Agenda packet — Santa Cruz City Council, February 27, 2024 (part 1 of 2)

CITY OF SANTA CRUZ
809 Center Street
Santa Cruz, California 95060

CITY COUNCIL AGENDA
Regular Meeting - February 27, 2024
2:00 P.M. CLOSED SESSION, ZOOM/COURTYARD CONFERENCE ROOM 2:20 P.M. ORAL COMMUNICATIONS, CONSENT AND PUBLIC HEARINGS,

ZOOM/COUNCIL CHAMBERS
The meeting may be viewed remotely, using any of the following sources:
 Click on Zoom link (no time delay): https://zoom.us/j/94684401344  Online at http://www.cityofsantacruz.com/government/city-council/council-meetings  Online at Watch – Community Television of Santa Cruz County  Comcast Channel 25
Or: Call any of the numbers below. If one is busy, try the next one.  1-833-548-0276 (Toll Free)
 1-833-548-0282 (Toll Free)
 1-877-853-5247 (Toll Free)
 1-669-900-9128
 Enter the meeting ID number: 946 8440 1344
 When prompted for a Participant ID, press #.
 Press *9 on your phone to “raise your hand” when the Mayor calls for public comment.  It will be your turn to speak when the Mayor calls on you. Press *6 to unmute yourself. The timer will then be set.

Correspondence to be included in the agenda packet must be received by 5:00 pm on Monday, February 26th
PLEASE NOTE:
 Council may take a break(s) as needed.
 Requests for extra speaking time on items other than Oral Communications must be made by 5:00 p.m. on Sunday, February 25th by emailing the Mayor and the City Clerk.

Approval will be confirmed via email.
[email protected] [email protected]
February 27, 2024 City Council 2
The City of Santa Cruz does not discriminate against persons with disabilities. Out of consideration for people with chemical sensitivities we ask that you attend fragrance free. Upon request, the agenda can be provided in a format to accommodate special needs. Additionally, if you wish to attend this public meeting and will require assistance such as an interpreter for American Sign Language, Spanish, or other special equipment, please call the City Clerk’s Department at 420-5030 at least five days in advance so that we can arrange for such special assistance, or email [email protected]. The CalRelay system number: 1-800-735-2922.

Si desea asistir a esta reunión pública y necesita ayuda - como un intérprete de lenguaje de señas americano, español u otro equipo especial - favor de llamar al Departamento de la Secretaría de la Ciudad al 420-5030 al menos cinco días antes para que podamos coordinar dicha asistencia especial o envié un correo electrónico a [email protected]. El número del sistema Cal-Relay es: 1-800-735-2922.

Agenda and Agenda Packet Materials: The City Council agenda and the complete agenda packet containing public records, which are not exempt from disclosure pursuant to the California Public Records Act, are available for review on the City’s website:
www.cityofsantacruz.com/government/city-council-meetings and at the Office of the City Clerk located at 809 Center Street, Room 9, Santa Cruz, California, during normal business hours.

Agenda Materials Submitted after Publication of the Agenda Packet: Pursuant to Government Code §54957.5, public records related to an open session agenda item submitted after distribution of the agenda packet are available at the same time they are distributed or made available to the legislative body on the City’s website at: www.cityofsantacruz.com/government/city-councilmeetings and are also available for public inspection at the Office of the City Clerk, 809 Center Street Room 8, Santa Cruz, California, during normal business hours, and at the Council meeting.

Need more information? Contact the City Clerk’s office at 831-420-5030.

February 27, 2024 City Council 3
2:00 PM
Closed Session

1. Real Property Negotiations (Government Code §54956.8) 1) Property: 1010 River Street (Colligan Theater)
APN: 008-661-13
Owner: Jewel Theater Company
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Julie James Under Negotiation: Price, terms of payment, or both
2) Property: 1520 K1 Pacific Ave (Kiosk)
APN: N/A – Right of Way
Owner: Tsegarede Embaye (dba NahNa Eritrean Foods)
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Tsegarede Embaye Under Negotiation: Price, terms of payment, or both
3) Property: 49-B Municipal Wharf
APN: 007-371-01
Owner: Olita’s Cantina & Grill, LLC
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Steve Elb
Under Negotiation: Price, terms of payment, or both
4) Property: 121 Soquel Avenue
APN: 005-081-51 (Portion)
Owner: Oswald, LLC dba Oswald
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Damani Thomas Under Negotiation: Price, terms of payment, or both
5) Property: 401 Upper Park Road
APN: 009-471-02 (Portion)
Owner: Dela Upper Park, Inc.

City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Tim and Jamie Loustalot Under Negotiation: Price, terms of payment, or both
February 27, 2024 City Council 4
City Council
2:20 PM
Call to Order
Roll Call
Oral Communications Announcement – Members of the public may address Council on matters not on the agenda, but within the jurisdiction of the Council. 30 minutes is allocated for Oral Communications. No extra time for groups will be granted.

Oral Communications
Presentations

2. Mayoral Proclamation Declaring February as Black History Month

3. Zero Emission Rail and Trail Project
Presiding Officer's Announcements
Statements of Disqualification
Additions and Deletions
City Attorney Report on Closed Session
Council Meeting Calendar

4. The City Council will review the meeting calendar attached to the agenda and revise it as necessary.

February 27, 2024 City Council 5
Consent Agenda

5. Minutes of the February 13, 2024 City Council Meeting (CC) Motion to approve as submitted.

6. 119-123 Locust Street Purchase and Sale Agreement and Related Actions (ED)
Resolution authorizing the City Manager to enter into a Purchase and Sale Agreement for real property located at 119-123 Locust Street (APN 005-043-02) and execute any related documents, amendments, modifications, or extensions of a non-substantive or conforming nature, in a form approved by City Attorney, between the City of Santa Cruz and David Posner.

7. 1122 Pacific Avenue – Lease Agreement with Eco Leo LLC, (aka Dyane Villalobos) dba Childish Toy Shop (ED)
Motion to authorize and direct the City Manager to execute a Lease Agreement with Eco Leo LLC (aka Dyane Villalobos) dba Childish Toy Shop for the retail space located at 1122 Pacific Avenue, and to execute any documents, amendments, or modifications, of a nonsubstantive or conforming nature, and to assign and relocate premises, as needed, in a form approved by City Attorney.

8. State Affordable Housing Sustainable Communities Program Funding Application for the 136 River St 100% Affordable Housing Project (ED) Resolution authorizing the City Manager to jointly apply for, accept, and appropriate any grant funds from the California Strategic Growth Council (SGC), if awarded, through the State Affordable Housing and Sustainable Communities Grant Program (AHSC); and, to authorize the City Manager or his designee to negotiate, execute, enter into, and deliver any necessary contracts, agreements, documents, amendments, in a form to be approved by the City Attorney; and take any other actions necessary to implement the grant-funded project, in an amount(s) not to exceed the grant award.

February 27, 2024 City Council 6
Consent Agenda (continued)

9. Coastal Conservancy Resilience Grant Program for the Santa Cruz Wharf Resilience Upgrades and Improvements Project and Related Actions (ED)
Resolution authorizing and directing staff to apply for and accept $6,893,700 in grant funds from the California Coastal Conservancy for the Santa Cruz Wharf Resilience Upgrades and Improvements Project; and, if awarded, authorizing the City Manager or his designee to appropriate funds not to exceed total project cost of $8,527,600, and to execute any agreements, documents, or project modifications necessary for acceptance and implementation of the grant.

10. Professional Services Agreements for On-Call Landscape Architectural Services (PR)
Motion to approve and authorize the City Manager to execute Professional Services Agreements with Conger Moss Guillard (CMG), SWA Group (SWA), Royston, Hanamoto, Alley & Abey (RHAA), and Bionic Landscape, in the form approved by the City Attorney, for oncall landscape architectural services for an amount not to exceed $1,000,000 per vendor over a three-year term with an option to extend for an additional three years. The Director of Parks and Recreation is authorized to execute contract amendments within the approved project budget.

11. Neary Lagoon Security Fencing Project (m409688) – Notice of Completion (PW)
Motion to accept the work of Abacherli Fence Company (Soquel, CA) as completed per plans and specifications and authorize the filing of the Notice of Completion for the Neary Lagoon Security Fencing Project (m409688).

End Consent Agenda
February 27, 2024 City Council 7
Public Hearings

12. 2nd Reading and Final Adoption Ordinance No. 2024-06 Amending Uncodified Ordinance No. 2022-16 Extending Temporary Use of Certain Adjacent Public Street and Outdoor Areas for Eligible Businesses (ED) Motion to adopt Ordinance No. 2024-06 amending uncodified Ordinance No. 2022-16 extending temporary use of certain adjacent public street and outdoor areas for eligible businesses that extends the temporary period for commercial use on private property from March 31, 2024 to May 31, 2025.

13. Joby Employment Incentive Loan Agreement (ED)
Motion authorizing the City Manager to execute an Employment Incentive Loan Agreement and any non-substantive changes, in a form approved by the City Attorney, and other related documents, with Joby Aero, Inc. in an amount up to $500,000.

Adjournment
February 27, 2024 City Council 8

INFORMATION ITEMS PREVIOUSLY DISTRIBUTED TO CITY COUNCILMEMBERS None issued.

MAYOR'S PROCLAMATIONS
ADDENDUM TO CITY COUNCIL AGENDA – FEBRUARY 27, 2024

14. Proclaiming February 13, 2024 as “Leslie Conner Day” and encouraging all citizens to join in this observance.

15. Proclaiming February 17, 2024 as “Laurie R. King Day” and encouraging all citizens to join in honoring her for her contribution to the local and national literary community.

Advisory Body Appointments
The following positions are either currently vacant or the terms are due to expire.

Council will make the appointments at a future meeting.

Commission for the Prevention of
Violence Against Women
One opening, to be appointed by Councilmember
Watkins.

County Latino Affairs Commission One opening – at-large nomination Public Hearing
If, in the future, you wish to challenge in court any of the matters on this agenda for which a public hearing is to be conducted, you may be limited to raising only those issues which you (or someone else) raised orally at the public hearing or in written correspondence received by the City at or before the hearing.

Any person seeking to challenge a City Council decision made as a result of a proceeding in which, by law, a hearing is required to be given, evidence is required to be taken, and the discretion in the determination of facts is vested in the City Council, shall be required to commence that action either 60 days or 90 days following the date on which the decision becomes final as provided in Code of Civil Procedure Section 1094.6 Please refer to code of Civil Procedure 1094.6 to determine how to calculate when a decision becomes “final.” The 60-day rule applies to all public hearings conducted pursuant to the City’s Zoning Ordinance, Title 24, Santa Cruz Municipal Code. The 90-day rule applies to all other public hearings.

ZERO EMISSION

PASSENGER RAIL

AND TRAIL PROJECT
Project Update and
Purpose and Need Statement
February 27, 2024

3.1 Background
2 • 2012: RTC acquired the Santa Cruz Branch Rail
Line (SCBRL)
• 2021: Preferred scenario identified high-capacity
zero emission passenger rail with a multi-use
bicycle and pedestrian trail along the SCBRL
• 2022: RTC solicited proposals to develop the
project concept and environmental documentation
• 2023: Contract awarded to HDR team and work
began on the Project Concept Report

3.2 Project Overview
• New high-capacity
passenger rail service
and stations on
approximately 22 miles
of the Santa Cruz Branch
Rail Line (SCBRL)
• 12 miles of Coastal Rail
Trail: Segments 13-20
and the Capitola Trestle
reach (Segment 11,
Phase 2)

3.3 4

3.4 Preliminary Purpose and Need
Statement
Summarizes the needs and constraints that drive the
development of the proposed project and the priorities in the development of project alternatives.

3.5 Preliminary Project Needs
6 Identifies mobility, accessibility and community
concerns, including:
• Diverse transportation needs not fully met
• Slow transit travel times
• Insufficient alternative travel options
• VMT and GHG reduction mandates
• Bicycle and pedestrian linkages

3.6 Preliminary Project Purpose
7 Identifies opportunities to address the needs and benefit the community, including:
• Provide increased access to accessible and reliable public travel options
• Improve transit connections
• Integrate with plans for future land use
• Reduce transit travel times and improve system reliability • Enhance bicycle and pedestrian connectivity and safety • Promote alternative transportation modes
• Reduce vehicle miles traveled and associated GHG emissions

3.7 Public Engagement
• Project Information at sccrtc.org/zeprt
• Stakeholder Briefings
• Virtual and In-Person Open House
Meetings
• Presentations at Partner Agency Meetings
in February/March
Feedback will be used to inform purpose
and need and ongoing project
development.

3.8 9
Next Steps

3.9 Thank you!

3.10 Meeting Type
Holiday
Jewish Holiday
Regular Meeting
Special Meeting (will be added as scheduled)
Study Session (will be added as scheduled)
Budget Hearing
DATE Location Meeting Type
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public April 22/23
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public May 27
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public May 29 Council Chambers Budget Hearing
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public June 19
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public July 4
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public September 2
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public October 2/3
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public October 11/12
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public November 11
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public November 28
Rosh Hashanah (City observed - sundown to sundown)
November 12
October 8
October 22
City Hall Closure - Veteran's Day (observed)
Yom Kippur (City observed - sundown to sundown)
City Hall Closure - Labor Day
August 27
July 9 and 23 Meetings Cancelled - CITY COUNCIL DARK
City Hall Closure - Independence Day
City Hall Closure - Memorial Day
Passover (City observed - sundown to sundown)
August 13
March 12
March 26
May 14
April 9
April 30
June 11
May 28
City Council Meeting Calendar for 2024
November 26
City Hall Closure - Thanksgiving Day
June 25
September 10
September 24
City Hall Closure - Juneteenth
Please note: Meeting times are not final and are likely to change

4.1 Meeting Type
Holiday
Jewish Holiday
Regular Meeting
Special Meeting (will be added as scheduled)
Study Session (will be added as scheduled)
Budget Hearing
DATE Location Meeting Type
City Council Meeting Calendar for 2024
Please note: Meeting times are not final and are likely to change November 29
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public December 25/26
December 25
December 24 Meeting Cancelled - CITY COUNCIL DARK
City Hall Closure - Christmas Day
Hanukkah (City observed - sundown to sundown)
December 10
City Hall Closure - Day After Thanksgiving Day

4.2 MINUTES ARE UNOFFICIAL UNTIL APPROVED BY COUNCIL
City of Santa Cruz
809 Center Street
Santa Cruz, California 95060

MINUTES OF A CITY COUNCIL MEETING
February 13, 2024
11:00 AM
Mayor Keeley opened the City Council Closed Session at 11:03 a.m. in a public meeting via Zoom and in Council Chambers, for the purpose of announcing the agenda, and receiving public testimony.

Roll Call

Present: Councilmembers Newsome, Brown, Watkins, Brunner (left at 11:46 a.m.), Kalantari-Johnson; Vice Mayor Golder; Mayor Keeley.

Absent: None.

Staff: City Manager M. Huffaker, Assistant City Attorney C. Bronson, Assistant City Manager L. Schmidt, Director of Economic Development and Housing B. Lipscomb, City Attorney T. Condotti (via Zoom), Director of Information Technology K. Morgan (via Zoom), Deputy City Clerk Administrator J. Wood, City Clerk Administrator B. Bush.

Public Comment
Mayor Keeley opened the public comment period at 11:04 a.m. There were no speakers. Mayor Keeley closed the public comment period at 11:04 a.m.

Statements of Disqualification – Councilmember Brunner announced she will be recusing herself from items 2.1—2.3 as it relates to her employment.

At 11:05 a.m. the meeting was closed to the public and Council adjourned to the Courtyard Conference Room.

5.1 February 13, 2024 CITY COUNCIL MINUTES 6728
Closed Session

1. Conference with Legal Counsel - Existing Litigation (Government Code §54956.9(d)(1))
1) Alicia Lopez v. Mary McCoy, et al.
(Santa Cruz Superior Court Case No. 18CV03301)
2) Don’t Morph the Wharf! v. City of Santa Cruz et al.
(Santa Cruz County Superior Court Case No. 20CV02731)
Council received an update, discussed these two items with legal counsel, and took no reportable action.

2. Real Property Negotiations (Government Code §54956.8) 1) Property: 1126 Pacific Avenue
APN: 005-153-10
Owner: Frederick Meng
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Frederick Meng dba Café Delmarette
Under Negotiation: Price, terms of payment, or both
2) Property: 1016 Cedar Street
APN: 005-042-36
Owner: Farouk Algosaibi
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Farouk Algosaibi dba Café Limelight Under Negotiation: Price, terms of payment, or both
3) Property: 1520 K2 Pacific Avenue
APN: No APN / Public Right of Way (Portion)
Owner: Sunny Kavil
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Sunny Kavil dba Opulence Under Negotiation: Price, terms of payment, or both
4) Property: 37 Municipal Wharf
APN: 007-341-03
Owner: Stagnaro Fish Corporation (c/o Dino Stagnaro) dba Gilda's City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Stagnaro Fish Corporation Under Negotiation: Price, terms of payment, or both

5.2 February 13, 2024 CITY COUNCIL MINUTES 6729
Closed Session (continued)

2. Real Property Negotiations (Government Code §54956.8) (continued) 5) Property: 59 Municipal Wharf
APN: 007-351-04
Owner: Stagnaro Bros. Seafood, Inc.

City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Stagnaro Bros. Seafood, Inc.

Under Negotiation: Price, terms of payment, or both
Council received a status report from the City Negotiator and took no reportable action. Councilmember Brunner recused herself from hearing items 2.1—2.3, and the whole Council was present for items 2.4—2.5.

5.3 February 13, 2024 CITY COUNCIL MINUTES 6730
City of Santa Cruz
809 Center Street
Santa Cruz, California 95060

MINUTES OF A CITY COUNCIL MEETING
February 13, 2024
12:30 PM
Call to Order – Mayor Keeley called the meeting to order at 12:32 p.m. in Council Chambers.

Roll Call

Present: Councilmembers Newsome (left at 12:59 p.m. and returned at 1:18 p.m.), Brown, Watkins, Brunner, Kalantari-Johnson; Vice Mayor Golder; Mayor Keeley.

Absent: None.

Staff: City Manager M. Huffaker, Assistant City Manager L. Schmidt, Assistant City Attorney C. Bronson, Director of Economic Development and Housing B. Lipscomb, Finance Director E. Cabell, Chief of Fire R. Oatey, Chief of Police B. Escalante, Director of Planning and Community Development L. Butler, Chief People Officer S. De Leon, Director of Parks and Recreation T. Elliot, Water Director H. Luckenbach (via Zoom), Director of Information Technology K. Morgan (via Zoom), Director of Public Works N. Nguyen (via Zoom), Senior Planner B.

Whitehill, Economic Development Manager R. Unitt, Principal Planner M. VanHua, Deputy City Clerk Administrator J. Wood, City Clerk Administrator B. Bush.

Oral Communications Announcement - The Mayor provided a brief announcement about Oral Communications.

Oral Communications
At 12:33 p.m. Mayor Keeley opened Oral Communications for members of the public who wished to speak regarding items not listed on the City Council agenda.

Garrett spoke regarding his experience with Black History in the third grade.

Ken Bare spoke regarding the third round of the Class and Compensation study.

5.4 February 13, 2024 CITY COUNCIL MINUTES 6731
Oral Communications (continued)
Bradley Snyder spoke regarding some buildings and apartments that are going up in downtown Santa Cruz.

James Ewing spoke regarding a loan from American Agency Bank, and a Putin interview he watched.

At 12:42 p.m. Mayor Keeley closed Oral Communications.

Presentations

3. Mayoral Proclamation Declaring February 13, 2024 as Leslie Conner Day Councilmember Kalantari-Johnson presented a proclamation to Leslie Conner declaring February 13, 2024 as Leslie Conner Day.

Presiding Officer's Announcements
Statements of Disqualification – Councilmember Newsome announced he will be recusing himself from item 18 as he owns property within 500 feet from the proposed project.

Additions and Deletions – None.

City Attorney Report on Closed Session – See pages 6728—6729 for the report.

Council Meeting Calendar

4. The City Council reviewed and did not revise the meeting calendar attached to the agenda.

5.5 February 13, 2024 CITY COUNCIL MINUTES 6732
Consent Agenda
Councilmember Brunner made a comment on items 9 and 12.

Councilmember Newsome made a comment on item 9.

Mayor Keeley made a comment on items 8 and 9.

Mayor Keeley opened the public comment period. The following people spoke:

Unidentified person spoke regarding items 7 and 15 (Consent Public Hearings).

Unidentified person spoke regarding item 5.

Mayor Keeley closed the public comment period.

MOTION: Councilmember Watkins moved, seconded by Vice Mayor Golder, to approve the Consent Agenda.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Newsome, Brown, Watkins, Brunner, KalantariJohnson; Vice Mayor Golder; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

5. Resolution Declaring the Existence of a State of Emergency Arising from December 2023 and January and February 2024 Winter Storms (CA/CM) Resolution No. NS-30,286 was adopted declaring the existence of a state of emergency arising from December 2023 and January and February 2024 winter storms.

6. Minutes of the January 23, 2024 City Council Meeting (CC) Motion carried to approve as submitted.

5.6 February 13, 2024 CITY COUNCIL MINUTES 6733
Consent Agenda (continued)

7. Integrated Regional Water Management – Memorandum of Agreement Renewal, Local Project Sponsorship Agreement Authorization, Decision-Support Tool Approval of Professional Services Agreement (CM/PW/WT)
Motion carried to authorize the City Manager to:
 Execute the Memorandum of Agreement for the Santa Cruz Integrated Regional Water Management Program and Complementary Efforts in a form approved by the City Attorney;
 Execute a Local Project Sponsor Agreement between the Regional Water Management Foundation and the City of Santa Cruz, in a form approved by the City Attorney; accept the funds; and execute all standard agreements for such funds and any amendments thereto and any other documents necessary to secure the Proposition 1 Integrated Regional Water Management Round 2 Implementation Grant Agreement funds for the Projects Entitled Project 3: Decision-Support Tool – Understanding Climate Influenced River Flooding and Project 4: Recreational Vehicle Sewage Dump Station in a form approved by the City Attorney; and
 Execute an agreement in a form to be approved by the City Attorney with Environmental Science Associates (ESA) for consulting services for Project 3: Decision-Support Tool and to authorize the City Manager to execute future contract amendments within the approved project budget.

8. Resolution Establishing the 2024 Security Deposit Interest Rate for Residential Rental Property (ED)
Resolution No. NS-30,287 was adopted establishing the 2024 interest rate for the residential security deposits at 0.03% and rescinding Resolution No. NS30,096.

5.7 February 13, 2024 CITY COUNCIL MINUTES 6734
Consent Agenda (continued)

9. City Participation in County-wide Landlord Incentive Program – Contract Amendment and Budget Adjustment (ED)
Motion carried to:
 Approve an amendment to the Agreement between the City of Santa Cruz and the Housing Authority of Santa Cruz County for the County-wide Landlord Incentive Program, authorizing and directing the City Manager to modify the existing Agreement in a form approved by the City Attorney; and
 Adopt Resolution No. NS-30,288 amending the FY 2024 budget to increase the allocation to the Landlord Incentive Program by $15,000 for the 2023- 2024 Program Year.

10. Annual Comprehensive Financial Report (ACFR) and Popular Annual Financial Report (PAFR) for the Fiscal Year Ended June 30, 2023 (FN) Motion carried to receive and file the Annual Comprehensive Financial Report (ACFR), and related reports, for the fiscal year ended June 30, 2023.

11. Neary Street Sewer Rehabilitation (c401511) – Authorization to Advertise and Award (PW)
Motion carried to approve the plans and specifications for the Neary Street Sewer Rehabilitation (c401511), authorize staff to advertise for bids, and award the contract. The City Manager is hereby authorized and directed to execute the contract as authorized by Resolution No. NS-27,563. The Director of Public Works is authorized to execute changes orders within the approved project budget.

12. HSIP10: Unsignalized Crossing Improvement Project (c402215) – Notice of Completion (PW)
Motion carried to accept the work of Kraemer Engineering, Inc. (Salinas, CA) as completed per the plans and specifications and authorize the filing of the Notice of Completion for HSIP10: Unsignalized Crossing Improvement Project (c402215).

5.8 February 13, 2024 CITY COUNCIL MINUTES 6735
Consent Agenda (continued)

13. Resource Recovery Facility Public Tipping Area Concrete Project 2024 (c401811) – Authorization to Advertise for Bids and Award Contract (PW) Motion carried to approve the plans and specifications for the Resource Recovery Facility Public Tipping Area Concrete Project (c401811) and authorize staff to advertise for bids and award the contract. The City Manager is hereby authorized and directed to execute the contract as authorized by Resolution No. NS-27,563. The Director of Public Works is authorized to execute change orders within the approved project budget.

14. Newell Creek Pipeline Replacement Project: Felton/Graham Hill – Award of Professional Engineering Services During Construction to Carollo Engineers (WT)
Motion carried authorizing the City Manager to execute an agreement in a form to be approved by the City Attorney with Carollo Engineers (Walnut Creek, CA) for professional engineering services during construction for the Newell Creek Pipeline Replacement Project: Felton/Graham Hill Water Treatment Plant section in the amount of $797,742 and to authorize the Water Director to execute future contract amendments within the approved project budget.

End Consent Agenda
Consent Public Hearings
Mayor Keeley opened the public comment period. There were no speakers. Mayor Keeley closed the public comment period.

MOTION: Councilmember Kalantari-Johnson moved, seconded by Councilmember Newsome, to approve the Consent Public Hearings Agenda.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Newsome, Brown, Watkins, Brunner, KalantariJohnson; Vice Mayor Golder; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

5.9 February 13, 2024 CITY COUNCIL MINUTES 6736
Consent Public Hearings (continued)

15. 2nd Reading and Final Adoption of Ordinance No. 2024-01 Implementing the CalPERS Contract Amendment (CC)
Motion carried to:
 Rescind prior action of the adoption of Ordinance No. 2024-01 implementing the CalPERS contract amendment from the January 23, 2024 City Council meeting; and
 Adopt Ordinance No. 2024-01 implementing the CalPERS contract amendment.

16. 2nd Reading and Final Adoption of Ordinance Number 2024-03 Municipal Code Amendments Relating to Objective Design Standards and Permit Processing Responding to Modifications Requested by the California Coastal Commission (PL)
Ordinance No. 2024-03 was adopted amending various parts Chapter 24.04 of the Santa Cruz Municipal Code related to permit processing in response to action by the California Coastal Commission.

17. 2nd Reading and Final Adoption of Ordinance No. 2024-05 Military Equipment Purchase Request and Policy Update per Assembly Bill 481 (PD) Motion carried to:
 Adopt Ordinance No. 2024-05 amending City of Santa Cruz Municipal Code (“SCMC”) Chapter 9.90 “AB 481 Military Equipment Use,” adopting an amended Military Equipment Use Policy (Policy) and incorporating the acquisition of unmanned aerial systems (UAS);
 Adopt Resolution No. NS-30,289 amending the FY 2024 budget in the amount of $170,942 from the Police Asset Seizure 214 Fund, and  Approve a five-year purchase with Axon, Inc. for a drone program, with Year 1 totaling $114,844, and authorize the City Manager to execute a contract in a form approved by the City Attorney.

5.10 February 13, 2024 CITY COUNCIL MINUTES 6737
At this time, Councilmember Newsome recused himself from this item and left the dais.

Public Hearing

18. 900 High Street: CP23-0164 (APN 001-022-40). Appeal of the Planning Commission Approval of the Development Proposal at 900 High Street Involving a Minor Land Division, Design Permit, Slope Development Permit, Density Bonus Request, and Heritage Tree Removal Permit to Divide a Parcel Into Two Lots and Construct a 40 Unit, Four-Story Apartment Building Within 20 Feet of a 30- Percent Slope and to Remove 14 Heritage Trees on a Site With an Existing Church in the R-1-10 (Single Family Residence) Zone District. (Environmental Determination: Exempt Under PRC Section 21083.3/CEQA Guidelines Section 15183), Applicant: Diana Alfaro, Workbench, Filed 11/30/22 (PL) Senior Planner B. Whitehill gave a presentation and responded to Council questions.

David Patee, Pastor of Peace United Church of Christ, spoke.

Mayor Keeley opened the public comment period. The following people spoke.

John Hall
Lola Quiroga
Lisa Hayes
Mayor Keeley closed the public comment period.

MOTION: Councilmember Brown moved, seconded by Councilmember Kalantari-Johnson, to adopt Resolution No. NS-30,290 denying the appeal of Norman Tardif, representing Springtree Homeowner’s Association (HOA) and Westlake Neighbors Association, thereby upholding the Planning Commission’s acknowledgment of the environmental determination and approval of the Minor Land Division, Design Permit, Slope Development Permit, Density Bonus Request, and Heritage Tree Removal Permit for the project at 900 High Street based on the findings and the Conditions of Approval.

ACTION: The motion carried with the following vote.

AYES: Councilmembers Brown, Watkins, Brunner, KalantariJohnson; Vice Mayor Golder; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: Councilmember Newsome.

5.11 February 13, 2024 CITY COUNCIL MINUTES 6738
At this time, Councilmember Newsome returned to the dais.

General Business

19. Mid-Year Budget Update
Finance Director E. Cabell and Chief People Officer S. De Leon gave a presentation and responded to Council questions.

City Manager M. Huffaker responded to Council questions.

Director of Parks and Recreation T. Elliot responded to Council questions.

Mayor Keeley opened the public comment period. The following people spoke.

Ken Bare
Garrett
Mayor Keeley closed the public comment period.

19.1 FY 2024 Budget Adjustments and Information on City’s Financial Status (FN)

19.2 Resolution Amending the City of Santa Cruz Personnel Complement and Classification and Compensation Plans for the Public Works, Parks and Recreation, Police, and Water Departments (HR)
MOTION: Councilmember Watkins moved, seconded by Councilmember Newsome, to:
 Adopt Resolution No. NS-30,291 amending the fiscal year (FY) 2024 budget appropriation of expenditures to all funds as listed in Exhibit A, in the amount of $14,274,517, including an increase of $721,206 to the General Fund, and a total appropriation decrease of revenues as listed in Exhibit A in the amount of $10,782,600 to all funds, including a net addition of $358,844 to the General Fund,
 Authorize the City Manager to allocate budgetary changes within the applicable funds and departments, and
 Adopt Resolution No. NS-30,292 amending the Classification and Compensation Plans and the Mid-Year 2024 Budget Personnel Complement by approving classification and position changes in certain departments.

At 2:12 p.m. Council took a break and returned at 2:26 p.m.

5.12 February 13, 2024 CITY COUNCIL MINUTES 6739
General Business (continued)

19. Mid-Year Budget Update (continued)

19.1 FY 2024 Budget Adjustments and Information on City’s Financial Status (FN) (continued)

MOTION: Councilmember Watkins moved, seconded by Councilmember Newsome, to:
 Adopt Resolution No. NS-30,291 amending the fiscal year (FY) 2024 budget appropriation of expenditures to all funds as listed in Exhibit A, in the amount of $14,274,517, including an increase of $721,206 to the General Fund, and a total appropriation decrease of revenues as listed in Exhibit A in the amount of $10,782,600 to all funds, including a net addition of $358,844 to the General Fund,
 Authorize the City Manager to allocate budgetary changes within the applicable funds and departments, and
 Adopt Resolution No. NS-30,292 amending the Classification and Compensation Plans and the Mid-Year 2024 Budget Personnel Complement by approving classification and position changes in certain departments.  Bring back Phase 3 to implement the compensation study at the March 26th Council meeting.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Newsome, Brown, Watkins, Brunner,
Kalantari-Johnson; Vice Mayor Golder; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

5.13 February 13, 2024 CITY COUNCIL MINUTES 6740
General Business (continued)

20. First Reading of an Ordinance Amending Uncodified Ordinance No. 2022-16 Extending Temporary Use of Certain Adjacent Public Street and Outdoor Areas for Eligible Businesses (ED)
Economic Development Manager R. Unitt spoke and responded to Council questions.

Mayor Keeley opened the public comment period. The following people spoke.

Karen Madura
Garrett
Mayor Keeley closed the public comment period.

MOTION: Councilmember Watkins moved, seconded by Councilmember Brunner, to introduce for publication Ordinance No. 2024-06 amending uncodified Ordinance No. 2022-16 extending temporary use of certain adjacent public street and outdoor areas for eligible businesses that extends the temporary period for commercial use on private property from March 31, 2024 to May 31, 2025.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Newsome, Brown, Watkins, Brunner,
Kalantari-Johnson; Vice Mayor Golder; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

5.14 February 13, 2024 CITY COUNCIL MINUTES 6741
General Business (continued)

21. Review of Recent State of California Legislation Impacting Local Control and 2023 Land Use and Housing Legislation Update (PL)
Principal Planner M. VanHua gave a presentation and responded to Council questions.

Director of Planning and Community Development L. Butler responded to Council questions.

Mayor Keeley opened the public comment period. The following people spoke.

Brad Snyder
Garrett
Mayor Keeley closed the public comment period.

MOTION: Councilmember Newsome moved, seconded by Councilmember Watkins, to:
 Accept the review of recent state of California legislation impacting local control and 2023 land use and housing legislation update, and  Reestablish the Council ad hoc Housing Committee with members consisting of Councilmembers Kalantari-Johnson and Newsome, and Mayor Keeley.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Newsome, Brown, Watkins, Brunner,
Kalantari-Johnson; Vice Mayor Golder; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

Adjournment – Vice Mayor Golder moved, seconded by Councilmember Brown, to adjourn. By consensus City Council adjourned at 3:45 p.m.

5.15 February 13, 2024 CITY COUNCIL MINUTES 6742
Respectfully Submitted:

Julia Wood, Deputy City Clerk Administrator
Attest:

Bonnie Bush, City Clerk Administrator
Approved:

Fred Keeley, Mayor

5.16 City Council

AGENDA REPORT
DATE: 02/08/2024
AGENDA OF: 02/27/2024
DEPARTMENT: Economic Development and Housing
SUBJECT: 119-123 Locust Street Purchase and Sale Agreement and Related Actions (ED)
RECOMMENDATION: Resolution authorizing the City Manager to enter into a Purchase and Sale Agreement for real property located at 119-123 Locust Street (APN 005-043-02) and execute any related documents, amendments, modifications, or extensions of a non-substantive or conforming nature, in a form approved by City Attorney, between the City of Santa Cruz and David Posner.

BACKGROUND: Since at least 2014, the City has been in the process of evaluating and updating its facilities to provide adequate office and service space for its various teams as City services continue to expand to keep up with the growth of the City. The City is dynamic and is supported by an equally dynamic organization that is projected to employ over 927.73 full time equivalent (FTE) employees in FY 2024 (FY 2024 Adopted Budget – Personnel Profile), an increase of 13 FTEs over the prior fiscal year. As staff continues to evaluate its space needs and adapts its staffing and service models, it has become clear that numerous facilities need modernization, optimization, or in some cases additional offices or facilities to support City staff.

The Parking Division operates and maintains the City’s four parking structures, eighteen parking lots, and on-street parking assets. Parking manages multiple parking programs in support of the City’s strategic priorities in the City’s downtown, beach, and other sectors and plays a key role in the maintenance of the downtown area, parking enforcement, and parking revenue collection citywide. Parking has historically operated from several different locations complicating management of the Division and leading to operational inefficiencies. ED staff has been working with Parking on the purchase of a new office building at 119-123 Locust Street (APN 005-043- 02) to consolidate parking teams in modern facilities to support their various operational needs.

Staff has negotiated the terms below and recommends that City Council authorize the City Manager to execute a Purchase and Sale Agreement for the acquisition of the property.

DISCUSSION: As noted in the background section above, the Parking Division (Parking) of Public Works is particularly challenged for adequate space and struggles to efficiently manage administrative, field crews, and public service from several different, decentralized spaces spread among the various downtown garages, at City Hall, and the Corp Yard. Several of their offices are also located in potentially leasable space that could be used to promote local business and economic development, and to generate revenues, if they were not in use by staff.

6.1 In fall 2023, an approximately 5,100 square foot commercial office building at 119-123 Locust Street was listed for sale across from the Locust Street Garage. The structure is currently owned by David Posner, who also owns and operates Awe Sum Organics on site. The property was recently remodeled in 2013 and is in good condition. The property will enable Parking to consolidate operations and staff facilities. This will improve operational efficiency and is expected to allow reuse or leasing of at least two commercial units at the Locust and Soquel/Front Garages that Parking currently uses. Depending on space, the building could also support temporary relocation of other city staff as modernization projects proceed at City Hall.

Staff recommends that City Council authorize the City Manager to execute a purchase and sale agreement, with the following terms:
 Purchase Price: $2.25 million, appraised Fair Market Value, subject to completion of minor repairs identified in property inspection.
 Due Diligence Period: 45-day early access prior to close.  Deposit: City shall pay to Seller a deposit of $25,000 within seven (7) days of execution of the Agreement. The deposit will be applicable toward purchase price.  Closing Costs: Transfer taxes shall be Seller’s obligation. Standard title insurance, recording fees, escrow fees and all other costs and charges of the escrow and closing shall be shared between the Purchaser and the Seller on a 50%/50% basis. The Purchaser shall pay the incremental premium for any extended coverage title insurance.
 Broker’s Commission: Sheldon Wiseman Commercial (Seller’s Agent) shall be paid a Commission by the Seller through escrow at the close of escrow.

Note: The Broker’s Commission is paid by the Seller with no additional contribution from the City.

HEALTH IN ALL POLICIES: The proposed acquisition will consolidate parking administration and certain operations teams into a central location. This will reduce commuting between locations along with corresponding greenhouse gas emissions. It will also provide modern well maintained facilities for staff offices and break rooms, while supporting staff services in a convenient walkable location that promotes healthy active transportation by staff.

FISCAL IMPACT: There is no impact to the General Fund by approval of the recommended actions. The proposed acquisition will be funded through a $2,300,000 advance from the City Public Trust Fund and allocated to the Parking Fund, budgeted in the FY 2024 midyear budget adjustments. The City Public Trust Fund will be reimbursed by parking revenues repaid over a period of up to five (5) years.

Prepared By:

David McCormic
Development Manager
Economic Development
Submitted By:

Bonnie Lipscomb
Director of Economic
Development and Housing
Approved By:

Matt Huffaker
City Manager

6.2 ATTACHMENTS:

1. RESOLUTION.DOCX

2. DRAFT PURCHASE AND SALE AGREEMENT.DOCX

6.3 RESOLUTION NO. NSRESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ AUTHORIZING

THE CITY MANAGER TO ENTER INTO A PURCHASE AND SALE AGREEMENT WITH

DAVID POSNER (AKA AWE SUM ORGANICS), FOR REAL PROPERTY LOCATED AT 119-123 LOCUST STREET, APN 005-043-02.

WHEREAS, the City of Santa Cruz wishes to acquire property located at 119-123 Locust Street for city office space; and
WHEREAS David Posner (Owner), has agreed to sell the property located at 119-123 Locust Street to the City; and
WHEREAS, the City Economic Development Trust Fund and Parking Fund have (Parking) have sufficient funds to purchase the property.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Santa Cruz that that the City Manager is authorized to negotiate and execute a purchase and sale agreement with David Posner, in an amount not to exceed of $2,300,000 from the Parking Fund for acquisition of the property located at 119-123 Locust Street, APN 005-043-02, under the terms and conditions presented herein; and, to execute any related documents, contracts, amendments, or other actions necessary to complete the purchase.

PASSED AND ADOPTED this 27th day of February by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED:

Mayor
ATTEST:

City Clerk Administrator

6.4 82811.00012\41976625.1
1 PURCHASE AND SALE AGREEMENT

AND JOINT ESCROW INSTRUCTIONS
(119-123 Locust Street, Santa Cruz, CA)
This Purchase and Sale Agreement and Joint Escrow Instructions (this “Agreement”) is made as of __________________, 2024 (“Effective Date”), between David Posner, Trustee of the David Posner Revocable Living Trust under Declaration of Trust dated December 17, 1996 (“Seller”), and City of Santa Cruz, a California municipal corporation (“Buyer”).

ARTICLE 1. AGREEMENT OF SALE.

Subject to and on the terms and conditions of this Agreement, Seller shall sell to Buyer and Buyer shall purchase from Seller all of the following (collectively, the “Property”):

1.1 Land. The real property is located at 119-123 Locust Street, Santa Cruz, CA 95060 (APN: 005-043-02-000), which is more particularly described in Exhibit A, together with (a) all privileges, rights, easements and appurtenances belonging to the real property, including without limitation all minerals, oil, gas and other hydrocarbon substances on and under the real property, (b) all development rights, air rights, water, water rights and water stock relating to the real property, and (c) all right, title and interest of Seller in and to any streets, alleys, passages, other easements and other rights-of-way or appurtenances included in, adjacent to or used in connection with such real property, before or after the vacation thereof (collectively, the “Land”);

1.2 Improvements. Any and all structures, fixtures, fences and parking areas located on the Land and any and all machinery, equipment, apparatus and appliances (including appliances installed in the kitchen on the Property) used in connection with the operation or occupancy of the Land (such as heating and air conditioning systems and facilities used to provide utility services, refrigeration, ventilation, garbage disposal or other amenities on the Land) and other improvements located upon the Land, (collectively, the “Improvements”).

The Land and the Improvements are sometimes collectively referred to in this Agreement as the “Property.”

1.3 Personal Property. No Personal Property is being sold as part of this transaction.

All Personal Property will be removed pursuant to Paragraph 4.1.8.

1.4 Other Assets. To the extent owned by Seller, (a) all warranties upon the Improvements to the full extent such warranties are assignable, (b) copies of all plans, specifications, engineering drawings and prints relating to the construction of the Improvements, and (c) all claims and causes of action arising out of or in connection with the Property.

ARTICLE 2. PURCHASE PRICE.

2.1 Amount. The purchase price (the “Purchase Price”) for the Property shall be Two Million Two Hundred Fifty Thousand Dollars ($2,250,000.00).

2.2 Deposit/Purchase Price. Within 10 business days after the Effective Date, Buyer shall deposit Twenty Five Thousand Dollars ($25,000) into Escrow (as defined below) into an

6.5 82811.00012\41976625.1
2 interest-bearing account on behalf of Buyer (the “Deposit”). The deposit shall be refundable to Buyer unless Buyer waives all contingencies by the expiration of the Due Diligence Period. The Deposit shall be disbursed to Seller if the Buyer approves the Due Diligence Investigation prior to expiration of the Due Diligence Period, and shall be applied to the Purchase Price at Closing. The failure of Buyer to make the Deposit within the time frame specified in this Section shall be material breach of this Agreement and Seller may terminate the Agreement. Buyer shall pay the Purchase Price to Seller through escrow at the Closing described in Section 9.1. On or before the Closing Date (as defined below), Buyer shall deposit into Escrow the Purchase Price, subject to adjustment by reason of any applicable prorations and the allocation of closing costs described below. The Deposit and Purchase Price shall be made by wire transfer of federal funds, cashier’s check or in another immediately available form. Notwithstanding anything herein to the contrary, One Hundred Dollars ($100.00) of the Initial Deposit (the “Independent Consideration”) shall not be refundable to Buyer, but shall represent consideration for this Agreement and shall be paid to Seller. The Independent Consideration shall be paid to Seller within 3 days of the Effective Date. The Independent Consideration shall serve as consideration for the granting of the time periods herein contained for Buyer to exercise Buyer’s right to satisfy and approve all of Buyer’s conditions herein contained. If the Deposit is refunded to Buyer for any reason pursuant to this Agreement, the Independent Consideration shall be subtracted from the Deposit pursuant to this Section.

ARTICLE 3. DUE DILIGENCE.

3.1 Due Diligence Period; Inspection and Access.

3.1.1 Due Diligence Period. The “Due Diligence Period” means the period beginning the later of (a) the Effective Date or (b) the date on which Buyer has received all of the Due Diligence Documents (defined in Section 3.2) from Seller and ending at 5:00 p.m. on the date forty five (45) days later.

3.1.2 Access to Information and the Property. Buyer shall conduct its investigation of the Property during the Due Diligence Period at no cost to Seller. This investigation (“Due Diligence Investigation”) may include, at Buyer’s option: a physical inspection of the Land and all Improvements thereon, including soil, geological and other tests, engineering evaluations of the mechanical, electrical, HVAC and other systems in the Improvements; review of all governmental matters affecting the Property, including zoning, environmental and building permit and occupancy matters; review and verification of all other information previously provided by Seller relating to the operation of the Property; and review of the condition of title to the Property, including the building, structural system and roof inspection.

In addition to the Preliminary Documents delivered to Buyer pursuant to Section 3.2, Buyer and its representatives shall have the right of access during reasonable business hours to all of the Additional Documents to be made available to Buyer at the Property pursuant to Section 3.3), wherever located, relating to the Property, including the right to copy the same. Buyer and its representatives shall also have the right of access to the Property during reasonable business hours to conduct its investigation of the physical condition of the Property. Seller agrees that the rights granted to Buyer herein and the results of its Due Diligence Investigation shall not relieve Seller of any obligations Seller may have under any other provisions of this Agreement, or under other documents entered into concurrently herewith, or implied by law, nor shall they constitute a waiver

6.6 82811.00012\41976625.1
3 by Buyer of the right to enforce any of the same. Seller shall cooperate with Buyer in its due diligence activities and provide access to the Property, its records, or provide information so long as it is within Seller’s control.

3.2 Delivery of Preliminary Documents. Within five (5) business days after the Effective Date, Seller shall deliver to Buyer, at Seller’s expense, all of the documents described in the remaining subsections of this Section 3.2 (collectively, the “Preliminary Documents”) in Seller’s possession or control.

3.2.1 Title Report and Survey. A preliminary title report or commitment for title insurance (the “Preliminary Title Report”), dated no earlier than ten (10) days before the Effective Date, covering the Property and issued by a title insurance company or companies acceptable to Buyer (the “Title Company”), together with a legible copy of each document, map and survey referred to in the Preliminary Title Report. Buyer, at Buyer’s sole cost, may obtain an as-built survey of the Property (the “Survey”) prepared by a certified land surveyor in accordance with the most recent American Land Title Association standards, certified by such surveyor to Buyer and the Title Company in a form acceptable to the Title Company for the purpose of deleting any survey exception from the Title Policy described in Section 4.1.3.

3.2.2 Leases. INTENTIONALLY DELETED

3.2.3 Soils Report. Any soils report on the Land prepared at Seller’s request or in the possession or control of Seller, including (if available) a report on compliance with any soils work recommended to be done prior to construction of the Improvements;

3.2.4 Engineers’ Reports. Any structural, mechanical, environmental or geological reports concerning the Property which have been prepared at Seller’s request or which are within Seller’s possession or control;

3.2.5 Operating Statements; Tax Bills. INTENTIONALLY DELETED;

3.2.6 Licenses, Etc. Copies of any licenses, permits or certificates required by governmental authorities in connection with construction or occupancy of the Improvements that are in possession of the Seller, including, without limitation, building permits, certificates of completion, certificates of occupancy and environmental permits and licenses;

3.2.7 Inspection Reports. Copies of all written reports received by Seller within three (3) years prior to the Effective Date from Seller’s insurance companies, any governmental agency or any other person or entity, which requires or demands correction of any condition, or requests modification in or termination of any uses of the Property, accompanied by Seller’s summary of (a) any oral reports from such insurance companies or governmental agencies, and (b) the present status of any matter noted in any oral or written report.

3.3 Additional Documents and Information. From the Effective Date through the Closing Date, Seller shall make available to Buyer at the Property in accordance with Section 3.1, the documents and information described in this Section 3.3 (collectively, the “Additional Documents”):

6.7 82811.00012\41976625.1
4 3.3.1 Agreements. Copies of written, and written descriptions of oral, easements, covenants, restrictions, agreements, contracts and other documents, whether existing or, to the knowledge of Seller, proposed as of the Effective Date, including without limitation any agreements relating to the insurance, service, operation, repair, supply, advertising, promotion, sale, leasing or management of the Property, which (a) affect the Property, (b) are not disclosed by the Preliminary Title Report, and (c) have not been delivered to Buyer pursuant to Section 3.2.

If no such documents exist, Seller shall furnish its certification to that effect;

3.3.2 Warranties/Roof Inspections/HVAC Inspections. Copies of any and all guarantees or warranties and other rights given to Seller in connection with the construction, maintenance, repair or remodeling of the Improvements, periodic inspections, or the purchase of any of the Personal Property. If no such documents exist, Seller shall furnish its certification to that effect;

3.3.3 Insurance Policies. Copies of certificates evidencing the insurance carried by Seller of the Property;

3.3.4 Other Documents. All data, correspondence, documents, agreements, waivers, notices, applications and other records with respect to the Property relating to transactions with taxing authorities, governmental agencies, utilities, vendors and others with whom Buyer may be dealing from and after the Closing Date; and

3.3.5 Requested Information. Such other documents and information concerning the Property as Buyer may reasonably request.

3.4 Approval/Disapproval of Due Diligence Investigations. Buyer shall approve or disapprove the results of Buyer’s Due Diligence Investigation, in the exercise of Buyer’s sole discretion, by written notice delivered to Seller no later than the expiration of the Due Diligence Period. Buyer’s disapproval shall terminate this Agreement unless, at the time Buyer gives notice of its disapproval, Buyer also notifies Seller of Buyer’s desire to enter into negotiations with Seller for the purpose of reaching an accommodation concerning the disapproval. If Buyer so notifies Seller and the parties have not reached a written agreement satisfactory to both of them regarding the disapproval within 10 days after the date of the disapproval notice, Buyer, at its option, may either (a) elect to terminate this Agreement by so notifying Seller and recover the Deposit, or (b) elect to proceed with the transactions contemplated by this Agreement notwithstanding its earlier disapproval. If Buyer fails to deliver to Seller notice of its approval or disapproval of the results of its Due Diligence Investigation, Buyer shall be deemed to have disapproved such results. If Buyer elects to terminate the Agreement, Buyer shall return to Seller all of the Preliminary Documents and Additional Documents previously delivered by Seller to Buyer within 5 business days of such termination.

3.5 Title Review.

3.5.1 Monetary Liens. At its expense, Seller shall remove all liens on the Property at or prior to the Closing (collectively, “Monetary Liens”): (i) all delinquent taxes, bonds and assessments and interest and penalties thereon (it being agreed that Seller shall not be required to remove any non-delinquent taxes and assessments imposed by any governmental agency that are

6.8 82811.00012\41976625.1
5 paid with the property taxes for the Property); and (ii) all other monetary liens, including without limitation all those shown on the Preliminary Title Report (including judgment and mechanics’ liens, whether or not liquidated, and mortgages and deeds of trust, with Seller being fully responsible for any fees or penalties incurred in connection therewith).

3.5.2 Approval/Disapproval of Title Review. Buyer shall approve or disapprove of the Preliminary Title Report, the Survey and any exceptions to title shown thereon (other than the Monetary Liens) in the exercise of Buyer’s sole discretion, within five (5) days prior to the expiration of the Due Diligence Period or forty (40) days of delivery of the Preliminary Title Report, whichever is later. If Buyer disapproves, Buyer may either (a) terminate this Agreement by giving Seller written notice of termination or (b) give Seller a written notice (“Disapproval Notice”) identifying the disapproved title matters (“Disapproved Title Matters”). With respect to any Disapproved Title Matters, other than the Monetary Liens, Seller shall notify Buyer in writing within 5 days after Seller’s receipt of the Disapproval Notice whether Seller will cause the Disapproved Title Matters to be removed or cured at or prior to Closing. If Seller elects not to remove or cure all Disapproved Title Matters, Buyer may, at its option: (i) subject to satisfaction of the other conditions to Closing, close the purchase of the Property and take title subject to the Disapproved Title Matters which Seller elects not to remove or cure; or (ii) terminate this Agreement in accordance with Section 9.6.1.

3.5.3 Buyer’s Options. If any Disapproved Title Matters (including the Monetary Liens) have not been removed at least 5 days prior to Closing or provision for their removal at the Closing has not been made to Buyer’s satisfaction, Buyer may, at its option: (i) close the purchase of the Property and take title subject to the Disapproved Title Matters which have not been removed; (ii) close the purchase of the Property and cure or remove the Disapproved Title Matters which have not been removed. Buyer may credit the costs of such cure or removal against the Purchase Price by reducing the amount of cash payable by Buyer at the Closing, but only to the extent such costs are expended to remove (A) Monetary Liens referred to in Section 3.5.1 or (B) Disapproved Title Matters which Seller agreed to remove; or (iii) terminate this Agreement in accordance with Section 9.6.1.

3.5.4 Failure to Disapprove. If Buyer fails to notify Seller of its approval or disapproval of the Preliminary Title Report, the Survey or the exceptions shown thereon by the end of the Due Diligence Period, then Buyer shall be deemed to have disapproved the same.

ARTICLE 4. CONDITIONS PRECEDENT.

4.1 Buyer’s Conditions. Buyer’s obligations under this Agreement are expressly subject to the timely fulfillment of the conditions set forth in this Section 4.1 on or before the Closing Date, or such earlier date as is set forth below. Each condition may be waived in whole or in part by Buyer by written notice to Seller.

4.1.1 Due Diligence. Buyer having approved of the results of its Due Diligence Investigation pursuant to Section 3.4;

4.1.2 Title Review. Buyer having approved of the results of its review of title pursuant to Section 3.5.

6.9 82811.00012\41976625.1
6 4.1.3 Title Policy. Seller having caused the Title Company to deliver to Buyer (a) an ALTA Standard Owner’s policy of title insurance, provided that Buyer may require an ALTA Owner’s Policy if Buyer pays the incremental premium for ALTA Extended coverage (“Title Policy”) (or at Buyer’s election a binder therefor) for the Property, or (b) the Title Company’s irrevocable commitment to issue such policy of title insurance, (including such coinsurance, reinsurance and endorsements as Buyer shall require), with liability equal to the Purchase Price showing fee title to the Property vested in Buyer and subject only to: (i) the matters and exceptions which were approved by Buyer pursuant to Section 3.5; and (ii) the standard printed exceptions in the form of title policy called for (collectively, “Conditions of Title”).

4.1.4 Performance of Covenants. Seller performing and complying in all material respects with all of the terms of this Agreement to be performed and complied with by Seller prior to or at the Closing.

4.1.5 Representations and Warranties. The representations and warranties of Seller set forth in Article 5 being true and accurate on the Closing Date, as if made on such date.

4.1.6 Non-Foreign Certification. Seller having executed and delivered to Buyer on or prior to the Closing Date a certification (the “Non-Foreign Certification”), substantially in the form of Exhibit C.

4.1.7 California Certification. Seller having furnished the residency certification required pursuant to Sections 18805 and 26131 of the California Revenue and Taxation Code (“Form 593”) or having authorized Escrow Holder in writing to withhold from the Purchase Price the amounts required to be withheld by such Sections.

4.1.8 Removal of Personal Property. All articles of personal property including the furniture and Living Wall Planters, shall be removed by the Seller from the Premises, at Seller’s sole cost and expense, on or before the Closing Date. Seller shall repair any damage caused by such removal

4.1.9 Seller Repairs. Seller completes the repair work identified in the Planet Orange report, dated December 21, 2021, which Buyer shall have the right to approve in its sole and absolute discretion.

4.2 Compliance with Legal Requirements. Buyer’s obligation to close escrow is subject to compliance with legal requirements for acquiring property. These requirements may include, but are not limited to: environmental review, land use review, and approval from the City Council.

Buyer retains sole and absolute discretion to determine whether all legal requirements have fulfilled as conditions precedent to closing.

4.3 Seller’s Conditions. Seller’s obligations under this Agreement are expressly subject to the timely fulfillment of the conditions set forth in this Section 4.2 on or before the Closing Date, or such earlier date as is set forth below. Each condition may be waived in whole or part by Seller by written notice to Buyer.

6.10 82811.00012\41976625.1
7 4.3.1 Covenants. Buyer performing and complying in all material respects with all of the terms of this Agreement to be performed and complied with by Buyer prior to or at the Closing.

4.3.2 Representations and Warranties. The representations of Buyer set forth in Article 6 being true and accurate on the Closing Date, as if made on such date.

ARTICLE 5. SELLER’S REPRESENTATIONS AND WARRANTIES.

Seller hereby makes the following representations and warranties to Buyer with the understanding that each such representation and warranty is material and is being relied upon by Buyer:

5.1 Defects. To the best of Seller’s knowledge, the Improvements are in good condition and repair and are free of any latent or patent design, construction, physical or mechanical defects and there is no actual or threatened settlement, earth movement, termite infestation or damage affecting the Property.

5.2 Compliance. To the best of Seller’s knowledge, the Property, and the operation thereof, are in compliance with all applicable laws, ordinances, rules, regulations, judgments, orders, covenants, conditions, restrictions, whether federal, state, local, foreign or private and Seller has not received any notice of any violation of the same. Seller has not received any request either formal or informal, oral or written, that Seller modify or terminate any use of the Property.

The zoning of the Property permits the current Improvements and use of the Property, and, there is no pending or to Seller’s knowledge, contemplated rezoning. The Property complies with all applicable subdivision laws and all local ordinances enacted thereunder and no subdivision or parcel map not already obtained is required to transfer the Property to Buyer.

5.3 Documents. All of the Preliminary Documents and the Additional Documents which have been delivered or made available to Buyer pursuant to Article 3, and all other documents delivered to Buyer by or on behalf of Seller (a) are true, correct and complete copies of what they purport to be, (b) represent truly the factual matters stated therein, (c) are in full force and effect, (d) have not been modified, except as set forth therein and (e) do not omit any information required to make the submission thereof accurate and complete in all material respects.

5.4 Taxes and Condemnation. To the best of Seller’s knowledge, there are no presently pending or contemplated special taxes or assessments which will affect the Property. There are no presently pending or, to Seller’s knowledge, contemplated proceedings to condemn or demolish the Property or any part of it.

5.5 Utilities. All water, sewer, gas, electric, telephone and drainage facilities, and all other utilities required by law or by the normal operation of the Property, are (a) installed to the property lines of the Property, (b) connected to the Property, (c) adequate to service the Property in its present use and to permit full compliance with all requirements of law and normal usage by the occupants of the Property and (d) in good working order and repair. All such utilities and storm and sanitary sewers required for the operation of the Property enter the Land through adjoining public streets or through adjoining private land in accordance with valid public or private easements that will inure to the benefit of Buyer.

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8 5.6 Licenses. Seller has all required licenses, permits (including, without limitation, all building permits and occupancy permits), easements and rights-of-way which are required in order to continue the present use of the Property. Seller has no knowledge of any law or regulation of any governmental authority having jurisdiction which might require the Property to be improved beyond its present state or which might restrict the use and enjoyment of the Property in the manner it is presently being used and enjoyed.

5.7 Leases. There are no agreements or other obligations to which Seller is party or, to Seller’s knowledge, by which it or the Property is bound which may affect the current use of the Property, nor are there any current leases, occupancy or operating agreements in force. Except for Seller, no person or entity has a right to occupancy, tenancy, or a license to use or enter the Property.

5.8 Litigation. There are no actions, suits, proceedings, judgments, orders, decrees or governmental investigations pending or threatened against the Property or Seller which could affect the Property or the purchase, use or enjoyment thereof by Buyer.

5.9 Agreements with Governmental Authorities. To Seller’s knowledge, there are no agreements with governmental authorities, agencies, utilities or quasi-governmental entities which affect the Property except those agreements which are identified in the Preliminary Title Report and those matters which are disclosed by the Survey.

5.10 Hazardous Materials.

5.10.1 Definitions. For purposes of this Agreement:
(a) “Environmental Law(s)” means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et. seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1801 et seq., the Clean Water Act, 33 U.S.C. Sections 1251 et seq., [The Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. H&S Code Sections 25249.5- 25249.13), the Carpenter-Preseley-Tanner Hazardous Substance Account Act (Cal. H&S Code Sections 25300 et seq.), and the California Water Code Sections 1300, et seq.], as said laws have been supplemented or amended to date, the regulations promulgated pursuant to said laws and any other federal, state or local law, statute, rule, regulation or ordinance which regulates or proscribes the use, storage, disposal, presence, cleanup, transportation or Release or threatened Release into the environment of Hazardous Material.
(b) “Hazardous Material” means any substance which is (i) designated, defined, classified or regulated as a hazardous substance, hazardous material, hazardous waste, pollutant or contaminant under any Environmental Law, as currently in effect or as hereafter amended or enacted, (ii) a petroleum hydrocarbon, including crude oil or any fraction thereof and all petroleum products, (iii) PCBs, (iv) lead, (v) asbestos, (vi) flammable explosives, (vii) infectious materials or (viii) radioactive materials. (c) “Release” means any spilling, leaking, pumping, pouring, emitting, discharging, injecting, escaping, leaching, dumping or disposing into the environment of any

6.12 82811.00012\41976625.1
9 Hazardous Material (including the abandonment or discarding of barrels, containers, and other receptacles containing any Hazardous Material).

5.10.2 Representations:
(a) To the best of Seller’s knowledge, the Property and all existing uses and conditions of the Property are in compliance with all Environmental Laws, and Seller has not received any written notice of violation issued pursuant to any Environmental Law with respect to the Property or any use or condition thereof.
(b) To the best of Seller’s knowledge, except for normal household cleaning products, neither Seller nor any other present or former owner of the Property has used, handled, stored, transported, released or disposed of any Hazardous Material on, under or from the Property in violation of any Environmental Law.
(c) To the best of Seller’s knowledge, there is no Release of any Hazardous Material existing on, beneath or from or in the surface or ground water associated with the Property.
(d) To the best of Seller’s knowledge, all required permits, licenses and other authorizations required by or issued pursuant to any Environmental Law for the ownership or operation of the Property by Seller have been obtained and are presently maintained in full force and effect.
(e) To the best of Seller’s knowledge, there exists no writ, injunction, decree, order or judgment outstanding, nor any lawsuit, claim, proceeding, citation, directive, summons or investigation pending or, to Seller’s knowledge, threatened pursuant to any Environmental Law relating to (i) the ownership, occupancy or use of any portion of the Property by Seller or occupant or user of any portion of the Property or any former owner of any portion of the Property, (ii) any alleged violation of any Environmental Law by Seller or occupant or user of any portion of the Property or any former owner of any portion of the Property or (iii) the suspected presence, Release or threatened Release of any Hazardous Material on, under, in or from any portion of the Property.
(f) To the best of Seller’s knowledge, there are no above-ground or underground tanks located on the Property used or formerly used for the purpose of storing any Hazardous Material.
(g) To the best of Seller’s knowledge, no asbestos abatement or remediation work has been performed on the Property.
(h) To the best of Seller’s knowledge, there is no PCB-containing equipment or PCB-containing material located on or in the Property.

5.11 Title to the Property. Seller has good and marketable title to the Property, subject to the Conditions of Title. There are no outstanding rights of first refusal or first look, options to purchase, rights of reverter, or claim of right relating to the transfer or sale of the Property or any interest therein. To Seller’s knowledge, there are no unrecorded or undisclosed documents or other

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10 matters which affect title to the Property. No person holding a security interest in the Property or any part thereof has the right to consent or deny consent to the sale of the Property as contemplated herein, and Seller has the right to pay off such person and to remove all such liens as of the Closing Date. Seller has enjoyed the continuous and uninterrupted quiet possession, use and operation of the Property.

5.12 Seller’s Authority. Seller has the requisite power and authority to own and operate the Property and conduct its business where the same is now owned or operated. The execution, delivery and performance of this Agreement by Seller have been duly and validly authorized by all necessary action and proceedings, and no further action or authorization is necessary on the part of Seller (or its trustees, executors, board of directors, or shareholders) in order to consummate the transactions contemplated herein. This Agreement and the other documents executed by Seller in connection herewith are legal, valid and binding obligations of Seller, enforceable in accordance with their respective terms. Neither the execution and delivery of this Agreement by Seller, nor performance of any of its obligations hereunder, nor consummation of the transactions contemplated hereby, shall conflict with, result in a breach of, or constitute a default under, the terms and conditions of the organizational documents pursuant to which Seller was organized, or any indenture, mortgage, deed of trust, agreement, undertaking, instrument or document to which Seller or any affiliate thereof is a party or is bound, or any order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over Seller.

5.13 Parking. There is no parking associated with the Property.

5.14 Zoning. Seller has received no written notice from any governmental agency that the Property is not in compliance with zoning requirements and laws.

5.15 Foreign Person. Seller is not a “foreign person” within the meaning of Section 1445(f) of the Internal Revenue Code.

5.16 No Employees. Buyer shall have no obligation to employ any individual employed by Seller or its affiliates in connection with the Property.

5.17 Inspections. Schedule 5.17 accurately describes (a) all inspections of the Property by any governmental agency or insurance company occurring within three (3) years prior to the Effective Date, (b) all matters which were noted by such governmental agency or insurance company as requiring correction, requesting or recommending modifications or termination of uses of the Property and (c) the present status of each such noted matter.

5.18 Misstatements and Omissions. To the best of Seller’s knowledge, neither the representations and warranties made by Seller in this Article 5 nor elsewhere in this Agreement contain any untrue statement or any omission of a material fact. Seller has no documents in its possession, nor has any knowledge, that omits material facts related to the property or which would contradict or negate any of its representations contained in this Agreement.

5.19 Disclaimer of Warranties; “AS IS” Purchase. Buyer acknowledges that it will have had an opportunity to conduct its Due Diligence Investigation of the Property and will acquire the Property in its current condition based thereon. Buyer acknowledges and agrees that the Property is to be conveyed by Seller to Buyer “as is, with all faults,” and substantially in its current

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11 condition. Buyer further acknowledges and agrees that, except for the representations and warranties by Seller set forth in this Section 5, the sale of the Property to Buyer is made without any warranty or representation of any kind by Seller, either express or implied or arising by operation of law, and Seller shall have no liability with respect to the nature, value, uses, habitability, merchantability, suitability, condition, design, operation, rents, financial condition or prospects, fitness for purpose or use, or the manner, construction, condition or state of repair or lack of repair of the improvements of the Property (or any part thereof), or any other aspect, portion or component of the Property whatsoever, it being specifically understood and agreed that Buyer shall have full opportunity, during the Due Diligence Investigation, to determine for itself the condition of the Property.

BUYER’S INITIALS: _________

5.20 Leases. The Property is not subject to any leases, rental agreement or other occupancy agreement granting a right of possession in the Property, and Seller has no knowledge of any claims to right of possession under any such agreements.

ARTICLE 6. BUYER’S REPRESENTATIONS AND WARRANTIES.

Buyer makes the following representation and warranties to Seller with the understanding that each such representation and warranty is material and is being relied upon by Seller:

6.1 Buyer’s Authority. The execution, delivery and performance of this Agreement by Buyer have been duly and validly authorized by all necessary action and proceedings, and subject to Buyer’s rights to complete the Due Diligence Investigation, no further action or authorization is necessary on the part of Buyer in order to consummate the transactions contemplated herein.

6.2 No Conflict. Neither the execution nor delivery of this Agreement by Buyer, nor performance of any of its obligations hereunder, nor consummation of the transactions contemplated hereby, shall conflict with, result in a breach of, or constitute a default under, the terms and conditions of the organizational documents pursuant to which Buyer was organized, or any agreement to which Buyer is a party or is bound, or any order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over Buyer.

ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION.

7.1 Survival of Warranties. Buyer and Seller agree that each representation and warranty, covenant by the respective parties contained herein or made in writing pursuant to this Agreement are intended to and shall be deemed made as of the date of this Agreement or such writing and again at the Closing, shall be deemed to be material, and unless expressly provided to the contrary shall survive the execution and delivery of this Agreement, the Deed and the Closing.

7.2 Notice of Changed Circumstances. If either party becomes aware of any fact or circumstances which would render false or misleading a representation or warranty made by such party, then it shall immediately give notice of such fact or circumstance to the other party, but such

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12 notice shall not relieve any party of any liabilities or obligations with respect to any representation or warranty.

ARTICLE 8. SELLER’S PRE-CLOSING COVENANTS.

Seller shall comply with the covenants contained in this Article 8 from the Effective Date through the Closing Date unless Buyer consents otherwise in writing. Buyer may grant or withhold any such consent requested by Seller in Buyer’s sole discretion.

8.1 Contracts and Documents. Seller shall not, without Buyer’s approval, not to be unreasonably withheld or delayed, (a) amend or waive any right under any Service Contract, Preliminary Document or Additional Document, or (b) enter into any material agreement of any type affecting the Property that would survive the Closing Date.

8.2 Insurance. Seller shall maintain or cause to be maintained in full force and effect its present insurance policies for the Property.

8.3 Compliance with Obligations. Seller shall fully and timely comply with all obligations to be performed by it under the service contracts currently serving the Property, the Leases, the other Preliminary Documents, the Conditions of Title and all permits, licenses, approvals and laws, regulations and orders applicable to the Property.

8.4 No Transfers. Seller shall not sell, encumber or otherwise transfer any interest in all or any portion of the Property, or agree to do so.

8.5 Termination of Contracts. Seller at its sole cost and expense shall transfer to Buyer or terminate all of the service contracts currently serving the Property at or before the Closing Date.

8.6 Maintenance. At its sole cost and expense, Seller shall operate and maintain the Property such that on the Closing Date the Property shall be in at least as good a condition and repair as on the Effective Date, reasonable wear and tear excepted. Without limiting the generality of the foregoing, Seller shall, at a minimum, spend such amounts for repair and maintenance as are consistent with its prior practice. Seller shall promptly advise Buyer of any significant repair or improvement required to keep the Property in such condition. Seller shall not make any material alterations to the Property, or remove any of the Personal Property therefrom, without Buyer’s prior consent, unless such Personal Property so removed is simultaneously replaced with new Personal Property of similar quality and utility.

8.7 Best Efforts. Seller shall use its best efforts to cause the conditions set forth in Section 4.1 to be satisfied by the Closing Date, and Seller shall not take or permit any action that would result in any of the representations and warranties set forth in Article 5 becoming false or incorrect.

ARTICLE 9. CLOSING.

9.1 Time. Provided all conditions set forth in Article 4 have been either satisfied or waived, the parties shall close this transaction (the “Closing”), on the date which is no greater than

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13 30 days after the expiration of the Due Diligence Period (the “Closing Date”), as such date may be extended by the provisions of Article 10.

9.2 Escrow. This Article 9, together with such additional instructions as First American Title Company, 2425 Porter Street, Suite 12, Soquel, CA 95073, Attention: Joyce Avila (“Escrow Holder”), shall reasonably request and the parties shall agree to, shall constitute the escrow instructions to Escrow Holder. If there is any inconsistency between this Agreement and the Escrow Holder’s additional escrow instructions, this Agreement shall control unless the intent to amend this Agreement is clearly stated in said additional instructions. Buyer and Seller shall cause Escrow Holder to execute and deliver a counterpart of this Agreement to each of them. If the Title Company does not serve as the Escrow Holder, the Title Company shall provide a letter to Buyer, in form and content acceptable to Buyer, pursuant to which the Title Company accepts responsibility and liability for the acts and omissions of Escrow Holder in discharging Escrow Holder’s obligations hereunder, including, without limitation, any acts or omissions of Escrow Holder relating to the Title Company’s commitment to issue the Title Policy, the receipt, recordation or delivery of any documents placed into escrow, and the receipt and disbursement of any funds placed into escrow.

9.3 Seller’s Deposit of Documents and Funds Into Escrow. Seller shall deposit into escrow on or before Closing the following documents:

9.3.1 A duly executed and acknowledged grant deed, in the form acceptable to Buyer, conveying the Property to Buyer (“Grant Deed”) in the form attached as Exhibit F;

9.3.2 A duly executed assignment, in the form of Exhibit E, assigning to Buyer all of Seller’s interest in all warranties of which Seller is the beneficiary with respect to the Property, (the “General Assignment”);

9.3.3 The Sellers costs of Closing, including, but not limited to, all of the transfer taxes and one half (1/2) of the CLTA premium for the Title Policy, one half (1/2) of the recording fees (if any), , and one-half (1/2) of the escrow fees, , plus or minus prorations as provided in Section 9.8; provided that, subject to Section 9.6, Buyer and Seller shall bear their own attorneys’ fees and costs in connection with the negotiation and preparation of this Agreement and the transactions completed by this Agreement;

9.3.4 Seller’s Non-foreign Certification in the form attached as Exhibit C;

9.3.5 All records and files relating to the current management or operation of the Property, including, without limitation, keys and security codes, property tax bills, insurance, and property taxes;

9.3.6 Such additional documents, including written escrow instructions consistent with this Agreement, as may be necessary or desirable for conveyance of the Property in accordance with this Agreement; and,

9.3.7 Form 593 as required by Escrow.

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14 9.4 Deliveries Outside of Escrow. Notwithstanding Section 9.3, Seller and Buyer may elect to deliver the documents described in Section 9.3 outside of escrow (other than documents which are to be recorded) by giving Escrow Holder a joint written notice of such election, specifying the documents which will be so delivered outside of escrow. Upon receipt of such notice, Escrow Holder shall have no further obligation concerning such specified documents.

9.5 Buyer’s Deposit of Documents and Funds. Buyer shall deposit into escrow:

9.5.1 The Purchase Price in accordance with the provisions of Article 2, plus or minus prorations as provided in Section 9.8, by electronic transfer of federal funds to Escrow Holder, on or before the Closing Date; and Buyers share of Closing cost including one half (1/2) of the CLTA Premium of Title Policy, one half (1/2) of the recording fees, one half (1/2)of the escrow fees and all costs associated with an ALTA premium for Title Policy.

9.5.2 Such additional documents, including written escrow instructions consistent with this Agreement, as may be necessary or desirable for conveyance of the Property in accordance with this Agreement.

9.6 Default, Termination and Remedies.

9.6.1 Buyer’s Termination. This Agreement shall automatically terminate without further notice or action by Buyer upon the occurrence of any of the following events, provided that Buyer is not then in material breach of this Agreement: (a) any condition to Closing contained in Section 4.1 has not been satisfied or waived by Buyer by the Closing Date; or (b) Buyer having exercised its right to terminate this Agreement pursuant to Section 3.4 (disapproval of Due Diligence Investigation), Section 3.5 (disapproval of title) or Article 10 (damage or condemnation). In such event, the parties shall have no further obligation to each other except for those obligations that specifically survive the termination of this Agreement. If this Agreement terminates as a result of Seller’s material breach of this Agreement, Buyer shall have all remedies it may have hereunder or at law as a result of such occurrence, including the remedy of specific performance.

9.6.2 Seller’s Termination. Provided that Seller is not then in material breach of this Agreement, this Agreement shall automatically terminate without further notice or action by Seller if any condition to Closing contained in Section 4.2 has not been satisfied or waived by Seller by the Closing Date.

9.6.3 Release from Escrow. Upon termination of this Agreement pursuant to Section 9.6.1 or 9.6.2, Escrow Holder shall promptly return to Buyer and Seller, respectively, all documents and monies deposited by them into escrow without prejudice to their rights and remedies hereunder.

9.6.4 Remedies.
(a) Buyer’s Remedies. If Seller breaches this Agreement, Buyer shall be entitled to pursue all remedies permitted herein and by law, including the remedy of specific performance. No termination of the escrow by Buyer following a breach by Seller shall be deemed to waive such breach or any remedy otherwise available to Buyer.

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15 (b) Seller’s Remedies/Liquidated Damages. IF BEFORE THE CLOSE OF ESCROW BUYER FAILS TO COMPLY WITH OR PERFORM BUYER’S OBLIGATIONS

UNDER THIS AGREEMENT AND (EXCEPT AS OTHERWISE PROVIDED IN PARAGRAPH 9.6) DOES NOT CURE SUCH FAILURE WITHIN TEN BUSINESS DAYS AFTER SELLER’S WRITTEN NOTICE OF SUCH FAILURE, THEN SELLER MAY THEREAFTER: (I) TERMINATE THIS AGREEMENT; (II) RECEIVE AND RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES IF SUCH DEFAULT OCCURS AFTER BUYER’S APPROVAL PERIOD; AND (III) EXERCISE THE OTHER RIGHTS AND REMEDIES RESERVED BY SELLER AS PROVIDED IN THIS PARAGRAPH. IN THE EVENT SELLER TERMINATES THIS AGREEMENT BY REASON OF BUYER’S DEFAULT, BUYER AND

SELLER SHALL BE RELIEVED OF ANY FURTHER OBLIGATION TO EACH OTHER

WITH RESPECT TO THIS AGREEMENT AND THE PROPERTY EXCEPT FOR ANY OBLIGATIONS WHICH EXPRESSLY SURVIVE. IT IS EXPRESSLY UNDERSTOOD AND AGREED BY BUYER AND SELLER: THAT SELLER WILL INCUR SUBSTANTIAL

DAMAGES AS A RESULT OF ANY FAILURE BY BUYER TO COMPLY WITH OR PERFORM BUYER’S OBLIGATIONS UNDER THIS AGREEMENT; THAT IT IS

EXTREMELY DIFFICULT AND IMPRACTICAL TO CALCULATE AND ASCERTAIN AS

OF THE EFFECTIVE DATE OF THIS AGREEMENT THE ACTUAL DAMAGES WHICH WOULD BE SUFFERED IN SUCH EVENT BY SELLER; AND THAT THE DEPOSIT IS A

REASONABLE ESTIMATE OF THE EXTENT TO WHICH SELLER MAY BE DAMAGED BY BUYER’S DEFAULT IN LIGHT OF THE DIFFICULTY THE PARTIES WOULD HAVE IN DETERMINING SELLER’S ACTUAL DAMAGES AS A RESULT OF SUCH DEFAULT BY BUYER.
___________________ ____________________
SELLER’S INITIALS BUYER’S INITIALS
(c) Waiver of Specific Performance. SELLER HEREBY WAIVES THE RIGHT TO MAINTAIN AN ACTION FOR SPECIFIC PERFORMANCE OF BUYER’S

OBLIGATION TO PURCHASE THE PROPERTY AND SELLER AGREES THAT SELLER

CAN BE ADEQUATELY COMPENSATED IN MONEY DAMAGES IF BUYER FAILS TO PURCHASE THE PROPERTY IN BREACH OF THIS AGREEMENT. SELLER

ACKNOWLEDGES THAT THE PROVISIONS OF THIS PARAGRAPH ARE A MATERIAL

PART OF THE CONSIDERATION BEING GIVEN TO BUYER FOR ENTERING INTO THIS

AGREEMENT AND THAT BUYER WOULD BE UNWILLING TO ENTER INTO THIS AGREEMENT IN THE ABSENCE OF THE PROVISIONS OF THIS PARAGRAPH. ____________________ ____________________
SELLER’S INITIALS BUYER’S INITIALS
(d) LIMITATION OF LIABILITY; RELEASE. Seller’s sole remedies and recourse against Buyer for any claims that relate to or arise from this Agreement shall be limited to the terms and conditions set forth herein. Seller hereby agrees and represents that it does not presently have any claims, allegations, or demands, and represents that it will make no claims, allegations, or demands, against Buyer, except for claims, allegations or demands relating to a breach of this Agreement. Seller specifically disclaims, waives, and relinquishes any claims, allegations, or demands that relate to or arise from Buyer’s status as a public entity acquiring the Property. Seller agrees that this is a negotiated agreement based on Seller’s public listing of the

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16 Property for sale. Buyer has not asserted or threatened to acquire the Property through eminent domain, and Seller agrees that it is not entitled to any monetary relief, damages, or compensation relating to any such claims, and hereby releases, waives, and relinquishes any claims. Seller intends that this release shall be a full and final settlement of and bar to any and all claims and/or causes of action arising between Buyer and Seller, except to the extent such claim or cause of action arises from a breach of this Agreement and is authorized herein. In connection with the release made herein, Seller acknowledges it may hereafter discover facts different from or in addition to the facts which it may know or believe to be true with respect to the Property or the Agreement, but that it intends to hereby fully and forever settle all disputes with the Buyer regarding the Property. In furtherance of such intention, the release given herein shall be and remain in effect as a full and complete release, notwithstanding discovery of any such different or additional facts. Therefore, Seller acknowledges it has been informed of and is familiar with the provisions of Civil Code section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE

CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO

EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE

RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE

MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE
DEBTOR OR RELEASED PARTY.

SELLER’S INITIALS: _________

9.7 Closing. When Escrow Holder has received all documents and funds identified in Sections 9.3 and 9.5, has received notification from Buyer and Seller that all conditions to Closing to be satisfied outside of escrow have been satisfied or waived and Title Company is irrevocably committed to issue the Title Policy, then, and only then, Escrow Holder shall:

9.7.1 Record the Grant Deed;

9.7.2 Cause the Title Company to issue the Title Policy to Buyer;

9.7.3 To the extent not otherwise delivered to Buyer outside of escrow, deliver to Buyer: (a) a conformed copy (showing all recording information thereon) of the Grant Deed; (b) fully executed original counterparts of the Bill of Sale, the General Assignment; and (c) the Seller’s Certificate, and the Non-foreign Certification;

9.7.4 Deliver the Purchase Price (as adjusted pursuant to Section 9.8) to Seller;

9.7.5 Deliver or mail Tenant Notice Letter to tenants for each Lease.

Escrow Holder shall prepare and sign closing statements showing all receipts and disbursements and deliver copies to Buyer and Seller and, if applicable, shall file with the Internal Revenue Service (with copies to Buyer and Seller) the reporting statement required under Section 6045(e) of the Internal Revenue Code.

9.8 Prorations. Subject to the other provisions of this Section 9.8, all receipts and disbursements of the Property will be prorated as of 11:59 p.m. on the day immediately preceding

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17 the Closing Date. Not less than five business days prior to the Closing, Seller shall submit to Buyer for its approval a tentative prorations schedule showing the categories and amounts of all prorations proposed, including all rents and operating expenses. Security deposits shall be credited to Buyer from Seller proceeds. The parties shall agree on a final prorations schedule prior to the Closing and shall deliver the same to Escrow Holder. If following the Closing either party discovers an error in the prorations statement, it shall notify the other party and the parties shall promptly make any adjustment required. The parties agree that any trailing bills that pertain to the Property operations before the Closing Date, which are not available as of Closing, may be presented to Buyer for proration and reimbursement up to forty five (45) days after Closing. Failure to provide any bills by such date shall be a waiver by Seller of such reimbursement and Buyer shall have no further obligation for any such bills and Property expenses. This section 9.8 shall survive closing.
________________

SELLER INITIALS

9.8.1 Capital Expenditures and Accounts Payable. All capital and other improvements (including labor and material) which have been performed or contracted for, by or on behalf of Seller prior to the Closing Date, and all sums due for accounts payable which have been incurred with respect to the Property prior to the Closing Date shall be paid by Seller and shall be subject to the indemnification provisions of Section 7.3. Buyer shall furnish to Seller for payment any bills for such period received after the Closing Date, and Buyer shall have no further obligation with respect thereto.

9.8.2 Property Taxes. All real and personal property ad valorem taxes and special assessments, if any, whether payable in installments or not, including without limitation, all supplemental taxes attributable to the period prior to the Closing Date for the calendar year in which the Closing occurs, shall be paid current to the Closing Date, based on the latest available tax rate and assessed valuation, so that Seller shall pay all property taxes current through Closing.

Buyer is a tax exempt entity, not subject to ad valorum taxes within its jurisdiction, prorated or not, and thus Buyer shall not pay any prorated taxes. Buyer shall not pay or reimburse any portion of real estate taxes to Seller if Seller has prepaid any installment of such real estate taxes within the county of Buyer’s jurisdiction. Buyer shall cooperate, at no cost to Buyer, in any refund request Seller submits to the county tax assessor. Seller acknowledges and agrees that Buyer shall not pay, by credit or otherwise, any prorated property taxes in escrow. ______________

SELLER INITIALS

9.8.3 Utility Charges. All utility charges shall be prorated as of the Closing Date and Seller shall obtain a final billing therefor. All utility security deposits, if any, shall be retained by Seller.

9.9 Possession. Seller shall deliver exclusive right of possession of the Property to Buyer on the Closing Date, subject only to the Conditions of Title and Paragraph 9.10 below.

9.10 Seller Lease Back. Seller shall have the right to lease back the property on a month to month basis for up to a maximum of Three (3) Months. The rental amount shall be $10,000 per

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18 month. Tenant shall be responsible for all utilities and maintenance of the property during the lease back period and shall provide insurance coverage as required by the Seller.

ARTICLE 10. DAMAGE, DESTRUCTION AND CONDEMNATION.

This Agreement shall be governed by the Uniform Vendor and Purchaser Risk Act as set forth in Section 1662 of the California Civil Code as supplemented and modified by this Article 10. Seller shall promptly notify Buyer in writing of any material damage to the Property and of any taking or threatened taking of all or any portion of the Property. Within a reasonable period of time after receipt of such notice, Buyer shall determine whether a material part of the Property has been damaged or whether such taking or threatened taking has affected or will affect a material part of the Property. As used herein, (a) the destruction of a “material part” of the Property shall be deemed to mean an insured or uninsured casualty to the Property having an estimated cost of repair which in the reasonable judgment of Buyer equals or exceeds $100,000.00 and (b) a taking by eminent domain of a portion of the Property shall be deemed to affect a “material part” of the Property if in the reasonable judgment of Buyer the estimated value of the portion of the Property taken exceeds $100,000.00. Upon making its determination, Buyer shall notify Seller in writing of the results of such determination. Buyer may elect, by written notice delivered to Seller within 30 days after giving Seller notice of such determination, to terminate this Agreement in accordance with Section 9.6.1 if a material part of the Property has been damaged or if such taking has affected or will affect a material part of the Property. If Buyer does not so terminate, (i) in the case of damage to a material part of the Property, Seller shall assign to Buyer at the Closing its right to recover under any insurance policies covering such damage and shall pay Buyer at the Closing the amount of the deductible, if any, and (ii) in the case of a threatened or actual taking of a material part of the Property, Seller shall assign to Buyer at the Closing Seller’s entire right, title and interest in the proceeds thereof. If between the Effective Date and the Closing Date the Property suffers damage which is not material, Seller shall repair such damage at its expense prior to the Closing, and the Closing Date shall be extended for a reasonable period of time not to exceed 30 days to allow for completion of such repairs. The Closing Date shall be extended as necessary to permit Buyer to exercise its rights under this Article

10. ARTICLE 11. GENERAL.

11.1 Notices. All notices, demands, approvals, and other communications provided for in this Agreement shall be in writing and shall be effective (a) when personally delivered to the recipient at the recipient’s address set forth below; (b) five business days after deposit in a sealed envelope in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the recipient as set forth below; or (c) one business day after deposit with a recognized overnight courier or delivery service, addressed to the recipient as set forth below, whichever is earlier. If the date on which any notice to be given hereunder falls on a Saturday, Sunday or legal holiday, then such date shall automatically be extended to the next business day immediately following such Saturday, Sunday or legal holiday. Email notices may be used for convenience only, unless otherwise agreed by the parties in writing, and shall be deemed delivered one (1) business day after delivery if sent after 5 pm, or received the same day if sent on a business day between 8 am and 5 pm, and a duplicate shall be sent via USPS on the same day as the email.

6.22 82811.00012\41976625.1
19 The addresses for notice are:

SELLER: Awe Sum Organics
Attn: David Posner
123 Locust Street
Santa Cruz, CA 95060
Phone: 831.435.9920
Email: [email protected]
BUYER: City of Santa Cruz
Attn: Bonnie Lipscomb, Economic Development Director
337 Locust St.

Santa Cruz, CA 95060
Phone: 831-420-5150
Email: [email protected]
With a copy to: Best Best & Krieger LLP
Attn: Nancy Park
500 Capitol Mall, Suite 1700
Sacramento, CA 95814
Phone: (916) 551-2849
Email: [email protected]
Either party may change its address by written notice to the other given in the manner set forth above.

11.2 Entire Agreement. This Agreement and the Schedules and Exhibits hereto contain the entire agreement and understanding between Buyer and Seller concerning the subject matter of this Agreement and supersede all prior agreements, including any previous letter of intent or terms, understandings, conditions, representations and warranties, whether written or oral, made by Buyer or Seller concerning the Property or the other matters which are the subject of this Agreement.

11.3 Amendments and Waivers. No addition to or modification of this Agreement shall be effective unless set forth in writing and signed by the party against whom the addition or modification is sought to be enforced. The party benefited by any condition or obligation may waive the same, but such waiver shall not be enforceable by another party unless made in writing and signed by the waiving party.

11.4 Invalidity of Provision. If any provision of this Agreement as applied to either party or to any circumstance shall be adjudged by a court of competent jurisdiction to be void or unenforceable for any reason, the same shall in no way affect (to the maximum extent permissible by law) any other provision of this Agreement, the application of any such provision under circumstances different from those adjudicated by the court, or the validity or enforceability of this Agreement as a whole.

6.23 82811.00012\41976625.1
20 11.5 References. Unless otherwise indicated, (a) all Article, Section, Schedule and Exhibit references are to the articles, sections, schedules and exhibits of this Agreement, and (b) all references to days are to calendar days. All the Schedules and Exhibits attached hereto are incorporated herein by this reference. Whenever under the terms of this Agreement the time for performance of a covenant or condition falls upon a Saturday, Sunday or California state holiday, such time for performance shall be extended to the next business day. The headings used in this Agreement are provided for convenience only and this Agreement shall be interpreted without reference to any headings. The masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others whenever the context so indicates or requires.

11.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and to be performed in California.

11.7 Confidentiality and Publicity. Buyer is a public entity and as such, this Agreement, upon its presentation for approval at Buyer’s City Council at a duly called and agendized public meeting, shall be subject to the Public Records Act and the Freedom of Information Act. No press release or other public disclosure may be made by Seller or any of its agents regarding Buyer’s intent for this Property this transaction without the prior consent of Buyer.

11.8 Time. Time is of the essence in the performance of the parties’ respective obligations under this Agreement.

11.9 Attorneys’ Fees. In the event of any legal or equitable proceeding to enforce any of the terms or conditions of this Agreement, or any alleged disputes, breaches, defaults or misrepresentations in connection with any provision of this Agreement, the prevailing party in such proceeding shall be entitled to recover its reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and costs of defense paid or incurred in good faith.

11.10 Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. However, Seller shall not have the right to assign all or any portion of its interest in this Agreement without Buyer’s prior written consent.

Buyer shall have the right to assign all or any portion of its interest in this Agreement, or substitute for itself a nominee, upon notice to Seller not later than three days prior to the Closing Date.

11.11 Further Assurances. Seller, at any time before or after Closing, shall, at its own expense, execute, acknowledge and deliver any further deeds, assignments, conveyances and other assurances, documents and instruments of transfer reasonably requested by Buyer and shall take any other action consistent with the terms of this Agreement that may reasonably be requested by Buyer for the purpose of transferring and confirming to Buyer, or reducing to Buyer’s possession, any or all of the Property or otherwise carrying out the terms of this Agreement.

11.12 Cooperation With Exchange. Buyer agrees to cooperate with the other if Seller intends to accomplish a tax-deferred exchange pursuant to Section 1031 of the Internal Revenue Code of 1986. Buyer and/or Seller may assign this Agreement to an exchange intermediary for the purpose of facilitating such an exchange by the assigning party. Buyer’s duty to cooperate shall be limited to the transfer of money to Seller or Seller’s designee in exchange for the Property,

6.24 82811.00012\41976625.1
21 and in no event shall Buyer act as purchaser or acquirer of any exchange property. Seller shall indemnify and defend and hold Buyer harmless from any claims, loss, damages or liability arising out of participation in an exchange.

11.13 No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any person other than the parties to it and their respective permitted successors and assigns, nor is anything in this Agreement intended to relieve or discharge any obligation of any third person to any party hereto or give any third person any right of subrogation or action over against any party to this Agreement.

11.14 Remedies Cumulative. The remedies set forth in this Agreement are cumulative and not exclusive to any other legal or equitable remedy available to a party.

11.15 Commissions, Indemnity, Disclosure. Each party represents to the other party that there is no broker representing such party in the current transaction, with the exception of Sheldon Wiseman Commercial Real Estate representing the Seller, and that the representing party has incurred no liability for any brokerage commission or finder’s fee arising from or relating to the transactions contemplated by this Agreement. Seller shall be responsible for any broker commission associated with this purchase. Each party hereby indemnifies and agrees to protect, defend and hold harmless the other party from and against all liability, cost, damage or expense (including without limitation attorneys’ fees and costs incurred in connection therewith) on account of any brokerage commission or finder’s fee which the indemnifying party has agreed to pay or which is claimed to be due as a result of the actions of the indemnifying party. This Section

11.15 is intended to be solely for the benefit of the parties hereto and is not intended to benefit, nor may it be relied upon by, any person or entity not a party to this Agreement.

11.16 Counterparts/Facsimile/PDF Signatures. This Agreement may be executed in counterparts and when so executed by the parties, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument that shall be binding upon the parties, notwithstanding that the parties may not be signatories to the same counterpart or counterparts. The parties may integrate their respective counterparts by attaching the signature pages of each separate counterpart to a single counterpart. In order to expedite the transaction contemplated herein, facsimile or .pdf signatures may be used in place of original signatures on this Agreement. Seller and Buyer intend to be bound by the signatures on the facsimile or .pdf document, are aware that the other party will rely on the facsimile or .pdf signatures, and hereby waive any defenses to the enforcement of the terms of this Agreement based on the form of signature.

11.17 Venue. In the event that suit is brought by either Party to this Agreement, the Parties agree that venue must be exclusively vested in the state courts of the County of Santa Cruz, or if federal jurisdiction is appropriate, exclusively in the United States District Court, Northern District of California, San Jose, California.

SIGNATURES CONTINUE ON FOLLOWING PAGE

6.25 82811.00012\41976625.1
22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

BUYER:

City of Santa Cruz, a California municipal
corporation
By:

Its:

ATTEST:

By:

City Clerk
APPROVED AS TO FORM:

BEST BEST & KRIEGER LLP
By:

Special Counsel
APPROVED AS TO FORM:

City Attorney
By:

Tony Condotti
SELLER:

David Posner, Trustee of The David Posner
Revocable Living Trust under Declaration of Trust
dated December 17, 1996
By:

Its: Trustee

6.26 82811.00012\41976625.1
23 6.27
82811.00012\41976625.1
24 Acceptance by Escrow Holder
Escrow Holder acknowledges receipt of the foregoing Agreement and accepts the instructions contained therein.

Dated: ______________, 2024 First American Title Company By:

Name: Joyce Avila
Title:

6.28 82811.00012\41976625.1
25 LIST OF EXHIBITS
EXHIBIT A: Land Description
EXHIBIT B: Personal Property Inventory
EXHIBIT C: Transferor’s Certification of Non-Foreign Status EXHIBIT D: Bill of Sale
EXHIBIT E: General Assignment
EXHIBIT F: Grant Deed

6.29 82811.00012\41976625.1
Exhibit A

EXHIBIT A

LAND DESCRIPTION

TO BE ADDED

6.30 82811.00012\41976625.1
Exhibit B

EXHIBIT B

PERSONAL PROPERTY INVENTORY

INTENTIONALLY OMITTED

6.31 82811.00012\41976625.1
Exhibit C

EXHIBIT C
TRANSFEROR’S CERTIFICATION OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”), provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform the CITY OF SANTA CRUZ, a California municipal corporation (the “Transferee”), that withholding of tax under Section 1445 of the Code will not be required upon the transfer of a U.S. real property interest to the Transferee by ___________________ (the “Transferor”), the undersigned hereby certifies the following on behalf of the Transferor:

1. The Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder);

2. The Transferor’s U.S. employer identification number is _______________; and

3. The Transferor’s office address is ______________________________________.

The Transferor understands that this Certificate may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalty of perjury I declare that I have examined this Certification and, to the best of my knowledge and belief, it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Transferor.

DATED: ________________, 2024
[EXHIBIT DO NOT SIGN]
_________________________
SELLER

6.32 82811.00012\41976625.1
Exhibit D

EXHIBIT D

BILL OF SALE
Intentionally omitted.

6.33 82811.00012\41976625.1
SCHEDULE 1

PERSONAL PROPERTY INVENTORY
Not Applicable

6.34 82811.00012\41976625.1
Schedule 1

6.35 82811.00012\41976625.1
Exhibit E

EXHIBIT E

GENERAL ASSIGNMENT
This Assignment (the “Assignment”) is made as of _________________, by [SELLER] (collectively “Assignor”).

FOR VALUABLE CONSIDERATION, as set forth in that certain Agreement of Purchase and Sale and Joint Escrow Instructions dated _______________, 2024 (the “Agreement”), Assignor hereby assigns and transfers to the City of Santa Cruz, a California municipal corporation (“Assignee”), all permits, licenses, consents, registrations and other similar approvals applicable to the Real Property, all as-built plans and specifications for: (1) the Real Property; (2) any and all improvements used in connection with the operation or occupancy of the Real Property or located upon the Real Property (the “Improvements”); and (3) any and all personal property owned by Assignor located within or used in connection with the operation of the Real Property and Improvements (the “Personal Property”) (collectively, the “Plans”); and all warranties of which Assignor is the beneficiary (the “Warranties”) with respect to the Improvements or Personal Property.

This Assignment shall not supersede the Agreement and, in the event of conflict between this Assignment and the Agreement, the Agreement shall control.

This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective heirs, executors, administrators, successors and assigns.

IN WITNESS WHEREOF, Assignor has executed this Assignment as of the date first above written.

ASSIGNOR:
[EXHIBIT DO NOT SIGN]
SELLER

6.36 82811.00012\41976625.1
Exhibit H

EXHIBIT F

GRANT DEED

RECORDING REQUESTED BY

AND WHEN RECORDED MAIL TO
City of Santa Cruz
337 Locust St.

Santa Cruz, CA 95060
ATTN: City Clerk

EXEMPT FROM RECORDING FEES PURSUANT
TO GOVERNMENT CODE SECTION 27383
SPACE ABOVE THIS LINE FOR RECORDER’S USE
APN: 005-043-02
Grant Deed
The undersigned Grantor(s) declare(s): City of Santa Cruz is exempt from property taxes Documentary transfer tax is $0.

Computed on full value of property conveyed, or
Computed on full value less value of liens and encumbrances remaining at time of sale.

Unincorporated area City of Santa Cruz and
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, David Posner, Trustee of The David Posner Revocable Living Trust under Declaration of Trust dated December 17, 1996
hereby GRANT(S) to
City of Santa Cruz, a California municipal corporation
the following described real property in the City of Santa Cruz County of Santa Cruz
State of California:

SEE ATTACHED EXHIBIT A
Dated: _______________, 2024
By: _________________________________
David Posner, Trustee of The David Posner Revocable
Living Trust under Declaration of Trust dated December 17, 1996

6.37 82811.00012\41976625.1
Exhibit H

EXHIBIT A TO GRANT DEED

TO BE ADDED

6.38 82811.00012\41976625.1
Exhibit H

ACKNOWLEDGMENT
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA )

COUNTY OF )
On _____________________, 20_____, before me, _____________________________________, Notary Public, personally appeared ___________________________________________, who 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.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature: (SEAL)

6.39 82811.00012\41976625.1
Exhibit H

CERTIFICATE OF ACCEPTANCE
Pursuant to Section 27281 of the
California Government Code
This is to certify that the interest in real property conveyed by the Grant Deed dated __________________, 2024, from David Posner, Trustee of The David Posner Revocable Living Trust under Declaration of Trust dated December 17, 1996 to the City of Santa Cruz, a municipal corporation, is hereby accepted by the undersigned officer on behalf of the City of Santa Cruz, pursuant to the authority conferred by Resolution No. _______, adopted by the City Council of the City of Santa Cruz on _______, 2024, and the Grantee consents to recordation thereof by its duly authorized officer.

Dated: _________________, 2024 CITY OF SANTA CRUZ, a municipal corporation
By _______________________________
Its _______________________________

6.40 City Council

AGENDA REPORT
DATE: 02/08/2024
AGENDA OF: 02/27/2024
DEPARTMENT: Economic Development and Housing
SUBJECT: 1122 Pacific Avenue – Lease Agreement with Eco Leo LLC, (aka Dyane Villalobos) dba Childish Toy Shop (ED)
RECOMMENDATION: Motion to authorize and direct the City Manager to execute a Lease Agreement with Eco Leo LLC (aka Dyane Villalobos) dba Childish Toy Shop for the retail space located at 1122 Pacific Avenue, and to execute any documents, amendments, or modifications, of a non-substantive or conforming nature, and to assign and relocate premises, as needed, in a form approved by City Attorney.

BACKGROUND: Eco Leo LLC. dba Childish Toy Shop is a current Downtown Pops! tenant at 1122 Pacific Avenue who wishes to execute a long-term lease in this location. The retail space is located at 1122 Pacific Ave, within the historic Del Mar building. Following major renovations that were completed in Summer 2022, the space became the first City-owned unit included in the Downtown Pops! Program. The Tenant (Childish) successfully completed a 6-month Downtown Pops! term in February 2023 and was awarded an extension through February 2024.

Downtown Pops! is the City's pilot program designed to lower the barriers to entry for businesses looking to open a brick-and-mortar space. A core aim of Downtown Pops! is to reduce commercial vacancy by allowing businesses to “test the waters” on new or expanding business concepts, and ideally to continue growing in those spaces or expanding overtime. This is similar but distinct from an incubator program, where participants are encouraged to “graduate” into the broader market. As this is a City-owned space, ED also seeks to enhance downtown retail offerings, encourage local business diversity, and promote downtown as a family-friendly destination with its assets. To that end, the Childish Toy Shop has achieved multiple goals, including the expansion of an established woman owned Midtown brand into downtown and diversifying downtown retail with more family-oriented offerings.

For the Downtown Pops! Program, Economic Development opened applications in July 2022, inviting emerging entrepreneurs to partner with the City on prototype or pop-up businesses in vacant downtown commercial spaces. Childish was selected from among nine (9) completed applications received by the City. These proposals were competitively screened to evaluate completeness, business readiness, experience, and alignment with program objectives. The announcement was posted on the City’s website, the Choose Santa Cruz newsletter and social media, as well as the email list of parties who expressed previous interest.

7.1 DISCUSSION: Dyane Villalobos has operated Childish Toy Store (Eco Leo LLC) since 2010 and has successfully grown her business in the Midtown neighborhood. After a successful popup Downtown in 2019, Ms. Villalobos was eager to return and provide downtown shoppers with a local and unique offering of toys, games, puzzles and more. Downtown Pops! provided such an opportunity and lowered the barriers to entry so that she could re-test the Childish concept in a post-COVID environment.

Through these experiences, Ms. Villalobos has learned a great deal about the demographics and desires of downtown shoppers. As a result, she has also expanded her offerings to include goods popular with students, young parents, and visitors seeking local wares. As a woman-owned, minority-owned, queer-owned independent business, creating a culture of openness, inclusivity and community is core to the Childish ethos. Childish has contributed to an active and welcoming Downtown by participating in First Fridays, hosting visits with Santa, and partnering with the Downtown Association on engagement campaigns. Based on her success with Downtown Pops! Ms. Villalobos has requested a permanent lease for the property.

Staff has considered whether to incubate other aspiring businesses with the space, but feels that Childish supports several economic development goals outlined above, specifically attraction of families and children to downtown, diversifying retail offerings downtown, supporting local minority and women owned businesses, and activating the streetscape with engaging storefronts.

Childish is also ideally located in a section of Pacific Avenue that is reinventing itself as new development comes online to the South. The value of a growing a quality, local toy store downtown is expected to increase over the next few years as many new affordable family housing units come online with new development projects. Childish also compliments other family friendly businesses nearby like the Del Mar Theater, Pizza My Heart, Kianti’s, Mission Creamery among others.

HEALTH IN ALL POLICIES: The proposed Lease Agreement aligns directly with the city's commitment to "Health in All Policies." In terms of assessing this item with respect to the three pillars of Health in All Policies, this action has a direct nexus with equity in that it not only supports the establishment of downtown businesses but also a woman-owned, minority-owned and queer-owned independent business.

RECOMMENDATION: Staff has negotiated the following terms for the Lease and recommends that City Council authorize the City Manager to execute a lease with Dyane Villalobos dba Childish Toy Shop as tenant for the retail space at 1122 Pacific Avenue.

Proposed Terms:
- Lease Term: Five (5) years, terminating February 28, 2029, with up to three (3) extensions for two (2) years, subject to mutual agreement to extend occupancy. - Base Monthly Rent: $2,350.00 per month ($2.67/SF). Rent shall be adjusted annually as indexed to the Consumer Price Index (CPI) for San Francisco-Oakland-San Jose, capped at 3%.
- Extension Adjustment of Base Rent: Upon any extension of the Lease, the Base Rent shall be adjusted to equal the greater of either, 1) current Base Rent for the year immediately prior to the

7.2 extension, plus any annual adjustment (Section 4.04); or, 2) ten (10%) percent of average gross monthly sales over the prior two (2) year period.

FISCAL IMPACT: The Base Monthly Rent of $2,350.00 per month ($2.67/SF) is expected to yield annual revenues of $28,200. Lease revenue from the commercial space is maintained in City’s General Fund and helps support property management activities and other uses allocated through the annual budget process. Rents will be adjusted annually in line with CPI.

Prepared By:

David McCormic
Asset and Development
Manager
Submitted By:

Bonnie Lipscomb
Director of Economic
Development and Housing
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. DRAFT LEASE AGREEMENT.DOC

7.3 LEASE AGREEMENT

BETWEEN

THE CITY OF SANTA CRUZ
AND
ECO LEO, LLC. DBA CHILDISH TOY SHOP
1122 PACIFIC AVENUE
(PORTION OF DEL MAR THEATER BUILDING)

7.4 i
Table of Contents
ARTICLE 1. BASIC LEASE PROVISIONS...................................................................................................1

1.01. Tenant's Trade Name................................................................................................................................1

1.02. Commencement of Term..........................................................................................................................1

1.03. Term..........................................................................................................................................................1

1.04. Premises....................................................................................................................................................1

1.05. Floor Area.................................................................................................................................................1

1.06. Tenant's Deadline to Complete Tenant's Work.......................................................................................1

1.08. Minimum Monthly Rent ..........................................................................................................................1

1.11. Security Deposit .......................................................................................................................................1

1.09. Use of Premises ........................................................................................................................................1

1.10. Hours.........................................................................................................................................................1

1.12. Guarantor of Lease...................................................................................................................................1

1.13. Address for Notices to Tenant .................................................................................................................2

1.13. Address for Notices to Tenant .................................................................................................................2 ARTICLE 2. LEASE OF PREMISES..............................................................................................................3

2.01. City of Santa Cruz as Landlord ...................................................................................................................3

2.02. Premises........................................................................................................................................................3

2.03. Reservations .................................................................................................................................................3

2.04. Tenant Improvements ..................................................................................................................................3

2.05. Condition of Premises..................................................................................................................................3

2.06. Common Areas.............................................................................................................................................3 ARTICLE 3. TERM ............................................................................................................................................4

3.01. Commencement of Term.............................................................................................................................4

3.02. Expiration; Holding Over ............................................................................................................................5 ARTICLE 4. RENT .............................................................................................................................................5

4.01 Minimum Monthly Rent..............................................................................................................................5

4.02 Commencement of Rent ..............................................................................................................................6

4.03 Annual Adjustment To Minimum Monthly Rent.......................................................................................7

4.04. Late Charges & Interest on Unpaid Rent....................................................................................................7 ARTICLE 7. SECURITY DEPOSIT................................................................................................................8

7.01 Amount of Deposit........................................................................................................................................8

7.02 Use and Return of Deposit ...........................................................................................................................8

7.03. Transfer of Security Deposit .......................................................................................................................8 ARTICLE 5. TAXES; ASSESSMENTS...........................................................................................................8

5.01. Personal Property Taxes ..............................................................................................................................8

5.02. Possessory Interest Taxes ............................................................................................................................8

5.03. Parking and Business Improvement Area Zone and Charges....................................................................8

5.04. Parking Deficiency Fees; Title 12 Santa Cruz Municipal Code — Local Improvements .......................8

7.5 ii
ARTICLE 8. USE.................................................................................................................................................9

8.01. Use of Premises............................................................................................................................................9

8.03. Storage; Office Space ..................................................................................................................................9

8.04. Cooperative Retail Management.................................................................................................................9

8.05. Hazardous or Toxic Materials.....................................................................................................................9

8.06. Compliance with Governmental Regulations...........................................................................................10

8.07. Americans With Disabilities Act ..............................................................................................................10 ARTICLE 9. ALTERATIONS AND ADDITIONS......................................................................................11

9.01. Consent.......................................................................................................................................................11

9.02. Notices........................................................................................................................................................11

9.03. Trade Fixtures ............................................................................................................................................11

9.04. Restoration .................................................................................................................................................12

9.05. Signs and Advertising Matter....................................................................................................................12 ARTICLE 10. UTILITIES................................................................................................................................12

10.01. Separate Charges......................................................................................................................................12

10.03. Interruption...............................................................................................................................................12 ARTICLE 11. INDEMNIFICATION; INSURANCE..................................................................................13

11.01. Indemnification........................................................................................................................................13

11.02. Liability and Personal Property Insurance..............................................................................................14

11.03. Tenant's Failure To Maintain Insurance .................................................................................................14

11.05. Waiver of Subrogation.............................................................................................................................14 ARTICLE 12. MAINTENANCE AND REPAIRS........................................................................................15

12.01. Landlord's Maintenance Obligations ......................................................................................................15

12.02. Landlord's Right of Entry ........................................................................................................................15

12.03. Tenant's Maintenance Obligations..........................................................................................................15

12.04. Plate Glass................................................................................................................................................16 ARTICLE 14. ASSIGNMENT AND SUBLETTING...................................................................................16

14.01. Prohibition Against Voluntary Assignment, Subletting, and Encumbering; Tenant's Request to Landlord................................................................................................................................................................16

14.02. Involuntary Assignment...........................................................................................................................16

14.03. Consent Required.....................................................................................................................................17

14.04. Deemed Assignment................................................................................................................................17

14.05. Unauthorized Assignment or Sublease...................................................................................................17

14.06. Effect of Consent .....................................................................................................................................17

14.07. Surrender of Lease...................................................................................................................................18 ARTICLE 15. DEFAULT.................................................................................................................................18

15.01. Events of Default .....................................................................................................................................18

15.02. Remedies ..................................................................................................................................................19

15.03. Covenants and Conditions.......................................................................................................................20

7.6 iii
ARTICLE 16. DAMAGE OR DESTRUCTION...........................................................................................21

16.01. Landlord's Duty To Repair......................................................................................................................21

16.02. Tenant's Duty to Repair or Replacement................................................................................................21 ARTICLE 17. ESTOPPEL CERTIFICATES; ATTORNMENT..............................................................22

17.01. Tenant to Furnish Certificate ..................................................................................................................22

17.02. Attornment ...............................................................................................................................................22

17.03. Additional Documents.............................................................................................................................22 ARTICLE 19. MISCELLANEOUS ................................................................................................................22

19.01. Attorneys' Fees.........................................................................................................................................22

19.02. Sale or Lease of the Premises by Landlord ............................................................................................22

19.03. Liability to Successors.............................................................................................................................22

19.04. Interpretation............................................................................................................................................22

19.05. Time..........................................................................................................................................................23

19.06. Force Majeure..........................................................................................................................................23

19.07. Notices......................................................................................................................................................23

19.08. Relationship of Parties.............................................................................................................................23

19.09. Waiver ......................................................................................................................................................23

19.10. Accord and Satisfaction...........................................................................................................................23

19.13. Guaranty of Lease....................................................................................................................................24

19.14. Recycling Activities.................................................................................................................................24

19.15. MacBride Principles and the Peace Charter...........................................................................................24

19.11. Authority ..................................................................................................................................................24

EXHIBITS
Exhibit A – Diagram of 1122 Pacific and Del Mar Theater Property Exhibit B – Landlord's and Tenant's Work - Not Applicable Exhibit C – Current Common Areas
Exhibit D – Insurance Requirements
Exhibit E –Sign Criteria
Exhibit F - Guaranty of Lease

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LEASE AGREEMENT
THIS LEASE AGREEMENT (“Lease”) is made this __th day of February, 2024 between the CITY OF SANTA CRUZ, a municipal corporation ("Landlord") and ECO LEO, LLC (dba CHILDISH TOY SHOP), a California limited liability corporation ("Tenant"). Landlord and Tenant agree to all of the terms and conditions of this Lease as follows:

ARTICLE 1. BASIC LEASE PROVISIONS.

The following are basic terms applicable to this Lease. The Sections and Exhibits referenced below in parentheses explain and define the basic terms specified below and are to be read in conjunction with basic terms herein:

1.01. Tenant's Trade Name: Childish Toy Shop. (Section 8.01).

1.02. Commencement of Term. March 1, 2024 (Section 3.01).

1.03. Term. Five (5) years, expiring February 28, 2029 (Section 3.01), unless extended further as provided herein (Section 3.02).

1.04. Property Address and Premises Location. Address: 1122 Pacific Street [a retail unit within the Del Mar Theater (Portion)], Santa Cruz, CA 95060 (Section 2.02, Exhibit A).

1.05. Rentable Area. 880 square feet (Retail Portion) of 19,200 square footage of building on Property. (Section 2.02, Exhibit A).

1.06. Tenant's Deadline to Complete Tenant's Work. Not Applicable (No new improvements contemplated). (Exhibit B).

1.07. Rent.
(a) Tenant shall pay to the City $2,350/month in Base Rent; and (b) Tenant shall also pay Tenant’s Share of Operating Costs at the rate of 2.29% as Additional Rent, billed on the Anniversary of this Lease each year. (Section 4.02)

1.08. Security Deposit: $4,700, equal to two months rent (Section 6.01).

1.09. Use of Premises: Tenant shall use the premises for operation of a retail toy and novelties shop (collectively, the “Permitted Use”) and for no other use without Landlord's prior written consent. (Section 8.01).

1.10. Business Hours. Tenant may establish hours of operation at Tenant’s discretion, except that Tenant shall be open a minimum of five (5) days per week including weekends, unless approved by Landlord in writing. Tenant is encouraged to set hours of operation consistent with family activities Downtown. (Section 8.02).

1.11. Guarantor of Lease. Dyane Villalobos (Exhibit F).

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1.12. Address for Notices to Tenant.

Childish Toy Shop
Attn: Dyane Villalobos
1127 Soquel Ave. Santa Cruz, CA 95062
Phone: 323.868.2363
Email: [email protected]

1.13. Landlord’s Address for Notices and Payment of Rent.

City of Santa Cruz
Economic Development
Attn: Asset Manager
337 Locust Street
Santa Cruz, CA 95060
Phone: 831.420.5156
Email: [email protected]

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ARTICLE 2. LEASE OF PREMISES

2.01. City of Santa Cruz as Landlord. Tenant acknowledges and understands that the Landlord is a municipality consisting of numerous offices, departments, agencies and districts. Whenever a provision contained in this Lease, or any extension, modification or amendment, requires the "written consent" of the Landlord, such consent must be obtained from the then acting City Manager or Assistant City Manager for the City of Santa Cruz. Tenant may not rely on any statement or representation by any other employee, agent or representative of Landlord in obtaining such consent and any such statement or representation other than the express written consent of the City Manager or Assistant City Manager shall be null and void and have no effect. Nothing contained in this Section shall limit in any way the authority of any office, department, agency or district of the City or County of Santa Cruz California from approving or withholding consent to any event or activity regulated by local law.

2.02. Premises. Landlord leases to Tenant and Tenant leases from Landlord the commercial space at the address designated in Section 1.04, (the "Premises") located in the theater building belonging to the City of Santa Cruz and commonly known as the Del Mar Theater (the "Property"). The approximate configuration and location of the Premises is shown on Exhibit “A”. Landlord and Tenant agree that the rentable area of the Premises for all purposes under this Lease shall be the Rentable Area specified in Section 1.05 of the Basic Lease Provisions.

2.03. Reservations This Lease confers no rights either with regard to the subsurface of the land below the ground level of the Premises or with regard to airspace above the roof of the Premises. Landlord reserves the right to enter and access the roof of the Premises or Property to repair and maintain the roof and to use any space within walls or above the ceiling finish and beneath the floor surface for utility lines and conduits. Except as otherwise expressly provided herein, Landlord shall not unreasonably interfere with the Tenant's quiet enjoyment of the Premises.

2.04. Tenant Improvements. If applicable, the respective obligations of the Landlord and Tenant regarding preparation of and initial improvements to the Premises for Tenant's use are set forth in Exhibit "B" attached to this Lease and are defined as either Landlord's Work or Tenant's Work, as the case may be. Any improvement, installation of fixture or item of equipment that is not listed on Exhibit B as “Landlord’s Work” is the Tenant's obligation at its sole cost; and any such work must be approved in writing by the Landlord before such improvement or installation of said fixture or equipment commences.

2.05. Condition of Premises. Tenant acknowledges that it recognizes the uniqueness of the Premises and Property and accepts them in their current and disclosed “AS IS, IN ITS CURRENT CONDITION, WITH ALL FAULTS” condition existing on the date of execution of this Lease, subject to all applicable zoning, municipal county or state laws, ordinances and regulations affecting the use of the Premises, and subject to those items, if any, included on Exhibit B as Landlord's Work. Tenant acknowledges that it has satisfied itself, by its own independent investigation, that the Premises are suitable for its intended use and neither Landlord nor its agents or representatives have made any representation or warranty as to the present or future suitability of the Premises for the conduct of Tenant's business.

2.06. Common Areas.
(a) The term "common areas" means those shared facilities outside the Premises and within the boundaries of the Property that are provided and designated by Landlord from time to time for the general use and convenience of Tenant and of other tenants of the Property and their respective authorized representatives and invitees. Common areas may include, without limitation, pedestrian walkways and patios (except patio area leased by Tenant or any other tenant), landscaped areas, service corridors, decorative walls, plazas, throughways, restrooms, and loading areas. The present designation of common areas is provided in Exhibit “C” attached hereto. (b) Tenant's Right to Use. Landlord gives to Tenant and its authorized representatives and invitees the nonexclusive right to use the common areas, with others who are entitled to use the common areas, subject to Landlord's rights set forth in Section 2.06 (a).
(c) Landlord's Maintenance and Management. Landlord shall maintain the common areas in good condition at all times. Landlord shall have the right to:

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i. Establish and enforce reasonable rules and regulations applicable to all tenants concerning the maintenance, management, use, and operation of the common areas. ii. Close any of the common areas to whatever extent required to prevent a dedication of any of the common areas or the accrual of any rights of any person or of the public to the common areas. iii. Close temporarily any of the common areas for maintenance purposes. If closure is for repair or for other than routine maintenance, and will require more than four hours, Tenant will be provided three (3) working days’ notice, except in case of emergency. Work is to be completed in a timely manner. iv. Designate other property outside the boundaries of the Property to become part of the common areas.
v. Select a person to maintain and operate any of the common areas if at any time Landlord determines that the best interests of the Property will be served by having any of the common areas maintained and operated by that third party. Landlord shall have the right to negotiate and enter into a contract with that third party on such terms and conditions and for such period of time as Landlord deems reasonable and proper both as to service and as to cost.
vi. Make changes to the common areas, including what is to be considered common areas. vii. Charge Tenant a reasonable share of the costs associated with maintaining and managing the common areas as part of Additional Rent as set forth under the Lease.

ARTICLE 3. TERM.

3.01. Commencement of Term. The initial term of this Lease (the “Initial Term”) shall commence on the date specified in Section 1.02 (“Commencement Date”) and shall continue until the date of termination specified in Section

1.03, unless extended at City’s sole discretion. Upon termination of this Lease, Tenant shall remove any fixtures and improvements in the Premises at Tenant’s sole expense and return the Premises to the condition it was in immediately prior to Tenant’s use, excepting normal wear and tear.

3.02. Option for Extension of Term.
(a) If Tenant fully and faithfully performs all of the terms and conditions of this Lease and is not in default at any time during the Initial Term of this Lease, Tenant may request an extension to the Initial Term by giving written notice (“Extension Request”) to Landlord at least one hundred twenty (120) days but not more than one hundred eighty (180) days before the expiration of the Initial Term. Landlord shall have the sole option to extend the Initial Term of this Lease for up to three (3) additional two (2) year periods (the “Extended Term”) immediately following the expiration of the Initial Term, upon the same terms and provisions contained in this Agreement except for the amount of the Base Rent, which shall be adjusted as provided in Article 4 (Rent). The Initial Term and Extended Term are collectively referred to herein as the “Term.”
(b) If Tenant has failed to cure a default in accordance with Article 15 (Default) of this Lease, at any time during the Initial Term of this Lease, Tenant’s request to extend the Initial Term of this Lease shall be totally ineffective and this Lease shall expire at the end of the Initial Term, unless otherwise agreed to by Landlord as provided in section (c) or terminated earlier in accordance with this Lease. (c) Landlord may (in its sole and absolute discretion and without any obligation to do so) elect to accept the Extension Request notwithstanding the default of Tenant (which acceptance shall not waive or otherwise relieve Tenant of its obligations to promptly correct such default(s) and fully comply with all terms and conditions of this Agreement).
(d) Tenant’s failure to timely give the Extension Request to Landlord shall constitute an election by Tenant not to request an extension. In that event, Tenant’s right to request an extension of the Initial Term shall

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automatically and immediately terminate without notice and this Lease shall expire at the end of the Initial Term. Tenant shall have no other rights to extend the Initial Term.
(e) Any extension granted to Tenant in this Lease is personal to the original Tenant and cannot be assigned or exercised by anyone other than said original Tenant without Landlord’s prior written consent, which may be given or withheld in Landlord’s sole and absolute discretion, and only while the original Tenant is in full possession of the Premises and, if requested by Landlord, with Tenant certifying that Tenant has no intention of thereafter assigning or subletting.
(f) Upon the beginning of any extension of the lease, the Base Rent shall be adjusted as described below (Section

3.03. Expiration; Holding Over. The Term will expire at 5:00 p.m. on the date specified as the termination date of this Lease, unless extended as provided herein. If Tenant should remain in possession of the Premises after the expiration of the Term of this Lease, or after Landlord has declared a forfeiture of this Lease as a result of Tenant's default, then such holding over shall be construed as a tenancy from month-to-month, subject to all of the terms, conditions, provisions and obligations of this Lease at the time this Lease expires or upon the Tenant's default, as the case may be, except the Base Rent shall be one and one-half (1.5) times the amount of such rent in effect prior to the Tenant's holdover. Unless the Tenant obtains the express written consent of Landlord to holding over, Landlord does not waive its right to pursue any legal or equitable remedy against Tenant with regard to Tenant's continued possession of the Premises after the expiration of the term of this Lease. Under a month-to-month tenancy, either party may terminate this Lease, by providing no less than thirty (30) day written notice to the other party.

ARTICLE 4. RENT.

4.01. Base Rent. Tenant shall pay to Landlord on the first day of each month during the Term of this Lease, a monthly Base Rent, without deduction, setoff, prior notice, or demand, in the amounts set forth in section 1.07, subject to adjustment set forth in this Section and Section 4.04. Base Rent for any partial month shall be prorated at the rate of 1/30th of the Base Rent per day.

Base Rent shall be adjusted at the start of any extension of this Lease to equal the greater of either, 1) current Base Rent for the year immediately prior to the extension, plus the annual adjustment (Section 4.04); or, 2) ten (10%) percent of average gross monthly sales over the prior two (2) year period.

4.02. Additional Rent.
(a) In addition to paying Base Rent, Tenant shall pay as “Additional Rent,” Tenant’s Share of the Operating Costs as set forth below in this section, and as indicated elsewhere in the Lease. All amounts due as Additional Rent shall be invoiced annually and are payable with fifteen (15) days of the Adjustment Date (Section 4.04) or Landlord’s issuance of the annual invoice. As used herein, “rent” includes both Base Rent and Additional Rent. Tenant's obligations to pay the Additional Rent shall survive the expiration of the Lease. (b) Tenant shall pay to Landlord as Additional Rent, the Tenant’s share (“Tenant’s Share”) of the following “Operating Costs” –
(i) the costs of managing, operating, repairing the Property (including maintenance, repair and replacement of glass, the roof covering or membrane, landscaping, janitorial services, security services);
(ii) the costs of insurance carried by Landlord for the Property, in amounts reasonably determined by Landlord;
(iii) utilities and services paid by Landlord (including, without limitation, water, telecommunications facilities and equipment, recycling programs and trash removal); (iv) administrative costs related to operation, maintenance, repair of the Property; (v) costs of licenses, permits, and inspections, or otherwise to comply with applicable laws or regulations;

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(vi) property management fees;
(vii) accounting, legal, and other professional services incurred in connection with the operation of the Property and calculation of Operating Costs, and enforcement of Lease; (viii) costs and expenses of operating, managing, maintaining, or repairing any shared or common areas of the Property;
(ix) any real property taxes paid or incurred by Landlord due to the ownership, leasing or operation of the Property; and
(x) other cost, expenditure, fee or charge, whether or not described hereinbefore, which in accordance with generally accepted property management practices would be considered an expense of managing, operating, maintaining and repairing the Property. Operating Costs for any calendar year during which average occupancy of the Property is less than one hundred percent (100%) shall be calculated based upon the Operating Costs that would have been incurred if the Property had an average occupancy of one hundred percent (100%) during the entire calendar year.
(c) The Tenant’s Share of Operating Costs set forth in Section 1.07 of the Basic Lease Provisions is a percentage calculated by the Rentable Area of the Premises divided by the total Rentable Area of the Property. Tenant’s Share of Operating Costs chargeable as Additional Rent shall be based on that percentage multiplied by the applicable sum of the Operating Costs. The amount of Additional Rent is subject to adjustment based on Landlord’s statement of actual Operating Costs. If the Rentable Area of the Premises or the Rentable Area of the Property is changed by Tenant’s leasing of additional space hereunder or for any other reason, Tenant’s Share shall be adjusted accordingly. (d) Prior to the Commencement Date and prior to the end of each accounting period during the Term of the Lease, Landlord shall notify Tenant of Landlord’s estimate of Tenant’s Share of the Operating Costs to be paid as Tenant’s Additional Rent for the following accounting period. Tenant shall pay to Landlord one-twelfth (1/12th) of the estimated Additional Rent. Landlord can adjust the monthly Additional Rent at the end of each accounting period on the basis of Landlord's reasonably anticipated Operating Costs for the following accounting period. An accounting period is a calendar year or other 12-month period, except that the first accounting period shall commence on the date the term commences and the last accounting period shall end on the date the term expires or terminates. (e) Annually, within 60 days after the end of each accounting period, Landlord shall furnish to Tenant a statement covering the accounting period just ended showing Tenant’s Share of the Operating Costs as finally determined and the Additional Rent payments made by Tenant during the accounting period. If the actual Tenant's Share of the Operating Costs for the prior accounting period exceeds the Additional Rent payments made by Tenant, Tenant shall pay Landlord the deficiency within 30 days after receipt of the statement. If Tenant's Additional Rent payments made during the accounting period exceed Tenant's Share of Operating Costs, Landlord shall reimburse Tenant the excess at the time Landlord furnishes the statement to Tenant, or shall apply a credit in the amount of the overage to future Additional Rent due. The obligations of Landlord to refund any overpayment of Additional Rent and of Tenant to pay any Additional Rent not previously paid shall survive the expiration of the Term. (f) Unless Tenant raises any objections to Landlord’s statement of Tenant’s Share of Operating Costs within thirty (30) days after receipt of the same, such statement shall conclusively be deemed correct and Tenant shall have no right thereafter to dispute such statement or any item therein or the computation of Additional Rent based thereon. If Tenant does object to such statement, then Landlord shall provide Tenant with reasonable verification of the figures shown on the statement and the parties shall negotiate in good faith to resolve any disputes. Any objection of Tenant to Landlord’s statement and resolution of any dispute shall not postpone the time for payment of any amounts due Tenant or Landlord based on Landlord’s statement, nor shall any failure of Landlord to deliver Landlord’s statement in a timely manner relieve Tenant of Tenant’s obligation to pay any amounts due Landlord based on Landlord’s statement. (g) Landlord shall keep full, accurate, and separate books of account covering the Operating Costs, and the statement to Tenant shall accurately reflect the total Operating Costs and Tenant's Share. The books of account shall be retained by Landlord for at least 12 months after the expiration of each accounting period. Tenant shall have the right at all reasonable times during the term to inspect the books of account.

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4.03. Commencement of Rent.
(a) Tenant's obligation to pay the rent under this Lease shall commence on the date set forth in Section 1.02. (b) In the event that Tenant's obligation to pay rent does not commence on the first (1st) day of a calendar month, Tenant shall pay rent for the fractional month on a per-diem basis (calculated on the basis of a thirty (30)-day month) until the first (1st) day of the calendar month following the commencement of Tenant's obligation to pay rent.

4.04. Annual Adjustment To Rent. Base Rent specified herein shall be subject to adjustment at the commencement of the second year of the Initial Term and each year thereafter on the anniversary of the Commencement Date including all extensions thereto (the "Adjustment Date") as follows:
(a) The base for computing the adjustment is the Consumer Price Index (“CPI”), All Urban Consumers, San Francisco-Oakland-Hayward, All Items (1982-1984 = 100), as published by the United States Department of Labor, Bureau of Labor Statistics ("Index"), which is in effect on the date of the commencement of the term ("Beginning Index"). The Index published most immediately preceding the Adjustment Date in question ("Extension Index") is to be used in determining the amount of the adjustment. If the Extension Index is increased over the Beginning Index, the Base Rent for the following year (until the next rent adjustment) shall be set by multiplying the Base Rent set forth above by a fraction, the numerator of which is the Extension Index and the denominator of which is the Beginning Index.
(b) In no case shall the Base Rent be less than the Base Rent set forth in Section 1.07, nor shall the Base Rent be less than the Base Rent in effect immediately prior to the adjustment date then occurring. On adjustment of the Base Rent as provided in this Lease, the Landlord shall notify the Tenant in writing of the new Base Rent. If the Index has changed so that the base differs from that in effect when the term commences, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics.

If the Index is discontinued or revised during the term, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the index had not been discontinued or revised.
(c) In no event shall the Annual Adjustment to Rent exceed three (3%) percent Base Rent prior to adjustment.

4.05. Payment of Rent. All amounts payable or reimbursable by Tenant under this Lease, including Base Rent, Additional Rent, late charges, and interest constitute rent and shall be payable and recoverable as rent in the manner provided in this Lease on the first day of each and every month throughout the term of this Lease and any extension periods. All sums payable to Landlord on demand under the terms of this Lease shall be payable within thirty (30) days after notice from Landlord of the amounts due. All rent shall be paid without offset, recoupment or deduction in lawful money of the United States of America to Landlord at Landlord’s Address for Payment of Rent as set forth in the Basic Lease Provision.

4.06. Late Charges & Interest.
(a) Late Charge. If any payment is not received by Landlord when due, Tenant shall pay to Landlord on demand as a late charge an additional amount equal to ten percent (10%) of the overdue payment. (b) Interest. In addition to the late charges referred to above, which are intended to defray Landlord’s costs resulting from late payments, any payment from Tenant to Landlord not paid when due shall bear interest from the date due until paid to Landlord by Tenant at the rate of one and one half percent (1 1/2%) per month, or the maximum rate of interest allowed by law, whichever is less (“Interest Rate”). (c) The parties agree that said late charges and interest represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant. The acceptance by Landlord of any late charge shall not constitute a waiver of Tenant's default with respect to the overdue amount, nor prevent Landlord from exercising any of the other rights and remedies available to Landlord under this Lease or as provided by law.

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4.07. Gross Sales. The term "Gross Sales" as used in this Agreement means all gross receipts of every kind and nature from sales and services from all business conducted by Tenant on, in, at or from the Premises, whether upon credit or for cash, in every department operating in the Premises, whether operated by the Tenant or by any subtenant or concessionaire, excepting therefrom any rebates or refunds to customers and the amount of all sales or excise tax receipts collected from customers and paid by Tenant to any government agency. Sales upon credit shall be included in the Gross Sales for the period in which the merchandise is delivered or service rendered to the customer, regardless of when payment is made.

ARTICLE 5. SECURITY DEPOSIT.

5.01 Amount of Deposit. Upon execution of this Lease, Tenant shall deposit with Landlord the sum set forth in Section 1.08 herein ("Security Deposit"), equivalent to $4,700 or equal to two months’ rent. This Security Deposit shall serve as partial security for the full and faithful performance by Tenant of all the terms, covenants and conditions of this Lease to be performed by Tenant. Landlord shall not be required to keep this security deposit separate from its general funds in a trust account, and Tenant shall not be entitled to any interest on such deposit.

5.02 Use and Return of Deposit. If Tenant fails to abide by any of the terms, covenants and conditions of this Lease, then Landlord, at its option, may use any amount of the Security Deposit to compensate Landlord for any loss or damage sustained or suffered due to such failure by Tenant. The entire Security Deposit, or any portion thereof, may be applied by Landlord for the payment of overdue rent or other sums due and payable to Landlord by Tenant hereunder.

Tenant shall, upon the written demand of Landlord, immediately remit to Landlord a sufficient amount in the form of a cashier's check to restore the Security Deposit to the original sum deposited. Failure to do so within five (5) days after such demand shall constitute a material breach of this Lease. Should Tenant comply with all of the terms, covenants and conditions of this Lease and promptly pay when due all of the rent herein provided and all other sums payable to Tenant to Landlord, the Security Deposit will be returned in full to Tenant within thirty (30) days following the end of the Term or earlier termination of this Lease.

5.03. Transfer of Security Deposit. Landlord may deliver the Security Deposit to Landlord's assignee or successor in interest in the Premises, in the event that Landlord's interest is sold, conveyed, transferred or assigned, and upon delivery, Landlord shall be discharged from any further liability with respect to repayment of the Security Deposit to Tenant.

ARTICLE 6. TAXES; ASSESSMENTS.

6.01. Personal Property Taxes. Tenant shall pay before delinquency all federal, state or local taxes, assessments, license fees, and other charges that are levied and assessed against Tenant's personal property installed or located in or on the Premises, including the Property, and that become payable during the term. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments.

6.02. Possessory Interest Taxes. Tenant shall pay before delinquency all Possessory interest taxes, assessments, license fees, and other charges that are levied and assessed against the leasehold interest, including leasehold improvements made in or to the Premises by or for Tenant regardless of whether title to those improvements is vested in Tenant or Landlord. "Possessory Interest Tax" means that tax imposed pursuant to laws of the State of California on leaseholds of tax-exempt property and does not include taxes on Tenant's inventory, personal, or any other tax or assessment that is presently or may, in the future be levied. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments.

6.03. Parking and Business Improvement Area Zone and Charges. Tenant shall pay before delinquency all taxes, assessments, license fees, and other charges that are levied, assessed, charged or imposed upon businesses within any Parking and Business Improvement Area Zones established by the City of Santa Cruz. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments.

6.04. Parking Deficiency Fees; Title 12 Santa Cruz Municipal Code — Local Improvements. Tenant shall pay before delinquency its proportionate share of all taxes, assessments, license fees, and other charges that are levied, and

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assessed against the Property, other improvements, and land of which the Premises are part by any improvement and/or maintenance district under Title 12 Santa Cruz Municipal Code — Local Improvements as amended (Chapter 12:32.420, Resolutions NS-2233, 20190, and 20424) or any revised or successor ordinances or resolutions thereto. This shall include, but not be limited to, parking deficiency fees. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments.

6.05 Tenant Taxes Paid by Landlord. If Landlord pays any taxes, assessments, fees, or other governmental charges levied against Tenant arising out of this Lease, Tenant shall reimburse Landlord upon demand for the amount of such payment, together with interest at the Interest Rate from the date of Landlord’s payment to the date of Tenant’s reimbursement.

ARTICLE 7. USE.

7.01. Use of Premises.
(a) Tenant shall use the Premises under the trade name, and solely for the use specified, in Sections 1.09 and 1.10, herein, and in compliance with all laws and regulations now existing or which shall exist. (b) Tenant shall not commit or suffer to be committed any waste upon the Premises or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenants or their customers in the Property. (c) Tenant shall not use or permit the Premises or any part thereof to be used, for any purpose other than the purpose for which the Premises are hereby leased. No use shall be made or permitted to be made of the Premises, nor acts done, which will increase the existing rate of insurance upon the Premises, or cause a cancellation of any insurance policy covering the Premises or any part thereof. Nor shall Tenant sell or permit to be kept, used, stored or sold in or about the Premises any article which may be prohibited by any policy of fire insurance obtained by the Landlord. Tenant shall, at its sole cost, comply with any and all requirements regarding the use of the Premises by any company that issues a policy of fire, casualty, or public liability insurance to the Landlord. If Tenant's use of the Premises results in a rate increase for the Premises or the Property, Tenant shall pay as additional rent within ten (10) days written notice, a sum equal to the additional premium caused by such rate increase.

7.02. Storage; Office Space. Tenant shall warehouse, store and stock within the Premises only such goods, as Tenant intends to use on or about the Premises for Tenant's business operation on the Premises.

7.03. Operation of Business/Covenant of Continuous Operation. Tenant shall continuously use the Premises for the uses specified in this Lease and shall continuously operate the Premises, during all usual business hours on all such days as comparable businesses of like nature in the area are open, but in no event less than those hours of operation stated in Section 1.10. If the Premises are partially destroyed or condemned and this Lease remains in full force and effect, Tenant shall continue operation of its business at the Premises to the extent reasonably practical from the standpoint of good business judgment during any period of reconstruction.

In the event that Tenant intends to terminate this Lease for any reason, or abandon the Premises, prior to the expiration of the Term of this Lease without the prior written consent of the Landlord, Tenant shall immediately notify Landlord in writing of its intention to terminate or abandon. Except for the expiration of the Term of this Agreement, Tenant agrees to keep the Premises open for business during regular business hours for a period of ninety (90) days following notice of termination or abandonment. During this ninety (90) day period, Tenant shall keep the Premises adequately stocked with merchandise and maintain sufficient personnel in order to conduct its business in accordance with sound business practices.

7.04. Hazardous or Toxic Materials. Tenant shall comply, at its expense, with all federal, state and local statutes or regulations concerning environmental conditions, emissions, pollutants and controls. Tenant shall not cause, store, use, or permit any Hazardous Material, including without limitation asbestos or polychlorinated biphenyls, to be brought upon, kept or used in or about the Premises or Property by Tenant, its agents, employees, contractors or invitees, without the prior written consent of Landlord, which Landlord shall not unreasonably withhold as long as Tenant

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demonstrates to Landlord's reasonable satisfaction that such Hazardous Material is necessary or useful to Tenant's business, does not violate any requirements of the Landlord's policies of fire, causality or public liability insurance and will be used, kept and stored in a manner that complies with all laws regulating any such Hazardous Material so brought upon or used or kept in or about the Premises or Property.

7.05. Tenant’s Indemnification. If Tenant breaches any of its obligation stated herein, or if the presence of Hazardous Material on the Premises or Property caused or permitted by Tenant results in contamination of the Premises or Property or poses a danger to public safety, then Tenant shall indemnify, defend and hold Landlord harmless from any and all claims, judgment, damages, penalties, fines, costs, liabilities or losses, including, without limitation, diminution in value of the Premises, damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises, damages arising from any adverse impact on marketing of space in the Property, and sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees or other costs which arise during or after the lease term as a result of such contamination. Without limiting the foregoing, if the presence of any Hazardous Material on the Premises caused or permitted by Tenant results in any contamination of the Premises or Property or poses a danger to public safety, Tenant shall promptly take all actions at its sole expense as are necessary to return the Premises and Property to the condition existing prior to the introduction of any such Hazardous Material to the Premises; provided that Landlord's approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises or Property.

7.06. Definition of Hazardous Material. As used herein, the term "Hazardous Material" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United States Government. The term "Hazardous Material" shall include without limitation, any material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste" or "restricted hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law); (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act); (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory); (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances); (v) petroleum; (vi) asbestos; (vii) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Titled 22 of the California Administrative Code, Division 4, Chapter 20; (viii) designated as a "hazardous substance" pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. § 1317); (ix) defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq. (42 U.S.C. § 6903); or (x) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (42 U.S.C. § 9601), and any amendments or successor statutes thereto.

7.07. Compliance with Governmental Regulations. Tenant shall, at its sole cost and expense, comply with all of the requirements of all local, state and federal authorities now in force, or which may hereafter be in force, pertaining to the Premises or Property. With regard to the use of the Premises or Property, Tenant shall faithfully observe all local ordinances and state and federal statutes now in force or which may hereafter be in force.

7.08. Americans With Disabilities Act. If the Premises requires modifications to comply with the Americans With Disabilities Act (ADA) or any other local, state or federal law or regulation regarding the accessibility of the Premises by disabled individuals, Tenant shall be fully responsible for the cost thereof, provided however, that if expenditures are required during the last six (6) months of this Lease, or Extended Term, and the cost thereof exceeds six (6) months’ rent, Tenant may instead terminate this Lease unless Landlord notifies Tenant, in writing, within ten (10) days after receipt of Tenant’s termination notice that Landlord has elected to pay the difference between the actual cost thereof and the amount equal to six (6) months’ rent. If Tenant elects termination, Tenant shall immediately cease the use of the Premises and deliver to Landlord written notice specifying a termination date at least ninety (90) days thereafter. Such termination date shall, however, in no event be earlier than the last day that Tenant could legally utilize

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the Premises without commencing such modifications. Termination of the Lease does not relieve Tenant of any duty to assume legal responsibility as stated below for any third-party claims related to compliance with the ADA.

Notwithstanding the above, Tenant acknowledges and expressly accepts full responsibility for compliance with the requirements of the Americans with Disabilities Act (ADA) and any other local, state or federal law or regulation regarding the accessibility of the Premises by disabled individuals. Tenant agrees to release, indemnify, defend, and hold harmless the Landlord its officials, officers, and employees for any claim, loss, expense, or liability arising from Tenant's failure to fully comply with all such laws or regulations.

7.09. CASp Inspection.

Landlord states that the Premises and Property has not been inspected by a Certified Access Specialist (CASp) Accordingly, this notice is provided by Landlord pursuant to California Civil Code Section 1938:
“A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law.

Although state law does not require a CASp inspection of the subject premises, the commercial property owner or Landlord may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the Tenant or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of the construction-related accessibility standards within the premises.” Unless otherwise expressly stated in this Lease and subject to the terms of this Lease: (a) Tenant may elect at any time to perform a CASp inspection of the Premises and Property at Tenant’s expense; (b) any repairs or modifications necessary to correct violations of applicable construction-related accessibility standards within or about Premises are the responsibility of Tenant; (c) any construction-related accessibility improvements by Tenant or alterations of or improvements to the Premises or Property are the responsibility of the Tenant; (d) any repairs or modifications to correct violations of applicable construction-related accessibility standards are the responsibility of Tenant.

ARTICLE 8. ALTERATIONS AND ADDITIONS.

8.01. Consent. Tenant shall not make any improvements, alterations, or additions to the Premises or Property exceeding $10,000 without Landlord's prior written consent. All improvements, alterations and additions shall be in conformity with the laws, directives, rules or regulations of all applicable public and governmental agencies.

8.02. Notices. At least fifteen (15) days prior to commencing any work relating to any improvements, alterations or additions approved by Landlord, Tenant shall notify Landlord in writing of the expected commencement date. Landlord shall have the right thereafter to post and maintain on the Premises or Property such notices as Landlord deems necessary to protect Landlord and the Property from mechanics' liens, materialmen's liens or any other liens.

Tenant shall pay, when due, all claims for labor and materials furnished to or for Tenant for use in improving the Premises or Property. Tenant shall not permit any mechanics' or materialmen's liens to be levied against the Premises or Property arising out of work performed, materials furnished or obligations to have been performed on the Premises or Property by or at the request of Tenant. Tenant hereby indemnifies and holds Landlord harmless against loss, damage, attorneys' fees and all other expenses on account of claims of lien of laborers or materialmen or others for work performed or materials or supplies furnished to Tenant or persons claiming under it.

8.03. Trade Fixtures. Tenant may install trade fixtures, display items, machinery or other trade equipment in conformance with all laws, ordinances, directives, rules or regulations of all applicable public and governmental

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agencies. With the exception of furniture, equipment, and trade fixtures that may be removed by Tenant without causing damage to the Premises, all improvements, alterations or additions shall become part of the realty and belong to Landlord at termination of the Lease. Tenant shall not remove any trade fixtures, display items, machinery or other trade equipment from the Premises or Property, without Landlord's written consent, if the removal of any such item would cause damage to the Premises or Property and, in the absence of Landlord's written consent to removal, any such item shall be deemed a part of the realty and belong to the Landlord at termination of the Lease.

8.04. Restoration. Except as otherwise provided herein, upon termination of the Lease, Tenant shall return the Premises and Property to the same clean condition as existed at the date of execution of the Lease, reasonable wear and tear excepted. In addition, Landlord, at its election, may require Tenant to remove, at Tenant's sole cost, any improvements, alterations, or additions approved by Landlord in accordance with this Lease. Tenant shall repair, at its sole cost, any damage resulting from the removal of any alterations, improvements, additions, equipment, machinery or trade fixtures.

8.05. Signs and Advertising Matter. Tenant will not place, install, maintain or construct or allow any third party to place, install, maintain or construct any sign, banner, flag, awning or canopy, covering, or advertising matter on the roof, or on any exterior door, wall or windows of the Premises or Property, or any interior portions of the Premises that may be visible from the exterior of the Premises or Property, without Landlord's prior written consent. Landlord, at Tenant's cost, may remove any item placed, constructed, or maintained that does not comply with the provisions of this paragraph. Tenant further agrees to maintain such sign, awning, canopy, decoration, lettering, advertising matter or window coverings in good condition and repair at all times. Tenant shall not display or sell any merchandise or allow carts, portable signs, devices, vending machines or other objects to be stored or remain on the sidewalk or elsewhere outside of the defined exterior of the Premises or Property without the prior written consent of the Landlord.

No advertising medium shall be used or allowed to be used by Tenant which can be heard or experienced outside the Premises, including without limitation, flashing lights, searchlights, loudspeakers, phonographs, radios or television. Except with Landlord's prior written consent, Tenant shall not display, paint or place, or cause to be displayed, painted or placed, any handbills, bumper stickers or other advertising devices on any vehicle parked near the Premises or the Property.

Tenant agrees, at Tenant's sole cost, to construct and install signs as may be required or allowed by Landlord in strict conformance with Landlord's sign criteria specified in Exhibit "D" attached to this Lease ("Sign Criteria") which specifies the permissible design, material, color, location, size and letter style of any such signs. Tenant's signs shall not be installed without the written consent of Landlord. Tenant, at its sole cost, shall obtain all necessary permits before installing, erecting or constructing any such sign. Signs shall be installed prior to the commencement of Tenant's business and thereafter shall be maintained by Tenant at Tenant's sole expense. If Tenant fails to maintain any such sign(s), Landlord shall have the right to maintain any such sign(s) and Tenant shall reimburse Landlord for such cost, plus a twenty percent (20%) overhead fee. If Tenant installs a sign without the Landlord's prior written consent, or said sign does not conform to Landlord's Sign Criteria, Landlord shall have the right, at its sole discretion, to remove and store Tenant's sign at Tenant's sole expense. The removal and storage costs shall bear interest at the Interest until paid.

Landlord reserves the right to revise the Sign Criteria for any reason, at any time, including without limitation changes in any governmental requirement or Landlord's renovation of the Premises or the Property. Within ninety (90) days of Landlord's request, Tenant shall remove Tenant's existing sign, patch the underlying attachment surface, and install a new sign, at Tenant's sole cost and expense, in accordance with Landlord's then existing Sign Criteria.

ARTICLE 9. UTILITIES.

9.01. Separate Charges. Tenant shall pay for all water, gas, heat, light, power, sewer, refuse, internet and telephone service and any other utilities metered or otherwise separately charged to the Premises.

9.02. Interruption. Landlord shall not be liable for any failure or interruption of any utility service being furnished to the Premises, and no such failure or interruption shall entitle Tenant to terminate this Lease.

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9.03. Efficiency. Tenant shall endeavor to manage electrical and water usage through the use of energy and water efficient equipment, light bulbs, appliances, or other such point of use fixtures, as available; and, shall turn-off all non-essential, non-security or food safety related equipment or lighting when not in use.

ARTICLE 10. INDEMNIFICATION

10.01. Landlord’s Indemnification of Tenant. Because Landlord is required to maintain insurance on the Building and Tenant compensates Landlord for such insurance as part of Tenant's Share of Operating Expenses, Landlord shall indemnify, defend, and hold harmless Tenant from and against any claims, actions, liabilities, damages, costs or expenses, including reasonable attorneys’ fees and costs incurred in defending against the same ("Claims") asserted by any third party against Tenant for loss, injury or damage, to the extent such loss, injury or damage is caused by the willful misconduct or negligent acts or omissions of Landlord or its authorized representatives in, on, about the Property, or by the breach of Landlord’s obligations under the Lease.

This obligation does not apply to: 1) any Claims caused in part or in whole by Tenant, its employees, agents, representatives, guests, invitees, customers, contractors, subcontractors, suppliers, trespassers, or others acting on Tenant’s behalf or under Tenant’s authority or control; or 2) Claims for damage to Tenant improvements and Tenant’s personal property, fixtures, furniture, and equipment in the Premises and is covered by insurance that Tenant is required to obtain under this Lease (or would have been covered had Tenant carried the insurance required under this Lease).

10.02. Tenant’s Indemnification of Landlord.
(a) Tenant agrees to defend, indemnify, and hold harmless Landlord, its officials, officers, employees, volunteers, and agents from any loss, claim, liability, judgment, expense, including attorney’s fees and costs for any injury or damage to person or property, or of any kind or nature (“collectively, the “Claims”) arising out of or relating to this Lease or the Premises, including: (i) the obligations of Tenant, its employees, and agents under this Lease; (ii) the acts or omissions, or negligence of Tenant or its employees, agents, representatives, guests, invitees, customers, contractors, subcontractors, suppliers, trespassers, or others acting on Tenant’s behalf or under Tenant’s authority or control; (iii) the occupancy and/or use of the Premises (including, but not limited to any improvements or personal property located therein) or Property by Tenant, or by its employees, agents, representatives, guests, invitees, customers, contractors, subcontractors, suppliers, trespassers, or others acting on Tenant’s behalf or under Tenant’s authority or control; or (iv) any breach or default under this Lease by Tenant. (b) Tenant’s indemnification obligations shall not apply to Claims for any injury or damage to person or property to the extent such Claims are caused by the negligence or willful misconduct of Landlord, its officials, officers, employees, volunteers, agents, and invitees, as determined by an adjudicatory body or court of competent jurisdiction, if applicable. Tenant’s obligation to defend shall arise regardless of any claim or assertion that Landlord caused or contributed to the Claims.

10.03. Damage to Tenant’s Property. Landlord shall not be liable for any damage to inventory or other property of Tenant, or others, located in, on or about the Premises or Property, nor for the loss of or damage to any personal property of Tenant or of others by theft or otherwise, which is not the direct result of Landlord's gross negligence, and Tenant waives any claim against Landlord with respect to such personal property, including loss of use, economic losses, and consequential or resulting damage of any kind. Landlord shall not be liable to Tenant, Tenant's employees or representatives for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain, or leaks from any part of the Premises or Property or from the pipes, appliances or plumbing, or from the roof, street or subsurface or from any other places or by dampness or by any other cause of whatsoever nature. Landlord shall not be liable to Tenant, Tenant's employees or representatives for any such damage caused by other tenants, persons, or occupants of adjacent spaces on the Property, or the public, or caused by operations in construction of any private, public or quasi-public work. All property of Tenant kept or stored on the Premises shall be so kept or stored at the sole risk of Tenant, and Tenant shall hold Landlord harmless from any claims arising out of damage to the same, including subrogation claims by Tenant's insurance carriers, unless such damage shall be caused by the willful act or gross neglect of Landlord.

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10.04. Survival. The indemnification provisions herein and any other indemnification provided elsewhere in this Lease shall survive the termination of this Lease.

ARTICLE 11. INSURANCE

11.01. Insurance Requirements. Tenant shall procure and maintain for the duration of the Lease, insurance as required in Exhibit “E” to protect against claims for injuries to persons or damages to the Premises and to loss or damage to Tenant’s trade fixtures, personal property, and improvements which may arise from or in connection with the Tenant’s operation and use of the leased Premises. The cost of such insurance shall be borne by the Tenant.

11.02. Review of Coverage/Contractor Insurance. Landlord may increase or decrease the amount of commercial general liability insurance required herein, based upon a general review by Landlord of the standard insurance requirements. Changes in insurance amounts shall occur not more frequently than once a year. Landlord will notify Tenant of any changes under this provision of this Lease. Landlord may also require Tenant’s contractor or subcontractor to obtain insurance sufficient in coverage, form and amount to provide adequate protection for Landlord, Tenant, and/or those using the Premises or Property.

11.03. Tenant's Failure To Maintain Insurance.
(a) Tenant agrees that if Tenant does not maintain any insurance policy required under this Lease or fails to pay any premiums when due, Landlord may, at its election, either terminate this Lease, require that the Premises be immediately closed for business pending reinstatement of insurance by Tenant, or obtain the necessary insurance and pay the premium, and the repayment thereof shall be deemed to be additional rent due by the Tenant and payable on the next date upon which a payment of rent is due.
(b) Landlord has the right at any time to demand a copy of a Certificate of Insurance from Tenant for the policies of insurance required herein and any other reasonable evidence proving compliance with these provisions. The failure to provide the Landlord with such evidence within five (5) calendar days of such demand shall constitute a material breach of this Lease.
(c) If Tenant is unable to obtain any policy of insurance required by Landlord under this Lease, then Landlord, at its sole discretion, and subject to the availability of coverage, may purchase such policy of insurance and Tenant shall reimburse Landlord for Tenant's pro rata share of the cost of such insurance as Additional Rent. In determining Tenant's pro rata share of the premiums for any such insurance specified herein, the schedule issued by the organization making the insurance rate on the improvements, areas and/or risks covered, showing the various components of such rates, shall be conclusive evidence of the charges which make up the insurance rate and the pro rata share to be charged to the Premises. If such a schedule cannot be obtained, then Tenant's pro rata share shall be based upon the ratio that the gross floor area of the Premises bears to the total gross leasable floor area of the Property for which said insurance policy relates. Landlord may estimate the cost of insurance and collect and impound Tenant's share of these costs upon written notice to Tenant. Tenant’s failure to repay at that time any amount expended by Landlord shall be considered the same as a failure to pay rent and a default by Tenant under this Lease.

11.04. Landlord’s Insurance. Landlord shall maintain in effect insurance on the Property with responsible insurers, on an "all risk" or "special form" basis, insuring the Premises in an amount equal to 100% of the replacement cost thereof, excluding land, foundations, footings and underground installations. Landlord may, but shall not be obligated to, carry insurance against additional perils and/or in greater amounts. Tenant acknowledges and agrees that Landlord is not required to maintain any insurance with respect to any of Tenant’s trade fixtures, personal property, or improvements; and that to the extent Landlord maintains any of such insurance Landlord shall retain the proceeds of such insurance.

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11.05. Mutual Waiver of Subrogation. Tenant and Landlord each waive its respective right of recovery against the other, and their respective successors, assigns, directors, agents, and representatives in connection with any loss or damage which is covered by any insurance policy of either the Tenant or Landlord maintained by either party or required by this Lease with respect to the Premises or the Property. Tenant and Landlord hereby waive, on behalf of each party's insurance carriers, any right of subrogation it may have against the other party and each shall notify its carriers of the waiver contained herein.

ARTICLE 12. MAINTENANCE AND REPAIRS.

12.01. Landlord's Maintenance Obligations.
(a) Except as otherwise stated in the Lease, Landlord, on behalf of Tenant and the other occupants of the Property, shall maintain in good condition and repair the following:
(i) structural parts of the building and other improvements in which the Premises are located, which structural parts include only the foundations, bearing and exterior walls (exclusive of doors, door frame, door checks, windows, window frames and store fronts), (ii) unexposed electrical, plumbing and sewage systems lying outside the Premises, (iii) roof (excluding skylights and areas penetrated for purposes of installing any heating, ventilating, or air conditioning equipment), roof drainage systems on the Property in which the Premises are located,
(iv) main sanitary sewer lateral, and
(v) public and common areas of the Property, such as elevators, stairs, corridors, restrooms, and landscaping.
(b) The cost of such repairs and replacements in Section 12.01(a), however, shall be the sole obligation of Tenant, if any repairs or replacements are necessitated by the negligence, gross negligence or willful acts of Tenant, its officers, employees, representatives, agents, customers, invitees or trespassers or by reason of Tenant's failure to observe or perform any provisions contained in this Lease or caused by alterations, additions or improvements made by Tenant or its officers, employees, representatives, agents, contractors, subcontractors, laborers or materialmen. (c) In the event Tenant fails to maintain, repair, or replace HVAC systems in accordance with Section 12.03, Landlord in its sole discretion, may contract with a service company licensed and experienced in servicing HVAC equipment for regular maintenance, repairs, and replacement, if required, of the HVAC equipment serving the Premises.

Tenant shall be responsible for the reasonable costs of such maintenance, repairs, or replacement as set forth in this Lease.
(d) Unless Tenant notifies Landlord in writing of the need for repairs under Section 12.01, Landlord shall not be liable for its failure to make such repairs. Landlord shall be entitled to a reasonable period of time to make such repairs upon receipt of said written notice from Tenant. Tenant waives any right of offset against any rent due hereunder and agrees not to assert as an affirmative defense in any judicial proceeding or arbitration brought by Landlord against Tenant on claims made under this Lease the provisions of Sections 1932(1), 1941 and 1942 of the California Civil Code, or any superseding statute, and of any other law permitting Tenant to make repairs at Landlord's expense.

12.02. Landlord's Right of Entry. Landlord, its agents, contractors, employees and assigns may enter the Premises at any time and from time to time with prior notice to Tenant or as soon as practicable in the case of an emergency, without liability to Tenant or entitling Tenant to any abatement of rent to: (a) examine the Premises; (b) perform any obligation of, or exercise any right or remedy of, Landlord under this Lease (c) make repairs, alterations, improvements or additions to the Premises or to the Property as Landlord deems necessary; (d) perform work necessary to comply with laws, ordinances, rules or regulations of any public authority or of any insurance underwriter; (e) to post "for rent" or "for lease" signs, or to show prospective tenants the Premises, during the last six (6) months of the Term; and (f) perform work that Landlord deems necessary to prevent waste or deterioration in connection with the Premises should Tenant fail to commence to make, and diligently pursue to completion, its required repairs within three (3) days

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after written demand therefor by Landlord. Landlord will give a minimum of twenty-four (24) hours advance notice of such entry when practicable.

12.03. Tenant's Maintenance Obligations.
(a) Tenant shall be solely responsible for all repairs to and maintenance of the Premises which are not expressly allocated to the Landlord under this Lease or by separate written agreement between the Landlord and Tenant. Except as provided elsewhere in this Lease, Tenant, at its sole cost and expense, shall keep the Premises in good clean order, condition and repair and shall make all replacements necessary to keep the Premises in such condition, including maintenance, and repair and replacement of interior walls, floor coverings, ceiling, fixtures, any appliances, HVAC systems, electrical systems and outlets, window and sidewalk cleaning, awnings, graffiti abatement, and maintenance and inspection of fire sprinkler systems.
(b) All replacement equipment shall be of a quality equal to or exceeding that of the original equipment or improvements. Should Tenant fail to make these repairs and replacements or otherwise maintain the Premises for a period of three (3) days after delivery of a written demand by Landlord, or should Tenant commence, but fail to complete, any maintenance, repairs or replacements within a reasonable time after written demand by Landlord, Landlord shall have the right to maintain, or make such repairs or replacements without liability to Tenant for any loss or damage that may occur to Tenant's business, and Tenant shall pay for all costs incurred by Landlord in making such repairs or replacements plus an administrative overhead fee of twenty percent (20%) from the date of commencement of the work through the date of payment. Tenant shall, at its expense, repair promptly any damage to the Premises or to the Property caused by Tenant, its agents, employees, customers, invitees, subtenants, assignees or concessionaires, or caused by the installation or removal of Tenant's personal property. (c) Tenant shall, at its own expense, comply with all requirements of the Landlord's insurance underwriters and any other governmental authority having jurisdiction thereof, regarding the installation and periodic maintenance of fire suppression systems or apparatus.

12.04. Plate Glass. Tenant shall replace, at its expense, any and all damaged or broken glass and plate glass components on or about the Premises resulting from any cause whatsoever other than the direct negligence of Landlord.

Tenant shall have full responsibility, at its sole discretion, to either self-insure or obtain insurance policies covering damage or replacement of said glass and plate glass components.

12.05. Notice by Tenant. Tenant shall give immediate notice to Landlord in case of fire or accidents in or around the Premises or Property, or of any damage or defects in the Premises or Property, or any fixtures or equipment therein.

ARTICLE 13. PARKING
This section is intentionally left blank
ARTICLE 14. ASSIGNMENT AND SUBLETTING.

14.01. Prohibition Against Voluntary Assignment, Subletting, and Encumbering; Tenant's Request to Landlord. Tenant shall not voluntarily assign or encumber its interest in this Lease or in the Premises, or sublease all or any part of the Premises, or allow any other person or entity (except Tenant's authorized representatives) to occupy or use all or any part of the Premises, without first obtaining Landlord's express written consent, which consent shall be at the sole and absolute discretion of the Landlord. Any assignment, encumbrance, or sublease without Landlord's consent shall be voidable, and at Landlord's election, shall constitute a default. No consent to any assignment, encumbrance, or sublease shall constitute a further waiver of the requirements of this provision.

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For purposes of this provision, the consent of the Landlord shall be construed as meaning the express approval of any assignment, encumbrance or sublease of the Premises by the City Council of Santa Cruz, California, or any agent or representative authorized by said City Council to give said consent. Unless otherwise provided in writing by Landlord, the term of this Lease shall not be extended under any option(s) to extend or renew the term of this Lease granted herein that have not already commenced at the time of said assignment or sublease.

14.02. Involuntary Assignment. No interest of Tenant in this Lease shall be assignable by operation of law including, without limitation, the transfer of this Lease by testate or intestate succession. Each of the following acts shall be considered an involuntary assignment:
(a) If Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or institutes a proceeding under the Bankruptcy Act in which Tenant is the bankrupt; or, if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; (b) If a writ of attachment or execution is levied on this Lease; (c) If, in any proceeding or action to which Tenant is a party, a receiver is appointed with authority to take possession of the premises.

An involuntary assignment shall constitute a default by Tenant and Landlord shall have the right to elect to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant.

If a writ of attachment or execution is levied on this Lease, Tenant shall have 15 days in which to cause the attachment or execution to be removed. If any involuntary proceeding in bankruptcy is brought against Tenant, or if a receiver is appointed, Tenant shall have 30 days in which to have the involuntary proceeding dismissed or the receiver removed.

14.03. Consent Required. Tenant shall not, without Landlord's consent, assign, mortgage or hypothecate this Lease or any interest in this Lease or any right or privilege appurtenant hereto or permit use of the Premises by any person or persons other than Tenant, its employees and invitees. Tenant must deliver to Landlord a form of a Consent to Assignment or Consent to Sublease to be executed by Landlord to confirm the consent to any transfer, which is also executed by the Tenant and the assignee/or sublessee confirming their respective obligations to this Lease. It is agreed that Landlord will not be acting unreasonably in refusing to consent to an assignment or sublease if, in Landlord's opinion, the quality of the operation of the proposed assignee or subtenant is not equal to or better than that of the Tenant, such assignee or subtenant may adversely affect the business of the other tenants or the tenant mix in the Property or Landlord's ability to obtain rent or if the net worth of such assignee or subtenant is less than that of Tenant.

If Tenant assigns this Lease or sublets the Premises to a third party who is not in any way affiliated or connected with Tenant by way of a merger, reorganization, consolidation or otherwise, any rent or additional rent paid to Tenant in addition to the rent payable to Landlord as set forth in this Lease shall be paid by Tenant to Landlord as Additional Rent.

14.04. Deemed Assignment. Any transfer of this Lease from Tenant by merger, consolidation, liquidation or sale of a controlling interest of corporate stock shall constitute an assignment.

14.05. Unauthorized Assignment or Sublease. Any attempted assignment or subletting without Landlord's required consent shall be void and shall, at the option of Landlord, terminate this Lease. Any assignee, subtenant or other recipient of Tenant's interest in this Lease is hereby notified that such transfer is of no force or effect without Landlord's prior written consent.

14.06. Effect of Consent. Consent by Landlord to an assignment or subletting shall not release Tenant from its primary liability under this Lease, and Landlord's consent to one assignment, subletting or occupation by other parties shall not be deemed a consent to other subleases, assignments or use by other parties. Each assignee/sublessee shall be jointly and severally liable with Tenant (and Tenant shall be jointly and severally liable with each assignee/sublessee) for

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the payment of rent (or, in the case of a sublease, rent in the amount set forth in the sublease) and for the performance of all other terms and provisions of this Lease.

14.07. Expenses and Attorneys’ Fees. Tenant shall pay to Landlord on demand all costs and expenses (including reasonable attorneys’ fees) incurred by Landlord in connection with reviewing or consenting to any proposed assignment or sublease (including any request for consent to, or any waiver of Landlord’s rights in connection with, any security interest in any of Tenant’s property at the Premises).

14.08. Excess Consideration. If Landlord consents to an assignment or sublease, Tenant shall pay to Landlord as Additional Rent, within thirty (30) days after receipt by Tenant, any consideration paid by any assignee or sublessee which is in excess of the amount of Base Rent and Additional Rent that is payable to Landlord by Tenant hereunder applicable to the subleased space.

14.09. Surrender of Lease. The voluntary or other surrender of this Lease by Tenant or a mutual cancellation of this Lease by Landlord and Tenant, shall not work a merger, and shall, at the election of Landlord, either terminate all or any existing subleases or subtenancies or may operate as an assignment to it of any or all of such subleases or subtenancies. Landlord shall exercise its election within thirty (30) days of the event so requiring.

ARTICLE 15. DEFAULT.

15.01. Events of Default. The occurrence of any of the following shall constitute a breach and material default of this Lease by Tenant:
(a) The failure of Tenant to pay or cause to be paid any rent, monies or other charges due Landlord as set forth in this Lease on or before the due date for payment of any such amounts; (b) The failure of Tenant to maintain all insurance coverage as set forth in Article 12. (c) The abandonment of the Premises by Tenant, which shall mean failure to operate as set forth in this Lease for five (5) consecutive days, except by prior written notice by Tenant and with the written consent of Landlord; (d) Except as otherwise provided in this Lease, the failure of Tenant to do or cause to be done any act as set forth in this Lease, or to do or cause to be done any act prohibited by this Lease or by applicable law or regulations, if the action or failure continues for fifteen (15) consecutive days after notice has been given to Tenant (if applicable).

However, Tenant shall not be in default of this Lease if Tenant commences to cure the default within said fifteen (15) day period and diligently and in good faith continues to cure the default to the satisfaction of the Landlord; (e) Tenant causing, permitting or suffering, without the prior written consent of Landlord, any act when this Lease requires Landlord's prior written consent or prohibits such act; or (f) Any act of bankruptcy caused, suffered or permitted by Tenant. For the purposes of this Lease, "act of bankruptcy" shall include any of the following:
(1) Any general assignment or general arrangement for the benefit of creditors; (2) The filing of any petition by or against Tenant to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, unless such petition is filed against Tenant and the same is dismissed within sixty (60) days; (3) The appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located in the Premises or of Tenant's interest in this Lease; or

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(4) The attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease.

15.02. Landlord Election. After the occurrence of an Event of Default, Landlord, in addition to or in lieu of exercising other remedies, may, but without any obligation to do so, cure the breach underlying the Event of Default for the account and at the expense of Tenant. However, Landlord shall by prior notice first allow Tenant a reasonable opportunity to cure, except in cases of emergency, where Landlord may proceed without prior notice to Tenant. Tenant shall, upon demand, immediately reimburse Landlord for all costs, including but not limited to: costs of settlements, defense, court costs, attorney fees, and administrative staff costs and fees that Landlord may incur in the course of any cure.
(a) No security or guaranty for the performance of Tenant’s obligations that Landlord may now or later hold shall in any way constitute a bar or defense to any action initiated by Landlord for unlawful detainer or for the recovery of the Premises, for enforcement of any obligation of Tenant, or for the recovery of damages caused by a breach of this Lease by Tenant or by an Event of Default.
(b) Except where this is inconsistent with or contrary to any provisions of this Lease, no right or remedy conferred upon or reserved to either party is intended to be exclusive of any other right or remedy, or any right or remedy given or now or later existing at law or in equity or by statute. Except to the extent that either party may have otherwise agreed in writing, no waiver by a party of any violation or nonperformance by the other party of any obligations, agreements, or covenants under this Lease shall be deemed to be a waiver of any subsequent violation or nonperformance of the same or any other covenant, agreement, or obligation, nor shall any forbearance by either party to exercise a remedy for any violation or nonperformance by the other party be deemed a waiver by that party of the rights or remedies with respect to that violation or nonperformance.

15.03. Landlord’s Right to Perform. All terms, covenants and conditions of this Lease to be performed or observed by Tenant shall be performed or observed by Tenant at Tenant’s sole cost and expense, and without any reduction of rent. If Tenant shall fail to pay any sum of money, or other rent, required to be paid by it hereunder, or shall fail to perform any other term or covenant hereunder on its part to be performed, and such failure shall continue for ten (10) days after written notice thereof by Landlord, Landlord, without waiving or releasing Tenant from any obligation of Tenant hereunder, may, but shall not be obligated to, make any such payment or perform any such other term or covenant on Tenant’s part to be performed. All sums so paid by Landlord and all necessary costs of such performance by Landlord plus an administrative overhead fee of twenty percent (20%), together with interest thereon at the rate of the prime rate of interest per annum as quoted by the Bank of America from the date of such payment or performance by Landlord, shall be paid (and Tenant covenants to make such payment) to Landlord on Landlord’s demand, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of nonpayment by Tenant as in the case of failure by Tenant in the payment of Base Rent hereunder.

15.04. Remedies. The remedies granted to Landlord shall not be exclusive but shall be cumulative. In the event of any breach by Tenant, in addition to other rights or remedies of Landlord at law or in equity, Landlord shall have the following remedies:
(a) Landlord may elect to continue this Lease in effect by not terminating Tenant’s right to possession of the Premises, in which case Landlord shall be entitled to enforce all Landlord’s rights and remedies under this Lease, including the right to cure the breach underlying the Event of Default for the account and at the expense of Tenant and Landlord shall recover all costs, including costs of settlements, court costs and attorney’s fees, administrative fees and costs that Landlord may incur in the course of curing Tenant’s breach; and Landlord may also recover all rent specified in this Lease as it becomes due under this Lease, and seek any other damages proximately caused by Tenant’s failure to perform the obligations under this Lease;
(b) Landlord shall have the right to terminate and recover against Tenant:
(1) The worth at the time of award of the unpaid rent that had been earned at the time of termination;

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(2) The worth at the time of award of the amount by which the unpaid rent that would have been earned after termination until the time of award exceeds the amount of this rental loss that Tenant proves could have been reasonably avoided;
(3) The worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of this rental loss that Tenant proves could be reasonably avoided; and
(4) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform Tenant's obligations under the Lease.

The worth at the time of award of the amounts referred to in subsection (b) shall be computed by allowing interest at ten percent (10%) per annum. The worth at the time of award of the amount referred to in subparagraph (b)(3) shall be computed by discounting this amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). (c) Efforts Landlord may make to mitigate the damages caused by Tenant's breach of this Lease shall not constitute a waiver of Landlord's right to recover damages against Tenant, nor shall anything contained in this Lease affect Landlord's right to indemnification against Tenant for any liability arising prior to the termination of this Lease for personal injuries or property damage, and Tenant agrees to indemnify and hold Landlord harmless from any injuries and damages, including all reasonable attorney fees and costs incurred by Landlord in defending any action brought against Landlord for any recovery, and in enforcing the terms and provisions of this indemnification against Tenant. (d) However, the breach of this Lease by Tenant, or an abandonment of the Premises by Tenant, shall not constitute a termination of this Lease, nor of Tenant's right of possession under this Lease, unless and until Landlord elects to do so, and until that time Landlord shall have the right to recover all rent and all other payments to be made by Tenant under this Lease as they become due; provided, that until Landlord elects to terminate this Lease and Tenant's right of possession under this Lease, Tenant shall have the right to sublet the Premises or to assign interests in this Lease, or both, subject only to the written consent of Landlord, which consent shall not be unreasonably withheld. (e) As security for the performance by Tenant of all duties and obligations under the Lease, Tenant assigns to Landlord the right, power, and authority, during the continuance of this Lease, to collect the rents, issues, and profits of the Premises, reserving to Tenant the right, prior to any breach or default by Tenant under this Lease, to collect and retain the rents, (solely in the case of a sublease previously approved by Landlord) issues, and profits, from the operation of Tenant's approved business use, as they become due and payable, and so long as payments to Landlord are also kept current. Upon any breach or default, Landlord shall have the right at any time afterward, without notice except as provided for previously, either in person, by agent, or by a receiver to be appointed by a court, enter and take possession of the Premises and collect rents, issues, and profits, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorney fees, upon any secured indebtedness, and in an order as Landlord may determine.
(f) In the event that Landlord should take any act to maintain or preserve the Premises on Tenant's behalf, or seek the appointment of a receiver to protect Landlord's interests under this Lease, such acts shall not constitute a termination of Tenant's right of possession unless Tenant receives written notice from Landlord to regarding Landlord's election to terminate.
(g) Tenant acknowledges that Landlord has executed this Lease in reliance on the financial information furnished by Tenant to Landlord as to Tenant's financial condition. If it is determined at any time subsequent to the date of this Lease that any of the financial information furnished by Tenant and relied upon by Landlord in executing this Lease is substantially untrue or inaccurate, Tenant shall be deemed to be in default under this Lease, which default shall not be subject to cure, and which shall entitle Landlord to exercise all remedies reserved to Landlord under this Lease or otherwise available to Landlord at law.

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(h) Landlord may remove all Tenant’s property from the Premises, and such property may be stored by Landlord in a public warehouse or elsewhere at the sole cost and for the account of Tenant. If Landlord does not elect to store any or all of Tenant’s property left in the Premises, Landlord may consider such property to be abandoned by Tenant, and Landlord may thereupon dispose of such property in any manner deemed appropriate by Landlord. Any proceeds realized by Landlord on the disposal of any such property shall be applied first to offset all expenses of storage and sale, then credited against Tenant’s outstanding obligations to Landlord under this Lease, and any balance remaining after satisfaction of all obligations of Tenant under this Lease shall be delivered to Tenant.

15.05. Covenants and Conditions. All covenants made by Tenant hereby are conditions of this Lease; therefore, in the event of any default by Tenant in fulfilling any of the same, Landlord may at any time thereafter at its option declare a forfeiture of this Lease. Landlord shall not be obligated to perform any covenant made by him under this Lease which accrues after the date of any default by Tenant hereunder.

ARTICLE 16. DAMAGE OR DESTRUCTION.

16.01. Landlord's Duty To Repair and Right to Terminate. (a) If the Premises are destroyed or materially damaged from a cause not insured against under a fire or casualty insurance required herein, or if the amount of available insurance proceeds, including deductible costs, is not sufficient to completely repair or restore any such damage or destruction, Landlord shall have the right to terminate this Lease by giving written notice of termination to Tenant within ninety (90) days after the date of the damage or destruction. If the Lease is not terminated, then Landlord shall diligently proceed to repair and restore the Premises to the extent that insurance proceeds, including deductible costs, are sufficient to repair or restore any such damage or destruction.
(b) If the Premises are materially damaged or destroyed from a cause covered by a fire or casualty insurance required herein, and it can be repaired or restored within ninety (90) days after commencement of repair or restoration, then Landlord shall diligently proceed to repair and restore the Premises. If Landlord determines that the Premises cannot be repaired or restored within this period, then Landlord shall have the right to terminate this Lease by written notice to Tenant given within ninety (90) days after the date of the damage or destruction, and Tenant's obligation to pay Rent and other charges under this Lease shall terminate as of the date of the damage or destruction, or the date Tenant ceases to do business at the Premises, whichever date is later. (c) If the Premises are damaged to the extent of fifty percent (50%) or more of the replacement cost, Landlord may elect to terminate this Lease by written notice to Tenant given within ninety (90) days after the date of the destruction.
(d) If Landlord elects or is required to make repairs under this Article, Tenant shall be entitled to a reduction in rent, equal to that portion of the Premises in which the floor area rendered unusable bears to the gross floor area of the Premises, from the date of damage to the earlier of the date Tenant can occupy the Premises or thirty (30) days from completion of Landlord's repair work. Tenant waives the provisions of Civil Code Sections 1932(2) and 1933(4) with respect to any destruction of the Premises.
(e) Except as otherwise provided in this Lease, damage to or destruction of the Premises shall not terminate this Lease or result in the abatement of any rent or other charges payable under this Lease. Tenant expressly waives any right it may have, in law or equity, to offset any cost incurred by Tenant for repairs or restoration to the Premises against Tenant's obligations to pay rent in connection with Landlord's duties of repair and restoration under this Lease. In no event shall Landlord be liable to Tenant by reason of any injury to or interference with Tenant’s business or property arising from fire or other casualty or by reason of any repairs to any part of the Property necessitated by such casualty. (f) Landlord's duties of repair and restoration under the provisions of this Lease shall extend only to those portions of the Premises insured under a policy of fire or casualty insurance required herein, and Landlord shall not be responsible for any loss, damage, or destruction to Tenant's personal property, trade fixtures, merchandise, inventory or equipment.

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(g) Landlord shall give Tenant notice within ninety (90) days after the date of the casualty, specifying whether Landlord elects to terminate this Lease as provided above and, if not, Landlord’s estimate of the time required to complete Landlord’s repair obligations under this Lease.

16.02. Tenant's Duty to Repair or Replacement. Except as otherwise provided herein, Landlord's obligation to restore shall not include the restoration or replacement of Tenant's personal property, trade fixtures, merchandise, inventory, or equipment. Tenant shall restore and replace said items in the event that Landlord is obligated or elects to repair any damage or destruction of the Premises.

16.03. Tenant’s Right to Terminate. If all or a substantial part of the Premises are rendered untenantable or inaccessible by damage to all or any part of the Property from fire or other casualty, and Landlord does not elect to terminate as provided above, then Tenant may elect to terminate this Lease if Landlord’s estimate of the time required to complete Landlord’s repair obligations under this Lease is greater than nine (9) months after the date permits are issued for the performance of such repair work, in which event Tenant may elect to terminate this Lease by giving Landlord notice of such election to terminate within thirty (30) days after Landlord’s notice to Tenant pursuant to Section 16.01.

16.04. Waiver. Landlord and Tenant each hereby waive the provisions of California Civil Code Sections 1932(2), 1933(4) and any other applicable existing or future Law permitting the termination of a lease agreement in the event of damage or destruction under any circumstances other than as provided in this Article 16.

ARTICLE 17. ESTOPPEL CERTIFICATES; ATTORNMENT.

17.01. Tenant to Furnish Certificate. Tenant shall, within ten (10) business days of written notice from Landlord, execute and deliver to Landlord a written statement certifying that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modification. Tenant's statement shall include other details requested by Landlord, such as the date to which rent and other charges are paid and Tenant's knowledge concerning any uncured defaults in Landlord's obligations under this Lease and the nature of such defaults if they are claimed. Any such statement may be relied upon conclusively by any prospective purchaser or encumbrancer of the Premises. Tenant's failure to deliver such statements within such time shall be conclusive upon the Tenant that this Lease is in full force and effect, except as and to the extent any modification has been represented by Landlord, and that there are no uncured defaults in Landlord's performance and that not more than one (1) month's rent has been paid in advance.

17.02. Attornment. If any proceedings are brought for foreclosure, or if the power of sale is exercised under any mortgage or deed of trust made by Landlord covering the Premises, Tenant shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this Lease.

17.03. Additional Documents. Tenant, upon request of any party in interest, shall execute promptly such instruments and certificates necessary to carry out the intent of the foregoing Sections as shall be requested by Landlord.

ARTICLE 18. OTHER MUNICIPAL RULES AND REGULATIONS
This section intentionally left blank.

ARTICLE 19. MISCELLANEOUS.

19.01. Attorneys' Fees. In the event of any legal action, arbitration or proceeding between the parties, the prevailing party shall be entitled to reasonable attorneys' fees and expenses as a part of the judgment or award resulting therefrom.

19.02. Sale or Lease of the Property by Landlord. Notwithstanding any provisions of this Lease, Landlord may assign in whole or in part Landlord's interest in this Lease and may sell all or part of Landlord's leasehold interest in

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the real estate of which the Premises are a part. In the event of any sale or exchange of the Property by Landlord and assignment by Landlord of this Lease, Landlord shall be entirely freed and relieved of all liability under all covenants and obligations contained in or derived from this Lease or arising out of any act, occurrence or omission relating to the Premises which occurs after the consummation of such sale, exchange or assignment.

19.03. Joint and Several Liability. If more than one individual or entity comprises Tenant, the obligations and liabilities imposed on each individual or entity that comprises Tenant under this Lease will be joint and several.

19.04. Interpretation. Whenever the singular number is used in this Lease, the same shall include the plural.

Reference to any gender shall include the masculine, feminine and neuter genders, and the word "person" shall include corporation, firm or association, when required by the content.

The headings or titles to the paragraphs of this Lease are for convenience only and do not in any way define, limit or construe the contents of such paragraphs.

This instrument contains all of the Leases and conditions made between the parties with respect to the hiring of the Premises and may not be modified orally or in any manner except by a written instrument signed by all the parties to this Lease.

The laws of the State of California shall govern the validity, performance and enforcement of this Lease. If any provision of this Lease is determined to be void by any court of competent jurisdiction, such determination shall not affect any other provision of this Lease and such other provisions shall remain in full force and effect. If any provision of this Lease is capable of two constructions, one which would render the provision void and one which would render the provision valid, the provision shall be interpreted in the manner which would render it valid.

Except as may otherwise be expressly stated, each payment required to be made by the Tenant shall be in addition to and not in substitution for other payments to be made by Tenant.

19.05. Time. Time is of the essence in this Lease.

19.06. Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, regulations or controls, enemy or hostile government action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, shall excuse the performance by such party for a period equal to that resulting from such prevention, delay or stoppage. Nothing in this section shall excuse the prompt payment of rent and other charges by Tenant as required by this Lease or the performance of any act rendered difficult solely because of the financial condition of the party required to perform the act.

19.07. Notices. All notices to be given by one party to the other or options to be exercised under this Lease shall be in writing, mailed or delivered to Tenant at the address shown in Section 1.12 and Landlord at the address shown in Section 1.13.

Mailed notices shall be sent by electronic mail and United States Postal Service, priority mail, postage prepaid, and shall be deemed to have been given on the date of posting in the United States Postal Service.

Either party may, by proper notice, at any time designate a different address to which notices shall be sent.

19.08. Relationship of Parties. The relationship of the parties hereto is that of Landlord and Tenant and it is expressly understood and agreed that Landlord is not in any way or for any purpose a partner of Tenant, or a joint venturer with Tenant in the conduct of Tenant’s business or otherwise.

19.09. Waiver. The waiver by Landlord of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any other term, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by Landlord shall not

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be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. No covenant, term or condition of this Lease shall be deemed to have been waived by Landlord, unless such waiver is in writing by Landlord.

19.10. Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this Lease provided.

19.11. Permits and Approvals. Tenant is responsible for obtaining all applicable and required government permits or approvals. Approval by Landlord of any action requiring approval does not constitute approval by the City of any required permits or applications, and in no way limits the discretion of the City in the permit, regulatory, and approval process. Landlord and Tenant will render to each other reasonable assistance in obtaining necessary City and other governmental permits or approvals. Any consent or approval of the City of Santa Cruz for any permit, application, or regulatory matter does not constitute consent or approval by the Landlord under the terms of this Lease.

19.12. Guaranty of Lease. If Section 1.12 specifies the name of one or more Guarantor(s), Tenant’s obligations under this Lease are guaranteed by that Guarantor(s), and Landlord reserves the right to enforce this Lease against Guarantor(s). In that event, this Lease shall not be effective until the named Guarantor(s) execute a written Guaranty in the form attached hereto as Exhibit "G". If Section 1.12 is blank or marked "Not Applicable" then Tenant shall be solely responsible for all payments and performance required by this Lease and this Lease shall be effective upon execution by Landlord and Tenant.

19.13. Recycling Activities. Tenant agrees to participate, to the greatest extent possible, in all existing or future recycling activities initiated or arranged by Landlord or by other City of Santa Cruz department or entity.

19.14. MacBride Principles and the Peace Charter. The City Council of the City of Santa Cruz approved Resolution No. NS-19,378 on the 24th day of July 1990, endorsing the MacBride Principles and Peace Charter and encourages all companies doing business in Northern Ireland to abide by the MacBride Principles and Peace Charter.

19.15. Compliance with Fire Department Rules and Regulations. Tenant agrees to comply with all rules and regulations imposed by the City's Fire Department.

19.16. Severability. In the event any of the provisions, or applications thereof, of this Lease are held to be unenforceable or invalid by any court of competent jurisdiction, the validity and enforceability of the remaining provisions, or applications thereof, shall not be affected.

19.17. Authority. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of such entity represents or warrants that he/she/they is/are duly authorized to execute and deliver this Lease on behalf of such entity and that their signatures serve to legally obligate their respective representatives, agents, successors, and assigns to be bound by all the terms and provisions hereof.

19.18. Counterparts. This Lease may be executed on one or more copies and each counterpart will be considered an original and binding to the party executing it. A scanned, electronic, facsimile or other copy of a party’s signature shall be treated the same as an original.
[SIGNATURES ON FOLLOWING PAGE]

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The parties have executed this Lease as of the date first written above.

LANDLORD: CITY OF SANTA CRUZ, a California
municipal corporation
By:

Matt Huffaker, City Manager
APPROVED AS TO FORM:

Office of the City Attorney Date
TENANT: ECO LEO, LLC, a California limited liability
corporation]
By:

NAME: Dyane Villalobos
TITLE: Owner / President
By: _______________________________________
NAME
TITLE:
(Signature Requirements for Corporation – 2 officer signatures required (one from each group, unless person signing holds officer positions in both Group 1 and 2):

Group 1: Chief Executive Officer, Chairman of the Board, President, or Vice President
Group 2: Secretary, Assistant Secretary, Chief Financial Officer, Treasurer, Assistant Treasurer)

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EXHIBIT A – DIAGRAM OF 1122 PACIFIC AVENUE AND DEL MAR THEATER PROPERTY

7.33 27

7.34 28

EXHIBIT B
LANDLORD’S AND TENANT’S WORK

NOT APPLICABLE

INTENTIONALLY LEFT BLANK

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EXHIBIT C – CURRENT COMMON AREAS
Current Common Areas are as described below. Interior Common Areas are depicted on Exhibit A as reference.
 Refuse Shed
 Exterior Walkways and sidewalks within the parcel
 Utility chases and access
 Shared building services, costs, and charges (Section 4.02)

7.36 EXHIBIT D

INSURANCE REQUIREMENTS
Upon executing this Lease Agreement, Tenant shall procure and maintain for the duration of the Lease and for so long as may be necessary to fully protect Landlord, insurance against claims for injuries to persons and/or damages to property which may arise from or in connection with the Tenant’s operations on, access to, and/or use of the Premises and Property. The cost of such insurance shall be borne by the Tenant.

CERTIFICATE REQUIREMENTS
The City will be issued a Certificate of Insurance (a Memorandum of Understanding will not be accepted) with the following minimum requirements:
 Certificate(s) will show current policy number(s) and effective dates,  Coverage and policy limits will meet, or exceed, requirements below,  The Certificate Holder will be City of Santa Cruz, Risk Management, 1200 Pacific Ave., Suite 290, Santa Cruz, CA 95060,
 Certificate will be signed by an authorized representative,  An endorsement, if required below, will be provided to show the City, its officers, officials, employees, and volunteers as additional insureds, and
 Coverages must be maintained during the term of the Lease with the City, unless a longer duration is required.

A. MINIMUM SCOPE AND LIMIT OF INSURANCE
Tenant acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. If Tenant maintains broader insurance coverage and/or higher limits than the minimums shown below, Landlord shall be entitled to the broader insurance coverage and/or higher limits maintained by Tenant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the Landlord.

Coverage shall be at least as broad as the following:

1. Commercial General Liability (CGL): Commercial Liability Insurance. During the term of this Lease, including any extensions or renewals thereof, Tenant, at its sole cost, shall keep in full force and effect a policy of standard form commercial general liability insurance, including coverage for contractual liability, personal injury, property damage, products liability, acts of independent contractors, and, if applicable, liability for the sale and distribution of liquor and alcoholic beverages, with a single combined liability limit of not less than Two Million Dollars ($2,000,000.00) per occurrence; Two Million Dollars ($2,000,000) in the aggregate, for bodily injury and property damage insuring against all liability of Tenant and its employees, agents, representatives, subtenants, assignees and concessionaires arising out of and in connection with Tenant's use or occupancy of the Premises.

The liability insurance policy required herein shall insure Tenant's performance of the indemnity provisions of this Lease, and Landlord, and its officials, officers, employees, and agents shall be named as additional insureds with cross-liability endorsements. The Landlord, and any person, firms or corporations designated by Landlord, by reason of their inclusion under said policy, shall not incur liability for payment of any premium for any policy of insurance required herein. If available, any policy of insurance required herein shall contain a provision requiring the insurer to give the Landlord thirty (30) days' prior written notice before canceling or changing any such coverage.

7.37 2. Automobile Liability: Tenant shall procure automobile insurance on an “Any Auto” Basis: ISO Form Number CA 00 01 covering any auto (Code 1), or if Contractor has no owned autos, hired, (Code 8) and non-owned autos (Code 9), with limit no less than $1,000,000 combined single limit each occurrence/per accident for bodily injury and property damage.

3. Workers’ Compensation and Employer’s Liability Insurance. Tenant shall obtain policies as required by applicable law against liability arising on account of injuries or death to workers or employees on the Premises or any improvement of Tenant. Such workers’ compensation insurance shall be in amounts at least equal to the maximum liability of Tenant, its agents, and contractors under the Workers’ Compensation Insurance and Safety Act of the State of California and the Federal Longshore and Harbor Workers’ Compensation Act, as applicable. Tenant shall also maintain Employer’s Liability insurance with limits no less than One Million Dollars ($1,000,000) per accident for bodily injury or disease, $1,000,000 disease – policy limit, $1,000,000 disease – each employee.

Such insurance shall include a waiver of subrogation in favor of Landlord.

4. Property Insurance
“All Risk” Property Insurance Coverage. Tenant shall, at Tenant's sole expense, obtain and keep in full force and effect an insurance policy covering all of Tenant's personal property, trade fixtures, equipment and merchandise located in or upon the Premises in an amount sufficient to cover not less than one hundred percent (100%) of the replacement value thereof, providing protection against any peril included within including sprinkler damage, vandalism and malicious mischief endorsements ordinarily included in extended coverage casualty insurance policies. Tenant shall be solely responsible for any uninsured loss or damage caused to Tenant's personal property, trade fixtures, equipment and merchandise located in or upon the Premises for any reason.

5. Business Interruption Insurance. Policy with adequate limits to cover the term(s) of this Lease and shall contain an inflation endorsement if the Premises or Tenant improvements are destroyed or rendered inaccessible by a risk insured against by a policy of standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements. Insurance proceeds thereunder shall be payable to Landlord for loss of rents.

B. OTHER INSURANCE PROVISIONS
Insurance Limits, Rating, and Proof of Coverages:

All insurance policies required hereunder shall be issued by an insurance company having not less than a financial rating of Class A VIII or better as rated in the most current available Best's Key Rating Guide.

Prior to the commencement of the term of this Lease, Tenant shall provide Landlord with evidence of any insurance policies required herein and shall continue to provide such evidence of insurance upon the request of Landlord during the remaining term of this Lease, including all extensions and renewals thereto. All public liability, property damage and other casualty policies shall be written as primary policies, not contributing with and not in excess of coverage which the Landlord may carry. Tenant will provide a copy of all insurance policies required under this Lease to the Risk Manager of the City of Santa Cruz.

C. SPECIAL RISKS/CIRCUMSTANCES
Landlord reserves the right to modify these requirements, including limits, based on the nature of the risk, prior experience, insurer, coverage, or other special circumstances and provide notice to Tenant.

7.38 EXHIBIT E – SIGN CRITERIA
Part 4: ADVERTISING DEVICES, SIGNS AND BILLBOARDS

24.12.300 PURPOSE.

Regulations in this ordinance governing signs (not in public right-of-way) are established in order to:

1. Accommodate the community’s need to communicate political, civic, public service, religious and other noncommercial messages with a minimum of restraint and to regulate commercial signs;

2. Protect the aesthetic amenities on which the city’s economy and quality of life depend;

3. Promote traffic safety and minimize structural hazards posed by unsafe signs;

4. Achieve consistency between General Plan goals and regulations dealing with size, location and content of exterior signs.
(Ord. 2020-22 § 18, 2020; Ord. 85-05 § 1 (part), 1985).

24.12.310 CLASSIFICATION AND REGULATION.

The zoning administrator shall designate an appropriate classification from the following categories (Sections 24.12.320 through 24.12.342 inclusive) for each sign. This section shall apply to all signs citywide unless superseded by regulations specific to an area plan, overlay district, or similar special regulations. Disputes concerning the proper sign category may be appealed to the planning commission. In calculating the area of signs, only one side of a two-sided sign shall be counted if the parallel planes are not more than twenty inches apart. Time and temperature devices are not included in the sign area, but may not exceed twenty percent of the allowed sign area. (Ord. 2020-22 § 18, 2020; Ord. 85-05 § 1 (part), 1985).

24.12.312 DEFINITIONS.
a. “A-frame sign/sandwich board” shall mean a portable freestanding sign in the shape of the letter “A” as viewed from the side, typically with two sides facing opposite directions. b. “Animated sign” shall mean a sign or any device designed to attract attention by visual means through the movement or semblance of movement of the whole or any part of the sign. c. “Canopy/awning sign” shall mean any sign that is part of a structural protective cover over a door or entrance.

7.39 d. “Freestanding sign” shall mean any sign standing on the ground or the support for which stands or rests on the ground. Such signs are usually, but not necessarily, supported from the ground by one or more poles or posts, or similar uprights, with or without braces. e. “Halo illumination” shall mean a light source that is not visible, where the light fixture is placed on the back side of the letter or sign face, resulting in a glow around the outside of the lettering or sign.
f. “Hanging sign” shall mean a projecting sign which is suspended from an overhang, canopy, marquee, or awning, or from a mounting attached directly to the building wall. g. “Icon sign” shall mean hanging or projecting signs that depict a physical object, such as a shoe, as opposed to signs that utilize lettering to convey the sign message. Icon signs may or may not include the name of the establishment.
h. “Master sign program” shall refer to a program established to integrate all signs into a site or building design to achieve a unified architectural statement. A master sign program provides a means for flexible application of sign regulations for properties with multiple signs, multi-tenant properties, and other properties with unified development, in order to encourage creativity and provide incentives to achieve, not circumvent, the intent of this division. i. “Projecting sign” shall mean any sign which uses a building structure as its main source of support and contains copy that is mounted at an angle to the building face. Projecting signs may be mounted vertically or horizontally on the support structure. j. “Public art” shall mean original works of art in any medium, whether two- or three-dimensional, created for placement in public places or integrated projects where the artwork is a part of the underlying architecture or landscape design and that is not prefabricated or a standard design.

Artwork should not use letters, words, numerals, figures, emblems, logos or any part or combinations thereof for the purpose of advertising goods, services, or merchandise. Public art should enhance rather than impair pedestrian use of the area, particularly with respect to pedestrian visibility and circulation.
k. “Roof sign” shall mean any sign erected upon or over the roof or parapet of any building. l. “Sign” shall mean any structure, device, or design and appurtenant light structures used principally to advertise or attract attention of the public. The term shall not include the United States flag, or any governmental flag, properly displayed in an approved manner, patriotic bunting, historic building plaques, and donor’s memorial plaques.
m. “Sign area” shall mean the area which is framed either physically or visually by the construction, design, or layout of the sign itself, but not including supporting structures. n. “Sign valuation” shall mean the valuation of a sign shall prima facie be the total cost or contract price of the sign. In the event such a cost or price is not available or does not fairly represent the true value of the sign, the valuation shall be based on a reasonable value estimate established by the building official.

7.40 o. “Temporary sign” shall mean sign(s) placed for a time not to exceed thirty consecutive calendar days. These signs are generally used for special events or grand openings, but may include the name of a business. Banners are a type of temporary sign which hang over a public street, walkway, or wall to advertise a special event or business.
p. “Time and temperature device” shall mean any mechanism that displays the time and/or temperature, but does not display any advertising or establishment identification. q. “Wall sign” shall mean any sign posted or painted on, suspended from, or otherwise affixed to the wall of any building or structure in an essentially flat position, or with the exposed face of the sign in a plane approximately parallel and in close proximity to the plane of such wall. r. “Wind sign” shall mean a flag, pennant, whirligig, or any device which is designed to wave, flutter, rotate, or display other movement under the influence of wind. s. “Window sign/graphics” shall mean any building sign, pictures, symbols, or combination thereof, designed to communicate information about an activity, business, commodity, event, sale, or service, that is placed inside a window or upon the window pane or glass and is visible from the exterior of the window.
(Ord. 2020-22 § 18, 2020).

24.12.315 TEMPORARY SIGNS.

1. Temporary signs not exceeding two in number and six square feet in total area for each business are allowed provided they meet the description in Section 24.12.312. Such signs shall be professionally designed and printed.

2. Temporary signs such as hastily hand-painted “Sale” signs printed on paper and plastered in windows are not permitted and shall be subject to the enforcement procedures provided under Title 4.

3. Temporary signs shall be allowed no more than three times per year for each individual business.
(Ord. 2020-22 § 18, 2020).

24.12.317 MASTER SIGN PROGRAM.

A master sign program as described in Section 24.12.312 may be created to allow for a coordinated, long-term sign plan for a multi-tenant building or property, subject to approval of a sign permit per Chapter 24.08, Part 6.
(Ord. 2020-22 § 18, 2020).

7.41 24.12.320 FREESTANDING SIGNS.

1. Freestanding Signs Five Feet or Under. Freestanding signs five feet or less in height shall be permitted in all districts subject to the limitations in this chapter. Specific regulations for the CBD district are contained in Section 24.12.352.
a. Area. The area of such signs may be one-half square foot per lineal foot of frontage with a maximum area of thirty-two square feet.
b. Location. Except for projecting signs, every such sign shall be wholly on the owner’s property.
c. Number. There may be no more than one such sign for each frontage. In the case of shopping centers and other multiple occupancies sharing a common frontage, the frontage shall be deemed to be that of the shopping center or commonly used parcel and not the frontages of the individual businesses or occupancies.

2. Freestanding Signs Over Five Feet. Freestanding signs over five feet in height shall be permitted only in accordance with the terms of a sign permit. a. Area. The maximum area of such signs shall be as indicated on Table 1, Section 24.12.390.
b. Height. No such sign shall exceed thirty feet in height. c. Location. Subject to obtaining an encroachment permit, such signs may project over public property, or public vehicular or pedestrian easements or ways, a distance determined by the clearance of the bottoms thereof above the level of the sidewalk or grade of the public property immediately below, as set forth in the following table:

Clearance Maximum Projection
Less than 8
feet
Not permitted
8 to 14 feet 1 foot plus 6 inches for each foot of
clearance in excess of 8 feet
Over 14 feet 4 feet
No sign shall project within two feet of the curbline. No sign or sign structure shall project into any public alley whatsoever, below a height of fourteen feet above grade, nor more than six inches when over fourteen feet.
d. Number. Subject to the provisions of Section 24.12.334, there may be one such sign for each street frontage. In the case of shopping centers and other multiple occupancies having a common frontage, the frontage shall be deemed to be that of the shopping center or commonly used parcel and not the frontage of the individual businesses or occupancies.

7.42 e. Distance Apart. Where two or more signs are permitted because of multiple frontages (two or more street frontages), such signs shall be at least thirty feet apart.

3. Sandwich Board and Movable Freestanding Signs. Sandwich board and movable freestanding signs shall be prohibited.
(Ord. 2020-22 § 18, 2020; Ord. 85-05 § 1 (part), 1985).

24.12.322 WALL SIGNS.

1. Except as otherwise provided in this chapter, every wall sign shall comply with the requirements of subsections (2) through (5) below, inclusive.

2. Area. The maximum wall sign area for each building face shall be as indicated on Table 2, Section 24.12.390.
a. The wall area of single-story buildings will be determined by multiplying the wall length by sixteen feet, or by using the actual wall area, whichever is greater. b. The external walls of buildings containing multiple businesses or tenants may be utilized for signs by all occupants of such buildings, regardless of whether said business or tenant is located adjacent to such wall; provided, however, that the aggregate area of such signs on any wall shall not exceed the maximum allowable area permitted for each such wall.

3. Height. No part of any such sign shall extend above the top level of the wall upon or in front of which it is situated. Any such sign which is suspended or projects over any public walkway or walk area shall have an overhead clearance of at least eight feet.

4. Depth of Projection. No such sign, including any light box or other structural part, shall project more than twelve inches from the building face.

5. Number. The number of wall signs permitted on each building face shall be no greater than the number of tenants in said building, and in no case shall the total wall sign area for each face exceed that shown on Table 2, Section 24.12.390. No building shall be deemed to have more than four building faces.
(Ord. 85-05 § 1 (part), 1985).

24.12.324 WINDOW SIGNS.

A permanent sign, or combination of permanent signs painted on, or attached to, windows shall not exceed twenty-five percent of the window area and shall be considered part of the allowable wall sign area.
(Ord. 85-05 § 1 (part), 1985).

7.43 24.12.326 PROJECTING SIGNS.

Every projecting sign shall comply with the requirements of subsections 1, and 2, below.

1. Projecting Signs in Nonresidential Zones.
a. Area. The permitted area of such signs shall be as set forth in the following table:

Building
Frontage
(Lineal Feet)
Maximum Area (Square Feet)
25 feet or
less
25 25 feet to 64
feet
25, plus 1 square foot for each
foot of frontage in excess of 25
feet
More than 64
feet
64 b. Height. No such sign shall extend above the top level of the wall upon or in front of which it is situated, or, in the case of buildings having sloping roofs, above the roof ridge.

Any such sign which projects over public property shall have a clearance of eight feet above the ground, and a fourteen-foot clearance above vehicle way. On multistory buildings, no such sign shall exceed the height of the building roof or parapet line. c. Location. Subject to obtaining an encroachment permit, such signs may project over public property, public vehicular or pedestrian easements or ways, a distance determined by the clearance of the bottoms thereof above the level of the sidewalk or grade immediately below, as set forth in the following table.

Clearance Maximum Projection
Less than 8
feet
Not permitted
8 to 14 feet 1 foot plus 6 inches for each
foot of clearance in excess of 8
feet
Over 14 feet 4 feet
d. Projection. No sign shall project within two feet of the curbline.

No sign or sign structure shall project into any public alley whatsoever, below a height of fourteen feet above grade, nor more than six inches when over fourteen feet. No sign, except a sign projecting not more than one foot, shall project a distance greater than one-fourth of its height.
e. Number. Subject to the provisions of Section 24.12.334, there may be one such sign for each street frontage.

2. Projecting Signs in Residential Zones.

7.44 a. Area. No such sign shall exceed five square feet in area. b. Height. No part of any projecting sign shall exceed a height of twelve feet, nor shall any part of such sign extend above the top level of the wall upon, or in front of, which it is situated. Any such sign over any public or private sidewalk or walkway shall have a minimum clearance above the same of eight feet.
c. Number. Subject to the provisions of Section 24.12.334 below, there may be no more than one projecting sign for each place of business for each building face. (Ord. 85-05 § 1 (part), 1985).

24.12.328 ROOF SIGNS.

Roof signs are prohibited.
(Ord. 85-05 § 1 (part), 1985).

24.12.330 FLAGS, BANNERS, WIND SIGNS.

1. Wind Signs. Wind signs are prohibited.

2. House Flags or Banners. Each separate business may display, only in conjunction with the display of the United States Flag, or in conjunction with the display of the United States Flag and governmental flags, one house flag or banner containing only the name, symbol, or logotype of the business; provided, however, that the United States Flag and any other governmental flag shall be displayed in an appropriate manner, and that the house flag or banner is displayed in a similar manner, and is not larger in size than the United States Flag. (Ord. 85-05 § 1 (part), 1985).

24.12.332 CANOPY SIGNS.

Signs painted on or affixed to canopies which are a part of a building shall be considered part of the total allowable area of wall signs for the wall from which the canopy projects. Signs painted on or affixed to canopies which are freestanding shall be considered part of the total allowable area of freestanding signs for that use. Signs suspended under canopies (marquees) which project over public rights-of-way shall be limited to three square feet. No sign placed on the fascia or roof of the canopy shall be more than one foot in height, or project more than two feet above the canopy. (Ord. 85-05 § 1 (part), 1985).

24.12.334 COMBINATION OF SIGN TYPES.

7.45 There may be permitted for each place of business or occupancy, a combination of not more than two types of signs; freestanding, wall, or projecting.
(Ord. 85-05 § 1 (part), 1985).

24.12.336 CHURCH AND QUASI-PUBLIC ORGANIZATION SIGNS IN RESIDENTIAL ZONES.

In all residential districts, churches and quasi-public organizations may erect signs on the premises identifying the premises or announcing activities thereon. (Ord. 85-05 § 1 (part), 1985).

24.12.338 SIGNS ON BENCHES.

Signs on benches maintained pursuant to a valid encroachment permit issued in accordance with Chapter 15.34 shall not be governed by the provisions hereof. Signs or advertising matter now existing on benches which do not require a permit issued in accordance with Chapter 15.34 because the benches are not on public property, but which benches are placed to serve persons awaiting transportation and are located in close proximity to public property, shall be removed from said benches prior to October 13, 1971.
(Ord. 85-05 § 1 (part), 1985).

24.12.340 SIGNS ON FREEWAYS.

Notwithstanding anything elsewhere contained in this part, no commercial sign shall be erected on any property so as to be visible from a freeway if such sign is designed to have or has advertising thereon maintained primarily to be viewed from the freeway.

1. Signs on Freeways – Exceptions. The provisions of Section 24.12.336 shall not apply to a single sign on an entire premises; provided, that said sign is used exclusively for noncommercial messages or to designate the name of the owner or occupant of the premises upon which the sign is situated, or to identify such premises. The total area of such sign shall be determined by using the standards set forth in this part, but shall not exceed fifty square feet.
(Ord. 85-05 § 1 (part), 1985).

24.12.342 OFF-SITE COMMERCIAL ADVERTISING AND BILLBOARDS.

1. Signs for Business Purposes Generally. Except as provided elsewhere in this part, commercial signs shall be erected or used for business purposes of any kind only on the site of the business or enterprise, and used solely for naming, designating or identifying said business or enterprise, product or services available on or within the premises.

7.46 2. Off-Site Signs in the Central Business District (CBD) Zone. Painted wall signs may be considered for a limited number of Pacific Avenue corner buildings to provide direction to side street businesses located on east-west streets. A sign permit is required to include a master sign program developed by the property owner and shall include the following items: demonstration that the building wall can accommodate the number of potential business names, specific location, design of the lettering style, size and color of the business names; and a mechanism and timing for change of business names and sign removal.
(Ord. 2016-04 § 8, 2016; Ord. 90-23 § 1, 1990: Ord. 85-05 § 1 (part), 1985).

24.12.344 PROHIBITED LOCATIONS.

1. Prohibited Locations Generally. All signs shall comply with the following location requirements:
a. Residential Districts. No sign shall be erected in any residential district except as provided in Section 24.12.326(2), Section 24.12.336 and Section 24.12.350(1), (4), and (5) through (7) or in conjunction with an approved use permit for commercial uses in residential districts. b. Public Places. Except as authorized by an encroachment permit or as authorized elsewhere in this code, no sign shall be erected upon or over any public street, sidewalk, parking lot or other public way or place.
c. Fire Escapes, Etc. No sign shall be erected in such a manner that any portion of the sign or its support is attached to or will interfere with the free use of any fire escape, exit or standpipe, or obstruct any required stairway, door, ventilator or window. d. Traffic. No sign shall be erected in such a manner that it will or may reasonably be expected to interfere with, obstruct, confuse or mislead traffic. e. Intersections. No freestanding or projecting sign shall be erected at the intersection of any street improved for vehicular traffic, within the clear corner triangle or clear vision areas as defined in Sections 24.22.202 and 24.22.206 of this title; unless the same, in compliance with the provisions of this part, is less than two feet or more than eight feet above curb grade, and no part of its means of support has a single or combined horizontal cross-section exceeding eight inches.
f. Setback Area. No sign erected in a residential zone shall be located in any front or exterior side yard, except special purpose signs placed in accordance with Section 24.12.350, subsections (1) through (7), inclusive.
g. Fence. No sign shall be placed, in any manner, or maintained on any fence. h. R-T Districts. All signs over sixty square feet in area shall be prohibited in any R-T District.

Freestanding signs shall be prohibited in the portions of Subdistricts B and C which are adjacent to and/or within two hundred feet of Subdistrict A. (Ord. 85-05 § 1 (part), 1985).

7.47 24.12.350 SPECIAL PURPOSE SIGN REGULATIONS.

1. Construction Project Signs.
a. Signs may be erected in conjunction with construction projects on site and used for the purpose of publicizing the future occupants of the building, or the architects, engineers and construction organizations participating in the project. b. In all districts, no such sign shall exceed twelve square feet in area, and no freestanding sign shall exceed five feet in height.
c. All such signs shall be removed before a final release on the construction is given by the building official.

2. On-Site Directional Signs.
a. Directional signs may be erected for the purpose of facilitating or controlling the efficient or safe movement of pedestrians or vehicles on or onto private property and shall be located on the property to which they pertain.
b. Such signs shall not be used for advertising purposes. c. Such signs shall not exceed an area of six square feet nor a height of five feet, and shall be located at least twenty feet from the nearest property line. A directional sign within twenty feet of a property line may be approved through express written permission by the director of planning or public works.

3. Off-Site Directional Signs. Off-site directional signs designating community service facilities (e.g., hospital, fire stations, municipal wharf, etc.) shall be permitted subject to the issuance of an administrative use permit for each such sign or series of signs.

4. Open House Signs. Open house signs, advertising real estate open for inspection for prospective sale, may be placed off the site of the open house only on private property in all districts, with the consent of the owner, lessee or occupant of the property on which the sign is to be placed. Such signs shall contain only the words “Open House” and a directional arrow, and may also contain the address of the open house. Such signs shall not exceed four square feet in area, nor three in number for any one sale.

5. Noncommercial Signs. Noncommercial signs containing political, civic, public service, religious or other noncommercial messages may be erected in conformity with this part in all districts. Such signs may be located on or off site.

6. Nameplate. One nameplate or marker shall be allowed for each dwelling unit, to indicate the occupant’s name; and shall not exceed one square foot in area, nor shall it contain an occupation designation.

7. Subdivision Signs.

7.48 a. Signs offering real estate or homes for sale in an approved subdivision may be erected under the following conditions:
(1) Not more than two such signs shall be allowed per subdivision. (2) Such signs shall be located on the subdivision being advertised. (3) No such sign shall be erected on or situated within one hundred feet of any occupied residential property.
(4) No such sign shall exceed forty square feet in area. (5) No such sign shall be illuminated.
(6) Such signs shall be removed when all lots and houses in the subdivision have been sold.
b. The application for a permit for any such sign shall be accompanied, in addition to the permit fee, by a deposit of fifty dollars for each sign to guarantee proper maintenance and ultimate removal thereof.
(1) The permit for any such sign shall be issued for a period not to exceed twelve months. At the end of such period, additional extensions of six months each may be granted by the building official for good cause.
(2) Upon expiration of the permit or any extension thereof, the sign shall be removed by the applicant. Following the removal of the sign, and upon request, the deposit shall be refunded to the applicant.
(3) If for any reason the applicant fails to remove the sign, the city may cause it to be removed and shall apply the cost of such removal against the deposit, and return the remainder to the applicant.
(Ord. 2020-22 § 18, 2020; Ord. 85-05 § 1 (part), 1985).

24.12.351 PUBLIC ART EXCEPTION.

The zoning administrator shall determine whether a proposal contains the characteristics of a sign, i.e., whether its principal function is to serve as an advertisement or notice of a business entity location. If the zoning administrator determines that the proposal is a sign, it shall be subject to the requirements of this part and may be subject to building and construction codes or other requirements of the municipal code.
(Ord. 2020-22 § 18, 2020).

24.12.352 SIGN REGULATIONS FOR CENTRAL BUSINESS DISTRICT (CBD) ZONE.

7.49 1. Purpose. The sign regulations have been created in order to: ensure the visibility of Central Business District (CBD) zoned businesses; to maintain safe and accessible public pedestrian areas; to ensure that signs are integrated with and harmonious to the buildings and sites which they occupy; to eliminate excessive and confusing sign displays; to preserve and improve the appearance of the CBD zone as a place in which to live and to work as an attraction to nonresidents; and to restrict signs which increase the probability of accidents by distracting attention or obstructing vision.

2. Permitting Requirements. Signs within the CBD zone are subject to the sign permit requirements of Chapter 24.08, Part 6, except as modified by this chapter. a. Projecting signs and hanging signs that conform to all provisions provided under subsection (5)(b) shall be permitted and do not require a sign permit. b. Exceptions and variations to the requirements may be considered by the zoning administrator without a public hearing, subject to the exception procedure set forth in Section 24.08.580; sign permit findings set forth in Section 24.08.530; and the following criteria:

The alternate sign design is necessary to achieve visibility due to: 1) the location of existing, permitted sign, awnings/canopies, or other architectural features on surrounding structures, 2) the location of existing vegetation, required landscaping, or other natural elements worthy of preservation, or 3) the physical location of the building.

3. Prohibited Signs. Signs prohibited within the CBD zone are subject to the regulations in Part 4 of Chapter 24.12. Additional types of signs prohibited include:
a. Sandwich board/A-frame signs.
b. Temporary signs that are displayed for longer than thirty days and/or that are prohibited under subsection (5)(f).

4. Definitions. The definitions listed in Section 24.12.312 apply to the CBD District sign regulations.

5. General Guidelines. The following statements are general rules for signs which apply to all parcels within the Central Business District zone.

General • Wall signs with large areas of dark colors, and which read as billboards because of size and corporate message, are out of place in the Central Business District zone.

Location • Shall not cover windows, roof shapes, or dominate trim.

Number • A maximum of 2 different types of the following signs per business:
• wall sign
• projecting sign
• hanging sign
• awning sign

7.50 • Internally illuminated signs shall be limited to illuminated lettering with an opaque background, neon signs, or halo illumination.

Lighting
• Exterior Lighting for Signs. All signs should have the capacity of being lit for evening visibility.

Materials and
Methods of
Construction
• Any materials or methods of construction are acceptable; however, signs shall be legible and shall be constructed of durable, high quality materials.

Exceptions • A Master Sign Program may be created to allow for a coordinated long-term sign plan for a multi-tenant building.

Maintenance • All signs, together with all supports, braces, guys and anchors, shall be free from excessive deterioration, rot, rust and loosening, and shall be maintained in safe condition as determined by the building official or community development director.

The display surface of all signs shall be kept neat and clean at all times.

6. Development and Design Standards.
a. Wall Signs.
• The total area of all signs on a building shall be limited to a size equal to 1 square foot of sign per linear foot of frontage of building face, with a minimum allowance of
25 square feet regardless of front footage.
• Multiple Tenants. If the ground floor is occupied by more than 1 tenant, each tenant is entitled to a pro-rata share footage based on frontage used by that tenant. Each
tenant is entitled to minimum allowance of 25 square
feet regardless of frontage.

Area
• If a continuous, solid band sign is used, only the area encompassed by the lettering shall be counted toward
the total sign area.
• Either on or above a tenant space fronting a public
street, alley or public parking lot.

Location
• Shall not cover windows, roof shapes, or other
distinguishing architectural features.

Height • No part of any sign shall extend above the top level of the wall upon or in front of which it is situated.

Projection • Not to exceed 12 inches from building face. • One, with the exception of corner buildings, which may have one sign per building face fronting a street.

Number
• Window signs are not included in the maximum number
b. Projecting Signs and Hanging Signs.

Area • A maximum of 6 square feet in area for projecting signs

7.51 on Pacific Avenue and 8 square feet in area on all other streets, as measured on one side of a two-sided sign.
• A maximum of 6 square feet in area for hanging signs as measured on one side of a two-sided sign.

Location • Determined by visibility.
• Shall be located directly above or to the side of an
entrance of a tenant space.

Number • A maximum of one projecting sign or one hanging sign per frontage face.

Height • A minimum clearance of 8 feet.
• For signs with an 8-14 foot clearance, signs may project 2 feet and may project 6 additional inches for each foot of clearance in excess of 8 feet.

Projection
• Not to exceed 4 feet.

Lettering • Usage of establishment’s name on the sign is preferred • An icon which has only the symbol or image of the store should suggest as nearly as possible those services
which are offered, or products which are sold, inside the establishment.

Projecting Sign
Hanging Sign
c. Window Graphics.

Area • Not to exceed more than 25% of the area of any
one window.

Location • Shall not obscure pedestrian’s visibility into shop. • Shall be integrated into store window displays.

Colors • Complementary and suitably contrasting accent
colors shall be used.
• Hand painted directly onto glass.
• Vinyl letters applied to glass.

Methods of
Application
• Clear acrylic panel hung or posted behind glass.
d. Street Address Numbers. Where consistent with the requirements of the city of Santa Cruz fire department, bold number graphics can be used to highlight a store’s address and location. This is especially effective when there is more than one shop per building. e. Canopy/Awning Signs. Signs painted on or affixed to canopies or awnings which are a part of a building shall be counted toward the total allowable area of wall signs. Signs suspended under canopies shall meet the requirements for a hanging sign provided under subsection (6)(b).

7.52 f. Temporary Signs.
(1) Temporary signs, such as hastily, hand-painted “Sale” signs printed on paper and plastered in windows, are not permitted and shall be subject to the enforcement procedures provided under Title 4 of the City of Santa Cruz Municipal Code. (2) Temporary signs not exceeding two in number and six square feet in total area for each business are allowed.
g. Public Art Exception. The zoning administrator shall determine whether a proposal contains the characteristics of a sign, i.e., whether its principal function is to serve as an advertisement. If the zoning administrator determines that the proposal is a sign, it shall be subject to the requirements of this part and may be subject to building and construction codes or other requirements of the municipal code.
(Ord. 2020-22 § 18, 2020; Ord. 2016-11 § 41, 2016; Ord. 2016-04 § 9, 2016).

24.12.360 PERFORMANCE REGULATIONS – LIGHTING, MOVEMENT, SOUND.

1. Lighting.
a. Lighting of Signs. Where a sign is externally illuminated the light source must be shielded such that it is not visible from the front of the sign or lighting fixture, or from beyond the property line. Illuminated signs are prohibited in residential zone districts. Intermittent or flashing lighting shall be prohibited. Illuminated surfaces with an integral light source, such as electroluminescent paneling, may be used if their illumination intensity does not interfere with surrounding land uses. Lighted signs in the Beach Recreational Area and time and temperature devices in any district are not subject to these restrictions. b. Searchlights. Portable shielded arc-type searchlights shall be permitted as temporary signs, in commercial and industrial districts only, provided that the beam of the searchlight shall not be projected at less than a forty-five degree angle measured from a horizontal plane, and shall not project upon or reflect upon property or buildings other than the property or buildings of permittee.

2. Movement and Sound.
a. Animated Signs. Movement or semblance of movement of signs shall be limited to three cycles per minute, except that in the Beach Recreational Area, there shall be no limit. b. Sound. No sign shall be designated for the purpose of emitting sound. See also Section 24.12.328 above (roof signs) and Section 24.12.330 above (flags, etc., regulations). (Ord. 85-05 § 1 (part), 1985).

24.12.370 CONSTRUCTION AND MAINTENANCE.

7.53 The appropriate sections of the Building Code shall apply to the construction of signs. (Ord. 85-05 § 1 (part), 1985).

24.12.380 NONCONFORMING SIGNS.

1. Nonconforming Signs, Amortization. There are hereby declared to be the following time periods beginning with October 13, 1966 within which all signs within the city shall be altered, removed, or otherwise made to comply with the provisions of this part. a. Temporary, sandwich board, movable freestanding, tire stacks, and wind signs: sixty days.
b. Signs painted on buildings, walls, or fences: two years. c. Signs of less than $100.00 in valuation: two years.
d. All off-site advertising signs together with all other signs: seven years.

2. Exceptions. Except that the following time periods shall apply to signs legally erected pursuant to a valid sign permit issued within two years immediately preceding the effective date of this part. a. Signs painted on buildings, walls, or fences: three years from permit date. b. Signs of less than $100.00 in valuation: three years from permit date. c. All other signs: ten years from permit date.

3. Signs Hereafter Rendered Nonconforming.
a. Any sign which becomes nonconforming subsequent to the effective date of this part either by reason of the annexation to the city of the territory upon which the sign is located, or the amendment of this part to render such sign noncomplying or otherwise, shall also be subject to the provisions hereof.
b. The period within which such sign must be abated as provided above, shall commence to run upon the effective date of such annexation or of such amendment, or the date upon which the sign otherwise becomes nonconforming.

4. Abatement. Nonconforming signs shall either be made to conform with the provisions of this part, or abated within the applicable period of time as provided in this part. In the event they are not, the building official shall order the same abated by the owner of the property and any other person known to be responsible for the maintenance of the sign. It shall thereafter be unlawful for any such person to maintain or suffer to be maintained any such sign on any property owned or controlled by him.

7.54 5. Manner of Abatement. Unless some other mode of abatement is approved by the building official, in writing, abatement of nonconforming signs shall be accomplished in the following manner. a. Signs painted on buildings, walls or fences: by removal of the paint constituting the sign or by permanently painting over it in a way that the sign shall not thereafter be or become visible. b. Other signs: by removal of the sign, including its dependent structures and supports; or pursuant to a sign permit duly issued by modification, alteration, or replacement thereof, in conformity with the provisions of this part.

6. Modification of Nonconforming Signs. No nonconforming sign shall be in any manner altered, reconstructed or moved without being made to comply in all respects with the provisions of this chapter; provided, however, that nothing herein shall prohibit the normal maintenance or repair of any nonconforming sign nor the painting or repainting of the face thereof. (Ord. 85-05 § 1 (part), 1985).

24.12.390 SIGN AREA TABLES.*
* Editor’s Note: The previous edition of this code did not contain Section 24.12.390, although the section was referred to in other sections of the code. This section was added into the code by the publisher at the time of the 1995 republication.

A. Table 1 – FREESTANDING SIGNS OVER FIVE FEET HIGH

7.55 Where total area of parcel of property involved exceeds 100,000 square feet, but has a frontage over 100 and less than 200 feet, sign area may be the same as where frontage is 200 feet.

B. Table 2 – WALL SIGNS (other than residential districts)

7.56 Where wall area exceeds 5,000 square feet, sign area may be increased by 10 square feet for each additional 50 square feet of wall area; but no sign shall exceed 300 square feet.

7.57 EXHIBIT F

GUARANTY OF LEASE

1. In consideration of the execution of the attached Lease dated ______________, 20__, by and between City of Santa Cruz, a municipal corporation (“Landlord”) and ___________, a “______________ company”, (“Tenant”) for the premises known as ________________ in Santa Cruz, California, the undersigned Guarantor(s) hereby unconditionally and irrevocably guarantee(s) to Landlord, its successors and assigns, the prompt payment by Tenant of the rent and all other sums required under the Lease, and the faithful performance by Tenant of all the terms, covenants, and conditions contained in the Lease. The lease is incorporated herein by reference.

2. This Guaranty shall not be affected by any deviation from or alteration of the terms, covenants, or conditions of the Lease or by any permitted assignment or subletting of all or any part of the interest of Tenant in the Lease. This Guaranty shall not be released, extinguished, modified, or in any way affected by failure on the part of Landlord to enforce any or all of its rights or remedies whether pursuant to the terms of the Lease or at law or in equity.

3. This Guaranty is a continuing one and shall terminate only on payment by Tenant of all the rent and other sums required under the Lease and on performance by Tenant of all duties and obligations contained in the Lease.

4. The undersigned waives notice: (a) of any default by Tenant (i) in payment by Tenant of any of the rent or other sums hereby guaranteed and (ii) in performance by Tenant of the terms, covenants, and conditions of the Lease, and (b) of acceptance by Landlord of this Guaranty. Landlord agrees to give written notice to the undersigned prior to commencing legal action against the Tenant or against the undersigned.

5. The undersigned consents that Landlord may from time to time extend the time for performance or otherwise modify, alter, or change the Lease and any or all of its provisions and may extend the time for payment of the rent and all other sums hereby guaranteed and may receive and accept notes, checks, and other instruments for the payment of money made by Tenant and extensions and renewals thereon without in any way releasing or discharging the undersigned from its obligations under this Guaranty. Notice of presentment of any such note or notes and/or notice of default in the payment thereof at maturity and/or protest or notice of protest thereof is expressly waived.

6. The undersigned further consents and agrees that Landlord shall not be required, in order to enforce this Guaranty, to first institute suit or exhaust its legal remedies against Tenant. This Guaranty of Lease shall not be extinguished as a result of any bankruptcy

7.58 proceeding.

7. This Guaranty may be immediately enforced against the undersigned (jointly and/or severally if more than one guarantor) on any default by Tenant, and the insolvency of Tenant shall be deemed a default.

8. In the event any action should be commenced by Landlord against the undersigned to enforce any of the terms or conditions of this Guaranty, Landlord shall be entitled to recover from the undersigned hereunder in any action in which it shall prevail, reasonable attorneys’ fees and expenses.

9. This Guaranty shall inure to the benefit of Landlord, its successors and assigns, and shall bind the successors and assigns of the undersigned.

10. The unenforceability, invalidity, or illegality of any provision(s) of this Guaranty shall not render the other provisions unenforceable, invalid, or illegal.

11. The undersigned Guarantor(s) acknowledge(s) that he/she has/have reviewed this Guaranty and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Guaranty.

12. The undersigned Guarantor(s) acknowledge(s) giving mature and careful thought to this Guaranty and has the legal capacity and standing to enter into this Guaranty.

The undersigned Guarantor(s) acknowledges understanding the meaning and legal consequences of this Guaranty.

13. This Guaranty may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned has executed this Guaranty this ______ day of _____________, 20__.

Guarantor:
______________________
_____________________, individually and
as ______________ of _______________________

7.59 Guarantor:
_______________________
_____________________, individually and
as ______________ of _______________________

7.60 CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC
State of California)
County of Santa Cruz)
On ______________________ before me, ,
Notary Public, personally appeared
__________________________________________________, who 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.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.
(This area for official notary seal)
Signature ______________________________
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

7.61 City Council

AGENDA REPORT
DATE: 02/08/2024
AGENDA OF: 02/27/2024
DEPARTMENT: Economic Development and Housing
SUBJECT: State Affordable Housing Sustainable Communities Program Funding Application for the 136 River St 100% Affordable Housing Project (ED) RECOMMENDATION: Resolution authorizing the City Manager to jointly apply for, accept, and appropriate any grant funds from the California Strategic Growth Council (SGC), if awarded, through the State Affordable Housing and Sustainable Communities Grant Program (AHSC); and, to authorize the City Manager or his designee to negotiate, execute, enter into, and deliver any necessary contracts, agreements, documents, amendments, in a form to be approved by the City Attorney; and take any other actions necessary to implement the grant-funded project, in an amount(s) not to exceed the grant award.

BACKGROUND: Redevelopment of 136 River Street (Project) is planned to be 100% affordable housing with a mix of 51 one-bedroom, two-bedroom and three-bedroom rental apartments (50 rental apartments plus one onsite manager’s unit). The City, the Santa Cruz Metropolitan Transit District (METRO) and For the Future Housing (FTF) intend to jointly apply for State Housing & Community Development (HCD) Affordable Housing Sustainable Communities (AHSC) program funding to revitalize Upper River Street near the River St. gateway to the City by increasing affordable housing supply and implementing pedestrian, bike and bus transit improvements in this area of the City.

For the AHSC program funding application, FTF or its Designee (Developer) will apply for a maximum award not to exceed $50,000,000 in AHSC Program funds with the City of Santa Cruz (City) and the Santa Cruz Metropolitan Transit District (METRO) as joint applicants, of which up to $35,000,000 will be requested as a loan to the Developer for the Project and up to $15,000,000 will be requested as a grant to the City for AHSC eligible Sustainable Transportation Infrastructure, Transit-Related Amenities or other AHSC eligible Programs.

DISCUSSION: On January 24, 2024, the City Zoning Administrator approved the Lot Line Adjustment, Design Permit and Density Bonus Request for this 100% affordable housing Project. The Project will be constructed on real property located at 136 River Street and identified by the APN’s 008-311-07, and 06. As currently proposed, the Project consists of ~50 units of affordable rental apartments plus one manager’s unit in a six-story mixed-use building including residential common and program space and ~1,970 SF of commercial space. To develop the Project, several different funding sources are needed, including AHSC as further described below.

8.1 Affordable Housing and Sustainable Communities (AHSC) Grant The California Strategic Growth Council (SGC) and the Department of Housing and Community Development (HCD) issued a Notice of Funding Availability (NOFA) dated January 19, 2024, for the availability of approximately $675 million in funding for the Affordable Housing and Sustainable Communities (AHSC) Program.

The AHSC Program funds loans or grants, or a combination thereof, to projects that achieve significant GHG emission reductions, particularly through increasing accessibility to affordable housing and key destinations via low-carbon transportation, such as transit, walkable neighborhoods, and bikeways or trails. AHSC funding is highly competitive each round requiring projects to score full points and meet tiebreaker requirements to qualify for funding.

Staff has been working with FTF, METRO, and Community Development Resource Group (CDRG) to prepare an AHSC Application for the Project ahead of the March 19, 2024 funding application deadline. The proposed application will request up to $50,000,000 in AHSC funds to support the development of affordable housing, METRO transit infrastructure, and related sustainable active transportation infrastructure.

City Council approval of the recommendation would allow staff to apply for, accept, and appropriate any awarded grants funds, and to enter into any necessary agreements for the AHSC Grant.

Health in All Policies:

With the Project located on the edge of downtown, it will help bridge the connection from the River St City Gateway to downtown and encourage a sustainable and healthy lifestyle by allowing residents to walk and ride to the job center and commercial uses in the downtown vicinity. The bike, pedestrian and bus transit improvements that will be implemented along the River St corridor will also encourage residents and downtown visitors to use public transit and/or multi-modal options to gain access to other areas of the city, thereby further promoting sustainable transportation use. By providing 100% affordable rental apartments, this will not only help the City with a more sustainable supply of rental housing, but will also help create a more inclusive equitable community.

FISCAL IMPACT: None for the General Fund. However, if the grant funds are awarded and once the development is complete, significant transit infrastructure improvements and revitalization efforts will be completed along upper River St. in addition to the much-needed affordable housing that will increase the vitality and help sustain the downtown economy.

Should the City be awarded, the recommended actions could provide a significant amount of State HCD funding to help develop the Project through funding reimbursements.

Prepared By:

Jessica de Wit
Housing and Community
Development Manager
Submitted By:

Bonnie Lipscomb
Director of Economic
Development and Housing
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. RESOLUTION.DOCX

8.2 RESOLUTION NO. NSRESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ AUTHORIZING THE CITY OF SANTA CRUZ TO SUBMIT A JOINT APPLICATION OF THE 100% AFFORDABLE HOUSING 136 RIVER STREET PROJECT FOR LOAN AND GRANT

FUNDS FROM THE STATE AFFORDABLE HOUSING AND SUSTAINABLE

COMMUNITIES (AHSC) PROGRAM IN AN AGGREGATE AMOUNT NOT TO EXCEED $50,000,000
All or a necessary quorum and majority of the City Council of the City of Santa Cruz, a California Municipal Corporation, (“Applicant”) hereby consents to, adopts and ratifies the following resolution:

WHEREAS, the Affordable Housing and Sustainable Communities (AHSC) Program, established under Division 44, Part 1 of the Public Resources Code section 75200 et seq., provides grants and/or loans that will achieve greenhouse gas emissions reductions and benefit disadvantaged communities by increasing accessibility of affordable housing and sustainable transportation; and
WHEREAS, the AHSC Program is administered by the Strategic Growth Council (SGC) and implemented by the California Department of Housing and Community Development (Department); and
WHEREAS, the State of California, SGC, and the Department issued a Notice of Funding Availability under the AHSC Program dated January 19, 2024, with an application deadline of March 19, 2024; and
WHEREAS, For the Future Housing (Developer), or its Designee, will be the managing general partner of Developer’s to-be-formed development entity and will apply for a maximum award not to exceed $50,000,000 in AHSC Program funds with the City of Santa Cruz (City) and the Santa Cruz Metropolitan Transit District (METRO) as joint applicants, of which up to $35,000,000 will be requested as a loan to Developer (or its Project development designee) for the Project (AHSC Loan) and up to $15,000,000 will be requested as a grant to the City for Sustainable Transportation Infrastructure (STI), Transit-Related Amenities (TRA) or Program (PGM) activities (collectively, “AHSC Grant”), as defined in the AHSC Program Guidelines and NOFA; and

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA CRUZ DOES HEREBY FIND, DETERMINE, RESOLVE AND DIRECT AS FOLLOWS:

Section 1. Applicant is hereby authorized and directed to apply, jointly with METRO and Developer or its Designee or Assignee, for and submit to the Department the AHSC Program Application as detailed in the NOFA dated January 19, 2024, for Round 8 in a total amount not to exceed $50,000,000 of which up to $35,000,000 will be requested as an AHSC Loan to Developer (or its Project development designee) for the Project up to $15,000,000 will be requested as an AHSC Grant to the City for grant-eligible purposes. If the application is approved, the Applicant

8.3 is hereby authorized and directed to enter into, execute, and deliver a State of California Standard Agreement (Standard Agreement), and any and all other documents required or deemed necessary or appropriate to secure the AHSC Program funds from the Department, and all amendments thereto (collectively, the “AHSC Documents”).

Section 2. Applicant shall be subject to the terms and conditions as specified in the Standard Agreement. Funds are to be used for allowable capital asset project expenditures to be identified in the Standard Agreement. The application in full is incorporated as part of the Standard Agreement. Any and all activities funded, information provided, and timelines represented in the application are enforceable through the Standard Agreement.

Section 3. The City Manager, currently Matt Huffaker, is authorized to execute in the name of Applicant the AHSC Program Application Package and the AHSC Documents, including any agreements, amendments, contracts, or other such documents as required by the Department for participation in the AHSC Program or for implementation of the Grant Project.

PASSED AND ADOPTED this 27th day of February, 2024 by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: ________________________________
Fred Keeley, Mayor
ATTEST: ________________________________
Bonnie Bush, City Clerk Administrator

8.4 City Council

AGENDA REPORT
DATE: 02/08/2024
AGENDA OF: 02/27/2024
DEPARTMENT: Economic Development and Housing
SUBJECT: Coastal Conservancy Resilience Grant Program for the Santa Cruz Wharf Resilience Upgrades and Improvements Project and Related Actions (ED) RECOMMENDATION: Resolution authorizing and directing staff to apply for and accept $6,893,700 in grant funds from the California Coastal Conservancy for the Santa Cruz Wharf Resilience Upgrades and Improvements Project; and, if awarded, authorizing the City Manager or his designee to appropriate funds not to exceed total project cost of $8,527,600, and to execute any agreements, documents, or project modifications necessary for acceptance and implementation of the grant.

BACKGROUND: The Coastal Conservancy funds a wide variety of projects along the California coast, San Francisco Bay, and in coastal watersheds to increase availability of beaches, parks and trails for the public, protect and restore natural lands and wildlife habitat, preserve working lands, and increase community resilience to the impacts of climate change.

In September 2022, Coastal Conservancy staff toured the Santa Cruz Wharf and two other City sponsored projects, including the San Lorenzo River Lagoon Culvert and the Santa Cruz Hostel at Carmelita Cottages; the Hostel having recently received Conservancy funding for rehab of affordable overnight coastal accommodations. During the tour, Conservancy staff learned about each of the projects and took an in-depth look at the Wharf to learn about its challenges and the ongoing Wharf Master Plan (WMP) effort.

As the Revised Wharf Master Plan and EIR were recirculated for public comment in Spring, 2023, staff revived discussions with the Conservancy about potential future funding for Wharf Master Plan projects and other Wharf needs. Numerous potential projects were evaluated for their fit with Climate Ready Program funding available from the Conservancy, including both near term rehabilitation and Wharf Master Plan projects. Through these efforts City and Conservancy staff arrived at the resilience projects included in the proposed award. Toward the end of the Conservancy’s fiscal year, it was determined that sufficient funds were available to support these projects, but an application needed to be submitted by June 30th to comply with their legislative mandate for the funds. The team was also awaiting Council reconsideration of the Wharf Master Plan, which outlined the proposed planning projects. In June 2023, staff submitted a formal application for grant funding to reserve eligibility for potential funding once the WMP and corresponding Environmental Impact Report (EIR) were approved.

9.1 On January 9, 2024, the City Council reapproved the WMP and recertified EIR. These approvals satisfied legal requirements for award of state grant funds and demonstrated public support for the project. Coastal Conservancy staff is now ready to recommend an award of $6,893,700 for the following project elements at their February 15, 2024 board meeting:

GRANT FUNDED ITEMS BUDGET
Rehab of Outer East Parking Lot $3,190,000
Entrance Gates/Widening (Design, Permits, + Construction) $1,020,700 East Promenade (Design + Permitting) $1,180,000
South Landing (Design + Permitting) $450,000
Small Boat Landing (Design + Permitting) $800,000
Wharf Interpretive Plan $100,000
Project + Grant Mgmt. $153,000
TOTAL $6,893,700
The City is required to provide a local match of $1,633,900 toward the grant funded projects (~20%). The match is planned to be split evenly between Wharf Rehabilitation Projects funding in the FY 2024 Adopted Budget including former Redevelopment bond funding from Economic Development and Public Works funds. Public Works is finalizing the funding source(s) for a portion of the grant match, which may include projected revenues from updates and optimization of parking facilities and fees on the Wharf. Pending this work and approval by the Coastal Commission, the Public Works match may be advanced from the Public Trust Fund, if needed, until future repayment is finalized.

DISCUSSION: The Santa Cruz Wharf is one of only a handful of public piers and wharves statewide that are maintained by a full-time dedicated crew. Despite this, existing operations funding and maintenance cannot keep up with the pace of wear and major capital updates are now needed. This need is expected to grow as climate change intensifies storms and damage to aging wharf infrastructure increases. The proposed grant award represents the largest single capital contribution to the Wharf in at least the last 30 years. The Conservancy’s award will deliver both immediate improvements to strengthen the resilience of the Wharf and will progress several public access features in the Wharf Master Plan to a grant and shovel ready state.

Together these improvements will help prepare the Wharf for climate change, expand public access, and increase recreational opportunities at the Wharf.

Near term improvements include rehabilitation of the outer East Parking Lot and widening in the wave crash zone near shore. East Parking Lot improvements will increase the load capacity from the eastern edge of the lot to the drive isle by replacing and adding stringers/joists, as well as replacing decking, paving, and site finishes. This is expected to reduce sheer, prepare the site for future construction of the East Promenade, and will enable the lot to better support modern vehicles that are often heavier today than when the lot was built in the 1960’s. Wharf widening near shore will enable relocation of the Wharf entrance, including new welcome signage and parking booths planned in the Wharf Master Plan and will be provided with the City’s match.

The grant also funds final planning, design, and permitting of future improvements envisioned in the Wharf Master Plan. Conservancy funding will advance the East Promenade, end of wharf improvements, and the Small Boat and South Landings to a grant and shovel ready stage. This will include new public engagement opportunities to finalize designs and will dramatically increase the viability of these projects to secure future grant funding. Along with construction

9.2 plans, the grant will fund the Wharf Interpretive Plan, a multi-stakeholder plan that is envisioned to balance the many important stories, cultural, and educational opportunities at the Wharf. The Plan will guide future interpretive materials, displays, exhibits, art, and interactive visitor experiences, and should help attract grants and public involvement for interpretive features.

Proposed grant funded projects align with the Conservancy Climate Ready Program goals by maximizing short and long-term benefits, supporting features and access for underserved populations, and adaption to climate change and related uncertainty.

HEALTH IN ALL POLICIES: The Climate Ready grant, if awarded, will support the City’s Health in All Policies Framework by improving the resiliency of the Wharf and reducing threats to human health and property from adverse environmental conditions. Additionally, future construction of public access improvements like the East Promenade and boat landings designed and permitted with this grant, will encourage more active transportation and water sport access for visitors. These activities have been shown to promote positive health outcomes.

Staff recommends that the City Council authorize staff to apply for, accept, and appropriate awarded grant funds from the Coastal Conservancy and City’s match, not to exceed the total project budget of $8,527,600 for the Santa Cruz Wharf Upgrades and Improvements Project.

FISCAL IMPACT: The project would not result in impacts to the City’s General Fund. The City’s match of $1,633,900 would be provided by 1) ED funding already appropriated in the Wharf Rehabilitation Project (c511502) in the FY 2024 Adopted Budget and 2) Public Works funds via an advance from the Public Trust Fund, if necessary, that will be repaid in the future by parking fee updates and restriping planned on the Wharf. It is anticipated that parking updates could generate up to $100,000-$200,000 annually. Increased parking capacity through restriping is also likely to increase sales and corresponding rents from Wharf businesses during peak visitation. Staff time and capacity will need to be directed toward implementation of the projects and grant management, some of which may be eligible for reimbursement under the Conservancy grant.

Prepared By:

David McCormic
Asset Manager
Submitted By:

Bonnie Lipscomb
Director of Economic
Development and Housing
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. RESOLUTION.DOCX

9.3 RESOLUTION NO. NS-29,XXX

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ APPROVING

AND ACCEPTING THE GRANT OF FUNDS FROM THE STATE COASTAL

CONSERVANCY FOR THE SANTA CRUZ WHARF RESILIENCE UPGRADES AND

IMPROVEMENTS PROJECT AND AUTHORIZATION OF RELATED ACTIONS WHEREAS, the Legislature of the State of California has established the State Coastal Conservancy (“Conservancy”) under Division 21 of the California Public Resources Code, and has authorized the Conservancy to award grants to public agencies and nonprofit organizations to implement the provisions of Division 21; and
WHEREAS, the Conservancy awards grants for projects that it determines are consistent with Division 21 of the Public Resources Code and with the Conservancy’s Strategic Plan and that best achieve the Conservancy’s statutory objectives, in light of limited funding.

WHEREAS, the City of Santa Cruz (“applicant”) has applied for or intends to apply for Conservancy grant funding for the Santa Cruz Wharf Resilience Upgrades and Improvements Project (“the project”).

WHEREAS, the Conservancy encourages applicants for grant funding to certify through a resolution the applicant’s approval of the application at the time of submission of an application to the Conservancy for an award of grant funds.

NOW, THEREFORE, be it resolved that the applicant hereby:

1. Approves the filing of an application for funding by the Conservancy and acceptance of such grant funding, if awarded.

2. Has or will have sufficient funds to complete and, following completion, to operate and maintain any property acquired under the project or to operate and maintain any facilities funded as part of the project for a reasonable period, not less than the useful life of the facilities.

3. Agrees to provide any funds beyond the Conservancy grant funds necessary to complete the project.

4. Authorizes any of the following named officers or employees of the applicant or any person holding any of the following positions with the applicant to act as a representative of the applicant and to negotiate and execute on behalf of the grantee all agreements, documents, project modifications, and instruments necessary to comply with the Conservancy's grant requirements, including, without limitation, the grant agreement: Matt Huffaker/City Manager, Bonnie Lipscomb/Director, Economic Development and Housing; and, to appropriate grant funds along with the required local match for the purposes of completing the grant funded project.

9.4 RESOLUTION NO. NS-29,XXX
2 PASSED AND ADOPTED this 27th day of February, 2024, by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: ______________________________
Fred Keeley, Mayor
ATTEST: ________________________________
Bonnie Bush, City Clerk Administrator

9.5 From: Gillian Greensite
To: Fred Keeley; Renee Golder; Sandy Brown; Scott Newsome; Martine Watkins; Shebreh Kalantari-Johnson; Sonja Brunner
Cc: City Council
Subject: Letter regarding Consent Item #9
Date: Monday, February 26, 2024 11:36:08 AM
Attachments: Dear Mayor Keeley.docx
Dear Mayor, Vice-Mayor and council members,
We request you read and consider the attached letter from Don’t Morph the Wharf! Thank you,
Gillian and John

9.6 Dear Mayor Keeley, Vice-Mayor Golder, and City Council members, This letter is in reference to Item #9 on the consent agenda for the council meeting of 2/27/24.

With the legal suit on the Wharf Master Plan and EIR settled and behind us, we expected the city to move forward with the various Wharf projects in a manner that respects and follows the public process. At every public hearing before the various commissions and before city council, staff reiterated that the Wharf Master Plan and EIR were just “placeholders,” and stating that there would be “many opportunities for the public to have input on the specific projects going forward and that after public input, a final project may look different from that proposed in the program EIR.”
Apparently, such assurances were hollow as evidenced by the Summary sheet and Resolution seeking your support for the Coastal Conservancy Resiliency Grant Program for the Wharf.

Specific projects are listed along with their projected costs. The summary sheet states that “the city and Conservancy staff arrived at the resilience projects included in the proposed awards.” Where is the public in this scenario? The one liner of “new public engagement opportunities to finalize designs” is not equivalent to public input on the various projects but rather a tweaking after the fact at best. Presumably the funders, who are funding specifically listed projects will expect those projects to be built with the money they are granting. There is no mention of the required public process nor mention that specific projects may be altered depending on public input.

The city’s required contribution of 20% or $1,8933,700 is described as “may include projected revenues from updates and optimization of parking facilities and fees.” Funds from the Public Works Trust Fund are stated to be “repaid by parking fee updates and restriping.” Put in plain English, this funding contribution will be borne by the public via higher parking costs on the Wharf and narrowing the existing parking bays.

Increased parking fees is inconsistent with the claim that the grant application is “maximizing access for underserved populations.” Narrowing the existing parking bays makes exiting and entering vehicles much more difficult particularly for the less mobile and elderly, inconsistent with the city’s Health in All Policies requirement and inconsistent with the recent designation of Santa Cruz as an elderly friendly community.

The summary report states that the CA Coastal Conservancy Board was making its decision on this grant proposal on February 15th. This suggests that even council approval is viewed as a minor rubber stamp to the process.

For all the above reasons, we strongly request that you continue consideration of this item until these issues, particularly that of proper public input into the various projects have been addressed. To apply for and receive grant monies for specific Wharf projects prior to securing

9.7 the required public input into those projects is unacceptable to the public and should also be so for our elected representatives.

Sincerely,
Gillian Greensite & John Aird.

On behalf of Don’t Morph the Wharf!

9.8 City Council

AGENDA REPORT
DATE: 02/08/2024
AGENDA OF: 02/27/2024
DEPARTMENT: Parks and Recreation
SUBJECT: Professional Services Agreements for On-Call Landscape Architectural Services (PR)
RECOMMENDATION: Motion to approve and authorize the City Manager to execute Professional Services Agreements with Conger Moss Guillard (CMG), SWA Group (SWA), Royston, Hanamoto, Alley & Abey (RHAA), and Bionic Landscape, in the form approved by the City Attorney, for on-call landscape architectural services for an amount not to exceed $1,000,000 per vendor over a three-year term with an option to extend for an additional three years. The Director of Parks and Recreation is authorized to execute contract amendments within the approved project budget.

BACKGROUND: Public agencies routinely enter into on-call agreements with landscape architects in order to streamline project delivery. Several funded Capital Investment Program projects will use consulting expertise to assist staff with services such as master planning, outreach, condition assessments, design standards, site designs, schematics and 3D renderings, construction drawings, cost estimates, feasibility studies, and construction phase services.

Landscape architectural services are based on qualifications and not overall price. On-call agreements are often used to pre-qualify consultants in advance to reduce staff time and costs when compared to hiring on a per project basis. Pre-qualifying consultants also allows public agencies to be more responsive when pressing needs arise.

In August 2023, the City released a Request for Qualifications (RFQu) to hire firms to provide on-call landscape architectural services as a means to prequalify consultants and streamline the hiring process. The RFQu was broadly distributed through the OpenGov procurement system.

Additionally, hundreds of notifications were sent to businesses registered as small and minorityowned. Consultants with whom the City had worked in the past, including local firms, were directly invited to apply. Seventeen proposals were received. An interdepartmental panel reviewed the proposals. The top seven ranked firms were invited to an in-person interview. From highest to lowest, the top four ranking firms were CMG, SWA, RHAA, and Bionic Landscape.

These firms are very reputable Bay-area companies.

DISCUSSION: The agreements will prequalify the consultants to perform landscape architectural services for the City on an on-call basis. Each project’s scope of work and costs will be negotiated with the highest-ranking vendor and if an agreement cannot be reached, staff will begin discussions with the next highest-ranked vendor in a sequential order.

10.1 An on-call agreement will streamline project implementation for projects that are funded on the City’s Capital Investment Program list. Some of these projects include developing design standards for West Cliff, redesigning Harvey West Park, and implementing the Jessie Street Marsh Management Plan. Additionally, City staff can utilize the consultants’ expertise for smaller or time-sensitive efforts, such as developing realistic cost estimates, irrigation plans or planting layouts, site analysis, design concepts for grant proposals, and ADA assessments and designs.

Health in All Policies
The on-call agreements are for consulting services to implement projects that improve parks, open spaces, and related facilities. These services will be used to enhance equity by improving park access and quality and designing features for park users of all ages and abilities. It also improves sustainability by maintaining quality parks within walking distance of housing, enhancing habitat, and designing public spaces through sustainable design principles. The services will improve public health by designing spaces for use, exercise, play, relaxation, and social engagement.

FISCAL IMPACT: None. Project funding will be used for specific projects. Operational budgets can be used for smaller tasks. Additional funding will be necessary for new projects and will be requested in future budget updates or through budget adjustment requests.

Prepared By:

Noah Downing
Park Planner
Submitted By:

Tony Elliot
Director of Parks and
Recreation
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. PROFESSIONAL SERVICES AGREEMENT FOR ON-CALL LANDSCAPE ARCHITECTURAL SERVICES.PDF

10.2 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 1
Professional Services Agreement With
[VENDOR NAME]
For ON-CALL LANDSCAPE ARCHITECTURAL SERVICES
THIS AGREEMENT for professional services is made by and between the City of Santa Cruz (“City”) and [VENDOR NAME] (“Consultant”) (each is referred to individually as a “Party” and collectively, as the “Parties”) as of March 13, 2024 (the “Effective Date”).

NOW, THEREFORE, in consideration of each other’s mutual promises, the Parties hereto agree as follows:

SECTION 1: SCOPE OF WORK
Consultant will furnish services as defined and described in the Scope of Work, attached hereto as Exhibit A and incorporated herein.

SECTION 2: RESPONSIBILITIES OF CONSULTANT
All work performed by Consultant, or under Consultant’s direction, shall be rendered in accordance with the generally accepted practices, and to the standards of, Consultant's profession. Consultant represents and agrees that Consultant: (i) is fully experienced and properly qualified to perform the work and services provided for herein, (ii) has the financial capability required for the performance of the work and services, and (iii) is properly equipped and organized to perform the work and services in a competent, timely, and proper manner, in accordance with the requirements of this Agreement.

Consultant shall not undertake any work beyond the Scope of Work set forth in Exhibit A unless such additional work is approved in advance and in writing by City. The cost of such additional work shall be reimbursed to Consultant by City on the same basis as provided for in Section 4.

If, in performing the work, it is necessary to conduct field operations, security and safety of the job site will be the Consultant's responsibility excluding, the security and safety of any facility of City within the job site which is not under the Consultant's control.

Consultant shall meet with Tony Elliot, Director of the Parks and Recreation Department, hereinafter called "Director", or other designated and authorized City personnel, or third parties as necessary, on all matters connected with carrying out of Consultant’s services described in Exhibit A. Such meetings shall be held at the request of either Party. Review and City approval of completed work shall be obtained monthly, or at other intervals as may be mutually agreed upon during the course of this Agreement. Review, approval, or acceptance of Consultant’s work by City or others shall not relieve Consultant from responsibility for errors and omissions in Consultant’s work.

SECTION 3: RESPONSIBILITIES OF THE CITY
City shall make available to Consultant all necessary data and information in the City's possession and shall actively assist Consultant in obtaining such information from other agencies and individuals as needed. Consultant is entitled to reasonably rely upon the accuracy and completeness of such data and information, and Consultant shall provide City prompt written notice of any known defects in such data and information.

The Director may authorize a staff person to serve as his or her representative. The work in progress shall be reviewed at such intervals as may be mutually agreed upon between the Parties. The City will be the sole judge of acceptable work, provided that such approval will not be unreasonably withheld or delayed. If the work is not acceptable, City will inform Consultant of the changes or revisions necessary to secure approval.

10.3 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 2
SECTION 4: FEES AND PAYMENT
For services actually performed, the City will compensate Consultant at the rates set forth in the Fee Schedule detailed in Exhibit B and in accordance with the terms set forth therein. Payment for Consultant's services in carrying out the entire Scope of Work shall be made within the budget limit, or limits shown, upon Exhibit B. Such payment shall be considered the full compensation for all personnel, materials, supplies, and equipment used by Consultant in the Scope of Work.

Consultant agrees that the payments to Consultant specified in this Section 4 will constitute full and complete compensation for all obligations assumed by Consultant under this Agreement. Where conflicts regarding compensation may occur, the provisions of this section apply.

Invoices shall detail the time worked by each class of employee on each task and the expenses incurred for which billing is made. Invoices shall indicate the percentage completion of each work task as identified in the Scope of Work in Exhibit A and the overall percentage of completion of the total required services. Unless otherwise specified in the fee schedule, payments shall be made monthly by the City within 30 days based on itemized invoices from the Consultant which list the actual costs and expenses.

All invoices shall contain the following affidavit signed by Consultant (if individual) or by an authorized representative of Consultant’s (if Consultant is an entity):
"I hereby certify [or an authorized representative of Consultant] that the charge of (Insert invoice amount) as summarized above and shown in detail on the attachments is in accordance with the terms of Agreement dated (Insert Agreement Date), and has not been previously paid." This Agreement is contingent upon the appropriation of sufficient funding by the City for the services covered by this Agreement. If funding is reduced or deleted by the City for the services covered by this Agreement, the City has the option without penalty or liability to either terminate this Agreement or to offer an amendment to this Agreement indicating the reduced amount.

SECTION 5: TRAVEL REIMBURSEMENT POLICY
The City agrees to reimburse Consultant and Consultant’s employee(s) for only authorized ground travel expenses, as indicated by a mark below, and according to the City’s Travel Reimbursement Policy. It is expected that all ground travel expenses incurred by Consultant while conducting activities on behalf of the City will be at reasonable rates and that Consultant and Consultant’s employee(s) will exercise prudence in incurring these expenses. ☒ Ground Transportation: Ground transportation is reimbursable when it is for travel between the Consultant’s place of business, an airport, or Santa Cruz hotel, as applicable, to the City work location.

1. Reasonable fees for taxis, shuttles, buses, trains, light rail, ride hailing services (Uber, Lyft or other), and similar modes of transportation will be reimbursed. Receipts are required for reimbursement.

2. When using vehicles owned by Consultant or Consultant’s employer:
• Mileage will be reimbursed at the current IRS mileage rate. • Evidence of automobile liability insurance meeting the City’s requirements must be provided. • Maps showing starting point, City work location, and total miles are required for reimbursement.

3. Use of car rentals are not reimbursable.

General Rule

1. Travel expenses not listed or checked above will not be reimbursed.

2. Travel reimbursements are paid after the completion of travel. There are no travel advances.

10.4 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 3

3. Exceptions to any of the above requirements require advance written permission from the Director or City’s designated agent contracting with the Consultant.

4. Tips and gratuities will not be reimbursed.

5. Alcoholic beverage purchases will not be reimbursed.

6. Consultants will exercise prudence in incurring reimbursable expenses.

7. The City of Santa Cruz has the sole discretion to deny any reimbursement request the City has determined to be excessive or an inappropriate use of public funds.

SECTION 6: CHANGES IN WORK
City may negotiate changes in the Scope of Work. No changes in the Scope of Work shall be made without the written approval of City and Consultant. Any change requiring compensation in excess of the sum specified in Exhibit B shall be approved in advance in writing by the City. Only City’s authorized representative(s) is authorized to approve changes to this Agreement on behalf of City.

SECTION 7: TERM AND SCHEDULE
The term of this Agreement shall be on the effective date of this Agreement and terminating on March 13, 2027. At the option of the City, this Agreement may be renewed in three-year increments under the same contractual terms and conditions by letter agreement.

Consultant shall begin work as specified in a written authorization (e.g., Notice to Proceed) to perform services. The written authorization to perform work shall not be issued until after this Agreement has been approved and authorized by the City.

The Work Schedule for completion of the work shall be as shown upon Exhibit C. In the event that major changes are ordered, the schedule for completion as stated in Exhibit C may be adjusted by City so as to allow Consultant a reasonable period of time within which to complete any additional work which may be required as a result of the ordered changes.

Neither party will be held responsible for delay or default caused by declared emergencies, natural disasters, or any Force Majeure event which is beyond the party's reasonable control. Consultant will, however, make all reasonable efforts to remove or eliminate such a cause of delay or default and will, upon the cessation of the cause, diligently pursue performance of its obligations in this Agreement.

The City reserves the right to obtain the item(s) and/or services covered by this Agreement from another source during any on-going suspension of service due to the circumstances outlined above.

Consultant acknowledges that it is necessary for Consultant to complete its work on or before the completion date set forth in Exhibit C in order to allow the City to achieve its objectives for entering into this Agreement. The Parties therefore agree that time is of the essence in the performance of this Agreement.

SECTION 8: TERMINATION
The City may terminate the Agreement for any reason by providing written notice to Consultant not less than 10 calendar days prior to an effective termination date.

The City may, at its option, allow Consultant to cure its failure to perform within 10 business days (or longer period authorized in writing by the City) from the date of the City’s termination notice. The termination shall be become effective if Consultant has not cured within the specified time period to the City’s satisfaction.

10.5 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 4
Consultant may terminate this Agreement for cause if the City fails to cure a material default in performance within a period of 30 calendar days (or such longer period agreed to by the Consultant), from the date of the Consultant’s written termination notice specifying the default in performance. Consultant must provide a notice of termination to the City not less than 30 calendar days of the effective termination date.

Upon notice of termination by either the City or Consultant, the Consultant will immediately act to not incur any additional obligations, costs or expenses, except as may be reasonably necessary to terminate its activities. The City’s only obligation to the Consultant will be just and equitable payment for services authorized by, and received to the satisfaction of, the City up to and including the effective date of termination less any amounts withheld. All finished or unfinished work or documents procured or produced under the Agreement will become property of the City upon the termination date. In the event of Consultant’s failure to perform pursuant to the Agreement, the City reserves the right to obtain services elsewhere and Consultant will be liable for the difference between the prices set forth in the terminated Agreement and the actual cost to the City. Termination of the Agreement pursuant to this paragraph shall not relieve the Consultant of any liability to City for additional costs, expenses, or damages sustained by City due to failure of the Consultant to perform pursuant to the Agreement. City may withhold any payments to Consultant for the purpose of set-off until such time as the exact amount of damages due City from Consultant is determined. After the effective date of termination, Consultant will have no further claims against the City under the Agreement. No other compensation will be payable for anticipated profit on unperformed services.

SECTION 9: INSURANCE
Prior to the beginning of and throughout the duration of the Agreement, Consultant will maintain and comply with the Insurance Requirements as set forth in Exhibit D. Consultant will insure the City against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder. The insurance coverages required shall not in any way limit the liability of the Consultant.

SECTION 10: INDEMNIFICATION
Consultant agrees, to the fullest extent permitted by law, to indemnify, defend, and hold harmless the City, its officials, officers, employees, agents, and volunteers (collectively, “Indemnitees”) from and against any and all liability, claim, action, loss, injury, damage, judgment, or expense, including attorneys’ fees and costs (“Losses”) caused by or resulting from the negligence, recklessness, or willful misconduct of Consultant, Consultant’s officers, employees, agents, or subcontractors in any way related to this Agreement. Consultant’s duty to indemnify and hold harmless Indemnitees shall not apply to the extent such Losses are caused by the sole or active negligence or willful misconduct of Indemnitees. Consultant’s obligation to defend shall arise regardless of any claim or assertion that Indemnitees caused or contributed to the Losses.

In the event this Agreement involves the performance of design professional services by Consultant, Consultant’s officers, employees, agents, or subcontractors, Consultant’s costs to defend Indemnitees shall not exceed the Consultant’s proportionate percentage of fault per Civil Code §2782.8. This section shall survive the termination or expiration of this Agreement.

SECTION 11: EQUAL EMPLOYMENT OPPORTUNITY/NON-DISCRIMINATION POLICIES City’s policies promote a working environment free from abusive conduct, discrimination, harassment, and retaliation; and require equal opportunity in employment for all regardless of race, religious creed (including religious dress and grooming practices), color, national origin (including language use restrictions), ancestry, religion, disability (mental and physical), medical condition, sex, gender (including gender identity and gender expression), physical characteristics, marital status, age, sexual orientation, genetic information (including family health history and genetic test results), organizational affiliation, and military or veteran status, or any other consideration made unlawful by local, State or Federal law. City requires Consultant to comply with all applicable Federal and State and local equal employment opportunity laws and regulations, and Consultant is responsible for

10.6 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 5
ensuring that effective policies and procedures concerning the prevention of abusive conduct, discrimination, harassment, and retaliation exist in Consultant’s business organization. The City’s current Equal Employment Opportunity and Non-Discrimination policies to which this Section applies may be viewed at http://www.codepublishing.com/CA/SantaCruz/?SantaCruz09/SantaCruz0983.html and http://www.cityofsantacruz.com/home/showdocument?id=59192.

SECTION 12: LEGAL ACTION/ATTORNEYS’ FEES
If any action at law or in equity is brought to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees in addition to any other relief. The laws of the State of California, with jurisdiction in the Santa Cruz County Superior Court, shall govern all matters relating to the validity, interpretation, and effect of this Agreement and any authorized or alleged changes, the performance of any of its terms, as well as the rights and obligations of Consultant and the City.

SECTION 13: AMENDMENTS
This Agreement may not be amended in any respect except by way of a written instrument which expressly references and identifies this particular Agreement, which expressly states that its purpose is to amend this particular Agreement, and which is duly executed by the City and Consultant. Consultant acknowledges that no such amendment shall be effective until approved and authorized by the City’s authorized representative. No representative of the City is authorized to obligate the City to pay the cost or value of services beyond the scope of services set forth in Exhibit A.

Such authority is retained solely by the City Manager, Director, or their designee. Unless expressly authorized by the City Manager or Director, Consultant’s compensation shall be limited to that set forth in Exhibit B, Fee Schedule.

SECTION 14: MISCELLANEOUS PROVISIONS

1. Project Manager/Key Staff. Director reserves the right to evaluate and confer with Consultant regarding the project manager or other key staff assigned by Consultant to perform the work under this Agreement. Consultant shall replace the project manager or key staff upon Director’srequest due to Director’s concern about their performance.

Otherwise, no change in assignment by the Consultant may occur without prior written approval of the City.

2. Consultant Services Only. Consultant is employed to render professional services only and any payments made to Consultant are compensation solely for such professional services.

3. Independent Contractor. In the performance of this Agreement, it is expressly understood that Consultant, including each of Consultant’s employees, agents, subcontractors or others under Consultant’s supervision or control, is an independent contractor solely responsible for its own acts and omissions, and shall not be considered an employee of the City for any purpose. Consultant agrees to indemnify, defend and hold harmless the City, its officials, officers, employees, and agents against any claim or liability, including attorneys’ fees and costs, arising in any manner related to this Agreement that an employee, agent or others under Consultant’s supervision or control was misclassified.

In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of City, Consultant shall indemnify, defend, and hold harmless City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of City.

4. Consultant Not an Agent. Except as City may specify in writing, Consultant shall have no authority, express or implied, to act on behalf of City in any capacity whatsoever as an agent. Consultant shall have no authority, express or implied, pursuant to this Agreement to bind City to any obligation whatsoever.

10.7 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 6

5. Subcontractors. Consultant shall obtain prior approval of the City prior to subcontracting of any work pursuant to this Agreement. If at any time, the City determines any subcontractor is incompetent or unqualified, Consultant will be notified and will be expected to immediately cancel the subcontract. Consultant shall require and verify that all subcontractors maintain insurance meeting all of the requirements stated herein, including naming the City of Santa Cruz, its officers, officials, employees, agents, and volunteers as additional insureds. Any modification to the insurance requirements for subcontractors must be agreed to by the City in writing.

Consultant shall be as fully responsible to the City for the negligent acts and omissions of its contractors and subcontractors or subconsultants, and of persons either directly or indirectly employed by them, as it is for the acts and omissions of persons directly employed by Consultant. Consultant’s obligation to pay its subconsultants is an independent obligation from the City’s obligation to make payments to the Consultant.

6. Assignment. This Agreement shall not be assigned without first obtaining the express written consent of the Director or after approval of the City Council. Neither party may assign this Agreement unless this Agreement is amended in accordance with its terms.

7. Conflicts of Interest. Consultant agrees to comply with conflict of interest lawsin performing the work and services under this Agreement. Consultant covenants (on behalf of Consultant and Consultant’s employees, agents, representatives, and subcontractors) that there is no direct or indirect interest, financial or otherwise, which would conflict in any manner or degree with the performance of services required under this Agreement. Consultant acknowledges and agrees to comply with applicable provisions of conflict of interest law and regulations, including the CA Political Reform Act, Sections 1090 and 87100 of the Government Code, and the City’s conflict of interest code. Consultant will immediately advise City if Consultant learns of a conflicting financial interest of Consultant during the term of this Agreement.

8. City Property. The work, or any portion, of Consultant in performing this Agreement shall become the property of City. The Consultant may be permitted to retain copies of such work for information and reference in connection only with the provision of services for the City. All materials and work product, whether finished or unfinished, shall be delivered to City upon completion of contract services or termination of this Agreement for any reason.

Consultant acknowledges and agrees that the work product shall be considered a work made for hire within the meaning of the patent and copyright laws of the United States; and Consultant agrees that all copyrights which arise from creation of project-related documents and materials pursuant to this Agreement shall be vested in the City and Consultant waives and relinquishes all claims to copyright or other intellectual property rights in favor of City. Any work product related to this Agreement shall be confidential, not to be used by the Consultant on other projects or disclosed to any third party, except by agreement in writing by the City, or except as otherwise provided herein.

Consultant’s final deliverables shall comply with Section 508 (29 U.S.C. Section 794d) accessibility requirements, as applicable.

9. Intellectual Property and Indemnity. Consultant represents to City that, to the best of Consultant’s knowledge, any Intellectual Property (including but not limited to: patent, patent application, trade secret, copyright and any applications or right to apply for registration, computersoftware programs or applications, tangible or intangible proprietary information, or any other intellectual property right) in connection with any services and/or products related to this Agreement does not violate or infringe upon any Intellectual Property rights of any other person or entity.

To the fullest extent permitted by law, Consultant agrees to indemnify, defend, and hold harmless City, its officials, officers, employees, and agents, from any and all claims, demands, actions, liabilities, damages, or expenses (including reasonable attorneys’ fees and costs) arising out of a claim of infringement, actual or alleged, direct or contributory, of any Intellectual Property rights in any way related to Consultant’s

10.8 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 7
performance under this Agreement or to the City’s authorized intended or actual use of Consultant’s product or service under this Agreement. This provision shall survive termination or expiration of this Agreement.

If any product or service becomes, or in the Consultant’s opinion is likely to become, the subject of a claim of infringement, the Consultant shall, at its sole expense: (i) provide the City the right to continue using the product or service; or (ii) replace or modify the product or service so that it becomes non-infringing; or (iii) if none of the foregoing alternatives are possible even after Consultant’s commercially reasonable efforts, in addition to other available legal remedies, City will have the right to return the product or service and receive a full or partial refund of an amount equal to the value of the returned product or service, less the unpaid portion of the purchase price and any other amounts, which may be due to the Consultant. City shall have the right to retrieve its data and proprietary information at no charge prior to any return of the product or termination of service.

10. Confidentiality.
a. Consultant shall not acquire any ownership interest in data and information (“City Data”) received by Consultant from City, which shall remain the property of the City. Certain information may be considered confidential (“Confidential Information”). Confidential Information shall mean all information or proprietary materials (in every form and media) not generally known to the public and which has been or is hereafter disclosed or made available directly or indirectly to Consultant through any means of communication, either verbally or in writing even if it has not been designated in writing as “Confidential” to Consultant in connection with this Agreement. Unless otherwise required by law, Consultant shall not, without City’s written permission, use or disclose City Data and/or Confidential Information other than in the performance of the obligations under this Agreement. As between Consultant and City, all City Confidential Information shall remain the property of the City. Consultant shall not acquire ownership interest in the City’s Confidential Information.
b. Consultant shall be responsible for ensuring and maintaining the security and confidentiality of City Data and Confidential Information, protect against any anticipated threats or hazards to the security or integrity of City Data and Confidential Information, protect against unauthorized access to or use of City Data and Confidential Information that could result in substantial harm or inconvenience to City or any end users; and ensure the proper return and/or disposal of City Data and Confidential Information upon termination of this Agreement with notice to the City.
c. Consultant shall take appropriate action to address any incident of unauthorized access to City Data and Confidential Information, including addressing and/or remedying the issue that resulted in such unauthorized access, notifying City as soon as possible of any incident of unauthorized access to City Data and Confidential Information, or any other breach in Consultant’s security that materially affects City or end users; and be responsible for ensuring compliance by its officers, employees, agents, and subcontractors with the confidentiality provisions hereof. Should confidential and/or legally protected City Data be divulged to unauthorized third parties, Consultant shall comply with all applicable federal and state laws and regulations, including but not limited to California Civil Code sections 1798.29 and 1798.82 at Consultant’s sole expense. Consultant shall not charge City for any expenses associated with Consultant’s compliance with these obligations.
d. Consultant shall defend, indemnify and hold harmless City, its officials, officers, employees and agents against any claim, liability, loss, injury or damage (including attorneys’ fee and costs) arising out of, or in connection with, the unauthorized use, access, and/or disclosure of City Data and/or Confidential Information by Consultant and/or its agents, employees or subcontractors, excepting only loss, injury or damage caused by the sole negligence or willful misconduct of the City. This provision shall survive the termination or expiration of this Agreement.

10.9 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 8

11. Consultant's Records/Audits. Consultant shall maintain accurate accounting records and other written documentation pertaining to the costs incurred relating to this Agreement for examination and audit by the City, State, or federal government, as applicable, in compliance with Gov. Code §8546.7 for a contract in excess of $10,000, or in compliance with other applicable federal laws (e.g. 48 CFR 31) or regulations for a period of at least three (3) years from the date of the final City payment for Consultant's services, , or from the date of final disposition of real property or equipment acquired with federal funds, or date of the termination of this Agreement, whichever is later. If Consultant engages a subcontractor to perform work related to this Agreement with a cost of $10,000 or more over a 12-month period, such subcontract shall contain these same requirements. This provision shall survive the termination of this Agreement.

12. California Public Records Act. City is a public agency subject to the disclosure requirements of the California Public Records Act (“CPRA”). If Consultant’s proprietary information is contained in documents or information submitted to City, and Consultant claims that such information falls within one or more CPRA exemptions, Consultant must clearly mark such information “Confidential and Proprietary,” and identify the specific lines containing the information. In the event of a request for such information, City will make best efforts to provide notice to Consultant prior to such disclosure. If Consultant contends that any documents are exempt from the CPRA and wishes to prevent disclosure, it is required to obtain a protective order, injunctive relief, or other appropriate remedy from a court of law in Santa Cruz County before the City is required to respond to the CPRA request. If Consultant fails to obtain such remedy within the time the City is required to respond to the CPRA request, City may disclose the requested information without any liability. Consultant further agrees that it shall defend, indemnify and hold City harmless against any claim, action or litigation (including but not limited to all judgments, costs, and attorney’s fees) that may result from denial by City of a CPRA request for information arising from any representation, or any action (or inaction), by the Consultant.

13. Compliance with Laws. All activities of Consultant, its employees, subcontractors and/or agents will be carried out in compliance with all applicable federal, state, and local laws and regulations. Consultant further agrees to comply with the covenant of good faith and fair dealing and other provisions of Santa Cruz Municipal Ordinance chapter 3.09, or otherwise Consultant may be subject to penalties including being declared an irresponsible contractor.

14. Licensure. Consultant agrees that Consultant, its subcontractors and/or agents (if any) has/have complied with all applicable federal, state, and local licensing requirements and agrees to provide proof of a current City of Santa Cruz Business Tax Certificate if:
• Consultant, its subcontractor(s) and agent(s) or its business is/are located in the City of Santa Cruz; • Will perform actual work in the City of Santa Cruz for 6 or more days annually; or • Will use company vehicles to deliver within the City of Santa Cruz for 6 or more days annually.

For additional information and licensing requirements, view the City’s Business Licenses and Permits webpage or call the Revenue and Taxation division at 831/420-5070.

15. Living Wage. Every contract for services to the City for $10,000 or more, is subject to City of Santa Cruz Living Wage Ordinance number 2000-25. If applicable, Consultant agrees to comply with the requirements of the Living Wage ordinance as provided in Santa Cruz Municipal Code Chapter 5.10.

16. Prevailing Wages for Public Work. To the extent that the work or services to be performed under this Agreement may be considered a “public work” (construction, alteration, demolition, or repair work) pursuant and subject to Labor Code section 1720 et seq., Consultant (and any subconsultant performing the work or services) shall conform to any and all prevailing wage requirements applicable to such work/and or services under this Agreement. Consultant (and any subconsultant) shall adhere to the prevailing wage determinations made by the Director of Industrial Relations (DIR) pursuant to California Labor Code Part 7, Chapter 1, Article 2,

10.10 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 9
applicable to the work, if any. All workers employed in the execution of a public works contract (as such term is defined California Labor Code section 1720 et seq. and section 1782(d)(1)) must be paid not less than the specified prevailing wage rates for the type of work performed. (CA Labor Code sections 1720, 1774 and 1782.) To the extent applicable to the scope of work and services under this Agreement, Consultant agrees to be bound by the state prevailing wage requirements, including, but not limited to, the following:
a. If a worker is paid less than the applicable prevailing wage rate owed for a calendar day (or any portion thereof), Consultant shall pay the worker the difference between the prevailing wage rate and the amount actually paid for each calendar day (or portion thereof) for which the worker(s) was paid less than the prevailing wage rate, as specified in Labor Code section 1775; b. Consultant shall maintain and make available payroll and worker records in accordance with Labor Code sections 1776 and 1812;
c. If Consultant employs (and/or is legally required to employ) apprentices in performing the work and/or services under this Agreement, Consultant shall ensure compliance with Labor Code section 1777.5; d. Consultant is aware of the limitations imposed on overtime work by Labor Code sections 1810 et seq. and shall be responsible for any penalties levied in accordance with Labor Code section 1813 for failing to pay required overtime wages;
e. Consultant shall post a copy of the applicable wage rates at each jobsite at a location readily available to its workers.
f. Any failure of Consultant and/or its subconsultant to comply with the above requirements relating to a public work project shall constitute a breach of this Agreement that excuses the City’s performance of this Agreement at the City’s sole and absolute option and shall be at the sole risk of Consultant. Consultant on behalf of itself and any subconsultant, agree to indemnify, defend and hold harmless the City and its officials, officers, employees, and agents from and against any and all claims, liabilities, losses, costs, expenses, attorney’s fees, damages, expenses, fines, financial consequences, interest, and penalties, of any kind or nature, arising from or relating to any failure (or alleged failure) of the Consultant and any subconsultant to pay prevailing wages or to otherwise comply with the requirements of prevailing wage law relating to a public work.
g. Consultant acknowledges that it and/or any subconsultant may not engage in the performance of any contract for public work unless currently registered with the DIR and qualified to perform public work pursuant to Labor Code section 1725.5 [with limited exceptions from this requirement for bid purposes only under Labor Code section 1771.1(a)].

17. Storm Water Requirements. To the extent applicable to the Scope of Work under this Agreement, Consultant, Consultant’s employees, subcontractors, and agents are required to abide by the applicable City of Santa Cruz Storm Water Best Management Practices (BMPs) for the duration of the work. The City’s mandatory Storm Water BMPs, which are listed according to the type of work, operations, or business, are located on the City website at: https://www.cityofsantacruz.com/government/city-departments/public-works/stormwater/bestmanagement-practices

18. Dispute Resolution. The Parties agree to attempt in good faith to resolve through negotiation any dispute, claim or controversy arising out of or relating to this Agreement. Either party may initiate negotiations by providing written notice in letter form to the other party, setting forth the subject of the dispute and the relief requested.

Promptly upon such notification, the Parties shall meet at a mutually agreeable time and place in order to exchange relevant information and perspective, and to attempt to resolve the dispute. In the event that no

10.11 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 10
resolution is achieved, and if, but only if, the parties mutually agree, then prior to pursuing formal legal action, the parties shall make a good faith effort to resolve the dispute by non-binding mediation or negotiations between representatives with decision-making power, who, to the extent possible, shall not have had substantive involvement in the matters of the dispute. To the extent that the dispute involves or relates to a public works project, the Parties agree to attempt to resolve the dispute by complying with the claims process as set forth in Public Contract Code sections 9204(e), 20104-20104.6, but without waiving the requirements of the California Tort Claims Act, Gov’t Code section 800 et seq. unless otherwise agreed to by the Parties.

19. Force Majeure. Neither party hereto shall be considered in default in the performance of its obligation hereunder to the extent that the performance of any such obligation is prevented or delayed by an act of God, natural disaster, pandemic, acts of terrorism, war, a strike, lockout or other labor difficulty, or other peril, which is beyond the reasonable control of the affected party and without the negligence of the respective Parties. Each party hereto shall give notice promptly to the other of the nature and extent of any Force Majeure claimed to delay, hinder or prevent performance of the services under this Agreement. Each Party will, however, make all reasonable efforts to remove or eliminate such a cause of delay or default and will, upon the cessation of the cause, diligently pursue performance of its obligations in this Agreement. In the event either party is prevented or delayed in the performance of its respective obligation by reason of such Force Majeure, the only remedy is that there may be an equitable adjustment of the schedule based on City’s sole discretion.

20. Complete Agreement. This Agreement, along with any attachments, is the full and complete integration of the Parties’ agreement with respect to the matters addressed herein, and that this Agreement supersedes any previous written or oral agreements between the Parties with respect to the matters addressed herein. Unless otherwise stated, to the extent there is any conflict between this Agreement and any other agreement (written or oral), the terms of this Agreement shall control.

21. Severability. The unenforceability, invalidity or illegality of any provision(s) of this Agreement shall not render the other provisions unenforceable, invalid or illegal.

22. Waiver. Waiver by any party of any portion of this Agreement shall not constitute a waiver of the same or any other portion hereof.

23. Governing Law. This Agreement shall be governed by and interpreted in accordance with California law.

24. Contract Interpretation. Each party acknowledges that it has reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

25. MacBride Principles/Peace Charter. City of Santa Cruz Resolution NS-19,378 (7/24/90) encourages all companies doing business in Northern Ireland to abide by the MacBride Principles and Peace Charter.

26. Notices. If either party shall desire or is required to give notice to the other such notice shall be given in writing, via email, and concurrently delivered by: (a) personal delivery, in which case notice is effective upon delivery; (b) overnight courier (i.e., Federal Express) with charges prepaid or charged to the sender’s account, in which case notice is effective when delivered; (c) priority U.S. Mail, in which case notice shall be deemed delivered on the second business day after the deposit thereof with the U.S. Postal Service. Notices shall be addressed to recipient as follows:

To CITY:

Parks and Recreation Department
Noah Downing
To CONSULTANT:

10.12 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 11
323 Church Street
Santa Cruz, CA 95060
[email protected]
831-420-5362
Changes to the above information shall be given to the other party in writing ten (10) business days before the change is effective.

27. Counterparts. The Parties may execute this Agreement in two or more counterparts, which shall, in the aggregate, be deemed an original but all of which, together, shall constitute one and the same instrument. A scanned, electronic, facsimile or other copy of a party’s signature shall be accepted and valid as an original.

28. Warranty of Authority. The signatories to this Agreement warrant and represent that each is authorized to execute this Agreement and that their respective signatures serve to legally obligate their respective representatives, agents, successors and assigns to comply with the provisions of this Agreement. [SIGNATURES ON FOLLOWING PAGE]

10.13 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 12
Signature Requirements Corporation: 2 officer signatures required (one from each group, unless person signing holds officer positions in both Group 1 and 2):

Group 1: Chief Executive Officer, Chairman of the Board, President, or Vice President Group 2: Secretary, Assistant Secretary, Chief Financial Officer, Treasurer, Assistant Treasurer Approved As To Form:

By: _____________________________ Date: __________________ Office of the City Attorney

CITY OF SANTA CRUZ
By: _____________________________ Date: __________________ Matt Huffaker
City Manager

CONSULTANT
By: _____________________________ Date: __________________ Printed: ___________________________ Title: __________________ By: _____________________________ Date: __________________ Printed: ___________________________ Title: __________________

10.14 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 13
EXHIBIT A: SCOPE OF WORK
City and Consultant agree that Consultant will provide on-call services pursuant to this Agreement and during the Agreement Term. For each on-call project, City and Consultant agree to enter into a separate written Scope of Work that will include the requirements for the project, Consultant’s total fee for the project, project schedule, and any additional project information. Each on-call project’s Scope of Work will refer to this Agreement and when signed by the City, will be incorporated into this Agreement as Exhibit A1, Exhibit A2, etc.

10.15 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 14
EXHIBIT B: FEE SCHEDULE
City and Consultant agree that Consultant will provide on-call services pursuant to this Agreement and during the Agreement Term. The total amount for services shall not exceed $1,000,000 over a three-year term. For each on-call project, City and Consultant agree to enter into a separate written Fee Schedule.

Each on-call project’s Fee Schedule will refer to this Agreement and when signed by the City, will be incorporated into this Agreement as Exhibit B1, Exhibit B2, etc.

10.16 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 15
EXHIBIT C: WORK SCHEDULE
City and Consultant agree that Consultant will provide on-call services pursuant to this Agreement and during the Agreement Term of three years with the option to extend the agreement for an additional three-year period. For each on-call project, City and Consultant agree to enter into a separate written Work Schedule. Each on-call project’s Work Schedule will refer to this Agreement and when signed by the City, will be incorporated into this Agreement as Exhibit C1, Exhibit C2, etc.

10.17 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 16
EXHIBIT D: INSURANCE REQUIREMENTS
Consultant shall procure and maintain insurance against claims for injuries to persons or damages to property and otherwise which may arise from or in connection with the performance of the work under this Agreement and the results of that work by Consultant, its agents, representatives, employees, or subcontractors.

A. CERTIFICATE REQUIREMENTS
The City will be issued a Certificate of Insurance (a Memorandum of Understanding will not be accepted) with the following minimum requirements:
• Certificate(s) will show current policy number(s) and effective dates, • Coverage and policy limits will meet, or exceed, requirements below, • The Certificate Holder will be City of Santa Cruz, Risk Management, 1200 Pacific Ave., Suite 290, Santa Cruz, CA 95060,
• Certificate will be signed by an authorized representative, • An endorsement, if required below, will be provided to show the City, its officers, officials, employees, and volunteers as additional insureds, and
• Coverages must be maintained during the term of the Agreement with the City, unless a longer duration is required as specified below.

B. MINIMUM SCOPE AND LIMITS OF INSURANCE
Consultant acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. If Consultant maintains broader insurance coverage and/or higher limits than the minimums shown below, the City of Santa Cruz requires and shall be entitled to the broader insurance coverage and/or higher limits maintained by Consultant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City of Santa Cruz.

Coverage will be at least as broad as:
• COMMERCIAL GENERAL LIABILITY (CGL): $1,000,000 PER OCCURRENCE; $2,000,000 AGGREGATE Proof of coverage for $1 Million per occurrence and $2 Million in the aggregate including products and completed operations, property damage, bodily injury, personal and advertising injury will be provided on Insurance Services Office (ISO) Form CG 00 01 covering CGL. • PROFESSIONAL LIABILITY (ERRORS AND OMISSIONS): $2,000,000 PER OCCURRENCE OR CLAIM, $2,000,000 AGGREGATE.

Consultant will maintain insurance appropriate to Consultant’s profession; with limit no less than $2,000,000 per occurrence or claim, $2,000,000 aggregate. Insurance must be maintained, and evidence of insurance must be provided for at least five (5) years after date of completion of the services under this Agreement. If coverage is canceled or non-renewed and not replaced with another claims-made policy form with a Retroactive Date prior to the contract effective date or start of work date, Consultant must purchase “extended reporting” coverage for a minimum of five (5) years after completion of the contract of work.
• AUTOMOBILE LIABILITY:

Proof of coverage for $1,000,000 provided on ISO Form Number CA 00 01 covering any auto (Code 1), or if Consultant has no owned autos, hired, (Code 8) and non-owned autos (Code 9), per accident for bodily injury and property damage.
• WORKERS’ COMPENSATION AS REQUIRED BY THE STATE OF CALIFORNIA, WITH STATUTORY LIMITS, AND EMPLOYER’S LIABILITY INSURANCE: $1,000,000 per accident for bodily injury or disease.

10.18 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 17
The Worker’s Compensation policy must be endorsed with a waiver of subrogation in favor of the City for all work performed by the Consultant and its employees. (Not required if Consultant provides written verification it has no employees) - If Consultant has no employees, Consultant shall complete and sign a Workers’ Compensation Exemption Declaration and Release of Liability.

C. OTHER INSURANCE PROVISIONS
The insurance policies are to comply with the following provisions:
• ADDITIONAL INSURED STATUS
The City, its officers, officials, employees, agents, and volunteers are to be covered as additional insureds on the CGL with respect to liability arising out of work or operations performed by or on behalf of Consultant including materials, parts, or equipment furnished in connection with such work or operations, products and completed operations. General liability coverage will be provided in the form of an endorsement to Consultant’s insurance at least as broad as ISO Form CG 20 10 11 85, or if not available, through the addition of both CG 20 10, CG 20 26, CG 20 33, or CG 20 38; and CG 20 37 (if a later edition is used).
o PRIMARY COVERAGE
For any claims related to this Agreement, Consultant’s and all subcontractor’s insurance coverage will be primary and non-contributory as respects the City, its officers, officials, employees, agents, and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees, agents, or volunteers will be excess of Consultant’s and all subcontractor’s insurance and will not contribute with it.
• NOTICE OF CANCELLATION
Each insurance policy required above shall state that the coverage shall not be canceled, except with notice to the City.
• WAIVER OF SUBROGATION
Consultant hereby grants to the City a waiver of any right to subrogation, except as otherwise not applicable, which any insurer of said Consultant may acquire against the City by virtue of the payment of any loss, including attorney’s fees under such insurance. Consultant agrees to obtain any endorsement that may be necessary to effectuate this waiver of subrogation, but this provision applies regardless of whether or not the City has received a waiver of subrogation endorsement from the insurer. • EXCESS LIABILITY/UMBRELLA INSURANCE POLICIES
Consultant may use excess liability/umbrella policies to meet the required liability limits on the condition that they provide all of the insurance coverages required herein, including, but not limited to, primary and non-contributory, additional insured, Self-Insured Retentions (SIRs), indemnity, and defense requirements. The excess liability/umbrella insurance policies shall be provided on a true “following form” or broader coverage basis, with coverage at least as broad as provided on the underlying CGL insurance. No insurance policies maintained by the additional insureds, whether primary or excess, and which also apply to a loss covered hereunder, shall be called upon to contribute to a loss until the Consultant’s primary and excess liability policies are exhausted. • DURATION OF COVERAGE
CGL & Excess Liability/Umbrella policies for any construction related work, including, but not limited to, maintenance, service, or repair work, shall continue coverage for a minimum of 5 years for Completed

10.19 City of Santa Cruz Professional Services Agreement for On-Call Landscape Architectural Services March 2024 (Form Rev.01/24) Page 18
Operations liability coverage. Such Insurance must be maintained and evidence of insurance must be provided for at least five (5) years after completion of the contract of work. • SELF-INSURED RETENTIONS (SIR)
Self-insured retentions must be declared to and approved by the City. City may require Consultant to purchase coverage with a lower retention or provide proof of ability to pay losses and related expenses.

The policy language shall provide, or be endorsed to provide, that the self-insured retention may be satisfied by either the named insured or City.
• ACCEPTABILITY OF INSURERS
Insurance is to be placed with insurers with a current A.M. Best’s rating of no less than A: VII, unless otherwise acceptable to the City.
• CLAIMS MADE POLICIES
If any of the required policies provide coverage on a claims-made basis:

1. The Retroactive Date must be shown and must be before the date of the contract or the beginning of contract work.

2. Insurance must be maintained, and evidence of insurance must be provided for at least five (5) years after completion of the contract of work.

3. If coverage is canceled or non-renewed, and not replaced with another claims-made policy form with a Retroactive Date prior to the contract effective date, the Consultant must purchase “extended reporting” coverage for a minimum of five (5) years after completion of contract work. • VERIFICATION OF COVERAGE
Consultant will furnish the City with original Certificates of Insurance including all required amendatory endorsements (or copies of the applicable policy language effecting coverage required by this clause) and a copy of the Declarations and Endorsement Page of the CGL policy (and CPL, automobile and any Excess Liability/Umbrella policies, as applicable) listing all policy endorsements to be approved by the City before work commences. However, failure to obtain the required documents prior to the work beginning will not waive the Consultant’s obligation to provide them. The City reserves the right to require complete, certified copies of all required insurance policies, including endorsements required by these specifications, at any time.

D. SUBCONTRACTORS
Consultant shall include their subcontractor(s) as additional insured(s) under the policies or shall furnish separate certificates and endorsements for each contractor and subcontractor. Consultant shall require and verify that all contractors and subcontractors maintain insurance meeting all the requirements stated herein, and Consultant shall ensure that City, its officers, officials, employees, agents, and volunteers are named as additional insureds on insurance required from its contractor(s) and subcontractor(s).

E. SPECIAL RISKS/CIRCUMSTANCES
City reserves the right to modify these requirements, including limits, based on the nature of the risk, prior experience, insurer, coverage, or other special circumstances and provide notice to Consultant.

10.20 City Council

AGENDA REPORT
DATE: 02/08/2024
AGENDA OF: 02/27/2024
DEPARTMENT: Public Works
SUBJECT: Neary Lagoon Security Fencing Project (m409688) – Notice of Completion (PW)
RECOMMENDATION: Motion to accept the work of Abacherli Fence Company (Soquel, CA) as completed per plans and specifications and authorize the filing of the Notice of Completion for the Neary Lagoon Security Fencing Project (m409688).

BACKGROUND: The Neary Lagoon Management Plan (NMLP) was established in 1992 and serves as a guide to maintain and preserve the long-term viability of the lagoon area as an ecosystem. The Neary Lagoon Fence is part of that plan and was constructed to control public access to sensitive wildlife habitat areas.

The City Council approved the Plans and Specifications and authorized the City Manager to execute the construction contract with Abacherli Fence Company in the amount of $130,850 the May 9, 2023 meeting. Work began on July 18, 2023, and included the rehabilitation and installation of an ornamental iron fence near the Wastewater Treatment Facility (WWTF) along the railroad tracks and Neary Lagoon Park trail. The Neary Lagoon fence serves the purpose of protecting important wildlife areas around Neary Lagoon Park and maintaining the current ecosystem.

DISCUSSION: The work for this project is now complete. The project has been inspected by the Public Works Department and found to be constructed in accordance with the plans and specifications.

FISCAL IMPACT: The project was funded in the FY 2023 Wastewater Enterprise Fund as Neary Lagoon Park Annual Rehabilitation and Maintenance (m409668). There is no impact on the General Fund.

Prepared By:

Dale Cabreros
Engineering Technician
Submitted By:

Nathan Nguyen, P.E
Director of Public Works
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. NOTICE OF COMPLETION.DOCX

11.1 P:\_Public\_Council Reports in Progress\February 27, 2024\Neary Lagoon Security Fencing Project (m409688) - Notice of Completion (PW)\Notice of Completion.docx
Wednesday, January 31, 2024
Dale Cabreros
(Space above for Recorder’s use only)
This instrument is being recorded for the benefit of the City of Santa Cruz.

No recording fee is required pursuant to Government Code § 27383.

NOTICE OF COMPLETION
(CA Civil Code Sections 8102 and 9204)
NOTICE IS HEREBY GIVEN THAT:

The undersigned is an authorized representative of the owner of the interest or estate stated below.

1. The Owner’s Name and Address. The Project owner is the City of Santa Cruz, a municipal corporation (the “City”). The City’s mailing address is 809 Center Street, Santa Cruz, California 95060. The City of Santa Cruz has the following interest in the subject Property described below: City Property

2. Project Title and Number. The full name of the work of improvement/public works project (the “Project”) which is the subject of this Notice of Completion is: Neary Lagoon Security Fencing Project m409668

3. Nature of Work Performed on the Property or Materials Furnished for the City. The Project consisted of work described as: Installation of new security fence in Neary Lagoon Park and near Santa Cruz Wastewater Treatment Facility

4. The general site location description or address (the “Property”) of the public improvement is located at: 110 California St, Santa Cruz CA 95060

5. Name and Address of Contractor. The Contractor on the Project is: Abacherli Fence Company 3125 Porter St, Soquel CA 95073

6. Construction Lender. The name and address of the construction lender, if any, is: NA

7. Date of Completion. The Project on the Property was completed on: January 5, 2024

8. The filing of this Notice of Completion was authorized by the Santa Cruz City Council Minute Order on Tuesday, February 27, 2024
DATE: ___________________
Nathan Nguyen
Director of Public Works, City of Santa Cruz
RECORDED AT THE REQUEST OF:

City of Santa Cruz, Public Works
Attn: Dale Cabreros
WHEN RECORDED MAIL TO:

City Clerk’s Department
809 Center Street, Room 9
Santa Cruz, CA 95060

11.2 P:\_Public\_Council Reports in Progress\February 27, 2024\Neary Lagoon Security Fencing Project (m409688) - Notice of Completion (PW)\Notice of Completion.docx
Wednesday, January 31, 2024
Dale Cabreros

VERIFICATION FOR THE CITY OF SANTA CRUZ
I have read the foregoing Notice of Completion and know the contents thereof, and I certify that the same is true of my own knowledge, except as to those matters which are therein stated upon my information or belief, and as to those matters I believe it to be true. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Executed on ____________________at Santa Cruz, CA
Nathan Nguyen
Director of Public Works, City of Santa Cruz

11.3 Notice of Completion (Revised Oct 2021)

PROOF OF SERVICE DECLARATION
(California Civil Code § 8118)
I, Dale Cabreros, declare that I served copies of the above NOTICE OF COMPLETION on the interested parties, in the manner and at the date and place set forth below (Check One):

Direct Contractor: Abacherli Fence Company
3125 Porter St, Soquel CA 95073
☐ REGISTERED, CERTIFIED, OR EXPRESS MAIL: by placing the Notice in a sealed envelope with postage fully prepaid and depositing the envelope in the United States mail by registered, certified, or express mail. Documentation of such service is attached herein. ☐ OVERNIGHT DELIVERY: by causing the Notice to be picked up for overnight delivery by an express service carrier. Documentation of such service is attached herein. ☐ PERSONAL DELIVERY: by causing the Notice to be personally delivered to each of the addresses above stated on the date below.
☐ CODE OF CIV. PROC. § 415.20: by leaving the Notice and mailing a copy of the Notice in the manner provided under California Code of Civil Procedure § 415.20 for service of a summons and complaint in a civil action.

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Executed on February 27, 2024, at Santa Cruz, California.

Dale Cabreros

11.4 ORDINANCE NO. 2024-06

AN UNCODIFIED ORDINANCE OF THE CITY OF SANTA CRUZ EXTENDING UNCODIFIED EMERGENCY ORDINANCE NO. 2022-16 AUTHORIZING TEMPORARY

USE OF CERTAIN ADJACENT PUBLIC STREET AND OUTDOOR AREAS FOR ELIGIBLE

BUSINESSES IMPACTED BY INDOOR BUSINESS CLOSURES RELATED TO THE COVID-19 PANDEMIC UNTIL MAY 31, 2025 ON PRIVATE PROPERTY BE IT ORDAINED by the City Council of the City of Santa Cruz as follows:

WHEREAS, on March 4, 2020, California Governor Gavin Newsom declared a State of Emergency to make additional resources available, formalize emergency actions already underway across multiple state agencies and departments, and help the state prepare for a broader spread of COVID-19; and
WHEREAS, on March 10, 2020, the Santa Cruz City Council adopted Resolution No. NS29,640 Declaring a Local Health Emergency in response to the COVID-19 pandemic; and WHEREAS, in light of the devastating impacts that the pandemic has had on the local economy and for locally owned businesses in particular, the Director of Emergency Services issued two related Executive Orders to address the ability for businesses to temporarily use certain areas of the public right-of-way and private property for commercial activity, namely Executive Order No. 2020-11, issued on June 4, 2020 (ratified by City Council Resolution No. NS-29,667 on June 23, 2020) and Executive Order No. 2020-15, issued on July 30, 2020 (ratified by City Council Resolution No. NS-29,695 on August 11, 2020); and
WHEREAS, on December 8, 2020, the City Council adopted an uncodified Emergency Ordinance No. 2020-27, incorporating Executive Order Nos. 2020-11 and 2020-15, allowing for the continued temporary use of certain public right-of-way and private areas until October 31, 2021; and
WHEREAS, on June 22, 2021, the City Council adopted an uncodified Emergency Ordinance No. 2021-14, which extended uncodified Ordinance No. 2020-27, allowing for the temporary use of certain areas of the public right of way and private property for commercial activity until December 31, 2021; and
WHEREAS, on November 9, 2021, cognizant of the prolonged negative impacts of the pandemic to local businesses, the City Council adopted an uncodified Ordinance No. 2021-21, further extending uncodified Ordinance No. 2020-27, allowing for the temporary use of certain areas in the public right-of-way and private property until December 31, 2022; and WHEREAS on October 25, 2022, the City Council adopted an uncodified Ordinance 2022- 16, which extended uncodified Ordinance No. 2020-27 to allow for the temporary use of certain public street and outdoor areas for commercial activity (1) until October 31, 2023 in the public

12.1 ORDINANCE NO. 2024-06
2 right-of-way; (2) until March 31, 2024 on private property; and (3) extending the Cathcart Street temporary partial street closure until March 31, 2023; and WHEREAS, at the October 25, 2022 meeting, the City Council also directed City staff to work with the Outdoor Dining City Council ad-hoc Subcommittee to draft ordinance amendments and procedures to streamline the permanent private outdoor dining permit process, and work with Coastal Commission for approval of permits for private properties within the coastal zone; and WHEREAS, City staff is finalizing ordinance amendments and procedures for the permanent private outdoor dining program, and estimates businesses will need approximately one year following the anticipated adoption of the program in Spring 2024 to continue operating under the temporary permits while the businesses apply for permits under the permanent private outdoor dining program; and
WHEREAS, the City Council finds that extending the duration of uncodified Ordinance No. 2020-27 until May 31, 2025 for temporary use of private property for commercial activity will facilitate business recovery, generate increased sales tax revenue for the City, provide City staff the time necessary to finalize ordinance amendments and procedures for the permanent private outdoor dining program, and provide business owners sufficient time to apply for and obtain permits for the permanent private outdoor dining program.

Section 1. Section 5 of uncodified Ordinance No. 2020-27, adopted as an emergency measure by the City Council on December 8, 2020, and amended by uncodified Ordinances No. 2021-14 on June 22, 2021,No. 2021-21 on November 9, 2021, and No. 2022-16 on October 25, 2022, is hereby further amended to include the following expiration date:

Temporary Use Located on Private Property: shall expire on May 31, 2025.

Section 2. California Environmental Quality Act (CEQA) Compliance. This ordinance is exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines 15301 (existing facilities), 15303 (construction and location of limited numbers of new, small facilities or structures; installation of small new equipment and facilities in small structures) and 15304(e) (minor temporary use of land having negligible or no permanent effects on the environment).

Section 3. This Ordinance shall take effect thirty (30) days following its final adoption (the “Effective Date”) and shall expire on the dates set forth above, unless further extended by action of the City Council.

12.2 ORDINANCE NO. 2024-06
3 PASSED FOR PUBLICATION this 13th day of February, 2024, by the following vote:

AYES: Councilmembers Newsome, Brown, Watkins, Brunner, Kalantari-Johnson; Vice Mayor Golder; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

APPROVED: ______________________________
Fred Keeley, Mayor
ATTEST: _________________________________
Bonnie Bush, City Clerk Administrator
PASSED FOR FINAL ADOPTION this 27th day of February 2024, by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: ______________________________
Fred Keeley, Mayor
ATTEST: _________________________________
Bonnie Bush, City Clerk Administrator
This is to certify that the above and
foregoing document is the original of
Ordinance No. 2024-06 and that it has
been published or posted in accordance
with the Charter of the City of Santa
Cruz.
________________________________
Bonnie Bush, City Clerk Administrator

12.3 Proof of Publication
(2015 C.C.P.)
I, the undersigned, declare:

That I caused the attached legal notice/advertisement to be published in the Santa Cruz Good Times, a weekly newspaper published and circulated in the County of Santa Cruz, and adjudged a newspaper of general circulation by the Superior Court of California in and for the County of Santa Cruz, under Proceeding No. 68833; and that the legal notice/advertisement was published in the above-named newspaper on the following date(s), to wit:

February 21, 2024
I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge.

This 21st day of February, 2024, Santa Cruz, California ____________________________
Julia Wood
Deputy City Clerk Administrator

12.4 DECLARATION OF POSTING

STATE OF CALIFORNIA )
) SS.

COUNTY OF SANTA CRUZ )
On the 20th day of February, 2024, I posted conspicuously in three public places within the City of Santa Cruz, Ordinance No. 2024-06, to wit:

1. City Hall: 809 Center Street: Bulletin Board outside Room 9/10

2. City Hall: Bulletin Board outside Council Chambers

3. The City of Santa Cruz website
The document, posted in its entirety, consists of pages 1—3.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 20th day of February, 2024, in Santa Cruz, California.
_______________________________
Julia Wood
Deputy City Clerk Administrator

12.5 From: Garrett
To: City Council
Subject: 2.27.24 Agenda Item #12 Outdoor Dining Ordinance Date: Friday, February 23, 2024 10:29:50 AM

2.27.24 Agenda Item #12 Outdoor Dining Ordinance
Dear Council,
For the record I would summarize my objections to an extension of emergency ordinances to allow eventually a permanent Outdoor dining ordinance in the City of Santa Cruz.
1) There is no longer a Covid emergency, and hasn't been for the longest time, made longer by repeated no justification extensions by the State and yourselves far in excess of nearly every state in the union. In effect, this is another, at least ideological (and unnecessary), extension.
2) Essentially, you are auctioning off the public right of way FOR MONEY, MONEY PAID TO THE CITY GOVERNMENT, to the benefit of a very few businesses, and to enrich the city government, and not to the benefit of the public at large who's right of way you intend to remove and abuse eventually forever.
3) By your logic, there is no limit to the public right of way you intend to remove. Any business with money can apply, secure exclusive use, and prevent public access demanding payment for services.
4) It removes public parking, and the general publics right to occupy public spaces by issuing these exclusive public property use permits. You ignore these downsides to your actions.
5) The ordinance interferes with the free market. Those business who have the money and available public space to expand do so at the market share expense of those who may not have either. There are always vacancies somewhere in the dining space across the city, and those with more tables will take business from those with less. It is not so clear the presence of extra tables automatically means there are more diners increasing revenue in total, but only more so for those business who can expand at the expense of others.
6) In general this continues the fear mongering campaign of the Covid scare. The lies and fear mongering of the pandemic still has people wearing masks, even outside, which we know don't protect anyone as well as the lie of social distancing.

While being outside dining might in the days of the pandemic be a safer alternative, that day is OVER and the sooner people return to normal behavior, the better.

Outside dining alternatives reinforce the now debunked fear narrative. Most all people were never at the risk levels the government did and continues to profess.

12.6 7) Exclusive use permits of public property should exist only where it is in the public interest to have them. A snack bar permit at the lighthouse is an example of such since retail is far away. Parking spaces converted all over the city to outside sidewalk dining to any business with the required cash is not.

Government is not a business. Not a growth business. Public property is not in existence for the benefit of the government. Public property is owned by the public, the vast majority of which are now being denied such by this ordinance.

This abuse of public property to enrich the government and the few needs to stop and go away.

Garrett Philipp - Westside

12.7 City Council

AGENDA REPORT
DATE: 02/08/2024
AGENDA OF: 02/27/2024
DEPARTMENT: Economic Development and Housing
SUBJECT: Joby Employment Incentive Loan Agreement (ED)
RECOMMENDATION: Motion authorizing the City Manager to execute an Employment Incentive Loan Agreement and any non-substantive changes, in a form approved by the City Attorney, and other related documents, with Joby Aero, Inc. in an amount up to $500,000.

BACKGROUND: Joby Aero, Inc (Joby) is an aeronautical technology company developing an all-electric aircraft intended for commercial operations. Joby’s mission is to help the world connect faster and more easily with the people and places that matter most by delivering a new form of clean, quiet aerial transportation. Building on recent advancements in energy storage, microelectronics, material science and software, Joby is developing an all-electric aircraft with zero operating emissions that will transport a pilot and four passengers at speeds of up to 200 mph, while also having the ability to take off and land vertically.

Joby’s vision is to operate aircraft on journeys of 5 to 100 miles, providing rapid and costeffective connections between cities and their surrounding areas. Compared to traditional, ground-based infrastructure such as road and rail, aerial ridesharing networks can be set up rapidly, and at significantly lower cost, enabling Joby to provide a sustainable solution to today’s dual challenges of congestion and climate change. To date, Joby has completed more than 1,000 test flights with their prototype aircraft, demonstrating the range, acoustic profile, speed and altitude capabilities of the aircraft.

In order to successfully bring clean, quiet aerial transportation to market, Joby will need to attract and retain employees with a diverse set of skills and perspectives in order to scale their manufacturing capabilities and expand their current operations. Many of Joby’s current 1,422 employees in California are located in highly competitive labor markets. In addition to providing competitive cash and equity compensation, Joby offers employees a compelling vision and an opportunity to positively impact their communities as a key part of their workforce growth strategy. Joby has a strong commitment to investing in the communities where they operate, with programs enabling accessibility, education and training. This has multiple benefits including broadening the reach of new technologies such as electric aviation, improving awareness and social license to operate in communities, extending opportunities to underserved communities, and developing their future workforce.

Over 80% of Joby’s employees in California directly support their engineering, certification and early manufacturing operations. As a fully integrated company, Joby employs full-time

13.1 technicians, machinists, construction workers, QA inspectors, engineers, managers and support personnel.

To fully realize their vision, Joby purchased a facility in the industrial area of Harvey West in November 2022 consisting of approximately 162,000 square feet and moved its corporate headquarters to this location in 2023. Previously, Joby’s headquarters were in a 23,000 square feet location off Delaware Avenue in Santa Cruz. Currently, Joby employs over 250 individuals who reside in the City of Santa Cruz. Joby is solidifying its commitment to the region as it works to expand its workforce exponentially in the coming years to reach 450-500 employees at its Encinal headquarters.

DISCUSSION: Joby has requested the City’s financial assistance to establish an employment center by providing a loan in the amount of five-hundred thousand dollars ($500,000) for the purchase and acquisition of certain equipment, which will be paid or forgiven over time if certain conditions are met relating to job creation and retention, as further described below. Expenditure of funds will be used for testing, manufacturing, and safety equipment, including communications, safety, and other advanced specialized manufacturing equipment for the facility, such as CNC machines, lasers, and grinders.

Providing Joby with incentives to establish and expand their employment center in the City would help diversify the City’s economy, create jobs for residents, and stimulate additional tax revenues to the City. The City desires to incentivize high-growth industries to establish and grow major employment centers in areas of the City most appropriate for job creation and to create and retain jobs in the City. The proposed Employment Incentive Loan Agreement is consistent with the City’s Economic Development Strategy goals of supporting growth in technology companies focused on innovation. The public purpose of this economic development incentive is to promote the general welfare of the City and its residents by creating new full-time jobs, expanding the range of employment opportunities and generating other City revenues, thereby enriching quality of life within the City of Santa Cruz.

Proposed Employment Incentive Loan Agreement (agreement) Terms:
• City would make a forgivable loan to Joby in an amount not to exceed $500,000. • The loan would be disbursed over a period of not more than five years with installment payments based upon an annual employment survey.
• Joby would submit the annual employment survey to demonstrate the total number of new fulltime employees in an agreement year. The employment growth would be determined on a net basis to ensure that Joby is contributing to employment growth in the City. The survey would require Joby to report the total number of employees at its Santa Cruz employment center, the total number of full-time employees (both on an hourly and salary basis), and information about prior year employment to determine the total number of net new full-time employees. • For each new full-time employee, the City would disburse $2,000. Joby cannot claim more than 100 net new employees in a year, which means that the City’s maximum payment for a given year is $200,000. The City would have the opportunity to review and approve the requested annual incentive payment.
• The loan amount would be forgiven within 90 days of submittal of the annual employment survey if Joby can demonstrate that it has eligible expenses, which include (1) testing, manufacturing, and safety equipment, and (2) communications, security, and other facilityrelated equipment.

13.2 • The agreement would require reimbursement of specified amounts to the City if: (1) there is a reduction in employment over the course of 5 years, or (2) the company relocates its Santa Cruz headquarters prior to 2038.
• The agreement will commence in 2024 and will use the employment baseline in 2023 to determine if Joby is eligible for annual incentive payments in 2024. • The agreement will provide that the city will have a security interest in certain personal property to secure the amounts loaned and Joby’s performance under the agreement. • In total, the agreement incentives 250 new full-time employees that would be employed at the Joby facility in the City of Santa Cruz.

Staff recommends that the City Council authorize the City Manager to execute an Employment Incentive Loan Agreement, in a form approved by the City Attorney, and other related documents including a promissory note, with Joby in order to provide assistance in the form of a loan in an amount up to $500,000 based on employee job generation and retention. Staff is also recommending that forgiveness of the loan be contingent upon Joby’s meeting specific performance benchmarks including its continued presence in the City of Santa Cruz during the life of the loan and a ten-year period afterwards, as well as increased employment retention during the specified period in the loan agreement.

ENVIRONMENTAL IMPACT: The Joby headquarters and employment center is located in the industrial area of Harvey West and the current land use is a principally permitted use consistent with the use by the previous owner and is categorically exempt. Developing sustainable mobility solutions including the electrification of aerial transportation will significantly reduce CO2 emissions as an alternative to current combustion engines.

HEALTH IN ALL POLICIES: The proposed Employment Incentive Loan Agreement aligns directly with the city’s commitment to “Health in All Policies.” By supporting and incentivizing the establishment of businesses and the growth of employment locally, we enhance the quality of life for residents. This not only contributes to economic growth and prosperity but also fosters health equity and sustainability in our community. Moreover, the company’s commitment to engagement of community members in the decision-making process ensures that their needs and perspectives are considered, leading to a more inclusive and healthier urban environment and a more vibrant city for all residents.

FISCAL IMPACT: The proposed Employment Incentive Loan Agreement results in a commitment of up to $500,000 from the City’s Economic Development Trust Fund. Loan funding would be provided to Joby on a reimbursement basis annually based on employee job generation and retention. Based on current projections, it is anticipated that the funding will be disbursed over a 3-4 year period. If Joby moves or relocates its employment center and headquarters prior to 2038, Joby will be obligated to reimburse the City for a percentage of loan funding, on a prorated basis. Funding for the agreement has been included in the FY 2024 approved Economic Development Budget. There is no impact to the General Fund related to the recommended action.

Prepared and Submitted By:

Bonnie Lipscomb
Economic Development and
Housing Director
Approved By:

Matt Huffaker
City Manager

13.3 ATTACHMENTS:

1. EMPLOYMENT INCENTIVE LOAN AGREEMENT .PDF

2. ECONOMIC DEVELOPMENT SUBSIDY REPORT.PDF

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EMPLOYMENT INCENTIVE LOAN AGREEMENT
This EMPLOYMENT INCENTIVE LOAN AGREEMENT (“Agreement”), dated _____________, 2024, for purposes of identification, is between the CITY OF SANTA CRUZ, a California municipal corporation (the “City”), and JOBY AERO, INC., a Delaware corporation (“Joby Aviation” or “Company”).

Background
Joby Aviation is an aeronautical technology company developing an electronic aircraft intended for commercial operations. Joby Aviation has located its corporate headquarters and certain operations in the City, including a planned development and testing facility (“Employment Center”). Joby Aviation creates high-quality, full-time jobs by paying competitive wages and offering comprehensive benefits packages.

The City wishes to provide Joby Aviation with incentives to establish and expand the Employment Center in the City because Joby Aviation would diversify the City’s economy, create jobs for residents, and stimulate additional tax revenues to the City. The City desires to incentivize high-growth industries to establish and grow major employment centers in areas of the City most appropriate for job creation and to create and retain jobs in the City.

Joby Aviation has requested the City’s financial assistance to establish the Employment Center by providing a loan in the amount Five-Hundred Thousand Dollars ($500,000) for the purchase and acquisition of certain equipment, which will be paid or forgiven over time if certain conditions are met relating to job creation and retention, as set forth herein.

The City desires to provide the assistance, as requested, on the terms set forth in this Agreement, in a manner that is consistent with the City’s Economic Development Strategy goals of supporting growth in technology companies focused on innovations. The City finds the public purpose of this economic development incentive is to promote the general welfare of the City and its residents by creating new full-time jobs, expanding the range of employment opportunities and generating other City revenues, thereby enriching quality of life.

With these background facts in mind, the City and Joby Aviation agree as follows:

1. Term. This Agreement takes effect as described in Section 24 and terminates January 31, 2038 (“Term”).

2. Definitions. The following definitions apply in this Agreement:
“Agreement Year” means each of the five (5) consecutive calendar years beginning on January 1, 2024.
“Annual Wage Standard” means, for each Agreement Year, an amount equal to the annual wages per employee for Santa Cruz County as shown on the most recent release as of January 1 of the calendar year immediately preceding the Agreement Year in the table of annual averages released by the U.S. Bureau of Labor Statistics’ Quarterly Census of Employment and Wages, Annual Averages, Private, 10 Total, all industries, All Counties in California, All establishment sizes

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(https://data.bls.gov/cew/apps/table_maker/v4/table_maker.htm#type=2&st=06&year=2016&qtr =A&own=5&ind=10&supp=0.)
“Annual Employment Measurement” means the number of Eligible Full-Time Employees, determined on an Annual Full-Time Equivalent basis, that Company Assigns to the Employment Center measured for the calendar year immediately preceding Agreement Year 1 and each calendar year thereafter. The Annual Employment Measurement must be a whole number, therefore, if the number of Eligible Full-Time Employees determined on an Annual Full-Time Equivalent basis is not a whole number, then the measurement will be rounded down to the nearest whole number.
“Annual Full-Time Equivalent” means either of the following: (i) In the case of a FullTime Employee or combination of Full-Time Employees paid hourly Wages, “Annual Full-Time Equivalent” means the total number of hours Worked by the employee or employees for Company during a calendar year, not to exceed 1,750 hours per employee, divided by 1,750, or (ii) In the case of a salaried Full-Time Employee or combination of Full-Time Employees, “Annual FullTime Equivalent” means the total number of weeks Worked by the employee or employees for Company during a calendar year, not to exceed 50 weeks per employee, divided by 50. “Assign to the Employment Center” means to require an employee to report for work, receive official business correspondence, and spend the majority of the employee’s office hours (excluding time spent in the field, at training, or on out-of-area business travel) at the Employment Center, but excluding any employee who meets both of the following: (1) the employee is temporarily working at the Employment Center, and (2) the Company does not claim an Employment Incentive for the employee.
“City Loan” shall mean the loan in the amount of Five Hundred Thousand Dollars ($500,000) for the purposes set forth in Section 4.
“City Note” shall mean the Promissory Note evidencing the City Loan attached hereto as Exhibit 4 and incorporated herein by reference, which evidences the City Loan. “Joby Aviation” or “Company” means Joby Aero, Inc. and its affiliates and subsidiaries listed in Exhibit 1, which may be amended from time to time pursuant to Section 14. “Eligible Full-Time Employee” means a Full-Time Employee who is hired by Company on or after January 1, 2023. An Eligible Full-Time Employee does not include any of the following:
(i) any person employed by Company who is transferred or otherwise re-located to Santa Cruz while employed by Company, except as specifically stated herein, (ii) an individual who becomes an employee of Company due to Company’s acquisition of, or merger with, another business located within the geographic boundaries of Santa Cruz County, (iii) an individual who becomes an employee of Company due to a transfer of employees from a person or entity that is treated as related to Company under 26 U.S.C. sections 267, 318, or 707 or from any member of a “controlled group of corporations” (as defined in California Revenue and Taxation Code section 23626) in which Company is a member, unless the transfer is of an employee employed outside of Santa Cruz County by a related person or entity and the employee is transferred so that the employee is located at the Employment Center, or (iv) an individual who becomes an employee of Company due to employment of any employees that were previously employed by a person or entity that is treated as related to Company under 26 U.S.C. sections 267, 318, or 707 or by any member of a “controlled group of corporations” (as defined in California Revenue and Taxation Code section

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23626) in which Company is a member, unless the employment is of an employee that was employed outside of Santa Cruz County by a related person or entity. “Employment Baseline” means, for Agreement Year 1, the number of employees Assigned to the Employment Center as of January 1, 2023. Beginning in Agreement Year 2, and for each subsequent Agreement Year, the Employment Baseline shall be increased by the total number of Eligible Full-Time Employees, determined on an Annual Full-Time Equivalent basis, for which Company has previously received an Employment Incentive, except that if the City’s Annual Incentive Payment is reduced or must be reimbursed pursuant to Section 8, then the Employment Baseline will be decreased by the number of Net New Employees for which the City offset or recaptured Employment Incentives.
“Employment Center” means the Company’s facilities located at 333 Encinal (APN: 001- 171-18) and 324 Encinal in Santa Cruz, California (APN: 001-17-219) where Company conducts or will conduct business as contemplated by this Agreement. “Employment Incentive” means a business attraction incentive payment of Two Thousand Dollars ($2,000) per Net New Employee claimed by Company, and which will be paid as part of the Annual Incentive Payment, in exchange for establishing and retaining Net New Employees at the Employment Center, in accordance with all requirements of this Agreement. “Fiscal Year” means July 1 of one year through June 30 of the next year. “Full-Time Employee” means a common law employee of Company that is paid Wages for services in California of not less than an average of 35 hours per week. “Full-Time Equivalent Employee Milestone” means a designated number of Full-Time Employees, determined on an Annual Full-Time Equivalent basis, that Company Assigns to the Employment Center.
“Net New Employee” means an Eligible Full-Time Employee, determined on an Annual Full-Time Equivalent basis, that represents a net increase in the number of Eligible Full-Time Employees, determined on an Annual Full-Time Equivalent basis, that Company Assigns to the Employment Center.
“Santa Cruz County” means the County of Santa Cruz, California. “Wage” or “Wages” means the amount of monetary compensation Company pays a fulltime employee (whether paid by the hour or a salary) per year and does not include tips, overtime, bonuses, commissions, stock options, benefits, or other compensation of any kind. “Worked” means an employee receives paid Wages on an hourly or weekly basis, including all paid leave.

3. Location of Employment Center. The purpose of this Agreement is to incentivize employment at the Employment Center. Company may amend the location or locations of the Employment Center, but only if the entire Employment Center remains within the City. If Company amends the location or locations of the Employment Center, Company shall notify the City of the additional parcels to be included at least 180 days before the beginning of the Agreement Year in which Net New Employees will be claimed on such additional parcels.

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4. City Loan.
(a) The City agrees to make a loan to Company in an amount not exceed Five Hundred Thousand Dollars ($500,000).
(b) The City Loan shall be disbursed to Company in Annual Incentive Payments on the terms and conditions set forth in this Agreement.
(c) The City Loan shall be repaid or forgiven on the terms and conditions set forth in this Agreement and the City Note.
(d) The City Loan shall be used solely for the purchase of (i) testing, manufacturing, and safety equipment and (ii) communications, security, and other facility-related equipment to be used at the Employment Center (collectively, the “Equipment”).

Company may also use the City Loan as reimbursement for the cost to purchase the Equipment, provided that the purchase occurred during the Agreement Year for which the Annual Incentive Payment is requested, or the immediately preceding calendar year. For the avoidance of doubt, in no event will the City Loan be used for capital expenditures. Title to the Equipment purchased with the City Loan shall be solely in the name of Company. Within ninety (90) days of receipt of an Annual Incentive Payment, Company shall provide documentation to City’s reasonable satisfaction that the City Loan has been expended for the uses stated herein. If required by Section 8(b)(iii), Company shall take all measures reasonably required by the City to grant and perfect a security interest in the Equipment as required by the Security Instrument.

5. Annual Incentive Payments. The City shall disburse the City Loan as Annual Incentive Payments, as provided in Section 6 for each Net New Employee that Company claims for an Agreement Year, and according to the procedure in Section 7, subject to the following conditions:
(a) The Company shall be eligible for an Annual Incentive Payment based on the number of Net New Employees that Company Assigns to the Employment Center, as measured from January 1 to December 31 of the calendar year immediately preceding the applicable Agreement Year. The amount of the Annual Incentive Payment shall be equal to the number of Employment Incentives that the Company is entitled to for an Agreement Year. For purposes of illustration, for Agreement Year 1, the Company may claim an Annual Incentive Payment for Net New Employees that qualify for an Employment Incentive based on the time period of January 1, 2023 to December 31, 2023.
(b) No Annual Incentive Payment will be disbursed in an Agreement Year unless at least fifty percent (50%) of the cumulative number of Net New Employees for which Company is claiming and has claimed an Employment Incentive are paid Wages during the immediately preceding calendar year that are equal to or greater than 120% of the Annual Wage Standard; provided that the amount shall not be less than $71,314.80, which is 120% of the Annual Wage Standard for 2021 in Santa Cruz County
(https://data.bls.gov/cew/apps/table_maker/v4/table_maker.htm#type=2&st=06& year=2021&qtr=A&own=5&ind=10&supp=0).

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(c) No Annual Incentive Payment will be disbursed for an Agreement Year unless the average of the Wages paid, on an Annual Full-time Equivalent basis, during the applicable calendar year to the cumulative Net New Employees for which Company is claiming and has claimed an Employment Incentive, is equal to or greater than 120% of the Annual Wage Standard that applies in the calendar year for which Company claims the Employment Incentive.
(d) In the event the Wages of Net New Employees for which Company previously received an Employment Incentive do not keep pace with an increase to the Annual Wage Standard, resulting in average Wages of Net New Employees for all Agreement Years that do not meet the standards set forth in subsections (b) and (c) above, Company shall not be credited additional Employment Incentives until such average Wages again meet the standards set forth in subsections (b) and (c); provided, however, that failure to meet the standards set forth in subsections (b) and (c) is not a basis for the City to recapture Employment Incentives under Section 8, nor shall it be a basis for the City to terminate the Agreement pursuant to subsection (f).
(e) On or prior to February 1 beginning in Agreement Year 2 and continuing for two years following the last Agreement Year, Company shall submit to the City completed employment surveys, in the format of Exhibit 3, certifying the number of Eligible Full-Time Employees, on an Annual Full-Time Equivalent basis, that Company Assigns or has Assigned to the Employment Center during the calendar year immediately preceding the year in which Company submits the employment survey and for which Company seeks an Employment Incentive (“Annual Employment Survey”). In Agreement Year 1, Company shall submit to the City the Annual Employment Survey within thirty (30) days of complete execution of this Agreement, but no later than April 1, 2024.
(f) If Company does not satisfy any condition in this Section 5, then it is in default under this Agreement. The City may, in its sole discretion, immediately terminate this Agreement if Company fails to cure the default within 365 days after receiving notice of default from the City, and seek any and all remedies under this Agreement and the City Note.

6. Employment Incentive Milestones. Employment Incentives will be available subject to following conditions:
(a) The total amount of Annual Incentive Payments under this Agreement will not exceed the amount owed under the City Note or create any obligation of City to pay Company an amount other than what is authorized by the City Note. (b) There will be five tranches of 50 Net New Employees for which Company may claim Employment Incentives. Each tranche has a Full-Time Employee Equivalent Milestone, measured as of January 1 of each Agreement Year, that Company must achieve and maintain to claim Employment Incentives for any of the 50 Net New Employees in that tranche. The five tranches of 50 Net New Employees and corresponding Full-Time Equivalent Employee Milestones are as follows:

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Tranche Net New Employees Full-Time Equivalent
Employee Milestone
1 50 250
2 50 300
3 50 350
4 50 400
5 50 450
Totals: 250 n/a
(c) The number of Net New Employees claimed for Employment Incentives shall be limited by Agreement Year such that Company shall not claim an Annual Incentives Payment for more than one hundred (100) Net New Employees for any Agreement Year.
(d) For each Agreement Year, Company may claim a Net New Employee for an increase in Eligible Full-time Employees, determined on an Annual Full-Time Equivalent basis, that occurs in the immediately preceding calendar year. In the event that Company is unable to claim a Net New Employee due to exceeding the maximum number of Net New Employees for an Agreement Year (as measured by the applicable calendar year), Company may claim a Net New Employee in any Agreement Year after the increase in Eligible Full-time Employees occurs if the number of Eligible Full-time Employees, determined on an Annual Full-Time Equivalent basis, and the Full-Time Equivalent Employee Milestone required for that tranche of Net New Employees are maintained for the applicable Agreement Year in which Company claims the Employment Incentive for the Net New Employee(s).

7. Procedure for Making Annual Incentive Payments. Beginning in Agreement Year 1 and each Agreement Year thereafter, the City shall make Annual Incentive Payments based on the following procedure:
(a) Company shall timely submit to the City the Annual Employment Survey as required by Section 5(e).
(b) In the Annual Employment Survey, Company will provide (i) the number of Net New Employees for which Company is claiming an Employment Incentive, and (ii) the cumulative number of Eligible Full-Time Employees, on an Annual Full-Time Equivalent basis during the applicable calendar year, and (iii) any other information reasonably required by City for the purpose of determining the Employment Incentives to be paid under this Agreement.
(c) The City shall determine the total number of Net New Employees that meet the requirements of this Agreement and which shall be counted for purposes of determining the Annual Incentive Payment no later than March 1 following Company’s submission of an employment survey claiming an Employment Incentive, provided Company provides a timely Annual Employment Survey.

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(d) Within twenty (20) business days of determining the total number of Net New Employees under sub-paragraph (c) of this Section 7, the City shall disburse the Annual Incentive Payment to Company in accordance with the Note.

8. Requirements for Forgiveness of City Loan.
(a) Within ninety (90) days of receipt of the Annual Incentive Payment to Company, Company shall provide the City with written documentation of eligible expenses of Equipment as described in Section 4(d) herein. Upon receipt of the written documentation of eligible expenses, the City shall reduce the amount owed under the City Loan by the amount of eligible expenses for Equipment, but not to exceed the Annual Incentive Payment or any interest, subject to the conditions stated in this Section 8 and the City Note.
(b) The Company shall reimburse the City for any amounts of the City Loan that have been previously forgiven as follows:
i. If the number of Eligible Full-Time Employees Company reports on an Annual Employment Survey is less than the Employment Baseline in any of the two calendar years after an Agreement Year in which Company received an Employment Incentive, then Company shall reimburse the City Loan by paying an amount equal to an Employment Incentive multiplied by the difference between the number of Eligible Full-Time Employees reported in the Annual Employment Survey and the Employment Baseline.

If the Employment Baseline for the prior two years is lower than the number of Eligible Full-Time Employees reported in the Annual Employment Survey, then the most recent Employment Baseline shall be used for determining the required reimbursement amount.
ii. Relocation of Employment Center. If, prior to January 31, 2038, the Company moves the Location of the Employment Center outside the City, or the Annual Employment Measure is otherwise reduced by fifty percent (50%) or more as compared to any prior calendar year during the Term of this Agreement, then the Company shall reimburse the City an amount equal to the percentage of Annual Incentive Payments that were paid to Company (“Relocation Reimbursement”) based upon the effective relocation date referenced below. To allow the City to make a determination as to whether reimbursement is owed under this sub-paragraph, on each January 31 through the year 2038, Company shall certify that it has not relocated the Employment Center outside the City.

1. For a relocation date on or before January 31, 2034, the Relocation Reimbursement shall be fifty percent (50%) of the Annual Incentive Payments paid and forgiven.

2. For a relocation date on or before January 31, 2035, the Relocation Reimbursement shall be forty percent (40%) of the Annual Incentive Payments paid and forgiven.

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3. For a relocation date on or before January 31, 2036, the Relocation Reimbursement shall be thirty percent (30%) of the Annual Incentive Payments paid and forgiven.

4. For a relocation date on or before January 31, 2037, the Relocation Reimbursement shall be twenty percent (20%) of the Annual Incentive Payments paid and forgiven.

5. For a relocation date on or before January 31, 2038, the Relocation Reimbursement shall be ten percent (10%) of the Annual Incentive Payments paid and forgiven.
iii. If Company defaults on the obligation to make any payment required under this sub-paragraph (b) or the Note, then the City shall have the right to record the Security Instrument attached as Exhibit 5 to this Agreement and file a UCC financing statement or fixture filing against the Employment Center.
(c) If Company is responsible for reimbursing the City as provided for in subparagraph (b) of this Section, it shall pay the amount within thirty (30) days from City’s written demand. If Company fails to timely make payment, then the City may, in its sole discretion, either: (i) reduce the Annual Incentive Payment by the amount Company failed to reimburse, or (ii) add the amount Company failed to reimburse to the principal of the City Loan.
(d) In the event that an Annual Incentive Payment is reduced or must be repaid as part of the City Loan under subdivision (b)(i) of this Section 8, the Employment Baseline for the next Agreement Year shall be reduced by an equivalent number of Eligible Full-Time Employees, on an Annual Full-Time Equivalent basis.

9. Inspection and Audit. During the Term of this Agreement, Company shall maintain all records regarding purchase of equipment for the allowed uses as set forth in Section 4, and payroll and employment records related to each Net New Employee for which Company receives an Employment Incentive under this Agreement. Once per calendar year, the City, through its accountants, auditors, attorneys, and consultants, may, upon giving 15-business days’ notice to Company, inspect (which includes making and retaining copies) and audit the records in support of the allowed uses and Exhibit 3 at the Employment Center to ensure Company’s compliance with the terms of this Agreement except that all “personally identifiable information,” as defined by the California Online Privacy Protection Act (“CalOPPA”) (Cal. Bus. & Prof. Code §22577, subd. (a)), must be redacted prior to making or retaining copies. Company shall reimburse the City for reasonable third-party audit expenses for up to two audits during the Term of this Agreement, not to exceed three thousand dollars ($3,000.00) per audit, incurred by the City no more than 30 days after the City provides Company with an invoice for the audit services.

10. Prevailing Wage. Company acknowledges the requirements of California Labor Code Section 1720, et seq., and 1770 et seq., as well as California Code of Regulations, Title 8, Section 16000 et seq. (“Prevailing Wage Laws”), which require the payment of prevailing wage rates and the performance of other requirements on “public works” and “maintenance” projects, as defined. If work at the Employment Center or any off-site improvements is being performed by Company as part of an applicable “public works” or “maintenance” project, as defined by the

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Prevailing Wage Laws, including but not limited to California Labor Code Section 1720 et seq. and implementing regulations, and if the total compensation under the contract in question is $1,000 or more, Company agrees to fully comply with such Prevailing Wage Laws. Company understands and agrees that it is Company’s obligation to determine if Prevailing Wages apply to work done on the Project or any portion of the Project. Upon Company’s request, the City shall provide a copy of the then current prevailing rates of per diem wages. If applicable, Company shall make available to interested parties upon request, copies of the prevailing rates of per diem wages for each craft, classification or type of worker needed to execute the work subject to Prevailing Wage Laws, and shall post copies at the Company’s principal place of business and at the Employment Center.

11. Indemnity.
(a) Company shall indemnify, defend (if so requested by the City, and with counsel reasonably acceptable to both Company and the City), and hold the City, its elected and appointed officers, officials, employees, agents, consultants, contractors, and assigns (severally and collectively, any “Indemnitee”), harmless from any loss, expense or other cost (including, without limitation, attorneys’ fees) related to any claim, action, lawsuit or other proceeding, whether administrative, at law or in equity, brought or maintained by or on behalf of any person or entity (other than Company or any Indemnitee) against any Indemnitee as a result of any conduct of Company in performing any obligation arising under this Agreement, except to the extent that any such claim, action, lawsuit, or other proceeding was caused by an Indemnitee’s gross negligence or willful misconduct. Without limitation on the foregoing provisions, and notwithstanding any other provision of this Agreement, if any court or administrative body of competent jurisdiction orders the return to the City of any Employment Incentive payment, Company shall hold any Indemnitee harmless from any claims that Company may have for reimbursement or contribution with respect to any such funds.
(b) Company shall indemnify, defend (with counsel reasonably acceptable to both Company and the City) and hold the City or any Indemnitees harmless from and against all liability, loss, cost, expense (including without limitation attorneys’ fees and costs of litigation), claim, demand, action, suit, judicial or administrative proceeding, penalty, deficiency, fine, order, and damage which directly or indirectly, in whole or in part, are caused by, arise in connection with, result from, relate to, or are alleged to be caused by, arise in connection with, or relate to, the payment or requirement of payment of Prevailing Wage Laws (including all claims that may be made by contractors, subcontractors, or third party claimants pursuant to Labor Code sections 1726 and 1781), the failure to comply with any state or federal labor laws, regulations or standards in connection with this Agreement, including California Labor Code Section 1720 et seq. and related regulations, or any act or omission of Company related to this Agreement with respect to the payment or requirement of payment of prevailing wages.

The provisions of this Section 11 shall survive the termination of this Agreement.

12. Contingent Obligation. This Agreement does not create an immediate indebtedness of the City to make Annual Incentive Payments under this agreement; instead, the City’s obligation to make Annual Incentive Payments is contingent on Company providing

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consideration by hiring and retaining Eligible Full-Time Employees and arises only after Company provides such consideration.

13. CEQA Compliance. This Agreement contains the framework for a government funding mechanism to provide Company with financial incentives for new jobs that it creates within the city. The parties acknowledge that City is not committing itself to any specific project by entering into this agreement. Company shall determine the location of the Employment Center.

The execution of this Agreement and imposes no obligation on the City to approve any Employment Center project. If preparation of the Employment Center for occupancy requires development that meets the definition of a project for purpose of the California Environmental Quality Act (“CEQA”), then no such project shall be deemed to be approved until after (i) the project is reviewed in accordance with the requirements of CEQA, (ii) any additional conditions or changes to the project based on the CEQA review have been resolved in a manner acceptable to the City, and (iii) all required permits for the project have been obtained by a qualified applicant in accordance with applicable laws and regulations. As required by law, the City retains the sole and independent discretion as the lead agency to decide whether to approve a project and, among other things, balance the benefits of the project against any significant environmental impacts prior to taking final action if such significant impacts cannot otherwise be avoided, and determine not to proceed with approval of the project.

14. Affiliates and Subsidiaries. Annually during the Term of this agreement, if there is a change in the affiliates or subsidiaries listed in Exhibit 1, then Company shall update Exhibit 1 no later than December 31, and upon the City’s request, Company shall provide the City with documentation that each entity with Eligible Full-Time Employees that Company claims as Net New Employees meets the definition of an affiliate or subsidiary.

15. Notices. Any notice, request, or other communication under this agreement must be in writing and is considered properly given and effective only when mailed or delivered in the manner provided by this Section 15 to the persons identified below. A notice or other communication that is mailed is effective or considered to have been given on the third day after it is deposited in the U.S. Mail (certified mail and return receipt requested), addressed as set forth below, with postage prepaid. A notice or other communication sent in any other manner will be effective or will be considered properly given when actually delivered. A party may change its address for these purposes by giving written notice of the change to the other party in the manner provided in this Section 15.

If to the City:

City of Santa Cruz
Economic Development Department
337 Locust Street
Santa Cruz, California 95060
Attn: Bonnie Lipscomb
Email: [email protected]
If to Company:

Joby Aero, Inc.
333 Encinal Street
Santa Cruz, CA 95060
Attention: Legal Department
Email: [email protected]

16. Assignments. A party may not assign or otherwise transfer this agreement or any interest in it without the other party’s prior written consent, which the other party may withhold in its sole discretion. An assignment or other transfer made contrary to this Section 16 is void.

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17. Binding effect. This agreement binds and inures to the benefit of the parties’ successors and assigns.

18. Time of Essence. Time is of the essence in performing this agreement.

19. Severability. If a court with jurisdiction rules that any nonmaterial part of this agreement is invalid, unenforceable, or contrary to law or public policy, then the rest of this agreement remains valid and fully enforceable.

20. Waiver. A party’s failure to insist on strict performance of this agreement or to exercise any right or remedy upon breach of this agreement will not constitute a waiver of the performance, right, or remedy. A party’s waiver of another party’s breach of any provision in this agreement is not a continuing waiver or a waiver of any later breach of the same or any other provision. A waiver is binding only if set forth in a writing signed by the waiving party.

21. Interpretation. This agreement is to be interpreted and applied in accordance with California law, except that that the rule of interpretation in California Civil Code section 1654 will not apply.

22. Attorneys’ fees. Should any litigation be commenced between the parties to this Agreement, the prevailing party shall be entitled to recover a reasonable sum as reimbursement for attorneys' fees and legal expenses.

23. No Third-Party Beneficiaries. This agreement is solely for the benefit of the City and Company. It is not intended to directly benefit any third parties.

24. Effective date. This agreement is effective as of the date it is duly executed by the Company and the City.

25. Counterparts. The parties may sign this agreement in counterparts, each of which is considered an original, but all of which constitute the same agreement. Facsimiles, pdfs, and photocopies of signature pages of the agreement have the same binding effect as originals.

26. Integration and modification. This agreement sets forth above and is intended to be their final, complete, and exclusive expression of those matters. It supersedes all prior or contemporaneous agreements, representations, and negotiations—written, oral, express, or implied—and may be modified only by another written agreement signed by both parties. (Signature Page Follows)

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City of Santa Cruz
By: ________________________________
NAME: Matt Huffaker
TITLE: City Manager
Date: _____________, 2024
Joby Aero, Inc.

By: ________________________________
NAME
TITLE
Date: _____________, 2024
Approved as to Form

BEST, BEST & KRIEGER
By: ______________________________
NAME:

TITLE: Special Counsel to the City
Attest:

By: _______________________________
City Clerk
Approved as to Form
NAME: Tony Condotti
TITLE: City Attorney
By: ___________________________

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EXHIBIT 1
(Joby Aviation, Inc. & Subsidiaries Organizational Chart)

TO BE INSERTED

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EXHIBIT 2
(Map)

TO BE INSERTED

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EXHIBIT 3
(Annual Employment Survey)

13.20 Exhibit 3
Annual Employment Survey

1.)

2.)

3.)

4.)

5.)

6.)

7.)

8.)

9.)

10.)

11.)

12.)

13.)

14.)
15) Enter the number of cumulative Net New Employees for which Joby has claimed Economic Incentives under this agreement (Enter sum of Line 13 for all Agreement Years).

Enter the Employment Baseline for the Calendar Year? (Enter line 9 from Annual Employment Survey from the immediately preceding Agreement Year, except in Agreement Year 1, enter "193") Enter the annual change (negative if decrease) in the number of Eligible Full-Time Employees, determined on an Annual Full-Time Equivalent basis, Assigned to the Employment Center for the Calendar Year? (Answer to Line 9 minus answer to Line 10)
Enter the number of Net New Employees for which Joby will claim Employment Incentives this Agreement Year.* (The lesser of Line 11 or the cumulative number of Net New Employees allowed for this and prior Agreement Years for which Joby has not received and retained an Employment Incentive, subject to yearly maximum and tranches in Section 6(b)-(c) of Incentive Agreement.)
Enter the lesser of lines 11 and 12. If less than zero, enter "0". This is the number of Net New Employees for which Joby is claiming Employment Incentives for this Agreement Year.

Enter the total number of the Full-Time Employees, determined on an Annual Full-Time Equivalent basis, Assigned to the Employment Center during the Calendar Year.

Enter the total number of Eligible Full-Time Employees, determined on an Annual Full-Time Equivalent basis, Assigned to the Employment Center during the Calendar Year (sum of Lines 1, 2, 5, and 8). This is the Annual Employment Measurement. If the number is not a whole number, then round down to the nearest whole number.

Calendar Year:

Agreement Year:

Annual Wage Standard this Agreement Year:

Enter the number of hourly Eligible Full-Time Employees Assigned to the Employment Center that were paid for 1,750 hours or more during the Calendar Year.

Enter the number of salaried Eligible Full-Time Employees Assigned to the Employment Center that were paid for 50 weeks or more during the Calendar Year.

Enter the number of hourly Eligible Full-Time Employees Assigned to the Employment Center that were paid for less than 1,750 hours during the Calendar Year.

For employees referenced in answer to question 3, enter the total number of paid hours Worked during the Calendar Year by the Eligible Full-Time Employees.

Enter the quotient that results when the answer to question 4 is divided by 1,750.

Enter the number of salaried Eligible Full-Time Employees Assigned to the Employment Center were paid for less than 50 weeks during the Calendar Year?
For the employees referenced in answer to question 6, enter the total number of paid weeks Worked during the Calendar Year by the Eligible Full-Time Employees.

Enter the quotient that results when the answer to question 7 is divided by 50.

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Santa Cruz City CouncilFebruary 27, 2024

Santa Cruz City Council
February 27, 2024