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16-0408_SAN JUAN HILLS GOLF CLUB, LP_Settlement Agreement Addendum SETTLEMENT AGREEMENT ADDENDUM This Addendum to the Settlement Agreement dated April 8, 2016 by and between the City of San Juan Capistrano and the San Juan Hills Golf Club, LP ("Partial Settlement Agreement") and attached hereto as Exhibit 1 ("Addendum") is made by the City of San Juan Capistrano (the "City"), and the San Juan Basin Authority ("SJBA") on the one hand, and San Juan Hills Golf Club, LP ("San Juan Hills"), on the other hand. The City, the SJBA and San Juan Hills are collectively referred to herein as "Parties." All terms defined in the Partial Settlement Agreement shall have the same meaning herein. RECITALS A. As of April 8, 2016, the City and San Juan Hills entered into the Partial Settlement Agreement. The underlying litigation at issue in the Partial Settlement Agreement is referred to as "the Action." The SJBA is not a party to the Partial Settlement Agreement, is not bound by the Partial Settlement Agreement, and has no obligations under the Partial Settlement Agreement. B. The Partial Settlement Agreement left open San Juan Hills' claim for damages in the litigation between the Parties, referred to as the "Remaining Claim" in the Partial Settlement Agreement. C. The purpose of this Addendum is to resolve the Remaining Claim left open in the Partial Settlement Agreement and to provide for the dismissal of the Action with prejudice as to the City and with prejudice as to the SJBA. D. This Addendum does not alter or modify the Partial Settlement Agreement in any way, other than as expressly provided for herein. This Addendum is not intended to serve as res judicata, collateral estoppel or retraxit. Page 1 of 5 040185\0002\14935651.2 8/2/16 AGREEMENT 1. The City, by itself and through the California Joint Powers Insurance Authority, shall,collectively pay San Juan Hills Two Million, Forty Thousand Dollars and Zero Cents ($2,040,000.00)on or before October 1,2016("Payment"). 2. San Juan Hills shall purchase from the City and the City shall sell, transfer and deed to San Juan Hills for the sum of$140,000 all of its right, title and interest in and to the parcel shown on attached Exhibit 2 (the "Parcel") "as is", the sale of which is governed by California Government Code section 38501, et seq. City shall retain no interests in the Parcel except for utility easements and such similar easements and rights of entry, if any, for existing facilities located upon the Parcel and any and all other facilities reasonably related to or required by the City's obligations to deliver Substitute Water to San Juan Hills pursuant to the Partial Settlement Agreement. San Juan Hills shall be solely responsible for payment of all recording fees and documentary transfer taxes. If San Juan Hills desires to obtain title insurance, San Juan Hills shall be solely responsible for obtaining such insurance and paying any premiums,fees and/or costs in connection therewith. San Juan Hills intends to incorporate the Parcel into its golf course, which may include relocating an existing green and/or lake on or adjacent to the Parcel. City will cooperate in good faith with San Juan Ilills in this regard. The SJH Lands shall include the Parcel. 3. Upon receipt of the Payment, San Juan Hills shall dismiss the Action against the City with prejudice and the SJBA with prejudice. 4. Pursuant to this Addendum, San. Juan Hills releases the City and the SJBA from all damages arising from the City's and/or the SJBA's extraction of water as alleged in the Action, any other extraction of water from the San Juan Basin and any use of the San Juan Basin through the date of this Addendum and waives the provisions of California Civil Code section 1542 as to these matters. 5. This Addendum is intended to fully and finally resolve the Action against the City and SJBA. This Addendum to the Partial Settlement Agreement is not intended to alter or Page 2 of 5 040185\0002\14935651.2 8/2/16 extinguish any Party's property, water or contractual rights, and nothing in the Addendum or the dismissals contemplated by this Addendum shall be considered an adjudication on the merits or retraxit of any such rights. 6. Provided the City fully complies with the Partial Settlement Agreement, San Juan Hills covenants that it will not initiate or maintain any lawsuit against the City or the SJBA based on the Golf Club's inability to extract groundwater through its wells, or the City's or the SJBA's operation of groundwater wells. The foregoing covenant will not operate as a bar or limitation on any lawsuit based on the intentional or negligent introduction of extraneous or potentially toxic matters into the San Juan Basin, including without limitation storm water surge or sewer water discharge (whether treated or not), or other material degradation of basin water quality by the City or SJBA. However, the City's current activities, including, but not limited to, surface application of recycled water within the boundary of the City service area and storm water discharges (which result in incidental recharge of the San Juan Basin, but which are not undertaken for the primary purpose of artificially recharging the San Juan Basin), will not be deemed an exception to the covenant not to sue set forth in this section. The foregoing covenant not to sue is void ab initio if any public entity files a condemnation action against San Juan Hills and this covenant shall not be considered in determining valuation of San Juan Hills or its water rights. The covenant not to sue will survive and be reinstated in the event that any proceeding in eminent domain does not result in a final judgment in favor of the condemning party that would have the effect of taking all of San Juan Hills' water rights. As to the SJBA only, this covenant shall not operate as a bar or limitation on any claim against the SJBA where the City has no obligation to indemnify the SJBA pursuant to the indemnity agreements attached as Exhibit 3. 7. As between the City and SJBA only, the City and SJBA agree that any agreement on the part of the City to indemnify the SJBA is unenforceable with respect to any action alleged by a third party arising from the acts of the City that are not taken under or with respect to the rights and obligations arising from the agreements attached hereto as Exhibit 3. Page 3 of 5 040185\0002\14935651.2 8/2/16 41 8. Dispute Resolution Mechanism. The Parties shall resolve any dispute, controversy or claim arising out of or relating to this Addendum or the Partial Settlement Agreement, or the breach, termination or invalidity either the Addendum or Partial Settlement Agreement (each, a"Dispute"), under the provisions of this Section prior to initiating litigation. The procedures set forth in this Section shall be the exclusive mechanism for resolving any Dispute that may arise from time to time between one or more of the Parties in respect to the subject matter hereof. Prior to initiation of any legal action in the courts, the initiating party must first send a notice and demand to engage in mediation to the non-disputing parting. Notice shall be sent to the City Manager on behalf of the City, the Executive of the SJBA, and the Executive of San Juan Hills. The Disputing Parties shall cooperate with one another in selecting a neutral mediator and in scheduling the mediation proceedings. If the Disputing Parties are unable to agree upon a single mediator within three (3) business days following the date of the Mediation Demand, each Disputing Party shall appoint a mediator who in turn shall, together, select and appoint a separate neutral mediator to oversee the mediation proceedings. The Parties agree to participate in at least eight (8) hours of mediation, unless otherwise agreed to by the Parties,in accordance with mutually agreed mediation procedures, or if none, in accordance with mediation procedures provided by the mediator. The Parties agree that the mediator's fees and expenses and the costs incidental to the mediation shall be shared equally between the Disputing Parties. The Parties further agree that all offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the Disputing Parties, their agents, employees, experts and attorneys, and by the mediator and any employees of the mediator, are confidential, privileged and inadmissible for any purpose, including impeachment, in any litigation, arbitration or other proceeding involving the Parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation. If the Disputing Parties cannot resolve for any reason, including, but not limited to,the failure of any Disputing Party to agree to enter into mediation or Page 4 of 5 040185\0002\14935651.2 8/2/16 S agree to any settlement proposed by the mediator, any Dispute within forty five (45) days after the mediation demand, any Disputing Party may commence an action in respect to the Dispute. 9. Each Party shall bear their own attorneys' fees and costs incurred herein. Dated: August 1/ 2016 City of to Juan Capistrano San Juan Hills Golf Club, LP By:_ _ , + r By:. Its: 0 1 Its: San Juan Basin Authority By: Its: ATTEST: Maria Mbrr , %ty Clerk Page 5 of 5 040185\0002\14935651.2 8/2/16 agree to any settlement proposed by the mediator, any Dispute within forty five (45) days after the mediation demand,any Disputing Party may commence an action in respect to the Dispute. 9. Each Party shall bear their own attorneys' fees and costs incurred herein. Dated: August ,2016 City of San Juan Capistrano San Juan fills i if Club,LP By: Byt Its: Its: San Juan Basin Authority By: Its: Page S of 5 040185\0002\14935651.2 8/2/16 agree to any settlement proposed by the mediator, any Dispute within forty five (45) days after the mediation demand, any Disputing Party may commence an action in respect to the Dispute. 9. Each Party shall bear their own attorneys' fees and costs incurred herein. (71 Dated: August__ ► , 2016 City of San Juan Capistrano San Juan Hills Golf Club, LP By: By: Its: Its: San Juan Basin Authority By Ic)(2_@, Its: tf-\c '1 Page 5 of 5 040185\0002\14935651.2 8/2/16