HomeMy WebLinkAbout1998-03-16 City CouncilCity
City of Palo Alto
Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE
SERVICES
DATE:MARCH 16, 1998 CMR:104:98
SUBJECT:APPROVAL OF MANAGEMENT~ AGREEMENT FOR GOLF
PROFESSIONAL -SERVICES, AND APPROVAL OF FACILITY
LEASE AT 1875 EMBARCADERO ROAD TO BRAD LOZARES TO
OPERATE A GOLF RETAIL SHOP; APPROVAL OF BUDGET
AMENDMENT ORDINANCE TO INCREASE GOLF COURSE
REVENUES AND EXPENDITURES WITH NO NET IMPACT ON
RESERVES, AND TO AMEND THE CITY’S MUNICIPAL FEE
SCHEDULE TO ADD GOLF FEES PREVIOUSLY SET BY BRAD
LOZARES
REPORT IN BRIEF
The purpose of this gtaffreport is to obtain Council’s approval of a 20-month management
agreement with Brad Lozares for goif course professional services at the Palo Alto Municipal
Golf Course, as well as approval of a 15-year agreement with Brad Lozares for lease of the
facility at the Palo Alto Municipal Golf Course to operate a golf retail establishment. The
lease and management agreement will take effect May 1, 1998. Changes to the existing lease
are necessary in order to comply with recent Internal Revenue Service Code regulations, and
thereby allow the City to sell tax-exempt debt to finance golf course capital improvements,
as approved by the City Council in July 1997 (CMR:327:97).
CMR:104:98 Page 1 of 8
RECOMMENDATION
Staff recommends that Council:
Approve and authorize the Mayor to execute the attached 20-month management
agreement with Brad Lozares for golf course professional services at the Palo Alto
Municipal Golf Course.
Approve and authorize the Mayor to execute the attached 15-year agreement with
Brad Lozares for lease of the facility at the Palo Alto Municipal Golf Course to
operate a golf retail establishment.
Approve the attached Budget Amendment Ordinance (BAO) to reflect changes in the
structure of the fees paid to Brad Lozares. The City will receive more golf revenues
directly that previously went directly to Brad Lozares-and will, in tum, pay him
additional fees. Both revenues and expenditures for the City are projected to increase
by $65,000, with no net impact on the General Fund.
Approve amendments to the City’s Municipal Fee Schedule to add driving range, golf
cart and golf club rentals to the City’s fees. These fees were previously set by Brad
Lozares.
o Direct staff to enter into a short form agreement to reimburse Brad Lozares for the
cost of using his architect to design various Americans with Disabilities Act (ADA)
retrofits on the exterior of the City-owned-golf course clubhouse.
BACKGROUND
On August 14, 1987, (CMR:380:7), Council approved a renewal of the City’s lease with
Brad Lozares for the City-owned clubhouse facility at thegolf course. The renewed lease
was for a ten-year term, with a five-year renewal option, at the discretion of the tenant, and
specified that the tenant would provide services and activities typically associated with a full-
service golf professional, including operation and management of golf course play, the
driving range, golf lessons, golf promotion and a retail and equipment rental shop.
Under the existing lease, Brad Lozares retains 3 percent of the golf green fees, all of the golf
lesson fees, and $2,000 per year for course marshal services. He pays the City 7 percent of
the gross receipts for pro-shop merchandise sales and 17 percent of driving range receipts,
and golf cart and equipment rental receipts.
On May 15, 1995, Council approVed a Golf Course Improvement Master Plan (CMR:248:95)
to upgrade various components of the golf course. The plan will involve the issuance of tax
CMR:104:98 Page 2 of 8
exempt debt to pay for a portion of the Master Plan improvements. In a report dated
February 13, 1996, (CMR:123:96), staff indicated that Internal Revenue Service (IRS)
regulations regarding the use of tax-exempt financing had changed since the last capital
improvements made at the golf course in 1977, and that the new regulations restrict the use
of tax-exempt financing for improvements that directly benefit a for-profit enterprise such
as the retail sales operation run by Brad Lozares.
DISCUSSION
The attached agreements were prepared in order to comply with the new IRS regulations, and
have been reviewed by both the City Attorney’s Office and by outside legal counsel (Jones
Hall Hill & White). The first agreement is a management contract for the professional golf
services provided by Brad Lozares. This agreement covers the portions of Brad Lozares’
operation that receive a direct benefit from the golf course improvements that will be
financed with tax-exempt bonds. This agreement must be for no more than five years under
the IRS regulations, and the compensation Brad Lozares receives for those services must be
at least 50 percent fixed, or pre-set in nature.
Prior to negotiating the fee package, staff consulted with both the City Auditor, and with an
outside consulting firm that specializes in golf contracts, the William Sherman Company.
Both concluded in separate analyses that under the existing agreement, Brad Lozares receives
compensation from the City for all services provided that puts him in the mid-range of
comparable public golf course professionals in the Bay Area, given the services offered and
level of activity at the course. The proposed agreement maintains the level of compensation
Brad Lozares receives in the existing agreement.
The second agreement is for a re-negotiated lease of the space for the retail shop facility at
the golf course. Because no bond financing is being used to improve the clubhouse facility
itself, this lease agreement can extend for longer than the five-year term and does not have
the same compensation restrictions as the management agreement. Except for these changes,
the other lease provisions are consistent with leases for other City-owned space.
Management Agreement
Attachment A is a negotiated management agreement, which provides for the continued
services 0fBrad Lozares to manage the play and fee collection at the golf course, to ensure
continued high quality golf programs, to maximize the public use Of the Palo Alto Golf
Course, and thereby ensure that the revenues received by the City are sufficient to continue
to operate the golf course with no subsidy from the City’s General Fund.
The management agreement requires Brad Lozares to provide the following services to the
City:
CMR:104:98 Page 3 of 8
1)management and control of course play, including management and control of the
starting system; collection and deposit of green fees and tournament play;
2)management and control of driving range and practice greens, including collection
and deposit of fees, regulation of use, and enforcement of course rules and
regulations;
3)management and control of golf carts, golf related rental equipment and deposit of
rental fees;
4)promotion of golf and golf related activities in cooperation with Golf Advisory
Committee, existing golf clubs, organizations and City;
5)course m .arshaling services ( i.e., regulation of play and enforcement of course rules
and regulations);
6)other services customarily provided by a Professional Golf Association (PGA) Class
A golf professional and requested by course users.
Under the terms of the proposed agreement, Brad Lozares will receive $175,000 in fixed fee
Compensation for the remainder of the 1998 calendar year, i.e., May to December 1998.
Additionally, Brad Lozares will receive 40 percent of the gross revenue of the driving range,
and the golf cart and equipment rentals, estimated to be $132,000 in total for the same period.
Total compensation to Brad Lozares is therefore estimated to be $307,000 for the remainder
of calendar year 1998, but it could be as high as $350,000 if golf and driving range activity
is higher than projected. (The attached BAO only covers the time remaining in this fiscal
year, i.e., May - June 1998. Ongoing costs and revenue will be budgeted in the 1998-99
operating budget.)
It is important to note that the compensation proposed for Brad Lozares cannot be translated
into a net income figure. The retail sales his shop generates and the proposed payments from
the City of Palo Alto must cover all his operating expenses, including staff costs, golf cart.
rental and maintenance, promotional activities, insurance, wholesale merchandise purchases,
etc.
The proposed fee arrangement leaves both Brad Lozares and the City neutral compared to
the current compensation arrangement: while the City will pay Brad Lozares fixed and
percentage fees, the City will receive the bulk of the driving range receipts, which formerly
went entirely to Brad Lozares. Furthermore, by paying Brad Lozares a percentage of driving
range receipts and golf cart rentals, staff believes there are sufficient compensation
CMR:104:98 Page 4 of 8
incentives built into the arrangement so that he continues to provide the outstanding services
he has become known for at the golf course, and strives to bring in new customers.
IRS regulations require that the management agreement be awarded for a term not to exceed
five years. This agreement covers only 20 months, through December 1999. Once this
agreement is in place, staff will need to send out a Request for Proposals (RFP) in
approximately.16 months for the next five-year term. If Brad Lozares continues to provide
outstanding service with a competitive compensation package, . the City could choose to
award a five-year management agreement with him at that time.
Lease A~reement
Attachment B is a negotiated 15-year lease agreement to allow Brad Lozares to continue to
operate the golf course retail shop. The shop continues to be honored annually by Golf
Digest as one of the one hundred best shops in the nation. The lease requires Brad Lozares,
acting in this capacity as tenant, to provide the following services:
1)operation and management of a fully equipped golf shop including, at a minimum,
sale of quality golf equipment and related incidental merchandise, sufficient in
inventory and diversity to meet the needs of the course users at rates and prices which
are fair and reasonable;
2)quality golf lessons and instruction for all levels of play and all other services
customarily provided by a PGA Class A golf professional;
3)promotion of golf and golf related activities in cooperation with existing golf clubs,
organizations and the City.
The minimum rent for the first five years of the lease will be the greater of $2,000 per month
or 4 percent of the golf shop merchandise sales. Subsequently, the minimum will be
adjusted annually, based on prior year’s shop retail sales.
In the event the lease is terminated and a new tenant does not buy the remaining inventory,
the City agrees to purchase the remaining inventory at 100 percent of the wholesale price.
If Brad Lozares terminates the lease because the management agreement has been.
terminated, or because the lease is terminated by no fault of the tenants, the City agrees to
reimburse the tenant for his undepreciated share of any capital improvement construction
costs incurred.
The term of the lease (15 years) will allow Mr. Lozares to invest in some retail shop
expansions and recover his investment over time. The lease also allows the tenant the option
of undertaking the remodel of the retail shop and expansion of the cart storage area as per the
CMR:104:98 Page 5 of 8
Council-approved Golf Course Master Plan. The tenant would fund and construct the
expansion under City supervision. In return, over the remaining term of the lease, the City
would provide a rent credit for up to $150,000 of the anticipated $300,000 total construction
cost. Both the City and the tenant would benefit from the anticipated future growth in sales
that can be accommodated with the additional space.
The remodeling work, although all within the retail shop itself, will trigger additional exterior
work to comply with the Americans with Disabilities Act (ADA). Specifically, the public
d " .nnking fountains, public rest rooms, and clubhouse access ramp will need to be retrofitted.
Those improvements are the City’s responsibility, as the landlord at the site. Because the
improvements support private, profit-making businesses, they are not eligible for inclusion
with the tax-exempt bond financing that will pay for the golf course improvements.
In order to expedite the completion of the ADA work, staffproposes to enter into a separate
agreement with Brad Lozares at a later date, apart from the attached agreements. Mr.
Lozares already has an architect that he will use to perform the design work related to
expanding the retail shop space, and the City’s ADA work can be included for a relatively
small incremental cost. In addition, by allowing Mr. Lozares to administer the design
contract, the City will save project management time.
With Council’s approval, staff would enter into a short form agreement with Mr. Lozares,
who will use his remodeling architect to design the ADA improvements. The ADA share of
the design work will cost approximately $7,500, and staffwill reimburse Mr. Lozares out
of funds available in the existing Capital Improvement Program project 19309, "Americans
Disability Act Compliance," after receipt of an itemized invoice.
After design is completed, a more precise estimate of construction costs will be available.
Staff will return tO Council with the cost, estimated at this time to be $100,000, and a
contract for Council approval. The contract will be with Mr. Lozares, who will use his
remodeling contractor to construct the drinking fountain, rest room, and access ramp
retrofits. The retrofits will be subject to City design review and approval, as well as all
required City inspection review.
RESOURCE IMPACT,
The attached BAO will have no net impact on the General Fund. It contains the following
items:
O Revenue increases of $65,000 to reflect two months (May 1 through June 30, 1998)
of driving range, golf cart, and golf equipment rental revenue that was previously
received directly by Brad Lozares under the old contractual arrangement;
.CMR:104:98 Page 6 of 8
O Expenditure increases of $65,000 to a~ccount for two months of City payments to Brad
Lozares. A fixed management fee will total $38,000, and variable compensation is
estimated to be $27,000 to account for two months of Brad Lozares’ share of driving
range, golf Cart, and golf equipment receipts.
o Municipal Fee Schedule Changes. As part of the changes due to the new management
agreement with Brad Lozares, some of the fees that were previously collected by him
must now be set by the City in order to comply with IRS regulations. The attached
BAO therefore adds fees for driving range play, golf cart rentals (both motorizied and
manual), and golf club rentals to the City’s fee schedule. The recommended fees are
the same as the ones currently being charged by Brad Lozares.
POLICY IMPLICATIONS
This report is consistent with current City policies. ~t allows for the financing of the Council-
approved Golf Course improvements by using tax exempt debt, which will save money for
the City and for golfers. It also provides for a fair rental return on Cityowned property.
ENVIRONMENTAL REVIEW
The City Council approved a Mitigated Negative Declaration for this project in May 1995
(CMR:248:95). The Mitigated Negative Declaration determined that any potential impacts
can be mitigated to levels of less than significance and will be incorporated into the design
of the project.
Should Brad Lozares choose to undertake the aforementioned improvements, an
environmental impact assessment, as may be required by the California Environmental
Quality Act, will be prepared.
ATTACHMENTS/EXHIBITS
Budget Amendment Ordinance
Attachment A - Management Agreement
Attachment B- Lease Agreement
CMR:104:98 Page 7 of 8
PREPARED BY:Jim Steele, Manager of Investments and Debt
William W. Fellman, Manager, Real Property
APPROVED BY:
CITY MANAGER APPROVAL:
CC: n/a
Melissa Cavallo
Acting Direc~ ~
Administrative ~Serv~ces
J] le Flem~lg .
~y Manager
CMR:104:98 Page 8 of 8
ORDINANCE NO.
’ORDINANCE OF THE ’COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR THE FISCAL YEAR 1997-98 TO
INCREASE REVENUES AND EXPENDITURES ASSOCIATED WITH THE
CITY’S CONTRACT WITH THE GOLF COURSE PROFESSIONAL BY
$65,000 AND TO AMEND THE GOLF FEES IN THE MUNICIPAL FEE
SCHEDULE
WHEREAS, pursuant tothe provisions of Section 12 of Article
III of the Charter. of the City of Palo Alto, the Council on June
23, 1997 did adopt a budget for fiscal year 1997-98; and
WHEREAS, the City proposes to issue tax exempt financing in the
Spring of 1998 to fund improvements at the Municipal Golf Course;
and
WHEREAS, in order to comply with current Internal .Revenue
Service (IRS)’ requirements for tax exempt financing, the current
compensation arrangement with the City’s golf professional, Brad
Lozares, must be adjusted; and
WHEREAS, The Municipal Fee Schedule (Fee Schedule) needs to be
amended to add several fees (shown in Exhibit A-l) that were
previously charged by Mr. Lozares; and
WHEREAS, the changes to Mr. Lozares’ compensation will result
in an estimated $65,000 in additional golf course revenues to the
City, from the driving range operation, as well as golf cart and
golf club rentals, which will be offset by an equivalent amount of
additional compensation owed to Mr..Lozares; and
WHEREAS, these changes in revenues and expenditures will
require an amendment to the 1997-98 budget; and
WHEREAS, City Council authorization is needed to amend the
1997-.98 budget as hereinafter set forth.
NOW, THEREFORE, the Council of the City of Palo Alto does
ORDAIN as follows:
SE.CTION I. Revenues in the Golf Services Functional Area of
the Community Services Department are increased by Sixty Five
Thousand Dollars ($65,000).
SECTION 2. The sum of Sixty Five Thousand Dollars ($65,000)
is hereby appropriated to non-salary expenses in the Golf Services
Functional Area in the Community Services Department.
SECTION 3. The Municipal Fee Schedule is hereby amended to
reflect the changes as noted in Exhibit A-I.
~T~!_-~. These transactions will have no impact on the
Budget Stabilization Reserve.
SECTION 5. As specified in Section 2.28.080(a) of t.he Palo
Alto M~nicipal Code, a two-thirds vote of the City Council is
required to adopt this ordinance.
SECTION 6. The City Council approved a Mitigated Negative
Declaration for this project in May 1995.
SECTION 7. As provided in Section 2.04.350 of the Palo Alto
Municipal Code, this ordinance shall become effective upon adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:APPROVED:
City Clerk Mayo9
APPROVED AS TO FORM:City Manager
Senior Asst.. City Attorney Acting Director, Administrative
Services Department
ATTACHMENT A
MANAGEMENT AGREEMENT BETWEEN THE
CITY OF PALO ALTO AND BRAD LOZARES
FOR PROFESSIONAL SERVICES AT THE
PALO ALTO MUNICIPAL GOLF COURSE
This Management Agreement (Agreement) is made this day of March, 1998 by and between the
City of Palo Alto, a municipal corporation, (CITY) and Brad Lozares (GOLF PROFESSIONAL).
RECITALS
CITY owns the Palo Alto Municipal Golf Course (Golf Course), par 72, 18-hole course
covering approximately 180 acres within the City of Palo Alto.
CITY desires to provide for the golf professional services at the Golf Course, collection of
fees and other related golf services to insure the highest quality of golf programs for the
public. CITY will retain responsibility for overall management and maintenance of the Golf
Course.
GOLF PROFESSIONAL is well-qualified through its experience to provide the Golf
Professional Services.
Effective May 1, 1998 GOLF PROFESSIONAL shall assume responsibiliu for the operation
and management of course play for the Golf Course facility on behalf of the CITY on the
terms and conditions more particularly set forth in this Agreement. ’
CITY and GOLF PROFESSIONAL agree that the primary objectives for GOLF
PROFESSIONAL’s performance under this Agreement are to 1) manage the play and fee
collection of the Golf Course to insure the highest-quality of golf programs, and 2) to
maximize the public use of the Palo Alto Golf Course, and the revenues to be received by
CITY as a result thereof.
NOW, THEREFORE, in consideration for the mutual promises hereinafter set forth the parties
hereto agree as follows:
I. SCOPE OF SERVICES
Ao GOLF PROFESSIONAL shall, throughout the term of this Agreement, provide
services and activities .typically associated with a full-service golf professional
facility. These include, as a minimum, the following services and activities:
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Operation and management of course play including management and control
of the starting system, collection and deposit of green fees, regulation of
play, tournament play, and enforcement of course rules and regulations;
Operation and management of the driving range and practice greens including
collection and deposit of fees, regulation Of use, and enforcement of course
rules and regulations;
Operation and management of golf carts and golf clubs, and deposit of rental
fees;
o Provide services customarily provided by a PGA class A Golf Professional
and requested by the course users;
o Promotion of golf and golf related activities in cooperation with Golf
Advisory Committee, existing golf clubs, organizations and CITY;
6.Provide Course Marshall services.
Subject to the prior written approval of the City Manager or designee, GOLF
PROFESSIONAL may also use the Golf Course to provide additional services and
uses which are ancillary to and compatible with the required services and uses stated
above and are not in conflict with the required uses of the Golf Course restaurant
tenant. Such approval shall be within the sole discretion of the City Manager.
Mutual Cooperation. GOLF PROFESSIONAL, Golf Course Superintendent, and
Director of Parks and Golf Division shall communicate and cooperate to assure that
said course is maintained to the highest standards. In furtherance of this purpose£
GOLF.. PROFESSIONAL and CITY agree as follows:
GOLF PROFESSIONAL shall periodically, as necessary, meet with or
otherwise convey to Golf Course Superintendent and Director of Parks and
Golf Division public comments and GOLF PROFESSIONAL’s
observations regarding the condition of the Golf Course and maintenance or
repairs necessary for satisfactory play, offer advice regarding tournaments
and special event preparation, care of greens, mowing, cutting cups, repair of
dents or pits on putting surfaces, weeding, moving of shoulders and trap
edges, watering, spraying, cleaning of litter or trash, raking or weeding of
traps, movement of tees, repair of divots and trimming of fairways and
roughs. Notwithstanding the above, the determination of CITY’s Director of
Parks and Golf Division with regard to the standards and conditions of the
Golf Course shall be final and conclusive for the purpose of this Agreement.
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GOLF PROFESSIONAL shall assist and make available his expertise to the
Citizens Golf Advisory Committee or any golf club or golf organization
formed at the Course and GOLF PROFESSIONAL may serve as ex-officio
member of any such club or Organization as may be necessary to further the
purposes of this Agreement. GOLF PROFESSIONAL shall further meet
with CITY’s staff, golf clubs and organizations and Golf Course restaurant
tenant, to arrange toumaments and other spe.cial events, to provide the
necessary scheduling of such events, and to discuss on-going needs of the
golfing public.
GOLF PROFESSIONAL shall keep up to date with the changes and trends
of the golfing profession and shall generally provide on-going evaluation of
the operation of the Golf Course.
GOLF PROFESSIONAL shall, unless specifically stated otherwise, be
accountable to and shall report all day to day operational problems to the
Director of Parks and Golf or designee. The Director of Parks and Golf may
in conjunction with GOLF PROFESSIONAL, develop reasonable rules and
regulations governing the use of the Golf Course. GOLF PROFESSIONAL
shall be bound by such rules and regulations. In the event that GOLF
PROFESSIONAL disagrees with such rules and. regulations, the
determination of the City Manager regarding their applicability shall be final
and conclusive.
GOLF PROFESSIONAL shall cooperate with the Golf Clubhouse TENANT
in use of the golf shop facility. TENANT has overall responsibility for the
facility on behalf of the CITY, and GOLF PROFESSIONAL will report any
facility problems to TENANT. The parties acknowledge that as of the date
of this Agreement, GOLF PROFESSIONAL is also the TENANT.
During the course of the agreement, the CITY anticipates making
improvements to the golf course consistent with the Golf Course Master Plan.
In order for the GOLF PROFESSIONAL to plan his business operations and
staffing effectively, CITY will make every effort to give. at least sixty (60)
days notice for any planned improvements that will affect the GOLF
PROFESSIONAL’s operations.
EQUIPMENT TO BE PROVIDED By, GOLF PROFESSIONAl,
GOLF PROFESSIONAL shall provide:
Ao Golf carts (both manual and power driven), golf clubs and Other ancillary items to be
available to the public for rent, in sufficient quality and quantity for normal course
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operation;
Maintenance for the driving range tee dividers and artificial tee mats in a good and
satisfactory condition, and replace them if necessary; the needs of the driving range
user: including artificial tee mats and range lighting;
Co Adequate driving range equipment including range balls, baskets, ball washers, ball
retrieval equipment, and incidental and necessary equipment to satisfy
GOLF PROFESSIONAL shall be responsible for damage or repair to the driving
range turf should the turf be damaged by GOLF PROFESSIONAL’S ball retrieval
equipment.
III. TERM
The term of this Agreement shall be twenty months commencing on May 1, 1998 and ending on
December 3 k, 1999.
IV. COMPENSATION
During the term of the Agreement, GOLF PROFESSIONAL shall recei~;e a fixed fee and percen.tage
fees as defined below (collectively the Management Fee).
A. E.ixed Fee
The GOLF PROFESSIONAL shall receive a fixed fee during the term of this Agreement for
GOLF PROFESSIONAL’s Golf Course and driving range management, Golf Course marshaling
and starting and cart rental services. The fixed fee for the full calendar year 1998 would be $250,000.
Because this Agreement takes effect May 1, however, the fixed fee shall be prorated to One
Hundred Seventy Five Thousand Dollars ($175,000) for the eight month.period May i-December
31, 1998.
The initial annual fixed fee amount of $250,000 will be adjusted to be effective January 1,
1999 based on the annual percentage increase in the Consumer Price Index (CPI), All Urban
consumers (base year 1982-1984=100), for San Francisco-Oakland-San.Jose CSMA
published by the United States Department of Labor, Bureau of Labor Statistics. (BLS), or
any replacement index published by the BLS. The adjustment shall be made based on the
most recent twelve month CPI figure available from the BLS as of December 10, 1998. In
no event shall the fixed fee for calendar year 1999 be less than $250,000.
CITY shall forward the fixed fee by the 5th working day of the CITY’s working month for
th~ amount due for that month to the GOLF PROFESSIONAL. If not received within ten
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calendar days after the fifth working day of the month, a late charge of one percent of
payment due and unpaid p!us an administrative fee of $45.00 shall be added to the payment
due and unpaid, and the total sum shall become immediately due and payable to GOLF
PROFESSIONAL. The parties agree that such late charges represent a fair and reasonable
estimate of the costs that GOLF PROFESSIONAL will incur by reason of CITY’s late
payments and that acceptance of such late charges in no event constitutes a waiver of CITY’s
default with respect to such overdue payment, nor prevents GOLF PROFESSIONAL from
exercising any of the other fights and remedies granted hereunder or by any provision of law.
Payment of the fixed fee shall be made in monthly installments. The monthly fixed fee
installments will be made based on the following percentages of the annual fixed fee:
Month
January.
February
March
April
May
June
July
August
September
October
November
December
Total, Cale~adar Year
Percentage of Total
Annual Fixed Fee
7.5%
7.5%
7.5%
7.5%
7.5%
7.5%
7.5%
7.5%
10%
10%
10%
10%
100%
Tl~e monthly installment percentages may be changed on January 1, 1999 to better coincide
with the golf season at the mutual agreement of both parties, with a higher fixed fee may be paid
during months of lower golf business activity, based on the first eight months’ experience.’
Bo Percentage Fees
In addition to the fixed fee, GOLF PROFESSIONAL shall receive 40% percent of
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the gross revenues of the driving range and of the gross revenues of the go!f cart and
golf club rentals. Percentage fees for each month will be calculated and paid no later
than the 10th day of the following month. In no event, however, shall the cumulative
percentage fees paid to GOLF PROFESSIONAL for a single calendar year exceed
the total fixed fee payments described in section IV-A herein for that same calendar
year.
C.Golf Cart Fuel Reimbursement
GOLF PROFESSIONAL, shall reimburse CITY quarterly for fuel supplied to gas
golf carts. Reimbursement shall be at the current retail full service pump price on the
date of billing for unleaded fuel, determined quarterly by CITY. GOLF
PROFESSIONAL shall reimburse the City no later than the 20th of the month
following the close of each quarter, with the first quarter ending June 30, 1998.
V. RECORDS AND ACCOUNTS
Bank Deposit.
1. On a daily basis, GOLF PROFESSIONAL shall collect a!l revenues and shall deposit
or cause to be deposited all revenues collected for the driving range, equipment rental
and golf course green fees into a bank account.
GOLF PROFESSIONAL agrees he is holding cash as a custodian for the CITY under
this agreement.
CITY agrees that these revenues collected by GOLF PROFESSIONAL may be, but
are not required to be, deposited, temporarily by GOLF PROFESSIONAL into the
same account used by him for his Golf Course lease operations. However, in no
event .shall such account be used for or contain any funds relating to personal use, or
to business use other than pursuant to an agreement between GOLF
PROFESSIONAL and the.CITY.
In the event that GOLF PROFESSIONAL deposits revenue.temporarily in a bank of
his choosing, the GOLF PROFESSIONAL agrees that:
a)GOLF PROFESSIONAL will pay for all banking fees, including all monthly
service charges, armored courier pickup services and any credit and debit
card service charges;
b)The CITY will be held harmless for any cash shortages, refunds, or other
losses that may occur as a result of his handling of CITY revenues;
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c)
d)
payments will be made to the CITY for a good faith estimate of revenues
collected and due to CITYnot less than every two weeks;
a detailed accounting and reconciliation of revenues and records for each
month, in accordance with the terms specified in section V. B below, shall be
provided to CITY no later than the 10th day of the following month.
The CITY agrees to issue a certificate of deposit to help offset GOLF
PROFESSIONAL’S account analysis/bank fees associated with managing the
collection of CITY revenues. This Certificate of Deposit instrument will be held in
the CITY’S sole name, at the GOLF PROFESSIONAL’S bank, in an amount not to
exceed $75,000. (Exact amount will be authorized at a later date by the CITY’S
Director of Administrative Services). All interest earned on this Certificate of
Deposit shall belong to the CITY and shall be paid to the CITY when the Certificate
of Deposit instrument mature~. GOLF PROFESSIONAL agrees to instruct their
Bank to release the Certificate of Deposit back to the CITY at the conclusion of the
term of the agreement.
In the event that.GOLF PROFESSIONAL does not deposit CITY revenues into
GOLF PROFESSIONAL’S business bank temporarily, .GOLF PROFESSIONAL
agrees to:
a)make ready CITY revenues for a daily pickup by the CITY or by the CITY’s
armored courier service. In this case, the GOLF PROFESSIONAL shall
segregate money collected for the CITY from any other revenue GOLF
PROFESSIONAL collects for his own business and from his personal funds.
In this case, the CITY will pay for the cost of all banking fees related to the
CITY’s revenues, including monthly service fees, armored courier service
and banking fees, and credit and debit card charges. The CITY will not, in
such event, pay for banking service fees for any revenues collected by GOLF
PROFESSIONAL;
transmit daily revenue activity recorded on CITY’s cash receipting system
electronically to CITY’s mainframe computer, system at City Hall;
c)provide a detailed accounting and reconciliation of revenues and records for
each month, in accordance with the terms specified in section V.B below, no
later than the 10th day of the following month.
Records. GOLF PROFESSIONAL shall, at all times during the term of this Agreement, ’
keep or cause to be kept true and complete books, records, and accounts of all financial
trfinsactions conducted in the operation of all business activities, of whatever nature,
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conducted pursuant to the rights granted herein. The records, books and accounts shall be
kept or made available to CITY at a location within Santa-Clara or Sail Mateo County. The
records must be supported by source documents such as cash register tapes, purchase
invoices, or other pertinent documents. Except as may be otherwise provided by this
Agreement, all charges shall berecorded by means of a cash register or recording device to
be supplied by CITY which displays to the customer the amount of the transaction and
automatically issues a receipt. The registers shall be equipped with devices which lock in
transaction records, or with counters which are not resettable and which record transaction
numbers. Totals registered shall be read and recorded at the beginning and end of each day.
Records that shall be supplied to the CITY shall include, but not be limited to the following:
I)A summary report generated from, or linked to the cash receipting system that, at a
minimum, lists all CITY transactions for the day with corresponding fees received,
summarizes the total fees by category, and lists the total revenue. Monthly summary
reports shall also be provided which cumulate fees collected by each category.
2)A summary of any other sales transactions for the day belonging to the GOLF
PROFESSIONAL.
In addition, GOLF PRoFEsSIONAL shall keep available for inspection by CITY staff the
daily records from a source in addition to the cash register or cash receipting system that can
be used by the CITY to verify the accuracy of cash receipting records of golf rounds,
driving range play, and equipment rentals.
All records and report formats shall be developed in collaboration with, and approved by
CITY’s Director of Administrative Services, or his or her designee. In the event of
admission charges or rentals, GOLF PROFESSIONAL shall issue serially numbered tickets
for each such admission or rental and shall keep an adequate record of the play-cards, both
issued and unissued.
Upon request of GOLF PROFESSIONAL and at the City Auditor’s sole discretion, the City
Auditor may authorize the keeping of the above-referenced books of account and records and
supporting source documents in a single location outside the limits of Santa Claraor San
Mateo County provided GOLF PROFESSIONAL agrees to pay all expenses including, but
not limited to, transportation, food, and lodging necessary, for the City Auditor to send its
representative to audit or review books and records.
GOLF PROFESSIONAL agrees to use a cash receipting system that is supplied by, or
approved by the CITY, and to take appropriate steps to keep the system in good running
order. CITY agrees to pay for maintenance costs for the system. GOLF PROFESSIONAL
further agrees to ensure that his staffdoe not use CITY’s acquired cash receipting system in
stich a way that violates proprietary agreements CITY has with 3ra party software company.
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Co
GOLF PROFESSIONAL shall not and shall ensure that none of his employees, agents or
contractors copy or duplicate any part of the cash receipting system software, nor disclose
in any manner any proprietary information related to the system or its software. GOLF
PROFESSIONAL further agrees to cooperate with CITY in using CITY approved credit card
and/or debit card acceptance. GOLF PROFESSIONAL agreeg to take appropriate and
reasonable, commonly practiced steps to ensure that any payments made for services by
personal check or by credit or debit card are valid and legitimate.
The Accounting Year. The accounting year shall be twelve full calendar months beginning
January 1. The accounting year shall be continued through the term of this Agreement
unless CITY specifically approves in writing a different accounting year. CITY shall
approve a change in accounting year only in the event of undue hardship being placed on
either the GOLF PROFESSIONAL or CITY, and not because of mere convenience or
inconvenience.
Do Financial Statements and Audit by CITY. Within one hundred twenty (120) days after the
end of each accounting year, GOLF PROFESSIONAL shall, at its own expense, submit to
CITY an unaudited balance sheet and income statement. Within one l’iundred eighty (180)
days after the end of each accounting year, GOLF PROFESSIONAL shall, at its own
expense, submit to CITY a balance sheet and income statement prepared and audited by a
Certified Public Accountant, reflecting business transacted on or from the Golf Course
during the preceding accounting year. The Certified Public Accountant must attest that the
balance and income statement submitted are an accurate representation of GOLF
PROFESSIONAL’s records as reported to the United States of America for income tax
purposes. At the same time, GOLF PROFESSIONAL shall submit to CITY a statement
certified as to the accuracy by a Certified Public Accountant wherein the total gross receipts
for the accounting year are classified according-to the categories established for percentage
fees listed in Clause IV B and for any other business conducted on or from the Golf Course.
The City Auditor may accept alternatives to the above Certified Public Accountant’s audited
statement proyided that in the City Auditor’s sole opinion, the alternative provides sufficient
assurance that the financial statement accurately reflects business transacted on or from the
Golf Course.
All of GOLF PROFESSIONAL’s books of account and records and supporting source
documents shall be made available to CITY’s representatives at any and all reasonable time
during the term of this Agreement and within two (2) years after expiration or termination
of.this Agreement, for the purpose of determining the accuracy of the monthly statements
of sales and monies received, and rent due and paid to CITY.
Notwithstanding the previous paragraph, the full cost of any such audit by CITY, as
determined by CITY, shall be borne by GOLF PROFESSIONAL if either of the following
conditions exists:
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The audit reveals an underpayment of more than five percent (5%) between the
monies due the CITY as reported in accordance with this Agreement and the monies
due as determined by the audit; or
GOLF PROFESSIONAL has materially failed to maintain tree and complete books,
records, accounts, and supporting source documents in accordance with subparagraph
A above. The adequacy of records shall be determined by the City Auditor.
Otherwise, CITY shall bear the cost of any such audit.
Upon the request of CITY, GOLF PROFESSIONAL shall promptly provide, at GOLF
PROFESSIONAL’s expense, necessary data to enable CITY to fully comply with any and
all requirements of the State of Califomia or the United States of America for information
or reports relating to this Agreement and to GOLF PROFESSIONAL’s use of the Golf
Course. Such data shall include, if required, a detailed breakdown of GOLF
PROFESSIONAL’s use of the Golf Course, and/or a detailed breakdown of GOLF
PROFESSIONAL’s receipts and expenses.
VI.HOLD HARMLESS
GOLF PROFESSIONAL hereby waives all claims, liability and recourse against CITY including
the right of contribution for loss or damage of or to persons or prope~y arising from, growing out
of or in any way connected with or related to this Agreement. GOLF PROFESSIONAL hereby
agrees to indemnify, hold harmless and defend CITY, its officers, agents, and employees against any
and all claims, liability, demands, damages, cost, liability costs, expenses or attorneys’ fees arising
out of the GOLF PROFESSIONAL’s negligence or wilful acts or omissions in the performance of
this Agreement; except for liability arising out of the sole negligence of CITY, its officers, agents
or employees. In the event CITY is named as co-defendant, GOLF PROFESSIONAL shall represent
CITY in such legal action unless CITY undertakes to represent itself as co-defendant in such legal
action, in which event GOLF PROFESSIONAL shall pay CITY of its cost of defense, including
reasonable attomeys’..fees. If GOLF PROFESSIONAL is not a party to litigation in Which it has an
obligation to defend hereunder, CITY shall have the right to reasonably approve any counsel selected
by GOLF PROFESSIONAL to defend ’CITY. Notwithstanding the foregoing, CITY shall
indemnify, hold harmless and defend GOLF PROFESSIONAL from any claims or loss arising from
stray range balls causing damage to any of the property at 1755 Embarcadero Road.
VII. INSURANCE .
GOLF PROFESSIONAL shall maintain insurance acceptable to CITY in full force and effect
throughout the term of this Agreement.
Minimum Scope of Insurance
Coverageshall be at least as broad as:
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1)Insurance Services Office Commercial General Liability coverage (occurrence form
CG 0001).
2)Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile
¯ Liability, code 1 (any auto).
3)Workers’ Compensation insurance as required by the State of California and
Employer’s Liability Insurance.
The policy or policies of insurance maintained by GOLF PROFESSIONAL shall provide the
following limits and coverages:
(1)
POLICY
W0r zRs’
COMPENSATION
MINIMUM LIMITS OF LIABILITY
Statutory
(2)COMPREHENSIVE
AUTOMOBILE
LIABILITY,
including owned,
hired, and non-owned
automobiles
Bodily Injury
Property Damage
$1,000,000 ca. person
$1,000,000 ea.occurrence
$1,000,000 ea.occurrence
(3)COMPREHENSIVE Bodily Injury
GENERAL
LIABILITY
including
products and
completed operations,
broad form contractual,
and personal injury.
Property Damage
Personal Injury
$1,000,000 ea. person
$1,000,000 ea.occurrence
$1,000,000 aggregate
$1,000,000 ca. occurrence
$1,000,000 ea. occurrence
VIII.DEDUCTIBLES,AND SELF-INSURED R.ETENTIONS
Any deductibles or self-insured retentions must be declared to and approved by the CITY. At the
option of the CITY either: a) the insurer shall reduce or eliminate such’deductibles or self-insured
retentions as respects the CITY, its officers, officials, employees and volunteers;or b) the GOLF
PROFESSIONAL shall procure a bond guaranteeing payment of losses and related investigations,
claim administration and defense expenses.
Insurance shall be in full force and effect commencing on the first day of the termof this Agreement.
Each insurance policy required by this Agreement shall contain the following clauses:
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o
o
"Each insurance policy required by this clause shall be endorsed to state that
coverage shall not be suspended, voided, canceled by either party, reduced in
coverage or in limits except after thirty.(30) days’ prior written notice by certified
mail, return receipt requested, has been given to the CITY."
"All rights ofsubr0gation are hereby waived against the CITY OF PALO ALTO and
the members of the City Council and elective or appointive officers or emp!oyees,
when acting within the scope of their employment or appointment."
"The CITY OF PALO ALTO is named as a loss payee on the property and course of
construction insurance policies described above."
"The CITY, its officers, officials, employees, agents and volunteers are to be covered
as insureds as respects: liability arising out of activities performed by or on behalf
of the GOLF PROFESSIONAL; products and completed operations of the GOLF
PROFESSIONAL; premises owned, occupied or used by the GOLF
PROFESSIONAL; or automobiles owned, leased, hired or borrowed by the GOLF
PROFESSIONAL. The coverage shall contain no special limitations on the scope
of protection afforded to the CITY, its officers, officials, employees, agents or
volunteers."
o "For any claims related to this Agreement, the GOLF PROFESSIONAL’s insurance
coverage shall be primary insurance as respects the CITY, its officers, officials,
employees, agents and volunteers. Any insurance or self-insurance maintained by
the CITY, its officers, officials, employees, agents or volunteers shall be excess of
the GOLF PROFESSIONAL’s insurance and shall not contribute with it."
°"Any failure to comply with reporting or other provisions of the policies including
breaches of warranties shall not affect coverage provided to the CITY, its officers,
officia.ls, employees, agents or volunteers."
IX. ACCEPTABILITY OF INSURERS
Insurance is to be placed with insurers with a current A.M. Best’s rating of no less than A:X.
X. POSSESSORY INTEREST
GOLF PROFESSIONAL recognizes and understands that this Agreement is not intended to, but may
create a real property possessory interest in the Golf Course that may be subject to real property or
other taxation, and that GOLF PROFESSIONAL shall be subject to or liable for the payment of any
real property taxes or other taxes levied on such interest.
XI. ARBITRATION
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Sh6uld arbitration be necessary, the matter in dispute shall be submitted to arbitration to take place
in Palo Alto, California, pursuant to the then current rules and regulations of the American
Arbitration Association. Either party requesting arbitration under such clauses shall make a demand
on the other party by registered or certified mail with a copy to the San Francisco Regional Office
of the American Arbitration Association, 225 Bush St. 18th Floor, San Francisco, Calif. 94104 (415-
981-3901). The arbitration shall take place as noticed by the American Arbitration Association.
Judgement upon the award rendered by the arbitrator (s) may be entered in any Court having
jurisdiction thereof.
XII. CIRCUMSTANCES WHICH EXCUSE PERFORMANCE (FORCE MAJEURE)
If either party hereto shall be delayed or prevented from the performance of any act required
hereunder by reason of acts of God, restrictive governmental laws or regulations, or other cause
without fault and beyond the control of the party obligated (financial inability excepted),
¯ performance of such act shall be excused for the period of the delay, and the period for the
performance of any such act shall be extended for a period equivalent to the period of such delay.
XIII. NONDISCRIMINATION
GOLF PROFESSIONAL and its employees shall not discriminate against any person because of
race, color, religion, ancestry, age, Sex, national origin, disability or sexual preference. GOLF
PROFESSIONAL shall not discriminate against any employee or applicant for employment because
of race, color, religion, ancestry, sex, age, national origin, disability or sexual preference. GOLF
PROFESSIONAL covenants to meet all requirements of the Palo Alto Municipal Code pertaining
to nondiscrimination in employment. If GOLF PROFESSIONAL is found in violation of the
nondiscrimination provision of the State of California Fair Employment Practices Act or similar
provisions of federal law or executive order in the conduct of its activities under this Agreement by
the State of California Fair Employment Practices Commission or the equivalent federal agency or
officer, it shall thereby be found in default under this Agreement, and such default shall constitute
a material breach of this Agreement. CITY shall then have the power to cancel or suspend this’
Agreement in whole or in part.
XIV.CONFLICT OF INTEREST
GOLF PROFESSIONAL warrants and covenants that no official or employee of CITY nor any
business entity in-which any official or employee of CITY is interested has been employed or
retained to solicit or aide in the procuring of this Agreement or will be employed in the performance
of this Agreement without the divulgence of such fact to CITY. In the event that CITY determines
that the employment of any such official, employee or business entity is not compatible with such
official’s or employee’s duties as an official or employee of CITY, GOLF PROFESSIONAL upon
request of CITY shall immediately terminate such employment. Violation of this provision
constitutes a serious breach of this Agreement and CITY may terminate this Agreement as a result
of such vfolation.
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XV. ~OTICES
All notices pursuant to this Agreement Shall be addressed as set forth below or as either party may
~ubsequently designate by written notice.
TO: CITY
Real Property
City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
FAX: (415) 323-1741
with a copy to:
City Clerk, City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
FAX: (415)328-3631
and
City Attorney, City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto CA 94303
FAX: (415) 329-2646
TO: GOLF PROFESSIONAL
Brad Lozares
Brad Lozares Golf Shop
835 Doverton Square
MountainView,Ca.94040
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above
written.
CITY:GOLF PROFESSIONAL:
CITY OF PALO ALTO
BY:BY:
Mayor/City GOLF PROFESSIONAL_q#l, ~--q 1_39--
Taxpayer I.D. Number
ATTEST:
BY:
City Clerk
APPROVED AS TO FORM:
By:
Senior Assistant City Attorney
RECOMMENDED FOR APPROVAL:
By:.
Director, Administrative Services
Department -
By:
Director, Community Services
By: ........ .........
Manager, Real Property
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sAasd~real.golfpro !
ATTACHMENT B
Project:..Golf Professional
Project Number:CL 27/25-97/5
LEASE #211
This Lease is made this day of.. ,19..’. by and between the City of Palo Alto, a
~municipal corporation, (CITY) and Brad Lozares (TENANT). ~
RECITALS
CITY owns the Palo Alto Municipal Golf Course, par 72, 18 hole course covering
approximately 180 acres within the City of Palo Alto;
Bo CITY desires to lease a pogion of the premises to provide for the operation of the course Pro-
Shop and related golf professional services and activities; and
Co TENANT desires to lease the course Pro-Shop and to provide the necessaD’ golf professional
equipment and related services for the CITY.
TENANT, under a separate Management Agreement, will also assume some of the
management and operation responsibilities of the Palo Alto Golf Course facility on beh;ilf
of the CITY.
Now, therefore, in .consideration of these covenants, terms and conditions, the parties hereto
mutually agree as follows:
][. PREMISES
Sfi’bject to the terms and conditions set forth in this Lease, CITY leases to TENANT that certain
property (PREMISES) shown as the Pro Shop in Exhibit B attached to and, by this reference, made
a part of:this Lease. Unless specifically provided elsewhere in this Lease, TENANT accepts the
PREMISES "as-is" on the date of execution of this Lease.
II. PORPOSE
The purpose of this Lease is to provide for operation and maintenance of the Pro-Shop and related
services:~nd activities at the Palo Alto Municipal Golf Course.
IIl. REOUIRED,AND OPTIONAL SERVICES AND USES
In furtherance of the purposes stated above, the following required and optional services and uses
shall be provided, permitted or prohibited:
Ao Required Services and Uses. Throughout the term of this Lease TENANT shall provide the
following services and activities typically associated with a full-service golf professional.
These shall include, as a minimum, the following services and activities:
Operation and management of a fully equipped golf shop including, as a minimum,
sale and off course rental of quality golf equipment and related incidental
merchandise, sufficient in inventory and diversity to meet the needs of the course
users at rates and prices ~vhich are fair and reasonable;
Provide quality golf lessons and instruction for all levels of play and all other
’ services customarily provided by a PGA class A Golf Professional and demanded by
the course users;
Promotion of golf and go!f related activities in cooperation with existing golf clubs,
organizations and LESSOR.
4.Opening and closing premises for GOLF PROFESSIONAL, and his or her staff.
Optional Services and Uses. Subject to the prior written approval of the City Manager,
TENANT may also use the PREMISES to provide additional services and uses which are
ancillary to and compatible with the required services and uses stated above and not in
conflict with the required uses stated above and not in conflict with the required uses of the
golf course restaurant tenant. Approval of optional uses shall be within the sole discretion
of the City Manager.
Restricted Uses. The above listed services and uses, both required and optional, shall be the
"only services and uses permitted upon Or from the PREMISES. TENANT agrees not to use
the PREMISES for any other purpose nor to engage in, or permit, any other business activity
within or from the PREMISES.
IV.,,TERM
The term of this Lease shall be fifteen (15) years, commencing May 1~ 1998 and ending on
April 30. 2013.
V[TERMINATION OF PRIOR,AGREEMENTS
This Lease supersedes any and all prior leases or agreements entered into by CITY for use of the
PREMISES. All such prior leases or agreements are null and void. *
VI. OPTION TO EX~FEND
TENANT shall have the option to extend this Lease term for an additional ten (10) years if the
following conditions have been satisfied:
ml TENANT has, to the satisfaction of the City Manager, faithfully performed each and every
condition of this Lease throughout the Lease term. -The City Manager’s assessment of
TENANT’S performance shall be final and conclusive and shall be based on information
received from CITY’S staff, and others that may have knowledge of TENANT’S
performance; and
Bo TENANT has submitted to CITY, a written notice of TENANT’S intent to extend the Lease
in accordance with the terms of this clause, on or before six (6) months prior to the end of
the Lease term set forth in Clause IV (TERM).
CITY may notify TENANT if TENANT’S performance has not been acceptable in accordance with
subparagraph A of this clause within two (2) months of receipt of TENANT’S notice of intent to
extend this Lease. CITY’S failure to notify shall not be deemed or construed as CITY’S approval
of TENANT’S option to extend.
VII.INVENTORY" BUY OUT
Upon expi.ration or earlier termination, TENANT agrees to cooperate with any successor golf
professional regarding sale of its remaining inventory. CITY agrees to include a Clause in any
successor lease requiring the successor golf professional’s cooperation with TENANT. Should
TE..NANTand any successor golf professional not agree on a sale and purchase of the remaining
inventory w~thin 30 days of the successor announcement of the selection of the golf professional,
CITY and TENANT agree that CITY will purchase the remaining inventory from TENANT
provided ’that:
Ao The maximum purchase price shall be one hundred percent (100%) of the then wholesale
value of the remaining inventory as determined by a mutually agreeable third party
knowledgeable of the wholesale value of such merchandise during the first five years and
at ninety percent~ ~of the wholesale value for the remainder of the term of the lease ;
The inventory so purchased shall be in good condition and of good quality and shall only be
golf-related merchandise.
VIII. CONSIDERATION/RENT
In consideration for TENANT’S use of the PKEMISES in accordance with the terms and conditions
of this Lease, TENANT agrees to pay to CITY a monthly rent, which shall be the greater of the
amount described in paragraph A (minimum rent) or the amount described in B (percentage rent).
Ao Minimum Rent. The minimum monthly rental for the term of the lease shall be $2.000,
with the exception that during the majorgolf-shop remodel project the minimum rent
will be waived and only the percentage rent shall apply.The period that the
minimum rent will be waived shall not to exceed 3 months.
Percentage Rent. Percentage rent for the PREMISES shall be calculated using the following
percentages of gross receipts from business operations conducted on or from the premises:
Business Operations Percentage
Gross sales from merchandise 4%
and equipment rented from but
not used at the P.A. Golf Course
o
Rent fo’r Optional Services and Uses. TENANT shall, in addition to. the above, pay
Io CITY rent for approved optional services and uses. Rent for optional services and
uses approved in accordance with Clause III (REQUIRED & OPTIONAL
SERVICES AND USES) subparagraph A., shall be mutually agreeable to the City
Manager and TENANT. Should TENANT and the City Manager fail to.agree to a
rent for such approved optional uses, the City Council shall review data presented by
TENANT and the City Manager and shall determine the appropriate rent. The City
Council determination shall be final and conclusive. Should TENANT not agree to
such rent determination, TENANT agrees not to engage in such activity,
notwithstanding any prior approval of such optional uses.
Rent Revision. 180 days prior to the end of the fifth year and 180 days prior to the
end 6f the tenth year TENANT and CITY shall meet and renegotiate the percentage
rents.
Payment of Rent. Rental payments shall bemade in accordance with the provisions
of Clause XI (RENT PAYMENT PROCEDURES).
IX!" CHARGE FOR UNAUTHORIZED SERVICES AND USES
TENANT shall pay CITY a sum equal to 30 percent (30%) of the gross receipts for any service or
use that is not permitted or authorized by Clause III (REQUIRED & OPTIONAL USES). This
payment is subject to the "due date" provided in Clause XI (RENT PAYMENT PROCEDURES)
and the charge for "late payment" provided in Clause XII (CHARGE FOR LATE PAYMENT). The
existence of such charge or the payment or receipt of money under this clause, does not constitute
an authorization of a particular service or use and does not constitute a waiver of CITY’S right to
terminate such service or use.
X. DEFINITION OF GROSS RECEIPTS
Theterm "gross receipts" upon which percentage rentals are to be based shall include:
mo The sale price of all goods, wares, merchandise, and products sold and rented on or from the
PREMISES by TENANT, whether for cash or credit and whether payment is actually made
or not; excluding however, fair and reasonable resale and employee discount purchases
provided their transactions are made on a cost basis;
The charges made by TENANT for sale or rendition on or from the PREMISES of s~rvices
of any nature or kind whatsoever, whether for cash or credit and whether payment is actually
made or not;
Co All admission, entry rental, and other fees of any nature or kind charged by TENANT
(including but not limited to deposits accepted by TENANT);
Do All sums deposited in any coin-operated vending machine or other device maintained on the
PREMISES; regardless of the ownership of the machine or device, or whether such sums are
removed and counted by TENANT or others, and regardless of what percentage thereof
TENANT is entitled to receive;
Eo The fair rental value of facilities used by TENANT or its employees for purposes other than
the business purposes for which the PREMISES are leased;
Security deposits collected by TENANT from its subtenants, agents, concessionaires or
licensees and not placed in an escrow or trust account with interest not accruing to the
TENANT.
XI. RENT PAYMENT PROCEDURE
A.Payment of Rentals. On or before the twentieth day of each month, TENANT shall render
to’~:ITY rent as set forth in Clause VIII (CONSIDERATION/RENT) and a correct statement
Co
Do
ofal! applicable gross receipts for that portion of the year which ends with and includes the
last day of the preceding calendar month. The statement shall be signed by TENANT or his
responsible agent under penalty of perjury, and shall be in a form similar to Exhibit C
attached to, and by this reference, incorporated into this lease.
TENANT’s obligation to pay percentage rent to CITY for activity or occupancy of any
sublessee of all or a port!on of the PREMISES (whether or not CITY has approved the
sublease and regardless of whether or not a percentage rent was established by CITY) shall
commence with the earliest of the following dates which shall be deemed the "due date" for
purposes of Clause XII (CHARGE FOR LATE PAYMENT):
1.Commencement date of sublease;
2.Date of physical occupancy; or
°Date of earliest activity (i.e.,sale of goods, solicitation of business construction or
alteration by sublessee, etc.).
Place of Payment and Filing. Rental payments shall be delivered to, and statements required
by this clause and Clause XIV (RECORDS AND ACCOUNTS) shall be delivered to the
Revenue Collections Division, 250 Hamilton Avenue, PO Box 10250,’Palo Alto, California
94303.. The designated place of payment and filing may be changed at any time by CITY
upon ten (10) days written notice to TENANT. Rental payments may be made b~, check
made payable to City of Palo Alto, however, TENANT assumes all risk of loss or delay if
payments are made by mail.
Acceptance of Late or Incorrect Rent: TENANT specifically agrees that acceptance of any
late or incorrect rentals submitted by TENANT shall not constitute an acquiescence or
waiver by CITY and shall not prevent CITY from enforcing Clause XII (CHARGE FOR
LATE PAYMENT) or any other remedy provided in this Lease.
XII.CHARGE FOR LATE PAYMENT
If ~ny paymeht of r~t as specified in Clause VIII (CONSIDERATION/RENT) or of any other sum
due CITY is not received by CITY, a late charge equal to 1% percent of the payment due and unpaid
plus an administrative fee of $45.00 shall be added to the payment, and the total sum shall become
immediately due and payable to CITY.
Acceptance of late charges and/or any portion of the overdue payment by CITY shall in no event
constitute a waiver of TENANT’S default with respect to such overdue payment, nor prevent CITY
from exercising any of the other rights, and remedies granted hereunder or by any provision of law.
Bo
RECORDS AND ACCOUNTS
Records. TENANT shall, at all times during the term of this Lease, keep or cause to be kept
tree and complete books, records, and accounts of all financial transactions conducted in the
operation of all business activities, of whatever nature, conducted pursuant to the rights
granted herein. The records, books and accounts shall be kept or made available to CITY
at a location within Santa Clara or San Mateo County. The records must be supported by
source documents such as sale slips, cash register tapes, purchase invoices, or other pertinent
documents. Except as may be otherwise provided by this Lease, all retail sales, and Other
incidental business revenue shall be recorded by means of cash registers or other comparable
devices which display to the customer the amount of the transaction and automatically issue.
a receipt. The registers shall be equipped with devices which lock in sales totals and other
transaction records, or with counters which are not resettable and which record transaction
numbers and sales details. Totals registered shall be read and recorded at the beginning and
end of each day (See Section XVI, C.) Retail sales may be recorded by a system other than
cash registers or other comparable devices provided that system is approved by the Director
of Administrative Services or his or her designee.
If the TENANT also provides Golf Professional services to the CITY under a separate
agreement, and if the Golf professional is responsible for depositing CITY golf revenue into
a bank account in that agreement, then TENANT shall provide bank deposit information to
CITY at least momhly which shows total funds deposited by TENANT and Golf’
Professional. While CITY agrees that detailed transaction, inventory, and purchasing
information related to retail sales is proprietary information, TENANT agrees to supply
CITY, on no less than a monthly basis, Summary information for retail sales.
The Accounting Year. The accounting year shall be twelve full calendar months. The
accounting year may be established by T .ENANT, provided TENANT has notified CITY in
writing of the accounting year to be used. The accounting year shall be deemed to be
approved by CITY unless CITY objects to TENANT’S selection in’writing within sixty (60)
days of receipt of TENANT’S written notification.
In the event TENANT fails to establish an accounting year of its choice, regardless of the
cause, the accounting year shall be synonymous with the twelve (12) month period following
commencement of this Lease.
Once an accounting year is established, it shall be continued through the term of the Lease
unless CITY specifically approves in writing a different accounting year. CITY shall
approve a change in accounting years only in the event of undue hardship being placed on
either the TENANT or CITY, and not because of mere convenience or inconvenience.
Financial Statements and Audit by CITY. Within one hundred twenty (120) days after the
erid of each accounting year, TENANT shall, at its own expense, submit to CITY an
7
unaudited balance sheet and income statement. Within one hundred eighty (180) days after
the end of each accounting year, TENANT shall, at its own expense, submit to CITY a
balance sheet and income statement prepared and audited by a Certified Public Accountant,
reflecting business transacted on or from the PREMISES during the preceding accounting
year. The Certified Public Accountant must attest that the balance and income statement
submitted are an accurate representation’ of TENANT’S records as reported to the United
States of America for income tax purposes. At the same time, TENANT shall submit to
CITY a statement certified as to the accuracy by a Certified Public Accountant wherein the
total gross receipts for the accounting year.are classified according to the categories of
business established for percentage rental and listed in Clause VIII
(CONSIDERATION/RENT) and for any other business conducted on or from the
PREMISES. The Director of Administrative Services or his or her design6e may accept
alternatives to the above Certified Public Accountant-audited statement provided that in the
Director’s opinion, the alternative provides sufficient assurance that the financial statement
accurately reflect business transacted on or from the PREMISES.
All of TENANT’S accounting records and supporting source documents shall be made
available to CITY’S representatives at any and all reasonable time during the term of this
Lease and within t~vo (2) years after expiration or termination of this Lease, for the purpose
of determining the accuracy of the monthly statements of sales and monies received, and rent
due and paid to CITY.
Notwithstanding the previous paragraph, the full cost of any such audit by CITY, as
determined by CITY, shall be borne by TENANT if either of the following conditions exists:
The audit reveals an underpayment of more than five percent (5%) between the rent
due as reported and paid by TENANT in accordance with this Lease and the rent due
as determined by the audit; or
o TENANT has failed to maintain true and complete books, records, accounts, and
supporting source documents in accordance with subparagraph A above. The
adequacy of records shall be determined by the City Auditor. Otherwise, CITY shall
bear the cost of any stich audit.
Ul~on the reciuest ofCITY, TENANT shall promptly provide, at TENANT’S expense, necessary data
to enable CITY to fully comply with any and all requirements of the State of California or the United
States of’.Arnerica for information or reports relating to this Lease and to TENANT’S use of the
PREMISES. Such data shall include, if required, a detailed breakdown of TENANT’S use of the
PREMISES, and/or a detailed breakdown of TENANT’S receipts and expenses.
XI~. SECURITY DEPOSIT
A security deposit inthe sum of Three Thousand Dollars ($3,000) shall be provided to LESSOR by
TENANT. The .security deposit shall take one Of the forms set out below and shall guarantee
TENANT’S full and faithful performance of all the terms, covenants, and conditions of this lease.
A.Cash.
Bo The assignment to CITY of a savings deposit held in a financial institution in Santa Clara or
San Mateo County acceptable to CITY. At a minimum, such assignment shall be evidenced
by the delivery to CITY of the original passbook reflecting the savings deposit and a written
assignment of the deposit to CITY in a .form approved by the Real Property Manager.
Co A Time Certificate of Deposit from a financial institution in Santa Clara or San Mateo
County wherein the principal sum is made payable to CITY on order. Both the financial
institution and the form of the certificate must be approved by the Real Property Manager.
D°A Letter of Credit or other instrument of credit from a financial institution, subject to
regulation by the state or federal government, pledging that funds necessary to secure
performance of the Lease terms, covenants, and conditions, are on deposit and guaranteed
for payment, and agreeing that said funds shall be trust funds securing TENANT’S
performance and that all or any part shall be paid to CITY or order upon demand by CITY.
Both the financial institution(s) and the form of the instrument(s) must be approved bY Real
Property Manager.
Regardless of the form in which TENANT elects to make said security deposit, all or any portion
of the principal sum shall be available unconditionally to CITY for correcting any default or breach
of this Lease incurred by CITY as a result of the failure by TENANT, its successors or assigns, to
faithfully perform all of the terms, covenants, and conditions of this Lease. Should TENANT elect
to provide a Time Ce.rtificate of Deposit, Letter of Credit, or other instrument of credit, hereinafter
collectivel); referred to as "INSTRUMENT", t6 fulfill the security deposit requirements of this
Lease, the INSTRUMENT shall contain a provision whereby the institution issuing the
INSTRUMENT agrees to provide CITY with written notice of its intent not to renew the
¯ INSTRUMENT at least thirty (30) days prior to expiration or termination of the INSTRUMENT.
If~ENANT has not:provided CITY with an acceptable alternate form of security deposit at least ten
(10) days prior to expiration or termination of the INSTRUMENT, CITY may demand and obtain
from the institution issuing the INSTRUMENT, the amount secured by the INSTRUMENT as
satisfaction of the security deposit provision of this Lease.
Should TENANT elect to assign the savings deposit to CITY, or provide an alternate
INSTRUMENT, to fulfill the security deposit requirements of this Lease, the assignment, or issuance
Of the INSTRUMENT shall have the effect of releasing the depositor or creditor therein from
liability oh account of the payment of any or all of the principal sum to CITY or order upon demand
of (~ITY. The agreement entered into by TENANT with a financial institution to establish the
deposit necessary to permit assignment or issuance of a certificate as provided above, may allow the
payment of interest accruing on account of the deposit to TENANT, or order.
TENANT shall maintain the required security deposit throughout the Lea~e term. Failure to do so
shall be deemed a default and may be grounds for immediate termination of this Lease. The security
deposit shall.be rebated, reassigned, released, or endorsed to TENANT or order, as applicable, at the
end of the Lease term, provided TENANT or order, as applicable, at the end of the Lease term,
provided TENANT has fully and faithfully performed each and every term, covenant, and condition
of this Lease.
On each five-year anniversary date of the commencement of this Lease, the amount of the security
deposit set forth above shall be adjusted according to the following formula:
~R=Ax 1.5 1.5 The current minimum monthly rental
Where:
Revised security deposit.
Current minimum monthly rental
In no event shall the amount of the revised security deposit be less than the initial security deposit.
The difference between the initial Security deposit and the revised security deposit shall be due and
payable to CITY within ten (10) days of receipt of a notice 0f revision of the security deposit from
the Real Property Manager.
XV. MAINTENANCE AND COOPERATION
A. Maintenance,of Facilities.
1.CITY shall maintain the following facilities related to the club house.
parking lot;
walkways and’public restrooms;
exterior of the clubhouse structure and support systems not exclusive to the
Premises (heating, ventilating and air conditioning systems, electrical ’system,
etc.) except that TENANT shall be responsible for any window breakage
caused from within the premises;
TENANT expressly agrees to maintain the PREMISES in a safe, clean, Wholesome,
and sanitary condition and substantial repair, to the complete satisfaction of CITY
and in compliance with all applicable laws. TENANT further agrees to provide
approved containers for trash and garbage and to keep the PREMISES free and clear
of rubbish and litter. CITY shall have the right.to enter upon and inspect the
PREMISES at any time for cleanliness and safety. Notwithstanding the above
provisions, TENANT shall be responsible for damage or repair to the PREMISES or
any of its support systems resulting from TENANT’S use of the PREMISES and not
occasioned by normal wear and tear, including plumbing and glass breakage.
TENANT shall be responsible for the repair and replacement of the Pro Shop floor
covering but not the sub-flooring and the Pro Shop burglar alarm installed by the
CITY in 1998.
TENANT shall designate in writing to CITY an on-~ite representative who shall be
responsible for the day-to-day operation and level of maintenance, cleanliness, and
general order.
If TENANT fails to maintain or make repairs or replacements as required herein,
CITY may notify TENANT in writing of the failure. Should TENANT fail to correct
the situation within a reasonable time thereafter, as established by the City Manager,
the Real Property Manager may make, or cause to be made, the necessary corrections
and the cost thereof, including but not limited to the cost of labor, materials, and
equipment and a fifteen percent (15%) charge for administration and overhead, shall
be paid by TENANT within ten (10) days of receipt of a statement of the cost from
the Real Property Manager. CITY may also, at its option, choose other remedies
available herein, or available by law.
TENANT shall i:ooperate with the GOLF PROFESSIONAL in use of the golf shop
facility. TENANT has overall responsibility for the facility on behalf of the CITY,
and GOLF PROFESSIONAL will report any facility problems to TENANT. The
parties acknowledge that as of the date of this Lease Agreement, TENANT is also
the GOLF PROFESSIONAL.
During the course of the agreement, the CITY anticipates making improvements to
the golf course consistent with the Golf Course Master Plan. In order for the
TENANT to plan his. business operations and s~affing effectively, CITY will make
every effort to give at least sixty (60) days notice for any planned improvements that
will affect the TENANT’s operations.
XVI.,EQUIPMENT TO BE PROVIDED BY TENANT
Tenant shall provide:
Ao Attractive fi,~tures, counters, showcases, equipment and devices necessary in the operation
of high quality golf shop and in keeping with the architectural standards of the clubhouse
and subject to the prior approval of CITY’S Director of Parks and Golf Course Division.
Bo
Co
Adequate inventory of golfing supplies and golf-related merchandise consistent with the
needs of the golfing public;
Cash register or related cash receipting systems for accepting payments for merchandise
sales and other incidental sales and off course equipment rentals. TENANT shall keep these
receipts separate from golf round fees, driving range fees, and equipment rental receipts that
are collected by the GOLF PROFESSIONAL under the Management Agreement (See
Section XIII RECORDS AND ACCOUNTS). If TENANT also provides services to the
CITY underthe Management Agreement, TENANT may use CITY provided cash receipting
system for accepting payments.
XVII.
A.
Bo
CONSTRUCTION AND/OR ALTERATION BY TENANT
CAPITAL’ IMPROVEMENTS. On May 15, 1995 the Palo Alto City Council approved a
master plan for the golf course. The master plan includes various proposed projects for
remodeling and improving the Golf Course facilities that will better service the needs of the
golfers. (Pro-shop expansion and additional cart storage.) TENANT may choose to
participate in the Pro-Shop and the additional cart storage expansions by funding and
constructing those improvements, with CITY’s written appro~’al, under CITY supervision
and in conformance with the CITY’s bid p~’ocedures. Once the project is complete.d and
TENANT has prox~ided documented proof of the actual costs, CITY agrees to reimburse
TENANT for one-half the costs. TENANT’s reimbursement will be in the form of a no
interest rent credit rendered in equal monthly amounts over the remaining term of theLease,
commencing on the second full month after Completion of the project. CITY’s share of the
reimbursement shall not exceed $150,000 and the project must becompleted within the first
five years of the initial lease term. Should the LEASE be terminated as defined in paragraph
XXVI, subparagraph B (TERMINATION OF LEASE), CITY v-ill reimburse tenant for the
outstanding balance of CITY’s share at time of termination. Notwithstanding any provisions
of this clause; if TENANT wishes to make improvements that are not covered in the Master
Plan and the CITY does not wish to participate,. TENANT may, upon necessary approvals
from CITY, plan and implement capital improvements solely at its own cost.
CITY’s Consent. Any conditions relating to the manner, me.thod, design, and construction
of the struc .tures, improvements, or facilities established by CITY shall be conditions of this
article as though originally stated herein. TENANT may, at any time and at its sole expense,
install and place business fixtures and equipment within any building constructed by CITY,
provided such fixtures and installation have been reviewed and approved by the City
Manager.
Strict Compliance with Plans and Specifications. All improvements, constructed by
TENANT within the PREMISES shall be constructed in an efficient and workmanlike
manner and in strict compliance with detailed plans and specifications approved by the City
Do
Council if required by City of Palo Alto procedures or ordinances or otherwise by the City
Manager, or designee, and applicable City of Palo Alto codes and ordinances.
Condition Precedent. TENANT may not begin construction unless and until all the
following conditions have been satisfied:
1)
2)
Architect. TENANT shall have engaged the services of a professional architect to
handle all aspects of design and review of the Project.
Project Manager. TENANT shall have engaged the services of a professional project
manager (the "Project Manager"), who may be TENANT’S architect for the Project,
and CITY’s Director of Public Works or his designee shall have reviewed and
approved TENANT’S contract with the Project Manager. CITY’S approval of the
contract is required prior to the commencement of construction, provided that CITY
will not unreasonably delay its approval of the Projedt Manager’s contract so long
as it sets forth the Project Manager’s responsibilities as follows:
Ca)To serve as the point of contact for CITY staff’s coordination with TENANT
and TENANTS’ contractor concerning the Project. from design through
completion;,
(b).To generally oversee construction of the Project, including conducting on-site
inspections from time-to-time, as appropriate;
(c)To monitor the Project’s conformance with the Construction Drawings (as
her+inafter defined) ; and
F°
Construction Drawings Approvals. TENANT shall have obtained approval of the
construction drawings for the Project (the "Construction Drawings") from CITY’S City
Engineer and Chief Building Official. Review of the Construction Drawings by the City
Engineer shall have included those aspects of design pertaining to whether the Project can
be effectively maintained after it is completed and given to CITY for bperation and
maintenance. The Construction Drawings shall include:
(a)
(b)
(c)
(d)
(e)
Complete architectural, landscape, systems’and engineering plans;
Complete structural calculations;
Complete construction specifications;
Complete construction contract form; and
Proposed construction schedule.
Certificate .of Inspection. Upon completion of construction of any building, TENANT shall
submit to the Real Property Manager, a Certificate of Inspection, verifying that the
construction was completed in conformance with Title 24 of the California Code of
Regulations for non-residential construction.
XVIII. TENANT’S ASSURANCE OF, CONSTRUCTION COMPLETION
Prior tO commencement of construction of approved facilities, or any phase thereof, within the
PREMISES by TENANT, TENANT shall furnish the Real Property Manager, evidence that assures
CITY that sufficient monies will be available to complete the proposed construction. The amount
of such assurance shall be at least the total estimated construction cost that was submitted to and
approved by CITY in accordance with this Lease. Evidence of such assurance shall take one of the
forms set out below and shall guarantee TENANT’S full and faithful performance of all of the terms,
covenants, and conditions of this Lease:
A.Completion Bond;
Performance, labor and material bonds, supplied by TENANT’S contractor or contractors,
provided the bonds are issued jointly to TENANT and CITY;
C.Irrevocable letter of credit from a financial ins.titution; or
D.Any combination of the above.
All bonds and letters of credit must be issued by a company qualified to do business in-the State of
California and be acceptable to the Director of the Administrative Services DepaJ’tment and City
Attorney. All bonds and letters of credit shall be in a form acceptable to the Director of the
Administrative Services Department and City Attorney, and shall insure faithful and full observance
and performance by TENANT of all of the terms, conditions, covenants, and agreements relating to
the construction of improvements in accordance with plans approved by CITY as set forth in this
Lease.
XIX.AS BUILT PLANS
Upon completion of any major TENANT-constructed improvements, TENANT shall provide the
,Real Property Manager with a complete set of reproducible "as built plans" reflecting actual
cori~tructionwcithin-or upon the PREMISES. TENANT shall also provide the Real Property
Manager with a statement signed by TENANT under penalty of perjury certified as to accuracy of
actual construction costs for all such improvements.
XX.OWNERSHIp....OF IMPROVEMENTS
All improvements constructed, erected or instal’led upon the PREMISES must be free and clear of
all liens, claims, or liability for labor or material and shall . become the property of CITY, at its
election, ti~on expiration or earlier termination of this lease and, upon City’s election, shall remain
upon the PREMISES upon termination of this Lease.
Title to all. equipment, furniture, fumishings and trade fixtures pla~ed by TENANT upon the
PREMISES shall remain in TENANT, and replacements, substitutions and modifications thereof
may be made by TENANT throughout the term of this Lease. TENANT may remove such fixtures
and furnishings upon termination of this Lease if TENANT is not then in default under this Lease,
provided that TENANT shall repair to the satisfaction of CITY any damage to the PREMISES and
improvements caused by such removal and provided that usual and customary lighting, plumbing
and heating fixtures shall remain upon the PREMISES upon termination of this Lease.
XXI.UTILITIES
CITY shall be responsible for and pay, prior to the delinquency date, all charges for utilities supplied
to the PREMISES and the driving range, except that TENANT shall be responsible for any and all
telephone charges, TENANT shall continue the recycle program for cardboard and other recyclable
materials.
XXII. INSURANCE
TENANT shall maintain insurance.acceptable to CITY in full force and effect throughout the term of
this Lease. Should TENANT not provide evidence of such required coverage at least three (3) days
prior to the expiration of any existing insurance coverage, CITY may purchase such insurance, on
behalf of, and at the expense of TENANT to provide six-months coverage.
A.Minimum Scope of Insurance
Coverage shall be at least as broad as:
1)Insurance Services Office Commercial General Liability coverage (occurrence form CG
0001).,.
2)Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile
Liability, code 1 (any auto).
3)Workers’ Compensation insurance as required by the State of California and Employer’s
Liability Insurance.
4) .. - Course of Construction insurance form providing coverage for "all risks" of loss.
The policy or policies of insurance maintained by TENANT shall provide the following limits
and coverages:
POLICY MINIMUM LIMITS OF LIABILITY
(1)
(2)
WORKERS’
COMPENSATION
COMPREHENSIVE
AUTOMOBILE
LIABILITY,
including owned,
hired, and non-owned
automobiles
Statutory
Bodily Injury
Property Damage
$1,000,000 ea. person
$1,000,000 ea. occurrence
$1,000,000 ca. occurrence
(3)COMPREHENSIVE Bodily Injury
GENERAL
LIABILITY
including :
products and
completed operations,
broad form contractual,
and personal injury.
Property Damage
Personal Injury
$1,000,000 ea. person
$1,000,000 ea. occurrence
$1,000,000 aggregate
$1,000,000 ca. occurrence
$1,000,000 ca. occurrence
(4) FIRE AND EXTENDED PREMISES COVERAGE Not less than one hundred percent
(100%) of the replacement coverage cost of all insurable improvements withiri or upon the
PREMISES. Such policies must include water damage and debris cleanup provisions. Additional
fire and extended coverage must be upon completion of construction or installation of any major
insurable improvement.
(5) COURSE OF
CONSTRUCTION.
Completed value of the project.
CITY shall retain the right at any time to re~’iew the coverage, form, and amount of the insurance
required l~reby. If, in the opinion of CITY’s Risk Manager, the insurance provisions in this Lease do
not provide adequate protection for CITY and for members of the public using the PREMISES, CITY’s
Manager, Real Property may require TENANT to obtain insurance sufficient in coverage, form, and
amount to provide adequate protection. CITY’s requirements shall be reasonable and shall be designed
to assure protection form and against the kind and extent of risk which exists at the time a change in
insurance is required.
CITY’S Manager, Real Property shall notify TENANT in writing of changes in the insurance
requirements; and if TENANT does not deposit copies of acceptable insurance policies with CITY
incorporating such changes within sixty (60) days of receipt of such notice, or in the event TENANT
fails to maintain in effect any required insurance coverage, this Lease shall be in default without further
notice to TENANT. Such failure shall constitute a material breach and may be grounds for termination
of this Lease at the option of CITY.
The procuring of such required policy or policies of insurance shall not be construed to limit
TENANT’s liability hereunder nor to fulfill the indemnification provision and requirements of this
Lease. Notwithstanding said policy or policies of insurance, TENANT shall be obligated for the full
and total amount of any damage, injury, or loss caused negligence or neglect connected with this Lease
or with use or occupancy of the PREMISES.
B. Deductibles and Self-Insured Retentions
Any deductibles or .self-insured retentions must be declared to and approved by the CITY. At the option
of the CITY either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as
respects the CITY, its officers, officials, employees and volunteers; or the TENANT shall procure a
bond guaranteeing payment of losses and related investigations, claim administration and defense
expenses. ,
Insurance shall be in full force and effect commencing on the first day of the term of this Lease. Each
insurance policy required by this Lease shall contain the following clauses:
"Each insurance policy required by this clause shall be endorsed to state that coverage
shall not be suspended, voided, canceled by either party, reduced in coverage or in limits
except after thirty (30) days’ prior written notice by certified mail, return receipt
requested, has been given to the CITY."
"All fights of subrogation are hereby waived against the CITY OF PALO ALTO and the
members of the City Council and elective or appointive officers or employees, when
acting within the scope of their employment or appointment."
3."The CITY OF PALO ALTO is named as a loss payee on the property and course of,_’" construction insurance policies described above."
"The CITY, its officers, officials, employees, agents and volunteers are to be covered
as insureds as respects: liability arising out of activities performed by or on behalf of the
TENANT; products and completed operations of the TENANT; premises owned,
occupied or used by .the TENANT; or automobiles owned, leased, hired or borrowed by
the TENANT. The coverage shall contain no special limitations on the scope of
protection afforded to the CITY, its officers, officials, employees, agents or volunteers."
3.7
o "For any claims related to this Lease, the TENANT’s insurance coverage shall be
primary insurance as respects the CITY, its officers, officials, employees, agents and
volunteers. Any insurance or self-insurance maintained by the CITY, its officers,
officials, employees, agents or volunteers shall be excess of the TENANT’s insurance
and shall not contributewith it."
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"Any failure to comply with reporting or other provisions of the policies including
breaches of warranties shall not affect coverage provided to the CITY, its officers,
officials, employees, agents or volunteers."
o "The TENANT’s insurance shall apply separately t0 each insured against whom claim
is made or suit is brought, except with respec.t to the limits of the insurer’s liability."
Acceptability of Insurers
Insurance is to be placed with insurers with a current A.M. Best’s rating of no less than A:X.
XXIII. ASSIGNING, SUBLETTING,..AND ENCUMBERING
Any mortgage, pledge, hypothecation, encumbrance, transfer, sublease, or assignment (collectively
referred to as ENCUMBRANCE) of TENANT’S interest in the PREMISES, or any part or portion there
of, shall first be approved in writing by the City Manager or designee. Any ENCUMBRANCE which
has not been approved by CITY in writing shall be void. Occupancy of the PREMISES by a
prospective transferee, subtenant, or assignee before approval of the transfer, sublease, or assignment
by CITY shall constitute a breach of this Lease.
If TENANT is a corporation, an unincorporated association or partnership, the ENCUMBRANCE or
transfer of any stock or interest in corporation, association, or partnership in the aggregate exceeding
twenty-five percent (25%) shall be deemed an assignment within the meaning of this Lease.
Should CITY consent to any ENCUMBRANCE, such consent shall not constitute a waiver of any of
the terms, covenants, or conditions of this Lease. Such terms, covenants, or conditions shall apply’to
each and every ENCUMBRANCE hereunder and shall be severally binding upon each and every
assignee, trarrsferee,’subtenant, or other successor in interest of TENANT. Any document to encumber,
transfer, sublet, or assign the PREMISES or any .part thereof shall incorporate directly or by reference
all the provisions of this Lease.
CITY agrees that it will not arbitrarily withhold consent to any encumbrance, but CITY may withhold
consent at its sole discretion if any of the following conditions exist:
A~TENANT or any of its successors or assigns is in default of any term, covenant, or condition
of this Lease, xvhether notice of default has or has not been given by CITY;
The prospective ENCUMBRANCER does not indicate in writing that such ENCUMBRANCE
is subject to all the terms, covenants, and conditions of this Lease;
Do
All the terms, covenants, and conditions of the proposed ENCUMBRANCE including the
consideration therefore of any and every kind, have not been revealed in writing to CITY;
Any construction required of TENANT as a condition of this Lease.has not been completed to
the satisfaction of CITY;
Eo The processing fee required by CITY and set forth in the then current Palo Alto Municipal Fee
Schedule has not been paid to CITY;
If an assignment or sublease is proposed, and TENANT has not provided CITY with sufficient
information to permit CITY to completely evaluate the background, skills, financial position,
proposed operating plan changes and references of the prospective assignee or subtenant; or
Go If the proposed assignee does not have the required skills, experience or financial standing to
provide at least the same level of service as TENANT which determination shall be withinthe
sole discretion of the City Manager.
The above list is not inclusive but is intended to give TENANT some idea of the types of situation
where CITY may withhold its consent to any ENCUMBRANCE. CITY reserves the right to withhold
its consent to any ENCUMBRANCE that will, in CITY’S sole option, adversely affect the provision
of service required by this Lease or adversely affect CITY’S interest in and to the land and structures
covered by this Lease. Hypothecation of the leasehold interest created by this Lease is expressly
prohibited and any attempted hypothecation shall be null and void.
¯ XXIV.DEFAULT IN TERMS OF THE LEASE BY TENANT
mo Act of
1.
Default Defined. The following events constitute acts of default under this Lease:
Should TENANT fail to pay all or any portion 0f rental or any other payment due CITY
at the times and in the manner provided in this Lease;
°Should TENANT a.) abandon or vacate the PREMISES (absence from the PREMISES
for ten (10) days or more shall conclusiyely be deemed an abandonment of the
PREMISES), b.) violate the provisions of Clause XXIII (ASSIGNING, SUBLETTING, ’
and ENCUMBERING), or c.) fail to provide evidence of insurance coverage throughout
the term of this Lease in accordance with Clause XXII (INSURANCE); and
Should TENANT violate any other provision of this Lease, and such violation shall not
be cured within thirty (30) days after written notice of such violation by CITY to
TENANT. However, in the event of a violation which cannot reasonably be cured
within thi .rty (30) days, TENANT shall have a reasonable period of time (as determined
by’ the City Manager) to cure such violation.
4.Should TENANT:
ao file a voluntary petition or have an involuntary petition filed against it in
bankruptcy or under any insolvency act or law;
b..be adjudicated a bankrupt; or
c.attempt to make a general assignment for the benefit of its creditors.
Bo Rights and Remedies of CITY. In the event TENANT commits an act of default, as defined in
Subparagraph A. of this clause and subject to the provisions of Clauses XXV (Bankruptcy) and
XXVI (Termination), the following fights and remedies shall be available to CITY which fights
and remedies shall not beexclusive, but which shall be cumulative and in addition to any and
all rights and remedies now or hereafter allowed by law or otherwise specifically provided in
other clauses in this Lease:
CITY may, at its election, continue this Lease in full force and effect and not terminate
TENANT’S fight to possession of the PREMISES, in which event CITY shall have the
right to collect rental and other payments, when due;
CITY shall also have the right to terminate this Lease and TENANT’S right to
possession of the PREMISES at any time after the occurrence of an act of default by
TENANT upon written notice to TENANT together with the right to recover damages
for such act of default;
CITY shall alsohave the right to have a receiver appointed to collect rentals and conduct
TENANT’S business;
CITY may, at its election, at any time after TENANT commits an act of default and
without notice, cure the act of default for the account and at. the expense of TENANT.
If CITY, by reason of an act of default by TENANT, is compelled to pay, or elect to
pay,-any sum of money or do any act that will require the payment of any sum of
money, the sum or sums paid by CITY, together with an administrative charge equal to
fifteen percent (15%) of said sum or sums, shall be deemed to be additional rental due
CITY under this Lease and shall be due from TENANT with ten (10) days of CITY’S
mailing an invoice therefore by certified mail;
CITY shall also have the right to seek an action or suit in equity to enjoin any acts or
things which may be unlawful or in violation of the rights of CITY;
2O
o of proceedingCITY shall also have the right to seek a mandamus or other suit, action .
at law or in equity to enforce its right against TENANT and any of its officers, agents,
employees, assigns or subtenants, and to compel it to perform and carry out its duties
and obligations under the law, the covenants and agreements as provided in this Lease.
Termination ,,and Damages
CITY and TENANT specifically agree that acts of maintenance or preservation or
efforts to relet the PREMISES (including the making of alterations and/or improvements
to the PREMISES in connection with any reletting), and/or the appointment of a
receiver upon initiative of CITY to protect CITY’S interests under this Lease will not
constitute a termination of TENANT’S right to possession.
o Upon a termination of TENANT’S right to possession, CITY shall have the right to
recover from TENANT:
ao The worth at the time of award of the unpaid rental which had been earned at the
time of termination of the Lease; and
bo The worth a..t the time of award of the amount by which the unpaid rental which
would have been earned after the date of termination of this Lease until the time
of award exceeds the amount of such rental loss that TENANT proved could
have been reasonably avoided; and
Co The worth at the time of award of the amount by which the unpaid rental for the ’
balance of the term after the time of award exceeds the amount Of such rental
loss that TENANT proves could be reasonably avoided; and
Any other amount necessary to compensate CITY for all detriment
approximately caused by TENANT’S act of default or which in the ordinary
course of things would be likely to result therefrom, including, without
limitation, all costs incurred by CITY in connection with reletting the
PREMISES, court costs and reasonable attorney’s fees.
Th’e phrase ~the Worth at the time of the award" as contained herein is to be computed by allowing
interest at the rate equal to CITY’S average rate of return on invested funds plus two percent (2%), or
the maximum allowed by law, whichever is greater.
CITY’S efforts to mitigate the damages caused by TENANT’S act of default shall not constitute a
waiver of CITY’S right to recover damages under the provisions of this clause. Upon termination of
this Lease, pursuant to Subparagraph B. of this clause, CITY may immediately re-enter the PREMISES
without due process of law, take possession of all buildings, improvements, additions, alterations,
equipmer~t, eject all parties in possession thereof therefrom, using such force for that purpose as may
21
be ~aecessary, without being liable to any prosecution for the re-entry or the use of such force. Any such
re-entry by CITY shall be allowed by TENANT without hindrance, and CITY shall not be liable in
damages or guilty of trespass because of any such re-entry. In the event of any re-entry or taking of
possession of the PREMISES, CITY shall have the right, but not be obligated, to remove therefrom all
of any part of the personal property located therein, and CITY may place the same in storage at a public
warehouse at the expense and risk of owner or owners thereof.
Nothing in this clause shall affect CITY’S right to indemnification for liability arising prior to
termination of this Lease for personal injury or property damage pursuant to other provisions of this
Lease.
D. Appointment of Receiver. Ifa receiver is appointed at the request of CITY in any action against
TENANT to take possession of the PREMISES and/or to collect the rents or profits derived therefrom,
the receiver may, if it is necessary or convenient in order to collect such rents from profits, conduct the
business of TENANT then being carded on in the PREMISES; and may take possession of any personal
property belonging to TENANT and used in the conduct of such business and may be used by the
appointed receiver in conducting such business on behalf of CITY and TENANT. Neither the
application for the appointment of such receiver nor the appointment of such receiver shall be construed
as an election on CITY’S part to terminate this Lease unless a notice of such intention is given to
TENANT. TENANT agrees to indemnify and hold CITY harmless from any liability arising out of the
entry by any such receiver and the taking of possession of the PREMISES and/or use of persona!
property.
XXV. BANKRUPTCYBY,,TENANT
Neither TENANT’S interest in this ’Lease, nor any lesser interest of TENANT in this Lease, nor any
estate of TENANT created by this Lease, shall pass to any trustee, receiver, assignee for the benefit of
creditors, TENANT as a Debtor-In-Possession or any other person or entity (hereinafter collectively
referred to as "TRUSTEE") by operation of law under the laws of any state having jurisdiction of the
person orproperty o.f TENANT under any bankruptcy proceeding unless CITY shall specifically
consent to such transfer (hereinafter referred to as "TRANSFER") or assignment in writing. Acceptance
by CITY of rent or any other payments due CITY from any such TRUSTEE shall not be deemed to be
a waiver of the need to obtain CITY’S consent to any such TRANSFER. CITY’S consent to any such
TRANSFER and CITY’S right to terminate this Lease under any bankruptcy proceedings shall be
go~,emed bythe following paragraphs of this Lease.
Ao CtTY’S Consent.to Transfer. CITY shall consent to TRANSFER only if the following terms
and conditions have been satisfied:
TRUSTEE has, in writing, elected to assume and has agreed to abide by all of the terms
and conditions, specifically including the use rest?iction of this Lease within sixty (60)
days from the date of the order for relief;
~2
o
°
TENANT or TRUSTEE has cured, or provided adequate assurance that any monetary
default under this Lease wilt be cured within thirty (30) days of such TRANSFER;
TENANT or TRUSTEE has compensated CITY or has provided CITY adequate
assurance that within ten(10) days of such TRANSFER, CITY will be compensated for
any pecuniary loss incurred by CITY arising from the default of TENANT or
TRUSTEE;
TENANT or TRUSTEE has pr6vided CITY With adequate assurance of the future
performance of each and every obligation of TENANT or TRUSTEE under this Lease;
TENANT or TRUSTEE has deposited with CITY, as security for timely payment of
rent, an amount equal to three (3) months rent and any other monetary charges which
may accrue or.come due within the .three (3) months following such TRANSFER.
Should rent be based on percentage rent, the rent shall be estimated by using the
monthly average total rent paid by TENANT over the preceding tl~.ee (3).years;
The TRANSFER shall not breach any provision relating to the leased PREMISES in any
other lease, mortgage, financing agreement or other agreement by which CITY is bound.
TENANT or TRU’STEE has provided CITY with sufficient information regarding
TRUSTEE, or any known proposed subsequent assignee, to enable CITY to determine
that the TRUSTEE, or any known proposed subsequent assignee, has the skills,
experience and financial standing to successfully provide the uses and services required
by this Lease, which determination shall be within the discretion of the City Manager.
For the purposes of this subparagraph A, CITY and TENANT acknowledge that, in the
context of the bankruptcy proceeding of TENANT, "adequate assurance" shall, as a
¯ minimum, mean:
ao TRUSTEE or TENANT has and shall continue to have Sufficient unencumbered
assets after the payment of all secured Obligations and administrative expenses
to assure CITY that TENANT or TRUSTEE will have sufficient funds to fulfill
the obligations of TENANT or TRUSTEE under this Lease, and to keep the
PREMISES stocked with sufficient merchandise and/or supplies and properly
staffed to conduct a fully operational actively promoted business on the
PREMISES; and
The Bankruptcy Court shall have entered an order segregating sufficient cash
payable to CITY and/or TRUSTEE shall have granted a valid and perfected first
lien and security inierest and/or mortgage in property of TENANT or
TRUSTEE, acceptable in value and kind to CITY securing TENANT’S or
TRUSTEE’S obligation to cure the monetary defaults under this Lease within the
23
time limits set forth above, or TRUSTEE shall have obtained guarantees
satisfactory in form and substance to CITY from one or more persons or entities
who satisfy CITY’S standards of credit worthiness; and
CITY has obtained all consents or waivers from any third party required under
any lease, mortgage, financing arrangement or other agreement by which CITY
is bound to permit CITY to consent to such TRANSFERS.
XXVI. TERMINATION OF LEASE
A.This Lease shall, at CITY’S option, terminate if any of the following conditions exist:
If TENANT or TRUSTEE fails to assume-this Lease in accordance with the
requirements of subparagraph A. 1 of Clause XXV;
If a TRANSFER meeting each and every condition set forth in subparagraph A of
Clause XXV has not been completed within 120 days of TENANT’S becoming a Debtor
under Chapter 7 of the Bankruptcy Code, or within one hundred twenty (120) days of
the date of filing of a Petition for reorganization or adjustment of debts under Chapter
11 or 13 of the Bankruptcy Code; or
If this Lease is assumed by a Trustee appointed for TENANT or by TENANT as
Debtor-In-Possession under the provisi6n of subparagraph A of Clause XXV and
TENANT is thereafter liquidated or files a subsequent Petition,for reorganization or
adjustment of debts under Chapter 11 or 13 of the Bankruptcy Code.
CITY’S election to terminate this Lease shall be delivered to TENANT in writing no
later than thirty (30) days after the occurrence of any of the above events. CITY shall
thereupon be immediately entitled to possession of the PREMISES without further
obliga.tion to TENANT or TRUSTEE, and this Lease shal! be canceled, but CITY’S
right to be compensated for damages in such liquidation proceeding shall survive.
Bo
The Management. Agreement, under which TENANT provides certain services to CITY
as GOLF PROFESSIONAL, is terminated.
If the Management Agreement is terminated or if this lease is terminated for a reason other than
as set forth in this Clause, CITY will reimburse TENANT for TENANT’s share of the actual
construction cost for the project described in Clause XIX (AS BUILT PLANS). The amount
of the reimbursement will be depreciated at an annual rate that is equal to the actual
construction cost divided by the number of years remaining on the lease from the date of the
termination.
: Example:Total construction cost is $300,000 tenants share is $150,000. Construction
24
is completed in the first year of the lease (1998). The lease is terminated in the 10th
year with 5 years remaining. The amount to be reimbursed would be $50,000.
($300,000 -:- 2 .(tenants share) -:- 15yrs. x 5yrs= $50,000.
XXVII. RESERVATION OF NAVIGATIONAL EASEMENT
CITY hereby reserves for the use and benefits of the public, a right of navigation, flight and resulting
noise for the passage of aircraft landing at, taking off or operating from the adjacent airport operated
by the Santa Clara County Transportation Agency.
XXVIII. LIMITATION OF THE LEASEHOLD
This Lease and the rights and privileges granted TENANT in and to the PREMISES are subject to all
covenants, conditions, restrictions, and physical or legal encumbrances, including those which are set
out in the Palo Alto Golf Course Master Plan. Nothing contained in this Lease or in any document
related hereto shall be construed to imply the conveyance to TENANT of rights in the PREMISES
which exceed those owned by CITY. "
XXIX. NOTICES
All notices pursuant to this lease shall be addressed as set forth below or as either party may
subsequently designate by written notice.
TO: CITY TO: TENANT
Real Property Manager
City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
FAX: (415) 329-2468
Brad Lozares
Brad Lozares Golf Shop
835 Doverton Square
Mountain View, Calif. 94040
with a copy to:
City Clerk, City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
FA~X: (415) 329-2646
25
and
City Attorney, City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto CA 94303
FAX: (415) 329-2646
XXX. ATTACHMENT TO LEASE
This L~ase includes the following exhibits, which are attached hereto and by this reference incorporated
into this Lease:
Exhibit A - General Conditions
Exhibit B - Description of Leased Premises
Exhibit C - Statement of Gross Receipts and Rent
The inclusion of clauses in Exhibit A (GENERAL CONDITIONS) is not in any way intended to lessen
the importance of these clauses, but is merely done to enhance the organization of various clauses and
this Lease.
IN ~’ITNESS WHEREOF, the parties have executed this Lease the day and year first above written.
RL 26.0)
CITY:-TENANT:
CITY OF PALO ALTO (LESSOR)
By:
Mayor
ATTEST:
Taxpayer I.D. Number
By:
City Clerk
APPROVED AS TO FORM:
By:
Senior Assistant City Attorney
APPROVED AS TO AUDIT AND ACCOUNTING:
By: ,,
City Auditor
RECOMMENDED FOR APPROVAL:
By!" - ~- :
Director, Parks and Golf Course Division
Real Property Manager
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EXHIBIT A
GENERAL CONDITIONS
1. DEFINITIONS
CITY shall mean the City Council of the city of Palo Alto, a municipal corporation.
The City Manager is hereby authorized to take any actions under this Lease on behalf of CITY except
for termination of this Lease.
Clauses in this lease refer to specific officers or employees of CITY. Should these positions be
eliminated or the title changes, it is understood and agreed that such references shall be considered to
be to the new title for renamed positions or to the replacement official designated with the
responsibilities of any eliminated position. Any reference to a City officer or employee includes a
reference to the officer’s or employee’s designated representative.
2. PARTNERSHIP/CORPORATE AUTHORITY & LIABILITY
If TENANT is a partnership, each.general partner:
A.represents and warrants that the partnership is a duly qualified partnership authorized to do
business in Santa Clara County; and
B. shall be jointly and severally liable for performani:e of the terms and provisions of this Lease.
If TENANT is a corporation, each individual signing this Lease on behalf of TENANT represents and
Warr .ants that;
Ao he is duly authorized to do so in accordance with an adopted Resolution of TENANT’S Board
of Directors or in accordance with the Bylaws of the corporation; and
B.TENANT is a duly qualified corporation authorized to do business in State of Califomia.
As~sed in this Least, the term "TENANT" shall include TENANT, its
agents, sublessees, concessionaires, or licensees, or any person acting under contract with TENANT;
however, the definition of TENANT used herein, shall not be construed to authorize or permit any
sublease or licenses not authorized or permitted elsewhere in this Lease.
3, TIME
Time is of the essence of this Lease.
4. ~;IG.NS
TENANT agrees not io construct, maintain, or allow any sign to be placed upon the PREMISES except
as may be approved by CITY. Unapproved signs, banners, etc., may be removed by CITY.
5. PERMITS AND LICENSES
TENANT shall be required to obtain any and all permits and/or licenses which may be required in
connection with the operation of, and any approved TENANT construction upon, the PREMISES as
set forth in this Lease.
6. CONTROL OF ...HOURS, PROCEDURES, AND PRICES
TENANT shall at all times maintain a written schedule delineating the operating hours and operating
procedures for each operation on or from the PREMISES. A schedule of prices charged for all goods
and/or services supplied to the public on or from the PREMISES shall also be maintained or individual
golf merchandise must be clearly priced.
TENANT agrees that when alternate forms of packaging are available, only items packaged in a manner
most compatible with the goals of reducing litter and preserving the environment shall be sold.
Upon written request, TENANT shall furnish CITY’s Director of Parks and Golf a copy of said
schedules and procedures. Should CITY’s Director of Parksand Golf; upon review and conference with
TENANT, decide that any part of said schedules or procedures is not justified with regard to fairly
satisfying the needs of the public, TENANT, upon written notice from CITY’s Director of Parks and
Golf, shall modify said schedules or procedures.
If TENANT does not agree with the modifications effected by CITY’s Director of Parks and Golf,
TENANTmay appeal the matter to the City Council or CITY’s City Manager, whose decision shall be
final and conclusive. TENANT’s failure to comply with the provisions of this clause shall constitute
a serious breach of this Lease and may be grounds for termination of the Lease.
Primary consideration shall be given to the public’s benefit in implementing this clause. All prices
charged for goods and!or services supplied to the public on .or from the PREMISES shall be fair and
rea.~onable. ~ :
TENANT"agrees that it will operate and manage the services and facilities offered in a competent and
efficient manner at least comparable to other well managed operations of similar type.
TENANT shall at all times i’etain active, qualified, competent, and experienced personnel to supervise
TENANT’s operation and to represent and act for TENANT.
TENANT:shall require its attendants and employees to be properly dressed, clean, courteous, efficient,
and neat in appearance at all times. TENANT shall not employ any person(s) in or about the
PREMISES who shall use offensive language and or act in a loud, boisterous, or otherwise improper
manner.
TENANT shall maintain a close check over attendants and employees to insure the maintenance of a
high standard of service to the public. TENANT shall replace any employee whose conduct is
detrimental to the best interests of the public.
7.MECHANICS LIENS
TENANT shall at all times indemnify and save CITY harmless from all claims for labor or materials
supplied in connection with construction, repair, alteration, or installation of structures, improvements,
equipment, or facilities within the PREMISES, and from the cost of defending against such claims,
including attomey fees. TENANT shall provide CITY with at least te~ (10) days written notice prior
to commencement of any work which could give rise to a mechanics lien or stop notice. CITY reserves
the right to enter upon PREMISES for the purposes of posting Notices of Non-Responsibility.
In the event a lien is i~nposedupon the PREMISES as a result of Such construction, repair, alteration,
or installation, TENANT shall either:
Ao ¯Record a valid Release of Lien; or
Deposit sufficient cash with CITY to cover the amount of the claim on the lien in question and
authorize payment to the extent of said deposit to any subsequent judgment holder that may
arise as a matter of public record from litigation with regard.to lienholder claim; or
Procure and record a bond in accordance with Section 3143 of the Civil Code, which releases
the PREMISES from the claim of the lien from any action brought to foreclose the lien.
Should TENANT fail to accomplish, one of the three optional actions within fifteen (15) days after the
filing of such a lien, the Lease shall be in default and may be subject to immediate termination.
8.LEASE ORGANIZATION AND, RULES OF CONSTRUCTION
Wc;~ds of the--masculine gender shall be deemed and construed to include correlative words of the
feminine and neuter genders. Unless the context otherwise indicates, words importing the singular
number shall include the plural number and vice versa, and words importing persons shall include
corporations and associations, including public bodies, as well as natural persons.
The terms "hereby", "hereof", "hereto", "herein", "hereunder" and any similar terms, as used in this
agreement, refer to this agreement.
All the teri:ns and provisions hereof shall be construed to effectuate the purposes set forth herein, and
3
to sustain the validity hereof.
The titles and headings of the sections of this agreement have been inserted for convenience of reference
only, are not to be considered a part here0fand shall not in any way modify or restrict any of the terms
of provisions hereof or be considered or given any effect in construing this agreement or any provision
hereof in ascertaining intent, if any question of intent shall arise.
9. AMENDMENTS
This Lease sets forth all of the agreements and understandings of the parties and any.modifications must
be written and properly executed by both parties.
,!0.UNLAWFUL,USE
TENANT agrees that no improvements shall be erected, placed upon, operated, nor maintained within
the PREMISES, nor any business conducted or carded on therein or therefrom, in violation of the terms
of this Lease, or of any regulation, order of law, statute, or ordinance of a governmental agency ha~’ing
jurisdiction over TENANT’S use of the PREMISES.
,11.NONDISCRIMINATION
TENANT and its employees shall not discriminate against any person because of race, color,.religion,
ancestry, age, sex, national origin, disability or sexual preference. TENANT shall not discriminate
against any employee or applicant for employment because of race, color, religion, ancestry, sex, age,
national origin, disability or sexual preference. TENANT covenants to meet all requirements of the
Palo Alto Municipal Code pertaining to nondiscrimination in employment. If TENANT is found in
violation of the nondiscrimination provision of the State of California Fair Employment Practices Act
or similar provisions of federal law or executive order in the conduct of its activities under this Lease
by the State of California Fair Employment Practices Commission or the equivalent federal agency or
officer, it shall thereby be found in default under this Lease, and such default shall constitute a material
breach of this Lease. CITY shall then have the power to cancel or suspend this Lease in whole or in
part.
12."INSPECTION
CITY’S employees and agents shall have the right at all reasonable times to inspect the PREMISES to
determine if the provisions of this Lease are being complied with.-
13.HOLD HARMLESS
.TENANT.hereby waives all claims, liability and recourse against CITY including the right of
contributibn for loss or damage of or to persons or property arising from, growing out of or in any way
4
cor~nected with or related to this agreement. TENANT hereby agrees to indemnify, hold harmless and
defend CITY, its officers, agents, and employees against any and all. claims, liability, demands,
damages, cost, expenses or attorneys’ fees arising out of the operation or maintenance of the property
described herein or TENANT’S performance or non performance of the terms of this Lease. In the
event CITY is named as co-defendant, TENANT shall notify CITY of such fact and shall represent
CITY in such legal action unless CITY undertakes to represent itself as co-defendant in such legal
action, in which event TENANT shall pay to .CITY one-half of the litigation costs, expenses and
attorneys’ fees.
14.TAXES AN_D ASSESSMENTS
This Lease may create a possessory interest.which is subject to the payment of taxes levied on such
interest. It is understood and agreed that all taxes and assessments (including but not limited to the
possessory interest tax) which become due and payable upon the PREMISES or .upon fixtures,
equipment, or other property installed or constructed thereon, shall be the full responsibility of
TENANT and TENANT shall pay the taxes and assessments prior to delinquency.
15.SUCCESSORS IN INTEREST
Unless otherwise provided in this.Leas.e, the terms, covenants, and conditions contained herein shall
apply to and bind the heirs, successors, executors, administrators, and assigns of all’the parties hereto,
all of whom shall’be jointly and severally liable hereunder.
16. CIRCUMSTANCES WHICH EXCUSE PERFORMANCE (FORCE MAJEURE)
If either party hereto shall be delayed or prevented from the performance of any act required hereunder
by reason of acts of God, restrictive governmental laws or regulations, or other cause without fault and
beyond the control of the party obligated (financial inability excepted), performance of such act shall
be excused for the period of the delay and the period for the performance of any such act shall be
extended for a period:equivalent to the period of such delay.
17.PARTIAL INVALIDITY
If .a.ny term, covenant, condition, or provision of this Lease is determined to be invalid, void, or
unenforceabl~, by a ~ourt of competent jurisdiction, the remainder of the provisions hereof shall remain
in full force and effect and shall in no way be affected, impaired, or inwalidated thereby.
18. WAIVER OF RIGHTS
The failure of CITY or TENANT to insist upon strict performance of any of the terms, covenants, or
conditions of this Lease shall not be deemed a waiver of any right or remedy that CITY or TENANT
may have;and shall not be deemed a waiver of the right to require strict performance of all the terms,
5
co~;enants, and conditions of the Lease thereafter, nor a waiver of any remedy for the subsequent breach
or default of any term, covenant, or condition of the Lease.
!9.COSTS OF SUSTAINING AN ACTION FOR BREACH OR DEFAULT
In the event .either CITY or TENANT commences legal action against the other claiming a breach or
default of this Lease, the prevailing party in suchlitigation shall be entitled to recover from the other
cost of sustainingsuch action, including reasonable attorney fees, as may be fixed by the Court.
20.RESERVATIONS ,TO CITY
The PREMISES are accepted "as is" and "where is" by TENANT subject to any and all existing
easements, and encumbrances..CITY reserves the right to install, lay, construct, maintain, repair, and
operate such sanitary sewers, drains, storm water sewers, pipelines, manholes, and connections; water,
oil, and gas pipelines; telephone and telegraph power lines; and the applications and appurtenances
necessary or convenient for connection therewith, in, over, upon, through, across and along the
PREMISES or any part thereof, and to enter the PREMISES for any and all such purposes. CITY also
reserves the right to grant franchises, easements, rights of way, and permits, in, over, upon, through,
across, and along any and all portions of the PREMISES. No right reserved by CITY in this clause
shall be so exercised as to interfere unreasonably with TENANT’S operation hereunder.
CITY agrees that rights granted to third parties by reason of this clause shall contain provisions that the
surface of the land shall be restored as nearly as practicable to the original condition upon the.
completion of an3/construction.
21.,,, HOLDING OVER
In the event TENANT shall continue in possession of the PREMISES after the term of the Lease, such
.possession shall not be considered a renewal of this Lease but a tenancy from month to month and shall
be governed by the conditions, and covenants contained in this Lease.
22.CONDITION OF PREMISES UPON TERMINATION
Up.on termination of this Lease, except as otherwise agreed to herein, TENANT shall redeliver
possession 6"f the PREMISES to CITY in substantially the same condition that existed immediately
prior to TENANT’S occupancy, reasonable wear and tear, .flood, earthquake, war, and any act of war
excepted."
23. ,DISPOSITION OF,ABANDONED PERSONAL PROPERTY
If TENANT abandons the PREMISES or is dispossessed thereof by process of law or otherwise, title
to any pe.rsonal property belonging to TENANT and left on the PREMISES forty-five (45) days after
such aban~lonment or dispossession shall be deemed to have been transferred to CITY. CITY shall have
the ~ight to remove and to dispose of such property without liability therefor to TENANT or to an)’
person claiming under TENANT, and shall’ have no need to account therefor.
24.QUITCLAIM OF TENANT’S INTEREST UPON TERMINATION
Upon termination of this Lease for any reason, including but not limited to termination because of
default by TENANT, TENANT shall, at CITY’S request execute, acknowledge and deliver to CITY
within five (5) days after receipt of wTitten demand thereof, a good and sufficient deed whereby all
rights,-title, and interest of TENANT in the PREMISES, is quitclaimed to CITY. Should TENANT fail
or refuse to deliver the required deed to CITY, CITY may prepare and record a notice reciting the
failure of TENANT to execute, acknowledge and deliver such deed and the notice shall be conclusive
evidence of the termination of this Lease, and of all right of TENANT or those claiming under
TENANT in and to the PREMISES.
25.CITY’S RIGHT TO RE-ENTER
TENANT agrees to yield and peaceably deliver possession of the PREMISES to CITY on the date of
termination of this Lease, whatsoever the reason for such termination.
Upon giving written notice of termination to TENANT, CITY shall have the right to re-enter and take
possession of the PREMISES on the date such termination becomes effective without further notice of
any kind and without institution of regular legal proceedings. Termination of the Lease and re-entry
of the PREMISES by CITY shall in no way alter or diminish any obligation of TENANT under the
Lease terms and shall constitute an acceptance or surrender.
TENANT waives any and all rigfits of redemption under any existing or future law or statute in the
event of eviction from or dispossession of the PREMISES for any reason or in the event CITY re-enters
and lawfully re-takes possession of the PREMISES.
26. CONFLICT QFINTEREST
TENANT warrants and covenants that no official or employee 0fCITY nor any business entity in which
any official or employee of CITY is interested: (1) has been employed or retained to solicit or aid in the
pro:curing of this agreement; or (2) will be empl0yedin the performance of this agreement without the
divulgence of such f~tct to CITY. In the event that CITY determines that the employment of any such
official, employeeor business entityis not compatible with such official’s or employee’s duties as an
official or: employee of CITY, TENANT upon request of CITY shall immediately terminate such
employment. Violation of this provision constitutes a serious breach of this Lease and CITY may
terminate this Lease as a result of such violation.
27. EMINENT,, DOMAIN
In the event the whole or any part of the PREMISES are condemned by a public entity in the lawful
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exercise of its power of eminent domain, this Lease shall cease as to the part condemned. The date of
such termination shall be the effective date of possession of the whole or part of the PREMISES by the
condemning public entity.
If only a pan is condemned and the condemnation of that pan does not substantially impair the capacity
of the remainder to be used for the purposes required by this Lease, TENANT shall continue to be
bound by the terms, covenants and conditions of this Lease. However, the then current minimum
annual rent shall be reduced in proportion to the relationship that the compensation paid by the
condemning public entity for the portion condemned bears to the value of the entire PREMISES as of
the date of possession of the part condemned. If the condemnation of a part of the PREMISES
substantially impairs the capacity of the remainder to be used for the purposes required by this Lease,
TENANT may:
No Terminate this Lease and thereby be absolved of obligations under this Lease which have not
accrued as of the date of possession by the condemning public entity; or
Bo Continue to occupy the remaining PREMISES and thereby continue to be bound by the terms,
covenants and conditions of this Lease. If TENANT elects to continue in possession of the
remainder of the PREMISES, the then current annual minimum rental shall be reduced in
proportion to the relationship that the compensation paid by the condemning public entity for
the part condemned bears to the value of the entire leased PREMISES as of the date of
possession by the condemning public entity.
TENANT shall provide CITY with written notice advising CITY of TENANT’S choice within thirty
(30) days of possession of the part condemned by the condemning public entity.
CITY shall be entitled to andshall receive all compensation related to the condemnation of all or pan
of the PREMISES by the exercise of eminent domain except that TENANT Shall be entitled to that
portion of the compensation which represents the value of the TENANT constructed improvements for
the remainder of the Lease term. The amount to which TENANT shall be entitled shall not exceed the
actual cost of improvements constructed by TENANT reduced .in proportion to the relationship of the
remaining Lease term to the original Lease term, using a straight line approach.
28._..CHANGES IN PRICE INDICES
Clauses" contained in this Lease may provide for adjustment based on the Consumer Price Index,
component indices, or other indices. Should these indices be changed, altered or cease to be published,
the following conditions shall apply:
If the subject index is changed so that the base year differs from that used as of the monthin
which the term commences, the subject index shall be converted in accordance with the
conversion factor published by the publisher of that index;
Bo If the subject index is discontinued or revised during the Lease term, such index shall be
replaced by another government index or computation which will obtain substantially the same
result as would be obtained if the subject index had not been discontinued or revised.
29.POST-ACQUISITION,TENANCY
TENANT hereby acknowledges that its occupancy of the PREMISES is subsequent to acquisition of
the PREMISES by CITY. TENANT further understands and agrees that as a post-acquisition tenant,
TENANT’is not eligible and furthermore waives all claims for relocation assistance and benefits under
federal, state or. local law.
30.HAZARDOUS SUBSTANCES
mo Definition. As used herein, the term "Hazardous Materials" means any substance or material
which has been determined by any state, federal or local governmental authority to be capable
of posing risk of injury to health, safety, and property, including petroleum and petroleum
products and all of those materials and substances designated as hazardous or toxic by the U.S.
Environmental Protection Agency, the California Water Quality Control Board, the U.S.
Department of Labor, the California’ Department of Industrial Relations, the California
Department of Health Services, the California Health and Welfare Agency in connection with
the Safe Water and Toxic Enforcement Act of 1986, the U.S. Department of Transportation, the
U.S. Department of Agriculture, the U.S. Consumer Product Safety Commission, the U.S.
Department of Health and Human Services, the U.S. Food and Drug Administration or any other
governmental agency now or hereafter authorized to regulate materials and substances in the
environment. Without limiting the generality of the foregoing, the term "Hazardous Materials"
shall include all of those materials and substances defined as "toxic materials" in Sections 66680
through 66685 of Title 22 of the Califomia Code of Regulations, Division 4, Chapter 20, as the
same may be amended from time to time.
Bo TENANT’S Use of PREMISES. During the term of this Lease, TENANT shall abide and be
bound by all of the following requirements:
¯ TENANT shall comply with all laws now or hereafter in effect relating to the use of
Hazardous Materials on, under or about the PREMISES, and TENANT shall not
contaminate the PREMISES, or its subsurfaces, with any Hazardous Materials.
TENANT shall restrict its use of Hazardous Materials atthe PREMISES to those kinds
of materials that are normally used in construction, during construction of the proposed
tenant improvements. Disposal of any Hazardous Materials at the Premises are strictly
prohibited. Storage of such permissible Hazardous Materials is allowed only in
accordance with all applicable laws now or hereafter in effect. All safety and
monitoring features of any storage facilities shall be approved by CITY’S Fire Chief in
accordance with all laws.
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llI.TENANT shall be solely and fully responsible for the reporting of all Hazardous
Materials releases to the appropriate public agencies, when such releases are caused by
or ~:esult from TENANT’S activities on the PREMISES= TENANT shall immediately
inform CITY of any release of Hazardous Materials, whether or not the release is in
quantities that would otherwise be reportable to a public agency.
iv.TENANT shall take all necessary precautions to prevent any of its Hazardous Materials
from entering into any storm or sewage drain system or from being released on the
Premises. TENANT shall remove releases of its Hazardous Materials in accordance
with all laws. In addition to all other rights and remedies of CITY hereunder, if the
release of Hazardous Materials caused by TENANT is not removed by TENANT within
ninety (90) days after discovery by TENANT, CITY or any other third party, CITY may
pay to have the same removed and TENANT shall reimburse CITY for such costs
within five (5) days of CITY’S demand for payment.
Vo TENANT shall protect, defend, indemnify and hold harmless CITY from and against
all loss, damage, or liability (including all foreseeable and unforeseeable consequential
damages) and expenses (including, without limitation, the cost of any cleanup and
remediation of Hazardous Materials) which CITY may sustain as a result of the presence
or cleanup of Hazardous Materials on the PREMISES or released from the PREMISES.
vi.TENANT’S obligation under this Clause shall survive the expiration or earlier
termination of this Lease.
31.ALL COVENANTS ARE, CONDITIONS
All provisions of the Lease are expressly made conditions.
~2. PARTIES OF INTEREST "
Nothing in this agreement, expressed or implied, is intended tO, or shall be construed to, confer upon
or to give to any person or party other than CITY and TENANT the covenants, condition or stipulations
her..eof. All covenants, stipulations, promises and agreements in this Lease shall be for the sole and
exclusive befi-efit of CITY and TENANT.
,33.RECORDATION OF LEASE
Neither CITY nor TENANT shall record this Lease; however, a short-form memorandum of Lease may
1re recorded at CITY’S request.
Latest revision: 3-4-98
EXHIBIT C
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