Arvin City Council
June 27, 2023

SPECIAL MEETING AGENDA
OF THE

ARVIN CITY COUNCIL / SUCCESSOR AGENCY TO THE

ARVIN COMMUNITY REDEVELOPMENT AGENCY / ARVIN HOUSING

AUTHORITY / ARVIN PUBLIC FINANCING AUTHORITY
TUESDAY JUNE 27, 2023 6:05p.m.

CITY HALL COUNCIL CHAMBERS
200 CAMPUS DRIVE, ARVIN
CALL TO ORDER Mayor Olivia Trujillo

PLEDGE OF ALLEGIANCE

INVOCATION
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ROLL CALL Olivia Trujillo Mayor
Daniel Borreli Mayor Pro Tem
Donny Horton Councilmember
Susana Reyes Councilmember
Juan Murillo Councilmember
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STAFF Jeff Jones City Manager / Finance Director
Nathan Hodges City Attorney – Hodges Law Group
Cecilia Vela City Clerk
I pledge allegiance to the flag of the United States of America and to the Republic for which it stands, one nation, under God, indivisible, with liberty and justice for all.

PUBLIC COMMENTS:

The meetings of the City Council and all municipal entities, commissions, and boards (“the City”) are open to the public. At regularly scheduled meetings, members of the public may address the City on any item listed on the agenda, or on any non-listed matter over which the City has jurisdiction. At special or emergency meetings, members of the public may only address the City on items listed on the agenda. Such comments shall be made in person and before the City during the meeting as prescribed below. There is a time limitation of two (2) minutes per person. However, the City shall allow a speaker using a translator four (4) minutes to ensure that non-English speakers receive the same opportunity to directly address the City. Sixteen Minutes (16) total (plus additional time based on use of a translator, if any) will be allowed for any one subject. For any item that is not on the agenda and within the jurisdiction or interest of the City, please come to the podium at this time. The Brown Act does not permit any action or discussion on items not listed on the agenda. If you wish to speak regarding a scheduled agenda item, please come to the podium when the item number and subject matter are announced, and the Mayor opens Public Comment on the item. When recognized, please begin by providing your name and address for the record (optional). Anyone wishing to submit written information at the meeting needs to furnish ten (10) copies to the City Clerk in advance to allow for distribution to City Council, staff and the media. Willful disruption of the meeting shall not be permitted. If the Mayor finds that there is in fact willful disruption of any City Council Meeting, he/she may order the disrupting parties out of the room and subsequently conduct the City’s business without them present.

In accordance with the Brown Act, all matters to be acted on by the City must be posted at least 72 hours prior to a regular meeting. In cases of an emergency, or when a subject matter needs immediate action or comes to the attention of the City subsequent to the agenda being posted, upon making certain findings, the City may act on an item that was not on the posted agenda.

AGENDA STAFF REPORTS AND HANDOUTS:

Staff reports and other disclosable public records related to open session agenda items are available at City Hall, 200 Campus Drive, Arvin, CA 93203 during regular business hours.

CONDUCT IN THE CITY COUNCIL CHAMBERS:

Rules of Decorum for the Public
Members of the audience shall not engage in disorderly or boisterous conduct, including the utterance of loud, threatening or abusive language, clapping, whistling, stamping of feet or other acts which disturb, disrupt, impede or otherwise render the orderly conduct of the City meeting infeasible. A member of the audience engaging in any such conduct shall, at the discretion of the presiding officer or a majority of the City, be subject to ejection from the meeting per Gov. Code Sect. 54954.3(c).

Removal from the Council Chambers:

Any person who commits the following acts in respect to a meeting of the City shall be removed from the Council Chambers per Gov. Code Sect. 54954.3(c).
(a) Disorderly, contemptuous or insolent behavior toward the City or any member thereof, tending to interrupt the due and orderly course of said meeting;
(b) A breach of the peace, boisterous conduct or violent disturbance, tending to interrupt the due and orderly course of said meeting;
(c) Disobedience of any lawful order of the Mayor, which shall include an order to be seated or to refrain from addressing the City; and
(d) Any other unlawful interference with the due and orderly course of said meeting.

AMERICANS with DISABILITIES ACT:

In compliance with the ADA, if you need special assistance to participate in a City meeting or other services offered by the City, please contact the City Clerk’s office, (661) 854-3134. Notification of at least 48 hours prior to the meeting or time when services are needed will assist the City staff in assuring that reasonable arrangements can be made to provide accessibility to the meeting or service.

Special Arvin City Council Meeting Agenda – June 27, 2023

1. APPROVAL OF AGENDA AS TO FORM.

Motion __________ Second __________ Vote __________
Roll Call: CM Murillo ___ CM Reyes ___ CM Horton ___ MPT Borreli ___ Mayor Trujillo ___

2. PUBLIC COMMENTS
(This is the opportunity for the public to address the City Council regarding any matter on the agenda.)

3. CONSENT AGENDA ITEM(S)
A. A Resolution of the City Council of the City of Arvin Receiving and Adopting the Annual Statement of Investment Policy and Authorizing the Investment of Surplus Funds Consistent with the Same.

Staff recommends approval of the Consent Agenda.

Motion __________ Second __________ Vote __________
Roll Call: CM Murillo ___ CM Reyes ___ CM Horton ___ MPT Borreli ___ Mayor Trujillo ___

4. ACTION ITEM(S)
A. Consideration and Approval of Emergency Improvement Capital Account Credit Agreement between the City of Arvin and Quantum Farms, LLC for Emergency Repairs. (City Manager)
Staff recommends approval of the Emergency Improvement Capital Account Credit Agreement.

Motion __________ Second __________ Vote __________
Roll Call: CM Murillo ___ CM Reyes ___ CM Horton ___ MPT Borreli ___ Mayor Trujillo ___

5. ADJOURNMENT
I hereby certify under penalty of perjury under the laws of the State of California that the foregoing agenda was posted on the Arvin City Council Chambers Bulletin Board not less than 24 hours prior to the meeting. Dated June 26, 2023.

Cecilia Vela, City Clerk

CITY OF ARVIN
Staff Report
Special Meeting Date: June 27, 2023
TO: Arvin City Council
FROM: Dennis Clark, Finance Supervisor
Jeff Jones, City Manager
SUBJECT: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARVIN

RECEIVING AND ADOPTING THE ANNUAL STATEMENT OF

INVESTMENT POLICY AND AUTHORIZING THE INVESTMENT OF
SURPLUS FUNDS CONSISTENT WITH THE SAME.

BACKGROUND:

This statement is intended to provide a guideline for the prudent investment of funds and to outline the policies for maximizing the efficiency of the City of Arvin and its components units (“Entity”) cash management system. The ultimate goal is to enhance the economic status of the City while protecting its pooled funds. This investment policy has been prepared so as to be in conformance with all pertinent existing laws of the State of California for General Law cities. The investment policy should be reviewed and adopted on an annual basis. The investment policy most recently adopted by the Council was on May 24, 2022.

OBJECTIVE:

The goal of the City’s investment policy is to enable the City to invest funds to enhance the economic status while protecting its pooled cash. The city attempts to obtain a market rate of interest without assuming undue risk to principal. The objective of such investments is:
1) preservation of capital with maintenance of liquidity; and 2) a competitive rate of return.

DELEGATION OF AUTHORITY:

The authority of the legislative body to invest or to reinvest funds of the Entity is delegated to the City Finance Director in accordance with State Statutes.

INVESTMENT RESPONSIBILITY / REPORTING:

Investments are the responsibility of the City Finance Director. He shall be responsible for reporting the status of investments to the City Council and the City Manager on a quarterly basis.

In addition, to be in compliance with the California Government Code, a report will be submitted to City Council not later than thirty (30) days after the end of the quarter which shows the type of investment, institution, cost, par, market value, interest rate, date of maturity, and source of market value for all investments of more than twelve months. The report will contain a certification regarding the compliance of investments with the Entity’s investment policy and disclosure regarding the availability to provide sufficient liquidity to meet six months of estimated expenditures.

3.A.1
Attachment: Investment policy SR FY 23-24 (City of Arvin Investment Policy FY 23-24) PRUDENCE:

The standard of prudence to be applied by the City Finance Director shall be the “prudent investor” rule, which states, “Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence description and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital, as well as the probable income to be derived.” The prudent investor rule shall be applied in the context of managing the overall portfolio.

INVESTMENT CRITERIA:

Criteria for selecting investments and the order of priority are:

1. SAFETY
The safety and risk associated with an investment refers to the potential loss of principal, interest or a combination of these amounts. The City only operates in those investments that are considered secure.

2. LIQUIDITY
This refers to the ability to “cash in” at any moment in time with a minimal chance of losing some portion of principal or interest. Liquidity is an important investment quality especially when the need for unexpected funds occurs occasionally.

3. YIELD
Yield is the potential dollar earnings an investment can provide and sometimes is described as the rate of return.

INVESTMENT INSTRUMENTS:

California cities may invest in any instrument allowable under current legislation of the State of California (Government Code Section 53600 et al.) so long as the investment is appropriate when the City’s investment objectives and policies are taken into consideration. Please see the attached proposed City of Arvin 2023-2024 Investment Policy for specifics.

FINANCIAL IMPACT:

N/A.

3.A.1
Attachment: Investment policy SR FY 23-24 (City of Arvin Investment Policy FY 23-24)

Reso Adopting the Annual Statement of Investment Policy FY 23-24 RESOLUTION NO. ___________

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARVIN

RECEIVING AND ADOPTING THE ANNUAL STATEMENT OF

INVESTMENT POLICY AND AUTHORIZING THE INVESTMENT OF
SURPLUS FUNDS CONSISTENT WITH THE SAME.

WHEREAS, the Legislature of the State of California has declared that the deposit and investment of public funds by local officials and local agencies is an issue of statewide concern (California Government Code sections 53600.6 and 53630.1; and WHEREAS, the legislative body of a local agency may invest surplus monies not required for the immediate necessities of the local agency in accordance with the provisions of California Government Code Sections 5920 et seq. and 53601 et seq.; and WHEREAS, the Finance Director of the City of Arvin shall annually prepare and submit a statement of investment policy and such policy, and any changes thereto, shall be considered by the legislative body at a public meeting; (CGC 53646(a)); and WHEREAS, both the Finance Director and the City Council declare the Annual Statement of Investment Policy included as Attachment “A” to this resolution to be the City of Arvin’s Investment Policy for Fiscal Year 2023-2024.

NOW THEREFORE BE IT RESOLVED, by the City Council of Arvin as follows:

1. The City Council receives, files and adopts the Annual Statement of Investment Policy for the City of Arvin.

2. The City Council confirms the authority of the Finance Director of the City of Arvin to invest surplus funds consistent with the adopted Annual Statement of Investment Policy and consistent the requirements of local, state and federal law. //////
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3.A.2
Attachment: Arvin investment policy 23.24 reso (City of Arvin Investment Policy FY 23-24)

Reso Adopting the Annual Statement of Investment Policy FY 23-24 I HEREBY CERTIFY that the foregoing resolution was passed and adopted by the City Council of the City of Arvin at a special meeting thereof held on the 27hday of June 2023 by the following vote:

AYES:

NOES:

ABSTAIN:

ABSENT:

ATTEST
CECILIA VELA, City Clerk

CITY OF ARVIN
By:

OLIVIA TRUJILLO, Mayor
APPROVED AS TO FORM:

By:

NATHAN HODGES, City Attorney
Hodges Law Group
Exhibit A: City of Arvin Investment Policy FY 2023-2024 I, ______________________________, City Clerk of the City of Arvin, California, DO HEREBY CERTIFY that the foregoing is a true and accurate copy of the Resolution passed and adopted by the City Council of the City of Arvin on the date and by the vote indicated herein.

3.A.2
Attachment: Arvin investment policy 23.24 reso (City of Arvin Investment Policy FY 23-24) Fiscal Year2021-22 City of Arvin Investment Policy 06/23/2023 Fiscal Year 2023-24 City of Arvin
Investment Policy
Fiscal Year 2023-2024

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 Table of Contents

1.0 Policy

2.0 Scope

3.0 Prudence

4.0 Investment Objectives
A. Safety
B. Liquidity
C. Yield

5.0 Delegation of Authority

6.0 Ethics and Conflicts of lnterest

7.0 Authorized Financial Dealers and Institutions

8.0 Authorized Suitable Investments

9.0 Review of Investment Portfolio

10.0 Investment Pools/Mutual Funds

11.0 Collateralization

12.0 Safekeeping and Custody

13.0 Diversification

14.0 Maximum Maturities

15.0 Internal Controls

16.0 Performance Standards

17.0 Reporting

18.0 Investment Policy Adoption
Glossary of Investment Policy Terms
Exhibit I -Allowable Investment Instruments Per State Government Code

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24

1. Policy
This statement is intended to establish the policies for prudent investment of the City of Arvin ("City") funds, and to provide guidelines for suitable investments.

It shall be the policy of the City to invest public funds not required for immediate day-to-day operations securely and in such a manner as to comply with federal, state and local laws, ensure prudent money management, and meet the objectives of this Investment Policy ("Policy"), in priority order of safety, liquidity and return on investment.

In the event of any conflict between this policy and the municipal code, the provisions of the municipal code shall govern.

On June 9, 2020 the City Council appointed the Finance Director as the Treasurer of the City of Arvin.

2. Scope
This investment Policy applies to all investment activities and financial assets of the City. The funds covered by this policy are accounted for and incorporated in the City's Comprehensive Annual Financial Report C'CAFR"), and include but are not limited to:
 General Fund
 Special Revenue Funds
 Capital Projects Funds
 Enterprise Funds
 Any new fund created and approved by the City Council.

3. Prudence
In accordance with California Government Code ("CGC") §53600.3, the Treasurer and/or his designee, who are authorized to make investment decisions on the City's behalf, are trustees and therefore fiduciaries subject to the "prudent investor standard":
"When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with the care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency."
Indemnification of Investment Officials
Investment officers acting in accordance with written procedures and the City's investment policy and exercising due diligence and prudence shall be relieved of personal liability for an individual security credit risk or market price changes, provided that deviations from expectations are reported in a timely fashion, and appropriate action is taken to control adverse developments.

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24

4. Investment Objectives
The City's primary investment objectives, in order of priority, are (1) safety - the preservation of principal, (2) liquidity - maintaining sufficient liquidity to meet its cash flow needs, and (3) yield - achieving a reasonable rate of return on public funds, while minimizing the potential for capital losses.

A. Safety: Preservation of principal is the foremost objective of the investment program.

Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective is to mitigate credit or default risk, interest rate risk and market risk, as summarized below.

Credit or Default Risk- The risk of loss due to the failure of the security issuer and/or guarantor, or backer, may be mitigated by:
 Limiting purchases to the safest types of investments,  Diversifying the investment portfolio among a variety of securities offering independent returns to minimize any potential losses on individual securities,  Avoiding the concentration of investments in any one specific security type or asset class, in any one financial institution, or in any one specific geographic area or industry,  Pre-qualifying financial institutions, brokers/dealers, intermediaries, and advisers with which the City does business and ensuring competitive transaction pricing.

Interest Rate Risk- The risk that the market value of securities will fall as interest rates rise in the general market may be mitigated by:
 Holding individual securities to maturity: i.e. structuring the investment portfolio to match the timing of cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity;  Employing a laddering strategy: i.e. staggering maturities of individual securities to provide incremental liquidity over a time horizon;
 Investing an appropriate level of operating funds in money market mutual funds, or similar investment pools, which provide for same or next day access to cash.

Market Risk - The risk of market value fluctuations or volatility may be mitigated by:
 Purchasing securities which are readily tradable in active secondary markets, rather than in thinly traded markets;
 Maintaining prudent duration levels;
 Staggering investment maturity dates over a desired overall duration target.

B. Liquidity: The investment portfolio shall remain sufficiently liquid to meet all reasonably anticipated operating requirements. This is accomplished by structuring the portfolio so that securities mature concurrently with the anticipated operational demands. Furthermore, since

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 all possible cash demands cannot be anticipated, it is recommended that a portion of the portfolio consist of money market mutual funds or local government investment pools that offer same-day liquidity for short-term funds, and/or securities with active secondary or resale markets.

C. Yield: The investment portfolio shall be designed with the objective of attaining a market rate of return throughout the budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. In so far as the City generally maintains a "Buyand-Hold" investment posture (one that avoids disposing of security positions prior to scheduled maturity) securities shall not be sold prior to maturity with the following exceptions:
 A declining credit security which could be sold early to minimize loss of principal;  Liquidity needs of the portfolio that require the security be sold;  A capital gain that would be realized to better position the overall portfolio to achieve investment policy goals.

5. Delegation of Authority
The City Council, as permitted under CGC §53607, delegates the responsibility to invest or reinvest City funds, or to sell or exchange securities so purchased, to the City Treasurer ("Treasurer"). Under the oversight of the Treasurer, responsibility of the operation of the investment program may be explicitly delegated to the Finance Director or City Manager who shall act in accordance with established written procedures and internal controls consistent with this policy. No person may engage in an investment transaction except as provided under the terms of this Policy and the investment procedures established by the Treasurer and approved by the Finance Director.

6. Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program or could impair their ability to make impartial investment decisions. City employees involved in the investment process shall disclose to the City Manager any material financial interest in financial institutions that conduct business within the jurisdiction. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Officers shall refrain from

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 undertaking any personal investment transactions with the same individual with whom business is conducted on behalf of the City.

These disclosure requirements shall include complying with the disclosure requirements as established by the Fair Political Practices Commission and Conflict of Interest Codes of the City.

7.Authorized Financial Dealers and Institutions
The Treasurer, in coordination with the Finance Director, shall maintain a list of approved financial institutions authorized to provide investment services to public agencies in the State of California. These may include '"primary" dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). Deposits shall only be made in a qualified public depository as allowed under State Statute. In selecting financial institutions for the deposit or investment of City funds, the Treasurer will consider the credit rating of the institutions.

All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the City Treasurer and Finance Director with the following:
 Audited financial statements;
 Proof of FINRA certification;
 Trading Resolution;
 Proof of State of California registration;
 Completed broker/dealer questionnaire;
 Written annual certification agreeing to abide by the City's investment policy and depository contracts.

An annual review of the financial condition and registrations of qualified bidders may be conducted by the City Treasurer or designee. As part of any review performed, a current audited financial statement will be obtained for those financial institutions and brokers/dealers subject to review. Whenever reasonable a competitive bid process, utilizing a minimum of two financial institutions deemed eligible by the Treasurer, will be used to place investment purchases. The City shall transact business only with banks, savings and loans, and with brokers/dealers approved by the Treasurer or designee.

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24

8. Authorized and Suitable Investments
Investment of City funds is governed by the California Government Code Sections 53600 et seq.

Within the context of such limitations, the following investments are authorized:

INVESTMENT TYPE MAXIMUM

MATURITY

MAXIMUM
%

MINIMUM
RATING
U.S. Treasury Obligations 5 years 100% None
U.S. Agency Obligations 5 years 100% None
Bankers' Acceptances 180 days 15%/ 10%
per issuer
None
Commercial Paper 270 days 15%/ 10%
per issuer
Al/Pl issue; AA
issuer
Negotiable Certificates of Deposit 5 years
30%
$250,000 FDIC
Insured
Non-Negotiable Certificates of Deposit 5 years $250,000 FDIC Insured
Placement Service Certificates of Deposit 5 years None
Repurchase Agreements* 1 year 15%/ 10%
per issuer
None
Medium Term Notes 2 years 15%/ 10%
per issuer
AA
Mutual Funds/Money Market Mutual Funds NIA 20%/ 10%
per issuer
Highest rating by 2
NRSROs
Collateralized Bank Deposits 5 years 100% None
CSJVRMA/Chandler Assets Pooled Fund NIA 25% None
Local Agency Investment Fund (LAIF) NIA 100% None
*Requires a Master Repurchase Agreement to be signed and on file with the bank or broker/dealer.

Legislative Changes
Any State of California legislative action that further restricts allowable maturities, investment type or percentage allocations will be incorporated into the Investment Policy and supersede any and all previous applicable language (see Exhibit 1, Allowable Investment Instruments Per State Government Code).

Unauthorized Investments
Investment of the City's investment portfolio in any of the following identified instruments is specifically prohibited:
• Local Agency Bonds
• California State and Local Agency Obligations
• Other State Obligations
• Negotiable Certificates of Deposit over $250,000 FDIC Limit • Reverse Repurchase Agreements
• Supranational Obligations
• Derivatives
• Common Stock
• Prohibited investments cited in CGC Section 53601.6, including but not limited to:
o Inverse Floaters
o Range Notes

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 o Mortgage Derivatives or other similar asset backed securities o Interest Only Strips
o Zero Interest Coupon Securities

9. Review of Investment Portfolio
The City's investment portfolio must be in compliance with Section 8 of this Policy at the time an investment is purchased. However, it is possible that, subsequently, the portfolio may be in breach of compliance even without any purchase activity due to a downgrade in a security's ratings, redemptions or maturities resulting in exceeding stipulated maximum percentages of a particular investment type, fluctuation in total portfolio size, or a change in California Government Code.

The portfolio shall be monitored, as often as practical, but at least quarterly. The Treasurer shall report any major and critical incidences of portfolio non-compliance either with statutes or Policy to the City Council and provide recommendations to remedy at least quarterly.

10. Investment Pools/Mutual Funds
A thorough investigation of any government sponsored pool and/or mutual fund is required prior to investing and on a continual basis. There shall be a questionnaire developed which will answer the following general questions:
• A description of eligible investment securities, and a written statement of investment policy and objectives.
• A description of how interest is calculated and distributed, and how gains and losses are treated.
• A description of how the securities are safeguarded (including the settlement processes),and how often the securities are priced and the program audited. • A description of who may invest in the program, how often, and what size of deposits and withdrawals are allowed.
• A schedule for receiving statements and portfolio listings. • Are reserves or retained earnings utilized?
• A fee schedule, and method for assessing fee
• Does the pool accept bond proceeds?

11. Collateralization
Collateralization will be required on two types of investments: certificates of deposit and repurchase agreements. In order to anticipate market changes and provide a level of security for all funds, the collateralization level for certificates of deposit will be 110% of market value of principal and accrued interest. Collateralization level for repurchase agreements shall be 102% of market value of principal and accrued interest. Collateral can be either U.S. Treasury securities or Federal Agency securities.

Section 53649 of the California Government Code specifies that the City Treasurer is responsible for entering into the deposit contracts with each depository. Investments held with third parties

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 holding collateral shall be properly collateralized in accordance with collateralization requirements of the California Government Code.

12. Safekeeping and Custody
A. Delivery vs. Payment: All security transactions entered into by the City shall be conducted on a "delivery vs. payment" (DVP) basis. The DVP basis for delivery applies also to the delivery and safekeeping of repurchase agreement collateral. Any exception to this standard delivery practice, e.g. a DVP failure necessitating delivery other than by simultaneous exchange, will require written procedural approval by the City Treasurer.

B. Custody: To protect against fraud and embezzlement, the investment securities of the City shall be held by a third party custodian according to established safekeeping procedures.

To protect against potential losses caused by the collapse of individual securities dealers, all securities owned by the City, including collateral on repurchase agreements, shall be held in safekeeping by the City's custodian bank or a third party bank trust department, acting as agent for the City under the terms of a custody or trustee agreement executed by the bank and by the City. Custody will be evidenced by safekeeping receipts.

13. Diversification
The City will diversify its investments by security type, issuer, credit risk profile, financial institution and maturity. See Section 8 for limitations by category on the investment of City funds. Maturities shall be selected which provide for stability of income and reasonable liquidity.

Risks of market price volatility shall be controlled through maturity and issuer diversification.

In order to reduce portfolio risk, the City's portfolio will be diversified by type and issuer. The portfolio shall be diversified to avoid incurring unreasonable and avoidable risks regarding specific security types or individual financial institutions. The City shall diversify its investments by investing funds among a variety of securities offering independent returns and financial institutions. In a diversified portfolio, occasional measured losses are inevitable, and must be considered within the context of the overall portfolio's investment return.

14. Maximum Maturities
To the extent possible, the City shall attempt to match its investments to anticipated cash flow requirements. The Treasurer will not directly invest in securities maturing more than five (5) years from the date of purchase or in accordance with government statute. The weighted average maturity (or duration) of the pooled portfolio shall reflect the liquidity needs and risk profile that the Treasurer deems appropriate. It is intended that all investments will be held to maturity to avoid possible capital loss.

15. Internal Controls
The Finance Director is responsible for establishing and maintaining a system of internal controls to ensure that City assets are protected from loss arising from fraud, employee error, imprudent actions, theft or misuse, and to ensure compliance with this Policy, City-mandated procedures and federal and state laws.

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 An internal control structure should include written procedures that encompass the following principles:
• Segregation of duties,
• Explicit delegation of authority and responsibility
• Timely reconciliation and balancing,
• Documentation, recording, and record keeping,
• Management control and oversight,
• Dual or secondary authorization.

The control structure should cover timely projections of cash flow and funding needs, cash collection and disbursements, wire transfers, anti-theft and anti-fraud practices, depository and custody services, collateral management, broker/dealer services, trading and confirmation, and master repurchase agreements (if appropriate).

It should be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management.

The Finance Director shall establish an annual process for independent review of these controls, including cash and investment testing, by an external auditor. This review will help to ensure compliance with the City's investment policies and procedures.

16. Performance Standards
The investment portfolio shall be designed with the objective of principal preservation, liquidity and obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs.

The City's investment strategy is passive, i.e. securities are purchased with the intent to hold to maturity. Given this strategy and given that the portfolio strategy may change over time due to the City's cash flow needs or due to market conditions, the Treasurer shall select an appropriate benchmark approximating the portfolio's weighted average maturity or select an appropriate combination of benchmarks that reflects the portfolio composition. The Treasurer shall compare the portfolio's total return annually against the appropriate benchmark to determine whether market yields are being achieved.

17. Reporting
Quarterly Reports
The Treasurer shall prepare a quarterly investment report to the City Council and City Manager within 30 days of the end of the quarter, in accordance with CGC Section 53646. Reports may be rendered more frequently at the discretion of the Treasurer or upon request by the City Council or

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 City Manager. Quarterly reports shall include the following information as of the end of the quarter:
• Type of investment
• Issuer
• Par and book value of the investment
• Market value
• Source of market value
• Maturity date
• Weighted average maturity of the portfolio
• Interest rate
• Percentage of the total portfolio represented by each investment category • Liquid balances, including, but not limited to, funds held in bank demand deposit accounts, LAIF and county pools
• A statement that the projected cash flow is adequate to meet expected obligations over the next six months, or an explanation of why sufficient money will not be available • A statement that the portfolio is in compliance with this investment policy, and if not, the reason for non-compliance and plan for remedy
Monthly Report
In accordance with CGC Section 53607, the Treasurer shall present a monthly report of transactions, including interest earned, purchases, sales and maturities to the City Council within 30 days of the end of the month.

Annual Report
Annually there shall be provided to the City Council and City Manager a report on the performance of the investment program. The report shall include a narrative discussion of the performance of the investment portfolio.

18. Investment Policy Adoption
The City's Investment Policy shall be adopted by resolution annually by the City Council. The policy shall be reviewed at least annually by the City Treasurer and the Finance Director, in conjunction with the City Manager, and any modifications must be approved by the City Council.

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24

CITY ARVIN

GLOSSARY OF INVESTMENT POLICY TERMS
Bank Deposit: Deposits in banks or other depository institutions that may be in the form of demand accounts (checking) or investments in accounts that have a fixed term and negotiated rate of interest Bankers' Acceptance: A draft or bill or exchange accepted by a bank or trust company. The accepting institution, as well as the issuer, guarantees payment of the bill.

Benchmark: A passive index used to compare the performance, relative to risk and return, of an investor's portfolio.

Book Value: The value at which an asset is carried on a balance sheet.

Broker: A person or firm that acts as an intermediary by purchasing and selling securities for others rather than for its own account
Buy and Hold Strategy: A strategy based on holding all securities until maturity, regardless of fluctuations in the market.

Cash Flow: A comparison of cash receipts (revenues) to required payments (debt service, operating expenses, etc.).

Certificate of Deposit (CD): A short-term, secured deposit in a financial institution that usually returns principal and interest to the lender at the end of the loan period.

CD Placement Service: A service that allows local agencies to purchase more than $250,000 in CDs from a single financial institution while still maintaining FDIC insurance coverage.

Collateral: Securities, evidence of deposit or other property, which borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.

Collateralization of Deposit: Process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing the repayment of deposited funds. Commercial Paper (CP): An unsecured short-term promissory note issued by corporations or municipalities, with maturities ranging from 2 to 270 days.

Comprehensive Annual Financial Report (CAFR): The official annual report for the City. It includes combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section.

County Pooled Investment Funds: The aggregate of all funds from public agencies placed in the custody of the county treasurer or chief finance officer for investment and reinvestment.

Coupon: The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value.

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 Credit Risk: The chance that an issuer will be unable to make scheduled payments of interest and principal on an outstanding obligation. Another concern for investors is that the market's perception of an issuer/borrower's credit will cause the market value of a security to fall, even if default is not expected.

Custodian: A bank or other financial institution that keeps custody of stock certificates and other assets.

Dealer: Someone who acts as a principal in all transactions, including underwriting, buying, and selling securities, including from his/her own account.

Default Risk: The risk that issuers/borrowers will be unable to make the required payments on their debt obligations.

Delivery vs. Payment: The payment of cash for securities as they are delivered and accepted for settlement.

Diversification: The allocation of different types of assets in a portfolio to mitigate risks and improve overall portfolio performance.

Duration: Indicator of the effect of an interest rate change on a bond price. The longer the duration, the greater the expected change in a portfolio's value when interest rates change.

Federal Deposit Insurance Corporation (FDIC): A federal agency that insures bank deposits, currently up to $250,000 per entity.

Financial Industry Regulatory Authority (FINRA): FINRA is the successor to the National Association of Securities Dealers (NASD) and the member regulation, enforcement and arbitration operations of the New York Stock Exchange. It is a non-governmental organization that regulates member brokerage firms and exchange markets. The government agency which acts as the ultimate regulator of the securities industry, including FINRA, is the Securities and Exchange Commission.

Government Sponsored Enterprises (GSE): Privately held corporations with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. Securities issued by GSEs carry the implicit backing of the U.S. Government, but they are not direct obligations of the U.S. Government. For this reason, these securities will offer a yield premium over Treasuries.

Interest: The amount a borrower pays to a lender for the use of his or her money.

Interest Rate Risk: Interest rate risk is the risk that an investment's value will change due to a change in the absolute level of interest rates, spread between two rates, shape of the yield curve, or any other interest rate relationship.

Liquidity: The measure of the ability to convert an instrument to cash on a given date at full face or par value.

Liquidity Risk: The risk that a security, sold prior to maturity, will be sold at a loss of value. For a local agency, the liquidity risk of an individual investment may not be as critical as how the overall liquidity of the portfolio allows the agency to meet its cash needs.

Local Agency Investment Fund (LAIF): A voluntary investment fund open to government entities and certain non-profit organizations in California that is managed by the State Treasurer's Office.

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 Market Risk: The chance that the value of a security will decline as interest rates rise. In general, as interest rates fall, prices of fixed income securities rise. Similarly, as interest rates rise, prices fall. Market risk also is referred to as systematic risk or risk that affects all securities within an asset class similarly.

Market Value: The price at which a security is trading and presumably could be purchased or sold at a particular point in time.

Master Repurchase Agreement: A written contract covering all future transactions between the parties to repurchase/reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer/lender to liquidate the underlying securities in the event of default by the seller/borrower.

Maturity: The date on which the principal or stated value of an investment becomes due and payable.

Medium Term Note: Corporate or depository institution debt securities meeting certain minimum quality standards (as specified in the California Government Code) with a remaining maturity of five years or less.

Money Market Mutual Funds: MMF's are mutual funds that invest exclusively in short- term money market instruments. MMF's seek the preservation of capital as a primary goal while maintaining a high degree of liquidity and providing income representative of the market for short- term investments.

Mutual Fund: An investment company that pools money and can invest in a variety of securities, including fixed-income securities and money market instruments.

Nationally Recognized Statistical Rating Organization (NRSRO): A rating organization designated by the SEC as being nationally recognized.

Negotiable Certificates of Deposit: Generally, short-term debt instrument that usually pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state-licensed branch of a foreign bank. The majority of negotiable CDs mature within six months while the average maturity is two weeks. Negotiable CDs are traded in a secondary market and are payable upon order to the bearer or initial depositor (investor). Negotiable CDs are insured by FDIC up to $250,000, but they are not collateralized beyond that amount.

Non-Negotiable Certificates of Deposit: CDs that carry a penalty if redeemed prior to maturity. A secondary market does exist for non-negotiable CDs, but redemption includes a transaction cost that reduces returns to the investor. Non-negotiable CDs issued by banks and savings and loans are insured by the Federal Deposit Insurance Corporation up to the amount of $250,000, including principal and interest.

Amounts deposited above this amount may be secured with other forms of collateral through an agreement between the investor and the issuer. Collateral may include other securities including Treasuries or agency securities such as those issued by the Federal National Mortgage Association.

Par Amount or Par Value: The principal amount of a note or bond which must be paid at maturity. Par, also referred to as the "face amount" of a security, is the principal value stated on the face of the security. A par bond is one sold at a price of 100 percent of its principal amount.

Portfolio: Combined holding of more than one stock, bond, commodity, real estate investment, cash equivalent, or other asset. The purpose of a portfolio is to reduce risk by diversification.

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24) Fiscal Year2023-24 City of Arvin Investment Policy 06/27/2023 Fiscal Year 2023-24 Price: Price is the amount of monetary consideration required by a willing seller and a willing buyer to sell an investment on a particular date.

Principal: The face value or par value of a debt instrument, or the amount of capital invested in a given security.

Prudent Investor Standard: A standard of conduct where a person acts with care, skill, prudence, and diligence when investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing funds. The test of whether the standard is being met is if a prudent person acting in such a situation would engage in similar conduct to ensure that investments safeguard principal and maintain liquidity.

Qualified Public Depository: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits.

Rate of Return: The yield obtainable on a security based on its purchase price or its current market price.

Repurchase Agreement: An agreement of one party (for example, a financial institution) to sell securities to a second party (such as a local agency) and simultaneous agreement by the first party to repurchase the securities at a specified price from the second party on demand or at a specified date.

Safekeeping: Offers storage and protection of assets provided by an institution serving as an agent.

Safety: In the context of investing public funds, safety relates to preserving the principal of an investment in an investment portfolio; local agencies address the concerns of safety by controlling exposure to risks.

Secondary Market: A market made for the purchase and sale of outstanding issues following the initial distribution.

Total Return: Total return includes interest, realized gains and losses, and unrealized gains and losses over a given period of time.

U.S. Agency Obligations: Agencies of the Federal government set up to supply credit to various classes of institutions (e.g. savings & loans, small business firms, students, farmers, housing agencies). Examples include Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Federal Home Loan Bank (FHLB) and Federal Farm Credit Bank (FFCB).

U.S. Treasury Obligations: Debt obligations of the U.S. Government sold by the Treasury Department in the forms of bills, notes, and bonds. Bills are short-term obligations that mature in one year or less and are sold at a discount. Notes are obligations that mature between one year and ten years. Bonds are long-term obligations that generally mature in ten years or more.

Weighted Average Maturity: The average maturity of all the securities that comprise a portfolio, typically expressed in days or years.

Yield: The current rate of return on an investment security generally expressed as a percentage of the securities current price.

3.A.3
Attachment: FY 24 Investment policy (City of Arvin Investment Policy FY 23-24)

CITY OF ARVIN
Staff Report
Special Meeting Date: June 27, 2023
TO: Arvin City Council
FROM: Jeff Jones, City Manager
SUBJECT: Approval of Emergency Improvement Capital Account Credit Agreement between the City of Arvin and Quantum Farms, LLC for Emergency Repairs.

Purpose:

The approval of the Capital Account contract between the City of Arvin and Quantum Farms, LLC (“Quantum”) will provide a one-time reimbursement of $54,000.00 for imminent emergency repairs. Staff recommends the Council approve the agreement as to its material terms, and authorize the City Manager to make any non-material, technical, and clerical edits and corrections to the agreement subject to approval as to form by City Attorney.

Background:

In late September of 2021, Arvin City Engineer, Adam Ojeda, notified Dr. Trent Jones, CEO of Apothio and Quantum of an imminent emergency at the Arvin Wastewater Treatment Plant (WWTP), specifically surrounding the 200+ million gallon, secondary effluent storage tank, named Earthen Tank #3. This unlined earthen tank was leaking profusely along the entire southwest side (along Rancho Road) of the tank from deep below the ground, and to the surface.

Adam was genuinely concerned that this tank would suffer catastrophic failure and hemorrhage across Rancho Road, first flooding Grimmway’s Organic Farm with secondary effluent.

Additionally, the hydraulic pressure of a 20 foot deep, 200+ million gallons create on the sides of an unlined tank are enormous, so the first emergency order was to begin draining Earthen Tank #3 as quickly as possible.

Additionally, once the California Regional Water Board (CRWB) was notified, via a video conference, Mr. Clay Rodgers, Assistant Executive Director of the Central Valley Regional Control Water Board, literally screamed at Adam purporting that if “that tank hemorrhages, he will ensure that Arvin is sued into oblivion by the CRWB, ensuring that Arvin would no longer exist as an incorporated California City”.

The leading issue is that the City of Arvin did not have the money, engineers, equipment or staff to fulfill this task, which meant that our small group had to begin emergency engineering and repairs to an already dilapidated Arvin farm irrigation network to drain Earthen Tank #3 as quickly as possible. Also, to be clear, we received no assistance from the Veolia WWTP Team. In fact, Veolia would notify the CRWB if they felt that we were pumping the water incorrectly or beyond agronomic rates.

It is also very important to note that by December 2021, Mr. Clay Rodgers, CRWB, declared a state of emergency in Arvin regarding the imminent hemorrhage of Earthen Tank #3. Mr. Rodgers instructed the City to immediately drain Earthen Tank #3 and without concern for normal agronomic water rates on the land. Thus, City Manager Jeff Jones, City Engineer Adam Ojeda

4.A.1
Attachment: Emergency Repair Capital Account SR (Emergency Improvement Capital Account Agreement Quantum Farms) and Apothio/Quantum CEO, Trent Jones agreed to fully engage, complete this task as quickly and as inexpensively as we can, and most importantly, we completed the task.

Thus, as a working Team, we completed the following tasks:

1. All costs were paid out of pocket by Quantum Farms, and does not include any form of a profit margin.

2. There are well over 25,000 linear feet of old, dilapidated 16" - 24" plastic and concrete irrigation pipe routed throughout the original Arvin Farm. For example:
a. There is over 2,700 feet linear feet of concrete irrigation pipe on the north side of the City Reserve Farm. However, historically, someone used heavy equipment to destroy the underground concrete pipe approximately every 30 feet of concrete.

There were dozens of fractures like this in that 2,700 foot stretch of pipe alone.

These repairs were made to add the 75 acres of effluent discharge on the City’s property.
b. In order to irrigate the Garcia Farm, there is a City owned 1,275 foot section of pipe from the City well pump and the southern border of Banana Lakes. The majority of that irrigation pipe was intentionally destroyed or damaged throughout that section, and required repairs to add these 75 acres of effluent discharge.

3. The first 20 months of time spent was the most rigorous used, engineer, repair and manage Arvin's WWTP secondary effluent and Farm infrastructure to the point of taking Earthen Tank #3 (ET#3) offline by mid-2022.

4. The first 12 months of the emergency required an extreme amount of labor to engineer, plan and physically repair existing infrastructure to properly empty ET #3.

5. Once the ET #3 was empty we continued with a tremendous amount of irrigation pipe repairs, especially on the south side of Banana Lakes, and the west side of the City Residential Farm.

6. From mid-2022 to current, Quantum has spent a significant amount of time preparing for and presenting at the CRWB meetings and hearing. We have never added any cost to the City for these efforts. Also, Dr. Trent Jones has not added any cost for the countless personal hours spent supporting Arvin, Engineering, managing the capital expenditures and preparing for CA Regional Water Board.

7. Per the CRWB, there are significant, ongoing repairs of pumps, valves, pipe and repairs to ensure Arvin’s compliance with the WDR & CRWB.

8. Per Dr. Jones and Team’s request, a large number of Engineers, Managers & Compliance Staff have delivered significant pro bono hours of advice, consult and actual work on this case.

9. Per the Apothio/Quantum Farm Lease Contract, these capital costs do not include any "standard", contracted farming costs. Those are separate and apart from this Capital Account and are solely borne by Quantum Farms for the production of the hay.

Introduction:

City Manager Jeff Jones, City Engineer Adam Ojeda and Apothio/Quantum CEO, Trent Jones agreed to complete this task as quickly and as inexpensively as possible. Most importantly, we completed the task, Earthen Tank #3 is empty, the City is no longer at risk, Carollo Engineering has been engaged to submit a $180 million grant request for a new WWTP and the CRWB is both relieved and pleased with the work that we have all done.

4.A.1
Attachment: Emergency Repair Capital Account SR (Emergency Improvement Capital Account Agreement Quantum Farms) In good faith, Dr. Jones and Quantum Farms completed this task without a signed and completed contract. Now it is the City’s turn to approve and complete the “Capital Account” with Quantum Farms for $542,620.20, while providing the $54,000.00 cash reimbursement. The cost to perform this work is exponentially lower than any other actual cost Arvin could have achieved.

The balance of the monies owed to Quantum Farms will not accrue interest, but will be reduced through future rental fees, city fees, or permit fees charged to Quantum; thereby, reducing the balance of the capital account to the point of zero dollars.

Analysis:

Staff reviewed Apothio’s/Quantum proposal on the basis of:

1. Responsiveness to the Request for Proposals and understanding of the scope of work. Dr. Jones and Team went well beyond expectations in the response to the WWTP Earthen Tank Emergency.

2. Qualification and experience of the firm and individual staff members. This Team consistently delivered support engineering teams, while successfully making the improvements needed.

3. References.

4. Lease structure and payments proposed
After reviewing this proposal, staff believes that the Apothio/Quantum Team has proven to the City of Arvin that they are qualified and capable to undertake the obligations set forth in this Agreement such that recommends that the City Council award this contract to Quantum.

Fiscal Impact:

The cost of making these repairs far outweighs the disastrous consequences of the Earthen Tank #3 disaster. This successful work and repairs ensure the future existence, future grants and future growth of the City of Arvin.

4.A.1
Attachment: Emergency Repair Capital Account SR (Emergency Improvement Capital Account Agreement Quantum Farms) AGREEMENT NO. _________

EMERGENCY IMPROVEMENT

CAPITAL ACCOUNT CREDIT AGREEMENT
This EMERGENCY IMPROVEMENT CAPITAL ACCOUNT CREDIT
AGREEMENT (“Agreement”) is entered into this June 27, 2023 by and between the CITY OF ARVIN, a California municipal corporation (“CITY”), and Quantum Farms, LLC, a California Limited Liability Company, (“Quantum”). CITY and Quantum are sometimes hereinafter referred to individually as “Party” and collectively as “Parties”.

RECITALS
WHEREAS, Quantum leases 253 acres of real property from the CITY and other 3rd parties located within the CITY which is more specifically described in the legal description set forth in Exhibit “A”, attached hereto and incorporated herein by this reference (“Property”); WHEREAS, the Lease Agreement between the CITY and Quantum is attached hereto as Exhibit “A(1)” and incorporated herein by this reference.

WHEREAS, as outlined fully in Exhibit “B,” Quantum and City worked together in good faith, diligence and regulatory compliance throughout the emergency created by the Wastewater Storage Earthen Tank #3 failure, beginning in September 2022 through current date.

WHEREAS, as part of the good faith efforts concerning the emergency create by the failure of Earthen Tank #3, Quantum expended October 2021 to April 2023 to help remedy the emergency situation and reduce the CITY’s potential exposure to further damages.

WHEREAS, Quantum has requested reimbursement of such expenditures through a credit account to the rent due under its Lease Agreement;
WHEREAS, CITY and Quantum now desire to enter into this Agreement for the following purpose: to provide a means by which Quantum’s costs for the emergency actions it took to help remedy the situation caused by the failure of Earthen Tank #3 at the CITY’s Wastewater Treatment Facility are offset against Quantum’s obligation to pay the CITY Rent under the Lease Agreement.

NOW, THEREFORE, for the purposes set forth herein, and for good and valuable consideration, the adequacy of which is hereby acknowledged, Quantum and CITY hereby agree as follows:

TERMS

1. Incorporation of Recitals. The Parties hereby affirm the facts set forth in the Recitals above and agree to the incorporation of the Recitals as though fully set forth herein.

2. Construction of Emergency Improvements. Quantum constructed or took action at its own

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum cost, expense, and liability to make those Improvements generally described as Emergency Improvements, and as shown more specifically on Exhibit “B,” the plans, profiles, and specifications, which have been approved and accepted by CITY, and which are incorporated herein by this reference.

3. Improvement Credits.
a. Credit Offset Against Quantum’s Improvements. In consideration of the Emergency Improvements made by Quantum, credit shall be applied by CITY to offset the amount expended by Quantum for such Emergency Improvements, subject to adjustment and reconciliation under Section 3(c) of this Agreement (“Emergency Improvement Credit” or “EIC”).
b. Verified Cost of the Emergency Improvements. Quantum shall submit to the CITY the information set forth in the attached Exhibit “C”. The CITY shall use the information provided by Quantum to calculate the total actual costs incurred by Quantum in delivering the Emergency Improvements covered under this Agreement (“DIF Verified Costs”). The CITY will use its best efforts to determine the amount of the Emergency Improvement Verified Costs and provide Quantum written notice thereof within thirty (30) calendar days of receipt of all the required information from Quantum.
c. Reconciliation; Final Credit Offset Against Rent Obligations. The actual amount of EIC that shall be applied by CITY to offset Quantum’s Rent Obligation shall be equal to the Emergency Improvement Verified Costs (“Actual EIC”). No Actual EIC will be provided until the Emergency Improvement Verified Costs are determined through the reconciliation process.
d. Reimbursement. City shall provide Quantum with a direct reimbursement related to the Emergency Improvements in the amount of $54,000, within 10 days of the effective date of this Agreement (“Reimbursement Amount”). The Reimbursement Amount shall reduce the Emergency Improvement Credit in a proportionate amount. The Parties agree that the Reimbursement shall be subject to all terms and conditions of this Agreement.

4. Miscellaneous.
a. Assignment. Quantum may assign all or a portion of its rights pursuant to this Agreement to a successor of its Lease Agreement with the City. Quantum and such successor shall provide to CITY such reasonable proof as it may require concerning the Lease Agreement was properly assigned and/or transferred. Any assignment of the Lease pursuant to this section shall not be effective unless and until Quantum and Assignee have executed an assignment agreement with CITY in a form reasonably acceptable to CITY, whereby Quantum and Assignee agree, except as may be otherwise specifically provided therein, to the following: (1) that Assignee shall receive all or a portion of Quantum's rights pursuant to this Agreement, including such credit as is determined to be applicable to the portion of the Property

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum purchased by Assignee pursuant to this Agreement, and (2) that Successor/Assignee shall be bound by all applicable provisions of this Agreement. b. Relationship Between the Parties. The Parties hereby mutually agree that this Agreement shall not operate to create the relationship of partnership, joint venture, between CITY and Quantum. Nothing herein shall be deemed to make Quantum or its contractors an agent or contractor of CITY.
c. Authority to Enter Agreement. Quantum hereby warrants it has the legal capacity to enter into this Agreement. Each Party warrants that the individuals who have signed this Agreement have the legal power, right, and authority make this Agreement and bind each respective Party.
d. Prohibited Interests. Quantum warrants that it has not employed or retained any company or person, other than a bona fide employee working solely for Quantum, to solicit or secure this Agreement. Quantum also warrants that it has not paid or agreed to pay any company or person, other than a bona fide employee working solely for Quantum, any fee, commission, percentage, brokerage fee, gift, or other consideration contingent upon the making of this Agreement. For breach of this warranty, CITY shall have the right to rescind this Agreement without liability. e. Notices. All notices, demands, invoices, and written communications shall be in writing and delivered to the following addresses or such other addresses as the Parties may designate by written notice:

To CITY: City of Arvin
Attn: Public Works Director
200 Campus Drive
Arvin, CA 93203
To Quantum: Quantum Farms, LLC
Attn: Dr. Trent Jones
_________________________
_________________________
Depending upon the method of transmittal, notice shall be deemed received as follows: by messenger, as of the date delivered; and by U.S. Mail first class postage prepaid, as of 72 hours after deposit in the U.S. Mail. f. Cooperation; Further Acts. The Parties shall fully cooperate with one another, and shall take any additional acts or sign any additional documents as may be necessary, appropriate, or convenient to attain the purposes of this Agreement. g. Construction; References; Captions. It being agreed the Parties or their agents have participated in the preparation of this Agreement, the language of this Agreement shall be construed simply, according to its fair meaning, and not strictly for or against any Party. Any term referencing time, days, or period for performance shall

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum be deemed calendar days and not work days. All references to Quantum include all personnel, employees, agents, and contractors of Quantum, except as otherwise specified in this Agreement. All references to CITY include its elected officials, officers, employees, agents, and volunteers except as otherwise specified in this Agreement. The captions of the various articles and paragraphs are for convenience and ease of reference only, and do not define, limit, augment, or describe the scope, content, or intent of this Agreement. h. Amendment; Modification. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing and signed by both Parties. i. Waiver. No waiver of any default shall constitute a waiver of any other default or breach, whether of the same or other covenant or condition. No waiver, benefit, privilege, or service voluntarily given or performed by a Party shall give the other Party any contractual right by custom, estoppel, or otherwise. j. Binding Effect. Each and all of the covenants and conditions shall be binding on and shall inure to the benefit of the Parties, and their successors, heirs, personal representatives, or assigns. This section shall not be construed as an authorization for any Party to assign any right or obligation.
k. No Third Party Beneficiaries. There are no intended third-party beneficiaries of any right or obligation assumed by the Parties.
l. Invalidity; Severability. If any portion of this Agreement is declared invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions shall continue in full force and effect.
m. Consent to Jurisdiction and Venue. This Agreement shall be construed in accordance with and governed by the laws of the State of California. Any legal action or proceeding brought to interpret or enforce this Agreement, or which in any way arises out of the Parties’ activities undertaken pursuant to this Agreement, shall be filed and prosecuted in the appropriate California State Court in the County of Kern, California. Each Party waives the benefit of any provision of state or federal law providing for a change of venue to any other court or jurisdiction including, without limitation, a change of venue based on the fact that a governmental entity is a party to the action or proceeding, or that a federal right or question is involved or alleged to be involved in the action or proceeding. Without limiting the generality of the foregoing waiver, Quantum expressly waives any right to have venue transferred pursuant to California Code of Civil Procedure Section 394.
n. Time is of the Essence. Time is of the essence in this Agreement, and the Parties agree to execute all documents and proceed with due diligence to complete all covenants and conditions.

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum o. Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and which collectively shall constitute one instrument. p. Entire Agreement. This Agreement contains the entire agreement between CITY and Quantum concerning those funds and actions taken by Quantum related to the Emergency situation caused by the failure of Earthen Tank #3 at the CITY’s Wastewater Treatment Facility and supersedes any prior oral or written statements or agreements between CITY and Quantum related to such subject matter. [SIGNATURE PAGE FOLLOWS]

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum IN WITNESS WHEREOF, City and Tenant have entered into this Lease on the day and year first above written.

CITY: City of Arvin, a California
municipal corporation
By:

TENANT: Quantum Farms, LLC, a California
Limited Liability Company *
By:

Jeff Jones, City Manager
By: ___________________________________
ATTEST:

By:

APPROVED AS TO FORM
By:

Cecilia Vela, City Clerk Attorney for Tenant

APPROVED AS TO FORM
By:
*Provide notarial acknowledgement for signature
Nathan M. Hodges, City Attorney

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum EXHIBIT “A”

LEGAL DESCRIPTION OF PROPERTY
[ATTACHED BEHIND THIS PAGE]

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum

4.A.3
Attachment: Exhibit A_Location of Property_Emergency Credit Agmt Quantum LLC_062723 Special CC

4.A.3
Attachment: Exhibit A_Location of Property_Emergency Credit Agmt Quantum LLC_062723 Special CC

4.A.3
Attachment: Exhibit A_Location of Property_Emergency Credit Agmt Quantum LLC_062723 Special CC EXHIBIT “A(1)”

LEASE AGREEMENT

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum

AGREEMENT NO. ________

CITY OF ARVIN/SUCCESSOR AGENCY

FIRST AMENDMENT TO AGRICULTURAL LEASE AGREEMENT
This Agricultural Lease Agreement (“Lease” or “Agreement”) is made and entered into effective _______________, 2023 (“Effective Date”), by and between the City of Arvin, a municipal corporation and the Successor Agency to Arvin Community Redevelopment Agency (hereinafter collectively referred to as “City”), and Apothio, LLC, an Indiana limited liability company, and Quantum Farms, LLC, a California limited liability corporation (hereinafter collectively referred to as “Tenant”), with reference to the following facts:

RECITALS
WHEREAS, City and Apothio entered into that certain Lease Agreement dated April 1, 2021 (the “Apothio Lease Agreement”). A true and correct copy of the Apothio Lease Agreement is attached hereto and incorporated herein as Attachment “A.” All terms and conditions of the Apothio Lease shall remain in full force and effect, except for those terms and conditions which are expressly modified in this Agreement;
WHEREAS, pursuant to the Apothio Lease Agreement, City Property was leased to Apothio, LLC. Both the City of Arvin and Apothio have mutually agreed to amend the Tenant from Apothio, LLC to Quantum Farms, LLC, which is a California based Limited Liability Company. As with Apothio, LLC, all leadership and key contacts remain that same for Quantum Farms, LLC;
WHEREAS, pursuant to the Apothio Lease Agreement, the City Property was leased to Tenant for the planting, growing, harvesting, and processing of annual legally marketable crops, specifically industrial hemp, and soil preparation as needed, consistent with the Permit (the “Permitted Use”). Both City and Tenant agree that the Tenant has exclusive rights to the management and application of all Secondary Wastewater for the next 25 years following the date of this Amendment;
WHEREAS, pursuant to the Apothio Lease Agreement, the Parties acknowledged that the City Property receives treated water from the City's Wastewater Treatment Plant (“Treated Water”) and Tenant acknowledged and was aware that material aspects of the Lease Agreement were (1) acceptance and usage of 100% of the Treated Water for the Permitted Use; WHEREAS, City and Tenant wish to enter into this Amendment to add additional 75 acres of property owned by the Successor Agency to the Arvin Community Redevelopment Agency (“Additional Property”) to the Lease Agreement under the same 25 year terms and provisions related to such additional real property;
WHEREAS, in addition to the Additional Property, Tenant has also added another 75 acres of tillable land via the “Garcia MOU” and has the option to add more land as needed. These non4.A.4 Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

City owned lands provide additional land for disbursement of the Secondary Water Effluent.

These same acres will not be subject to any sort of rent payment or revenue sharing to the City.

WHEREAS, the Tenant has added over 300 acres of “Winter Crops” to the Farming Operation; thereby, increasing the farm’s ability to use and percolation the secondary effluent.

WHEREAS, if necessary to dispose of the Secondary Water Effluent, the City and Tenant will continue to acquire additional land by standard lease, complete acquisition, or when legally justified, eminent domain.

WHEREAS, City and Tenant wish to enter into this Amendment to modify certain payment terms contained in the Lease Agreement. These Terms will be negotiated by the City Manager and Tenant;
WHEREAS, City and Tenant wish to enter into this Amendment to modify the future existing Wastewater Treatment systems. The Tenant has worked diligently and has borne significant extraneous financial costs in the repair of wastewater emergencies related to historical wastewater infrastructure and wastewater management practices that existed before the Tenant became active. The Arvin City Manager and CEO of Quantum Farms, LLC will complete an updated, mutually agreed upon, payment/repayment schedule between the City and Tenant, applying a portion of the Tenant’s emergency expenses toward all past or any current rent or other fees due to the City of Arvin through 2026.

WHEREAS, the Tenant and City acknowledges that each party has worked together in good faith, diligence and regulatory compliance throughout the emergency created by the Wastewater Storage Earthen Tank #3, beginning in September 2021 through current date. It is the intent of the Parties to work together to negotiate mutually agreeable additional agreements, which may be drafted and executed as separate document(s) not included in this Agreement. Such negotiations will aim at creating potential additional agreements that seek to ensure that the City and Tenant, based upon objective performances, create a very long term Public-Private Partnership” agreement, which if agreed to by the parties will be known as the “International Sustainability Incubator Site” for the research, development and commercialization of sustainable clean water, clean air, the bioremediation and recycling of clean water, BioPharma production of organic, FDA level whole plant extracted, natural plant medicines and sustainable green energy production. Under any such potential agreement, the Tenant would share its unique abilities via a significant amount of plant genetics, intellectual property, patents, access to capital and grant monies in order to actualize the “Arvin International Sustainability Incubator Site” (AISIS).

WHEREAS, City and Tenant agree that any potential Public Private Partnership would include broad, far reaching mutual considerations. For example, the City and Tenant both acknowledge that the AISIS would be designed to create clean water and energy for the City of Arvin, while also providing new, unique and international workforce development, education, scholarship, and employment opportunities for the Citizens of Arvin for many decades to come.

Successful inclusion of AISIS would likely reward the City and/or its Designees and the Tenant and/or its Designees with an AISIS contract for no less than 30 years after the completion of said project. Notwithstanding the foregoing, nothing in this Agreement shall create a binding

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

obligation on either party to enter into any agreement establishing a Public-Private Partnership between the City and Tenant or any designees or agents thereof.

AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, City and Tenant agree as follows:

1. Recitals. The Recitals above are true and correct and incorporated herein by this reference.

2. Name Change. The Tenant in the Apothio Lease Agreement shall be changed from Apothio, LLC, an Indiana limited liability company to Quantum Farms, LLC, a California limited liability company.

3. Lease of Premises. City hereby leases to Tenant, and Tenant leases from City, on the terms and conditions set forth in this Lease, the Additional Property, as described above and as generally depicted on the diagram attached as Attachment “B”. The parties acknowledge the Lease of the Additional Property shall not include that area currently being used for petroleum extraction operations located to the west of the Sycamore Sump area.

Additionally, the Parties acknowledge that this Lease, because it involves Successor Agency Land, shall not become effective related to that portion of the Property, until approved by the County of Kern Oversight Board, if necessary.

4. Term and Effective Date. The term of the Lease begins on the Effective Date of this Amendment, and terminates twenty-five (25) years later, on _____________, 2048, unless terminated sooner pursuant to Section 24 of this Agreement (the “Lease Term”). The Lease Term may be extended by up two (2) additional five-year periods, upon mutual written assent of the parties.

5. Use of Property; Updating the Permit; Indemnification. a. The Property is leased to Tenant for the planting, growing, harvesting, and processing of annual legally marketable crops, and soil preparation as needed consistent with the Permit (the “Permitted Use”). As the Permit currently only authorizes the use of the Treated Water on animal and fiber crops 3-way grass, corn and alfalfa, Tenant shall only cultivate industrial hemp, 3-way grass, corn and alfalfa until the Permit is amended or otherwise updated to allow the cultivation of industrial hemp. Once the Hemp Permit authorizes the cultivation of industrial hemp, and Tenant demonstrates that such a crop is capable of accepting and using all of the effluent generated by the WWTP and can be farmed in compliance with the applicable Water Discharge Requirement Permit (“Permit”), Tenant may plant up to 35,000 Tenant-derived hemp dioecious (male and female) seeds per acre. At all times during the term of this Agreement, and any extension terms, Tenant must obtain all necessary permits and comply with all current regulations as defined by CDFA. Tenant shall not use, or permit to be used, any part of the Property for any purpose other than the Permitted Use. All operations directly or indirectly related to the Permitted Use shall be performed in accordance with all then-applicable laws including the Permit and the best course of farming practiced in the vicinity. If

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

Tenant fails to so perform or uses the Property for a use other than the Permitted Use, City may provide Tenant with a 10-days’ written notice of such failure. If Tenant does not take satisfactory remedial measures within that 10-day-period, then City may take necessary remedial measures, at the expense of Tenant, for which Tenant agrees to reimburse City on demand.
b. Tenant acknowledges and agrees that the Permit, which was issued in 2000, outlines the requirements for the proper use and application of the undisinfected secondary effluent produced by the treatment train from the WWTP. Because of the onset of the 2022 3
rd Earthen Tank Emergency, the Permit will need to be
updated or renewed through equal cooperation between the Tenant and City. The Tenant and City will work together in good faith, while bearing their own costs to complete the task before the California Regional Water Quality Board (“RWQCB”) in the most efficient manner possible. Tenant further acknowledges and agrees that, before Tenant can commence farming industrial hemp on the Property, Tenant must update or renew the Permit, as required by RWQCB, to state that the Property will accept all of the effluent generated by the WWTP, which is estimated to be approximately 1.3 million gallons per day or 475 million gallons per year (1,456 acre feet).
c. Tenant has engaged Waterworks Technology, Inc. (“Waterworks”) as a subcontractor to assist Tenant with the management of the Treated Water from the WWTP. Tenant shall be solely responsible for managing Waterworks, and making sure that Waterworks complies with all requirements of this Lease and the Permit, as may be amended, including providing proof to the City that Waterworks carries the same types and amounts of required insurance as Tenant is required to carry. d. Tenant will not permit any noxious weeds to go to seed on the Property, and all seed planted thereon shall be free from morning glory and other noxious weed seeds. City reserves the right to go onto the Property, at any time, for the purpose of inspecting same and treating any morning glory or other noxious weeds which may be growing thereon. Whenever Tenant removes crops from the Property, or the Additional Premises, Tenant agrees to plow, disk, or otherwise cultivate the land where such crops have been removed so that no weeds grow thereon. e. Tenant shall, at Tenant’s sole cost and expense, properly comply with any and all laws, ordinances, rules, regulations, requirements, and orders including the Permit, present or future, of the federal, State of California, County of Kern, or City’s government which may in any way apply to the Permitted Use, maintenance of, occupation of, or operations on the Property, the production of crops thereon, or the sale or other disposition of such crops.
f. Tenant shall not release, discharge, dispose of, or spill any toxic or hazardous substance, waste, or materials on the Property, except that Tenant may apply pesticides, herbicides, and fungicides as usually used in farming operations in accordance with industry standards and any and all regulations pertaining to the use

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

thereof; provided, however, that Tenant agrees not to use pesticides, herbicides, or fungicides that will have residual effect beyond the Lease Term, without the prior written consent of City.
g. Tenant acknowledges that it shall have the right and duty as provided herein to take up to two (2) mgd of effluent from the WWTP for and during the term of this Lease.

Tenant shall obtain the written consent from Landlord to dispose of effluent in a manner other than as herein provided. City agrees that Tenant may have, and Tenant agrees and covenants to take, for and during the Term all effluent from the WWTP at all times of the year and Tenant agrees to use the same in such a way as to be in compliance with all applicable laws, rules or regulations. h. Tenant shall be responsible for repair of all irrigation facilities, including but not limited to pipelines, valves, standpipes, and tail water reservoir and fences on the Property solely caused by Tenant's acts or negligence. City shall be responsible for any repairs due to age, deterioration, flood damage, vandalism, etc. City agrees to cooperate with Tenant in such matters that will arise so far as it is practicable. City shall be solely responsible for all the maintenance of the pipelines, valves, standpipes and pumps not located on the Property, but used to convey effluent to the Property. Tenant agrees to cooperate with City in such matters that will arise so far as it is practicable. City shall offset those amounts due to City from Tenant for all costs and expenses related to repair of irrigation facilities due to age, deterioration, flood damage, vandalism, etc., after receipt and approval of an invoice describing the cost and expense.
i. City shall be responsible for the cost of the electrical power necessary to operate the irrigation pump(s) and tail water pump located on the Property. j. City shall maintain and keep in good repair a water well on the Property for use by Tenant.

6. Regulatory Agency Requirements. Tenant shall obtain any required written approval from the Kem County Health Department and California Regional Water Quality Control Board of cropping plans for any and all portions of the Property irrigated with treated effluent. City shall be responsible for ensuring that the effluent delivered to the Property meets any and all regulatory requirements and the disposal of effluent on the Property is compliant with all Waste Discharge Requirements and other regulatory strictures. Tenant shall be responsible for lawfully utilizing and disposing of all treated effluent received, within the boundaries of the Property and, in its discretion, on nearby property leased by Tenant and in compliance with any and all Waste Discharge Requirements. Tenant shall comply with all applicable requirements of the California Regional Water Quality Control Board for wastewater reclamation in the operations on the Property. Tenant shall provide a setback as specified in the Waste Discharge Requirements from any traffic lane of a dedicated public road or highway for any effluent storage reservoirs which are constructed within the Property.

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

Tenant agrees to defend, indemnify and hold harmless City, and each of its officers, directors, employees, agents and attorneys (collectively, the “Indemnitees”) from and against any and all obligations (including removal and remedial actions), losses, claims (including third party claims), suits, judgments, liabilities, penalties, damages (including consequential and punitive damages), costs and expenses (including attorneys’ fees and expenses) of whatever kind or nature whatsoever that may at any time be incurred by, imposed on, or asserted against the Indemnitees directly or indirectly based on, or arising or resulting from (i) the actual or alleged presence of Hazardous Substances or Materials at, on or beneath the Property, or (ii) any environmental claim relating in any way to the alleged presence of Hazardous Substances or Materials at, on or beneath the Property; provided, that this indemnification shall only apply to Hazardous Substances or Materials resulting from Tenant’s actions or omissions. For the purpose of this Agreement, “Hazardous Materials” or “Hazardous Substances” shall include, but not be limited to, substances defined as “extremely hazardous substances,” “hazardous substances,” “hazardous materials,” “hazardous waste,” or “toxic substances” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.

Sections 11001-11050; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; and those substances defined as “hazardous waste” in Section 25117 of the California Health and Safety Code, as “infectious waste” in Section 25117.5 of the California Health and Safety Code, or as “hazardous substances” in Section 25316 of the California Health and Safety Code or “hazardous materials” as defined in Section 353 of the California Vehicle Code; and in the regulations adopted and publications promulgated pursuant to said laws.

The parties acknowledge that portions of the Property receives treated water from the City’s WWTP (“Treated Water”). Tenant acknowledges and is aware that a material aspect of this Agreement is the usage of 100% of this Treated Water for the growth of crops, and shall accept and use for the irrigation of the Property 100% of the Treated Water. Tenants understands that, because of the use of the Treated Water, those crops that receive Treated Water may not be grown for human consumption. Tenant shall at all times comply with Permit, as it may be amended to authorize Tenant’s use of the Treated Water. Tenant’s failure to: modify the Permit as required by RWQCB for the Permitted Use to occur, to grow crops on the Property, to contain the Treated Water on the Property, and the Additional Premises, utilize 100% of the Treated Water, or to comply with the Permit, or any combination thereof, will constitute a material breach of this Agreement.

City shall provide Tenant with 100% of all Treated Water for the Permitted Use as such Treated Water is available.

7. Taxes. Tenant acknowledges that although the City is a municipal entity exempt from real property taxes, Tenant’s possessory interest under this Lease may be subject to real property taxation. Tenant shall be solely liable for the payment ofsuch taxes, if any. Tenant shall pay, when due, real property and any other taxes and general and special assessments of every description which, during the term of this Lease, may be levied upon or assessed against the Property and all interest therein (possessory or otherwise). Tenant shall also

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

pay all licenses or permit fees necessary or required by law for the conduct of Tenant's operation.

8. Rent.
a. Base Rent. Tenant agrees to pay a base rent flat fee of $100 per acre for a total of Twenty-Four Thousand Seven Hundred Dollars ($24,700.00), per year to City as rent for the use and occupancy of the Property originally leased by Apothio. Tenant also agrees to pay a base flat fee of $100 per acre for a total of Seven Thousand Five Hundred Dollars ($7,500.00), per year to the City as rent for the use and occupancy of the Additional Premises. The RWQCB requires a Permit or amended Permit to be issued for the Additional Property to accept or have Treated Water applied to it. Both City and Tenant therefore acknowledge and agree that, although the Additional Property is currently being used for farming purposes, the State Water Board must approve the use of this real estate for application of secondary effluent and growing of said animal and/or fiber crops for Tenant’s continued use of the Additional Property for the Permitted Use. Both the City and Tenant acknowledge that the State is aware that Tenant is currently, or will be in the near future, planting, growing, harvesting, or processing of annual legally marketable crops on the Additional Property as such facts were part of the City of Arvin’s overall sustainable wastewater treatment, bioremediation of water and energy production plan submitted to the State of California Waterboard in April 2023. b. Income Sharing. In addition to base rent, at or shortly after each calendar yearend, Tenant will also make an income sharing payment to the City in an amount equal to 25% of the net income derived from the growth processing, manufacturing and sale of all crops farmed on the Property and the Additional Premises, including, but not limited to, alfalfa, three way grass, or industrial hemp, as applicable, and all of its byproducts from the Property in the preceding year. c. Charitable Contribution. At the end of each calendar year, Tenant shall also donate to the Noah’s Arch Foundation, a 501(c)(3) non-profit (www.noahsarchfountaion.com) (“NAF”) an additional 25% of the net income derived from the growth, processing, manufacturing, and sale of all crops farmed on the Property and the Additional Premises, including, but not limited to, alfalfa, three way grass, or industrial hemp, as applicable, and all of its byproducts from the Property in the preceding year. This donation shall be earmarked for programs for the benefit of economic and workforce development programs, including training programs and facilities, to benefit residents of the City and/or for use in the Kern Community College District Promise Scholarship Programs or similar educational programs available to benefit residents of the City. d. Carbon Credits. Any payments or credits which pay farmers for carbon sequestration or otherwise related to the use of the Property for the Permitted Use will be treated as income to Tenant, such that the payments or credits shall be deemed income to Tenant from the Permitted Use, accruing to the benefit of the

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

City and beneficiaries of the NAF through the income-sharing and charitable contribution commitments noted above.
e. Total Rent. The Base Rent, Income, Income Sharing, Charitable Contribution, and Carbon Credits are all collectively referred to herein as “Total Rent”. Rent shall be paid each year, post-harvest, but no later than January 15th each year and shall be provided to the City at 200 Campus Drive, Arvin, CA 93203 while this Lease is in effect. If the Rent is not paid when due, and City elects not to terminate the Lease, Tenant agrees to pay interest on the amount of unpaid rent at the rate of 7% per annum from the due date until paid.

If Tenant continues to occupy the Property after the effective date of the notice of termination described in Section 24 of this Agreement, then Rent shall immediately be equal to two hundred percent (200%) of the otherwise normally applicable Rent.

Nothing in this Paragraph shall preclude the City from any of its remedies including ejecting Tenant for holding over or terminating the Lease for failure by the Tenant to timely Rent.

9. Entry by City. Tenant shall allow City, and City’s agents and assigns, at all reasonable times, to enter the Property for the purposes of inspection, ascertaining compliance with the terms of this Lease, exercise of City’s rights under this Lease, to survey and complete studies associated with City’s future use of the Property, and for all other lawful purposes.

City shall use reasonable caution in entering the Property for such purposes in order to avoid causing damage to Tenant’s crops.

10. Condition of Property. By execution of this Lease, Tenant accepts the Property in its asis present condition, and agrees, on the last day of the term or on sooner termination of this Lease, to surrender the Property to City in the same condition as when received, reasonable use and wear caused beyond the Tenants control excepted, and to promptly remove all of Tenant's personal property from the Property except for additional improvements or alterations which have been approved by City and installed by Tenant or that are attached to the Property. If the City wants to reserve the right to require Tenant to remove any such additional improvements upon the expiration or earlier termination of this Lease, the City must reserve such right in its notice of approval of the improvements. If Tenant is required to remove any improvements from the Property upon termination of this Lease, Tenant shall do so at Tenant’s sole cost and expense, and Tenant will repair any damage to the Property caused by such removal. Tenant shall at all times, and at Tenant’s sole cost and expense, keep, maintain and repair the Property (including the irrigation system) in good order, condition, and repair.

11. Disclaimer of Warranty - Soil Suitability and Treated Water. City makes no warranty of the soil’s suitability for growing the crops Tenant is authorized to grow under this Lease.

Tenant represents Tenant has made an independent inspection of the Property and is not relying upon any representation or warranty from City as to such condition. . City makes no representation as to water quality and quantity of the Treated Water. Tenant acknowledges there may be sales restrictions, regulations, or other requirements governing crops grown with Treated Water, and agrees Tenant is solely responsible for determining

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

what regulations apply and what crops may be appropriate for irrigation with Treated Water. Tenant waives all claims against City regarding the use, quality and quantity of Treated Water and acknowledges and agrees that the crop grown on the Property cannot be used for human consumption.

12. Operating Costs. All costs incurred by Tenant directly or indirectly connected to the Permitted Use, including, but not limited to, costs of tools, labor, materials, water, electricity, and other utilities shall be the sole responsibility and borne and paid by Tenant.

13. Release and Hold Harmless.
a. Tenant, as a material part of the consideration of this Lease, on its behalf and on behalf of Waterworks, hereby waives all claims against the Indemnitees for damages arising out of, in whole or in part, from Tenant and Waterworks’ operations upon, of and/or concerning the Property and the Permit. Tenant also agrees to indemnify, defend and hold harmless the Indemnitees from and against all claims, liability, loss, damage, costs or expenses (including reasonable attorney’s fees and court costs) (“Damages”) arising from or as a result of the death of any person or any accident, injury, loss or damage whatsoever caused to any person or to the property of any person which shall occur on or adjacent to the Property, or otherwise in connection with this Lease or the Permit; provided, that Tenant’s obligation to indemnify and hold harmless shall only be to the extent Tenant and/or Waterworks was, or is alleged to have been, a direct or indirect cause of the Damages. Tenant shall be responsible for any loss of or damage to pumps, fencing, access roads, storage ponds, irrigation head ditch, turnouts, tailwater ditch, tailwater pond, supplemental irrigation ditch and ground water monitoring wells and protective features.
b. Tenant agrees to keep City free from all liability and claim for damages arising from any injury from any cause to any person, including officers, employees, and agents of Tenant and/or Waterworks, or to property of any kind belonging to anyone, including Tenant and/or Waterworks, arising from Tenant and /or Waterworks’ operations while in, upon, or in any way connected with the Permit and the Property, including the flooding of public roads or neighboring lands because of improper or inadequate drainage or escaping irrigation waters, during the term or any occupancy under this Agreement.

14. Insurance.
a. Liability Insurance. Tenant shall maintain in good standing liability insurance at least as broad as Insurance Services Offices Commercial General Liability Coverage (occurrence form CG 0001), to protect against loss from liability imposed by law for damages on account of, but not limited to, (1) bodily injury, including death therefrom, suffered or alleged to be suffered by any person or persons whomsoever on or about the Property and the business of the Tenant on the Property, or in connection with the operations thereof, resulting directly or indirectly from any acts or activities of Tenant, or any person acting for Tenant, or

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

under Tenant's control or direction, and also to protect against loss from liability imposed by law for (2) damagesto any property of any person occurring on or about the Property, or in connection with the operation thereof, caused directly or indirectly by or from acts or activities of Tenant, or any person acting for Tenant, or under Tenant's control or direction. Such property damage and bodily injury insurance shall also provide for and protect City against incurring any legal cost in defending claims for alleged loss. Such Commercial General Liability insurance shall be maintained in full force and effect during the term of this Lease in the following amount: Commercial General Liability insurance with limits not lessthan $1,000,000 for each occurrence, combined Single limit for bodily injury and property damage. If a general aggregate limit is used, either the general aggregate limit shall apply separately to this location or the general aggregate limit shall be twice the required occurrence limit. Any deductible or self-insured retention must be declared to and approved by the City, and the City shall be named as an additional insured. At City’s option, City may require Tenant to reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, elected and appointed officials, employees and volunteers, or City may require Tenant to provide a financial guaranty satisfactory to City, guaranteeing payment of losses and related investigations, claims administration, and defense expenses. b. Workers’ Compensation Insurance. Tenant shall maintain in good standing Workers' Compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the workers' compensation laws now or hereafter in force in California or in lieu thereof. Such workers' compensation insurance shall cover all persons employed by Tenant in connection with the Property and shall cover liability within statutory limits for compensation under any such act aforesaid, based upon death or bodily injury claims made by, for or on behalf of any person incurring or suffering injury or death in connection with the Property or the operation thereof by Tenant. Notwithstanding the foregoing, Tenant may, in compliance with the laws of the State of California and in lieu of maintaining such insurance, self-insure for workers' compensation in which event Tenant shall deliver to City evidence that such self-insurance has been approved by the appropriate State authorities.
c. General Requirements. All of the above policies of insurance shall be primary insurance and shall name the City, its elected and appointed officers, employees and agents as additional insureds and any insurance maintained by City or its officers, employees or agents may apply more than, and not contribute with Tenant’s insurance. The insurer is deemed hereof to waive all rights of subrogation and contribution it may have against the City, its officials, officers, employees and agents and their respective insurers. Moreover, the insurance policy must specify that where the primary insured does not satisfy the self-insured retention, any additional insured may satisfy the self-insured retention.

All of said policies of insurance shall provide that said insurance may not be amended or cancelled by the insurer or any party hereto without providing at least thirty (30) days prior

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

written notice to City, or at least ten (10) days prior written notice to City in the case of cancellation for nonpayment. In the event any of said policies of insurance are cancelled, the Tenant shall, prior to the cancellation date, submit new evidence of insurance in conformance with Section 14 to the City.

No occupation, work, or services under this Agreement shall commence until Tenant has provided the City with Certificates of Insurance, additional insured endorsement forms or appropriate insurance binders evidencing the above insurance coverages and said Certificates of Insurance or binders are approved by the City. City reserves the right to inspect complete, certified copies of and endorsements to all required insurance policies at any time. Any failure to comply with the reporting or other provisions of the policies including breaches or warranties shall not affect coverage provided to City.

Tenant agrees that the requirement to provide insurance shall not be construed as limiting in any way the extent to which the Tenant may be held responsible for the payment of damages to any persons or property resulting from the Tenant’s activities or the activities of any person or persons for which the Tenant is otherwise responsible nor shall it limit the Tenant’s indemnification liabilities or obligations as provided in this Agreement.

15. Lease Subject to Existing Rights of Others. This Lease is subject to all existing easements, servitudes, licenses, and rights of way for canals, ditches, levees, roads, highways, telephone, telegraph, and electric power lines, railroads, pipelines, and other purposes, whether or not of record.

16. Quiet Enjoyment. Subject to the City’s rights contained herein, including, but not limited to the inspection rights, the City hereby covenants and agrees that if Tenant pays Rent as herein provided and faithfully performs the terms and conditions on Tenant's part to be kept, observed, and performed, Tenant shall have the quiet enjoyment of the Property during the term hereof, without hindrance or interference from City.

17. Waste. Tenant shall not commit, or permit others to commit, any waste or nuisance upon the Property, or commit or allow any other act thereon that could disturb the quiet enjoyment of City, any other tenant of City, or other persons lawfully upon the Property or upon adjacent or nearby property. Unless otherwise agreed by the Parties, waste shall include removing or damaging otherwise viable long-term crops such as trees, vines and perennials upon expiration or termination of this Lease, damaging or rendering the irrigation system inoperable, etc.

18. Assignment or Subletting. Neither this Lease nor any interest therein shall be assigned, either voluntarily or involuntarily, by Tenant, or by operation of law or otherwise, nor shall the Property, or any part thereof, be subleased by Tenant without the prior written consent of City. Any assignment or subletting without such prior written consent of City shall be void.

19. Liens. Tenant shall nor permit or suffer any liens of any kind to be recorded or filed against the Property for any reason whatsoever and Tenant shall diligently take all steps necessary and proper to immediately remove and discharge any liens which are filed. Tenant shall

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

promptly discharge or remove by bond or otherwise prior to foreclosure thereof any and all mechanics’, materialmen’s and other liens for work or labor done, services performed, materials, appliances, teams or power contributed, used or furnished to be used in or about the Property for or in connection with any operations of Tenant, any alterations, improvements, repairs or additions which Tenant may make or permit or cause to be made, or any work or construction by, for or permitted by Tenant on or about the Property, and to save and hold City and all of the Property and all buildings and improvements thereon tree and harmless of and from any and all such liens and claims of liens and suits or other proceedings pertaining thereto. Tenant covenants and agrees to give City written notice not less than twenty (20) days in advance of the commencement of any construction, alteration, addition, improvement or repair costing in excess of Twenty-Five Thousand Dollars ($25,000) in order that City may post appropriate notices of City’s nonresponsibility.

20. Time of Essence. Time is of the essence in this Lease and each and every provision thereof, and each such provision is hereby made and declared to be a material, necessary, and essential part of this Lease.

21. Governing Law and Venue. This Lease will be construed, interpreted, and enforced pursuant to California law. Venue regarding any matter arising out of this Lease between the parties shall be the County of Kern, Kern Superior Court.

22. Attorneys’ Fees; Limitations of Legal Acts. In any action or proceeding by either party to enforce this Lease or any provision of this Lease, the prevailing party shall be entitled to all costs incurred and to reasonable attorneys’ fees. Except as provided by the preceding sentence, in no event shall the City, or its officers, agents or employees, be liable in damages for any breach or violation of this Lease, it being expressly understood and agreed that Tenant’s sole legal remedy for breach or violation of this Lease by City shall be a legal action in mandamus, specific performance, or other injunctive or declaratory relief to enforce the provisions of this Lease.

23. Relocation Waiver and Compensation for Early Termination by City. Tenant hereby waives any and all compensation that may be due under Title 25, Division I, Chapter 6, Subchapter 1, of the California Code of Regulations relating to relocation assistance.

24. Termination. Tenant may terminate this Lease by giving notice to City at least 180 days prior to January 1
st of the next year. City may terminate the Lease as follows:
a. Abandonment by Tenant. Should Tenant breach this Lease and abandon all or any part of the Property prior to the scheduled expiration of the term of this Lease, City may continue this Lease in effect by not terminating Tenant’s right to possession of the Property, in which event City shall be entitled to enforce all City’s rights and remedies under this Lease including the right to recover the Rent specified in this Lease as it becomes due under this Lease.
b. Termination for breach by Tenant. All covenants and agreements contained in this Lease, including Tenant’s obligation to modify the Permit as required by RWQCB

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

for the Permitted Use to occur, are declared to be conditions to this Lease and to the term hereby demised to Tenant. Should Tenant fail to perform any covenant, condition, or agreement contained in this Lease, except for payment of any Rent or other monetary amount due, and such failure is not cured within 30 days after written notice thereof is served on Tenant, then City may terminate this Lease immediately, and in the event of such termination, Tenant shall have no further rights hereunder and Tenant shall thereupon forthwith remove its personal property from the Property and shall have no further right or claim thereto and City shall immediately thereupon have the right to re-enter and take possession of the Property, subject only to appropriate legal process.
c. Termination for failure to pay Rent. If any payment of Rent is not made as herein provided and such failure to pay is not cured within three (3) days after written notice thereof is served on the Tenant, then City shall have the option to immediately terminate this Lease; and in the event of such termination, Tenant shall have no further right or claim thereto and City shall immediately thereupon have the right to re-enter and take possession of the Property, subject only to appropriate legal process.

25. No Partnership. It is expressly understood and agreed that City does not, in any way or for any purpose by executing this Lease, become a partner of Tenant in the conduct of Tenant's business, or otherwise, or a joint venture or a member of a joint enterprise with Tenant.

26. Covenants Run With Land. The agreements, covenants and conditions in this Lease contained are and shall be deemed to be covenants running with the land and the reversion and shall be binding upon and shall inure to the benefit of City and Tenant and their respective successors and assigns and all subsequent landlords and Tenants respectively hereunder.

All references in this Lease to ''Tenant" or “City/Landlord” shall be deemed to refer to and include successors and assigns of Tenant or City, respectively, without specific mention of such successors or assigns.

27. Holding Over. This Lease shall terminate without further notice upon the expiration of the Term, and any holding over by Tenant after the expiration of the Term shall not constitute a renewal hereof or give Tenant any rights hereunder or in or to the Property, except as otherwise herein provided, it being understood and agreed that this Lease cannot be renewed, extended or in any manner modified except in writing signed by City and Tenant and approved by City's Council.

28. General. If any term or provision of this Lease or any application thereof shall be invalid or unenforceable, then the remainder of this Lease and any other application of such terms or provisions shall not be affected thereby. The captions of this Lease are for convenience of reference only and shall not define or limit any of its terms or provisions. All of the

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

covenants of Tenant hereunder are deemed and construed to be "conditions" as well as "covenants" as though the words specifically expressing or imparting covenants and conditions were used in each separate instance. The relationship created by this lease is one of Landlord/Tenant. This Lease is not intended to create a joint venture relationship or any relationship other than that of Landlord/Tenant.

29. Notices. Any notices, requests, demands, documents, approvals or disapprovals given or sent under this Lease from one Party to another (collectively, “Notices”) may be personally delivered, transmitted by facsimile (“fax”) transmission, email, overnight courier, or deposit with the United States Postal Service for mailing, postage prepaid, to the address of the other Party as stated in this Paragraph. Notices shall be sent as follows:

If to City:

City of Arvin
Attn: City Manager
200 Campus Drive
Arvin, CA 93203
If to Tenant:

Quantum Farms, LLC
Attn: Dr. Trent Jones
_________________________
_________________________
And electronically to:

Dr. Trent Jones, CEO
Each such Notice shall be deemed delivered to the party to whom it is addressed (i) if personally served or delivered, upon delivery, (ii) if given by email, upon the sender's receipt of an appropriate answerback or other written acknowledgement (iii) if given by fax, upon the sender's receipt of an appropriate answerback or other written acknowledgement, (iv) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (v) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (vi) if given by any other means, upon delivery at the address specified in this Paragraph.

30. Estoppel Certificate. Tenant shall, at any time and from time to time upon not less than twenty (20) days prior notice from the City, execute, acknowledge and deliver to the City a statement in writing certifying that this Lease is unmodified and is in full force and effect, and the dates to which the Rent has been paid, and stating whether or not to its best knowledge the City isin default under this Lease, and, if in default,specifying in reasonable detail each such default, and such other matters as the City may reasonably request, it being intended that any such statement delivered by Tenant may be relied upon by the City or

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

any prospective purchaser of the fee or any prospective mortgagee or encumbrancer thereof. If the City desires to refinance or transfer the Property, Tenant agrees to deliver to the City or any lender or transferee designated by the City such financial information concerning Tenant as may be reasonably required by such lender or transferee and is reasonably available to Tenant. All such financial information shall be received by the City in confidence to the extent allowed by applicable laws.

31. Discrimination and Conflicts of Interest. With regard to the farming operations involving the Property, Tenant agrees it shall not discriminate against any employee or applicant for employment because of race, color, creed, religion, sex, marital status, ancestry or national origin. Tenant also warrants Tenant has not entered and will not enter into any arrangement to pay financial consideration to, and has not made and will not make any payment to, any City official, agent or employee that would create a legally cognizable conflict of interest as defined in the Political Reform Act (California Government Code Sections 87100 et seq.).

32. Recordation. Tenant shall cause a notice of this Lease agreement to be recorded with the Kern County Recorder within 30 days of approval by the parties, and Tenant shall provide all signatures or take any other actions necessary to allow the City to accomplish the same.

Upon termination or expiration of the Lease, Tenant shall promptly cooperate with City to effectuate removal of the notice of the Lease recorded with the Kern County Recorder.

33. Representation by Counsel/Understanding. The parties acknowledge that they have been, or had the opportunity, to be represented by counsel of their choice and have had the opportunity to receive independent legal advice from such counsel with respect to the negotiation and advisability of entering into this Lease. Each of the parties acknowledges that it has fully read and understood this Lease, and is executing this Lease freely, voluntarily, with full knowledge of its significance, and without duress, undue influence or coercion.

34. Non-Applicability of Rule of Construction/Enforceability. Prior to the execution of this Lease, each party reviewed this Lease, made any desired changes, and signed this Lease to indicate the agreement of the parties, and had the opportunity for legal counsel to approve this Lease as to form. The rule of construction that any ambiguities are to be construed against the drafting party shall not be employed in interpreting this Lease. To the extent any provision or term of this Lease is held unenforceable, the remaining terms and provisions shall remain in full force and effect, and enforceable.

35. Entire Agreement. This Lease (together with the exhibits and schedules, if any, referenced herein and appended hereto) constitutes the entire agreement between the City and Tenant with respect to the subject matter hereof and supersedes all prior offers and negotiations, oral or written. This Lease may not be amended or modified in any respect whatsoever except by an instrument in writing signed by the City and Tenant.

36. Counterparts. This Lease may be executed in several counterparts which, when taken together, shall constitute the entire Lease.

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

37. No Third-Party Beneficiaries. The terms of this Lease are for the sole and exclusive protection and use of the Tenant and City. No third-party beneficiary is created by this Lease, and no provision of this Lease shall operate or inure to the use and benefit of any such third party.

38. Authority to Execute Agreement. Each party warrants and represents to each other that the person(s) whose signature appears below their respective name is duly authorized and has full authority to execute this Lease on behalf of the entity appearing above such signatures.
{Signatures on Following Page}

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

IN WITNESS WHEREOF, City and Tenant have entered into this Lease on the day and year first above written.

CITY: City of Arvin and Successor
Agency to Arvin Community
Redevelopment Agency
By:

TENANT: Apothio, LLC, an Indiana limited
liability company, and Quantum Farms, LLC, a
California limited liability corporation
By:

Jeff Jones, City Manager
By: ___________________________________
ATTEST:

By:

APPROVED AS TO FORM
By:

Cecilia Vela, City Clerk Attorney for Tenant

APPROVED AS TO FORM
By:
*Provide notarial acknowledgement for signature
Nathan M. Hodges, City Attorney
Attachments:

Attachment “A” – City of Arvin Agricultural Lease
Attachment “B” – Map of Property

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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

State of California )
County of Orange )
On ____________________, before me, ____________________________, a Notary Public, personally appeared _______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

Signature

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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

State of California )
County of Orange )
On ____________________, before me, ____________________________, a Notary Public, personally appeared _______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

Signature

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

Attachment “A”
Agricultural Lease Agreement between City of Arvin and
Apothio, LLC dated April 1, 2021.

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement ©©
22002200GGooooggllee

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag 01248.0024/699198.2 TJI

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

State of California )
County of Orange )
On ____________________, before me, ____________________________, a Notary Public, personally appeared _______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

Signature

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement 01248.0024/699198.2 TJI

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

State of California )
County of Orange )
On ____________________, before me, ____________________________, a Notary Public, personally appeared _______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

Signature

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

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Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

Attachment “B”
Map of Property Leased

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag Lease_062723_Redacted (Emergency Improvement

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag

4.A.4
Attachment: Exhibit A(1)_Apothio, LLC and Quantum Farms, LLC - First Amendment to Ag EXHIBIT “
B”

EMERGENCY IMPROVEMENTS AND RELATED COSTS
[ATTACHED BEHIND THIS PAGE]

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum October 2021 - YTD 2023 Expenses Related to the Emergency Repairs & Improvements to Prevent Catastrophic Outcomes from Earthen Pond #3: 6/7/2023 20 Months of Emergency Work Designed to Prevent Catastrophic Failure of EP#3: Individual Expense and Use Date of Expense Labor Hours Gross Expense 2021, 2022 & 2023: 11+ Months of Backhoe Rental, Diesel Fuel & Transport Multiple $ 44,600.00 Labor for Back Hoe Operators - Berms, Irrigation, Water Movement, Road Repairs & Trash Removal Multiple 2,270.40 $ 102,168.00 Cash Cost for Replacement Large High Pressure Irrigation PVC Pipes (16+" pipe = $100/ft) Multiple $ 87,000.00 Cash Cost for Large Irrigation Pipe Fittings, Valves, Caps + glue purchased (avg = $100/fitting) Multiple $ 16,800.00 Labor Costs for Installation of New Irrigation Pipes & Berms Multiple 3,784.00 $ 75,680.00 Labor Costs to Repair In-Ground 18" - 24" Concrete Pipes (Pipes were crushed in dozens of spots - Res Acres) Multiple 5,676.00 $ 113,520.00 Concrete & Rebar Costs to Repairing 18" - 24" Concrete Pipes Multiple $ 4,875.00 Labor Costs to Make Rancho Road Pond Return & Pipes Diverted to Residential Acres Multiple $ 14,274.00 Labor and Pipe Costs to Repair Freedom Farms' Road Leakage Multiple 180.00 $ 4,500.00 Replacement Cost of New Flood Irrigation Valves ($125/valve) Multiple $ 25,375.00 "100 Year Flood Ditch" Repairs & Debris Removal - Flood Mgmt for Banana Lake Multiple $ 6,010.00 Additional Heavy Equipment, Trucking Multiple $ 16,100.20 Miscellaneous Supplies and Additional Completion Costs Multiple $ 31,718.00 Sub-Total 11,910.40 $ 542,620.20
Comments:

1. 20 months of time has been spent responding to, repairing and managing Arvin's WWTP and Farm infrastructure to the point of taking EP #3 offline.

2. The first 12 months from the onset of the emergency required an extreme amount of labor to repair infrastructure to properly empty EP #3.

3. There are significant, ongoing repairs of pumps, valves, pipe and repairs to ensure the City could be compliant with the WDR & Water Board.

4. The above are actual costs covered by Quantum Farms, and does not include any form of a profit margin.

5. Dr. Trent Jones has not added any cost for the countless personal hours spent supporting Arvin, Engineering and preparing for CA Regional Water Board.

6. A large number of Engineers, Managers & Compliance Staff have delivered significant pro bono hours of advice, consult and actual work on this case.

7. These costs do not include the "standard" farming costs borne by Quantum Farms for the production of the hay.

8. There are well over 25,000 linear feet of old 16" - 24" plastic and concrete irrigation pipe routed all over the Arvin Farm.

9. There are more expenses in 2023 for the repairs made on this system based upon both existing fractures in the irrigation systems and engineering needs.

4.A.5
Attachment: Arvin - Costs to Prevent WWTP-Tank #3 Disaster - Capital Account 6-7-23 (Emergency EXHIBIT “C”

DOCUMENTATION TO BE PROVIDED TO CITY BY QUANTUM FOR

DETERMINATION OF CONSTRUCTION COSTS
To assist CITY in determining the Construction Costs for a completed Emergency Improvement, Quantum shall provide the following documents to CITY:

1. Plans, specifications and Quantum’s civil engineer’s cost estimate;

2. List of bidders from whom bids were requested;

3. Construction schedules for Improvements made;

4. Contracts, insurance certificates and change orders with each contractor or vendor;

5. Invoices received from all vendors;

6. Canceled checks for payments made to contractors and vendors (copy both front and back of canceled checks);

7. Spreadsheet showing total costs incurred in and related to the construction of each Emergency Improvement and the check number for each item of cost and invoice;

8. Final lien releases from each contractor and vendor; and

9. Such further documentation as may be reasonably required by CITY to evidence the completion of construction and the payment of each item of cost and invoice.

4.A.2
Attachment: Emergency Improvements Capital Account Agreement 6-19-23 (Emergency Improvement Capital Account Agreement Quantum