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1999-0615_SOUTH COAST FARMS_Lease AgreementC�1 LEASE AGREEMENT This Lease Agreement is made this/5'4day of June, 1999 (the "Agreement") by and between the City of San Juan Capistrano, a public body, corporate and politic, and the San Juan Capistrano Community Redevelopment Agency, a public body, corporate and politic (known jointly hereinafter as the "Agency"), and South Coast Farms (hereinafter "Lessee"). RECITALS: WHEREAS, Agency is the owner of a 28.225 acre farm in the City of San Juan Capistrano, California, which property was acquired to be maintained as open -space within the City; and WHEREAS, Lessee desires to conduct farming operations on the property; and WHEREAS, Lessee has farming expertise and experience and desires to manage the maintenance and operations of all agricultural activities on the property; NOW, THEREFORE, Agency and Licensee do hereby mutually agree as follows: Section 1. Grant of Lease/Term. (a) Grant of Lease. Agency hereby grants to Lessee a lease to manage, maintain, and operate a fruit and vegetable farm on certain property located in the City of San Juan Capistrano, California, as depicted on the site plan attached hereto as Exhibit "A", and incorporated herein by reference (hereinafter referred to as the "Premises" or alternatively the "Property"). Lessee shall provide the expertise, supervision and management over the farm operations, and Lessee shall own all crops produced on the Premises. . (b) Term. The term of this Agreement with regard to the land, excluding the Congdon House area, shall be for a period of ten (10) years. With regard to the Congdon House structure and accompanying land described in Section 4, the lease term shall be for that period of time it takes Lessee to complete the Congdon House restoration work, but in any event not longer than five(5) years. When the Congdon House restoration work is completed the Agency will propose a new lease to Lessee for the Congdon House. Lessee shall have 30 days to determine whether to enter into said lease with Agency. If Lessee determines not to enter into the lease, then the Agency will take possession of the Congdon House. Section 2. Lease Rate. (a) Agency shall receive from Lessee a lease rate of $50,000.00 annually, to be paid on a quarterly basis to Agency for the first full five years of the Lease term. (b) At the end of the fifth year of the lease term, the lease rate shall be renegotiated between Agency and Lessee with the intent being that the agreed upon lease rate shall match the market rate for similarly situated properties. In no case shall the lease rate be reduced as a result of the lease rate negotiations. (c) In the event that the parties cannot come to agreement within 45 days of commencement of lease rate negotiations, either party may call for a binding arbitration process wherein each side selects an arbitrator and a third arbitration panel member is then chosen by the two selected arbitrators. The three-person panel shall then conduct an informal hearing to receive evidence and argument regarding the appropriate lease rate. The panel shall render a final and binding decision within 30 days of convening the panel. Section 3. Nature of Uses Permitted Under the Agreement (a) Operation of Farm. Lessee shall be responsible for the supervision and management of every aspect of mmming a fruit and vegetable farming operation for human consumption on the Property in a business like manner. The existing retail stand may be utilized by Lessee for fait and vegetable retail sales only. Any expansion, regardless of size or scope, is not permitted under this lease unless Agency written approval is first obtained. Such supervision and management shall include, but not be limited to: (i) the employment, supervision and direction of all employees engaged in the farming operation; (ii) providing for the maintenance of all equipment and supervising its use in a safe and prudent manner; (iii) soil preparation, planting, fertilizing, irrigating, pesticide and herbicide applications, and the harvesting of all crops; (iv) the marketing and sale of crops; (v) maintenance of records and accounting for all revenues and expenditures, including employee payroll and related records; (vi) the purchasing of all seeds, plants, fertilizers, herbicides, pesticides, and other materials and supplies, such as boxes and packaging materials, required for marketing and sale of the crops; (vii) management and maintenance of all on-site improvements, including temporary housing, for Licensee's employees. Lessee warrants that all services will be performed in a competent and satisfactory manner, consistent with the standards of the industry and in accordance with applicable Federal, State and local regulations. (b) Maintenance of Premises and Equipment. Lessee agrees to accept the Premises and equipment in present condition on the date of execution of this Agreement. Specified buildings and farm equipment shall be provided to Lessee by Agency, for Lessee's use in farming operations. Lessee shall maintain, at Lessee's expense, the Property, including all existing structures and all equipment owned and furnished by Lessee that is used in farming operations, in a reasonable state of repair and working order. With respect to the Congdon House, Lessee shall restore and maintain this structure under the terms and conditions set forth in Section 4 of this Agreement. All other equipment to be used in farming operations shall be furnished by Lessee. Equipment owned and furnished by Lessee shall not be removed from the Property without the consent of Lessee, except for temporary repairs, after which it shall be immediately returned. Lessee and the authorized representatives of Lessee shall inspect all equipment within sixty (60) days of execution of this Agreement and mutually agree upon the condition of the equipment. (c) Marketing and Sale of Crops. Lessee shall be responsible for the marketing and sale of crops produced on the Property. Crops will be sold retail at the cash stand located on the Property and to commercial produce wholesalers and distributors. Lessee shall provide a schedule to Agency of proposed days and hours of operation of the on-site retail location. (d) Condition of Property. Lessee accepts the Property in its present condition upon execution of this Agreement. Agency makes no warranty of the suitability of the Property for growing crops. Lessee agrees, at Lessee's expense, to use reasonable care to control all weeds, noxious or otherwise, growing on the Property, including those growing in drainage ditches. Lessee shall furnish all labor and materials required to eliminate and otherwise reasonably control all rodents, insects and other pests on the property. Lessee agrees to farm the property in a manner reasonably calculated to protect the soil and maintain the fertility through the use of fertilizers and chemicals in accordance with good farming practices as generally followed and recognized in Orange County, California. Lessee agrees, at Lessee's expense, to keep fences, ditches and borders of the Property in good condition and repair at all times, reasonable wear and tear excepted. The duly authorized representative of Lessee may enter upon the Property and all buildings thereon, or any portion thereof, at a reasonable time for the purposes of inspection. (e) Residential Use of Property. Lessee agrees that no persons or employees will be allowed to reside upon the Property except for: i) the use of existing temporary farm labor residences during irrigation periods only, or ii) as otherwise provided for in this Agreement. Lessee shall obtain all necessary licenses, permits and approvals, and shall abide by all state, local and national laws for such temporary residential use. (f)Use of Herbicides/Pesticides. Lessee shall be responsible for the safe application of herbicides and pesticides as the premises is in close proximity of residential, park and school locations. Agency desires that the farm be managed as an organic farm. However, the parties agree and understand that for the farm to operate competitively in the market place, use of these substances may at times be necessary. These substances shall nqt, however, be applied when wind speeds exceed ten (10) miles per hour. Aerial spraying is prohibited. (g)Control of weeds, Insects, Rodents. Lessee shall make the premises free of weeds, insects, and rodents. Lessee is responsible for taking appropriate measures to prevent rodents and insects from migrating from the premises to surrounding properties. Section 4. Restoration of the Congdon House. (a) Restoration Obligation. Lessee agrees to restore the Congdon in full conformance with a Scope of Work (the "plans and specifications") to be prepared by a registered Architect, approved by Agency. Structural plans must be prepared by a structural engineer, also approved by Agency. The restoration work shall be in compliance with all applicable City of San Juan Capistrano and State building code requirements. Costs of the restoration work shall be shared as set forth in subsection (c) below. (b) Time frame. Lessee shall complete all of the restoration work by not later that 5 years from date of execution of this Agreement, except, that, after reviewing the cost estimates for the proposed renovations, either party may, at their discretion, determine that it is unable to proceed based upon these costs. In addition, the following schedule of performance shall be completed by Lessee: (i) August 1, 1999: Check. Lessee has signed a contract with the Architect. (ii) January 1, 2000: Lessee has submitted plans and cost estimates to Agency for Plan (iii) March 1, 2000: Lessee and Agency to have reviewed cost estimates and have evaluated commitment to continue with the lease agreement or not. House from Agency. (iv) January 1, 2001: Lessee commences building/restoration construction. (v) July 1, 2003: Lessee has obtained a certificate of occupancy for the Congdon (vi) July 1, 2004: Lessee has obtained a Notice of Completion for all outbuildings and grounds from Agency. (c) Agency's Co -Financial Commitment to Restoration Work. Agency agrees to financially participate in the restoration of the Congdon House by pledging lease income, owing from Lessee to Agency, toward the restoration effort. The amount to be pledged shall be based upon cost estimates prepared from Lessee's approved plans, and shall be determined prior to commencing construction, as documented previously in paragraph b of this section of the lease agreement. Agency shall defer rent as payment to Lessee as the work progresses providing Agency has certified that the work is consistent with the plans and specifications for the project. Rent shall not be deferred if work has not progressed. Section 5 Insurance and Indemnity. (a) Insurance. Lessee shall maintain comprehensive general liability, property damage, and fire insurance with a reputable insurance company in amounts of not less than $1,000,000.00 combined single limit, or other format acceptable to the Office of the City Attorney. (b) Indemnity. Lessee shall defend, indemnify and hold harmless Agency, and its respective officers, employees and agents, and the City of San Juan Capistrano, its elected and appointed officials, and employees from and against any and all actions, claims, demands, losses, costs, expenses, including legal costs and attorneys fees, for death or injury to persons or damage to the Property, or for the pollution thereof and cleanup costs, arising out of or related to Lessee's performance under this Agreement, except to the extent of such loss as may be caused by Licensor's own negligence, including that of their respective officers and employees. Agency shall not be held accountable for any preexisting soil contamination including those identified in the report dated January 28, 1990, prepared by Chem Risk, and the report dated December 18, 1990, prepared by South Coast Geological Services, Inc. Section 6. Access to Premises By Agency. Agency reserves the right to access the premises at any time to conduct any desired inspection of any aspect of the farm operation or Congdon house premises. Section 7. No Assignments. Lessee shall not assign this Lease or any interest herein, or sublet the Premises or any part thereof, or license the use of all or any portion of the Premises or business conducted therein or thereon, or encumber or hypothecate this Lease, without first obtaining the written consent of Agency. Any assignment, subletting, licensing, encumbering, or hypothecating of this Lease without such prior written consent shall, at the option of Agency, be subject to automatic termination of the Lease by Agency. Section 8. Surto Bond As to Performance of Congdon House Restoration. Lessee shall post a surety bond in the amount of $250,000, with a surety company and in a form acceptable to the Office of the City Attorney, to insure completion of the Congdon House restoration work. Section 9. Water An existing water well and backbone irrigation system is available to the Lessee for irrigation uses. The Lessee will be required to pay for water and any costs required to keep the irrigation system operational. The Agency is responsible for the well maintenance. In event of well closure the Agency will be required to provide another source of water. in this event, the Agency will not be obligated to pay for differences in water rate costs. Lessee agrees to work cooperatively with Agency to coordinate watering schedules between the Property and the City Sports Park. Water costs for the City Sports Park will be the responsibility of Agency. Section 10. Utilities. Lessee is fully and solely responsible for providing any utility service required for the farm operation and Congdon House restoration, maintenance, and operation. Section 11. Community Gardens Lessee will be responsible for rodent, weed and pest control and provide professional input for the nearby Community Gardens. Management of the Community Gardens will remain under the City of San Juan Capistrano Community Services Department. Section 12. Time of the Essence. Time is of the essence of each and every provision, covenant, and condition herein contained and on the part of Lessee to be done and performed. Section 13. Default. (a) If Lessee defaults in the payment of the tease rate, or any additional applicable lease payments, or defaults in the performance of any of the other covenants or conditions hereof, including but not limited to the Congdon House restoration scope of work, Agency may give Lessee notice of such default and if lessee does not cure any such default within three (3) days, or such other time period as specified in the notice of default, after the giving of such notice, then Agency may terminate this lease on not less than ten (10) days' notice to lessee. On the date'specified in such notice the term of this lease shall terminate, and lessee shall then quit and surrender the premises to Agency, but lessee shall remain liable as hereinafter provided. If this lease shall have been so terminated by Agency, Agency may at any time thereafter resume possession of the premises by any lawful means and remove lessee or other occupants and their effects. (b) If Lessee breaches any covenant or condition of this lease, Agency may, on reasonable notice to Lessee (except that no notice need be given in case of emergency), cure such breach at the expense of Lessee. The reasonable amount of all expenses, including attorney's fees, incurred by Agency in so doing shall be deemed additional rent payable on demand, or otherwise subtracted from the security deposit, at Agency's election. (c) To the extent waiver is permitted by law, the parties waive trial by jury in any action or proceeding brought in connection with this lease or the premises. Section 14. Termination Due to BanknWtcy or Insolvency. In the event proceedings in bankruptcy are commenced by Lessee, or Lessee is found to be in a state of insolvency, then in such event, Agency shall have the right to terminate this Agreement and all further rights and obligations thereunder, by 10 days' notice in writing to Lessee, in which event, on the expiration of the 10 days from mailing of the notice, this Lease shall automatically terminate. Section 15. Notices, Any notice required to be given under this Agreement shall be in writing and shall be deemed to have been duly given and received if and when personally served, or forty-eight (48) hours after being deposited in the United States mail, first class, postage prepaid, addressed to the intended party at: Agency/City: City of San Juan Capistrano/ Redevelopment Agency City Manager 32400 Paseo Adelanto San Juan Capistrano, Ca. 92675 Any notice required to be sent to the Agency/City shall be addressed as noted above. Lessee: George Kibby South Coast Farms 2268 E. Sandalwood Place Anaheim, CA 92806 Section 16. Attom-eys' Fees. If either party commences an action against the other party arising out of or in connection with this Agreement, the prevailing party shall be entitled to have and recover from the other party reasonable attorney's fees and costs of suit. Section 17. Leasehold Taxes. To the extent that the County of Orange believes any leasehold taxes are due on this lease, Lessee shall be responsible for said taxes. Section 18. Surrender of Premises Lessee shall, at the termination of this Lease, vacate the Premises in as good condition as they are in at the time of entry thereon by Lessee. Upon vacating, Lessee shall leave the Premises free and clear of all rubbish and debris. Section 19. Entire Agreement. This Agreement constitutes the entire understanding and agreement between the Parties and supersedes all previous negotiations between them pertaining to the subject matter thereof. IN WITNESS WHEREOF, the Licensor and Licensee have caused this Agreement to be executed on the date and year first written above. ATTEST: Cheryl Johns4 Ciq Clerk APPROVED AS TO FORM: John R. Shaw, City Attorney COMMUNITY public ATTEST: Cheryl John ncy Secretary APPROVED AS TO FOAM: _ _ John R. Oaw, Agency Counsel CITY OF CAPISTRANO, corpor ld pc By: SAN JUAN public body Mayor SAN JUAN CAPISTRANO REDEVELOPMENT AGENCY, a body corporate and politic By: — — Wya Hart, Charrman SOUTH COAST FARI�SS By: 1 George Kibfjy EXHIBIT A (SITE PLAN) LEGEND A. Agricultunl Preserve Al Farnten AQarhedProduce Stonge A2 Roadside Produce Stand w Paddng AD Intemal Farm Roads Ai EquipmenuMachinery Stonge A5 Farm Labor Residence A6 Ag iculmn to Remain E. Historical Preservation dl Joel Congoon Rcmdencc 32 Hutoncai Farm Equipment Display Arcs A A6 A - CAMINO DEL AVION SIII I .r Dal A4 CAS B 1 � / Al / I J 32