exhibit_10-1.htm


    EXHIBIT
10.1

    
 

      LONGITUDINAL
LEASE AGREEMENT

       

      This
Longitudinal Lease Agreement (“Agreement”) is entered into as of this 17th day of
September, 2008 (“Effective Date”), by and between Arizona & California
Railroad Company, a Delaware corporation (“ARZC”), with its principal office
located at 5300 Broken Sound Boulevard, Boca Raton, Florida 33487, and Cadiz
Real Estate, L.L.C., a Delaware limited liability company (“Cadiz RE”), with its
principal offices located at 550 S. Hope, Suite 2850, Los Angeles,
California 90071.

       

      RECITALS

       

      WHEREAS,
ARZC operates a railroad line along the center line of an approximately two
hundred foot (200’) wide right of way between points near Cadiz and Freda, San
Bernardino County, California (Mile Posts 144.0 and 189.0, respectively), as
described on Exhibit “A”, attached hereto and incorporated herein by
reference (hereinafter the “Property”); and

       

      WHEREAS,
Cadiz RE desires to lease from ARZC, and ARZC agrees to lease to Cadiz RE,
portions of the Property (collectively “Premises”) described as: (a) an
area of the Property approximately fifteen feet (15’) wide and approximately
fifteen feet (15’) deep, located more than fifty feet (50’) northeasterly from
the centerline of the existing railroad track to install, construct, operate,
maintain, repair, renew and remove one (1) underground water conveyance pipeline
approximately seven feet (7’) in diameter; (b) as many as four (4) areas of
the Property of sufficient size to install, construct, operate, maintain,
repair, renew and remove underground manifold pipelines approximately
twenty-four inches (24”) to thirty-six inches (36”) in diameter, that will cross
beneath the existing railroad track; (c) an area of the Property located
more than seventy-five feet (75’) southwesterly from the center line of the
existing railroad track of sufficient size to install, construct, operate,
maintain, repair, renew and remove electrical power poles designed to support an
overhead electrical power line or, alternatively, to install, construct,
operate, maintain, repair, renew and remove an underground electrical power
line; and (d) areas of the Property of sufficient size to install,
construct, operate, maintain, repair, renew and remove appurtenances related to
(a), (b) and (c), which together are defined as the “Facilities”.  The
specific locations of the Premises within the Property shall be determined
pursuant to this Agreement;

       

      WHEREAS,
in connection with the operation of the Facilities, Cadiz RE desires to lease
from ARZC, and ARZC agrees to lease to Cadiz RE, non-exclusive interests in the
surface of the Property twenty-five feet (25’) wide and located more than fifty
feet (50’) from the centerline of the existing railroad track, to install,
construct, operate, maintain, repair, renew and remove the Facilities as well as
access roadways along the surface of the Property in an area within twenty-five
feet (25’) wide adjacent to the outer margins of the Premises (“Access Areas”),
and ARZC is willing to grant Cadiz RE such interests in the
Property.  The specific location of the Access Areas within the
Property shall be determined pursuant to the terms of this Agreement;
and

       

      WHEREAS,
ARZC and Cadiz RE desire to enter into this Agreement to memorialize the terms
and conditions upon which Cadiz RE has agreed to lease from ARZC, and ARZC has
agreed to lease to Cadiz RE, the Premises and Access Areas.

       

      OPERATIVE
PROVISIONS

       

      NOW,
THEREFORE, in consideration of the foregoing Recitals, which Recitals are
incorporated herein by this reference, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
for the mutual covenants contained herein, the parties hereby agree as
follows:

       

      1. Lease.  ARZC
hereby leases to Cadiz RE, its successors and assigns: (a) the Premises for
the purpose of installing, constructing, operating, maintaining, repairing,
renewing and removing the Facilities, and (ii) a non-exclusive interest in
the surface of the Access Areas, subject to ARZC’s operating and maintenance
rights, to install, construct, operate, maintain, repair, renew and remove the
Facilities (collectively, “Lease Rights”), which Lease Rights shall be in the
locations indicated on Exhibit “B”, attached hereto and incorporated herein
by reference, subject to all existing
licenses, easements, leases, other occupancies, encumbrances, and permits, all
under the terms and conditions set forth herein.  The Parties
acknowledge and agree that the rights of Cadiz RE to the Access Areas are
non-exclusive and, accordingly, ARZC (but not Cadiz RE) shall have the right to
grant rights in the Access Areas to other parties, provided that any such rights
are subject to, and do not materially impact, the Lease Rights of Cadiz RE
hereunder.

       

      2. Term.  The
term of this Agreement shall be for a period of ninety-nine (99) years (“Term”)
and shall commence on the Effective Date and terminate on the expiration of
ninety-nine (99) years (“Termination Date”).  The Term consists of an
Initial Design Term, a Design Term Extension and a Construction and Operation
Term (each as hereinafter defined).

       

      3. Rent.  During
the Term of this Agreement, Cadiz RE shall pay to ARZC rent for the Lease Rights
according to the following schedule (“Rent”):

       

      
        	
                a.  

              	
                Initial Design
      Term.  Cadiz RE has previously paid to ARZC an initial
      Rent payment in the amount of Two Hundred Fifty Thousand and No/100
      Dollars ($250,000.00), receipt of which is hereby acknowledged by ARZC
      (“Initial Rent Payment”).  The Initial Rent Payment is for the
      period from the Effective Date through March 6,
  2011.

              


      

       

      
        	
                b.  

              	
                Design Term
      Extension.  On or before March 7, 2011, Cadiz RE
      shall make a second payment of Rent in the amount of Two Hundred Fifty
      Thousand and No/100 Dollars ($250,000.00) to ARZC (“Design Term Extension
      Rent Payment”).  The Design Term Extension Rent Payment is for
      the period from March 7, 2011 through March 6,
      2013.  In the event that Cadiz RE makes the Construction Rent
      Payment (as hereinafter defined) before March 7, 2011, Cadiz RE shall
      have no obligation to make the Design Term Extension Rent
      Payment.

              


      

       

      
        	
                c.  

              	
                Construction and
      Operation Term.

              


      

       

      
        	
                i.  

              	
                Construction Rent
      Payment.  Prior to entering to Premises to construct the
      Facilities, Cadiz RE shall pay to ARZC a Rent payment that is determined
      based upon the date that Cadiz RE provides ARZC notice of its intent to
      commence construction of the Facilities (“Construction Rent
      Payment”).  In the event that Cadiz RE provides notice of its
      intent to commence construction (a) on or before March 6, 2010,
      the Construction Rent Payment shall be Two Million Seven Hundred Fifty
      Thousand and No/100 Dollars ($2,750,000.00); (b) if after
      March 7, 2010, but before March 6, 2012, the Construction Rent
      Payment shall be Three Million and No/100 Dollars ($3,000,000.00); and
      (c) if between March 7, 2012 and March 6, 2013, the
      Construction Rent Payment shall be Three Million Three Hundred Thousand
      and No/100 Dollars ($3,300,000.00).

              


      

       

      
        	
                ii.  

              	
                Additional Rent
      Payments.  Commencing on or before the first anniversary
      of the date that the Construction Rent Payment is paid, and continuing
      thereafter on or before each of the next nine (9) anniversaries, Cadiz RE
      shall make an additional rent payment based upon the date that Cadiz RE
      paid the Construction Rent Payment (each an “Additional Rent
      Payment”).  In the event that Cadiz RE pays the Construction
      Rent Payment: (a) on or before March 6, 2010, the Additional
      Rent Payment amount shall be Two Hundred Fifty Thousand and No/100 Dollars
      ($250,000.00), (b) if after March 7, 2010, but before
      March 6, 2012, the Additional Rent Payment amount shall be Two
      Hundred Seventy-Five Thousand and No/100 Dollars ($275,000.00), and
      (c) if between March 7, 2012 and March 6, 2013, the
      Additional Rent Payment amount shall be Three Hundred Thousand and No/100
      Dollars ($300,000.00).

              


      

       

      
        	
                iii.  

              	
                Annual Rental Payments
      for Balance of Term.  Commencing as of the first
      anniversary after the last Additional Rent Payment is made, and continuing
      thereafter on each anniversary through the balance of the Term, annual
      Rent payments of One Hundred and No/100 Dollars ($100.00) shall be paid by
      Cadiz RE to ARZC.

              


      

       

      In the
event that Cadiz RE fails to make any Rent payment required to be paid
hereunder, ARZC’s sole and exclusive remedy with respect to a failure by Cadiz
RE to make such payment of Rent shall be to terminate this Agreement pursuant to
the provisions of Section 30 below.

       

      4. Location of
Facilities.  Before constructing the Facilities in the
Premises, Cadiz RE and ARZC shall work together in good faith to agree upon the
location of the Premises within the Property (“Premises Location”), and the
plans and specifications for the construction of the Facilities (“Construction
Plans”).  Prior to the Effective Date, the Parties have discussed the
Premises Location and Construction Plans, and have memorialized their
preliminary discussions in a letter from Cadiz RE to ARZC dated as of even date
herewith, which letter is hereby incorporated herein by reference (“Cadiz
Construction Letter”).  The Parties agree that such Premises Location
and Construction Plans shall be generally consistent with the terms outlined in
the Cadiz Construction Letter.  After the parties have agreed upon the
Premises Location and Construction Plans, this Agreement shall be amended to
incorporate such Premises Location and Construction Plans on Exhibit “B”,
attached hereto and incorporated herein by reference.

       

      5. Maintenance of
Facilities.  Except for any maintenance that does not require
disturbance on the surface of the Premises, at least thirty (30) days prior to
any installation, maintenance, repair or removal of the Facilities, Cadiz RE
shall furnish ARZC with the plans and/or details of the proposed
construction.  Construction will be subject to the acceptance of the
plans and written approval of ARZC’s Chief Engineer.  The Facilities
shall be installed, maintained, renewed and repaired by Cadiz RE at a depth of
not less than three feet (3’) below grade, except in bedrock where acceptable
minimum installation depth shall be twenty-four inches (24”) below grade, and
except for those above-ground portions of the Facilities that are specifically
approved by ARZC.  In any instance where the Facilities crosses under
any ARZC tracks, such under crossings shall be subject to the written approval
of ARZC’s General Manager and, if such under crossings are approved, they shall
be installed, maintained, renewed and repaired by Cadiz RE at a depth of not
less than five feet (5’) below the base of the rail.  The Facilities,
as well as the access road in the Access Areas, shall be installed, maintained,
renewed and repaired by Cadiz RE strictly in accordance with American Railway
Engineering and Maintenance of Way (“AREMA”) standards and shall, in any event,
be subject to approval by ARZC’s Chief Engineer.  Any plans for
attachment of the Facilities to any bridge or other railroad structure must be
specifically approved by ARZC’s Chief Engineer.

       

      6. Access
Areas.  Before performing any work on the Access Areas, Cadiz
RE will, at its sole cost and expense, obtain and thereafter maintain during the
term of this Agreement the following types and limits of insurance:

       

      
        	
                a.  

              	
                Workers’
      Compensation Insurance and Employer’s Liability Insurance with limits of
      not less than Three Million and No/100 Dollars
      ($3,000,000.00).

              


      

       

      
        	
                b.  

              	
                Commercial
      General Liability Insurance, Property Damage Liability Insurance
      including  Products & Completed Operations coverage with a
      minimum single combined limit of not less than Two Million and No/100
      Dollars ($2,000,000.00) per occurrence, Six Million and No/100 Dollars
      ($6,000,000.00) annual aggregate.  Coverage shall include
      Railroad Contractual Liability endorsement ISO GL 24 17 or
      its equivalent, have a cross-liability clause, name Railroad as an
      additional insured with endorsement ISO GL 20 10, and
      include a waiver of subrogation in favor of the Railroad.  The
      “x,” “c” and “u” exclusions and any exclusions dealing with proximity to
      railroad property shall be removed.  The contractual coverage
      endorsement shall specifically refer to this Agreement by date, name of
      railroad, description and location of work to be
  performed.

              


      

       

      
        	
                c.  

              	
                During
      construction and maintenance, Railroad Protective Liability Insurance with
      limits of not less than Two Million and No/100 Dollars ($2,000,000.00) per
      occurrence and Six Million and No/100 Dollars ($6,000,000.00) in the
      aggregate, with ARZC as the only named insured.  The contractual
      coverage endorsement shall specifically refer to this Agreement by date,
      name of railroad, description and location of work to be
      performed.

              


      

       

      
        	
                d.  

              	
                Automobile
      Liability Insurance with limits of not less than Two Million and No/100
      Dollars ($2,000,000.00).  ARZC shall be named as an additional
      insured with respect to this
coverage.

              


      

       

      
        	
                e.  

              	
                Before
      entering the Access Areas, Cadiz RE shall provide ARZC with both a
      certificate of insurance and true and complete copy of the policy or
      policies of insurance for all above required insurance
      coverage.  The policies shall be endorsed to provide thirty (30)
      days’ prior written notice to ARZC in the event of termination of the
      insurance prior to normal expiration date or any material change in
      coverage.  ARZC, in its sole discretion, may increase the limits
      of the insurance coverage required upon ninety (90) days’ notice to Cadiz
      RE, but any such increases in required coverage shall not exceed the
      corresponding increase in the Cost of Living Index over the same time
      period.  In the event Cadiz RE engages any contractor to perform
      work on the Facilities, each contractor shall provide ARZC with evidence
      that it has obtained and currently maintains insurance of the foregoing
      types, with limits not less than those stated above and naming ARZC as an
      additional insured, before entering the Access
  Areas.

              


      

       

      7. Notice Prior to Entry onto
Property.  Cadiz RE will give notice to ARZC’s Chief Engineer
not less than seventy-two (72) hours, excluding Saturdays, Sundays and holidays,
before the installation, repair, replacement, renewal or removal of the
Facilities, except that emergency repairs necessitated by the preservation of
life or property may be made with notice of less than seventy-two (72)
hours.  The work of making such repairs or replacements shall be
conducted in such manner as in the sole judgment of ARZC’s Chief Engineer, to
avoid interference with the proper and safe operation, use and enjoyment of the
Property by ARZC and others having the right to use the
property.  Cadiz RE shall restore the Access Areas to, as near as
practicable, the same or as good a condition as they were in prior to any
work.

       

      8. Changes to Existing
Improvements.  If the installation, maintenance, repair or
removal of the Facilities causes or requires any changes or alterations to any
existing pipelines, sewers, drains, conduits, fences, power, signal or
communication lines, or any other facilities, whether owned by ARZC or by
others, any changes or alterations shall be made by Cadiz RE or its authorized
agents or contractors at Cadiz RE’s sole cost and expense and only upon the
written approval of the owner of existing pipelines, sewers, drains, fences,
power, signal or communication lines, or any other facilities.

       

      9. Cost of
Work.  All the work of construction, maintenance and repair of
the Facilities, including the furnishing of all labor, materials, tools, and
equipment, shall be performed by Cadiz RE or its authorized agents or
contractors, at Cadiz RE’s sole cost and expense.

       

      10. Effect on Construction on
ARZC’s Property.  The construction, repair, use and maintenance
of the Facilities shall be executed without damage to the property of ARZC,
without the settlement of its tracks or surface, subsidence of its lands, and
without any interference with the operation of ARZC, its lessees and
licensees.  Notwithstanding any other provision of this Agreement,
Cadiz RE agrees to indemnify ARZC from and against any loss, damages, cost or
expense sustained by ARZC which may result from Cadiz RE’s failure to comply
with this Section.

       

      11. Cost of Repairs to Existing
Improvements.  Cadiz RE shall reimburse ARZC for any
inspection, flagging and signal maintenance expenses and any other expenses for
any other related services required by and/or expenses incurred by ARZC as a
result of the installation, maintenance, repair, replacement, renewal or removal
of the Facilities.  ARZC and Cadiz RE agree that ARZC may charge the
amount of Five Hundred and No/100 Dollars ($500.00) per day per
flagman.  Cadiz RE shall make any repairs, replacements and/or
renewals that ARZC’s Chief Engineer deems necessary to the Facilities for the
safe operation of ARZC’s locomotives, trains and cars over its tracks (“Required
Repairs”).  In the event that Cadiz RE shall fail or refuse for
whatever reason to make any such Required Repairs within thirty (30) days of its
receipt of a second notice to repair from ARZC (which notices shall be sent at
least thirty (30) days apart), or in the event that Cadiz RE fails to commence
and diligently prosecute to completion such Required Repairs within thirty (30)
days of its receipt of a second notice to repair from ARZC, in the event that
any such Required Repairs will require a period longer than thirty (30) days to
complete, ARZC shall have the right to make such Required Repairs, in which
event Cadiz RE shall reimburse ARZC for the cost of such Required Repairs within
thirty (30) days of its receipt of any invoice from ARZC, together with
reasonable back-up documentation to support the cost paid for such Required
Repairs.

       

      12. Assumption of
Risk.  Notwithstanding any other provision of this Agreement,
Cadiz RE assumes all risk of and liability for damage to the Facilities when
caused or claimed to be caused, in whole or in part by or as a result of
railroad operations and/or the weight of or vibration or derailment of passing
trains, cars or engines on ARZC’s tracks or as a result of the use of the
Property for any purpose related to the operation and maintenance of ARZC’s
railroad, regardless of ARZC’s negligence.  IN NO EVENT AND UNDER NO
CIRCUMSTANCES SHALL ARZC BE LIABLE TO CADIZ RE FOR CONSEQUENTIAL, INCIDENTAL,
INDIRECT, SPECIAL OR PUNITIVE DAMAGES.

       

      13. Indemnity.  Cadiz
RE shall indemnify, defend and save harmless ARZC, its employees and agents,
from and against any loss, damage, cost, expense, claim, lawsuit, judgment or
settlement (including attorney’s fees and costs of defense) resulting from or
arising out of the exercise, or attempted exercise, by Cadiz RE or any person
acting on Cadiz RE’s behalf of any right granted to Cadiz RE by this Agreement,
regardless of negligence on the part of ARZC, its employees or agents; provided,
however, that the foregoing obligation of indemnity shall not be enforceable
with respect to any loss, damage, cost, expense, claim, judgment or settlement
which may result from ARZC’s sole negligence or intentional
act.  Cadiz RE, upon receipt of notice from ARZC, shall assume the
defense of any claim or lawsuit for which it is obligated hereunder to indemnify
ARZC.

       

      14. Compliance with
Laws.  Cadiz RE shall comply with all city, county, state and
federal laws and regulations regarding protection of the environment and shall
protect the Premises from any and all contamination and pollution of any nature
whatsoever which arises from Cadiz RE’s use of the
Premises.  Notwithstanding any other provision of this Agreement,
Cadiz RE shall indemnify, defend and hold harmless ARZC regardless of ARZC’s
negligence, from any and all claims arising the contamination or pollution of
the Premises, adjacent properties, and watercourses and ground water which are
served or associated with said Premises which results or are claimed to result
form the exercise of any right granted to Cadiz RE by this
Agreement.  If claims are made or suit instituted against ARZC, for
any matters herein (including attorneys’ fees and costs of defense) indemnified,
Cadiz RE will settle, adjust or defend the same at its sole cost and expense and
without expense to ARZC and will pay any judgment rendered, or settlement made,
therein together with costs of court and any expenses required to bring affected
properties into compliance.

       

      15. Construction Permits and
Approvals.  Cadiz RE shall obtain all necessary and required
permits, permissions and approvals for the construction, installation,
maintenance and use of the Facilities and will construct, install, maintain and
use the Facilities in conformity with all requirements of all public authorities
having jurisdiction over the Facilities.

       

      16. Contractors for Cadiz
RE.  In the event Cadiz RE has any work performed by a
contractor, the dealings of the contractor (other than maintenance and repair)
shall be handled through Cadiz RE and not directly with ARZC; and contracts
entered into by and between Cadiz RE and the contractor relative to the work
shall be subject to all the terms and conditions of this Agreement.

       

      17. Water Usage by
ARZC.  Cadiz RE agrees to reasonably cooperate with ARZC to
provide ARZC with available water from the Facilities to the extent necessary
for ARZC’s railroad operations over the Property, through a connection to the
Facilities that does not materially affect the use of the Facilities, and which
is established in a location mutually agreed upon by ARZC and Cadiz
RE.

       

      18. Railroad
Tracks.  It is expressly understood and agreed that the rights
in the Access Areas granted to Cadiz RE hereunder shall not preclude or
interfere with the full, free and complete use of the Property for the
installation of railroad tracks thereon and the operation of locomotives, trains
and cars thereover and for any and all other railroad purposes.  ARZC
shall have the right to construct additional tracks, improvements or provide
other pipeline and occupancies that cross over the Access Areas in locations
that are reasonably acceptable to ARZC and Cadiz RE, so long as such additional
improvements are constructed in a manner to mitigate, to the extent practicable,
any interference with the Facilities.  No additional railroad tracks
shall be constructed on top of the area where the Facilities are located,
running longitudinal with the Facilities for any extensive
distance.  Notwithstanding any provisions contained in this Section to
the contrary, Cadiz RE’s contractor’s or other agents and/or representatives
must enter into a Right of Entry Agreement in the form attached hereto as
Exhibit “C” and incorporated herein by reference, prior to entering onto
the Access Areas for any construction work or ground disturbing
activities.

       

      19. ARZC Right to Require
Relocation of Facilities or Early Termination.  In the event
that ARZC determines, at any time during the Term, that the Premises or Access
Areas are necessary for ARZC’s railroad purposes (“Railroad Use Determination”),
ARZC shall have the right to require Cadiz RE to relocate the Premises and
Access Areas (together with the appropriate Facilities) to another location on
the Property reasonably acceptable to ARZC and Cadiz RE.  In
connection with any such relocation, ARZC shall reimburse Cadiz RE for the
actual costs incurred by Cadiz RE in connection with any such relocation of the
Facilities, Premises or Access Areas.

       

      In the
event that ARZC makes a Railroad Use Determination, and ARZC reasonably
determines that relocation of the Premises or Access Areas is not feasible, ARZC
shall have the right to terminate this Agreement upon thirty (30) days notice to
Cadiz RE.  In the event that ARZC exercises it right to terminate this
Agreement, ARZC shall reimburse Cadiz RE an amount equal to: (a) the
un-depreciated book value of the leasehold improvements (calculated in
accordance with generally accepted accounting principles, consistently applied)
as of the date of such termination, plus (b) the capitalized market value
of the lease for the balance of the Term, reduced by the sum of all Rent
payments required to be paid by this Agreement for the balance of the
Term.

       

      20. Taxes Payable by Cadiz
RE.  Cadiz RE agrees to pay all personal property taxes, and
any increase in other taxes, assessments and charges, ordinary and
extraordinary, attributable to exercise of the rights granted to Cadiz RE by
this Agreement on the Premises covered by this Agreement and all of Cadiz RE’s
personal property located upon the Access Areas.  In the event that
such taxes, assessments, or charges shall be levied, assessed, or imposed as to
subject, directly or indirectly, ARZC, its successors, lessees, licensees, or
assigns to the payment thereof, Cadiz RE will reimburse the ARZC for all sums
paid by the ARZC on account thereof.

       

      21. Permanent Abandonment by
Cadiz RE.  In the event that, after constructing the
Facilities, Cadiz RE actually abandons the Facilities, ARZC shall have the right
to record an affidavit of such abandonment in the Official Records, in which
event any such Memorandum of Agreement recorded pursuant to Section 28
below shall be terminated and the rights of Cadiz RE hereunder shall be
released.  For purposes of this Section 21, Cadiz RE shall not be
deemed to have actually abandoned the Facilities until such time as Cadiz RE
fails to pay Rent as required hereunder for a period of three (3) consecutive
years, and ARZC has exercised its right to terminate this Agreement pursuant to
Section 30 below.

       

      22. Removal of
Facilities.  Upon the termination of this Agreement, ARZC shall
have the right to make a determination, in its reasonable discretion, which, if
any, of the Facilities may be allowed to remain in the Premises.  With
respect to any portion of the Facilities that remain in the Premises, Cadiz RE
shall provide to ARZC a bill of sale conveying its interest in the Facilities to
ARZC, without warranty.  Cadiz RE will, at its sole cost and expense,
remove all other portions of the Facilities and restore the Premises to a
condition satisfactory to the Chief Engineer of ARZC within three hundred
sixty-five (365) days following notification in writing by registered or
certified U.S. Mail.  If ARZC shall allow the Facilities to remain in
the Premises, the Facilities shall immediately become the exclusively property
of ARZC and ARZC shall be entitled to any salvage associated with the
Facilities.

       

      23. Assignment.  It
is agreed that the Facilities and Lease Rights covered by this Agreement will be
only for the sole, private and personal use of Cadiz RE, its affiliates,
subsidiaries, and tenants.  Cadiz RE shall not sell, lease, license,
permit or transfer the use of the Facilities or Lease Rights, or any portion of
it, or assign all or any part of its rights under this Agreement, to any person
or entity other than the affiliates, subsidiaries or tenants of Cadiz RE without
the prior written consent of the ARZC, which consent shall not be unreasonably
withheld.

       

      24. As-Built
Plans.  Within six (6) months after the installation of the
Facilities, Cadiz RE will furnish to ARZC reproducible “as built” plans showing
the location and details of the Facilities.

       

      25. Required
Signage.  Cadiz RE will, at its sole cost and expense, furnish,
install and maintain signs or markers showing the locations, depth and direction
of the underground portions of the Facilities.

       

      26. Title to
Premises.  The Lease Rights granted hereunder are subject to
ARZC’s title and interest in the Property and all defects
therein.  ARZC disclaims any warranty of its title to the Property or
that the rights granted herein will permit Cadiz RE to construct, maintain or
operate all of the Facilities contemplated hereunder.

       

      
        	
                a.  

              	
                Cadiz
      RE understands that ARZC occupies, uses and possesses lands, rights-of-way
      and rail corridors under all forms and qualities of
      ownership.  Accordingly, nothing in this Agreement shall act as
      or be deemed to act as any warranty, guaranty or representation of the
      quality of ARZC’s title for the Property occupied, used or enjoyed in any
      manner by Cadiz RE under any rights created in this
      Agreement.  It is expressly understood that ARZC does not
      warrant title to the Property, and Cadiz RE will accept the grants and
      privileges contained herein subject to all lawful outstanding existing
      liens, mortgages and superior rights in and to the Property, and all other
      leases, licenses and easements or other interests previously granted to
      others therein.

              


      

       

      
        	
                b.  

              	
                Cadiz
      RE agrees it shall not have or make any claim against ARZC for damages on
      account of any deficiencies in title to the Property in the event of
      failure or insufficiency of ARZC’s title to any portion thereof arising
      from Cadiz RE’s use or occupancy
thereof.

              


      

       

      
        	
                c.  

              	
                Cadiz
      RE further agrees to defend, indemnify and hold ARZC, and the Property,
      harmless from all claims or litigation for slander of title, overburden of
      easement, or similar claims, arising because of or based upon Cadiz RE’s
      placement, or the presence, of Cadiz RE’s facilities or structures in, on
      or along the Access Areas, except for that portion of such claims which
      relate solely to ARZC’s right to continue rail operations in or over such
      Property, and to defend, indemnify and hold ARZC harmless from any such
      litigation or defense costs, and any judgment
  therefrom.

              


      

       

      
        	
                d.  

              	
                At
      no cost to it, ARZC will cooperate with Cadiz RE’s efforts to acquire any
      additional property rights necessary to construct, operate and maintain
      Facilities along the Access Areas.

              


      

       

      
        	
                e.  

              	
                With
      respect to any mortgage, loan or obligation that is secured by a lien
      against the Property, upon the request of Cadiz RE, ARZC agrees to
      exercise its best efforts to provide Cadiz RE with a Subordination,
      Non-Disturbance and Attornment Agreement, on a form reasonably acceptable
      to Cadiz RE, pursuant to which the holder of such lien shall recognize
      this Agreement and the interest of Cadiz RE in the Property, and agree not
      to disturb Cadiz RE in the event that the holder of such lien becomes the
      owner of the Property.

              


      

       

      27. Notice.  All
notices or other communications required by this Agreement shall be delivered by
personal delivery or Certified Mail, return receipt requested, to the intended
recipient at the following address:

       

      
        	
                If
      to ARZC:

                Arizona
      & California Railroad Company

                Attn:
      General Manager

                1301
      California Avenue

                Parker,
      AZ  85344

                With
      a copy to:

                Arizona
      & California Railroad Company

                c/o
      RailAmerica, Inc.

                Attn:
      General Counsel

                7411
      Fullerton Street, Suite 300

                Jacksonville,
      FL  32256

              	
                If
      to Cadiz RE:

                Cadiz
      Real Estate, L.L.C.

                550
      S. Hope, Suite 2850

                Los
      Angeles, CA  90071

                With
      a copy to:

                GreshamSavage

                Attn:
      President (ref: JMW)

                550
      East Hospitality Lane, Suite 300

                San
      Bernardino, CA  92408

                With
      a copy to:

                Paragon
      Partners

                Attn:
      Manager

                5762
      Bolsa Avenue, Suite 201

                Huntington
      Beach, CA  92649

              


      

      Notices
shall be deemed effective upon receipt or rejection only.  The
foregoing addresses shall be used for notice until such time as the Parties
provide notice as required herein of a new address for giving
notice.

       

      28. Memorandum of
Agreement.  Concurrently with the execution of this Agreement,
the Parties shall execute and acknowledge a Memorandum of this Agreement in the
form attached hereto as Exhibit “D” and incorporated herein by
reference.  The Memorandum of Agreement may be recorded, at any time,
upon the request of Cadiz RE.

       

      29. Successors.  The
rights, terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the respective successors or assigns of the
parties.

       

      30. Default.  In
the event of Cadiz RE’s default of any of the terms and conditions contained in
this Agreement, ARZC shall have the right to provide a notice of default to
Cadiz RE (“Notice of Default”), which Notice of Default shall indicate, with
particularity, the default and the required cure for such default.

       

      With
respect to a default arising out of Cadiz RE’s failure to pay the Rent payments
required by Sections 3.a, 3.b, or 3.c.i hereunder, if Cadiz RE fails to make any
such Rent payment within seven (7) days of the receipt of a Notice of Default,
ARZC shall have the right to terminate this Agreement upon notice to Cadiz RE,
in which event this Agreement shall automatically terminate.

       

      With
respect to a default arising out of Cadiz RE’s failure to pay the Rent payments
required by Sections 3.c.ii or 3.c.iii, or any other default, in the event that
Cadiz RE fails to commence to cure such purported default and diligently
prosecute such cure to completion, or respond disputing the existence of such
purported default within thirty (30) days of receipt of such Notice of Default,
ARZC shall have the right to provide a second Notice of Default.  If
Cadiz RE thereafter fails to commence to cure such purported default and
diligently prosecute such cure to completion, or respond disputing the existence
of such purported default within thirty (30) days of the receipt of such second
Notice of Default, ARZC shall have the right to terminate this Agreement upon
notice to Cadiz RE, in which event this Agreement shall automatically
terminate.

       

      31. Restriction on Premises
Location.  Under no circumstances shall Cadiz RE be permitted
to either install the Facilities and/or have access to any portion of the
Property that is closer than fifty feet (50’) from the centerline of any active
railroad track as of the date hereof, without the written consent of ARZC’s
General Manager and Chief Engineer, provided that such written consent shall not
be unreasonably withheld.

       

      32. Amendments.  Any
alteration, change or modification of or to this Agreement, in order to become
effective, shall be made by written instrument or endorsement hereon and in each
such instance executed on behalf of each Party hereto.

       

      33. Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which, taken together, shall constitute one and
the same instrument.

       

      [END –
SIGNATURES ON NEXT PAGE]

       

      IN
WITNESS WHEREOF, the parties have placed their signatures as of the date set
forth above.

       

      “ARZC”

       

      ARIZONA
& CALIFORNIA RAILROAD COMPANY, a Delaware corporation

      


      By: 
/s/ David
Novak                                                                

             
David
Novak

      Its:
 Vice President

      Date: 
November 18,
2008

       

      “CADIZ
RE”

       

      CADIZ
REAL ESTATE, LLC, a Delaware limited liability company

      


      By:  /s/ Richard E.
Stoddard                                                                

             
Richard E. Stoddard

      Its:  Chief
Executive Officer

      Date:  November 17,
2008