LEASE BETWEEN JOHN & SUSAN SOBRATO 1979 REVOCABLE TRUST & FLEXTRONICS INTERNATIONAL USA, INC..
Section Page # - ------- ------
Parties.................................................... 1 Premises................................................... 1 Use........................................................ 1 Term and Rental............................................ 1
Rental Adjustment................................. 2 Security Deposit........................................... 2 Late Charges............................................... 3 Construction and Possession................................ 3
Building Shell Construction....................... 3
Tenant Improvement Plans.......................... 3
Preliminary Cost Estimates........................ 4
Final Pricing..................................... 4
Change Orders..................................... 4
Building Shell Costs.............................. 5
Tenant Improvement Costs.......................... 5
Construction...................................... 5
General Contractor Overhead & Profit.............. 6
Insurance/Indemnity............................... 6
Punch List & Warranty............................. 6
Other Work by Tenant.............................. 6 Acceptance of Possession and Covenants to Surrender........ 7 Uses Prohibited............................................ 7 Alterations and Additions.................................. 8 Maintenance of Premises.................................... 8 Hazard Insurance........................................... 9
Tenant's Use...................................... 9
Landlord's Insurance.............................. 9
Tenant's Insurance................................ 9
Waiver............................................ 10 Taxes...................................................... 10 Utilities.................................................. 11 Abandonment................................................ 11
Page i 2 Free From Liens.................................................... 11 Compliance With Governmental Regulations........................... 11 Toxic Waste and Environmental Damage............................... 12
Tenant's Responsibility................................... 12
Tenant's Indemnity Regarding Hazardous Materials.......... 12
Actual Release by Tenant.................................. 13
Environmental Monitoring.................................. 13 Indemnity.......................................................... 14 Advertisements and Signs........................................... 14 Attorney's Fees.................................................... 14 Tenant's Default................................................... 14
Remedies.................................................. 15
Right to Re-enter......................................... 16
Abandonment............................................... 16
No Termination............................................ 16 Surrender of Lease................................................. 16 Habitual Default................................................... 16 Landlord's Default................................................. 17 Notices............................................................ 17 Entry by Landlord.................................................. 17 Destruction of Premises............................................ 18
Destruction by an Insured Casualty........................ 18
Destruction by an Uninsured Casualty...................... 18 Assignment or Sublease............................................. 18
Consent by Landlord....................................... 18
Assignment or Subletting Consideration.................... 19
No Release................................................ 20
Effect of Default......................................... 20 Condemnation....................................................... 20 Effects of Conveyance.............................................. 21 Subordination...................................................... 21 Waiver............................................................. 22 Holding Over....................................................... 22 Successors and Assigns............................................. 22 Estoppel Certificates.............................................. 22 Option to Extend the Lease Term.................................... 23
Grant and Exercise of Option.............................. 23
Determination of Fair Market Rental....................... 23
Resolution of a Disagreement over the Fair Market Rental.. 24 Options............................................................ 24 Quiet Enjoyment.................................................... 25
Page ii 3 Brokers............................................................ 25 Landlord's Liability.............................................. 25 Authority of Parties............................................... 25 Transportation Demand Management programs.......................... 25 Dispute Resolution................................................. 25 Lease Guaranty..................................................... 26 Miscellaneous Provisions........................................... 26
Rent...................................................... 26
Management Fee............................................ 26
Performance by Landlord................................... 26
Interest.................................................. 26
Rights and Remedies....................................... 26
Survival of Indemnities................................... 26
Severability.............................................. 26
Choice of Law............................................. 27
Time...................................................... 27
Entire Agreement.......................................... 27
Representations........................................... 27
No Presumption Against Drafter............................ 27
Headings.................................................. 27
Exhibits.................................................. 27 EXHIBIT A - Premises, Building & Project........................... 28 EXHIBIT B - Shell Plans and Specifications......................... 29 EXHIBIT C - Building Shell Definition.............................. 30 EXHIBIT D - Tenant Improvement Plans and Specifications............ 32 EXHIBIT E - Guaranty of Lease...................................... 33
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1. PARTIES: THIS LEASE, is entered into on this 19th day of November, 1996, between the JOHN AND SUSAN SOBRATO 1979 REVOCABLE TRUST, whose address is 10600 North De Anza Boulevard, Suite 200, Cupertino, CA 95014 and FLEXTRONICS INTERNATIONAL USA, INC., a California Corporation, whose address is 2241 Lundy Avenue, San Jose, CA 95131, hereinafter called respectively Landlord and Tenant.
2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from Landlord those certain Premises with the appurtenances, situated in the City of San Jose, County of Santa Clara, State of California, commonly known and designated as 2090 Fortune Drive consisting of 71,750 rentable square feet ("Building") with parking for approximately 260 cars as outlined in red on Exhibit "A". Unless expressly provided otherwise, the term Premises as used herein shall include the Tenant Improvements (defined in Section 7.B) constructed by Tenant pursuant to Section 7.B.
3. USE: Tenant shall use the Premises only for the following purposes and shall not change the use of the Premises without the prior written consent of Landlord: Office, research and development, marketing, light manufacturing, storage and other incidental uses. Landlord makes no representation or warranty that any specific use of the Premises desired by Tenant is permitted pursuant to any Laws.
4. TERM AND RENTAL: The term ("Lease Term") shall be for one hundred twenty (120) months, commencing, on the "Commencement Date" as determined pursuant to Section 7.H, and ending one hundred twenty (120) months thereafter ("Expiration Date"). In addition to all other sums payable by Tenant under this Lease, beginning six (6) months following the Commencement Date, Tenant shall pay as base monthly rent ("Base Monthly Rent") for the Premises the amount of Sixty Four Thousand Seven Hundred Ninety and No/100 Dollars ($64,790.00), which amount shall be subject to increase pursuant to Section 4.A below. Base Monthly Rent shall be due in advance on or before the first day of each calendar month during the Lease Term. All sums payable by Tenant under this Lease shall be paid to Landlord in lawful money of the United States of America, without offset or deduction and without prior notice or demand, at the address specified in Section 1 of this Lease or at such place or places as may be designated by Landlord during the Lease Term. Base Monthly Rent for any period less than a calendar month shall be a pro rata portion of the monthly installment.
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A. RENTAL ADJUSTMENT: Beginning twelve (12) months after the Commencement Date, and every twelve (12) months thereafter (an "Adjustment Date"), the then- payable Base Monthly Rent shall be subject to adjustment based on the increase, if any, in the Consumer Price Index that has occurred during the twelve (12) months preceding the then-applicable Adjustment Date. The basis for computing the adjustment shall be the U.S. Department of Labor, Bureau of Labor Statistic's Consumer Price Index for All Urban Consumers, All Items, 1982-84=100, for the San Francisco-Oakland-San Jose area ("Index"). The Index most recently published preceding the Commencement Date for the first Adjustment (or previous Adjustment Date, as applicable), shall be considered the "Base Index". If the Index most recently published preceding the Adjustment Date ("Comparison Index") is greater than the Base Index, the then- payable Base Monthly Rent shall be increased by multiplying the then-payable Base Monthly Rent by a fraction, the numerator of which is the Comparison Index and the denominator of which is the Base Index. On adjustment of the Base Monthly Rent, Landlord shall notify Tenant by letter stating the new Base Monthly Rent. Landlord's calculation of the Base Monthly Rent escalation shall be conclusive and binding unless Tenant objects to said calculation within thirty (30) days of Tenant's receipt from Landlord of such calculation. Landlord's failure to adjust Base Monthly Rent on an Adjustment Date shall not prevent Landlord from retroactively adjusting Base Monthly Rent at any subsequent time during the Lease Term. If the Index base year is changed so that it differs from 1982-84=100, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised during the Lease Term, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the index had not been discontinued or revised.
5. SECURITY DEPOSIT: Concurrently with Tenant's execution of this Lease, Tenant has deposited with Landlord the sum of Sixty Four Thousand Seven Hundred Ninety and No/100 Dollars ($64,790.00) ("Security "Deposit"). Landlord shall not be required to separate the Security Deposit from Landlord's other funds and Tenant shall not be entitled to interest on the Security Deposit. If Tenant defaults with respect to any provisions of the Lease, including but not limited to the provisions relating to payment of Base Monthly Rent or other charges, Landlord may, to the extent reasonably necessary to remedy Tenant's default, use any or all of the Security Deposit towards payment of the following: (i) Base Monthly Rent or other charges in default; (ii) any other amount which Landlord may spend or become obligated to spend by reason of Tenant's default; and (iii) any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of the Security Deposit is so used or applied, Tenant shall, within ten (10) days after written demand from Landlord, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its full original amount, and shall pay to Landlord such other sums as necessary to reimburse Landlord for any sums paid by Landlord. If Tenant shall default more than three (3) times in any twelve (12) month period, irrespective of whether or not such default is cured, then the Security Deposit shall, within ten (10) days after demand by Landlord, be increased by Tenant to an amount equal to three (3) times the Base Monthly Rent.
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The Security Deposit shall be returned to Tenant within thirty (30) days after the Expiration Date and surrender of the Premises to Landlord, less any amount deducted in accordance with this Section, together with Landlord's written notice itemizing the amounts and purposes for such deduction. In the event of termination of Landlord's interest in this Lease, Landlord shall transfer the Security Deposit to Landlord's successor in interest.
6. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant to Landlord of Base Monthly Rent and other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which is extremely difficult to ascertain. Such costs include but are not limited to: administrative, processing, accounting, and late charges which may be imposed on Landlord by the terms of any contract, revolving credit, mortgage, or trust deed covering the Premises. Accordingly, if any installment of Base Monthly Rent or other sum due from Tenant shall not be received by Landlord or its designee when due, Tenant shall pay to Landlord a late charge equal to five (5%) percent of such overdue amount, which late charge shall be due and payable on the same date that the overdue amount was due. Landlord agrees to waive said late charge in the event all amounts set forth in any notice served upon Tenant by Landlord to pay rent or quit in connection with the overdue amount are paid in full by cashier's check within five (5) days after Landlord's service upon Tenant of such notice to pay rent or quit. The parties agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. Acceptance by Landlord of such late charge shall not constitute a waiver of Tenant's default with respect to such overdue amount nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) consecutive installments of Base Monthly Rent, then the Base Monthly Rent shall automatically become due and payable quarterly in advance, rather than monthly, notwithstanding any provision of this Lease to the contrary.
7. CONSTRUCTION AND POSSESSION:
A. BUILDING SHELL CONSTRUCTION. Landlord shall cause the shell of the Building ("Building Shell") to be constructed by independent contractors to be employed by and under the supervision of Landlord's affiliated construction company, Sobrato Construction Corporation ("General Contractor"), in accordance with the Building Shell plans and guideline specifications prepared by Arctec ("Architect") and approved by Landlord and Tenant, which are attached hereto as Exhibit "B" ("Shell Plans and Specifications"). General Contractor shall construct the Building Shell in accordance with all applicable municipal, local, state and federal laws, statutes, rules, regulations and ordinances. Landlord shall pay for all costs and expenses associated with the construction of the Building Shell. The Building Shell shall include those items set forth in the attached Exhibit "C" ("Building Shell Definition").
B. TENANT IMPROVEMENT PLANS. Tenant, at Tenant's sole cost and expense, has also
Page 3 7 hired the Architect to prepare plans and outline specifications which shall be attached hereto as Exhibit "D" ("Tenant Improvement Plans and Specifications") with respect to the construction of improvements to the interior premises ("Tenant Improvements"). The Tenant Improvements shall consist of all items not included within the scope of the Building Shell Definition. The Tenant Improvement Plans and Specifications shall be completed and submitted to Landlord by December 31, 1996 in sufficient detail to allow General Contractor to construct the Tenant Improvements. Landlord shall cause General Contractor to construct the Tenant Improvements in accordance with all Tenant Improvement Plans and Specifications. The Tenant Improvements shall become the property of Tenant upon installation and shall not be removed or altered by Tenant without the prior written consent of Landlord as provided in Section 10. Tenant shall have the right to depreciate and claim and collect any investment tax credits in the Tenant Improvements during the initial Lease Term. Upon expiration of the Lease Term or any earlier termination of the Lease, the Tenant Improvements shall become the property of Landlord and shall remain upon and be surrendered with the Premises, and title thereto shall automatically vest in Landlord without any payment therefore.
C. PRELIMINARY COST ESTIMATE. Within fourteen (14) days after Tenant's delivery of the Tenant Improvement Plans and Specifications to Landlord, General Contractor shall deliver to Tenant a preliminary cost estimate to construct the Tenant Improvements. The preliminary cost estimate shall contain sufficient detail for Tenant to understand the cost element of each portion of the proposed Tenant Improvements.
D. FINAL PRICING. Within ten (10) days after Tenant's approval of the preliminary cost estimate for the Tenant Improvements, the General Contractor shall submit to Tenant competitive bids from at least three (3) subcontractors for each aspect of the work which is to be performed. General Contractor must utilize the low bid in each case unless Tenant approves General Contractor's use of another subcontractor, and the cost of the Tenant Improvements shall be based upon construction expenses equal to the sum of the bid amounts as approved by Tenant. Upon Tenant's written approval of the contract bids, Landlord and Tenant shall be deemed to have given their respective approvals of the final Tenant Improvement Plans and Specifications on which the cost estimate was made, and General Contractor shall proceed with the construction of the Tenant Improvements in accordance with the terms of Section 7.H below. If Tenant does not specifically approve or disapprove the bids within seven (7) days, Tenant shall be deemed to have disapproved the bids.
E. CHANGE ORDERS. Tenant shall have the right to order changes in the manner and type of construction of the Building Shell or the Tenant Improvements. Any change order submitted by Tenant after ten (10) days from the date of issuance by the City of San Jose of a building permit for the construction of the Tenant Improvements, which causes General Contractor's construction schedule to be delayed, shall cause the Commencement Date to occur one (1) day in advance of the date the Building is Substantially Complete (as defined in Section 7.H) for each day of delay. Upon
Page 4 8 request and prior to Tenant's submitting any binding change order, General Contractor shall promptly provide Tenant with written statements of the cost to implement and the time delay and increased construction costs associated with any proposed change order, which statements shall be binding on Landlord. If no time delay or increased construction cost amount is noted on the written statement, the parties agree that there shall be no adjustment to the construction cost or the Commencement Date associated with such change order. If ordered by Tenant, General Contractor shall implement such change order and the cost of constructing the Tenant Improvements shall be increased in accordance with the cost statement previously delivered by General Contractor to Tenant for any such change order.
F. BUILDING SHELL COSTS. Landlord shall pay all costs associated with the Building Shell.
G. TENANT IMPROVEMENT COSTS. The cost of Tenant Improvements shall consist of only the following to the extent actually incurred by General Contractor in connection with the construction of Tenant Improvements: construction costs, permitting costs, and Landlord overhead as described in Section 7.I below. During the course of construction of Tenant Improvements, General Contractor may deliver to Tenant not more than once each calendar month a written request for payment which shall include and be accompanied by General Contractor's certified statements setting forth the amount requested, certifying the percentage of completion of each item for which reimbursement is requested, and certifying that the progress payment requested is due to a subcontractor of General Contractor pursuant to a contract between General Contractor and the subcontractor. Tenant shall pay General Contractor, within fifteen (15) days after Tenant's receipt of the above items, the costs incurred by General Contractor in connection with Tenant Improvements installed in the Building in accordance with the Tenant Improvement Plans and Specifications, minus the retention set forth below. Tenant shall be entitled to retain ten percent (10%) of the amount invoiced by General Contractor until the Tenant Improvements are Substantially Complete as defined in Section 7.H below. Tenant shall pay the retained balance owing to General Contractor within fifteen (15) days following the date that the Tenant Improvements are Substantially Complete. All costs for Tenant Improvements shall be fully documented to and verified by Tenant. The amounts charged to Tenant shall be limited as provided in Section 7.D above.
H. CONSTRUCTION. Landlord shall use its best efforts to obtain a building permit from the City of San Jose as soon as possible after Tenant's approval of the Tenant Improvement Plans and Specifications. The Building Shell and Tenant Improvements shall be deemed substantially complete ("Substantially Complete") when the Building Shell and Tenant Improvements have been substantially completed in accordance with the Shell Plans and Specifications and Tenant Improvement Plans and Specifications, as evidenced by the issuance of a certificate of occupancy or its equivalent by the appropriate governmental authority for the Building Shell and Tenant Improvements, and the issuance of a certificate by the Architect certifying that the Building Shell and Tenant Improvements have been completed in accordance with the plans.
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I. GENERAL CONTRACTOR OVERHEAD & PROFIT. As compensation to General Contractor for its services related to construction of the Building Shell and Tenant Improvements, General Contractor shall receive a fee of six percent (6%) to cover all of the following: field personnel and superintendent, temporary on-site facilities, home office administration, supervision, and coordination and construction profit. Except as provided therein, Landlord or General Contractor shall not receive any other fee or payment from Tenant in connection with General Contractor's services.
J. INSURANCE/INDEMNITY. General Contractor shall indemnify, protect, defend and hold Tenant harmless from and against all liability, cost, expense, or damage, including attorneys fees, arising from construction of the Building Shell or Tenant Improvements; construction defects; or failure to properly construct the Building Shell or Tenant Improvements in accordance with the approved Shell Plans and Specifications or Tenant Improvement Plans and Specifications. Tenant's review and approval of plans, specifications, or any other documents shall not relieve General Contractor from its obligations under the foregoing indemnification. General Contractor shall procure (as a cost of the Building Shell) and keep in effect from the Lease execution date until Lease termination a "Broad Form" liability insurance policy in the amount of Three Million Dollars ($3,000,000.00), insuring all General Contractor's activities with respect to the Building and Premises, including Landlord's indemnity obligations under this Section 7.J. Landlord shall also procure (as a cost of the Building Shell) builder's risk insurance for the full replacement cost of the Building Shell and Tenant Improvements while the Building and Tenant Improvements are under construction, up until the date that the fire insurance policy described in Lease Section 12 is in full force and effect.
K. PUNCH LIST & WARRANTY. After the Building Shell and Tenant Improvements are Substantially Complete, Landlord shall cause the General Contractor to immediately correct any construction defect or other "punch list" item which Tenant brings to General Contractor's attention. All such work shall be performed so as to cause the least possible interruption to Tenant and its activities on the Premises. General Contractor shall provide a standard contractor's warranty with respect to the Premises for one (1) year from the Commencement Date. Such warranty shall exclude routine maintenance, damage caused by Tenant's negligence or misuse, and acts of God. Landlord shall assign to Tenant any manufacturer's warranties on equipment installed as a part of the construction of the Building Shell and Tenant Improvements.
L. OTHER WORK BY TENANT. All work not within the scope of work normally performed by the construction trades employed on the Building and not described in the Shell Plans and Specifications or Tenant Improvement Plans and Specifications, such as furniture, telephone equipment, telephone wiring and office equipment work, shall be furnished and installed by Tenant. When the construction of the Tenant Improvements has proceeded to the point where Tenant's work of installing its fixtures and equipment in the Premises can be commenced, General Contractor shall notify Tenant and shall permit Tenant and its authorized representatives and contractors access to
Page 6 10 the Premises before the Commencement Date for the purpose of installing Tenant's trade fixtures and equipment. Any such installation work by Tenant or its authorized representatives and contractor shall be undertaken upon the following conditions: (i) if the entry into the Premises by Tenant or its representatives or contractors interferes with or delays General Contractor's work, Tenant shall cause the party responsible for such interference or delay to leave the Premises; and (ii) its entry on the Premises shall not interfere with General Contractor's work.
8. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER: On the Commencement Date, Landlord shall deliver and Tenant shall accept the Premises as being in good and sanitary order, condition and repair, and shall accept the Substantially Complete Premises and the other improvements in their present condition. Within ninety (90) days after the Commencement Date, Tenant agrees to be in occupancy of at least fifty percent (50%) of the rentable square footage of the Premises.
Tenant further agrees on Expiration Date or on the soone ...
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