City of White Settlement, Texas, and the White Settlement Economic Development Corporation v. Benjamin S. Emmons, and Source Capital, LLC

• Court: Court of Appeals of Texas
• Decided: December 20, 2017
• Docket: 02-17-00358-CV
• Status: Published

Opinion

ACCEPTED 02-17-00358-CV SECOND COURT OF APPEALS FORT WORTH, TEXAS 12/21/2017 11:10 AM DEBRA SPISAK CLERK

NO.02-17-00358-CV FILED IN 2nd COURT OF APPEALS In the Court of Appeals FORT WORTH, TEXAS Second District of Texas 12/20/2017 12:00:00 AM Fort Worth, Tegas DEBRA SPISAK Clerk

City of White Settlement, Texas, and White Settlement Economic Development Corporation

Appellants,

►•~

Benjamin S. Emmons,and Source Capital,LLC,

Appellees.

On Appealfrom the 48th Judicial District Court ofTa~~ant County, Texas Cause No.048-288516-16; the Honorable David L. Evans Presiding

APPELLANTS'BRIEF

Robert F. Maris State Bar No. 12986300 rmaris@marislanier.com Alise N. Abel State Bar No. 24082596 aabel@marislanier.com MARTS &CANTER,P.C. 3710 Rawlins Street, Suite 1550 Dallas, Texas 75219 214-706-0920 telephone 214-706-0921 facsimile

ATTORNEY FOR APPELLANTS NO.02-17-00358-CV

In the Court of Appeals Second District of Texas Fort Worth,Tegas

City of White Settlement, Texas,and White Settlement Economic Development Corporation

On Appealfrom the 48th Judicial District Court ofTa~~ant County,. Texas Cause No.048-288516-16; the Honorable David L. Evans Presiding

Robert F. Marls State Bar No. 12986300 rmaris@marislanier.com Alise N. Abel State Bar No. 24082596 aabel@marislanier.com MARTS &CANTER,P.C. 3710 Rawlins Street, Suite 1550 Dallas, Texas 75219 214-706-0920 telephone 214-706-0921 facsimile

ATTORNEY FOR APPELLANTS ORAL ARGUMENT REQUESTED IF PERMITTED BY COURT IDENTITY OF PARTIES &COUNSEL

Plaintiffs in the trial court and Appellants herein:

City of White Settlement, Texas

White Settlement Economic Development Corporation

Attorneys for Plaintiff in the trial court and Appellants on appeal:

Robert F. Maris State Bar No. 12986300 rmaris@marislanier.com Alise N. Abel State Bar No. 24082596 aabel@marislanier.com Mates &Larry,P.C. 3710 Rawlins Street, Suite 1550 Dallas, Texas 75219 (214)706-0920 telephone (214)706-0921 facsimile

Defendants in the trial court and Appellees herein:

Benjamin S. Emmons

Source Capital, LLC

Additional Defendants in the trial court but not a party on appeal:

Hawaiian Parks-White Settlement, LLC

Clinton Hill

Attorney for Defendant in the trial court and Appellees on appeal:

C. Michael Moore State Bar No. 14323600 Matthew T. Nickel

APPELLANTS'BRIEF PAGE 1 State Bar No. 24056042 Spencer Hamilton State Bar No. 24087656 DENTONS US LLP 2000.M"cKinney Avenue, Suite 1900 Dallas, Texas 75201

Trial Court:

The Honorable David Evans 48th Judicial District Court Tarrant County Courts Building

STATEMENT REGARDING ORAL ARGUMENT

Appellants City of White Settlement, Texas ("White Settlement") and White

Settlement Economic Development Corporation("White Settlement EDC")feel that

oral argument, if allowed, would give the Court a more complete understanding of

the facts presented in this appeal. Therefore, Appellants request the opportunity to

present an oral argument.

APPELLANTS'BRIEF PAGE 2 TABLE OF CONTENTS

Identity of Parties &Counsel ................................................................................... 1

Statement Regarding Oral Argument........................................................................ 2

Table of Contents ..................................................................................:................... 3

Index of Authorities...........................................................................:....................... 5

Statement of the Case ................................................................................................ 8

Statement of Jurisdiction ........................................................................................ 10

Statement ofIssues Presented for Review .............................................................. 11

Statement of Facts and Background........................................................................ 11

Summary of the Argument...................................................................................... 19

Argument &Authorities.......................................................................................... 20

Appellants' Issue No. 1:

THE TRIAL COURT ERRED 1N GRANTING ENIMONS AND SOURCE CAPITAL'S FIRST A1V~NDED VERIFIED SPECIAL APPEARANCE .......................................................................... 20

A. Standard ofreview .............................................................................. 20

B. Emmons and Source Capital have minimum contacts with the State of Texas................................................................................ 22

i. General Jurisdiction ................................................................. 24 ii. Specific Jurisdiction ................................................................ 24

iii. Source Capital's Contacts with the State of Texas .................. 25 iv. Benjamin S. Emmons' Contacts with the State. of Texas......................................................................................... 30 C. The exercise of jurisdiction comports with fair play and substantial justice ............................................................................... 35

APPELLANTS'BRIEF PAGE 3 Conclusion &Prayer ............................................................................................... 37

Certificate of Compliance ....................................................................................... 40

Certificate of Service ............................................................................................... 40

Appendix ................................................................................................................. 41

APPELLANTS'BRIEF PAGE 4 INDEX OF AUTHORITIES Case Law Page

BMC Software Belg. N. V. v. Ma~cltand, 83 S.W.3d 789(Tex. 2002)..................................................................................21

Carlile Bancshares, Inc. v. ANmstrong, 2014 WL 3891658 at *13 (Tex.App.- Fort Worth Aug. 7, 2014, no pet.).......33,34

Cornerstone Healthcare GNoup Holding, Inc. v. Nautic 1Vlgmt., 2016 WI,3382159 at *6(Tex. June 17, 2016)............ . ..........................26,27

Daimler AG v. Bauman, 134 S.Ct.746 (2014)......................................................................................24

Flanagan v. Royal Body Care, Inc., 232 S.W.3d 367(Tex.App.-Dallas 2007, pet. denied)......................................20

Formosa Plastics CoNp. USA v. P~esidio Engineers and Cont~acto~s, Inc., 960 S.W.2d 41 (Tex. 1998)..................................................................32

Fox Lake Animal HospitalPSP v. Wound Management Technologies, Inc., 2014 WL 1389751 at *5(Tex.App.-Fort Worth April 10, 2014, pet. denied).......35

Glencoe Capital Partners II, LP v. Ge~nsbache~, 269 S.W.3d 157(Tex.App.-Fort Worth 2008, no pet.).......................25,33,36,37

Goodyeat~ Dunlop Tires OpeNations, S.A. v. Brown, 564 U.S. 915, 924(2011)...................................................................................... 24

Guardian Royal Exchange Assurance, LTD. v. English China Clays. P.L.C. et al, 815 S.W.2d 223 (Tex.1991)................................................................36

Holloway v. Skinner, 898 S.W.2d 793(Tex.1995)..........................................................................26

Horizon Shipbuilding, Inc. v. Blynn IIHolding, LLC., 324 S.W.3d 840(Tex.App.-Houston [14th Dist.] 2010, no pet.)..................27,28

APPELLANTS'BRIEF PAGE 5 Hosl~ins v. Ricco Family Pa~tne~s, Ltd., 2016 WL 2772164 at *8(Tex.App.- Fort Worth May 12, 2016, no pet.)........21,25

.Tani-KingF~anchising, Inc. v. Falco Franchising, S.A., 2016 WL 2609314 at *2(Tex.App.-Dallas May 5, 2016,no pet.)....................31

Kelly v. Gen. Inte~^io~ Const~^., Inc., 301 S.W.3d 653(Tex. 2010).........................................................................20,21

Michiancr Easy Livin' County, Inc. v. Holten, 168 S.W.3d 777(Tex. 2005)...................................................................23

Mold Mac Rives Expeditions v. D~ugg, 221 S.W.3d 569(Tex. 2007)..........................................................20222 > 3

Monc~iefOil Intern. Inc. v. OAO Gazp~om, 414 S.W.3d 142(Tex. 2013)................................................23,24,25,26,27,32,36,37

Mountain States Employes Council, Inc. v. Cobb Mechanical Contactors, Inc,, 2008 WL 2639711 at *3(Tex.App.-Fort Worth July 3,2008,no pet.)................22

NoNstNud v. Cicu~, 2015 WL 4878716 at *2(Tex.App. Fot-t Worth,no pet.)............................20,34

Patel v. Pate, 2017 WL 2871684 at *5(Tex.App.-Fort Wot-th July 6,2017,no pet.).................28

Retamco Operating Inc., v. Republic Drilling Co., 27A S.W3d 333. 357(Tex. 20091.........................................................20

SITQ E. U., Inc. v. Reata Restaurants, Inc., 111 S.W.3d 638(Tex.App.-Fort Worth 2003, pet. denied)............................31

Stull v. LaPlant, 411 S.W.3d 129(Tex.App.-Dallas 2013, no pet.)..............................................31

360-Irvine, LLC v. Tin Stagy^ Development, LLC, 2015 WL 3958509 at *5 (Tex.App.-Dallas June 30, 2015, no pet.)..................26

STATUTES PAGE

APPELLANTS'BRIEF PAGE 6 TEX. CIV.PRAC.&REM.CODE §51.014(a)(7)......................................10

TEX. CIV.PRAC.&REM. CODE §17.042 .................................................22

APPELLANTS'BRIEF PAGE 7 TO THE HONORABLE JUSTICES OF THIS COURT:

NOW COMES, Appellants City of White Settlement, Texas ("White

Settlement") and White Settlement Economic Development Corporation ("White

Settlement EDC")(collectively the "City") and submit their appellants' brief in the

above-styled and -numbered appeal and respectfully show:

STATEMENT OF THE CASE

Nature ofthe Case:

1. The City sued two residents of state of Georgia:(1)Benjamin S. Emmons

("Emmons") and Source Capital, LLC ("Source Capital") in the 48th District Court

in Tarrant County.l The City asserts that the trial court incorrectly granted both

Emmons' and Source Capital's Special Appearances.

2. This case involves a water park which was built and located in White

Settlement.2 The City contends that Emmons and Source Capital breached a contract

with the City and made numerous representations that were either fraudulent or

negligent while in Texas.3 The contract and representations relate to the operations

1 CR. 286-307.

2 CR. 286-307.

3 la.

APPELLANTS'BRIEF PAGE 8 ofthe water park. The City also contends that Emmons caused equipment and arcade

games to be removed from the water park and sold despite being owned by the City.4

Course ofProceedings:

3. This case was initiated on October 27, 2016.5 On February 23, 2017,

Emmons and Source Capital filed their First Amended Verified Special Appearance

alleging that the trial court did not have jurisdiction as Emmons was not a resident

ofTexas and Source Capital was principally located in Atlanta, Georgia.6 Appellants

filed their First Amended Petition on April 7, 2017 and their Second Amended

Petition on May 5, 20178. Appellants filed their original response to the Special

Appearance on May 8, 2017.9 An amended response was filed by Appellants on

August 30, 2017.10 Emmons and Source Capital filed an amended reply on

4 CR. 301-302.

5 CR. 5-61.

6 CR. 144-220.

~ CR. 221-285.

8 CR. 286-351.

9 CR. 352-361. to CR. 586-960.

APPELLANTS'BRIEF PAGE 9 September 6, 2017.11 The special appearance was then submitted to the trial court

without a hearing.12

Vial Court's Disposition:

4. On October 2, 2017, the trial court entered its Order sustaining the special

appearance and dismissing Emmons and Source Capital from the suit for lack of

personal jurisdiction.13

5. On October 20, 2017, Appellants filed their Notice of Appea1.14 The

remaining claims are currently abated pending resolution ofthis appeal.ls

STATEMENT OF JURISDICTION

This Court has jurisdiction of this interlocutory appeal pursuant to Tex. Civ.

Prac. &Rem.Code 51.014(a)(7)to review the order granting the special appearances

ofEmmons and Source Capital.

11 CR. 965-1036.

12 CR. 580-584.

13 CR. 1037

14 CR. 1040-1041.

is TEX. CIV.PRAC.&REM.§51.014(b).

APPELLANTS'BRIEF PAGE 10 STATEMENT OF ISSUES PRESENTED FOR REVIEW

Issue l: The trial court erred in granting Emmons and Source Capital's First

Amended Verified Special Appearance

STATEMENT OF FACTS AND BACKGROUND

1. Source Capital is a private equity firm which makes both equity and

debt investments in businesses which span over a wide range of industries.16

Emmons was and is a partner and a Managing Director of Source Capital.l~

Beginning in 2013, Source Capital caused the Source Capital Lenderslg to make a

$3.5 million loan to Horizon Family Holdings, LCC ("Horizon").19 Horizon is a

Missouri based holding company but does business in the state of Texas.20 Prior to

receiving the loan from Source Capital, Horizon had obtained a loan from Capital

One Bank in Fort Worth.21

2. The loan made by the Source Capital Lenders was to be repaid from the

16 CR 289.

l~ CR 292.

18 Source Capital Lenders are various investment funds which are pooled together. 19 CR. 289.

20 CR 289,291. 21 CR. 291.

APPELLANTS'BRIEF PAGE 11 operations of Horizon's seven waterparks in Texas (the "Seven Water Parks").22

Emmons was directly involved in the negotiation ofthe $3.5 million dollar loan and

made numerous visits to Texas and regularly communicated with individuals in

Texas concerning the loan and the Seven Water Parks.23 Each ofthe water parks was

owned by a different city in the State of Texas: White Settlement, Waco, Garland,

Pflugerville, Roanoke, The Colony, and Mansfield (the "Seven Cities").2`~ Horizon

had a long term lease with each City with each ofthe Seven Cities.25 Matthew Smith,

the Vice President of Source Capital, was also directly involved and frequently

communicated with individuals in Texas and made numerous visits to Texas.26

3. Construction began on the waterpark in White Settlement in 2013.27

The City entered into both a Construction Agreement and Lease and Operating

Agreement with Hawaiian-Parks White Settlement, LLC ("HParks").28 HParks is

ZZ CR 289.

23 CR. 293.

z4 CR. 289.

zs CR. 289.

26 CR. 293.

Z~ CR 289.

28 CR 290.

APPELLANTS'BRIEF PAGE 12 owned by Horizon.29 Emmons has represented that Source Capital or its affiliate,

Source Horizon, LLC,is the controlling owner of Horizon.3o

4. The City provided $12,500,000 in funding for the construction of the

water park in White Settlement which was to be paid back through semi-annual lease

payments.31 Despite some setbacks, the water park at White Settlement opened on

or about May 24, 2014.32 Unfortunately, by late 2014, HParks went into default on

White Settlement's Lease and Operating Agreement.33 Horizon also went into

default on its loans with Source Capita1.34 Due to these defaults, many of the Seven

Cities, including the City, threatened to terminate their leases.35 If the leases were

terminated, Source Capital would not be able to obtain repayment of their original

$3.5 million loan.36

29 CR 289.

3o CR 289.

31 CR 290-291.

32 CR 291. 33 CR. 292.

3`~ CR. 292. 3s CR. 292

36 CR 292.

APPELLANTS'BRIEF PAGE 13 5. In an attempt to ensure that Source Capital was paid back for the $3.5

million dollar loan, Emmons, representing Source Capital, negotiated a workout

agreement with Capital One Bank as well as the.Seven Cities who owned the Seven

Water Parks (the "Workout Agreement").37 Capital One Bank was Horizon's senior

lender and Source Capital's loan was subordinate to the Capital One Bank loan.38

6. The principle features ofthe Workout Agreement are as follows:

a. Capital One Bank would enter into a forbearance agreement whereby

the Bank would refrain from foreclosing before the end of2015;

b. Source Capital would advance an additional 5 million dollars to pay

past due rents due on the waterpark leases and to operate the Seven

Water Parks through the end of2015;

c. Source Capital would refinance the debt ofHorizon by the end of2015

or sell the parks and pay offthe debts of Horizon.39

7. From late 2014 through May 2015, Emmons and Source Capital were

37 CR. 293; Appendix Tab 2.

3g CR. 291.

39 Appendix Tab 2.

APPELLANTS'BRIEF PAGE 14 attempting to persuade the Seven Cities to agree to the Workout Agreement.4o

During this time period, Emmons initiated and participated in many telephone

conversations with representatives of Capital One Bank, Horizon and the Seven

Cities.41 Emmons also made numerous visits to the State of Texas to meet with

representatives ofCapital One Bank,Horizon as well as officials at the City of White

Settlement.42

8. The Workout Agreement was only possible if the Seven Cities would

agree to changes in the debt structure and agree to defer their ability to exercise the

rights and remedies under the Lease and Operating Agreements even though their

Lease and Operating Agreements were in default.43 The willingness of the Seven

Cities to forebear exercising their rights generated by Horizon's default was key to

the success ofthe Workout Agreement.4`~

9. In early 2015, Emmons met with White Settlement officials to discuss

`~0 CR. 294 `~1 CR. 294. 42 CR. 294.

43 CR. 294. 44 CR. 294.

APPELLANTS'BRIEF PAGE 15 the Workout Agreement.45 This meeting occurred in White Settlement, Texas.`~6 At

this meeting, Emmons sought the City's approval of a Consent to Mortgage of

Leasehold of the Park (the "Mortgage Consent").47 Emmons represented to the City

that this Mortgage Consent would benefit the City and that Capital One Bank would

only extend its lending transaction ifthe Mortgage Consent was signed by the City.48

10. In addition to the Mortgage Consent, at the meeting Emmons requested

that the City agree to a Consent to a future Change of Ownership (the "Ownership

Consent").49 This Ownership Consent would allow for the transfer of ownership

from Horizon to Source Horizon, LLC which is a Georgia limited liability company

that is affiliated with Source Capital.50 Emmons represented that Source Capital

would inject up to $5,000,000 into Horizon for the benefit ofthe Seven Water Parks

and that this cash injection, together with an additional cash injection of$1,000,000

by Source Capital and Capital One Bank, would ensure that Horizon could resolve

4s CR. 294.

46 CR. 294.

`~~ CR. 295.

48 CR. 295.

`~9 CR. 295. so CR. 295.

APPELLANTS'BRIEF PAGE 16 all of its 2014 hold-over obligations and handle its 2015 commitments including the

$600,000 rent payment which was due to the City in October 2015.x1

11. As the City did not timely and fully receive the first and second lease

payments, the City was concerned about HParks' financial health and viability.52

The City had no reason to agree to the Mortgage Consent or Ownership Consent

unless the cash infusions were made by Source Capital and would benefit the City.s3

At the meeting in White Settlement, Emmons specifically represented to the City

that if the Mortgage Consent was given by the City, the October 1, 2015 lease

payment to the City would be paid.5`~ This representation was material and was relied

upon by the City. Based on these representations by Emmons and Source Capital,

the City agreed to the Mortgage Consent and Ownership Consent.ss

12. After the Mortgage Consent and Ownership Consent were agreed to the

City, Emmons' representations proved to be untrue as Emmons and Source Capital

sl CR. 295.

52 CR. 296.

s3 CR. 296.

5`~ CR. 296. ss CR. 296.

APPELLANTS'BRIEF PAGE 17 determined that the water park in White Settlement was not financially viable.56 AS

such,Emmons and Source Capital engaged in the following activities which reduced

the financial commitment to the water park:

a. Only 3.7 million of the 5 million promised was advanced for the debt

service and operation ofthe Seven Water Parks;

b. All of the Seven Water Parks' rent payments through 2015 were paid

except for White Settlement; the $600,000 rental payment was

purposefully not paid;

c. $300,000 in operating income generated at White Settlement was

diverted to support the other six water parks in Texas;

d. No efforts were made to maintain the White Settlement water park;

e. Efforts to pay outstanding vendor indebtedness were delayed or halted,

resulting in mechanic's liens;

f. Adequate insurance was not maintained at the water park; and

g. Emmons caused the arcade games and other equipment owned by

White Settlement from the park to be removed from the water park. The

s6 CR. 297.

APPELLANTS'BRIEF PAGE 18 arcade games and equipment were valued at over $276,000.57

13. When it became clear that the City would not receive the $600,000 lease

payment, the City terminated the Lease and Operating Agreement.58 This lawsuit

was then brought against Emmons and Source Capital as well as HParks and Clinton

Hill for various causes of actions relating to the facts and circumstances outlined

above.59 Specifically, the City brought suit against Emmons for conversion and

violation ofthe Texas Theft Liability Act, and both Emmons and Source Capital for

fraud, negligent misrepresentation, breach of contract, and promissory estoppel.6o

SUMMARY OF THE ARGUMENT

The trial court erred in granting Emmons and Source Capital's First Amended

Verified Special Appearance because both Emmons and Source Capital had

purposeful contacts with the State of Texas to give rise to personal jurisdiction. The

City provided the trial court with adequate evidence of the quality and quantity of

the purposeful contacts, which directly relate to the claims in this case. None ofthese

57 CR. 296-97. ss CR. 298:

s9 See CR. 286-307.

6o CR. 301-305.

APPELLANTS'BRIEF PAGE 19 contacts were legally or factually negated by either Emmons or Source Capital.

Therefore, it was impermissible for the trial court to grant Emmons' and Source

Capital's Special Appearance.

ARGUMENT &AUTHORITIES

Issue No. 1: The trial court e~~ed in granting Emmons and Source Capital's Fist Amended Verified Special Appearance

A. Standard of review

1. The granting of a special appearance is reviewed de novo. Moki Mac

River Expeditions v. Drugg,221 S.W.3d 569, 574(Tex. 2007). The court may draw

factual allegations from the plaintiff's petition and any response opposing the special

appearance. See Flanagan v. Royal Body Calve, Inc., 232 S.W.3d 367, 374

(Tex.App.- Dallas 2007, pet denied). The plaintiff has the initial burden of

sufficiently pleading facts to confer jurisdiction. Retamco Operating Inc., v.

Republic Drilling Co., 278 S.W.3d 333, 357 (Tex. 2009). "This minimal pleading

requirement is satisfied by an allegation that the nonresident defendant is doing

business in Texas." Norst~ud v. Cicur, 2015 WL 4878716 at *2 (Tex.App. Fort

Worth, no pet.).

2. The nonresident defendant is then able to negate jurisdiction on either

a factual or legal basis. Kelly v. Gen. Interior Const~., Inc., 301 S.W.3d 653, 659

APPELLANTS'BRIEF PAGE 20 (Tex. 2010). Factually, a defendant can allege that it does not have any contacts with

the State of Texas. Id. Legally, the defendant can demonstrate that even if the facts

are true, the evidence is not sufficient to establish jurisdiction in that either the

contacts were not purposeful; the claims do not arise from the contacts; or that

traditional notions offair play and substantial justice are offended by the exercise of

jurisdiction. Id.

3. The general statement that the nonresident defendant has not

"committed a tort, in whole, or in part, in Texas" is conclusory and therefore

insufficient to shift the burden to the plaintiff to produce evidence of the specific

allegations that give rise to jurisdiction. Hoskins v. Ricco Family Partners, Ltd.,

2016 WL 2772164 at *8 (Tex.App.- Fort Worth May 12, 2016, no pet.). Notably,

"[j]urisdiction cannot turn on whether a defendant denied wrongdoing- as virtually

all will." Michiana Easy Livin' Country, Inc. v. Holten, 168 S.W.3d 777, 791 (Tex.

2005).

4. When a trial court does not issue findings of fact and conclusions of

law, as in this case, the court of appeals is to imply that the trial court found all facts

necessary to support the judgment. BMC Software Belg. N. V. v. Marchand, 83

S.W.3d 789, 795 (Tex. 2002). The implied findings of the trial court may be

challenged for both their legal and factual sufficiency on appeal. Id.

APPELLANTS'BRIEF PAGE 21 5. In this case,Emmons and Source Capital do not deny that they both had

contacts with the State of Texas. Instead, Emmons and Source Capital allege that the

contacts were not sufficient to give rise to the level of minimum contacts.

B. Emmons and Source Capital had minimum contacts with the State of Texas

1. A Texas court can exercise personal jurisdiction over a nonresident if

"(1) the Texas long-arm statute authorizes the exercise of jurisdiction, and (2) the

exercise ofjurisdiction is consistent with federal and state constitutional due-process

guarantees." Moki Mac Rives Expeditions, 221 S.W.3d at 574.

2. The Texas long-arm statute allows a court to exercise jurisdiction over

anon-resident defendant who "does business" in Texas. TEX. CIV.PRAC.&REM.

CODE §17.042; Mountain States EmployeNs Council, Inc. v. Cobb Mechanical

Contractors, Inc., 2008 WL 2639711 at *3 (Tex.App.- Fort Worth July 3, 2008, no

pet.). Pursuant to section 17.042 of the Texas Civil Practice and Remedies Code, a

non-resident defendant "does business" if it:

a. Contracts by mail or otherwise with a Texas resident and either party is

to perform the contract in whole or in part in this state;

b. Commits a tort in whole or in part ofthis state.

TEX. CIV.PRAC. &REM.CODE §17.042

APPELLANTS'BRIEF PAGE 22 3. Due process, the second prong for personal jurisdiction, is satisfied if:

(1) the defendant has minimum contacts with the state; and (2) the exercise of

jurisdiction comports with traditional notions of fair play and substantial justice.

Moki Mac Rive~Expeditions,221 S.W.2d at 575. The"minimum contacts" test looks

to see whether or not the defendant purposefully availed himself of the privilege of

conducting activities in Texas. See Michiana Easy Livin' Countf^y, Inc. v. Holten,

168 S.W.3d 777, 784(Tex. 2005).

4. Courts utilize the following factors in determining whether or not a non-

resident defendant has purposively availed himselfto the State of Texas:(1)the acts

must be the defendant's own actions;(2)the defendant's actions must be purposeful

as opposed to random,isolated and fortuitous; and(3)the defendant must seek some

benefit, advantage or profit by availing himself ofthe privilege of doing business in

Texas.Id. at 785.

5. "At its core, the purposeful availment analysis seeks to determine

whether anon-resident's conduct and connection to a forum are such that it could

reasonably anticipate being hauled into court here." MoncriefOillntern Inc. v. OAO

GazpNom,414 S.W.3d 142, 152(Tex. 2013)(internal quotations omitted).

6. Minimum contacts can give rise to either general or specific

jurisdiction. Only relevant jurisdictional facts, as opposed to the ultimate merits of

APPELLANTS'BRIEF PAGE 23 the case, should be considered by the Court in determining the issue ofjurisdiction.

See Monc~ief Oil Intern, 414 S.W.3d at 154. At the jurisdictional phase, the trial

court is to review the defendant's business contacts with the State of Texas and the

subjective intent ofthe defendants cannot negate their contacts. Id.

i. General Jurisdiction

7. To establish general jurisdiction, the defendant's contacts must be

continuous and systematic. For a corporation, general jurisdiction is typically

established in either the state of incorporation and the corporation's principle place

of business. Daimler AG v. Bauman, 134 S.Ct. 746, 758, n.11 (2014). For an

individual, the exercise of general jurisdiction is usually limited to the individual's

domicile. Goodyear Dunlop Ties Operations, S.A. v. Brown, 564 U.S. 915, 924

(2011). However, courts have held that a corporation's operations in another state

might be substantial enough to render the corporation "at home" in that state.

Bauman, 134 S.Ct. at 761. Here,the City concedes that generaljurisdiction does not

exist because Emmons lives in Georgia and Source Capital's principle place of

business is Georgia. Therefore, the City will only focus on specific jurisdiction

which is applicable in this case.

ii. Specific Jurisdiction

8. Specific jurisdiction is established if the defendant's liability arises out

APPELLANTS'BRIEF PAGE 24 of or is related to an activity conducted in the State of Texas. Mold Mac Rive

Expeditions, 221 S.W.3d at 576. In order to be related to, there must be a substantial

connection to the facts in the case. Id. at 585."A substantial connection can result

from even a single act." Moncrief Oil Intern, 414 S.W.3d at 151. For specific

jurisdiction, courts look a~t the relationship "between the defendant, the forum and

the litigation." Glencoe Capital Partners II, LP v. Ge~nsbacher, 269 S.W.3d 157,

154 (Tex.App.- Fort Worth 2008, no pet.). For specific jurisdiction, "it is not

necessary that the nonresident defendant's conduct actually occur in Texas, as long

as the defendant's acts were purposefully directed towards Texas..." Hoskins v.

Ricco Family Partners, Ltd., 2016 WL 2772164 at *5 (Tex.App.- Fort Worth May

12, 2016, no pet.)(internal quotations omitted).

9. This Court is to analyze the contacts on a claim by claim basis unless

all claims arise from the same contacts. Monc~iefOil Intern, 414 S.W.3d at 142. In

this case, all ofthe claims arise from the same contacts, and therefore,the Court does

not need to analyze the contacts on a claim by claim basis.

iii. Source Capital's Contacts with the state of Texas

10. Appellants' Second Amended Petition asserts the following claims

against Source Capital; fraud, negligent misrepresentation, breach of contract and

promissory estoppel. These claims stem from representations and promises made by

APPELLANTS'BRIEF PAGE 25 Emmons and Source Capital both while present in Texas and directed towards a city

in Texas. Therefore, Appellants sufficiently established their initial pleading burden.

See, e.g., Monc~iefOil Intern Inc. 414 S.W.3d at 149.

11. In general,"the actions ofa corporate agent on behalfofthe corporation

are deemed the corporation's acts." Holloway v. Skinner, 898 S.W.2d 793, 795

(Tex.1995). In addition, an LLC can only act through its agent and authorized

representatives. 360Irvine, LLC v. Tin Stagy Development, LLC,2015 WL 3958509

at *5(Tex.App.-Dallas June 30,2015,no pet.). Therefore,the "actions ofan entities'

agent are deemed the acts ofthe entity." Id.

12. Atrial court may exercise jurisdiction if a nonresident business

specifically seeks out a Texas business or Texas assets. Cornerstone Healthcare

G~ozcpHolding, Inc. v. Nautic Mgmt.,2016 WL 3382159 at *6(Tex. June 17,2016).

13. In Co~neNstone Healthcare, the Texas Supreme Court held that an out-

of-state private equity fund and its general partner who specifically targeted Texas

assets to invest(and ultimately profit from) had purposefully availed themselves to

jurisdiction in the State ofTexas.Id. The Texas Supreme Court held that even though

a subsidiary actually purchased the Texas hospitals,"[k]eeping legal entities distinct

does not mean that they can escape jurisdiction by splitting an integrated transaction

into little bits." Id. at 73. In finding that the private equity fund and general partner

APPELLANTS'BRIEF PAGE 26 could be subjected to jurisdiction in Texas, the Court took into consideration the

following facts: (1) the private equity fund "spearheaded" the transaction and

"ultimately stood to profit" from the transaction; and the fund specifically sought

out a Texas seller and Texas assets. Id.

14. In Moncrief Oil Intern, the Texas Supreme Court held that a Russian

company was subject to jurisdiction in Texas when the defendants attended two

meetings in Texas regarding a potential joint venture in Texas. Monc~iefOillntern,

414 S.W.3d at 156. The Court in Moncrief Oil Intern held that the defendants

purposely availed themselves to jurisdiction in Texas when they attended two

meetings in Texas and sought the benefits and protection ofTexas law.Id. The Court

noted that the United States Supreme Court "concluded that forming an enterprise

in one state to send payments to a corporation in the forum state was sufficient to

confer specific jurisdiction." Id. at 153.

15. In Horizon Shipbuilding, the Houston Court of Appeals held that an

Alabama Corporation, by way of its project manager and president, was subject to

jurisdiction when the two individuals attended a meeting in Texas to discuss aspects

of an already executed contract amongst the parties. Horizon Shipbuilding, Inc. v.

Blynn IIHoldings, LLC., 324 S.W.3d 840(Tex.App.-Houston [14th Dist.] 2010, no

pet.) The appellate court noted that the meeting "constituted a significant part of an

APPELLANTS'BRIEF PAGE 27 ongoing relationship among the parties" and "it was foreseeable that any disputes

deriving from that meeting might be heard by a Texas court." Horizon Shipbuilding,

324 S.W.3d at 848-49.

16. Recently, the Fort Worth Court of Appeals upheld the denial of a

special appearance when the non-resident defendants made fraudulent statements

while physically present in the State of Texas which were the basis of the lawsuit.

Patel v. Pate, 2017 WL 2871684 at *5 (Tex.App.-Fort Worth July 6,2017,no pet.).

The Appellate Court held that the Plaintiff sufficiently brought forward legally and

factually sufficient evidence to establish that the representations were made while

the non-resident defendant was located in Texas.Id. at *8.

17. In this case, Source Capital, through Benjamin Emmons and Matthew

Smith, undertook and negotiated a Workout Agreement with Capital One Bank as

well as Horizon and the Seven Cities (one of which was White Settlement). To

memorialize these promises, Source Capital and Emmons sent Phil Bray, then

Director of Finance at the City, a detailed letter which explained the various

promises by Source Capital and Emmons.61 Notably, this letter is on Source

Capital's letterhead.

61 Appendix Tab 2

APPELLANTS'BRIEF PAGE 28 18. These representations, which are the foundation of the City's'contract

and fraud claims against both Emmons and Source Capital, were made by Emmons

while attending a meeting in White Settlement.62 The City provided the trial court a

copy of the letter as well as the affidavits of Jim Ryan and Phillip Bray who both

attested to the fact that these allegations were made by Emmons and Source

Capita1.63 Emmons also admits that he made three trips to Texas which related to the

water park in White Settlement.6`~ Source Capital also admits that it made three

payments to White Settlement relating to the water park in this case.6s

19. In addition to the payments made by Source Capital and the trips to

White Settlement, both Emmons and Matthew Smith, on behalf of Source Capital,

initiated' and participated in numerous telephone and email communications with

representatives from the City regarding the Workout Agreement and the various

promises and representations that were substantially relied upon by the City.66 These

62 CR. 605.

63 CR. 603-617.

64 CR. 148.

6s CR. 148.

66 CR. 701-723.

APPELLANTS'BRIEF PAGE 29 contacts were purposeful and directly relate to the claims being brought by the City

against both Emmons and Source Capital. Source Capital sought out White

Settlement and the investment into Horizon.67 These contacts are more than enough

to establish that Source Capital has minimum contacts with the State of Texas to

give rise to specific jurisdiction.

iv. Benjamin S.Emmons' Contacts with the State of Texas 20. Due to the multiple meetings attended by Emmons and the numerous

telephone calls, emails and letters directed to individuals in the State of Texas which

directly relate to the claims in this case, Emmons purposefully availed himself to

jurisdiction in the State of Texas. The claims asserted against Emmons are

conversion, Texas Theft Liability Act, fraud, negligent misrepresentation, breach of

contract and promissory estoppel. All of these claims either arise from

representations and actions taken by Emmons while physically present in the State

or directed towards individuals in the State of Texas. Emmons alleged that his visits

to Texas did not amount to purposeful availment.68 However, as stated in more detail

below,Emmons'contacts with the State ofTexas were purposeful and directly relate

67 CR. 676-681.

68 CR. 152.

APPELLANTS'BRIEF PAGE 30 to the facts surrounding the claims in this case.

21. Emmons alleges that the fiduciary shield doctrine protects him from

jurisdiction.69 Emmons is mistaken. The fiduciary shield does not protect a corporate

officer from specific jurisdiction as to intentional torts or fraudulent acts for which

Emmons could be held individually liable. Stull v. LaPlant, 411 S.W.3d 129, 135

(Tex.App.- Dallas 2013, no pet). "There is no blanket protection from jurisdiction

simply because a defendant's alleged acts were done in a corporate capacity." SITQ

E. U., Inc. v. Reata Restaurants, Inc., 111 S.W.3d 638, 651d (Tex.App.-Fort Worth

2003, pet denied.)(internal quotations omitted).

22. In this case, the City alleges that Emmons committed a fraud while in

Texas and that he instructed individuals in Texas to commit a tort. Therefore, the

fiduciary shield doctrine is not applicable. See .Tani-King Franchising, Inc. v. Falco

F~^anchising, S.A., 2016 WL 2609314 at *2(Tex.App.-Dallas May 5,2016,no pet.).

23. Emmons also alleges that the contract and promissory estoppel claims

in this case are actually converted tort claims and therefore the fiduciary shield

doctrine applies. As stated in more detail below,this argument should be disregarded

by this Court.

69 CR. 155.

APPELLANTS'BRIEF PAGE 31 24. Emmons cites to one unpublished opinion to support his argument that

the fiduciary shield does not apply if the claim is "nothing more than a contract

dispute."70 First, it is impermissible at this stage in the lawsuit to look to the merits

of the claims. MoncriefOil Intern, 414 S.W.3d at 156..Instead, the Court is to look

at all jurisdictional facts to determine if Emmons has minimum contacts with the

State ofTexas. Second,the Texas Supreme Court has held that "it is well established

that the legal duty not to fraudulently procure a contract is separate and independent

from the duties established by the contract itself' and the Texas Supreme Court"has

also repeatedly recognized that a fraud claim can be based on a promise made with

no intention of performing, irrespective of whether the promise is later subsumed

within a contract." FoNmosa Plastics Corp. USA v. P~esidio EngineeNs cznd

Cont~actoNs, Inc., 960 S.W.2d 41,46(Tex. 1998).

25. In this case, Appellants allege that Source Capital and Emmons made

representations to the City which were false or made recklessly.~l These promises

were later laid out in a letter from Emmons to the City. Ultimately, it will be up to

the trier of fact to determine if the City has established either a fraud and/or breach

~~ CR. 156.

71 CR. 303.

APPELLANTS'BRIEF PAGE 32 of contract claim. Emmons should not be able to circumventjurisdiction in the State

of Texas by impermissibly hiding behind the fiduciary shield when the City has

adequately pled plausible facts to suggest that Emmons committed a fraud in the

state of Texas.

26. In addition, the City is bringing a conversion and claim under the Texas

Theft Liability Act for Emmons' role in selling equipment that was owned by the

City. These claims are distinctly separate from the other claims in this case.

27. As the fiduciary shield does not apply in this case, Emmons has

purposefully availed himselfto jurisdiction in the State of Texas. In Glencoe Capital

Pa~tne~s, the Fort Worth Court of Appeals held that a shareholder and nonresident

director had purposefully availed themselves ofjurisdiction in Texas based on their

participation in telephone meetings where representations were made which were

the basis ofthe lawsuit. Glencoe Partners II, LP v. Gernasbacher, 269 S.W.3d 157,

167(Tex.App.-Fort Worth 2008, no pet.). The Court concluded that these telephone

calls were purposeful and that their liability, if any, arose from their contacts with

the State of Texas.Id.

28. The Fort Worth Court of Appeals in Carlile Bancshares held that

former non-resident directors had sufficient contacts with the state to give rise to

jurisdiction. Ca~lile Bancshares, Inc. v. ANmstr~ong, 2014 WL 3891658 at *13

APPELLANTS'BRIEF PAGE 33 (Tex.App.-Fort Worth Aug. 7,2014,no pet.). The Court took into consideration that

the directors sent emails to employees in Texas; traveled to Texas to meet with

employees; and "were experienced businessmen and knew the information they

provided would be relied upon" by the Plaintiff in making a decision in Texas.Id.

29. In No~st~zcd, the Fort Worth Court of Appeals upheld the special

appearance denial ofthe non-resident chieffinancial officer. No~st~ud v. Cicur,2015

WL 4878716 at *11 (Tex.App.-Fort Worth Aug. 13, 2015, no pet.). The Court held

that the fiduciary shield did not apply because it was alleged that the CFO

purposefully targeted the plaintiff in Texas and directed the misinformation in order

to secure the investment. Id. at. *8. Despite not even traveling to the State of the

Texas, the Court upheld the denial ofthe special appearance.Id. at *9.

30. In this case, Emmons traveled to Texas; initiated and participated in

numerous phone calls into Texas and exchanged many emails with representatives

from White Settlement.72 It was during a meeting in White Settlement that he made

the representations which are the basis of the fraud and contract claims in this case.

He also directed individuals in Texas to sell the City's equipment.73 These contacts

72 CR. 605-606; CR. 612-615; CR. 701-723.

73 CR. 946-958.

APPELLANTS'BRIEF PAGE 34 were purposeful, plentiful and directly relate to the City's claims in this case.

Emmons has not provided any evidence to contradict the evidence provided by the

City that Emmons made false representations while in White Settlement or that he

caused certain equipment to be improperly sold. See Fox Lake Animal Hospital PSP

v. Wound Management Technologies, Inc., 2014 WL 1389751 at *5(Tex.App.-Fort

Worth April 10, 2014, pet.denied).

31. Emmons is an experienced businessman who knew that the

representations would be relied upon by individuals in the State ofTexas. See Cc~~lile

BancshczNes, Inc., 2014 WL 3891658 at *13. Therefore, the Court should find the

Emmons has purposefully availed himself ofjurisdiction in Texas.

C. The exercise of jurisdiction comports with fair play and substantial justice 32. As both Emmons and Source Capital had minimum contacts with the

State of Texas and purposefully availed themselves, the exercise of jurisdiction

comports with fair play and substantial justice. Courts look to the following factors

to determine if the exercise of jurisdiction comports with fair play and substantial

justice: (1) the burden on the defendants; (2) the interest of the forum state in

adjudicating the dispute; (3) the plaintiff's interests in obtaining convenient and

effective relief; (4) the interstate judicial system's interest in obtaining the most

efficient resolution of controversies; and (5)the shared interest of the several states

APPELLANTS'BRIEF PAGE 35 in furthering fundamental, substantive social policies. Glenco Capital Pa~tne~s, II,

LP., 269 S.W.3d at 168.

33. "If a nonresident has minimum contacts with the forum, rarely will the

exercise ofjurisdiction over the nonresident not comport with traditional notions of

fair play and substantial justice." Monc~iefOillnt'l Inc., 414 S.W.3d at 154-55. The

burden is on Source Capital and Emmons to sufficiently "present `a compelling case

that the presence of some consideration would render jurisdiction unreasonable."'

Guardian Royal Exchange Assurance, LTD. v. English China Clays. P.L.C. et al,

815 S.W.2d 223,231 (Tex.1994). Distance to the forum is also generally insufficient

to defeat jurisdiction. Glencoe Capital Pa~tne~s, II, LP., 268 S.W.3d. at 168.

34. Source Capital and Emmons have not met their burden of providing a

compelling reason as to why the exercise of jurisdiction would be unreasonable.

Instead, Source Capital and Emmons claim it would be unreasonable because neither

have sufficient ties with Texas and "Plaintiffs have potential recourse against

Hawaiian Parks..."74 Using this rationale, any nonresident defendant could avoid

jurisdiction by claiming that the Plaintiff could recover from another party. Such an

unreasonable result should not be permitted by the Court.

~`~ CR. 161.

APPELLANTS'BRIEF PAGE 36 35. Both Enunons and Source Capital knew based on their contacts within

Texas that they could be brought into a Texas court room. This case also involves

other parties and claims and thus it would be more efficient to resolve the entire case

in the same place. See Monc~iefOillnt'l, Inc., 414 S.W.3d at 155. Texas also has an

interest in providing a forum for its residents to address grievances inflicted by non-

resident parties. See Glencoe Capital Pa~tne~s, II, LP., 268 S.W.3d. at 168.

36. Source Capital and Emmons have both failed to provide any reasonable

justification for why jurisdiction should not be imposed in this case; therefore, the

Court should find that the exercise ofjurisdiction in this case compot-ts with fair play

and substantial justice.

CONCLUSION &PRAYER

The facts in this case are not in dispute. Emmons and Source Capital made

substantial, subordinate loans to Horizon, a business entity in Texas. Horizon had

leases to operate seven water parks located in seven cities tluoughout Texas

including, the City of White Settlement. When Horizon went into default with its

senior lender (Capital One Banlc) and its leases, Emmons and Source Capital sought

to salvage their loan with the Workout Agreement. Emmons and Source Capital

came to Texas to persuade the Seven Cities, including White Settlement, to

APPELLANTS'BRIEF PAGE 37 cooperate. Promises were made and reliance occurred. White Settlement agreed to

forebear from putting its Lease into default. The promises made by Emmons and

Source Capital were breached which caused damage to the City.

Both Source Capital and Emmons have more than enough purposeful contacts

within Texas which directly relate to the claims in this case. As Source Capital and

Emmons have purposefully availed themselves of jurisdiction, the Court should

reverse the trial court's granting of the Special Appearance for both Emmons and

Source Capital.

W~-IEREFORE, premises considered the City respectfully requests that the

Justices of this Honorable Court reverse the trial court's granting of the Special

Appearance for Emmons and Source Capital, remand the case back to the trial court

and grant the City any and all other reliefto which they may show themselves justly

entitled, in law or equity.

APPELLANTS'BRIEF PAGE 38 Respectfully submitted,

MARIs & LAtv~x,P.C.

/s/ Robert F. Maris Robert F. Maris State Bar No. 12986300 rmaris@marislanier.com Alise N. Abel State Bar No. 24082596 aabel@marislanier.com Maxzs & L~r~x,P.C. 3710 Rawlins Street, Suite 1550 Dallas, Texas 75219 214-706-0920 telephone 214-706-0921 facsimile

ATTORNEYS FOR APPELLANTS

APPELLANTS'BRIEF PAGE 39 CERTIFICATE OF COMPLIANCE

I hereby certify, pursuant to Rule 9.4(1)(3) of the Texas Rules of Appellate Procedure, that this brief complies with the length limitations of Rule 9.4(i) and the typeface requirements of Rule 9.4(e).

Exclusive ofthe contents excluded by Rule 9.4(1)(1), this brief contains 5,462 words as counted by the Word Count function (including textboxes, footnotes, and endnotes) of Microsoft Word 2013.

This brief has been prepared in proportionally spaced typeface using:

Software: Microsoft Word 2013 Typeface: Times New Roman Font Size: 14 point

/s/Robei-t F. Maris Robert F. Maris

CERTIFICATE OF SERVICE

I hereby certify that a true, correct and complete copy of the foregoing document was served in accordance with Rule 9.5 of the Texas Rules of Appellate Procedure on the 20th day of December, 2017 to:

C. Michael Moore Matthew T. Nickel Spencer Hamilton DENTONS US LLP 2000 McKinney Avenue, Suite 1900 Dallas, Texas 75201 VIA E-FILE

/s/Robert F. Maris Robert F. Maris

APPELLANTS'BRIEF PAGE 40 NO.02-17-00358-CV

In the Court of Appeals Second District of Texas Fort Worth, Texas

City of White Settlement, Texas, and White Settlement Economic Development Corporation

v.

Benjamin S. Emmons,and Source Capital, LLC,

On Appealfrom the 48th Judicial District Court ofTarrant County, Texas Cause No.048-288516-16; the Honorable David L. Evans Presiding

APPELLANTS' APPENDIX

Contents Page

Plaintiffs' Second Amended Petition ................................................................Tab 1

Workout Agreement ...........................................................................................Tab 2

Phillip Bray Affidavit.........................................................................................Tab 3

Jim Ryan Affidavit .............................................................................................Tab 4

Order...................................................................................................................Tab 5

APPELLANTS' APPENDIX PAGE 41 APPENDIX TAB "1" FILED 048-288516-16 TARRANT COUNTY 5/5/2017 4:23:05 PM THOMAS A. WILDER DISTRICT CLERK CAUSE NO.048-288516-x6

CITY OF WHITE SETTLEMENT, § IN THE DISTRICT COURT Z`EXAS and the WHITE SETTLEMENT § ECONOMIC DEVELOPMENT § CORPORATION, §

Plaintiffs, §

v. § 48*~ JUDICIAL DISTRICT HAWAIIAN PARKS- WHITE §, SETTLEMENT,LLC,a Missouri limited § liability company,BENJAMIN S. § EMMONS,SOURCE CAPITAL § LLC,a Georgia limited liability company § and CLINTON HILL, §

Defendants. § T~~RRAN'T COUNTY,Z`EXAS

PLAINTIFFS'SECOND AMENDED PETITION

TO THE HONORABLE JUDGE OF SAID COURT:

COME NOW Plaintiff City of White Settlement, Texas ("the City") and the White

Settlement Economic Development Corporation("EDC")(collectively "Plaintiffs" and/or

"White Settlement") and complain of Defendants Hawaiian Parks-White Settlement,

LLC ("HParlcs"), Benjamin S. Emmons ("Emmons"), Source Capital, LLC ("Source

Capital") and Clinton Hill ("Hill) (collectively "Defendants"). In support thereof,

Plaintiffs respectfully show the following:

•~ I.

Discovei~Control Plan

1. Plaintiffs plead that discovery in this case should be governed by the Level

3 Discovery Control Plan, as set out at Rule 190.4 of the Texas Rules of Civil Procedure.

II.

Parties

2. The City of White Settlement is a governmental entity organized as a Texas

home rule municipality.

3. White Settlement Economic Development Corporation is a Texas non-

profit corporation and is a Type B corporation created and operating under The

Development Corporation Act, V.T.C.A., Local Government Code, Title 12, Subtitle Cl,

as amended,specifically Chapters 501 and 502 thereof.

4. Hawaiian Parks-White Settlement, LLC is a limited liability company

organized under the laws of the state of Missouri. HParks is a nonresident doing

business in Texas pursuant to Section 1.042 of the Civil Practice and Remedies Code.

HParks no longer maintains a place of regular business in this State nor a designated

agent upon whom service may be made. At all times relevant to the matters pled

herein, HParks maintained its regular place of business in Texas. In addition, HParks'

last business activity tools place in Texas. HParks has already been served with process.

5. Benjamin S. Emmons is a nonresident individual doing business in Texas

pursuant to Section 1.042 of the Civil Practice and Remedies Code and he has already

been served with process.

6. Source Capital, LLC is a Georgia limited liability company whose principal

place of business is 75 14~ Street, Suite 2 00, Atlanta, Georgia 3o3og. Source Capital is

• a nonresident doing business in Texas pursuant to Section 1.042 of the Civil Practice

and Remedies Code who has already been served with process.

~. Clinton Hill is an individual residing in Texas who has already been served

with process.

III.

Venue and Jurisdiction

8. Venue is proper in Tarrant County, Texas, pursuant to Section

15.002(a)(1)inasmuch: a) all or a substantial part of the events or omissions giving rise

to the claims occurred in Tarrant County, Texas; and b) the contract upon which the

suit is based was performed, in whole, in Tarrant County, Texas. This Court has

personal jurisdiction over Defendants as they have purposefully availed themselves to

the jurisdiction of this Court by making contacts with this forum that are sufficient to

give rise to general or specific jurisdiction and the exercise of jurisdiction will not

offend the traditional notices of fair play and substantial justice.

9. Specifically, Emmons has personally availed himself to the jurisdiction of

this Court based on the numerous communications and visits made by Emmons in the

State of Texas. In addition, Plaintiffs allege Emmons committed a fraud and/or

negligent misrepresentation when he caused Plaintiffs to enter into an agreement, in

Texas, based on false pretenses.

10. This Court also has jurisdiction over Source Capital based on the

numerous communications and visits within Texas made by Source Capital

representatives including Ben Emmons and Matt Smith. Plaintiffs also allege that

Source Capital committed a fraud and/or negligent misrepresentation when it caused

Plaintiffs to enter into an agreement,in Texas, based on false pretenses.

.. N.

Statement of Relevant Facts

11. Source Capital is a private equity firm which makes both control equity

investments and mezzanine debt investments in mature, lower-middle market U.S.

companies across a range of industries. Source Capital Mezzanine Fund I, LP is a

Delaware limited partnership that is a pooled investment fund; Source Horizon

Mezzanine Co-Investment Fund I, LP is a Delaware limited partnership that is a pooled

investment fund; and Gregson Trust is a family owned trust, all collectively referred to

as the "Source Capital Lenders". In 2013, Source Capital caused the Source Capital

Lenders to make a debt investment(a loan) in Horizon Family Holdings, LLC. Horizon

Family Holdings, LLC ("Horizon") is a Missouri based holding company with offices in

and doing. business in, the State of Texas. The loan was to be repaid from the

operations of Horizon's waterparks in Texas(the "Seven Water Parks"). The purpose of

the loan was for essential working capital and construction monies for certain of the

Seven Water Parks. Appropriate loan documents were executed by Horizon. See

Paragraph 18 below for further discussion. In 2013, Horizon began construction of the

Pflugerville and White Settlement parks and thereafter, operated water and adventure

park companies in the state of Texas, including companies whose parks are located in

Garland, Pflugerville, Mansfield, Roanoke, The Colony, Waco and White Settlement

("the Seven Water Parks"). Horizon no longer operates the parks in White Settlement

or Pflugerville. The waterpark lease at White Settlement was owned by Horizon's

affiliate, HParks.

12. Emmons has represented that Source Capital or its affiliate, Source

Horizon, LLC,is the controlling owner of Horizon.

i• 13. Horizon operated the Seven Water Parks on a consolidated basis,

including the financing, accounting, key management, human resources, marketing

and administration activities of the Seven Water Parks. Particularly, Horizon

controlled the funds of itself and all of its Seven Water Parlc affiliates.

14. Beginning in 2013, White Settlement and Mr. David Busch initiated

discussions for the development, construction and operation of a water and adventure

park (the "Park") to be built in White Settlement by HParlcs. Mr. Busch had an

extensive history in developing and operating water parks. The proposal was attractive

to White Settlement as it presented a means of generating new economic development

sorely needed in the City.

15. On September 26, 2013, the City and HParks entered into a Construction

Agreement ("Construction Agreement") in which the City agreed to provide up to

~12,500,000.0o to fund the construction and equipping of the Park on the City's

property. In return, HParks was responsible for designing, developing, constructing

and equipping the Park. Construction was set to begin no later than November 1, 2013

and was to be completed by May 24, 2014.

16. The $12,500,000.00 funding for the construction to HParks was provided

by White Settlement.

1~. Simultaneous with the Construction Agreement, White Settlement, and

HParks entered into a Water and Adventure Park Ground Lease and Operating

Agreement ("Lease and Operating Agreement") on September 26, 2013.1 The Lease

and Operating Agreement provided that HParks would operate and maintain the Park,

1 A true, correct and complete copy of the Lease and Operating Agreement is attached hereto as F~chibit "1" and incorporated herein by reference.

' i as well as pay semi-annual lease payments initially in amounts sufficient enough to

reimburse the debt servicing cost for the construction and equipping of the Parlc, and

thereafter annual lease payments of five (5) percent of Gross Revenues.2 HParlcs was

also liable for any operating cost shortfalls. The term of the Lease and Operating

Agreement was forty (40) years and provided for renewals thereafter. The first lease

payment was to be paid the thirtieth (30~) day after the certificate of occupancy was

issued to HParks. All lease payments were to be made by HParks at the City of White

Settlement Finance Department, 214 Meadow Park Drive, White Settlement, Texas

X6108.3

18. During 2013, Horizon needed additional money to finish construction of

the waterparks at White Settlement and Pflugerville and for additional operating

capital. As such, Horizon sought to borrow 3.5 million dollars from Source Capital.

Source Capital orchestrated the loan from the Source Capital Lenders. To collateralize

this loan, the Source Capital Lenders obtained liens on the assets of Horizon. Prior to

this, Horizon had borrowed money from Capital One Bank in Fort Worth. The 3.5

million dollar Source Capital Lender's loan was subordinate to the Capital One loan.

Appropriate documents to reflect the subordination agreement were executed by

Capital One and the Source Capital Lenders.

1g. The opening of the White Settlement park (the "Park") was set to occur on

or about May 24, 2014. However, due to delays in construction, the Park did not open

for operation until June 6, 2014. After construction was completed, the Park contained

numerous pools and water slides together with food concessions and a conference

2 F~chibit "1" at Paragraph 8. 3 F~hibit "1" at Paragraph 8.4

291 center. The adventure park with rope courses and climbing walls was not completed at

the time of opening. The Park was to be open year-around with the water portion of

the Park available only during the summer.

20. Pursuant to the Lease and Operating Agreement, HParlcs was required to

make the first lease payment on October 1, 2014 in the amount of $500,000.00. The

second payment of $200,000.00 was due on April 1, 2015. HParks did not make these

lease payments fully or timely. HParks did so only after White Settlement signed

certain Consents sought by Emmons and Source Capital as further discussed in

Paragraph 3o below.

21. The Lease and Operating Agreement also required HParlcs to make a lease

payment in the amount of $600,000.00 to White Settlement on or before October 1,

2015. HParlcs failed to make this lease payment. HParlcs was obligated to pay interest

on any late lease payments. HParlcs failed to pay the interest as required.

22. By late 2014, HParlcs went into default on White Settlement's Lease and

Operating Agreement and Horizon went into default on the loan or loans with Capital

One Bank and the loans with the Source Capital Lenders. As a result of the defaults,

numerous cities, including White Settlement, threated to terminate their lease and

Capital One Banlc threatened to foreclose on the assets of Horizon. If the leases were

terminated and Capital One foreclosed on its liens, the Source Capital Lenders would

not be able to obtain repayment of their 3.5 million dollar loan.

23. Ben Emmons was and is a partner and a Managing Director of Source

Capital. Mr. Emmons was and is an investor and limited partner in one or more of the

Source Capital Lenders and a managing member of the general partner entities of

certain of the Source Capital Lenders. As such, Mr. Emmons has a personal financial

292 interest in Source Capital and the Source Capital Lenders. Source Capital and Source

Capital Lenders each have published statements about Mr. Emmon's roles in their

organizations. Source Capital had only one Texas business in its portfolio; that being

Horizon.

24. Emmons was directly involved in the negotiation of the 3.5 million dollar

loan from the Source Capital Lenders to Horizon. Emmons was also directly involved in

servicing this loan. As part of these activities, Emmons physically visited all the

waterparks in Texas; he regularly communicated with the management of Horizon

including David Bush and Clinton Hill in Texas; he regularly communicated with a

Capital One representative, David Denbin, who was located in Fort Worth, Texas and

he communicated with the City of White Settlement as well as with the other cities

where the waterparks were located. Emmons also had meetings in Texas with

representatives of Horizon and Capital One. At all times relevant to this lawsuit, White

Settlement believed that Ben Emmons represented Source Capital and/or himself.

25. Other Source Capital personnel were involved in the Horizon loans.

Particularly, Matthew Smith was actively involved in lcey matters regarding Horizon.

Mr. Smith is a team member and vice president of Source Capital. Mr. Smith

frequently communicated with Horizon, Capital One, and the Seven Water Parks by

telephone and email communications. Mr. Smith also made numerous visits to Texas.

26. In early 2015, Ben Emmons, representing Source Capital and the Source

Capital Lenders, undertook and negotiated a workout agreement with Capital One

Bank as well as the cities who owned the Seven Water Parks (the "Workout

Agreement"). The Workout Agreement is reflected in the press release attached hereto

as E~iibit "2". According to the press release, the principal features of the Workout

293 Agreement including the following:

a. "Capital One Banlc would enter into a forbearance agreement whereby the

Bank would refrain from foreclosing before the end of 2015;

b. Source Capital would advance an additional 5 million dollars to pay past

due rents due on the waterpark leases and to operate the Seven Water

Parks through the end of 2015;

c. Source Capital would refinance the debt of Horizon by the end of 2015 or

sell the parks and pay off the debts of Horizon."

2~. The negotiation process stretched over a six month period from late 2014

through May 2015. During this period of time, Emmons had numerous telephone

conversations with representatives of Capital One Bank, Horizon, and representatives

of the Seven Water Parks. All of the persons communicating with Emmons were in the

State of Texas. Emmons also made numerous physical visits to Texas to meet with

representatives of Capital One Bank, Horizon as well as with officials at the City of

White Settlement in connection with the Workout Agreement.

28. In order to complete the Workout Agreement, it was necessary for the

cities of the Seven Water Parks to consent to the changes in the debt structure of

Horizon as well as the ownership of the parks. It was also necessary that the Seven

Water Parks defer their ability to exercise the rights and remedies under their ground

leases even though the ground leases were in default.

2g. Ben Emmons met with White Settlement officials in early 2015 to discuss

the Park's operations and finances as well as the Workout Agreement. The meeting

occurred in White Settlement, Texas. At the meeting, Emmons asked White Settlement

to consider approving certain matters regarding the Lease and Operating Agreement

?94 and the financing of the Park's operations. Particularly, Emmons sought the approval

by White Settlement of a Consent to Mortgage of Leasehold of the Park (the "Mortgage

Consent") to secure the continuation of a previous loan up to $l0,200,000.0o from

Capital One (the "Lender") to Horizon. Emmons specifically represented that the

Consent would benefit White Settlement. Emmons stated that the Mortgage Consent

from White Settlement was especially important to Capital One. Particularly, Capital

One conditioned its agreement to the extended lending transaction on receipt of White

Settlement's signed Consent to Mortgage.

30. In addition to requesting White Settlement agree to the Mortgage Consent,

Emmons requested White Settlement agree to a Consent to a future Change of

Ownership (the "Ownership Consent") for the transfer of ownership of Horizon to

Source Horizon, LLC,a Georgia limited liability company affiliated with Source Capital.

In connection with this transfer of ownership, Emmons represented Source Capital

would inject up to $5,000,000 in Horizon for the benefit of HParks and other of the

Seven Water Parks. Mr. Emmons further represented that this cash injection, together

with an additional cash injection of $1,000,000 by Source Capital and Capital One

Banlc, would ensure that Horizon would have enough cash to resolve all of the 2014

hold-over obligations, handle the 2015 commitments as they became due (including

the $600,000 rent payment due to White Settlement in October, 2015, and carry

enough reserves into the off-season for operating expenses. Emmons also represented

that Mr. Busch would remain the CEO.

31. Because HParks had failed to timely and fully pay the first and second

lease payments, White Settlement was very concerned about the ability of HParks to

pay the remaining balances of 2014 and 2o151ease payments already delinquent and to

295 timely pay subsequent lease payments timely, particularly the one -due on October 1,

2015. White Settlement had no reason to agree to the Mortgage Consent unless White

Settlement would benefit from the continuation of Capital One's loan and White

Settlement would be paid the lease payments. Additionally, because HParizs had failed

to resolve its 2014 hold-over obligations, White Settlement was very concerned about

HParks'financial health and ability for 2015 and the following years. White Settlement

had no reason to agree to the Ownership Consent unless the cash infusions were made

by Source Capital and Capital One in connection with the change of ownership sought

by Source Capital and such infusions were used to benefit White Settlement. At the

meeting in White Settlement and in conversations and writings thereafter, Emmons

represented that if the Mortgage Consent was given by White Settlement, the

outstanding and the future October 1, 2o151ease payments to White Settlement would

be paid.4 This representation was material. White Settlement relied on the

representation. But for this representation, White Settlement would not have executed

the Mortgage Consent requested by Emmons and would have pursued its rights and

remedies for the defaults under the Lease. Based on information and belief, Emmons

knew this representation was false or made it without any knowledge of its truth.

Again, Mr. Emmons promised White Settlement that lease payments would be made

timely if the Mortgage Consent was signed by White Settlement. This representation

was material. White Settlement relied on the representation. Similarly, but for the cash

injection representations, the operating representations and key management

representations made by Mr. Emmons in connection with the request for the

Ownership Consent, White Settlement would not have executed the Ownership

4 A copy of the letter sent by Ben Emmons is attached hereto as F~hibit "3".

296 Consent, and would have pursued its rights and remedies for the default under the

Lease.

32. Emmons' representations proved to be untrue. Emmons, and Source

Capital, determined that the Parlc at White Settlement was not financially viable. As a

result of this conclusion, Emmons and Source Capital engaged in activities which

reduced the financial commitment to the Park. These activities included:

a. Only 3.~ million of the 5 million dollars promised was advanced for the

debt service and operation of the Seven Water Parks, including White

Settlement;

b. All the Seven Water Parks' rent payments through 2015 were paid except

for White Settlement. Their promises to the contrary, the $600,000.00

rental payment due to White Settlement in October 2015 purposefully was

not paid;

c. $300,000.00 in operating income generated at White Settlement was

diverted to the support of the other Seven Water Parks;

d. No efforts was made to maintain the White Settlement waterpark;

e. Efforts to pay outstanding vendor indebtedness were delayed or halted,

f. Adequate insurance was not maintained on the Park; and

g. Mr. Busch was not retained as the CEO.

33• Following HParks' failure to make a lease payment, White Settlement

notified HParks of its default under the Lease on February 18, 2016. HParks was given

sixty (6o days) to remedy the default. HParks failed to remedy the default and White

Settlement subsequently terminated the Lease and Operating Agreement.

297 34• der Source Horizon acquired Horizon, Emmons, Matthew Smith and

Clinton Hill served on the board of Source Horizon. Source Horizon exercised

significant control over the operations of Horizon, the control being greater than that

normally exercised by a parent entity over a subsidiary entity.

35• Prior to the termination of the.Lease and Operating Agreement, Emmons

and Clinton Hill ("Hill") caused the arcade games and other equipment owned by

White Settlement from the Park (collectively, the "Equipment")to be removed from the

Park. This activity by Emmons and Hill was done without approval or permission of the

City despite the fact the City owned the Equipment. The Equipment was valued at over

$26,000.00. The Lease and Operating Agreement clearly state that at the termination

of the Lease and Operating Agreement, the City shall retain title to all personal

property which includes all goods, Operating Inventory, merchandise, computers,

software, vehicles, and machinery owned in connection with the Park.5

36. Multiple mechanics liens were filed against the Park in direct violation of

the Lease and Operating Agreement as a result of Horizon's non-payment to the

vendors. The claimed indebtedness for these liens exceeded $900,000.00. Horizon

did not timely resolve several of these liens. At least one lawsuit regarding one of the

liens was filed in Tarrant County, Texas. The City had to resolve this lawsuit at a cost of

$2,605.37. Emmons represented the mechanics liens would be resolved and requested

all such claims be reported to Source Capital. The City complied with this request.

However, to date, certain of these encumbrances filed against HParks and White

Settlement's Park property are not released.

37. Horizon also failed to maintain adequate insurance as required under the

5 F~hibit"i" at Paragraph 6.6.3

•• • Lease and Operating Agreement. Particularly, full replacement cost value property

insurance was required by the Lease. In 2016, White Settlement discovered that

neither HParks or Horizon or Source Capital purchased property insurance for all of

the water parks (not only HParks, but also for the other six parks operated by Horizon

and its subsidiaries.) This insurance stated the value of White Settlement's property to

be only $4~784~400.00. This stated value was substantially less than the full

replacement cost value required by the Lease and Operating Agreement. As a result,

White Settlement, at its expense, secured the necessary property insurance. The cost of

the property insurance was $43$2.50•

38. In addition, Horizon failed to maintain the Park as required by the Lease

and Operating Agreement and allowed waste to be committed on the Parlc which was

prohibited under the Lease and Operating Agreement. Horizon also failed to repair or

replace certain latent defects in the Park's improvements. The repair or replacement

was required by the Lease and Operating Agreement. Among other latent defects, the

platforms for the Adventure Park facility were inadequate and the roofs and/or

structures leaked. In 2015, Emmons represented all needed maintenance and repairs

would be made. The representations were material. The City relied on these

representations. This representation proved to be false. After the termination of the

Lease and Operating Agreement, White Settlement discovered the Park premises,

fixtures and equipment were in disrepair and not in the good condition as required by

the Lease and Operating Agreement. In order to open the Park in 2016, White

Settlement made extensive repairs and necessary maintenance at a cost in excess of

$290,62.00.

1~

•~ a. First Cause of Action: Breach of Contract(HParks)

39• White Settlement sues HParlcs for breach of contract as follows:

40. White Settlement and HParks had a valid and enforceable Lease and

Operating Agreement whereby HParks agreed to operate and manage the Park. White

Settlement has performed all of its obligations under the Lease and Operating

Agreement. HParks breached the Lease and Operating Agreement for the following

reasons:

a. Failure to timely make lease payments and interest thereon; b. Failure to return White Settlement's personal property following the termination of the Lease and Operating Agreement; c. Failure to report and resolve any mechanic liens; d. Failure to maintain required insurance; e. Failure to maintain and repair the Park;failure to repair or replace improvements with latent defects; and allowing waste of the Premises to occur; and f. Failure to operate the Park per the Lease and Operating Agreement.

41. As a result of HParks' breaches, White Settlement has been damaged.

White Settlement hereby sues HParks to recover its actual damages plus pre- and post-

judgment.interest at the maximum legal rate permitted by law, attorneys' fees, and

costs of court. In addition, should it become necessary to impose equitable remedies to

collect its damages, such as the imposition of a constructive trust or injunction, White

Settlement requests that this Court grant all such relief to which White Settlement

shows itselfjustly entitled.

b. Second Cause of Action: Promissory Estouuel(HParks)

42. Pleading further, and in the alternative, White Settlement sues HParks for

promissory estoppel as follows:

43• At the request of HParks and in reliance upon the promise of payment by

300 HParks, White Settlement provided a substantial amount of funding to HParks.

HParlcs accepted the $12,500,000.00 and had reasonable notice that White Settlement

expected payment in return. In the event that it is determined that the agreement

between White Settlement and HParlcs did not constitute an enforceable contract,

White Settlement asserts that HParks should be estopped from denying the existence

of an enforceable agreement because, by its words and deeds, HParks promised to pay

White Settlement and White Settlement reasonably and substantially relied on HParks'

promise to its detriment, that such reliance was foreseeable to HParks such that White

Settlement will suffer a loss and HParks will be unjustly enriched in a like amount,

should the promise not be enforced. White Settlement hereby sues HParks for its actual

damages plus pre-and post-judgment interest at the maximum legal rate permitted by

law, attorneys' fees and costs of court. In addition, should it become necessary to

impose equitable remedies to collect its damages, such as the imposition of a

constructive trust or injunction, White Settlement requests that this Court grant all

such relief to which White Settlement shows itselfjustly entitled.

c. Third Cause of Action: Conversion(Emmons and Hill)

44. The City sues Emmons and Hill for conversion as follows:

45• Emmons and Hill unlawfully, and without authorization, assumed

dominion and control over property,including:

a. Arcade games owned by the City; and

b. Other equipment,including by not limited to, computer equipment and

TVs,lockers, picnic tables, chairs, shade sails and power equipment and

tools, owned by the City.

46. Emmons and Hill assumed dominion over this property to the exclusion of

301 the City's rights in the property.

47. The City sues Emmons and Hill for the value of its property at the time

and place of Emmon's and Hill's conversion. The City is entitled to interest on the

amount at the prejudgment rate of interest.

48. In addition, Emmons and Hill maliciously converted property that

belonged to the City because they specifically intended to cause substantial injury to

the City. Accordingly, the City seeks exemplary damages against Emmons and Hill for

conversion.

d. Fourth Cause of Action: Texas Theft Liability Act(Emmons and Hill)

49• The City sues Emmons and Hill pursuant to the Texas Theft Liability Act

as follows:

50. The City had a possessory right to the property described in paragraph 35•

51. Emmons and Hill unlawfully appropriated this property with the intent to

deprive the City of the property.

52. As a result of Emmons and Hill's theft, the City has sustained damages and

sues Emmons and Hill for its actual damages and $l,000.00 in statutory damages

under Tex.Civ.Prac. &Rem. Code §134.005(a)(1). In addition, the City is entitled to

attorney's fees pursuant to Tex.Civ.Prac.&Rem. Code §134•oo5~)•

e. Fifth Cause of Action: Fraud(Emmons and Source Capital)

53• Emmons and Source Capital made a representation to White Settlement

that if White Settlement agreed to the Workout Agreement, the outstanding and the

future lease payments, and particularly the lease payment of $600,000.00 which was

due on October 1, 2015, would be made to White Settlement.

54. Emmons and Source Capital represented to White Settlement that if White

302 Settlement agreed to the Workout Agreement, Source Capital would inject up to

$5,000,000 in Horizon Family Holdings, LLC and/or HParks.

55• Mr. Emmons and Source Capital further represented that this cash

injection, together with an additional cash injection of $1,000,000 by Source Capital

and Capital One Bank, would ensure that Horizon would have enough cash to resolve

all of the 2014 hold over obligations, handle the 2015 commitments as they became

due, and carry enough reserves into the off-season for operating expenses. Emmons

also represented that Mr. Busch would remain the CEO.

56. Emmons and Source Capital also represented that all needed maintenance

and repairs would be made at the Parlc.

5~. Emmons and Source Capital represented that the mechanics liens would

be resolved.

58. Emmons and Source Capital either knew each of the representations was

false or made the representations recl~lessly without knowledge of its truth. Emmons,

and Source Capital intended for White Settlement to rely on these representations and

White Settlement did rely on these representations.

59• Due to Emmons'and Source Capital's blatant fraud, White Settlement was

injured. White Settlement seeks recovery of its actual damages, exemplary damages,

interest and court costs from Emmons and Source Capital.

f. Smith Cause of Action: Negligent Misrepresentation

(Emmons and Source Capital)

60. Pleading further and in the alternative, White Settlement sues Emmons

and Source Capital for negligent misrepresentation.

61. Emmons and Source Capital made a representation to White Settlement

303 that if White Settlement agreed to the Workout Agreement, the outstanding and the

future lease payments, and'particularly the lease payment of $600,000.00 which was

62. Emmons and Source Capital represented to White Settlement that if White

Settlement agreed to the Workout Agreement, Source Capital would inject up to

63. Emmons and Source Capital further represented that this cash injection,

together with an additional cash injection of $1,000,000 by Source Capital and Capital

One Bank, would ensure that Horizon Family Holdings, LLC would have enough cash

to resolve all of the 2014 hold over obligations, handle the 2015 commitments as they

became due, and carry enough reserves into the offseason. Emmons also represented

64. Emmons and Source Capital also represented that all needed maintenance

and repairs would be made at the Park.

65. Emmons and Source Capital represented that the mechanics liens would

66. These representations given to White Settlement were false and Emmons

and Source Capital did not exercise reasonable care in communicating the

representations.

6~. White Settlement relied on these representations and only entered into the

Workout Agreement following the representations by Emmons and Source Capital.

68. Emmons and Source Capital's representations caused White Settlement

injury. White Settlement seeks to recover its actual damages, exemplary damages,

304 g. Seventh Cause of Action: Breach of Contract(Emmons and Source Capital)

6g. Pleading further and in the alternative, White Settlement sues Emmons

and Source Capital for breach of contract.

~o. As stated above, Emmons and Source Capital made certain promises to

White Settlement which are contained in the Workout Agreement. Emmons and

Source Capital may contend that they believed, in good faith, that the terms of the

Workout Agreement would be performed.

71. Emmons and Source Capital failed to perform as promised. This failure to

perform constitutes a breach of contract which has caused damage to White

Settlement. Therefore, White Settlement sues Emmons and Source Capital to recover

its actual damages caused by the breach.

h. Eighth Cause of Action: Promisso ,Estoppel(Emmons and Source Capital)

~2. Pleading further. and in the alternative, White Settlement sues Emmons

and Source Capital on a promissory estoppel theory.

73. Emmons and Source Capital made promises to White Settlement.

74. White Settlement reasonably relied on these promises to its detriment.

75. White Settlement's reliance was foreseeable by Emmons and Source

Capital.

~6. A material injustice will befall White Settlement unless the terms of the

Workout Agreement are enforced through a judgment of this case. Therefore, White

Settlement sues Emmons and Source Capital to recover its actual damages.

'7'7. Punitive Damages. Per Civil Practices and Remedies Code Section 41 with

regard to the fraud and conversion claims.

~8. Attorney's Fees. Pursuant to Civil Practices and Remedies Code Section

305 _~

PTa

WHEREFORE, premises considered, White Settlement respectfully requests that

a judgment be entered against Defendants and in favor of White Settlement requiring

Defendants to pay to White Settlement the actual damages, exemplary damages, pre-

and postjudgment interest, attorneys'fees and costs of court as well as any and all other

relief to which White Settlement may show itselfjustly entitled.

Respectfully submitted,

MARIS & LANIER,P.C.

/s/Robert F. Maris Robert F. Maris rmaris@marislanier.com State Bar No. 12986300 Alise N.Abel aabel@marislanier.com State Bar No. 24082596 3710 Rawlins Street, Suite 1550 Dallas, Texas 75219 214-X06-0920 telephone 214-~06-0921 facsimile ATTORNEYS FOR PLAINTIFF CITY OF WHITE SETTLEMENT,TEXAS AND THE WHITE SETTLEMENT ECONOMIC DEVELOPMENT CORPORATION

306 CERTIFICATE OF SERVICE

This is to certify that a true, correct and complete copy of the foregoing instrument has been served in accordance with Rule 21a of the Texas Rules of Civil Procedure on the 5th day of May,201 to:

C. Michael Moore Matthew T. Nickel Blake J. Brownshadel DErrTONs Us LLP 200o McKinney Avenue, Suite 1900 Dallas, Texas 75201 E-Filing

Clinton Hill 2912 Appalachian Lane Frisco, Texas X5033 VIA CMRR#~oo8 i83o 000i 6456 gi69

fs/ Robert F. Maris Robert F. Maris

307 C

`G :11 I~IT ~:

,: C ~~

'WATER AND ADVENTUZtE ~'ART~ GR0Y7ND LEASE ADD'OP~T2A.T]NG AGItE~MENT

'Phis A.greeme~t is :made and entered into thzs tl~e 2btla day o~ September, 2013, by and between the City of White Settlement, Texas, the White Settlement Economic Development Corporation (he~ei.nafter ~efinecl as "LAC"), ar~d Hawaiian Parks ~ White Seftlement, LLC, (he~eiiiafter defined as"H~AR~~"),

WZTNESS~TH;

The paxties hereto agree as follows;

1, GRANT,AEFTNITIONS, AND WARREIN'z'ZES;

1,1 De~nition of Terms;

1,1.1 Affiliate; T~PARKS ox airy parson or entity oon~xolling HPART~S, ox a:ny pexson ox e~atity other than ~II'A.RX~S in which. ~-TPARKS, or any person or entity co~fa~olli~g I~PART~.S, ludivaduall~ o~~ collectzve~y with ~PAIZI~S,ohms oi~ bas tie right to vote at Xeast a fifty ~ercant (50%) capital o~ votz~g ~atexest of the common stock, ~al~nership twits oz' l~.i~~ite~ liability eo~ipany interests, as applicable,

I,1,2 Agreement; Tl~~s Watez~ and Adventuz'a Pat'k Ground Tease and Oper~til~g Agt~eenaent.

l,1,3 l7ebt Obli ate ions; The Debt Obligat~obs issued by tb.a CXTY o~ -the ADC to finance the CITY's Oxiginal ~vesttnent. City or EDP wi11 piesant Debt Obligation terms to HPARKS for xeview and disousslon ~rzor to issuance, ~ .

• ~,~,q~ Capital Jmprovement; Subse~ueat to the co~apletaon o~'the Water and Adventure Park, ariy new cons~tructlon, improvement or addition (as opposed to Maintenance and Repays to, or the St~uctuial Replacement off', existing Water and Adventure Pa~~C Tm~rovaxi~ents) costing move than $5,000 in and one instance and having a pro~ec-~e~ useful life of at least ~tve years,

x,1,5 City and EDC;• a. CITY; Tlie City ~ of Wl~te Settlement, Ta~as, a '~'e~as home-sula mux~icipali#y, ' b. EDC; 'Jae White Settlement Econorrzic Development Coxpo~atioz~, a Texas non~proftt aot~ox~at~on cz~eated and operating pursuant to V,T.C,A,, Zocal Groveialment Code,Title 12, Subtitle C1, as amended, s~acifically Chapters 50~,502 and thereof,

1,1,6 Ori~mal Ynvestment; 'I`l~e original~investment by the CITY and/or FAC fog construction costs of the Water and Adr~enttar,~e Pack ~nprovements and costs of issuance of the Dobt Obligatzans, ~n tl~.e azr~ount uat to exceed $12;650,000,

P~ga l of 3A~ Wa(er and Adventure Park Ground Lease &operating Agreement Clly of Whlte settlement, Texas ~ Hawallan Par(cs •White Sefllement, LLC 1,1,7 Cons~.~uction Agreement; The Agreement between the CITY' and ~iL'ARRS fox' the const~~uation 'o£ tae Water. and Ad~v~nture park Xinprovements, executed' eoncur~,~ently with tl~s Agreement,

1,1,8 Effective D'atec The date the CZTX issues a tem~o~~ary or final cel~ti~icate o~ occupancy to HPAkKS fox the Water and Adventure paxk provided HPARI~S is in eo~npliance with tk~e provisions offlee Construction Agreement.

1,1,9 Envirorunental Re lat~on; and+ law, statute, regulation, order or ~u1e now or hereafter p~~omulgated by and+ Gove~.~nmental Authority, wl~ethex local, state or federal, r@lating to a7.r' pollution, water pollution, noise control and/ox traz~spoz~ting, storing, Dandling, discharge, disposal or reeovexy of onLsite ox offsite hazardous substances of matet7als, as same xnay be amended from t7me to time, including without limitationtlae following; (x) the Clean Air ,A.at(42 U,S,C, § 7401 et seq,); (u) Maxine ??rotectzon, Reseaich and Sanctuaries .A.ct (33 ~(J,S~C, § ~40~-1445); (ui) ~e Clean Water Act (33 U,S,C, § 1251 et seq,); (iv) Resource Conservation and Recovery Act, as amended by the hazardous and Solid Waste Amendments of 198 (42 ~(J,S,C, § 6901 et seq.);(v) Comprel~e~sive E;~vxxonmenta~ Respa~se Coin~ensation and ~.iabi~ity Act, as ~.uaended by the Superfund AmencLnents and Reauthorization. Act of 1986 (42 U,S,C, § 9601 et seq,); (vi) Toxic Substances Control Act (15 U,S,C, § 2601 at seq,)3 (vii) the Federal Insecticide, Fungic~c~e at~d Rodenticide Act as amended(7 U,S,C § 135 et seq,); (~zix) the Safe Dri~ki~g Wate~~ Act(42 U,S,C, § 300(~ et seq,); (~~) Occupational Health an~~ Safety .A,cf (29 U,S,C, § 6S~ at seq,); (x) -t1~e hazardous Liquid Pipeline Safety Act (q-9 U,S,C, § 2001 et seq,);(xz) khe ~Sazardous Matex*ials Txat~sportation Aat (q~9 U',S,C, § ]80 ~, et sack); (iii) the Noise Control Act of 19'12(42 U,S,C § 4901 st seq,); (xiii) Binexgency Planning and Corzamunity Right to Kno+,v Act(42 (7,S,C §§ ~ 1001~~ 1050); and (xiv) the National Environvsentaa Policy .A.ct (42 U,S,C §§ 4321-X347).

1,x.,10 ~oxce Majeuxa Event: Declaxed ox~ undae~ared way, sabotage, ~~evolutions, :riot ox acts of ter~orlsm or oivil disobedienoe; acts o~ omissions of governmental age~tc~es; accidents, fires o~ explosions; Moods, eaz~.qualtes ox' other acts of God; s~txikas or labor disputes; sb~oz~tages of materials; oz~ any atlaex event ;not wifif~~n the control of HPARKS, the CZ`~'Y, 4x the EDC and not caused by tk~a x~eglige~7t act or omission or int~ntio~tal ~nongful conduct ofHPARKS,the C7~"X, ox the EDC,

1.1.11 Gross Revenues; All modes ax noz~-cas1~ cons;ide~:atzv~ xecei~+ed by HPARKS, or any A:Cfiliata ox any party having an ownex~shxp interest in HPARK.S or azi Affiliate ax any coz~cesszonaire, sublessee, or licensee ralatiug to or derive~.frorn the operatzoz~ of tie 1~ater and Ad~rezlture ~'axlt du~riug any calendar year fiom the Rer~-t Cornrnenceme~t Dade a~ad continuing through the Texm of this Agreement oz~ any renewal terix~, without any deductzoxzs except for;

• a. and sales texas or othez~ admiss~ons and/or amusement taxes imposed by at~y gover:~r~ental entities and collected by HPARI~.,S, o~

Page 2 of 34 Water and Adventure Park Ground Lease & Opataling Agteetylent City of Whlte Se(tlement, Texas — Hawallan Parks .White settlement, l.l,c

310 b, "trade-outs" oi~ other ~ ai7angazx~ents whereby ~-IPAIZI~S engages in advertising, promotion or other Made of,the Water and Ad~ventu~e dark in exck~an~e ~o~~ non-cash benefits unless tha arrangement is with an .A.f~.lzate; az~

c, the amount of any sales initially included in Gross 12evenues that are subsequently subject to refund or credit,

Gross Revenues shah include sales o~ tzekats and passes fox entrance to the Water aid Adventure ~a~k via iraternet sales and sales Uy mail,.

1.1,12 Hazardous .Material, Any nlatexzal, subs~anca, wasta or z~aatker which is flammable, ea~losi~ve, corrosiva,~radiaactive ox to~c, or which contains asbestos, or is a pesticide, or is a clzeinical known to cause cancer ox zeproductive toxicity or which is defined as • a hazardous substance, material or waste, or as a toxin substance, material o~ waste, ~n any Envu~oiunental Regulation,

1,1,13 HPARKS; I~awauan ~atks —White Settlement, LLC, a Missouri limited liability eo~pat~y,

1,x.14 Le a~ ]Requirements; A111aws, statutes, ordinances, oxders, z'ules, regulations,~eraxaits, licenses, authorizat~ons, directives.and a~equzxaz~en~s of all governments and governmental autharitjes, which now oz he~eaftex n~ay.ba applicable to HPARK.S, tlae dater and Adventure park or the operation ofthe Water a~~d .A.dventuz~e Pa~.~k.

x,1,15 Maintenanve and ~Zepaixs; ,AJI routine and o~'din~~y- maintenance and repairs to the Water and A~ves~tw~e ~'arlc required to ~reser~ve the mater and Adventut~e T'ark Zm~~o~vements ire good working ~.~epaix during their projected useful lifa'which do zaot constitute Stru-ctut~al Replacements,

1,1.~ 6 Opei~ati~~ Tn~vei~tor~; Conswnable items used or ~.eld i~ storage for use In kbe opezation of tie Water and Adventure Paris, which naay 1z~clude xefail shod me~~ohandisa, food and ~bevexage inventory, kitchen supplies, paper and plastzc wawa, bathroo.rn. supplies, paper towels, fuel, cleaning materials, fe:rtilizexs, pes~ici.des, chem~aals, intiar tubes and life safety vests, maintenance parts at~d supplies, office supplies and other sunilar items and opaxataonal supplies ;fox rides and attractions,

1,1,17 Opexat~n~,Season; The paz~zod duri~,g which the Water ar~d Ad~entu~~e 'ark is open for business aacb yaax,

1,1,18 Parlciug Area; The paved perking areas constructed consistent w~th.tk~e City of White Settlement's code of ordinances for par~ir~g up to five ~iu~dxed (500) cars for the exclusive use oP employees, vendor's and custo~.ers of HPAI~S~S dluizig •the Opezating Season,located in the crass indicated,on ExltibitB, .

Page 3 of3~ Water and Adventure Park around Lease & Operaling Agreement Clfyof Whits Setflement~ Texas ~ Hawaiian Parks -While Settlement, LI.0

311 X,1,19 Premises; The tract o~ tracts of land with the di~n.ensions, boundaries, and~loaation depicted in Exhibit A, attached hereto and ir~corpoxated herein, Onoe stuveyed,the final premises including p~ld~g areas shall measare approximately 14 acres,

1,1,20 Profit and Loss Statement; ,A. statement that sets foz~tk~ gross ~•evenues and expenses fox the calendar ~eaC just concluded; the statement sl~al] be in tk~e forz~a attached as Exlttbit C,

1,X;21 Purchase Rei~butsernent Obligation: 'Z'l~e obligatloz~ o~ CX'I"~ under Saetzon 6,6,2 hereof to pay HPARI~.S for one ox more Capital Tmproveznents wha]Iy paid fox by HP.ARX~S at an amount egx~al to the z~amaining undep~eciated value of tie Capital Tnlpxovements if' depxecia~ed on a straight line basis in accoxdance with, Generally Accapted A.ceounting Principles (ths"~urahase Reim~bursament Obligatiozi"),

1,1,22 Rest Commencement Date; The fibirtieth (30th)day_ after a cez~ificate of oacupaa~cy xs issued to~ HPA.IZKS with ~esp~e~ to the Wataz and A.dvez~ture Park rxnpxovements to be oonstruated upon the Premises b~ HI'.A.~T~.S pursuant to the Construction .A.greema~xt,

1,X,23 Sti~uct~u~al Realacexnents; The replacement, major xepari nr z~econstxucfion of Water and Adver~tux~e Park Impi~o~emer~ts, including (a) building xoo~s, slabs, foundations and walls; ~aeatiza~, ve~tzlation, air condif~oning, ~lumb~ng, sawa~~, utility, 1~~gation and d~ainaga systez~as; ~oo7.s and slides; paved axaas, including parking dots aid oaxculatidn walkways; landscaping and xides a7id athaotlons and (b) cost moxe tb.ara $5,000 i~. auy one instance at~d have a pxojBated usaful life ofat least ~t-ve(5) yeas,

1,1,24 Unforeseen Site Condition; ,A, potentiaa ox actual enviro~ztental mitigation issue, or other conditions x~equi~ing eoxiection or remedia~ion undei the environmental haws, or additional co~ist~~uct~o~. casts ~z~ add~tzo~a to the costs .in the Co~struct~o~t.A,gxaement, but exclud{ng problams with soils unrelated to Hazardous Matauals and ~toz7n. water con.dztious,

1,1,25 Water and Adventure park: The aquatic ~laygzound and wate~~ ar~d adve~ature park cgnsistiug of ~va~~oUs paz~lc ~ldas, amezuties and ~'aoilities as generally desoxibed in .E~lttbitD,to be oonstrncted on the Premises and operated anal mazxatained puxsuant to this Agreement,

1,x,26 ~V'ater 'and. Adventure Park 7m~rovements; The • bu~ld~i~gs, s~ructuras, ad~vartising displags, landscapi~ag, zn~'rast~~uctura, utilities, parking lots, driveways and walkways, and other inn~rovements or facilii~es eonsta~ucted or jnstalled or to be constructed ox zusta~led oa the premises pursuar~'t to the Conshuction Agreamen~, except for Capital Improvements,

1,2 Grant of Ri hits,; CITY, in considez~atzon of the pTOV151g11S of this Ag~~earraent, a;nd subject to the teams ~Zaxeo~, gratrts, bets atzd leases fo HPAS~I~S foi the pu~'~oses st~.ted ha~ein, the exclusive eight to design, flan, coustruc~, equip, operate aid maintain a Water

Page 4 of34 Water end Adventure petit Ground Lease & Operaiing Agreement city of Whfte settlement, 7exas~ --Hawaiian Parka -White Seitlamenf, LL.R

312 (.

acid Adve~tu~~e ~'aik at the ~x~e~,ises, as part of kl~e CIT~Y's park and xecxeation system, This Agreement is subject to such l~mitatzous and restrictions as uiay,front tithe to time, be imposed b~ any governmental entity other than the CITY' and subject to Ef~e iequireme~ts of flee Teas COI]StltLif1011, Zt is expressly ag~'eed that the CYTY retai~ls'tha ownership o~ the Water and Adventure ka~k'and tl~a Px~znises and tJ~at the z~~ghts granted fo HP,A.RKS do not exte.~d ~o any ownership night whatsoever, other than ownership o~ lts leasehold interest, any parsona~ pz~operty paid for solely with ~TPA~tSCS'funds and ~-IPARKS Funded TinprovemeYlts(as defined in Sect~o~ 6.6,2).

• 1,3 CITY Warranties; CITY makes the following representations, warranties and aclrnowledgements as o:f the data of this Agreeax~e~;t at~.d agrees that such rapxesentations, wai~antias acid aclrnorxrledgemants shall sul^viva and continue therea~er;

1,3,1 ~Ri~htto Transfer; CITY ~va~~ants that ~t leas the power to txans£ex~ the rights a~~d giant quiet enjoy~azent aid exclusive use of the ~'~~emis~s as provided under this Agreeme~'t,

1,3,2, Envixo~u~le~tal Condrtioa; CITY wa~~rarats that to the best of its knowledge, there are no Haza~~dous Materials on or about the proposed site and;there axe no Unfo;raseen Site Conditions with regaj~d io the ~iro~osed szta £or tl~e Watez~ and .A,dvea~tu~e Pa~~k ox ~rifh respect to t}~e premises, existing o~ o~~ prior to the date o£tbis Agreement,

1,~ Unforeseen Site condition; zf either party becomes aware o~ an '(7nforeseon Site Gond~tion with, respept to tho P~er~:tses of a ta~agnitude that will materially interfere vt~t~ tk~e operation o:~ the ~Natar and Adventure dark,the CTTY and HPA~KS agree to consider t1~..a costs to remedy the ~l'nfozeses~ Szte Condition, The CITY, at its sole discretion, mad terminate this Agz~eameut on 90 days pxioz~ wxitten notzce to HPARKS, given within X 80 c1a~s of t1~.e identification o:F tk~a ue~rl~ ~isco~rered condition; provided, however, that,o:~ the effective date of such termination, aid pxovxded HPART~S is not in default of this Agreement, t~.a C7T'Y s$all pay H~.ARK~ an amount equal to the sum o~ HPA~S's total expe~dituras for const~~uction of the Watez~ and .A.dventura dark, including the Water and Adventure ~az'k 7~pxo~veme~ats and the Capital Impro~veinants, plus HPA.RI~S's actual ~x~ancing costs incuixed to ~'u~d these expenditures, calculated from the date o~'pay~nent fox' each such ~Natez~ and Advautu~e Pail{ Improvame~xt or Capitat Tm~~ovament-(this payment, is referred to laez~ein as t ie "HPARI~.S Cap~tallZeimbt~rsement"),

1.4.1 HPARKS 0 Lion; xf CITY uoti~ies H~ARX~S of termination o~this Agreement pursualit to this Seotion l ,4.J., HPARKS sha11 have i~ha option, at its.expense, to xemed~ the Unforeseen Site Concli~ion avd thereby nullify the termination of this Agreement by the CITY, ~ Tf I~.A_RK,S elects to continue this T.,ease a~te~ ~oti~ication of te~miiiatio~. puxsuant to this Section, b~ x~ezned~ix~g tk~e Unforeseen Site Coz~dztiozl at HPAItKS's expe~s~,.ARKS shad notify tl~e CITX of such election wzthin 60 days following notice fa'om. tkze CITY o~ ter~~natio~ due to an Unfoi~0seen Site Condition and proceed d~ligeu~ly to cotr~plete the remediation of the Premises.

• Page 5 of 34 Water and Adventure Park Ground lease & oparatin~ Agreemeht Oity of White settlement, Texas —Hawaiian Parks -White Settlement, LLC

313 ( (~

~,S ~Si'ARKS Wat~ranfies: HPART~S makes the following xepiesentations, waxxarzties and acknowledgments as of the date of -this Agreement and a~~ees ~laat such xepresentatio~s, ~wai`ranties and acknowledgments sha11 survive abd continue thereafterc

1,5,1 Sfatus; HPARK,S is a limited liability eorn~a~y duly fo~nec~ in the state of Missouri and validly e~sting and authorized to do business~undeL the laws of tkaa.State'o~' Texas, arzd laas all powe~~ and. authority to eoi~summatetie ~sansac~,ox~s~ conterriplated hez~eby,

x,5,2 ~ Authoxi HPARKS has complied with all haws and regulatio~,s conee~~ning its oxganizatio~, existence and transaction of busi~~ess. HPARI~.S, has or at all app~~opriate times shall lava pro~erl~ obtained, alb pe~inits, licenses anal app~~ovals necessary to occupy'and operate the Watex and Adventuxe Park ar~d ixi so doing has, or shall have (as approprzate), substantially complied with all applicable statutes, laws, regulations and ordfnanaes,

1.5,3 No Liti ate; Theme 1s no litigat~ort, action, suit, o~ other proceeding pending•or threatened against HPAR.KS, or, upon cozn~letior~~o#'t1~e cozzstructzon of the ~7V'ater and Adventure k'aik, the Watex and Adventure Parr which may substantially adve~~sely affaot the validity, prioxi~ty, oz' enfo.~ceability of tJais .A.greement or the cons~:act~o~a, use, occupancy ox opexat~on ofthe 'Water and Adventuxs Pa~~k,

1.5,4 Enfoxceability; HP.ARKS has full right, pour aid authority fo e~:eeute and deliver this Agxe~melit and ail instruments executed pursuant }aexeto, a~.d to pexfoz~zn the undertakings o~HPARF~S contained in this Agreement,

1,5,5 N'o Breaah: Iona o~ tl~e.undex~takings of HPARKS contained in this A~~earnent or any agreement,executed pursuant ~.ereta vao~ates any applicable statute, law, regulation ox~ ordinance or any order of iuli~g of any court o~~ governmental entity, ox conflicts with, oi~ constitutes a bieaoh ox default uz~dar, any agreemea~t bq which HPARr~S is bound or regulated,

1.5,6 Accurae ; All documents, reports, instruments, papers, data, in~oznlatiov. and foz~u~s of evidence delivered to CITY by HPARI~S w~tk~ respect to this Ag~'eement are aocurate and aorreet, era complete inso#'at' as co;r~p~efeness maa~ be necessary to gzve the CIT~S~' t1'tte and ~cetu~ata knowledge of the subject matted thexeo#', and do not eo~ntairi at1~ rx~atexial ~x~~srep~esantatzon or omission,

1,5,7 Taxes; HP.ARKS has filed all federal and state tax retw~s required to have bean filed, and have laid all taxes whi~eh have beoome dua.putsuant to such retut~ns,

2,TERM;

2.1 rnitial Tei7n. Tlie rnitial 'berm o~ ~kus Agxeeme~t co~xzxrxences on the Effective Date arzd continues until ~e exp~zation o£ foxfy (DLO) years from the Rent Cotrarrxe~ce~a~e~at Date (the "Z~aztial Te~7n"),

Page 6 of3~ Water and Adventure•park oround ~.easa & operating Agreement Clly of While Settlement, Texas —Hawaiian Parks .White Seftlameni, I.LC

3-14 2.2 Renewal Tern.; CITY giants to T~PARKS options fo extend this Agreement for Four (4) addztlonal five (5) dear periods (tk~e Initial Tenn and any xanewal pez~iods shall be z~efe~~ed to l~e:~ein as fhe "Term"), Eaeb.z~enewal option may be e~ezcxsed o ily if at tha time of caxnmer~cezneizt of that option HPA~S zs not ~~ default ox beach a#~ any term or condition contained in~ tbis Agreement (beyond any applicable notice and cure period), HPARZ~S s~a11 del~var wrztten notice to the -CIT-Y-...~~i~ving notice of i~anevval or non~Penewal at feast sxghteen (18) months prior to the expiration of the then, current te;t~n, Tf no notice is p~~ovided this Agreement sha1.1 be deez~ned to be xenewed :Foz' the'applica~le option period. If the rane~al option is exercised; the extended lease term shall be subject to. all the terzz~s aad conditions of this Agteeinent, ~ Annual 7.ease paynle~ts during ata~ renevt+al period s~a11 be payable as provided In Sectio~~. 8 hereof, ,

3, QUITCLAIM DEEb; ~lPART~S acicno~lvledges that no right of owne~sh~p fes o~ estate is granted by this Lease, At the #ermxz~atzo~~. of this Agreem_eizt, ~TP.A.RZ~S sha11 execute aid deliver to CZ'z'~'' wi~~n thirty (30) days a good and suft"~c~exit Quitclai~a Deed to at~~ rights to and possessory ox puz~oY~ted ownez~ship rights or ala~ns to 'the real estate arising he~~eunder,

~, pARI~ING AND ACCESS TO ~REMTSES;

4,1 TIPARKS to provide Parking Access and use; Tn accoxdarzce wztli the site plan attached hereto as Exlttbit B, HPART~S shall control a1i parking on the premises, CITY acknowledges at~d agrees that HP.c~RT~S may ehazge a fee for any ox all paz~~dng spaces with paid ~arkzng spaces to be ma~~l~ed in Exhibit B,no o~vex~~.ow parking will be chaxged a lea,

4,2 Pedeshla.n Access; CTT~Y shall p~~ovide designated,pedestrian acoess to the '~7later and Adventure S'axk fox custornexs, employees and sa~vica persont~..el related to HPAIZT~.S's activztzes puj:suan~ to this Agi~eemant in accordance with the Mans attached hereto as ~~rtt~i~t13, Px~ox to the E;f~ective Aate, the CXT~'shah use its best efforts to secuxe commitments fiom ail appx~o~ziate governmental authorities to place, prior to the o~er~ing of the Mater end Ad~entuxe ~axk, appropriate roadway signage and signals, txa~zc abatement aid speed x~eduetion signage and• devices, and othex appropriate signage 'arad sa~et~ zne~su~es, to a11ow for safe and adequate pedestrian. foot traffic, allowing for heavy foot tra~£ia at pea~~ usage, to and fxorxt the Watez~ arzd Adventure Pa~~k,

5, RIGHTS OF HPARKS;

5,1 ~ Permitted Activities; HPARKS may use tl~.e VJatex and ,Advent~.ue Park ~xemisas for commercial ~tuposes only as follows; all activities noi~nally associated wiih Wader and Adventure Park entei~taiz~ment facilities, including, witk~out limitation, v~ious mater-orze~~.ted entartaiz~x~aer~ts, rides, sides, pools, and attractions, zzplznes, cl~~a.bing walXs, ropes aau~ses, sky aides, games, competitions, promotions, aett~vity based entertainment, special occasions at~d group gatherings, concessions, and musical concerts, dramatic or othax~ sfage shows of sianzla~ presentations, open and available to the general public, ,

. Page 7 of 3~4 Watep and Adventure Park ~raund Lease & operating Agteement City of Whlfe Settlement, TeXas —Hawaiian Parka -White Seltlemanl, LLC

315 5,2 New .A.otivities; Any othez~ aides o~' attractions'not within the scope of the abo~~e described aativfdes which HFARZ~,~ p~.~oposes to conduct at the Water and Advex~tu~e Parlc shall xequire tha appxoval of CITY, wUick~ a~proval~ shall not be unreasor~abl~ withheld, co~d~t~oned or delayed,

5.3 Exclusive Commercial Rights on the 1'ramises;

5,3,1 Uses; The rights conveyed under' tkus Agreement 3~iclude the exalusiva right to comn~excial use of the Prenuses for the purposes set forth herein, except as liinited~ by this ,Ag~~eeinent.

5,3,E Entiv into Other Agreements; HPAR~S shall have the sole and exclusive xight to enter into concession, promotion o;r spoz~soxship agreernenfs, o~~ exclusive use a~angemants relating to t1~e latex acid Adventure Park so long as the agxeements do not e~~tend beyond the Tartu o:F•this Agxeement. Any such agreement shall be subject to and liuuted b~the app~icab~e te~xzs o~ this Agreement, S~~,A_RKS shall submit any significant or material co~cessioa~, pxo~otion .or sponsorship agreements that depart ~iom the past and ordinaxy ~z~actices in opeYati~g ~'arnily ~orianted water and adventure park facilities for tk~e approval of CTz`Y, which ap~rova~ s1~aI1 not be unz~easoz~ablq withheld, conditioned or delayed,

5,3,3 Limitations; The parties recognize and acknowledge that cextain types o~ advertising might contain material inap~ropiiate fox a public ~^acreationa~ ~acxlzty, The paz~Eies acknowledge that signs, photo~~aphs o~.~ graphic advertising ~zaterial z~alating to me~xcal pxoduafs or cex~ta~~ fiypes of oontcm~orary clothing might create issues with community noxxzas tk~at would be unacceptable in a ~aik facility HPARKS.shall notify CZ'z'Y MANAC~BR or desxgx~ee of its intent to ~laca advez~tisix~g or dis~la~ material and shall provide the content o£t~is proposed and/or intended advertising az~d/ar naoc~C-up ofthe display Uaatexials at least two weeks prior to placerne~t~ If ~:ha CITY objects to adv~z~isi~g a~~ dispJ.a~ materials to ire placed ~~ the facility,it shall do so in w~'zti~g witl~ln one(1) week of the placexne~t o~the ad~e~~tising to which objection is taken, ~PAk~S~S shall n~ofi e~,tex into any ~romot3onal or s~onsoiship arrangern.ents involving tobacco products,

5,3.3,1 Alcoholic beverages mad be allowed on tl~e Pxeinises, subject to eom~l~anee with ail applicable gvvez~mental laws axzd regulations,

5,3,3,2 CITY recognizes that S~~A1~.S does not knave co~p~ete cont~~o1 oven ambzez~t noise or incidental visibility, While the volume of pubic address announcements mill be modulated to the level necessary to be audible to Tatar and Adventure Park patrons, it is ~ossibls that tl~esa annourzeements z~.ay be audible outside the Water at~d Adventure ~ar1c, Noise volume and charaoter shall co~foxm to the requirements o~ any rnun~cipal noise regulation then applicable to the Pram9ses,

S,4 ~PARKS's Right to Lev~Chax eg s Approval by CTTY;

Page 8 of 3~ Water and Adventure Park around Lease & operating Agreement City of White Selllement, Texas —Hawaiian Parks ~ White Battlement, LLC

3'16 5,4.7 ees; HPARKS may charge fees,Fates or prices as follows;

a, for the initial adzx~~ssiox~ to tl~e Watex and/or A.~.~venture Pa~~1< (except as limited by this .A.greement);

b,. .for amusezaaeut facilities ~vitl~in the Water and Adventure S'a~Xc;

c, for use of all other facili-Cies opez~atec~ b~' HPARI~S upon the Watar aid Adventure Park;

d. fox sales o~food and other cgncessxox~ items at the Park;

e, for use of the 'remises by concesslonaixes, licensees, and other third pat~taes otherwise ailthorizad by this Agxeemant; and '

f for parking,including, with limitation, VIP or valet paz'king,

g, any fees z~e~afed to items (a) through (fl including, but not Iitnited to, fees xalated to ticket pu~~chases via tk~e Internet a~zd ot~ex fees that axe usual aid custo~aty to the entextainmen~ ii~dusfxy,

5,4,2 ~.evzsion o~Fees; HPAI~K.S shad pa.~ovideto CITY a complete list o~ its fees, xates and prices at the ~Iatei' and ~.d~venture Park. ~ARI~S ~ese~~ves the right to add additional concession items o~ tickets dut7ng tie season that mad iaot ba on tl~e list initially pxovide~ to the CTTX but agz~ees that a~~ prices will be simila~~ to those alt~eady provided to CITY, HPARKS shall post schedules of przaes and chaxgas at tic~Cet boxes, concession outlets, anc~ other conspicuous places,

5,4,3 ~ench~aark fot~ Fees; All fees, charges aad prices fox services• at f1~a Water ~~d Adves~tuxe ~ax1c sha11 ba sefi by ~TpARKS anal shall be on a generally app~xcabla rate schedule eompaxabXe to those of ofher water and adve~tux•e paa~lcs its. Texas of similai size, scope acid quality,

5.4,4 biscounted Admissions; Notwithstanding anything to tl~e co~ztraxy, residents, cu~sent WSISD Students, arzd em~loy~es of ~e CITX sk~akl receive a 25% discount o~the staffed front gate daily tttzd season pass rates by slowing proof ofxesidenca in the City, or employment by the CJT~'ox currant WSZSD photo ID,

S.5 Control of Ticket Salese ~IPARI~S sba11 operate tielcet sales for -its operations, ~.PART~S vt~il~ follow reasonable revenue control procedures to monitor xsvenues, T~PA~tKS wi11 fouow ~'easonabls ~evept~e cont~'ol ~z'ocedures approved by Cz'~'Y to naonitax revenues, CZTX shall have aeess, upon reasortab~e notice to the ticket safe operations, to review and audit records ofreceipts anal ~ezi~y accu~~acy of the operations themselves,

. Page 9 of 3~ Walar and Adventure Park Around Lease &operating Agreement C1ty of Whlta Settlement, Texas ~ Hawaiian Parks •White 5ettlemant, LLC

317 ~ ~ ~ ~

5,6 ., Identifyi~~~ns

5~.~,1. ~ Water and A~ventuze Park Sins: ~TPARI~S will erect a monument ox pylon sign identifying the Water and 'Adventure Par~C with associated logo, This cost is included ~in the Construction Agreement. CITY will gzve HPART~.S the option, at ~SP:ARKS's e~peuse, to erect additional szgrzs. CZTX sha11 lave the right to review anal approve these signs, iricl~ding, but not limited ta, loeat~o~t, size, design, co~.tent, mefhod of attachment(if any) and matex~als used to znar~ufactura th.e sign; provided, l~owe~ve~, CITY's approval shall not ba uru~easonabl~ vvlthheld, conditlone~ oz' delayed.. A]1 signs must conform to tho CITY's ordinances regarding signaga, .

_ 5.6,2 Other Sins; HPARKS, subject to the reasonable ap~:taval of CITY, may locate othex 'identifying or direetiaiial signs at other points on the Pa~emiaes, T~PAR~S sha11 have the right to main~tai~ ent~~y signs attk~e pedestrian ent~~ance of t~.e Watax az~d Ad~entu~'e Parr,

5,6.3 'Di~~ectional Sins; CITY agrees to ~o ooze than- fen (10) dii~actional (~wa~~finder) signs to be pXaced ou higb. traf~xc thoroughfares wltl~in the CITY, di~~ecti~g guests to the mater aad Ad~velltux'e Park,

5,6,q~ Texas Department of Zz~.suxance Aanusement Rids I~speetion Certiftcation; ~PART~S agrees to buzld and operate tk~s Wate~~ aid Adventure Park in accordance with tk~e State off'Texas Amusement Ride A,et to include passing annual iuspeations and hosting s~gllage xequixed ~~ the A.et, ~peoifta requirements by the Act may be fiound at http;//www,tcli,sta~e,hc,us/commercial/inde~ainusament.h-tnn~~

5,7 Promotion and Advei~tisin~; Except as othez~wise expx~essly provzded herein, HPARKS shall have control oven a~vert~sing and p~~omotxon o~the Mater and Adventure Park, CI~'X vt~i11 use all reasonable ef~oxts to promote the use of the Water and A.dwenture Park through the use of city~co~h~o~lad media, publications, utility mailings, aid othar~ materials or fliers fntended far general distrlbut~on, .Any ~SS~A~S~S coupon oz~ inserts will be prepared aid p~uited at HPA12~S's expezase, and ~nc~u.c~ed by the CX'I'~ wzt~ utility bill rnailyngs at CTTY's cost. 'i'he CITY shall have tk~e right to prepa~~e and dissezni~aate such additional material as it xeasonably deems appxopriate for promotion ofthe Watex and Ad~vontura Pant as a feature o~ the CYT'~''s parrs and recreation system, provzded tk~is material is consistent ~vi~h tlae natuxe and charaoter of the. Water a.~d Adventure Park, CITX, iz~ ids sole discxetzon.; may pxovide to HPA.RKS tba rightto advertise or pxamote, on other CZTX property, its :Facilities and activities at t~ia Watex and AdventuxeParl~,

•- 5,'7,1 CITY's Allocation: Wjthout limit~n~~the provisions set forth in Section 5.7 above, CITY uid HPARKS sha11 collaborate ~ and meet at least once- a~uallp to discuss maxketiug stxat~gy and carx~paagt~, CITY shall, as appropriated by the City Council, allocate $35,000 annually to advertise, promote and otherwise market tie Water and Adventu~'e Pa~l~, H~'ARKS slia~l provide neeessa~~+ mazketing guidance to CITY and pextnissio~ to use

Page 10 of 3~4 Water and Adventure park ground Lease &operating Agreement Clly of White Battlement, Texas — Hawaiian Parks - Wltlte Settlement, LLC

318 ~ ~~

HPARKS logos in any marketing campaign, CZTX shall follow a~ applicable rules and guidelines issued b~ 1'-~1~ARKS franchise, HPA.RKS sha11 have the ability to re~t~iew and app~~o~ve all marketing n~atexzals and advertisements for compliance wzth HPA.RT~S's fi~anchise agreements, .

6, D~[J1'IES OF I~PARKS;

6,~ Quality o~ Opexation;

6,1,1 Opexatin~ Season; HPARI~S shall operate the Water and .A.dventl~re I'arlc foi~ a commerc~all~ reasonable pe~~od dutx~g its Opexatt~~ Season., The opexations shall be offirst class quality in all respects, as compared to similat~size operations in Texas, HPARKS shall puz~sue a promotionaX program to incz~ease the Use of its services a~.d ~'acilzt~es which shall 1~e comparable its scope and cost to ~'omotional activities of H~.ARI~S or ifs afC~liafes £ox other wafex and ad'ventuie ~arlcs,

6,1.2 Operating ~Iouxs,; HP.ARKS shall establis~~ its Ope~atin.g Se~so~ and Schedule o~ Operating Hours pursuatat to opa~rafiz~g plans that wi11 maximize economic return from operations, in ~TPARK.S's reasonable business judgment, Prior to eaoh Operating Season; HEARI~S sha11 prepaie and submit ~o CITX the Schedule o;F Operating Hou~:s,

~- 6,1.2.1 Th~~o~ughout the Term, and any renewals tUarso~, duzing each Operating Season ~-Il'ARI~ shall deep the ~Jater and Adventut~e Pelt open fox business during ordinary business hours for comparable facilities; provided, however, that this provision sha11 no-t apply if ~ha Water at~d Adventure Park xs closed clue to i~cle~a.ent weafher ar Water and A.dventuxe S'ari's business is te~.pot~ariJ.~ shut dog.due to casualty, condemnation,fire or othai causes beyond the reasonable control ofI~PARKS,

6,1,2,2 Z3ours of operation that exceed noxma~ o~erating hours, shall be subject to the review and co~se~t ofthe ~IT`Y' Manages ox designee, whie~i oor~sent shall ~aot be unseasonably wit~eld, coriditzo~ed ar delayed,

6,2 HPARKS Pexsonuel;

6,2,1 Compensation; The z~urnbez~ o~ e~.ployees wanking at the Water ,aid A.dvanture.Park, and the compensation (salaries oz~ wages, benefits and commissions) paid to them, shall be reasonably es~af~lished .b~ ~ART~S, but mi~unal sta;Ffing levels shah be eon~paxabls to tlxosa established b~ watez~ and adventure parks of similar size and scope ~n other locations in Teas,

6.2.2 Trainin ; ~'A.RI~.S agrees that at all times tts employees shall be clean in appearance and aouz~eous :l~ ~azvaea~ and shall ba trained so t~aat the public and patrons at the site shall be heated and served v,~th ever reasonable co~s~deration and oouttesy~ ~-~'Ak~S agrees thaf it sha11 maintain tt~ained and competent aquatic s~af~ in accordance with

• gage 1 I of 34 Wafer and Adventure park around Lease &Operating Agreement City of While Sel(lement, Texas —Hawaiian Farks •White Settlement, LLC

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National Aquatic Safety Coz~pany, J'ef~ Ellis &Associates or lea Cross training standards or othez~ generally applicable industc~ si'auda~ds foi staffing,

6,2,3 Fooc1 Service; Employees ~of HPARI~S or its concessionaires oz~ vendoxs'who woik whexa food and beverage is sold shall comply with federal, state, municipal and countysat~itaxy regulations,

6.3 Capital Tm~x~ovaments Structural Replacements and Re~aus; CITY atxl HPARKS have agreed to slaa~re the various costs and obligations involved i~ the conskeuctlon of tlae Water and Adyenfure dark ~~i aeco~'dance with the terms az~d conditions of the Consfruc~ion Agreement entered into b~ the pasties aonctu7ently with this Agreement, HPAR.I~S shall make xepaxxs axed new Capital I~pz~ovaments and Structural RepJ.acements on the Pxemises as ~'o~~ows;

6.3,1 ~ Repairs due to Initial Construction, HpARS~S, at no cost to C7T`Y', shalX~ cause to be made all repairs and replacements. to the Water and Adventure Park regttixecl because oflatent defects or latent ~'ault~ installation o~ faulty construction uzadarfialcen puxsuant to the Construction Agt~eeznent ox by a contractor or subconh~aotor,

6.3,2 Capital Improvements Plan; HPAIu~S sha11 annually pz~epa~e or revise and submit to C7T~'' a curxent capital Stnp~ovements Ian that identifies eo~templated Capital Iruprovements and Structural Replacements to tlaa ~'reinises, ir~c~uding any substantial cha~iges or altarat~ons zu any axisiir~g inlproveir,.ents, pxojeated to ocour during the nest twenty ~foui (24) months, The CITY acicnowledgas that ~P.A,RZ~S will, ~i~om time to time over the Texzn o£ this Ag~~aama~tt, steed to xeplace certain odes and attractions r~i~Ykh na~w acid different x~des and attractions to iriainfain and attract continued intexest in the Water and Adventure Paxk, The CITY fuz~er acknowledges that because of the rapidly ck~anging nature o£the teal~nologies anal imp~ovezne~ts a~vailab~e ~ the watex and advax~tule park tiidustxy,the Capital Itriprovernents P]an w~l~ eontazn genexal daseri~tioi~s o~ ant~czpated ~n~roverrxe.~ts and rna~ need to have substantial flexibility, with xegard to ~lis exact speci~.cations for the i:mprovau~ents and capital itarn~,s and tkaa vendors for saz~e, Except as ~~~ovided in Sec-~ax~ 6,3,3 haxeof, I~P,A~t2KS shall gat be required to carry out any improvements proposed in the Capital Im~rove~xzer~ts Plan. unless the Capital Tmprovsments and Structural Replacements described tha~ain are a~provad by the CXTY and t1~e CITY agrees to Ruud its 50% sh~xe as herea£~ar p~ovzded, ~ X~ CXT~' and H~'ARKS dgxee t~ fund new Capital Im~io~a~nents and/oi Sttuetutal Replacements, the CITY and S~PA~S~S s1aa11 each ~a~ ~:E~y pexce~t (50%) 'of the cost of suol~ Capital Impi~ovaments and/or Straetural R,e~laoenaents; p~o~vided, howevex, CIT~''s share ofthe post of said Capjtal Im~iovemants and/or Structural Rep~aeemezlts s~iall be Funded from the Sales Tax Escrow .A.ccount(da~i~ed iu Section 12,3 below), ~ '

6,3,2,E Im~rovaments Funded by I3PATtI~S; Tf the CITY ~a~Is to approve a request from ~TPARI~S to fu~zd proposed Ca~ifal In~pro~vements at~,d/ox Structural Replacements, HPAIZKS inaq request that the CYTY p~xmit T3PARKS ~o construct such Capital Impraveinents at HPARKS's expense, CITY agrees ~t +,yil1 not un~.easonably withhold, condition ox de]ay such oonsent.

Page 12 0~ 34 Water and Adventure Park ground lease &operating Agreement City of While Selllemant, Texas ~ Hawaiian Parks -White Setilemenl, LLC

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6,3,3 Expenditures b~ HPARI~S; During the ~~s~ eve ~ea~~s off' this Agxee~ent, HPARl~S t~vi11 e~cpend no less tha~a $500,000 in Capi4al Inipro~vements and St~~uctural Replacements to the 1're~nisas; ~C7TY is not i~ec~uited to participate or znatck~ the $500,000 eozrmaitment ofHPARKS under this Section, '

.,6,3,4 Maintenance and Repaia~ Sexvices, Subject to the terms of this Agreement, HPARRS at its cost and•expense sha11 secure or provide Maintenance and Repaixs of the ~Jater and Adventure parlt 7mpz~ovanxa~ts and Capital Trnpro~vements to keep thez~a in good opexating oo~dztxon 'and in good repaia' ~ (damage by casualty or bonderr~nation excepted) tl~~oughout theix us~:Ful life and ire aceordan.ce with all ap~licable.laws, To the e~ctent available, ~S~.A~ZKS may pay khe cost's of Ma~nte~ance and Repa~~s from funds da~osxtad by HPARKS into the Mainte~aanea Reserve Escxow Account pursuant to Sectiort ~ 2,4 hereof, `

b,3,5 ~exnnit and Other'Fees; The CITY will waive a1T CITY buz~dix~g permit and CITY license fees associated witlx the development oftha Watex and Adventure Paxk, The CITY agrees .hat H~ART~.S shall got be requixed to pay any other fees, taxes, o~~ suxcliaxges to the CITY iu eoznaection with this project,~ addition, the CZT~'' will use its best af~orts to see that the Water and Adven~tuxe ~'a~.k aid BP S ai:e not subjeot to any othex pezmitting Fees, Iica~se fees, stucharges, speazal faxes oz~ assessments, or other fees ox claaa~ges, in cozwection with tUe o~exat~on. o~ the latex and Adventuxa Park, that would not be assessed, if the Watex and Adventure park wexa a CITY operated pai.k facility, CITY and HPARKS agree to woxk togetk~er to joix~.tly prepa~~e and submit any t~eoessar~ pa~artivorlt to inform airy applicable governmental authorities a~~d/oz~ taping ar licans~g aut~oxities that the Water and Adventure ParX~ at~d au irnpxovements associated with Water and Adventure Park are and will ~~ema~n city~owned pxoperty, except as otharw~se expi~ossly provided lierei~, S~p.A1~S agxess to defend City should any texas be assessed and ~TPARICS wilX agree to pay az~y tax assessme~zt, SPARKS will ba subject to fees ofthe City o~Fort Wo:~h ir~cludi~g Impact Fees aid Pass Thiough fees,

6,3.6 Timing o~ Jmp~oveznants; Bxce~t as specifically described ~.exeX~n, the timing of any Capital Improvements shall be entirely wiCh~n the discretion ofHP.ARKS,

6,3,7 ~'~~tas; I~P.ARKS agues and aonvnits to the inclusion in the initial V,ratez'~and Ac~ve~t-tuxe ~ar~ deve~opmeut of sim-'tJ.az' am~r~itl.es and plans as ide~ti~.ed inExlitbit D, The partie's acknowledge tJlat the attractions, ~'acilitzes and impxove~er~ts wxl~ not be static and veil] change from time to time over tl~e ~'errn o~ this Agreement,

6,4 ~ ~2.estrictio~as on Subletting and Concessions; H~'.ARKS sha11 got sublet or allow occupancy of any portion of the ~rem.is~s to or by concessionaires or otl~ax third parties except 1z~ coznpliazlce with t~.e ~ol~o~v{r1g conditions

a, HPARK~ ~na~ grant the operation of specialized shops andJor facilities, restaurants 'and other food providexs, to concessionaizes ore tl~e following conditions; and

Page 13 0~ 34 Water and Adventure Park Ground Lease &operating Agraemen! Clly oP Whlfe Selflement, Texas — Hawallail Parks -White Settlamenf, I.I.0

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b, ~ Each concession g~•anted shall b~ subject to tie applicable terms and conditions o~'this Agreerner~t, and S~PAItT~S shall ~~st notify CITY' that a concession has been g~~anted in compliance vaitli this subsection, ,

6,5 Non,d~sczimination; Neithe~~ HPA~I~S nar , its ernp~oyees or concessionaires shall dzsariminate 1~ecause ofrace, religion, color, ancestry, age, rational origin,, or disability against any person by refusing to ~~lix.~ish any such ~exson any accommodation, ~acllity, sez~vice o~ pt~i~ilege offered to or enjoyed by the general public, Nox shall ~LPA.RI~.S or ifs employees publicize the accomt~iodations, Facilities, sei`vices oz' pi~.vilsges in any annex that would d~reetly or inferentially ieflect upon ox questzoz~ the acceptability ofthe patronage o~ any person because ofrace, religio~a, color, ancestry, age, national oi}gin or physical kandicap,

6,5,1 Access; ~ARI~S shall provide disabled persons access to its tides or otl~er ei~tai~tainments as requixed by 1~-vv, - ,~

6,5,2 ~ubltc Areas; HPARKS mad occaszona~ly conduct ox engage i~ public religious act~~yities iii the areas o~ the 'Watex and Adventure Park open to tl~e pnh~ta (inClut~vlg, but riot ~ilxzited to, p~'oselytizi~g, preaching, baptizing, passing out religious utexature, playing musk with ovez~tly religious massages,inviting members ofthe public to attend religious activi~ias or services, and praying o~e:r tk~e speaka~~ system o~~ in any other manner designed to be heard colleotively b~ vxs~toz~s to the park, whether or not any or a~10~ suo~Z pax~soz~s actually hear suchpxayex). Tkais Section 6,5,2 is not intended to, nor it shall xt ba construed to, ~xakubitpxi~vate expressions of xaligious faith by either patxons, employees or eontraators ,o£ tk~e Water and Advez~tui;~e ~'a~~k, noi~ s11a11 this Section 6,5,2 be interpreted ix~ any way to condone o~ ~errnit d:iscxlmination against ati~ ~erson or group on t~~e basis " of religion ox roligious beliefs ox' pxactices, Mozeover, nothing in dais Agrean~ant is intended to, nor slaall be construed to, inhibit or i~fri~ige on any i~idi~vidual o~ g~~oup's freedom of association,fxeedorn of xeligion, or freedom ofspeech,

6,5,3 Special Events; HPART~S shall not disca~~ninate lea any mannex p~~ohib~ted by law ua making the Water and Advez~tuxe ~'a~k available to an entity ox gtou~ on a p~~~vate paxt~ basis o~~ aftei normal o~ex~atf~g hours,.

6,5,4 Access; ~xespt as limited b~ tins paragz~aph anal by ap~~icable la~,v, HPARKS may limit access to the Pi~ernises as necessary to prevent d~srupt~an of to promote the safety ofits castoxners dz~ emp~o~ees,

6,6 Acltnowledgmezzt of CITY'S Title to Premises, Acquiescence in Ownership by CITY; HPARKS Funded S~n~ro~ve~ants; HPA.RKS Slaal~ Commit No Waste;

6.6,1 Title; Except as otherwise expressly provided herein, HP.A.RK~ herrab~ ackr~ow~edges the tine of CITY irz a~.d to th~,a ]at~d constituting the )?remises and the deal property improvements, at~x~aotions, ~~idas, aid facilities acid fixtuxe,~ and appiu~tenances cons~xucted by eithe~~ pai~t~ on the pxemises dux~ng the Term o~ this A.g~'eeznex~t and ~ie~~eby~ covenants and agrees nevez~ to contest said title, Notwitl~sfanding~the foregoing or an~tlaing to

Page 1~{ of 34 Water and Adventure park Ground Lease &operating Agreement City of White settlement, Texas — Hawaiian Parks - Whlla Settlement, l.l.0

322 tha cos~txaiy in fhis Agreement, if CITY dec]ines to fund Its portion of anq Capital Impxovemant and H~'ARr~,S instead prooeecl~ with the fu11 funding of such C~~ital Improvement utilizing its owt~ funds, HPAI~T~S shall take title to and such Capital Improvement upon termination of this Agreement in accordance'with Sect~o~ 6.6,2 below,unless CYTY males the payrr~ents ~equi~ed in Section 6,6.2 below,

6,6.2 T~PARKS funded Tm~provements; 'At least ninety (90) da~s~~xior to te~mvnat~on of this Agreema~t, CITE' skaal~ pay HPARKS the Purchase Rai~bursenient Ob~i~ation fox any Capital 7mprovementa r~vk~olly funded by HPART~S ~u~suant to Section 6,3,2,1(`°~iFA~2Z~S ~u~.ded Tinprovements"). HPARI~,S Funded ~npz'ovar~ents sk~a~. trot izlclude and CapitaX TYnpxovements £ended by HPARKS~puxsuanf fio its abUgations under Section 6,3,3, Zf the CITY declines to ~pa~ the Purchase Rezrs~buz'sement ~Obligatio~, the full ~;ight and title to st~clz ~mpxovements sha11 ~i~ansfer to ~iPART~S, axed HPA.RT~,~ shall have t11~ ~3gh't to~talte title to such impxovements and remove such I]7~.pTOVerilerifS from. tlae ~?xemises to the extent 1khat ~il.'.ARKS can do so w3thont and damage to the o-lhea~ improvements on the ~'xe~nzses, Zn addition,the CITX aclrngwledges and agiees that it does not and sha11 not hold title to any leased oz~ rented im~rovaments, attzactions, rides and facilities.

6.6.3 Ownership On Terxninatiori; At the texrr~i~ation of this A~'eement fox any z~eason;(i)title to any ~~xsonal property puxchased in connection nth,and integral to,the o~exataon. of the Water and Advantut~e Pant and paid fo~~ ~ whole or in part b~ the CITY shall vest (or z~emain vested) ~n the C7T~', r~vhich perso~.al pzoperty includes, without livaitat~o~, all goods, Opez~atir~g Xnven~to~y, mex~cbandise, co~nputei~s, software, vehicles, and machinery owned i~ co~nectio~ ~rfti~.the operation of the Wa~ar and Adventure Park;(ix) CITY shaJ.l xetai~n ~u~~ title and owz~axship o~ any and all Capjtal Trripi~ova~.ants, Stxuctural Replacements, Water and Adveni:ure Park Impx~ovemer~ts, and all otl~e~ btuldin~s, equipmar~t and ~ac~lities pa~,d fox :l~n whole or in part by the CITY; and (iii) HPARKS shall take tithe and ownership of any (a) I~P.~RT~S Funded S~rn~rovements acid (b)pexsonal prope~~ty which k~as baer~ paid for entirely by ~-TZ'A~2S~S, ~'.A~RT~S may z~emove the p~opei~fy referred to in clause (ui) above at and time prior to the expiration of thirty (3Q) dais after such termination, In removi~.g HP.A.1~~S's pro~er~y, ~I~ART~.S sha11 spot damage or ren.de~~ inoperable any of tl~e otk~er Watex and .A.dve~atura Park Tnl~rovements ox Ca~ztal Ir~pxovements, attx~aetzons, rides and facilities at the Water and .A.dvei~~tue Park, '

6.6,4 .Condition of Water and Adventure Paxk at Terminatzos~; At the ax~i~ation or ea~~lier termination of tl~e Tema, HPARKS shall teuninate its service and vacate tk~e Wate~~ ar~d Ad~eratuta Park, leaving atI rexna~ning i~npiovements, equipment, ~ixtuz~es and ix~ade ~xtuies iz~ good and xeasoi~ably clean co~nditia~, subJectto o~~di~ary -wea~ and tear,

6,6,5 Waste; HPAIZT~S shad cox~~mit Sao waste of -tbe Pxeinises and shall be responsibly ~oz~ ax~y damages to the premises caused by the activities of H~'AR.T~S, its agents, amplogaes, guests, and i~ivitees,

6,6.6 Hazardous Materials; H~'A~S~,S s}aaJl at no time,d~sehaige any waste or Hazai~daus Mate~~ials on the pxemises, ~iPARKS shad at no time during the Tartu o~

' ~ Page 15 of 3~ Waler and Adventure Park Ground.l.ease & Operaiing Agreement City of White Settlement, Texas --Hawaiian Parks -White Settlement, LLC

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this A.greet~ent use ~oi~ hermit the Pre~aises to be used in violation of sny Environmental Regulation, HPART~S shall not exercise any control over et~~vironmental cozaditions or any activi~es, u~.der this Agreemaiit, at oz~ near the Premises that involve the genei~atioia, storage, treatment, or disposal of any Hazardous Matexial,

6,6,6,1 A.ny use of , fertilizers, herbicides, pas~icides or other T~azaidous Materials or regulated chemicals b~ ~-Il'ART~S or its employees, cot~tracta~~s or subco~tractox~s shall be done in stxict accordance ~,r~ith a~. applicable Bnvirowne~tal Regulations. ~IPARKS shag pxovide CXT~ upon request with copies o~ all chemicals constituents and Material Safety Data Sheets(MSDS)sheets prior to tk~a application of ax~y fertilizer, herbicide, pest~oida ox other chemicals to the premises, T~PA~T~S sha11 ~e strlct~y liable for auk spoilage or spills in handing such matexzals and chemicals,

6,6,6,2 HP.4RT~S shad be xes~onsible fo~~ all costs and expenses associated with the remedzatron of, and liabzli~y ai°ising froiv. o~~ related to, damages to the ~'xezn~ses a~.~isiz~g £rom the storage, use ox disposal of Hazardous Materials by T~PAR~S, its em~~oyees, agents and eont~~actors, thew subcontractors, or invitees after T~PARI~.S enters the Premises to commence construotion pursuant fa the Notzee to Pz~ooeed issued undei~ t1~e Construction Agreement.

6,6,6,3, Notwithstandi~xg anything to fihe co~txa~'y in this A~~eernant, the CITY acknowledges and a~ees that the C~I'~Y' sha11 have the sole responsibility aid obligation w~tk~ regazd to all en-vi~'onmental x~egulations and compliance, enviia:nmental abate~a~at, enyixo~mental iemed~ation, claims, pauses of action, demands, liability, dat~~agas, costs, expanse, assessments, penalties, fines, losses, attoz~ey's fees and judgments xasu~ting frara ox a~~ising out of the existenoa o~ and ~-Ta2a<

6,6,7 Pernsitted Encumbrances; Duxing tk~e Tez~ o:F this Agreezne~t, Hl'ART~S (including any of its contractors, sublessees, licensees, a~.d concassionai~~es) will rapt in a~iy way et~cu~ba~~ o~~ cloud the title to ail 'or azay portion o~'t~~.e laid constituting the kra~ni~es, Notwzthsta~d~~g the foxego~ng, however, ~IPARKS; w9~tb tk~e coz~se~t of the CITY (wlilch consent shall got be unxeasonabl~ ~-Chheld, conditioned ax delayed), sliall ~av's the xiglat to Madge, encumber or~ giant a ~xe~ ox secU~ity interest in (i) its leasehold interest uradex khzs Agreement and (ii) all Capital ~znpravements (including rides acid related facilities) and ~erson~l properly paid for entirely by HPf1RZ~.S wzth auk borrowed :funds, and tke CITY agrees not to oppose ox xesist the xaoordation of saz~e with the appropriate governmental authorities, I~ addition, CITX sk~al~ execute such subordination ag~~eaments as ire~uested by lenders pz~oviding

• .Page ],6 of 34 Water and Adventure Park Ground l.aase & Pperaling Agreement City of Whlle Selllement, Texas — Hawalfan Patks •Whlte Settlement, LLC

324 ~inanczug to HPA.RI~S for the cost of such Capital Tmprovemants and personal propax~ty, as a~plicable, ~ '

6,6,7.1 Mechanic's Tliens Prohibited; HPA.RI~S shall not suffer or permit qtly meck~ania's liens or othex liens to be ~~ed against the fee of the Premises noa~ against ~IPAR.I~'s leasehold it~texest iz~ the lard nox guy i~.pxovemezits on the Premises by reason. of any work, labor, services or. m,atarials supplied o~~ claimed.to have bean supplied to HPARKS or to aiiyona holding the Premises ox~ and dart ~hexeof though or index HPART~S, Tf any suoh mechanic's lien or m.aterialman's liens sha11 be recorded against the Premises, ox any improvements theieon, HP~~S sha11 within sixty (60) days cause the same to be renYoved ox, In the altexr~at~ve,~ z~ S~A.RI~.,S in good faith desires to contest the same, HPARKS shall be privileged to do so, but i~. such case l~P.A.RKS hexeb~ agxees to pt•avide a surety 1~oz~d, or other' collateral, acoeptable to CITY and to i~~demnify and save CZT'Y k~armless from all liability for damages occasioned thereby and shall, an the event o~ a judgment of ~o~eclosu~e on said mechanic's ox materiahnan's Liens, cause the same to be dxschaxged and re~toved pzlor to the execution ofsuch judgment.

7, CONSTRUCTION OF CA.~ITAL ~SPROVEMEI~TS;

7,1 Compliance; ~ARI~S wi11 comply with all applicable codes a~.d xegulatio~ns xn connection wifh the constauction of the Capzta~ Zr~~pxoveme~ts,

8, LEASE•PAYMENTS:

8,1 Annual Lease Payment Computation; puring the Tezm ofth{s Agreement, HPARKS sha~1 male annual lease payments as follows;

a. HPARI~S s1~a1X day an amount equal to the CXTY's debt service payment i~acurred by the CITX tie Debt Obligations as its lease payment on the Lease Payment Aates on in and tl~e Lease payment Amounts shown in section 8,2 hereof

b, Upon payment iu fu11 o~'the Debt Obligations, the aru~ual lease paysrzent payable by HP~RT~S ~vi11 be dive pez~cent (S%) off' Gross Revenues for the applicable cale~dax yaat~, irxolud~z~g any renewal periods. ~ ,

8,1,1 Whilethe Aebt Qbligatzans aTe outstanding, HPARt~S will raceme an annual credit against the lease pa~+ments payable bereu~der in an amount equal to tl~e ag~egate sum o~ the Hotel Occupancy Tax (herein so called) paid by the ~:st ftve Hotels eotastrueted within the City of White Settlezx~eiit that receive a eaz~ti£tcate o~ occupancy aftez~ fi1~a fu~st day that the Water and Advent are Park is ope~~ed to .flee publ~o, As used herein, "T~otel" shall mean any hotel, uaotet, a~u~,']odge ox similar faczlity with more than :fo~~ty (40) rooms for lodging, With the excep-taon of the hotel to be constructed at 811b ~V, Fxaeway, White Settlement, Taus 76108 If cex~tii~icate of occupancy occurs b~ December 31, 2014, aid the hotel cuxxeutly under co~ast~~c~io~ at 7801 Scott St~~ee~, W1~{te Settlezne~zt, Texas'76108,

Page 17 a~ ~4 Waler end Adventure Park around !.ease & Operai(ng Agreement Clly.ot White Seillement, Texas —Hawaiian Parks -White Seltlament, LLC

325 C

g,2 Annul Pa merit: H~'AkT~S shall make each lease payment in the Lease ~Payznent Amounts attd on the Lease Pa meht Dates shown below; LASE PAYMENT LEASE PAYMENT DATA ;,., , ~ $AMOUNT ,,,;, . , ,,, „ BATE , ,. ;.,,,$AMOUNT .. . ,, „ .,, `,. ,, 04/01/202A~,...~. , .202,933.50 ~.0/01/2014~ '• 500,OOb,00 ; 10/01f2024: 842,9ss,50 ; 04/0~,/20~.5 ; 200,000~QO ~ '04/0,/2025: 186,869,50 ~.p/01/2Q15 600,000,00 .... _'10/0./2025. 856,869.50•' 04/01/20.6; 3p0,000,Q0 ; ~ 04/0~,/2026~ j 170,052,50 10/01/206; 6g0,b00~Op ; 10/0~./2026~ 875,052,50 04/01/2017, 300,000;00 04/0./2027' ~ • ,' 152,,3S7;Otl 7.0/p1f20.7 700,000,00 F .,,.... 10/01/2027, '...~1, 892,857~d0 . 04/0~./20~8, 300,000,00 ; 04/01/2028; j X93,783,00 10/0~./ZQ18 ..' 900,000,00 ...1.',10/01/2028' 913,783,OU~ 04/D1/20~9 ~ ~00,000~00 ? ~ 04/0./2029 .,. ~. ~.~.4,205,00 ; . 10/01/20.9 ~ 800,000~00' .1 ,'10/0./2029: ~ 934,205,00 . 04/0./2020• .. ,.. ,., , .„600,000,00 ,., ... ; ., ~;` 04/0,/2080; , . , ,,. ~ ... 93,623.00 ! 1001/2020' 696~~}20,Op ~ . ,,.~..~,0/Q1/20~0......~... 958,623,00 04/0~/202~, - 246,6p7.S0 ~ . ,~ Q4/~~./203~.:.......... . 71,9.1,50 , 10/0,/2021' 796,607~~0 , .... ~ 7.0/0~./203~.: ~ 976,9~.~.,50 0~}/0~/2022~ 232,802,50 ~ ~ DQ/0~./2032' ~ 49,96,00 , AO/0~./2022; 812,802,50' ; 10/01/2032 ~.,004,~.96.00 • 04/01/2Q23' ~ 218,2g4,50 ;.. '0}/01f2033~ 25,225,50 ;, x.0/01/2028' 828,2a4~S0 , `X0/01/2038; ~ x.,030,225,50 ; '

r,- 8,3 ~n~ual Report and Reconciliation: Wi~in si~rEy (60) days followltlg tl~a close o~ each aalen~ax year,including the year of tk~e Resat Cominat~cemen~ Date, HP~I~ZKS shall furnish to CITY a staterz~ent.of the Gross kavanues for t ie entire calendar year signed by an officer o~ the independent CPA ~zxm o~ H~'ARZ~S on behalf of~PA.RY~S, Yn the event additional• xeut is due, such additional vent shall be due and payable within ninety (90) days of the close of the caler~dal year, Tn the .event that the statarn.ax~t shows that HP.ART~.S has x~ade an overpayarzerat, such ovez~a~+naent shall be refunded to HPA.~S~S within nivatq (90) days o~ the close o~'the ca~e~da~' dear,

8,~ Place of pa, ant: All rant payments skaall be made by HPARKS to CITY at CXTY's office at City of White Settlement Finance Da~artment, 214 Ivleadow Pant Drive, Wk~lte ~ettleznent, Texas 76108 or at such offer location ss shall be designai;ed in writing b~ CI'~Y:

Page l8 of 34 Water and Adventure f'atk around Lease &Operating Agreement Clty of Whlle Settlement, Texas — Hawallan Parks - Whlte.Setllemant, LLC

326' 8,5 X,ate Payments; Tn the event a rental papment is not made on or before the last day of the z~econcitiation pexiod herein provided, HPAR.KS shall day to CYTY a late chaxge on uu~aid xental ~ayrnez~ts afi a xata of ,75 paxeent ~ez~ month (nir~a percent(9,4%)pez annum) or the rnaxiri~.um xate pexixutted by law, whichever is less, fi~om and after the due data thareo~ unfit. tUe date o~'~ayinent, ~ `

9. RECORDS AND REPORTS;

9,~ Financial Reports,; V~ith~n one bandied twenty (120) days a~tex tl~~ end. at' each calendar year daring the 'z'ez~~.1, commencing after the fist Operating Season, HPARKS sha11 furnish the CIT~',with a copy of an a~vival Profit and Loss Statement and a~ antaual balance sheet for the operations ofthe Water ar~d Adventure Park,

10, ]NbEMNITY AGREEivLENT;

X0,1 Xndem~z~ication; HPA.RKS~ shaXl indemnify, def~z~c~, protect and ~o~d ha~mles~ the CITY, its couno9l memb~ex~s, off"icars, ernpIo~ees, a~nr1 voXu~.teers (collectively tri,e "7ndemn9tees~') from and againsf any axed aYX claims, losses, p~roeeec~xaxgs, damages, causes of action, liability, cos#s and e;~penses (including x~easonab~e s~t~oxz~eys' fees), arising fxom or xn eonneotion with, or caused ins vyhole or ire dart b~ (z) any n~egZzgerit act, or omission o~ T~A~S or any coneessionai~e of T~PAR.~S, or their res~ec~i~~ con,txactors, licensees, xnvztees, agents oar arnplo~ees; (ii) and uae of the'Water aind A.d~vez~tuxe ~ax~c, or any ace dent, inj~txy, death or damage to any person ox' ~xoperty ocet~xring in, on ox about the premises, or and part thereof,_or £rom the conduct of ~ARX~S's business ox from ax~y aetivity'~ ~t~vo~rl~ or thing doze, pexmitted or suffered b~ ~A~~S or its eQn,tractoxs, subcontractors, employees or 9uvitees in, on oar about- the Premises; (iii) and ~reaeh ox default in the performance of any obligatio~.s an ~'A,R.~~S's part fo ba performed under fhe terms o~ this Agx~cem~eat, or arising from any nagZzgezzce o~I~PART~S, ox az~ys~c~ ela~m ox any action o~~ pxoceec~jng broughE thereon; or (zv) any az~d all liabil~itites, obXigaE~oz~s, damages, pettalties, cXaims, liens, costs, charges, Xosses and expenses zrn~osed t~pon~ inouxre~ ~y ox asserted agaa~.s~ the ~c~emnitees ~y any third ~a~(y b~ reason of. an.y c~azm or lien a~~sing out of word, Xabax, matex~9ais~ ox suppl~ea ~ror~ided or su~~~lxed to HP.ARKS, its aa~tractors or subcontractors, for• fhe installations ox constract~on of CapitaY Im~iro~vements, end the apo~~atxon, maintenance or arse of the ~remiseg, Notwithstanding tl~e foregoing, tea indemnity provzded.by HPARI~S herein expxessly e~c~udes•ata~ ar~d all liability (i) arising out of an event,w$iah 000urrad prior to the date HPARKS entered tk~e Premises uzzder the Construction A~eamet~t; (ii) atisi~g out of a bxeaah o~ this Agreement by an Tndezzanitee~ or Indemnitees; ox (ii9) arising out ofthe wi11fu1, reckless or ueglagent conduct of the Indemnitee(s) or (iv) arising out of tie existence o~ at~y Hazardous Material o~ the ~'~~emises oj~ any othex violation or alleged violation of En~vixonmental Regulations on the pieln.ises before the date that HPARKS assumes possession and control o~ the Pxeza~ises puxsUant to the Co~steuction AgLeemeut.

Page 19 0~ 34 Water and Adventure Park ground i.ease & opeTaling Agreement Clly of White sefllemant, Texas — Hawallan Parka -White seltlemanf, LLC

327 10.2 Infant; If a claim zs made in and forum against Indemliitees for any of the 'reasons re~erxed to i~ this Section, and upon iasolution ofthe claim; ,~ (a) them is afinding ofneg~ige~ace bq HPAIZT~S and t~.ere is no ~i~di~g f~y~ a court of competent juxisdiction t1~at Inde~nitees t~exe also negligent or rec~Cless in connection. with any o~'tha xeasor~s ~t~efexx~ed to iri this Section, HPARKS s1iall fold Indemnitee(s) ha~t~t]ess and ~ndemt'i~fy tl~e~n for any damage, loss, expense, or liability resulting from tk~e clairm, ,including all atto~eys'fees, costs, and penalties inctu7ed; or

(b) there is a finding by a court'of compatent jurisdiction that H~ART~S was negligent to a greater degxee tl~a~ 7ndemnitees in connection with any of t1~e reasons refarred to to fhis Section,they HPART~S shall hold Zndemnzties ha~~xnless and inde~uaify tk~ezaa £or any damage, loss, ex~e~se, or liability 1'esulti~►g from the claim, z~cluding all attorneys' fees, costs and~enalties; or

(c) thexa is a ~indzng by a court o:F competent jurisdiction that liability i~esuXtad from a~ act of intentional misconduct ox xecl~lessness o~ an Ii~.demnitee or 7ndamnitees, a breach o~this Agreement by are Indamnitee ox rndemniteas, ox solely from the negligence of an Zndez~witee o~~ Indeii~nitees, t~ie~, CITY shall, to tl~e extant pet~mi~:ted by law, k~old S~P.A,12S~S hatmless and indemnify diem for any damage, loss, expense, o~ liability resulting ~xom that cot, including w~thoutlimitation, all attoz7aey's fees, costs and~analties,

10,3 The Tndetnnitee sha11 give HPARI~.S prompt notice of any event t~~iggei~ing -the foregoing i~demnit~ and shall cooperate with tl~e Tndemnif~i~g Party in the defs~se of any cause off'action.to which the foregoing indemnity rebates,

10,E ~1P,ARKS, as a material part o:f the cor~sidei~ation to tl~e CXT~', hereby assumes, except as otk~ax~vvzse ~i~ovidad ~n this Agreement, all risk of damage to pxoper~y o~~ injury to ~ez~son on the Pxemises,

l 1., INSURANCE;

11,1 Without liiniti~g any of the othez~ obligations or lzabilitias of S~A~tI~S, HP.A.RT~S agrees to ~urchasa and maintain dut~ing the Tenn anal any renewal, and at ~Il'ARK,S's sole expense, the types and minizz~utzz amounts of uasurat~ce coverages listed below, togatllei with tl~e coverage ~xovisio~ and endoxsa;rnents as x~adicated;

a. Workexs' Com-pensation Insurance; Wor]caxs' Compensation 7nsuxazzce is subject to the ~'ollawing rsquiraznents;

i,' Wo~.kexs' eompensatzon coverage sha11 be rr~a~~tazned for root less than the Texas Statutory limits,

ii. Employee's Liabi~it~r J~tsutance shall be maintained with minimum limits ofgot less than $250,000 per occurrence and $500,000 aggregate,

Page 20 of 34 Water and Adventure park around Lease &•Opatating Agraeme'nt City of White Settlement, Texas ~ Hawaiian Parlts -White SettleFnent, Ll.0

328 iii, The polioy shall contain a waivex of subrogation in fayoi~ o:f the CXTY,

iv. The policy shah contain a requu'ei~.ent that CZT~'be given not less •th~.n thit~ty (30) daps written notioe ofcancellation, noz~-renewal or r~atexial change,

b, Commez~cial General (~'ublic T~iability Insurar~oe; Co~nercial Ci-e~~ei~al (Public) Liability Tnsuranee s~ia11 inol~ude coverage for Praz~iises/ Operatzo~s, ~iodu.ctsl Completed Opexatio:as, S~adependent Cont~~actor's liability, Personal Injury, Explosion/ Collapse/ Underground, ar~d Coz~t~~actual liability i~surii~g the indemnity provision contained in this Agt~ee~nent and ~ul1y insiuirxg ~IPARI~S oi~ ifs subcontxactoz~'s liability for bodily injury or death or pxoparty damage;

i. Combined limn of$2,000,000 per occ~u~e~ee for bodily injuxy and pxopez~fy damage.

ii, Annual aggregate limit of $2,000,000,

iii, Products-Components/Opezatior~s A.ggiegata of$1,000,000,

zv, ~erso~zal and Advertising, TnJucy (with employment exclusion deleted) of$x,000,000,

v, Contractual Liability: Bodily Injury of$1,000,000 each occa~rence Property Damage of$1~,000,OOQ each occui7ence

vi, Explosion, Collapse, Y7nderground,

c, Business Co~~excial Automobile Liability Znsuxance; Busi~nass commea~oial automob~~e liability a~isura~ace shall a~cluda coverage ~foz owned/leasec~ vah~cles, x~on-owned vehicles, and hired vehicles, as follows;

i, Bodily injury Iimit a~ $1,000,000 pe~~ occurrence,

ii, Property damage limit of$100,000 pax occurrence,

ui. The CZT'Y, its of~xcers, employees and agents shall ba Izsted as an additional irasuxed,

d, Commercial Crime•Insurance; Commerc~a~ cxi~me ~nsUrance s]~a~I include cove1~age fox employee dishonesty, forgery or alteration, and the#t, disappea~:ance and desixuctioz~ and meetthe follor~ing;

Page 21 0~34 Water and Adventure park Ground Lease &operating Agreement City of White settlement, Texas —Hawaiian Parks - WhNe SeftlemenE, LLC

329 Cove~~age sha11 be o~ a blanket basis.

ii, S~zmits s1~a11 b~ equal to $100,000 ~e~~ occurrence,

iii, Such xttsarance on the ~mpxove~i~ents, fixtures, ~ivaishings, and equipment of HPART~.S on the Premises, shall be i~. an amount adequate to,.insu~e t1~a rep~aaement and/or removal ofsaid property in the event oftoss.

e, ~'ropez~ty Insurance;,

i, A11 Risk Coverage; HPARI~~ shall o~tai~ and keep in £ores a polzcy of ins~utan.ce covers-ng loss or damage to the '~7Jatei and Adventure Park, the W~tex and A.dvanture Park Jmpiovements, the Capital Improvements atld alb pe~~sonal pxope:~~ in the amount ofthe full ieplacernent value thereof, as the same mad exist from.~im.e to time, agaixzst all perils ineXuded wzt~iin the classi~ieation of file, extended eovarage, vandalises., r~,aliczoUs mischief and special extended perms ("ail z~xslc," as ghat term is knovv~ in the xnsuxar~ce indust~~y), but e~ccluding darnaga due to Mood; earthquake or terrorist activities, HPARI~S shaXl obtain such• endorserne~ts as are reeommaz~ded by the CITY's risk manage,inc]uding, without Limitation, an e~.do~seznent for ehar~ges in building codes, ~xoy~ded such andot~sezx~ents ~~aay be obtai~.ed ob coznme~ciall~ reasonable tezxx~s; CITY shall ba the loss ~agee on, s~ch.polie~, To the e;~-tent i~sux~a~.ce ~i~ocaeds are not used to rebuild~~he Water and Adventure Pate Capital Iixipz~o~Vern~ents following au insured casualty they sha11 be divided pro rata by the pasties based upon. contribution to capital,

• ii, ~teplacement Value, The "dull ~~ep~acement value" o£ the propai~ty to be ~asut'ed tu~.dez this Section skull be detexanined bathe CXT'Y and the Company issuing the insurance policy at the time the policy is injtially obtained, Not mot's frequently than. o~.ea every . two (2) yea~~s, either ~at~ty s~.a~X leave the right to notify the other t1~at it elects to have the xeplaceraaer~t value ~e-~etermiraed by an insurance company, The redetexznination shall be made prolnptl~ and in aeaordanee with the rules and ~xactzces o~-tlze i~sivance eompan~, Laeh party sha11 be pzo:mptly notz#ied of the results by the company, 'Z'he iu~sui~ance policy shall be adjusted according to the redetarxnination,

11,2 Companies; All policies of insurance shall be written with a co~npan~ or companies approved aad licensed by the Teas Da~artment of insurance to tratxsact business i~ ~kte State of Texas with a Bast Rating of A, ox better, ,

11.3 Ca~~tificates;~ S~ARI~S agrees to provide CITY rxtith certificates of ~vsuranee, endorsements, exolusions,.and re~e~vant extracts from the insurance policy, o~ capi.as of policies to the CITX evidencing tkae regt~ire~ insurance coverages aid shall provide CIT~S~' with cartifcates oz~ other pzoof of cove~~age as requested by CITY off' current coverage upon the expi~~atzon ar xeneWal of any insurance coverage,,

1X,4 Additional Insureds; ~7V~th respect ~~o T~.PARKS's operations only, the CITY, its council rnembexs, o~~cers, empJ~oyees a~ad ~olutiteez's shall be shown. as additional

Page 22 of 34 Water and Adventure Park ground lease &operating Agreement Clly of White Settlement,Texas —Hawaiian Parks.Whlta Saitlement, I.I.R

330 insureds o~ the policies by using endorsement CG 2d 26 or broader. The coverage shall contain zoo specza~ limitations on the scope o~protection afforded the CrTY,,

11,5 Builder's A1~ ~Z{sk Coverage, Foy all contracts for the co~sti~uction of Capital 7mpro-vements a~~ Stxuctu~~a~ Re~lacezner~ts .undertaken by HPARI~S, I3PART~S shall purchase and maintain, or require fts co~txacto~ to purchase and maintain, a~ all times prope~.~ty insuxanc~ wxitte~a on~ a builder's risk "a11-risk" or equ~va~ent ~oliey form in the amount of the initial co~zttact pixca, plus valve of sabsequent oantraat modifications and cost of materials, supplied ox installed bq others, compzxsing total value for the e~tu~ pxojeet at the site on a xeplacement cast basis without _optional deductibles, Sucks property ~nstuance shall bs ~aintainad, unless otherwise in wz~zting by all ~erso~s and entities w~10 are beneficiaries o~ such insu~~anee, untlt final payment has been made, or until no person or entity other khan the CITY k~as an ~nsuz'ab~e interest in the property rec~u red by this paiagrap~ to be covered, whichever ~s 1ate:r, This insurance shall include inteiasfs of the CITY', HPAR.KS, its subcontractors and sub subcor~tractoxs i~~ tk~e contact,

I1,6 Insurance Policy Requirements;

a, Each iiisaraz~ee policy to be £iunislied by Hk'ART~S undex t~iis Ag~~eement sha11 include the Following conditions by e~tdoxseme~tt to the policy (H~'ARKS sha11 be ~xima~'~ over' any athai coverage);

~., name the CZ~'~.' as an addjtional insured as to all applicable policies, e~capt the CITY shall not be an additional insured an fibs ~Torkexs' Corn.~ensatio~/Emp~o~ex's Liabz~~ty policy;

2, scab policy shall require that thirty (30) days prior to eax~ce~lation, ~on~ renewal or and material c~ia~~ga in coverage, a notice thereof shall be gives to CXT~:' by oerti~ied znai~, Z£ the policy is canceled.for nonpayment of premium, only ten(10) days written nonce to CITE ~s requi~'ed;

3, the policy phrase "otl~e~ insuxanee" shall not apply to t~.e CS'~'Y w~.~xe the CITY is an additional insu~~ed o~ the policy;

4. SIISLIT~CO furnished by HARKS sha1Z he in accordance wtth, the following requiz~eznents;

S, each policy ~s to be ~w~.~itten through compaaues dull+ licensed to transact that class of insui~a~iee in tlae State of Texas;

6. each liabzl~ty policy xe~uii~ed l~exain shall be wi7tten with an "oaouz~~snce" 1~as~s coverage trigger;

7. HPARKS waives subrogation rights ~'o~~ loss a~ daxx~age against tie CYTY, Insurers shall have ao right of recovery ai subroga~zo~ against the CZTX~, it being t ae-intention

gage 23 of 3~ Wata~ and Adventure Patk Ground lease &Operating Agreement C1ly ofWhile Settlement, Texas --Hawaiian darks - Whlta settlement, I,LC

33~ that the insurance policies shall ~z~otect all pa~kies to the cont~~act and.be primary ooverage foz~ all losses covered b~ the policies;

8, Companies issuing the insurance policies and S~ARZ~S shall have no recourse against the CZT'Y for payment of any ~iamiurns o~' assesstne~.ts fo~~ any deductibles, as all such pxemiiims and deductibles are the so1~ ~~esponsibility and risk of tha HPARI~S;

9, Deductible limits oii insu~~ance policies exceeding $100,000 z~equire approval ofthe CITY;

10. Ar~~ o#'such insurance poL-icias requixed under this Section znay be yvxztten. in combfnation with any of the othaxs, where .legally permitted, but none of the specified Xirnits may ba lowaz~ed thereby;

11, HP~S shall provide not~ee of any o~aim o~.~ litigation that would affect . rac~ui~ed ~nsuxance coverages to the CXT~ in a timely manner; and

12. Prior to the effective date' o~ oanceXlafion of any policy, ~IPARI~S sha11 deli~ex to the CITX a xe~~acement ce~~ti~icate of itasurance oi' proof ofreinstatement,

12, MAINTENANCE;

12,1 SS's Responsibilities; X-~ARS~S agrees to maxtatain, any and all facilities at the Watex and Adventure Park in good operating and safe conclitzon and cleat, good order and repair at its owzi post and expense year. z~ound az~d, during the ent~xa `i'erm, T}zzs shall ~nelude keeping tt~e landscaping anc~ groundcove~~ in a healthy and wall ma~niained co~d~tion, HPARI~S agrees to nnaantain atad operate the Water' and A.dventuxe Pa1~1~ in accordance with the State of Texas Amusaznent aide A.et to include passing annual inspections and posfing szgnage xequi:red by tl~e A.ct.

12.2 Other Maintenance Services; HPARKS fiu~hex agrees to assume az~d pay when ~ due all operating expenses for pasf oontzol, garbage and waste (hazardous and/or ofhexw~se) raiuoval, janitorial se~y3ces, and 'any other o~arating services acct~u7ng oz' payable in connection, with its oceupallcy of the Premises and, at~y part thaz~eo~ i~ic~ucUng deposits, saes, or otlZer charges required by ~e suppliex off' and such servzce, ~iI',ARKS will use all ~~easonable effo~~ts to e~,gage businesses located in CX~'X for these services.

12,3 Ese~owed Funds b;v CITY, During the Tei7n, CXTY sha1~ co~tx~ibuta seventy five percent ('7S%) of the sales tax ~~evenuas received f.-rom tk~e Water aid Ad~v~nt~ire Pa~~C (the "Sales Ta~c Escrowed Finds") to az~ escrow accou~it for defea~ed o~~ current St~uc~w:al Re~lacemants arxd new or updated Capital Tin~rovements, The Sales Tax ~scxowed funds will ba funded sixty days after each quarter eud~ng March 31st, June 30~', September 30~, and Aecer~zbex 31st of the following year into 'an account establisha~ by CTT~' and HP,A:~I~.S at a ~edexal~y insured bank ox othex ~nanczal itastatutzon appxoved by both panties (the '!Sales Tai Escrow Account"). CTTY wiX1' notify SHARKS of all deposits of Sates' Tax ~scxowed Funds into the

Page 24 of 34 Water and Adventure Park Ground Lease & ope~aling Agreement C(ty of White settlement, Texas —Hawaiian Parks -White Settlement, LLC

X32 Sales Tax Escrow Account. The Sales T~ Escrowed Funds uaa~ be used by T~'1'ARKS oily to pad the CITY's 50% share of the cast o£ Capital Xmpxovements and Structural Replacame~ts approved pursuant to Sectzon 6,3,2, The EscXowed ~un~s shall be released to ~IPARKS upon its submzssian to tk~e Czty of dt~a~v requests comp~~~ng -with tha same requiremnents and procedures as a~~e sat forth in tlae Construction Agreement for the pa~mant of draw requests subix~itted under the ConstttzctionAgreement,

12,E escrowed Funds by HPARKS,, Begi-nnvig 1n the third full calendar Sear of tk~e 'Z'ez~.r~., HPARK,S shall deposit annually four percent (~%) of C3ross Revenues received 1~y HPAR7~S fl~om ~e ~Natea and Adventure Pack (tl~e "Maintenance ~.eser~ve Escxowed Fux~cts") into an escxaw account established by ~TPART~S. at a £ec~a~ally ins~.u~ed bank or other ~inan~ia~ institut~o~x appz•ove~ by CITY and HPARKS (the "Mai-nteuance Reserve escrow Account"),'~'he Maintenance ~Zeserve Esc~~owad ~uuds mad ba used by T~PARKS only to pay the costs of Mainten,at~ce and Repairs, Tlie Maintenance Resexve Escrowed Funds fox each calendar year ' will be deposited by Ma~~ch 1 oftl~e following yeax anc~ ~3PARI~S will notify CTT~'i~ wxlt ~g of all such deposits, Prior to withdrawing any IvZaintenance Iteseive Escrowed Funds, ~1PA.~S will submit a w~hdxawal request fa CXTY for CITY's a~pzoval, which shall not be unreasonably wzt~iheZd ox delayed,

~.3, UTILITIES AND SEIt~VSCES;

13,1 General Responsibilities for Y7tilifies; HPAR.T~S sha11 ba ~~espon.szble foi fihe installation and provision of all utilities within tk~~ premises including sewage lines ~ecessa~y to at~d used in oonnection ~ritl~ its oeoupancy of the ~xemises as described in Exlttbit B, azzd tie xemoval a~ d disposal of all rabbish, refuse and garbage ~~esulting :From park operation,

13,2 Payment of Utility Charges; HPARKS sha~~ assume and pay wk~a~ data all claa~ges for water, gas, power, te~ep~ane, ~zght, and any other utility services acci~ing ox ~ayabla i~. connection with Its occupancy of the ~'remisas an;d any part hereof, includ~r~g deposits, comiectxox~ fees ox• charges axzd equipment yenta] required by the su~pliei of any such utility service, Tf such ntiljty services are pro~v~ded by the CITY, the CZ'Z'Y agl'ees to wave any deposits, connecixa~n fees, oz advance chaiges wat]~ xegard to sucJ~ utilities,"CITY agrees to ~~~avide £ox ~l.'ARY~S any CITY provided utilities on the same tens and conditions as such uti~itzes axe provided to othei citywosvned facilities or, in tl~e case of utilities riot ~xovided by t1~e CITY, to use reasonable .a~fioz~s to secure such utilities fox HPART~S on the saz~e texnas aid cox~djtio~s as made a-vailabJ.e to the CITY toi~ other city-owned buildings az~d facilities,

1,4, NOTICES; All notices hereunder must ba in writi~ig aid sha11, be deers~ed delivered oz~ the day personally daltvered, oz~ on the third day frown the day sent by ragzstared mail or certified mail, retut~ receipt requested with the U,S, postal Sexyice, ox on tho day after the day sent by national ovez~night courier, to t1~e pasties at the ~ollovving addresses, o~ at such other addresses as shall be speci~Zed by notice,

7~' addrass~d to HPARK.S;

Page 25 0:F 34 Water and Adventure Park Ground Lease & operating AgreemBnt City of White Selllement, Texga —Hawaiian Parks -White Seltlemeni, I.LC

333 ~awalian k'ar~Cs -- W11ite Settlement, LLC David T, Busch, P~esideiit 3100 ~ramier Axive, Suite 240 7rvit~g, TX 75063

. ~ Witk~ a copy to;

T~avzd r, Busch q 670 Gresham D~i~ve EI Dorado Hills, CA 95760 ~ .

And a copy to;

AeSitnone Pearson, IBC 4324 Belleview Kansas CITY, MO 64111 ,A~ttn, Ba.~ad•I, Pea~san

Zf addz~essed to the CITY;

City Managex City of White Sat~lement 21~ Meadow Park Drive White Settlement, Texas 76108

~71ith a copy to;

City Atto~e~ City o~ Wbite Settlement 21q~ meadow Park Dzive White Settlement, ~'e~as 76 08

., With a copy to;

City Seci~etai.~~+ Cite bf White Settlement 21~A~ Meadow Pa~~k Drive Whits Settlement, Texas 76108

1S, 'W,ANER OF AGREEMENT TERMS; No waiver by either party at anq tune of any of t1~e teems, conditions ox eo~renants of tk~is .A.gxeexnez~t shall be dea~ned as a waivex at aay time thereafter of the same or of any other tat~r~., condz~ion or covenant a~ herein contained, x~ox oftl~e strict and ~xoznpt performance thereof,

16, A~S7GNMENTS;

Page 26 0~ 34 Water and Adventure hark Ground Lease &operating A9raemen~ Clly of White Settlement, Texas —Hawaiian Parks -While 5e(tlement, I.LC

334 - C

x'6,1 No Tz~ansfer Wzthout CITY Consent; No transfex, assigiuuant ox corporate. merger by HPART~S that affects this Agreement or and pa~.~t thereof or interest therein directly or indirectly, voluntarily or involu~atarily, sk~all be made unless such t~ansfer, assignment or corporate merger is first consented to in writing by CI'T'Y as required by, and pursuant to tf~e provisions of this Paragraph, Zn deciding whe~ber to consent, CITY may consider tl~a fina~icial capability and stability of the ~ro~osed assignee and the e~periel~ce o~ the ~navage~ent of the assignee in ope~atixag water and adve~izu~e parl~s;.provided; however, CITY's eonseiit sha11 i~.ot ba unreaso~.ab~y withheld, co~.ditioxzed o~~ delayed,

17. COMPLTANC]3WITH LAWS _H~'ARI~S shall;

a. couxply with all applicable federal, state and local. haws; and

b, plot discl'ilnv~te against auy Paxson on account of xa~e, colox, deed, religiozi, see, tt~a~~ita1 status, ~isabllity, national oxzgin or ancestry in its perfQxma~zee under the texans o~ this Agreement. .

~ 8, TrME OF ESSENCE; '~~me shall be a~ the essence in the per~'ormanca o~ this ~greernent,

~ 9. PARA.GRApH TITLES; The pa~agrapb.titles in this Agreement are inserted o~l~ as a matfiar of con~venie~xae and £o:r rafez•ance, and in ~o wad define, limit ox desc~~ibe tlaa scope o~ zntez~t o~t~is A~'eem~~t o~ i:~ any way affect this Agz~eemezit,

20, ~ •ENTIRE UNAERSTANDING; 'Z'k~3s Agreement contains a~ad ern:b~~aces the entire A.greenaer~t between the patties hez~eto and naitl~er it no~~ a:ny pant o£ it may ba changed, altered, xnodi~ied, limited or extended oxally exoept by written an~.endinent thereto signed by CTT~' and ~TPARY~.S, or their successors in interest,

21, RELATZONSHTP 0~' TS~E ~'ARTIES; While engaged ~n carrying out and complying with the terms anc~ ao~aditioz~s of flee ,A.graemant, HPARKS .is and shall be an independent conlxaatox~ and skull .got, witlx ~~es~ect to its acts and onussio~is~ be deemed an of~.cex~, employee, agent ox xepresa~.tativa of CITE, HPARI~S shall not in any mannex, whether directly of by implication, z~aprese:nt Chat l~PARKS is an officer, employee, agent or represautativ~ of CTT~, The fact that CXT'S~ bas the right to obsexve ~i~ARI~S's worlc or ~o exexcise otk~ar pz~exogati~as undex this Agt'eament or by its xegulatory autl:zo~'zty zs not ixtte~ded to and shall not affect tie status o~ HpARKS as an inc~ape~dent contractor,

22, REGr~7LATORY AUTHO~TYt HPAI2KS acknow~adgas ghat i~ is ext~~emely. 9mportant to CITY •that all activities oo:a~uc~ed by I-~~'.ARKS undai~ -this Ag~~eement stuctl~ eoni~ly ~svith a]1 CITY' o;rdinanoes, ~~egula~.or~s, pexmit requi~e~ents, and laws, Nothing corttai.:~ad izz fiefs Agt~eemen.t shall limit the regulatory autl~otxty of CITY to tex~m~nate some o~ all of the act~~vities of T~PA12~~S~ for a violation of any CITX ordinance, regulation, permit requirement, or othcx law, E;~cept for the pxovisio~s of this A~raernent xelating to the

Page 27 of 34 Water and Advantute Pa►k Ground Lease & Operaling Agreement city of White Settlement, Texas —Hawaiian Parks• While Settlement, l.I.0

335 C~ ~ ~

indemnification of emp~oyeas, agents and raprasentaiives of elthei~ ~ai~ty, there ate no third-patty bene~iciar~es to this Agreement and no thiid~party bene~iciat'ies aie in-~e~ded by implication or othei~vise,

23, 1NDEPLNDENT CONTRACTORS Nothing contained in this Agreement sX~all be deemed or co»strue~ by flee parties hereto or by any thud pai.~ty to create the relatzonship o~ pxi~cipal and agent or ofpa~~tnership,jointventure, o~~ employment,it being expz~essly understood and agreed that na px~o~v~sion contained in this Agreement nor and act or acts of tie pasties hereto shall ~e deemed to o~eate any ~elatianship between the parties other than the relat~o~ship o£ indepe~clent ~a~ties cor~i~acting ~v~th each other solely fog the purpose of effeoting the pxa~visio~s- of this Agreement, Neither party has the authority to ester ix~.to ooz~fracts ox to assume a~~ obligation o f the othez~ nox' to make wat7anties or i~epz~esentatio ~s on be~xalf of the other e~aept an accordance with the e~pi~ess teams ofthis Agreement or as otherwise authorized in writing by t1~e othex,

24, MTSCELS,ANEOUS PROVISIONS; This Agreement and the Const~~uetzo#~ Agreement supersede all agreements, whathax writ~an ox oral, pxaviously made between the parties relating to the subject ~naatter haxeo~, There axe no other un.de;rstandings or agreements between the panties hereto with xes~ect to the subject mattex he~eo~'except for the Construction Agreenlant, Any consent at~~ appi~ova~ requested by either party s~al~ not be uzireasozaably ~withhald or delayed b~ the other party This AgTe0Trie11t i14ay lie executed in. two ox more oowitez~arts, each of~vhieh shall be cleemec~ au original, ~uf all of wh~leh togethaz shall constitute one'and the same agreement, Except as othe~~vvisa provided here~x~, the ter~as and co~di~ions a:~ this Ag~~eeznex~t sl~a~1 ba binding upon, and inuxe to the benefit of, the parties ~ia~•eta and the respective successors and permitted assigns, Any failure o#'any panty hereto to• comply with az~y obligat~o~, covenant, agreement or condition k~ere~n may be waned b~ the other pa~~ty, but any suclx waiver or :failure to insist upon strict compliance with such obligation, covenant, agreement oi~ condition s~aall not operate as a waiver ox estoppel with respect to any subsequent ox £utuie failure, .

25, FORCE MA,IEURE:DAMAGE;CONDEMNATION,

25,1 Procedure; Xt~ the evert of a ~o;rce Majeure $vent, the time ~'or sv.ch pez~'oxt~aance shall be extended by the a~tou~ut of ti~sze of such delay, but no longer than tl~e aino~vt o~ time ~easox~ably occasioned by the delay, The patty claiming delay of~eifoxtx~anea as a a~esult o£ ~'oxce Majetue went sha11 del~~vez~ written. notice d~'tha coznmez~ca~nent of any sued dewy resulting f~'om such Force Majeure Event not dater than seven (7) dais afar the claiming party becomes aware o~'tk~e same, and :if the claiming party fails to so noti~'y the otl~ex panty o£ the occture~oe o~ a Force ~14ajetu~0 Event eausit~g such delay and ~.e other party sha11 not otherwise be aware of the Force Ma~aura Evart, the clair~ai~zg ~ai~y sha11 not be entitled to ava{a itse]~ of the provisions for the extensio~i ofperformance contained iii this paragraph,

25,2 Damage ox ' Destrttation ~'z~ior to Debt Obligation Defeasance Date; Should the Water and Advantu~~e Park be substantially damaged by a forceIblajeure Event occuvxtag prior to ~a~mez~t ire Full. of the bebt Obligatxon,(the "$o~.d De#'easaz~ce Date"), GZTY

Page 28 of 3A~ Water and Adventure Park oround Lease &operating Agreement City of Whlie 5etgement,Texas --Hawaiian Parks ~ White Settlement, l.l.0

336 ~~. ~ ~

and HPARI~S mad agree to terminate~this Ag'eemet~t, If they agree to do so, in that event any and aXl ~~asurance p~~oceeds payable as a i~asult of the Foxce Majeure went s1aa11 ~e divided by tlae parties pxo rata based on ~hei~ p~opo~.~tionate share of each i~ tl~e total.investmez~t in tha cast to aaquue az~d construct the Water and Adventure Pa~:k 7mpz~ovements azad Capital ~n~~oveme~fs; thereafrex ~ieither paL~y shall have any fiu~er obligationto the other party undex this Agrearnent, e:~eept with respect to liabilities occurring and based upon ave~its occui~ing prior to t~.e effeet~ve date of such terminat7ion, The Wate~~ and Adveniiue Park s$all be deemed 'to hate been ."substantially. damaged" it' the cost o~ restoring the Water and Adventure Park to its condition immediately befoz~e such damage, including the cost paid by atly insurance pz~ocee~s, is fifty percent (SO%) or more ofthe entire re~lacerr~eut post o~ the mater. and Adventta~a Park Iiziproveme~nfs, ff t1~e paa~ies do trot agree to texlninate thus Agreame~t, then the paz~tiss agree to ap~~y ail insurance proceeds to comz~ence and complete, with all due diligence, xestoratron of tk~e Water and Adventut•e Par~C to its eonditio~ and character just prior fo the occurrence of such casualty.

25,3 barrage or Destruction af~ex Debt Obli~ation.befeasanae Date: S~.ou1d tk~e Watei and Adventure 1'arlc be substantially damaged (as defined above) by a force IvZajeure Event occurring on oi~ aftez~ the Bond Defeasance. Date, I3P.ARI~.S,~ by w~~itten notice to .CYTY' glvez~ wzth~~ sixty (60) days ~ollowi:~g the ocatiz~:ance of such event, shall have the right to texmuaata this Agreement, In such eve~.t,the pasties shall apportion tl~e ins~u~anoe proceeds based on the p~o~o~~t~onate share of each in tie total investment in ~e cost to acquire and construct the Water and A.dventuxe Pa~~lc Txnprovements and Capital Impxover~ents, A.~:e~ sucb termination. and appo~tzonme~.t, rze~thex~ party sha11 have any fiu~tbex obligation to the ot~ier paxty under this Agi~eement, except with ~~espect to liabilities oecux~ing and based upo~a evenfs occttrrixzgpziox to tk~e e~£ect~ve date of such termination, rf this ,t~gxeement is not termz~aated, then the parties agree to apply all available insurance proceeds clad use all due diligence to comti~ence and complete restoration o~ the Water azzcl Adventure ~axk to its co~zdition and character just px7.or to fhe oecu~e~ce ofsuch casualty, X5,4 CompletQ Condemnation. I~ the whole of the Premises stall ba appropriated o~~ condez~zed unde~~ power of evvnent domain or by any eom~atant authority fog any ~ublzc oz' quasipublic use or puzposa during the teen of this Ag~eernent, or any xenewal or extension hereof, alb conxpensatlon awarded fbr any such appz~opriation o~ fialc{ng o:~ CITY's o~me~sl~.p intaz~est in the Premises shall ba the property of CITX, and HPARKS k~ezeby assigns to CYT~.' alt ofHFAR7~S's sights, tlt~a aud- iuteiest in and to receive any portion of said award, except tl~zat T~PARKS reserves unto xiself the sight to prosecute its claim for a separate award for damages £or the terminat9o~ of this .A.~'eetx~.e~t and its loss of its irztexest undet~ this Agceezx~ent caused by such appropriation ar talt{zzg, together with damages based oz~ the value o~ ~P.ARI~S's personally erected oa installed on the Premises and the damages HPARI~S may sustai-n to the .business opexated by HPARKS on the Premises,. including, bud not limited to; goodwill, pat~o~aga and the te~noval, xelocatioza a~~d raplacemenf costs aid expenses caused by such appropriation or talcitag, In such evert, this Agreement shall terminate when HPARKS can no longe~~ use the Premises ire t1~.e manner herein intended, or r~rhen possession thereof s6a11 ba required by the appropxiatir~g of condemning a~thoxity; whichever shall first occur, but such termination ofthis Agreement shall not cl~an~e,~ecXude ax~ a~£ect ~lYYA~t.T~S's right to an awaad as hez~einbefore provided,

Page 29 0~ 3q~ Wafer and Adventure park Ground Lease & operating Agreement City of White Settlement, Texas --Hawaiian Parks - While Settlement,1.1.0

337 < <"

25,5 PartlaI Condemnation,'In the event that a part of fihe Premises shall be approprzafefl or condemned and; (i) if the part so taken shall include the Capital Tmprovamants on -the ~'rex~ises, oz any material ~a~~t thereof;(ii)the dart so taken shall remove ten percent(10%) ox rr~ax~e o:F the depth or width of tl~e Pr~xnises as measured f~oin front to back or side to side; or (iii).tl~e part so talcar~ shall eliminate ten(10%~ percent ofthe paxlcing places,then in any such event, at any time within a period o£ ozae hundred ezghty (1S0) days after the date,whewpossession. of tt~e pa~~t of tl~e Pi'emisas so taken shaXl be acquired by the appropz~ating or cozzdemning authority, HPAIZKS'may elect to teirninate this Ag~eerxzaz~t by w~~Itten notice to PCDC, 7~ the event HPARI~S shall exercise suc1~ election to tei~roinate this Agreement, HPARI~.S sha11 have the right to prosecute its claim foz~ a se~arata award four dar~nages foi~ the termination of thzs Agreement caused by such pat~ial appro~riatlon oi~ taldr~g, together with damages based on the value of HPARI~S's pez~sonalty and business in#erest, in the same ma~nex arzd to the same extent,. as thafi herein before xeseiwed by HPAR~.S in the event that the whole of the Pi'ern~ses were appxopxiated ox coz~dem~.ed; p~o~vided t~Zat ix~ ~o eve~.t sk~alX such separate awa~~d to S~P,A,Ri~.S ~~educe the sums payable to CXTY' wzth iespect to the loss oftl~e 1'ramises and tl~e,Ca~ita~ ~z~a~x~o~emants, Tip the event HPA~.T~S shall fail fa exercise such option to te~7ninate this AgLeeme~.t, then atad iz~ ez~.~ex such event, CITY, With reasonable p~~o:mptness, shall'malce necessary xepai~s to at~d a~texataons ofthe Im~rovan~ents on tk~e Premises :foz~ the purpose of restoaiTag sage to a Functional economic unit, susceptible to the saga use as that which was in e~'eet i~nmediatel~ ~p~ior to such taking aild to the extent illat such xepa{rs aye necessitated by such a~pt~opriafzon o~~ condemnation, In the event CX'~'Y' fails or refuses to do so, t~aen ~IPARI~S may, on thirty(30)days pz~~or written notice and o~porhu~ity to cwe to CTxY', cancel the Lease or eonl~lete tree repair's at CITY's axpezlsa, 25,6 Rant Redaction, In the event that a part oftl~e ~xemises shall ba appx~opxiated ox coz~clemned and ~~ ~-I.PART~.S s1~a11 fail to axezcise its option to terminate tk~is S~ease, then in such event, this S~ease shall continue in fu11 force and effect and shall te~ninate only as to that dart of the Premises so taken. In sack eventthe rent z~equu~ed to be paid under this Lease s1~ai1 be reduced, as oi'tlie date when possession of such potion o:f the Pxernlses shall be required by ~ha ap~roprxati~g or condemning authority, b~ a pxo~oxtional atbount equal to tea ratio, exp~~essed as a percentage that the land area so talcenbeais to the totalland.axea o~the ~'raznlses, 26, DEFAULT;TERMIl~IATION;

26,1 HPARKS's Default; The ocetu~rence of the following shall constitute a default by ~S'.ARI~S; '

HPAIZI~S's ~'ailuxe to perform any eovezaant ox pxo~vtsion of this Agreement, if the failure to per:foxixL is not cured witku~l sixty (60) days after delivery by the CITY to HPARX~S o~ written notice of default speci£yi~ag with particularity the nature of the default. If tl~e :Failure to perform does not involve the payment ofrant ox other financial obligation and ca~ot reasonably be cule~ within sixty (64) days, HP.ARKS s1~a11 not be in de£ar.~.t o£thl.s Agreement if ~PART~S corz~mances to cure the failure to parfoun within the sixty (60) day parzod and thereafter diligently and in good faith prosecutes tl~e cure to completion,

26,2 CITY's Default; The occut~rence o~'the fo~owi~ag shall constitute a default by the CITY; the C7TY's failure to pe~foxln an.~ covenant ox provision of this Ag~'eame~tt, i~ tkte ~'ai~ure to perfoi7n is z~ot cared within sixty (60) days after deli~ve~y by ~'ARI~S to the CITX o~ Page 30 of 3q~ Water and Adventure Park C3round L.easa &Operating Agreement Cily ofWhite Satllemeht, Texas --HaWaUan ParKs -White Settlement, LI.0

338 { ~~

written notice of default specifying with par.~icularity the nature off' tt~e default, Z~ the failUxe to perform cannot reasonablq be cured within si~:ty (60) days, the CITY shall not be in clefault'of this Agreement 1f fihe CITY commences to cure the failure to pexfoi'r.~i Within the sixty (60) day period aid thet~eaftex diligently and in good faith p~~osecutes the cuie to completion.

26,3, Remedies and ~arl~ Teixnination,

26.3,1 CITY's Remedies; If and default by HPARI~S under Sectzo~ 26,1 shalt continue uncuzed, following notice of default as rewired by this Agreement,for the period applicable to the default under the a~~licable provzszon o~ this Agreement,the CITY' m.ay, at its election, texminata this Agreement b~ gi ving ~IPARI~S ~rritten notice oftermination and re-enter the Premises and this Agreement sha11 terminate immediately upon receipt o~ such w~:ittez~ notXce, The foz~egoing remedies are in addition to all othei rights and remedies provided by law ox equity, to which t.~ie CIT`~ may z'esoxt cumulatively of in the alternative, whether this Agreement k~as been texn:ainate~ oar not,

26,3,2 ~TPARKS's Remedies; ~ any default bq tk~e 'CITX undex Sac~ion 26.2 shall eontznue uncured, fol~ovving notice of default as requii:ed by this A.gteernei~t, for the period applicable 'to the default under tk~e applicable provision of this A.gxeez~~ent, 1-~PAI~T~,S n ay at zts electzon terminate this Agxaement b~ giving the CZT'Y' wrxt~e~..notice of termination and this Agreement shall tei7ninate thjrty(30) days aftex the date silch written notice is z'eceiVed by the CYT~, ~'he foregoing iezxzedtes at'e i~ addition to and ~aot in lieu o~ all o~e~ ~~ights and xemedies provided by last o~ equity, including an aotion ~o~ damages or fo~'l~~urxct~va relied, to w1~i.ch HPA.~2KS may reso~~ cumulativalq or in the alte~at~ve, whether this Agieeme~t his been termi~tated or not,

26,3,3 Damages; NeXtl~.ex CITY' nox HPARI~S s~ajl be liable for special, exezn~lary, consequential or puxziti~e damages due to default uz~.dex this Agreement,

27. NON-COMPETE AGREEMENT; Tk~e CZ'z'Y agxees, to the extent permitted by law,to not compete witk~ ~I~A.RI~S by building, develo~~ng, sponso~i~g and/ox operating a water and adventure park with attractions similar to tie ~Natar and Adve~tura Park,

28, APPLICABLE LA~1 AND VENUE; This Agreement~shal~ be construed and iX~terp~eted iu accordance with, and shall be ~ovexned. b~, the laws o~ the State of Teas and venue for at~z~ judicial act7on under this agreement shall be in ~'atx~ant County,Texas,

29., N'0 p12ESUMPTION REGARDING DRA~'T'~R; The teens and ~rovisiors of this Ag~~eers~ex~t ha~~ bean axtensiva~y r~egotxai;ad and discussed between the CITY axed HPAR~f~S, Tkus document xeflects their mutual agceemant regarding t1~a subject mattex o~ tkais docu~nan~, Because of the nature of such negotiafiions 'and discussions, n~eithez' the CITX nor S~A.RI~.S sha11 be deemed or construed to be tl~e draf~ex of this Agreement, Tharefaxe, no pxeswnption foz or against the drafter sha11 be~ applicable for interrating or enforcing this Agreement,

Page 31 of 34 Water and Adventure Park around l.aase & operating Agreement Illy of While settlement, Texas --Hawaiian Parks .White Seitiement, I.i.0

339 30, LIMITED. WAIVER 0~ SOVEREIGN XMMUNTTY' SEVERABTI,I'~'~; Tk~e CITY expressly waives and agrees, to~tua extent pez~mitfed by laW, not to plead, clai~a, o~ take advantage of, its so~vereigu immunity and auy defenses that may be asse~~ted on the basis of sovereign immunity, and any other defenses of unenforcea~bility, with respect to (i) suit; (ii) the rights and xeraaedies of HPARI~ pursuant to this Agreement to require CITY to pay, under cartai~, circumstances set foz~fh herein, tha ~'urc~aase Reimbursement Obligation, and (iii) any request or effort by HARKS to seek injunc~.~ve relief and/ox specific perfoianance -with xegards to the pei~foi~n~ance by CITY o£ its obligations duxscant to this Ag~eeme~.ti, These limited waivers , of sovereign immunity shall c~axi~~-and expand, but a~~e not intended to, now sha~~ theq, limit or reduce in any way tl~a scope off' any waivers of so~verezgn immunity otherwise granted by o~e~at~on off' law, statute ox common law, If any teen, condition, covenant or obligation o£ this Agreement shall be determined to be us~enfoxceab~e, i~yal~d, o~ void, such dete~~ination sha11 not affect, in~pai~, invalidate or tender unenforceable any othex taxm, condition, co~vena~t or obligataou of this Agreement,

31, ATTORNEY'S' FEES; The prevailing ~a1~ty zn the adjudication o~ any praceed~g relating to this Agreement s1~all be authozized to zecovex its reasonable attorney's Fees puxsuazit fa Secfion 27],153 of t1~,e Texas Loea1 Go~ewn~,ent Code,

32, T'A~ES, ASSESSMEN`z'S; AND SEES; CITX' shall pay and ~ull~ disc~aa~'ge alb ad 'va~oxe~z real and pexsox~al ~~'ope~y taus, if any, assessed against the CYT~SC &s owner of the premises and anq pexsanal property located the~~aos~; ~xovided, ho~wevex, HPART~.S sha11 pay all taxes, if any, levzed, assessed ox imposed upon all ~ez~sonal property owned entixely by HPARI~S, C7'TX agrees that no pxape~t~ taxes s~tal~ be assessed to HPARK.~ for the premises and the Water and Adventure Parr Improvements 'during the Term, CITY agrees that all consttruction xelatad purchases in connection with~the cor~stx'uctzon p~ the Water and .Adventure dark arzdthe CapxtaX Xmpror~emai~fs and related expendituxes shall be exein~tfrom. sales tam, Tks CITY agrees to cooperate fu11y with ~-TPA1tS~S in resisting and opposi~~g the imposition o~ ar~y tapes levied, assessed, oi~ Imposed upon the Water ar~d A,dve~t~ue Pack 7rnprovernan~s ox construction»related pu~cl~ases that a~'e not o~~di~a~~ly levied, assessed, ox unposed upon CXT'`.~ owned pxope~~ty, projects ox purchases of like kind and nature, ~iPARX~S sha~~ have t~ze Wight in good faith to contest ar~y such tapes, ckZarges, and assessments for whic~i zt is liable u~ndaz~ tk~is Section and shall be obligated to pay the contested an~.otwt only if aid when ~inallq deteru~ii~.ed to~be due, HI'ARX~S s1~a11 gz~e uoti.ee to CITY o~Its i.nte~t to contest aiay suc~~ taxes, charges, or assessments, the ai~ot~nt tlza~eof, and the entity to w~iieh sucks taus, charges, oz~ assessnaex~ts ai~e ~ur~ortedl~y owed.

33, AUDXT; Upon reasonable request, SPARKS shalX fitz~ai.sh CITY a copy a~ HPARKS's recoxds, docwnents, agzeenaaz~ts and othai~ instruments to snsura HPART~.S's com~liar~ce wzth the covenants set foz't~ in this Agreement, T~PAR~~S sha11 rnaintai~ such records as are deemed reasonably necessary by the CITY and auditoz~s of CY'I"Y, or sacks other pet~sons or entities designated by CITY,to ensuxe pzopex accounti~ag for all costs,pez~orn~a~rices, and bun~ber of jobs a~~eated ox ~etaxned related to this Agraeine~t, Upop no less than ftfteen (1S) da-ys advance notice and xequesf, SPARKS shall grant access, to all hapax and electronic 'recozds, books, documents, accounting procedures, practices o~ any other ztems relevant ~td the

Page 32 of 3A~ Water and Adventure perk oround Lease & Operagng Agreement City of White settlement, Texas —Hawaiian Parks •While Settlement, LLC

340 performance of this Agreement to CITY, or such other persons o~ entities designated by CrTY for the purposes of inspeotzzag, audit7lig, ox copying such books alldreco~ds; provided, l~,owevex, CIT~X' xna~ request such access no i~aore that one time in any calelldar quaxtex unless HPARX~~ is than ~n default under this A,g~•eemerat, CITX shall conduct a:ny such ii~spact~on, audit oz copying of such boars and records. 1n a manner that will izot disxupt or interere with HPART~S's oz~dxnaxy opez~at~ons and conduct of business,

3~. ~v1EMORANDC7Tv1 OF LEASE; ESTOI'p~L CERTI~'YCATES; HPART~S aid CITE'' agxee to sign• and properly record a Memorandum of Lease, memorializilag the terns and conditions of this Agxeeme~.t, foi~ the purpa~e of placing third. paxties on notice of the axiste~ce and terns and conditions of t}iis Agreement, HPART~.S and~CITX s~al~, at at~y time and fi~oxn tune to txlne upon not less than ten (10) days' px~io~ smitten xaquast b~ the other pax'Gy, execute, acknowledge and delivet~ to tkie requasti~g panty, a statement in writing ce~rtlfyin.g (a) its ownership of file interest of CXTY o~ SPARKS hereunder, as the case maq ba,(b)that tivs Lease is unmodified and an full foxce anal effect(or:'there have been any nsodi~cation, that the same is iu full Lorca and.ef.~ect as modified azad stating the modifications),(c)the dates to which the ~le~se payments and arty other charges f~ave been paid,(d) tf~at, to tfie bast knowledge oftl~e certifying pa~~ty, ~o de~'au~t heraund~r on the ~at~f of the requesting party e~cists (except that i~ ar~y such default does exist, -the cei~a~ying partly shall specify such default), YJpon xequest b~ I~PARKS, CYTY~'s estoppel ce~rti~cata also skull be ad~tessed to the 18~sahoId interest mortgagee, if ai~~,

,(,S'igs2atu~e pagefollowsJ'

Page 33 of 34 Water and Adventure Park around lease & oparaling Agra~ment City of White Setllemen(,Texae —Hawaiian Parks •White Saitlement, LLC

341 C

7N WI'T'NESS WHEREOF,.tl~e panties Uezeto have af~ced their signatures, as oftha date ~rsfi above wr~tte~t,

~A.WA.I[A.N P.A.~t~S ~ ~VT~ITE SlC7['7CX~P1YI~I~IT, LLC,.a' Missouxi limited liabllity company, r

B~; Davi 7,}3uscll, P1'eszde~.t

WHITE SETT7~lYlEl~i`z' EC~N(~IYJIC D~'4~LO~IVS~NT CbRkORATxON'--(~DG~~ a Texas z~on~p~rafit corpox~atlnn,

By, Y,mda n, president.

Date Executed: ~l'~/r/~-

CI'T'Y OZ+''VS'~TE S~T'z'1,~11~IVT, T~~'AS3 a Teas k~ome~x~le municip~lit~,

ay; !~-!~ City Maaage~~

Date Executed. ~ ~l^ ~~'"~~

ATTEST. llllll(~(+F~~+

City Searatary. t ~ti„ ', y``~fr

~_~~• H~ APPROVE TOI'•ORM;~ ~' w~ :''k , ti ~t

~~.f~J l Jlll(IIf511

~ ,City ,AtYol~ey

Wage 34.of 3A~ Water and Adventure Park.Ground Lease & vparaling Agreement Cily of Whlle;seltl'ement, Texas,Hawa4an F'arks ~Whll~ Setllemant, I,I.G

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E~I]~ZT ~ ~ C~'

'UVl~ite Settzement prat and doss Statement

Ordinary Tncoiroa/E~tponsa ~, Tncowe Jan -Dec .100 Admission Income 0.00 200 Food &Beverage .0,'00 225 CooleP lncouta 0.00 251 Cabanas 1 Pavilions 0,00 2S~ T~oekar Rentals ~ ~ O,Od 27S Retail Income 0.00 2901viiseeJlaneous.[ueome 0.00 299 Sponsorship Lncoma O,QO interest ~ Cp ~ 0,00 Total Income OAO

Gross Profit 0,00

Expense 300 Cost of Snles ~.~&B 0,00 300 Cost ofSAles -Retail 0,00 301 Corporate overhead , O,Op x{00 AdvertisingE~peuse 0,00 S00 Igsuranoe 0,00 6D0 Genera( Expenses ~ 0,40 650 Repa)r & Ivlaintenane~ 0.00 C>7S Sifpplies ~ 0,00 700 PayraU ~~penses 0,00 750 Fringes/Tapes 0.00 800 Profassional Fees 0.00 900 Texas & l,icensas ~ 0,00 925 Transaction~ees O,QO 950 Traval Expense 0.00 975 Uttlifies & Te(epl~one 0,00 Miscellaneous Expense AP 0,00 Property Rent 0,00 Total E;cpensa 0,00

Net Ordlnn~y Y~icome ~ 0,00

345 346 1

X47 Hawaiian falls Receives'Investment frnm Source Capital,!LC •Horizon Family Holdings, LLC, the owner and operator of seven Hawa(ian ~a~lis water parks and two adventure parks in Texas, received an additional investment from~an affiliate of Source,Capltal, I.LC, ah Atlanta-based private equity firm, the company announced"today, Davld Busch,the founder and CEO of Horizon, wilt continue in his current position. In announcingthe acquisition Source Capital Partner Bin Emmons said "we are excited to expand'ourrelationship with Hawaiian Falls and look forward to pursul~g a number of Initiatives with management to Improve upon the 14-year operating history of Naw~ilan~ Falls, Ne said,"When the parks open on Memorial Weekend, we want to make certain our guests have a fun and safe experience. Hawaiian Falls represents quality, wholesome entertainmehtfor Ilterally hundreds of thousands of Texas famlllEs and we look forward to continuing and even enhancing the high standards of service set'by the parks' employees," He•continued,"Another high priority fs to ensure our staff of 2,000 Ambassadors have a goad work environment .and are trained and ready to give our. guests the best experience possible:' In commenting on the acquisition David Busch, Hawaiian Fails CEO,said,"We are fortunate to have investors that areas committed as we always have been to serving our Hawaiian Falls guests, ourcommUllitles and~out' employees. Our parks' philosophy of"serving the community by bringing families closer together' will continue and thrive under our new ownership:' .

Busch stated Source capital has been an investor in Horizon since December, zols and has been a supportive partner during the company's eXpanslon over the last two years. "The Source Capital team has observed our operation over two operating seasons at~d concluded that,the parks represent a solid investment fortheir pbrtFolio," Busch said. "We are thrilled in every way to be a part of their fam(iy."

All parks open to the public Saturday; May 23. For specific operating hours and directions gq to hfails,com or facebook.com/hfalls,

About Hawaiian Falls _Hawaiian Falfs opened its first dark in 2003 in Garland'and currently has water parks in The Colony, Mansfield, Roanoke and Waco. In 2014 the company premiered a new family entertainment concept in White'Settlement~an~d Pflugerville respecfiively, which includes Hawaiian F~IIs water park, HatNailan High Adventures challenge and adventure park and th'~ 22,500 square foot Aloha Event Center. • About Source Capital Source Capital, LI.0 is a private.equity firm founded in 2002 which makes both equity and~deb~ Investments ~n mature, lower m(ddle-market U,S, companies across a range of Industries, source capital tias~completed 49'transactions aver the last 13 years and [nvested across a broad selection of industries Including: business services, light manufacturing, consumer products &services, healfihcare, and value-ad-dad distribution, Source Capital has offices In Atlanta and San Frandsen. ~ ~~ '

.. ~ 34.8 G` /~

349 Y ~ l ~

• ,~ SOUZ'C8C~i~1t~

' 7i 14th Strxt Suite 2700 Allanlq Georsa 30309 ~ ofjjce; 404,' 49.8330, ~ fps: 770.73.1.4152 ~ ivww,aouroe-cap,com

March 31,2015

Mr. Phfl Bray. Director of Finance Clty Of,Whfte Settlement White SetYlement,lX 76108

bear Phil, ,

Thanks again forfihe time you provided to myself and the Hawaiian Falls team last week.- It was good to meet with you and J(m as we felt a fare to'face introduction was the best path to rnakirig sure all the parties operate.on the same page. I think we~can both agree~that 2014 did not play nut as eJther of us anticipated: That being said, we feel the Issues.were external and tied to the poor execution of expansIon and not related to the operation of the waterparks, This point has been validated by the strong performance of season pass, group sales and events at all the parks (up 20%). With the new parks fully completed and ready for 2015, management has refocused its'efforts on marketing and sales, As you requested, I have outlined below our plan going forward to stabiilze the company and mosfi importantly make good on the obllgations'owed to the ctty of White Settlement, • Source Capital and Capital One Bank have agreed to provide up to $1,000,OQO ("Initial Cap{tal Agreement")to ensure that all the parks are prepared for the opening in mid-May.The documentation Is flna(and we will be•closing on Apri(3. t Source and bavld 6usch signed a Letter of Intent ("Source/Busch Capital Agreement") in which source will be injecting up to $5,000,D00 Into the Company. The documentation is in the legal process and we are targeting an April 30th close. • 'Upon closing of'the Source/Busch Capital Agreemenfi,Source Capital w111 be the controlling owner of Horizon Family Entertainment, and speciflcalfy as It relates to your team,,the sole owner of Hawaiian Parks, White Settlement LLC, •, 5ource will need a consentfrom the'c(ty of ahfhite Settlement prior to close allowing for the 'change of control. We will be providing a standard consent document in•the next couple of weeks. Dade Busch will be re'm~ining in his role as CEO and you should see no change 1n the day today operations. ~ '• • Upon the closing of khe Source/Busch Capital Agreement we will make the 1~ of 3 payme~lts (May 15~'/June 15'h/July 15~}-each payment v~,~ill be for $191,333 for a total of $575,000. This will cover all the 2014 past due lease payments ($375,000)and the amounts owed to date for 2015($200,000). • The remaining 2015 payment- $600,000- will be made as required in October of 2015,

350 1, ,.~ :ti.

SOUZ`C8C1p1~~.

7~ 14th Street Suite 3700 Atlanta, Georgia~0309 ~ ~oJjlce; 404349.9330, ~ joz; 770.23#,4153 ~' wiyw,souroe-cap,cont

As outlined, this process Is a 2 step path in which the Initial Cap(tal Agreement wil( ensure we are•ready for the 2015 season and the Source/Busch Capital Agreement, along with the 2015 season performance, will ensure we have enough cash toresolve all the 2014 hold over obligations, handle the 2015 commitments as they come due, and carry~enough reserves into the offseason.

look forward to working wFth•you and your team in getting th(s completed, Please feel.free to contact, me at your convenience with any questions ar concerns. ~~

All the best,

Benjamin Emmons ', Managing Director Source Capital Partners 7514'Street Atlanta GA X0309 404~294~9249

351 L• l

SouxceCapita~. [ ~. 7514th Sheet Suite 2700 Atlanta, Georgia 30309 ~ oJ~ice: 404.249.9330, ~ Ji~z; 77d.23

March 31, 2015

Mr. Phil Bray. Director of Finance City Of.White Settlemen# White Settlement, TX 76108

_ Dear Phil, ,

Thanks again for the time you provided to myself and the Hawaiian Falis team last week. It was good to meet w(th you and Jirn as we felt a face to'face introduction was the best path to making sure all the parties operate on the same page. I think we can both agree that 2014 did not play out as either of us anticipated. That being said, we feel the issues.were external and tied to the poor execution of expansion and not related to the operation of the waterparks, This point has been validated by the strong perfort~ance of season pass, grou p sales and events at all the parks (up 20%). With the new parks fully completed and ready for 2015, management has refocused its efforts on marketing and sales,

As you requested, I have outlined below our plan going forward to stabilize the company and most importantly make good on the ob(igations'owed to the city of White Settlement.

• Source Cap►ta) and Capital One Bank have agreed to provide up to $1,000,000 ("lnitlal Capital Agreement")to ensure that all the parks are prepared for the opening in mid-May.The documentation is final and we will be.closing on April 3, . • Source and David Busch signed a Letter of intent("Source/8usch Capital Agreement")in which Source will be injecting up to $5,000,000 into the Company. The documentation is in the legal process and we are targeting an April 30th close. • ~ Upon closing of'the Source/Busch Capital Agreement, Source Capital will be the controlling owner of Horizon Family Entertainment, and specifically as it relates to your team, the sole owner of Hawaiian Parks, WhlteSettlement LL'C. • Source will need a consent from thecity of White Settlement prior to close allowing for the change of control. We wilt be providing a standard consent document In the next couple of weeks. • Dave Busch will be remaining in his role as CEO and you should see no change in the day to day operations. • Upon the closing of the Source/Busch Capital Agreement we will make the 1n of 3 payments (May 15~'/June 15th/July 15~')-each payment will be for $191,333'for a total of $575,000. This will cover all the 2014 past due lease payments ($375,000) and the amounts owed to date for 2015($200,000). • The remaining 2015 payment- $600,000- will be made as required in October of 2015,

~~ • :y.

Sounce Capita.

7~ 14th Street Suite 2700 Aflanta, Georgia 30309 ~ ~ oJ}ice: 404.249.9330, ~ jiix: 770.23.4152 ~ ' wwtiv.source-cap.coni

As outlined, this process is a 2 step path in which the Initial Capital Agreement will ensure we are ready fvr the 2015 season and the Source/Busch Capital Agreement, along wi#h the 2015 season performance, will ensure we have enough cash to resolve all the 2014 hold over obligations, handle the 2015 commitments as they come due, and carry enough reserves intothe offseason. look forward to working with -you and your team in getting this completed. Please feel,free to contact me at your convenience with any questions or concerns.

~~~~u~~

Benjamin Emmons Managing Director Source Capital Partners 7514'Street Atlanta GA 30309 404-294-9249

•i ~ APPENDIX TAB "," CAUSE NO.o48-a885~6-~6

CITY OF WHITE SETTLEMENT, § IN THE DISTRICT COURT TEXAS and the WHITE SETTLEMENT § ECONOMYC DEVELOPMENT § CORPORATION, §

v. § 48~ JUDICIAL DISTRICT HAWAIIAN PARILS- WHITE § SETTLEMENT,LLC,a Missouri limited § liability company,BENJAMIN S. § EMMONS,SOURCE CAPITAL § LLC,a Georgia limited liability company § and CLINTON HILL, §

Defendants. § T~~RRANT COUNTY,TEXAS

AFFIDAVIT OF PHILIP BRAY

STATE OF TEXAS § T.A.RRANT COUNTY §

BEFORE ME,the undersigned authority, on phis day personally appeared Philip Bray, a

person known to me,who,being duly sworn, on his oath states and deposes:

1. "My name is Philip Bray, T have never been convicted of a crime of moral

turpitude, All the statements contained in this affidavit are true and correct and are based

upon my personal knowledge.

2. I was the chief financial officer for the City of White settlement, Texas from

December 19, 2011 until February 17, 2017, As CFO, my responsibilities included

overseeing all of the financial affairs of the City. These responsibilities included

accounting for cash receipts received by the City from various taxes and fees as well as all

AFFIDAVIT OF PHILIP BRAY. PAGEi

603 ofthe expenditures of the City. While CFO,I maintained an office at the city ha11 of White

Settlement, Texas.

3. I am familiar with the Hawaiian Falls water park located in White

Settlement(the "Park"). The City paid for the construction ofthe Pariz and purchased all

of the personal property that was used in the operation of the Park. The City of Whine

Settlement, as the owner of the Park, entered into a Ground Lease and Operating

Agreement ("Lease Agreement") with Hawaiian Parrs- White Settlement, LLC

("HPARI~S) which is a subsidiary of Horizon Family Holdings, LLC ("Horizon Family").

Pursuant to the Lease Agreement, HPARIZS was given possession of the Park and was

charged with its operation. HPARKS was to make semi-annual rent payments to the City.

4. Attached hereto is exhibit "3B", a true, correct and complete copy of the

Lease Agreement between the City and HPARKS. This Lease Agreement required rental

payments of $~oo,000.00 due in Octobex 2014; $200,000.00 due in April zo15; and

$600,000,00 due in Oct zox5.

5. The Park at White Settlement opened in May 2oz4. The rental payment due

in October 2014 was not timely made. Neithex was the rental payment due in April 2015.

As the payments were not timely, I was prepared to pnt HPAR.I~S into default under the

Lease Agreement. I recommended to the city manager, Jim Ryan, that the Lease

Agreement be put into default and that the City retake possession of the Park.

6. During late 201q. or early 2015, Y first became aware of Ben Emmons.

Emmons represented to me that he was the managing director of Source Capifial, LLC;

that Source Capital had injected some $3,500,000.00 into Horizon Family and its

subsidiaries; thaf the Source Capital loan to Horizon Family was in default; that Capital

One Banlc in Fort Worth, Texas was the principal lender to Horizon Family and its

AFFIDAVIT OF PHILIP BRAY PAGE 2

•~~ subsidiaries; and that Capital One's loan to Horizon Family and its subsidiaries was also

in default. Emmons represented that he and Source Capital had been authorized by

Capital One to reorganize Horizon Family and its subsidiaries' debt. Capital One had

agreed to forbear from putting its loan to Horizon Family and subsicliaries into default.

Emmons acknowledged that if Capital One had put its loan with Horizon Family and

subsidiaries into default and foreclosed on its collateral that Source Capital's debt would

be wiped out.

~. During the January through April 2015 timeframe, I had numerous

telephone communications and email communications with Emmons and his assistant,

Matthew Smith about the financial reorganization issues described above. Emmons

represented to me that his office and that of Matthew Smith were located in Atlanta,

Georgia. All of the telephonic and email communications I had with Emmons and Smith

were received by me at my office in White Settlement, Texas. Attached hereto as Exhibit

"3G" are examples of emails sent by Emmons and Smith into the State of Texas,

8. I am familiar wi~li the document attached hereto as Exhibit "3C". This is a

true, correct and complete copy ofthe original documenf,This document was provided to

me by Emmons. The document describes the efforts undertaken by Source Capital to

reorganize the Horizon Family and subsidiaries'finances.

g. I also received a copy of E~ibit"3D"from Emmons.This is a true, correct

and complete copy of the original document. I specifically requested that Emmons send

me Exhibit"3D" fio confirm the promises he made to me and the city manager, Jim Ryan,

during a meeting we had in Mr,Ryan's office in White Settlement,Texas in March of 2015,

In the meeting Emmons specifically represented to us that Source Capital would advance

up to an additional $5,000,000.00 to catch up on the Horizon Family and subsidiaries'

AFFIDAVIT OF PHILIP BRAY PAGE 3

605 financial obligations. Emmons specifically promised that the unpaid vendors that

provided services and products to the Parlc would be paid; that past due rents and future

rents through zo15 would be paid; and that the maintenance of the Parlc would be at the

highest level.

10, In return for benefits described above at paragraph 9, the City of White

Settlement promised that it would not put HPARKS into default on the Lease Agreement;

that HPARKS would be allowed to continue to possess and operate the Pariz; and that the

City would sign whatever documents were necessazy to effect the financial reorganization

of Hoxizon Family and its subsidiaries. In fact, the City did execufie a nuxxaber of consents

at the request of Source Capital which are attached as Exhibit"gE",These documents are _

all true and correct copies of the originals executed by fihe City.

11, There were ~ clifferent water paxlzs located in seven different Texas cities

which were included in the Hawaiian Falls wa-~er park system. These cities include White

Settlement, Pflugerville, Waco, Roanoke, Mansfield, Garland, and The Colony,

12. During the January through April 2015 timefrarne, E~namons stated to me

that he(Emmons)was having similar meetings and convexsations with representatives of

all seven Texas cities and that each city would have to cooperate with the financial

reorganization of Horizon Family. Emmons further stated that he was successful in

persuading the cities to cooperate.

13. The promises made by Emmons and Source Capital were not kept.

Specifically,the October 2015 rent owedto White Settlement was nofi paid, all offihe White

Settlement vendors were not paid, and the maintenance at White Settlement did nod

occur.

AFFIDAVIT OF PHILIP BRAY PAGE 4

~~~ 14. The promises described above were not kept and have damaged the City of

White Settlement,

15, The City purchased all of the personal property used in the operation of the

Parlc. This specifically included ail ofthe arcade games.

16. During Oct 201, all the arcade games disappeared from the Park, I never

gave permission to Emmons,Smith, or anyone else at Source Capital or Horizon Family

to remove the arcade games from the Park."

AFFIDAVIT OF PHILIP BRAY PAGE 5

607 FURT~TER A.FFIANT SAYETH NOT.

//~ '. .: j

~+ SUBSCRY~ED.AND SWORN TO BEFORE 1VIE, on fibs ~9 ~ dad of August,201 .

Notary Pubic in for ~e State ofTeas

~~~Y~'

STEPHANIE JIt,L PALKO My Commission E~ires Apfll 4,241$

AFFIDAVTT OF PY3ILIP BRAY PAGE b APPENDIX TAB "q." CAUSE NO.048-2885x6-i6

CITY OF WHITE SETTLEMENT, § IN THE DY5TRTCT COURT TEXAS and the WHITE SETTLEMENT § ECONOMIC DEVELOPMENT § CORPOR.ATIOIV, §

Plaixrtiffs, §

v. § 48~ JUDICIAL DISTRICT HA.WAIYAN PARRS- WHITE § SETTLEMENT,LLC,a Missouri limited § liability company,BENJAMIN S. § EMMONS,SOURCE CAPxTAL § LLC,a Georgia limited liability company § and CLXNTON HILL, §

Defendants. § Tt~~IZRAN'I' COUN'I'Y,TEXAS

AFFIDAVIT OF JIM RYAN

STATE OF TEXAS § TARRAlVT COUNTY §

BEFORE ME, the undersigned authority, on this day personally appeared Jim Ryan, a

person known to me,who,being duly sworn, on hex oath states and deposes;

x. "My name is Jim Ryan. I have never been convicted of a crime of moral

turpitude. All the statements contained in this affidavit are based upon my personal

knowledge and are true and correct.

2. Beginning in September of 2009, I became the Economic Development

Director for the City of White Settlement. Starting in December zo14,I became the City

Manager fox the City of White Settlement,Texas. As the Economic Development Director

and then City Manager,I was tasked wifih supervising all ofthe municipalfunctions ofthe

AFFIDAVIT OF JIM RYAN PAGE 1

610 City of White Settlement including public utilities, code enforcement, fire department,

police department,city maintenance,public facilities and parks, as well as the czty's roads,

I was authorized by the City to enter into contracts on behalf offihe City and to assuxe that

these contracts were properly performed.

3. White Settlement entered into a Construction Agreement with Hawaiian

Parks- White Settlement,~LLC ("HPARKS"). Attached hereto is Exhibit "3A", a true and

correct and complete copy of the Construction Agreement. Pursuant to the Construction

Agreement, HPARKS was to supervise the construction of a water park, adventure paxk,

and arcade Centex ("the Park")on property owned by the City. The City was to provide the

financing for the construction of the Park as well as all personal property necessazy for

the Park's operation. To this end, the City borrowed $12,~00,000.00..All of this money

was expended on construction of the Park. The Park opened in May of 2014,but was not

completed until September 2014,

4. The City was the owner of -rhe Park as well as all equipment located afi the

Park that were necessary for its operation. The City entered into a Ground Lease and

Operating Agreement with HPARKS("Lease Agreement"). A true and correct copy ofthis

Lease Agreement is attached hereto as Exhibit "3B", Pursuant to this Leasa Agreement,

HPARKS was given possession ofthe park;the rightto operate the Park and obtain money

from the operation of the Park, In return, HPARKS was to make semi annual lease

payments to Whifie Settlement beginning in Qctober of 2014.

5. Horizon Family Holdings, LLC("Horizon Family"), an affiliate of HPARKS,

operated water parks in 6 other Teas cities in addition ~o White Settlement. These cities

included Pflugerville, Waco,Roanoke, Mansfield, Garland, and The Colony. Each ofthese

other cities had similar lease agreements as that entered into with White Settlement.

AFFIDAVIT OF JIM RYAN ~ PAGE 2

611 6. HPARK5 failed to pay the lease payment due to White Settlement in

October 2014 in the amount of $500,000.00. The City was prepared to exercise its rights

under the Lease Agreement which included termination of the lease; terminating

HPARKS'rights to operate the Park; and to take over the operations ofthe Parlc, The City

was prepared to bring any other legal actions necessazy to remedy damages caused by

HPARKS'failuxe to pay rent as promised.

~. In December of 2ox4, I was contacted by Ben Emmons who stated that he

was the managing director of Source Capital, LLC. Emmons stated that Souxce Capital

had injected $3,500,000,00 to Horizon Family during 2013 and that Source Capital's

debt with Horizon Family was in default. Emmons also stated that the senior lender ~o

Horizon Family was Capital One bank in Fort Worth, Texas and that this debfi was

similarly in default. Emmons stated that the rental obligations to the other s~ Texas cities

were in default as well, Emmons stated that he and Source Capital were attempting to

reorganize the liabilities of Horizon Family and its subsidiaries (including HPARIZS)

which included: the debt to Capital One, the rends owed to the ~ Texas cities as well as

shortfalls in maintenance afi the seventh Hawaiian Falls water parizs. Attached hereto is

Exhibit "3C", a true and correct copy of a document provided by Emmons and Source

Capital to White Settlement describing who Source Capital is and whafi they were trying

to accomplish in the financial reorganization of Horizon Family and its subsidiaries.

8. Emmons requested ~hafi White Settlement not exercise its rights pursuant

~o the Lease Agreement described above. Emmons requested that the City cooperate with

him and Souxce Capital in reorganizing the Horizon Family and subsidiaries' financial

obligations.

AFFIDAVIT OF JIM RYAN PAGE 3

612 g. During the period of time from December 2014 through Apri12o15, I had

numerous telephone conversationswith Emmons as well as Matthew Smith. Smith was

Emmons'assistant. Emmons and Smith told me that Source Capital's offices were located

in Atlanta, Georgia. X was always in my office at White Settlement when I tallied to

Emmons and Smith, The topics I discussed with Emmons and Smith included the

following; the Lease Agreement; the amounts owed to the City by HPA~KS; and

operations of the Park. The principal topic of conversation was how the debt

reorganization being,advanced by Source Capital could benefit not only Horizon Family

and HPARKS,but how the City of White Settlement could benefit as well.

10, There were also numerous email exchanges between myselfon the one hand

and Emmons and Smith on the other hand. All these emails were clirected to us at our

offices in White Settlement. Attached to this affidavit as Exhibit "3F", are examples of

emails sent by Emmons and Smith into the sfiate of Texas. The topics discussed in our

email traffic was Hoxizon Family and subsidiaries' debt restructuring.

~1. Emmons made at least 3 trips I personally know of to the State of Teas

during the 2015 — 2016 timeframe. Emmons appeared at my office in white Settlement

on or about March 22, 2015. He also appeared at my office on December 16, 2015 and at

the Parlc on March 24, 2016.

12, Exnznons told me that he was also communicating with representatives of

all ofthe other 6 cries included in the Hawaiian Falls water park networJ.c. He stated that

he had visited with other cities while in Texas; and that he made telephone and email

communications with each of these cities in the state o~ Texas. Emmons stated that for

the reorganization to work, all ~ cities would have to cooperate.

AFFIDAVIT OF JIM RYAN PAGE4

613 13. During telephone conversations and face to face meetings, Emmons made

the following representations to me and other members of my staff:

a, Tf White Settlement agxeed to forebear putting HPARKS into default on the

Lease Agreement and allow HP.ARIZS to continue to operate the Park afi

White Settlement, Source Capital would undertalze to do the following

matters:

i. Persuade Capital One to forebear on its debt owed by Horizon Family

and its subsidiaries;

ii. Provide sufficient money to pay the txade vendors of HPARIz,S and

bring maintenance of the water parks to fihe highest standard;

iii. Source Capital would pay the October zo~4 rent to White Settlement

as well as the rent accruing in March 2oY5 and October 2015; and

iv. Source Capital. would pay up to $5,000,000.00 to assure the above-

referenced financial commitments could be performed.

14, The pxomises made by Emmons were made to me and my staffin my office.

Phillip Bray, the chief financial officer at the City of White Settlement, requested that

Emmons confirm his promises at this meeting. We received the document attached hereto

as Exhibit "3D" which is a true, correct and complete copy.

15. Relying on the promises of Emmons and Source Capital, the Czty of Whifie

Settlement did the following:

a. The City agxeed to forebear from exercising its right to put HPARK.S into

default and take over operations of the Parlc for a full year.

b. The City agreed to sign all debt reorganization agreements requested by

Source Capital including the various consents attached herefio as E~iibit

AFFIDAVIT OF JIM RYAN PAGE 5

614 "E'.'. These exhibits are all true and correcfi copies of the original documents

approved by the City at Emmons and Source Capital's request.

c. The City allowed HPARIZS to continue to possess and operate the Park at

White Settlement.

16, All the material promises made by Emmons and Source Capital referenced

in paragraphs 13 and 15 above were not kept. Specifically, Source Capital did not pay the

$600,000.00 rental payment due in October 2015, Source Capital didpay all ofthe other

Texas cities rents through 2015,only White Settlement was excluded. Also,Source Capital

failed to pay the trade creditors ofthe Park at White Settlement. Source Capital also failed

fio assure that the Park was properly maintained.

1~. During the summer of 2015, I had numerous telephonic discussions with

Emmons and Clinton Hill about the personal property located at the Park. Clinton Hill is

the manager appointed by Horizon Family to run the ~ water parks in Texas. I made it

very clear to Emmons and Hill that the City of White Settlement paid fox and was the

owner of all the personal property located at the Park. The City was,therefore, the owz~ex

of all the personal property located at the Park, specifically including all of the arcade

games.

18, During October zo15, all of the arcade games as well as other personal

pxoperty located at the Park were removed from.the Park. Neither I nor anyone under my

supervision gave permission to anyone to remove the arcade games from the Park.

Despite the City paying for the arcade games, Clinton Hill told me that the arcade games

were actually leased and were being returned. Nevertheless,Emmons and Source Capital

instructed that the arcade games be removed from the Park and sold to defray e~enses

of other water parks, I vigorously objected fio these activities by Emmons and Hill.

AFFIDAVIT OF JIM RYAN PAGE 6

615 19. The City of White Settlement has been substantially da~nnaged by the

wrongful conduct of Emmons,Source Capital, and Hill."

AFFIDAVIT OF JIM RYAN PAGE ~

• i FURTHER AFFIANT SAYETir NOT.

SY.7BSCRXBED AND SWORN TO BEFORE ME,on fhe ~~ day of August, 20~~.

~~,~.,~.. t.~s_. Notary ublic in an or the State of Texas

~~u~r a~

STEPHANIE d~,L PAIKd Mq Commission Expires h+~art~ Apfll A, 2018

AFFIDAVIT'dF JIM RYAN PAGE 8

~a ~.. _. _. . APPENDIX TAB "5" 048-288516-16

CAUSE NO.048-288516-16

CITY OF WHITE SETTLEMENT,TEXAS } and the WHITE SETTLEMENT IN THE DISTRICT COURT ECONOMIC DEVELOPMENT CORPORATION,

Plaintiffs, v. 48th JUDICIAL DISTRICT

HAWAIIAN PARKS-WHITE SETTLEMENT,LLC,a Missouri limited liability company,BENJAMIN S. EMMONS,and SOURCE CAPITAL,LLC, TARRANT COUNTY,TEXAS a Georgia limited liability company,

Defendants.

ORDER ON DEFENDANTS BENJAMIN S. EMMONS' AND SOURCE CAPITAL LLC'S FIRST AMENDED VERIFIED SPECIAL APPEARANCE

After considering Defendants Benjamin S. Emmons' and Source Capital, LLC's First

Amended Verified Special Appearance, any response, Plaintiffs' Original Petition, the discovery

on file, affidavits of Benjamin S. Emmons and Matt Smith and arguments ofcounsel, the Court:

SUSTAINS the special appearance and dismisses PEaintiffs' suit for lack of personal

jurisdiction.

SIGNEI7"on-~~,2017.

T e Honorable avid Evans

~AA~L~~ COPY Td PJl ATTOR~tEYS E~MA~LED Ml~F SE S