NO CV. In the Court of Appeals Second District of Texas Fort Worth, Tegas. Appellants, Appellees. APPELLANTS' BRIEF

Transcription

1 ACCEPTED CV SECOND COURT OF APPEALS FORT WORTH, TEXAS 12/21/ :10 AM DEBRA SPISAK CLERK NO CV In the Court of Appeals Second District of Texas Fort Worth, Tegas FILED IN 2nd COURT OF APPEALS FORT WORTH, TEXAS 12/20/ :00:00 AM DEBRA SPISAK Clerk City of White Settlement, Texas, and White Settlement Economic Development Corporation Appellants, ~ Benjamin S. Emmons, and Source Capital, LLC, Appellees. On Appeal from the 48th Judicial District Court of Ta~~ant County, Texas Cause No ; the Honorable David L. Evans Presiding APPELLANTS' BRIEF Robert F. Maris State Bar No rmari sl ani er. c om Alise N. Abel State Bar No aabel@marislanier. com MARTS &CANTER, P.C Rawlins Street, Suite 1550 Dallas, Texas telephone facsimile ATTORNEY FOR APPELLANTS

2 NO CV In the Court of Appeals Second District of Texas Fort Worth, Tegas City of White Settlement, Texas, and White Settlement Economic Development Corporation Appellants, Benjamin S. Emmons, and Source Capital, LLC, Appellees. On Appeal from the 48th Judicial District Court of Ta~~ant County,. Texas Cause No ; the Honorable David L. Evans Presiding APPELLANTS' BRIEF Robert F. Marls State Bar No com Alise N. Abel State Bar No com MARTS &CANTER, P.C Rawlins Street, Suite 1550 Dallas, Texas telephone facsimile ATTORNEY FOR APPELLANTS ORAL ARGUMENT REQUESTED IF PERMITTED BY COURT

3 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 com Alise N. Abel State Bar No com Mates &Larry, P.C Rawlins Street, Suite 1550 Dallas, Texas (214) telephone (214) 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 Matthew T. Nickel APPELLANTS' BRIEF PAGE 1

4 State Bar No Spencer Hamilton State Bar No DENTONS US LLP M"cKinney Avenue, Suite 1900 Dallas, Texas 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

5 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 Statement of Issues Presented for Review Statement of Facts and Background Summary of the Argument Argument &Authorities Appellants' Issue No. 1: THE TRIAL COURT ERRED 1N GRANTING ENIMONS AND SOURCE CAPITAL'S FIRST A1V~NDED VERIFIED SPECIAL APPEARANCE A. Standard of review B. Emmons and Source Capital have minimum contacts with the State of Texas i. General Jurisdiction ii. Specific Jurisdiction iii. Source Capital's Contacts with the State of Texas iv. Benjamin S. Emmons' Contacts with the State. of Texas C. The exercise of jurisdiction comports with fair play and substantial justice APPELLANTS' BRIEF PAGE 3

6 Conclusion &Prayer Certificate of Compliance Certificate of Service Appendix APPELLANTS' BRIEF PAGE 4

7 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 at * 13 (Tex.App.- Fort Worth Aug. 7, 2014, no pet.)...33,34 Cornerstone Healthcare GNoup Holding, Inc. v. Nautic 1Vlgmt., 2016 WI, at *6(Tex. June 17, 2016) ,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 Hospital PSP v. Wound Management Technologies, Inc., 2014 WL 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) 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 II Holding, LLC., 324 S.W.3d 840 (Tex.App.-Houston [14th Dist.] 2010, no pet.)...27,28 APPELLANTS' BRIEF PAGE 5

8 Hosl~ins v. Ricco Family Pa~tne~s, Ltd., 2016 WL at * 8 (Tex.App.- Fort Worth May 12, 2016, no pet.)...21,25.tani-kingf~anchising, Inc. v. Falco Franchising, S.A., 2016 WL 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) > 3 Monc~ief Oil 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 at *3 (Tex.App.-Fort Worth July 3, 2008, no pet.)...22 NoNstNud v. Cicu~, 2015 WL at *2 (Tex.App. Fot-t Worth, no pet.)...20,34 Patel v. Pate, 2017 WL at *5 (Tex.App.-Fort Wot-th July 6, 2017, no pet.)...28 Retamco Operating Inc., v. Republic Drilling Co., 27A S.W3d (Tex 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.) Irvine, LLC v. Tin Stagy^ Development, LLC, 2015 WL at *5 (Tex.App.-Dallas June 30, 2015, no pet.)...26 STATUTES PAGE APPELLANTS' BRIEF PAGE 6

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

10 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 of the 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 CR la. APPELLANTS' BRIEF PAGE 8

11 of the 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 of Proceedings: 3. This case was initiated on October 27, 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 of Texas 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, Appellants filed their original response to the Special Appearance on May 8, An amended response was filed by Appellants on August 30, Emmons and Source Capital filed an amended reply on 4 CR CR CR ~ CR CR CR to CR APPELLANTS' BRIEF PAGE 9

12 September 6, 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 On October 20, 2017, Appellants filed their Notice of Appea1.14 The remaining claims are currently abated pending resolution of this appeal. ls STATEMENT OF JURISDICTION This Court has jurisdiction of this interlocutory appeal pursuant to Tex. Civ. Prac. &Rem. Code (a)(7) to review the order granting the special appearances of Emmons and Source Capital. 11 CR CR CR CR is TEX. CIV. PRAC. &REM (b). APPELLANTS' BRIEF PAGE 10

13 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 The loan made by the Source Capital Lenders was to be repaid from the 16 CR 289. l~ CR Source Capital Lenders are various investment funds which are pooled together. 19 CR CR 289, CR APPELLANTS' BRIEF PAGE 11

14 operations of Horizon's seven waterparks in Texas (the "Seven Water Parks"). 22 Emmons was directly involved in the negotiation of the $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 of the 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 of the 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 Construction began on the waterpark in White Settlement in 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 CR z4 CR zs CR CR Z~ CR CR 290. APPELLANTS' BRIEF PAGE 12

15 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, 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 CR o CR CR CR CR `~ CR s CR CR 292. APPELLANTS' BRIEF PAGE 13

16 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 The principle features of the 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 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 From late 2014 through May 2015, Emmons and Source Capital were 37 CR. 293; Appendix Tab 2. 3g CR Appendix Tab 2. APPELLANTS' BRIEF PAGE 14

17 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 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 of the Workout Agreement.4`~ 9. In early 2015, Emmons met with White Settlement officials to discuss `~0 CR. 294 `~1 CR CR CR CR APPELLANTS' BRIEF PAGE 15

18 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 if the Mortgage Consent was signed by the City 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 of the 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 CR `~~ CR CR `~9 CR so CR APPELLANTS' BRIEF PAGE 16

19 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 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 CR s3 CR `~ CR ss CR APPELLANTS' BRIEF PAGE 17

20 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 of the 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 APPELLANTS' BRIEF PAGE 18

21 arcade games and equipment were valued at over $276, 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 of the 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 of these 57 CR ss CR. 298: s9 See CR o CR APPELLANTS' BRIEF PAGE 19

22 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 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

23 (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 of fair 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 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

24 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 of jurisdiction is consistent with federal and state constitutional due-process guarantees." Moki Mac Rives Expeditions, 221 S.W.3d at 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 ; Mountain States EmployeNs Council, Inc. v. Cobb Mechanical Contractors, Inc., 2008 WL at *3 (Tex.App.- Fort Worth July 3, 2008, no pet.). Pursuant to section 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 of this state. TEX. CIV. PRAC. &REM. CODE APPELLANTS' BRIEF PAGE 22

25 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 nonresident defendant has purposively availed himself to 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 of the privilege of doing business in Texas. Id. at "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." Moncrief Oillntern 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

26 the case, should be considered by the Court in determining the issue of jurisdiction. 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 of the 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 general jurisdiction 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

27 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 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~ief Oil Intern, 414 S.W.3d at 142. In this case, all of the 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

28 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~ief Oil Intern Inc. 414 S.W.3d at In general, "the actions of a corporate agent on behalf of the 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. 360 Irvine, LLC v. Tin Stagy Development, LLC, 2015 WL at * 5 (Tex.App.-Dallas June 30, 2015, no pet.). Therefore, the "actions of an entities' agent are deemed the acts of the 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 at *6(Tex. June 17, 2016). 13. In Co~neNstone Healthcare, the Texas Supreme Court held that an outof-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 of Texas. 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

29 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~ief Oillntern, 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 of Texas 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 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 II Holdings, 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

30 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 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 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 * 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

31 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 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 CR CR s CR CR APPELLANTS' BRIEF PAGE 29

32 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, s 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 of Texas were purposeful and directly relate 67 CR CR APPELLANTS' BRIEF PAGE 30

33 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 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 APPELLANTS' BRIEF PAGE 31

34 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. Moncrief Oil 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 of Texas. 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 CR APPELLANTS' BRIEF PAGE 32

35 of contract claim. Emmons should not be able to circumvent jurisdiction 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 himself to 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 of jurisdiction in Texas based on their participation in telephone meetings where representations were made which were the basis of the 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 at * 13 APPELLANTS' BRIEF PAGE 33

36 (Tex.App.-Fort Worth Aug. 7, 2014, no pet.). The Court took into consideration that the directors sent s 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 of the non-resident chief financial officer. No~st~ud v. Cicur, 2015 WL 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 of the special appearance. Id. at * In this case, Emmons traveled to Texas; initiated and participated in numerous phone calls into Texas and exchanged many s 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 ; CR ; CR CR APPELLANTS' BRIEF PAGE 34

37 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 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 of Texas. See Cc~~lile BancshczNes, Inc., 2014 WL at *13. Therefore, the Court should find the Emmons has purposefully availed himself of jurisdiction 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 bur den 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

38 in furthering fundamental, substantive social policies. Glenco Capital Pa~tne~s, II, LP., 269 S.W.3d at "If a nonresident has minimum contacts with the forum, rarely will the exercise of jurisdiction over the nonresident not comport with traditional notions of fair play and substantial justice." Monc~ief Oillnt'l Inc., 414 S.W.3d at 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 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 APPELLANTS' BRIEF PAGE 36

39 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~ief Oillnt'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 nonresident parties. See Glencoe Capital Pa~tne~s, II, LP., 268 S.W.3d. at 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 of jurisdiction 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 tlu oughout 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

40 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 relief to which they may show themselves justly entitled, in law or equity. APPELLANTS' BRIEF PAGE 38

41 Respectfully submitted, MARIs & LAtv~x, P.C. /s/ Robert F. Maris Robert F. Maris State Bar No com Alise N. Abel State Bar No com Maxzs & L~r~x, P.C Rawlins Street, Suite 1550 Dallas, Texas telephone facsimile ATTORNEYS FOR APPELLANTS APPELLANTS' BRIEF PAGE 39

42 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 of the 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 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 VIA E-FILE /s/robert F. Maris Robert F. Maris APPELLANTS' BRIEF PAGE 40

43 NO CV In the Court of Appeals Second District of Texas Fort Worth, Texas City of White Settlement, Texas, and White Settlement Economic Development Corporation Appellants, v. Benjamin S. Emmons, and Source Capital, LLC, Appellees. On Appeal from the 48th Judicial District Court of Tarrant County, Texas Cause No ; 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

44 APPENDIX TAB "1"

45 CAUSE NO x6 FILED TARRANT COUNTY 5/5/2017 4:23:05 PM THOMAS A. WILDER DISTRICT CLERK CITY OF WHITE SETTLEMENT, Z`EXAS and the WHITE SETTLEMENT ECONOMIC DEVELOPMENT CORPORATION, IN THE DISTRICT COURT Plaintiffs, v. HAWAIIAN PARKS- WHITE, SETTLEMENT, LLC, a Missouri limited liability company, BENJAMIN S. EMMONS, SOURCE CAPITAL LLC, a Georgia limited liability company and CLINTON HILL, 48*~ JUDICIAL DISTRICT 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: ~

46 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 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 nonprofit 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 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 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

47 a nonresident doing business in Texas pursuant to Section 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 (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...

48 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

49 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, The $12,500, 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, 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'

50 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 X 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, However, due to delays in construction, the Park did not open for operation until June 6, 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

51 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, The second payment of $200, was due on April 1, 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, to White Settlement on or before October 1, 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

52 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 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

53 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 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

54 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

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

56 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, rental payment due to White Settlement in October 2015 purposefully was not paid; c. $300, 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, resulting in mechanic's liens; 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, 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

57 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, 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 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, 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, 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

58 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~ 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 $43$ 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, ~ ~

59 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 postjudgment. 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 itself justly 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

60 HParks, White Settlement provided a substantial amount of funding to HParks. HParlcs accepted the $12,500, 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 itself justly 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

61 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 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, in statutory damages under Tex.Civ.Prac. &Rem. Code (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, 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

62 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

63 that if White Settlement agreed to the Workout Agreement, the outstanding and the future lease payments, and'particularly the lease payment of $600, which was due on October 1, 2015, would be made to White Settlement. 62. Emmons and Source Capital represented to White Settlement that if White Settlement agreed to the Workout Agreement, Source Capital would inject up to $5,000,000 in Horizon Family Holdings, LLC and/or HParks. 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 that Mr. Busch would remain the CEO. 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 be resolved. 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, interest and court costs from Emmons and Source Capital. 304

64 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

65 _~ 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, preand post judgment interest, attorneys' fees and costs of court as well as any and all other relief to which White Settlement may show itself justly entitled. Respectfully submitted, MARIS & LANIER, P.C. /s/robert F. Maris Robert F. Maris marislanier. co m State Bar No Alise N. Abel aab marislanier. com State Bar No Rawlins Street, Suite 1550 Dallas, Texas X telephone 214-~ facsimile ATTORNEYS FOR PLAINTIFF CITY OF WHITE SETTLEMENT, TEXAS AND THE WHITE SETTLEMENT ECONOMIC DEVELOPMENT CORPORATION 306

66 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 E-Filing Clinton Hill 2912 Appalachian Lane Frisco, Texas X5033 VIA CMRR#~oo8 i83o 000i 6456 gi69 f s/ Robert F. Maris Robert F. Maris 307

67 C `G :11 I~IT ~:,:

68 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~~"), The paxties hereto agree as follows; WZTNESS~TH; 1, GRANT, AEFTNITIONS, AND WARREIN'z'ZES; 1,1 De~niti on 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 Oper~til~g Agt~eenaent. Agreement; Tl~~s Watez~ and Adventuz'a Pat'k Ground Tease and 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, Wa(er and Adventure Park Ground Lease &operating Agreement Clly of Whlte settlement, Texas ~ Hawallan Par(cs White Sefllement, LLC P~ga l of 3A~

69 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 of flee 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 off site 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 of HPARKS, the C7~"X, ox the EDC, 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~ Water and Adventure Park Ground Lease & Opataling Agteetylent City of Whlte Se(tlement, Texas Hawallan Parks.White settlement, l.l,c Page 2 of

70 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 of the 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,. Water and Adventure Park around Lease & Operaling Agreement Clfyof Whits Setflement~ Texas ~ Hawaiian Parks -While Settlement, LI.0 Page 3 of 3~ 311

71 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 pxoj Bated usaful life of at 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~lttbit D, 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 Water end Adventure petit Ground Lease & Operaiing Agreement city of Whfte settlement, 7exas~ --Hawaiian Parka -White Seitlamenf, LL.R Page 4 of

72 (. 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"), 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

73 ( (~ ~,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~summate tie ~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 of the '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"), Water and Adventure park oround ~.easa & operating Agreement Clly of While Settlement, Texas Hawaiian Parks.White Seftlameni, I.LC Page 6 of 3~ 3-14

74 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

75 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 of the 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; Water and Adventure Park around Lease & operating Agreement City of White Selllement, Texas Hawaiian Parks ~ White Battlement, LLC Page 8 of 3~ 3' 16

76 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); S'a~Xc; Watar aid Adventure Park; b,..for amusezaaeut facilities ~vitl~in the Water and Adventure c, for use of all other facili-cies opez~atec~ b~' HPARI~S upon the 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 limitation, VIP or valet paz'king, for parking, including, with 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 of receipts 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

77 ~ ~ ~ ~ 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 at tk~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 of the 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 Water and Adventure park ground Lease &operating Agreement Clly of White Battlement, Texas Hawaiian Parks - Wltlte Settlement, LLC Page 10 of 3~4 318

78 ~ ~~ 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 of first 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 of I~PARKS, 6,1,2,2 Z3ours of operation that exceed noxma~ o~erating hours, shall be subject to the review and co~se~t of the ~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, 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 319

79 C _ ~ 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 of latent 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 of the 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. Water and Adventure Park ground lease &operating Agreement City of While Selllemant, Texas ~ Hawaiian Parks -White Setilemenl, LLC Page 12 0~

80 C ~, 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 of HPARKS 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 of the 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 of HP.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 Water and Adventure Park Ground Lease &operating Agraemen! Clly op Whlfe Selflement, Texas Hawallail Parks -White Settlamenf, I.I.0 Page 13 0~

81 ~ ~.. 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 of race, 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 of the patronage o~ any person because of race, 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 of the 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 of speech, 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 of its 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 Water and Adventure park Ground Lease &operating Agreement City of White settlement, Texas Hawaiian Parks - Whlla Settlement, l.l.0 Page 1~{ of

82 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 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~ Waler and Adventure Park Ground.l.ease & Operaiing Agreement City of White Settlement, Texas --Hawaiian Parks -White Settlement, LLC ' ~ Page 15 of 3~ 323

83 r 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<<dous Matex~al on the Premises or any other vzolat~on oi~ alleged violation o~environmental ReguJ.ations oz~ the P~enuses befoz~e the date that HPARI~S assurt~es possasszo~ aid control of tie Premises pursuant to the Coiast~~uetiox~.A,graement (the "Pre-existing Environmenjal Comp~~arice Obligations."), The CITY further acknowledges and agrees that is ~i11 n.ot seek ax z~ec~u~ye ally Cp~.ti'~bu~ion ~y HPARI~S, ox impose o~ HPA.R~S and. such obligations ox costs, by failing to fully pay and satisfy its obliga~ioz~s with rega~~d to a17 P:reexi~ting Environmental Obligations, This provision s~a11 sw.~vive' the termination o~ this Agreement, 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

84 ~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 of such 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 of th{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 on tie Debt Obligations as its lease payment on the Lease Payment Aates and in 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 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, Waler end Adventure Park around!.ease & Operai(ng Agreement Clly.ot White Seillement, Texas Hawaiian Parks -White Seltlament, LLC Page 17 a~ ~4 325

85 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, ~.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./ , ' 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/p1f ,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, ',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, ! 1001/2020' 696~~}20,Op ~.,,.~..~,0/Q1/20~0...~ ,623,00 04/0~/202~, - 246,6p7.S0 ~.,~ Q4/~~./203~.: ,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,~ /01/2Q23' ~ 218, 2g4,50 ;.. ' 0}/01 f 2033 ~ 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 or at such offer location ss shall be designai;ed in writing b~ CI'~Y:. Water and Adventure f'atk around Lease &Operating Agreement Clty of Whlle Settlement, Texas Hawallan Parks - Whlte.Setllemant, LLC Page l8 of '

86 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 of the 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 of the 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. Water and Adventure Park ground i.ease & opetaling Agreement Clly of White sefllemant, Texas Hawallan Parka -White seltlemanf, LLC Page 19 0~

87 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 of the claim;,~ (a) them is a finding of neg~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 of got less than $250,000 per occurrence and $500,000 aggregate, Water and Adventure park around Lease & Opatating Agraeme'nt City of White Settlement, Texas ~ Hawaiian Parlts -White SettleFnent, Ll.0 Page 20 of

88 CXTY, iii, The polioy shall contain a waivex of subrogation in fayoi~ o:f the iv. The policy shah contain a requu'ei~.ent that CZT~' be given not less th~.n thit~ty (30) daps written notioe of cancellation, 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; pxopez~fy damage. i. Combined limn of $2,000,000 per occ~u~e~ee for bodily injuxy and 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, additional irasuxed, ii, ui. Property damage limit of $100,000 pax occurrence, The CZT'Y, its of~xcers, employees and agents shall ba Izsted as an 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 meet the follor~ing; Water and Adventure park Ground Lease &operating Agreement City of White settlement, Texas Hawaiian Parks - WhNe SeftlemenE, LLC Page 21 0~

89 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 of said property in the event of toss. 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 of the 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 Water and Adventure Park ground lease &operating Agreement Clly of White Settlement, Texas Hawaiian Parks. Whlta Saitlement, I.I.R Page 22 of

90 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 cover age, 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 Wata~ and Adventure Patk Ground lease &Operating Agreement C1ly of While Settlement, Texas --Hawaiian darks - Whlta settlement, I,LC gage 23 of 3~ 33~

91 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 of the 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 of reinstatement, 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 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.ṟom 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 3 0~, 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 Water and Adventure Park Ground Lease & ope~aling Agreement C(ty of White settlement, Texas Hawaiian Parks -White Settlement, LLC Page 24 of 34 X32

92 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 of tl~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; Water and Adventure Park Ground Lease & operating AgreemBnt City of White Selllement, Texga Hawaiian Parks -White Seltlemeni, I.LC Page 25 0:F

93 . ~ Witk~ a copy to; ~awalian k'ar~cs -- W11ite Settlement, LLC David T, Busch, P~esideiit 3100 ~ramier Axive, Suite 240 7rvit~g, TX T~avzd r, Busch q 670 Gresham D~i~ve EI Dorado Hills, CA ~. 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 ~71ith a copy to;., With a copy to; City Atto~e~ City o~ Wbite Settlement 21q~ meadow Park Dzive White Settlement, ~'e~as City Seci~etai.~~+ Cite bf White Settlement 21~A~ Meadow Pa~~k Drive Whits Settlement, Texas S, '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 of tl~e strict and ~xoznpt performance thereof, 16, A~S7GNMENTS; Water and Adventure hark Ground Lease &operating A9raemen~ Clly of White Settlement, Texas Hawaiian Parks -While 5e(tlement, I.LC Page 26 0~

94 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 Water and Advantute Pa k Ground Lease & Operaling Agreement city of White Settlement, Texas Hawaiian Parks While Settlement, l.i.0 Page 27 of

95 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~sof 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 wat7 anties or i~epz~esentatio ~s on be~xalf of the other e~aept an accordance with the e~pi~ess teams of this 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 $vent, the time ~'or sv.ch pez~'oxt~aance shall be extended by the a~tou~ut of ti~sze of such delay, but no longer than tl~e aino~vt o~ time ~easox~ably occasioned by the delay, The patty claiming delay of ~eifoxtx~anea as a a~esult o ~'oxce Majetue went sha11 del~~vez~ written. notice d~'tha coznmez~ca~nent of any sued dewy resulting f~'om such Force Majeure Event not dater than seven (7) dais afar the claiming party becomes aware o~'tk~e same, and :if the claiming party fails to so noti~'y the otl~ex panty o the occture~oe o~ a Force ~14ajetu~0 Event eausit~g such delay and ~.e other party sha11 not otherwise be aware of the Force Ma~aura Evart, the clair~ai~zg ~ai~y sha11 not be entitled to ava{a itse]~ of the provisions for the extensio~i of performance contained iii this paragraph, 25,2 Damage ox ' Destrttation ~'z~ior to Debt Obligation Defeasance Date; Should the Water and Advantu~~e Park be substantially damaged by a force Iblajeure Event occuvxtag prior to ~a~mez~t ire Full. of the bebt Obligatxon,(the "$o~.d De#'easaz~ce Date"), GZTY Water and Adventure Park oround Lease &operating Agreement City of Whlie 5etgement, Texas --Hawaiian Parks ~ White Settlement, l.l.0 Page 28 of 3A~ 336

96 ~ ~ ~~. 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 of the 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 of such 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' quasi public 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 of HFAR7~S's sights, tlt~a audiuteiest 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 of this Agreement shall not cl~an~e, ~ecxude ax~ a~ ect ~lyya~t.t~s's right to an awaad as hez~einbefore provided, Wafer and Adventure park Ground Lease & operating Agreement City of White Settlement, Texas --Hawaiian Parks - While Settlement,1.1.0 Page 29 0~ 3q~ 337

97 < <" 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 of the 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 of tl~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 of the 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 of tl~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 event the 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 of rant 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~ Water and Adventure Park C3round L.easa &Operating Agreement Cily ofwhite Satllemeht, Texas --HaWaUan ParKs -White Settlement, LI.0 Page 30 of 3q~ 338

98 { ~~ 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 of termination 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, Water and Adventure Park around l.aase & operating Agreement Illy of While settlement, Texas --Hawaiian Parks.White Seitiement, I.i.0 Page 31 of

99 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 dux scant 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 Water and Adventure perk oround Lease & Operagng Agreement City of White settlement, Texas Hawaiian Parks While Settlement, LLC Page 32 of 3A~ 340

100 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 of tl~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 page followsj' Water and Adventure Park around lease & oparaling Agra~ment City of White Setllemen(, Texae Hawaiian Parks White Saitlement, LLC Page 33 of

101 C 7N WI'T'NESS WHEREOF,. tl~e panties Uezeto have af~ced their signatures, as of tha 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~~+ APPROVE City Searatary. TOI' ORM;~ t ', y``~f r ~ti ~_~~ H~ ~' w~ :''k,ti ~t ~,City,AtYol~ey ~~.f~j Jlll(IIf5 11 l Water and Adventure Park.Ground Lease & vparaling Agreement Cily of Whlle; seltl'ement, Texas, Hawa4an F'arks ~ Whll~ Setllemant, I,I.G Wage 34.of 3A~ 342

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103 ~ ~ti9 ~ ~6 ~ ~ ~'~ ~ :. l ~q~il~a S J~, I ~i ~ ~~ V t i 1 ~~ ~ i i 4~~lll ~l ~l ~l~~li i 1'i ~I ~~ :~~- ~Y i-''~ i"i ~ e..w ~ i t U. ~ t I ~Y~ t ~ r J ~i I ~.~ ~ ip I ~, ~ t., '~,I: ~ i.'i m I i ~t i l. ~t~ ~1!~~.1 S Y - ~ r1i ai l ~ +.I~`~ ' t~ l I ~ F.'fLi. h~~~iri ip ~ i ~ ~'.,~m~e 1 kiy ~ ~~ '~ ~,,.,, i ~ ~ ~JVateF PaYk 1 Adventure Park Area -~ -. ~ i.~ ~^=+dfmmr+-55`~'~ f'i i i ~ ~ ~ J i i~ i i n ~ iii i~pl ~IIIII i ~ ii~~i t li ~~ i. ~ i i i~ 1 i t i ~ r i~ s i 1 v'. r~~ ~ ~ ~,-..ir: ~ ~- t ~ ~ IiGI ~' ~ ~ i. i i i ~~ i (~p`.u7f ':ri ~in 11 ~(~ f~i~~ r ~~ i~ ~ i i.r ~' r ~ ~ ~~~ `~~j i..l i ~ d~~ 'It I ~ l.n. ~~ ~ ~~ ~~I ~t' i~ul~4i ~~~~~ff i~~u~~i ~1 i~ ~~ ~i~f~ II I i ~~ c i a'~i :1 i'. i ~ I t ~ l 'l5l'`~i,11b1~~,1 )p'i ' i i ulr, f ' I I ll y ~ ~~, JItr~'~j'lo~f~~~ li~l~~ll~~~~~~7~'.~ I~ 2r~0~~~1~Go,-I ~ ~ P.?. I' ~,i ~~u~4 j. ~ ~~ 1 (~i ~ i~n~iic~~~9l /~j i~ I~~dfI f'' fpt~ i r "~mu~jn-4rf ~,w1, ~+ I ~. I 1, ~ ~li.l 1 I I.I ' ~ ~, '~~. ~ ~ilj~r ~M~~I' I~~~I~ ~I I~ 1 '1 I ~ 1 ~ I ~.~ ~I.; r 'I 1' i { I ~~ Ì~~~ ~VI`j' I' i I I III F) 1 ~' i ~ i' ~1~I~~ ~ 1 I II i ~I i~ - 1 ~' ll,f~.? 5i' I I ~..I,I I I ~i: 1i '1 ~ I i1 11~ ~ ~~~ I a i iii i ~ '. i p p I ~.6 ~1 i i I ~ ~~ I ~ r I ~ ~ ' ~ ~ J. JAI j' n II,.: ~. I,,. I 5 ~ ) I ~~ i'~~il( t -75~ 7 1~pY1 I~ I 4 ~ I i I ~ ~I ~ i ~ ~ II ~ I t 1 i t~ ~~ i 1 ''.:} r. ~ ~.,I _ I i i Yi I I ~f ~,~~~~,~~ y ~ i ~... i ~ ~.. i ~ is ~~ ~~ i.7+~ ~J s~~ i,us~~o~`.ti d~in~,~ lw~,-~:.m~ ~ ' ~ ~ ~'~~~ ~~~i00~`~~~:.'.p i i ~,i h'. ;i a; ~~ ~~ ~ ~ r~.~, L... r ~ H.~~, L ~, ~. ~~T7 ~ M ~ I f ~ Inv ~ G ~.~., I ~ ~. ~ i i(. '~~i..' I II.. IC ^; i ~~ ~?~ ' :llrl~rv~.{j~f1 ~Ia'~ ~4~~~ ij'~ ~ ~',~ f ;I:!~I t.~ r ~i ~.~i,..:~",.,,.. ; ~.. ~ ~~1~95 I ~~r~,, ~~.,~:~;;~,r ~ `; y'~,~~,..,~.... imagery: Da ~.~j.stt~!2t133 ;~ ~ ~>;3Z ~,?~~'S0~:2~",'3~; ~~. ~~tp'~:i.yai,,:j~i.! I'c'd~s~Al'.Il:~~fllh~"I,~_~9n:.~ ` r1. i r ~ I n t i. I ill~~y~' i I.I ~.~I~~~ A I 5J~ ~ 'f ~ ~'. "4'D I '. r ~ i.r l ~ ~.I'~il1. r~ i -.. "'~F, ~eleu,.`!e9?.ft.,,eye' aft, "~~ ~~?, ~t,;

104 ~ ~ E~I]~ZT ~ ~ C ~' Ordinary Tncoiroa/E~tponsa ~, 'UVl~ite Settzement prat and doss Statement Tncowe Jan -Dec.100 Admission Income Food &Beverage.0,' CooleP lncouta Cabanas 1 Pavilions 0,00 2S~ T~oekar Rentals ~ ~ O,Od 27S Retail Income viiseeJlaneous.[ueome Sponsorship Lncoma O,QO interest ~ Cp ~ 0,00 Total Income OAO Gross Profit 0,00 Expense 300 Cost of Snles ~.~&B 0, Cost of SAles -Retail 0, Corporate overhead, O,Op x{00 AdvertisingE~peuse 0,00 S00 Igsuranoe 0,00 6D0 Genera( Expenses ~ 0, Repa)r & Ivlaintenane~ 0.00 C>7S Sifpplies ~ 0, PayraU ~~penses 0, Fringes/Tapes Profassional Fees Texas & l,icensas ~ 0, Transaction~ees O,QO 950 Traval Expense 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

105 346