Watsonville City Council
January 25, 2022

1 Reso No. (CM)
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RESOLUTION NO. __________ (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WATSONVILLE APPOINTING MAYOR ARI PARKER AS ALTERNATE TO THE PÁJARO

REGIONAL FLOOD MANAGEMENT AGENCY JOINT EXERCISE OF

POWERS BOARD OF DIRECTORS
Amends Resolution No. 81-21 (CM)
WHEREAS, on or about January 19, 2021, the Council adopted Resolution No. 39-21 (CM) approving the Joint Exercise of Powers Agreement establishing the Pájaro Regional Flood Management Agency between the City of Watsonville, the County of Santa Cruz, the County of Monterey, Santa Cruz County Flood Control and Water Conservation District, and Monterey County Water Resources Agency; and WHEREAS, Section 4.01 (Governing Body of the Agency) of Article IV (Organization and Governance) of the Pájaro Regional Flood Management Agency Joint Exercise of Powers Agreement requires the City Council to appoint a Member to the Board of Directors and appoint an alternate from among the appointing authority’s members to serve in their absence; and
WHEREAS, the appointed Board Member shall hold office for one (1) year commencing with the first Board meeting of each calendar year provided, however, that the first Chairperson, Vice Chairperson, and Secretary appointed shall hold office from the date of their appointment to the second January 1st thereafter to avoid initial terms of less than a year, pursuant to Section 4.08 (Officers) of Article IV (Organization and Governance) of the Pájaro Regional Flood Management Agency Joint Exercise of Powers Agreement.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

2 Reso No. (CM)
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1. That Mayor Ari Parker is hereby appointed alternate to the Pájaro Regional Flood Management Agency Joint Exercise of Powers Board of Directors and shall serve at the pleasure of the City Council.

2. That the City Clerk is hereby directed to transmit a copy of this resolution to the Pájaro Regional Flood Management Agency Joint Exercise of Powers Board of Directors.
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Agenda Report
MEETING DATE: Tuesday, January 25, 2022
TO: January 25, 2022
FROM: ASSISTANT CITY MANAGER VIDES
SUBJECT: ADOPT RESOLUTION APPOINTING REPRESENTATIVES TO THE

SANTA CRUZ COUNTY HOUSING FOR HEALTH PARTNERSHIP

POLICY BOARD
STATEMENT OF ISSUES:

The current CoC Homeless Action Partnership (HAP) adopted a new governance charter intended to increase the effectiveness and impact of the CoC in preventing and ending homelessness in Santa Cruz County. Through the newly established governance structure the City of Watsonville will have two seats at the CoC Board and the Mayor has nominated Tamara Vides, City Manager Pro Tempore and Suzi Merriam, Community Development Department Director to a two-year term on the Continuum of Care (CoC) Board RECOMMENDED ACTION:

In 1995, the Federal Department of Housing and Urban Development (HUD) developed the concept of a Continuum of Care (CoC) through its annual homelessness assistance grants. At that time, the CoC was envisioned as a local network of relevant organizations and stakeholders that plan and coordinate funding for services and housing to assist individuals and families at-risk of or currently experiencing homelessness.

The Federal Homeless Emergency Assistance and Rapid Transition to Housing Act of 2009 (HEARTH Act) codified the role of a local CoC to coordinate efforts to prevent and end homelessness. Since the passage of the HEARTH Act, an increasing number of federal, state, and local programs, and funding resources, require involvement and collaboration with the local CoC.

Previously Santa Cruz County CoC was known as the Homeless Action Partnership (HAP).

On April 27, 2021, the City Council accepted and filed the final version of the Housing for a Healthy Santa Cruz: A Strategic Framework for Addressing Homelessness in Santa Cruz County, which specifically called for County staff to “design, launch, and operate a new regional coalition, anchored by a leadership and accountability structure.” County staff from the Housing for Health Division worked with the current HAP Board and Executive Committee to develop a new governance charter and CoC coalition structure consistent with the Framework.

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On June 18, 2021, the HAP Board adopted a new governance charter that outlined a process for establishing a new CoC entity in 2022. The new CoC entity will be known as the Santa Cruz County Housing for Health Partnership and will be overseen by its Policy Board. Meetings will be open to the public with agendas and meeting minutes published on an accessible website.

The governance charter calls for the Policy Board to include nine jurisdictional, three operational and working group, and three partner system representatives. Policy Board representatives will attend a minimum of six meetings per year and agree to serve for two-year terms. The jurisdictional representatives include appointments by city councils and the County Board of Supervisors. The cities of Watsonville and Santa Cruz have two appointments each.

Capitola and Scotts Valley will share a seat and alternate appointing a representative to the Board for two-year terms.

DISCUSSION:

The current CoC Homeless Action Partnership (HAP) adopted a new governance charter intended to increase the effectiveness and impact of the CoC in preventing and ending homelessness in Santa Cruz County.

Rates of homelessness vary throughout the United States and California. Research has established strong correlations between rates of homelessness in each community and the housing affordability gap between household incomes and housing costs. However, the housing affordability gap alone does not fully explain different regional rates of homelessness.

A variety of other factors contribute to homelessness including the ability of local health, housing, human service, and criminal justice systems to work collaboratively with the community on shared goals and initiatives focused on prevention and re-housing efforts.

The Mayor has recommended to appoint Tamara Vides, City Manager Pro Tempore and Suzi Merriam, Community Development Director to a two-year term on the Housing for Health Partnership Policy Board. If appointed, they will serve at the pleasure of the Council until their two-year term expires.

STRATEGIC PLAN:

Appointing Watsonville representatives to the Santa Cruz Housing for Health Policy Board supports the Strategic Plan goal of Housing.

FINANCIAL IMPACT:

Appointment of a representative to the Santa Cruz Housing for Health Policy Board will have no direct financial impact on the City, other than the commitment of staff time to serve on the Board.

ALTERNATIVE ACTION:

The City Council can choose not to appointment Tamara Vides and Suzi Merriam.

ATTACHMENTS AND/OR REFERENCES (If any):

None.

Reso No. (CM)
Meeting Date: 012522 SWZ ______ TV ______
1 RESOLUTION NO. __________ (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

WATSONVILLE APPOINTING TAMARA VIDES, CITY MANAGER PRO

TEMPORE AND SUZI MERRIAM, COMMUNITY DEVELOPMENT

DIRECTOR TO THE SANTA CRUZ COUNTY HOUSING FOR HEALTH

PARTNERSHIP POLICY BOARD
WHEREAS, the U.S. Department of Housing and Urban Development (HUD) initiated Continuums of Care (CoCs) which span all 50 states and 6 United States territories. California is divided into 44 CoCs; and
WHEREAS, CoCs are charged with promoting and implementing evidence-based, best, promising, and emerging practices for preventing and ending homelessness; and WHEREAS, previously, Santa Cruz County CoC was known as the Homeless Action Partnership (HAP); and
WHEREAS, on June 18, 2021, the HAP Board adopted a new governance charter that outlined a process for establishing a new CoC entity in 2022; and WHEREAS, the new CoC entity will be known as Santa Cruz County Housing for Health Partnerships; and
WHEREAS, the City of Watsonville has two appointments for a term of two years; and
WHEREAS, the appointees shall serve at the pleasure of the City Council.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

1. That Tamara Vides, City Manager Pro Tempore is hereby appointed to the Santa Cruz County Housing for Health Partnership Policy Board for a term of two years and shall serve at the pleasure of the City Council.

Reso No. (CM)
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2 2. That Suzi Merriam, Community Development Director is hereby appointed to the Santa Cruz County Housing for Health Partnership Policy Board for a term of two years and shall serve at the pleasure of the City Council.

3. That the City Clerk is hereby directed to transmit a copy of this resolution to the Santa Cruz County Housing for Health Partnership Policy Board. ********************************

1 Reso No. (CM)
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RESOLUTION NO. __________ (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WATSONVILLE

APPOINTING MAYOR ARI PARKER TO THE SANTA CRUZ

METROPOLITAN TRANSIT DISTRICT BOARD OF DIRECTORS
COMMENCING ON JANUARY 26, 2022, AND ENDING DECEMBER 31, 2025

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

1. That Mayor Ari Parker, a member of the City Council of the City of Watsonville, is hereby appointed to the Santa Cruz Metropolitan Transit District Board of Directors for a four-year term of Seat 10 commencing on January 26, 2022, and ending December 31, 2025.

2. That the City Clerk is hereby directed to transmit a copy of this resolution to the Santa Cruz Metropolitan Transit District.
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1 Agenda Report
MEETING DATE: Tuesday, January 25, 2022
TO: City Council
FROM: PUBLIC WORKS AND UTILITIES DIRECTOR DI RENZO

ASSISTANT PUBLIC WORKS AND UTILITIES DIRECTOR PALMISANO SUBJECT: RESOLUTION URGING CALPERS TO INVEST IN SUSTAINABLE

ENERGY AND DIVEST FROM FOSSIL FUELS IN SUPPORT OF THE
CITY’S CLIMATE ACTION AND ADAPTATION PLAN AND DIRECT

STAFF TO PURSUE AND SUPPORT STATE AND FEDERAL

LEGISLATION THAT SUPPORTS CLIMATE SAFE CALIFORNIA G
STATEMENT OF ISSUE: The City Council adopted its Climate Action and Adaptation Plan (CAAP) in October 2021, and endorsed the Climate Safe California Initiative in July 2021, whereby each set a goal of net-negative emissions by 2030. A key way to achieve this goal is to invest in renewable energy and divest from fossil fuels. The City can support this goal by urging CalPERS (one of the largest funds in the world) to invest in renewable energy while also divesting from fossil fuels.

RECOMMENDATION
The City Council Climate Committee recommends that the City Council adopt a resolution that includes the following:

1. Formally request that CalPERS invest in sustainable energy projects while divesting from the fossil fuel sector, and to adopt policies to ensure future investments in sustainable energy continue.

2. Direct staff to pursue and support State and Federal legislation that supports the Climate Safe California goals, including investing public funds only in sustainable and renewable energy portfolios.

BACKGROUND
Carbon Emissions are Driving Climate Change. The climate crisis is a serious threat to current and future generations for our community and globally. The United Nation’s Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report found that global warming is already causing costly disruption of human and natural systems throughout the world including the melting of Arctic ice, the ocean’s rise in acidity, increased wildfires, flooding, and drought.

2 Almost every government in the world has agreed through the 2015 Paris Agreement that any warming above a 3.6°F (2°C) rise would be unsafe, and to pursue efforts to limit the increase to 2.7°F (1.5°C) and that humans can only release 500 more gigatons of carbon dioxide into the atmosphere to maintain this limit.

The Carbon Tracker Initiative found that fossil fuel companies possess proven fossil fuel reserves that would release 2,800 gigatons of carbon dioxide if they are burned, which is over five times the amount that can be released without exceeding 2°C of warming.

Shifting to Sustainable Energy Investments is an Effective Strategy for Reducing Carbon Emissions. In October 2021, the City Council adopted its own Climate Action and Adaptation Plan as well as a General Plan Amendment. These actions create the roadmap for the many actions and programs that the City can implement locally to reduce our impact on the environment. Key programs include advancing electric vehicles, reducing natural gas use in buildings by moving towards electric heating, reducing food waste, conserving energy, restoring our wetlands, planting more trees, and protecting our local water bodies and water supplies.

Over the past decade, one of the most effective strategies for reducing emissions at the global level has been to divest from investments in fossil fuels and to invest in sustainable energy sources, such as solar, wind, and geothermal energy companies. Currently, over 1500 organizations have divested a total of $39 trillion from the fossil fuel industry, according to Fossil Free California.

Shifting to Sustainable Energy Makes Financial Sense. The world’s largest investment house, BlackRock, confirmed in a critical research report commissioned by New York City that divestment from fossil fuels has been economically successful for those who have tried it and would continue to be so based on historical data:
“Due to the mounting risks of climate change, technological advances and regulatory actions are signaling toward a global energy transition. The potential transition to a low-carbon economy presents investment risks to fossil fuel reserve owners, raising the possibility that fossil fuel reserves — which may be unusable in a low carbon scenario — will face precipitous devaluation or become ‘stranded assets.’”
BlackRock’s findings are critical for three reasons. First, because they are based on actual returns to date. Studies critical of the divest-invest movement, nearly all funded by fossil fuel companies, have focused on projections and models. Second, because the firm has no ties to the movement but nevertheless agreed with the movement’s core financial arguments. Third, because BlackRock was under contract with the City of New York and had a formal fiduciary duty. The research was used to support a specific investment decision upon which fiduciaries relied to cast their votes for divestment.

A new report from Stand Earth, (attached), documents the overall economic advantages of investing in sustainable energy over fossil fuels. For example, compare the 5-year annualized total returns of the Standard and Poor’s (S&P’s) Global Clean Energy Index, which tracks the

3 performance of “global clean energy-related business,” to both the S&P 500 market benchmark and the S&P’s energy sector index, which tracks major U.S. companies in all sectors of the fossil fuel supply chain. The Clean Energy Index, with annualized returns of about 22%, beat the market’s 17% (Total Market Index). Meanwhile, the fossil fuel index lost money, with annualized returns of -1.6% (see graph below).

Hundreds of university systems have now divested from fossil fuels. Last year, the University of California (UC) divested its last $1 billion from fossil fuels, and invested that amount in sustainable energy.

UC’s Chief Investment Officer Jagdeep Singh Bachher noted that UC Investments’ journey with divestment began five years ago and that the office sold all its coal and oil sands assets a year later. “Today we remain convinced that continuing to invest in fossil fuels poses an unacceptable financial risk to UC’s portfolios and therefore to the students, faculty, staff and retirees of the University of California,” he said.

CalPERS is Heavily Invested in Fossil Fuels. The California Public Employees Retirement System (CalPERS) is the largest pension fund in the USA with over $400 billion in investments serving 1.9 million members. CalPERS has $30 billion invested in fossil fuels, a position that is in direct opposition to the goals of the City’s CAAP.
0 50
100
150
200
250
300
350
400
450
12/2/2016 12/2/2017 12/2/2018 12/2/2019 12/2/2020 12/2/2021 Performance of Funds
S&P 500 Energy (Sector) S&P Total Market Index (TMI)
S&P Global Clean Energy Index

4 Many cities have adopted resolutions demanding that CalPERS divest from fossil fuels, including Brisbane, Berkeley, Encinitas, Fairfax, Fremont, Mountain View, Oakland, Richmond, Palo Alto, San Luis Obispo, Santa Monica, and Sunnyvale.

DISCUSSION
In support of the City’s CAAP and the City’s Climate Safe California Goal of net-negative emissions by 2030, the Council Climate Committee recommends the following action:

1. Urge CalPERS to invest in sustainable energy projects while divesting from the fossil fuel sector, and to adopt policies to ensure future investments in sustainable energy continue.

The attached resolution outlines a number of steps that CalPERS should take to divest from fossil fuels. Key requests include urging CalPERS to:
● Prepare a report discussing options for investing funds removed from fossil fuel stocks in a way that maximizes their positive impact by seeking out investments in renewable energy, sustainable companies, and sustainable communities with an emphasis on investments that would support local projects and local jobs. ● Review their investment portfolio to identify holdings that include direct or indirect investments in fossil fuel companies, as well as sustainable and renewable energy holdings.
● Ensure that none of its investments or commingled assets include holdings in fossil fuel public equities and corporate bonds within five years. ● Release quarterly updates, available to the public, detailing progress made towards investment in sustainable energy, and full divestment of fossil fuel holdings including indirect and commingled assets.

2. Direct staff to pursue and support State and Federal legislation that supports the Climate Safe California goals, including ensuring that public funds are only invested in sustainable and renewable energy portfolios.

City staff is currently engaged with our State legislators to create legislation to support the City’s climate action goals. Current efforts include setting a State goal for climate neutrality by 2030, and providing funding programs for electric vehicle infrastructure and shifting from natural gas to electric heat in buildings; these are both very expensive programs that will require outside funding to be successful.

State legislation is also needed to ensure divestment of all fossil fuels occurs within the California Public Employees’ Retirement System (CalPERS).

In 2015, the State approved SB 185, also called “Investing with Values and Responsibility,” which calls for the CalPERS and the California State Teachers’ Retirement System (CalSTRS)

5 to begin a divestment process in any holdings of thermal coal, and to complete that divestment within 18 months.

The next critical step in this process is to urge further investment in clean energy companies, and to require divestment from the remaining fossil fuels, including natural gas and oil.

STRATEGIC PLAN
The proposed action supports the City’s strategic plan goal for infrastructure and environment by taking specific actions that would help reduce carbon emissions locally and globally, and support the goals of the City’s CAAP.

FINANCIAL IMPACT

1. Requesting CalPERS to invest only in sustainable energy companies while divesting from the fossil fuel sector would not have an immediate and direct financial impact on the City. If CalPERS were to make the policy decision to invest only in clean and sustainable energy, based on the current data (presented above), it would likely improve financial performance as well as decrease long-term financial risk.

2. Directing staff to pursue and support State and Federal legislation that supports the Climate Safe California goals, including the divestment of public funds from fossil fuels, would only incur a minimal cost of staff time.

ALTERNATIVES
The City Council could choose not to approve any or all of the proposed actions.

ATTACHMENTS AND/OR REFERENCES (If any):

1. Divest-Invest 2021 Report from Stand Earth

1 Invest
Divest
2021

A DECADE

OF PROGRESS

TOWARDS A JUST

CLIMATE FUTURE
Attachment 1

TABLE OF CONTENTS
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 THE IMPACT OF THE MOVEMENT . . . . . . . . . . . . . . . . . . . . . 4 A decade of history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 A broader and deeper movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Case Study: Divestment Gains Ground in South Africa . . . . . 11 Game-changing divestment commitments . . . . . . . . . . . . . . . . . . . . . 12 Case Study: All Institutions. All Assets. All Fossil Fuels.

Why Partial Divestment is No Longer Enough. . . . . . . . . . . . . . . 15 Broader pressure on fossil fuel finances . . . . . . . . . . . . . . . . . . . . . . 16 Engagement cannot replace divestment . . . . . . . . . . . . . . . . . . . . . . . 17

DIVEST-INVEST IS THE SMART
FINANCIAL CHOICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Divestment raises profits and lowers risk . . . . . . . . . . . . . . . . . . . . . . . 18 Case Study: Legal Pressure on Harvard to Divest . . . . . . . . . . 20 Fossil fuel industry in decline . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Divest-Invest movement impact on the fossil fuel industry . . . . 23 The rise of renewables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 INVESTING IN A RAPID, JUST TRANSITION . . . . 25
Why investment in a just transition needs to scale quickly ..... 25 Case Study: Navajo Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Mission-driven investors must lead on a just transition . . . . . . . . 30 Case Study: Frontier Markets in India . . . . . . . . . . . . . . . . . . . . . 32 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Attachment 1

2 Amidst a depressing era in the race against climate change--with killer fires and titanic storms, political stalemate and corporate greenwashing--the fossil fuel divestment movement is a source for tremendous optimism.

Ten years in, the divestment movement has grown to become a major global influence on energy policy. There are now 1,485 institutions publicly committed to at least some form of fossil fuel divestment, representing an enormous $39.2 trillion of assets under management. That’s as if the two biggest economies in the world, the United States and China, combined, chose to divest from fossil fuels.

Since the movement’s first summary report in 2014, the amount of total assets publicly committed to divestment has grown by over 75,000 percent. The number of institutional commitments to divestment has grown by 720 percent in that time, including a 49 percent increase in just the three years since the movement’s most recent report. The true amount of money being pulled out from fossil fuels is almost certainly larger since not all divestment commitments are made public.

The movement has now expanded far beyond its origins as a student-driven effort on college campuses. Divestment campaigners now target cities, states, foundations, banks, investment firms, and any player who participates in the global investment pool. Major new divestment commitments from iconic institutions have arrived in a rush over just a few months in late 2021, including Harvard University, Dutch and Canadian pension fund giants PME
and CDPQ, French public bank La Banque Postale, the U.S. city of Baltimore, and the Ford and MacArthur Foundations.

The movement has gone global: originally less than a quarter of divestment campaigns were based outside of the U.S., now it is more than two thirds. Related financial campaigns have sprung up to target bankers, asset managers, and insurers, cutting the fossil fuel industry off from the financial services they depend on for expansion.

With this growth, divestment has proven successful at its core goal of helping to delegitimize fossil fuel companies as political players.

While the remaining power of these companies should not be underestimated, it has clearly diminished. Public opinion of fossil fuel use has plummeted both globally and in the U.S. For the first time, a majority of the U.S. candidates for President refused to take fossil fuel money in an election. Divestment-inspired campaigns have stalled or halted fossil fuel projects from Nebraska to Uganda.

The movement has grown so large that it is now helping hold fossil fuel companies accountable for the true cost of their unregulated carbon pollution. Oil companies themselves have started to admit that the divestment movement is raising their costs and hampering their profits and access to capital. Credit ratings agencies take it into consideration in their analyses. The divestment movement has become a market factor.

It’s not a blow the fossil fuel industry is well positioned to absorb.

This year has seen a short-term surge in oil prices and stock market gains, but over the last nine years, fossil fuel stocks have routinely underperformed the market. Institutional investors are focused on these long term trends. Big Oil once dominated Wall Street, literally setting the market pace as a major component of both the Dow Jones Industrial Average and S&P 500 indices. But those days are over. ExxonMobil was kicked off the Dow in 2020.

Oil and gas companies now make up only 2.7 percent of the stock market’s value, down from 28 percent, even with recent gains.

EXECUTIVE SUMMARY
Attachment 1

3 One of the most important victories for the movement has been the financial elite’s gradual acceptance of the movement’s core financial arguments. Fossil fuels are a bad bet financially. It was once considered a fringe position to argue that the fossil fuel industry’s value is dependent on “stranded assets”--fuel reserves still buried in the ground that will become worthless in a clean, renewable energy future. Now the concept is cited by BlackRock, the largest investment house in the world, as a reason to divest.

The movement can now also offer solid proof that divestment is a sound financial strategy. Early adopters of divestment strategies are reporting positive financial results. Surveys and analyses by Wall Street firms support it. Divestment now moves in a positive feedback loop. As more and more institutions announce their plans to divest, many cite the financial reality that climate change will make fossil fuels obsolete and a renewable energy future inevitable. And by doing so, they are both hastening that change and convincing others of its inevitability.

But more needs to be done. In the past few years it has become painfully clear that the pace of investment in renewable energy systems, as well as in sustainable climate solutions more broadly, is woefully insufficient. That is why this report is titled “Invest-Divest.” The International Energy Agency, in their landmark roadmap to a net-zero future released earlier this year, said that achieving the world’s climate goals requires investors to more than triple the amount of money flowing to renewable energy projects by 2030.

A delayed transition will be expensive, and so a rapid increase in investment is critical for the health of the world economy. Such investment is also likely to be profitable for institutions.

How that money is invested will be just as important as where it is invested. There is increased recognition of the need for a just transition, one that avoids the mistakes of past economic shifts and centers economic, gender, and racial justice. Workers and communities who have depended on fossil fuels, Indigenous communities who have faced generations of injustice, women and children who are disproportionately impacted by the effects of climate change--none of them can be left behind. As with divestment, there is evidence that investing in a just transition makes economic sense, but it will take mission-driven institutions to lead the way for the larger investment community. This will be a time of serious upheaval for many people. When conceived broadly, a just transition carries with it great possibility for positive change.

After ten years, it is clear the tremendous impact that the movement has already had, and the huge potential it holds for growth. But it is time for the movement to go even bigger. The latest IPCC report confirms that there are less than nine years left to make transformative changes to the world’s energy systems and economies before facing dangerous and irreversible damage to the climate.1
Going forward, the divest-invest movement must keep
up the pressure and make three demands of institutional investors across the world:

1. All institutional investors must make an immediate public commitment to fully divest from and stop all financing of coal, oil, and gas companies and assets. Institutions that have partially divested must now divest all of their assets from all fossil fuels. As linked to this commitment, all institutions must align their policy, regulatory positions, and political expenditures with this commitment.

2. All institutional investors must immediately move to invest a minimum of 5 percent of their assets in climate solutions, doubling to 10 percent by 2030, including investments in renewable energy systems, universal energy access, and a just transition for communities and workers. Further, investors must hold these companies accountable to respecting
Indigenous and other human rights and environmental
standards.

3. To achieve Net Zero emissions by 2050, all institutional investors should adopt Net Zero plans that both immediately cut investments in fossil fuels and ensure that all other assets in their portfolio develop transition plans that halve absolute emissions by 2030, consistent with science’s demands to limit global warming to 1.5°C.

Institutional investors everywhere are beginning to come to terms with the danger that fossil fuels pose to their investment portfolios, their communities, and their constituencies. This realization is important but it is not enough. Institutions around the world must step up now and commit to joining the divest-invest movement before it is too late--for them, for the economy, and for the world.

Attachment 1

4 THE GROWTH OF THE DIVEST-INVEST MOVEMENT AND ITS IMPACT HAS EXCEEDED NEARLY ALL EXPECTATIONS.

The total amount of assets under management committed to some form of fossil fuel divestment has leaped from a mere $52 billion across 181 institutions in 2014, when the movement first tallied all total commitments,2 to now more than $39.2 trillion across 1,485 institutions. This growth includes both new commitments and portfolio growth among previously committed institutions. (See Methodology section below.) By comparison, the gross domestic products of the world’s two largest economies, the United States and China, were only $20.9 trillion and $14.7 trillion, respectively, in 2020.3
The rate of growth has accelerated. While the first three years of the campaign netted 181 public commitments, the most recent three years have seen 485 new commitments.4
These numbers reflect only known, public commitments to divestment. More institutions, to say nothing of individual investors, are almost certainly divesting in numbers beyond this, as the fossil fuel sector’s dominance of the stock market has shrunk considerably.

THE MOVEMENT

THE IMPACT OF

GROWTH IN DIVESTMENT COMMITMENTS
0 300
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

TOTAL PUBLIC INSTITUTIONAL COMMITMENTS

TO FOSSIL FUEL DIVESTMENT
Source: Global Divestment Commitments Database
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
$0T
$5T
$10T
$15T
$20T
$25T
$30T
$35T
$40T

TOTAL ASSETS UNDER MANAGEMENT COMMITTED

TO FOSSIL FUEL DIVESTMENT
* 2021 figures represent an update of some institutions’ total assets under management.

See Methodology section.

Source: Global Divestment Commitments Database
Attachment 1

5 A DECADE OF HISTORY
The fossil fuel divest-invest movement started a decade ago, in 2011, when students at Swarthmore College in Pennsylvania launched a campaign calling on their university to divest from all fossil fuels. Students at another eight schools launched similar campaigns focused just on divestment from coal, the dirtiest fossil fuel. Soon, with the support of foundations such as the Wallace Global Fund, campaigns sprang up on campuses across the country. While Hampshire College5
is acknowledged as the first
institution to be divested from fossil fuels, the campaign’s first real win was in the fall of 2012, when Unity College in Maine announced plans to divest after a strong student-driven campaign.6
The movement grew rapidly after Superstorm Sandy devastated the northeastern United States in 2012, causing tens of billions of dollars in damages. That’s when environmentalist Bill McKibben, 350.org, and student organizers launched the “Do the Math” tour.7 The non-profit organization Carbon Tracker Initiative also published its first two “Unburnable Carbon” reports in 2011 and 2013, introducing many to the concepts of a “carbon bubble” and “stranded assets.”8
These events inspired divest-invest campaigns in cities and campuses across North America, Australia, Asia and Europe.9 The faith community, an influential contributor to past divestment campaigns, also quickly became actively involved. The Church of Sweden, a leader in faith-based values driven investing, was the first religious group to divest, completing a process in 2014 that it began six years earlier.10 The World Council of Churches, representing 600 million Protestants worldwide, followed soon after.11 In 2014, ahead of the UN climate change summit, the movement received an endorsement from Bishop Desmond Tutu just as it released its first report and announced public divestment commitments totaling $52 billion.12
Since then, the divest-invest movement has expanded
substantially, becoming a central part of the broader climate movement and spawning critical offshoot campaigns. It seeded campaigns, often led by Indigenous communities, to defund fossil-fuel infrastructure projects such as the DefundDAPL campaign in the U.S. and the campaign to cut off insurance for the Trans Mountain Pipeline in Canada. It has also been the inspiration for other finance-focused climate campaigns directed at private equity, central banks, insurance companies, asset managers, and financial regulators. Perhaps most importantly, divest-invest campaigns have proven to be a successful recruitment and training ground for climate activists who have then gone on to lead climate organizations and drive climate action across the world.

The movement, from the very start, has focused on shifting the narrative around the fossil fuel companies themselves. The goal has been to brand these companies as moral outcasts, and to focus the public’s attention on the web of finance supporting their operations and their aggressive manipulation of the political process to block climate action. From 2016 to 2019, the three years which followed the signing of the Paris Agreement, the five largest publicly-traded oil companies (ExxonMobil, Royal Dutch Shell, Chevron, BP and Total) spent over $1 billion on lobbying efforts to block climate action and advertising campaigns to mislead the public about their role in the climate crisis.13 But there are clear signs that public opinion and political power around climate are both shifting. While credit for this broader change is of course shared with the entire climate movement, divest-invest campaigns have played a critical role in shifting opinions specifically around these corporations and their money:
•In the 2020 U.S. Presidential election, for the first time, a majority of candidates pledged to refuse all campaign
donations tied to fossil fuels.14
•Around the globe, major fossil fuel infrastructure projects are increasingly being stalled or canceled due to shifts in public opinion driven by protest movements, according to the credit rating agency Moody’s.15 16 The Indigenous-led protest
movements in North America alone are on track to prevent carbon emissions equal to a quarter of total U.S. and Canadian annual emissions combined.17
•Public support for fossil fuel use has plummeted. Globally, more people now support expansion of solar, wind and
hydropower than support the expansion of any fossil fuel.18 In Europe, an overwhelming 81 percent of people now favor
greater government financial support for renewable energy, even if it means reducing subsidies for fossil fuels.19 In 2019, for the first time, Gallup reported that a majority of Americans believed the country should put less emphasis on fossil fuels of all types. Support for more use of natural gas, which the fossil fuel industry had spent years falsely labeling a “clean” fuel, dropped from 65 percent in 2013 to only 46 percent in 2019. Support for oil dropped from 46 percent to 28 percent and coal dropped from 31 percent to 22 percent.20
A 2019 survey found that 57 percent of Americans, including majorities in historically oil-dependent states like Texas and Louisiana, believed that oil companies and other fossil fuel companies should pay for the damages caused by climate
change.21
Attachment 1

6 2011 – 2020

KEY MOMENTS IN THE DIVEST-INVEST MOVEMENT
2011
• Student climate activism on divestment on college campuses start showing up across America, largely in response the failure of the UN climate conference in 2009 to curb carbon emissions, and climate advocacy’s failure to engage youth. Students at Swarthmore College push for the college to divest its endowment from the largest 16 fossil fuel companies, citing their solidarity with Appalachian communities who had been disproportionately negatively affected by coal. Student campaigns begin spreading. • December 2011, Hampshire College becomes the first academic institution to divest from fossil fuels, just as it was the first to divest from Apartheid South Africa 2012
• Bill McKibben’s article Global Warming’s Terrifying New Math highlighted the Carbon Tracker Initiative’s new calculations that 80% of fossil fuel reserves globally are unburnable if we want to avert climate crisis. It went viral and helped galvanize a movement around fossil fuel divestment, starting on US college campuses. • 20 cities in 22 days, the Do The Math tour ignited a broader movement around fossil fuel divestment. Within a month of the tour over 100 campus campaigns had sprung up around the United States, with campaigns in cities too. 2013
• In April 2013, the first commitments from municipalities start rolling in: Seattle, WA, San Francisco, CA, Berkeley, CA, Richmond, CA, Boulder, CO, Bayfield, WI, Madison, WI, State College, PA, Eugene, OR, and Ithaca, NY.
• In June 2013, Obama embraces the divestment movement
2014
• Divest-Invest Philanthropy launched on January 30, 2014 when seventeen foundations, with combined assets of more than $2 billion, publicly announced their joint commitment to divest and invest and called upon the philanthropic sector to have a wider dialogue on the relationships between investments and climate change. Rockefeller Brothers Fund announced fossil fuel divestment in September 2014, notable at the time due to the Rockefeller wealth being built from fossil fuel expansion. • Divestment gains the endorsement of public figures such as Archbishop Desmond Tutu who addressed the UN Global Climate Summit calling for global divestment in a historic video. At the UN Global Climate Summit, the movement makes the first joint divestment announcement, listing 52 billion dollars in assets divested. 2015
• In a watershed moment for the growing divestment movement, The Guardian outgoing editor-in-chief has decided to set the Guardian’s editorial sights on keeping the majority of fossil fuels underground and achieving significant progress on climate change before stepping down.
• Norway’s Parliament approves a decision to divest the country’s sovereign wealth fund from companies with more than 30% of their income from coal extraction or coal power.

Attachment 1

7 2016
• June marked the first-ever joint Catholic divestment announcement on the commemoration of the first anniversary of Pope Francis’ encyclical Laudato Si, and a letter signed by multi-faith leaders calling for divestment.

Seven Catholic institutions from all over the world announced that they are divesting from fossil fuels.
• Student divestment movement in the UK is wildly successful with 43 university divestment commitments in 2016.
2017
• Cape Town, South Africa announces divestment in June 2017 and becomes one of the first major cities in the Global South to commit to fossil fuel divestment. • In May 2017, a Global Divestment Mobilization took place with people all over the world engaging in direct action and protest to demand fossil fuel divestment 2018
• In 2018, the divestment movement saw massive gains. It welcomed its 1,000th institutional commitment to divest from fossil fuels, bringing the global size of portfolios and endowments committed to divestment to more than $6.4 trillion. Ireland becomes the first country to divest from fossil fuels, and Divest-Invest pledges came from across 37 different countries, spanning every continent except Antarctica • Major city pension funds also joined the divestment campaign – New York City committed to divest their $189 billion pension fund from fossil fuels and London announced plans to divest their multi-billion dollar pension funds from coal, oil, and gas. 2019
• The financial case to ditch fossil fuels kept getting bigger and bigger – IEEFA released a groundbreaking report showing that BlackRock, the world’s largest fund manager, and its holdings in fossil fuels lost over $90 billion in value destruction and opportunity cost.

Financiers begin to pull back from fossil fuels -the European Investment Bank became the first multilateral bank to commit to ending financing of oil, coal, and gas by end of 2021. • In September 2019, the first major global conference on divestment was hosted in Cape Town, South Africa - “Financing the Future: The Global Climate Divest-Invest Summit” which served as a major platform for new institutional divest-invest announcements. It emphasized the equal importance of investing in a clean, equitable, and just future to ensure sustainable energy access for all. By the end of 2019, more than 11 trillion U.S. dollars had been committed to divesting from fossil fuels. 2020
• New York State, the United States’ third-largest pension, announced in December 2020 that they would be divesting their $226 billion retirement fund of the riskiest fossil fuel companies by the end of 2024.
• Faith leaders, foundational and instrumental partners to the divestment movement, launched the largest joint divestment announcement ever of over 1.5 billion USD in assets when over 47 faith institutions spanning across 21 different countries and 5 different continents announced their exit from fossil fuels.

Attachment 1

8 A BROADER AND

DEEPER MOVEMENT
While the overall growth of the movement is clear by the growing number of commitments, the depth and breadth of the movement has also expanded.

There are now institutions committed to fossil fuel divestment in 71 countries, up from the 37 recorded in the movement’s most recent report from 2018.22 In 2014, only 22 percent of divesting institutions were based outside of the U.S. But by 2021, that has climbed to 69 percent, signifying the globalization of the movement.23 The diversity of institutions and their average size has also grown, and now includes more and more high-profile institutions. Large insurance companies, pension funds, and universities with massive endowments have driven the biggest increases in assets under management committed to divestment, while faith and philanthropic institutions have driven the largest increases in the number of commitments in recent years.

The philanthropic sector has stepped up its commitments significantly. The Divest-Invest Philanthropy coalition first launched in January 2014 with 17 foundations, holding combined assets of nearly $2 billion, publicly committing to both divest from all fossil fuels and invest at least 5 percent of their portfolio in climate solutions. As of October 2021, there are 192 foundations and family funds with assets over $125 billion committed to divestment in some form.

Faith-based Organization 521
Educational Institution 220
Philanthropic Foundation 192
Government 166
Pension Fund 164
For Profit Corporation 132
NGO 51
Healthcare Institution 17
Other 5
Cultural Institution 4

DIVESTMENT BY SECTORS
Fossil fuel divest-invest commitments by
type of institution
Source: Global Divestment Commitments Database
TOTAL
1485
Attachment 1

9 10

GLOBAL REACH

OF DIVEST-INVEST

PAKISTAN
PANAMA
PERU

PHILIPPINES

PORTUGAL
REPÚBLICA

DOMINICANA

REPUBLIC OF THE

MARSHALL ISLANDS
RWANDA

SENEGAL

SIERRA LEONE

SINGAPORE

SOMALIA
ANGOLA

ARGENTINA

AUSTRALIA

AUSTRIA

BANGLADESH

BELGIUM

BERMUDA
BRAZIL

CAMEROON
CANADA
CHINA

COLOMBIA

CZECH REPUBLIC

DENMARK

ECUADOR

SENEGAL

SOUTH AFRICA

SOUTH KOREA
SPAIN

SRI LANKA
SWEDEN

SWITZERLAND

THAILAND
UGANDA
UK

UKRAINE

VATICAN CITY
ZAMBIA
USA

ESTONIA
FIJI

FINLAND
FRANCE

GERMANY
GREECE
INDIA

INDONESIA

IRELAND
ISRAEL
ITALY
JAPAN

LIBERIA
KENYA

LEBANON

LESOTHO

LIBERIA

LUXEMBOURG
MALAWI

MALAYSIA
MALTA
MEXICO

MYANMAR

NETHERLANDS

NEW ZEALAND

NIGERIA

NORTHERN IRELAND
NORWAY
Attachment 1

SOUTH AFRICA

DIVESTMENT GAINS GROUND IN

CASE STUDY
Most growth in energy demand is expected in the Global South in the coming years, making nations in that area critical to the climate fight. Divestment campaigners are finding new success across Africa, particularly in South Africa.

In 2020, the city of eThekwini/Durban followed Cape Town to become the second city in South Africa to commit to divest.

Both signed the divestment declaration of the C40 coalition. 24 Durban’s two pension funds control over $130 million in assets.
25 26
City leaders acknowledged that divesting from fossil fuels and investing in climate solutions would help support Durban’s ambitious Energy Policy, which seeks to fully transition the city to 100 percent renewable energy by 2050. 27 They also cited
divestment as a way to free up investment dollars to help small and medium businesses, social enterprises, and cooperatives to participate in the green economy. 28 Mayor Mxolisi Kaunda of Durban, said: “City Leadership is committed to invest in a fossil-free sustainable economy and Durban is ready to demonstrate that just transition.”29 11 Attachment 1

12 GAME-CHANGING

DIVESTMENT

COMMITMENTS
Some of the world’s most influential and iconic institutions have committed to divestment over the past 24 months. These
announcements have grabbed headlines around the world,
pushed forward the political conversation on climate, and further energized the movement:

HARVARD
Following nearly a decade of pressure from student activists, alumni, and faculty, Harvard, the world’s wealthiest university, announced that it has nearly entirely divested its $42 billion endowment from fossil fuels and will bar any future investments in coal, oil, and gas.30 It was quickly followed by a divestment announcement from fellow Ivy League university Dartmouth,31 and follows progress in divestment campaigns at other prominent Ivy schools, including Brown, Columbia, and Cornell.32 33 34

LA BANQUE POSTALE
The French public bank La Banque Postale ($894 billion in assets)35 announced in October 2021 that it would divest from all oil and gas companies by 2030.36 Significantly, the bank also promised a broad denial of financial services to “conventional and non-conventional fossil-fuels producers, upstream and midstream activities … companies involved in infrastructure development for the industry … (and) businesses involved in lobbying for the oil and gas industry.”37

FORD FOUNDATION
With $17 billion in assets, the Ford Foundation is one of the largest philanthropic funds in the world, built on a legacy that gives its announcement powerful significance.38 The foundation said in October 2021 it “will not invest in any fossil-fuel-related industries” and will look for opportunities to invest in a “renewable sector that is strong, diverse, and varied enough to sustain a green-energy economy.”39
CAISSE DE DÉPÔT ET PLACEMENT
DU QUÉBEC
CDPQ is Canada’s second-largest pension fund with assets over $307 billion.40 It announced in September 2021 that it will divest from all oil investments, which the Toronto Star reported “will make it harder for Canadian oil and gas producers to raise money for new wells and oil sands projects,”41 a major development given that Canada is home to the largest tar sands deposits.42 The fund also said it would invest $10 billion in renewable energy43 and has increased investments in sustainable infrastructure, such as Montreal’s new light-rail system.44
PME
Dutch pension fund PME ($71 billion in assets) announced it had divested in September 2021,45 becoming the first Dutch pension fund to do so. Fund managers noted that the process took only six weeks and did not impact their overall portfolio.46

HARVARD

HONG-KONG BASED AIA GROUP
LONDON

CATHOLIC CHURCH
Attachment 1

13 NEW YORK STATE
One of the largest and most influential U.S. pension funds, the $265 billion New York State Common Retirement Fund, took important steps towards divestment in 2020 and 2021. In December 2020, New York State Comptroller Thomas DiNapoli announced that the fund would shed its riskiest investments in fossil fuels by 2024 and reach net zero emissions across its investment portfolio by 2040. In April 2021, it became the first state pension fund in North America to divest from oil sands companies.47 The fund has committed to double investment in climate solutions to $20 billion.48

OXFORD AND CAMBRIDGE
For nearly a decade, alumni, faculty, and students have diligently and creatively pressured two of the world’s oldest and most prestigious universities, Oxford and Cambridge, to divest from fossil fuels. Both buckled to pressure in 202049 with announcements covering their $4.1 billion and $4.8 billion endowments respectively.50

ROCKEFELLER FOUNDATION
The $5 billion fund, established by famed Standard Oil tycoon John D. Rockefeller, announced in December 2020 that it will fully divest from all fossil fuels and increase investments in a just transition to a renewable energy economy. It joins its sister foundations, the Rockefeller Brothers Fund, which became an early leader of the movement when it committed to divestment back in 2014, and the Rockefeller Family Fund, which committed in 2016.51
MAINE
In June 2021, the U.S. state of Maine became the first jurisdiction in North America to direct divestment of its treasury and state pension fund via legislation.52 The law was passed after years of campaigning by grassroots and youth advocates with Sierra Club, Maine Youth for Climate Justice, and 350 Maine. It directs the $17 billion state pension and treasury to divest more than $1.3 billion from fossil fuels by 2026.53 One of the cosponsors of the bill was state senator Chloe Maxmin, a co-founder of the successful Fossil Fuel Divest Harvard campaign.54

BALTIMORE
All three of the U.S. city’s pension funds must begin divestment next year under a law signed by the mayor in October 2021. The Baltimore City Fire & Police Employees’ Retirement System ($3.5 billion in assets), Baltimore City Employees’ Retirement System ($2.2 billion) and Baltimore Elected Officials’ Retirement System ($31 million) will shed all holdings in the top 100 holders of coal reserves and the top 100 holders of oil and gas reserves over the next five years.55 The measure is significant given Baltimore’s proximity to major oil and natural gas import/export operations.56

NEW YORK CITY
Following up on the city’s 2018 commitment, the New York City Employees’ Retirement System ($87.0 billion in assets), the New York City Teachers’ Retirement System ($102.2 billion in assets), and the New York City Board of Education Retirement System ($8.8 billion in assets) voted in 2021 to divest, pulling $4 billion out of fossil fuels by 2022.5758 The mayor also announced in 2021 a goal of moving the funds to reach net-zero emissions by 2040 and invest $50 billion in climate solutions by 2035.59 The New York City comptroller, on behalf of the city’s pension funds, also led a successful push to unseat former Exxon CEO Lee Raymond from the board of JP Morgan Chase.60 61
LONDON
London in 2021 reaffirmed and expanded on its commitment to reduce fossil fuel investment.62 In parallel, the London Pensions Fund Authority (LPFA, $9.1 billion in assets)63 has reduced fossil fuels to just 0.6 percent of its investments in listed equities as of March 2021. In September 2021, the LPFA announced a
commitment to reach net-zero carbon emissions by 2050 and to soon set an interim target for 203064
C40 DIVEST/INVEST FORUM
New York and London lead C40’s Divest/Invest Forum, a peer network supporting a growing number of cities divesting from fossil fuels and investing in climate solutions. As of September 2021, cities representing more than 43 million residents and over $360 billion in pension assets have signed the “Divesting from Fossil Fuels Investing in a Sustainable Future Declaration,” committing to push their pension funds to adopt a divest-invest strategy now. This includes: Auckland, Berlin, Bristol, Cape Town, Copenhagen, Durban (eThekwini), Los Angeles, Milan, New Orleans, Oslo, Paris, Pittsburgh, Seattle, and Vancouver, as well as forum co-chairs New York and London.65

UNIVERSITY OF CALIFORNIA SYSTEM
As one of the largest university systems in the world, serving more than 285,000 students, the University of California system has one of the nation’s largest endowments, pension funds, and working capital pools. The system completed divestment in 2020, announcing it had sold off $1 billion worth of shares in fossil fuel companies across $125 billion worth of assets.66 The university has committed to increase investments in climate solutions by at least $1 billion.

CATHOLIC CHURCH
An official Vatican statement in 2021 called on Catholic investors worldwide to divest from fossil fuel holdings.67 Thanks to organizing by the Laudato Si’ Movement (formerly Global Catholic Climate Movement), over 250 Catholic institutions globally have divested, including Bishops’ Conferences, religious orders, Catholic colleges and universities, donor institutions, and others around the globe.68

MACARTHUR FOUNDATION
Known globally for its MacArthur Fellows program (often called the “MacArthur genius grants”), the foundation committed in September 2021 to unwind its $8 billion endowment from fossil fuels, making it one of the largest foundations in the U.S. to do so.

It specifically acknowledged the voices calling for alignment between grants and investments as a driver in its decision..69

MAJOR INSURANCE COMPANIES
Several global insurance companies, which are among the world’s largest investors, made major new or improved divestment commitments over the past two years, with large financial impacts.

Germany-based Allianz updated its coal exclusion policy in May 2021.70 Hong-Kong based AIA Group divested from coal in 2021,71 the first major Asian insurer to do so.72 MetLife became the first major US life insurer to divest in June 2020, excluding coal and tar sands from their portfolios.73 Suncorp, based in Australia, adopted an oil and gas divestment policy in 2020 as well.74 The total assets under management of these four firms is more than $2.13 trillion.

Attachment 1

participants from all companies,
banks, institutions and
governments immediately halt
all investments in fossil fuel
exploration and extraction,
immediately end all fossil fuel
subsidies and immediately and
completely divest from fossil
fuels. We don’t want these things
done by 2050, 2030 or even
2021, we want this done now –
“We demand
that…
as in
right NOW.”
–GRETA THUNBERG
Attachment 1

15 WHY PARTIAL DIVESTMENT
IS NO LONGER ENOUGH.

ALL INSTITUTIONS. ALL ASSETS. ALL FOSSIL FUELS.

CASE STUDY
When the divest-invest movement began a decade ago, it faced great resistance. Many institutional investors said complete divestment from fossil fuels was too complex or financially risky. Under pressure to divest, many institutional investors chose different paths and pursued commitments that did not reflect full divestment.

Some divested only part of their assets, such as direct investments, while leaving other portions of their assets untouched. Others focused on divestment from only certain fossil fuel sectors. Many institutions started their divestment efforts by focusing on coal, the most carbon-intensive fossil fuel. For instance, in 2015, the U.S. state of California voted to divest its pension fund from companies that derived at least half of their revenue from coal mining, as did the city of Providence, Rhode Island. 75 The multinational life insurance and asset
management company Aegon committed to coal divestment in 2016. 76 Investment giant BlackRock said in 2020 it would divest from companies that “generate more than 25% of their revenues from thermal coal production.”77 European banking leader HSBC said in 2018 it would stop direct “funding new coal power plants, oil sands and arctic drilling,”78 naming a trio of politically toxic projects that many other institutions also targeted. After first opposing all divestment, the Gates Foundation began to reverse course by cutting all holdings in oil giants BP and ExxonMobil in 2016. 79 In 2016, the Hewlett Foundation made the decision to end “future investments in private partnerships primarily involved in oil and gas drilling.”80 While important progress, movvement leaders continued to call for full divestment of all assets.

Demands for investors to invest in climate solutions were always part of the movement and commitments to both divest and invest began to increase as the movement progressed. The Divest-Invest Philanthropy campaign launched in 2014 asked foundations to pledge to fully divest from fossil fuels and invest at least 5 percent of their portfolio in climate solutions. By 2019, almost 200 foundations had taken the pledge, and half of those surveyed were investing 10 percent, or more, in solutions. 81 For example, the Rockefeller Brothers Fund, an early signatory, made its first direct investment in a renewable energy company in July 2016. 82 Due to continued movement pressure and a growing body of data on the financial weakness of fossil fuel investments, some of the institutions named above later made broader divestment commitments, while others continue to be critical of demands to move more quickly and more boldly. Both HSBC and BlackRock, for example, remain targets of active divestment campaigns in 2021.

It is for that reason that movement leaders have made clear their demands for 2021, which reflect the urgency of the moment: that all institutions must divest all assets, including private equity funds, from all fossil fuels, and that they match that divestment with greater investment in climate solutions.
15 Attachment 1

16 BROADER PRESSURE ON FOSSIL FUEL FINANCES
The intensity and growing breadth of the divest-invest movement has led to pressure on many institutions to reveal and ultimately end other types of financial ties to the fossil fuel industry.

Many large banks and financiers have committed to stop lending or giving other financial support to fossil fuel companies. As of 2021, at least 150 large banks, asset managers, and insurers, each of which has assets of at least $10 billion, have announced that they will cut ties from one or more fossil fuel industries.83 Other banks have responded to direct demands by campaigners to cut funding of specific fossil fuel infrastructure projects. U.S. Bank moved to end funding for the Enbridge Line 3 pipeline84 following global protests led by the Indigenous communities targeting the project’s financing.85 Similarly, major private banks such as Barclays, Credit Suisse, and ANZ released statements saying they will not provide funding86 for the controversial East Africa Crude Oil Pipeline in Uganda, which is fiercely opposed by local community members and environmentalists.87
Major insurance companies have stopped offering policies to some fossil fuel projects, creating a barrier for financing. Coal projects are becoming “uninsurable” after an exodus of U.S. and European insurance companies from the business, according to a report from Insure our Future.88 Suncorp committed in 2020 to cease underwriting of any new gas or oil infrastructure projects.89 The Trans Mountain tar sands pipeline in Canada is struggling to find insurers, forcing costs higher.90 While many institutions remain resistant to true fossil fuel divestment, movement pressure has increased so dramatically that many have scrambled to show some progress on shifting capital away from the fossil fuel industry. This has led to a proliferation of so-called “Net Zero by 2050” commitments from financial institutions, non-fossil companies, and even fossil fuel companies themselves. Many of these announcements set far-reaching 2050 goals without sufficient short-term targets, realistic plans for implementation, or, most importantly, clear policies for excluding fossil fuels.91 However, they are an important signal that pressure from the movement is effective and expanding. • More than one in five of the world’s 2,000 largest publicly traded companies have made some form of net-zero commitment, according to a 2021 study from researchers at Oxford University.92
•Facebook, Google, Apple, and Microsoft all announced new or stronger net-zero pledges in 2020.93 •Ford in 2020 became the first U.S. automaker to commit to carbon neutrality,94 followed by an even more ambitious announcement by GM in 2021 to achieve carbon neutrality by 2040 and stop selling gas-powered cars and trucks altogether by 2035.95 •Vanguard, the largest issuer of mutual funds in the world, and BlackRock, the world’s largest asset manager, were among 43 investment firms managing a combined total of more than $22.8 trillion in assets who pledged in 2021 to reach net-zero emissions by 2050 across all their holdings.96 Both firms have been slow to reveal clear plans for implementation or fully divest from companies expanding fossil fuel infrastructure.97
Attachment 1

17 Recent years have also proven that open-ended “shareholder engagement” strategies with fossil fuel companies are not an adequate substitute for divestment.

Fund managers resisting fossil fuel divestment have often cited shareholder engagement with fossil fuel companies as a more effective method for fighting climate change. They argue that by remaining shareholders of these fossil fuel companies, they keep a “seat at the table” to force fossil fuel companies to alter their behavior.

But the record makes clear that this strategy, when it does not include the threat of divestment and is not time-limited, is ineffective and too slow with regards to major fossil fuel companies.

Researchers at the University of Cambridge reviewed two decades worth of research on shareholder engagement and concluded that it was an ineffective strategy for forcing the level of change needed at the pace needed in fossil fuel companies:
“Shareholder resolutions are indeed largely non-binding, and results in this quarter are poor regardless; most
resolutions fail, and a majority of those that pass or are withdrawn fail to be implemented. Those that are
implemented tend to fall into the category of disclosure only, leaving open the charge that there is indeed some
greenwashing – and delaying – going on in the field.

Evidence of positive results are lacking, and these results are incremental at best – if there is any real-world outcome at all (except, perhaps, improved spending on R&D and
small increases in benzene internalisation). By any
threshold one could devise as to the efficacy of a tactic for action on climate change and other social and
environmental issues, it would be difficult to deem
shareholder engagement a success.”98
For instance, the researchers noted, Exxon has been one of the top targets for climate-related shareholder votes for years, but has not changed its behavior in any meaningful way.99
Even worse, as one recent Bloomberg report noted, investor pledges to support environmentally related shareholder resolutions cannot always be trusted:
“A study from Dutch investment manager Robeco and the
Erasmus School of Economics found that only 35% of
(Principles for Responsible Investment) signatories backed U.S.-based environmental resolutions as recently as 2018. … The majority of environmental and social
recommendations fail to garner enough shareholder
support to steer the corporate agenda ‘towards
sustainability focused decision making,’ Robeco said in its 41-page report.”100
Even when shareholders succeed after considerable effort, fossil fuel companies remain dug in.

For instance, several major oil companies have agreed to so-called “net-zero by 2050” commitments, with oil giants Shell and BP both making big pledges in 2020. These commitments have been touted as proof of success by advocates of an engagement strategy.101 102 But even by these advocates’ own analyses, both BP and Shell’s commitments fall short on critical measures associated with the scope of emissions covered. Most notably, Shell does not make meaningful short-to-medium term commitments that align with the Paris Agreement, nor has it committed to stop making capital expenditures in new oil and gas reserves.103 104 Shell plans to actually increase its natural gas operations by 25 percent through 2025.105 Independent
researchers with Oxford similarly concluded that neither company’s plan actually accounts for all of their emissions or realistically matches a real path to limit climate change.106 In a May 2021 report, the research group Carbon Tracker said that nearly all oil companies with net zero commitments either exclude some part of their production or emissions, leave open the option of actually increasing emissions through a focus on “carbon intensity,” or rely on unrealistic projections of unproven carbon capture technology.107 The group’s September 2021 report noted that, despite net zero commitments, no major oil company has actually stopped new drilling or other capital expenditures, which the IEA has identified as critical for reducing emissions to target levels.108
After years of effort, the most notable shareholder engagement strategy to gain traction with Big Oil happened at the May 2021 shareholder meeting of ExxonMobil. Insurgent shareholders organized to successfully vote in three new corporate board members against management recommendations.109 But these directors remain in the minority and in the months since, ExxonMobil’s management has refused to make any substantive changes in climate-related policy, limit spending on new infrastructure, or curb real emissions. The company’s first public announcement after the shareholder insurgency was a boast about expanded greenfield drilling in Guyana.110
Engagement may be useful in changing the behavior of other industries, but it has proven ineffective as a tool for forcing fossil fuel companies to alter their fundamental business model. For movement and institutional leaders committed to fighting for climate justice and reducing the power of fossil fuel companies, divestment is a clear choice.

But investment managers who are focused on the bottom line have every reason to join the divest-invest movement as well.

ENGAGEMENT CANNOT REPLACE DIVESTMENT
Attachment 1

18 With ten years of data and studies from some of the most respected financial entities in the world, the verdict is now clear — there is no rationale for investors to keep fossil fuels in their portfolio. Divestment both increases financial returns and reduces long-term financial risk.

But recent years have also made clear that it is not enough just to divest from fossil fuels. It is both necessary and profitable for institutions to invest in the transition to clean, renewable, and sustainable infrastructure.

Smart decisions in long-term investing lie at the core of investment managers’ “fiduciary duty,” which is their legal responsibility to make wise financial decisions on behalf of shareholders or beneficiaries. Institutional investors resisting divestment have often cited fiduciary duty as their rationale. But the evidence is now clear that fiduciary duty should lead investment managers towards, not away, from fossil fuel divestment.

DIVEST-INVEST IS THE

SMART FINANCIAL CHOICE

DIVESTMENT RAISES PROFITS AND LOWERS RISK
The divestment movement can now point to solid records from multiple institutions which have divested as proof of the financial benefits of the strategy.

Many previous analyses have used models to project that divestment would improve returns. But significantly, hard data has emerged in the last two years that has conclusively proven that divested portfolios are performing well.

The world’s largest investment house, BlackRock, confirmed in a critical research report commissioned by New York City that divestment has been a winner for those who have tried it and would be a winner now based on historical data:
“ ..no investors found significant negative performance from divestment but rather, have reported neutral to positive results.”111
“The broadest of all [divestment] options … outperforms all other options and the benchmark portfolio on both a
standalone cumulative and standalone annualized return
basis.”112
And, the report said, fossil fuel stocks have been losing value and are risky going forward:
“The standalone performance analysis shows the universe of [fossil fuel investments] has consistently underperformed the broader market over the past five years.”113
“Fiduciary investors must consider the potential increase of transition risks for fossil fuel reserve linked securities within their portfolios.”114
“Due to the mounting risks of climate change, technological advances and regulatory actions are signaling toward a
global energy transition. The potential transition to a low-carbon economy presents investment risks to fossil fuel reserve owners, raising the possibility that fossil fuel reserves — which may be unusable in a low carbon
scenario — will face precipitous devaluation or become
‘stranded assets.’”115
“The IEA World Energy Outlook has consistently
underestimated the rate at which renewable power has
been adopted and overestimated the demand for fossil fuel energy. … This is the paramount risk for companies and
investors — the risk that the transition away from fossil fuels happens quicker and more abruptly than forecasted.”116
The report notes further that the risk of stranded assets is actually made worse if governments delay action on climate change because the inevitable shift will be more sudden.117
BlackRock’s findings are critical for three reasons. First, because they are based on actual returns to date. Studies critical of the divest-invest movement, nearly all funded by fossil fuel companies, have focused on projections and models. Second, because the firm has no ties to the movement but nevertheless agreed with the movement’s core financial arguments. Third, because BlackRock was under contract with the City of New York and had a formal fiduciary duty. The research was used to support a specific investment decision upon which fiduciaries relied to cast their votes for divestment.

Other recent analyses agree. A 2019 survey by the Croatan Institute asked 60 philanthropic foundations who had divested about their experience and found that 94 percent had
“experienced positive to neutral performance since committing to Divest Invest.” The remaining 6 percent said either that positive results were expected soon or that divestment was not the clear cause of their difficulties.118
Individually divested institutions that have made returns public provide further proof. The Rockefeller Brothers Fund, five years into divestment, reported in 2020 that its analysis showed the decision had improved returns.119 Wallace Global Fund, a private foundation that was nearly fully divested from fossil fuels by 2012, completely divested by 2014, and now has over 15 percent of its portfolio invested in climate solutions, has outperformed their financial benchmarks for more than a decade, performing in the top decile of market returns as compared to a larger group of 178
foundations.120
Attachment 1

PROMINENT ECONOMISTS AND

FINANCIAL ANALYSTS ON THE DECLINE

OF FOSSIL FUELS AND THE WISDOM OF

DIVEST-INVEST

JIM CRAMER
“I’m done with fossil fuels. They’re done. … We are
starting to see divestment all over the world. … Big
pension funds are saying, ‘Listen, we’re not going to
own them anymore.’ … The world’s changed. … We’re in
the death knell phase.”123

JOSEPH STIGLITZ
“I’ve been a supporter of divestment … The prudent
simply economic perspective is that the market is short sighted … (and is) not taking into account the fact that we will be moving, whether it’s in 10 years or five years or 20 years to a green economy. And there will be a
carbon price and there will be lots of stranded assets
and the value of those carbon assets are going to go
down. So to me, prudential behavior. it says don’t be in those assets that are going to go down. It’s foolish.”124

JEREMY GRANTHAM
“We looked at the real cost of divestment, and there is none. … The data is clear.”125

THOMAS PICKETTY
“This is a rare and decisive moment in history. Science, ethics, and economics are intersecting to form a clear
market signal … responsible investors should divest
from fossil fuels.”126

CHRISTINE LAGARDE
“But if (the transition to clean, renewable energy) is
delayed, the reduction in emissions may have to be
sharper, resulting in a disorderly, disjointed and more disruptive transition for the economy. Certain economic activities may quickly be rendered obsolete, leading to a re-pricing of assets and the risk that some will become stranded. … The financial sector will be pivotal in
mobilising the necessary financial resources for the
transition and in helping our economies to cope through adaptation and mitigation. It is vital that it provides finance of sufficient quantity and quality for the task.”127 Recent data from Morningstar, one of the most influential investment research firms on Wall Street, provides a critical window into how divestment could not just improve returns, but also reduce portfolio risk. A review of Morningstar’s 2021 data revealed that investment options which rate well for environmental, social, and corporate governance considerations (ESG) carried less risk than options that were low on Morningstar’s ESG scale, with a standard deviation of 14.1 percent vs. 15.2 percent over 10 years. At the same time, these funds earned higher returns (12.1 percent vs 10.9 percent.)121 While it is important to note that ESG-rated funds are not synonymous with divested funds, this nonetheless provides an important rebuttal of the oft-cited argument that divestment may increase portfolio risk.

Meanwhile, major pension funds that have resisted demands to divest lost money because of their exposure to fossil fuel investments.122
•California’s state teachers’ retirement fund, CalSTRS, ($238 billion in assets) would have gained $5.5 billion if divested from fossil fuels.
•California’s public employees’ retirement fund, CalPERS, ($380 billion in assets) would have gained $11.9 billion if divested.
•Colorado’s state pension fund, PERA, ($45 billion in assets) would have gained $1.77 billion if divested.

Going forward, institutional investors have another incentive to divest--limiting their legal exposure. The movement has begun a pivot to litigation, as students and other constituencies seek to prove that ongoing financial support of fossil fuels is at odds with laws that govern the fiduciary duty of universities and other non-profit institutions. It is likely that the threat of such a court judgement or investigation by the State Attorney General influenced Harvard University’s groundbreaking decision in September to 2021 to reverse its years of resistance to divestment.
19 Attachment 1

HARVARD TO DIVEST

LEGAL PRESSURE ON

CASE STUDY
In March 2021, the decade-long campaign to pressure Harvard University to divest got a boost when the Climate Defense Project (CDP) filed a formal complaint with the office of the Massachusetts Attorney General.

The complaint,128 signed by elected officials, community groups, and prominent alumni and faculty, requested the attorney general investigate whether Harvard’s investments in fossil fuels violated the university’s legal fiduciary duty.

The complaint relied on the Massachusetts Uniform Prudent Management of Charitable Funds Act (UPMIFA) and Massachusetts common law. It detailed Harvard’s violation of its duty to invest with prudence, the duty of loyalty, the duty of care, the duty to act in good faith, and the requirement that non-profits invest in a way that is consistent with the charitable purposes of the institution.

Harvard announced its plans to divest on Sept. 10, 2021, before the attorney general’s office could formally respond to the complaint. However, between the date of filing and Harvard’s announcement, Harvard divestment campaigners and CDP attorneys met with senior staff from the attorney general’s office on two occasions.

When Harvard’s administrators explained their decision, their statement was strikingly similar to the language of CDP’s complaint: “Given the need to decarbonize the economy and our responsibility as fiduciaries to make longterm investment decisions that support our teaching and research mission, we do not believe such investments are prudent.”129
Notably, this legal argument could be applied to many other universities and non-profit investors, as UPMIFA is the law in every state except Pennsylvania. CDP has filed complaints on behalf of campaigners at four schools: Harvard, Cornell, Boston College, and the University of Wisconsin-Madison. Thus far, Cornell and Harvard have divested after the complaints were filed.
20 Attachment 1

FOSSIL FUEL INDUSTRY IN DECLINE
Driving these analyses is the
unmistakable decline in the long-term
performance of the coal, oil, and gas
industries, which has occurred over
decades and accelerated over the last
decade.

Investors continue to buy oil and gas
stocks, but with poor results.
•In 1980 seven of the top ten S&P 500
companies were from the oil and gas
sector.130 Today, there are none
among the top ten.131
•In 1980 the oil and gas sector
accounted for 28 percent of the stock
market’s value, according to the S&P
500. Today, despite recent oil and
share price increases, it accounts for
only 2.7 percent.132
•In 2020, Exxon left the Dow Jones
Industrial Average after 92 years of
continuous presence, to be replaced
by Salesforce, a tech company.133
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
100
150
200
250
300
350
400
FOSSIL-FREE FUNDS VS. MARKET INDEX
The S&P 500 market benchmark index vs. the S&P Fossil Free index S&P 500 Fossil Fuel Free Index S&P 500
Over the last decade the industry’s decline has become more pronounced as competition within the oil and gas space has accelerated. At the same time, the sector faces competition from clean, renewable energy sources, which have seen advances in technology that make them more profitable and efficient than fossil sources,134 as well as environmentally safe and sustainable. •For the last decade, the MSCI ACWI global index--one of the world’s most important benchmarks for stock performance--has produced steady and stronger returns when calculated without fossil fuels than with them.135 •In 2019, 72 percent of newly added electricity capacity was in renewable energy.136 In 2020, it was 100 percent.137 • New equity shares sold by fossil fuel companies have lost $123 billion of their $640 billion in value since 2012, significantly underperforming the market.138
The long-term outlook for the oil and gas industry is grim, even as the exit from the COVID-19 pandemic may provide a short-term boost in prices. The International Energy Agency has concluded that in order for the world to reach its climate goals, no new oil and gas production should go forward.139 Both sectors continued their decline in early 2021 despite receiving $8.2 billion in U.S. taxpayer support as part of the U.S. government’s COVID relief plans.140 Closing out the third quarter of 2021, even with a 40 percent short-term surge in the price of oil,141 energy stocks still made up less than 3 percent of the stock market. That’s far behind the market-leading information technology sector, which represents over 27 percent of the stock market’s value, according to the S&P 500.142 Meanwhile, the coal industry is facing a sharp decline in both production and employment base. China, which has been the world’s top funder of coal energy projects, announced in September 2021 that it would end financing for coal projects overseas.143 From just 2019 to 2021, the U.S. coal industry lost 24,000 jobs, a 30 percent decline.144 Coal employment in the U.S. is now at its lowest level since the American Civil War. From 2008 to 2020 coal production fell in the U.S. from 1.17 billion to 535 million tons per year.145 146 Independent credit rating agencies have begun to take note of the fossil fuel industry’s long-term failing prospects. Moody’s 2021 analysis concludes that the coal industry’s limited access to capital, loss of regulatory support, public opposition, health and safety risks, pollution contributions, and loss of employment base leaves it vulnerable to increasing pressure on investors to divest.147 Moody’s has also issued a warning that due to market uncertainties and popular opposition, financing of oil and gas infrastructure faces a bumpy credit future.148 Major oil-producing nations are similarly predicting a decline in oil revenue. Norway, a country that derives 25 percent of its national revenues from oil and gas, now projects budget deficits through 2050 due to failing oil revenues.149 Source: S&P Dow Jones Indices
21 Attachment 1

22 Over 100 oil and gas
companies went
bankrupt in 2020
Fracking Firms Fail, Rewarding
Executives and Raising Climate Fears
Exxon Mobil Exits:

The Dow Drops
Its Oldest Member
Exxon Mobil dropped
from the Dow after nearly
a century
Oxford announces
historic commitment to
fossil fuel divestment
Five Years Out of Oil,
the RBF Isn’t Looking Back
New Study Shows Oil, Coal and
Gas Investments Drove Over
$19 Billion in Losses for Major
Pension Funds
Mayors of 12 Major Cities
Commit to Divest From
Fossil Fuel Companies, Invest
in Green and Just Recovery
from COVID-19 Crisis
A Tale of Two Share Issues: How fossil fuel
equity offerings are losing investors billions
Nations Must Drop Fossil Fuels,
Fast, World Energy Body Warns
An industry ‘operating on
borrowed time’: Energy
experts on the increasing
risks ahead for Big Oil
Harvard University Will
Stop Investing In Fossil
Fuels After Years Of
Public Pressure
Attachment 1

23 DIVEST-INVEST,

MOVEMENT IMPACT

ON THE FOSSIL FUEL

INDUSTRY
At the outset of the movement a decade ago, advocates for fossil fuel divestment set out to build an ethical case against fossil fuel companies and brand them as rogue actors, so that a political shift could occur. Movement leaders did not generally believe that the movement could grow large enough to influence the overall financial picture of the industry. But there is evidence that the movement has now grown so large and pervasive that it is having a real impact on the cost of business for fossil fuel companies.

As a permanent component of the economic landscape, the divestment movement has now reached into the financial decisionmaking calculus of institutional investors across the world.

Corporations, industry organizations, and credit rating agencies now all consider the efforts of the movement of sufficient authority and prominence to remain aware of it and to consider changes to business practices.

Formal regulatory disclosures by major fossil fuel companies make this clear. Corporate managers take the movement’s influence so seriously that they felt it necessary to inform investors about the risk it represents to company profits.

Shell, for instance, informed investors in their 2020 disclosures that efforts to divest fossil fuel holdings may harm the price of securities and cause difficulties for oil and gas partnerships:
“Additionally, some groups are pressuring certain investors to divest their investments in fossil fuel companies. If this were to continue, it could have a material adverse effect on the price of our securities and our ability to access capital markets. Additionally, some groups are pressuring
commercial and investment banks from financing fossil fuel companies. Furthermore, according to press reports, some financial institutions also appear to be considering limiting their exposure to certain fossil fuel projects. Accordingly, our ability to use financing for future projects may be adversely impacted. This could also adversely impact our potential partners’ ability to finance their portion of costs, either through equity or debt.”150
Similarly, ExxonMobil told investors it sees a risk in the work of those seeking to change corporate behavior on the climate issue:
“Political and other actors and their agents also increasingly seek to advance climate change objectives indirectly, such as by seeking to reduce the availability of or increase the cost for, financing and investment in the oil and gas sector and taking actions intended to promote changes in
business strategy for oil and gas companies.”151
The financial world has also noted how the divest-invest movement, and the related “Keep it In the Ground” and “Stop the Money Pipeline” movements, have been successful at halting progress on major new fossil fuel infrastructure projects. The infamous and long-protested Keystone XL Pipeline was finally defeated in 2021.152 A report prepared by the United States Chamber of Commerce cited fifteen other examples of recent instances where citizen activism resulted in the termination of proposed coal ports, oil and gas pipelines, and other energy infrastructure.153 Moody’s 2020 report on the natural gas sector acknowledged that the change in climate politics is hurting the industry, and noted the effectiveness of the movement’s stand against new infrastructure:
“Development of oil and gas transmission infrastructure, in particular, continues to face legal challenges from
environmental groups, which are succeeding in delaying
pipeline development … Environmentalists and Indigenous communities have opposed both oil and gas pipelines as
well as broader development projects, such as the Frontier oil sands project in Alberta, Canada. Moreover, even
existing pipeline facilities have come under fire, such as the Dakota Access Pipeline and an Enbridge Inc. compressor
station that will increase pipeline capacity in
Massachusetts.”154
A study released in 2021 from the University of Edinburgh Business School concluded that the “effect of the fossil fuel divestment movement is highly significant” in reducing the ability of fossil fuel companies to raise new capital.155
Finally, evidence of the movement’s impact can be seen in the fierce efforts by the oil, gas, and coal industry to discredit it. The industry has supported numerous studies and articles to challenge divestment advocates. These reports usually feature consultant models to argue that fossil fuel divestment would cause financial harm to institutional investors.156 157 158 159 160 161 As noted above, this claim has now been conclusively disproved by real data.

Attachment 1

24 THE RISE OF RENEWABLES
While the fossil fuel industry begins its inevitable collapse, the renewable energy sector is rising with unstoppable momentum:
•Renewables were the only source of electricity generation to grow in 2020, which saw overall energy demands decrease because of the pandemic. The International Energy Agency raised its forecasts for wind and solar capacity growth by 25 percent in a single year.162 •It is now cheaper in the U.S. to build new renewable energy generation than to operate existing coal-fired power plants or natural gas lines.163 • New investments in renewable energy rose in the U.S. to a record high of $55.5 billion in 2019, an increase of 28 from the previous year.164 Use of renewables is growing particularly fast in emerging markets, where 88 percent of the growth in energy demand is expected over the next two decades.165 A 2021 report from Carbon Tracker said that most developing nations have or will “leapfrog” the use of fossil fuels for electricity generation, going straight to cheaper renewables as they expand electricity access. In developed markets like the United States and Europe, fossil-fuelbased electricity generation has been dropping since 2007. “That means peak global fossil fuel usage for electricity generation was probably 2018,” the report concludes.166
A new research paper from Oxford University analysed the trends in renewable energy costs to reach a stunning conclusion (emphasis added):
“Rapidly decarbonising the global energy system is critical for addressing climate change, but concerns about costs have been a barrier to implementation. Most energy-economy models have historically underestimated deployment rates for renewable energy technologies and overestimated their costs. The problems with these models have stimulated calls for better approaches and recent efforts have made progress in this direction. … We use these methods to estimate future energy system costs and find that, compared to continuing with a fossil-fuel-based system, a rapid green energy transition will likely result in overall net savings of many trillions of dollars--even without accounting for climate damages or co-benefits of climate policy.
“The prices of fossil fuels such as coal, oil and gas are volatile, but after adjusting for inflation, prices now are very similar to what they were 140 years ago, and there is no obvious long range trend. In contrast, for several decades the costs of solar photovoltaics (PV), wind, and batteries have dropped (roughly) exponentially at a rate near 10% per year. The cost of solar PV has decreased by more than three orders of magnitude since its first commercial use in 1958. “The combination of exponentially decreasing costs and rapid exponentially increasing deployment is different to anything observed in any other energy technologies in the past, and positions renewables to challenge the dominance of fossil fuels within a decade.”167
In other words, the common narrative about the transition to a renewable energy economy--that it will be expensive, difficult, and only possible in the future--is deeply false. That story has been built on incorrect assumptions about the reliability of renewable energy technology and how fast its costs can drop.168 The renewable energy future is inevitable and it is arriving faster than expected.

Attachment 1

25 As the scale and speed of climate change becomes frighteningly more clear, the scale and speed of the economy’s transition must increase to match it. Divestment alone is insufficient. The world’s available capital must be redirected towards the transition to clean, renewable energy, clean industrial and transportation systems, and climate-resilient infrastructure and communities.

The current pace of investment does not meet the challenge. Driving these transitions forward more quickly will help to reduce the human suffering that will take place if the world warms 1.5°C or greater. That alone should be enough to satisfy investors’ fiduciary duty on the need for greater investment. But to be clear, a faster transition is also critical for the health of the economy. It will both reduce the devastatingly destructive effects of climate change--which is costing billions of dollars annually already--and provide a path forward for robust economic growth. And it can make investors money.

How these investments are made will be just as important as when they are made. The transition to a renewable energy economy represents a huge shift in society and, as with all such upheavals, contains within it both the potential for compounding injustice and the opportunity for positive transformational change. All investors should consider the benefits of focusing their resources on a “just transition,” one which avoids the mistakes of past economic shifts and centers economic, gender, and racial justice. As they have with the divestment side of the equation, mission-driven investors have a critical role to play in leading the rest of the investment community forward.

Scientific consensus has emerged on the need for a rapid transition to renewable energy. Although it is not the only hurdle, insufficient investment remains a barrier to this goal.

The “Net Zero by 2050” roadmap from the IEA released in 2021 found that “immediate and massive” deployment of all available clean and efficient energy technologies is needed in order to limit global temperature rise to 1.5°C. “To reach net zero emissions by 2050, annual clean energy investment worldwide will need to more than triple by 2030 to around $4 trillion,” the report says.169 The International Monetary Fund said in October 2021 that the financial world needs to do more to support the transition and that investment vehicles for doing so are still too few:
“The transition to net-zero greenhouse gas emissions
requires unprecedented change by companies and
governments, as well as additional investment of as much as $20 trillion over the next two decades. … The world’s $50 trillion investment fund industry, especially funds with a sustainability focus, can play an important role financing the transition to a greener economy and helping to avoid some of the most perilous effects of climate change…
“However, even though sustainability is becoming
mainstream in investment strategies, sustainable investment funds still represent only a small fraction of the investment fund universe. At the end of 2020, funds with a
sustainability label totaled about $3.6 trillion, representing only 7 percent of the overall investment fund sector. Funds with a specific climate focus accounted for a meager $130 billion of that total.”170

WHY INVESTMENT IN A JUST TRANSITION NEEDS

TO SCALE QUICKLY
2012
2013
2014
2015
2016
2017
2018
2019
$360B

MAXIMUM

NECESSARY
$3,800B

MINIMUM

NECESSARY
$1,600B
ACTUAL

INVESTMENT
$342B
$388B
$472B
$455B
$608B
$540B
$615B

ACTUAL VS NEEDED INVESTMENT

IN GREEN ECONOMY
Comparison of annual investment in transition to a green economy vs minimum and maximum estimates for needed
investment to hold global warming to 1.5°C

JUST TRANSITION

INVESTING IN A RAPID,
Source: “Updated View on the Global Landscape of Climate Finance 2019,” Climate Policy Initiative, December 18, 2020, https://www.climatepolicyinitiative.org/ publication/updated-view-on-the-global-landscape-of-climate-finance-2019/ Attachment 1

26 Investors must also recognize that the slower the transition to a renewable energy economy, the greater will be the economic burden of responding to climate devastation.

Since 1980, the U.S. National Oceanic and Atmospheric
Administration has tracked extreme weather events in the U.S. that cost at least $1 billion in damages and costs. In total there have been 298 events that met that threshold, costing the country over $1.975 trillion.171 But both the frequency and total cost of such events is rising alarmingly:
2020 set the new annual record of 22 events - shattering the previous annual record of 16 events that occurred in 2011 and 2017. 2020 was the sixth consecutive year
(2015-2020) in which 10 or more billion-dollar weather and climate disaster events have impacted the United States.

Over the last 41 years (1980-2020), the years with 10 or more separate billion-dollar disaster events include 1998, 2008, 2011-2013, and 2015-2020.
172
As of the end of September, 2021 is on pace to exceed 2020’s record on total costs.173
Globally, the collective cost of responding to climate-driven disasters--especially in communities that lack basic, essential services and economic opportunity--far outweighs the cost of investing in community preparedness and economic resilience today. A 2019 report from the Global Commission on Adaptation, headed by former UN Secretary-General Ban Ki-moon,
philanthropist Bill Gates, and IMF Chair Kristalina Georgieva, said investment in climate adaptations such as early warning systems and clean, resilient infrastructure will be critical for avoiding massive human suffering. But such investments would also bring clear economic benefits (emphasis in source):
“The Commission found that the overall rate of return on investments in improved resilience is very high, with
benefit-cost ratios ranging from 2:1 to 10:1, and in some cases even higher. Specifically, our research finds that investing $1.8 trillion globally in five areas from 2020 to 2030 could generate $7.1 trillion in total net benefits. … The case for ambitious adaptation is clear, but it’s not happening at nearly the pace and scale required. This is because climate impacts and risks are not yet adequately factored into decisions by those who make choices about the future.”174
Achieving such adaptation will require, among other things, a “revolution in finance” to increase the flow of money to adaptation projects, the report found.175
Along with avoiding calamity, there are strong economic benefits to a broad-based increase in investment in a rapid, just transition.

Worldwide, renewable energy already employs 11.5 million people.176 Two of the five fastest-growing occupations in the U.S. over the next ten years will be renewable energy jobs--wind turbine technician and solar panel installer--according to U.S. government data. No fossil fuel jobs are on the list of the top 20.177 A rapid increase in renewable energy development can grow these jobs significantly, and the world economy with it. One study by the International Renewable Energy Agency (IRENA) revealed that doubling the percentage of renewables in the world energy supply and increasing energy access by 2030 would increase global GDP by up to 1.1 percent, or $1.3 trillion.178 A 2020 Roosevelt Institute Report explained why investment in renewables is better for the economy than investment in fossil fuels:
“Compared to fossil fuels, clean energy is highly laborintensive. In fact, investments in clean energy generate nearly three times more jobs than comparable investments in fossil fuels (Garrett-Peltier 2017). This is largely because ‘investments in clean energy—including the direct spending on specific projects plus the indirect spending on
purchasing supplies—devote significantly more of their
overall budgets on hiring people and relatively less on acquiring machines, supplies, land (either on- or offshore), and energy itself’ when compared to fossil fuels (Pollin et al. 2014). Renewables also create many more jobs in the short term, which leads to more private spending, an
expansion of demand, and an increase in short-run GDP
multipliers.”179
A 2018 report by researchers from the London School of
Economics and Harvard University makes a cohesive case for why investors should build a strategy around not only rapid transition, but just transition. The researchers argue that investors need to understand that a poorly managed transition would trigger rising economic inequality, which represents a systemic risk to their portfolio. Similarly, they need to account for the benefits to the economy, and their financial returns, from investments that improve overall societal and environmental conditions.Attachment 1 180

27 “As the pace of decarbonisation accelerates and the physical impacts of climate change intensify, the just transition approach will increasingly provide investors with a strategic way to anticipate, evaluate and respond to the social and economic implications for their beneficiaries, their portfolios and the financial system as a whole. 181
A fully just transition would also close the gap on universal energy access, particularly in the Global South. Nearly 800 million people lack basic access to reliable electricity today. The problem was badly exacerbated by the COVID-19 pandemic in 2020, which made electricity financially inaccessible for an additional 30 million people, mostly in Africa.182 Decentralized, renewable energy projects are the cleanest, quickest, and most affordable way to close the energy access gap in Africa.183 Mission-driven investors have already found these projects successful in increasing energy access, reducing emissions, and generating local jobs.184 Overall, about $35 billion of investment is needed every year from now to 2030 to achieve universal electrification with net zero emissions, according to the IEA.185 Building renewable energy systems could create 25 million jobs in Asia and Africa186 and improve healthcare. These outcomes and others tied to energy access can broadly stimulate macroeconomic growth.187 Increasingly, investors are organizing to push their peers to embrace a just transition. As of 2020, a coalition of 161 investors representing $10.2 trillion in assets were signed onto the “Statement of Investor Commitment to Support a Just Transition on Climate Change:” “As investors with a requirement to act in the best interest of our beneficiaries and in line with our fiduciary duties, we believe that strategies to tackle climate change need to incorporate the full environmental, social and governance (ESG) dimensions of responsible investment. There is an increasing recognition that the social dimension of the transition to a resilient and low-carbon economy has been given insufficient attention, notably in terms of the implications in the workplace and wider community. Achieving a just transition, in line with the 2015 Paris Agreement on Climate Change, will help to accelerate climate action in ways that deliver the Sustainable Development Goals.”188
Finally, while a robust investment strategy for a just transition can take many forms, it’s clear based on long-term past performance and the current outlook that it could be profitable for any investor who pursues it.

For example, compare the 5-year annualized total returns of the S&P’s Global Clean Energy Index, which tracks the performance of “global clean energy-related business,” to both the S&P 500 market benchmark and the S&P’s energy sector index, which tracks major U.S. companies in all sectors of the fossil fuel supply chain. The clean energy index, with annualized returns of about 22 percent, beat the market’s 17 percent.

Meanwhile, the fossil fuel index lost money, with annualized returns of -1.6 percent.189 190 191 192 S&P Global Clean Energy Index S&P 500 S&P 500 Energy (Sector) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
0 50
100
150
200
250
300
350
400

RENEWABLES VS FOSSILS IN THE MARKET
Comparison of stock market gains for the clean energy sector, fossil fuel sector, and the overall stock market, per S&P indices.

Source: S&P Dow Jones Indices
Attachment 1

28 –JOSEPH STIGLITZ
“ We have been treating truly scarce resources, our environment, our water, our air, as if they were free. But economics teaches us that there is no such thing as a free lunch.

We will have to pay the check someday. And delay is
costly. Taking carbon out of the atmosphere is far more expensive than not putting it into the atmosphere. A
smooth transition is far less costly than the one we will surely face if we do not take action urgently.”
Attachment 1

CASE STUDY

NAVAJO POWER
Navajo Power is “a native majority owned clean energy developer” working to build renewable energy generation in the Navajo Nation and other tribal lands.

The company received $4.5 million in seed funding in 2020 for projects that include solar panel assembly operations on Navajo land and the deployment of off-grid energy systems for thousands of Navajo families who still lack access to electricity.

The company is focused on ensuring that the benefits of the renewable energy resolution reach the many tribal communities that have depended on fossil fuels not just for energy, but for employment. “Coal was the backbone of the Navajo Economy for many years,” said Jerry Williams, the Chapter President of the LeChee community on Navajo. “I myself worked at Navajo Generating Station for 40 years, along with 460 other Navajo workers at the plant and another 400 at Peabody Coal mine. As we move forward and transition to renewable energy, we can’t forget about the communities and workers who provided energy for the West and the world. … That’s what got me excited about Navajo Power.” Brett Isaac, founder and CEO of Navajo Power, noted that the Navajo Nation has what could be the highest unemployment rate in the country at 65%. “We need to put people back to work in creating the clean energy future. … Clean energy can be our bridge.”193
29 Attachment 1

30 MISSION-DRIVEN

INVESTORS

MUST LEAD ON A

JUST TRANSITION
As they have for the past decade, mission-driven investors have a special role to play. Schools, churches, cities, and foundations were early adopters of the divestment strategy because they had a broader interpretation of their investment responsibilities and understood that continued financial support of the fossil fuel industry was deeply harmful to the constituencies they serve. Now these institutions must recognize that they have an equally crucial responsibility to demonstrate the power and possibility of investment in a just transition.

It is well understood that the climate crisis will disproportionately hit low-to-middle income countries and communities the hardest.

Marginalized communities in these areas, such as women and children, who often lack basic human rights and access to essential services, are particularly vulnerable. The UN climate panel’s 2018 report said that even if the world meets the goals set out in the Paris agreement, these communities will suffer:

Warming of 1.5°C is not considered ‘safe’ for most nations, communities, ecosystems and sectors and poses
significant risks to natural and human systems as compared to the current warming of 1°C … The impacts of 1.5°C of warming would disproportionately affect disadvantaged and vulnerable populations through food insecurity, higher food prices, income losses, lost livelihood opportunities, adverse health impacts and population displacements.
194
Institutions with a mission or values that prioritize care for these communities should therefore prioritize investments in a transition that will allow them to build resilience, long-term economic wealth, and political power.

Similarly, a poorly managed transition could be devastating for the workers and communities who have relied on the fossil fuel economy. Historically, economic transitions driven by market forces and powerful corporate entities have left workers and communities behind. Such economic shocks can be very
damaging to individuals and communities in both tangible and intangible ways, as major industrial employers like mines, plants, and factories are often part of a region’s culture and identity.

Economic impacts can be made worse by structural racism, gendered discrimination, and persistent wealth inequality. Much of the political resistance to the transition away from fossil fuels is grounded in these harsh realities. Mission-driven investors who want to remediate, rather than exacerbate, inequalities should ensure that projects they are supporting guarantee strong union jobs with worker protections, sufficient wages, and benefits.195 Attachment 1

31 A fully just transition remains a fluid concept, and mission-driven institutions should consider the full breadth of possibilities as they design their investment strategy. A 2021 report from the Labor Network for Sustainability described it this way:
“Just transition ideals can be seen along a spectrum. On one end is a relatively narrow concept that addresses and mitigates the job and revenue losses from ending use of fossil fuels. From there, the idea expands to incorporate specific attention to workers and communities who were
excluded from the benefits of a fossil-fuel economy in the first place, all the way to understanding just transition as a holistic transformation of existing institutions and
structures, fundamentally reconfiguring the relationship between human beings, industry, land and resources.
“A just transition that includes all workers recognizes the exploitative nature of existing working conditions and the ties between underlying systemic racism and the precarity of work. Underlying racism and worker exploitation must be addressed for a just transition. … In other words, for there to be a just transition, underlying social injustices must be addressed to avoid replicating the same systems of
resource and human exploitation.
“Moving beyond expanding just transition to include all workers, some argue that just transition must address all exploitation, including exploitation of land and natural resources. In this ideal of just transition, there is a clear relationship between exploitation of land and the climate crisis. Addressing the climate crisis will require not just ending the use of fossil fuels, but a fundamental change in our relationship with land and natural resources.

As such, just transition goes beyond an energy transition: it is a rethinking of land and resource use.”196
For example, the need for investments in the transition does not just include things like electricity generation and the built environment, but also includes investments in services such as health care, community and ecosystem adaptation, and child and elder care. A 2021 report from the Feminist Green New Deal Coalition observed that investments in the care economy both provide the foundation for a transition to new economic models and are a source of future employment for transitioning workers:
“Without universal access to high-quality and affordable care, there will remain disproportionate barriers to women, and especially women of color, to entering the clean energy workforce, which today is predominantly male. … To truly accomplish a just transition, we must recognize careers in care as important options for the transitioning workforce, dismantle harmful gender norms and break down stigmas
of who does paid (and unpaid) care work, and make certain that care jobs are high-quality jobs.”197
Finally, the transition to a renewable energy economy must include a focus on closing the electricity access gap. Along with the macroeconomic effects described earlier, expanding access to clean, renewable energy has clear benefits for human rights and wellbeing in the Global South, which is why it was identified as a priority by the UN in both the Paris Agreement198 and the Sustainable Development Goals.199 It would benefit households by saving time, providing access to information and earning opportunities, and enabling human development within the household.200 Expanding access to electricity particularly benefits women, who on average spend more time on household chores and child care. For example, women’s employment in rural South Africa increased by 9 to 9.5 percent within 5 years of
electrification, while male employment rose by only 3.5 percent.201 Just transition projects are already underway across the globe, in places as diverse as Colorado202 and South Africa.203 As with the overall shift to clean, renewable energy, a just transition is increasingly being centered in domestic and international energy and climate policy discussions. The question remains whether investors will get ahead of the curve.

Attachment 1

INDIA

FRONTIER MARKETS IN

CASE STUDY
Many rural areas of India still struggle with access to energy. Frontier Markets, an e-commerce startup that employs women in rural India,204 had sold over 650,000 renewable energy products by February 2019, primarily through its program.

Sahelis are trained in use of the company’s technology platform and are then able to reach women in some of India’s poorest and most remote areas. About 2,000 women have trained for the program, and the network has proven successful in selling solar lamps and other systems that can provide clean, reliable sources of light.

According to Ashden, a nonprofit focused on recognizing climate innovations: “Solar systems make cooking and studying easier, providing brighter, less smoky light than kerosene lamps. Robust, long-range [flashlights] are particularly popular with women, for moving around outside after dark and checking livestock. Solar [flashlights] are brighter and more reliable … For many women [working as Sahelis], this is their first significant income, and very useful for buying clothes and household equipment, contributing to children’s education, and saving for weddings.”205 Frontier Markets secured additional funding in 2021 and plans to grow to 1 million rural women entrepreneurs and 100 million customers by 2025.
206
Photo by Ashden
32 Attachment 1

33 CONCLUSION
Divestment remains a critical strategy for the climate movement. It must be combined with an accelerated push for investment in a just transition to a clean, renewable energy future if the world is to avoid a future of worsening human injustice and irreversible ecological damage. Financial arguments against divest-invest no longer hold water.

Institutional investors and other financial actors must agree to these three principles if they want to be on the right side of history and humanity:

1. All institutional investors must make an immediate public commitment to fully divest from and stop all financing of coal, oil, and gas companies and assets. Institutions that have partially divested must now divest all of their assets from all fossil fuels. As linked to this commitment, all institutions must align their policy, regulatory positions, and political expenditures with this commitment.

2. All institutional investors must immediately move to invest a minimum of 5 percent of their assets in climate solutions, doubling to 10 percent by 2030, including investments in renewable energy systems, universal energy access, and a just transition for communities and workers. Further, investors must hold these companies accountable to respecting Indigenous and other human rights and environmental standards.

3. To achieve Net Zero emissions by 2050, all institutional investors should adopt Net Zero plans that both immediately cut investments in fossil fuels and ensure that all other assets in their portfolio develop transition plans that halve absolute emissions by 2030, consistent with science’s demands to limit global warming to 1.5°C.

Societies, economies, and the climate are all changing. The financial world will have to change with them.

METHODOLOGY
The tally of divestment commitments and assets under management is taken from the Global Divestment Commitments Database, currently managed by Stand.earth in partnership with 350.org. This is the most comprehensive database of public divestment pledges. The true amount of money being pulled out from fossil fuels is almost certainly larger since not all divestment commitments are made public.

For this report, an update of the assets under management (AUM) of the institutions listed in the database was conducted, using the best available public information disclosed by those institutions or reported on by third parties. In past reports, and in the database itself, the assets were calculated based on their value at the time of the commitment. As the age of the movement has grown, this has meant that the total financial impact of the movement has been underestimated--the vast majority of institutions have seen their assets grow, in some cases, quite significantly, since the time of their commitment. To better reflect the true current value of the movement, this report updates these assets under management and will do so going forward in future reports.

Note that asset sizes represent the total assets under management of institutions that have committed to divest and do not represent the amount divested from fossil fuel companies. For this and all prior reports, AUM is used as the metric because the precise amounts of an investor’s portfolio devoted to fossil fuels is often not known, and the total AUM represents the total pool of potential capital being taken “off the table” for the fossil fuel industry. Fossil fuel divestment commitments vary in the reach and impact on investments. Many fossil fuel divestment commitments are partial in nature, in that the institution has chosen to divest solely from thermal coal or tar sands or only the largest fossil fuel companies by size of reserve.

Others have committed to divesting only certain asset classes. As the movement has evolved, this spectrum of divestment commitments has widened.

In recent years, divestment commitments have tended to be more comprehensive and restrictive, capturing a wider group of fossil fuel companies, with less of a focus solely on coal. Of late, there is increasing focus on private equity investments and their heavy exposure to fossil fuel companies, often ones that are more risky than publicly traded firms. This reflects the evolving financial literacy of decision makers as they increasingly recognize the risk of the entire fossil fuel industrial chain, beyond just coal.

Data on institutions’ assets was obtained from various sources. In many cases, when an institution publicly commits to divest, it discloses the value of its assets. In cases where this information is not made available in an announcement, and for the purposes of updating assets under management, this report relies on several public sources including reported size of endowment, annual and financial reports, and information posted on institution’s websites. In each case, both the AUM and written confirmation of the institution’s commitment to divest were verified by independent researchers before being confirmed as final.

ACKNOWLEDGMENTS
This report was a joint effort between the Institute for Energy Economics and Financial Analysis, Stand.earth, C40, and the Wallace Global Fund.

Writing was led by Jonathan Lipman. Report design by Fenton Communications.

In addition, thanks to all who contributed to the writing, research, and report development: Tom Sanzillo (Institute of Energy Economics and Financial Analysis), Richard Brooks (Stand.earth), Amy Gray (Stand.earth), Thomas Van Dyck (Royal Bank of Canada - SRI Wealth Management), Julia Lipton (C40), Annabel Rice (C40), Kidan Araya (Wallace Global Fund), Isabel Salas (Wallace Global Fund), Heather Coleman (Wallace Global Fund), Cindy Coltman (Both ENDS), Mark Campanale (Carbon Tracker), Fletcher Harper (GreenFaith), Kelsey Skaggs (Climate Defense Project), Ted Hamilton (Climate Defense Project), Andrew Behar (As You Sow), Sian Ferguson (The Climate Change Collaboration), and Svitlana Romanko (Laudato Si’ Movement).

In addition, the report authors thank all of those organizations who have been strategic partners in this effort: 350.org, DivestEd, Climate Defense Project, Stop the Money Pipeline, Future Coalition, Fossil Free Media, Both ENDS, Giniw Collective, As You Sow, Sunrise Project, Market Forces, Just Share, People and Planet, Rainforest Action Network, Laudato Si’ Movement, Operation Noah, GreenFaith, World Council of Churches, Anglican Church of Southern Africa, and The Climate Change Collaboration.

Attachment 1

34 ENDNOTES
1 “Special Report on Global Warming of 1.5 ºC,” Chapter 00, Intergovernmental Panel on Climate Change, published October 8, 2018, accessed September 30, 2021, www.ipcc.ch/ sr15/chapter/spm/
2“ Measuring the Global Fossil Fuel Divestment Movement,” Arabella Advisors, published November 5, 2016, accessed September 29, 2021, www.arabellaadvisors.com/wp-content/ uploads/2016/11/Measuring-the-Global-Divestment-Movement.pdf. Note that the text of the report cites $50 billion in total assets divested, but this was updated to $52 billion by the time of the report’s release.
3 “World Economic Outlook Database,” International Monetary Fund, published April 2021, accessed October 1, 2021, www.imf.org/en/Publications/WEO/weo-database/2021/April/ weo-report
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178 Rabia Ferroukhi, et al., “Renewable Energy Benefits: Measuring Economics,” IRENA, published 2016, accessed October 12, 2021, www.irena.org/-/media/Files/IRENA/Agency/ Publication/2016/IRENA_Measuring-the-Economics_2016.pdf 179 Rhiana Gunn-Wright, Kristina Karlsson, Kitty Richards, Bracken Hendricks, David Arkush, “A Green Recovery: The case for climate-forward stimulus policies in America’s COVID-19 recession response,” The Roosevelt Institute, published October 2020, accessed September 30, 2021, rooseveltinstitute.org/wp-content/uploads/2020/10/RI_AGreenRecovery_ Report_202010.pdf page 15
180 Nick Robins, Vonda Brunsting, David Wood, “Climate change and the just transition A guide for investor action,” The London School of Economics and The Harvard Kennedy School, published December 2018, accessed September 30, 2021, page 4, iri.hks.harvard.edu/files/iri/files/jtguidanceforinvestors.pdf?m=1554219326 181 Nick Robins, Vonda Brunsting, David Wood, “Climate change and the just transition A guide for investor action,” The London School of Economics and The Harvard Kennedy School, published December 2018, accessed September 30, 2021, page 10, iri.hks.harvard.edu/files/iri/files/jtguidanceforinvestors.pdf?m=1554219326 182 “Report: Universal Access to Sustainable Energy Will Remain Elusive Without Addressing Inequalities,” The World Bank, published June 7, 2021, accessed September 30, 2021, www.worldbank.org/en/news/press-release/2021/06/07/report-universal-access-to-sustainable-energy-will-remain-elusive-without-addressing-inequalities 183 “Unlocking Climate Finance to Accelerate Energy Access in Africa,” The Rockefeller Foundation, published April 22, 2021, accessed September 31, 2021, www. rockefellerfoundation.org/wp-content/uploads/2021/04/Unlocking-Climate-Finance-for-SDG7-Report-For-RF.pdf 184 Rachel Bass, Noshin Nova, Sophia Sunderji, “Evaluating Impact Performance: Clean Energy Access Investments,” Global Impact Investing Network, published October 2019, accessed September 30, 2021, page 7, s3.amazonaws.com/giin-web-assets/iris/assets/files/research/Evaluating%20Impact%20Performance_Clean%20Energy%20Access_webfile. pdf
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195 J. Mijin Cha, Vivian Price, Dimitris Stevis, Todd E. Vachon, “Workers and Communities in Transition: Report of the Just Transition Listening Project,” Labor Network for Sustainability, published March 19, 2021, accessed September 30, 2021, www.labor4sustainability.org/jtlp-2021/jtlp-report/workers-and-communities-in-transition 196 J. Mijin Cha, Vivian Price, Dimitris Stevis, Todd E. Vachon, “Workers and Communities in Transition: Report of the Just Transition Listening Project,” Labor Network for Sustainability, published March 19, 2021, accessed October 12, 2021, www.labor4sustainability.org/jtlp-2021/jtlp-report/workers-and-communities-in-transition/ 197 Lenore Palladino and Rhiana Gunn-Wright, “Care & Climate: Understanding the policy intersections,” The Feminist New Deal Coalition, published April 2021, accessed September 30, 2021, pages 12-15, http://feministgreennewdeal.com/wp-content/uploads/2021/04/FemGND-IssueBrief-Draft7-Apr15.pdf 198 Melissa Denchak, “Paris Climate Agreement: Everything You Need to Know,” NRDC, published February 19, 2021, accessed September 30, 2021, www.nrdc.org/stories/ paris-climate-agreement-everything-you-need-know
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Attachment 1

CORE PARTNER ORGANIZATIONS

LAUDATO SI'

MOVEMENT
formerly Global Catholic Climate Movement

ENDORSING ORGANIZATIONS
RAN, GreenFaith, People & Planet, Mid-Ohio Valley Climate Action, Green Education and Legal Fund, People of Albany United for Safe Energy, The United People Project , 350Vermont, Shift: Action for Pension Wealth & Planet Health, Texas Campaign for the Environment, Climate Hawks Vote, WESPAC Foundation, Inc., Texas Campaign for the Environment, Divest Ed, Youth Emergency Auxiliary Services Sierra Leone(YEAS-SL), 350PDX, Volusia Climate Action, New Mexico Climate Justice, FreshWater Accountability Project , 350NYC, Green America, 350 Colorado, DivestNY, 350GDL, 350 Bay Area, 350 West Sound Climate Action, Divest NJ, Extinction Rebellion San Francisco Bay Area, 350 Charlotte, Fossil Free California, AtEnergyStocks.com, Jai Jagat US, Fossil Fuel Divest Harvard, 350 Butte County, Elders Climate Action, 350 New Orleans, Divest NY, 350MoCo, Future Coalition, 350 Triangle, Extinction Rebellion San Francisco Bay Area, 350 Hawaii, Divest Oregon, 350Vermont, Earth Guardians, Maine Youth for Climate Justice, 350 Maine, NM Climate Justice , CCAG, 350 Conejo / San Fernando Valley, 350 Butte County, UNM LEAF (Leaders for Environmental Action and Foresight), Women’s Earth and Climate Action Network (WECAN), Extinction Rebellion San Francisco Bay Area, Platform London DATE OF PUBLICATION: 10/26/21
Attachment 1

Reso No. (CM)
Meeting Date: 012522 1
RESOLUTION NO.__________ (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WATSONVILLE

URGING CALPERS TO INVEST IN SUSTAINABLE ENERGY AND DIVEST FROM FOSSIL FUELS IN SUPPORT OF THE CITY’S CLIMATE ACTION AND

ADAPTATION PLAN AND DIRECT STAFF TO PURSUE AND SUPPORT

STATE AND FEDERAL LEGISLATION THAT SUPPORTS CLIMATE SAFE

CALIFORNIA GOALS
WHEREAS, the climate crisis is a serious threat to current and future generations here in the City of Watsonville and around the world; and WHEREAS, the United Nation’s Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report found that global warming is already causing costly disruption of human and natural systems throughout the world including the melting of Arctic ice, the ocean’s rise in acidity, increased wildfires, flooding, and drought; and WHEREAS, almost every government in the world has agreed through the 2015 Paris Agreement that any warming above a 2°C (3.6°F) rise would be unsafe, and to pursue efforts to limit the increase to 1.5°C (2.7°F) and that humans can only create 500 more gigatons of carbon dioxide into the atmosphere to maintain this limit; and WHEREAS, the Carbon Tracker Initiative found that fossil fuel companies possess proven fossil fuel reserves that would release approximately 2,800 gigatons of CO2 if they are burned, which is over five times the amount that can be released without exceeding 2°C of warming; and
WHEREAS, the City of Watsonville seeks to protect the lives and livelihoods of its inhabitants from the threat of climate change; and
WHEREAS, the City of Watsonville’s Climate Action and Adaptation Plan sets Green House Gas emission targets that are achievable through a combination of reduced energy use and a transition to renewable energy use; and

Reso No. (CM)
Meeting Date: 012522 2
WHEREAS, the City of Watsonville believes that investments should support a future where all citizens can live healthy lives without the negative impacts of a warming environment; and
WHEREAS, more than 1500 organizations throughout the world have launched campaigns to have their institutions invest in sustainable energy and divest from fossil fuel companies; and
WHEREAS, the California Public Employees' Retirement System (CalPERS), has holdings of over $30 billion in fossil fuel companies; and WHEREAS, clean and sustainable energy is now outperforming the fossil fuel market, as indicated by the S&P Clean Energy Index, with annualized returns of about 22%, beat the market’s 17% (S&P Total Market Index). Meanwhile, the fossil fuel index lost money, with annualized returns of -1.6%.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

1. That the City Council hereby urges the Pension Board of CalPERS to review their investment portfolio to identify holdings that include direct or indirect investments in fossil fuel companies as well as holdings of sustainable and renewable energy holdings.

2. That the City Council urges CalPERS to ensure that it increases investments in sustainable and renewable energy, and that none of its investments or commingled assets include holdings in fossil fuel public equities and corporate bonds within 5 years.

Reso No. (CM)
Meeting Date: 012522 3

3. That the City Council urges CalPERS to release quarterly updates, available to the public, detailing progress made towards investment in sustainable energy and divestment of fossil fuels, including indirect and commingled assets.

4. That the City Council urges CalPERS to prepare a report discussing options for investing funds removed from fossil fuel stocks in a way that maximizes their positive impact by seeking out investments in opportunities to limit the effects of burning fossil fuels or help to mitigate its effects including, but not limited to, clean technology & renewable energy, sustainable companies or projects, and sustainable communities with an emphasis on investments that would support local projects and local jobs.

5. That the City Council direct City staff to pursue and support State and Federal legislation that supports the City’s Climate Action and Adaptation Plan goals, as well as legislation ensuring that public pension funds are only investing in sustainable and renewable energy portfolios and are divesting from fossil fuels, by meeting with legislators and developing Council resolutions or letters of support.

6. That the City Clerk shall send a copy of this resolution to the Pension Board of California Public Employees’ Retirement System (CalPERS), as well as to the State legislators that represent the City of Watsonville. *******************************************

1/20/2022 8:39:16 PM
C:\Program Files\eSCRIBE\TEMP\20391457851\20391457851,,,ELLA'S AT THE AIRPORT ASSIGNMENT DENIAL APPEAL.docx Agenda Report
MEETING DATE: Tuesday, January 25, 2022
TO: City Council
FROM: AIRPORT DIRECTOR WILLIAMS

ASSISTANT ADMINISTRATIVE ANALYST AGUADO
SUBJECT: ELLAS’S AT THE AIRPORT ASSIGNMENT DENIAL APPEAL STATEMENT OF ISSUES:

The applicant is appealing the Municipal Airport (Airport) Director’s denial of a lease assignment to Chielo Apac dba Nancy’s Airport Café, Willows/Glenn County Airport.

RECOMMENDED ACTION:

Airport management recommends the City Council uphold the denial of the requested lease assignment to Chielo Apac, filed by the appellants Tiffany Ella King and Sergio Angeles.

DISCUSSION:

The Airport restaurant facility lease (Resolution No. 168-17) (Lease, Exhibit A.) with Tiffany Ella King and Sergio Angeles, doing business as Ella’s at the Airport (EATA), expired on October 31, 2021. EATA continues to occupy the Airport restaurant facility pursuant to the Lease’s holdover provision in a month-to-month tenancy on the same terms and conditions as the expired Lease.

The four-year Lease allowed for assignment with advance approval of the City, and articulates certain factors on which the City may condition its consent. On May 20, 2021, EATA contacted the City stating that it intended to exercise its option to extend the lease (Exhibit B). Since the lease required EATA to notify the City of EATA’s intent to exercise its option to extend by April 30, 2021, the City responded to EATA, noting that, while EATA did not exercise its option by the deadline, the City would be willing to negotiate a new lease with EATA. In August 2021, the Airport contracted with a commercial real estate broker to negotiate a lease renewal with EATA.

After much discussion, the Airport’s broker and EATA negotiated terms for a new lease, and signed a term sheet in mid-September.

On September 20, 2021, before the new lease had been considered by the Council or executed by the parties, EATA notified the Airport that EATA had identified a potential assignee that EATA had completed the required “Assignment Checklist”.

1/20/2022 8:39:16 PM
C:\Program Files\eSCRIBE\TEMP\20391457851\20391457851,,,ELLA'S AT THE AIRPORT ASSIGNMENT DENIAL APPEAL.docx The Airport retained the services of the Santa Cruz Small Business Development Center (SBDC) to assist with the evaluation of the proposed assignee and immediately commenced an assessment of the potential assignee by: (1) personally visiting and dining at assignee’s cafe and (2) forwarding requested information, provided by the assignee, to the SBDC consultant.

After the Airport’s site visit, the Airport’s and SBDCs’ consultant independent review of the requested information (or lack thereof), including analysis of the proposed assignee’s Balance Sheet, Income and Expense Statement, income tax returns, industry quick ratios comparison, and assessment of resumes and business plan, Airport management forwarded a memorandum, dated September 30, 2021, to the City Manager recommending not approving an assignment of the requested assignee. (Exhibit C).

As explained in the memo, City staff assessment of this assignment is inconsistent with the requirements of the lease because the proposed assignee has insufficient experience and inadequate financial strength. We base this conclusion on our analysis, and that of SBDC, of the resumes and financial information submitted by the proposed assignee. Also noting the failure to submit certain financial information and references requested by Airport staff.

In October 2021, Airport orally informed the broker representing EATA of the reasons why the proposed assignee was not acceptable. EATA’s broker stated the Airport’s findings of inadequate experience and financial strength were unwarranted, but did not offer any additional information to support this claim.

The Airport informed EATA’s broker that the parties had reached new lease terms that would allow EATA to sell the restaurant once the City had approved the assignment.

The Airport further advised EATA’s broker that a signed lease was required for an assignment and that EATA should seek out potential buyers for EATA before the lease expired on October 31, 2021.

The Airport rescheduled the planned September consent agenda item to October.

Although EATA previously agreed, in writing, to new lease terms, EATA continued to insist the Airport approve the assignment request, without providing any additional information that would refute the Airport’s assessment and subsequent denial.

As a result of the continued delay in signing a new lease, the previous Lease expired and EATA entered into its current holdover status.

On November 4, 2021 the Airport delivered the new lease to EATA and provided two weeks to review and sign, allowing time to be placed on the November consent agenda.

Again, although EATA and the City previously agreed to the terms of the lease, in writing, EATA refused to execute the new lease. Instead, EATA demanded the Airport first approve the assignment request, although there was no lease in effect to assign,

1/20/2022 8:39:16 PM
C:\Program Files\eSCRIBE\TEMP\20391457851\20391457851,,,ELLA'S AT THE AIRPORT ASSIGNMENT DENIAL APPEAL.docx and without providing any information that would refute the Airport’s assessment and assignment denial.

On November 12, 2021 Airport management transmitted a memorandum, “Ella’s at the Airport Lease Status and Recommendation”, with exhibits, to the City Council, City Manager, Tiffany Ella King and Sergio Angeles, to summarize the lease history of EATA and substantiate and document in writing the Airport’s decision to deny the requested assignment. (Exhibit D.)
APPEAL LETTER:

Subsequently, EATA’s legal counsel submitted a Notice of Appeal, dated November 19, 2021, in which he agrees that the Airport Director has “sole and unfettered discretion to approve or reject any sub-lease or assignment” and alleges that the Airport Director’s denial of the requested assignment is “unfounded [and] unsupported.” The letter also cites to the California Civil Code as support that the Airport Director’s decision is unreasonable. (Exhibit E.)
California Civil Code Section 1995.260 and 1995.270(b) both require that if a restriction on the transfer of a lease requires the landlord’s consent but provides no standard for giving or withholding consent, the landlord’s consent may not be unreasonably withheld.

The burden is on the tenant to prove that the landlord failed, within a reasonable time, to state in writing a reasonable objection to the transfer Section 20 of the Lease provides, in pertinent part, as follows:

CONSENT BY LANDLORD.

Landlord shall have the sole and unfettered discretion to approve or reject any sublease or assignment. Landlord may condition consent upon such factors as the identity, reputation, financial worth and stability and operating ability of any proposed assignee or subtenant.

The Notice of Appeal reveals EATA’s attorney’s misunderstanding of the Lease consent provision. Although the Watsonville Municipal Code (Code) delegates authority to the Airport Director to administer Airport leases, the Airport Director possesses no sole and unfettered discretion. The Lease clearly defines “Landlord” as the City of Watsonville, which is governed by the City Council. Accordingly, the Code provides for the appeal to the City Council of administrative decisions made by the City’s administrative staff.

However, the Landlord did not exercise sole and unfettered discretion to reject the assignment. Rather, the Airport Director, in the exercise of his delegated lease administration authority, retained the services of an experienced real estate broker to negotiate a lease and the services of the Santa Cruz Small Business Development Center (SBDC) to assist in the evaluation of the proposed assignee, and applied the standards, as articulated in the lease, of assignee identity, reputation, financial worth and stability, and operating ability.

1/20/2022 8:39:16 PM
C:\Program Files\eSCRIBE\TEMP\20391457851\20391457851,,,ELLA'S AT THE AIRPORT ASSIGNMENT DENIAL APPEAL.docx The Airport staff and SBDC reviewed and analyzed the documents submitted by the proposed assignee, including the proposed assignee’s Balance Sheet, Income and Expense Statement, income tax returns, industry quick ratios comparison, Business Plan, and assessment of resumes. Following the review and analysis, Watsonville Airport management forwarded a memorandum to the City Manager recommending not approving a purchase and assignment by the proposed assignee. The Airport Director informed EATA of the decision to deny the requested assignment, in writing, on November 12, 2021.

The City provided a verbal notification of the assignment denial on October 7, 2021, less than two weeks after receiving the assignment request. The City provided the written decision of the Airport Director to EATA within 54 days of the Airport first being informed of the proposed assignee, which is reasonably timely. The decision was based on, and supported by, the actual data provided by, or lack of information not provided by, the proposed assignee.

FINANCIAL IMPACT:

If the City Council upholds the Airport Director’s denial of the appeal of the requested EATA lease assignment there will be no financial impact to the Airport Enterprise Fund unless the appellant litigates the matter in court, at which time the Airport would be subject to attorney’s fees to defend the case. If Council supports the appeal and rescinds the Airport Director’s denial of the requested assignment, there may be continuing rent in connection with the restaurant facility lease.

ALTERNATIVE ACTION:

The City Council could grant the appeal. The Council could also require the Airport to reevaluate the requested assignee with any additional documentation submitted relative to financial analysis, restaurant management experience and a cogent business plan for a General Aviation airport restaurant facility.

ATTACHMENTS AND/OR REFERENCES (If any):

Exhibit A: Airport restaurant lease (Resolution No. 168-17) Exhibit B: EATA intent to exercise its option to extend the lease.

Exhibit C: Memo to City Manager recommending not approving an assignment Exhibit D: Airport memorandum, “Ella’s at the Airport Lease Status and Recommendation”
Exhibit E: EATA’s submitted a Notice of Appeal, dated November 19, 2021

Reso No. (CM)
C:\Program Files\eSCRIBE\TEMP\20391417711\20391417711,,,Resolution - EATA Appeal.docx ri 1/20/2022 8:39:15 PM
1 RESOLUTION NO.__________ (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

WATSONVILLE UPHOLDING THE WATSONVILLE MUNICIPAL
AIRPORT DIRECTOR’S DECISION TO DENY A LEASE ASSIGNMENT
AND SALE TO CHIELO APAC OF NANCY’S AIRPORT CAFÉ,
WILLOWS/GLENN COUNTY AIRPORT – APPEAL FILED BY TIFFANY

ELLA KING AND SERGIO ANGELES, INDIVIDUALLY, AND DBA
ELLA’S AT THE AIRPORT
WHEREAS, on November 28, 2017, Council adopted Resolution No. 168-17 (CM), approving a four-year Lease with one four-year option term between the City and Tiffany Ella King and Sergio Angeles dba Ella’s at the Airport (EATA) located at 100 Aviation Way; and
WHEREAS, the Lease required EATA to notify the City of its intent to exercise its option to extend the term of the Lease by April 30, 2021; and WHEREAS, while EATA did not exercise its option by the deadline, the City was willing to negotiate a new Lease; and
WHEREAS, in August 2021, the City contracted with a commercial real estate broker to negotiate a lease renewal with EATA; and
WHEREAS, on September 20, 2021, Airport staff was notified by EATA, of a potential assignee; and
WHEREAS, the Airport retained the services of the Santa Cruz Small Business Development Center (SBDC) to assist with the evaluation of the proposed assignee; and
WHEREAS, an assessment of the potential assignee was immediately started by Airport staff and restaurant consultant from the SBDC; and

Reso No. (CM)
C:\Program Files\eSCRIBE\TEMP\20391417711\20391417711,,,Resolution - EATA Appeal.docx bvf 1/20/2022 8:39:15 PM
2 WHEREAS, per Section 20 (Assignment or Subletting) of the Lease, an Assignment is allowed with advance approval of the City, and articulates certain factors on which the City may condition its consent; and
WHEREAS, after site visit to assignee’s café and SDBC’s independent review, Airport staff recommended to the City Manager not approving an assignment to the requested assignee; and
WHEREAS, EATA continues to occupy the Airport restaurant facility pursuant to the Lease’s holdover provision in a month to month tenancy on the same terms and conditions of the expired Lease; and
WHEREAS, per Section 1-4.01 of the Watsonville Municipal Code, “any person excepting to the denial to any administrative decision made by any official of the City to any provisions of this Code, may appeal in writing to the Council by filing with the City Clerk a written notice of such appeal.”
WHEREAS, on November 29, 2021, a Notice of Appeal was received by the City Clerk’s office from the appellant’s attorney.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

That the City Council upholds the Watsonville Municipal Airport Director’s decision to deny a Lease Assignment and Sale to Chielo APAC of Nancy’s Airport Café, Willows/Glen County Airport based on, and supported by, the actual data provided by, or lack of information not provided by, the proposed assignee. Appeal filed by the appellants Tiffany Ella King and Sergio Angeles.
***********************************

Reso No. 168-17 (CM)
P:\COUNCIL\2017\112817\Lease for Ella's at the Airport.docx ri 11/30/2017 5:16:50 PM
1 RESOLUTION NO. 168-17 (CM)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WATSONVILLE APPROVING FOUR-YEAR LEASE WITH ONE (1)

FOUR-YEAR OPTION TERM BETWEEN THE CITY OF WATSONVILLE

AND TIFFANY ELLA KING AND SERGIO ANGELES, INDIVIDUALLY, AND DBA ELLA’S AT THE AIRPORT FOR THE USE OF CITY OWNED PROPERTY WHICH INCLUDES 2400 SQUARE FEET OF BUILDING
SPACE, 650 SQUARE FEET OF OUTSIDE STORAGE AREA AND 427
SQUARE FEET OF PATIO AREA LOCATED AT 100 AVIATION WAY,

FREEDOM, CALIFORNIA, AND AUTHORIZING AND DIRECTING THE

CITY MANAGER TO EXECUTE SAME

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WATSONVILLE, CALIFORNIA, AS FOLLOWS:

1. That the four-year Lease with one (1) four-year option term between the City of Watsonville and Tiffany Ella King and Sergio Angeles, individually, and dba Ella’s at the Airport for the use of City owned property which includes 2,400 square feet of building space, 650 square feet of outside storage area and 427 square feet of patio area located at 100 Aviation Way, Watsonville, California, a copy of which Lease is attached hereto and incorporated herein by this reference, is fair and equitable and is hereby ratified and approved.

2. That the City Manager be and is hereby authorized and directed to execute such Lease for the original term, and if properly exercised, a new lease to extend the term by four years.
********************************************
Exhibit "A"

Exhibit "A"

Restaurant Lease between the City of Watsonville and Tiffany Ella King and Sergio Angeles, individually and dba Ella’s at the Airport 1 2 Contents
3 1. Premises. ..............................................................................................................3 4 2. Term. ....................................................................................................................3 5 3. Initial Term Rent...................................................................................................4 6 4. Option Term Rent.................................................................................................5 7 5. Security Deposit....................................................................................................6 8 6. City, County or State licenses(s)...........................................................................7 9 7. Late Payment........................................................................................................7 10 8. Permitted and Prohibited USes............................................................................7 11 9. No Subordination.................................................................................................8 12 10. Utilities..............................................................................................................8 13 11. Alterations andAdditions. ................................................................................8 14 12. Compliance with rules, regulations andlaws. ..................................................9 15 13. Storage of Materials andEquipment. ...............................................................9 16 14. Environmental Considerations.........................................................................9 17 15. Repairs............................................................................................................11 18 16. Maintenance Inspections...............................................................................12 19 17. Freedom fromLiens. .......................................................................................13 20 18. Holding Over. .................................................................................................13 21 19. Abandonment.................................................................................................13 22 20. Assignment or Subletting...............................................................................13 23 21. Subletting. ......................................................................................................15 24 22. Signs, Posters, Buildings and Towers.............................................................16 25 23. Towers or Structures......................................................................................16 26 24. Waiver ofDamages and Indemnification. .......................................................16 27 25. Payment of Rent and Services. ........................................................................16 28 26. Security Deposit. ............................................................................................17 29 27. Non-Liability of Landlord for Damages...........................................................18 30 28. Insurance. .......................................................................................................18 31 29. Equipment and Supplies. ...............................................................................19 32 30. Closure of Airport in anEmergency................................................................19 33 31. Reservation of Right. ......................................................................................19 34 32. Right of Landlordto Enterfor Inspection. .......................................................20 Exhibit "A"

100 Aviation Way Restaurant Lease

1 33. Nondiscrimination. .........................................................................................20 2 34. EnforcementofNondiscriminationClause......................................................20 3 35. Nondiscrimination/FAA, MBE (DBE Requirements......................................20 4 36. Affirmative Action..........................................................................................22 5 37. Subordinationto FutureFAAAgreements.......................................................22 6 38. NoticetoFederalAviationAdministration.......................................................22 7 39. Non-Exclusive Right........................................................................................22 8 40. Damage or Destruction. .................................................................................22 9 41. Condemnation................................................................................................23 10 42. Default and Remedies....................................................................................23 11 43. Remedies. .......................................................................................................24 12 44. Attorney's Fees. .............................................................................................26 13 14
Exhibit "A"

100 Aviation Way Restaurant Lease

1 2 LEASE
3 THIS LEASE made and entered into this __________of November, 2017 by and 4 between the CITY OF WATSONVILLE, a municipal corporation, hereafter called 5 "Landlord," and Tiffany Ella King and Sergio Angeles, individually, and dba Ella's at the 6 Airport hereafter called "Tenant," IT IS AGREED BETWEEN THE PARTIES AS 7 FOLLOWS:
8 1. PREMISES.
9 Landlord does hereby rent and Tenant does hereby hire and take from Landlord 10 the facilities consisting of 2,400 square feet of Restaurant and Cocktail Lounge, 650 11 square feet of outside storage and 427 square feet of patio located at the Watsonville 12 Municipal Airport, 100 Aviation Way, in the City of Watsonville, Santa Cruz County, 13 California, together with the right of ingress and egress to such Premises; hereafter 14 collectively called "Premises. No representation is made or understood with respect to the 15 actual area and the areas mentioned are for identification purposes only. 16 2. TERM.
17 INITIAL TERM.
18 The initial term of this Lease shall be four (4) years, commencing effective 19 retroactive to November 1, 2017 and expiring on October 31, 2021. Tenant shall have no 20 right to extend the term of this Lease other than as set forth herein 21 OPTION TO EXTEND.
22 If Tenant is not in breach of any term or condition of this Lease between the time 23 this Option is exercised and the time any new lease is executed by both Landlord and 24 Tenant, the Tenant shall have one option for a four-year term. This option must be 25 exercised no sooner than twelve (12) and no later than six (6) months before expiration 26 of the initial term. The Landlord and Tenant shall have ninety (90) days after Landlord 27 receives the Notice of Exercise in which to agree on terms and conditions of a new lease. 28 Unless a new lease is executed and approved by the Watsonville City Council at least 29 nine months before the expiration date of the original, this original Lease will 30 automatically expire on its original expiration date. This option to negotiate shall expire 31 in any event automatically on its own terms, 60 days before the expiration of this Lease 32 unless a new Lease is in effect with Tenant at that time. Exhibit "A"

100 Aviation Way Restaurant Lease

1 3. INITIAL TERM RENT.
2 BASE RENT.
3 Rent is due on the 1st day of each month. During the initial term of this Lease, 4 Tenant shall pay to Landlord the agreed monthly base rent as follows:
5 • For the months of December, 2017 through and including November, 6 2018, the sum of $2,700/month plus an annual rent adjustment as 7 described below
8 • For the month of December, 2018 through and including November, 2019, 9 the sum of $2,800/month plus an annual rent adjustment as described 10 below
11 • For the months of December, 2019 through and including November, 12 2020, the sum of $2,900/month plus an annual rent adjustment as 13 described below
14 • For the months of December, 2020 through and including November, 15 2021, the sum of $2,900/month plus an annual rent adjustment as 16 described below
17 ANNUAL RENTADJUSTMENT.
18 The original monthly rent for each year of the initial term and for each year of the 19 option term shall also be adjusted annually in July of each year asfollows:
20 The base for computing the adjustment is the "All Urban Consumer California 21 Wide Consumer Price Index," which is computed from April to April each year and 22 published in May of each year. If the index published nearest the adjustment date 23 ("extension index") has increased over the "Beginning Index," the monthly rent for the 24 following year shall be set by multiplying the monthly rent by a fraction, the numerator 25 of which is extension index and the denominator of which is the beginning index. The 26 "beginning index" is defined as the first monthly rent for the first adjustment to be made 27 after one (1) year and is thereafter defined as the new monthly rent thereafter established, 28 after each adjustment date for each year remaining Lease term. On adjustment of the 29 monthly rent for each year period, the parties shall confirm by letter stating the new 30 monthly rent. In no event shall the monthly rent be less than the amount first specified 31 in this Lease notwithstanding the fact that the index may, as of some adjustment date, be 32 less than the original monthly rent.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 If on any rental adjustment date there shall not exist a Consumer Price Index in 2 the same format as recited herein, the parties shall substitute the Consumer Price Index for 3 all Urban Consumers provided such index has been so revised or changed in such a way 4 as to affect the direct comparability of such revised or changed index published by the 5 Bureau of Labor Statistics or similar or successor governmental agency as may then be in 6 existence and most nearly equivalent thereto (i.e. the Wholesale Price Index). If the 7 parties are unable to agree on a successor index, then the parties shall refer the choice of 8 the successor index to arbitration in accordance with rules of the American Arbitration 9 Association.
10 Notwithstanding provisions set forth in this Section 3, no annual rental adjustment 11 shall exceed five percent (5%) of the rentfor the preceding year. 12 COMMON AREA MAINTENANCE
13 Tenant shall pay $900 per month in advance as additional rent for common area 14 janitorial maintenance and supplies for daily and nightly cleaning of restrooms and 15 weekly deep cleaning of the Airport Terminal Lobby. Landlord shall see that restroom 16 paper products and supplies are stocked and available and that consumables are 17 replenished.
18 TAXES.
19 Tenant shall pay as additional rent all taxes, assessments and licenses levied, 20 imposed or required by any governmental subdivision, body or authority on or in respect 21 to:
22 a. Any improvement or property placed on the Premises by Landlord or 23 Tenant or any person with Tenant's permission.
24 b. The use, occupancy or possessory rights in the Premises. Landlord, 25 pursuant to §107.6 of the California Revenue and Taxation Code hereby 26 gives notice that the interest of Tenant in this Lease may be subject to 27 property taxation as a possessory interest. By signing this Lease, Tenant 28 acknowledges that it is aware of such tax and agrees to pay same when 29 due.
30 4. OPTION TERM RENT
31 The first year of option term rent shall be $3,600/month. Rent shall be adjusted 32 by the cost of living in the manner described above on July 1, 2022, 2023, 2024 and 33 2025. Exhibit "A"

100 Aviation Way Restaurant Lease

1 Tenant shall pay additional monthly rent in advance for common area 2 maintenance as described in the description of common area maintenance responsibilities 3 for the initial term. The rent shall be determined solely by Landlord after discussions 4 with Tenant based on actual expenses incurred during the initial term. CAM rent during 5 the option term shall not however exceed $1,200 per month. 6 If the parties fail to agree on the then fair market ground rent, the Parties shall 7 agree upon an experienced appraiser who shall decide the fair market rent which 8 determination shall be binding and final. If the parties do not agree on an appraiser, either 9 party may apply to the Santa Cruz County Superior Court for appointment of an appraiser 10 who shall establish fair market ground rent for similar property in Santa Cruz County. 11 However established, said rent shall be the base rent for the option term except for the 12 annual rent adjustment as described above. An annual rent adjustment shall be applied as 13 described above as of July 1, 2021, July 1, 2022 and July 1, 2023. 14 5. SECURITY DEPOSIT
15 Before providing this lease to the Council for consideration, Tenant shall deposit 16 $2,700 ($2,700 base rent) as a Security Deposit with the Landlord. This Security Deposit 17 is security that the Tenant will comply with all the terms of this Lease. This Security 18 Deposit may not be used to pay the last month’s rent without the Landlord’s prior written 19 consent.
20 If the Tenant breaks or otherwise violates this Lease before the prescribed 21 expiration date, the Landlord may keep all or part of this Security Deposit to cover 22 unpaid rent, CAM charges and or/damage to the property. 23 Upon Tenant’s office move-out date, the Landlord will inspect and document the 24 condition of the Premises. Within 30 days of the end of this Lease, if the Tenant has 25 supplied the Landlord with a forwarding address, the Landlord will do one of two things. 26 1. If the Tenant has complied with all terms of this Lease and returns the Premises 27 to the Landlord in the same good condition as when Tenant moved into the Premises, the 28 Landlord will return the Security Deposit.
29 or
30 2. The Landlord will provide the Tenant with a written notice including an 31 itemized list as to why the full Security Deposit amount is not being returned to the tenant 32 and a check for any remaining Security Deposit owed to the Tenant after the allowed 33 deductions have been made.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 6. CITY, COUNTY OR STATE LICENSES(S).
2 Tenant's liability to pay taxes shall be prorated, if necessary, based on a 360-day 3 year to account for any fractional portion of a fiscal tax year included in the term at its 4 commencement and/or expiration. On demand by Landlord, Tenant shall furnish 5 Landlord with satisfactory evidence of these payments. 6 a. Any taxes, fees, assessments, license fees, and other charges that are 7 levied and/or assessed against Tenant's personal property or trade fixtures 8 installed or located in or on the Premises, whether, or not same that 9 become payable during the term of this Lease or while Tenant continues 10 in possession of the Premises.
11 b. Any business, activity or transaction conducted thereon by Tenant. 12 7. LATE PAYMENT.

Rent is delinquent if not paid on or before the 151 13 of the month. If any monthly 14 payment is delinquent for a period of ten (10) days or more, Tenant shall, as to each late 15 payment penalty, pay to Landlord as and for a late payment the sum of ten percent (10%) 16 of the amount due for each and every installment not paid when due, which penalty shall 17 be payable with the delinquent monthly rental payment. Interest shall also accrue on any 18 payment over 30 days late at 10% per annum, compounded monthly. 19 8. PERMITTED AND PROHIBITED USES.
20 PERMITTED USES
21 The Landlord hereby grants to Tenant the exclusive right, license, and privilege, 22 to conduct and operate the restaurant and cocktail lounge in the Watsonville Airport 23 terminal building at 100 Aviation Way during the term of this Lease. Tenant 24 acknowledges and waives any claim(s) it may have resulting from interference with 25 business associated with issuance of permits by the City Council during the annual 26 Watsonville "Fly-In" or other public events at the Airport. 27 PROHIBITED USES.
28 The leased Premises shall not be used any purpose other than a restaurant and 29 cocktail lounge, and specifically not for any of the following purposes:
30 a. Sale of aviation grade fuel, jet fuel, automobile or other fuel. 31 b. Public tie down and hangar services which shall remain the exclusive 32 services of the Landlord. Exhibit "A"

100 Aviation Way Restaurant Lease

1 c. Manufacturing aircraft.
2 d. The operation of a scheduled air cargo service.
3 e. The operation of a "UNICOMM" radio communication system with 4 aircraft.
5 f. The operation of a maintenance or repair service on non-aviation related 6 items, including but not limited to automobiles, motorized vehicles and 7 boats.
8 g. Any other use not expressly allowed in Section 4.0 of this Lease. 9 9. NO SUBORDINATION.
10 Landlord shall not subordinate the fee title to the Premises to any security 11 transaction to enable Tenant to obtain financing for the new improvements. The Premises 12 are now and shall remain free and clear of any liens, encumbrances or other Tenant 13 obligations to third person.
14 10.UTILITIES.
15 Tenant shall pay all water, gas, heat, light, power, telecommunication services, 16 telephone service, garbage disposal, storm and sanitary sewer services, and all other 17 utilities or services supplied to the Premises, including installation and connection of such 18 services from the main source thereof, including City meters, and hold harmless the 19 Landlord therefor. Any failure to pay City of Watsonville municipal utility charges when 20 due shall be a material breach of this Lease.
21 The Landlord will maintain the electric power standby generator in good repair. 22 However, the Landlord assumes no liability for losses of any kind that Tenant may incur 23 for failure of the standby power generator to operate in the event of electrical power 24 disruption from whatever cause.
25 11.ALTERATIONS AND ADDITIONS.
26 Tenant shall not make any alterations or improvements to or erect any additional 27 structures on the Premises without prior written consent of Landlord. Any alterations or 28 additions approved by Landlord shall be constructed at the sole expense of Tenant. Such 29 improvements shall become the property of Landlord at the expiration of thisLease.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 12.COMPLIANCE WITH RULES, REGULATIONS ANDLAWS.
2 In the use and occupancy of the Premises and in the conduct of all business, 3 activities and transactions thereon, Tenant will comply with all applicable laws, 4 ordinances, rules, regulations and orders of the City or any governmental subdivision, 5 body or authority, including all federal, state and municipal laws and ordinances and all 6 rules and regulations of the Federal Aviation Administration and the City of Watsonville 7 rules and regulations concerning the operations of the Watsonville Municipal Airport and 8 environs.
9 13.STORAGE OF MATERIALS ANDEQUIPMENT.
10 No materials, supplies, products, equipment or other personal property, except for 11 vehicles in regular use, shall be stored or permitted to remain on any portion of the 12 Leased Premises outside ofLandlord approved buildings or structures without Landlord's 13 prior written consent. Tenant shall store personal property items, supplies, materials and 14 combustibles inside the buildings in a safe, neat and sanitary manner. Tenant shall 15 provide or cause to be provided adequate enclosures, screened areas and/or suitable 16 covered metal receptacles within the Leased Premises for the short-term accumulation 17 and storage of solid waste, such as rubbish, trash, garbage, and sludge. Such enclosures 18 and/or screened areas shall be designed in such a way as to prevent, odors, fumes, 19 attraction of pests, and dispersal of wastes due to wind or water runoff, and shall be 20 serviced regularly by qualified waste removal and disposal services. 21 14.ENVIRONMENTAL CONSIDERATIONS.
22 WASTE, NUISANCE, DISTURBANCE OF QUIET ENJOYMENT.
23 Tenant shall not commit, or suffer to be committed, any waste upon the Premises, 24 or any nuisance or other act or thing which may disturb the quiet enjoyment of the use of 25 Watsonville Airport or surrounding property. Tenant shall ensure that no untreated liquid 26 waste from any type of operation will enter the airportstorm drainage system or sanitary 27 sewer system.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 RELEASE OF POLLUTANTS; STORAGE OF WASTE.
2 Tenant shall at all times comply with all applicable laws, rules and regulations of 3 federal, state or local governmental agencies, including, but not limited to, the City of 4 Watsonville, Santa Cruz County, Regional Air and Water Quality Control Boards, the 5 Watsonville Airport Storm Water Pollution Prevention Plan in the Airport Minimum 6 Commercial Standards and the laws and regulations of the Federal Aviation 7 Administration. Tenant shall not permit any activity which directly or indirectly produces 8 objectionable or unlawful amounts or levels of air pollution (gases, particulate matter, 9 odors, fumes, smoke, or dust), water pollution, noise, glare, heat emissions, electronic or 10 radio interference with navigational and communication facilities for the operation of the 11 Airport and for its use by aircraft, trash or refuse accumulation, or which is hazardous or 12 dangerous by reason or risk of explosion, fire or harmful emission. 13 HAZARDOUS SUBSTANCES.
14 The term "Hazardous Materials" shall mean any toxic substance, hazardous 15 substance, hazardous material, or hazardous waste, pollutant or contaminant which is or 16 during the term of this Lease becomes regulated by any local governmental authority, the 17 State of California, or the United States government, including, but not limited to any, 18 material or substance which is defined as a "hazardous waste," "extremely hazardous 19 waste" or "restricted hazardous waste" under local, State, or federal law and as 20 determined by the Watsonville Fire Department. Except in strict compliance with all 21 government approvals, applicable laws and regulations pertaining to Hazardous 22 Materials, and in accordance with the provisions of this Lease, Tenant shall not cause or 23 permit the presence, use, handling, generation, emission, release, discharge, storage, or 24 disposal of any Hazardous Materials on, under, in or about the Premises, excepting the 25 presence of any Hazardous Materials on, under, in or about the Premises as of the date 26 of this Lease or the migration to or seepage of Hazardous Materials from surrounding or 27 adjacent property; and shall not cause or permit the transportation of any Hazardous 28 Materials to or from the Premises. Tenant shall at all times notify Landlord of any 29 Hazardous Materials present, used, generated, handled, emitted, released, discharged, 30 stored or disposed of on or from the Premises.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 INDEMNIFICATION BY TENANT.
2 Tenant shall defend, indemnify, protect and hold Landlord and Landlord's elected 3 and appointed officials, successors and assigns, officers, directors, employees, agents, 4 subtenants and assignees, harmless from and against all claims, liability, damages, 5 penalties, expenses and costs of any required or necessary remediation, repair, removal, 6 clean up or detoxification, of the Premises and surrounding properties, and from and 7 against the preparation of any clean up, remediation, closure or other required plans, 8 whether such action is required or necessary during or following the term of this Lease, to 9 the full extent that the same is attributable to the use, handling, generation, emission, 10 release,storage, discharge or disposal of hazardous material byTenant, its agents, 11 employees, and contractors.
12 INDEMNIFICATION SURVIVES LEASE.
13 The indemnification provisions ofthe foregoing shall survive the termination of 14 this Lease.
15 NO WARRANTY OF CURRENT CONDITION.
16 Landlord makes no representation or warranty, express or implied, as to the 17 physical condition of the Premises, including, but not limited to the condition of the air, 18 soil, surface water or groundwater, the geology, the presence of known and unknown 19 faults, the presence of any Hazardous Materials or other kinds of contamination or 20 pollutants of any kind in the air, soil, groundwater or surface water, or the suitability of 21 the Premises for the construction and use of the improvements thereon; except as stated 22 in this Lease, Premises are conveyed in "as is" condition. 23 15.REPAIRS.
24 LANDLORD'S PREMISES OBLIGATIONS.
25 Landlord shall maintain the outside walls and roof of the building except if repair 26 or replacement arises from negligence or misconduct of the Tenant or if Tenant fails to 27 notify Landlord in writing within three (3) days of a need to repair. 28 Landlord shall pay to repair and maintain the heater air conditioner and thermostat 29 control for the Premises.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 Landlord shall provide maintenance services by its own employees at the 2 published rate and schedule, but only if Tenant if completes the on-line maintenance 3 request; i.e. no “Ad hoc” or “on demand requests will be honored with the exceptions of 4 emergencies and then only with approval of Airport management. 5 TENANT’S PREMISES OBLIGATIONS.
6 a. Tenant shall sweep and if necessary, mop the two exterior restaurant 7 building entrances and the entry to the exterior storage area and sweep 8 sidewalks and keep them free of debris.
9 b. Tenant shall keep interior and exterior of Premises windows clean and 10 shall wash all interior and exterior windows no less than twice yearly. 11 c. Tenant shall provide, at no cost to Landlord, sufficient daily ground coffee 12 for Landlord to the Terminal for Landlord to serve to terminal customers. 13 d. Tenant shall secure and lock the Premises and the Terminal Building each 14 evening at close of business, excluding days the Tenant may be closed. 15 e. Tiffany Ella King shall devote sufficient time to manage and operate the 16 restaurant.
17 f. Tenant shall operate a facility serving as a general aviation fly in 18 destination restaurant on the Premises open at least six days a week for at 19 least lunch, afternoons anddinner.
20 g. Tenant shall maintain and repair all interior heating, air conditioning, and 21 interior plumbing, air conditioning and heating ducts and vents, interior 22 walls, doors, hardware, interior electrical, fire and intrusion alarms in as 23 good order, condition and repair as they shall be upon the commencement 24 of the term of this Lease.
25 h. Tenant shall be solely responsible for maintaining and repairing 26 Landlord’s ice machine, walk in refrigerator, oven and stove, Ansul or 27 other stove hood fire suppression system and
28 i. Tenant shall keep concrete drainage swales, rain gutters and downspouts 29 on the premises free from debris.
30 16.MAINTENANCE INSPECTIONS
31 Landlord may, but is not required, to inspect the Premises at least quarterly to be 32 informed about the condition of the Premises and to determine if tenant is complying 33 with Tenant’s Premises inspection obligations.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 17.FREEDOM FROMLIENS.
2 Tenant shall not create or permit to be created or to remain, and covenants to 3 remove and discharge promptly, at its cost and expense, all liens, claims, stop notices, 4 encumbrances and charges upon the Premises, or Tenant's leasehold interest therein 5 which arise out of the use or occupancy of the Premises byTenant or anyone using or 6 occupying the Premises with the consent or sufferance of Tenant, or by reason of labor or 7 materials furnished or claimed to have been furnished to Tenant for any construction, 8 alteration, addition or repair of any part of the Premises. Tenant shall give Landlord 9 fifteen (15) days’ notice prior to commencing any work on the Premises, so that 10 Landlord shall have a reasonable time within which to post notices of non-responsibility. 11 18.HOLDING OVER.
12 If Tenant shall hold possession of the Premises after the term of this Lease, Tenant 13 shall become a Tenant from month to month at the rental and upon the terms herein 14 specified and shall continue to be such tenant until the tenancy shall be terminated by 15 Landlord on thirty (30) days-notice or until Tenant shall have given at least thirty (30) 16 days-notice of Tenant's intention to terminate the tenancy. The provision of this Lease, so 17 far as applicable, shall govern such tenancy, except that the monthly rent for such tenancy 18 shall be the same as the last full month's rental rate. 19 19.ABANDONMENT.
20 Tenant shall not vacate or abandon the Premises at any time during the term 21 thereof. If Tenant shall abandon, vacate or surrender the Premises or be dispossessed by 22 process of law, or otherwise, any personal property belonging to Tenant and left on the 23 Premises shall be deemed to be abandoned and at the option of Landlord shall become 24 Landlord's property free from all claims of Tenant. If Tenant abandons the Premises 25 Landlord shall have the option to terminate this Lease by giving Tenant notice of belief of 26 abandonment pursuant to California Civil Code Section 1951.3 or Landlord has the 27 remedy described in California Civil Code Section 1951.4, i.e., Landlord may continue 28 the Lease after breach and abandonment and recover rent as it becomes due. 29 20.ASSIGNMENT OR SUBLETTING.
30 Tenant has the right to sublet or assign, subject to reasonable limitations as 31 provided in this Section.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 RESTRICTION AGAINST ASSIGNMENT.
2 Tenant shall not assign or encumber any interest in this Lease or in the Leased 3 Premises, or sublease all or any part of the Premises, or allow any other person or entity 4 (except Tenant's authorized representatives) to occupy or use all or any part of the 5 Premises, without Landlord's prior written consent, and consent to one assignment or 6 sublease shall not be construed as consent to any subsequent assignment orsubleasing. 7 VOLUNTARY ASSIGNMENT.
8 If Tenant is a corporation or partnership, any dissolution, merger, consolidation or 9 other reorganization of Tenant or the sale or transfer of controlling percentage of the 10 capital stock of Tenant or the sale of twenty-five percent (25%) of the value of the assets 11 of Tenant shall be deemed a voluntary assignment. The phrase "controlling percentage" 12 means the ownership of and the right to vote stock possessing at least twenty-five percent 13 (25%) of the total combined voting power of all classes of Tenant's capital stock issued 14 outstanding and entitled to vote for the election of directors. 15 CONSENT BY LANDLORD.
16 Landlord shall have the sole and unfettered discretion to approve or reject any 17 sub-lease or assignment. Landlord may condition consent upon such factors as the 18 identity, reputation, financial worth and stability and operating ability of any proposed 19 assignee or subtenant. If the Premises are sublet to any person with the permission of 20 Landlord, one hundred percent (100%) of any incremental leasing profits shall accrue to 21 Landlord. Unless prior written consent of Landlord shall have been obtained, any 22 transfer, or attempted assignment or transfer, of this Lease or any interest therein, or any 23 subletting, either by voluntary or involuntary act of Tenant or by operation of law or 24 otherwise, shall at the option of the Landlord terminate this Lease, and any such 25 purported assignment, transfer or subletting without such consent shall be null andvoid. 26 PROCEDURE FOR OBTAINING APPROVAL FOR ASSIGNMENT.
27 Tenant shall not have the right to assign this Lease, except by Leasehold 28 mortgage, without the prior written consent of Landlord. If Tenant desires to assign the 29 Lease, Tenant shall comply with the following procedures:
30 Tenant shall give Landlord at least sixty (60) days prior written notice of its 31 desire to assign the Lease.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 Tenant shall simultaneously provide Landlord with the assignee's name, business 2 organization, financial statement, and other documentation as may be requested by 3 Landlord.
4 Tenant shall provide Landlord with a true copy of the proposed assignment and 5 the proposed assignee shall, expressly assume all the covenants and conditions of this 6 Lease.
7 Tenant shall pay Landlord at the time the request to assign is submitted, a deposit 8 of FIVE THOUSAND AND N0/100 DOLLARS ($5,000.00) against Landlord's 9 expenses, including attorney's fee, in evaluating and documenting the assignment. 10 Landlord shall charge againstsaid deposit at the then current hourly rate for staff time. 11 Any balance of said deposit shall be refunded to Tenant, and any excess amount charged, 12 excluding said deposit, shall be paid by Tenant as a condition precedent for approval of 13 any assignment.
14 Landlord and Tenant hereby deem it reasonable for the Landlord to refuse to 15 consent to a proposed assignment in the following circumstances:
16 Landlord may object to any proposed assignment if, in the Landlord's sole and 17 unfettered opinion, the proposed assignee is not a qualified assignee in terms of financial 18 strength, business experience, restaurant style or ambiance, reputation or the ability to 19 operate the food establishment and provide the required services in a manner consistent 20 with the purposes for which this Lease was granted.
21 Landlord may object on any other grounds.
22 COMMENCEMENT DATE OF ASSIGNMENT - LANDLORD'SDISAPPROVAL. 23 The effective date of the assignment shall not occur until sixty (60) days after the 24 Tenant's notice of the proposed assignment unless, within that time, Landlord gives 25 notice of a valid objection or refusal of consent as set forth in subsection 17.4.a. hereof. 26 If Landlord gives notice of a valid objection and withholds consent, the Lease will not be 27 assigned.
28 21.SUBLETTING.
29 Not allowed under the terms of this Lease except as specifically authorized, and 30 then only if one hundred percent (100%) of any leasing profits are assigned and paid to 31 Landlord rather than Tenant.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 22.SIGNS, POSTERS, BUILDINGS AND TOWERS.
2 No advertising signs, posters or similar devices shall be erected, displayed or 3 maintained in, on, about or above the Premises or the structures thereon without a sign 4 permit and the prior written approval ofthe Airport Manager. 5 23.TOWERS OR STRUCTURES.
6 No towers or structures erected on the Premises. Tenant in its operations shall not 7 unreasonably interfere with the property, interests, operations or activities of the 8 Landlord or of other tenants of the Landlord. Tenant shall not be permitted to operate 9 any radio transmitting devices inor about the Premises. 10 24.WAIVER OFDAMAGES AND INDEMNIFICATION.
11 Landlord shall not be liable to Tenant for any injury or damage that may 12 result to any person or property by or from any cause whatsoever, except as results from 13 acts of the sole negligence on thepart of Landlord, its agents, servants, employees or 14 invitees. Without limiting the generality of the foregoing waiver, it is expressly extended 15 to injury or damage caused by water leakage of any character from the roof(s), wall(s), 16 basement or any part of the property, or caused by gas, oil, electricity or any other cause 17 in or about the Premises or the building(s). Tenant agrees to defend, indemnify and hold 18 Landlord harmless from and against, any and all claims or liability for any death of for 19 injury to any person or damage to any property, whatsoever, occurring in, on or about 20 the Premises.
21 25.PAYMENT OF RENT AND SERVICES.
22 Notwithstanding any other provision of this Lease, all rents shall be paid to City of 23 Watsonville, c/o Finance Department, by delivering or mailing to the address provided 24 herein.

CityofWatsonville
Accounts Payable
250 Main Street
Watsonville, CA95076
Exhibit "A"

100 Aviation Way Restaurant Lease

1 26.SECURITY DEPOSIT.
2 Tenant shall furnish a good and sufficient surety, Certificate of Deposit or 3 assignment for security of a deposit account, in a form satisfactory to the City Attorney. 4 The sum shall be not less than Two Thousand Three Hundred Dollars ($2,700.00), and 5 shall guarantee faithful performance of this Lease, and any other financial obligation of 6 Tenant to Landlord, by Tenant, it being understood that at all times during the term of 7 this Lease such obligation, must be in full force and effect. Any interest that may accrue 8 from the ownership of such security deposit will accrue and be paid to the owners of 9 the security providing the tenant is not then in default of any term of this Lease. The 10 Tenant shall be responsible for any fees associated with complying with this section, the 11 Personal Property Security Agreement, being executed simultaneously, and City Utility 12 Fees.
13 HOLD HARMLESS & INDEMNIFICATION.
14 Tenant shall save, protect, indemnify, and hold Landlord, its elective and 15 appointive boards, commissions, officers, agents, and employees harmless from any and 16 all claims, cost or liability of any kind allegedly suffered, incurred or threatened, 17 including personal injury, death, property damage, inverse condemnation, or any 18 combination of these, foreseeable or unforeseeable, arising directly or indirectly from or 19 connected with any acts performed pursuant to this Lease, or any omission to perform, 20 including, but not limited to, claims, costs or liability resulting from: (1) The conduct, 21 negligent or otherwise, of Tenant, its subtenant(s), assignee(s), or any officer(s), agent(s) 22 or employee(s) of one or more of them; (2) The joint conduct of the Landlord and 23 Tenant, regardless of whether the Landlord is concurrently, active or passively negligent 24 or not negligent at all; or (3) The sole concurrent conduct of any other person or 25 entity. The indemnification provisions of the foregoing shallsurvive the termination of 26 this Lease.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 27.NON-LIABILITY OF LANDLORD FOR DAMAGES.
2 This Lease is made upon the express condition that Landlord isto be free from all 3 liability and claim for damages by reason of any injury to any person or persons 4 including, Tenant, or property of any kind whatsoever and to whomsoever belonging, 5 including Tenant, from any cause or causes whatsoever while in, upon, or in any way 6 connected with the Premises during the term of this Lease or any extension hereof or any 7 occupancy hereunder, Tenant hereby covenanting and agreeing to indemnify and save 8 harmless Landlord from all liability, loss, cost, attorneys fees, and obligations on 9 account of or arising out of any such injuries or losses however occurring. The hold 10 harmless provisions of the foregoing shallsurvive the termination of this Lease 11 28.INSURANCE.
12 GENERAL LIABILITY LIABILITY POLICY.
13 During the Lease term, Tenant shall, at its own expense, maintain in full force a 14 policy or policies of commercial liability insurance, including property damage, written 15 by one or more responsible insurance companies licensed to do business in California, 16 and in good standing with the Insurance Commissioner of California, that will insure 17 Tenant and Landlord as named insured (and such other persons, firms or corporations 18 as are designated by Landlord) against liability for injury to persons and property and 19 for death of any person or persons occurring in or about the Premises. The liability under 20 such insurance shall not be less than One Million Dollars ($1,000,000.00) bodily injury 21 and OneHundred Thousand Dollars($100,000.00) for property damage. 22 EVIDENCE OF INSURANCE.
23 Tenant shall provide Landlord with endorsements naming Landlord as an 24 additional insured in a form acceptable to the City Attorney and all policies required 25 hereunder, including in each instance a certificate providing that such insurance shall not 26 be canceled or terminated except after thirty (30) days written notice toLandlord. 27 WAIVER OF SUBROGATION.
28 Landlord hereby releases Tenant, and Tenant hereby releases Landlord, from any 29 and all claims or demands for damages, loss, expense or injury to the Premises, or to the 30 improvements, fixtures and equipment, or personal property or other property of either 31 Landlord or Tenant in, about or upon the Premises adjoining property as the case may be, 32 which is caused by or results from perils, events or happening which are the subject of 33 insurance carried by the respective parties and in force at the time of any suchloss. Exhibit "A"

100 Aviation Way Restaurant Lease

1 SURRENDER OF PREMISES.
2 Tenant agrees to surrender the Premises and any addition thereto at the 3 termination of the tenancy (including any shortened tenancy after financial reviews) 4 herein created in the same condition as the Premises were in at the beginning of the 5 tenancy or at the time of completion of the improvements as the case may be, reasonable 6 use and wear thereof and damage by act of God or the elements excepted. 7 29.EQUIPMENT AND SUPPLIES.
8 Tenant agrees, at his own expense, to furnish all equipment and supplies 9 necessary for the operation of the restaurant cocktail lounge. Title to such equipment 10 supplied by the Tenant shall remain in him. However, upon termination or expiration of 11 this Lease, any extension thereof, or if Tenant does not sell or assign this restaurant 12 cocktail facility to a successful buyer approved by the Landlord, Landlord shall have the 13 option to purchase same from Tenant at its fair market value to be established by an 14 independent and reputable restaurant equipment firm to be selected mutually by the 15 Tenant and the Landlord. Attached equipment shall become the property of the Landlord 16 upon expiration or termination of this Lease.
17 30.CLOSURE OF AIRPORT IN AN EMERGENCY.
18 During any period when the Airport shall be closed or civil aircraft grounded by 19 any lawful authority restricting the use of the Airport or civil aircraft in such a manner as 20 to interfere substantially with the use of the Premises by Tenant, the rent payable under 21 this Lease shall abate, and the period of such closure at the option of Tenant shall be 22 added to the term of this Lease. During the time of war or national emergency, Landlord 23 shall have the right to lease or lend the landing area of the Airport, or any part thereof, to 24 the United States Government or State government for military or naval use, and if such 25 lease or lending is executed and the use thereunder interferes substantially with the use of 26 the Premises by Tenant, the rentshall abate, and this Lease shall be suspended or 27 terminated.
28 31.RESERVATION OF RIGHT.
29 Landlord reserves the right, but shall not be obligated to maintain and keep in 30 repair the landing area of the Airport and all publicly owned facilities at the Airport, 31 together with the right to direct and control all activities of Tenant in this regard.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 32.RIGHT OF LANDLORD TO ENTER FOR INSPECTION.
2 Landlord shall have the right to enter upon the Premises at all reasonable times 3 during the term of this Lease for the purpose of making any inspection it may deem 4 expedient to the proper enforcement of this Lease.
5 33.NONDISCRIMINATION.
6 Tenant hereby covenants that Tenant in its use of the Premises and any and 7 all structures, buildings and improvements located hereon shall conduct the fixed base 8 operation or any other activity hereafter authorized by the Landlord on the Premises on a 9 non-exclusive and non-discriminatory basis in all respects with regard to any person, firm 10 or group of persons. Tenant shall not act in any manner prohibited by Part 15 of the 11 Federal Aviation Regulations and further agrees to be nondiscriminatory also with respect 12 to price or cost of services or goods and in every other fashion. 13 34.ENFORCEMENTOFNONDISCRIMINATION CLAUSE.
14 Landlord shall have the right to take such action against the Tenant as the United 15 States Government may direct or request to enforce the terms of the preceding 16 paragraph on behalf of the United States Government or on behalf of any of its citizens 17 or the Landlord itself.
18 35.NONDISCRIMINATION/FAA, MBE (DBE REQUIREMENTS
19 DISCRIMINATION PROHIBITED
20 The Tenant, for itself, its heirs, personal representatives, successors in interest, and 21 assigns, as a part of the consideration for this Lease, does hereby covenant and agree as a 22 covenant running with the land that if facilities are constructed, maintained, or otherwise 23 operated on the Premises for a purpose for which a Department of Transportation (DOT) 24 program or activity is extended or for another purpose involving the provision of similar 25 services or benefits, the Tenant shall maintain and operate such facilities and services in 26 compliance with all other requirements imposed pursuant to Title 49, Code of Federal 27 Regulations, DOT, Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in 28 Federally- Assisted Programs of the Department of Transportation-Effectuation of Title 29 VI of the Civil Rights Act of 1964, and assuch Regulations may be amended.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 The Tenant for itself, its personal representatives, successors in interest, and 2 assigns, as a part of the consideration hereof, does hereby further covenant and agree as a 3 covenant running with theland that: (a) no person on the grounds of race, color or 4 national origin shall be excluded from participation in, denied the benefits of, or be 5 otherwise subjected to discrimination in the use of facilities; (b) that in the construction 6 of any improvements on, over, or under such land and the furnishing of services thereon, 7 no person on the grounds of race, color, or national origin shall be excluded from 8 participation in, denied the benefits of, or otherwise be subject to discrimination; that the 9 Tenant shall use the Premises in compliance with all other requirements imposed by or 10 pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle 11 A, Office of the Secretary, Part 21, Nondiscrimination in Federally- Assisted Programs of 12 the Department of Transportation-Effectuation of Title VI of the Civil Rights Act of 13 1964, and assuch Regulations may be amended.
14 Tenant shall furnish its accommodations and/or services on a fair, equal and not 15 unjustly discriminatory basisto all users thereof and itshall charge fair,reasonable and not 16 unjustly discriminatory prices for each unit or service; PROVIDED, THAT the Tenant 17 may be allowed to make reasonable and nondiscriminatory discounts, rebates or other 18 similar type of price reductionsto volume purchasers. 19 Tenant shall insert the provisions of this section in any Lease agreement or 20 contract by which Tenant grants a right of privilege to any person, firm or corporation 21 to render accommodations and/or services to the public on the Premises. 22 REMEDY FOR DISCRIMINATION.
23 Upon of breach of any of the nondiscrimination covenants identified in Paragraph 24 30, Landlord shall have the right to terminate this Lease and to reenter and repossess the 25 Premises and the facilities thereon, and hold the same as if this Lease had never been 26 made or issued. The provision does not become effective until the procedures of 49 CFR 27 Part 21 are followed and completed including expiration of appealrights. 28 Non-compliance with Paragraph 30 shall constitute a material breach thereof and 29 if such Non-compliance Landlord shall have the right to terminate this Lease and the 30 estate hereby created without liability therefore or at the election of the Landlord or the 31 United States either or both Governments shall have the right to judicially enforces 32 Paragraph 30.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 36.AFFIRMATIVE ACTION.
2 Tenant assures that it will undertake an affirmative action program as required by 3 14 CFR Part 152, Subpart E, to insure that no personal shall be on the grounds of race, 4 creed, color, national origin, or sex be excluded from participating in any employment 5 activities covered in 14 CFR, Subpart E. Tenant assures that no person shall be excluded 6 on these grounds from participating in or receiving the services or benefits of any 7 program or activity covered by such subpart. Tenant assures that it will require that its 8 covered by such subpart. Tenant assures that it will require that its covered 9 suborganizations provide assurances to the Tenant that they similarly will undertake 10 affirmative action programs and that they will require assurances from their 11 suborganizations, as provided by 14 CFR Part 152,subpart 2, to the same effect. 12 37.SUBORDINATION TOFUTUREFAAAGREEMENTS.
13 This Lease shall be subordinate to the provisions and requirements of any 14 existing or future agreement between the Landlord and the United States, relative to the 15 development, operation or maintenance ofthe Airport. 16 38.NOTICETOFEDERALAVIATIONADMINISTRATION.
17 Tenant shall comply with the notification and review requirements covered in Part 18 77 of the Federal Aviation Regulations in the event of future construction of a building 19 planned for the Premises, or in the event of any planned modification or alteration of any 20 present or future building or structure situated on the Premises. 21 39.NON-EXCLUSIVE RIGHT.
22 It is understood and agreed that nothing herein contained shall be construed to 23 grant or authorize the granting of an exclusive right within the meaning of Section 308 of 24 the Federal Aviation Act.
25 40.DAMAGE OR DESTRUCTION.
26 If the Premises shall be damaged by fire, earthquake, the elements or other 27 casualty whether or not covered by insurance and whether or not such damage may be 28 repaired, reconstructed or restored, Tenant shall promptly commence the work or repair, 29 reconstruction and restoration, and shall diligently prosecute the same to completion at 30 Tenant's expense. During this period or time, this Lease shall continue in full force and 31 effect.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 41.CONDEMNATION.
2 Should the whole or any part of the Premises be condemned and taken by any 3 competent authority for any public or quasi-public use or purpose, or should Landlord 4 make a conveyance in lieu thereof, all awards payable on account of such condemnation 5 and taking or conveyance shall be payable to Landlord, and Tenant hereby waive all 6 interest in or claim to said awards, or any part thereof. Tenant shall be entitled, however, 7 to any award based upon the taking of or damage to Tenant's trade fixtures and 8 improvement to the Premises to the extent Tenant has the right to remove them at the 9 end of the LeaseTerm.
10 Ifthe whole of the Premises of the Premises shall be so condemned and taken or 11 conveyed, then this Lease shall terminate.
12 If a part only of the Premises is so condemned and taken or conveyed, and the 13 remaining portion thereof is not suitable for the purpose for which Tenant has leased said 14 Premises, Tenant shall have the right to terminate this Lease. If by such condemnation 15 and taking only a part of the Premises, and the remaining part thereof issuitable for the 16 purposes for which Tenant has leased said Premises, this Lease shall continue, but the 17 rental shall be reduced in an amount proportionate to the value of the portion taken as it 18 relates to the total value of the Premises or the Premises may be relocated on the same 19 site depicted on Exhibit "A."
20 42.DEFAULT AND REMEDIES.
21 The occurrence of any one or more of the following events shall constitute a 22 material default and breach of this Lease byTenant:
23 BANKRUPTCY AND INSOLVENCY.
24 The filing or commencement of any proceeding by or against Tenant under the 25 Federal Bankruptcy Code whether voluntary or involuntary, if not dismissed within sixty 26 (60) days from the date of filing, shall constitute a default under this Lease. 27 RECEIVERSHIP.
28 Either the appointment of a receiver to take possession of all, or substantially all, 29 of the assets of any Tenant or garnishment of or levy or writ of execution on, all or 30 substantially all of the assets of any Tenant which remain in effect for more than sixty 31 (60) days, or a general assignment by any Tenant for the benefit of creditors, shall constitute a 32 breach of this Lease by Tenant.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 VACATION OR ABANDONMENT.
2 The vacating or abandonment of the Premises by Tenant (which shall be 3 conclusively presumed in Tenant leaves the Premises closed or unoccupied 4 continuously for fifteen (15) days.
5 FAILURE TO PAY RENT.
6 The failure by Tenant to make any payment of rent or any other payment 7 required to be made by Tenant hereunder as and when due and after five (5) days 8 written notice to Tenant by Landlord to pay same.
9 FAILURE TO PERFORM COVENANT OR SATISFY CONDITIONS.
10 The failure by Tenant to observe or perform any of the covenant, conditions or 11 provision of this Lease to be observed or performed by Tenant above, where such failure 12 shall continue for a period ofthirty (30) days after written notice thereof from 13 Landlord to Tenant.
14 FAILURE TO PAY VENDORS
15 Failure to pay Tenant's vendors and public utilities on agreed terms. 16 FAILURE TO PAY FOR CITY UTILITIES OR GARBAGE SERVICES. 17 The failure by Tenant to pay City utilities or service fees when due. 18 FAILURE TO PAY TAXES.
19 The failure byTenant to pay taxing agency applicable taxes described herein 20 when due.
21 43.REMEDIES.
22 Upon any such material default or breach by Tenant, Landlord may at any time 23 thereafter, with or without notice or demand and without limiting Landlord in the 24 exercise of any right or remedy which Landlord may have by reason or such default or 25 breach take advantage of the remediesset forth below.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 CONTRACT REMEDIES.
2 Terminate Tenants right to possession of the Premises by any lawful means, 3 in which case this Lease shall terminate and Tenant shall immediately surrender 4 possession of the Premise to Landlord. In such event, Landlord shall be entitled to 5 recover from Tenant all damages incurred by Landlord by reason of Tenant's default, 6 including, but not limited to expenses of reletting, reasonable attorney's fees, and any 7 real estate commission actually paid; the worth at the time of award by a court having 8 jurisdiction of unpaid rent which had been reasonably avoided; the worth at the time of 9 such award of the amount by which the unpaid rent for the balance of the term after the 10 time of cash award exceeds the amount of such rental loss that the Tenant proves could 11 be reasonably avoided; and the portion of any real estate commission payable by 12 Landlord applicable to the unexpired term of this Lease. Unpaid installment of rent or 13 other sums shall bear interest from the date due at the rate of ten percent (10%) per 14 annum, compounded monthly. If Tenant shall have abandoned the Premises, Landlord 15 shall have the option of:
16 • retaking possession of the Premises and recovering from Tenant the 17 amount specified in this Section or
18 • proceeding against Tenant as set forth in this Section. For purposes of this 19 Section, the term "worth at the time of such award" shall have the meaning 20 provided in Section 1951.2(b) of the California Civil Code. 21 • apply the Security Deposit described in Section to pay damages to which 22 Landlord may be entitled.
23 STATUTORY REMEDIES.
24 Landlord shall have all the remedies provided in Section 1951.4 of the California 25 Civil Code, including the right to maintain Tenant's right to possession, in which case 26 this Lease shall continue in effect whether or not Tenant shall have abandoned the 27 Premises. In such event, Landlord shall be entitled to enforce all of Landlord's rights and 28 remedies under this Lease, including the right to recover the rent as it becomes due 29 hereunder.
30 OTHER REMEDIES.
31 Landlord may also pursue any other remedy now or hereafter available to 32 Landlord under the laws orjudicial decisions of the State of California.

Exhibit "A"

100 Aviation Way Restaurant Lease

1 Should Tenant default, Landlord shall, at its option, be entitled to remove any 2 property of Tenant from the Premises and store the same elsewhere for the account, and at 3 expense and risk, of Tenant and should Tenant fail to pay the cost of storing any such 4 property after it has been stored for a period of ninety (90) days or more, Landlord, after 5 ten (10) days' written notice to Tenant and Tenants failure to pay the required amount, 6 may sell any or all of such property at public or private sale, in such manner and all such 7 times and places as Landlord, in its sole discretion, may deem proper, for the 8 payment of any charges for the removal, storage and sale of such property and shall 9 apply the proceeds of such sale: first, to the cost and expense of such sale: first, to the 10 cost and expense of incurred; second, to the payment of the cost of or charges for 11 removing and storing any such property; third, to the payment of any other sums of 12 money which may then or thereafter be due to Landlord from Tenant under any of the 13 terms hereof; and fourth, the balance, if any, to Tenant. 14 Tenant hereby waive all claims for damages that may be caused by Landlord's 15 re-entering and taking possession of the Premises, of removing and storing the property of 16 Tenant as hereby provide, and will hold Landlord harmless from loss, costs or damages 17 occasioned thereby, and no such re-entry shall be considered or construed to be a forcible 18 entry.
19 44.ATTORNEY'S FEES.
20 If suit is brought to enforce or interpret any part of this Lease, the prevailing party 21 shall be entitled to recover as an element of costs of suit, and not as damages, a 22 reasonable attorney's fee to be fixed by the court. The "prevailing party" shall be the 23 party who is entitled to recover his costs of suit, whether or not the suit proceeds to final 24 judgment. A party not entitle to recover his costs shall not recover attorney's fees. No sum 25 for attorney's fees shall be counted in calculating the amount of a judgment for purposes 26 of determining whether a party is entitle to recover his costs of attorney's fees. 27 28 IN WITNESS WHEREOF, the parties hereto have executed this Lease the 29 day and year first above written.
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Exhibit "A"

Exhibit "A"

Exhibit "A"

7/9/2021 City of Watsonville Mail - Lease renewal - EATA, Inc. https://mail.google.com/mail/u/0?ik=0127c6aa78&view=pt&search=all&permthid=thread-f%3A1700202427174411908%7Cmsg-f%3A17002024271744… 1/1 Rayvon Williams <[email protected]> Lease renewal - EATA, Inc.
1 message
T. Ella King <[email protected]> Wed, May 19, 2021 at 8:49 AM To: Rayvon Williams <[email protected]>, Alexandra Aguado <[email protected]>, Sergio Angeles <[email protected]>
Hello Rayvon,
Please find this email as official notice that we intend to renew our lease at 100 Aviation Way.

I did not see an email come over concerning it but wanted to confirm that we are going to be exercising the extension option.

We will look for the renewal from you folks.

Thank you,
T. Ella King
Exhibit "B"

Airport Memo
Date: 9/30/2021
To: Matt Huffaker, City Manager
Fr: Rayvon Williams, Airport Director
Subj: Proposed purchaser of Ella’s at the Airport by Chielo Apac d/b/a Nancy’s Airport Cafe Cushman Wakefield’s Reuben Helick has been helpful in bringing the Municipal Airport and Ella’sat-the-Airport to terms regarding lease renewal. On September 20th Reuben informed the Airport that EATA had discovered a potential purchaser for the restaurant business.

Reuben’s initial review of the information provided to Ella, by Ms. Apac, noted that the airport’s desire to: (a) confirm financial standing commensurate with current leasehold (P&L performance and Balance Sheet, Reasonable capital base and “Good” credit), (b) determine Experiential base (Demonstrated track record and success) and (c) obtain a cogent well-stated Business Plan.

Based on a review of the information there are a number of “Red Flags” lead the airport to pass on this offer and continue to task Reuben to shop for alternatives. (Note: The Municipal Airport has independently been communicating with other airports for alternatives). At a high level there are three areas that cause the airport to take a “Pass” on Ms. Apac. These are Financial, Experience and Management.

FINANCIAL
A review of the submitted P&L by Ms. Apac is questionable on at least two fronts. First is the we find it difficult to believe a document would be submitted with the items highlighted in the attached and second a review of the metrics is questionable.

Data present is for a nine-month, two-week period (Jan 1, 2021 to Sept 14, 2021) Adjusted sales for food for the period: $
Approximately monthly average $
Average Sales per day $
Points of Concern based on P&L

1. Cost of food is about 29% which is below standard for the menu price points and the protein heavy selections. Industry ratios would estimate this to be somewhere in the 37% to 39% range. Concern: Understating food cost.

2. Labor cost is 21.4% of food sales but with a minimum staff and an hourly rate of $15 the number should be closer to 40%. Concern: Understating labor cost.

3. Top line revenue shows an additional $ in “uncategorized” income? From where?

4. A bottom-line expense of $ with an “Ask my accountant.” as an explanation? Points of Concern based on BALANCE SHEET

1. Additional Paid in Capital of $ followed by…

2. A Shareholder distribution of $
Overall, reviewing a restaurant balance sheet should allow us to simultaneously verify the accuracy of a profit and loss statement while getting a more holistic view of the restaurant’s financial health. With the presented data we just can’t do that.

Exhibit "C"

Airport Memo

EXPERIENCE
Chielo D. Apac
Her resume lists several hourly and part-time management positions in the Sacramento area. The level of the positions is not commensurate with her listed qualifications.

Her dates of employment have overlaps, sometimes for years.

One of her positions was 7 years at Lido Café in Sacramento which was just fined $160,000 for overtime violations, they immediately paid the fine. It’s important to note Ms. Apac was not employed at the time of the violation.

Chef John Pigott
John’s resume shows 21 years with the Levy Restaurant Group in various southern California locations. His resume currently states he has been employed by a Los Angeles restaurant for at least a year before Nancy’s Airprot Café opened?
We would question his departure from that career to work in a new facility that is at least 200 miles away. Interestingly his resume also lists his address as New Milford, N.J.

MANAGEMENT
Neither Ms. Apac nor Mr. Pigott have experience managing a full-time restaurant vs a diner or café.

Neither Ms. Apac nor Mr. Pigott have experience managing a full California ABC certificated 47 License.

Under “Management Team/Qualifications” of the submitted business plan there is not clearly defined experience base that give confidence both Apace and Pigott have communicated how their respective skill set can make EATA a continued success.

Conversation with the Willows Public Works interim Director did not result in a level of confidence that Ms. Apac could operate two restaurants that are 200 miles apart.

SUMMARY
In summary we find that this fourth attempt to sell EATA, while a more complete package, still does not meet the best interest of the Municipal Airport. From potential purchasers who were competent, but not personally “liked”, to potential purchasers who had the talent but could not come up with the funding, to potential purchasers who had the funding but had no relevant experience we have yet another potential who has questionable financial reporting and not the level of experience we think is required for the airport restaurant.

Our recommendation is we express appreciation for the interest but at this time don’t find Nancy’s Airport Café a good fit. As a next step we will direct current interested parties, whom the airport has contacted, to contact EATA.

Exhibit "C"

Airport Memo
Date: November 12, 2021
To: Watsonville City Council, Matt Huffaker, City Manager, Ella King and Sergio Angeles Fr: Rayvon Williams, Airport Director
Subj: Ella’s at the Airport Lease Status and Recommendation This is a summary of the lease history of Tiffany Ella King and Sergio Angeles dba “Ella’s at the Airport”. 2017 EATA LEASE BACKGROUND
(1) The now expired four-year lease (Reso 167-17) was with Tiffany Ella King and Sergio Angeles (Ella and Sergio) doing business as Ella’s at the Airport (EATA) (2) The lease includes a clause allowing assignment of the lease (and sale of the restaurant business) if certain conditions are satisfied. See Exhibit 1.
(3) Ella and Sergio have had EATA for sale at least since March 2019. (4) Ella and Sergio actively marketed the sale of the EATA furniture, fixtures, equipment and good will and assignment of the lease from March 2019 until September 2020 WINTER 2020 SBDC ENGAGEMENT
The Airport contacted the Santa Cruz Small Business Development Center (SBDC) to assist Ella and Sergio to sell EATA and satisfy assignment conditions. (SBDC had assisted in evaluating and bringing EATA to the Airport in 2014) SBDC, Ella, Sergio and the Airport agreed to: (a) develop an “Assignment Checklist” (See Exhibit 2) and (b) to have SBDC develop a “Plan of Action” to market EATA for sale.

OTHER AIRPORT LEASES
Several Airport leases expired in early 2021, leases with options required the tenant to notify the Airport so the Airport could plan ahead. Several tenants notified the Airport that they intended to exercise their option. Ella and Sergio did not notify the Airport until after the deadline to provide notice. (Exhibit 3). The Airport replied as provided in Exhibit 4. For a number of reasons, the Airport engaged an experienced commercial real estate broker (Reuben Helick) to negotiate with Ella and Sergio. By mid-August 2021 Mr. Helick was under contract and began negotiations.

LEASE NEGOTIATIONS
After much discussion the Airport (represented by the Broker) and Ella and Sergio negotiated a new lease with the goal of presenting to the City Council by October 31, 2021. Agreement was reached by mid-September as set forth in Exhibit 5. The term sheet was signed in mid-September and the Airport began to prepare a revised lease as agreed.

INTERESTED BUYER
On September 20, 2021, Mr. Helick informed the Airport that Ella and Sergio had engaged a Broker to sell EATA and had identified a purchaser who operated a small restaurant at the Willows-Glenn County Airport. (Willows-Glenn is 86 miles northwest of Sacramento just off Interstate 5, with 35 based aircraft, 20,000 annual operations and a nearby population of 7,000.) (1) Ella and Sergio’s broker completed the assignment Checklist and forwarded it to the Airport.

The Airport immediately forwarded the assignment checklist to SBDC for review and contacted Willows-Glenn Airport for an initial discussion. Someone said that someone spoke to the “Willows-Glenn Airport Manager'' and said the Manager confirmed the restaurant there was a successful general aviation airport restaurant. The City contacted the Willows-Glenn Airport Exhibit "D"

Airport Memo
and learned there is no current Willows-Glenn airport manager, but the airport is “supervised” by the Interim City Manager.
(2) The Interim City Manager said she had no experience with airports but did confirm the proposed buyer-assignee was a “good tenant”, had an established clientele and apparently successful airport "diner".

REVIEW OF WILLOWS-GLENN COUNTY CHECKLIST
Watsonville Airport management then contacted SBDC to review proposed buyer documents. After an Airport and SBDC review of documents including analysis of the buyer’s Balance Sheet, Income and Expense Statement, income tax returns, a comparison to industry quick ratios and assessment of resumes, Watsonville Airport management forwarded a memo to the City Manager recommending not approving a purchase and assignment by the Willows-Glenn operator. “Our recommendation is we express appreciation for the interest but at this time don’t find Nancy’s Airport Café a good fit. As a next step we will direct current interested parties, whom the Airport has contacted, to contact Ella and Sergio.

See Exhibit 6.

OUTREACH FROM EATA BROKER
The Airport told Ella and Sergio’s Broker the reasons why the Willows-Glenn County operator was not acceptable. Sergio and Ella’s broker requested reconsideration of the Willows-Glenn potential purchaser. He said the City’s finding of inadequate experience and financial strength were unwarranted, but did not include any additional information. Airport told Ella and Sergio’s broker to seek out buyers for EATA before the lease expired.

OTHER INTERESTED BUYERS
Two other buyers expressed interest in purchasing EATA: “Elevation LVK” (an on-field restaurant at Livermore Municipal Airport) and “The Fish House'', an established off-field Watsonville restaurant.

Principals from Elevation LVK visited the Airport and EATA on September 28. Shortly thereafter principals from the Fish House came forward. Both potential buyers were referred to Ella and Sergio’s broker and at least one contacted Ella and Sergio before the lease expired on October 31, 2021.

In early October 2021, Elevation LVK informed Airport management that EATA did not complement their business model and LVK would not make an offer. The owners of the Fish House expressed continued interest but apparently could not get the interest of Ella and Sergio or their broker.

Shortly thereafter, Airport management received the following message from Mr. Helick:
“Hi Rayvon, Thank you for the voice message this morning. Yes, Ella King was updated by email Wednesday (Oct 27th) morning about the lease estimated time of arrival. Her broker told me by phone earlier this week that if Ms. Apac was not approved as an assignee that Ella King may just wrap things up and vacate the restaurant at the end of her lease or shortly thereafter, and not sign the new lease. I explained to him that we put this renewal together as an accommodation to her, but if she did not want to sign the new lease with the cancellation right in the event she does not find a suitable buyer, then that is her prerogative. I reminded him that I was hired by the City to either work out a new lease with Ella King et al or find a new tenant for the space. If she decides not to move forward then we will proceed to market the space for lease to a future tenant, whomever that would be. No business sale for Ella King. You have provided her with a viable path forward to sell her business. It is up to her to take it, or leave it.” Ella and Sergio say Airport Management has not explained why it rejects the Willows-Glenn County applicant. But the Airport did tell Ella and Sergio’s broker why. See attached Exhibit 6 explaining why Exhibit "D"

Airport Memo
the Willows-Glenn County applicant does not satisfy the requirements based on vetting, financial analysis and experience.

CURRENT STATUS
We have a lease on the terms agreed with Ella and Sergio and we need a signature. The Lease was negotiated by Sergio and Ella and the airport’s representative, Mr. Helick. The new Lease is substantially the same except for terms making an assignment easier. Instead of signing, without objecting to the lease terms, Ella and Sergio insist the City approve the Willows-Glenn County buyer which the Airport found unqualified.

RECOMMENDATION
Airport management believes Ella, Sergio and their attorney have had ample opportunity to review the lease. Airport Management requests lease be signed by 5:00pm on November 18, 2021.

Exhibits
#1 Assignment Clause
#2 EATA Assignment Check List
#3 COW Mail Lease Renewal
#4 COW Mail Re: lease Renewal
#5 DocuSign _LOI_Ellas_At_Airport
#6 Memo Airport Resturant_20210930
Exhibit "D"

100 Aviation Way Restaurant Lease

1 RESTRICTION AGAINST ASSIGNMENT.
2 Tenant shall not assign or encumber any interest in this Lease or in the Leased 3 Premises, or sublease all or any part of the Premises, or allow any other person or entity 4 (except Tenant's authorized representatives) to occupy or use all or any part of the 5 Premises, without Landlord's prior written consent, and consent to one assignment or 6 sublease shall not be construed as consent to any subsequent assignment orsubleasing. 7 VOLUNTARY ASSIGNMENT.
8 If Tenant is a corporation or partnership, any dissolution, merger, consolidation or 9 other reorganization of Tenant or the sale or transfer of controlling percentage of the 10 capital stock of Tenant or the sale of twenty-five percent (25%) of the value of the assets 11 of Tenant shall be deemed a voluntary assignment. The phrase "controlling percentage" 12 means the ownership of and the right to vote stock possessing at least twenty-five percent 13 (25%) of the total combined voting power of all classes of Tenant's capital stock issued 14 outstanding and entitled to vote for the election of directors. 15 CONSENT BY LANDLORD.
16 Landlord shall have the sole and unfettered discretion to approve or reject any 17 sub-lease or assignment. Landlord may condition consent upon such factors as the 18 identity, reputation, financial worth and stability and operating ability of any proposed 19 assignee or subtenant. If the Premises are sublet to any person with the permission of 20 Landlord, one hundred percent (100%) of any incremental leasing profits shall accrue to 21 Landlord. Unless prior written consent of Landlord shall have been obtained, any 22 transfer, or attempted assignment or transfer, of this Lease or any interest therein, or any 23 subletting, either by voluntary or involuntary act of Tenant or by operation of law or 24 otherwise, shall at the option of the Landlord terminate this Lease, and any such 25 purported assignment, transfer or subletting without such consent shall be null andvoid. 26 PROCEDURE FOR OBTAINING APPROVAL FOR ASSIGNMENT.
27 Tenant shall not have the right to assign this Lease, except by Leasehold 28 mortgage, without the prior written consent of Landlord. If Tenant desires to assign the 29 Lease, Tenant shall comply with the following procedures:
30 Tenant shall give Landlord at least sixty (60) days prior written notice of its 31 desire to assign the Lease.

Exhibit "D"

EXHIBIT 1

Restaurant Facility Assignment Checklist
Lease Section 20: CONSENT BY LANDLORD
Landlord shall have the sole and unfettered discretion to approve or reject any sub-lease or assignment.

Landlord may condition consent upon such factors as the identity, reputation, financial worth and stability and operating ability of any proposed assignee or subtenant.

Required Documents for an entity (Corporation, LLC, etc) ❑Letter requesting Lease assignment
❑$5,000 Assignment deposit
❑Resume(s) and at least three (3) references
❑Documentation of demonstrated financial standing
❑If owner/operator of existing business: Income Statement, Balance Sheet and P&L of business ❑If individual: Financial statement, personal tax returns for two years and current credit report ❑Business Plan similar to the Open Table "How To Guidance". ❑Insurance Certificate (per lease)
If individual, other than an entity is financially responsible, additional required documents ❑Signed Personal Guaranty
❑Signed Assignment document
Exhibit "D"

EXHIBIT 2

7/9/2021 City of Watsonville Mail - Lease renewal - EATA, Inc. https://mail.google.com/mail/u/0?ik=0127c6aa78&view=pt&search=all&permthid=thread-f%3A1700202427174411908%7Cmsg-f%3A17002024271744… 1/1 Rayvon Williams <[email protected]> Lease renewal - EATA, Inc.
1 message
T. Ella King <[email protected]> Wed, May 19, 2021 at 8:49 AM To: Rayvon Williams <[email protected]>, Alexandra Aguado <[email protected]>, Sergio Angeles <[email protected]>
Hello Rayvon,
Please find this email as official notice that we intend to renew our lease at 100 Aviation Way.

I did not see an email come over concerning it but wanted to confirm that we are going to be exercising the extension option.

We will look for the renewal from you folks.

Thank you,
T. Ella King
Exhibit "D"

EXHIBIT 3

11/9/21, 10:24 PM City of Watsonville Mail - Re: Lease renewal - EATA, Inc. https://mail.google.com/mail/u/0/?ik=0127c6aa78&view=pt&search=all&permthid=thread-f%3A1700202427174411908%7Cmsg-f%3A1700323376024… 1/1 Rayvon Williams <[email protected]> Re: Lease renewal - EATA, Inc.
1 message
Alexandra Aguado <[email protected]> Thu, May 20, 2021 at 4:51 PM To: ella king <[email protected]>, "Sergio Primehl. Com" <[email protected]> Cc: Rayvon Williams <[email protected]> Hello Ella,
Thank you for your email.

Per your Lease, the City of Watsonville should've received written notice of your intention to exercise your option to extend the Lease by April 30, 2021.

Since written notice was not submitted by the deadline, that option is no longer available. We are more than happy to engage in a discussion to negotiate terms for a new lease, effective at the expiration of your current lease which is October 31, 2021. It's our desire that the term continue for an additional four years with a few minor adjustments.

Thank you,
-Alex
On Wed, May 19, 2021 at 8:49 AM T. Ella King <[email protected]> wrote:

Hello Rayvon,
Please find this email as official notice that we intend to renew our lease at 100 Aviation Way.

I did not see an email come over concerning it but wanted to confirm that we are going to be exercising the extension option.

We will look for the renewal from you folks.

Thank you,
T. Ella King
Exhibit "D"

EXHIBIT 4

100 Aviation Way
Watsonville, CA 95076
September 3, 2021
Ella King – Sergio Angeles
RE: Term Sheet to Lease Restaurant at 100 Aviation Way – City Response Dear Mr. Williams:

Here is a general outline of the terms and conditions whereby EATA, Inc. will lease space at the City of Watsonville Airport Terminal Building:

1. Lessee: EATA, Inc.,
dba Ella’s at the Airport, OR its assignee approved
Lessor: City of Watsonville, a municipal corporation
275 Main Street
Watsonville, CA 95076 approved

2. Premises Location: 100 Aviation Way, Watsonville, CA 95076 Located at the Watsonville Airport Terminal Building
Watsonville, CA 95076
A portion of APN: 015-221-01 (10,109,492± SF parcel) approved

3. Premises Size: 2,400± SF interior restaurant facility 650± SF outside storage
427± SF outside patio seating
see §15

4. Term: FIVE (5) Years approved

5. Commencement: November 1, 2021

6. Early Occupancy: Not applicable – Lessee currently occupies under a lease.

7. Option to Renew: ONE (1) FIVE (5) Year Option to Renew at Fair Market Value.

FMV not to exceed any annual increase in excess of 7% over the prior year's lease rent.

8. Option to Rescind: With a Sixty (60) day advance written notice, Lessee may cancel the Lease at any time during the initial 180 days of the Lease DocuSign Envelope ID: 3F2B751A-6E3B-41D4-86CE-59D88E83AF53 DocuSign Envelope ID: 8657F523-FF03-4364-8B2F-E49E0786F850 Exhibit "D"

EXHIBIT 5

Term. If Lessee cancels, Lessee must pay rent obligations through the termination date, pay unamortized leasing
commissions expended by Lessor, and Lessee forfeits its security deposit. However, the above provision to pay unamortized leasing commissions expended by Lessor, and Lessee forfeiting its security deposit, will not apply if Lessee or its assign cancels and/or rescinds this Lease at any time on or before October 31, 2021 (the end date of the existing Lease)

9. Use: Rejected. No Exclusive Use Provision will be granted

10. Base Rent:

Choose either fixed rental rate or blend of base plus gross sales Year 1: $4,000 plus $900 NNN or $3,000 +
$600 NNN & 1% Gross Sales
Year 2: (1st 6 months) $4,500 + $900 NNN or
$3,100 + $600 NNN & 1% Gross Sales
Year 2: (2nd 6 months) $4,750 + $900 NNN
or $3,100 + $600 NNN & 1% Gross Sales
Year 3: $5,000 + $900 NNN or $3,200 +$600
NNN & 1% Gross Sales
Year 4:  $5,250 + $900 NNN or $3,300 +
$600 NNN & 1% Gross Sales
Year 5: $5,500 + $900 NNN or $3,400 + $600
NNN & 1% Gross Sales
Additional Rent Mo. Prepayment: NNN
costs are estimated to be $900 Per mo.

11. Rent
Commencement: November 1, 2021

12. Deposit: Security deposit of $3,200 currently held by Lessor. $3,300 additional to be paid on or before November 1, 2021 totaling $6,500 security deposit.

DocuSign Envelope ID: 3F2B751A-6E3B-41D4-86CE-59D88E83AF53 DocuSign Envelope ID: 8657F523-FF03-4364-8B2F-E49E0786F850 Exhibit "D"

13. Utilities: In addition to base rent and operating costs paid to Lessor, Lessee is solely responsible for the payment of gas/electric utilities, water, sewage, garbage, internet, telephone, and security systems for Premises.

Lessor will maintain the electric power standby generator in good repair, but Lessor will not be liable for any losses to Lessee in the event of failure of the standby power generator to operate

14. Common Area
Maintenance,
R.E. taxes &Insurance: Lessor to maintain upkeep of fountain garden area at eastern entrance. Lessee has non-exclusive use of the common bathroom core located in the Terminal Lobby. Lessee is not charged base rent for this. Neither Lessee or its assign will be charged or assessed taxes or fees for "common area" for parking, lobby, airport ramp areas, public viewing areas about the terminal, or for any other space or usage not tied specifically to, and identified within, the Lease
Lessee will pay a flat fee for janitorial service & stocking of bathrooms with paper products/supplies, soap, light bulbs, repairs to the fixtures. – This is the monthly NNN fee of $900/month

15. Specific Tenant
Improvements: Removed by December 31, 2021
NOTE: This seating was provided on a temporary basis. Airport willing to allow the temporary seating to continue until December 31, 2021, but then must be removed. The structure impedes airport access to the ramp, to include need for operations and emergency vehicles. Additionally the structure blocks security camera view of ramp by Airport Operations, Watsonville Police and FAA ATC.

16. American
Disabilities
Act (ADA): The Building exterior and common areas must meet requirements as established by the Americans With Disabilities Act (ADA). Should they not be in compliance with ADA laws during the Term, Lessor shall make changes or alternations required to so comply, at no cost to Lessee (whether through Operating Expenses or otherwise). Lessee shall comply with ADA laws within the exclusive, demised Premises at Lessee’s sole expense during its tenancy. approved

17. HVAC: Per §15 of the current Lease “Landlord shall pay to repair and maintain the heater air conditioner and thermostat control for the Premises.”

18. Agency: Cushman & Wakefield represents Lessor as its exclusive agent (Listing Agent). Lessee is exclusively represented by its legal counsel. Leasing commissions paid by Lessor to Listing Agent.

DocuSign Envelope ID: 3F2B751A-6E3B-41D4-86CE-59D88E83AF53 DocuSign Envelope ID: 8657F523-FF03-4364-8B2F-E49E0786F850 Exhibit "D"

19. Parking: Lessee shall be entitled to its unreserved, pro-rata share of parking.

20. Assignment: Lessee may assign and transfer all of Lessee’s rights, duties and obligations under this Lease of the Premises subject to standard City of Watsonville Lease (as shown at bottom of §20 – current Lease: “Landlord and Tenant hereby deem it reasonable for the Landlord to refuse to consent to a proposed assignment in the following circumstances:

Landlord may object to any proposed assignment if, in the Landlord's sole and unfettered opinion, the proposed assignee is not a qualified assignee in terms of financial strength, business experience, restaurant style or ambiance, reputation or the ability to operate the food establishment and provide the required services in a manner consistent with the purposes for which this Lease was granted. Landlord may object on any other grounds.” . Lessee to follow the instructions per the attached EATA Assignment Checklist.

21. Signage: Signage remains “as-is” including prominent restaurant signage on Airport Monument located on Airport Boulevard, signage at its current location on the building.

22. Expiration: This letter must be responded to no later than September 10, 2021 or it becomes void, of no further effect.
************************************************************************************************************ This proposal is merely a statement of the terms upon which the parties may be interested in pursuing further negotiations concerning the property and is not intended to be a complete or binding agreement. No binding agreements shall be created between the parties until a full and final written agreement, containing these and all other terms of the transaction, is prepared, reviewed, and approved by the parties’ respective counsel, if any, and mutually executed and delivered.

Each party acknowledges that it has incurred, and will incur, costs and expenses in connection with the transaction contemplated hereby, including but not limited to the costs of investigation and assessment of the economic and other merits of the proposal, as well as legal expenses in connection with the preparation of a final and binding agreement, all of which costs are incurred at such party’s sole cost and risk, and not in reliance upon any act or representations of the other party or its agent. Either party may terminate the negotiations at any time for any reason, or for no reason, without liability or obligation whatsoever.

The parties acknowledge that Broker has made no independent determination or investigation regarding the present or future use or zoning of the property, its compliance with state, local, or federal laws, availability of governmental permits or approvals, measurements of land and/or buildings, or the condition of the property, including, but not limited to its environmental, structural, mechanical and soils conditions. Broker recommends the parties consult with their own advisors with experience in these matters. Buyer/Lessee agrees to make its own investigation and determination regarding such items.

DocuSign Envelope ID: 3F2B751A-6E3B-41D4-86CE-59D88E83AF53 DocuSign Envelope ID: 8657F523-FF03-4364-8B2F-E49E0786F850 Exhibit "D"

Any agreement reached pursuant to these negotiations shall be subject to all applicable federal, state and local laws, regulations, codes, ordinances and administrative orders having jurisdiction over the parties, property or subject matter of this proposal, including but not limited to, the 1964 Civil Rights Act and all amendments thereto, the Foreign Investment in Realty Property Tax Act, the Comprehensive Response Compensation and Liability Act, and Americans with Disabilities Act.

If you are interested in proceeding to the preparation of a complete and formal agreement encompassing the foregoing general terms and conditions, please execute and return a copy of this proposal to Broker.
cc: file
Read & Approved:

Lessor: Lessee:

City of Watsonville Tiffany Ella King & Sergio Angeles, individually dba: Ella’s at the Airport
______________________________ _____________________________ Real Property Disclosures
Cushman & Wakefield (“Broker”) provides this Notice in reference to a proposed transaction by and between City of Santa Cruz (“Lessor”) and Tiffany Ella King & Sergio Angeles, individually dba Ella’s at the Airport (“Lessee”) regarding real property identified as: a portion of 100 Aviation Way, Watsonville, CA 95076 (the “Property”). This Notice applies to any transaction involving any type of real property, whether improved or unimproved. As used herein, “seller” includes, where applicable, a seller, landlord, lessor, or sublessor, and “buyer” includes, where applicable, a buyer, tenant, lessee, or subtenant.

Hazardous Materials and Underground Storage Tanks
Comprehensive federal and state laws and regulations (“Laws”) control the use, storage, handling, removal and disposal of hazardous substances (“Hazardous Materials”). The term “Hazardous Materials” includes, but is not limited to, products containing petroleum, paint, solvents, lead, cyanide, DDT, inks, acids, pesticides, ammonium, asbestos, heavy metals, PCBs and a wide variety of other products. Hazardous Materials may be present at the Property due to current or prior use, or the use of adjacent properties. Some Laws impose liability upon owners, tenants, and users for clean-up costs and damages, regardless of such party’s lack of fault or involvement in the presence of such Hazardous Materials. Other Laws establish certain duties of disclosure which may apply to this transaction. For instance, a seller who has reason to believe that Hazardous Materials are present is required to disclose such knowledge to a buyer; the seller of any Property which contains any residential unit must disclose whether lead-based paint is present; and a seller or landlord must disclose reports and other information regarding the presence of asbestos in the Property to a buyer or tenant, and to contractors, employees, and others who may occupy the Property. A party who fails to make required disclosures may face substantial liability.

The Laws regulating Hazardous Materials are extensive and complex, and it is not practical to list all such Laws in this Notice; nor is Broker qualified to advise you regarding your rights, obligations or liability that may arise in connection with Hazardous Materials. Broker recommends that you consult with your advisors with respect to these issues, and investigate prior and surrounding uses which may have caused Hazardous Materials to be present at the Property.

Americans with Disabilities Act (ADA)
The Americans with Disabilities Act (42 USC §12101 et seq.) requires, among other things, that owners of “public accommodations” remove barriers to access by disabled persons, and provide auxiliary aids and services for hearing, vision or speech impaired persons. Any change of use or alterations of the Premises may trigger such requirements, even if existing use is in compliance with the ADA. Broker recommends that you consult with your advisors regarding the ADA and related Laws, to determine whether and how the ADA might affect you.

DocuSign Envelope ID: 3F2B751A-6E3B-41D4-86CE-59D88E83AF53 9/4/2021 | 12:15:32 PM PDT
DocuSign Envelope ID: 8657F523-FF03-4364-8B2F-E49E0786F850 9/16/2021 9/17/2021
Exhibit "D"