment.
If Lessee consists of more than one person, a purported assignment,
voluntary, involuntary,
10
or by operation of law, from one person to the other or from a majority of
persons to the others, shall be deemed a voluntary assignment.
If Lessee is a corporation, any dissolution, merger, consolidation, or
other reorganization of Lessee, or the sale or other transfer of a
controlling percentage of the capital stock of Lessee, or sale of at least
fifty-one percent (51%) of the value of the assets of Lessee, shall be
deemed a voluntary assignment. The phrase "controlling percentage" means
the ownership of, and the right to vote, stock possessing at least fifty-
one percent (51%) of the total combined voting power of all classes of
Lessee's capital stock issued, outstanding, and entitled to vote for the
election of directors. This Paragraph shall not apply to corporations the
stock of which is traded through an exchange or over the counter.
In the event of any subletting or transfer which is consented to, or
not consented to, by Lessor, a subtenant or transferee agrees to pay monies
or other consideration, whether by increased rent or otherwise, in excess
of or in addition to those provided for herein, then all of such excess or
additional monies or other consideration (after first deducting Lessee's
reasonable costs associated with said subletting or transfer) shall be paid
solely to Lessor, and this shall be one of the conditions to obtaining
Lessor's consent.
Lessee immediately and irrevocably assigns to Lessor, as security for
Lessee's obligations under this Lease, all rent from any subletting of all
or a part of the Premises as permitted by this Lease, and Lessor, as
assignee and as attorney-in-fact for Lessee, or a receiver for Lessee
appointed on Lessor's application, may collect such rent and apply it
toward Lessee's obligations under this Lease; except that, until the
occurrence of an act of default by the Lessee, Lessee shall have the right
to collect such rent.
A consent to one assignment, subletting, occupation, or use by another
party shall not be deemed to be a consent to any subsequent assignment,
subletting, occupation, or use by another party. Any assignment or
subletting without such consent shall be void and shall, at the option of
the Lessor, terminate this Lease. Lessor's waiver or consent to any
assignment or subletting hereunder shall not relieve Lessee from any
obligation under this Lease unless the consent shall so provide. If Lessee
requests Lessor to consent to a proposed assignment or subletting, Lessee
shall pay to Lessor, whether or not consent is ultimately given, Lessor's
reasonable attorneys' fees incurred in conjunction with each such request.
22. Parking Charges. Lessee agrees to pay upon demand, based on its percent of
---------------
occupancy of the entire Premises, its pro-rata share of any parking
charges, surcharges, or any other cost hereafter levied or assessed by
local, state, or federal governmental agencies in connection with the use
of the parking facilities serving the Premises, including, without
limitation, parking surcharge imposed by or under the authority of the
Federal Environmental Protection Agency.
23. Insolvency or Bankruptcy. Either (1.) the appointment of a receiver to take
------------------------
possession of all or substantially all of the assets of Lessee, or (2.) a
general assignment by Lessee for the benefit of creditors, or (3.) any
action taken or suffered by Lessee under any insolvency or bankruptcy act
shall constitute a breach of this Lease by Lessee. Upon the happening of
any such event, this Lease shall terminate ten (10) days after written
notice of termination from Lessor to Lessee. This section is to be applied
consistent with the applicable state and federal law in effect at the time
such event occurs.
24. Lessor Loan or Sale. Lessee agrees promptly following request by Lessor
-------------------
to (1.) execute and deliver to Lessor any documents, including estoppel
certificates presented to Lessee by Lessor, (a.) certifying that this Lease
is unmodified and in full force and effect, or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified,
is in full force and effect and the date to which the rent and other
charges are paid in advance, if any, and (b.) acknowledging that there are
not, to Lessee's knowledge, any uncured defaults on the part of Lessor
hereunder, and (c.)
11
evidencing the status of the Lease as may be required either by a lender
making a loan to Lessor, to be secured by deed of trust or mortgage
covering the Premises, or a purchaser of the Premises from Lessor, and (2.)
to deliver to Lessor the current financial statements of Lessee with an
opinion of a certified public accountant, including a balance sheet and
profit and loss statement, for the current fiscal year and the two
immediately prior fiscal years, all prepared in accordance with Generally
Accepted Accounting Principles consistently applied, or if Lessee does not
prepare financial statements in the manner specified above, Lessee shall
provide Lessor with the financial statements which most accurately reflect
the financial condition of Lessee. Lessee's failure to deliver an estoppel
certificate within three (3) days following such request shall constitute a
default under this Lease and shall be conclusive upon Lessee that this
Lease is in full force and effect and has not been modified except as may
be represented by Lessor. If Lessee fails to deliver the estoppel
certificates within the three (3) days, Lessee irrevocably constitutes and
appoints Lessor as its special attorney-in-fact to execute and deliver the
certificate to any third party.
25. Surrender of Lease. The voluntary or other surrender of this Lease by
------------------
Lessee, or a mutual cancellation thereof, shall not work a merger nor
relieve Lessee of any of Lessee's obligations under this Lease, and shall,
at the option of Lessor, terminate all or any existing Subleases or
Subtenancies, or may, at the option of Lessor, operate as an assignment to
him of any or all such Subleases or Subtenancies.
26. Attorneys' Fees. If, for any reason, any suit be initiated to enforce any
---------------
provision of this Lease, the prevailing party shall be entitled to legal
costs, expert witness expenses, and reasonable attorneys' fees, as fixed by
the court.
27. Notices. All notices to be given to Lessee may be given in writing,
-------
personally, or by depositing the same in the United States mail, postage
prepaid, and addressed to Lessee at the said Premises, whether or not
Lessee has departed from, abandoned, or vacated the Premises. Any notice or
document required or permitted by this Lease to be given Lessor shall be
addressed to Lessor at the address set forth below, or at such other
address as it may have theretofore specified by notice delivered in
accordance herewith:
LESSOR: Huettig & Schromm/Heaton & Keyser
900 Welch Road, Suite 10
Palo Alto, California 94304
LESSEE: Oratec Interventions
3700 Haven Court
Menlo Park, CA 94025
28. Transfer of Security. If any security be given by Lessee to secure the
--------------------
faithful performance of all or any of the covenants of this Lease on the
part of Lessee, Lessor may transfer and/or deliver the security, as such,
to the purchaser of the reversion, in the event that the reversion be sold,
and thereupon Lessor shall be discharged from any further liability in
reference thereto, upon the assumption by such transferee of lessor's
obligations under this Lease.
29. Waiver. The waiver by Lessor or Lessee of any breach of any term, covenant,
------
or condition, herein contained shall not be deemed to be a waiver of such
term, covenant, or condition, or any subsequent breach of the same or any
other term, covenant, or condition herein contained. The subsequent
acceptance of rent hereunder by lessor shall not be deemed to be a waiver
of any preceding breach by Lessee of any term, covenant, or condition of
this Lease, other than the failure of Lessee to pay the particular rental
so accepted, regardless of Lessor's knowledge of such
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preceding breach at the time of acceptance of such rent.
30. Holding Over. Any holding over after the expiration of the term or any
------------
extension thereof, with the consent of lessor, shall be construed to be a
tenancy from month-to-month, at a rental of one and one-half (1 1/2) times
the previous month's rental rate per month, and shall otherwise be on the
terms and conditions herein specified, so far as applicable.
31. Covenants, Conditions, and Restrictions. Not applicable.
---------------------------------------
32. Limitation on Lessor's Liability. If Lessor is in default of this Lease,
---------------------------------
and, as a consequence, Lessee recovers a money judgment against Lessor, the
judgment shall be satisfied only out of the proceeds of sale received on
execution of the judgment and levy against the right, title, and interest
of Lessor in the Premises, or in the building, other improvements, and land
of which the Premises are part, and out of rent or other income from such
real property receivable by Lessor or out of the consideration received by
Lessor from the sale or other disposition of all or any part of Lessor's
right, title, and interest in the Premises or in the building, other
improvements, and land of which the Premises are part. Neither Lessor nor
any of the partners comprising the partnership designated as Lessor shall
be personally liable for any deficiency.
33. Letter of Credit. Upon commencement of the Lease, Lessee shall provide
Lessor with an irrevocable Letter of Credit in the amount of the total
tenant improvement costs (which the parties estimate will be approximately
$147,000) less the amount of the security deposit. This Letter of Credit
can be drawn on by Lessor if Lessee defaults on any material obligation
under the terms of this Lease. However, if there is no material default on
the part of Lessee, the Letter of Credit shall be reduced on an annual
basis as follows:
Month 13 Reduced by 33.33%
Month 25 Reduced by 33.33%
Month 37 Released in its entirety
34. Miscellaneous.
A. Time is of the essence of this Lease, and of each and all of its
provisions.
B. The term "building" shall mean the building in which the Premises are
situated.
C. If the building is leased to more than one tenant, then each such
tenant, its agents, officers, employees, and invitees, shall have the
non-exclusive right (in conjunction with the use of the part of the
building leased to such Tenant) to make reasonable use of any
driveways, sidewalks, and parking areas located on the parcel of land
on which the building is situated, except such parking areas as may
from time to time be leased for exclusive use by other Tenant(s).
D. Lessee's such reasonable use of parking areas shall not exceed that
percent of the total parking areas which is equal to the ratio which
floor space of the Premises bears to floor space of the building.
E. The term "assign" shall include the term "transfer."
F. The invalidity or unenforceability of any provision of this Lease
shall not affect the validity or enforceability of the remainder of
this Lease.
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G. All parties hereto have equally participated in the preparation of
this Lease.
H. The headings and titles to the Paragraphs of this Lease are not a part
of this Lease and shall have no effect upon the construction or
interpretation of any part thereof.
I. Lessor has made no representation(s) whatsoever to Lessee (express or
implied) except as may be expressly stated in writing in this Lease
instrument.
J. This instrument contains all of the agreements and conditions made
between the parties hereto, and may not be modified orally or in any
other manner than by agreement in writing, signed by all of the
parties hereto or their respective successors in interest.
K. It is understood and agreed that the remedies herein given to Lessor
shall be cumulative, and the exercise of any one remedy by Lessor
shall not be to the exclusion of any other remedy.
L. The covenants and conditions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors,
executors, and administrators, and assigns of all the parties hereto;
and all of the parties hereto shall jointly and severally be liable
hereunder.
M. This Lease has been negotiated by the parties hereto and the language
hereof shall not be construed for or against either party.
N. All exhibits to which reference is made are deemed incorporated into
this Lease, whether covenants or conditions, on the part of Lessee
shall be deemed to be both covenants and conditions.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the date first
above-written.
LESSOR: LESSEE:
BY: /s/ Howard J. White BY: /s/ Nancy Westcott
--------------------- ----------------------
ITS: General Partner ITS:_____________________
--------------------
DATE: 6/4/98 DATE: 6/1/98
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