Exhibit 10.5

 

FIRST AMENDMENT TO LEASE

 

This First Amendment to Lease (this “Amendment”) is made as of the __ day of
June, 2013, by and between SUN LIFE ASSURANCE COMPANY OF CANADA, a Canadian
corporation (“Landlord”), and BAXANO SURGICAL, INC., a Delaware corporation
(“Tenant”) (NASDAQ symbol BAXS).

 

Landlord and Tenant, as successor in in interest to TranS1, Inc., are parties to
that certain Office Lease dated October _, 2012 (the “Lease”), pursuant to which
Landlord leases to Tenant approximately 4,358 rentable square feet known as
Suite 230 (the “Original Premises”) in the building owned by Landlord known as
Horizon IV, with a street address of 110 Horizon Drive, Raleigh, North Carolina.
Landlord and Tenant now wish to amend the Lease.

 

NOW THEREFORE, in consideration of the mutual covenants contained herein, and
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the Lease is hereby amended and the parties
hereto do hereby agree as follows:

 

1.             Recitals; Definitions. The foregoing recitals are true, correct
and complete and are hereby incorporated in this Amendment by this reference.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given them in the Lease.

 

2.             Expansion Premises. Effective as of the Expansion Commencement
Date (as defined below), Landlord leases to Tenant and Tenant leases from
Landlord the additional areas known as Suite 210, consisting of 6,745 rentable
square feet, and Suite 130, consisting of 1,759 square feet, which space is
shown on Exhibit A attached hereto and incorporated herein by this reference
(collectively, the “Expansion Premises”). As of the Expansion Commencement Date
and except as expressly set forth herein, all references to the “Premises” in
the Lease shall be deemed to refer to the Original Premises and the Expansion
Premises and shall consist of an aggregate of 12,862 rentable square feet.

 

3.             Expansion Commencement Date. The “Expansion Commencement Date”
shall mean the earlier of (i) October 1, 2013 or (ii) the first business day
after Landlord delivers the Expansion Premises with the Tenant Improvements (as
defined below) substantially completed (net of any Tenant delays).

 

4.             Extension Term. The term of the Lease for the Premises (Original
Premises and Expansion Premises) is hereby extended (the “Extension Term”) until
the date which is seventy four (74) months after the Expansion Commencement
Date.

 

5.             Rent.

 

(a)          Base Rent: Expansion Premises. The Base Rent payable during the
Extension Term for the Expansion Premises only shall be as follows:

 

 

 

 

Months   Monthly Rent   Annual Rent   Rent PRSF   1- 2   $0.00   $0.00   $0.00 
 3-12   $14,279.63   $171,355.60   $20.15   13-24   $14,708.02   $176,496.27  
$20.75   25-36   $15,149.26   $181,791.16   $21.38   37-48   $15,603.74  
$187,244.89   $22.02   49-60   $16,071.85   $192,862.24   $22.68   61-72  
$16,554.01   $198,648.10   $23.36   73-74   $17,050.63   $204,607.55   $24.06 

 

(b)          Base Rent: Existing Premises. The Base Rent for the Existing
Premises shall be as currently set forth in the Lease through June 10, 2018, and
thereafter shall increase by three percent (3%) per annum.

 

(c)          Operating Expenses. Effective as of the Expansion Commencement
Date, Tenant’s Percentage shall be adjusted to 27.52%.

 

6.             Condition.

 

(a)          Prior to delivering the Premises to Tenant, Landlord shall install
the tenant improvements to the Premises as depicted on the space plan and
specifications (if any) (collectively, the “Plan”) prepared by
_______________________ dated ______________, 2013 (the “Tenant Improvements”).
Landlord shall cause the Tenant Improvements to be installed in accordance with
the Plan and all applicable permits, approvals, codes, ordinances and
regulations, in a good and workmanlike manner, using Building-standard materials
unless otherwise specified in the Plan, free of all liens, by a licensed
contractor. Once installed, the Tenant Improvements shall be a part of the
Premises and the sole property of Landlord. Landlord shall obtain bids from
three (3) reputable general contractors and select the lowest bid. In selecting
the general contractor, Landlord agrees to cooperate with any project manager
retained by Tenant, at Tenant’s expense, and to work with Tenant to adjust the
scope of work to Tenant’s construction budget.

 

(b)          Landlord shall provide Tenant a tenant allowance of up to Fifteen
Dollars ($15.00) per rentable square foot (the “Tenant Allowance”) for design,
permitting, construction and supervision of the Tenant Improvements to the
Premises. Any costs of the Tenant Improvements in excess of the Tenant Allowance
shall be paid by Tenant to Landlord, as additional rent, within thirty (30) days
after substantial completion of the Tenant Improvements (as “substantial
completion” is defined in Exhibit C to the Lease). Any amount not used by
Landlord for the Tenant Improvements shall be retained by Landlord. The costs of
the Tenant Improvements shall include the actual costs of construction
(including the overhead and profit of Landlord’s contractor), all construction
management fees of Landlord’s property manager, the costs of all permits and
approvals, and all design costs and other charges by Landlord’s architects and
engineers. The parties acknowledge that the construction management fees of
Landlord’s property manager equal three percent (3%) of the total project costs.
The early access provisions of Section 4.4 of the Lease shall apply to the
Expansion Premises.

 

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(c)          Landlord shall notify Tenant in writing of the substantial
completion of the Tenant Improvements. Within three (3) days after receipt of
such notice, Tenant shall inspect the Expansion Premises and provide Landlord
with a punch list of uncompleted items; delivery of the punch list shall not,
however, delay the Expansion Commencement Date (which may occur prior to
completion of the Tenant Improvements). Tenant shall be deemed to have approved
all work not listed in the punch list (other than latent defects). The punch
list items shall be completed by Landlord within thirty (30) days, subject to
availability of labor and materials.

 

(d)          Tenant shall purchase (not using the Tenant Allowance) and
thereafter maintain, repair and replace the supplemental HVAC unit for Tenant’s
server room, which shall be installed by Landlord’s general contractor during
installation of the Tenant Improvements.

 

7.             Use. The Expansion Premises shall be used by Tenant only for
offices, storage and sterilization of instruments, which shall be delivered and
sent in a decontaminated (no blood) form using sealed boxes.

 

8.             Security Deposit. Upon full execution hereof, as a condition to
the effectiveness of this Amendment (in addition to the existing Security
Deposit under the Lease), Tenant shall deliver to Landlord an irrevocable letter
of credit issued by a major banking institution reasonably acceptable to
Landlord (the "Bank") in the amount of $150,000 having an expiration date three
(3) months after the expiration of the Lease term (or a self-renewal provision
which extends the final expiration date to three (3) months after the expiration
of the Lease term), and otherwise in form and content acceptable to landlord in
its discretion. The letter of credit shall provide that Landlord may draw from
time to time upon such letter to the extent that Landlord certifies to the Bank
as to any one or more of the following: (a) that Landlord is owed Base Rent or
additional rent, or both, or other amounts which Tenant is obligated to pay
under the Lease which remain unpaid beyond applicable grace periods, (b) that
the letter of credit has not been renewed or replaced as required below, or (c)
that a default beyond applicable grace periods has occurred under the Lease.
Such letter of credit shall be replaced or renewed, and such replacement or
renewal letter of credit shall be delivered to Landlord, not later than thirty
(30) days prior to expiration thereof. If Landlord draws upon the letter of
credit to satisfy any obligation of Tenant hereunder, Tenant shall immediately
upon request by Landlord deliver a replacement letter of credit to Landlord or
otherwise restore the Security Deposit to its original amount. In the event the
letter of credit is drawn upon by Landlord because such letter of credit is
about to expire and has not been replaced or renewed by Tenant in accordance
with the provisions of this Section, the proceeds of such letter of credit and
all interest accrued thereon shall be held in escrow by Landlord or its agent as
security for Tenant's obligations hereunder until such time as Tenant shall have
delivered Landlord a replacement letter of credit. Upon thirty (30) days prior
notice from Landlord, Tenant shall cooperate with Landlord in transferring the
letter of credit to a grantee or transferee and, if necessary, shall deliver a
replacement letter of credit if such letter of credit is not otherwise
transferable.

 

9.             Brokers. Landlord and Tenant acknowledge that Avison Young is
acting as broker for Landlord and shall be paid a commission pursuant to a
separate agreement with Landlord, and Jones Lang LaSalle is acting as broker for
Tenant and shall be paid a commission pursuant to a separate agreement. Tenant
hereby indemnifies and holds harmless Landlord from any claim from any third
party claiming to be Tenant’s agent and therein demanding a fee for the
transaction contemplated by this Amendment, and Landlord hereby indemnifies and
holds harmless Tenant from any claim from any third party claiming to be
Landlord’s agent and therein demanding a fee for the transaction contemplated by
this Amendment.

 

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10.          Entire Agreement. This Amendment and the Lease represent the entire
agreement between the parties hereto. Landlord and Tenant agree that there are
no collateral or oral agreements or understandings between them with respect to
the Premises. This Amendment supersedes all prior negotiations, agreements,
letters or other statements with respect to the Premises.

 

11.          No Further Modifications. Except as expressly amended and modified
hereby, the Lease shall otherwise remain in full force and effect, the parties
hereto hereby ratifying and confirming the same. To the extent of any
inconsistency between the Lease and this Amendment, the terms of this Amendment
shall control. Landlord and Tenant hereby confirm that there are no defaults
under the Lease.

 

12.          OFAC. Neither Tenant nor, to Tenant's actual knowledge without
inquiry (i) its direct parent or any of its subsidiaries, (ii) any of their
respective partners, or members, shareholders or other equity owners, or
(iii)any of their respective employees, officers, directors, representatives or
agents, is a person or entity with whom U.S. persons or entities are restricted
from doing business under regulations of the Office of Foreign Asset Control
("OFAC") of the Department of the Treasury (including those named on OFAC's
Specially Designated and Blocked Persons List) or under any statute, executive
order (including the September 24, 2001, Executive Order Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism), or other governmental action.

 

13.          Counterpart Execution. This Amendment may be executed in any number
of counterparts, each of which shall be an original, but all of which when
attached together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the duly authorized representatives of the parties herein
have hereunto set their hands and seals, the day and year first above written.

 

TENANT:     LANDLORD:         Baxano Surgical, Inc.   Sun Life Assurance Company
of Canada           By:     By:             Name:     Name:             Title:  
  Title:                   By:                   Name:                   Title:
 

 

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EXHIBIT A

 

DRAWING OF EXPANSION PREMISES

 

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