Santa Cruz City Council
February 10, 2026

CITY COUNCIL AGENDA
Regular Meeting - February 10, 2026
Council Chambers
809 Center Street
Santa Cruz
2:00 P.M. CLOSED SESSION
3:00 P.M. ORAL COMMUNICATIONS, CONSENT, AND PUBLIC HEARINGS Council meetings are hybrid, and 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 9th
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 8th by emailing the Mayor and the City Clerk.

Approval will be confirmed via email.
[email protected] [email protected]
February 10, 2026 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 Cal-Relay 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.santacruzca.gov/councilmeetings and at the Office of the City Clerk located at 809 Center Street, Room 8, 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.santacruzca.gov/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. 2:00 PM
Statements of Disqualification
Public Comment on Closed Session Items
Closed Session

1. Conference With Legal Counsel – Liability Claims (Government Code §54956.95)
1) Claimant: Michael Andrew Collins
2) Claimant: Brendan W. Daly
3) Claimant: Linda Ann Waskiewicz
4) Claimant: Vahid Ebrahimi
Claims against the City of Santa Cruz
February 10, 2026 City Council 3
Closed Session (continued)

2. Real Property Negotiations (Government Code §54956.8) 1) Property: 47 Municipal Wharf
APN: 007-341-06
Owner: City of Santa Cruz
City Negotiator: Bonnie Lipscomb
Negotiating Parties: Bonnie Lipscomb and Bruce Noland (dba Flotsam of California, Inc.)
Under Negotiation: Price, terms of payment, or both
2) Property: 41 Municipal Wharf
APN: 007-341-04
Owner: City of Santa Cruz
City Negotiator: Bonnie Lipscomb
Negotiating Parties: Bonnie Lipscomb and Bruce Noland (dba Flotsam of California, Inc.)
Under Negotiation: Price, terms of payment, or both
3) Property: 121 Soquel Avenue (Frazier Lewis Lane, portion) and 1316- 1320 Pacific Ave
APN: 005-081-51, 005-081-20, and 005-081-21
Owner: City of Santa Cruz and Doghouse2 LLC
City Negotiator: Bonnie Lipscomb
Negotiating Parties: Bonnie Lipscomb and Danco Communities Under Negotiation: Price, terms of payment, or both.

3. Conference with Labor Negotiators (Government Code §54957.6) Police Officers Association
City Negotiator - Sara De Leon
February 10, 2026 City Council 4
City Council
3:00 PM
Call to Order
Roll Call
Oral Communications - 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.

Presentation

4. Leslie Keedy 25-year Service Pin Presentation
Presiding Officer's Announcements
Statements of Disqualification
Additions and Deletions
City Attorney Report on Closed Session
Council Meeting Calendar

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

February 10, 2026 City Council 5
Consent Agenda

6. Minutes of the January 27, 2026 City Council Meeting (CC) LOCATION: None
Motion to approve as submitted.

7. City of Santa Cruz Sugar-Sweetened Beverage Distribution Tax Oversight Committee (CM)
LOCATION: Citywide
Motion to:
1) Ratify the Parks and Recreation Commission’s December 8, 2025 selection of Barbara Lawrence to serve on the Sugar-Sweetened Beverage Tax Oversight Committee (Committee);
2) Appoint Vice Mayor Kalantari-Johnson to serve on the Committee; and
3) Ratify the City Manager’s selection of five at-large members to the Committee.

8. Municipal Wharf Lease Agreement with Flotsam of California, Inc, dba Surf City for City-owned Commercial Space at 41 Municipal Wharf (EDH)
Location: District 4
Motion to:
1) Approve and authorize the City Manager to execute the Municipal Wharf Lease Agreement with Flotsam of California, Inc., and any documents, amendments or extensions of a non-substantive nature, in a form approved by the City Attorney, for the commercial retail space at 41 Municipal Wharf;
2) Adopt a resolution amending the Fiscal Year 2026 budget to appropriate revenue in the amount of $19,480.39 to the Municipal Wharf Fund (Fund 104) and $1,970.00 to 41 Municipal Wharf (w512501); and
3) Adopt a California Environmental Quality Act (CEQA) finding of categorical exemption pursuant to 14 CCR 15301 (Existing Facilities) and 14 CCR 15061(b)(3) (Common Sense Exemption).

February 10, 2026 City Council 6
Consent Agenda (continued)

9. Amended and Restated Municipal Wharf Lease Agreement with Flotsam of California, Inc, dba Noland’s for City-owned Commercial Space at 47 Municipal Wharf (EDH)
Location: District 4
Motion to:
1) Approve and authorize the City Manager to execute the Amendment and Restated Municipal Wharf Lease Agreement with Flotsam of California, Inc., and any documents, amendments or extensions of a non-substantive nature, in a form approved by the City Attorney, for the commercial retail space located at 47 Municipal Wharf; 2) Adopt a resolution amending the Fiscal Year 2026 budget to appropriate revenue in the amount of $382.44 to the Municipal Wharf Fund (Fund 104); and
3) Adopt a California Environmental Quality Act (CEQA) finding of categorical exemption pursuant to 14 CCR 15301 (Existing Facilities) and 14 CCR 15061(b)(3) (Common Sense Exemption).

10. Liability Claims Filed Against the City of Santa Cruz (FN) Motion to reject the liability claims of 1) Michael Andrew Collins, 2) Brendan W. Daly, 3) Linda Ann Waskiewicz; and to return as late claim of 4) Vahid Ebrahimi, based on staff recommendation.

February 10, 2026 City Council 7
Consent Agenda (continued)

11. FY 2026 Budget Adjustments and Information on City’s Financial Status – Budget Adjustment (FN/HR)
Location: Citywide
Motion to:
1) Adopt a resolution amending the Fiscal Year (FY) 2026 budget appropriation of expenditures to all funds as listed in Exhibit A, in the amount of $24,669,730, including an increase of $2,735,762 to the General Fund, and a total decrease in revenues as listed in Exhibit A in the amount of $26,432,222 to all funds, including a reduction of $124,666 to the General Fund;
2) Authorize the City Manager to allocate budgetary changes within the applicable funds and departments; and
3) Adopt a resolution amending the personnel complement for the City Manager’s Office, Economic Development and Housing, Human Resources, Information Technology, Library, Parks and Recreation, Public Works, and Water Departments.

12. 2025-2028 City of Santa Cruz Supervisors Operating Engineers, Local 3 Agreement for Successor Memorandum of Understanding (HR) LOCATION: Citywide
Motion to adopt a resolution adopting the 2025-2028 Successor Memorandum of Understanding between the City of Santa Cruz and the Supervisors Operating Engineers, Local 3, effective December 6, 2025 through December 8, 2028.

13. 2025-2028 City of Santa Cruz Fire Management Association Agreement for Successor Memorandum of Understanding (HR)
LOCATION: Citywide
Motion to adopt a resolution adopting a successor Memorandum of Understanding between the City of Santa Cruz and the Fire Management Association effective October 11, 2025 through June 30, 2028.

February 10, 2026 City Council 8
Consent Agenda (continued)

14. 2025-2028 City of Santa Cruz International Association of Firefighters, Local 1716, Successor Memorandum of Understanding (HR)
LOCATION: Citywide
Motion to adopt a resolution adopting successor Memorandum of Understanding between the City of Santa Cruz and the Fire Management Association effective October 11, 2025 through June 30, 2028.

End Consent Agenda
Public Hearing

15. Amendments to Municipal Code Chapter 24.04 – Administration, Section

24.12.1755 – Properties with Accessory Dwelling Units, and Chapter

24.16 Part 2 – Accessory Dwelling Units to Align Local Accessory Dwelling Unit Regulations with New State Laws, Clarify Language of Existing Regulations, and Other Minor Changes (PL)
LOCATION: Citywide
Motion to:
1) Introduce for publication an ordinance amending Chapter 24.16 Part 2 of the Santa Cruz Municipal Code (SCMC) related to Accessory Dwelling Unit Regulations;
2) Introduce for publication an ordinance amending the Local Coastal Program (LCP) Implementation Plan (IP), amending Chapter 24.04 and Section 24.12.1755 of the Municipal Code related to Coastal Commission appeal of Accessory Dwelling Unit coastal permits and length of tenancy in Junior Accessory Dwelling Units; and 3) Acknowledge the determination that the proposed amendments are exempt under Public Resources Code Section 21080.17 as an ordinance to implement ADU state law and under California Environmental Quality Act (CEQA) Guidelines Section 15061(b)(3) as a project that can be seen with certainty to have no possibility for causing a significant effect on the environment.
4) Provide direction to staff on whether or not to bring back, at a later date, an analysis of Planning Commission’s recommended changes to short-term rental regulations as they relate to Accessory Dwelling Units for further consideration by Planning Commission and City Council.

Adjournment
February 10, 2026 City Council 9

INFORMATION ITEMS PREVIOUSLY DISTRIBUTED TO CITY COUNCILMEMBERS ADDENDUM TO CITY COUNCIL AGENDA – FEBRUARY 10, 2026

16. Economic Development Department: Local Preference Policy Update 1/21/26 (EDFYI 001)

17. Water Department: Loch Lomond Recreation Area March 2026 Schedule Change 1/30/26 (WTFYI 083)

MAYOR'S PROCLAMATIONS
ADDENDUM TO CITY COUNCIL AGENDA – FEBRUARY 10, 2026

18. Proclaiming the month of January 2026 as “Orphan Trafficking Awareness Month” and encouraging all residents to learn more about preventing orphan trafficking and to call on the State of California and the United States of America to enact regulations and laws that will help protect the rights of children globally.

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

Council will make appointments at a future meeting.

Board of Building and Fire Appeals 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.

Service Recognition
Providing quality public spaces and experiences that build a healthy community, foster equity, and better the environment

PARKS AND RECREATION

4.1 PARKS AND RECREATION
25 Years of Service
Leslie Keedy

4.2 IMPACT STATS
• 25 years of service
• Certified Arborist since 1994
• Leads the City’s Tree USA designation
• Serves a critical role in City storm response
• Leads community tree planting efforts with City
Schools, Cabrillo College, etc.
• Developed first City Street Tree Master Plan in 2021
• 2021 ISA Award of Commendation
• 2025 Parks & Recreation Employee of the Year

PARKS AND RECREATION

4.3 Thank you

PARKS AND RECREATION

4.4 2026 City Council Meeting Calendar
February 16 - City Hall Closure - Presidents' Day
February 24 - Regular Meeting
March 10 - Regular Meeting
March 24 - Regular Meeting
March 31 - City Hall Closure - Cesar Chavez Day
April 1/2 - Passover (City observed sundown to sundown) April 14 - Regular Meeting
April 28 - Regular Meeting
May 12 - Regular Meeting
May 25 - City Hall Closure - Memorial Day
May 26 - Regular Meeting/Budget Hearings
May 27 - Special Meeting - Budget Hearings
June 9 - Regular Meeting
June 19 - City Hall Closure - Juneteenth
June 23 - Regular Meeting
July 3 - City Hall Closure - Independence Day
July 14 and 28 Meetings Cancelled
August 11 - Regular Meeting
August 25 - Regular Meeting
September 7 - City Hall Closure - Labor Day
September 8 - Regular Meeting
September 11/12 - Rosh Hashanah (City observed -  sundown to sundown) October 20/21 - Yom Kippur (City observed -  sundown to sundown) September 22 - Regular Meeting
October 13 - Regular Meeting
October 27 - Regular Meeting
November 11 - City Hall Closure - Veteran's Day (observed) November 17 - Regular Meeting
November 26 - City Hall Closure - Thanksgiving Day
November 27 - City Hall Closure - Day After Thanksgiving Day December 4/5 - Hanukkah (City observed -  sundown to sundown) December 8 - Regular Meeting
December 22 Meeting Cancelled
December 25

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

MINUTES OF A CITY COUNCIL MEETING
January 27, 2026
Closed Session
1:30 PM
Mayor Keeley opened the City Council Closed Session at 1:30 p.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 Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

Absent: None.

Staff: City Manager M. Huffaker, City Attorney C. Bronson, Deputy City Manager/Director of Economic Development B. Lipscomb, Director of Finance E. Cabell, Director of Parks and Recreation T. Elliot, Deputy City Clerk Administrator J. Wood, City Clerk Administrator B. Bush.

Statements of Disqualification – Councilmember Brunner announced she will be recusing herself from item 1.2, as it relates to her employment.

Public Comment on Closed Session Items
Mayor Keeley opened the public comment period at 1:31 p.m. The following person spoke:

Felicia Van Stolk spoke regarding item 1.1.

Mayor Keeley closed the public comment period at 1:35 p.m., at which time the meeting was closed to the public and Council adjourned to the Courtyard Conference Room.

6.1 January 27, 2026 CITY COUNCIL MINUTES 8150
Closed Session

1. Real Property Negotiations (Government Code §54956.8) 1) Property: 1305 E. Cliff Drive
APN: 010-282-01
Owner: City of Santa Cruz
City Negotiators: Tony Elliot
Negotiating Parties: City of Santa Cruz and Felicia Van Stolk Under Negotiation: Price, Terms of payment, or both
2) Property: 1124 Pacific Avenue
APN: 005-153-10
Owner: City of Santa Cruz
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Silver Cinemas Acquisition Co.

Under Negotiation: Price, terms of payment, or both
3) Property: 31 Municipal Wharf
APN: 007-341-02
Owner: City of Santa Cruz
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Peter Drobac Under Negotiation: Price, Terms of payment, or both
4) Property: 49A Municipal Wharf
APN: 007-371-01
Owner: City of Santa Cruz
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Peter Drobac Under Negotiation: Price, Terms of payment, or both
Councilmember Brunner recused herself from item, 1.2. Council received a status report from the City Negotiator, and no reportable action was taken.

2. Conference with Legal Counsel – Anticipated Litigation (Gov’t. Code §54956.9(d)(4))
Initiation of litigation (one potential case to be discussed) Council received a status report and unanimously approved the City entering into litigation in a coalition with a group of local governments to be a Plaintiff to a case against the federal government to preserve the City’s federal funding.

6.2 January 27, 2026 CITY COUNCIL MINUTES 8151
Closed Session (continued)

3. Conference with Legal Counsel - Existing Litigation (Government Code §54956.9(d)(1))
City of Fresno, et al., v. Scott Turner, et al.
(Northern District of California Case No. Case No.: 3:25-cv-07070-RS) Council received a status report, and no reportable action was taken.

6.3 January 27, 2026 CITY COUNCIL MINUTES 8152
City of Santa Cruz
809 Center Street
Santa Cruz, California 95060

MINUTES OF A CITY COUNCIL MEETING
January 27, 2026
2:30 PM
Call to Order – Mayor Keeley called the meeting to order at 3:04 p.m. in Council Chambers.

Roll Call

Present: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

Absent: None.

Staff: City Manager M. Huffaker, City Attorney C. Bronson, Deputy City Manager/Director of Economic Development B. Lipscomb (via Zoom), Director of Community Development L. Butler (via Zoom), Director of Finance E. Cabell, Chief of Fire R. Oatey (via Zoom), Chief of Police B.

Escalante (via Zoom), Director of Public Works N. Nguyen, Director of Water H. Luckenbach, Sustainability and Resiliency Officer T. WiseWest, Deputy City Clerk Administrator J. Wood, City Clerk Administrator B. Bush.

Oral Communications
At 3:05 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.

Unidentified person spoke regarding Measure C, thanking Council, and Economic Development staff.

Garrett spoke regarding Measure Z ballot questions and the purpose of its ad hoc subcommittee.

Patrice Boyle spoke regarding the Murray Street Bridge and raising prices at her business to accommodate for the bridge closure and asking Council to keep the bridge opened in two ways.

6.4 January 27, 2026 CITY COUNCIL MINUTES 8153
Oral Communications (continued)
Unidentified person spoke regarding the Murray Street Bridge being reopened to two-way traffic and requested Council do everything possible to keep it open in the summer.

Traci Bliss spoke regarding the Seabright neighborhood, its historic buildings and reminded Council of the City’s commitment to historic Seabright.

Unidentified person spoke, thanking Council for planning to reopen two-way traffic on the Murray Street Bridge, and requested it to remain open.

Unidentified person spoke regarding previously running for City Council and encouraging others to run.

Joe Michalak spoke regarding the Seabright neighborhood and urged Council to do everything they can to retain the economic vitality of that community.

Unidentified person spoke regarding the Seabright neighborhood, and the traffic impacts due to the Murray Street Bridge closure.

At 3:21 p.m. Mayor Keeley closed Oral Communications.

Presentations

4. Mayoral Proclamation Declaring January 2026 as Orphan Trafficking Awareness and Prevention Month
Councilmember Trigueiro spoke and read from a proclamation declaring January 2026 as Orphan Trafficking Awareness and Prevention Month.

Filmmaker Barak Laub spoke.

5. Leslie Keedy 25-year Service Pin Presentation
This item was continued.

Presiding Officer's Announcements – Mayor Keeley called on Bobby Roy, Founder of the 3D Entrepreneurs Club, to speak about 3D printing technologies.

Statements of Disqualification – Mayor Keeley announced he will be recusing himself from item 15 out of an abundance of caution due to the location of his residence.

Additions and Deletions – None.

City Attorney Report on Closed Session – See pages 8150–8151 for the report.

6.5 January 27, 2026 CITY COUNCIL MINUTES 8154
Council Meeting Calendar

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

Consent Agenda
Councilmember O’Hara made a comment on items 7, 11, and 12.

Vice Mayor Kalantari-Johnson made a comment on items 10 and 12.

Councilmember Brunner made a comment on items 10 and 12.

Mayor Keeley made a comment on item 11.

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

Bradley Snyder made a comment on item 13.

Garrett made a comment on item 10.

Mayor Keeley closed the public comment period.

MOTION: Councilmember O’Hara moved, seconded by Councilmember Golder, to approve the Consent Agenda.

ACTION: The motion carried with the following vote.

AYES: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley (with the exception of item 15).

NOES: None.

ABSENT: None.

DISQUALIFIED: Mayor Keeley (item 15).

7. City Manager Annual Merit Increase (CA/HR)
LOCATION: None
Resolution No. NS-30,606 was adopted amending the Personnel Complement and Classification and Compensation Plans and the FY 2026 Budget – City Manager, effective January 3, 2026.

8. Minutes of the January 13, 2026 City Council Meeting (CC) Motion carried to approve as submitted.

6.6 January 27, 2026 CITY COUNCIL MINUTES 8155
Consent Agenda (continued)

9. Adoption of a Council Policy, "Disruption of Remote Participation During a Council Meeting," as required by Senate Bill 707 (CC)
LOCATION: Citywide
Resolution No. NS-30,607 was adopted adopting Council Policy 6.22, Disruption of Remote Services, to incorporate new Brown Act amendments regarding Council meeting disruption procedures for two-way remote access pursuant to Senate Bill 707.

10. Resilient Coast Santa Cruz 2.0 Update: Summary of Community Engagement Events and Data Summary Conditions Technical Brief (CM) LOCATION: Districts 2, 3, 4, and 6
Motion carried to receive information on the community engagement events to date and accept the Data Summary Technical Brief Snapshot for the Resilient Coast Santa Cruz 2.0 Project.

11. Annual Comprehensive Financial Report (ACFR) and Popular Annual Financial Report (PAFR) for the Fiscal Year Ended June 30, 2025 (FN) LOCATION: Citywide
Motion carried to receive and file the Annual Comprehensive Financial Report (ACFR) and the Popular Annual Financial Report (PAFR), and related reports, for the fiscal year ending June 30, 2025.

12. Fiscal Year 2025/26 California Department of Justice, Office of the Attorney General, Tobacco Program Grant Award - Budget Adjustment (PD) LOCATION: Citywide
Motion carried to:
 Adopt Resolution No. NS-30,608 authorizing the City Manager of the City of Santa Cruz to accept grant funds in the amount of $374,883 from the State of California Department of Justice, Office of the Attorney General, Tobacco Grant Program, and authorizing and directing the City Manager to execute the contract and agreements associated with the acceptance of this grant, and
 Adopt Resolution No. NS-30,609 amending the FY 2026 budget in the amount of $374,883 for the FY 2025/26 Tobacco Program Grant.

6.7 January 27, 2026 CITY COUNCIL MINUTES 8156
Consent Agenda (continued)

13. Pacific-Beach Roundabout Enhancements Project (c402507) – Budget Adjustment (PW)
LOCATION: District 4
Resolution No. NS-30,610 was adopted amending the FY 2026 budget to appropriate funds in the amount of $100,000 from Traffic Impact Fee (TIF) for the Pacific-Beach Roundabout Enhancements Project (c402507).

14. Award Single Source Purchase Order for the 212 Locust Street/117 Union Street – Sewer Repair Project - Budget Adjustment (m402502) (PW) LOCATION: District 4
Motion carried to:
 Authorize the 212 Locust Street/117 Union Street – Sewer Repair Project and authorize the City Manager to award and execute the Single Source Purchase Order for $123,744 to Montano Plumbing (Santa Cruz, CA) in a form approved by the City Attorney. The Director of Public Works or designee is authorized to execute change orders within the approved project budget;
 Adopt Resolution No. NS-30,611 to amend Public Works Fund 101 FY 2026 budget and appropriate funds in the amount of $123,744 from Fund 711 and Fund 951; and
 Adopt a finding of categorical exemption pursuant to Section 15301 of the California Environmental Quality Act (CEQA) Guidelines (Class 1, existing facilities, 14 CCR 15301).

6.8 January 27, 2026 CITY COUNCIL MINUTES 8157
Consent Agenda (continued)

15. 222 Market Street Roofing Project (c402604) - Change Order (PW) LOCATION: District 1
Motion carried to:
 Authorize a Change Order for additional work as outlined in the latest proposal from Moriarty’s Roofing, Inc dated December 15, 2025 for the 222 Market Street roofing project from the Public Facilities Upgrades and Repairs Project (c402604). The Public Works Director or designee is authorized to execute change orders within the approved project budget; and
 Approve of the California Environmental Quality Act (CEQA) determination contained in this Agenda Report. The Council’s action is exempt from CEQA review under (1) Class 1 Categorical Exemption (14 CCR 15301) for existing facilities.

16. Service Order 11 Change Order 2 with HDR Inc. for Capital Program Management Services - Budget Adjustment (WT)
LOCATION: None
Motion carried to:
 Authorize the City Manager to execute Change Order 2 in the amount of $1,993,028 with HDR, Inc. in a form to be approved by the City Attorney; and
 Adopt Resolution No. NS-30,612 to amend the FY 2026 budget by transferring funds within the Water Department’s CIP in the amount of $825,000 from project c702103 (ASR - Santa Margarita Groundwater Basin) to c701501 (GHWTP CC Tanks Replacement), to provide funding for additional work needed to complete the GHWTP CC Tanks Replacement Project.

End Consent Agenda

6.9 January 27, 2026 CITY COUNCIL MINUTES 8158
Consent Public Hearing
Mayor Keeley opened the public comment period. There were no speakers. Mayor Keeley closed the public comment period.

MOTION: Councilmember Trigueiro moved, seconded by Councilmember Brunner, to approve the Consent Public Hearing Agenda.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

17. 2nd Reading and Final Adoption of Ordinance No. 2026-01 Amending Chapter

16.02 of the Santa Cruz Municipal Code Restricting the Irrigation of Nonfunctional Turf (WT)
LOCATION: County (Water Service Area)
Motion carried to:
 Adopt Ordinance No. 2026-01 amending Chapter 16.02 of the Santa Cruz Municipal Code restricting the irrigation of nonfunctional turf; and  Acknowledge the determinations that the ordinance is exempt from the California Environmental Quality Acti (CEQA) per CEQA Guidelines Section 15307, Actions by Regulatory Agencies for Protection of Natural Resources and Section 15308, Actions by Regulatory Agencies for Protection of the Environment.

Public Hearing

18. Amendments to the Zoning Map and to Municipal Code Chapter 24.10 – Land Use Districts to Create a New Overlay District to Allow Ministerial Approval of 100 Percent Affordable Housing in Specified Zone Districts, Including New Objective Standards for Heritage Tree Removals on Those Sites (PL) LOCATION: Citywide
This item was continued to a future meeting and was not discussed.

6.10 January 27, 2026 CITY COUNCIL MINUTES 8159
General Business

19. 2025 Health in All Policies (HiAP) Progress Update and Proposed 2026-2029 HiAP Citywide Implementation Workplan (CM)
LOCATION: Citywide
Sustainability and Resiliency Officer T. Wise-West gave a presentation.

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

Garrett
Mayor Keeley closed the public comment period.

MOTION: Councilmember Brunner moved, seconded by Councilmember Trigueiro, to:
 Accept 2025 Health in All Policies (HiAP) progress update; and  Approve the proposed 2026-2029 HiAP Citywide Implementation Workplan.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

Advisory Body Appointments
City Clerk Administrator B. Bush gave a presentation and responded to Council questions.

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

Jeremy Stone
Unidentified person
Jennalee Dahlen
Cynthia Denny
Megan Goddard
Leah Kahn
Mayor Keeley closed the public comment period.

6.11 January 27, 2026 CITY COUNCIL MINUTES 8160
Advisory Body Appointments (continued)

20. Arts Commission
LOCATION: Citywide
Councilmember O’Hara nominated Jeremy Stone.

By consensus Jeremy Stone was appointed to the Arts Commission with a term ending January 31, 2029.

21. Children’s Fund Oversight Committee
LOCATION: Citywide
Councilmember Trigueiro nominated Aracely Contreras and Pamela Velazquez.

Councilmember Golder nominated Patricia Marrone Bennett.

Voting for Aracely Contreras: Councilmembers Trigueiro, Brunner, Newsome, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

Voting for Patricia Marrone Bennett: Councilmember Golder.

Voting for Pamela Velazquez: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

By consensus, Council:
 Reappointed Aracely Contreras and Pamela Velazquez to the Children’s Oversight Fund Committee with terms ending January 31, 2030; and  Ratifed the reappointments of David Brody as the First Five Santa Cruz representative and Andrew Cunningham as the youth organization representative.

22. County Latino Affairs Commission
LOCATION: County
By consensus Aracely Contreras was appointed to the County Latino Affairs Commission with a term ending April 1, 2029.

6.12 January 27, 2026 CITY COUNCIL MINUTES 8161
Advisory Body Appointments (continued)

23. Downtown Commission
LOCATION: Citywide
Councilmember Trigueiro nominated Jennalee Dahlen.

By consensus Jennalee Dahlen was reappointed to the Downtown Commission with a term ending January 31, 2027.

24. Historic Preservation Commission
LOCATION: Citywide
Councilmember Brunner nominated Olga Pastuszynski.

Councilmember Newsome nominated Margo McBane.

By consensus Olga Pastuszynski and Margo McBane were appointed to the Historic Preservation Commission with terms ending January 31, 2029.

25. Parks and Recreation Commission
LOCATION: Citywide
Vice Mayor Kalantari-Johnson nominated Don Iglesias.

Councilmember Brunner nominated Emma Ussat.

By consensus Don Iglesias and Emma Ussat were appointed to the Parks and Recreation Commission with terms ending January 31, 2029.

6.13 January 27, 2026 CITY COUNCIL MINUTES 8162
Advisory Body Appointments (continued)

26. Planning Commission
LOCATION: Citywide
Councilmember O’Hara nominated Monica Hammer.

Vice Mayor Kalantari-Johnson nominated Pete Kennedy.

Councilmember Newsome nominated John McKelvey.

By consensus Monica Hammer was appointed with a term ending January 31, 2029, Pete Kennedy was reappointed with a term ending January 31, 2029, and John McKelvey was reappointed with a term ending January 31, 2027.

27. Sister Cities Committee
LOCATION: Citywide
Councilmember O’Hara nominated Leah Kahn.

Councilmember Golder nominated Margaret Diego.

Voting for Leah Kahn: Councilmembers Trigueiro, Brunner, Newsome, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

Voting for Margaret Diego: Councilmember Golder.

By consensus Leah Kahn was appointed to the Sister Cities Committee with a term ending January 31, 2030.

28. Transportation and Public Works Commission
LOCATION: Citywide
Councilmember Brunner nominated Dustin Mulvaney.

By consensus Dustin Mulvaney was appointed to the Transportation and Public Works Commission with a term ending January 31, 2029.

6.14 January 27, 2026 CITY COUNCIL MINUTES 8163
Advisory Body Appointments (continued)

29. Water Commission
LOCATION: Citywide
Councilmember Brunner nominated Megan Goddard.

By consensus Megan Goddard was reappointed to the Water Commission with a term ending January 31, 2029.

Adjournment – Councilmember Trigueiro moved, seconded by Councilmember Golder, to adjourn. By consensus City Council adjourned at 4:35 p.m.

Respectfully Submitted:

Julia Wood, Deputy City Clerk Administrator
Attest:

Bonnie Bush, City Clerk Administrator
Approved:

Fred Keeley, Mayor

6.15 City Council

AGENDA REPORT
DATE: 01/13/2026
AGENDA OF: 02/10/2026
DEPARTMENT: City Manager
SUBJECT: City of Santa Cruz Sugar-Sweetened Beverage Distribution Tax Oversight Committee (CM)
LOCATION: Citywide
RECOMMENDATION: Motion to:
1) Ratify the Parks and Recreation Commission’s December 8, 2025 selection of Barbara Lawrence to serve on the Sugar-Sweetened Beverage Tax Oversight Committee (Committee); 2) Appoint Vice Mayor Kalantari-Johnson to serve on the Committee; and 3) Ratify the City Manager’s selection of five at-large members to the Committee.

BACKGROUND: At the November 5, 2024 election, a majority of voters approved Measure Z, which established the Santa Cruz Sugar-Sweetened Beverage Distribution Tax and amended the Municipal Code to add a tax of two cents per fluid once on the wholesale distribution of sugarsweetened beverages (SSB).

DISCUSSION: Per Measure Z, the City will establish the Sugar-Sweetened Beverage Tax Oversight Committee (Committee) which shall be comprised of seven members in total including:
 One member of the Parks and Recreation Commission (Commission) may be recommended by the Commission.
 One City Councilmember may be appointed by the Council.  Five at-large community members are selected through an application process and recommended by the City Manager’s Office to be ratified by the City Council. o The at-large members shall, to the greatest extent possible, be comprised of community members representing categories that include: healthcare, dental, and/or wellness professional(s); representative(s) from the education industry; and representative(s) from youth organization(s). (See Santa Cruz Municipal Code §

3.38.015.)
Once the Committee is selected and convened, they will discuss recommendations on the use of future revenues in a manner consistent with Measure Z. Bylaws will be drafted and provided to

7.1 the City Council for consideration and adoption. The City Council will receive recommendations from the Committee as part of each fiscal year’s budget approval process.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed Council action is not a “project” under CEQA because it does not have the potential to cause a physical change in the environment directly or indirectly. (Pub. Resources Code, § 21065.)
HEALTH IN ALL POLICIES (HiAP): HiAP is a collaborative framework designed to improve population health by integrating health considerations into decision-making processes across sectors and policy areas. HiAP is built on three core pillars: equity, public health, and sustainability. Its primary goal is to ensure that policymakers fully consider the health, equity, and sustainability impacts of various policy options during development. The proposed action aligns with HiAP principles by promoting public health and equity, resulting in local investments such as safe and accessible parks, open spaces, and public facilities, as well as new or expanded programs for residents of all ages. Measure Z reinforces commitment to a healthier community.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: No

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: None.

Prepared By:

Gina Liebig
Principal Management
Analyst
Submitted By:

Michelle Templeton
Assistant City Manager
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. APPLICATIONS.PDF

7.2 7.3

7.4 7.5

7.6 This application is considered a public document and will be available for release upon request.

CITY OF SANTA CRUZ APPLICATION FOR APPOINTMENT TO

SUGAR SWEETENED BEVERAGE TAX OVERSIGHT COMMITTEE
Applications will be considered active for two years from date of submission. If vacancies occur, your application may be reconsidered by the Council.

NAME* DATE
# CELL #
VOTER? Yes No YEARS LIVED IN CITY LIMITS OF SANTA CRUZ
EMPLOYED BY CITY OF SANTA CRUZ? Yes No PRESENTLY SERVING ON ADVISORY BODY?* Yes No PERSONAL REFERENCE or
ENDORSING COUNCILMEMBER (optional) PHONE
*required fields.

Members appointed to this committee are subject to the Conflict of Interest laws of the State of California and are required to submit a Form 700, “Statement of Economic Interest” within 30 days of assuming office and annually thereafter.

SIGN AND RETURN TO CITY CLERK’S DEPARTMENT
By Email [email protected]
By Mail/In Person: 809 Center Street, Room
Santa Cruz, CA 95060
Signature of Applicant Fax: 831-420-5031
How did you hear about the advisory body opening?
City Website Word of mouth Display ad City Staff, Commissioner, or Councilmember Other (explain)

PLEASE USE THE REVERSE SIDE FOR ADDITIONAL INFORMATION

7.7 This application is considered a public document and will be available for release upon request.

Please answer the following questions. *required fields (Feel free to attach additional sheets.)

1. Why are you interested in this position? What particular skills would you bring to the Committee?

2. What types of diverse interests/experiences would you bring to Committee?

3. List community/volunteer activities with which you have been involved in the last five (5) years.

7.8 7.9

7.10 This application is considered a public document and will be available for release upon request.

CITY OF SANTA CRUZ APPLICATION FOR APPOINTMENT TO

SUGAR SWEETENED BEVERAGE TAX OVERSIGHT COMMITTEE
Applications will be considered active for two years from date of submission. If vacancies occur, your application may be reconsidered by the Council.

NAME* DATE
RESIDENCE ADDRESS* ZIP
EMAIL* # CELL #

EMPLOYER OCCUPATION
REGISTERED CITY VOTER? Yes No YEARS LIVED IN CITY LIMITS OF SANTA CRUZ EMPLOYED BY CITY OF SANTA CRUZ? Yes No PRESENTLY SERVING ON ADVISORY BODY?* Yes No PERSONAL REFERENCE or
ENDORSING COUNCILMEMBER (optional) PHONE
*required fields.

Members appointed to this committee are subject to the Conflict of Interest laws of the State of California and are required to submit a Form 700, “Statement of Economic Interest” within 30 days of assuming office and annually thereafter.

SIGN AND RETURN TO CITY CLERK’S DEPARTMENT
By Email [email protected]
By Mail/In Person: 809 Center Street, Room
Santa Cruz, CA 95060
Signature of Applicant Fax: 831-420-5031
How did you hear about the advisory body opening?
City Website Word of mouth Display ad City Staff, Commissioner, or Councilmember Other (explain)

PLEASE USE THE REVERSE SIDE FOR ADDITIONAL INFORMATION

7.11 This application is considered a public document and will be available for release upon request.

Please answer the following questions. *required fields (Feel free to attach additional sheets.)

1. Why are you interested in this position? What particular skills would you bring to the Committee?

2. What types of diverse interests/experiences would you bring to Committee?

3. List community/volunteer activities with which you have been involved in the last five (5) years.

7.12 This application is considered a public document and will be available for release upon request.

CITY OF SANTA CRUZ APPLICATION FOR APPOINTMENT TO

SUGAR SWEETENED BEVERAGE TAX OVERSIGHT COMMITTEE
Applications will be considered active for two years from date of submission. If vacancies occur, your application may be reconsidered by the Council.

NAME* DATE
RESIDENCE ADDRESS* CITY ZIP
EMAIL* HOME # CELL #

EMPLOYER OCCUPATION
REGISTERED CITY VOTER? Yes No YEARS LIVED IN CITY LIMITS OF SANTA CRUZ EMPLOYED BY CITY OF SANTA CRUZ? Yes No PRESENTLY SERVING ON ADVISORY BODY?* Yes No PERSONAL REFERENCE or
ENDORSING COUNCILMEMBER (optional) PHONE
*required fields.

Members appointed to this committee are subject to the Conflict of Interest laws of the State of California and are required to submit a Form 700, “Statement of Economic Interest” within 30 days of assuming office and annually thereafter.

SIGN AND RETURN TO CITY CLERK’S DEPARTMENT
By Email [email protected]
By Mail/In Person: 809 Center Street, Room
Santa Cruz, CA 95060
Signature of Applicant Fax: 831-420-5031
How did you hear about the advisory body opening?
City Website Word of mouth Display ad City Staff, Commissioner, or Councilmember Other (explain)

PLEASE USE THE REVERSE SIDE FOR ADDITIONAL INFORMATION

7.13 This application is considered a public document and will be available for release upon request.

Please answer the following questions. *required fields (Feel free to attach additional sheets.)

1. Why are you interested in this position? What particular skills would you bring to the Committee?

2. What types of diverse interests/experiences would you bring to Committee?

3. List community/volunteer activities with which you have been involved in the last five (5) years.

7.14 City Council

AGENDA REPORT
DATE: 01/21/2026
AGENDA OF: 02/10/2026
DEPARTMENT: Economic Development and Housing
SUBJECT: Municipal Wharf Lease Agreement with Flotsam of California, Inc, dba Surf City for City-owned Commercial Space at 41 Municipal Wharf (EDH) Location: District 4
RECOMMENDATION: Motion to:
1) Approve and authorize the City Manager to execute the Municipal Wharf Lease Agreement with Flotsam of California, Inc., and any documents, amendments or extensions of a nonsubstantive nature, in a form approved by the City Attorney, for the commercial retail space at 41 Municipal Wharf;
2) Adopt a resolution amending the Fiscal Year 2026 budget to appropriate revenue in the amount of $19,480.39 to the Municipal Wharf Fund (Fund 104) and $1,970.00 to 41 Municipal Wharf (w512501); and
3) Adopt a California Environmental Quality Act (CEQA) finding of categorical exemption pursuant to 14 CCR 15301 (Existing Facilities) and 14 CCR 15061(b)(3) (Common Sense Exemption).

BACKGROUND: Flotsam of California, Inc. (Flotsam) has been a fixture on the Wharf for almost 65 years. Originally founded by Ward Noland Senior (c. 1962) as Flotsam, dba Surf City at the present day location of Noland’s (47 Municipal Wharf), the Noland family has operated retail shops on the Wharf and in Santa Cruz (Pacific Wave) for generations. Although names have changed over the years, Bruce Noland and his family continue to highlight iconic local merchandise as well as global brands at both Surf City and Noland’s on the Wharf.

On April 30, 1971 Flotsam entered into a Wharf Lease Agreement (Lessee Builder) to construct the building at the premises now known as 41 Municipal Wharf. The lease provided for the construction of an approximately 2,736 square foot building and operation of a retail clothing and gift store. Over the years, through several amendments, the term extended through April 2020 and converted to month-to-month during the COVID-19 pandemic.

Where Flotsam has been in good standing and staff capacity has been directed toward other urgent projects, wharf emergencies, and resolving outstanding COVID-19 pandemic impacts to

8.1 other City tenants, a new lease for Flotsam has been on hold until an updated wharf lease template was completed by the City Attorney in winter 2025.

The City and Bruce Noland now wish to proceed with the new lease for Surf City which will proceed upon the terms outlined below. If approved by City Council, concurrent with the Amended and Restated Municipal Wharf Lease Agreement for Noland’s at 47 Municipal Wharf, the terms for both businesses would be aligned, allowing for continued operation of these historic local businesses for up to ten (10) years.

Additionally, per the existing Wharf Lease Agreement, the City is to take ownership of the building upon termination of the existing lease. Staff is working with the City Attorney to prepare a quitclaim deed for administrative acceptance of the building as authorized in the original lease.

DISCUSSION: Based on the Tenant’s long-standing operation of Surf City, staff recommend that City Council approve the new lease concurrent with extension of the Noland’s lease (separate agenda item), subject to the major terms outlined below:

Proposed Terms:

Commencement Date: March 1, 2026
Term: Five (5) years, plus one (1) five (5) year option to extend.

Rent: The greater of an annual minimum base rent of $78,140.16, or the sum of 8% of gross sales up to and including the Breakpoint, plus 6% of any amount over that Breakpoint. The Breakpoint shall be equal to 25% of the average gross sales over the preceding three (3) years.

The minimum base rent is subject to a 2% annual adjustment.

Tenant Improvements: Flotsam will replace the existing roof with a new PVC roof by May 15, 2027, as well as upgrade electrical systems to code and replace existing flooring within the initial term. Tenant is also required to contribute no less than $25,000 in general tenant improvements and/or equipment upgrades to the premises over the initial term, in addition to the Capital Improvement Fund contributions outlined below.

Capital Improvements: During the lease term, Flotsam will make payments of 1% of gross sales to a capital improvement fund project. The Flotsam payments will be reduced by half until the 50% cost obligation of the City toward the roof replacement is satisfied. The total roof replacement cost is estimated between $40,000-$55,000.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed City Council action not a “project” under CEQA. (Public Resources Code § 21065.) And, if the proposed Council action is deemed a CEQA “project”, it is exempt from CEQA under: (1) 14 CCR 15301 – Class 1 Categorical Exemption because the City Council action relates to the lease of an existing facility involving negligible or no expansion of existing or former use; and (2) 14 CCR 15061(b)(3) as an activity that, with certainty, does not have an effect on the environment.

8.2 HEALTH IN ALL POLICIES (HiAP): Promoting locally owned businesses helps support social and community bonds, improves community economic resilience, reduces commute times and pollution from owner operators, and generally aligns business activities with local culture and initiatives. While these factors may not in themselves influence public health, they have been shown to have a positive impact on the social determinants of health and support the overall well-being in the community.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: Yes

2. This recommendation requires a budget adjustment: Yes

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: The minimum base rent of $19,535.04 per quarter is expected to yield annual revenue in the amount of $78,140.16. For the remainder of Fiscal Year (FY) 2026, the minimum revenue is expected to increase by at least $19,480.39. Should sales exceed the minimum base rent, the percentage rent would increase revenue. Lease revenue from the commercial space is maintained in the City’s Municipal Wharf Fund (Fund 104) and helps support ongoing maintenance of the Wharf.

The new lease will also add new Capital Improvement Fund contributions to 41 Municipal Wharf (w512501) to support ongoing property improvement and capital needs related to and at the premises, and/or to be expended on repairs or replacement of Wharf decking, substructure and pilings if 50% of any tenant contributions remain unspent in any calendar year. For the remainder of FY 2026, the expected revenue is pro-rated for four (4) months at $1,970.00 based on observed FY 2025 sales; this estimation has accounted for the 50% shared cost credit toward roof replacement. Actual revenue collected will fluctuate based on gross sales and the real cost of roof replacement. Projected forward at an annualized rate, it is anticipated that the City’s contribution to the roof will be repaid in 3-4 years, depending upon future sales and final roof cost; following repayment, Tenant will resume paying a full 1% of adjusted sales toward the Capital Improvement Fund.

Prepared By:

Dave McCormic
Development Manager
Submitted By:

Bonnie Lipscomb
Deputy City Manager
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. WHARF LEASE AGREEMENT - SURF CITY DRAFT.PDF

2. BUDGET ADJUSTMENT.PDF

8.3

MUNICIPAL WHARF LEASE AGREEMENT
THIS MUNICIPAL WHARF LEASE AGREEMENT (the “Lease”) is entered into by and between the City of Santa Cruz, a municipal corporation (hereinafter “Landlord") and Flotsam of California, Inc., a California corporation (hereinafter “Tenant”). The effective date of this Lease shall be ______________ (“Effective Date”). Landlord and Tenant are sometimes hereinafter referred to individually as “Party” and collectively as “Parties”. Landlord and Tenant agree to all terms and conditions of this Lease as set forth herein.

ARTICLE 1 - BASIC LEASE PROVISIONS
The following are basic terms applicable to this Lease. The Sections and Exhibits referenced below in parenthesis explain and define the basic terms specified below and are to be read in conjunction with basic terms herein:

1.01 Tenant Trade Name. “Surf City” (Section 8.01).

1.02 Commencement Date. March 1, 2026 (“Commencement Date”) (Section 3.01).

1.03 Term. Five (5) years, as of the Commencement Date and terminating no later than 11:59 p.m. on February 28, 2031 (“Expiration Date”), unless sooner terminated or otherwise extended as permitted under this Lease (Article 3).

1.04 Premises Location and Leased Area. That certain designated area, located on the Wharf at 41 Municipal Wharf, Santa Cruz, California 95060 (APN 007-341-04) in the City of Santa Cruz, County of Santa Cruz, State of California and further depicted on Exhibit A and consisting of:
a. Approximately 2,736 square feet of space
b. 0 parking spaces
(collectively the “Premises”).

The Premises is further described in Section 2.02 (Premises) of this Lease and depicted in Exhibit A (Premises) and Exhibit B (Floor Plan of Premises), both of which are attached hereto and incorporated herein.

1.05 Rent.
a. Minimum Base Rent - $19,535.04 per quarter, subject to annual increase. (Article 4)
b. Percentage Rent Rate - Eight percent (8%) of Gross Sales (Section 4.04) up to and including the Breakpoint (Section 4.01), plus, six percent (6%) of Gross Sales in excess of the specified Breakpoint, subject to increase (Article 4).

1.06 Use of Premises. Tenant shall use the Premises for operating and maintaining sale of general merchandise, clothing, souvenirs, etc. (the “Permitted Use”) and for no other purposes without Landlord’s prior written consent. (Article 8).

1.07 Hours of Operation. Tenant’s hours of operation, unless otherwise agreed in writing by Landlord, shall be at least the following:

Summer (Memorial Day through Labor Day): 10:00 AM - 8:00 PM (daily)

8.4

Winter: 11:00 AM – 5:00 PM (daily) (Section 8.04) (Operation of Business; Hours of Operation).

1.08 Security Deposit. $39,070.08 (Article 7).

1.09 Tenant’s Deadline to Complete Tenant’s Work. March 15, 2027.

1.10 Guarantor of Lease. Bruce Noland.

1.11 Tenant’s Address for Notices.

Ports of Call dba Surf City
Bruce Noland
41 Municipal Wharf
Santa Cruz, CA 95060
Phone: 831-471-7873
Email: [email protected]

1.12 Landlord’s Address for Notices.

City of Santa Cruz
Attn: Dave McCormic
337 Locust Street
Santa Cruz, CA 95060
Phone: (831) 420-5156
Email: [email protected]

1.13 Landlord’s Address for Payment of Rent.

City of Santa Cruz
Finance Department
Attn - Revenue
1200 Pacific Ave, Suite 290
Santa Cruz, CA 95060

8.5

ARTICLE 2 - LEASE OF PREMISES

2.01 City of Santa Cruz as Landlord. Tenant acknowledges and understands that Landlord is a municipality consisting of numerous offices and departments. Whenever a provision contained in this Lease, or any extension, modification or amendment, requires the “written consent” of Landlord, such consent must be obtained from the then acting City Manager or authorized designee for the City of Santa Cruz (“City”). 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 then acting City Manager or authorized designee shall be null and void and have no effect.

Nothing contained in this Section shall limit in any way the authority of any office, or department of the City of Santa Cruz from approving or withholding consent to any event or activity regulated by local law.

2.02 Premises. For and in consideration of the rents to be paid and promises and covenants to be performed by Tenant under this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, in accordance with the terms and conditions set forth in this Lease, that certain designated area, (together with certain appurtenant rights and easements), described in Section 1.04 (Premises), as more particularly described and depicted in Exhibit A (collectively the “Premises”). A floor plan of the Premises is attached to this Lease as Exhibit B.

2.03 License Area of Adjacent Public Right of Way. INTENTIONALLY OMITTED.

2.04 Reservations of Leasehold Rights. This Lease is subject to any and all exceptions, easements, rights, rights-of-way, and other matters of record affecting the Premises, structures or other improvements on the Premises, and land of which the Premises are a part, and such other matters as are apparent from an inspection of the Premises (including, but not limited to, existing easements, servitudes and right-of-ways for roads, telephone, and electric power lines and facilities, pipelines, and other purposes whether recorded or not). This Lease confers no rights either with regard to the subsurface of the water or land below the ground level of the Premises or with regard to airspace above the roof of the Premises. Easements for light and air are not granted in this Lease. Tenant shall have no rights in, the Municipal Wharf of Santa Cruz (the “Wharf”), or the Wharf decking, pilings, substructure, and support elements underlying or surrounding the Premises.

Landlord reserves and shall at all times have the right to make inspections, alterations, repairs, improvements, and/or additions to the Premises and the Wharf and all associated structures, including, but not limited to, areas and structures under and/or affecting the Premises; and, to conduct or perform any obligations or duties assigned or assumed to be the responsibility under this Lease or applicable law. Landlord also reserves the right to construct other buildings or improvements on the Wharf and to make alterations or additions thereto. Landlord further reserves the right to enter and access the roof of any buildings and/or structures on and/or comprising the Premises, or to repair and maintain the roof, and to use any space within the walls, above the ceiling finish, beneath the floor surface, and under the Premises for purposes including, but not limited to, inspections, utility lines and conduits, and/or Wharf operation and maintenance.

Tenant hereby waives any claims for damage against Landlord (including, but not limited to, those arising from loss of business) by reason of Landlord’s entry onto the Wharf and/or removal of all of any portion of any structure or building on the Wharf for the purposes of making repairs, alterations, improvements and/or additions. Except as otherwise expressly provided herein, when exercising the rights reserved under this Section, Landlord shall not unreasonably disturb or interfere with Tenant’s quiet enjoyment of the Premises.

2.05 Condition of Premises. Tenant agrees to lease the Premises in their “AS IS, WHERE IS, IN ITS CURRENT CONDITION, WITH ALL FAULTS” condition, subject to all

8.6

applicable city, county, state or federal laws, ordinances, and/or regulations affecting the use of the Premises.

Tenant acknowledges that Tenant has determined by Tenant’s own independent investigation that the Premises are suitable for Tenant’s intended use.

Tenant is responsible for determining whether or not the building codes, zoning, applicable laws, permits, certifications, permissions, approvals, authorizations, and covenants and/or restrictions of record ("Applicable Requirements") are appropriate for Tenant's intended use, and acknowledges that past uses of the Premises may no longer be allowed. Correction of any item of non-compliance with any Applicable Requirements shall be the obligation of Tenant at Tenant's sole cost and expense. Any work required by Tenant to prepare the Premises for Tenant’s occupancy shall be paid for by Tenant and shall be subject to all of the terms and conditions set forth in this Lease.

Tenant acknowledges that: (a) Tenant has been advised by Landlord to satisfy itself with respect to the condition of the Premises (including, but not limited to, the electrical, security, environmental aspects, and compliance with Applicable Requirements, including, but not limited to, the Americans with Disabilities Act), and their suitability for Tenant’s intended use; (b) Tenant has made (and will make) such investigation as Tenant deems necessary and Tenant assumes all responsibility for the investigation related to Tenant’s occupancy and use of the Premises; (c) Tenant acknowledges that Tenant has determined by Tenant’s own independent investigation that the Premises are suitable for Tenant’s intended use; and (d) neither Landlord, nor Landlord’s employees, officers, officials, representatives, or agents have made any oral or written representations or warranties (express or implied) as to the condition of the Wharf or Premises or as to the present or future suitability of the Wharf or Premises for the conduct of Tenant's business or any purposes whatsoever.

Tenant Initials: ___________________

2.06 Wharf Closure. Tenant acknowledges and understands that the Wharf may be subject to closure (either full or partial) due to conditions, events, or other public health, welfare, and safety reasons in Landlord’s sole discretion, including, but not limited to, ocean conditions (including, but not limited to, high surf), waterfront and/or weather related conditions, as well as Force Majeure events (as defined in Section 20.06 (Force Majeure)) (collectively “Closure Conditions”). Tenant enters into this Lease with full knowledge of the existing conditions of the Wharf and Closure Conditions, and with the understanding that at any point during the Lease Term (as defined in Article 3), Landlord may close the Wharf and/or Premises to public and Tenant access and use (including, but not limited to Tenant’s access and/or use) due to Closure Conditions, without any liability to Tenant by virtue of such closure and/or related actions.

Notwithstanding the forgoing, Landlord reserves the right to establish policies for Tenant relief and compensation but in no event shall Landlord be obligated to do so. During any such period of Wharf closure where Tenant is completely unable to access and use the Premises, Tenant shall not be liable to Landlord for damages for failure to operate pursuant to Section 4.90 (Damages For Failure To Operate).

2.07 Relocation of Premises. Landlord shall have the right, at Landlord’s sole discretion, during the term of this Lease and any extensions thereof, to relocate Tenant to other premises (“New Premises”) on the Wharf comparable to the Premises in accordance with the following:
(a) For the purposes of this Section “comparable” shall mean New Premises of reasonably similar size to the Premises to the extent that such alternate property is available or made available within the timeline described in Section 2.08(b). In the event that the New Premises varies in square footage, Rent shall be adjusted by the same square footage rate.

8.7

(b) Except in a case of an emergency, such as the destruction of the Premises, Landlord shall give Tenant at least one hundred eighty (180) days’ notice of Landlord’s intention to relocate the Premises (“Notice of Intent to Relocate”) and at least ninety (90) days’ notice (“Relocation Notice”) of the estimated date of relocation (“Relocation Date”), and the location of the New Premises. Tenant shall have ten (10) days following the date of the Relocation Notice to accept in writing regarding the relocation to the New Premises. In the event that Tenant fails to so accept the New Premises within such ten-day period, this Lease shall be terminated ninety (90) days following the date of the Relocation Notice to Tenant and Tenant shall have ninety (90) days following the date of the Relocation Notice to vacate and surrender the current Premises.

Should Tenant accept the New Premises within such ten-day period, Tenant shall have ninety (90) days following the date of the Relocation Notice to complete the move to the New Premises.

Landlord shall provide Tenant access to the New Premises for the purpose of planning and constructing any Tenant Improvements (as defined below in Article 9) effective as of the date of the Relocation Notice, and Tenant shall not be required to pay Minimum Base Rent or Percentage Rent for the New Premises prior to the earlier of (a) the Relocation Date or (b) the date Tenant has relocated to the New Premises.
(c) Landlord shall not require Tenant to relocate during the period between May 15 through September 15 of each calendar year, except in a case of an emergency.

(d) Tenant shall be responsible for vacating the current Premises and relocating all of Tenant’s trade fixtures, furniture, equipment, inventory, and other personal property (collectively “Personal Property”) to the New Premises no later than the Relocation Date. Tenant shall submit to Landlord within sixty (60) days of Landlord’s issuance of the Notice of Intent to Relocate a schedule itemizing Tenant’s anticipated costs to relocate Tenant’s Personal Property.

Landlord shall review said schedule and provide to Tenant a moving allowance (“Moving Allowance”), the amount of which shall be determined by Landlord at Landlord’s sole discretion.

Such Moving Allowance shall cover the reasonable cost of relocating Tenant’s Personal Property to the New Premises, said payment to be made to Tenant following Landlord’s receipt of correct invoices for the expenses actually incurred by Tenant (in form satisfactory to Landlord), provided Tenant submits such invoices within sixty (60) days after completion of Tenant’s move to the New Premises. Landlord shall reimburse Tenant the lesser of (a) the approved Moving Allowance or (b) Tenant’s actual relocation costs within thirty (30) days of Landlord’s receipt of Tenant’s correct and substantiated invoices, not to exceed the specified Moving Allowance. (e) Tenant shall be responsible for installing Tenant Improvements at the New Premises equal in quality and function to those at the Premises, subject to the terms, conditions, and requirements of Article 9 (Tenant Improvements, Alterations, and Additions). Tenant shall obtain Landlord’s prior written approval, which shall not be unreasonably withheld, for any proposed Tenant Improvements, subject to the terms and conditions of Article 9 (Tenant Improvements, Alterations, and Additions). Tenant shall submit to Landlord within sixty (60) days of Landlord’s issuance of the Notice of Intent to Relocate a schedule itemizing Tenant’s anticipated costs to install the Tenant Improvements. Landlord shall review said schedule and provide Tenant an improvement allowance (“New Premises Improvement Allowance”), the amount of which shall be determined by Landlord in Landlord’s sole discretion. Such New Premises Improvement Allowance shall cover the reasonable cost of the approved Tenant Improvements, including costs to demolish, remove, or alter existing Tenant Improvements at the New Premises, and any required permits, said payment to be made to Tenant upon receipt of correct invoices (in form satisfactory to Landlord) for expenses actually incurred by Tenant, provided Tenant submits such invoices within sixty (60) days after completion of the move.

Landlord shall reimburse Tenant the lesser of (a) the approved New Premises Allowance or (b) Tenant’s actual costs to install the subject improvements within thirty (30) days of Landlord’s receipt of Tenant’s correct and substantiated invoices, not to exceed the specified New Premises Allowance.

8.8

(f) If Tenant does not accept Landlord’s determination of the Moving Allowance and/or the New Premises Improvement Allowance, Tenant shall rescind Tenant’s acceptance of the New Premises and shall vacate and surrender the Premises no later than ninety (90) days following the date of the Relocation Notice to Tenant.
(g) Tenant shall be solely responsible for applying for and obtaining all building, planning, development, zoning and other permits, licenses, authorizations, permissions, certifications, dispensations and approvals required by local, regional, state, and/or federal regulatory authorities related to the work and/or Tenant Improvements. (h) Tenant shall be responsible for the transfer of all Utilities and Services (as defined in Article 11 below) to the New Premises.
(i) Tenant shall be solely responsible for all other costs of remodeling, outfitting and furnishing the New Premises. At no time shall Landlord be obligated for other out-of-pocket expenses over and above the Moving Allowance and the New Premises Improvement Allowance or for downtime incurred by the Tenant or Tenant’s employees, representatives, and agents in the event of a relocation. Except as set forth in this Section 2.08 (Relocation of Premises), Tenant hereby releases, indemnifies, and holds harmless Landlord (and its officials, officers, directors, employees, agents, attorneys, volunteers, representatives, successors and assigns) from any and all losses, claims, injuries, damages, costs, expenses, fines, penalties, or other liability, of every kind and nature, including, but not limited to, consequential damages, whether to persons or property, no matter how caused, resulting from or in any manner related to or incidental to the relocation of the Premises pursuant to this Section 2.08 (Relocation of Premises), and Tenant expressly waives any right to claim that such relocation constitutes grounds for a claim of abatement of rent, constructive eviction, or for termination of the Lease. (j) Landlord shall transfer Tenant’s contributions to the Premises’ Capital Improvement Fund to the New Premises’ Capital Improvement Fund. (k) Effective as of the Relocation Date, and notwithstanding any adjustments allowed under the Lease, Tenant’s Minimum Base Rent at the New Premises shall be determined by multiplying the Premise’s annual square foot rent in effect on the Relocation Date by the square footage of the New Premises. Minimum Base Rent for the New Premises shall be calculated in accordance with Article 4 (Rent).
(l) Pursuant to Section 20.32 (Amendments to Lease), Landlord and Tenant shall execute an amendment to this Lease acknowledging the relocation of the Premises to the New Premises and the terms and conditions thereof. Upon the effective date of the amendment, the term “Premises” in this Lease shall refer to the New Premises. (m) Landlord may only relocate Tenant to other premises once during the Initial Term and once during the Extended Term (both as defined in Article 3 [Term] below), if any, of this Lease. Landlord may exercise its right to substitute the Premises pursuant to this Section

2.08 (Relocation of Premises) during any subsequent extension or renewal of the Term.

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 (Term), unless terminated sooner in accordance with the terms and provisions of this Lease.

3.02 Extension of Term.

8.9

(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 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 one (1) additional five (5) year period (the “Extended Term”) immediately following the expiration of the Initial Term, upon the same terms and provisions contained in this Lease except for the amount of the Minimum Base Rent, and/or Percentage 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 Term of this Lease shall be totally ineffective and this Lease shall expire at the end of the Initial Term, unless otherwise 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 Lease). (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 Term shall 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 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.

3.03 Expiration; Holding Over.
(a) The Term will expire at 11:59 p.m. (PST) on the Expiration Date specified in Section 1.03 (Term), unless sooner terminated or otherwise extended as permitted under this Lease.
(b) If Tenant should remain in possession of the Premises after the expiration or earlier termination of the Term of this Lease in the absence of a new lease agreement, 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 Tenant’s default, as the case may be, except the Minimum Base Rent, and/or the Percentage Rent shall be one and one half (1 ½ ) times the amount of such rent in effect immediately prior to Tenant’s holdover. Unless 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-tomonth tenancy, Tenant may terminate this Lease by providing Landlord with written notice at least thirty (30) days prior to the intended termination date. Tenant shall be responsible for paying Rent through the termination date even if moving out early. Landlord may terminate the tenancy by giving notice to Tenant as required by law.

3.04 Surrender of Premises.

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(a) Surrender. On the expiration or earlier termination of this Lease, Tenant shall, at Tenant’s sole expense:
(i) surrender and vacate the Premises (including, but not limited to all Tenant Improvements) to Landlord in a clean, safe, sanitized, and in good order and condition, except for ordinary wear and tear; and,
(ii) abate and remove all of Tenant’s Personal Property in compliance with Applicable Requirements; and repair all damage caused by such removal subject to the provisions of Section 9.04 (Trade Fixtures), Section 9.05 (Design Standards), Section 9.07 (Restoration), Section 9.08 (Ownership of Improvements), and this Section; and, (iii) restore the Premises to the condition existing as of the first day of the Term or better, without removing approved Tenant Improvements, alterations or additions, reasonable wear and tear excepted, unless Landlord expressly requested their removal at Tenant’s sole cost and expense; and,
(iv) render the Premises safe and free from debris and hazards, and without any reduction in value resulting from any conduct in violation of this Lease; and (v) surrender all keys to the Premises to Landlord.

Tenant’s abatement and removal of its Personal Property on the Premises pursuant to this section shall be in compliance with all applicable Laws, permits, certifications, approvals, permissions, and authorizations.
(b) Landlord’s Property. Landlord may remove, store, and dispose of any items Tenant does not remove from the Premises as permitted or required under this Lease. (c) No Implied Acceptance of Surrender. Landlord's acceptance of Tenant's surrender of the Premises will be valid and binding only if it is in a writing signed by Landlord, and no act by Landlord will be deemed to be Landlord's acceptance of Tenant's surrender. (d) Indemnity. Tenant shall reimburse Landlord and indemnify and hold harmless Landlord, and Landlord’s officers, officials, employees, and agents against any and all damages that Landlord incurs from Tenant’s delay in vacating and/or surrendering the Premises, removing and abating Tenant’s Personal Property, and/or restoring the Premises. This indemnification and hold harmless provision extends to any and all damages, costs, and expenses incurred by Landlord as a result of Tenant’s breach of the covenants contained herein with respect to the condition of the Premises at the expiration or earlier termination of this Lease as provided in this Lease.
(e) Survival of Surrender Obligations. Tenant's obligations under this Section will survive the expiration or termination of this Lease.

3.05 Quit Claim Deed. At any time after the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within fifteen (15) days after receipt of written demand therefore, a good and sufficient deed whereby all right, title and interest of Tenant in and to the Premises, Tenant Improvements and other improvements are quitclaimed to Landlord. Should Tenant fail or refuse to deliver the required deed to Landlord, Landlord shall have the right to prepare and record a notice reciting the failure of Tenant to execute, acknowledge, and deliver such deed. Said notice shall be conclusive evidence of the termination of this Lease and of all right of Tenant in and to the Premises, any Tenant Improvements and other improvements.

ARTICLE 4 - RENT

4.01 Rent. Beginning with the Commencement Date, Tenant shall pay to Landlord the greater of: a minimum base rent (“Minimum Base Rent”) as described in Section 1.05 (Rent) per

8.11

quarter based on the following periods for each quarter (Jan-March, April-June, July-Sept, OctDec); or a percentage rent (“Percentage Rent”) in a sum equal to eight percent (8%) of Gross Sales (as defined in Section 4.07 [Gross Sales] below) calculated quarterly, up to and including the Breakpoint (as defined below), plus six percent (6%) of Gross Sales in excess of the Breakpoint.

As used in this Lease, the term “Breakpoint” means a monetary amount equal to twenty-five percent (25%) of the annual Gross Sales for the specified calendar year. For the Commencement Date and continuing through December 31, 2026, the Breakpoint, shall be calculated by determining the average Gross Sales for calendar years 2023, 2024, and 2025 and multiplying such annual Gross Sales average by twenty-five percent (25%).

Calendar Year Gross Sales
2023 $1,632,811.28
2024 $1,425,563.83
2025 $1,120,613.01
Total $4,188,988.12
Average per year $1,396,329.37
Breakpoint $349,082.34
The foregoing Minimum Base Rent and Percentage Rent shall be subject to increase during the Term as provided in Section 4.05 (Adjustments to Minimum Base Rent).

In addition to the Minimum Base Rent and Percentage Rent specified above, Tenant shall pay to Landlord any additional rent (“Additional Rent”) as defined in Section 4.10 below. “Rent” as used in this Agreement shall mean the applicable Minimum Base Rent, Percentage Rent, and Additional Rent.

4.02 Commencement of Rent.
(a) Tenant’s obligation to pay the Minimum Base Rent or Percentage Rent under this Lease shall start on the Commencement Date of the Term as set forth in Section 1.02 (Commencement Date). The greater of the Minimum Base Rent or Percentage Rent specified in Section 4.01 (Rent), subject to adjustment as set forth in Section 4.05 (Adjustments to Minimum Base Rent). Rent shall be remitted to Landlord at the address set forth in Section

1.13 (Landlord’s Address for Payment of Rent) or at such other location as Landlord may notify Tenant in writing.
(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) for the first month.

4.03 Rent Payment Procedure. Rent shall be paid in lawful money of the United States and remitted to Landlord at the address listed in Section 1.13 (Landlord’s Address for Payment of Rent) or at such other location as Landlord may notify Tenant in writing. Rent for the preceding quarter shall be due and payable in full by Tenant thirty (30) days after the quarter ending. Rent paid after thirty (30) days after the quarter ending will be considered late and subject to a late charge and interest as set forth below. Each rent payment shall be paid without deduction, offset, prior notice or demand.

4.04 Percentage Rent/Quarterly Statements of Gross Sales. In accordance with the rent payment schedule set forth in Section 4.03 (Rent Payment Procedure), Tenant shall furnish

8.12

to Landlord a written Statement of Gross Income and Percentage Rent (the “Quarterly Statement”) (Exhibit D), certified by Tenant under penalty of perjury to be true and correct, showing the total Gross Income and Percentage Rent and other rent due based upon the preceding quarter. Said statement shall be in a form substantially similar to that as set forth in Exhibit D (Statement of Gross Income and Percentage Rent) (attached hereto and made part hereof), which is subject to modification by Landlord. In addition, Tenant shall provide Landlord with copies of all state sales tax reports at the same time as they are provided to the State Board of Equalization and upon request by Landlord. Tenant acknowledges that Rent paid without being accompanied by the Quarterly Statement will be considered late payment of Rent.

4.05 Adjustments to Minimum Base Rent.
(a) Adjustments to Base Rent. Commencing on each anniversary of the Commencement Date of the Lease, the Minimum Base Rent shall increase by two percent (2%). In no event shall the Minimum Base Rent for any given year be less than the Minimum Base Rent established for the immediately preceding year.
(b) Adjustments to Breakpoint.
(1) Commencing on January 1, 2027 and continuing through the end of the Initial Term and any Extended Term, the Breakpoint used in the Percentage Rent calculation shall be adjusted on an annual basis to an amount equal to twenty-five percent (25%) of all Gross Sales for the immediately preceding year. Within sixty (60) days after the close of each calendar year, or as soon thereafter as reasonably practicable, Landlord shall notify Tenant in writing of the Breakpoint to be used in the Percentage Rent calculation for the ensuring year. (c) Upon adjustment of the Minimum Base Rent, as provided for above, Landlord shall notify Tenant in writing. Failure of Landlord to so notice Tenant shall not relieve Tenant of responsibility to pay any increase in Minimum Base Rent and/or Percentage Rent.

4.06 Late Charges and Interest on Unpaid Rent; Maximum Legal Interest; NonSufficient Funds. (a) Tenant acknowledges that late payment by Tenant to Landlord of Rent, and/or failure to submit when due Quarterly Statements, California state, local and district sales and use returns, and/or other reports, records or documentation set forth herein, will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Landlord by the terms of any encumbrance and/or note secured by any encumbrance covering the Premises.

(b) Therefore, if any installment of Rent due from Tenant, Quarterly Statement, sales and use return, and/or report, record, or documentation referenced herein which is due from Tenant is not received by Landlord when due, Tenant shall pay to Landlord an additional sum of ten percent (10%) of the overdue Rent as a late charge, and interest at the rate of one and one half percent (1½%) per month, or the maximum rate of interest allowed by law (whichever is less), on the unpaid balance of said Rent or sum until paid (or until such outstanding Quarterly Statement, report or record is received by Landlord). 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 (and/or late submittal of required documentation) 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.

8.13

(c) Additionally, if a check is returned for non-sufficient funds (“NSF”), Tenant shall pay to Landlord a $25 NSF fee. If any payment is returned for NSF or because Tenant stops payment, then Landlord may, in writing, require Tenant to pay future Rent in cash.

4.07 Gross Sales. The term "Gross Sales" as used in this Lease means all gross receipts of every kind and nature from sales and services from all business conducted by Tenant on, in, at, about, or from the Premises, whether upon credit or for cash, in every department operating on, in, at, about, or from the Premises, whether operated by Tenant or by any subtenant, representative, agent, or concessionaire, excepting therefrom any rebates or refunds to customers and clients and the amount of all sales or excise tax receipts collected from customers and clients 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 or client, regardless of when payment is made.

4.08 Books and Records.
(a) Tenant shall keep full, complete and proper books, records, and accounts of its operations and daily Gross Sales for a period of four (4) years. Landlord and its employees, representatives and agents shall have the right, with twenty-four (24) hours prior notice, and anytime during the regular business hours, to examine and copy all of the books, records, and accounts of Tenant, including, but not limited to, any sales tax reports pertaining to the business of Tenant conducted on, in, at, about, or from the Premises, for the purpose of investigating and verifying the accuracy of any Quarterly Statement and/or of Gross Sales.

(b) If Tenant fails to furnish any Quarterly Statement or annual balance sheet and profit and loss statement when due, Landlord shall have the right, after giving Tenant five (5) days' written notice, to engage an auditor to examine Tenant's books, records, and accounts and verify the amount of Tenant's Gross Sales. Such auditor’s verification will be binding on Tenant, and Tenant shall promptly pay the cost of the examination, plus any Rent shown to be due. (c) In addition to engaging an auditor as provided in subsection (b), Landlord may also, once in any calendar year, cause an audit of Tenant's business to be made by an accountant of Landlord's selection. Tenant shall furnish any requested information necessary for the audit within thirty (30) days, unless otherwise approved by Landlord in writing. If the audit discloses an understatement by Tenant of three percent (3%) or more in Gross Sales for the period of any report, then Tenant shall immediately pay to Landlord the cost of such audit, as well as the additional Rent payable by Tenant to Landlord, plus interest and late charges; otherwise, the cost of such audit shall be paid by Landlord.
(d) Tenant shall provide Landlord, annually within ninety (90) days after the close of the business fiscal year for income tax purposes, Tenant's current annual balance sheet and profit and loss statement for Tenant's business on, in, at, about, or from the Premises, either certified under penalty of perjury by Tenant to be true and correct or accompanied by a report of Tenant's certified public accountant (“CPA”). Any Guarantor of this Lease shall, upon request but not more frequently than annually, provide Landlord its current balance sheet, either certified under penalty of perjury by Guarantor to be true and correct or accompanied by a report of Guarantor's CPA. Any annual balance sheet or profit and loss statement submitted by Tenant or Guarantor shall be used by Landlord only to verify and audit compliance with this Lease, including, but not limited to, verifying and auditing Gross Sales records.
(e) Landlord agrees to maintain all business information obtained through Quarterly Statements and/or audits as confidential, to the extent legally permitted and allowed under the California Public Records Act, with the exception of information required to bring or defend legal actions.

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(f) Tenant agrees to use a cash collection system acceptable to Landlord to record sales. Landlord may, at its option, require Tenant to institute changes in said cash collection system.

4.09 Damages For Failure To Operate. LANDLORD DESIRES TO HAVE TENANT KEEP THE PREMISES FULLY OPERATIONAL. TENANT ACKNOWLEDGES AND

UNDERSTANDS THAT ITS FAILURE TO KEEP ITS BUSINESS OPEN AND OPERATIONAL

DURING THE TIMES SET FORTH ELSEWHERE IN THIS LEASE WITHOUT THE PRIOR

WRITTEN CONSENT OF LANDLORD WILL CAUSE LANDLORD TO INCUR LOSSES NOT

CONTEMPLATED BY THIS LEASE, THE EXACT AMOUNT OF SUCH LOSSES BEING EXTREMELY DIFFICULT AND IMPRACTICABLE TO FIX. THEREFORE, (A) IF TENANT FAILS

TO OPEN AND CONTINUOUSLY OPERATE ITS BUSINESS TO THE PUBLIC ON THE

COMMENCEMENT DATE, OR (B) THEREAFTER, IF TENANT FAILS TO CONTINUOUSLY

OPERATE ITS BUSINESS IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS

LEASE OR VACATES OR ABANDONS THE PREMISES PRIOR TO THE EXPIRATION OF THE

INITIAL TERM, OR ANY EXTENDED TERM, LANDLORD SHALL HAVE THE RIGHT, AT ITS OPTION, TO COLLECT AS LIQUIDATED DAMAGES AN AMOUNT EQUAL TO $214.00 FOR

EACH DAY WHICH TENANT FAILS TO SO OPERATE IN ORDER TO COMPENSATE

LANDLORD FOR THE LOSS OF PERCENTAGE RENT AND CUSTOMER TRAFFIC, AND ANY OTHER LOSSES. LANDLORD AND TENANT AGREE THAT SAID CHARGE REPRESENTS A

FAIR AND REASONABLE ESTIMATE OF THE COSTS THAT LANDLORD WILL INCUR BY

REASON OF SUCH ACTION BY TENANT AND THAT LANDLORD MAY (AT ITS OPTION AND

WITHOUT ANY OBLIGATION TO DO SO) DEDUCT SAID CHARGE FROM THE SECURITY DEPOSIT. THIS LIQUIDATED DAMAGES PROVISION SHALL NOT IN ANY WAY AFFECT OR LIMIT LANDLORD’S RIGHTS OR REMEDIES RESULTING FROM TENANT’S BREACH OF ANY OBLIGATION UNDER THIS LEASE. BY EXECUTING THIS LEASE, TENANT

ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD THE ABOVE PROVISION

COVERING LIQUIDATED DAMAGES, AND THAT TENANT HAD THE OPPORTUNITY TO

CONSULT WITH LEGAL COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS LEASE WAS EXECUTED.

TENANT’S PAYMENT OF THE AMOUNTS NOTED ABOVE AS LIQUIDATED DAMAGES

HEREUNDER IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO LANDLORD PURSUANT TO CIVIL CODE SECTION 1671.

Tenant Initials: ___________________

4.10 Additional Rent. All amounts which Tenant is required to pay pursuant to this Lease (other than Minimum Base Rent or Percentage Rent), together with any fine, penalty, interest and costs which may be added for nonpayment or late payment thereof, shall constitute additional rent (hereinafter referred to as “Additional Rent”). Additional Rent shall include but not be limited to payment for Operating Expenses, as defined in Section 6.01 (Operating Expenses), and utility charges as provided in for in Section 11.02 (Jointly Metered Utilities). Unless this Lease provides otherwise, Tenant shall pay all Additional Rent as described in Section 4.03 (Rent Payment Procedure) or by the due date noted in the notice to submit payment (whichever is sooner). If Tenant fails to pay when due any Additional Rent due under this Lease, then Landlord shall have the right, but not the obligation, to pay the same and shall have all of the rights, powers and remedies with respect thereto as are provided in this Lease or by law in the case of nonpayment of Minimum Base Rent or Percentage Rent.

4.11 Capital Improvement Contributions.
(a) Commencing with the Commencement Date and continuing throughout the Term of this Lease (including, but not limited to any Extended Term), Tenant shall fund a capital

8.15

improvement reserve fund (the “Capital Improvement Fund”) in accordance with the provisions of this Section for the cost of Permitted Capital Improvements (as defined below). (b) Tenant and Landlord agree and acknowledge that the purpose of the Capital Improvement Fund shall be to provide funds for the costs and expenses of additions, replacements, renovations, and/or significant upgrades of or to the improvements on the Premises, including, but not limited to, building exteriors and major building systems (such as HVAC, mechanical, electrical, plumbing, vertical transportation, security, communications, Wharf substructure and pilings, structural elements, roof, etc.) that significantly increase the capacity, efficiency, useful life and/or or economy of operation of the improvements or their major systems, as determined by Landlord (the “Permitted Capital Improvements”). Landlord’s determination as to whether an addition, replacement, renovation or upgrade is necessary and constitutes a Permitted Capital Improvement shall be binding upon Tenant and shall conclusively establish whether amounts may be disbursed from the Capital Improvement Fund. (c) Commencing with the Minimum Base Rent first due after the Commencement Date, Tenant shall make quarterly deposits to the Capital Improvement Fund in an amount equal to one percent (1%) of Tenant’s total Gross Sales (as defined above) for the previous quarter. All interest and earnings on the Capital Improvement Fund shall be added to the Capital Improvement Fund, but shall not be treated as a credit against the Capital Improvement Fund deposits required to be made by Tenant pursuant to this Section 4.10 (Capital Improvement Contributions).

In the event, Tenant separately funds Permitted Capital Improvements that may be reimbursed by the Capital Improvement Fund, Landlord at its sole discretion may reimburse Tenant for the real cost of improvements or authorize a credit towards the Capital Improvement Fund payments. Reimbursements shall not exceed available Capital Improvement Funds; credits towards payment to the Capital Improvement Fund shall be established in writing signed by both Parties and shall not reduce the payment amount to less than one-half percent (0.5%) of Tenant’s total Gross Sales for any quarter nor exceed a cumulative total amount of $99,999 without prior City Council approval. Except in the event of an emergency or other sole source procurement eligible case, Tenant shall comply with City procurement rules and regulations, including, but not limited to, seeking a minimum of three (3) bids or proposals, for any work above $10,000 seeking reimbursement.
(d) The Capital Improvement Fund shall be held in an account established and administered by Landlord into which deposits shall be made by Tenant pursuant to this Section

4.11 (Capital Improvement Contributions).
(e) Disbursements shall be made from the Capital Improvement Fund only for costs which have been approved by Landlord in writing and which satisfy the requirements of this Section 4.11 (Capital Improvement Contributions). For the purpose of obtaining Landlord’s prior written approval of any Capital Improvement Fund disbursements, Tenant shall submit to Landlord on an annual calendar year basis a capital expenditure plan (the “Capital Expenditure Plan”) for the upcoming year which details the amount and purpose of anticipated Capital Improvement Fund expenditures for which Tenant requests Landlord’s approval (which approval shall not be unreasonably withheld). Any anticipated expenditure set forth in such Capital Expenditure Plan that is approved in writing by Landlord as an acceptable Capital Improvement Fund disbursement shall be considered pre-approved by Landlord (but only up to the amount of such expenditure approved by Landlord and set forth in the annual Capital Expenditure Plan) for the duration of the upcoming year. Tenant shall have the right during the course of each year to submit to Landlord for Landlord’s approval revisions to the then current Capital Expenditure Plan in effect for such year, or individual expenditures not noted on the previously submitted Capital Expenditure Plan. Prior to the disbursement of any amounts from the Capital Improvement Fund, Tenant shall furnish to Landlord applicable invoices, evidence of payment and other back-up

8.16

materials reasonably acceptable to Landlord, documenting and substantiating costs incurred and the use of amounts from the Capital Improvement Fund.
(f) Notwithstanding any provision contained in this Lease that may be construed to the contrary, the Capital Improvement Fund shall not be used to fund any portion of the cost of periodic, recurring or ordinary expenditures, repairs or replacements (excepting repairs or replacement of Wharf substructure and/or pilings) that keep the Premises or its major systems in an ordinarily efficient operating condition, but that do not significantly add to their value or appreciably prolong their useful life. Permitted Capital Improvements must constitute capital replacements, improvements or equipment under generally accepted accounting principles consistently applied. Permitted Capital Improvements shall not include costs for any necessary repairs to remedy any broken or damaged improvements (including, but not limited to, Tenant Improvements), all of which costs and expenses shall be borne solely by Tenant. All specific purposes and costs for which Tenant desires to utilize amounts from the Capital Improvement Fund shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld.
(g) Notwithstanding any provision contained in this Lease that may be construed to the contrary, Landlord may in its discretion utilize and expend fifty percent (50%) of any Capital Improvement Fund contributions of Tenant that remain unspent in any calendar year for repairs or replacement of Wharf decking, substructure and pilings related to or supporting the Premises.

ARTICLE 5 – TAXES; ASSESSMENTS; AND LICENSES

5.01 Tenant to Pay Personal Property and Possessory Interest Taxes. (a) Tenant shall be solely responsible for and promptly pay before delinquency during the Term of this Lease, without abatement, deduction, or offset, any and all real property, possessory interest, and personal property taxes, general and special assessments, and other charges and fees of any description (including, without limitation, any increase caused by a change in the tax rate or by a change in assessed valuation) attributable, levied or assessed by any governmental agency or entity on or against the Premises, the improvements located (or to be located) on the Premises (including, but not limited to any Tenant Improvements), personal property located on, at, about or in the Premises or improvements located or to be located thereon (including, but not limited to any Tenant Improvements), and the leasehold estate created by this Lease. Tenant shall also be responsible for all other operating costs associated with the Premises and/or Tenant’s use of and/or operations at the Premises (as further described in Article 6 below). (b) Landlord hereby gives notice to Tenant, pursuant to California Revenue and Tax Code Section 107.6 that this Lease may create a possessory interest that is the subject of property taxes levied on such interest, the payment of which taxes shall be the sole obligation of Tenant.

Tenant shall advise (in writing) any sublessee or third party using the Premises of the requirements of Section 107.6.
(c) Any payments under this Section shall not reduce or offset Rent payments.

Landlord has no liability for such payments. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments by delivering to Landlord the official and original receipt evidencing the payment of any taxes, fees, assessments, and other charges required under this Article 5; or Tenant shall retain at its sole cost and expense for the Term of this Lease, a tax service to notify Landlord whether the taxes, assessments, and other charges have been paid by Tenant as required under this Article 5. If Tenant fails to timely pay any taxes, fees, charges, or assessments, as provided herein, Landlord shall have the right (without notice to Tenant), but not the obligation, to pay such taxes, fees, charges, and/or assessments on behalf of Tenant. In that event, Tenant shall promptly on written demand of Landlord reimburse Landlord for the full amount paid by Landlord in paying or discharging that tax, assessment, fee or other charge, together with a twenty percent (20%) overhead administrative fee and interest thereon at

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the then-maximum legal rate from the date of payment by Landlord until the date of repayment by Tenant.

5.02 Tenant Indemnification of Landlord for Taxes. Tenant shall indemnify, defend and hold Landlord (and Landlord’s officers, officials, employees, representatives, and agents) and Landlord's property, including, but not limited to, the Wharf, the Premises and any improvements (including, but not limited to, any Tenant Improvements) now or subsequently located on the Premises, harmless from any liability, loss, cost, or damage resulting from any taxes, fees, assessments, or other charges required by this Article 5 to be paid by Tenant and from all interest, penalties, and other sums imposed thereon and from any sales or other proceedings to enforce collection of any such taxes, assessments, or other charges.

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

5.04 Title 12 Santa Cruz Municipal Code - Local Improvements. Tenant shall pay before delinquency its proportionate share of all taxes, assessments, fees, and other charges that are attributable, levied, and/or assessed against the building(s), other improvements, and land of which the Premises are part by any improvement and/or maintenance district that includes the Santa Cruz Municipal Wharf, which may be created 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 applicable thereto. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments.

5.05. City of Santa Cruz Business License. A city business license is required concurrent or prior to execution of this Lease. Tenant agrees to provide proof of a current City of Santa Cruz Business Tax Certificate. Tenant may contact the City’s Finance Department at 831- 420-5050 for more information.

ARTICLE 6 - OPERATING EXPENSES

6.01 Operating Expenses. In addition to the Minimum Base Rent and Percentage Rent specified above, Tenant shall pay as Additional Rent, a pro rata amount of certain expenses (the “Operating Expenses”) incurred by Landlord in the operation and maintenance of the Premises.

These common Operating Expenses include, without limitation, general maintenance and repair of the fabric portion of the awnings, general maintenance and repair of exterior siding, exterior painting, periodic cleaning of the roof, and certain maintenance, repairs and replacement of the heating, ventilation and air conditioning systems. Upon request, on or before September 30th of each year, Landlord shall provide Tenant with an annual statement or recapitulation of all charges allocated to Tenant as Operating Expenses and Landlord reserves the right to seek payment thereof with prior notice to Tenant, of not less than thirty (30) days, for Tenant’s payment of such expenses.

6.02 Tenant’s Pro Rata Share. Tenant’s pro rata share of Operating Expenses shall be determined as follows:

(a) Exterior Siding: Tenant shall be responsible for a pro rata share of the cost of maintenance and repair of all exterior siding based on the ratio of the square footage of the Premises to the total square footage of the building in which the Premises are located.

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(b) Awnings: Tenant shall be responsible for a pro rata share of the cost of maintenance (including, but not limited to, cleaning) and repair of the fabric portion of all exterior awnings based on the ratio of the linear feet of the awnings benefiting the Premises to the total linear feet of all awnings.
(c) Roof: Tenant shall be responsible for a pro rata share of the cost of the cleaning of the roof based on the ratio of the square footage of the Premises to the total square footage of the building in which the Premises are located. Said periodic cleaning shall include, without limitation, the removal of bird debris and excrement at such times as the Landlord deems necessary.
(d) HVAC: In the event that Landlord contracts with a service company pursuant to Section 10.01 (Landlord’s Maintenance Obligations), Tenant shall be responsible for the cost of the maintenance, repairs and replacement of the heating, ventilation and air conditioning systems (“HVAC”) of the Premises.

ARTICLE 7 - SECURITY DEPOSIT

7.01 Amount of Deposit. Concurrently with the Effective Date of this Lease or within a timeline approved by Landlord, Tenant shall deposit with Landlord the sum set forth in Section

1.08 herein (the “Security Deposit”) or an amount equal to two (2) quarters of the Minimum Base Rent, whichever is greater. This Security Deposit shall be held by Landlord, 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 may commingle the Security Deposit and shall not be required to keep it separate from its general funds. Tenant shall not be entitled to any interest on such deposit.

Landlord may adjust the Security Deposit amount annually to account for increases in Minimum Base Rent. Such additional Security Deposit amounts shall be due within a timeline approved by Landlord. The Security Deposit shall not exceed the equivalent of two (2) quarters of the Minimum Base Rent.

7.02 Use of Security Deposit. If Tenant fails to abide by any of the terms, covenants and/or conditions of this Lease, or otherwise defaults with respect to the provisions of this Lease, then Landlord, at its option (and without any obligation to do so), 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 to restore the Security Deposit to the original sum deposited or two (2) quarters of the Minimum Base Rent, whichever is greater. Failure to do so within five (5) days after such demand, or a timeline approved by Landlord, shall constitute a material breach of this Lease.

7.03 Return of Security Deposit. If Tenant fully performs all of its duties and obligations under this Lease, complies with all of the terms, covenants and conditions of this Lease, and promptly pays when due all of the Rent herein provided and all other sums payable by Tenant under this Lease, Landlord will return to Tenant the remaining portion of the Security Deposit within thirty (30) days after the expiration or earlier termination of this Lease, Tenant’s vacation of the Premises, and Landlord’s receipt of possession of the Premises in accordance with the provisions of this Lease.

7.04 Increase of Security Deposit. If Tenant shall default under this Lease more than two (2) times in any twelve (12) month period, irrespective of whether or not such default is cured, then the Security Deposit shall, within ten (10) days after demand by Landlord, be increased by

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Tenant to an amount equal to the greater of: (i) two (2) times the amount specified in Section 7.01 (Amount of Deposit) above; or (iii) as may be otherwise reasonably required by Landlord.

7.05 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.

7.06 Waiver. Tenant waives the provisions of California Civil Code section 1950.7 and any Laws, or any successor statute, or any other law, which is contrary to the terms of this Article

7. ARTICLE 8 - USE

8.01 Use of Premises.
(a) Tenant shall use the Premises under the trade name, and solely for the use specified in Section 1.01 (Tenant Trade Name), Section 1.06 (Use of Premises) and Section 1.07 (Hours of Operation) herein, subject to the terms and conditions contained in this Article 8 and in compliance with all Applicable Requirements, and governing permits, approvals, authorizations, and Laws (which shall include all applicable city, county, state, or federal laws, ordinances, and/or regulations) now existing or which shall exist.
(b) Tenant shall use the Premises solely for the purposes of operating, maintaining and managing for profit as described in Section 1.06 (Use of Premises). Tenant’s business shall be established and conducted throughout the Term in a clean, safe, and lawful manner. Tenant shall not change the use of the Premises without first obtaining the written consent of Landlord (which consent may be delayed or withheld in Landlord’s sole and absolute discretion). Tenant shall use its best efforts to operate its business on the Wharf and use the Premises for purposes permitted by this Article 8 in a manner that will maximize Gross Sales. (c) Tenant’s branding and business concepts shall be distinct from other businesses on the Wharf and approved by the City of Santa Cruz’s Economic Development and Housing Director, or City’s designee.
(d) At City’s request, Tenant shall provide an anticipated annual percentage increase in growth of Gross Sales goal during the Term (including, without limitation, any Extended Term) to Landlord, and at a minimum, shall consider the following recommendations to attain the annual goals:

1. Clearly identify a target market

2. Mixed media advertising campaign

3. Develop online presence and/or virtual sales

4. Consider pricing changes

5. Consult with Small Business Development Center

6. Explore options to enhance curb appeal and customer experience (e) In the event Tenant sales decrease more than twenty-five percent (25%) over the prior three (3) year average, Tenant and Landlord shall, within forty-five (45) days of Landlord’s request, develop an action plan incorporating the recommendations outlined in Section

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8.01(d) to increase growth of Gross Sales. Such plan shall be subject to Landlord approval.

Tenant shall implement this pre-approved action plan within one hundred eighty (180) days or within a timeline approved in writing by Landlord.
(f) Tenant shall at no time allow slot machines or any other gaming machines or arcade amusement machines (including, without limitation pinball, video, and other games of amusement), to be used, operated or kept within the Premises without the prior written consent of Landlord. 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 on the Wharf.

8.02 Compliance with Laws; Permits. From and after the Effective Date of this Lease and throughout the entire Term of this Lease and operation of Tenant’s business, Tenant shall, at Tenant's sole cost and expense, observe, comply with and conform to all Laws, permits, approvals, certifications, permissions, authorizations and requirements (including, without limitation, those requiring capital improvements to the Premises and/or improvements thereon) of all Governmental Bodies (which for purposes of this Lease shall include, without limitation, federal, state, county, and/or municipal) and any board of fire underwriters (or other similar body now or hereafter constituted), relating to the Premises and/or the improvements located (or to be located) thereon, any activities on, at or in connection with the Premises and/or the improvements located (or to be located) thereon, and any use and/or occupancy of the Premises and/or the improvements located (or to be located) thereon (and including, but not limit to, any particular use or occupancy by Tenant).

Any use permitted by this Lease, as well as any construction, improvement, addition, alteration, or modification of the Premises or improvements located (or to be located) thereon, must be independently consistent with, and not in violation of, the provisions of the City of Santa Cruz Charter and Municipal Code, Applicable Requirements and Laws. Tenant is advised and understands that in addition to this Lease, Tenant may need to obtain permits, licenses, authorizations, certifications, permissions, approvals, and/or other dispensations from the City of Santa Cruz and/or other Governmental Bodies prior to engaging in the permitted uses, performing any work, performing any Tenant Improvement, and/or engaging in any other construction, improvement or modification of the Premises or improvements located (or to be located) thereon.

From and after the Effective Date and throughout the Term of this Lease, Tenant shall be responsible for obtaining and maintaining, at its own cost and expense, any and all licenses, permits, certifications, permissions, approvals, and/or other governmental authorizations required for Tenant’s occupancy and use of the Premises, any portion of the Premises, and any improvements located (or to be located) thereon, in the manner contemplated under this Lease, including, without limitation, those necessary for the construction and operation of any Tenant Improvements, and all related uses. Tenant shall promptly take all actions necessary to comply with all Laws, licenses, permits, certifications, permissions, approvals, and authorizations regulating the occupancy and/or use by Tenant of the Premises and improvements located (or to be located) thereon.

8.03 Prohibited Uses; No Illegal Purposes or Nuisance. Tenant shall not use, or permit the Premises (or any part thereof or any improvement located or to be located thereon) 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 or any improvement located (or to be located) thereon, 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. Tenant shall not sell or permit to be kept, used, stored or sold in, on, at or about the Premises (or any improvement located or to be located thereon) any article which may be prohibited by any policy of fire, casualty or liability insurance obtained by Landlord. Tenant shall, at its sole cost and expense, comply with any and all requirements regarding the use of the Premises (and any improvement located or to be located thereon) by any company that issues a

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policy of fire, casualty or public liability insurance to Landlord. If Tenant's use of the Premises results in any rate increase for the Premises, Tenant shall pay as Additional Rent within ten (10) days written notice, a sum equal to the additional premium caused by such rate increase.

Tenant shall not use or permit the Premises (or any improvement located or to be located thereon) or any portion of the Premises to be improved, altered, constructed, developed, used, or occupied in any manner or for any purpose that is in any way prohibited or in violation of any applicable Law or permit. Furthermore, Tenant shall not cause, maintain, commit, or permit the Premises (or any improvement located or to be located thereon) or any adjoining or underlying portion of the Wharf to be used in any way that constitutes waste or a nuisance (as now or hereafter defined by any statutory or decisional law applicable to the Premises or any part of the Premises), or that unreasonably annoys, disturbs or interferes with owners and/or occupants of, or causes damage to the balance of the Wharf or neighboring premises, properties, or improvements.

Tenant shall not conduct any auctions, liquidation or bankruptcy sales, “fire” sales or sidewalk sales on, about or near the Premises without Landlord’s prior written consent.

8.04 Operation of Business; Hours of Operation. During the Term of this Lease, including, but not limited to, any and all extensions thereto, Tenant shall utilize all of its usable space within the Premises in the ordinary course of business. Tenant shall conduct its business in the Premises during the usual and customary days and hours for such type of business, as set forth in Section 1.06 (Use of Premises) and Section 1.07 (Hours of Operation). Unless otherwise agreed by Landlord in writing, Tenant’s hours of operation shall be as specified in Section 1.07 (Hours of Operation) and shall in no event be less than such hours of operation, except in an emergency or Force Majeure event, or otherwise approved in writing by Landlord.

Tenant shall notify Landlord prior to any temporary closure of the business exceeding two (2) days, or any modification of ongoing operating hours. In the event Tenant desires to close the business for five (5) consecutive days, Tenant shall make a written request to Landlord at least fourteen (14) days prior to the start of the business closure, or immediately in the event of an emergency. In no event, shall Tenant close the business for five (5) consecutive days or more without Landlord’s prior written approval. Notwithstanding any other terms of this Lease, Tenant’s closure of the business shall not constitute a waiver or modification of any Rent due.

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 Landlord, Tenant shall immediately notify Landlord in writing of its intention to terminate or abandon. Except for the expiration of the Term of this Lease, 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.

8.05 Storage; Office Space. Tenant may warehouse, store and stock within the Premises only such goods, wares and merchandise as Tenant intends to offer for retail sale on or about the Premises. This shall not preclude occasional emergency transfers of merchandise to any other store belonging to Tenant, if any, which is not located on the Wharf. Tenant shall use for office, clerical or other non-selling purposes only such limited space in the Premises as is, from time to time, reasonably required for Tenant’s business operation on the Premises.

Tenant shall not conduct any auctions, liquidation or bankruptcy sales, “fire” sales or sidewalk sales on, about or near the Premises without Landlord’s prior written consent.

8.06 Cooperative Retail Management. INTENTIONALLY OMITTED.

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8.07 Hazardous or Toxic Materials/Indemnification of Landlord. (a) Tenant shall, at its sole cost and expense, comply with all Laws concerning environmental conditions, emissions, pollutants and controls. Tenant warrants and agrees that it will not introduce, disturb, release, discharge, use, maintain, generate, store, treat or dispose of any Hazardous Material (as defined below) on, in, at, about, from, or under the Premises (or any improvements located or to be located thereon) in violation of any applicable environmental Laws (including, but not limited to, those laws described below). Tenant further warrants and agrees that 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 on, in, at, about, from, or under the Premises (or the improvements located or to be located thereon) by Tenant, its officers, directors, employees, representatives, agents, volunteers, contractors, subcontractors, suppliers, invitees, customers, or others acting on Tenant’s behalf or under Tenant’s authority or control, without the prior written consent of Landlord (which consent may be withheld or delayed in Landlord’s sole discretion).
(b) Tenant shall indemnify, defend (with counsel reasonably satisfactory to Landlord) and hold harmless Landlord (and its officials, officers, directors, employees, volunteers, agents, representatives, independent contractors, successors, and assigns) from and against (a) any costs, actions, lawsuits, judgments, penalties, fines, liability, loss, damages, or claims as related to a Hazardous Materials contamination of the Premises (or the improvements located or to be located thereon) caused by Tenant, its officers, directors, employees, representatives, agents, volunteers, contractors, subcontractors, suppliers, invitees, customers, or others acting on Tenant’s behalf or under Tenant’s authority or control; and (b) any and all claims, actions, lawsuits, judgments, damages, penalties, fines, costs, expenses (including, but not limited to, reasonable attorneys’ fees), liabilities and/or losses, including, without limitation, diminution in value of the Premises (or the improvements located or to be located thereon), damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises (or the improvements located or to be located thereon), damages arising from any adverse impact on marketing of space on the Wharf, and sums paid in settlement of claims, attorneys’ fees, consultant fees and expert fees which arise during or after the Term as a result of or as related to (i) the presence in, on, under, at or about the Premises (or the improvements located or to be located thereon), or discharge in, on, at, under or from the Premises (or the improvements located or to be located thereon), of any Hazardous Materials generated and/or brought on or about the Premises (or the improvements located or to be located thereon) by Tenant (or its officers, directors, employees, agents, or anyone acting within Tenant’s authority or control); and/or (ii) Tenant’s failure to comply with any applicable environmental Laws (including, without limitation, those laws described below) applicable to the Premises (and/or the improvements located or to be located thereon). Without limiting the foregoing, if the presence of any Hazardous Material on the Premises (or the improvements located or to be located thereon) caused or permitted by Tenant results in any contamination of the Premises (or the improvements located or to be located thereon), Tenant shall promptly take all actions at its sole cost and expense as are necessary to return the Premises (and the improvements located or to be located thereon) to the condition existing prior to the introduction of any such Hazardous Material to the Premises; provided that Landlord’s approval of such action(s) shall first be obtained, which approval shall not be unreasonably withheld so long as such action(s) would not potentially have any material adverse long-term or short-term effect on the Premises (or the improvements located or to be located thereon).
(c) 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

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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); (ii) defined as a “hazardous material” under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory); (iii) 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); (iv) petroleum; (v) asbestos; (vi) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20; (vii) designated as a “hazardous substance” pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. § 1317); (viii) 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 (ix) 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.

8.08 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 and the Wharf. With regard to the use of the Premises, Tenant shall faithfully observe all local ordinances and state and federal statutes now in force or which may hereafter be in force.

8.09 Americans with Disabilities Act. Throughout the Term of the Lease, Tenant acknowledges and expressly accepts full responsibility and shall incur all costs and expenses (whether structural or non-structural in nature) for compliance with the requirements of the Americans with Disabilities Act (ADA) and any other Law regarding the accessibility of the Premises (and the improvements located or to be located thereon) by disabled individuals. Tenant agrees to release, indemnify, defend and hold harmless Landlord (and its officials, officers, directors, employees, agents, representatives, volunteers, contractors, successors and assigns) from and against any claim, loss, expense or liability arising from or related to Tenant’s failure to fully comply with all such Laws and/or this Section 8.08 (Americans with Disabilities Act).

If the Premises requires modifications to comply with the 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 the Minimum Base 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 the Minimum Base 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 the Premises without commencing such modifications. Termination of this 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.

8.10 CASp Inspection. Landlord states that the Premises has been inspected by a Certified Access Specialist (CASp). Accordingly, pursuant to California Civil Code Section 1938, Landlord states that to the best of Landlord’s knowledge, there have been no modifications or alterations completed or commenced between the date of the inspection and the date of this Lease which have impacted the Premises’ compliance with construction-related accessibility standards. Landlord agrees to provide to Tenant, at least forty-eight (48) hours prior to execution of this Lease, a copy of a report prepared by the CASp and the Tenant shall sign a document agreeing to keep the information in the report confidential, except as necessary for the Tenant to complete repairs and corrections of violations of any construction-related accessibility standards

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that the Tenant agrees to make to the Premises. If the report is not provided to the Tenant at least 48 hours prior to execution of this Lease, the Tenant shall have the right to rescind this Lease, based upon the information contained in the report, for seventy-two (72) hours after execution of this Lease.

8.11 Green Business Program.
(a) Landlord requires that all Wharf tenants become a certified Green Business through the City of Santa Cruz Green Business Program. Green Businesses reduce carbon dioxide generation, conserve energy by using fluorescent lighting and Energy Star rated equipment, conserve water through the use of low-flow toilets and water flow restrictors, conserve natural resources by promoting public transit, biking and walking, reduce waste by recycling and composting and using materials with recycled content, and use less toxic products, all of which provide a safer and healthier environment for employees and visitors to the Wharf. (b) Tenant shall contact the City of Santa Cruz Green Business Program and schedule and complete a free Green Business Program Audit within six (6) months of the Commencement Date.
(c) Upon receiving the results of the Green Business Program Audit, and at Tenant’s sole discretion, Tenant may proceed to become a certified Green Business. (d) As an incentive to Tenant to become a certified Green Business, and only after receiving Landlord’s express written approval, Tenant may utilize up to twenty-five (25%) percent of Tenant’s contributions to the Capital Improvement Fund for improvements to the Premises specifically listed on the Certified Green Business Program Checklist. (e) Upon receipt from Tenant of documented proof of Tenant’s payment of costs for eligible Green Business improvements, and Tenant’s certification as a Green Business Program, Landlord, at Landlord’s sole and absolute discretion, will reimbursement Tenant or defer collection of Tenant’s required quarterly Capital Improvement Fund contributions until the total amount deferred equals the amount of Tenant’s Green Business improvement costs, at which time Tenant shall resume making quarterly Capital Improvement Fund contributions.

8.12 Use of Sidewalk Area. Tenant shall not in any way encumber, obstruct or impede the sidewalks and any ramps that may be present in front of the Premises.

Tenant shall at all times keep and maintain said sidewalks in good condition and repair, free and clear of all obstacles, stands (including, but not limited to, any hostess or sales stands), dirt, mud, water, debris, rubbish, filth, and other encumbrances or obstructions, and safe and convenient for the use of the public, unless otherwise approved by the Landlord in writing.

ARTICLE 9 - IMPROVEMENTS, ALTERATIONS, AND ADDITIONS
For the purpose of this Lease, “Tenant Improvements” shall mean any fixtures, furnishings, equipment, or modifications to the Premises installed or caused to be installed by Tenant or otherwise not present on the Premises prior to Tenant’s occupancy.

9.01 Tenant Improvements
Prior to the end of the Initial Term, and as a requirement to obtain Landlord’s approval of the Extended Term, Tenant shall make Tenant Improvements, as defined above, with Landlord’s prior written consent (which consent may be withheld or delayed in Landlord’s sole and absolute discretion) in an amount equal to at least $25,000. Tenant shall be required to construct Tenant Improvements at the Premises in accordance with the following:

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(a) No later than thirty (30) days following the expiration of the Tenant Improvement Period, Tenant shall submit to Landlord an accounting of all expenses paid by Tenant for any Tenant Improvements at the Premises. Such accounting shall include copies of paid receipts, paid invoices, and other documentation as determined by Landlord to be sufficient to validate Tenant’s aggregate costs for the Tenant Improvements. (b) In the event that Tenant cannot document its expenditures for the Extended Term Tenant Improvements in the amount required herein, Tenant shall, immediately upon demand from Landlord, pay to Landlord any underage as determined by Landlord. (c) If Tenant desires to construct Tenant Improvements during the Initial Term of this Agreement, Tenant may do so provided that Tenant obtain Landlord’s prior written consent pursuant to Section 9.02 (Consent) of this Agreement.
(d) Tenant shall be solely responsible for applying for and obtaining all building, zoning or other permits required by local or state regulatory authorities related to any Tenant Improvements.
(e) Tenant may receive a credit, at Landlord’s sole discretion, towards Capital Improvement Fund for fifty percent (50%) of the value of roof improvements as specified in Exhibit H (Description of Landlord and Tenant Work) and constructed by Tenant at the Premises during the Initial Term. The terms and amount of this credit shall be established in a writing signed by both Parties. In order to receive a credit Tenant shall submit documentation as determined by Landlord to be sufficient to validate Tenant’s aggregate costs.

9.02 Consent. Tenant shall not make any improvements, alterations, additions, or repairs to the exterior of the Premises without Landlord’s prior written consent (which consent may be withheld or delayed in Landlord’s sole and absolute discretion). Tenant shall not make any improvements, alterations or additions to the interior of the Premises which cost in excess of fifteen thousand dollars ($15,000), or the equivalent current dollar value at Landlord’s sole discretion, at the time work is proposed, without Landlord’s prior written consent (which consent may be withheld or delayed in Landlord’s sole and absolute discretion). All improvements, alterations, additions, or repairs shall be in conformity with the laws, directives, rules, permits, or regulations of all applicable public and governmental agencies, as well as the terms and conditions of this Lease, including, but not limited to, the provisions of this Article 9. Any improvements, alterations, additions, or repairs shall be made at Tenant’s sole costs and expense. Landlord shall also own any improvements constructed by Tenant or Landlord on the Premises.

9.03 Notices; Liens. At least fifteen (15) days prior to commencing any work relating to any improvements, alterations, additions, or repairs approved by Landlord, Tenant shall notify Landlord and Wharf Supervisor in writing of the expected commencement date and completion date for the work. Landlord shall have the right thereafter to post and maintain on the Premises such notices (including, but not limited to, notices of Landlord’s non-responsibility) as Landlord deems necessary to protect Landlord and the Premises from mechanics’ liens, materialmen’s liens and/or any other liens or encumbrances. Tenant shall pay, when due, all claims for labor and materials furnished to or for Tenant for use in repairing or improving the Premises. Tenant shall not permit any mechanics’ or materialmen’s liens to be levied against the Premises arising out of work performed, materials furnished or obligations to have been performed on the Premises 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.

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In the event of an emergency, Tenant may promptly commence repairs to the Premises, but shall provide written notice to Landlord as soon as practical.

At all times during the Term of this Lease, Tenant shall keep the Premises and all improvements now or hereafter located on the Premises (including, but not limited to, any Tenant Improvements) free and clear of all liens and claims of liens for labor, services, materials, supplies, and/or equipment performed on or furnished to the Premises. Tenant shall not suffer or permit any mechanics’ or materialmen’s lien, attachment, execution or similar liens or stop notices to attach to, or to be filed or levied against the Premises (including, but not limited to, the equipment or improvements located thereon) or against Landlord’s interest therein. Subject to the provisions of Section 9.03 (Contesting Liens) below, if any such liens, stop notices, or similar proceedings are filed or commenced, Tenant shall, within twenty (20) days after notice of the filing, cause the same to be discharged of record by payment, deposit, order of court or by bonding. Subject to the provisions of Section 9.03 (Contesting Liens) below, should Tenant fail to pay and discharge or cause the Premises (and improvements now or hereafter located on the Premises) to be released from any such lien or claim of lien within twenty (20) days after notice of the filing of such lien or claim, Landlord shall have, in addition to all other remedies provided under this Lease and/or applicable Law, the right (but not the obligation) to cause the same to be released by such means as Landlord shall deem proper (including, but not limited to, paying, adjusting, compromising, and/or discharging any such lien or claim on any terms and in any manner that Landlord may deem appropriate on behalf of the Tenant) and charge Tenant the costs incurred by Landlord as Additional Rent. In that event, Tenant shall, on or before the first day of the next calendar month following any such payment by Landlord, reimburse Landlord for the full amount paid by Landlord in paying, adjusting, compromising, and/or discharging that lien or claim of lien, including, but not limited to, any attorneys' fees or other costs expended by Landlord, together with interest at the then-maximum legal rate from the date of payment by Landlord to the date of repayment by Tenant.

Tenant shall indemnify, hold harmless, and defend (with counsel reasonably satisfactory to Landlord) Landlord (and Landlord’s officers, employees, representatives, and agents) from and against any and all liens and encumbrances arising out of any work performed or materials furnished by or at the direction of Tenant, as well as any loss, damage, attorneys’ fees and all other costs and 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 Tenant.

Nothing in this Lease shall be deemed or construed in any way as giving Tenant any right, power or authority to contract for or permit, on Landlord’s behalf or as to Landlord’s interest, the rendering of any services or the furnishing of any materials.

9.04 Contesting Liens. If Tenant desires to contest any lien of the nature set forth above, it shall notify Landlord of its intention to do so within ten (10) days after the filing of such lien, and Tenant shall furnish the bond required in California Civil Code § 8424 (or any comparable statute hereafter enacted) or otherwise cause such lien to be removed within twenty (20) days after it has been recorded against the Premises. Within five (5) days after the final determination of the validity thereof, Tenant shall satisfy and discharge such lien and the amount owed to the extent held valid, and all penalties, interest and cost in connection therewith, as the case may be.

In the event of any such contest, Tenant shall indemnify, defend, and protect Landlord (and Landlord’s officers, employees, representatives, and agents) and the Premises (and improvements located or to be located thereon) against all loss, cost, expense and damage (including, but not limited to, attorney’s fees and costs) resulting therefrom. If Tenant fails to comply with foregoing provisions, Landlord may (but is not obligated to) do so on behalf of Tenant and charge the Tenant the costs incurred by Landlord as Additional Rent.

9.05 Trade Fixtures. Tenant may install trade fixtures, display items, machinery or other trade equipment in conformance with this Article 9 and all laws, ordinances, directives, rules,

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permits, or regulations of all applicable public and governmental 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, repairs, or additions shall become part of the realty and belong to Landlord at expiration or earlier termination of this Lease. Tenant shall not remove any trade fixtures, display items, machinery or other trade equipment from the Premises, without Landlord’s prior written consent, if the removal of any such item would cause damage to the Premises 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 Landlord at expiration or earlier termination of the Lease.

9.06 Design Standards.
(a) No structure or other improvement of any kind (including, but not limited to, any Tenant Improvements) shall be constructed on the Premises unless and until the construction documents (including, but not limited to, the plans, specifications, drawings, and related documents [collectively “Construction Documents”]) and proposed location of that structure and/or improvement have been approved in writing by Landlord. The Construction Documents prepared for the Tenant Improvements by Tenant shall comply with all applicable goals, policies, and guidelines contained in the 2024 Santa Cruz Wharf Master Plan and Engineering Report (as such may be amended), particularly the 2024 Santa Cruz Wharf Master Plan and Engineering Report Design Standards (the “Design Standards”), all of which are incorporated herein and made part hereof by reference. No structure or other improvement of any kind (including, but not limited to, the any Tenant Improvements) shall be constructed on the Premises that does not comply with the Construction Documents (including, but not limited to, the plans and specifications) approved in writing by Landlord. (b) After approval by Landlord of the Construction Documents pertaining to any Tenant Improvements, any substantial change in the Construction Documents must be approved in writing by Landlord. For purposes of this Section, "substantial change" means a change that (i) materially alters the exterior appearance of the subject Tenant Improvements, (ii) substantially alters the approved design intent, or a (iii) results in a decrease or increase in construction costs of $15,000 or more. Minor changes in work or materials not constituting a substantial change need not be approved by Landlord, but a copy of the altered plans and specifications reflecting those changes must be promptly given to Landlord. (c) Tenant shall accomplish any and all repair, construction, addition, improvement, and/or alteration in, on, at, about, from, or under the Premises expeditiously, diligently, and with due care.
(d) Contractor Requirements.
(1) All work required in the construction of any Tenant Improvements, including, but not limited to, any site preparation work, landscaping work, and/or utility installation work, as well as actual construction work on the Tenant Improvements, shall be performed only by competent contractors licensed and registered under the laws of the State of California and shall be performed in accordance with written contracts with those contractors. Each such contract shall comply with California prompt payment laws (including, but not limited to California Public Contract Code section 7201) and provide that the final payment under the contract due to the contractor shall be in an amount equaling at least five percent (5%) of the full amount payable under the contract and shall not be paid to contractor until whichever of the following last occurs:
(a) The expiration of thirty-five (35) days from the date of recording by Tenant of a Notice of Completion of the Tenant Improvements, Tenant agreeing to record that Notice of Completion promptly within the time specified by law for the recording of that notice; or (b) The settlement and discharge of all liens of record claimed by persons who supplied any labor and/or materials for the construction of the Tenant Improvements.

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(2) If Tenant engages or uses an independent contractor for the subject work, Tenant shall furnish to Landlord for Landlord’s approval, a true and correct copy of Tenant’s proposed contract with the general contractor for the Tenant Improvements, along with evidence of the general contractor’s financial condition. The contract shall grant Tenant the right to assign and Landlord the right (but not the obligation) to assume Tenant’s obligations and rights under that contract if Tenant defaults (with such assignment becoming effective only upon and to the extent of Landlord’s acceptance of such assignment(s) in writing). Landlord may disapprove such contract by notice given within thirty (30) days following Landlord’s receipt of the copy of the proposed contract and evidence specified above. The notice shall specify the grounds for disapproval. Landlord shall not unreasonably disapprove and shall be considered to have approved in the absence of notice of disapproval given within thirty (30) days after Landlord receives the contract and evidence specified above.
(3) Prior to entering into a contract with Tenant for such work and/or services, each contractor engaged by Tenant to perform any work or services for construction of the authorized and approved Tenant Improvements that costs over $25,000, including, but not limited to, any construction, site preparation, utility installation, or landscaping services, shall furnish to Tenant, who shall promptly deliver copies of both of the following to Landlord:
(A) A faithful performance bond issued by a corporate
surety authorized to issue surety insurance in California, in an amount equal to one hundred percent (100%) of the contract price payable under the contract securing the faithful performance by the contractor of its contract with Tenant, and in form and content acceptable to Landlord; and (B) A labor and materials payment bond issued by a
corporate surety authorized to issue surety insurance in California, in an amount equal to one hundred percent (100%) of the contract price payable under the contract securing the payment of all claims for the performance of labor or services on, or the furnishing of materials for, the performance of the contract and in form and content acceptable to Landlord.

The labor and materials payment bond and faithful performance bond referenced above shall be issued by an insurance organization or surety (1) currently authorized by the Insurance Commissioner to transact business of insurance in the State of California; (2) listed as an acceptable surety in the latest revision of the Federal Register Circular 570; and (3) assigned a Policyholders’ Rating A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best’s Key Rating Guide: Property-Casualty. (e) Tenant shall take all reasonably necessary measures to minimize any damage, disruption or inconvenience caused by such work and make adequate provision for the safety and convenience of all persons affected thereby. Dust, noise and other effects of such work shall be controlled by Tenant using methods customarily utilized in order to control deleterious effects associated with construction.
(f) All improvements, alterations, additions, or repairs (including, but not limited to, any Tenant Improvements) shall be constructed and maintained in a good and workmanlike manner, in accordance with the generally accepted practices, and to the standards of, any engaged contractor’s profession, using only new materials of good quality and which are equal to or exceeding that of the original equipment or improvement, and in compliance with all Applicable Requirements, Laws, and permits, licenses, certifications, variances, authorizations, permissions, and other regulatory approvals, including but not limited to the City’s Coastal Development Permit conditions for the Wharf Maintenance Program (Th16a – Application Number: 3-18-1081).

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(g) Tenant shall have the sole responsibility for obtaining all necessary permits, licenses, certifications, authorizations, and other approvals for the Tenant Improvements and shall make application for such permits, licenses, certifications, variances, authorizations, and other approvals directly to the person or governmental agency having jurisdiction. Tenant shall notify Landlord in writing at least thirty (30) days prior to submitting application(s) to any governmental regulatory agency for any development, construction or building permit or license pertaining to the Premises or the Tenant Improvements. Tenant shall provide Landlord with a copy of all application(s) within five (5) days of making said application(s), along with copies of all documentation (including, but not limited to, plans and specifications) submitted as part of the application(s). Tenant shall also provide Landlord, within ten (10) days of Tenant’s receipt, a copy of all permits, licenses, variances, certifications, authorizations, or other approvals subsequently issued.
(h) Tenant shall pay all Landlord’s costs incurred in connection with review and approval of any Tenant Improvement. Landlord shall bear no cost for their review or processing of any Tenant Improvement.
(i) All construction work shall comply with and conform to the City’s Construction Work Best Management Practices and Regulations, a copy of which is attached hereto as Exhibit E and incorporated herein.
(j) It shall be the obligation of Tenant (and any contractor and/or subcontractor under Tenant) to comply with and conform to all applicable State of California labor laws, rules and regulations (including, but not limited, prevailing wage laws and requirements as further detailed below), and the Parties agree that Tenant shall be liable for any violation thereof. (k) With respect to Tenant Improvements involving structural changes or expenditures in excess of $15,000, or equivalent current dollar value at Landlord’s sole discretion, at the time work is proposed, Tenant shall submit to Landlord evidence that Tenant has sufficient cash on-hand to build Tenant Improvements in accordance with the approved Construction Documents (defined above) and working drawings. (l) Tenant shall make, at its sole cost and expense, improvements, alterations, repairs, or additions in and to Tenant Improvements and structures on the Premises that may be required by any Applicable Requirement and/or Laws (including, but not limited to, the ADA) from time to time.
(m) The construction of any Tenant Improvements involving structural changes (if any are proposed by Tenant and allowed by Landlord) shall strictly conform to the requirements and terms of this provision.
(1) Tenant shall submit an executed construction contract or contracts, in a form and content reasonably acceptable to Landlord, with competent and financiallyresponsible contractors for construction in accordance with the Construction Documents and working drawings approved by Landlord.
(2) Tenant will commence construction within sixty (60) days of approval by Landlord of the construction contract(s) and Tenant shall continuously and diligently pursue construction to completion by a date approved by the Landlord. Provided, however, the commencement and completion dates may be extended pursuant to subsection (m)(3) below. All construction will be substantially in accordance with the plans and specifications, including but not limited to the Construction Documents and working drawings, previously approved in writing by Landlord, subject to changes thereto as may be approved in writing by Landlord, in Landlord’s sole discretion. Said plans and specifications, and any approved changes thereto, are by this reference made a part of this Lease. In the event of any inconsistency between the Construction

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Documents (including, but not limited to, the plans and specifications) and the terms and conditions of this Lease, the terms and conditions of this Lease shall prevail. (3) The time(s) during which Tenant’s construction is delayed by Force Majeure Events (as defined in Section 20.06 [Force Majeure] below), shall be added to the times for the commencement and completion of the construction established above on a day-for-day basis. Any extension due to excused delay shall not commence until such time as Tenant notifies Landlord in writing of such delay.
(n) If requested by Landlord, Tenant shall furnish Landlord a completion bond as described below promptly following Landlord’s demand therefor. The bond shall be issued by a corporate surety authorized to issue surety insurance in California, in an amount equal to one hundred percent (100%) of the estimated costs of construction of the Tenant Improvements, securing completion of the proposed construction of the Tenant Improvements and in form and content acceptable to Landlord. Landlord may, but shall not unreasonably, disapprove the completion bond. The completion bond shall be deemed approved unless notice of disapproval is given within fifteen (15) working days after receipt of the proposed bond. (o) Tenant shall indemnify, defend (with counsel reasonably satisfactory to Landlord), and hold harmless Landlord its officials, officers, directors, employees, agents, representatives, contractors, volunteers, successors and assigns from and against any damage, claims, cost, expense or liability as a result of or as related to the Tenant Improvements, including, without limitation, any and all expenses such as consultant, architect, contractor fees and attorney’s fees related to reviewing and approving the Construction Documents (including, but not limited to, the plans) or removing any Tenant Improvements upon termination or expiration of this Lease. This Article 9 shall not expand or restrict the indemnity obligations of the Parties under Article 12 (Indemnification, Insurance) below.
(p) With the exception of furniture, equipment and trade fixtures that may be removed by Tenant as provided in Section 9.04 (Trade Fixtures) above, the Tenant Improvements shall be surrendered with and remain on the Premises upon expiration or earlier termination of this Lease, subject to Landlord’s right to require their removal by Tenant within sixty (60) days after the termination or expiration of this Lease. (q) Tenant shall, at the expiration or earlier termination of this Lease, remove the Tenant’s Personal Property and the trade fixtures that are removable as provided in Section 9.04 (Trade Fixtures), whether or not bolted or otherwise attached to the Premises, and shall repair all resultant damage or injury to the Premises. (r) Notwithstanding any other provision of this Lease that may be construed to the contrary, the Parties agree that upon expiration or earlier termination of this Lease, Landlord shall have no liability or obligation to pay compensation for any improvements made to the Premises.

9.07 Signs and Advertising Matter.
(a) 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 without Landlord’s prior written consent, which shall not be unreasonably withheld. 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 without the prior written consent of Landlord.

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(b) 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 in the parking area of the Wharf, including, but not limited to, those belonging to Tenant, or to Tenant’s agent or any other person; nor shall Tenant distribute or cause to be distributed on the Wharf any handbills or other advertising devices.
(c) Tenant agrees, at Tenant’s sole cost and expense, to construct and install signs as may be required or allowed by Landlord in strict conformance with the Municipal Wharf Sign Guidelines (“Sign Guidelines”) attached hereto as Exhibit F and the Design Standards made part hereof by reference. Tenant’s signs shall not be installed without the written consent of Landlord. Tenant, at its sole cost and expense, shall obtain all necessary permits, licenses, variances, certifications, authorizations, and other approvals 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 cost and expense. If Tenant fails to maintain any such sign(s), Landlord shall have the right (but not the obligation) to maintain any such sign(s) and Tenant shall reimburse Landlord for such cost, plus a twenty percent (20%) administrative overhead fee. If Tenant installs a sign without Landlord’s prior written consent, or said sign does not conform to Landlord’s Sign Guidelines, Landlord shall have the right, at its sole and absolute discretion, to remove and store Tenant’s sign at Tenant’s sole cost and expense. The removal and storage costs and expenses shall bear interest at the rate of one and one half percent (1 1/2%) per month until paid, or at the maximum rate allowed by law, whichever is less.
(d) Landlord reserves the right to revise the Sign Guidelines and the Design Standards for any reason, at any time, including without limitation changes in any governmental requirement or Landlord’s renovation of the Wharf. Within sixty (60) days of Landlord’s request, Tenant shall remove Tenant’s existing sign, patch and repair the underlying attachment surface, and install a new sign, at Tenant’s sole cost and expense, in accordance with Landlord’s then existing Sign Guidelines and Design Standards.

9.08 Restoration. Except as otherwise provided herein, upon expiration or earlier termination of this Lease, Tenant shall return the Premises to the same condition as existed at the date of execution of the Lease, except as the Premises were repaired, rebuilt, restored, altered, and/or added to as permitted or required by the provisions of this Lease, reasonable wear and tear excepted. Landlord, at Landlord’s sole discretion and authority, and upon receipt of written request from Tenant, may consider allowing any Tenant Improvements approved by Landlord under this Lease to remain. In addition, Landlord, at its election, may also require Tenant to remove, at Tenant’s sole cost and expense, any improvements, alterations or additions approved by Landlord in accordance with this Lease. Tenant shall repair, at its sole cost and expense, any damage resulting from the removal of any improvements, alterations, additions, equipment, machinery or trade fixtures.

9.09 Ownership of Improvements.
(a) Any improvements existing on the Premises at the Effective Date of this Lease and/or the Commencement Date shall remain Landlord’s property. Landlord shall also own any improvements constructed on the Premises by Tenant or Landlord. (b) Landlord owns the Wharf and the pilings, substructure, and decking under the Premises, as well as the Premises.

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(c) Upon expiration or earlier termination of this Lease from any cause, all improvements on the Premises, including but not limited to any Tenant Improvements, Landlord elects to retain, shall automatically and without any act of Landlord, Tenant, or any third party, become Landlord’s property and Tenant, upon Landlord’s demand, shall execute a quit claim deed whereby all right, title and interest of Tenant in and to the Premises (including, but not limited to, the Tenant Improvements) is quitclaimed to Landlord. Said improvements on the Premises shall be free and clear of all liens and encumbrances upon expiration or earlier termination of this Lease.
(d) Subject to Landlord’s right to require removal of fixtures and improvements as provided in this Article 9, all permanent improvements and fixtures on the Premises at the expiration or earlier termination of this Lease shall, without compensation to Tenant, automatically and without any act of Tenant or any third party become Landlord's property. Tenant shall surrender the Premises and all improvements constructed thereon to Landlord at the expiration or earlier termination of this Lease, free and clear of all liens, encumbrances, and third party claims. Tenant shall indemnify, defend and hold harmless Landlord against all liability and loss arising from such liens, encumbrances, or claims and/or from Landlord’s exercise of the rights conferred by this Section. Tenant agrees to execute, acknowledge, and deliver to Landlord any instrument requested by Landlord as necessary in Landlord's opinion to perfect Landlord's right, title, and interest in and to the Premises and the permanent improvements and fixtures located thereon. Tenant may remove any movable personal property and equipment, provided such removal is consistent with Section 9.04 (Trade Fixtures) and Tenant shall repair any damage caused by such removal. Tenant shall not remove trade fixtures, display items, machinery or other trade equipment except as allowed pursuant to Section 9.04 (Trade Fixtures) above. Notwithstanding anything contained in this Lease that may be construed to the contrary, to the full extent permitted by law (including, but not limited to, California Public Resources Code Section 6312, or any successor statute), the Parties agree that upon expiration or earlier termination of this Lease, Landlord shall have no liability or obligation to pay compensation for any improvements made to the Premises.

ARTICLE 10 - MAINTENANCE AND REPAIRS

10.01 Landlord’s Maintenance Obligations.
(a) Landlord shall maintain in good condition and repair the foundations, roofs, the Wharf substructure and pilings, and exterior surfaces of exterior walls of the Premises (exclusive of doors, door frames, door checks, windows, window frames and store fronts); provided, however, if any repairs or replacements are necessitated by the acts, omissions, negligence, gross negligence or willful acts of Tenant (or its officers, directors, employees, representatives, agents, volunteers, contractors, subcontractors, suppliers, customers, invitees, or others acting on Tenant’s behalf or under Tenant’s authority or control), or trespassers, or by reason of Tenant’s failure to observe or perform its obligations and/or any provisions contained in this Lease or caused by alterations, additions or improvements made by Tenant or its directors, officers, employees, representatives, agents, contractors, subcontractors, laborers or materialmen, the cost and expense of such repairs and replacements shall be the sole obligation of Tenant.
(b) Landlord shall maintain and inspect all fire sprinkler systems on the Premises in accordance with the California Fire Code and Santa Cruz Municipal Code Chapter 19.05, and any other applicable state or local rules and regulations. Landlord shall 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 on the Premises. All costs related to the maintenance and inspection of fire sprinkler systems on the Premises shall be considered Additional Rent and billed to Tenant.

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(c) Tenant shall be solely responsible for all repairs to and maintenance of the Premises and improvements constructed by Tenant (including, but not limited to, any Tenant Improvements) which are not expressly allocated to the Landlord under this Lease or by separate written Lease between the Landlord and Tenant.
(d) Tenant acknowledges and agrees that it shall be responsible for paying Landlord a pro rata share of Landlord’s Operating Expenses in maintaining the surfaces of the exterior walls and for periodic cleaning of awnings and of the roof of the building in which the Premises are located as set forth elsewhere in this Lease. Landlord agrees to exercise reasonable effort to obtain cleaning and maintenance services at a reasonable and market rate. (e) In its sole discretion, or in the event Tenant fails to maintain, repair, or replace any mechanical or electrical system (including, but not limited to, the HVAC systems) in accordance with Section 10.03 (Tenant’s Maintenance Obligations), Landlord may contract with a service company licensed and experienced in servicing the applicable systems and/or equipment and approved by Landlord for regular maintenance, repairs and replacement, if required, of the applicable systems and/or equipment serving the Premises. Tenant shall be responsible for the costs and expenses of such maintenance, repairs or replacement as set forth in this Lease.
(f) Unless Tenant notifies Landlord in writing of the need for repairs under this provision, Landlord shall not be liable to Tenant or others for its failure to make such repairs.

Landlord shall be entitled to a reasonable period of time to effect such repairs upon receipt of said written notice from Tenant. Tenant expressly waives and agrees not to assert as an affirmative defense in any judicial proceeding or arbitration brought by Landlord against Tenant (1) the right to require Landlord to make repairs; (2) any right to make repairs at the expense of Landlord; (3) the right to reduce or offset rent as a consequence of the condition of the Premises or the improvements located thereon; (4) the benefits of California Civil Code Section 1932, 1941, and 1942, as amended from time to time, or any superseding statute, and of any other Law permitting Tenant to make repairs at Landlord's expense; and (5) any Law, judicial pronouncement, or common law principal similar thereto, which is now or hereinafter in effect or is otherwise inconsistent with the provisions of this Lease.

10.02 Landlord’s Right of Entry. Landlord, its agents, contractors, employees, representatives, contractors, and assigns may enter the Premises at all reasonable times to:
(a) Examine the Premises and improvements thereon;
(b) Perform any obligation of, or exercise any right or remedy of, Landlord under this Lease;
(c) Make improvements, alterations, additions, or repairs to the Premises, or to other portions of the Wharf as Landlord deems necessary; (d) Perform work necessary to comply with laws, ordinances, rules or regulations of any public authority or 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 and/or the Wharf should Tenant fail to commence to make, and diligently pursue to completion, in a reasonable time, as defined by Landlord, Tenant’s required repairs after written demand therefore by Landlord. Landlord will give Tenant a minimum of twenty-four (24) hours advance notice of such entry when practical, except in the

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case of an emergency and/or in situations involving an immediate peril and/or hazard to the Wharf, when such entry shall be made summarily by Landlord. Landlord shall be the sole and exclusive judge as to what constitutes immediate peril and hazard to the Wharf.

Tenant hereby waives any claims for damage against Landlord arising from loss of business by reason of Landlord’s entry onto, use of, modification to, and/or removal of all or any portion of the Premises or any structure or building on the Wharf for the purpose of making improvements, alteration, additions and/or repairs to the Premises or to any other area.

Tenant shall furnish key(s) to Premises within ten (10) days of Landlord’s written request.

10.03 Tenant’s Maintenance Obligations.
(a) Except as provided elsewhere in this Lease or as expressly assigned to Landlord, Tenant, at its sole cost and expense, shall clean and maintain the Premises and any Improvements in good order, condition and repair and shall make all replacements necessary to keep all portions of the Premises and any Improvements (including inside and outside) in a safe, clean, neat, and sanitary condition, including, but not limited to, maintenance, repair, and replacement of interior plumbing and fixtures and HVAC systems. For the purposes of this Section, the term “Improvements” shall be inclusive of any such improvements on, in, at, about, from, or under the Premises, that are not otherwise the responsibility of the Landlord and those specified in Section 10.01(b). Without limiting the foregoing, Tenant’s maintenance obligations shall include, without limitation, the following:
(1) Cleaning the building sewer main and the sewer distribution system related to the Premises and Improvements located (or to be located) thereon with a rotorooter system as needed. (2) Maintaining, without limitation, all plumbing fixtures and the plumbing system in the Premises and Improvements located (or to be located) thereon. (3) Steam-cleaning or pressure washing the pedestrian sidewalk fronting the Premises on a quarterly basis or upon Landlord’s request. (4) Keeping and maintaining the sidewalk, ramp, and railings fronting the Premises in good condition and repair, free and clear of all obstacles, stands, dirt, mud, water, debris, rubbish, filth, and other encumbrances or obstructions, and safe and convenient for the use of the public.
(5) Washing windows inside and out on a regular basis; maintaining flags, awnings and signs in a good condition; keeping lights operable; washing any fabric awnings regularly and repairing immediately if ripped or torn; removing graffiti immediately; cleaning and polishing regularly any brass or metallic hardware. (6) Handling, recycling and/or disposing of all waste on, in, at, about, from, or under the Premises consistent with City’s applicable rules and regulations. (7) In the event, Tenant chooses to paint the exterior of the Premises, Tenant shall endeavor to conduct all exterior painting activities during typically rain free months (April through September); and, Tenant shall thereafter be responsible for maintenance of any such painted surfaces, except if reverting to City specified color and motif, at Landlord’s sole discretion. Tenant shall address any paint issues, and repaint surfaces as needed, within ninety (90) days of any request by Landlord. Any painting of the building exterior shall require Landlord’s approval of color, material, and motif.

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(b) All replacement equipment shall be of a quality, value and use equal to or exceeding that of the original equipment or Improvements. Should Tenant fail to promptly and diligently make these repairs and replacements or otherwise maintain and/or repair the Premises and Improvements located (or to be located) thereon for a period of three (3) days after delivery of a written demand by Landlord, Landlord shall have the right (but not the obligation) to make such repairs or replacements without liability to Tenant for any loss or damage that may occur to Tenant’s stock or business, and Tenant shall pay for all costs and expenses incurred by Landlord in making such repairs and/or replacements, together with interest thereon at the maximum rate permitted by law from the date of commencement of the work through the date of payment. Tenant shall, at its sole cost and expense, promptly and diligently repair any damage to the Premises, building(s) and/or Improvements located (or to be located) on the Premises, and/or the Wharf caused by Tenant, its officers, directors, employees, representatives, agents, volunteers, contractors, subcontractors, suppliers, customers, invitees, subtenants, assignees, concessionaires, or others acting on Tenant’s behalf or under Tenant’s authority or control, or caused by the installation or removal of Tenant’s personal property.

10.04 Windows. 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 that proximately caused by the sole negligence or willful misconduct 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. If Tenant elects not to obtain such insurance coverage, it does so at its sole risk.

10.05 Requirements of Governmental Bodies. At all times during the Term of this Lease, Tenant, at Tenant's sole cost and expense, shall do all of the following:
(a) Make all improvements, alterations, additions, and/or repairs to, on, in, at, about from, or under the Premises required by any Laws (including, but not limited to, ADA) now or hereafter in effect and applicable;
(b) Indemnify, defend and hold Landlord (and Landlord’s officers, officials, employees, representatives, and agents) and the property of Landlord, including, but not limited to the Premises, free and harmless from any and all liability, loss, cost, damages, fines, penalties, claims, and actions resulting from or related to the Tenant's failure to comply with and perform the requirements of this Section.

ARTICLE 11 – UTILITIES AND SERVICES

11.01 Separate Charges. Tenant shall make all arrangements and be solely responsible for obtaining all gas, water, electricity, heat, fuel, communication service, refuse disposal, sewer, grease interceptor, maintenance, security services, and other utilities and services (collectively “Utilities and Services”) for the Premises and/or improvements located or to be located thereon (including, but not limited to any Tenant Improvements). Tenant shall promptly pay or cause to be paid before delinquency, and hold Landlord and Landlord's property, including, but not limited to, the Premises and improvements located or to be located thereon (including, but not limited to, any Tenant Improvements) free and harmless from, all charges, costs and expenses for the furnishing of all Utilities and Services to the Premises and/or improvements located or to be located thereon and for the removal of garbage, tallow, and rubbish from the Premises and/or improvements located or to be located thereon.

Tenant shall pay for all water, gas, heat, light, power, communication service and any other utilities metered or otherwise separately charged to the Premises.

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11.02 Jointly Metered Utilities. Tenant shall pay, as Additional Rent, a pro rata share of any Utilities and Services which are jointly metered or charged. Tenant’s pro rata share of these charges and fees shall be based upon the ratio of the square footage of the Premises to the total square footage of the building or buildings serviced by such meter, plus any extraordinary uses by Tenant which may be reasonably ascertained by Landlord. Such charges will be paid as Rent to Landlord at the time of regular Rent payments.

In the event that any other premises shall be submetered or otherwise utilize utilities for which the Tenant is the primary account holder and responsible for payment, Tenant shall be entitled to recoup a pro rata shared of such charges and fees as can be reasonably assigned to the secondary user.

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

11.04 Electricity Use Included. INTENTIONALLY OMITTED.

11.05 No Offset. Any payments under this Section shall not reduce or offset Rent payments. Landlord has no liability for such payments.

ARTICLE 12 - INDEMNIFICATION AND INSURANCE

12.01 Indemnification. In addition to any other indemnity provided for in this Lease, and to the fullest extent permitted by law, Tenant agrees to indemnify, defend (with counsel reasonably satisfactory to Landlord), and hold harmless Landlord, its officials, officers, directors, employees, agents, attorneys, volunteers, representatives, successors and assigns (“Indemnified Parties”) from and against any and all claims, demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorney’s fees, disbursements and court costs) for any injury or damage to person or property, or of any other kind or nature, that may arise from or in any manner relate to (directly or indirectly): (i) the rights and/or obligations of Tenant, its employees, and agents under this Lease, (ii) the acts or omissions or negligence or willful misconduct of Tenant or its officers, directors, employees, agents, representatives, invitees, customers, contractors, sublessees, suppliers, trespassers, or others acting on Tenant’s behalf or under Tenant’s authority or control as related to this Lease, (iii) the occupancy and/or use of the Premises, or improvements to the Premises (including, but not limited to any Tenant Improvements or personal property located therein) by Tenant, or its officers, directors, employees, agents, servants, representatives, volunteers, guests, invitees, customers, contractors, subcontractors, suppliers, laborers, materialmen, sublessees, or others acting on Tenant’s behalf or under Tenant’s authority or control (collectively “Tenant Agents” and individually “Tenant Agent”), (iv) any breach or default under this Lease by Tenant; and/or (v) any construction or other work undertaken by Tenant on the Premises (including any Tenant Improvements)(individually, each a “Claim” and, collectively, “Claims”).

Tenant’s obligations in this Section shall not extend to any Claim that is caused by the sole negligence or willful misconduct of Landlord or an Indemnified Party, subject to any immunities which may apply to Landlord with respect to such Claims. Tenant’s obligation to defend shall arise regardless of any claim or assertion that Landlord caused or contributed to the Claims. This Section and any other indemnification provided elsewhere in this Lease shall survive the termination of this Lease and shall survive for the entire time that any third party can make a Claim.

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Tenant shall ensure that its contractors and subcontractors (e.g. those constructing any Tenant Improvements or performing any work on the Premises) also fully indemnify, defend and hold harmless the Indemnified Parties to the same extent that Tenant is required to indemnify, defend and hold harmless such Indemnified Parties.

12.02 Insurance Requirements. Upon execution of this Lease, and, in any event, before Tenant enters the Premises (or any portion thereof) or commences any work on or at the Premises, Tenant shall, at its sole cost and expense, procure and maintain in full force and effect for the duration of this Lease, insurance as required by Exhibit G (Insurance Requirements) 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 Premises. The cost of such insurance shall be borne by the Tenant.

12.03 Review of Coverage. 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.

12.04 Tenant’s Failure to Maintain Insurance.
(a) Tenant agrees that if Tenant does not procure, maintain and show evidence of any insurance policy required under this Lease or fails to pay any premiums when due, Landlord may, at its election (but without any obligation to do so), 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. (including, but not limited to, complete, certified copies of all required insurance policies, including, but not limited to, endorsements). 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) In the event that Tenant fails to maintain insurance coverages, as required in this Lease, and a loss or damage occurs that results in Landlord’s liability for copayments, deductibles, or other such charges to replace the loss under Landlord’s applicable insurance policy, Tenant agrees to reimburse the City for all such charges within ninety (90) days of the City’s notification to Tenant.

12.05 Waiver of Subrogation. Tenant for itself and on behalf of its insurers, hereby waives and releases the Landlord, and its officers, officials, directors, employees, agents, representatives, and volunteers (i.e. the additional insureds) from liability for injury to any person or damage to property that is caused by or results from any risk covered under any insurance policy required by this Agreement or any other valid and collectible insurance policy otherwise carried by Tenant. Tenant agrees to defend, indemnify and hold Landlord and its officers, officials, directors, employees, agents, representatives, and volunteers harmless from any and all such liability. Tenant shall obtain a waiver of any subrogation right that its insurers may acquire against any of the additional insureds by virtue of payment of any such loss covered by such insurance.

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12.06 Waiver of Loss and Damage. Landlord shall not be liable for any damage to inventory or other property of Tenant, or others, located in, on, at, or about the Premises, nor for the loss of or damage to any property of Tenant or of others by theft or otherwise, which is not proximately caused by Landlord’s sole negligence or willful misconduct, and Tenant waives any claim against Landlord with respect to such property. Landlord shall not be liable to Tenant or Tenant’s officers, directors, employees, agents, representatives, volunteers, contractors, subcontractors, guests, invitees, or customers 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 from the pipes, appliance or plumbing works or from the roof, street or subsurface or from any other places or by any other cause of whatsoever nature. Landlord shall not be liable to Tenant or Tenant’s officers, directors, employees, agents, representatives, volunteers, contractors, subcontractors, guests, invitees, or customers for any such damage caused by other tenants or persons in the Premises, occupants of adjacent property of the Wharf, 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, but not limited to, subrogation claims by Tenant’s insurance carriers, unless such damage shall be proximately caused by the willful act or sole negligence of Landlord.

12.07 Notice by Tenant. Tenant shall give prompt notice to Landlord in case of fire or accidents in or around the Premises or of any damage or defects in the Premises (or any improvements located thereon), or any fixtures or equipment therein.

ARTICLE 13 - PARKING

13.01 Employee Parking. Tenant understands and agrees that it will use good faith efforts to discourage Tenant’s employees from parking on the Wharf except by permit which may be issued by Landlord. Tenant and its employees shall park their vehicles only in those areas as may be designated for such purpose by Landlord. Tenant and its employees agree not to occupy parking places directly in front of Wharf businesses.

13.02 Customer Parking. Landlord shall have the right to adopt and implement such parking programs as may be necessary to alleviate parking problems during peak traffic periods, including, without limitation, requiring the use of off-site parking. Landlord reserves the right to change the entrances, exits, traffic lanes, and the boundaries and locations of the parking area.

Tenant shall be responsible for compliance with all parking rules and regulations as may be adopted and implemented by Landlord from time to time, including, without limitation, systems of validation, shuttle transportation or any other programs which may be deemed necessary or appropriate by Landlord to control, regulate or assist parking by customers of the Wharf.

ARTICLE 14 – TRANSFER, ASSIGNMENT AND SUBLETTING

14.01 Transfers Prohibited. Tenant and its permitted successors and assigns shall not either voluntarily, or by operation of law, Transfer (as defined below) its interest in this Lease or in the Premises, or any portion thereof, without first providing written request to Landlord and obtaining Landlord’s prior written consent pursuant to Section 14.02(b) below (which consent may be withheld or delayed in Landlord’s sole discretion). As used in this Lease, the term “Transfer” means any attempt to sell, convey, assign, sublease, transfer, mortgage, pledge, grant, hypothecate or encumber this Lease or any interest in this Lease, or the Premises or any portion thereof or the buildings and improvements thereon, and any attempt to sublet, license or grant any concession to the Premises, in whole or in part, or allow any person other than Tenant’s employees, agents, customers, and invitees to occupy or use all or any portion of the Premises.

14.02 Landlord Consent; Tenant’s Request to Landlord.

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(a) Any Transfer made in violation of this Article 14 is voidable, at Landlord’s election, and shall constitute a default subject to the cure right in Article 15 (Default). (b) For purposes of this Article 14, the consent to any Transfer must be obtained from the City Council, or any agent or representative authorized by said City Council to give said consent. Unless otherwise provided in writing by Landlord, approved transferees and assignees may not extend the Initial Term of this Lease (and any applicable Extended Term) by exercising any option(s) to extend or renew the Initial Term (or Extended Term, as applicable) of this Lease granted herein that have not already commenced at the time of said assignment, sublease or other Transfer.
(1) Notwithstanding anything to the contrary herein, Landlord reserves, at Landlord’s sole discretion, all authority to withhold, deny, approve, or otherwise require the modification of any proposed Transfer.
(c) Tenant shall comply with the following requirements for any Transfer. Tenant agrees that failure to satisfy these requirements are reasonable bases for Landlord to deny consent but is not exhaustive of the bases to deny consent:
(1) Tenant shall give Landlord at least thirty (30) days’ written notice of its proposed Transfer and provide appropriate documentation demonstrating, to Landlord’s satisfaction, the financial and operational responsibility and appropriateness of the proposed transferee. Tenant shall provide Landlord within five (5) days such other or additional information and/or documentation as may be reasonably requested by Landlord; and
(2) Tenant shall provide the terms and provisions of the proposed Transfer; and (3) The proposed assignee or transferee shall expressly assume all the terms, covenants, obligations, responsibilities, liabilities, duties, and conditions of this Lease.

14.03 Involuntary Assignment. No interest of Tenant (or Tenant’s shareholders as of the Effective Date) in this Lease, shall be assignable by operation of law including, without limitation, the Transfer of this Lease by testate or intestate succession, except to Tenant’s heirs at law in the first degree. 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 Transfer 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 fifteen (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 thirty (30) days in which to have the involuntary proceeding dismissed or the receiver removed.

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14.04 Consent Required. Tenant shall not, without Landlord’s prior written consent, Transfer 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, agents, invitees, and customers. It is agreed that Landlord will not be acting unreasonably in refusing to consent to a Transfer if, in Landlord’s opinion, (A) the quality of the operation of the proposed assignee or transferee is not equal to or better than that of the Tenant, (B) such assignee or transferee may adversely affect the business of the other tenants or the tenant mix in the Wharf or Landlord’s ability to obtain Rent, (C) such assignee or transferee does not have a positive net worth on the date of assignment, or (D) such assignee or transferee does not have a net worth on the date of assignment that is equal to or greater than Tenant and Guarantor’s combined net worth as of the Effective Date of this Lease. The term “net worth” shall mean the amount by which the total of all assets shall exceed the total of all liabilities as determined by an independent certified public accountant in accordance with generally accepted accounting principles.

14.05 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. All Transfers shall require Landlord’s prior written approval pursuant to this Article

14. 14.06 Unauthorized Assignment or Sublease. Any attempted Transfer without Landlord’s required consent shall be void. Any assignee, subtenant, transferee 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.

14.07 Expenses and Attorneys’ Fees. Tenant shall pay to Landlord, all of Landlord’s costs and expenses (including reasonable attorneys’ fees) incurred by Landlord in connection with reviewing, considering, or consenting to any proposed Transfer, regardless of whether such transfer is approved or consummated, or in connection with any other actions taken by Landlord pursuant to this Article 14.

14.08 Effect of Consent. Consent by Landlord to a Transfer shall not release Tenant from its primary liability under this Lease. Landlord’s consent to one Transfer or occupation by other parties shall not be deemed a consent to other or future assignments or use by other parties, or constitute a waiver of the requirements of this Article 14.

14.09 Surrender of Lease. The voluntary or other surrender or a cancellation of this Lease by Tenant shall not work a merger, and shall, at the election of Landlord, either terminate all or any existing subleases or sub-tenancies or may operate as an assignment to Landlord of any or all of such subleases or sub-tenancies. 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 material breach and an Event of 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 (Indemnification and Insurance);

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(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 to Landlord at least fourteen (14) days in advance 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, if the failure continues for fifteen days (15) consecutive days after notice has been given to Tenant. 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:
(i) Any general assignment or general arrangement for the benefit of creditors;
(ii) 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;
(iii) 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.
(iv) 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.
(g) Failure to abide by any Laws; or
(h) Failure to maintain the Premises in a clean, safe, and attractive condition, as described above; and, failure to promptly remedy any maintenance issues within sixty (60) days of notice from Landlord.

15.02 Remedies. In the event of any breach or default by Tenant, Landlord may, at Landlord's option and in Landlord’s sole discretion, exercise any and all rights available to a landlord under the laws of the State of California (including, but not limited to, those rights and remedies set forth in California Civil Code Sections 1951.2, 1951.4, and 1951.8), including, without limitation, the right to do any of the following:
(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 overhead fees 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, 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,

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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 this Lease and recover against Tenant:
(i) The worth at the time of award of the unpaid Rent which had been earned at the time of termination (plus applicable late charges and interest);
(ii) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided (plus interest on the award at the maximum rate allowed by law);
(iii) The worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such rental loss for the same period that Tenant proves could be reasonably avoided, including, without limitation, interest on the excess at the rate set forth in Section 4.06 (Late Charge and Interest on Unpaid Rent); and
(iv) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease or which in the ordinary course of things would be likely to result therefrom.
(c) The “worth at the time of award” of the amounts referred to in the previous subparagraphs 15.02(b)(i), and (b)(ii) 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 15.02(b)(iii) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). (d) 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 (including, but not limited to, for personal injuries and/or property damage), and Tenant agrees to indemnify and hold Landlord (and Landlord’s officers, employees, representatives, and agents) harmless from any injuries and damages, including, but not limited to, 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.
(e) In addition to all other rights and/or remedies of Landlord at law, in equity, and/or under this Lease, the Landlord has the remedy described in California Civil Code Section 1951.4, as such may be amended (Landlord may continue Lease in effect after Tenant’s breach and abandonment and recover Rent as it becomes due, if Tenant has right to sublet or assign, subject only to reasonable limitations). Accordingly, 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 so terminate this Lease, and until that time Landlord may (at Landlord’s option) continue this Lease in full force and effect and shall have the right to recover 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

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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 or delayed. The Parties intend that this Section 15.02(e) satisfies the requirements of California Civil Code §1951.4 and that the Landlord has the remedy set forth in California Civil Code Civil Code §1951.4. (f) In the event Landlord terminates this Lease pursuant to this Section

15.02, and Tenant has made an advance payment of Rent as defined in California Civil Code §1951.7, and Tenant has requested in writing that Landlord notify it of any initial reletting of the Premises, then and only then must Landlord notify Tenant pursuant to California Civil Code §1951.7(c) that the Premises have been relet.
(g) 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, but not limited to, those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including, but not limited to, reasonable attorney fees, upon any secured indebtedness, and in an order as Landlord may determine.
(h) 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 regarding Landlord’s election to terminate. (i) 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 rights and remedies reserved to Landlord under this Lease or otherwise available to Landlord at law. (j) 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 expense 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.

15.03 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 Landlord under this Lease which accrues after the date of any default by Tenant hereunder.

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15.04 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, covenant, or condition 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, covenant or condition 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 any Rent hereunder.

ARTICLE 16 - DAMAGE OR DESTRUCTION

16.01 Repair of Damage by Landlord. Tenant agrees to notify Landlord in writing promptly of any damage to the Premises resulting from fire, earthquake, or any other identifiable event of a sudden, unexpected, or unusual nature (“Casualty”). If the Premises are damaged by a Casualty or any adjacent or surrounding common areas providing access to the Premises are damaged by a Casualty, such as but not limited to a Wharf closure as provided in Section 2.06 (Wharf Closure), and such that the Premises are untenantable, or Tenant does not have reasonable access to the Premises, provided that the Casualty was not caused by the negligence, gross negligence or willful misconduct of any Tenant’s employee, contractor, invitee, guest, licensee, contractor or subtenant (“Tenant Party”), and if neither Landlord nor Tenant has elected to terminate this Lease under Section 16.03 (Landlord’s Option to Terminate or Repair) or Section

16.04 (Tenant’s Option to Terminate), Landlord will promptly and diligently restore such common areas, the Premises, and the Tenant Improvements originally constructed by Landlord to substantially the same condition as existed before the Casualty, or to a condition that satisfies required buildings codes and other laws, or to a condition that is desirable by Landlord in its sole discretion. In making these modifications, Landlord will not materially impair Tenant’s access to the Premises. Landlord’s obligation to restore is subject to reasonable delays for insurance adjustment and other matters beyond Landlord’s reasonable control and subject to the other clauses of this Article 16. If Tenant requests that Landlord modify the Tenant Improvements in connection with the rebuilding, Landlord may condition its consent to those modifications on:
(a) Tenant’s payment to Landlord before construction is begun of any sums in excess of the amount of insurance proceeds received by Landlord that are needed to complete the Tenant Improvements; and
(b) Confirmation by Landlord’s architect or contractor that the modifications will not increase the scope of work or the time necessary to complete the Tenant Improvements.

16.02 Repair Period Notice. Landlord will provide written notice to Tenant indicating the anticipated period for repairing the Casualty (“Repair Period Notice”), within the later of: (a) sixty (60) days after the date on which Landlord determines the full extent of the damage caused by the Casualty, or (b) thirty (30) days after Landlord has determined the extent of the insurance proceeds available to effectuate repairs. The Repair Period Notice will also state, if applicable, Landlord’s election either to repair or to terminate the Lease under Section 16.03 (Landlord’s Option to Terminate or Repair).

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16.03 Landlord’s Option to Terminate or Repair. Landlord may elect either to terminate this Lease or to effectuate repairs if:
(a) The Repair Period Notice estimates that the period for repairing the Casualty exceeds one (1) year from the date of the commencement of the repair; (b) The estimated repair cost exceeds the available insurance proceeds, if any, for such repair (not including the deductible), plus any amount that Tenant is obligated to pay for, or elects to pay for such repair;
(c) The estimated repair cost of the Premises, even though covered by insurance, exceeds fifty percent (50%) of the full replacement cost of the Premises; or (d) The Premises cannot be restored except in a substantially different structural or architectural form than existed before the Casualty.

Landlord’s election will be stated in the Repair Period Notice.

16.04 Tenant’s Option 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 Premises from a Casualty, and Landlord does not elect to terminate as provided above, then Tenant may elect to terminate this Lease if the Repair Period Notice provided by Landlord indicates that the anticipated period for repairing the Casualty exceeds one (1) year from the date of commencement of the repairs. Tenant may elect to terminate this Lease by providing written notice (“Tenant’s Termination Notice”) to Landlord within thirty (30) days after receiving the Repair Period Notice from Landlord. If Tenant does not elect to terminate within this thirty-day (30-day) period, Tenant will be considered to have waived the option to terminate. Tenant will not have an option to terminate if Tenant is in default under this Lease and the Casualty was caused in part or in whole by the fault of any Tenant Party, including negligence, gross negligence or willful misconduct of any Tenant Party.

16.05 Rent Abatement Due to Casualty. Landlord and Tenant agree that, if the Casualty was not the result of the negligence, gross negligence, or willful misconduct of any Tenant Party, and provided that Tenant is not then in default under this Lease, Tenant will be provided with a proportionate abatement of Rent based on the Rentable Square Footage of the Premises rendered unusable (due to physical damage to the Premises or the unavailability of access to the Premises) and not used by Tenant. That proportional abatement, if any, will be provided during the period beginning on the later of: (a) the date of the Casualty, or (b) the date on which Tenant ceases to occupy the Premises and ending on the date of substantial completion of Landlord’s restoration obligations as provided in this Article 16. Subject to Section 16.04 (Tenant’s Option to Terminate), the Rent abatement provided in this Section16.05 is Tenant’s sole remedy due to the occurrence of the Casualty. Landlord will not be liable to Tenant or any other person or entity for any direct, indirect, or consequential damage (including but not limited to lost profits of Tenant or loss of or interference with Tenant’s business), whether or not caused by the negligence of Landlord or Landlord’s employees, contractors, licensees, or invitees, due to, arising out of, or as a result of the Casualty (including but not limited to the termination of the Lease in connection with the Casualty). Tenant agrees to maintain business interruption insurance in amounts and with coverage no less than that required by Exhibit G (Insurance Requirements) to provide coverage regarding such matters.

16.06 Damage Near End of Term. Notwithstanding any other provision of this Article 16, if the Premises is destroyed or damaged by a Casualty during the last eighteen (18) months of the Lease Term, Landlord has the option to terminate this Lease by giving written notice to Tenant consistent with the Repair Period Notice.

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16.07 Effective Date of Termination and Rent Apportionment. If Landlord or Tenant elects to terminate this Lease under this Article 16 in connection with a Casualty, the termination will be effective thirty (30) days after delivery of notice of such election. Tenant must pay Rent, properly apportioned up to the date of the Casualty or Tenant’s cessation of revenue generating business activities from the Premises, whichever is later. After the effective date of the termination, Landlord and Tenant will be discharged of all future obligations under this Lease, except for those provisions that, by their terms, survive the expiration or earlier termination of this Lease.

16.08 Waiver of Statutory Provisions. The provisions of this Lease, including those in this Article 16, constitute an express agreement between Landlord and Tenant that applies in the event of any Casualty to the Premises. Landlord and Tenant, therefore, each fully waives the provisions of any statute or regulation, including California Civil Code §§1932(2) and 1933(4), or any successor statute, relating to any rights or obligations concerning a Casualty.

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 acknowledgement 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 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) quarter’s Minimum Base 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

18.01 Rules and Regulations. Tenant acknowledges and understands that the Premises are located on property of Landlord, primarily devoted to commerce and navigation, namely the Municipal Wharf, which is under exclusive control of Landlord. By executing this Lease, Tenant agrees to abide by all Laws promulgated by the City Council of the City of Santa Cruz now existing or hereafter made for the government, management, maintenance, operation and/or improvement of the Wharf, including, without limitation, such directives as to the usage of the Wharf as may be determined or promulgated by the officials, officers or representatives of Landlord in their official or departmental capacity. Tenant further agrees that such Laws or conditions as may be imposed by Landlord through its City Council, administrative officers, department heads and/or duly authorized representatives, shall be subject to immediate compliance by Tenant without question or qualification as to the validity or reasonableness thereof.

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18.02 Collective Wellbeing and Reputation. Tenant acknowledges and understands that maintaining the positive reputation of all businesses on the Municipal Wharf is essential to the success of the entire Wharf as a tourist destination and center of commerce. By executing this Lease, Tenant acknowledges their own duty to maintain a position reputation and favorable customer reviews during the Term of the Lease. Tenant shall endeavor to maintain favorable customer reviews across popular online review platforms, such as, but not exclusively, Yelp, Tripadvisor, Google, Zagat, Open Table, etc. For the purposes of this Section, favorable reviews shall be considered as an average of three and one half (3.5) stars or above, or other equivalent rating, across at least two (2) platforms with a minimum of fifty (50) reviews each. In the event that Tenant’s ratings drop below this threshold, Tenant shall develop and implement an action plan that identified and address issues that consistently and negatively impact reviews within forty-five (45) days of Landlord’s request. Landlord reserves the right to consider reviews in its decision to approve or deny any Extension Request, and shall provide Tenant a minimum of thirty days (30) days to contest any such decision on the premise of reviews.

18.03 Collective Responsibility for Wharf Safety and Experience. Tenant acknowledges that maintaining a safe and welcoming environment on the Wharf promotes the success of Tenant’s business and those of other Wharf tenants, as well as the sustainability of the Wharf itself. Tenant accepts its responsibility to comply with all Laws and permit conditions regarding the responsible sale of alcohol, including control of service, portion control, and the responsibilities of third-party liability, which are essential to protecting Tenant’s business, other tenants, the City, and visitors to the Wharf, if applicable.

In the event that Tenant is found to be in violation of alcohol laws or permit conditions, the City may require the Tenant to pay a fine of $1,000 per occurrence. This fine is cumulative and in addition to any other remedies the City or other public agency may take related to alcohol permit compliance.

18.04 Tenant Meeting Attendance. Tenant agrees to attend no fewer than fifty percent (50%) of Tenant coordination meetings held between the Landlord and Wharf tenants. Quarterly meetings are currently held between City staff and Wharf tenants to discuss issues and policies related to Wharf businesses, operations, and tenants. Tenant may designate an agent or employee to attend such meetings on behalf of Tenant.

ARTICLE 19 – CONDEMNATION

19.01 Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively "Condemnation"), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than twenty-five percent (25%) of that portion of the Premises is taken by Condemnation, Tenant may, at Tenant’s option, to be exercised in writing within ten (10) days after Landlord shall have given Tenant written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Tenant does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Minimum Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Except as provided herein, Landlord shall be entitled to receive all compensation and anything of value awarded, paid, or received in settlement or otherwise related to any Condemnation (“Award”) and Tenant irrevocably assigns and transfers to Landlord all rights to and interests in the Award, including, without limitation, any amount attributable to any excess of the market value of the Premises for the remainder of the Term over the present value as of the termination date of the Rent payable for the remainder of the Term (commonly referred to as the “bonus value” of the Lease). Notwithstanding the foregoing, Tenant shall have the right

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to make a separate claim in the Condemnation proceeding, as long as the Award payable to Landlord is not reduced thereby, for: (a) the taking of the unamortized or undepreciated value of any leasehold improvements owned by Tenant that Landlord has the right to remove at the end of the Term and that Tenant elects not to remove; (b) reasonable removal and relocation costs for any leasehold improvements that Tenant has the right to remove and elects to remove (if condemner approves of the removal); and (c) relocation costs under California Government Code section 7262, the claim for which Tenant may pursue by separate action independent of this Lease.

ARTICLE 20 - MISCELLANEOUS

20.01 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 awarded by the court, arbitrator or other person deciding the legal action, arbitration or proceeding as a part of the judgment or award resulting therefrom.

20.02 Sale or Lease of the Premises 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 the real estate of which the Premises are a part. In the event of any sale or exchange of the Premises 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.

20.03 Liability to Successors. The covenants and conditions herein contained shall, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, administrators and assigns of the Parties hereto who shall be jointly and severally liable for the covenants contained herein. This Lease shall be binding on and shall inure to the benefit of the heirs, executors, administrators, successors, and assigns of the Parties hereto, but nothing in this Section shall be construed as a consent by Landlord to any assignment of this Lease or any interest in this Lease by Tenant except as provided in Article 14 (Assignment and Subletting) of this Lease.

20.04 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 agreements 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. Any action or proceeding arising out of or relating to the Lease shall be brought in a state or federal court situated in the County of Santa Cruz, State of California. If any provision of this Agreement 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.

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

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

20.06 Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, abnormal adverse weather conditions, acts of God, inability to obtain labor or materials or reasonable substitutes therefore, governmental restrictions, regulations or controls, enemy or hostile government action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of and not caused by the fault or negligence 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. However, nothing contained in this Section shall excuse the prompt payment of Rent by Tenant as required by this Lease. Tenant's obligations to make payment for Rent and other charges pursuant to the terms of this Lease shall be excused or reduced only as elsewhere expressly and specifically provided in this Lease.

20.07 Notices. Any notice to be given by one Party to the other under this Lease or any options to be exercised under this Lease, shall be in writing. To the extent permitted by law, such notices shall be delivered via email to the addresses listed in Section 1.11 (Tenant’s Address for Notices) and Section 1.12 (Landlord’s Address for Notices).

If email is not permitted as sufficient written notice pursuant to California written law, the notice shall be delivered by: 1) personal delivery in writing to the address set forth in Section

1.11 (Tenant’s Address for Notices) and Section 1.12 (Landlord’s Address for Notices), in which case notice is effective upon delivery; 2) overnight courier (i.e. Federal Express) to the address set forth in Section 1.11 (Tenant’s Address for Notices) and Section 1.12 (Landlord’s Address for Notices) with postage and charges prepaid and return receipt requested, in which case notice is effective when delivered; 3) priority U.S. Mail to the address set forth in Section 1.11 (Tenant’s Address for Notices) and Section 1.12 (Landlord’s Address for Notices), in which case notice shall be deemed delivered on the second business day after the deposit thereof with the United States Postal Service; or 4) as otherwise required by law. Either Party may change its notification contact information set forth in Section 1.11 (Tenant’s Address for Notices), Section 1.12 (Landlord’s Address for Notices) and Section 1.13 (Landlord’s Address for Payment of Rent) by providing written notice of any such change in accordance with this paragraph.

Mailed notices shall be sent by United States Postal Service, certified or registered 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 written notice pursuant to this Lease, at any time designate a different address to which notices shall be sent.

20.08 Relationship of Parties. The relationship of the Parties hereto is that of Landlord and Tenant. Nothing in this Lease shall be construed to render Landlord in any way or for any purpose a partner, joint venturer, or associate in any relationship with Tenant other than that of Landlord and Tenant, nor shall this Lease be construed to authorize either to act as agent for the other.

20.09 Advertising and Promotion Fund. Landlord, upon acquiring approval from a majority of Wharf tenants and licensees, may establish a Wharf Marketing Association (“Association”) to market, advertise and promote the Municipal Wharf and its various businesses.

By executing this Lease, Tenant agrees to join the Association, if any, and to contribute funds to a Wharf Marketing and Promotion Fund (“Fund”) for the purpose of developing coordinated

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marketing plans which may include without limitation, media advertising, community-relations programs, special events and promotions of the Wharf and its businesses.

The Association members shall select a board of directors or other such advisory group as a majority of the members of the Association shall select which shall decide and approve all expenditures from the Fund. The activities of the Association shall be financed by the proceeds of the Fund and shall be based upon an annual budget based on an appropriate fiscal year.

If the Landlord elects to establish the Association, Landlord may impose a marketing fee on all members of the Association to implement the Fund. The marketing fee shall equal one-half percent (1/2%) of Gross Annual Sales as defined in this Lease. No such charge shall be imposed unless all members of the Association are similarly charged. This fee shall be in addition to any other Rent, payment or charge required under this Lease and shall be paid in quarterly installments to the Landlord for remittance to the Association.

If a Business Improvement Area or Assessment District (as defined in the Santa Cruz Municipal Code) is established in the future which includes the Wharf and its tenants, the collection of marketing fees described above shall terminate if the assessments collected through said District equal or exceed the amounts collected by the Landlord for deposit into the Fund during the prior fiscal year.

20.10 Waiver. The waiver by Landlord of any breach of any provision, term, covenant or condition of this Lease shall not constitute a continuing waiver or a waiver of any subsequent breach by Tenant of either the same or a different provision, term, covenant, or condition of this Lease. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any provision, 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 provision, covenant, term or condition of this Lease shall be deemed to have been waived by Landlord, unless such waiver is in writing by Landlord.

20.11 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.

20.12 Authority. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of such entity represents or warrants that he or she is duly authorized to execute and deliver this Lease on behalf of such entity and that such entity shall be bound by all the terms and provisions hereof.

20.13 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.

20.14 Broker’s Commission. Each Party represents and warrants that there are no claims for brokerage commissions or finder’s fees arising from that Party’s activities in connection with this Lease, and each Party agrees to indemnify and hold the other Party harmless from all liability arising from any such claim.

20.15 Guaranty of Lease. This Lease shall not be effective until the Guarantor(s) named in Section 1.10 (Guaranty of Lease) has executed a written Guaranty in the form attached

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hereto as Exhibit C (Guaranty of Lease). If Section 1.11 (Guaranty of Lease) are blank or marked “Intentionally Omitted” then Tenant shall be solely responsible for all payments and performance required by this Lease.

20.16 Recycling Activities. Tenant agrees to participate, to the greatest extent possible, in all existing or future recycling activities initiated or arranged by Landlord with regard to the Wharf.

20.17 Assessment District Establishment. Tenant agrees not to unreasonably protest the establishment of an assessment district for purposes of parking, promotion, or maintenance.

20.18 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.

20.19 Partial Invalidity; Severability. If any provision of this Lease is held by a court of competent jurisdiction to be invalid, void, or unenforceable, such determination shall not affect any other provision of this Lease and such remaining provisions of this Lease shall remain in full force and effect unimpaired by the holding.

20.20 Approval by City Council/City Attorney. This Agreement, and any amendment of its terms, except as under such authority delegated to the City Manager, or designee, is subject to the approval of the City Council of the City of Santa Cruz and the City Attorney, and shall not bind Landlord until such time as their approval and consent has been received in writing.

20.21 Subordination. This Lease is and shall be subordinate to any encumbrance now of record or recorded after the date of this Lease affecting the building, other improvements, and land of which the premises are a part.

Such subordination is effective without any further act of Tenant. Tenant shall from time to time, on request from Landlord, execute and deliver any documents or instruments that may be required by a lender to effectuate any subordination. If Tenant fails to execute and deliver any such documents or instruments, Tenant irrevocably constitutes and appoints Landlord as Tenant’s special attorney in fact to execute and deliver any such documents or instruments.

20.22 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 Santa Cruz of any required permits or applications, and in no way limits the discretion of the City of Santa Cruz in the permit, regulatory, and approval process. Landlord and Tenant will render to each other reasonable assistance in obtaining necessary City of Santa Cruz 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.

20.23 Prevailing Wage. It shall be the obligation of Tenant and/or any contractor or subcontractor under Tenant to comply with and conform to all State of California labor laws, rules and regulations and the Parties agree that the Landlord shall not be liable for any violation thereof.

To the extent that the construction of any Tenant Improvements or any other work performed pursuant to this Lease may be considered a “public work” (construction, alteration, demolition, or repair work) under and pursuant to the California Labor Code (see California Labor Code Sections 1720 et seq. and Title 8, California Code of Regulations, Chapter 8, Subchapter 3, commencing with Section 16000) and subject to labor compliance monitoring and enforcement by the Department of Industrial Relations, Tenant (and its contractor(s) and subcontractor(s) performing the work) shall conform to any and all prevailing wage requirements applicable to the work on the

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Premises under this Lease. Tenant (and its contractors and subcontractors) shall adhere to the prevailing wage determinations made by the Director of Industrial Relations pursuant to California Labor Code Part 7, Chapter 1, Article 2, applicable to the Tenant Improvements and associated work. 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. (Reference: California Labor Code Sections 1720, 1774 and 1782). Tenant shall ensure that its contractors and subcontractors also comply with and adhere to this prevailing wage provision. Tenant shall be responsible for any failure of Tenant’s contractors and/or subcontractors to comply with applicable prevailing wage and public works laws. If the Tenant is unsure whether the subject work is a “public work” as defined in the California Labor Code, it may wish to seek a timely determination from the California Department of Industrial Relations (“DIR”) or an appropriate court. Only the DIR and courts of competent jurisdiction have jurisdiction to issue legally binding determinations that a particular project is or is not a public work.

To the extent applicable to this Lease, Tenant 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), Tenant 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 California Labor Code section 1775;
b. Tenant shall maintain and make available payroll and worker records in accordance with California Labor Code sections 1776 and 1812; c. If Tenant employs (and/or is legally required to employ) apprentices in performing any work and/or services on the Premises under this Lease, Tenant shall ensure compliance with California Labor Code section 1777.5;
d. Tenant is aware of the limitations imposed on overtime work by California Labor Code sections 1810 et seq. and shall be responsible for any penalties levied in accordance with California Labor Code section 1813 for failing to pay required overtime wages; e. Tenant shall post a copy of the applicable wage rates at each jobsite at a location readily available to its workers.
f. Any failure of Tenant and/or its subconsultant to comply with the above requirements relating to a public work project shall constitute a breach of this Lease that excuses the Landlord’s performance of this Lease at the Landlord’s sole and absolute option and shall be at the sole risk of Tenant. Tenant on behalf of itself and any subconsultant, agree to indemnify, defend and hold harmless the Landlord 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 Tenant and any subconsultant to pay prevailing wages or to otherwise comply with the requirements of prevailing wage law relating to a public work.
g. Tenant 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 California Labor Code section 1725.5 [with limited exceptions from this requirement for bid purposes only under California Labor Code section 1771.1(a)].

20.24 Limitation of Liability; Waiver of Consequential Damages; No Liability for Damages.
(a) The obligations of Landlord under this Lease shall not constitute personal obligations of Landlord or its City Council members, officials, directors, officers, employees, representatives, agents, or volunteers, and Tenant shall not seek recourse against

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Landlord’s City Council members, officials, directors, officers, employees, representatives, agents, or volunteers, or any of their personal assets for such satisfaction. (b) In no event shall Landlord (or its City Council members, officials, officers, directors, employees, agents, representatives, or volunteers) be liable to Tenant for penalties or liquidated damages, or for special, indirect, consequential, or incidental losses or damages including, but not limited to, lost profits, loss or interruption of business, lost or damaged data, loss of use of facility or equipment, or the failure or increased expense of operations, regardless of whether any such losses or damages are characterized as arising from breach of contract, breach of warranty, tort, strict liability, or otherwise, even if Landlord is advised of the possibility of such losses or damages, or if such losses or damages are foreseeable. (c) Tenant acknowledges that Landlord would not enter into this Lease if it were to be liable for damages (including, but not limited to, actual damages, economic damages, consequential damages, lost profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use) under, or relating to, this Lease or any of the matters referred to in this Lease. Accordingly, Tenant covenants and agrees on behalf of itself and its successors and assigns, not to sue Landlord (either in its capacity as landlord in this Lease or in its capacity as the City of Santa Cruz) or Landlord’s City Council members, officials, officers, directors, employees, agents, representatives, or volunteers for damages (including, but not limited to, actual damages, economic damages, consequential damages, lost profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use) or monetary relief for any breach of this Lease by Landlord or for any dispute, controversy, or issue between Landlord and Tenant arising out of or connected with this Lease or any of the matters referred to in this Lease (including, without limitation, any and all Wharf closures, Landlord obligations, and/or any and all plans, permits, licenses, regulatory approvals, California Environmental Quality Act (“CEQA”) documents, Transfers and/or any future amendments or enactments thereto), the Parties agreeing that declaratory relief, injunctive relief, mandate and specific performance shall be Tenant’s sole and exclusive judicial remedies.

20.25 Offer. Preparation of this Lease by either Party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto.

20.26 Compliance with City Departmental Rules and Regulations. Tenant agrees to comply with all rules and regulations imposed by the City's Fire, Police, Planning, Water, Public Works, Building, Finance, Economic Development and Housing and Sanitations departments and divisions, and any other departments and divisions in existence now or at any time in the future.

20.27 Retention of Discretion. By its execution of this Lease, Landlord is not committing itself or agreeing to undertake any activity requiring the subsequent exercise of discretion by the City of Santa Cruz, or any department thereof, including but not limited to the approval of any Tenant Improvements, any CEQA documents, any development proposal or land use regulation governing the Premises, or any other approval. Tenant understands and agrees that Landlord in its capacity as the City of Santa Cruz reserves the right to exercise its discretion as to all matters which it is, by law, entitled or required to exercise its discretion, including, but not limited to, the consideration of Tenant Improvements, any CEQA documents, a final development or project, any and all plans, permits, licenses or regulatory approvals, and/or any other acts or activities requiring the subsequent independent exercise of discretion by the City of Santa Cruz or any agency or department thereof. Nothing in this Lease shall obligate the Landlord in its capacity as the City of Santa Cruz to exercise its discretion in any particular manner, and notwithstanding any provision of this Lease to the contrary any exercise of discretion required by law or permitted by this Lease shall not be deemed to constitute a breach of Landlord’s duties under this Lease.

8.54

20.28 Cumulative Remedies. The various rights, options, elections, powers and remedies contained in this Lease shall be construed as cumulative, and no one of them shall be exclusive of any of the others or of any other legal or equitable remedy which either party might otherwise have in the event of a breach or default in the terms of this Lease. The exercise of one right or remedy by such Party shall not impair its right to any other right or remedy until all obligations imposed on the other party have been fully performed.

20.29 Counterparts. This Lease may be executed in several counterparts and all such executed counterparts together shall constitute one agreement binding on all of the Parties. A scanned, electronic, facsimile or other copy of a Party’s signature shall be accepted and valid as an original.

20.30 Entire Agreement. This Lease and the attached Exhibits contain all of the agreements and conditions made between the Parties with respect to the hiring and leasing of the Premises and the subject matter of this Lease and supersede all prior agreements or understandings between the Parties related thereto. Any agreements or representations respecting the Premises, their leasing to Tenant by Landlord, or any other matter discussed in this Lease not expressly set forth in this instrument are null and void. This Lease may not be modified or amended orally or in any manner except as provided in Section 20.32 (Amendments to Lease) below.

20.31 Construction of Agreement. Each Party acknowledges that it has reviewed this Lease and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not apply in the interpretation or construction of this Lease.

20.32 Amendments to Lease. This Lease may not be amended in any respect except by way of a written instrument which expressly references and identifies this particular Lease, which expressly states that its purpose is to amend this particular Lease, and which is duly executed by the Parties.

20.33 Warranty of Authority. The signatories to this Lease warrant and represent that each is authorized to execute this Lease and that their respective signatures serve to legally obligate their respective representatives, agents, successors and assigns to comply with the provisions of this Lease.

SIGNATURE PAGE FOLLOWS

8.55

The Parties have executed this Lease as of the Effective Date.

LANDLORD
City of Santa Cruz
A California municipal corporation
By: ________________________________ Date: _____________________ Matt Huffaker
Its: City Manager
TENANT
By: _____________________________ Date: _____________________ Bruce Noland
By: _____________________________ Date: _____________________

APPROVED AS TO FORM:
_____________________________ Date:

Stephanie Duck
Office of the City Attorney
Signature Requirements for Business Entity:
a. 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 b. Partnership - Signature of General Partner, or signature of partner who is authorized to execute documents per the Certificate of Partnership. If authorized partner is a corporation, follow Corporation signature requirement. c. LLC- For a member-managed LLC, signature of any member. For a manager-managed LLC, signature of the manager. If the LLC has corporate officer designations, follow Corporation signature requirement.

Februrary 3, 2026

8.56

Exhibit A
Location of Premises on Santa Cruz Municipal Wharf

8.57

Exhibit B
Floor Plan of Premises
Not available

8.58

Exhibit C
Guaranty of Lease

1. In consideration of the execution of the attached Lease dated ______________, by and between City of Santa Cruz, a municipal corporation (“Landlord”) and Flotsam of California, a California corporation, (“Tenant”) for the premises known as 41 Municipal Wharf 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 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. If there is more than one Guarantor, the obligations and liabilities imposed on each individual that serves as a Guarantor under this Guaranty will be joint and several.

8.59

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

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

12. 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.

13. 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.

14. 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 _____________, 2026.

Guarantor:
______________________
Bruce Noland, individually and as
owner and manager of Flotsam of California dba as Surf City

8.60

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.

8.61

Exhibit D
Statement of Gross Income and Rent
(form of begins next page)

8.62

IN ACCOUNT WITH

CITY OF SANTA CRUZ
1200 PACIFIC AVENUE, SUITE 290
SANTA CRUZ, CALIFORNIA 95060
Flotsam of California Inc. dba Surf City
41 Municipal Wharf
Santa Cruz, CA 95060
This completed and signed form, together with the accompanying payment, must be received by the City no later than close of business on the fifteenth day of the month following the quarter for which you are reporting sales. Do not modify this form.

QUARTERLY STATEMENT OF GROSS INCOME, RENT, AND

CAPITAL IMPROVEMENT CONTRIBUTIONS
FOR QUARTER ENDING _________________ 20___

1. Gross quarterly income (all sales and business transactions): ..................................... $ ___________

2. Cash or credit refunds made upon sales from premises: ..................................................... $ ___________

3. The amount of any city, county, state or federal sales, luxury or excise taxes on sales from the premises where such taxes are both added to the selling price and paid to the taxing authorities by Tenant: ................................................................................. $ ___________

4. Total adjustments (Line 2 plus Line 3): ................................................................................ $ ___________

5. Adjusted gross income (Line 1 minus Line 4): ..................................................................... $ ___________

6. Percentage Rent:

Breakpoint: $349,082.34
a. Up to and including Breakpoint: $___________ x 8%: ................................................. $ ___________ b. Over Breakpoint: $___________ x 6%: ........................................................................ $ ___________

7. Percentage Rent (Line 6a plus 6b): ..................................................................................... $ ___________

8. Current minimum quarterly rent: ............................................................................ $ _19,535.04__

9. RENT DUE (the greater of Line 7 or Line 8): ....................................................................... $ ___________

10. CAPITAL IMPROVEMENT CONTRIBUTION (1.0% of Line 5): ........................................... $ ___________

11. LATE FEE (10% of Line 9 plus Line 10 if paid after the due date): ...................................... $ ___________

12. INTEREST ON UNPAID RENT (1.5% monthly interest on Line 9 plus Line 10 if paid after the due date): ....................................................................................................................... $ ___________

13. CREDIT/TRUE UP (amount of any prior rent over/underpayments)*: .................................. $ ___________

14. TOTAL REMITTANCE (Sum of Line 9-13): .......................................................................... $ ___________

*Description of Credit/True Up
I hereby certify that “Gross Quarterly Income” reported herein is equal to total gross sales which have been or will be reported on the State, Federal and District Sales and Use Tax Return submitted to the State Board of Equalization for the period ending _________________.
______________________________________________________
Signature of Tenant or Tenant’s Principal Agent
Executed at Santa Cruz, California on ______________________, 20_____ w512501
Capital Improvements

8.63

Exhibit E
Construction Work Best Management Practices and Regulations (attached)

8.64 CONSTRUCTION WORK
Best Management Practices
Chapter 4 of the Best Management Practices Manual for the City’s Storm Water Management Program
Planning Department
Public Works Department
809 Center Street, Santa Cruz, CA 95060
Revised: June 2014
Published: March 2007
Authorized by Municipal Code Chapter 16.19

8.65 ii

TABLE OF CONTENTS

1. PLANNING CONSTRUCTION PROJECTS ................................................................................................ 1

1.1. Site Planning to Minimize Project Impacts .............................................................................................. 1

1.2. Erosion Control Plan Requirements ......................................................................................................... 2

2. EROSION AND SEDIMENT CONTROL REQUIREMENTS..................................................................... 3

2.1. Erosion Control ........................................................................................................................................ 3

2.2. Sediment Control...................................................................................................................................... 4

3. SITE HOUSEKEEPING REQUIREMENTS ................................................................................................. 5

3.1. Equipment and Vehicle Maintenance and Cleaning ................................................................................ 5

3.2. Material Storage and Soil Stockpiles ....................................................................................................... 5

3.3. Dewatering Operations ............................................................................................................................. 6

3.4. Waste Management: Building Materials, Demolition Waste, and Vegetation ........................................ 6

3.5. Portable Toilet Facilities .......................................................................................................................... 7

3.6. Site Cleanup ............................................................................................................................................. 8

4. PAINTING AND MASONRY WORK .......................................................................................................... 8

4.1. Painting..................................................................................................................................................... 8

4.2. Masonry and Concrete Work ................................................................................................................... 9

5. SIDEWALK AND ROADWORK ............................................................................................................... 10

6. References & Credits .................................................................................................................................... 10

7. Contact .......................................................................................................................................................... 10

8.66 1
In the City of Santa Cruz, water in the streets, gutters, and storm drains flows to local creeks, the San Lorenzo River, or Monterey Bay without any treatment. Construction sites have the potential to generate wastewater and runoff that carry sediment, debris, paint, concrete, and other harmful pollutants. Thus, in order to reduce the amount of pollutants reaching the storm drain system and local waterways, the City developed “Best Management Practices (BMPs)” for construction work. All types of construction projects, whether large or small projects, must abide by these BMPs. Construction work includes, but is not limited to, clearing, grading, excavation, stockpiling, building, masonry and concrete work, and roadwork. These BMPs apply to commercial, retail, industrial, and residential projects, and to both new construction sites and remodeling projects.

1. PLANNING CONSTRUCTION PROJECTS

1.1. Site Planning to Minimize Project Impacts
Coordinating BMP implementation and construction activities is critical in preventing erosion and sediment loss. The site planning measures below shall be incorporated in project grading and erosion control plans to reduce the potential for soil erosion and storm water impacts:
 Site development shall closely match the existing
topography and soil in order to minimize the
potential for erosion. Minimize disturbed area and
protect natural features including soil, trees and
shrubs.
 Protect trees subject to the Heritage Tree
Ordinance and other trees designated for protection
by a development proposal through the use of
fencing, tree armoring, barricades or other
appropriate methods during the construction phases.
 Clearly mark the proposed limits of land
disturbance prior to commencing topsoil or
vegetation removal to ensure that only the required
land is cleared. Delineate clearing limits,
easements, setbacks, sensitive or critical areas,
trees, drainage courses, and buffer zones prior to
construction to prevent excessive or unnecessary
disturbances and exposure.
 Do not remove existing trees or tree stands located
on a site for which a discretionary permit is
required until such a permit is approved by the
Planning Department.
 Conduct grading operations in phases in order to
reduce the amount of disturbed areas and exposed
soil at any one time. Unless specifically approved
on the project’s Erosion Control Plan, no clearing,
excavation, or grading shall be conducted during rainy weather. All rainy season grading must be in accordance with Section 18.45.040 of Title 18 of the City’s Municipal Code. An exception may be granted by the Building Official for minor soil disturbance that does not present a hazard.  Plan to route construction traffic over areas that must be disturbed for other construction activities in order to reduce the amount of area that must be cleared.

HEADS UP!
SOIL DISTURBANCE OVER 1 ACRE
If your project will disturb one acre or more of soil
(or is less than one acre but part of a larger
development), you must file a Notice of Intent (NOI)
with the State Water Resource Control Board
(SWRCB) to obtain coverage under the General
Permit for Discharges of Storm Water Associated
with Construction Activity (Construction General
Permit) prior to commencing work.

As part of the submittal to the SWRCB, a Storm
Water Pollution Prevention Plan (SWPPP) must be
prepared for the proposed project by a Qualified
SWPPP Developer (QSD).When receiving coverage
under the Construction General Permit, the project
will be assigned a Waste Discharger Identification
(WDID) from the SWRCB. The City of Santa Cruz
will not issue a Building permit for the project
unless it has received a WDID. For more
information on the Construction General Permit,
visit
http://www.waterboards.ca.gov/water_issue
s/programs/stormwater/construction.shtml

8.67 2

1.2.Erosion Control Plan Requirements
Site grading and construction activities shall be implemented in accordance with an approved erosion control plan. Before designing an Erosion Control Plan, gather project background information, including soil type, drainage, topography, and surrounding site conditions. This information will help determine appropriate Construction BMPs. Erosion Control Plans shall be submitted with all building permit applications involving ground disturbance and shall include at a minimum:
 Site topography
 Nearby watercourses within 200 feet of the project area  Proposed grading contours
 Locations of existing utilities, including sewer, storm drain, curb and gutter, as applicable  Location of proposed erosion control measures and installation details (see section 2.1 for requirements)
 Location of proposed sediment control measures and installation details (see section 2.2 for requirements)
 Location of proposed construction waste control measures (see section 3.4 for requirements)  Stockpile and equipment staging areas
 Total area of disturbance (in acres)
 List of other required permits associated with the grading activity, such as State Construction General Permit, U.S. Army Corps of Engineers 404 permit, State Water Board 401 Water Quality Certification, California Department of Fish and Wildlife 1600 Agreement, as applicable. .

Figure 1: Example Erosion Control Plan

8.68 3

2. EROSION AND SEDIMENT CONTROL REQUIREMENTS
Erosion and sediment control BMPs shall be in place and implemented, as appropriate, prior to commencing grading or vegetation removal. These measures shall be maintained on all disturbed areas in order to minimize the release of sediment in a site’s storm water discharge.

2.1. Erosion Control
Any project that involves ground disturbance shall include the following minimum erosion control measures on the erosion control plan. Note erosion control measures on the plan and provide installation details.
 Protect and preserve topsoil to minimize erosion and retain infiltration capacity.
 Minimize land disturbance such as cuts and fills. Stabilize slopes and all disturbed areas as soon as grading is finished or cut-and-fills are made.
 Cover bare soils and slopes as soon as possible. Use one or more of the following to reduce the erosion potential from bare, exposed, or disturbed soil: rolled erosion control products (e.g. filter fabric, erosion control blankets, geotextiles), hydraulic mulch or hydroseeding, straw or wood mulch, seeding,
vegetation planting, or other appropriate cover material.  Do not use seeding or loose mulch on slopes greater than 3:1 (H:V) without additional erosion protection such as geotextiles or hydroseeding. If vegetative cover is used, establish a uniform vegetative cover with a minimum of 70 percent coverage.  Protect vegetated buffer zones and riparian corridors by using silt fences, that are properly staked in (on flat land or moderate slopes), or use other appropriate sediment controls.  Properly install and maintain all on-site erosion control measures and structural devices, both temporary and
permanent. Promptly repair or reinstall any erosion control measures and structural devices that were damaged during construction and maintain them so that they do not become nuisances with stagnant water, odors, insect breeding, heavy algae growth, debris, and/or safety hazards.
 A qualified person should conduct inspections of all on-site BMPs during each rainstorm, if possible, and after a storm is over to ensure that the BMPs are functioning properly. For sites greater than one-acre, on-site inspections are required in accordance with the State Water Quality Control Board
Construction Activities Storm Water General Permit.

Figure 2: Types of Erosion
Figure 3: Protect Vegetated Buffers &
Riparian Corridors

8.69 4

2.2. Sediment Control
Any project that involves ground disturbance shall include the following minimum sediment control measures on the erosion control plan. Note sediment control measures on the plan and provide installation details. Installation standard details can be downloaded from the California Department of Transportation (Caltrans) website at http://www.dot.ca.gov/hq/construc/stormwater/details.htm or on the California Stormwater Quality Association (CASQA) website.  Perimeter control. Use one or more sediment control measures, such as fiber rolls and silt fences, to prevent sediment from leaving the site during the winter season. The measure(s) used will depend upon site conditions and topography.

Fiber rolls can be used around the perimeter of the soil disturbance area on flat sites to prevent or limit
sediment from leaving the site. In urban areas or sites directly adjacent to streets, place fiber rolls at the back of the curb or sidewalk. Fiber rolls are also appropriate in combination with erosion control cover on slopes to
shorten slope length and spread runoff as sheet flow.

Silt fences can be used for perimeter control and/or as interior controls down-slope of disturbed areas on sites where slopes do not exceed 4:1 (H:V). Silt fences are
not appropriate in concentrated runoff flow areas, in
areas where flooding is a concern, or along slopes.

Silt fences must be properly staked in to be effective. Install silt fences so that the drainage around each fence does not create erosion and rills down-slope of the fence. Turn the ends of the silt fence uphill to prevent storm water from flowing around the fence. If not installed at the same elevation throughout, silt fences will create erosion.
 Storm Drain Inlet Protection. Projects that include storm drain inlets or projects that drain into storm drains shall include measures on the Erosion Control Plan to protect the inlets so silt and other pollutants do not enter the storm drain system. Effective methods to protect storm drain inlets include rock/sand bag barriers, fiber rolls, heavy rubber mats to cover and seal the inlet, and geotextile blankets inserted into the catch basin.

Do not use sand bags or straw wattles around storm drain inlets exposed to vehicular traffic in streets or parking lots.

Train employees and contractors to not drive over or park on sand bags, fiber rolls or berms protecting storm drain inlets. If protective barriers are broken or damaged, cleanup and remove any particles entering the storm drain inlet, and replace them immediately.  Stabilized construction access/exit. All projects that include ground disturbance must include a stabilized construction access/exit, unless construction vehicles and equipment will remain on paved surfaces at all times during construction. Show the location of the stabilized construction access/exit on the Figure 6: Stabilized construction access Erosion Control Plan as well as construction details and notes.

Figure 4: Perimeter silt fence
Figure 5: Storm drain inlet
protection

8.70 5
 Sediment Control on Slopes. Additional measures will be required to reduce runoff velocity and to trap sediments on slopes.

The following measures may be applied individually or in combination: erosion control blankets, fiber rolls, terracing, check dams and energy dissipaters, and/or diversion structures to reduce runoff velocity and trap sediments.
 Long-term sediment control. Measures are required to ensure that erosion and sedimentation do not become an issue once the project is completed. The following measures can be effective for long term sediment control once the plantings and roots have grown to sufficient size:
o Seeding slopes by hydro-seeding or with seeded blankets; preferably using native seeds
o Landscaping with plant species that grow rapidly and have root systems that are effective at “holding” soil

3. SITE HOUSEKEEPING REQUIREMENTS
Include the following housekeeping practices on the Erosion Control Plan as applicable. Implement during construction in order to minimize the potential for storm water impacts.

3.1. Equipment and Vehicle Maintenance and Cleaning
 Inspect equipment and vehicles frequently and repair any leaks as soon as possible. Contain and clean up leaks, spills, and drips of hazardous materials and chemicals as quickly as possible to minimize run-off or soak in. This includes fuel and motor oil, hydraulic fluid, and glycol based anti-freeze from vehicles. Use dry cleanup methods if possible. Perform major maintenance and repairs off-site.  Remove encountered abandoned fuel/oil tanks (and their contents) in a manner consistent with methodology approved by both the City and the Santa Cruz County Environmental Health Department.  If repair or refueling of vehicles and equipment must be done on-site, use a designated location away from storm drain inlets, water bodies, and other sensitive areas.  If equipment is washed on-site, wash water may not be discharged to the storm drain system. If possible, wash vehicles at an appropriate off-site facility.  Recycle used motor oil, other vehicle fluids, and vehicle parts whenever possible.

3.2. Material Storage and Soil Stockpiles
 Locate material and soil stockpiles away from gutters, storm drain inlets, and water bodies. In addition, keep stockpiles away from steep slopes and unstable soil in order to minimize the chance of an accidental release to the environment. Stockpiles may never be stored on a street or in an alley unless specifically approved by the Public Works Department.
 Store materials, including stockpiles and excavation spoils, under cover and protected from wind, rain, and runoff. Cover piles of soil, construction materials and wastes with plastic sheeting or tarps.

Figure 7: Fiber roll installation

8.71 6
 During the rainy season, after October 1st or sooner if rain is forecast, implement control measures for the items listed below if stored outside in order to prevent sediment, litter, and other pollutants from leaving the site and/or being discharged into the storm drain system. o Material stockpiles
o Soil stockpiles
o Excavation spoils
o Construction materials
 Store open bags of particulate, granular, or powder materials (such as plaster or concrete) indoors if possible. If stored outside, they must be covered or closed, and during the rainy season they must be kept within secondary containment.
 Store paints, chemicals, solvents, and other hazardous materials inside or within a shed with double containment.
 Keep dumpster lids closed and secured. For dumpsters or bins that don’t have a lid, cover them with plastic sheeting or a tarp during rainy or windy weather.

3.3.Dewatering Operations
Proper procedures must be followed before starting construction and during construction to manage the discharge of groundwater or storm water accumulated in construction site excavations or other non-storm water discharges.
 When it is expected that water encountered during site construction will need to be discharged offsite, make
arrangements ahead of time to properly manage and
dispose of this water. Identify the location of
dewatering activities and the nearest sanitary sewer
connection where the water will be discharged on the
Erosion Control Plan.
 Direct groundwater or storm water that must be
pumped out of an excavation to a settling tank to
allow sediments to settle out of the water.
 Retain water from fire sprinkler system dewatering
onsite for landscape irrigation or direct it towards the sanitary sewer.
 Apply for a wastewater discharge permit from the City’s Wastewater Treatment Facility before connecting to the sanitary sewer. Contact an Environmental Compliance Inspector, at 420-6050 to request a permit.

3.4.Waste Management: Building Materials, Demolition Waste, and Vegetation  Onsite storage of construction materials. Store wastes in containers or a dumpster whenever possible.

Cover piles of uncontained wastes and wastes stored in open containers during windy conditions and prior to significant forecasted rain (0.25 inches in a 24-hour period). Do not hose dumpsters out on the construction site.

Use construction products made from or packaged in polystyrene/plastic foam in a manner preventing the polystyrene/plastic foam from being released into the environment.

HEADS UP!

DEWATERING OPERATIONS
Water from fire sprinkler and excavation
dewatering that cannot be managed onsite
shall be directed towards the sanitary
sewer. A permit must be obtained from
the City’s Wastewater Treatment Facility
before connecting to the sanitary sewer.

8.72 7
 Building materials and demolition waste. All residential and nonresidential construction projects must comply with the mandatory 50% recycle rate for all construction and demolition waste, per City’s Construction Waste Management Plan (CWMP). If contractors, and/or subcontractors haul their own material as part of the scope of work, they shall not be excluded from complying with the CWMP.

All contractors, and/or subcontractors shall provide the City of Santa Cruz with all required documentation of weight and waste diversion data for the materials hauled. Contact the Green Building coordinator at 420-5120 for more information.

Never leave or abandon materials or excavation spoils at a project site. At the end of a construction project, collect all unused or waste materials and dispose of properly. Do not leave discarded building materials, demolition wastes and waste vegetation in a street, gully, or waterway.  Construction and demolition waste recycling. Recyclable waste includes broken concrete, green waste, lumber and wood, scrap metal and appliances. Call the City’s Customer Service Division, at telephone (831) 420-5220, for information about what may be recycled and to make arrangements to have recycling bins or dumpsters brought to the work site.

Construction projects at commercial or industrial sites must obtain any detached roll-off boxes, dumpsters, debris-boxes or other containers for collection of waste materials (to be disposed of or recycled) from the City’s Sanitation Services at (831) 420-5220. A private hauling service may be used only if all roll-off boxes or containers are left attached to the service’s vehicle the entire time the box is at the site.

There are reduced rates available for certain waste materials separated according to type. These waste types are: 1) green waste, lumber and wood; 2) mixed construction and demolition debris; 3) dirt; and 4) broken brick, asphalt, and concrete. When calling Customer Service, please ask about the “Other Materials” box rates and tonnage fees for separated materials. The same tonnage fees are also available at the landfill for self-hauled separated loads.
 Waste vegetation. Dispose of waste vegetation and unpainted or untreated lumber through the City’s GreenCycle! program.

The program accepts many types of vegetation including brush, plants, branches, untreated boards, and tree trunks (not exceeding 24 inches in diameter and four feet in length).

Vegetation may be dropped off at the City’s Resource Recovery Facility or placed in a City GreenCycle! container for pickup by the City. For more details, call the City’s Customer Service Division at (831) 420-5220.

Never dump or leave soil, mulch, vegetation, and other
landscape products into the street, gutter, or storm drain system.  Hazardous materials. Asbestos and other debris containing hazardous materials must be disposed of as hazardous waste. For more information about hazardous waste disposal, please contact the County Environmental Health Department at (831) 454-2022.

3.5. Portable Toilet Facilities
All sanitary wastes shall be collected and managed through the use of portable toilet facilities, serviced with disposal in the sanitary sewer system, or permanent toilet facilities plumbed to the sanitary sewer.  If portable toilets are used, ensure that the leasing company properly maintains the toilets and promptly makes repairs as needed. Conduct visual inspections for leaks.

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 Place portable toilets on a level surface and at a safe distance away from paved areas and, to the extent practical, storm drain inlets. Secure them to prevent blowing over.  Provide secondary containment for portable toilets located within 20 feet of a stream, storm drain, or street.
 During pump-out, take appropriate measures to avoid spillage. If spillage occurs it shall be cleaned up immediately.

3.6. Site Cleanup
 When cleaning up, sweep whenever possible. Litter and debris must be picked up and disposed of properly.
 Road or sidewalk work. In the roadway or on the
sidewalk, material stockpiles must be removed and
cleaned up by the end of each day.
 Landscaping work. Sweep up soil and other landscape
products that remain on pavement, such as the sidewalk, driveway, or street by the end of each day.
 Sediment Control Devices. Sweep and remove any solid
waste that accumulates at erosion and sediment control
devices as soon as possible.

4. PAINTING AND MASONRY WORK

4.1. Painting
 Paint, paint thinner, and rinse water containing either of these may never be discharged into the storm drain system.
 When there is a risk of a spill reaching storm drains, protect nearby storm drain inlets prior to starting painting.
 Clean up spills immediately.
 When work is conducted on a bridge, take precautions to prevent runoff from reaching the water body beneath the bridge.  When cleaning brushes and rollers after painting, brush out excess paint onto newspaper or cardboard. Never clean or rinse paintbrushes, rollers, and containers into a street gutter or storm drain inlet.

If using latex paints, the brush or roller can be rinsed in a sink that is plumbed to the sanitary sewer. If using oil-based paints, the brush or roller needs to be cleaned with paint thinner. Do not discharge paint thinners to the sanitary sewer. Paint thinner must be disposed of as hazardous waste.
 Drain leftover paint in the roller pan back into the paint can. If using paint hoses and guns, spray out the paint residue into the paint can.

HEADS UP!

SITE CLEANUP
Do not clean the street, sidewalk, or
other paved areas by washing or by
directing sediment, concrete, asphalt, or
other particles into the storm drain
system. If using water, direct it to a
landscaped or grassy area large enough
to absorb all the water.

Figure 8: Do not let paint, paint thinner,
or water containing either flow to the
gutter or storm drain system

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 Leftover water-based (latex) paint should be
recycled, returned to the supplier or donated to
someone who will use it. Dried latex paint and empty
paint cans may be disposed of in the garbage.
 Leftover oil-based paint may be recycled or disposed
of as hazardous waste. For more information about
hazardous waste disposal, please contact the County
Environmental Health Department at (831) 454-2022.
 Non-hazardous paint chips and dust from dry
stripping and sand blasting may be swept up or
collected in plastic drop cloths and disposed of as
trash. Residue from chemical paint stripping and chips
and dust from marine paints or paints containing lead
or tributyl tin must be disposed of as a hazardous
waste.
 If grinding or blasting is used to remove old paint,
protect nearby storm drain inlets with some type of a
protective cover such as a heavy rubber mat. Paint
dust, particles, and other debris must be completely
cleaned up, preferably by sweeping, after the job is
done.

4.2. Masonry and Concrete Work
 Concrete, cement, and masonry products may never be discharged into the storm drain system.

Concrete, cement, and masonry mixing containers may not be washed or rinsed into the street or storm drain system. If a concrete transit mixer is used, a suitable washout box, excavation or self-washing mixer able to contain the waste material shall be provided on-site.  Do not mix fresh concrete or cement mortar in a gutter, over a storm drain inlet, or immediately adjacent to a water body.
 During tile or concrete cutting, ensure that the slurry water does not run off into the street or storm drain system. Also, dried slurry must be cleaned up and properly disposed so that it will not be carried into the storm drain system by wind, traffic, or rain.
 Store materials under cover and protected from wind, rain, and runoff.  Small amounts of excess concrete, grout, and mortar may be disposed of in the trash.  Wash out from concrete mixers may never be disposed of in the street or storm drain system. If possible, pump the washout back into the mixer for reuse.

HEADS UP!

BUILDING EXTERIOR CLEANING
When using high-pressure water to strip
or clean building exteriors prior to
painting, cover or berm nearby storm
drain inlets to prevent discharge into the
storm drain system. The wastewater must
be collected and discharged to the
sanitary sewer if the paint does not
contain lead (usually buildings painted
after 1978) or mercury. If paint
containing lead or mercury was used,
contact an Environmental Compliance
Inspector, at (831) 420-6050, for
information about the appropriate
discharge or disposal options prior to
commencing the work.

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5. SIDEWALK AND ROADWORK
 Protect nearby storm drain inlets (preferably with heavy rubber mats) and adjacent water bodies prior to breaking up asphalt or concrete.
 If it rains unexpectedly, take appropriate action to prevent pollution of storm water runoff (e.g., divert runoff around work areas, cover materials).
 Saw-cut slurry. The discharge of saw-cut slurry to the storm drain system is prohibited. Take measures to contain the slurry and, if necessary, protect nearby catch basins or gutters. If slurry enters the storm drain system, remove material immediately.

Dried saw cut slurry must be cleaned up and properly disposed so that it will not be carried into the storm drain system by wind, traffic, or rainfall.
 Oil sealants. Cover and seal nearby storm drain inlets and manholes before applying seal coat, slurry seal, etc. Leave covers in place until the oil sealant is dry or the end of the day.  Park paving machines over drip pans or absorbent materials if they have a drip or leak.  Waste and material management. After breaking up old pavement, sweep up materials and recycle as much material as possible. Properly dispose of non-recyclable materials.

Never wash sweepings from exposed aggregate concrete into a street or a storm drain inlet. Collect and return to aggregate base stockpile or dispose of in the trash.

Remove and clean up material stockpiles (i.e. asphalt and sand) by the end of each week or, if during the rainy season, the end of the day. Stockpiles must be removed by the end of each day if they are located in a public right-of-way.

6. References & Credits
Erosion and sediment control illustrations from: U.S. Environmental Protection Agency (EPA), National Pollutant Discharge Elimination System (NPDES), “Developing Your Stormwater Pollution Prevention Plan: A Guide for Construction Sites”, available online at http://water.epa.gov/polwaste/npdes/stormwater/Stormwater-Pollution-Prevention-Plans-for-ConstructionActivities.cfm

7. Contact
For more information, please call the City of Santa Cruz:

Public Works Department: 420-5160
Environmental Compliance Inspector: 420-6050
Planning Department: Building Inspection Services at 420-5120 Planning Department: Green Building at 420-5120
Figure 9: Do not discharge saw cut slurry
to the gutter or storm drain system

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