PAGE 1 OF 9
4934-3479-7409v2/022283-0548
OPTION AGREEMENT
This Option Agreement (the “Option Agreement”) is made and entered into as of _______________, 2025 (the “Date of Agreement”), by and between TIVOLI INVESTMENTS, LLC, a California limited liability company (“Optionor”), and the CITY OF LANCASTER, a municipal corporation and charter city (“Optionee”). Optionor and Optionee are sometimes referred to herein individually as a “Party” and together as the “Parties”.
Recitals
A. As a matter of history, after years of litigation related to the groundwater rights in the Antelope Valley areas of Los Angeles and Kern Counties of the State of California, on December 23, 2015, the Los Angeles County Superior Court, Case No. 1-05-CV-049053, entered an Order and Statement of Decision, whereby it approved and adopted a Judgment and Physical Solution (hereinafter “Judgment”) as a mechanism to manage the groundwater rights in said Antelope Valley of California.
B. Optionor is a “Party” to the Antelope Valley Groundwater Adjudication, as that term is defined in Section 3.5.27 of the Judgment. By virtue of the foregoing, Optionor possesses:
(i) standing to enter into this Option Agreement; (ii) the legal right to extract and produce water pursuant to the Antelope Valley Groundwater Cases; and (iii) the legal right to transfer water rights pursuant to the Antelope Valley Groundwater Cases and applicable laws.
C. Optionee is a public entity and is an adjudicated Party to the Antelope Valley Groundwater Adjudication, as that term is defined in Section 3.5.27 of the Judgment and is not required to intervene in the Judgment to acquire the Water Rights, defined below, subject to this Option Agreement.
D. As a public agency, Optionee holds the power of eminent domain pursuant to Government Code section 40404, among other statutes. If Optionor did not voluntarily agree to the Option as defined and conveyed herein, Optionee’s staff would have recommended and Optionee’s City Council would have considered acquiring the same by eminent domain.
E. Optionor owns groundwater rights pursuant to the Judgment, which rights are administered by the Antelope Valley Watermaster (“Watermaster”), and desires to grant to Optionee an option to purchase FIVE HUNDRED (500) acre feet of such groundwater rights (hereinafter “Water Rights”) for a purchase price of FIVE MILLION DOLLARS ($5,000,000.00) (“Purchase Price”). Optionee desires to acquire an option to purchase the Water Rights, subject to the terms and conditions of this Option Agreement.
F. Under a separate agreement dated August 26, 2025 (“Separate Agreement”), Optionee and Optionor have an agreement for Optionee to acquire FIVE HUNDRED (500) acre feet of water rights which are not subject to or related to this Option Agreement.
NOW THEREFORE, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Optionor and Optionee do hereby agree as follows:
PAGE 2 OF 9
4934-3479-7409v2/022283-0548
1.GRANT OF OPTION
Optionor hereby grants to Optionee, the exclusive right and option (the “Option”) to purchase the Water Rights in accordance with the terms and conditions of the Water Transfer Agreement (“Agreement”) that is attached hereto as Exhibit A. By executing this Option Agreement, Optionor acknowledges that (i) Optionor has the full power and authority to enter into and perform its obligations under this Option Agreement and (ii) Optionor is the sole owner of the Water Rights.
2. TERM OF OPTION
Subject to the Watermaster’s approval, the term of this Option Agreement shall commence on January 1, 2026, and shall expire on December 31, 2028 (the “Term”), unless earlier terminated pursuant to the terms hereof.
3. CONSIDERATION FOR OPTION
For the Option to purchase the Water Rights, Optionee shall pay to Optionor annual consideration for the Option (the “Option Payments”). To maintain the Option, Optionee shall pay annual Options Payments of $262,500.00, which shall be due and payable on or before January 1st of each year subsequent to the execution of this Option Agreement, starting January 1, 2026, until the Option is exercised or this Option Agreement is terminated, whichever occurs first. The Option Payments shall NOT be applied to the Purchase Price, if or when Optionee exercises the Option. The Option Payments are deemed due when paid without proration or refund if the Option Agreement is terminated prior to the end of a calendar year. Notwithstanding any other provision of this Option Agreement, Optionee shall have no obligation to begin making Option Payments unless and until this Option Agreement is approved by the Watermaster.
4. METHOD OF EXERCISING OPTION
Optionee may exercise the Option at any time during the Term. In the event Optionee elects to exercise the Option during the Term, Optionee shall give written notice (the “Exercise of Option Notice”) indicating its intent to exercise the Option. Within thirty (30) days after the Exercise of Option Notice is given to Optionor, Optionor shall sign, date and deliver two copies of the Agreement to Optionee who shall execute such copies of the Agreement and return to Optionor one fully executed original of the Agreement. At the time of execution and delivery of the Agreement, Optionor shall deliver to Optionee such additional documents, affidavits, certificates and other items as Optionee may reasonably require.
5. TERMINATION
Optionee may terminate this Option Agreement at any time during the Term by giving written notice to Optionor, however. If this Option Agreement is terminated pursuant to this section, then Optionor shall not be required to refund any Option Payments already received from Optionee under the terms of this Option Agreement.
6. BINDING NATURE AND ASSIGNMENT
PAGE 3 OF 9
4934-3479-7409v2/022283-0548
This Option Agreement shall be binding on and inure to the benefit of the successors and permitted assigns of Optionor and Optionee. Optionee shall have the right, without obtaining Optionor’s consent, to sell, assign, encumber or otherwise transfer all or any portion of its right, title or interest under this Option Agreement, provided, that Optionee provides Optionor with the name, address, telephone number and contact person for such assignee and that such assignee assumes all duties and obligations of Optionee hereunder. Upon such assumption, Optionee shall have no further obligations or liability hereunder.
7. NOTICE
Any notice or communication required or permitted to be given by any provision of this Option Agreement will be in writing and will be deemed to have been given when delivered or on the first business day following the day sent by nationally-recognized overnight courier, or the fifth (5th) business day after the same is deposited in the United States Mail, certified mail, postage prepaid or (iii) two (2) days after delivery to a reputable overnight courier (provided receipt is obtained and charges prepaid by the delivering Party) and (c) addressed as follows:
Optionor: Tivoli Investments, LLC
PO Box 8010
Lancaster, CA 93539
[email protected]
With Copy to: R. Steven Derryberry, Esq.
Derryberry & Associates LLP
41240 11th Street West, Suite A
Palmdale, CA 93551
[email protected]
Optionee: City of Lancaster
Trolis Niebla, City Manager
44933 Fern Avenue
Lancaster, CA 93534
[email protected]
8. AMENDMENTS
This Option Agreement shall not be amended or modified in any way except by an instrument signed by Optionor and Optionee.
9. GOVERNING LAW; VENUE; ATTORNEY’S FEES
This Option Agreement shall be construed, enforced, governed by, interpreted and performed pursuant to the internal laws, and not the law of conflicts, of the State of California applicable to agreements, contracts and understandings made and to be performed in such state.
The Parties also agree that this Option Agreement is made and to be performed in Los Angeles County, California; however, if the Parties are unable to amicably resolve any dispute arising out PAGE 4 OF 9
4934-3479-7409v2/022283-0548
of or in connection with this Option Agreement, then all legal proceedings shall be held in the Los Angeles County Superior Court. The Parties agree that the subject matter of this Option Agreement is unique, and that specific performance shall be available to enforce the obligations undertaken under this Option Agreement. The Parties agree that any rule of construction to the effect that ambiguities are to be resolved in favor of either Party shall not be employed in the interpretation of this Option Agreement and is hereby waived. If either Party brings an action or proceeding in connection with this Option Agreement or any of the terms, covenants or conditions hereof, the prevailing Party shall be entitled to recover from the other Party reimbursement for all reasonable expenses, costs and attorneys’ fees incurred in connection therewith and any related appeals.
10. MISCELLANEOUS
10.1 Entire Agreement. This Option Agreement constitutes the Parties’ sole and entire agreement and supersedes any prior understandings or written or oral agreements between the Parties with respect to the subject matter hereof which are of no further force or effect; provided, however, that this section shall not apply to the Separate Agreement. The Exhibits referred herein are integral parts hereof and are made a part of this Option Agreement by reference.
The recitals at the beginning of this Option Agreement are hereby incorporated herein and expressly made a part of this Option Agreement.
10.2 Severability. If any term or provision of this Option Agreement, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Option Agreement, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Option Agreement shall be valid and shall be enforceable to the extent permitted by law.
10.3 Miscellaneous. The use of the neuter gender includes the masculine and feminine, and the singular number includes the plural, and vice versa, whenever the context so requires. Captions used herein are for convenience of reference only and do not affect the meaning or intent hereof. If Optionor consists of more than one person or entity, then (i) each reference herein to “Optionor” shall include each person and entity signing this Option Agreement as or on behalf of Optionor and (ii) the liability of each person and entity signing this Option Agreement as or on behalf of Optionor shall be joint and several. The Parties shall at all times hereafter execute any documents and do any further acts that may be necessary or desirable to carry out the purposes or intent of this Option Agreement, including without limitation, any estoppel certificates or similar statements that either Party or is lenders may require from time to time. This Option Agreement may be executed with counterpart signature pages and in duplicate originals, each of which shall be deemed an original, and all of which together shall constitute a single instrument.
10.4 Recording. Either Party shall, upon request of the other, execute, acknowledge and deliver to the other an original of this Option Agreement for recording purposes.
10.5 Watermaster Approval. Prior and as a condition precedent to the effectiveness of this Option Agreement, including Optionee’s obligation to commence the Option Payments, Optionor shall submit a competed application to the Watermaster for approval of and/or PAGE 5 OF 9
4934-3479-7409v2/022283-0548
consent to this Option Agreement. This Option Agreement shall be subject to any and all requirements imposed by the Judgement, as wells as any and all rules, regulations, policies, and/or guidelines prolongated by the Watermaster.
[SIGNATURES ARE FOUND ON THE FOLLOWING PAGE]
PAGE 6 OF 9
4934-3479-7409v2/022283-0548
IN WITNESS WHEREOF, the Parties have executed this Option Agreement as of the Effective Date.
OPTIONOR:
TIVOLI INVESTMENTS, LLC
______________________________________
By: John A. Calandri
Its: Manager
OPTIONEE
CITY OF LANCASTER
______________________________________
By: Trolis Niebla
Its: City Manager
7.docx –
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 )
) ss.
COUNTY OF ________________________________ )
On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(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 OF NOTARY PUBLIC
8.docx –
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 )
) ss.
COUNTY OF ________________________________ )
On ___________________ before me, ____________________________________, Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose names(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 OF NOTARY PUBLIC
4934-3479-7409v2/022283-0548
EXHIBIT A
PURCHASE AGREEMENT
[INSERT]