HomeMy WebLinkAbout2004-07-19 City Council (4)City of Polo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:
DATE:
CITY MANAGER
JULY 19, 2004
DEPARTMENT: ADMINISTRATIVE
SERVICES
CMR: 350:04
SUBJECT:AWARD OF OPTION TO LEASE TO CRIMSON PALATE, INC.,
D.B.A. SAFFRON CLUB RESTAURANT AT LOT S/L SITE NON-
PARKING AREA, 445 BRYANT STREET
RECOMMENDATION
Staff recommends that Council authorize the Mayor to execute the attached option to
lease with Crimson Palate, Inc., d.b.a. Saffron Club Restaurant, for the 7,410 square foot
office/retail space in the non-parking area of the Lot S/L site, 445 Bryant Street.
BACKGROUND
On March 19, 2001, Council approved a new University Avenue Off-Street Parking
Assessment District to provide funding to design and build two new parking structures on
Lots R (High!Ahna South Garage) and S/L (Bryant/Florence Garage). In addition to
building a parking structure on the Lot S/L site, Council approved construction of a non-
parldng area that would be an extension of the parking garage. Costs for .building the
extension were to be paid from Certificates of Participation (COP) backed by the City’s
General Fund. Initial plans for this area were for a downtown teen center, with the
remaining space to be used for rental and other commercial purposes. Rent from
commercial users was to be used to offset the City’s debt service costs for constructing
the non-parking area.
On May 14, 2001, as a result of receipt of the Youth Master Plan study and a student
survey indicating teens would prefer having more programs, activities and special events
to a new downtown teen center, Council approved a staff proposal endorsed by the Youth
Council to allocate 75 percent of net revenues derived from renting the entire non-
parking area to funding youth and teen ’activities and the Barker Hotel parking
assessment. On :December 10 and December 17, 2001, Council reviewed and approved
CMR:350:04 Page 1 of 6
the financing for construction of the non-parking area on the Lot S/L site. Construction of
the non-parking area was completed in February 2004.
DISCUSSION
Non-Parking Area Office/Retail Space
The non-parking area. space for lease totals 7,410 square feet, consisting Of two 3,705
foot floors of open bare space ready for a tenant to build to suit. The space is divisible to
1,500 square feet, and the zoning allows for ground floor retail and second floor office or
retail. During the design process, Council specified the uses that would be permitted
under the Ground Floor Combining District (GF) were: 1) eating and drinking; 2)
personal services; 3) retail services; and 4) travel agencies. Financial service providers
are not allowed nor are any conditional uses.
As discussed in the May 10, 2004 City Manager’s Report to Council (CMR:253:04), the
non-parking area of the Lot SiL garage was constructed for less than the budgeted cost,
leaving $1 million remaining in bond proceeds. Some of these remaining funds will be
used to pay for shell improvements, such as the heating and air-conditioning system
(HVAC) and sprinkler system, in order to assure the equipment installed will be
dependable and the easiest for the City to maintain. In CMR:253:04, staff estimated the
City’s cost for tenant improvelnents would be a maximum of $40-$50 per square foot
($296,400 to $370,500) of the total tenant improvements of $80 -$100 per square foot
($592,800-$741,000). The City will be responsible for maintaining the outside of the
building, the roof, the heating and air-conditioning system (HVAC), sprinlder system and
elevator. The tenant will be responsible for all other maintenance, taxes and insurance.
Solicitation of Proposals
Staff began advertising the space for lease in early April 2004. Advertising included
placing "For Lease" signs, in the windows of the buildings to be leased and mailing over
250 brochures’to local commercial real estate brokers and agents informing them of the
availability of the space..
Proposals were received until 5:00 p.m. June 9, 2004, by which time six written proposals
were submitted. Two of the six proposals are to lease the entire 7,410 square feet of space
and four propose to lease varying portions of the space. The proposals are summarized as
follows and in Attachment A: 1) The Saffron Club Restaurant (Saffron Club), proposing
a 10-year lease for the entire space with an initial rent of $ 3.00 per square foot and a City
allowance of $40 per square foot for improvements (tenant to pay for any improvelnent
costs over $40 per square foot); 2) a health and fitness service, proposing a 10-year lease
for the entire space with an initial rent of $1.85 per square foot and a tenant improvement
contribution of $10 per square foot; 3) a restaurant proposing a 10-year lease for
approximately 5,650 square feet with a rent of $2.50 per square foot; 4) a wine tasting
CMR:350:04 Page 2 of 6
and retail sales use proposing a 3-year lease for 1,500 square feet at $3.00 per square
foot; 5) a printing use proposing a 5-year lease for 1,100 square feet at $3.00.per square
foot; and 6) a beauty salon proposing a 3-year lease for 1500 square feet at $3.00 per
square foot.
Evaluation of Proposals
The primary factor staff used in evaluating the proposals is lease income to the City. In
its December 10, 2001 report to Council regarding the financing of the construction of
non-parking space on Lot S/L (CMR: 444:01), staff estimated rental rates would come in
at approximately $4.50 per square foot rent for the second floor office space and $5.00
per square foot rent for first floor retail space. This amount would have covered the
projected annual debt service payment on the taxable COPs of around $331,000, leaving
net revenue of $131,000 to partially offset the Barker Hotel parking assessment; for youth
and teen services; and for General Fund revenue. However, since the 2001 staff
estimates, .the market for office/retail space has weakened, and the rentable square
footage is actually less than originally thought. Of the six proposals received, the highest
per square foot rental proposed is $3.00. If the entire site is leased for $3.00 per square
foot, the annual rent would be $266,760, far less than the 2001 projected rent of
$462,000. Although the actual annual debt service payment for the S/L lease space COPs
is $320,000 (less than the $331,000 projected in the 2001 staff report), it would require a
rent of at least $3.60 per square foot per month to cover the annual debt service payment.
Attachment A compares the six proposals in terms of proposed square footage, lease
term, rent per square foot and contribution to tenant improvements. Of the six, the
Saffron Club proposal results in the highest income to the City. The Saffron Club’s
proposed 10-year lease for the entire 7,410 square feet of space, with a $40.00 per square
foot City allowance for improvements and a rent of $3.00 per square feet in the first year
and increasing to $4.20 in the 10th year, results in a total income to the City of $3,173,202
over the 10-year term. By the 6th year of the lease term, the rent will be $3.61 per square
foot, enough to cover the annual debt service payment for the COPs. The total income to
the City from the proposed Saffron Club lease exceeds the income from next highest
proposal by $370,000.
As described in its proposal, the Saffron Club is an upscale contemporary fusion South
Asian restaurant and wine bar, which Crimson Palate, Inc. will open in key urban clusters
in the United States. The proposed restaurant will be the flagship unit and the leased
space will also house the company headquarters. The full-s.ervice restaurant will be open
for lunch and dinner six days a week and will include a delivery/takeout menu. The
restaurant will offer high quality, fresh South Asian food in a modern setting with the
cuisine to be developed by nationally renowned chefs, led by Chef Floyd Cardoz of Tabla
Restaurant in New York City who has won numerous national culinary awards. The
Saffron Club plans to promote and showcase the work of local artists within the
CMR:350:04 Page 3 of 6
restaurant and to hold exhibitions and events regularly to exhibit the work of small,
unlonown artists who generally do not have the opportunity to display their work in a
retail setting. The restaurant anticipates being a destination restaurant for both Palo Alto
residents and residents of other towns and acting as an anchor to attract people and new
businesses to the neighborhood. Saffron Club Restaurant was oversubscribed in its
fundraising, which has been completed and will be used to finance tenant improvements
and initial operations. The restaurant has strong financial backing and stable investors in
place who are committed to the long-term financial success of the restaurant.
Total tenant improvements for the Saffron Club are estimated to cost $120 to $150 per
square foot ($889,200 to $1,112,000). The City will contribute up to $40 per square foot
($296,400) for items such as the HVAC, sprinlder system, grease trap, electrical upgrade
and ADA compliant restrooms. The Saffron Club will be responsible for all costs above
$40 per square foot.
Option to Lease
Based on its evaluation of the proposals, staff has negotiated the attached option to lease
with Saffron Club. Terms of the option and lease are summarized in Attachment B.
Under the option agreement, the Saffron Club is granted a nine-month period to satisfy
the specified conditions prior to exercising the option and entering into the lease. The
major conditions the optionee must satisfy:
Pay the option purchase price ($5,000).
Receive approval of its improvement plans from the Architectural Review
Board and receive approvals from the City Engineer and Chief Building
Official of the construction drawings, including the construction contract form
and proposed construction schedule. .
Receive approval of any and all permits required to implement the proposed
use and improvements.
Satisfy the Director of Administrative Services that optionee has sufficient
finances or financial commitments to implelnent the project as approved by the
City and furnish the Director of Administrative Services with evidence that
sufficient financial sedurity will be available to construct the project.
Submit to the Real Property Manager a security deposit as required by the
Lease.
Once the option conditions are met, the lease will be executed by both parties without
returning to Council. Major terms of the lease include a 10-year term with two 5-year
options to renew; a rent of $3.00 per square foot in the first year, increasing to $4.20 by
the tenth year; tenant to pay for all improvement costs above the City’s $40 persquare
foot contribution; City to maintain roof, HVAC, sprinklers and elevator; tenant to be
responsible for all other maintenance and cost of annual maintenance inspection
CMR:350:04 Page 4 of 6
contracts; tenant to pay for utilities, insurance and taxes and assessments; and
assignments and subletting subject to City approval.
RESOURCE IMPACT
The City’s cost for structural improvements will be $296,400, to be paid from the $1
million remaining in bond proceeds from the construction of the non-parking area of the
Lot SiL garage. Staff is in the process of evaluating whether to use remaining COP
proceeds to retire certificates or offset annual debt service.
Total rental .income to the City over the 10-year term of the proposed lease will be
$2,876,802. In addition, staff estimates the tenant will generate between $14,800 and
$18,000 in annual sales taxes. For the first five years of the lease, the rental income will
be used to partially offset the $320,000 annual debt service payment on the taxable COPs
used to construct the non-parldng space on Lot S/L. Starting with the sixth year of the
lease, the rental income will be adequate to pay the entire COP annual debt service, with
any excess rental income to be used to partially offset the Barker Hotel parking
assessment; for youth and teen services; and for General Fund revenue.
POLICY IMPLICATIONS
The proposed option to lease does not represent any changes to existing City policy.
ENVIRONMENTAL REVIEW
An Environmental Impact Report for the parking structures, including the non-parking
area, was prepared as part of the zoning application and was certified by Council on
December 20, 2000, by adoption of Resolution No. 7917. During the option.period, the
optionee will be required to fully comply with all provisions of CEQA as they may apply
to improvement plans.
ATTACHMENTS
Attachment A:
Attachment B"
Attachment C"
PREPARED BY:
Proposal Spreadsheet
Summary of Option to Lease
Option and Lease
WILLIAM W. FELLMAN
Manager, Real Property
CMR:350:04 Page 5 of 6
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
’r or/Admin/~ervices
HARRISON
Assistant City Manager
cc: Crimson Palate, Inc.
CMR:350:04 Page 6 of 6
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ATTACHMENT B
SUMMARY OF OPTION TO LEASE
between the City of Palo Alto and the Crimson Palate, Inc., d.b.a. Saffron Club Restaurant
for the building located at 445 Bryant Street, Palo Alto
Conditions of the Option
Prior to exercising its option to lease the property, Crimson Palate, Inc. must satisfy the
following conditions:
1.Pay the option purchase price ($5,000).
2.Submit schematic plans for the project within three (3) months of the commencement
of the option.
3.Receive approval of its development plans from the Architectural Review Board and
receive approvals from the City Engineer and Chief Building Official of construction
drawings, including the construction contract form and proposed construction
schedule.
4.Receive approval of any land use permits or approvals required to implement the
project and development plans.
5.Provide evidence to the Real Property Manager that any and all permits from any
agencies having pre-construction jurisdiction over the proposed development have
been authorized and are available.
Satisfy the Director of Administrative Services that the Museum has sufficient
finances or financial commitments to implement the project as approved by the City
and furnish to the Director of Administrative Services evidence that sufficient
financial security will be available to construct the project.
Submit to the Real Property Manager a security deposit as required by the Lease.
Attachment C
Option and Lease
PROJECT:445 Bryant
OPTION AGREEMENT
This Option Agreement is made this day of , 2004, by
and between the City of Palo Alto, a California munihipal
corporation ("CITY"), and Crimson Palate, Inc., d.b.a. Saffron Club
Restaurant ("OPTIONEE").
RECITALS
CITY owns property located at 445 Bryant Avenue, in the City
of Palo Alto, Santa Clara County, commonly referred to as the
S/L Parking Lot Building (the "P:ROPERTY"), more specifically
described and shown in .Exhibit B to the Lease attached hereto
as Exhibit I (the "Lease"), which Lease is made a part hereof
by this reference.
CITY advertised the PROPERTY for lease and received a
proposal from OPTIONEE which was selected by the City
Council.
C o OPTIONEE desires to obtain an exclusive option to lease the
PROPERTY, in accordance with the terms and conditions of this
Option Agreement and the Lease, for the purpose of developing
and operating the PROPERTY for use as a restaurant (the
"PROJECT").
Do CITY desires to grant an exclusive option to OPTIONEE to
lease the PROPERTY, during which time OPTIONEE shall develop
specific plans, obtain financing, and satisfy other
conditions set forth herein prior to exercising the option
and leasing and developing PROPERTY, in accordance with this
Option Agreement and the Lease.
NOW, THEREFORE, in consideration of the premises set forth above,
the parties hereto mutually agree as follows:
i.GRANT OF OPTION
CITY hereby grants to OPTIONEE an exclusive option to lease the
PROPERTY for the purposes of developing and operating the PROPERTY
for the PROJECT, subject to the terms, covenants and conditions set
forth be!ow and in the Lease.
RELEASES. 7/OLWMS 1
2.TERM OF OPTION
The term of the option granted hereunder shall be nine (9) months
and shall commence upon execution of this Option Agreement by the
Mayor of CITY.
3.PURCHASE PRICE OF OPTION
The purchase price of the option under this option Agreement shall
be Five Thousand Dollars ($5,000), due and payable to CITY upon the
execution of this Option Agreement by OPTIONEE. CITY shall retain
the Five Thousand Dollars ($5,000) purchase price even if OPTIONEE
does not ultimately exercise the option to lease in accordance with
the terms of this Option Agreement.
4.CONDITIONS PRECEDENT
The option to lease the PROPERTY under this Option Agreement may
not be exercised by OPTIONEE unless and until each and every
following condition has been satisfied:
A. Purchase Price of Option
OPTIONEE shall have paid the purchase price of the option as
required dnder Section 3 hereof.
B. Schematic Plans Submittal
OPTIONEE shall have submitted the schematic plans to CITY for
the PROJECT (the "Schematic plans") within three (3) months
of the commencement of this Option Agreement. The Schematic
Plans shall include schematic floor plans, simple elevations,
a detailed description of all proposed improvements or
modifications (including proposed uses and methods of
operation and a general outline specification which
identifies proposed construction material and methods), and
an estimate of the total construction cost for all proposed
improvements required for the PROJECT.
C. Development Plans Approvals
OPTIONEE shall have submitted to, and shall have received
approval of, the develQpment plans for the PROPERTY ("the
Development Plans") from CITY’s Architectural Review Board.
The Development Plans shall include the Schematic Plans,
interior plans, structural plans, exterior elevations,
signage, and interior elevations.
RELEASES. 7/OLWMS 2
D.Construction Drawings Approval
OPTIONEE shall have obtained approval of the construction
drawings for the PROJECT (the "Construction Drawings") from
the City Engineer and the Chief Building Official. The
Construction Drawings shall include:
i.Complete architectural and engineering working
drawings;
ii. Complete construction specifications;
iii. Complete construction contract form; and
iv. Proposed construction schedule.
E. Permits
OPTIONEE shall have provided to the Real Property Manager
evidence that any and all permits and approvals from any and
all public agencies having pre-construction jurisdiction over
the PROJECT, including but not limited to building permits,
street opening permits and health permits,have been
authorized and are available.
F.Certification to Chief Building Official
OPTIONEE shall have submitted to the Chief°Building Official
certification that the plans for any proposed building
construction comply, in all respect.s, with current building
codes, the. federa! Americans with Disabilities Act of 1990,
as amended, including any implementing regulations, and
energy conservation requirements as set forth in the
California Code of Regulations, Title 24, for non-residential
construction.
G.Sufficient Finances or Financial Commitments
OPTIONEE shall have satisfied the Director of Administrative
Services that OPTIONEE has sufficient finances or financial
commitments to implement the PROJECT as approved by CITY,
including constructing the improvements set forth in the
approved Development Plans and Construction Drawings. In
making a determination that the OPTIONEE has satisfied the
requirements contained in this Conditions Precedent, the
Director of Administrative Services shal! apply a
commercially reasonable standard of review. For construction
of the improvements to the Property, the standard shall be
met if OPTIONEE has assembled sufficient equity capital
and/or loans to meet OPTIONEE’S construction budget. For
operation of the Project, the standard shall be met if
OPTIONEE provides evidence of ability to pay rent for the
RELEASES. 7/OLWMS 3
Premises for the first six months of the term of the attached
Lease from sources other than projected income from the
Project.
H. Security Deposit
OPTIONEE, in accordance with Section XIII (TENANT’S ASSURANCE
OF CONSTRUCTION COMPLETION) of the Lease, submitted to the
Real Property Manager a security deposit in accordance with
Section X (SECURITY DEPOSIT) of the attached Lease. OPTIONEE
shall be entitled to apply the Five Thousand Dollars
($5,000.00) purchase price of the option under this Option
Agreement toward the required security deposit under the
Lease.
I. Hypothecation of the Lease
If OPTIONEE proposes to hypothecate the leasehold as security
for a !oan in accordance with Section XX (ASSIGNING,
SUBLETTING & ENCUMBERING) of attached Lease, OPTIONEE shall
have submitted to CITY’s Manager, Real Property, any and all
documents related to such hypothecation and shal! pay the
necessary processing fees as set forth in the attached Lease.
EXERCISE OF OPTION
If at any time during the Term.of this Option Agreement OPTIONEE
has satisfied each and every condition precedent set forth in
Section 4 hereof to the satisfaction of CITY, OPTIONEE may exercise
the option to lease PROPERTY by giv£ng the Real Property Manager
written notice of OPTIONEE’S election to do so, accompanied by two
(2) properly executed copies of the Lease substantially in the form
of Exhibit I hereof. CITY shall execute the Lease within ten (i0)
days of receipt of: OPTIONEE’S request to exergise the option in
accordance with this Section.
6.GENERAL CONDITIONS
A. Review by City
OPT.IONEE hereby acknowledges that one of the purposes of this
Option Agreement is to afford OPTIONEE and CITY the opportunity
to determine whether or not OPTIONEE is able to meet the
various conditions and obtain the required approvals as set
forth in this Option Agreement to implement the PROJECT.
Several of those conditions involve obtaining review and
approva! from officers, employees or agents of CITy. Each of
those reviews shall be conducted in an independent manner and
nothing contained herein shall be deemed to limit the
RELEASES. 7 / OLWMS 4
jurisdiction or authority otherwise possessed by said officers,
employees or agents in the conduct of such review. Nothing
contained in this Option Agreement shall be deemed to imply
that said approvals will be forthcoming, and the failure to
issue any such approval or permit by any officer, employee or
agent of CITY shall not be deemed in any manner a breach of
this Option Agreement, nor shall any such denial give raise to
any claim, liability, obligation, or cause of action with
respect to this Option Agreement or the Lease.
B.Other Governmental Approvals
Co
CITY agrees to consent to any lawful and complete application
by OPTIONEE with respect to any permits or approvals related to
activities or improvgments approved by CITY in accordance with
this Option Agreement that may be required by any governmental
or other regulatory agencies aside from CITY.
Assignment Prohibited
This option has been awarded based on the unique background and
proposal of OPTIONEE. Therefore, this option cannot be s61d,
assigned or otherwise transferred without the prior written
consent of CITY. Failure to obtain CITY’s required written
consent shall render said sale, assignment or transfer void.
Extension-of Option
Upon written request of OPTIONEE stating the reasons therefore,
the City Manager or designee may, at his/her sole discretion,
extend the term of the option under this Option Agreement. The
City Manager or designee may grant an extension of the.term of
this option for a reasonable period of time, as determined by
the City Manager or designee, in the event OPTIONEE is delayed
in fulfilling the conditions precedent to the 8xercise of this
Option Agreement by reason of any cause not the fault of, or
within the control of, OPTIONEE or its agents or employees.
7.TERMINATION OF OPTION
Subject to Section 6(D) hereof, failure of OPTIONEE to meet the
terms and conditions of this Option Agreement fully and
satisfactorily within the time limits stated under Section 2
hereof shall absolutely and conclusively terminate OPTIONEE’S
rights hereunder. Execution of the Lease by CITY and OPTIONEE
substantially in the form of Exhibit I hereof shall also
constitute a termination of this Option Agreement.
RELEASES. 7 !OLWMS
8.OPTIONEE’S RIGHT TO ENTER AND
OBLIGATION DURING OPTION
RELATED INDEMNIFICATION
o
CITY hereby grants to OPTIONEE, its officers, agents and
employees, during the term of this Option Agreement or any
extension thereof, the Jight to enter the PROPERTY or any
portion thereof, at reasonable times for the purposes of con-
ducting, at OPTIONEE’S own cost and expense, such engineering
investigations as may be required in connection With the
PROJECT. OPTIONEE hereby agrees to protect, indemnify, defend
and hold CITY, its officers, agents and employees, ~free and
harmless from and against any loss, damages or liability CITY
may incur in connection with, as a result of, or by reason of
any such investigation. Should this Option Agreement be
terminated without execution of the Lease, OPTIONEE agrees to
repair any and all damage caused to the PROPERTY by reason of
any such inveptigation performed.
NOTICES
Any notice, tender, or delivery to be given in accordance with
this Option Agreement by either party to the other shall be
given in accordance with Section XXII (NOTICES) of the Lease.
i0.OPTIONEE’S REPRESENTATIONS AND WARRANTIES
OPTIONEE represents and warrants to CITY that it has not
employed any tea! estate broker or finder in connection with
this Option Agreement and hereby agrees to hold CITY harmless
and free from any liability in connection with any commission
or finder’s fee alleged to be incurred.
ii.ENTIRE AGREEMENT
This instrument contains the entire agreement between the
parties relating to the option granted under this Option
Agreement. Any oral representatiops or modifications concerning
this instrument shall be of no force and effect, except in a
subsequent modification, which is made in writing and signed by
both parties.
12.RECOVERY OF ATTORNEYS’ FEES
In the event of any controversy, claim or dispute between the
parties hereto, arising out of or relating to this Option
Agreement or the.breach thereof, the prevailing party shall be
entitled to recover from the losing party reasonable expenses,
including attorneys’ fees, and other legal costs.
RELEASES. 7 / OLWMS 6
13.BINDING ON SUCCESSORS
This Option Agreement shall bind and inure to the benefit of
the respective heirsr personal representatives, successors and
assigns of the parties hereto, except as may be expressly
provided elsewhere in this Option Agreement.
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RELEASES . 7 / OLWMS
IN WITNESS WHI~REOF, the parties hereto have executed this Option
Agreement on ’the day and year first above written.
CITY:
CiTY OF PALO ALTO
Mayor
OPTiONEE:
Crimson Palate,inco
.(dob.a.Saffron Club
Restaurant)
By:
Its:
By:
City
APPROVED AS TO FORM
Asst, Cizy Attorney
RECO~{’{ENDED FOR APPROVAL
By:
Asst. City Manager
Director, A~@.inistratj.ve
Services Department
Massager, Real P)toperty
Terms of the Lease
LESSOR:
City of Palo Alto
TENANT:
Crimson Palate, Inc., d.b.a. Saffron Club Restaurant
PREMISES:
445 Bryant Street, Palo Alto
PURPOSE:
The purpose of the lease is to allow the tenant to develop, operate, and maintain a restaurant
according to the terms and conditions of the lease.
TERM:
The term of the lease is 10 years with two (2) five-year options to renew.
USES:
A.PERMITTED USES: The development, maintenance and operation of a restaurant and
incidental activities and uses in accordance with and as permitted by the Palo Alto
Municipal Code.
B..OPTIONAL USES: Subject to the prior written approval of the City Manager, the tenant
may sublet a portion of the Premises for other uses.
CONSIDERATION/RENT:
Rental Rate Per Sq Ft Rent Per Month Rent Per Year
Year 1 $3.00 $22,230.00 $266,760.0(
Year 2 $3.11 $23,074.74 $276,896.86
Year 3 $3.23 $23,951.58 $287,418.9(
Year 4 $3.36 $24,861.74 $298,340.8~
Year 5 $3.48 $25,806.49 $309,677.84
Year 6 $3.61 $26,787.13 $321,445.55
Year 7 $3.75 $27,805.04 $333,660.53
Year 8 $3.89 $28,861.64 $346,339.63
Year 9 $4.04 $29,958.38 $359,500.53
Year 10 $4.20 $31,096.80 $373,161.55
In addition, tenant to pay for all improvements over the $40 per square foot contribution by City.
SECURITY DEPOSIT:
Tenant to provide City a security deposit equal to one month’s rent ($22,230), tO be increased to
$25,800 upon the five year anniversary of the commencement of the Lease
REQUIRED IMPROVEMENTS TO BE MADE BY TENANT:
Required improvements are those improvements which are identified and shown inthe plans
approved by the City during the option period.
MAINTENANCE AND REPAIRS:
Tenant shall be responsible for all maintenance and repairs except for the elevator, HVAC and
sprinkler system. Tenant shall pay for annual maintenance inspection contracts for the elevator,
HVAC and sprinkler system.
ASSIGNMENT/SUBLETTING:
Assignment or encumbrance of the lease is prohibited without prior approval of the City.
Subleasing is permitted subject to approval of the City.
TAXES~ ASSESSMENTS AND UTILITIES:
Tenant shall be responsible for all costs for utilities and taxes and assessments for the-property.
INSURANCE:
Tenant shall maintain insurance meeting the City’s standard requirements forinsurance
protection.
LEASE #
Project: 445 BRYANT
This Lease is made this day of ., 2004, by and between the .City of Palo Alto, a
California municipal corporation ("CITY"), and Crimson Palate, Inc., (d.b.a. Saffron Club
Restaurant) (" TENANT").
RECITALS
o
On __, 2004, CITY entered into an Option Agreement with TENANT, on file with the
City Clerk as City Contract No. (the "Option Agreement"). Under the Option
Agreement, TENANT agreed to secure all necessary CITY approvals and permits in order to
exercise the option granted under the Agreement to lease the PREMISES (the "Option"), and
construct the improvements.
TENANT has satisfied all the conditions set forth in the option Agreement, and now desires
to exercise the Option and lease the PREMISES from CITY.
CITY desires to lease the PREMISES to TENANT, in accordance with the terms and
conditions set forth below.
Now, therefore, in consideration of these covenants, terms and conditions, the parties hereto
mutually agree as follows:
I. PURPOSE
The purpose of this Lease is to allow TENANT to develop and operate a restaurant and associated
and incidental uses on the PREMISES according to the terms and conditions of this Lease.
II. PREMISES
Subject to the terms and conditions set forth in this Lease, CITY hereby leases the PREMISES to
TENANT. PREMISES are described as 445 Bryant Street a two story, 7410 square foot retail and
office site plus an outside patio area of approximately 780 square feet. TENANT hereby leases the
PREMISES from CITY for the purpose of operating a restaurant. TENANT may also sublet a
portion of the PREMISES for compatible uses, which are permitted by the Palo Alto Municipal
Code. TENANT agrees to comply with the requirements set forth under Clause III (PERMITTED
AND OPTIONAL SERVICES AND USES) of this Lease.
III.PERMITTED AND OPTIONAL SERVICES AND USES
In furtherance of the purpose stated above the following permitted and oPtional services and uses
shall be permitted or prohibited on the PREMISES including any additions or modifications to the
Premises approved by CITY.
A. Permitted Services and Uses. Throughout the term of this Lease TENANT shall provide the
following services, activities and uses on the PREMISES:
Development, maintenance and operation of a restaurant and associated and incidental activities
and uses in accordance with and as permitted by the Palo Alto Municipal Code including but not
limited to Title t8 (Zoning). Current zoning for the ground-floor PREMISES permits 1) eating
axid drinking services; 2) personal services; 3) retail services; and 4) travel agencies. Financial
services providers are not permitted nor are any conditional uses.
B. Optional Services and Uses. Subject to the prior written approval of the City Manager,
TENANT may also sublet a portion of the PREMISES for additional services and uses which
are compatible with the permitted services, activities and uses stated above and which are
permitted by the Palo Alto Municipal Code. Approval of optional uses shall be within the sole
discretion of the City Manager.
C. Prohibited Uses. The above listed required, permitted and optional services, activities and
uses shall be the only services, activities and uses permitted upon or from the PREMISES.
IV. TERM
The term oftEis Lease shall be Ten (10) years, commencing on the first day of the month following
the date of execution of the Lease by the Mayor of CITY.
V.EXTENSIONS OF TERM
CITY hereby grants to TENANT the option to extend the term of this Lease for two additional five-
year periods cormnencing when the prior term expires u~pon each and all of the following terms and
conditions:
A.in order to exercise an option to extend, TENANT must give written notice of such election
to City and City must receive the same at least nine months but not more than 12 months
prior to the date that the option period would commence, time being of the essence. If
proper notification of the exercise of an option is not given and/or received, such option
shall automatically expire. Options may only be exercised consecutively.
B. Except for the provisions of this Lease granting an option or options to extend the term, all
of the terms and conditions of this Lease except where specifically modified by this option
shall apply.
Co Tenant has not received two default notices in the twenty-four months proceeding
TENANTS notice to exercise either 5 year option (whether the default described in the
notice has been cured or not).
Do All rights of TENANT under the provisions of an Option shall terminate find be of no
further force or effect, if after such exercise and during the term of this Lease, (i) TENANT
fails to pay rent for a period of thirty (30) days after such obligation becomes due or (ii)
TENANT fails to cure a default or (iii) City gives TENANT three notices late payment
notices.
VI. RENT
As consideration for TENANT’S use of the PREMISES in accordance with the terms and conditions
of this LEASE, TENANT agrees to pay to CITY Rent as set forth in the schedule below, due and
payable in acdordance with Clause VIII (RENT PAYMENT PROCEDURE).
Rental Rate Per Sq Ft Rent Per Month Rent Per Year
Year 1 $3.00 $22,230.00 $266,760.00
Year 2 $3.11 $23,074.74 $276,896.88
Year 3 $3.23 $23,951.58 $287,418.96
Year 4 $3.36 $24,861.74 $298,340.88
Year 5 $3.48 $25,806.49 $309,677.84
Year 6 $3.61 $26,787.13 $321,445.59
Year 7 $3.75 $27,805.04 $333,660.53
Year 8 $3.89 $28,861.64 $346,339.63
Year 9 $4.04 $29,958.38 $359,500.53
Yearl0 $4.20 $31,096.80 $373,161.55
VII. EXTENSION RENT
In the event that TENANT chooses to exercise the Extension(s) provided for in Section V
EXTENSION OF TERMS of this Lease, Rent for each additional term shall be calculated as
follows:
i. As of the first day of each five-year extension period (each, an
"Adjustment Date") the previous years rental shall be adjusted to the "Market Rental
Value" of the property as follows: Within 30 days after the date that the CITY receives
from TENANT written notice electing to extend the term as described in section V,
the parties shall attempt to agree upon what the new Market Rate Rental Value will be
from and the adjustment date. If agreement cam~ot be reached, within thirty days, then
Market Rental Value will be determined pursuant to clause (a) or (b) below:
City and Tenant shall immediately appoint a mutually acceptable broker to establish
the new Market Rental Value as of the Adjustment Date within the next 30 days.
Any associated costs will be split equally between the Parties, or
b)If City and TENANT have been unable to agree on a mutually acceptable broker,
then both City and Tenant shall each immediately make a reasonable determination
of the Market Rental Value as of the Adjustment Date and ~submit such
determination, in writing, to arbitration in accordance with the following provisions:
ii. Within fifteen days thereafter, City and TENANT shall each select a
broker of their choice to act as an arbitrator. The two arbitrators so appointed shall
immediately select a third mutually acceptable broker to act as a third arbitrator.
iii.The three arbitrators shall within thirty days of the appointment of the
third arbitrator reach a decision as to what the actual Market Rate Value for the
PREMISIS is, and whether CITY’S or TENANT’S submitted determination of Market
Rental Value is closer thereto. The decision of a majority of the arbitrators shall be
binding on the Parties. The submitted Market Rental Value shall thereafter be used by
the Parties.
iv. (iii) If either of the Parties fails to appoint an arbitrator within the
specified fifteen days, the arbitrator timely appointed by one of them shall reach a
decision on his or her own, and said decision shall be binding on the Parties.
Parties.
(iv) The entire cost of such arbitration shall divided equally among the
Notwithstanding the foregoing,(a) Date during the five-year extension period and (b) the new
Market Rental Value will be subject to adjustment annually on each anniversary of the Adjustment
the new Market Rental Value shall not be less than the rent payable for the year immediately
preceding the rent adjustment, increases in the CPI, as described below in Section 5; provided,
however, in on event will the rent following any CPI adjustment be less than the rent payable for the
year immediately preceding the CPI adjustment.
REVISION OF RENT DURING THE 2ND, 3RD AND 4TM YEARS OF THE OPTION PERIODS
The Market Rental Value determined as of the Adjustment Date of .an Extension Period shall be
subject to automatic annual adjustments, effective on the annivdrsary of the Adjustment Date~ in
proportion to changes in the Consumer Price Index, All Urban Consumers, (base years 1982-1984 --
100) for San Francisco-Oakland-San Jose CSMA published by the U.S. Department of Labor,
Bureau of Labor Statistics or any replacement index published by said Bureau (INDEX).
The automatic adjustment shall be effective on each anniversary of the commencement date of the
term of this LEASE and shall be calculated in accordance with the following formula:
X = A (B/C)
Where:(the rental rate adjustment is to become effective)
Monthly index for the second calendar month prior to the Adjustment Date
Adjusted rental.
Rental at the Commencement of the LEASE.
B = INDEX for the second calendar month prior to the month in which ttiat rental rate
adjustment is to become effective (or, if the INDEX is not published for that month, the
INDEX for the third calendar month prior to the month in which or, if the INDEX was not
published for that month, the INDEX for the third calendar month prior to the date of this
LEASE). Provided, however, in no event will the rent following the date on which any
rental rate adjustment is to be effective be less than the rent payable for the year
immediately preceding such date.
VIII. CHARGE FOR UNATHORIZED SERVICES AND USES
TENANT shall pay CITY a sum equal to one hundred percent (100%) of the gross receipts for any
service or use that is not permitted or authorized by Clause III (PERMITTED AND OPTIONAL
SERVICES AND USES) hereof. 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 uses.
IX.RENT PAYMENT PROCEDURE
Payment of Rent. On or before the first day of each month, TENANT shall pay to CITY the Rent
as set forth in Clause V (CONSIDERATION/RENT) hereof.
Commencement of Obligation. TENANT’s obligation to pay the Rent shall commence upon
execution of this Lease by both parties and TENANT’ S receipt of the final Occupancy permit issued
by the City’s Building Department.
Place of Payment. Rental payments shall be delivered to the Revenue Collections Division, 250
Hamilton Avenue, PO Box 10250, Palo Alto, CA 94303. The designated place of payment may be
changed at any time by CITY upon ten (10) days’ written notice to TENANT. Rental payments
may be made by check made payable to the City of Palo Alto. TENANT assumes all risk of loss if
payments are made by mail.
X.SECURITY DEPOSIT
A security deposit in the sum of Twenty-two Thousand Two Hundred and Thirty Dollars ($22,230)
shall be provided to CITY by TENANT prior to the execution of this Lease by the Mayor of CITY.
¯ CITY shall retain the security deposit throughout the term of this Lease. TENANT may apply the
Five Thousand Dollars ($5,000.00) purchase price of the Option, and the Two Thousand Dollars
($2,000.00) purchase price of the Option Extension, if any, to the required security deposit under
this Clause XI.
TENANT shall increase the security deposit to Twenty Five Thousand Eight Hundred Dollars
($25,800) upon the five-year anniversary of the commencement of this Lease. Should this Lease be
extended beyond the first ten-year term, the security deposit shall be adjusted to equal the then
current monthly rent.
The security deposit shall take one of the forms set out below.
A.Cash.
B. The assignment to CITY of a savings deposit held in a financial institution in ganta Clara or
San Mateo County acceptable to CITY. At a minimnm, 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 City Attorney and the Real. Property Manager.
C. 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 or order. Both the financial institution
and the form of the certificate must be approved by the City Attorney and 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 on order .upon demand by CITY. Both the financial institution(s) and the
form of the instrument(s) must be approved by the City Attorney and the 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
f~iithfully perform all of the terms, covenants, and conditions of this Lease. Should TENANT elect
to provide a Time Certificate of Deposit, Letter of Credit, or other instrument of credit, hereinafter
collectively referred to as "INSTRUMENT", to 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 1.east thirty (30) days prior to expiration or termination of the INSTRUMENT. If
TENANT 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 sedured 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 on account of the payment of any or all of the principal sum to CITY or order upon
demand of CITY. 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 requi)ed security deposit throughout the Lease 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 on 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.
XI.INITIAL CONSTRUCTION BY TENANT
A. Minimum Construction and Timing. Commencing upon the execution of this Lease,
TENANT shall in an efficient and worl~nanlike manner improve the PREMISES, with a maximum
contribution by CITY of $296,000, to adequately accommodate those services, activities and uses
required by TENANT. CITY’s contribution of the $296,000 shall be paid in installments upon
receipt by CITY of written statements accompanied by copies of invoices for major structural
improvements such as the HVAC system, major plumbing, electrical and structural improvements
as itemized below. The development plans prepared by TENANT and approved by CITY during
the Option period under the Option Agreement, preceding execution of this Lease, shall be a master
plan for development of the PREMISES, and the construction drawings prepared by TENANT and
approved by the City Engineer and the Chief Building Official during the same period shall provide
the plans, specifications, and time schedule for constructing such improvements. The approved
development plans and construction drawings are attached hereto as Exhibit "B" and incorporated
herein by this reference.
The list of Structural Improvements includes, but is not limited to"
®
o
Design and installation of a code compliant HVAC System
Design and installation of a code compliant Fire Sprinlder System
Design and installation of a Grease trap/interceptor that meets the Santa Clara County
Health Department’s requirements
Design and installation of ADA compliant Restrooms
Design and relocation of stairs and construction of non-load-bearing interior walls
Desgin and upgrading of electrical and plumbing systems to accommodate TENANT’s
restaurant use
Design and installation of additional eleetric meters
Design and installation of ny other structural improvements that are mutually agreed upon
by the CITY and TENANT.
B. Development Plans and Construction Drawings. All design and construction of the
improvements shall conform to the construction and architectural standards contained in Exhibit
"B" and shall meet all other requirements contained in this Lease.
C. Compliance with ADA, All construction or improvement of the PREMISES shall comply
with the Federal Americans with Disabilities Act of 1990, as amended, including the Act’s
implementing regulations, as anaended.
D. Certificate of Inspection. Upon completion of construction of any substantial improvement
to the PREMISES, 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.
XII. ADDITIONAL CONSTRUCTION AND/OR ALTERATION BY TENANT
A. CITY’s Consent. No additional structures, improvements, or facilities shall be constructed,
erected, altered, or made within the PREMISES without the prior written consent of the City
Council if required by CITY procedures or ordinances, or otherwise by the City Manager.
B. Strict Compliance with Development Plans and Construction Drawings. Any additional
improvements constructed by TENANT within the PREMISES shall be constructed in an efficient
and worlcmanlike manner and in strict compliance with detailed plans and specifications approved
by the City 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.
C. Certificate of Inspection. Upon completion of construction of any substantial improvement
to the PREMISES, 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.
XIII.TENANT’S ASSURANCE OF CONSTRUCTION COMPLETION
Prior to commencement of this Lease and improvement of the PREMISES, or any phase thereof,
TENANT shall furnish the Real Property Manager with satisfactory evidence that assures CITY that
sufficient funds will be available to complete the approved 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 the Option Agreement. Evidence oi~ 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:
Co
Completion Bond naming CITY as beneficiary;
Performance and payment bonds, supplied by TENANT’s contractor or contractors,
provided the bonds are issued with both TENANT and CITY named as beneficiaries;
Irrevocable letter of credit from a financial institution naming CITY as beneficiary; or
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.- All bonds and letters ~of credit shall also be in a form acceptable to the Director of
Administrative Services 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 the development plans and construction plans
approved by CITY as set forth in this Lease.
XIV. DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS
In the event of damage to or destruction of TENANT-constructed or TENANT-improved
improvements located within the PREMISES, or in the event TENANT-constructed or TENANT-
improved improvements located within the PREMISES are declared unsafe or unfit for use or
occupancy by a public entity with the authority to make and enforce such declaration, TENANT
shall, within thirty (30) days, commence and diligently pursue to completion, the repair,
replacement, or reconstruction of improvements necessary to permit full use and occupancy of the
PREMISES for the purposes required by this Lease. Repair, replacement, or reconstruction of
improvements within the PREMISES shall be accomplished in. a manner and according to plans
approved by the City Engineer, the Chief Building Official and the Real Property Manager.
In the event that the TENANT-constructed or TENANT-improved improvements on the
PREMISES be more than seventy-five percent (75%) destroyed or damaged by an insured loss
during the last five (5) years of the Term of this Lease, TENANT shall have the option of rebuilding
or repairing such damage or terminating this Lease. TENANT shall notify the Real Property
Manager in w~iting of its decision within ten (10) days of the occurrence of such damage or
destruction. In the event that TENANT elects to terminate this Lease and not rebuild or repair such
damage, TENANT shall demolish any remaining structures or portions of structures r~ot desired by
CITY and clean up any and all debris and shall pay to CITY a pro-rata portion of the proceeds of
insurance required in accordance with Clause IXX (INSURANCE) hereof. The pro-rata portion
shall be based on the following formula:
Where:
L = P(P./T)
CITY’s portion of insurance procee~ts.
Total insurance proceeds paid exclusive of demolition and debris removal
expenses.
Remaining term of the Lease.
The total Lease term, including any extensions made in accordance with this
Lease.
TENANT’s liability for demolition and cleanup shall be limited to insured losses including any
deductible amount.
XV.AS BUILT PLANS
Upon completion of all the improvements on the PREMISES, TENANT shall provide the Real
Property Manager with a complete set of reproducible "as built plans" reflecting the actual
construction within or upon the PREMISES. TENANT shall also provide the Real Property
Manager with a statement of actual construction costs for all such improvements.
XVI.OWNERSHIP OF IMPROVEMENTS
All improvements constructed, erected or installed 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, upon 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, furnishings and trade fixtures placed 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.
XVII. MAINTENANCE OBLIGATIONS OF CITY AND TENANT
CITY’S and TENANT’S maintenance obligations shall be defined according to the portion of the
Premises being maintained.
1. CITY shall have the obligation to perform any repairs to portions of the PREMISES constructed
by CITY and existing prior to execution of the Option Agreement by TENANT. TENANT shall
have the obligation to perform ordinary maintenance to such to portions of the PREMISES,
including exterior window washing and similar tasks.
2. TENANT shall maintain contracts for annual inspection and regular maintenance of the elevator,
HVAC and Fire Sprinkler System and shall provide copies of such contracts and evidence of
satisfactory condition to CITY upon request by CITY. Should TENANT fail to perform any
necessary maintenance on’ these systems, CITY shall have the option to make perform such
maintenance and TENANT, within ten (10) days of receipt of a bill therefore from the Real
Property Manager, shall reimburse CITY for the cost of such repairs, including a fifteen percent
(15%) administrative overhead fee. Performance of such maintenance by CITY shall in no event be
construed as a waiver of the duty .of TENANT to make repairs or perform maintenance as provided
in this Clause. CITY shall pay for major repair and/or replacement of the elevator, HVAC and fire
sprinkler system.
3. TENANT shall maintain, at its sole expense, all equipment, furnishings and trade fixtures upon
the PREMISES required for the maintenance and operation of TENANT’S business. In no event
shall CITY shall have any authority to perform such maintenance. TENANT will also maintain the
780 square foot patio area including the six trees.
TENANT agrees that if and when any repairs, alterations, additions or betterments shall be made by
it as required by this paragraph, it shall promptly pay for all labor done or materials furnished and
shall keep the PREMISES free and clear of any lien or encumbrance of any kind whatsoever.
XVIII. UTILITIES
TENANT shall be solely responsible for and shall pay, prior to delinquency, all charges for utilities
supplied to the PREMISES during the term of this Lease. TENANT shall be solely responsible for
the installation of separate meters for all utilities should they be necessary.
IXX. INSURANCE
TENANT, at its sole expense, shall maintain insurance acceptable to CITY in full force and effect
throughout the term of this Lease.
A. Minimum Scope of Insurance
Coverage shall be at least as broad as:
1)
3)
4)
Insurance Services Office Commercial General Liability coverage (occun’ence form CG
0001).
Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile Liability,
code 1 (any auto).
Workers’ Compensation insurance as required by the State of California and Employer’s
Liability Insurance.
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 minimum
limits and coverages:
POLICY
o
°
WORKERS’
COMPENSATION
COMPREHENSIVE
AUTOMOBILE
LIABILITY,
including owned, hired,
and non-owned
automobiles.
COMMERCIAL
GENERAL
LIABILITY,
including
products and
completed operations,
broad form contractual,
and personal injury.
FIRE & EXTENDED
MINIMUM LIMITS OF LIABILITY
Statutory
Bodily Injury
Property Damage
$1,000,000 ea. person
$1,000,000 ea. occurrence
$1,000,000 ea. occurrence
Bodily Injury
Property Damage
$1,000,000 ea. person
$1,000,000 ea. occurrence
$1,000,000 aggregate
$1,000,000 ea. occurrence
Not less than one hundred percent (100%) of
COVERAGE.
5.COURSE OF
CONSTRUCTION
the replacement cost of all insurable improvemdnts within or
upon the PREMISES. Such policies must include water
damage and debris cleanup provisions. Additional fire and
extended coverage must be obtained in accordance with this
clause upon completion of construction or installation of any
maj or insurable improvement under the Project.
Completed value of the Project.
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 Sublease.
Each insurance policy required by this Sublease 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 rights 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 ab0ve."
o "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, Subleased, 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."
"For any claims related to this Sublease, 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 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, officials,
employees, agents or volunteers."
"The TENANT’s insurance shall apply separately to each insured against whom claim is
made or suit is brought, except with respect to the limits of the insurer’s liability."
C. Acceptability of Insurers
Insurance is to be placed with insurers with a current A.M. Best’s rating of no less than A:VII.
TENANT agrees to deposit with the Real Property Manager, on or before the effective date of this
Sublease, certificates of insurance necessary to satisfy CITY that the insurance provisions of this
Sublease have been complied with, and to keep such insurance in effect and the certificates
therefore on deposit with CITY during the entire 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 of coverage.
CITY shall retain the right at any time to review the coverage, form, and amount of the insurance
required hereby. If, in the opinion of the Risk Manager, the insurance provisions in this Sublease
do not provide adequate protection for CITY and for members of the public using the PREMISES,
the Real Property Manager may require TENANT to obtain insurance sufficient in coverage, form,
and amount to provide adequate protection as determined by the Risk Manager. CITY’S
requirements shall be reasonable and shall be designed to assure protection from and against the
.kind and extent of risk which exists at the time a change in insurance is required.
The Real Property Manager shall notify TENANT in writing of changes in the insurance
requirements. 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, TENANT shall be in default
under this Lease without further notice to TENANT. Such failure shall constitute a material breach
and shall be grounds for immediate 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 the policy or policies of insurance, TENANT shall be obligated for the full
and total amount of any damage, injury, or loss caused by or colmected with this Lease or with use
or occupancy of the PREMISES.
XX. ASSIGNMENT AND SUBLETTING
TENANT shall not, either voluntarily or by operation of law, assign, transfer, mortgage, pledge,
hypothecate or encumber this Lease or any interest herein, or any right or privilege appurtenant
hereto, or allow any other person (the employees, agents and invitees of TENANT excepted) to
occupy or use the Premises, or any portion thereof, without first obtaining the written consent of the
City Manager, in the City Manager’s sole and absolute discretion but,which consent shall not be
unreasonably withheld if all of the following conditions are satisfied:
1.TENANT’s construction of improvements has been substantially completed in
accordance with the terms of this Lease;
TENANT provides to CITY at least 45 days prior to the date of the proposed
assignment, transfer or sublease, evidence that the proposed assignee, transferee
or sublessee has sufficient finances or financial commitments to perform
TENANT’S then-remaining obligations under this LEASE. In evaluating the
acceptability of such evidence, the CITY shall apply a commercially reasonable
standard of review. Such standard shall be met if the proposed assignee,
transferee or sublessee provides evidence of ability to pay rent for the Premises
for the first six months of the term of the assignment, transfer or sublease.
o The proposed assignee, transferee or sublessee agrees to operate the Premises for
substantially the same use as theretofore conducted therein, or for a use permitted
by this Lease and otherwise compatible with other uses then operating on the
property in which the Premises are located;
4. TENANT shall remain fully liable during the unexpired term of this Lease; and
Any such assignment, sublease, or transfer shall, be subject to all of the terms,
covenants and .conditions of this Lease and the assignee, sublessee or transferee
shall expressly assume for the benefit of CITY the obligations of TENANT under
this Lease by a document reasonably satisfactory to CITY.
Consent to one assignment, subletting, occupation or use by any other person shall not be deemed to
be consent to any subsequent assignment, subletting, occupation or use by another person. Consent
to any such assignment or subletting shall in no way relieve TENANT of any liability under this
Lease. Any such assignment or subletting without such consent shall be void, and shall, at the
option of the CITY, constitute a default under this Lease.
For purposes of this Section, a change in the ownership (voluntary or involuntary, by operation of
taw, or otherwise) of 51% or more of the capital stock of TENANT shall be deemed an assignment
subject to the provisions hereof.
XXI. DEFAULT BY TENANT
A. Default Defined. The occurrence of any of the following events shall constitute a default by
TENANT under this Lease:
TENANT’s failure to pay all or any portion of Rent or any other payment due
CITY at the times and in the manner provided in this Lease, if the failure
continues for ten (10) days after notice has been given to TENANT;
2.TENANT’S total abandonment or vacation of the PREMISES for twenty (10)
days or more, shall conclusively be deemed an abandolm~ent of the PREMISES.
3. Violation of the provisions of Section XX ASSIGNING, SUBLETTING, AND
ENCUMBERING,
4.Failm’e to provide evidence of insurance coverage throughout the term of this
Lease in accordance with Section IXX (INSURANCE)
o TENANT’s violation of any other provision of this Lease, if the violation is not
cured within thirty (30) days after written notice of such violation by CITY to
TENANT. However, if the violation cannot reasonably be cured within thirty (30)
days, TENANT shall have a reasonable period of time (as determined by the City
Manager) to cure such violation so long as TENANT commences to cure the
default within the thirty-day period and thereafter diligently and in good faith
continues to cure the default.
B. Rights andRemediesofCITY. If TENANT commits a default, as defined in
Subparagraph A. of this Section, CITY shall have the following rights and remedies, which rights
and remedies shall not be exclusive, 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
Sections in this Lease:
CITY may continue this Lease in full force and effect and not terminate TENANT’S right to
possession of the PREMISES, in which event CITY shall have the right to collect Rent and
other payments when due;
CITY may terminate this Lease and TENANT’S right to possession of the PREMISES;
CITY may have a receiver appointed to collect rentals and conduct TENANT’S business;
CITY may cure the 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 Rent due CITY under this Lease and shall be
due immediately from TENANT at the time the sum is paid, and if repaid at a later date shall
bear interest at the rate of 10% per annum from the date the sum is paid by CITY until CITY
is reimbursed by TENANT;
CITY may 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;
CITY may seek a mandamus or other suit, action of proceeding at law or in equity to
enforce its right against TENANT and any of its officers, agents, employeesl assigns or
subtenants, and to compel it to perform and carry out its duties and obligations under the law
and this Lease.
C.Default and Damages
1. 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. CITY’S efforts to mitigate the damages caused by TENANT’S
default shall not constitute a waiver of CITY’S right to recover damages under this Section.
2. Upon a termination of TENANT’S right to possession, CITY shall have the right to
recover from TENANT:
a.The worth, at the time of award, of the unpaid rental which had been earned at the
time of termination of this Lease; and
No The worth, at the time of award, of the amount by. which the unpaid Rent 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 proves could have been
reasonably avoided; and
The worth at the time .of award of the amount by which the unpaid Rent for the
balance of the term after the time of award exceeds the amount of such rental loss
that TENANT proves could be reasonably avoided; and
d.Any costs incurred by CITY in connection with reletting the PREMISES, court Costs
and reasonable attorney’s fees.
"The worth, at the time of the award," as used in paragraphs (a) and (b) of this section is to be
computed by allowing interest at the rate of 10% per annum. ’!The worth, at the time of the award,"
as used in paragraph (c) of this section, is to be computed by discounting the amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of the award, plus 1%.
Nothing in this Section 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. If a 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 carried 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 by CITY to terminate this Lease unless a notice of
such intention isgiven 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 personal property.
XXII. NOTICES
All notices, statements, demands, requests, consents, approvals, authorizations, offers, agreelnents,
appointments or designations hereunder give by either party to the other, shall be in writing and
shall be sufficiently given and served upon the other party if (1) personally served, (2) sent by
United States certified mail, postage, prepaid, (3) sent by express delivery service, or (4) in the case
of a facsimile, if sent to the telephone number(s) set forth below during normal business hours of
the receiving party and followed within 48 hours by delivery of hard copy of the material sent by
facsimile, in accordance with (1), (2) or (3) above. Personal service shall include, without
limitation, service by delivery service and service by facsimile transmission. Delivery of notices
properly addressed shall be deemed complete when the notice is physically deliverdd to the Real
Property Manager or to __.(tenant’s designee).__
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: (650) 329-2472
with a copy to:
City Clerk
City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
FAX: (650) 329-2646
and
Ms. Sabena Puri
CEO
Crimson Palate, Inc.
786 West Greenwich Place
Palo Alto, CA 94303
FAX: 650-649,1864
with a copy to:
Owen Byrd, Esq.
Law Offices of Owen Byrd
418 Florence Street
Palo Alto, CA 94301
FAX: 650-325-9041
City Attorney
City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto CA 94303
FAX: (650) 329-2646
XXIV. ATTACHMENTS TO LEASE
This Lease includes the following exhibits, which are attached hereto
and by this reference incorporated into this Lease:
Exhibit A - General Conditions
Exhibit B - Development Plans and Construction Drawings
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 WITNESS WHEREOF, the parties have executed this Lease the day and year first above
written.
CITY:TENANT:
CITY OF PALO ALTO CRIMSON PALATE, INC., dba
SafI?on Club Restaurant
By:
Mayor
By:
Its:
ATTEST:
By:
City Clerk
APPROVED AS TO FORM:
By:
Sr. Asst. City Attorney
RECOMMENDED FOR APPROVAL:
By:
Asst. City Manager
By:
Director of Administrative
Services
ALL-PURPOSE ACKNOWLEDGMENT
¯STATE OF CALIFORNIA )
) SS.
COUNTY OF SANTA CLARA )
On ,20__, before me,
(NOTAR’O
personally appeared
SIGNER(S)
__ personally known to me -or- __ proved to me on the basis-of satisfactory evidence to be the
person(s) whose name is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
NOTARY’S SIGNATURE
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 theofficer’s or employee’s designated representative.
2.CORPORATE AUTHORITY & LIABILITY
Because TENANT is a corporation, each individual signing this Lease on behalf of TENANT
represents and warrants that;
A. (s)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 in the State of California.
As used in this Lease, the term "TENANT" shall include TENANT, its officers, agents,
employees, 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.SIGNS
TENANT agrees not to construct, maintain, or allow any sign to be placed upon the PREMISES
except as may be approved by CITY. Unapproved signs, banners or the like 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.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 attorney’s fees. TENANT shall provide CITY with at least ten
(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 the PREMISES for the
purposes of posting Notices of Non-Responsibility.
In the event a lien is imposed upon the PREMISES as a result of such construction, repair,
alteration, or installation, TENANT shall either:
A.Record a valid Release of Lien; or
B. 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 the lienholder claim; or
C. Procure and record a bond in accordance with Section 3143 of the Civil Code, as
amended, 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. ,
7.LEASE ORGANIZATION AND RULES OF CONSTRUCTION
Words 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 terms and provisions hereof shall be construed to effectuate the purposes set forth herein,
and 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 hereof and shall not in any way modifj 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.
8.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. The Option Agreement,
entered into on ., 2004, by and between TENANT and CITY, is hereby
superseded by this Lease.
9.UNLAWFUL USE
TENANT agrees that no improvements shall be erected, placed upon, operated, nor maintained
within the PREMISES, nor any activity conducted or carried 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 having jurisdiction over TENANT’s use of the PREMISES.
10.NONDIS CRIMINATION
TENANT and its employees shall not discrimil~ate 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.
11.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. CITY shall
provide TENANT with reasonable notice prior to any inspection conducted pursuant to this
Lease.
12. HOLD HARMLESS
A.TENANT hereby waives all claims, liability and recourse against CITY
Including the right of contribution for loss or damage of or to persons or property arising from,
growing out of or in any way connected with or related to this lease. TENANT herby agrees to
protect, 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, or construction on, the PREMISES, or TENANT’S performance
or nonperformance 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 its litigation costs, expenses and attorneys’ fees.
B. CITY hereby agrees to protect, endemnify, hold harmless and defend TENANT its
officers, agents, and employees against any and all claims, leability, demands, damages, cost,
expenses or attorneys’ fees arising out of CITY’S failure to preform any of the material terms of
this lease. In the event Tenant is named as co-defendent in any action brought against CITY
related to any such failure to perform, City shall notify TENANT of such fact and shall represent
TENANT in such legal action.
13. TAXES AND ASSESSMENTS
This Lease may create a possessory interest that 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.
14.SUCCESSORS IN INTEREST
Unless otherwise provided in this Lease, 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.
15.CIRCUMSTANCES WHICH EXCUSE PERFORMANCE (FORCE MAJEURE)
¯If either party hereto shall be delayed or prevented from the performance o.f any act required
hereunder by reason of acts of God, restrictive govelwnnental 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.
16.PARTIAL INVALIDITY
If any term, covenant, condition, or provision of this Lease is determined to be invalid, void, or
unenforceable, by a court 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 invalidated thereby.
17.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, covenants, 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.
18.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 such litigation shall be entitled to recover
from the other cost of sustaining such action, including reasonable attorneys’ fees, as may be
fixed by the Court.
19.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
co~mections; 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 any construction.
20.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.
21.DISPOSITION OF ABANDONED PERSONAL PROPERTY
If TENANT abandons the PREMISES or is dispossessed thereof by process of law or otherwise,
title to any personal property belonging to TENANT and left on the PREMISES forty-five (45)
days after such abandonment or dispossession shall be deemed to have been transferred to CITY.
CITY shall have the right to remove and to dispose of such property without liability therefor to
TENANT or to any person claiming under TENANT, and shall have no need to account therefor.
22. 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 written 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.
23. 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 rights 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.
24."CONFLICT OF INTEREST
TENANT warrants and covenants that no official or employee of CITY 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 procuring of this Lease; or (2) will be employed in the performance of this
Lease 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, 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.
25.EMINENT DOMAIN
In the event the whole or any parts of the PREMISES are condemned by a public entity in the
lawful 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 condenming public entity.
If only a part is condemned and the condemnation of that part 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:
A.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
B.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 and shall receive all compensation related to the condemnation of all or
part 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.
26.POST-ACQUISITION TENANCY
TENANT hereby acknowledges that its occupancy of the PREMISES is subsequent to
construction of the PREMISES by CITY. TENANT further understands and agrees that as a
post-construction tenant, TENANT is not eligible and furthermore waives all claims for
relocation assistance and benefits under federal, state or local law.
27. SURRENDER OF PREMISES
Upon expiration or termination of this Lease TENANT shall redeliver possession of the
PREMISES to CITY in substantially the same condition that existed upon completion of all
construction and first occupancy by TENANT, reasonable wear and tear, flood, earthquake and
act of war excepted. Upon notice of tenants termination, or upon expiration of this lease,
whichever may occur first, CITY agrees that it shall not post signs to release the space prior to
thirty (30) days of the termination or expiration date.
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 month
in which the term commences, the subject index shall be converted in accordance with
the conversion factor published by the publisher of that index;
No 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.HAZARDOUS SUBSTANCES
go
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 California Code of Regulations, Division 4, Chapter 20, as the
same may be amended from time to time.
TENANT’s Use of PREMISES. During the term of this Lease, TENANT ~hall abide and
be bound by all of the following requirements:
i. TENANT shall comply with all laws now or hereafter in effect during the
term of this Lease 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.
ii. TENANT shall restrict its use of Hazardous Materials at the PREMISES to
those kinds of materials that are normally used in constructing the Project. 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.
iii. TENANT shall be solely and fully responsible for the reporting of .all
Hazardous Materials releases that occur during the term of this Lease, to the
appropriate public agencies, when such releases are caused by or result 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 be solely and fully responsible and liable for such releases at
the Premises, or into CITY’s sewage or storm drainage systems. TENANT shall take
all necessary precautions to prevent any of its Hazm’dous 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.
v. Notwithstanding Section 12 of this Exhibit A, 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.
vi. TENANT’s obligations to CITY under this Section 29 shall include
TENANT’s obligation and responsibility to abate or contain any asbestos containing
material or lead paint that may be present in the building on the PREMISES.
vii. TENANT’s obligation under this Clause shall survive the expiration or earlier
termination of this Lease.
30. ALL COVENANTS ARE CONDITIONS
All provisions of the Lease are expressly made conditions.
31. 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 hereof. All covenants, stipulations, promises and agreements in this Lease shall be
for the sole and exclusive benefit of CITY and TENANT.
32. REAL ESTATE BROKERS
Each party represents that it has not had dealings with any real estate broker finder or other
person with respect to this lease in any manner. Each party shall hold harmless the other party
from all damages resulting from any claims that may be asserted against the other party by any
broker, finder or other person with whom the other party has or purportedly has dealt.
33. CHARGE FOR LATE PAYMENT
TENANT acknowledges that late payment of Rent will cause CITY to incur costs not
contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain.
Accordingly, if any payment of Rent is not received by CITY within five (5) days after the due
date, then, without any requirement for notice to TENANT, TENANT shall pay to CITY a late
charge equal to the greater of (i) six percent (6%) of the amount of the overdue payment, and (ii)
$100.00. The parties agree that such late charge represents a fair and reasonable estimate of the
costs CITY will incur by reason of late payment by TENANT. Acceptance of the late charge by
CITY shall not constitute a waiver of TENANT’s default with respect to the overdue amount, nor
prevent CITY from exercising any of the other rights and remedies available to CITY.
34.RECORDATION OF LEASE
Neither CITY nor TENANT shall record this Lease; however, a short-form memorandum of
Lease may be recorded at CITY’s request.