HomeMy WebLinkAbout2000-09-18 City Council (29)C ty of Palo 7
Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT:CITY MANAGER’S
OFFICE
DATE:SEPTEMBER 18, 2000 CMR: 353:00
SUBJECT:APPROVAL OF AN IMPLEMENTATION AGREEMENT WITH
THE PALO ALTO MEDICAL FOUNDATION (PAMF)
REGARDING THE LJ~ASE OF LAND ,AT RAMONA STREET AND
CHANNING AVENUE FOR A CHILD CARE CENTER;
APPROVAL OF THE LEASE AGREEMENT BETWEEN PAMF
AND CHILDREN’S CREATIVE LEARNING CENTERS (CCLC);
AND APPROVAL OF FEE WAIVERS IN AN AMOUNT NOT TO
EXCEED $50,000 TO FACILITATE THE DEVELOPMENT OF
THIS CENTER ’
REPORT IN BRIEF
At its July 12, 1999 meeting, Council approved the issuance of a Request for Proposals to
find a qualified child care organization to build and run a downtown child care center to
serve the community and City employees on land at Ramona Street and Channing
Avenue. The land was provided through a development agreement with the Palo Alto
Medical Foundation (PAMF). Children’s Creative Learning Centers (CCLC) has been
selected as the center developer/operator. This staff report recommends that Council
approve: an agreement with PAMF to implement the terms of the Development
Agreement; the lease agreement between PAMF and CCLC; and staff’s recommendation
to waive City fees associated with the development of the center in accordance with the
City’s Public/Private Partnership Policy.
CMR:353:00 Page 1 of 7
RECOMMENDATION
Staff recommends that the City Council:
1. Approve an agreement with the Palo Alto Medical Foundation (PAMF) to
implement PAMF’s obligation under the Development Agreement to lease the site
at Ramona Street and Channing Avenue for the development and operation of a
downtown child care center.
2.Approve the lease of the Ramona/Channing site from PAMF to Children’s
Creative Learning Centers (CCLC) for the development and operation of a
downtown child care center.
3.Approve a waiver of City planning, building, utility connection and other fees
related to CCLC’s development of the downtown child care center in the amount
not to exceed $50,000, in accordance with the Council’s Public/Private Partnership
Policy.
BACKGROUND
In 1991, as part of a development agreement, PAMF agreed to lease to the City of Palo
Alto land at the comer of Channing Avenue and Ramona Street for the purpose of
establishing a downtown child care center. The City’s right to lease the property,
currently a parking lot, was for a term of 35 years at a cost of one dollar per year.
Facilitating the development of a downtown child care center was determined to be a
logical continuation of the City’s long history of commitment to child care. Furthermore,
the need for additional child care capacity in Palo Alto, particularly for infants, toddlers
and preschool age children, and particularly in the downtown area, was widely
acknowledged.
Staff hired a consultant to conduct a feasibility study which concluded that an
economically viable child care center for infants, toddlers and preschoolers could be
developed on the Channing/Ramona site. Staff transmitted this feasibility study to the
City Council at its July 12, 1999 meeting (CMR:276:99)..
Since the City did not have the staff or capital resources to develop the site as a child care
center or to operate the center once constructed, staff proposed to issue a Request for
Proposals (RFP) to find a qualified child care organization to build and run a downtown
center to serve the community and City employees. As identified in CMR:276:99, the
City’s role was to provide the land and act as a partner, facilitating the design review
process and waiving development fees as appropriate. The Council approved the
issuance of an RFP and authorized the City Manager to enter into a land lease to provide
the selected child care organization with the use of the land at Ramona Street and
Channing Avenue.
CMR:353:00 Page 2 of 7
DISCUSSION
Selection of a Child Care Center Developer/Operator
A selection committee was formed with representatives from the City Manager’s Office,
Human Services Division and Administrative Services Department as well as parents
from City staff and representatives of the City’s Child Care Advisory Committee and
South of Forest Avenue Coordinated Area Plan Working Group. The RFP was issued on
July 13, 1999 and a bidders conference was held on July 28. The RFP closed on August
13; five proposals were received.
Proposals described the child care services to be offered, including child to staff ratios,
parent fees, staff salaries and training. Proposals also included a preliminary center
design, construction budget and schedule, and a statement of projected revenue and
expense for the center’s operation. The selection committee reviewed all proposals and
carefully analyzed the proposers’ capability to construct the center and provide a high
quality child care program. Based on this review, four proposers were selected as
finalists and were interviewed.
Each of the finalists presented strengths that they would bring to the creation of a
downtown child care center. The strongest and most comprehensive proposal was put
forth by Children’s Creative Learning Centers (CCLC). Founded in 1992, CCLC
provides high quality child care to families in its six Bay Area centers, including a center
in Palo Alto. CCLC has experience financing and overseeing the construction of child
care centers. Given the narrow margins faced by most child care operators, staff was
aware that securing construction financing and servicing the resulting debt payments
might be a stumbling block for a child care organization. CCLC was the only
organization able to present a plan for financing, constructing and operating the
downtown center that would not require a subsidy from the City in order to avoid
substantial losses.
In addition, the selection committee looked carefully at the factors that contribute to child
care quality, including child to staff ratios, child group sizes, and staff tumover,
education and salary. The child care program proposed by CCLC met the City’s
requirements for quality and was in all instances comparable or superior to the programs
described by the other proposers. CCLC has committed to become accredited by the
National Ass.ociation for the Education of Young Children, thus guaranteeing the City
that the center will meet stringent quality standards.
Another strength of the CCLC proposal was the commitment to give City employees
priority enrollment for 20 percent of the center’s child care slots. This aspect of the
proposal responded to the RFP requirement that the downtown center serve both the
community and City employees. This requirement was included in recognition of the
CMR:353:00 Page 3 of 7
importance of child care as an element of the City’s efforts to improve employee
recruitment and retention.
After due diligence, which included a careful review of CCLC’s financial statements,
reference checks with CCLC’s staff and customers, and a second interview, the selection
committee chose CCLC as the organization best able to develop and operate a downtown
center that would meet the community’s and the City’s expectations for high quality child
care.
Lease Agreement
Although the original Development Agreement envisioned a lease from PAMF to the
City and a sublease from the City to a child care operator, the parties have agreed that
PAMF will lease the site directly to CCLC. Under this arrangement, the City will have
the right to find a substitute child care operator for the duration of the term in the event
CCLC were to default and its construction lender did not exercise its right to cure the
default. During any such interim period between child care operators, the City would be
obligated to maintain and insure the site as if it were the lessee. In the event of default,
CCLC’s lender would be subject to all the terms and conditions of the lease, including the
use restriction to child care only. Further, the lease cannot be amended without consent
of the City.
The lease provides that PAMF may require that the child care facility be demolished at
no cost to PAMF at the end of the lease term. The lease provides that CCLC must
provide a security deposit of $25,000, payable in installments, to cover its obligation to
demolish the facility at the end of the lease should PAMF require this. However, in
keeping with the City’s rights to keep the property available for child care for the entire
thirty-five years, the lease requires the City to assume the demolition obligation to the
extent CCLC has not paid the full $25,000. Because of the City’s rights under the lease,
the City is a party to the lease agreement.
Implementation Agreement
The Implementation Agreement between PAMF and the City essentially sets the stage for
the lease.of the site by PAMF to CCLC. It restates the original requirement to lease the
site for child care, which is the last surviving term from the original Development
Agreement. It authorizes the lease directly from PAMF to CCLC and gives the City the
right to determine whether to approve any subsequent proposed operator, as well as to
determine that an operator/lessee is not meeting agreed-upon operating standards, which
would constitute a default under the lease agreement.
Public/Private Partnership.Proposal
At its July 12, 1999 meeting, Council approved staff’s recommendation to select a child
care organization and provide this organization with use of the land and other assistance
CMR:353:00 Page 4 of 7
(CMR:276:99). Staff recommends that this assistance be provided in accordance withthe
City’s Public/Private Partnership Policy (Policy and Procedure 1-25). Approved by the
City Council in February 1994, the policy defines public/private partnerships as
cooperation between the City and private sector or nonprofit organizations in providing
services, facilities or other capital projects to the community. The policy states that the
City shall encourage the development of public/private partnerships for public benefit
through such means as fee waivers and facilitation of proposals through the City’s
regulatory process. Fee waivers are to be limited to "capital projects that result in a new
or improved public facility, building or park that will be solely owned or controlled by
the City."
While the downtown child care center will not be owned or controlled by the City, staff
believes the waiver of fees is appropriate for several reasons. First, PAMF has given the
City rights to the land for 35 years expressly for the purpose of child care. While the City
could have developed the center itself, it chose not to do so since it did not have the
capacity to take on an additional capital project and did not want to assume programmatic
responsibility or commit operating funds on an ongoing basis. Instead, the City
determined that it would select a child care organization to build and run the center and
thus provide a service determined by the City’s Child Care Advisory Committee, Council
and staff to be of critical importance to the community. The type of child care center to
be developed - one serving infants, toddlers and preschoolers - was determined by the
City. The process for selecting this child care organization was initiated and controlled
solely by the City and City staff will be responsible for ensuring that the center meets the
City’s operating standards.
A second reason to waive fees for the downtown child care center is that such assistance
is consistent with the City’s history of supporting child care in Palo Alto. Through the
Lease and Covenant Not to Develop, the City currently contracts with several child care
organizations to provide school-age child care at 11 Palo Alto Unified School District
elementary schools. The City sets the lease rates offered to these organizations at
significantly below market rates because of its commitment to providing child care.
Finally, while the land for the downtown child care center will be leased to CCLC at
essentially no cost (one dollar per year), CCLC will be responsible for a significant
annual expense to service the debt it will incur to construct the center. CCLC bears this
expense - and all of the risk of financing and constructing a new facility - in place of
renting a finished center and will likely pay more on a square footage basis in annual debt
service payment than the rent the City charges for the school-age programs. It is widely
acknowledged that providing quality child care is very expensive. Child care providers
are challenged to keep parent fees affordable while maintaining salary levels and making
other investments necessary to keep quality standards high. Therefore, it is in the City’s
CMR:353:00 Page 5 of 7
interest to do what it can to minimize City-controlled costs that CCLC will need to incur
to establish the downtown center.
Motivated by these compelling reasons to use the Public/Private Partnership Policy to
support the downtown center, the staff public/private committee met and developed a
proposal. The committee identified a variety of City fees that CCLC may be required to
pay, including: fees for Architectural Review Board.(ARB) applications; environmental
review documentation; building, fire sprinkler/alarm, and other permits; plan checks;
street work permits, and utility connections. The committee proposes that the City
Council approve a waiver of such fees in an amount not to exceed $50,000.
Using the City Manager’s Contingency, staffwill also reimburse CCLC for the cost of a
soils assessment estimated at $6,000. This assessment was done to ensure that the
property was safe and ready for development.
In addition to the above financial assistance, staff will help CCLC navigate the City’s
development review process. Review of the preliminary center designs developed by
CCLC has already begun in order to identify and resolve issues, such as parking and
circulation, that will be key to an appropriate design and a timely and successful review
process through the ARB. Staff will also facilitate CCLC’s outreach to the neighbors of
the center to identify and address any resident concerns.
RESOURCE IMPACT
The fee waiver recommended by staff is not to exceed $50,000. City General Fund and
Utility Fund revenues therefore would be reduced by a total of up to $50,000. Since
minor revenue changes are not reflected in the budget, no budget amendment is required.
The waiver of fees will be taken into account in the Development Center cost recovery
analysis and in regularly produced variance reports if actual revenues are significantly
below projected revenues. In addition, $6,000 will be expended from the City
Manager’s contingency to reimburse CCLC for the cost of a soils assessment on the
Channing/Ramona site.
POLICY IMPLICATIONS
Facilitating the provision of child care in Palo Alto is consistent with existing City policy.
The City created the Child Care Advisory Committee in 1995 to promote an increase in
the supply of quality child care. Under Comprehensive Plan Goal C-3, which calls for
improved services for children, there are six policies that address the issue of child care.
Among these, Policy C-16 says the City should "identify existing or potential locations
CMR:353:00 Page 6 of 7
for child and/or senior care in public facilities and actively promote the establishment of
such facilities." In addition, the establishment of a downtown child care center is
included in the South of Forest Avenue (SOFA) Coordinated Area Plan.
Use of fee waivers to promote public/private partnerships is established in Policy and
Procedure 1-25. Staff has been thoughtful in its application of this policy to ensure that
no undesired precedent is set. The proposed fee waivers are appropriate since the land on
which the center will be built is under City control and the scope of the child care center
project and the process for selecting a center developer/operator was controlled by the
City.
TIMELINE
Following execution of the lease, CCLC will submit an application to the City for review
by the ARB. Staff anticipates that CCLC will complete the development review and
building permit process and be ready to begin center construction by January 2001. The
anticipated completion date for the center is September 2001.
ENVIRONMENTAL REVIEW
The development of a child care center at Ramona Street and Channing Avenue was
included in the Environmental Impact Report (EIR) done for the SOFA Coordinated Area
Plan. The child care center currently proposed by CCLC is consistent with the
parameters analyzed in the SOFA plan EIR. Staff does not anticipate that additional
environmental review will be necessary.
PREPARED BY:
CITY MANAGER APPROVAL:
ATTACHMENTS
Audrey Seymour, Senior Executive Assistant
SON
Assistant City Manager
Attachment A
Attachment B:
Implementation Agreement between the City and PAMF
Lease Agreement between PAMF and CCLC
Palo Alto Medical Foundation
Children’s Creative Learning Centers
CMR:353:00 Page 7 of 7
This document is recorded for the benefit
of the City of Palo Alto and is entitled to be
recorded free of charge in accordance with
Section 6103 of the Government Code.
After Recordation, mail to:
OFFICE OF THE CITY ATTORNEY
250 Hamilton Avenue
Palo Alto, CA 94301
IMPLEMENTATION AGREEMENT
Between
PALO ALTO MEDICAL FOUNDATION
FOR HEALTH CARE, RESEARCH, AND EDUCATION,
A California Nonprofit Public Benefit Corporation
and
CITY OF PALO ALTO, CALIFORNIA
A Chartered City
Gray CarykPA\10048078.4
1160530-901700
IMPLEMENTATION AGREEMENT
This Implementation Agreement ("Agreement") is enacted and entered into as of the
day of ,2000 ("Effective Date"), between the CITY OF
PALO ALTO ("City"), a chartered city and California municipal corporation, and the PALO
ALTO MEDICAL FOUNDATION FOR HEALTH CARE, RESEARCH, AND EDUCATION
("Foundation"), a California nonprofit public benefit corporation.
RECITALS
THIS Agreement is entered into and enacted on the basis of the following facts,
understandings and intentions of the parties:
A. The parties have heretofore entered into a statutory development agreement
("Original Agreement"), dated as of October 29, 1991, and filed for record in the Office of the
Santa Clara County Recorder on November 3, 1991, as amended by a First Amendment ("First
Amendment") which was enacted and entered between the parties as of March 14, 1996, and
filed for record in the Office of the Santa Clara County Recorder on May 1, 1996. The Original
Agreement as amended by the First Amendment is hereinafter referred to as the "Development
Agreement."
B. Foundation is the owner of the Property, also referred to herein as the "Downtown
Site," which is affected by the Development Agreement and this Agreement. Said property is
described in Exhibit A to the Development Agreement.
C. Following execution of the Development Agreement, Foundation acquired an
alternative site ("Urban Lane Site") for its proposed medical facility, and has applied for and
obtained certain legislative and administrative development approvals ("Urban Lane Approvals")
affecting the Urban Lane Site.
D. Section 6(d) of the Original Agreement provides that the site at the northwest
comer of Channing Avenue and Ramona Street (the "Child Care Site") shall be leased to City by
Foundation free of any liens or encumbrances (other than those resulting from public easements
of record, or limitations, mitigation measures or conditions imposed by City in connection with
discretionary land use approvals and environmental review for development of the Child Care
Site) for One Dollar ($1.00) per year for a term of no less than thirty-five (35) years, and that
City will lease the Child Care Site back to Foundation for One Dollar ($1.00) per year for
continued use as parking until such time as a building permit for a child care center or other use
which may be deemed acceptable to Foundation and City is issued for the Child Care Site. The
Child Care Site is more particularly described in Exhibit "A" attached hereto and incorporated
herein by this reference.
E. The parties now believe that the purposes and objectives of Section 6(d) of the
Original Agreement can be implemented more simply and efficiently by instead allowing
Foundation to enter into a direct lease with a child care center operator that is acceptable to the
City.
Gray Cary~PA\10048078.4 11160530-901700
F. The terms and conditions of this Agreement have been found by City to be fair,
just and reasonable and, prompted by the necessities of the situation, to provide equivalent
benefits to the City.
G. This Agreement is consistent with the present public health, safety and welfare
needs of the residents of the City and the surrounding region. City specifically has considered
and approved the effects of this Agreement upon the regional welfare.
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. As used in this Agreement, each capitalized term used, unless
otherwise defined herein, shall have the meaning defined in the Development Agreement.
2. Interest of Foundation. Foundation represents to City that as of the Effective Date
it owns the Child Care Site in fee, subject only to encumbrances, easements, covenants,
conditions, restrictions and other matters of record.
3. Binding Effect. Subject to the provisions of Section 17(0 of the Development
Agreement, this Agreement and all of its terms and conditions shall run with the land with
respect to the Child Care Site, binding and inuring to the benefit of the parties and their
respective assigns, heirs and other successors in interest.
4. Negation of Agency. The parties acknowledge that in entering, enacting and
performing this Agreement, each is acting as an independent entity and not as an agent of the
other party in any respect.
5. Child Care Obligations. The provisions of Section 6(d) of the Original
Agreement are hereby superseded by the obligations (the "Child Care Obligations") attached
hereto as Exhibit "B" and incorporated herein in their entirety. The parties acknowledge that in
anticipation of the execution and recordation of this Agreement against the Child Care Site, the
Development Agreement has been terminated and released.
6. Altemative Method of Satisfying Obligations. In lieu of leasing the Child Care
Site to the City, Foundation may satisfy its Child Care Obligations by (i) leasing the Child Care
Site to a child care center operator ("Operator") that is approved the City (which approval may
be revoked in accordance with this Agreement) pursuant to a ground lease (the "Ground Lease")
that is on terms and conditions acceptable to the City in its sole discretion, and (ii) otherwise
complying with the terms of this Agreement. The City has approved Children’s Creative
Learning Centers as an Operator.
7. Approval of Day Care Center Operator. City shall give its approval of any
Operator which, in the good faith judgment of City, meets the standards specified in Exhibit "C"
attached hereto and incorporated herein by this reference. City may at any time revoke its
approval if, in the good faith judgment of City, the Operator no longer meets such standards, in
which event the Ground Lease shall terminate if the Operator’s mortgage lender does not timely
designate a replacement operator pursuant to the terms of the Ground Lease. If the Lease with
the Operator terminates pursuant hereto, Lessor shall enter into a new Grotmd Lease with the
City or a replacement operator designated or approved by the City on the same terms and
Gray Cary~PA\10048078.4 21160530-901700
conditions as the Ground Lease unless the City gives Lessor written notice that the City elects
not to find a replacement operator in which event Lessor and the City shall have no further rights
or obligations hereunder except as set forth in Section 6.2 of the Ground Lease and in Section 8
of this Agreement.
8. Obligation To Lease. Foundation shall not be deemed to be in breach of the Child
Care Obligations as long as Foundation is not in breach of its obligations hereunder and under
the Ground Lease. Once the Foundation has entered into a Ground Lease with the Operator, the
Foundation’s obligations shall be governed by the terms of the Ground Lease, which shall not be
amended without the consent of City, which shall not be unreasonably withheld. The City shall
provide the Foundation with a release and termination of this Agreement and all remaining rights
thereunder in a document in form for recordation at such time as the Ground Lease (or, if
applicable, any replacement ground lease) terminates in accordance with its terms and the City
has no further right to enter into (or designate an operator to enter into) a replacement ground
lease.
9.Miscellaneous.
(a) Authori _ty to Execute. The person or persons executing this Agreement
warrant and represent that they have the authority to bind Foundation to the performance of its
obligations hereunder.
(b) Exhibits. The following exhibits to which reference is made in this
Agreement are deemed incorporated herein in their entirety:
Exhibit A - Description of Child Care Site
Exhibit B - Section 6(d) Obligations
Exhibit C - Standards for Approval of Operator
IN WITNESS WHEREOF, this Agreement has been executed by the parties .as of the day
and year first above written.
PALO ALTO MEDICAL FOUNDATION
FOR HEALTH CARE, RESEARCH AND
EDUCATION, a Califomia nonprofit public
benefit corporation
By:.
Its:
Gray CarykPA\10048078,4 31160530-901700
ATTEST CITY OF PALO ALTO
City Clerk
By:
Mayor
APPROVED AS TO FORM:
Senior Asst. City Attomey
APPROVED:
City Manager
APPROVED AS TO CONTENT:
Director of Administrative Services
Gray CarykPA\10048078.4 41160530-901700
EXHIBIT "A"
Description of Child Care Site
Gray Caryh~A\10048078.4 51160530-901700
LEGAL DESCRIPTION ~
REAL PROPERTY in the City of Palo Alto, County of Santa Clara, State of California, described as follows:
Lots 5, 6, 7, 8, and 9 In Block 9, as shown upon that certain Map entitled, "Morris and Greenwood Subdivision
of Block 9 University Park", which Map was filed for record in the office of the Recorder of the County of
Santa Clara, State of California on April 15, 1890 in Book "D" of Maps, page 189, described as follows:
Beginning at the point of intersection of the Southwesterly line of Ramona Street, formerly Wadsworth Street
with the Northwesterly Ilne of Channing Avenue, running thence Southwesterly along said Northwesterly line
of Channing Avenue t25 feet; thence at e right angle Northwesterly 100 feet: thence at a right angle 125 feet
to said Southwesterly line of Ramona Street; thence at a right angle Southeasterly,along said Southwesterly
line of Ramona Street 100 feet to the point of beginning,
APN: 120-28-030
ARB: 120-28-030
EXHIBIT "B"
Child Care Obligations
Section 6(d). Channing/Ramona Site Lease The site at the northwest comer of
Channing Avenue and Ramona Street shall be leased to the City directly or to a child care
provider, at City’s election, by Foundation free of any-liens or-encumbrances (other than those
resulting from public easements of record, or limitation, mitigation measures or conditions
imposed by City in connection with discretionary land use approvals and environmental review
for development of the Channing/Ramona site) for One Dollar ($1.00) per year for a term of no
less than thirty-five (35) years. The lease shall be in form approved by City. The lease shall be
executed and become effective as soon as practicable. City and Foundation acknowledge that
further discretionary land use approvals and environmental review may be necessary before any
building permit can be issued for the site and that the lease will be subject to any limitations,
mitigation measures or conditions deemed reasonably necessary by City.
Gray Cary~PA\10048078.4
1160530-901700
EXHIBIT "C"
Standards for Approval of Operation
1. Licensing and Exemptions. Operator shall operate a child care program for infants,
toddlers and pre-school children that is licensed by the California Department of Social Services,
Community Care Licensing Division, unless exempted from lic~nsure as stated in the general
licensing requirements of Title 22 of the California Code of Regulations as promulgated by the
Department of Social Services/Community Care Licensing Division. All licensed programs shall
maintain a current non-ambulatory license.
2. Licensing Reports. Operator shall promptly provide to the City copies of all licensing
reports issued by the California Department of Social Services, Community Care Licensing
Division.
3. Accreditation. Operator shall begin the National Association for the Education of Young
Children (NAEYC) accreditation process within six (6) months of the date operation begins.
NAE¥C accreditation shall be achieved within eighteen (18) months of the date operation
begins. Operator shall maintain accreditation standards as set forth by the NAEYC.
4. Accreditation Reports. Operator shall provide to the City copies of all licensing and
accreditation reports issued by the California Department of Social Services, Community Care
Licensing Division, and the NAEYC.
5. Health and Safety Standards. Operator shall enforce health and safety standards that are
consistent with state regulations and NAEYC accreditation guidelines in such areas as
administration of medications, emergency information forms, and exclusion of sick children.
Operator shall ensure that staff members receive ongoing training in the areas of basic first aid
and cardiopulmonary resuscitation (CPR).
6. Emergency Preparedness. Operator shall implement and follow emergency preparedness
procedures and drills that are consistent with state laws and national accreditation standards.
7. Sign 1n/Sign Out Procedures. Operator shall maintain sign-in and sign-out procedures in
accordance with state licensing requirements.
8. Staffing; Staff Development. Operator will assign a program director to have supervisory
responsibility for the performance, progress, and execution of Operator’s program at the center.
The program director will represent Operator during the day-to-day work on the program. The
program director and every individual, .including any consultant charged with the performance of
services, shall be duly licensed or certified by the State of California, to the extent such licensing
or certification is required by law to perform such services, and the program will be executed by
them or under their supervision. If circumstances or conditions cause the replacement of the
program director for any reason, the City shall be notified of the appointment of a replacement
program director. Operator shall provide the City with documentation of staff and staff
qualifications on an annual basis. Operator shall offer appropriate staff development activities
Gray CarykPA\10048078.4
1160530-901700
on an ongoing basis, including staff training, in order to fully meet the child development needs
of children enrolled in the program.
9. Children with Special Needs. Operator shall identify children with special needs at the
time of enrollment to insure adequate staffing levels. Children with special needs who require
assistance during an emergency evacuation shall be accommodated.
10. Enrollment and Waiting Lists. Operator shall grant priority enrollment to City employees
for 20% of the center’s child care slots. Operator shall maintain a current waiting list when
program is at licensed capacity.
11. Written Schedules. Operator shall at all times maintain written schedules setting forth the
operating hours and operating procedures for each service provided on or from the child care
center. A fee schedule for prices charged for all services shall be maintained. All prices shall be
affordable for families who live or work in or near the center.
12. Equipment and Supplies. Operator shall assume responsibility for program
implementation, and shall provide furniture, equipment, and supplies.
13. Parent Advisory Committee. Operator shall provide the opportunity for establishment of
a parent advisory committee. All interested parents shall be eligible for membership. The role
of the parent advisory committee and its involvement in the operation of the center will be
determined when the committee is established and reported to the City.
14. Annual Parent Survey. Operator shall conduct an annual parent survey. Results of the
parent survey shall be made available to the Manager of Child Care and Family Services.
15. Materials to be Kept on File. Operator shall ensure that materials required by the City, as
more specifically outlined in this Exhibit, be maintained on file with the Manager of Child Care
and Family Services. Materials to be kept on file include but are not limited to:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Calendar of Days Open and Closed
Current Operating License
Emergency Preparedness Plan
Licensing Reports issued by the California Department of Social
Services/Community Care Licensing Division
Operating Procedures and Polices (Parent Handbook)
Summary Sheet of Annual Parent Evaluations
Tuition Schedule
Certificate of Accreditation
Information Regarding Staff Salaries and Benefits
Annual Staff Turnover Rate
16. Annual Site Evaluation. Operator shall participate in an annual site evaluation conducted
by the City to determine that the program continues to satisfactorily meet the City’s requirements
as stated in this Exhibit.
Gray CarykPA\10048078,4
1160530-901700
17. Reports to the City. All correspondence to the City relating to this Exhibit shall be sent to
the following address:
City of Palo Alto, Office of Human Services
4000 Middlefield Road T-2
Palo Alto, CA 94303
Attn: Child Care & Family Services Manager
18.Operation of the Center. Operator will:
(1) Procure all permits and licenses, pay all charges and fees, and give all
notices which may be necessary and incident to the due and lawful prosecution of Operator’s
program;
(2) Keep fully informed of all existing and future Federal, State of California,
and local laws, ordinances, regulations, orders, and decrees which may affect those engaged or
employed and any materials used in performance of Operator’s services;
(3) At all times observe and comply with, and cause its employees and
consultants, if any, to observe and comply with, the laws, ordinances, regulations, orders and
decrees mentioned above;
(4) Be responsible for employing or engaging all persons necessary to staff
the program. All consultants of Operator will be deemed to be directly controlled and supervised
by Operator, which will be responsible for their performance. If any employee or consultant of
Operator fails or refuses to carry out his or her duties or appears to be incompetent or to act in a
disorderly or improper manner, the employee or consultant will be discharged by the Operator.
(5) Coordinate its services with other existing organizations providing similar
services in order to foster community cooperation and to avoid unnecessary duplication of
services.
(6) Ensure that all services offered under the program shall be secular in
nature. Operator shall further ensure that it shall refrain from offering religious instruction,
worship or other religious activities while providing child care services, in accordance with the
provisions of the California and United States Constitutions.
(7) Operate and manage the services and facilities in a competent and efficient
manner at least comparable to other well managed operations of a similar type. Operator shall at
all times retain active, qualified, competent, and experienced personnel and insure the
maintenance of a high standard of service to the public.
(8) Not discriminate in the employment of persons or provision of child care
service because of the age, race, color, national origin, ancestry, religion, disability, sexual
preference or gender of such person. Operator agrees to meet all requirements of the Palo Alto
Municipal Code pertaining to nondiscrimination in employment, including completing the
requisite forms furnished by the City.
Gray CarykPA\10048078.4
1160530-901700
(9) Cause each contract for services from independent providers to contain a
provision substantially as follows:
"[Name of Provider] will provide Operator with a certificate
stating that [Name of Provider] is currently in compliance with all
Federal and State of Califomia laws covering nondiscrimination in
employment; and that [Name of Provider] will not discriminate in
the employment of any person under this contract because of the
age, race, color, national origin, ancestry, religion, disability,
sexual preference or gender of such person."
Gray Caryh°A\10048078.4
1160530-901700
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)
STATE OF
COUNTY OF
.)
)
On , before me,, a notary public in
and for said County, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) 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.
Gray CarykPA\10048078.4
1160530-901700
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)
STATE OF
COUNTY OF
)
)
On , before me,, a notary public in
and for said County, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) 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.
Gray Cary\PA\ 10048078.4
1160530-901700
GROUND LEASE
by and between
THE PALO ALTO MEDICAL FOUNDATION
FOR
HEALTH CARE, RESEARCH AND EDUCATION
"Lessor"
and
CHILDREN’S CREATIVE LEARNING CENTER, INC.
"Lessee"
.,2000
Note:Any amendments to this Ground Lease shall be subject to the approval of Lessee’s Lender
and the City of Palo Alto.
Gray Cary~A\10058630.2
1160530-901700
GROUND LEASE
THIS LEASE (the "Lease") is made and entered into as of ,2000
("Execution Date") by and between THE PALO ALTO MEDICAL FOUNDATION FOR
HEALTH CARE, RESEARCH AND EDUCATION, a California corporation ("Lessor"), and
CHILDREN’S CREATIVE LEARNING CENTER, INC., a California corporation
("Lessee").
RECITALS
A. Lessor owns that certain real property (together with certain appurtenant rights
and easements) located in the City of Palo Alto, County of Santa Clara, State of California, and
more particularly described in Exhibit A attached hereto (the "Premises").
B. Pursuant to a condition contained in a Development Agreement previously
entered into between Lessor and the City of Palo Alto (the "City") which has been superseded by
an Implementation Agreement (the "Implementation Agreement") dated ., 2000
between Lessor and the City and which has been recorded against the Premises, Lessor agreed to
make the Premises available to the City for use as a child day care facility (the "Child Care
Condition").
C. Lessee desires to lease the Premises for the purpose of constructing a child day
care facility, appurtenant parking areas and other related improvements (collectively, the
"Improvements;" such term is further defined in Appendix 1 of this Lease). Lessor has agreed,
at the request of the City, to lease the Premises to Lessee in satisfaction of the Child Care
Condition and the City has given Lessor its written acknowledgment that the execution of this
Lease shall fully satisfy Lessor’s obligations under the Child Care Condition.
D. Lessor and Lessee have agreed to enter into a lease of the Premises upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the rents to be paid hereunder and of the
agreements, covenants and conditions contained herein, the parties hereby agree as follows:
ARTICLE 1. BASIC LEASE INFORMATION
The following is a summary of basic lease information. Each term or item in this
Article 1 shall be deemed to incorporate all of the provisions set forth below pertaining to such
term or item and to the extent there is any conflict between the provisions of this Article 1 and
any more specific provision of this Lease, the more specific provision shall control. Any
capitalized terms not otherwise defined shall have the meanings set forth in Appendix 1 attached
hereto.
Lessor:The Palo Alto Medical Foundation for Health
Care, Research and Education
Address of Lessor:795 E1 Camino Real
Palo Alto, Califomia 9430
Attention: David Jury
Gray CarykPA\10058630.2 11160530-901700
Lessee:Children’s Creative Learning Center, Inc.
Address of Lessee:794 East Duane Avenue
Sunnyvale, California 94086
Commencement Date (Article 4):The date Lessee commences demolition or
construction on the Premises
Term (Article 4):From the Commencement Date to the date that is
thirty-five (35) years after.the Execution Date
Expiration Date (Article 4):
Annual Rental (Article 5):One Dollar ($1)
Address of City for Notice Purposes:City Clerk
City of Palo Alto
P.O. Box 10250
Palo Alto, CA 94303
Amendments to Lease (Section 7.12 and Article ALL AMENDMENTS REQUIRE CONSENT
11): . OF LENDER AND THE CITY.
ARTICLE 2. LEASE OF PREMISES; RESERVATION OF RIGHTS
2.1 Premises. Lessor and Lessee hereby agree that as of the date of this Lease, all prior
agreements between them for the lease of the Premises are hereby superseded and shall have no
further force or effect. Lessor hereby leases the Premises to Lessee, and Lessee hereby hires the
Premises from Lessor, on the terms and conditions set forth in this Lease. The term "Premises"
shall not include any Improvements. This Lease shall be subject to all zoning and governmental
regulations now or hereafter in effect, any Leasehold Encumbrance (as defined in Section 7.1
hereof) hereafter in effect, and all liens, encumbrances, restrictions, rights and conditions of law
or of record existing as of the execution date of this Lease or otherwise known to Lessee or
ascertainable by inspection or a survey.
2.2 Reservation of Rights. Subject to Section 37.10, Lessor hereby reserves and excepts
all rights in and with respect to the Premises not inconsistent with Lessee’s use of the Premises
as permitted herein, including without limitation the right of Lessor, at all reasonable times and,
if reasonably practicable, following advance notice to Lessee, to enter and to permit
governmental bodies, public or private utilities and other persons to enter upon the Premises for
the purposes of installing, using, operating, maintaining, renewing, relocating and replacing such
underground wells and water, oil, gas, steam, storm sewer, sanitary sewer and other pipe lines,
and telephone, electric, power and other lines, conduits, and facilities and maintenance rights of
way and equipment, as Lessor may deem desirable in connection with the development or use of,
or remediation of Hazardous Substances in, on, or under, the Premises or any other property in
the neighborhood of the Premises, whether owned by Lessor or not. Lessor hereby agrees to
indemnify Lessee from all loss, liability, claims or damage arising from or related to any
activities undertaken by Lessor pursuant to this Section 2.2.
Gray CarykPA\10058630.2 21160530-901700
2.3 Reservation of Initial Parking Lot Rights Between the Execution Date and the
Commencement Date (the "Retained Use Period"), Lessor shall be entitled to retain possession
of the Premises for use as a parking area. During the Retained Use Period, the following shall
apply:
(a) Lessee shall have no responsibility under this Lease with respect to any
Annual or Additional Rent for the Premises.
(b) Lessor shall be responsible for real estate taxes and impositions and
maintenance obligations.
(c) Lessor shall maintain all insurance in place that Lessee is required to maintain
during the Term pursuant to Sections 19.6(c) and 19.7, with Lessee named as an additional
insured thereunder.
(d) Lessor shall comply with and be subject to Articles 18 and 20 of the Lease for
the period prior to the Commencement Date as if Lessor were the Lessee. Lessee shall be
entitled, upon giving Lessor written notice of the Commencement Date, to have its
environmental consultant make a final site inspection prior to commencement of any demolition
or construction activities at the Premises to determine whether there has been any release of
Hazardous Materials onto the surface of the Premises during the Retained Use Period. If any
such release is discovered that requires further investigation or remedial action, Lessee shall
report same to Lessor and Lessor shall be responsible for determining the nature and extent of
such investigation and/or remedial action and in pursuing such actions as necessary to be in
compliance with applicable law, with such participation of applicable environmental agencies as
Lessor’s environmental consultant may reasonably determine to be necessary. Any investigation
or remedial action required of Lessor pursuant to this Section 2.3(d) shall be deemed to defer the
Commencement Date (but not the Expiration Date) until completed to Lessee’s reasonable
satisfaction. If at any time Lessee is not fully satisfied with the progress or nature of such
actions by Lessor, Lessee shall be entitled to waive the requirement of further action by Lessor
and accept responsibility for further investigation and/or action or, at Lessee’s sole election,
terminate this Lease. In the event Lessee elects to terminate the Lease pursuant to Section
2.3(d), Lessee shall have no further obligations to Lessor under the Lease, but such termination
shall be subject to the rights of Lender under Article 7 and the rights of the City under Article 11
hereof.
ARTICLE 3. ACCEPTANCE OF PREMISES
Lessee acknowledges that it has inspected the Premises and is satisfied that the Premises
are in an acceptable condition and meet Lessee’s needs. Lessee specifically agrees to take the
Premises in their existing condition and acknowledges that in entering into this Lease, Lessee
does not rely on, and Lessor does not make, any express or implied representations or warranties
as to any matters including, without limitation, the suitability of the soil or subsoil, any
characteristics of the Premises, the suitability of the Premises for the intended use, the likelihood
of deriving business from or other characteristics of Lessor, the economic feasibility of the
business Lessee intends to conduct on the Premises, title to the Premises, Hazardous Substances
Gray Cary~PA\10058630.2 31160530-901700
on or in the vicinity of the Premises, or any other matter. Lessee has satisfied itself as to such
suitability and other pertinent matters by Lessee’s own inquiries and tests into all matters
relevant in determining whether to enter into this Lease. Lessee accepts the Premises in its
existing condition, and hereby expressly agrees that if any remedial or restoration work is
required in order to conform the Premises to the requirements of Applicable Laws as a result of
the use or occupancy of the Premises by Lessee, Lessee shall assume sole responsibility for any
such work. Lessee accepts the Premises subject to the terms and conditions of the
Implementation Agreement and the City’s rights thereunder.
ARTICLE 4. TERM
The term of this Lease (the "Term") shall be for the period stated in the Basic Lease
Information, commencing on the Commencement Date and expiring on the Expiration Date,
unless terminated earlier as hereinafter provided. The Commencement Date shall be the date on
which Lessee is ready, willing and able to commence demolition and construction activities for
the Improvements to be built on the Premises and has obtained the building permits from the
city of Palo Alto for such work, provided that Lessee shall give Lessor at least ten (10) days
prior written notice of the Commencement Date and Lessor shall surrender possession of the
Premises to Lessee on the Commencement Date. The parties shall execute a memorandum
setting forth the Commencement Date when that date is determined.
ARTICLE 5. ANNUAL RENTAL
As part of the consideration for this Lease, commencing upon the Commencement Date
and continuing throughout the Term, Lessee shall pay to Lessor, at Lessor’s address stated in the
Basic Lease Information, or to such other person or at such other place as Lessor may from time
to time designate by notice to Lessee, without prior notice or demand, Annual Rental in the
amount stated in the Basic Lease Information. Annual Rental may be payable annually, in
advance, on or before the first day of each Lease Year, or may be prepaid in whole or in part.
ARTICLE 6. ADDITIONAL RENTAL AND SECURITY DEPOSIT
6.1 Additional Rental. Each and every sum payable to Lessor pursuant to this Lease
(other than Annual Rental) and each and every sum which Lessor pays to any third party to cure
a default of Lessee shall be ’additional rent ("Additional Rental"). Lessor shall be entitled to the
same rights and remedies with respect to the recovery of Additional Rental as it shall be with
respect to Annual Rental. Annual Rental and Additional Rental are collectively referred to
herein as "Rent."
6.2 Security Deposit. In the event that the City grants an exemption to Lessee from
City’s parking requirements for construction of the Improvements and Lessee constructs the
Improvements based on such parking exemption, then prior to the commencement of any
construction by Lessee, Lessee shall be required to obtain from the City for Lessor’s benefit and
protection; a written assurance from the City that following a termination of this Lease the City,
at its sole cost and expense upon receipt of written request by Lessor, shall demolish and remove
the Improvements at no cost to Lessor, if in fact Lessee does not do so following written notice
to so do pursuant to Article 26. To secure Lessee’s obligation to remove the improvements from
the Premises upon termination of the Lease (if Lessor should request such removal pursuant to
Article 26), Lessee shall deposit with Lessor a security deposit (the "Security Deposit") in the
Gray Cary~PA\10058630.2 41160530-901700
amount of Twenty-Five Thousand Dollars ($25,000.00) which shall be payable to Lessor in
installments as follows:
(a) Upon the Commencement Date:
(b)Upon each of the first four anniversaries of the
Commencement Date:
(c)
(d)
Upon each of the next five anniversaries of the
Commencement Date
Upon each anniversary of the Commencement Date
thereafter until the total Security Deposit of $25,000 has been
paid to Lessor
1,000.00
1,000.00
2,000.00
3,000.00
All installments of the Security Deposit shall be held by Lessor for the duration of the Lease (or
any replacement lease entered into at the direction of Lender under Section 7.7 below or the City
under Article 11 below), without any obligation to maintain such deposit in a separate account
and without any obligation to pay interest thereon, for application to Lessee’s demolition and
removal obligations in the event Lessor elects to have Lessee remove the Improvements upon
termination of the Lease, whether such termination is at the natural expiration of the Term of the
Lease or upon an early termination of the Lease without exercise by Lender or the City of their
rights to designate a replacement tenant. If Lessee is required to and does complete its
demolition and removal obligations upon termination of the Lease, the Security Deposit shall be
returned to Lessee (or any successor of Lessee to the extent that any such successor has made
any of the installment payments of the Security Deposit or satisfied the demotion and removal
obligations) without interest.
At such time as the full amount of the Security Deposit has been paid to Lessor, the City
shall be relieved of its obligations under this Section 6.2. Furthermore, if the Lease terminates
prior to payment of the full. amount of the Security Deposit to Lessor, the City shall be entitled to
satisfy its obligations by paying the balance of the Security Deposit to Lessor within forty-five
(45) days of City’s receipt of written notice of Lessor’s election to have the Improvements
removed; provided that if Lessee defaults in the payment of any installments of the Security
Deposit when due, City shall not be relieved of its obligations under this Section 6.2 unless City
has cured any such default with respect to payment of installments of the Security Deposit within
forty-five (45) days of City’s receipt of written notice of default from Lessor.
ARTICLE 7. ENCUMBRANCE OF LEASEHOLD ESTATE
7.1 Lessee’s Right to Encumber. Lessee may, at any time and from time to time during
the Term, encumber to any third party (referred to in this Lease as "Lender"), by deed of trust or
mortgage or other security instrument, all of Lessee’s interest under this Lease and the Leasehold
Estate (any such encumbrance shall be referred to in this Lease as a "Leasehold Encumbrance")
for any purpose or purposes consistent with the Premises Use Restrictions as set forth in Section
9.1 hereof, without the consent of Lessor. The term "Leasehold Estate" as used in this Lease
Gray CaryWA\10058630.2 51160530-901700
shall mean the leasehold estate regarding the Premises created in Lessee by this Lease.
However, no Leasehold Encumbrance incurred by Lessee in accordance with this Section 7.1
shall, and Lessee shall not have the power or authority to incur an encumbrance that shall,
constitute a lien or encumbrance on Lessor’s fee interests in the Premises. Any Leasehold
Encumbrance shall be subject to all terms, provisions, covenants, conditions, and restrictions set
forth in this Lease and to all rights and interests of Lessor, except as otherwise expressly
provided in this Lease. Lessee shall give Lessor at least ten (10) business days prior written
notice of any Leasehold Encumbrance, together with a copy of the deed of trust, mortgage, or
other security interest evidencing the Leasehold Encumbrance, all in the form (i) as will actually
be executed by the parties thereto and (ii) as will actually be recorded, if at all, in the official
records of the Recorder’s Office of the County of Santa Clara, California.
7.2 Notices Regarding Lender, Lessor, and City. Lessor shall mail to any Lender who
has given Lessor written notice of Lender’s name and address (such notice to Lessor shall have
been in conformance with the requirements of notice to Lessor pursuant to this Section 7.2), a
duplicate copy of any and all notices Lessor may from time to time give to Lessee in accordance
with or relating to this Lease, including but not limited to any notice of default, notice of
termination, or notice regarding any matter on which Lessor may predicate or claim a default.
Any notices or other communications given to Lender by Lessor or permitted by this or any other
section of this Lease or by law to be given to Lender by Lessor shall be deemed duly delivered to
Lender when deposited in the United States mail, first-class postage prepaid, addressed to Lender
at the last mailing address for Lender furnished in writing by Lender to Lessor (notice to Lessor
of such mailing address of Lender shall have been given in conformance with the requirements
of notice to Lessor pursuant to this Section 7.2). As a condition to exercising any rights granted
to Lender under this Lease, Lender shall, without limitation, (i) comply with the provisions of
Section 33 hereof (regarding notices to be sent to Lessor or City) with respect to any and all
notices or communications sent by Lender to Lessor or City, (ii) concurrently send a duplicate
copy to Lessor and City of any notice given to Lessee by Lender regarding a breach or default by
Lessee with respect to a Leasehold Encumbrance or any loan made in connection with a
Leasehold Encumbrance, and (iii) promptly notify Lessor and City of any pending or completed
foreclosure of the Leasehold Encumbrance or any pending or completed assignment or other
transfer of the Leasehold Estate in lieu of foreclosure.
7.3 Right of Lender to Realize on Security. A Lender shall have the right at any time
during the Term and the existence of the Leasehold Encumbrance to do both of the following:
(a) Any act or thing required of Lessee under this Lease, and any such act or thing
done and performed by Lender to prevent a forfeiture of Lessee’s rights under this Lease shall be
as effective as if done and performed by Lessee; and
(b) Realize on the security against the Leasehold Estate afforded by the Leasehold
Encumbrance by means of foreclosure proceedings, accepting an assignment in lieu of
foreclosure, or other remedy afforded in law or in equity or by the leasehold deed of trust
evidencing the Leasehold Encumbrance (referred to herein as the "Leasehold Deed of Trust"),
and thereafter within the Foreclosure Rights Period
(i) To transfer, convey, or assign the Leasehold Estate to any
purchaser at the foreclosure sale, whether the foreclosure sale is conducted under court order or a
Gray CaryWA\10058630.2 61160530-901700
power of sale contained in the Leasehold Deed of Trust, or to an assignee under an assignment in
lieu of foreclosure; and
(ii) To acquire and succeed to the interest of Lessee under this Lease
by virtue of any foreclosure sale, whether the foreclosure sale is conducted under a court order or
a power of sale contained in the Leasehold Deed of Trust, or by virtue of an assignment in lieu of
foreclosure.
(c) The Lender or any person or entity acquiring or otherwise obtaining the
Leasehold Estate shall be liable to comply with the terms, conditions, provisions, covenants and
restrictions applicable to Lessee under this Lease, including but not limited to the Premises Use
Restrictions, and to perform Lessee’s obligations under this Lease, but only during the period in
which that entity or person has ownership of such Leasehold Estate or otherwise is in possession
of the Premises (except as to those terms, conditions, provisions, covenants, restrictions or
obligations of, or applicable to, Lessee which survive termination or expiration of this Lease, as
expressly set forth in this Lease).
7.4 Right of Lender to Cure Lessee’s Defaults. For as long as there is in effect any
Leasehold Encumbrance, before Lessor may terminate this Lease because of default under this
Lease by Lessee, Lessor shall give written notice of the default to Lender and afford Lender the
opportunity after delivery of the notice to do one of the following; provided that (i) neither such
notice to Lender, nor any action by Lender short of fully curing the default within time periods
set forth below in subsections 7.4(a) or 7.4(b), shall operate to waive or mitigate Lessee’s default,
(ii) Lender shall first orconcurrently notify Lessor and City of Lender’s intention to cure the
default, and (iii) Lender’s failure to timely cure such default shall entitle Lessor to terminate the
Lease subject to Sections 7.5 and 24.2 below:
(a) Cure the default within five (5) days after expiration of the time period
granted to Lessee under this Lease for curing a default, when the default can be cured by
payment of money to Lessor or some other person; or
(b) Cure the default within fifteen (15) days after expiration of the time period
granted to Lessee under this Lease for curing a default, when the default can be cured by
something other than the payment of money to Lessor or some other person; provided that if the
nature of the default is such that it will reasonably take more than such fifteen (15) day period to
cure, Lessee shall not be in default so long as Lender promptly commences and diligently
prosecutes such cure to completion.
7.5 Foreclosure in Lieu of Curing Default. Notwithstanding any other provision of this
Lease, a Lender may forestall termination of this Lease by Lessor for a default under this Lease
by Lessee by commencing proceedings to foreclose the Leasehold Encumbrance (the
"Foreclosure Rights"). The proceedings so commenced may be for foreclosure of the Leasehold
Encumbrance by order of court or for foreclosure of the Leasehold Encumbrance under a power
of sale contained in the Leasehold Deed of Trust or by assignment of the Lease to Lender or its
assignee in lieu of foreclosure. The proceedings shall not, however, forestall termination of this
Lease by Lessor for the default by Lessee unless all of the following conditions are met:
Gray Cary~PA\10058630.2 71160530-901700
(a) The proceedings are commenced within ten (10) days after delivery to Lender
of the notice described in Section 7.4 of this Lease, and Lender first or concurrently notifies
Lessor and City of its intention to initiate such proceedings and such notice includes a statement
from Lender that it will comply with the requirements of Sections 7.5(b) and 7.5(c) hereof;
(b) The proceedings are, after having been commenced within the period set forth
in Section 7.5(a) above, diligently pursued in the manner required by law to completion within
one hundred thirty (130) days after delivery to Lender of the notice described in Section 7.4 of
this Lease (the "Foreclosure Rights Period"); and
(c) Lender adheres to and performs all of the terms, provisions, covenants, and
conditions of this Lease requiring the payment or expenditure of money by Lessee (including,
but not limited to, expenditures to satisfy Lessee’s maintenance and repair obligations and
Lessee’s insurance coverage obligations under this Lease), until the foreclosure proceedings are
complete or are discharged by redemption, satisfaction, payment, or conveyance of the
Leasehold Estate.
7.6 Assignment Without Consent on Foreclosure. Subject to Section 7.11 hereof, a
transfer of Lessee’s interest in the Leasehold Estate to any of the following shall not require the
prior written consent of Lessor:
(a) An assignee of Lessee’s leasehold estate created by this Lease under an
assignment in lieu of foreclosure, provided Lender gives Lessor and City written notice of the
transfer, including the name and address of the assignee and the effective date of the assignment,
and provided the assignee gives to Lessor its written agreement to be bound by all of the terms,
conditions, covenants, provisions, and ~estrictions of this Lease; or
(b) A purchaser or assignee of the purchaser at a foreclosure sale of the Leasehold
Encumbrance or the assignee of the Leasehold Estate acquired under an assignment in lieu of
foreclosure, provided the purchaser or assignee gives Lessor and City written notice of the
transfer, including the name and address of the purchaser or assignee and the effective date of the
purchase or assignment, and provided the purchaser or assignee gives to Lessor its written
agreement to be bound by all of the applicable terms, conditions, covenants, provisions, and
restrictions of this Lease.
7.7 New Lease to Lender. Notwithstanding any other provision of this Lease, should
this Lease terminate prior to expiration of the Foreclosure Rights Period because of any default
under this Lease by Lessee, Lessor agrees to enter into a new lease for the Premises with a
Qualified Party designated by Lender under a Leasehold Encumbrance, as lessee, provided all of
the following conditions are satisfied:
(a) A written request for a new lease is given to Lessor and City by Lender within
ten (10) days after delivery to Lender of the notice of termination of this Lease during the
Foreclosure Period due to a default by Lessee, and the new lease is signed by such Qualified
Party and delivered to Lessor within twenty (20) days after delivery of such new lease by Lessor
to the Qualified Party and Lender;
(b) The new lease (i) is for a term ending on the same date the term of this Lease
would have ended had this Lease not been terminated; (ii) provides for the payment of Rent at
Gray CarykPA\10058630.2 81160530-901700
this same rate that would have been payable under this Lease during the remaining term of this
Lease had this Lease not been terminated; and (iii) contains the same terms, conditions,
covenants, provisions, and restrictions as are contained in this Lease (except those that the parties
mutually agree are no longer applicable);
(c) Lender, on execution of the new Lease by Lessor, shall pay any and all sums
that would at the time of execution of the new lease be due under this Lease but for its
termination and shall otherwise fully remedy, or agree in writing to remedy,, any other defaults
under or breaches of this Lease committed by Lessee that can be remedied;
(d) Lender, on execution of the new lease, shall pay all reasonable costs and
expenses, including attorneys’ fees and court costs, incurred in terminating this Lease, recovering
possession of the Premises from Lessee or the representative of Lessee, and preparing the new
lease;
(e) The new lease shall be subject to the Implementation Agreement and to all
existing subleases between Lessee and sublessees (if any), provided that for any sublease, the
sublessee agrees in writing to attorn to Lender (or its assignee); and
(f) Subject to Section 7.11 hereof, the new lease shall be assignable only with the
prior written consent of Lessor pursuant to Article 22 hereof.
7.8 No Merger of Leasehold and Fee Estates. For as long as any Leasehold
Encumbrance is in existence, there shall be no merger of the leasehold estate created by this
Lease and the fee estate of Lessor in the Premises merely because both estates have been
acquired or become vested in the same person or entity, unless Lender otherwise consents in
writing.
7.9 Lender as Assignee of Lease. No Lender shall be liable to Lessor as an assignee of
this Lease unless and until Lender acquires some or all rights of Lessee under this Lease through
foreclosure, an assignment in lieu of foreclosure, or as a result of some other action or remedy
provided by law or by the instrument creating the Leasehold Encumbrance.
7.10 Lender as Including Subsequent Security Holders. Except for purposes of
Section 7.7, the term "Lender" as used in this Lease shall mean not only the institutional lender
that loaned money to Lessee and is named as beneficiary, mortgagee, secured party, or security
holder in the Leasehold Deed of Trust creating any Leasehold Encumbrance, but also all
subsequent purchasers or assignees of the leasehold interest created by this Lease that is secured
by the Leasehold Encumbrance.
7.11 Transferee as Qualified Party. Notwithstanding any other provision of this
Lease, each and every acquirer, purchaser, assignee or other transferee of the Leasehold Estate
who obtains its interest in the Leasehold Estate in connection with provisions of this Article 7, or
in connection with the assignments, purchases, or other actions or proceedings contemplated by
this Article 7 (collectively, "Lender Transferees"), shall, without limitation, (i) be required to
comply with the Premises Use Restrictions of Section 9.1 hereof, and (ii) be required to be and
to remain for the duration of the Term a Qualified Party (as defined in Article 22 hereof) in order
to perform any operations or to conduct any business at, on or in the Premises or the
Gray Cary~PA\10058630.2 91160530-901700
Improvements. Each Lender Transferee’s status as a Qualified Party shall be subject to prior
approvals by Lessor pursuant to Article 22 hereof.
7.12 Amendment to Leases. For so long as a Leasehold Encumbrance is in existence,
Lessor and Lessee agree that the Lease shall not be amended without the prior written consent of
Lender, which shall not be unreasonably withheld. Any amendment for which such consent is
not obtained shall have no force or effect unless and until such approval is obtained.
ARTICLE 8. NET LEASE; NO COUNTERCLAIM OR ABATEMENT
8.1 Net Lease. The Annual Rental and Additional Rental due to Lessor hereunder shall
be absolutely net to Lessor and shall be paid without assertion of any counterclaim, setoff,
deduction or defense and without abatement, suspension, deferment or reduction. Under no
circumstances or conditions, whether now existing or hereafter arising, and whether or not
beyond the present contemplation of the parties, shall Lessor be expected or required to make
any payment of any kind whatsoever with respect to the Premises or be under any obligation or
liability hereunder except as expressly set forth in this Lease.
8.2 Independent Covenants. The obligations of Lessee hereunder shall be separate and
independent covenants and agreements. Each agreement of Lessee shall be both a covenant and
a condition. Lessee hereby waives, to the full extent permitted by applicable law, all rights now
or hereafter conferred by statute, including without limitation the provisions of Civil Code
Sections 1932 and 1933, to quit, terminate or surrender this Lease or the Premises or any part
thereof, or to any abatement, suspension, deferment, diminution or reduction of any rent
hereunder.
ARTICLE 9. USE AND OPERATION OF PREMISES AND IMPROVEMENTS
9.1 Use Restriction. Subject to all provisions and limitations contained herein, the
Premises and all Improvements to be located thereon shall at all times be used and operated by
Lessee as a child day care facility, and for no other purpose. In connection with such use, Lessee
shall have the right to carry out the administrative and incidental uses necessary to the foregoing.
Lessee agrees and acknowledges that Lessee and Lessee’s operations and business activities at
the Premises shall at all times comply with each and all of the standards, terms, requirements,
conditions, and provisions of that certain document entitled "Standards for Approval of
Operation" (collectively, "Operations Standards") which is attached as Exhibit "D" to the
Implementation Agreement, as such Operations Standards may be modified or amended from
time to time. The parties hereby acknowledge and agree that Lessee’s covenant that the
Premises shall be used solely for the purposes stated in this Section 9.1 and for no other purpose,
and Lessee’s covenant to comply with the Operations Standards, are material consideration for
Lessor’s agreement to enter into this Lease. The parties further acknowledge and agree that any
violation of either of said covenants shall constitute a material breach of this Lease and entitle
Lessor to exercise any and all of its rights and remedies under this Lease or otherwise at law or
in equity. Without limitation of the foregoing, or any other provision of this Lease, in no event
shall the Premises be used for (a) any purpose that in any manner causes, creates, or results in a
nuisance, (b) any purpose or use that is of a nature to involve substantial hazard, or any purpose
or use that otherwise may harm the health or welfare of persons or the physical environment, or
(c) any discharge of Hazardous Substances on the Premises, including but not limited to the
Gray Cary~PA\10058630.2 101160530-901700
disposing or discharging of such substances into or under the Premises. The provisions of this
Section 9.1 are collectively referred to herein as the "Premises Use Restrictions."
9.2 Operation of the Premises After Completion. Lessee covenants that upon
completion of construction of the Improvements, Lessee will, through the entire Term,
continuously and uninterruptedly operate the Premises for the uses permitted under Section 9.1;
provided, however, that Lessee’s obligations under this Section 9.2 shall be suspended (a) for
any single time period not to exceed three (3) months in a twelve (12) month period, (b) during
any Foreclosure Rights Period or City’s Tenant Replacement Right Period (c) during any period
of restoration, repair, replacement or rebuilding undertaken by Lessee pursuant to Article 20 of
this Lease, (d) during any period of Appropriation, and (d) during any periods of Alterations
undertaken in accordance with the provisions of Article 11 of this Lease, provided, however, that
all of the foregoing shall be limited to the portion of the Premises actually affected thereby and
for such time as is reasonably required by such restoration, repairs, replacement or rebuilding or
condemnation or Alterations, or where otherwise prevented by reason of causes beyond Lessee’s
control (other than any financial difficulties of Lessee).
ARTICLE 10. LIMITATION ON EFFECT OF APPROVALS
All rights of Lessor to review, comment upon, approve, inspect or take any other action
with respect to the Premises, the Improvements, or the design or construction thereof, or any
other matter, are specifically for the benefit of Lessor and no other party. No review, comment,
approval or inspection, right or exercise of any right to perform Lessee’s obligations, or similar
actions required or permitted by, of, or to Lessor hereunder, or actions or omissions of Lessor’s
employees, agents and trustees, or other circumstances shall give or be deemed to give Lessor
any liability, responsibility or obligation for, in connection with, or with respect to, the design,
construction, maintenance or operation of the Premises or any Improvements, or the removal
and/or remediation of any Hazardous Substances on, in or from the Premises, nor shall any such
approval, actions, information or circumstances relieve or be deemed to relieve Lessee of the
sole obligation and responsibility for the design, construction, maintenance and operation of the
Premises and Improvements and the removal and/or remediation of Hazardous Substances
required under this Lease, if any.
ARTICLE 11. LICENSE TO OPERATE CHILD DAY CARE FACILITY
Lessee shall be solely responsible for obtaining from the California State Department of
Social Services, at its sole cost and expense, a license or special permit to operate, establish,
manage, conduct and maintain a child day care facility as required under the California Child
Day Care Facilities Act (California Health & Safety Code Section 1596.70 et seq.). Lessee shall
diiigently prosecute the procurement of such license or special permit immediately upon the
execution of this Lease. Prior to the commencement of occupancy of the Premises, Lessee shall
provide Lessor with a true copy of a valid and current license or special permit obtained in
accordance with the provisions of this Article 11. If Lessee ceases to use the Premises as a child
day care facility or ceases to be a Qualified Party licensed to operate a child day care facility,
then subject to the rights of a Lender as set forth in Article 7, this Lease shall terminate, subject
to City’s right to become or designate a successor tenant to operate the child day care facility
("City’s Tenant Replacement Right"). Unless and until City (a) designates a replacement tenant
approved by Lessor pursuant to Article 22 or (b) provides Lessor with written notice that City
Gray Caryk°A\10058630.2 111160530-901700
does not intend to exercise City’s Tenant Replacement Right ("City’s Termination Right"), City
shall reimburse Lessor on the same terms and conditions as this Lease for all of Lessee’s
obligations for taxes, insurance, and maintenance (including any increased security precautions
reasonably necessary to maintain the Premises in a safe and secure condition while vacant) and
Security Deposit installment payments. If City exercises City’s Termination Right, the Lease
shall terminate automatically without further notice or action by Lessor, except to the extent set
forth in Section 6.2. If City does designate a Qualified Party to be a successor tenant pursuant to
the exercise of City’s Tenant Replacement Right as set forth herein, City may require Lessor to
enter into a new lease with the Qualified Party on essentially the same terms as herein set forth
and for a term that would end on the same date as this Lease would end if it continued to the
natural expiration of its term. Lessor and Lessee also agree that this Lease shall not be amended
without the prior written consent of City, which shall not be unreasonably withheld. Any
amendment for which such consent is not obtained shall have no force or effect unless and until
such approval is obtained.
ARTICLE 12. INITIAL CONSTRUCTION AND ALTERATIONS
12.1 Construction of Improvements. Lessee hereby is granted permission and agrees
and covenants to commence and prosecute diligently, at Lessee’s sole cost and expense, the
design, development and construction upon the Premises of the Improvements as described
herein and in the plans and specifications to be approved by Lessor in accordance with the
provisions of this Article 12.
12.2 Alterations. Lessee shall have the right to make Alterations; provided, however,
that any proposed Alteration for the purpose in whole or in part of the treatment, storage or
disposal of any Hazardous Substance, or requiring any health, safety or environmental approval
or any application to a political jurisdiction for rezoning, general plan amendment, variance or a
conditional use permit or that, pursuant to any other provision of this Lease, requires Lessor’s
approval, shall be subject to Lessor’s prior written approval, which approval may be given or
withheld in Lessor’s reasonable discretion. Any Alterations shall be at Lessee’s sole cost and
expense, and shall be subject to the terms of this Article 12.
12.3 Permits and Approvals. Lessee shall be solely responsible for obtaining any and
all necessary approvals of any governmental agencies having jurisdiction for any general plan
amendment, rezoning, variance, conditional use permit, building, electrical and plumbing
permits, environmental impact analysis and mitigations imposed thereby, or other governmental
action necessary to permit the development, construction and operation of the Improvements
(including any Alterations) in accordance with this Lease. Lessee shall provide Lessor with
copies of all such permits and approvals prior to commencement of construction on the Premises.
In the event Lessee is unable to obtain necessary approvals for the Improvements within three
years after the date of this Lease, this Lease shall expire and neither party shall have any further
rights or obligations hereunder. Notwithstanding the foregoing, Lessee shall keep Lessor fully
informed regarding any such approval process. Lessor, at no cost or expense to itself, shall
cooperate with Lessee to the extent reasonably required to obtain any and all necessary approvals
for the Improvements and any proposed Alterations approved by Lessor hereunder. In the event
Lessor is required to expend time or incur expenses in such cooperation, Lessee shall reimburse
Lessor for any out-of-pocket expenses incurred by Lessor in connection with such cooperation.
Gray Cary~PA\10058630.2 121160530-901700
Nothing contained herein, however, shall permit or be deemed to permit Lessee to use the
Premises for any purpose not expressly permitted under Section 9.1 hereof.
12.4 Design. Design matters with respect to the Improvements shall be solely within
the discretion of Lessee.
12.5 Prerequisites to Commencement of Construction. In addition to all other
requirements set forth herein, before commencing the construction of the Improvements or any
Alterations and before any building materials have been delivered to the Premises by Lessee or
under Lessee’s authority, Lessee shall:
(a) Upon Lessor’s request, furnish Lessor with a true copy of Lessee’s contract
with the general contractor.
(b) Upon Lessor’s request, deliver to Lessor true copies of all documents to
evidence the commitment of construction financing for any new construction or other
arrangements to provide for payment for work undertaken by Lessee, if any. Such evidence shall
be in a form and substance satisfactory to Lessor.
(c) Provide Lessor at least ten (10) days prior written notice of the
commencement of any such construction or Alterations in order that Lessor shall have sufficient
time to post in a conspicuous location on the Premises as well as to record with the County of
Santa Clara, a notice of lessor’s nonresponsibility pursuant to the California Civil Code.
(d) Procure or cause to be procured the insurance coverage described below in the
limits hereinafter provided, and provide Lessor with certified copies of all such insurance or,
with the written approval of Lessor, certificates of such insurance in form satisfactory to Lessor.
All such insurance shall comply with the requirements of Articles 12 and 19.
(i) During the course of construction, to the extent not covered by
property insurance maintained by Lessee pursuant to Article 19, comprehensive "all risk"
builder’s risk insurance, including vandalism and malicious mischief, covering all Improvements
in place on the Premises, all materials and equipment stored at the Premises and furnished under
contract, and all materials and equipment that are in the process of fabrication at the premises of
any third party or that have been placed in due course of transit to the Premises when such
fabrication or transit is at the risk of, or when title to or an insurable interest in such materials or
equipment has passed to, Lessee or its construction manager, contractors or subcontractors
(excluding any contractors’, subcontractors’ and construction managers’ tools and equipment,
and property owned by the employees of the construction manager, any contractor or any
subcontractor), such insurance to be written on a completed value basis in an amount not less
than the full estimated replacement value of the Improvements or such Alterations, as applicable.
(ii) Comprehensive liability insurance covering Lessee, Lessor and
each construction manager, contractor and subcontractor engaged in any work on the Premises,
which insurance may be effected by endorsement, if obtainable, on the policy required to be
carried pursuant to Article 19, including insurance for completed operations, elevators, owner’s,
construction manager’s and contractor’s protective liability, products completed operations for
four years after the date of acceptance of the work by Lessee, broad form blanket contractual
liability, broad form property damage and full form personal injury (including but not limited to
Gray CarykPA\10058630.2 131160530-901700
bodily injury), covering the performance of all work at or from the Premises by Lessee, its
construction manager, contractors and subcontractors, and in a liability amount not less than the
amount at the time carried by prudent owners of comparable construction projects in the Santa
Clara Valley, but in any event not less than Three Million Dollars ($3,000,000) combined single
limit, which policy shall contain a cross-liability clause or separation of insureds provision, .an
endorsement deleting the property damage exclusion as to explosion, underground, and collapse
hazards, and an endorsement providing incidental malpractice coverage, and shall include
thereunder for the mutual benefit of Lessor and Lessee, bodily injury liability and property
damage liability automobile insurance on any non-owned, hired or leased automotive equipment
used in the construction of any work.
(iii) Worker’s Compensation Insurance in the amounts and coverages
required under workers’ compensation, disability and similar employee benefit laws applicable
to the Premises, and Employer’s Liability Insurance with limits not less than One Million Dollars
($1,000,000), or such higher amounts as may be required by law.
12.6 General Construction Requirements.
(a) All construction and other work, including the design of and materials for the
Improvements, shall be done at Lessee’s sole cost and expense and in a prudent manner
consistent with and appropriate for the surrounding uses as determined by the City of Palo Alto’s
architectural review board. Lessee shall construct the Improvements and all Alterations in strict
accordance with all Applicable Laws, and with plans and specifications that are in accordance
with the provisions of this Article 12 and all other provisions of this Lease.
(b) Lessee shall construct all Improvements within setbacks required by
Applicable Laws or the provisions of this Lease.
(c) Prior to the commencement of any construction of Improvements or
Alterations, repair or landscaping, Lessor shall have the right to post in a conspicuous location
on the Premises as well as to record with the County of Santa Clara, a notice of lessor’s
nonresponsibility pursuant to the California Civil Code.
(d) The general contract for the Improvements or any Alterations shall contain
provisions acceptable to Lessor that permit such contracts to be assumed by Lessor or its
designee, at Lessor’s sole discretion, following a termination of this Lease. Any such
assumption shall be on the same terms and conditions (including fees and prices) as set forth in
such contracts.
(e) Lessee shall take all necessary safety precautions during any construction.
(f) Upon completion of construction, Lessee shall prepare and maintain as-built
drawings showing the final location of all mechanical equipment, utility lines, ducts, outlets,
structural members, walls, partitions and other significant features of the Improvements and any
subsequent Alterations. These as-built drawings shall be kept at the Premises and Lessee shall
update them as often as necessary to keep them current. The as-built drawings and annotated
plans and specifications shall be made available for copying and inspection by Lessor at all
reasonable times.
Gray Cary~PA\10058630.2 141160530-901700
12.7 Construction Completion Procedures. On completion of the construction of the
Improvements or any Alterations during the Term, Lessee shall file for recordation, or cause to
be filed for recordation, a notice of completion.
12.8 On Site Inspection. Lessor shall be entitled to have on site, at all times during
the construction of the Improvements or any Alterations, an inspector or representative who shall
be entitled to observe all aspects of the construction on the site of the Premises. No inspection
performed or not performed by Lessor hereunder shall give, or be deemed to give, Lessor any
responsibility or liability with respect to the work or the prosecution thereof or the design or
construction of the Improvements, or constitute or be deemed to constitute, a waiver of any of
Lessee’s obligations hereunder, or be construed as approval or acceptance of the work or the
prosecution thereof, or the design or construction of the Improvements.
ARTICLE 13. MECHANICS’ AND OTHER LIENS
13.1 No Liens. Lessee covenants and agrees to keep all of the Premises and every part
thereof free and clear of and from any and all mechanics’, material supplier’s and other liens for
work or labor done, services performed, materials, appliances, or power contributed, used or
furnished, to be used in or about the Premises for or in connection with any operations of Lessee,
any construction of Improvements or Alterations, or repairs that Lessee may make or permit or
cause to be made, or any work or construction by, for oi permitted by Lessee on or about the
Premises, and at all times promptly and fully to pay and discharge any and all claims upon which
any such lien may or could be based, and to save and hold Lessor and all of the Premises free
and harmless of and from any and all such liens and claims of liens and suits or other
proceedings pertaining thereto.
13.2 Right to Contest Liens. Lessee shall have the right to contest, in good faith, the
amount or validity of any lien of the nature described in Section 13.1 above, provided that Lessee
shall give Lessor written notice of Lessee’s intention to do so within ten (10) days after the
recording of such lien, and provided further, that Lessee shall, at its expense, defend itself and
Lessor against the same and shall pay and satisfy any adverse judgment that may be rendered
thereon before the enforcement thereof against the Premises. In addition, at the request of
Lessor, Lessee shall procure and record the bond provided for in Section 3143 of the California
Civil Code or any comparable statute hereafter enacted providing for a bond freeing the Premises
from the effect of such lien or claim or action thereof. Lessee shall pay all reasonable attorneys’
fees, consultants’ fees, travel expenses, and other costs incurred by Lessor in connection with
any such contest.
13.3 No Effect on Lessor’s Interests. No mechanics’ or material suppliers’ liens or
other liens of any character whatsoever created or suffered by Lessee shall in any way, or to any
extent, affect the interest, right or title of Lessor in and to the Premises.
13.4 Lessor’s Right to Cause Release of Liens. If Lessee shall not within ten (10)
days following the imposition of any such lien which is not being contested by Lessee in
accordance with Section 13.2, cause the lien to be released of record by payment or posting of a
proper bond, Lessor shall have the right but not the obligation to cause the same to be released
by such means as Lessor shall deem appropriate and the amount paid by Lessor together with all
expenses incurred by Lessor in connection therewith (including without limitation reasonable
Gray Cary~PA\10058630.2 151160530-901700
attomeys’ fees and expense), plus interest at the maximum rate allowed by law from the date of
payment by Lessor, shall be Additional Rental, immediately due and payable by Lessee to Lessor
upon demand.
ARTICLE 14.OWNERSHIP OF IMPROVEMENTS
All Improvements constructed, installed or placed by Lessee on the Premises shall be the
property of Lessee during, and only during, the Term and no longer, unless a new lease is entered
into pursuant to Section 7.7, then during the new lease term as well, and no longer. During the
Term, the Improvements shall not be conveyed, transferred or assigned. Any attempted
conveyance, transfer or assignment of the Improvements, whether voluntarily or by operation of
law or otherwise, to any person, corporation or other entity shall be void and of no effect
whatever. Upon any termination of this Lease, whether by reason of the expiration of the Term
hereof, or pursuant to any provision hereof, or by reason of any other cause whatsoever, all of
Lessee’s right, title and interest in the Improvements shall cease and terminate and title to the
Improvements shall immediately vest in Lessor; provided, however, Lessor reserves the right to
require Lessee, in the alternative, to remove the Improvements from the Premises upon
termination of this Lease. In the event Lessor elects to retain the Improvements on the Premises
upon termination of this Lease, Lessee shall surrender the Improvements to Lessor as provided in
Article 26 hereof. No further deed or other instrument shall be necessary to confirm the vesting
in Lessor of title to the Improvements. However, upon any termination of this Lease, Lessee,
upon request of Lessor, shall execute, acknowledge and deliver to Lessor a quitclaim deed and
quitclaim bill of sale confirming that all of Lessee’s rights, title and interest in the Improvements
has expired and that title thereto has vested in Lessor.
ARTICLE 15.MAINTENANCE AND REPAIRS; NO WASTE
15.1 Maintenance and Repairs. During the Term, Lessee shall, at its own cost and
expense and without any cost or expense to Lessor, keep and maintain the Premises and the
Improvements and all appurtenant facilities, including without limitation the grounds, sidewalks,
parking, trees, creek banks and landscaped areas, fixtures and equipment, in good condition and
repair and shall allow no nuisances to exist or be maintained thereon; provided, however, that
Lessee’s duty does not extend to Lessee’ personal property unless and except to the extent that
such personal property is used on the exterior of the buildings and affects the appearance of the
Premises. Lessee shall promptly make all repairs, replacements and alterations (whether
structural or nonstructural, foreseen or unforeseen, or ordinary or extraordinary) necessary to
maintain the Premises and the Improvements thereon in good condition and in compliance with
all Applicable Laws and to avoid any structural damage or injury to the Premises or the
Improvements.
15.2 No Waste. Lessee shall not commit or permit waste upon the Premises.
I5.3 No Lessor Obligations. Lessor shall not be obligated to make to the Premises or
the Improvements any repairs, replacements or renewals of any kind, nature or description
whatsoever and Lessee hereby expressly waives any right to terminate this Lease and any right to
make repairs at Lessor’s expense under Sections 1932(1), 1941 and 1942 of the California Civil
Code, or any amendments thereof or any similar law, statute or ordinance now or hereafter in
effect.
GrayCarykPA\10058630.2 161160530-901700
ARTICLE 16.UTILITIES AND SERVICES
During the Term, Lessee shall be solely responsible for, shall make all arrangements for,
and shall pay for all utilities and services furnished to or used at the Premises, including without
limitation, gas, electricity, other power, water, telephone, cable and other communication
services, security services, sewage, sewage service fees, trash collection, and any taxes or
impositions thereon. All service lines of such utilities shall be installed beneath the surface of
the Premises, shall be independent of any other facilities located on property owned by Lessor,
and all such utility lines and services located on or connected to the Premises shall be
maintained, repaired and replaced by Lessee at no cost or expense to Lessor.
ARTICLE 17.COMPLIANCE WITH LAWS; INSURANCE REQUIREMENTS
17.1 Compliance with Applicable Laws. Lessee, at Lessee’s cost and expense, shall
comply with all Applicable Laws. Any work or installations made or performed by or on behalf
of Lessee or any person or entity claiming through or under Lessee in order to conform the
Premises to Applicable Laws shall be subject to and performed in compliance with the
provisions of Article 12. Lessee shall give Lessor immediate written notice of any violation of
Applicable Laws known to Lessee and, at its sole cost and expense, Lessee shall immediately
rectify any such violation. Without in any way limiting the generality of the foregoing obligation
of Lessee, Lessee shall be solely responsible for compliance with, and shall make or cause to be
made all such Improvements and Alterations to the Premises (including, without limitation,
removing such barriers and providing such alternative services) as shall be required by, the
Americans with Disabilities Act (42 U.S.C. Section 12101 et seq.), as the same may be amended
~om time to time, and any similar or successor laws, and with any rules or regulations
promulgated thereunder. Lessee’s liability shall be primary and Lessee shall indemnify Lessor in
accordance with Article 19 in the event of any failure or alleged failure of Lessee to comply or to
cause the Improvements to comply with said laws and rules and regulations.
17.2 Compliance with Insurance Requirements. Lessee shall not do anything, or
permit anything to be done, in or about the Premises that would: (i) invalidate or be in conflict
with the provisions of any fire or other insurance policies covering the Premises, the
Improvements, or any property located therein, or (ii) result in a refusal by insurance companies
of good standing to .insure ’the Premises, the Improvements, or any such property in amounts
required hereunder. Lessee, at Lessee’s expense, shall comply with all rules, orders, regulations
or requirements of the American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body that shall hereafter perform the function of such
Association.
ARTICLE 18.HAZARDOUS SUBSTANCES
18.1 Hazardous Substances. Lessee shall not use, treat, keep, store, sell, release,
discharge or dispose of any Hazardous Substance from, on, about, under or into the Premises,
except for standard office and cleaning supplies stored in quantities reasonably necessary for
standard use.
18.2 Indemnity for Environmental Damages. Lessee shall indemnify, protect,
defend, reimburse, and save and hold harmless Lessor and the Premises, from and against any
Gray Cary~PA\10058630.2 171160530-901700
and all Environmental Damages. Lessee’s obligations hereunder shall include, but not be limited
to, the burden and expense of defending all claims, suits and administrative proceedings (with
counsel reasonably approved by Lessor), even if such claims, suits or proceedings are
groundless, false or fraudulent, and conducting all negotiations of any description, and paying
and discharging, when and as the same become due, any and all judgments, penalties or other
sums due against such indemnified parties.
18.3 Obligation to Remediate. Notwithstanding the obligation of Lessee to
indemnify Lessor pursuant to this Lease, Lessee shall, upon demand of Lessor, and at its sole
cost and expense, promptly take all actions to remediate the Premises from the effects of a
Hazardous Substance Occurrence. Such actions shall include, but not be limited to, the
investigation of the environmental condition of the Premises, the preparation of any feasibility
studies, reports or remedial plans, and the performance of any cleanup, remediation,
containment, operation, maintenance, monitoring or restoration work, whether on or off of the
Premises. Lessee shall take all actions necessary to restore the Premises to the condition existing
prior to the Hazardous Substance Occurrence. All such work shall be performed by contractors
selected by Lessee and approved in advance and in writing by Lessor. Lessee shall proceed
continuously and diligently with such investigatory and remedial actions, provided that in all
cases such actions shall be in accordance with all applicable requirements of governmental
entities. Any such actions shall be performed in a good, safe and workmanlike manner. Lessee
shall pay all costs in connection with such investigatory and remedial activities, including but not
limited to all power and utility costs, and any and all taxes or fees that may be applicable to such
activities. Lessee shall promptly provide to Lessor copies of testing results and reports that are
generated in connection with the above activities and any that are submitted to any governmental
entity. Promptly upon completion of such investigation and remediation, Lessee shall
permanently seal or cap all monitoring wells and test holes to industrial standards in compliance
with Applicable Laws, remove all associated equipment, and restore the Premises to the
maximum extent possible, which shall include, without limitation, the repair of any surface
damage, including paving, caused by such investigation or remediation hereunder.
18.4 Obligation to Notify Lessor. If Lessee shall become aware of or receive notice
or other communication concerning any actual, alleged, suspected or threatened violation of
Environmental Requirements, or liability for Environmental Damages in connection with the
Premises or past or present activities of any person thereon, including but not limited to, notice
or other communication concerning any actual or threatened investigation, inquiry, lawsuit,
claims, citation, directive, summons, proceeding, complaint, notice, order, writ, or injunction,
relating to same, then Lessee shall deliver to Lessor, within fourteen (14) days of the receipt of
such notice or communication by Lessee, a written description of said violation, liability,
correcting information, or actual or threatened event or condition, together with copies of any
documents evidencing same. Receipt of such notice shall not be deemed to create any obligation
on the part of Lessor to defend or otherwise respond to any such notification.
18.5 Right to Inspect. Lessor shall have the right in its sole discretion, but not the
duty, at reasonable times during business hours following reasonable notice to Lessee, to enter
and conduct an inspection of the Premises, including invasive tests, at any time to determine
whether Lessee is complying with the terms of this Lease, including but not limited to the
compliance of the Premises and the activities thereon with Environmental Requirements and the
existence of Environmental Damages as a result of the condition of the Premises or surrounding
Gray Cary~PA\10058630.2 181160530-901700
properties and activities thereon. Lessor shall have the right, but not the duty, to retain at its
expense any independent professional consultant to enter the Premises to conduct such an
inspection and to review any report prepared by or for Lessee concerning such compliance.
Lessee hereby grants to Lessor, and the agents, employees, consultants and contractors of Lessor
the right to enter the Premises and to perform such tests on the Premises as is reasonably
necessary in the opinion of Lessor to conduct such review and investigations. Lessor shall use
reasonable efforts to minimize interference with the business of Lessee and to restore the
condition of the Premises, but Lessor shall not be liable for any interference caused thereby or
for failure to restore if Lessor determines in its sole discretion that such restoration is not
economically practicable.
18.6 Right to Remediate. Should Lessee fail to perform or observe any of its
obligations or agreements pertaining to Hazardous Substances or Environmental Requirements,
then Lessor shall have the right, but not the duty, without limitation of any other rights of Lessor
hereunder, upon written notice of default to Lessee and following a reasonable time for Lessee to
cure the default, to enter the Premises personally or through its agents, consultants or contractors
and perform the same. Lessee agrees to indemnify Lessor for the costs thereof and liabilities
therefrom as set forth above in this Article 18.
18.7 Release of Lessor. Lessee, on behalf of itself and its successors and assigns,
hereby releases Lessor from any and all claims, demands, debts, liabilities, and causes of action
of whatever kind or nature, whether known or unknown or suspected or unsuspected which
Lessee may have, claim to have, or which may hereafter accrue against Lessor, arising out of or
relating to or in any way connected with the presence, suspected presence, release or suspected
release of any Hazardous Substances at any time, in or into the air, soil, groundwater, surface
water or improvements at, on, about, under or within the Premises or any portion thereof, or
elsewhere in connection with the transportation of Hazardous Substances to or from the
Premises. In connection with the above release, Lessee hereby waives any and all rights
conferred upon it by the provisions of Section 1542 of the California Civil Code, which reads as
follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known
by him must have materially affected his settlement with the debtor, or by the
provisions of any similar statute.
18.8 General Provisions.
(a) The obligations of Lessee under this Article 18 shall not be affected by any
investigation by or on behalf of Lessor, or by any information which Lessor may have or obtain
with respect thereto. ,
(b) As used in this Article 18, the term "Lessor" shall include all of its affiliated
organizations, and their respective trustees, directors, officers, employees, faculty, students,
agents, and insurance carriers.
(c) The provisions of this Article 18 shall survive any termination of this Lease.
Gray CarykPA\10058630,2 191160530-901700
(d) The provisions of Article 19 (Insurance) shall not limit in any way Lessee’s
obligations under this Article 18.
ARTICLE 19.IMPOSITIONS; INSURANCE
19.1 Impositions. As Additional Rental hereunder, Lessee covenants and agrees to
bear, discharge and pay to the relevant authority or entity, in lawful money of the United States,
without offset or deduction, as the same become due, before delinquency, all taxes, assessments,
rates, charges, license and permit fees, municipal liens, levies, excises or impositions, whether
general or special, or ordinary or extraordinary, of every name, nature and kind whatsoever,
including all governmental charges of whatsoever name, nature or kind that may be levied,
assessed, charged or imposed or may be or become a lien or charge upon the Premises or any
part thereof; or upon the rent or income of Lessee; or upon the use or occupancy of the Premises;
or this transaction or any document creating or transferring an estate or interest in the Premises;
upon any of the buildings or improvements that are hereafter placed, built or constructed upon
the Premises; or upon the leasehold of Lessee or upon the estate hereby created; or upon Lessor
by reason of its ownership of the fee underlying this Lease, commencing as of the
Commencement Date and continuing throughout the Term, excluding any income taxes as may
be assessed upon Lessor or any other taxes assessed, charged or imposed upon Lessor which are
unrelated to the Premises. Lessee’s obligations described above include, but are not limited to,
the payment of any bonds or charges imposed or required by any governmental agency or
department by reason of the proposed or actual use, treatment, storage, discharge, cleanup or
disposal, or oversight thereof, of Hazardous Substances by any governmental agency, Lessee, or
any subtenant, tenant or licensee claiming through Lessee; provided, however, that this provision
shall not, and shall not be deemed to, permit Lessee to use, treat, store or dispose of any such
substances on the Premises. If at any time during the Term, under any Applicable Laws, any tax
is levied or assessed against Lessor directly, in substitution in whole or in part for real property
taxes, Lessee covenants and agrees to pay and discharge such tax. All of the foregoing taxes,
assessments and other charges are herein referred to as "Impositions."
19.2 Receipts. Lessee shall obtain and deliver to Lessor, promptly upon payment
thereof, receipts or duplicate receipts for all Impositions required to be paid by Lessee.
19.3 Right to Contest. Lessee shall have the fight to contest, by appropriate
proceedings, the amount or validity, in whole or in part, of any Imposition, provided that Lessee
shall not postpone or defer payment of such Imposition but shall pay such Imposition in
accordance with Section 19.1 notwithstanding such contest. Lessor shall have no obligation to
join in any such proceedings. Lessee shall indemnify and defend Lessor against and save Lessor
harmless, in accordance with Article 20, from and against any and all claims, demands, losses,
costs, liabilities, damages, penalties and expenses, including, without limitation, reasonable
attorneys’ fees and expenses, arising from or in connection with any such proceedings.
19.4 Proration. Any Imposition relating to a fiscal period of any taxing authority,
only a part of which period is included within the Term, shall be prorated as between Lessor and
Lessee so that Lessor shall pay the portion thereof attributable to any period prior to the
Commencement Date and subsequent to the Expiration Date of the Term, and Lessee shall pay
the portion thereof attributable to any period during the Term. Lessee, however, shall pay all
Gray Cary~PA\10058630.2 201160530-901700
personal property taxes, without proration, that relate to a fiscal year in which the Term hereof
shall commence or terminate.
19.5 Assessment Proceedings. If at any time during the Term any governmental
authority shall undertake to create an improvement or special assessment district the proposed
boundaries of which shall include the Premises, Lessee shall be entitled to appear in any
proceeding relating thereto and to exercise all rights of a landowner to have the Premises
excluded from the proposed improvement or special assessment district or to determine the
degree of benefit to the Premises resulting therefrom. However, Lessor retains to itself an
independent right, but shall be under no obligation, to appear in any such proceeding for the
purpose of seeking inclusion of the Premises in, or exclusion of the Premises from, any proposed
improvement or special assessment district or of determining the degree of benefit therefrom to
the Premises. The party receiving any notice or other information relating to the proposed
creation of any improvement or special assessment district, the proposed boundaries of which
include the Premises, shall promptly advise the other party in writing of such receipt.
19.6 Required Insurance. At all times during the Term and at its sole cost and
expense, Lessee shall obtain and keep in force for the benefit of Lessee and Lessor as an
additional insured the following insurance:
(a) Property Insurance. All risks, fire and other perils, including extended
coverage insurance on all Improvements. The amount of such insurance shall be the Full
Insurable Replacement Value. Each such policy shall include an endorsement protecting the
named and additional insureds against becoming a co-insured under the policy. Lessee hereby
waives as against Lessor any and all claims and demands, of whatever nature, for damages, loss
or injury to the Improvements and to the property of Lessee in, upon or about the Premises
caused by or resulting from fire and/or other insured perils.
"Full Insurable Replacement Value" means 100% of the actual costs to replace the
Improvements (without deduction for depreciation but with standard exclusions such as
foundations, excavations, paving and landscaping, as applicable to specific perils), including the
costs of demolition and debris removal and including materials and equipment not in place but in
transit to or delivered to the Premises. The Full Insurable Replacement Value initially shall be
determined at Lessee’s expense by an appraiser or one of the insurers, selected by Lessee and
acceptable to Lessor. Lessor or Lessee may at any time, but not more frequently than once in
any twelve (12) month period, by written notice to the other, require the Full Insurable
Replacement Value to be redetermined, at Lessee’s expense, by an appraiser or one of the
insurers, selected by Lessee and reasonably acceptable to Lessor. Lessee shall maintain
coverage at the current Full Insurable Replacement Value throughout the Term.
(b) Worker’s Compensation and Employer’s Liability Insurance. Worker’s
Compensation Insurance in the amounts and coverages required under worker’s compensation,
disability and similar employee benefit laws applicable to the Premises, with all elective
employment covered on a voluntary basis where permissible, and Employer’s Liability Insurance
with limits not less than One Million Dollars ($1,000,000), or such higher amounts as may be
required by law.
Gray Cary~PA\10058630.2 211160530-901700
(c) Comprehensive GeneralLiability. Comprehensive general liability through
one or more primary and umbrella liability policies against claims, including but not limited to,
bodily injury and property damage occurring on the Premises or the streets, curbs or sidewalks
adjoining the Premises, with such limits as may be reasonably required by Lessor from time to
time and to adequately protect against the increased liability inherent in the operation of a child
day care facility, but in any event not less than Three Million Dollars ($3,000,000), combined
single limit and annual aggregate for the Premises, which Lessee shall increase as necessary
during the Term to maintain adequate coverage over time which is comparable to the
requirements in effect as of the execution of this Lease. Such insurance shall insure the
performance by Lessee of the indemnity agreements contained in this Lease. If any
governmental agency or department requires insurance or bonds with respect to any proposed or
actual use, storage, treatment or disposal of Hazardous Substances by Lessee or any sublessee,
tenant, or licensee of Lessee, Lessee shall be responsible for such insurance and bonds and shall
pay all premiums and charges connected therewith; provided, however, that this provision shall
not and shall not be deemed to modify the provisions of Article 16 hereof.
Such insurance shall (i) delete any employee exclusion on personal injury coverage;
(ii) include employees as additional insureds; (iii) provide for blanket contractual coverage,
including liability assumed by and the obligations of Lessee under Article 18 for personal injury,
death and/or property damage; (iv) provide Products and Completed Operations and Independent
Contractors coverage and Broad Form Property Damage liability coverage without exclusions
for collapse, explosion, demolition, underground coverage and excavating, including blasting;
(v) provide aircraft liability coverage, if applicable, and automobile liability coverage for owned,
non-owned and hired vehicles; (vi) provide liability coverage on all mobile equipment used by
Lessee; and (vii) include a cross liability endorsement (or provision) permitting recovery with
respect to claims of one insured against another. Such insurance shall insure against any and all
claims for bodily injury, including death resulting therefrom, and damage to or destruction of
property of any kind whatsoever and to whomever belonging and arising from Lessee’s
operations hereunder and whether such operations are performed by Lessee or any of its
contractors, subcontractors, or by any other person.
(d) Other. All other insurance that Lessee is required to maintain under
Applicable Laws.
19.7 Policy Form and General.
(a) All of the insurance policies required under this Lease, including without
limitation, under the provisions of Article 11 and this Article 17, and all renewals thereof shall be
issued by one or more companies of recognized responsibility, authorized to do business in
California with a financial rating of at least a Class B+--X (or its equivalent successor) status, as
rated in the most recent edition throughout the Term of Best’s Insurance Reports (or its
successor, or, if there is no equivalent successor rating, otherwise reasonably acceptable to
Lessor). All property insurance hereunder shall name Lessor as an additional insured and all
liability insurance shall name as additional insureds Lessor, and its directors, trustees, officers,
agents, and employees, and such other parties as Lessor reasonably may request. Any
deductibles or self insurance retention for any of the foregoing insurance must be agreed to in
advance in writing by Lessor, at its sole discretion; all deductibles and self insurance retention
shall be paid by Lessee. All insurance of Lessee shall be primary coverage.
Gray Cary’ff’A\10058630.2 221160530-901700
(b) Each policy of property insurance and all other policies of insurance on the
Premises and the Improvements, which shall be obtained by Lessee, whether required by the
provisions of this Lease or not, shall be made expressly subject to the provisions of this
Article 18 and shall provide that Lessee’s insurers shall waive any right of subrogation against
Lessor. All policies provided for herein expressly shall provide that such policies shall not be
canceled, terminated or altered without thirty (30) days’ prior written notice to Lessor. Each
policy, or a certificate of the policy executed by the insurance company evidencing that the
required insurance coverage is in full force and effect, shall be deposited with Lessor on or
before the date of this Lease, shall be maintained throughout the Term, and shall be renewed, not
less than thirty (30) days before the expiration of the term of the policy. Except for specific
provisions described herein, no policy shall contain any provisions for exclusions from liability
and no exclusion shall be permitted in any event if it conflicts with any coverage required
hereby, and, in addition, no policy shall contain any exclusion from liability for personal injury
or sickness, disease or death or which in any way impairs coverage under the contractual liability
coverage described above.
(c) No approval by Lessor of any insurer, or the terms or conditions of any policy,
or any coverage or amount of insurance, or any deductible amount shall be construed as a
representation by Lessor of the solvency of the insurer or the sufficiency of any policy or any
coverage or amount of insurance or deductible and Lessee assumes full risk and responsibility
for any inadequacy of insurance coverage or any failure of insurers.
ARTICLE 20. INDEMNITY AND RELEASE
20.1 Indemnity. Lessee shall indemnify, protect, defend and save and hold harmless
Lessor from and against, and reimburse Lessor for, any and all claims, demands, losses,
damages, costs, liabilities, personal injuries, property damage, mechanic’s liens and other liens
or encumbrances caused or permitted by Lessee, causes of action and expenses, including,
without limitation, reasonable attorneys’ fees and expenses, incurred in connection with or
arising, in whole or in part, in any way out of this Lease, any default by Lessee in the observance
or performance of any of the terms, covenants or conditions of this Lease on Lessee’s part to be
observed or performed, the use, occupancy or manner of use or occupancy of the Premises by
Lessee or any sublessee, licensee, or any other person or entity, the conduct or management of
any work or thing done in Or on the Premises, the design, construction, maintenance, or condition
of any Improvements, the condition of the Premises during the Term, any actual or alleged acts,
omissions, or negligence of Lessee or of the sublessees, contractors, agents, servants, employees,
visitors or licensees of Lessee, in, on or about the Premises or other of Lessor’s lands, and any
accident or other occurrence on the Premises from any cause whatsoever, except to the extent
caused by the gross negligence or willful misconduct of Lessor. In case any claim, action or
proceeding be brought, made or initiated against Lessor relating to any of the above described
events, acts, omissions, occurrences, or conditions, Lessee, upon notice from Lessor, shall at its
sole cost and expense, resist, or defend such claim, action or proceeding by attorneys approved
by Lessor. Notwithstanding the foregoing, Lessor may retain its own attorneys to defend or
assist in defending any claim, action or proceeding involving potential liability of One Hundred
Thousand Dollars ($100,000) or more, or in the alternative Three Hundred Thousand Dollars
($300,000) or more if Lessee is joined in such defense and indemnity obligation by a
creditworthy party acceptable to Lessor in Lessor’s sole and absolute discretion, and Lessee shall
pay the reasonable fees and disbursements of such attorneys.
Gray CarykPA\ 10058630.2 231160530-901700
20.2 Release. Except as set forth herein, Lessor shall not be responsible for, and
Lessee hereby waives any and all claims and causes of action whatsoever of any kind or nature
against Lessor for, any injury, loss, damage or liability to any person or property in or about the
Premises or in any way connected with the Premises or this Lease, from any cause whatsoever
(other than caused by the gross negligence or willful misconduct of Lessor). As used in this
Article 19, the term "Lessor" shall include all of Lessor’s affiliated organizations and their
respective trustees, directors, officers, employees, faculty, students, agents, and insurance
carriers. The provisions of this Article 19 shall survive any termination of this Lease. The
provisions of Article 18 (Insurance) shall not limit in any way Lessee’s obligations under this
Article 19.
ARTICLE 21. APPROPRIATION, DAMAGE OR DESTRUCTION
21.1 No Termination. No Appropriation nor any loss or damage by fire or other
cause resulting in either partial or total destruction of the Premises, the Improvements or any
other property on the Premises shall, except as otherwise provided herein, operate to terminate
this Lease. Unless this Lease is terminated pursuant to and in accordance with this Article 21,
and except as expressly provided in Section 21.3 below with respect to reduction of Rent in the
event of a partial Appropriation, no such Appropriation, loss or damage shall relieve or discharge
Lessee from the payment of Rent or from the performance and observance of any of the
agreements, covenants and conditions herein contained on the part of Lessee to be performed and
observed. Lessee hereby expressly waives the provisions of Sections 1932(2) and 1933(4) of the
California Civil Code, or any amendments thereto or any similar law, statute or ordinance now or
hereafter in effect. Notwithstanding the foregoing, Lessee expressly covenants and agrees that
Lessee shall not exercise its powers of eminent domain to cause an appropriation of the Premises
to occur during the term of this Lease or for a period of one year thereafter.
21.2 Evaluation of Effect of Damage or Appropriation. Upon the occurrence of any
event of damage or destruction to the Premises or the Improvements or any portion thereof,
Lessee shall promptly undertake to determine the extent of the same and the estimated cost and
time to repair’ and restore the Improvements in accordance with the provisions of this Lease.
Lessee shall notify Lessor of its estimation of such cost and time not later than ninety (90) days
after the occurrence of the damage or destruction. Upon any Appropriation of less than the
entire Premises, Lessee shall promptly undertake to determine the effect of such Appropriation
on the remaining portion of the Premises and the function of the Premises and, if this Lease is
not terminated pursuant to and in accordance with this Article 21, the cost and time to make any
repairs and Alterations to the remaining portion of the Premises necessary in order for the
Premises to be restored to an economically viable whole capable of operation in accordance with
this Lease. Lessee shall notify Lessor of its estimation of such cost and time not later than ninety
(90) days after the occurrence of the Appropriation.
21.3 Partial Appropriation; Amendment; Duty to Restore. If less than the entire
Premises is subject to an Appropriation and this Lease is not terminated by either party pursuant
to and in accordance with this Article 21, (i) this Lease shall be deemed terminated as to the part
so Appropriated as of the date of Appropriation and shall be d~emed amended, effective as of the
effective date of such Appropriation, such that the definition of the "Premises" shall include only
that portion of the land described in Exhibit A that is not subject to such Appropriation. Lessee,
as promptly as practicable and with all due diligence, shall cause the repair or reconstruction of
Gray Cary~PA\10058630.2 241160530-901700
or the making of Alterations to the Improvements as necessary to restore the Impr~ments to a
fully functioning whole with all facilities necessary to operate the Premises in accordance with
this Lease.
21.4 Damage or Destruction; Duty to Restore. If the Premises or the Improvements,
or any portion thereof, are damaged or destroyed at any time during the Term and this Lease is
not terminated pursuant to and in accordance with this Article 21, Lessee, as promptly as
practicable and with all due diligence, shall cause the repair, reconstruction and replacement of
the Improvements to a condition substantially equal to or better than their condition immediately
prior to such damage or destruction and, except as otherwise approved in writing by Lessor, to
their same general appearance in accordance with the original design drawings.
21.5 Performance of Repairs, Restoration and Alterations. All repairs, and
restorations, as well as any Alterations, shall be performed in accordance with the provisions of
Article 12 of this Lease. Unless this Lease is terminated pursuant to Section 21.6 or
Section 21.7, all insurance proceeds and all Awards received by or payable to any party with
respect to such damage or Appropriation, less actual costs and expenses incurred in connection
with the collection thereof, shall be applied to the costs of repair, restoration and Alteration, as
the case may be, of the Premises and the Improvements in accordance with the provisions of this
Article 21 and Article 12 hereof. Lessee shall pay any amount by which the Award or insurance
proceeds received as a result of such damage or Appropriation, less the costs and expenses
incurred in connection with the collection thereof, are insufficient to pay the entire cost of such
repair, restoration or Alterations. Unless Lessee covenants to spend any amounts in excess of the
Award or insurance proceeds to make repairs, restorations and/or Alterations, this Lease shall
terminate and the Award or insurance proceeds shall be allocated to the parties in accordance
with the following provisions of this Article 21. Further, Lessee shall be responsible for
replacing and restoring all furniture, fixtures and equipment and other personal property
necessary for the operation of the Premises in accordance with this Lease.
21.6 Option to Terminate Upon Damage or Destruction. In the event any casualty
causes material damage to or destruction of the Premises or the Improvements or any portion
thereof at any time during the Term, then Lessee shall have the option to terminate this Lease,
exercisable as provided below.
21.7 Option to Terminate Upon Appropriation. If during the Term the entire
Premises or such substantial portion thereof shall be Appropriated that such Appropriation makes
the continued operation of the remaining portion of the Premises for the purposes permitted
hereunder infeasible, then Lessor and Lessee shall each have the option to terminate this Lease.
21.8 Termination; Lessee’s Obligation to Restore; Arbitration. Any party having
the option to terminate this Lease pursuant to this Article 21 may exercise such option by giving
written notice to the other party, within one hundred twenty (120) days after the occurrence of
the event of damage or destruction, or within thirty (30) days after the Appropriation, as the case
may be. If either party elects to terminate this Lease pursuant to this Article 21, Lessee shall
surrender the Premises to Lessor in accordance with the provisions of Article 26, except to the
extent the damage, destruction or Appropriation prevents Lessee from so doing. If either party
elects to terminate this Lease pursuant to this Article 21, all Awards with respect to Lessee’s
interests and all Awards for severance damages and all proceeds of insurance payable with
Gray CarykPA\10058630.2 251160530-901700
respect to such Appropriation or damage to, or destruction of the Improvements and other
property located on the Premises, after payment of costs and expenses of collection thereof, shall
first be applied to the costs of demolition, removal, restoration, and remediation, provided that
Lessee’s obligations under Article 26 shall not be limited by the amount of any such Award or
insurance proceeds, and then, to the extent of any remaining insurance proceeds, to the cost of
the repair and restoration of any Improvements Lessor elects to retain on the Premises. The
balance, if any, of such Awards or insurance proceeds, shall be distributed as provided in
Section 21.10. Should Lessor and Lessee for any reason disagree as to whether the conditions
provided in this Article 21 to the parties’ rights to elect to terminate this Lease have occurred, the
matter shall be determined by arbitration.
21.9 Determination of Award. The amount of the Award due to Lessor and Lessee as
a result of Appropriation shall be separately determined by the court having jurisdiction of such
proceedings based on the following: Lessor shall be entitled to that portion of the Award
attributable to the value of the fee interest in the Premises (or portion thereof subject to
Appropriation, in case of a partial Appropriation) as if the Premises were not subject to this
Lease, as determined by the court; Lessee shall be entitled to the value of Lessee’s interest in the
Improvements (or portion thereof subject to Appropriation, in case of a partial Appropriation), as
determined by the court.
21.10 Excess Proceeds and Awards for Lessee’s Interests. If the total Award made in
connection with any Appropriation for Lessee’s interests, and for severance damages to both
Lessee’s and Lessor’s interests, exceeds the amount necessary to repair, restore or construct
Alterations as required under this Article 21, or if there are proceeds of insurance in excess of
that required to repair or restore the Premises and the Improvements as required under this
Article 20, upon receipt by Lessor of satisfactory evidence that the work of repair, restoration
and construction required under this Article 21 has been fully completed and paid for in
accordance with the provisions of Article.12 and that the last day for filing any mechanic’s or
materialmen’s liens has passed without the filing of any, or if filed, any such lien has been
released, any remaining proceeds of insurance shall be paid to Lessee.
21.11 Right to Participate in Settlement. Lessor and Lessee shall both have the right
to participate in the settlement or compromise of any insurance proceeds and Awards provided
that all such proceeds and Awards shall be paid to Lessor and held by Lessor for application in
accordance with the provisions of this Article 21. If in any Appropriation the court does not
make the allocation of Awards referred to in Section 21.9 and the parties cannot agree upon such
allocations, such allocations shall be determined by arbitration.
21.12 Emergency Repairs. If a casualty occurs there is a substantial possibility that
immediate emergency repairs will be required to eliminate defective or dangerous conditions and
to comply with Applicable Laws pending settlement of insurance claims and prior to procuring
bids for performance of restoration work. Notwithstanding any provision of this Article 21 to the
contrary, Lessee shall promptly undertake such emergency repair work after a casualty as is
necessary or appropriate under the circumstances to eliminate defective or dangerous conditions
and to comply with Applicable Laws.
Gray Cary~PA\10058630.2 261160530-901700
ARTICLE 22.ASSIGNMENT AND SUBLETTING
Lessor is entering into this Lease in reliance on the particular and unique resources and
reputation of Lessee and Lessor would not enter into this Lease except for such particular and
unique resources and reputation. Subject to Section 7.1 (regarding a specified right of Lessee to
encumber its Leasehold Estate) and Section 7.6 (regarding certain specified transfers of Lessee’s
interest in its Leasehold Estate; Section 7.6 is subject to Section 7.11) hereof, the parties
expressly agree that Lessee shall not directly or indirectly, voluntarily or by operation of law,
sell, assign, sublet, encumber, pledge or otherwise transfer or hypothecate its interest in or rights
with respect to the Premises or Lessee’s leasehold estate therein or the Improvements; provided,
however, that upon Lessor’s prior written approval, which approval shall not be unreasonably
withheld or delayed. For purposes hereof, it shall not be deemed reasonable for Lessor to
disapprove an assignment or subletting to a Qualified Party. As used in this Lease, the term
"Qualified Party" means a person or entity that is financially qualified and sufficiently
experienced in and licensed for the operation and management of a child day care facility and
has been approved in writing by City pursuant the Implementation Agreement, and that has
agreed in writing to comply with the Operations Standards, as the same may be amended from
time to time, and whose use of the Premises shall be consistent with the Premises Use
Restrictions as set forth in Section 9.1. Any attempted assignment or subletting in violation of
this Article 22 shall be void and shall constitute a breach of this Lease.
ARTICLE 23. LESSOR’S RIGHT OF INSPECTION
Lessor shall be entitled, at all reasonable times and following advance notice to Lessee, to
go upon and into the Premises and the Improvements for the purposes of (a) inspecting the same,
(b) inspecting the performance by Lessee of the terms, covenants, agreements and conditions of
this Lease, (c) posting and keeping posted thereon notices of non-responsibility for any
construction, alteration or repair thereof, as required or permitted by any law or ordinance, and
(d) any other lawful purposes.
ARTICLE 24. EVENT OF DEFAULT AND LESSOR’S REMEDIES
24.1 Events of Default. The occurrence of any of the following shall be an Event of
Default on the part of Lessee hereunder:
(a) Failure to pay Rent at the times or in the manner herein provided, when such
failure shall continue for a period of ten (10) days after written notice thereof from Lessor to
Lessee and to the City; any such notice shall be deemed to be the notice required under
California Code of Civil Procedure Section 1161. No such notice shall be deemed a forfeiture or
a termination of this Lease unless Lessor expressly so elects in such notice.
(b) Failure to perform any express or implied nonmonetary provision of this
Lease when, except in the case of any provision which by its terms provides for no grace period,
such failure shall continue for a period of thirty (30) days, or such other period as is expressly set
forth herein, after written notice thereof from Lessor to Lessee and to the City; any such notice
shall be deemed to be the notice required under California Code of Civil Procedure
Section 1161; provided that if the nature of the default is such that it will reasonably take more
than thirty (30) days to cure, Lessee shall not be in default so long as Lessee or the City
Gray Cary~PA\10058630.2 271160530-901700
promptly commences and diligently prosecutes such cure to completion. No notice of default.
shall be deemed a forfeiture or a termination of this Lease unless Lessor expressly so elects in
such notice.
(c) Subject to Section 9.2, the vacation of the Premises for a period of thirty (30)
consecutive days or more except in connection with repair, restoration or Alterations undertaken
pursuant to and in accordance with Articles 12 or 21 hereof, or the abandonment of the Premises.
(d) The failure to be or remain a Qualified Party, as determined by the City
pursuant to the Implementation Agreement.
24.2 Lessor’s Remedies. Upon the occurrence of an Event of Default, Lessor shall
have the following rights and remedies:
(a) The right to terminate this Lease, subject to Lender’s right to (A) exercise its
Foreclosure Rights during the Foreclosure Rights Period, and (B) cure Lessee’s defaults (as more
fully set forth in Section 7.4). In the event Lender does not timely exercise its Foreclosure
Rights and cure rights under Section 7.4, Lessor may terminate this Lease, subject to City’s right
to exercise City’s Tenant Replacement Right. In the event of a termination hereunder, Lessee
shall immediately surrender possession of the Premises in accordance with Article 27, and pay to
Lessor all Rent and other charges and amounts due from Lessee hereunder to the date of
termination.
(b) The rights and remedies described in California Civil Code Section 1951.2,
including without limitation, the right to recover the worth at the time of award of the amount by
which the Rent payable hereunder for the balance of the Term after the time of award exceed the
amount of such rental loss for the same period that Lessee proves could be reasonably avoided,
as computed pursuant to subdivision (b) of said Section 1951.2, and the right to recover any
amount necessary to compensate Lessor for all the detriment proximately caused by Lessee’s
failure to perform its obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom which, without limiting the generality of the foregoing,
includes unpaid taxes and assessments, any costs or expenses incurred by Lessor in recovering
possession of the Premises, maintaining or preserving the Premises after such default, preparing
the Premises for reletting to’a new lessee, any repairs or alterations to the Premises for such
reletting, leasing commissions, architect’s fees and any other costs necessary or appropriate
either to relet the Premises or to adapt them to another beneficial use by Lessor and such
amounts in addition to or in lieu of the foregoing as may be permitted from time to time by
applicable California law.
(c) The rights and remedies described in California Civil Code Section 1951.4
that allow Lessor to continue this Lease in effect and to enforce all of its rights and remedies
under this Lease, including the right to recover Rent as it becomes due, for so long as Lessor,
does not terminate Lessee’s right to possession. Acts of maintenance or preservation, efforts to
relet the Premises or the appointment of a receiver upon Lessor’s initiative to protect its interest
under this Lease shall not constitute a termination of Lessee’s right to possession.
(d) The right and power, as attorney in fact for Lessee, to enter and to sublet the
Premises, to collect rents from all subtenants and to provide or arrange for the provision of all
Gray CarykPA\10058630.2 281160530-901700
services and fulfill all obligations of Lessee, and Lessor is hereby authorized on behalf of Lessee,
but shall have absolutely no obligation, to provide such services and fulfill such obligations and
to incur all such expenses and costs as Lessor deems necessary in connection therewith. Lessee
shall be liable immediately to Lessor for all costs and expenses Lessor incurs in collecting such
rents and arranging for or providing such services or fulfilling such obligations. Lessor is hereby
authorized, but not obligated, to relet the Premises or any part thereof on behalf of Lessee, to
incur such expenses as may be necessary to effect a relet and make said relet for such term or
terms, upon such conditions and at such rental as Lessor in its sole discretion may deem proper.
Lessee shall be liable immediately to Lessor for all reasonable costs Lessor incurs in reletting the
Premises including, without limitation, brokers’ commissions, expenses of remodeling the
Premises required by the reletting, and other costs. If Lessor relets the Premises or any portion
thereof, such reletting shall not relieve Lessee of any obligation hereunder, except that Lessor
shall apply the rent or other proceeds actually collected by it as a result of such reletting against
any amounts due from Lessee hereunder to the extent that such rent or other proceeds
compensate Lessor for the nonperformance of any obligation of Lessee hereunder. Such
payments by Lessee shall be due at such times as are provided elsewhere in this Lease, and
Lessor need not wait until the termination of this Lease, by expiration of the Term hereof or
otherwise, to recover them by legal action or in any other manner. Lessor may execute any lease
made pursuant hereto in its own name, and the lessee thereunder shall be under no obligation to
see to the application by Lessor of any rent or other proceeds, nor shall Lessee have any right to
collect any such rent or other proceeds. Lessor shall not by any reentry or other act be deemed to
have accepted any surrender by Lessee of the Premises or Lessee’s interest therein, or be deemed
to have otherwise terminated this Lease, or to have relieved Lessee of any obligation hereunder,
unless Lessor shall have given Lessee express written notice of Lessor’s election to do so as set
forth herein.
(e) The right to enjoin, and any other remedy or right now or hereafter available
to a lessor against a defaulting lessee under the laws of the State of California or the equitable
powers of its courts, and not otherwise specifically reserved herein.
24.3 Commencement of Actions. Any legal action by Lessor to enforce any
obligation of Lessee or in the pursuit of any remedy hereunder shall be deemed timely filed if
commenced at any time Prior to one (1) year after the expiration or termination of the Term
hereof or prior to the expiration of the statutory limitation period that would be applicable except
for this Section 24.3, whichever period expires later.
24.4 Rights Cumulative. The various rights and remedies reserved to Lessor herein,
including those not specifically described herein, shall be cumulative and shall be in addition to
every other right or remedy provided for in this Lease or now or hereafter existing at law or in
equity and the exercise of the rights or remedies provided for in this Lease or now or hereafter
existing at law or in equity shall not preclude the simultaneous or later exercise by Lessor of any
or all other rights and remedies.
ARTICLE 25. LESSOR’S RIGHT TO CURE DEFAULTS
If Lessee shall fail or neglect to do or perform any act or thing herein provided by it to be
done or performed and such failure shall not be cured within any applicable grace period
provided in Article 24, then, notwithstanding any other provision of this Lease, Lessor shall have
Gray CarykPA\10058630.2 291160530-901700
the right, but shall have no obligation, to pay any Imposition payable by Lessee hereunder,
discharge any lien, take out, pay for and maintain any insurance required under Article 19, or do
or perform or cause to be done or performed any such other act or thing (entering upon the
Premises for such purposes, if Lessor shall so elect), and Lessor shall not be or be held liable or
in any way responsible for any loss, disturbance, inconvenience, annoyance or damage resulting
to Lessee on account thereof, and Lessee shall repay to Lessor upon demand the entire
reasonable cost and expense thereof, including, without limitation, compensation to the agents,
consultants and contractors of Lessor and reasonable attorneys’ fees and expenses. Lessor may
act upon shorter notice or no notice at all if necessary in Lessor’s reasonable judgment to meet
an emergency situation or governmental time limitation or otherwise to protect Lessor’s interest
in the Premises. Lessor shall not be required to inquire into the correctness of the amount or
validity of any Imposition or lien that may be paid by Lessor, and Lessor shall be duly protected
in paying the amount of any such Imposition or lien claimed, and, in such event, Lessor shall
also have the full authority, in Lessor’s sole judgment and discretion and without prior notice to
or approval by Lessee, to settle or compromise any such lien or Imposition. Any act or thing
done by Lessor pursuant to the provisions of this Article 25 shall not be or be construed as a
waiver of any default by Lessee, or as a waiver of any term, covenant, agreement or condition
herein contained or of the performance thereof. All amounts payable by Lessee to Lessor under
any of the provisions of this Lease, if not paid when the same become due as in this Lease
provided, shall bear interest at the maximum rate allowed by law.
ARTICLE 26. SURRENDER OF THE PREMISES
Upon the termination of this Lease, whether at the expiration of the Term as stated in
Article 4 hereof or prior thereto pursuant to any provision hereof, Lessee shall remediate on,
from, or under the Premises any Hazardous Substances to the extent resulting from any
Hazardous Substances Occurrence, and surrender to Lessor the Premises in good order and
repair, reasonable wear and tear excepted, and free and clear of all liens and encumbrances.
Upon any termination of this Lease, all Improvements shall automatically and without further act
by Lessor or Lessee, become the property of Lessor, free and clear of any claim or interest
therein on the part of Lessee or anyone claiming under Lessee, and without payment therefor by
Lessor; provided that Lessee may remove any fixtures that can be removed without damage to
the Premises, and provided further that Lessor reserves the right to require Lessee, in the
alternative, to remove the Improvements from the Premises. In the event Lessor elects to retain
the Improvements on the Premises upon or at any time after the Termination Date, if requested
by Lessor, Lessee shall, without charge to Lessor, promptly execute, acknowledge and deliver to
Lessor a good and sufficient quitclaim deed and bill of sale of all of Lessee’s right, title, and
interest in and to the Premises and the Improvements. Lessee hereby irrevocably appoints
Lessor as its lawful attorney in fact to execute and deliver for, on behalf of and in the name of
Lessee, any such deed, bill of sale, or other instrument referred to in this Article 26 or otherwise,
required to document the transfer or reversion to Lessor of such interests of Lessee, and Lessee
and Lessor agree that such power of attorney shall be a power coupled with an interest. Any
personal property of Lessee that remains on the Premises after the Termination Date may, at the
option of Lessor, be deemed to have been abandoned by Lessee and may either be retained by
Lessor as its property or disposed of, without accountability, in such manner as Lessor may
determine in its sole discretion.
Gray CaryWA\10058630,2 301160530-901700
ARTICLE 27. USE OF NAME
Lessee shall not use any such name or any variation thereof or identify Lessor in any
promotional advertising or other promotional materials to be disseminated to the public or any
portion thereof or use any trademark, service mark, trade name or symbol of Lessor or that is
associated with it, without Lessor’s prior written consent, which may be given or withheld in
Lessor’s sole discretion.
ARTICLE 28.REPRESENTATIONS AND WARRANTIES OF LESSEE
Lessee hereby represents and warrants to Lessor as follows:
(a) Lessee is a corporation duly formed and validly existing under the laws of the
state of California and is qualified to do business under the laws of the State of California.
Lessee has full corporate power and authority to enter into and perform its obligations under this
Lease and to develop, construct and operate the Premises as contemplated by this Lease.
(b) Lessee has taken all necessary action to authorize the execution, delivery and
performance of this Lease and this Lease constitutes the legal, valid, and binding obligation of
Lessee.
(c) Lessee has the right, power, legal capacity and authority to enter into and
perform its obligations under this Lease and no approvals or consents of any person are required
in connection with the execution and performance of this Lease. The execution and performance
of this Lease will not result in or constitute any default or event that with notice or the lapse of
time or both, would be a default, breach or violation of the organizational instruments governing
Lessee or any agreement or any order or decree of any court or other governmental authority to
which Lessee is a party or to which it is subject.
ARTICLE 29. NO WAIVER BY LESSOR OR LESSEE
No failure by Lessor or Lessee to insist upon the strict performance of any term,
covenant, agreement, provision, condition or limitation of this Lease or to exercise any right or-
remedy upon a breach thereof, and no acceptance by Lessor of full or partial Rent during the
continuance of an such breach, shall constitute a waiver of any such breach or of such term,
covenant, agreement, provision, condition or limitation. No term, covenant, agreement,
provision, condition or limitation of this Lease and no breach thereof may be waived, altered or
modified except by a written instrument executed by Lessor or Lessee. No waiver of any breach
shall affect or alter this Lease but each and every term, covenant, agreement, provision, condition
and limitation of this Lease shall continue in full force and effect with respect to any other then
existing or subsequent breach.
ARTICLE 30. NO PARTNERSHIP
It is expressly understood that neither Lessee nor Lessor is or becomes, in any way or for
any purpose, a partner of the other in the conduct of its business, or otherwise, or joint venturer
or a member of a joint enterprise with the other, or agent of the other by reason of this Lease or
otherwise.
Gray CarykOA\10058630.2 311160530-901700
ARTICLE 31. NO DEDICATION
This Lease shall not be, nor be deemed or construed to be, a dedication to the public of
the Premises, the areas in which the Premises are located or the Improvements, or any portion
thereof.
ARTICLE 32. NO THIRD PARTY BENEFICIARIES
This Lease shall not confer nor be deemed nor construed to confer upon any person or
entity, other than the parties hereto, any right or interest, including, without limiting the
generality of the foregoing, any third party beneficiary status or any right to enforce any
provision of this Lease.
ARTICLE 33. NOTICES
Any notice, consent or other communication required or permitted under this Lease shall
be in writing and shall be delivered by hand, sent by air courier, sent by prepaid registered or
certified mail with return receipt requested, or sent by facsimile, and shall be deemed to have
been given on the earliest of (i) receipt, (ii) one business day after delivery to an air courier for
overnight expedited delivery service, or (iii) five (5) business days after the date deposited in the
United States mail, registered or certified, with postage prepaid and return receipt requested
(provided that such return receipt must indicate receipt at the address specified) or on the day of
its transmission by facsimile if transmitted during the business hours of the place of receipt,
otherwise on the next business day. All notices shall be addressed as appropriate to the
addresses set forth in Article 1 (or to such other or further addresses as the parties may designate
by notice given in accordance with this section).
ARTICLE 34. HOLDING OVER
This Lease shall terminate upon the Termination Date and any holding over by Lessee
after the Termination Date shall not constitute a renewal of this Lease or give Lessee any rights
hereunder or in or to the Premises.
ARTICLE 35. NONDISCRIMINATION
In performing the obligations set forth herein, Lessee shall not discriminate against any
person on the basis of race, age, creed, cohabitation, sexual preference, gender, color, ancestry,
national origin, heritage, religion or physical or mental disability.
ARTICLE 36. MEMORANDUM
This Lease shall not be recorded. However, at the request of either party, the parties
hereto shall execute and acknowledge a memorandum hereof in recordable form that Lessor shall
file for recording in the Official Records of Santa Clara County.
ARTICLE 37. GENERAL PROVISIONS
37.1 Severability. In case any one or more of the provisions of this Lease shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality
Gray Cary~PA\10058630.2 321160530-901700
or unenforceability shall not affect any other provision of this Lease, and this Lease shall be
construed as if such invalid, illegal or unenforceable provisions had not been contained herein.
37.2 Time of the Essence. Time is hereby expressly declared to be of the essence of
this Lease and of each and every term, covenant, agreement, condition and provision hereof.
37.3 Headings. Article, Section and subsection headings in this Lease are for
convenience only and are not to be construed as a part of this Lease or in any way limiting or
amplifying the provisions hereof.
37.4 Lease Construed as a Whole. The language in all parts of this Lease shall in all
cases be construed as a whole according to its fair meaning and not strictly for or against either
Lessor or Lessee. The parties acknowledge that each party and its counsel have reviewed this
Lease and participated in its drafting and therefore that the rule of construction that any
ambiguities are to be resolved against the drafting party shall not be employed nor applied in the
interpretation of this Lease. No prior draft of this Lease shall be admissible as evidence of the
parties’ intent.
37.5 Meaning of Terms. Whenever the context so requires, the neuter gender shall
include the masculine and the feminine, and the singular shall include the plural, and vice versa.
Any reference to a specific sum of money, shall mean that amount of lawful money of the United
States of America.
37.6 Attorneys’ Fees. In the event of any action or proceeding at law or in equity
between Lessor and Lessee to enforce or interpret any provision of this Lease or to protect or
establish any right or remedy of either party hereunder, the party not prevailing in such action or
proceeding shall pay to the prevailing party all costs and expenses, including without limitation,
reasonable attorneys’ fees and expenses (including attorneys’ fees and expenses of in-house
attorneys), incurred therein by such prevailing party and if such prevailing party shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys’ fees shall be
included in and as a part of such judgment.
37.7 California Law; Forum. The laws of the State of California, other than those
laws denominated choice of law rules which would require the application of the laws of another
forum, shall govern the validity, construction and effect of this Lease. This Lease is made and
all obligations hereunder arise and are to be performed in the County of Santa Clara, State of
California. Any action which in any way involves the rights, duties and obligations of the parties
hereto may (and if against Lessor, shall) be brought in the courts of the State of California
located in Santa Clara County or in the United States District Court for the Northern District of
California, and the parties hereto hereby submit to the personal jurisdiction of said courts.
37.8 Binding Agreement. Subject to the provisions of Article 21 of this Lease, the
terms, covenants and agreements contained in this Lease shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
37.9 Entire Agreement. This instrument, together with the exhibits hereto, all of
which are incorporated herein by reference, constitutes the entire agreement between Lessor and
Lessee with respect to the subject matter hereof and supersedes all prior offers, negotiations, oral
Gray CaryWA\10058630.2 331160530-901700
and written. This Lease may not be amended or modified in any respect whatsoever except by
an instrument in writing signed by Lessor and Lessee, and approved in writing by the City.
37.10 Quiet Enjoyment. Lessor agrees that Lessee, upon paying Rent and all other
sums due hereunder and upon keeping and observing all of the covenants, agreement and
provisions of this Lease on its part to be observed and kept, shall, subject to the exceptions and
reservations referred to in Article 2, lawfully and quietly hold, occupy and enjoy the Premises
during the Term without hindrance or molestation by anyone claiming by, through, or under
Lessor.
37.11 Brokers. Each party warrants to the other that it has not dealt with any real estate
agents or brokers with respect to this Lease. Each party agrees to indemnify, defend and hold the
other harmless from all loss, cost and expense incurred as a result of the breach of this warranty.
ARTICLE 38. SUBORDINATION AND NONDISTURBANCE
This Lease and the rights of Lessee hereunder, shall be subordinate to any mortgage, deed
of trust, or any other hypothecation or security now or hereafter placed upon the Premises or any
portion thereof and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee agrees to execute
any documents requires to effectuate such subordination of Lessee’s right under this Lease in
favor of any existing or future lenders or Lessor. Notwithstanding such subordination, Lessee’s
right to quiet possession of the Premises shall not be disturbed if Lessee is not in default beyond
any applicable notice and cure period and so long as Lessee shal! pay the rent and observe and
perform all of the terms and provisions of this Lease, unless this Lease is otherwise terminated
pursuant to its terms. Lessor agrees to execute any documents required to effectuate a
nondisturbance agreement from any and all existing and future lenders of Lessor.
Gray CarykPA\10058630.2 341160530-901700
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease by proper
persons thereunto duly authorized as of the date first above written.
THE PALO ALTO MEDICAL FOUNDATION
FOR HEALTH CARE, RESEARCH AND
EDUCATION,
a Califomia corporation
By
Its
CHILDREN’S CREATIVE LEARNING
CENTER, INC., a Califomia corporation
By
Its
The foregoing Ground Lease is hereby approved as of this day of ., 2000.
ATTEST CITY OF PALO ALTO
City Clerk
APPROVED AS TO FORM:
By:
Mayor
Senior Asst. City Attomey
APPROVED:
City Manager
APPROVED AS TO CONTENT:
Director of Administrative Services
Gray Cary~PA\10058630.2 3 51160530-901700
LEGAL DESCRIPTION ~
REAL PROPERTY in the City of Palo Alto, County of Santa Clara, State of California, described as follows:
Lots 5, 6, 7, 8, and 9 In Block 9, as shown upon that certain Map entitled, "Morris and G~:eenwood Subdivision
of Block 9 University Park", which Map was filed for record in the office of the Recorder of the County of
Santa Clam, State of California on April 15. 1890 in Book "D" of Maps, page 189. described as follows:
Beginning at the point of intersection of the Southwesterly line of Ramona Street, formerly Wadsworth Street
with the Northwesterly’ line of Channing Avenue, running thence Southwesterly along said Northwesterly line
of Channing Avenue t2~ feet; thence at e right angle Northwesterly 100 feet: thence at a right angle 125 feet
to said Southwesterly line of Ramona Street; thence eta right angle Southeasterly along said Southwesterly
!lne of Ramona Street 100 feet to the point of beginning.
APN:120-28-030
ARB:120-28-030
Exhibit "A"
A_p_p_endix 1
As used in this Lease, the following terms shall have the following meanings, applicable,
as appropriate, to both the singular and plural forms of the terms herein defined:
"Additional Rental" is as defined in Article 6.
"Alterations" means any additional exterior improvements, alterations, remodeling, or
reconstruction of or to the Improvements which are visible from the exterior of the
Improvements after the completion of the initial construction of the Improvements.
"Annual Rental" means the amount stated in the Basic Lease Information, and payable in
accordance with Article 5.
"Applicable Laws" means all applicable laws, codes, ordinances, orders, rules,
regulations and requirements, including, without limitation, the California Child Day Care
Facilities Act, all Environmental Requirements, of all Federal, state, county, municipal and other
governmental authorities and the departments, commissions, boards, bureaus, instrumentalities,
and officers thereof, and all orders, rules and regulations of the Pacific Fire Rating Bureau, and
the American Insurance Association (formerly the National Board of Fire Underwriters) or any
other body exercising similar functions relating to or affecting the Premises, the Improvements
now or hereafter located on the Premises or the use, operation or occupancy of the Premises for
the purposes permitted hereunder, whether now existing or hereafter enacted.
"Appropriation" means any taking by exercise of right of condemnation (direct or
inverse) or eminent domain, or requisitioning by military or other public authority for any
purpose arising out of a temporary emergency or other temporary circumstance or sale under
threat of condemnation. "Appropriated" means having been subject to such taking and
"Appropriating" means exercising such taking authority.
"Award" means the amount paid by the Appropriating authority as a result of an
Appropriation.
"Basic Lease Information" means the information contained in Article 1.
"City’s Tenant Replacement Right" and "City’s Tenant Replacement Right Period" are as
defined in Article 11.
"Commencement Date" is as stated in the Basic Lease Information.
"Environmental Damages" means all claims, demands, judgments, damages, losses,
penalties, fines, liabilities (including strict liability), encumbrances, liens, costs, and expenses of
investigation and defense of any claim, whether or not such claim is ultimately defeated, and of
any good faith settlement of judgment, of whatever kind or nature, contingent or otherwise,
matured or unmatured, foreseeable or unforeseeable, including without limitation reasonable
attorneys’ fees and disbursements and consultants’ fees, any of which are incurred at any time as
a result of a Hazardous Substance Occurrence, including, without limitation:
Gray Cary~PA\10058630.2 3 61160530-901700
(i) Damages for personal injury, or injury to property or natural resources
occurring upon or off of the Premises, foreseeable or unforeseeable, including, without
limitation, lost profits, consequential d ~amages, the cost of demolition and rebuilding of any
improvements on real property, interest and penalties, and claims brought by or on behalf of
employees of Lessee, with respect to which Lessee waives any immunity to which it may be
entitled under any industrial or worker’s compensation laws;
(ii) Fees incurred for the services of attomeys, consultants, contractors,
experts, laboratories and all other costs incurred in connection with the investigation or
remediation of Hazardous Substances or violation of Environmental Requirements, including,
but not limited to, preparation of feasibility studies or reports, or the performance of any cleanup,
remediation, removal, response, abatement, containment, closure, restoration or monitoring work
required by any federal, state or local governmental agency or political subdivision, or
reasonably necessary to make full economic use of the Premises or any other property or
otherwise expended in connection with such conditions, and including without limitation any
attorneys’ fees, costs and expenses incurred in enforcing this Lease or collecting any sums due
hereunder;
(iii) Liability to any third person or governmental agency to indemnify such
person or agency for costs expended in connection with the items referenced in subsection (ii)
above;
(iv) Diminution in the value of the Premises, and damages for the loss of
business and restriction on the use of, or adverse impact on the marketing of, rentable or usable
space or any amenity of the Premises.
"Environmental Requirements" means all applicable present and future statutes,
regulations, rules, ordinances, codes, licenses, permits, orders, approvals, plans, authorizations,
concessions, franchises, and similar items, and all amendments thereto, of all governmental
agencies, departments, commissions, boards, bureaus or instrumentalities of the United States,
California, and political subdivisions thereof, and all applicable judicial, administrative and
regulatory decrees, judgments, and orders relating to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.) and including, without limitation: (i) all
requirements pertaining to reporting, licensing, permitting, investigation and remediation of
emissions, discharges, releases, or threatened releases of Hazardous Substances, whether solid,
liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of
Hazardous Substances, and (ii) all requirements pertaining to the health and safety of employees
or the public.
"Expiration Date" is as stated in the Basic Lease Information.
"Event of Default" is as defined in Article 24.
"Foreclosure Rights" and "Foreclosure Rights Period" are as defined in Section 7.5.
"Full Insurable Replacement Value" is as defined in Section 19.1.
Gray CarykPA\10058630.2 371160530-901700
"Hazardous Substance" means any substance:
(i) the presence of which requires investigation or remediation under any
Environmental Requirement;
(ii) which is or becomes defined as a "hazardous waste, .... hazardous
substance," "pollutant," or "contaminant" under any Environmental Requirement;
(iii) which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated under any
Environmental Requirement;
(iv) the presence of which on the Premises causes or threatens to cause a
nuisance upon the Premises or to surrounding properties or poses or threatens to pose a hazard to
the health or safety of persons on or about the Premises;
(v) the presence of which on adjacent properties could constitute a trespass by
Lessee;
(vi) without limiting the foregoing, which contains gasoline, diesel fuel or
other petroleum hydrocarbons;
(vii) without limiting the foregoing, which contains polychlorinated biphenyls
(PCBs), asbestos or urea formaldehyde foam insulation; or
(viii) without limiting the foregoing, radon gas.
"Hazardous Substance Occurrence" means any use, treatment, keeping, storage, sale,
release, disposal, migration or discharge of any Hazardous Substance from, on, about, under or
into the Premises, or the exacerbation of any previously existing Hazardous Substance condition,
that occurs during the Term and arises out of, as a result of or related to the acts or omissions of
Lessee, its employees, agents, contractors and invitees on or about the Premises.
"Implementation Agreement" is as defined in Recital B.
"Impositions" is as defined in Section 19.1.
"Improvements" means all landscaping, buildings and other structures and
improvements, and fixtures thereto, to be constructed, planted, or installed on the Premises
during the Term, including, without limitation, the Improvements as described in Recital C to be
constructed by Lessee in accordance herewith, and all subsequent Alterations, more particularly
described in the Plans and Specifications.
"Leasehold Deed of Trust" is as defined in Section 7.3(b).
"Leasehold Encumbrance" is as defined in Section 7.1.
"Leasehold Estate" i~ as defined in Section 7.1.
Gray Cary~PA\10058630.2 3 81160530-901700
"Lease Year" shall mean each successive twelve month period commencing on January 1
and ending on December 31, provided that the first Lease Year shall commence on the
Commencement Date and the last Lease Year shall end on the Termination Date.
"Lender" is as defined in Section 7.1.
"Lender Transferees".is as defined in Section 7.11.
"Lender’s Tenant Replacement Right" shall mean and refer to Lender’s right to find a
successor tenant to operate the child day care facility in the Premises as set forth in Sections 7.3,
7.5, 7.6 or 7.7.
"Operations Standards" is as defined in Section 9.1.
"Premises" is as defined in Recital B, and does not include "Improvements."
"Premises Use Restrictions" is as defined in Section 9.1.
"Qualified Party" is as defined in Article 22.
"Rent" is as defined in Article 6.
"Term" is as defined in Article 4.
"Termination Date" shall mean the Expiration Date or such earlier date as this Lease is
terminated pursuant to any provision hereof.
Gray CarykPA\10058630.2 391160530-901700
ARTICLE 1. BASIC LEASE INFORMATION ...........................................................................1
ARTICLE
2.1
2.2
2.3
ARTICLE
LEASE OF PREMISES; RESERVATION OF RIGHTS .......................................2
Premises ...................................................................................................................2
Reservation of Rights ...............................................................................................2
Reservation of Initial Parking Lot Rights ................................................................3
3. ACCEPTANCE OF PREMISES .............................................................................3
ARTICLE 4. TERM ......................................................................................................................4
ARTICLE 5. ANNUAL RENTAL ................................................................................................4
ARTICLE 6. ADDITIONAL RENTAL ........................................................................................4
ARTICLE
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7~8
7.9
7.10
7.11
ARTICLE 7.
7.1
7.3
ARTICLE 8.
8.1
8.2
ARTICLE 9.
ENCUMBRANCE OF LEASEHOLD ESTATE ....................................................5
Lessee’s Right to Encumber .....................................................................................5
Notices Regarding Lender, Lessor, and City ...........................................................6
Right of Lender to Realize on Security ....................................................................6
Right of Lender to Cure Lessee’s Defaults ..............................................................7
Foreclosure in Lieu of Curing Default .....................................................................7
Assignment Without Consent on Foreclosure .........................................................8
New Lease to Lender ...............................................................................................8
No Merger of Leasehold and Fee Estates ................................................................9
Lender as Assignee of Lease ....................................................................................9
Lender as Including Subsequent Security Holders ..................................................9
Transferee as Qualified Party ...................................................................................9
NET LEASE; NO COUNTERCLAIM OR ABATEMENT .................................10
Net Lease ......................i ........................................................................................10
Independent Covenants ..........................................................................................10
USE AND OPERATION OF PREMISES ............................................................10
Use Restriction .......................................................................................................10
Operation of the Premises After Completion .........................................................11
LIMITATION ON EFFECT OF APPROVALS ...................................................11
ARTICLE 10. LICENSE TO OPERATE CHILD DAY CARE FACILITY ................................11
ARTICLE 11.
11.1
11.2
11.3
11.4
11.5
INITIAL CONSTRUCTION AND ALTERATIONS ...........................................12
Construction of Improvements ..............................................................................12
Alterations ..............................................................................................................12
Permits and Approvals ...........................................................................................12
Design ....................................................................................................................13
Prerequisites to Commencement of Construction ..................................................13
Gray Cary~PA\1342446.2
1160530-901700 i
11.6
11.7
11.8
ARTICLE 12.
12.1
12.2
12.3
12.4
ARTICLE 13.
ARTICLE 14.
14.1
14.2
14.3
ARTICLE 15.
ARTICLE 16.
16.1
16.2
ARTICLE 17.
17.1
17.2
17.3
17.4
17.5
17.6
17.7
17.8
ARTICLE 18.
18.1
18.2
18.3
18.4
18.5
18.6
18.7
ARTICLE 19.
19.1
19.2
TABLE OF CONTENTS
(continued)
General Construction Requirements ......................................................................14
Construction Completion Procedures ....................................................................15
On Site Inspection ..................................................................................................15
MECHANICS’ AND OTHER LIENS ..................................................................15
No Liens ...............................................................................: .................................15
Right to Contest Liens ...........................................................................................15
No Effect on Lessor’s Interests ..............................................................................15
Lessor’s Right to Cause Release of Liens ..............................................................15
OWNERSHIP OF IMPROVEMENTS ..................................................................16
MAINTENANCE AND REPAIRS; NO WASTE ................................................16
Maintenance and Repairs .......................................................................................16
No Waste ................................................................................................................16
No Lessor Obligations ...........................................................................................16
UTILITIES AND SERVICES ...............................................................................17
COMPLIANCE WITH LAWS; INSURANCE REQUIREMENTS .....................17
Compliance with Applicable Laws ........................................................................17
Compliance with Insurance Requirements ............................................................17
HAZARDOUS SUBSTANCES ............................................................................17
Hazardous Substances ............................................................................................17
Indemnity for Environmental Damages .................................................................17
Obligation to Remediate ........................................................................................18
Obligation to Notify Lessor ...................................................................................18
Right to Inspect ......................................................................................................18
Right to Remediate ................................................................................................19
Release of Lessor ...................................................................................................19
General Provisions .................................................................................................19
IMPOSITIONS; INSURANCE .............................................................................20
Impositions .............................................................................................................20
Receipts ..................................................................................................................20
Right to Contest .....................................................................................................20
Proration .................................................................................................................20
Assessment Proceedings ........................................................................................21
Required Insurance .................................................. ...............................................21
Policy Form and General .......................................................................................22
INDEMNITY AND RELEASE .............................................................................23
Indemnity ...............................................................................................................23
Release ...................................................................................................................24
Gray Cary~A\1342446.2
1160530-901700 ii
ARTICLE 20.
20.1
20.2
20.3
20.4
20.5
20.6
20.7
20.8
20.9
20.10
20.11
20.12
ARTICLE 21.
ARTICLE 22.
ARTICLE 23.
23.1
23.2
23.3
23.4
ARTICLE 24.
ARTICLE 25.
ARTICLE 26.
ARTICLE 27.
ARTICLE 28.
ARTICLE 29.
ARTICLE 30.
ARTICLE 31.
ARTICLE 32.
ARTICLE 33.
ARTICLE 34.
TABLE OF CONTENTS
(cominued)
APPROPRIATION, DAMAGE OR DESTRUCTION .........................................24
No Termination ......................................................................................................24
Evaluation of Effect of Damage or Appropriation ................................................24
Partial Appropriation; Amendment; Duty to Restore ............................................24
Damage or Destruction; Duty to Restore ...............................................................25
Performance of Repairs, Restoration and Alterations ............................................25
Option to Terminate Upon Damage or Destruction ...............................................25
Option to Terminate Upon Appropriation .............................................................25
Termination; Lessee’s Obligation to Restore; Arbitration .....................................25
Determination of Award ........................................................................................26
Excess Proceeds and Awards for Lessee’s Interests ..............................................26
Right to Participate in Settlement ..........................................................................26
Emergency Repairs ................................................................................................26
ASSIGNMENT AND SUBLETTING ..................................................................27
LESSOR’S RIGHT OF INSPECTION .................................................................27
EVENT OF DEFAULT AND LESSOR’S REMEDIES .......................................27
Events of Default ...................................................................................................27
Lessor’s Remedies .................................................................................................28
Commencement of Actions.., .................................................................................29
Rights Cumulative .................................................................................................29
LESSOR’S RIGHT TO CURE DEFAULTS ........................................................30
SURRENDER OF THE PREMISES .....................................................................30
USE OF NAME .....................................................................................................31
REPRESENTATIONS AND WARRANTIES OF LESSEE ................................31
NO WAIVER BY LESSOR ..................................................................................31
NO PARTNERSHIP ..............................................................................................32
NO DEDICATION ................................................................................................32
NO THIRD PARTY BENEFICIARIES ..............................................................32
NOTICES ...............................................................................................................32
HOLDING OVER .................................................................................................32
NONDIS CRIMINATION ......................................................................................32
Gray Cary~PA\1342446,2
oo,1160530-901700 111
ARTICLE 35.
ARTICLE 36.
36.1
36.2
36.3
36.4
36.5
36.6
36.7
36.8
36.9
36.10
EXHIBIT A -
TABLE OF CONTENTS
(continued)
MEMORANDUM .......................................’ ..........................................................3 3
GENERAL PROVISIONS ....................................................................................33
Severability ............................................................................................................33
Time of the Essence ...............................................................................................33
Headings ................................................................................................................33
Lease Construed as a Whole ..................................................................................33
Meaning of Terms ..................................................................................................33
Attorneys’ Fees ......................................................................................................33
California Law; Forum ..........................................................................................33
Binding Agreement ................................................................................................34
Entire Agreement ...................................................................................................34
Quiet Enj oyment ....................................................................................................34
Site Plan of Premises
Gray Cary~PA\1342446.2
1160530-901700 iv