Court Opinion

ID: 4232425
Source: CourtListenerOpinion
Date Created: 2017-12-26 20:16:04.040101+00
Date Added: 2024-06-11T14:43:04.376503
License: Public Domain

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

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

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

                             Appellants,

                                 ►•~

          Benjamin S. Emmons,and Source Capital,LLC,

                             Appellees.

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

                      APPELLANTS'BRIEF

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

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

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

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

                             Appellants,

          Benjamin S. Emmons,and Source Capital,LLC,

                              Appellees.

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

                       APPELLANTS'BRIEF

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

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

Plaintiffs in the trial court and Appellants herein:

      City of White Settlement, Texas

      White Settlement Economic Development Corporation

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

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

Defendants in the trial court and Appellees herein:

      Benjamin S. Emmons

      Source Capital, LLC

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

      Hawaiian Parks-White Settlement, LLC

      Clinton Hill

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

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

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

Trial Court:

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

               STATEMENT REGARDING ORAL ARGUMENT

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

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

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

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

present an oral argument.

APPELLANTS'BRIEF                                                            PAGE 2
                                         TABLE OF CONTENTS

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

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

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

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

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

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

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

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

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

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

Appellants' Issue No. 1:

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

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

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

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

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

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

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

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

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

APPELLANTS'BRIEF                                                                                                 PAGE 4
INDEX OF AUTHORITIES
Case Law                                                                                                Page

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

STATUTES                                                                                      PAGE

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

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

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

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

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

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

above-styled and -numbered appeal and respectfully show:

                         STATEMENT OF THE CASE

Nature ofthe Case:

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

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

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

Emmons' and Source Capital's Special Appearances.

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

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

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

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

1 CR. 286-307.

2 CR. 286-307.

3 la.

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

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

Course ofProceedings:

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

Emmons and Source Capital filed their First Amended Verified Special Appearance

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

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

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

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

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

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

4 CR. 301-302.

5 CR. 5-61.

6 CR. 144-220.

~ CR. 221-285.

8 CR. 286-351.

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

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

without a hearing.12

       Vial Court's Disposition:

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

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

personal jurisdiction.13

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

remaining claims are currently abated pending resolution ofthis appeal.ls

                           STATEMENT OF JURISDICTION

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

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

ofEmmons and Source Capital.

11 CR. 965-1036.

12 CR. 580-584.

13 CR. 1037

14 CR. 1040-1041.

is TEX. CIV.PRAC.&REM.§51.014(b).

APPELLANTS'BRIEF                                                            PAGE 10
              STATEMENT OF ISSUES PRESENTED FOR REVIEW

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

               Amended Verified Special Appearance

STATEMENT OF FACTS AND BACKGROUND

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

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

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

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

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

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

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

One Bank in Fort Worth.21

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

16 CR 289.

l~ CR 292.

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

20 CR 289,291.
21 CR. 291.

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

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

made numerous visits to Texas and regularly communicated with individuals in

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

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

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

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

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

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

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

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

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

ZZ CR 289.

23 CR. 293.

z4 CR. 289.

zs CR. 289.

26 CR. 293.

Z~ CR 289.

28 CR 290.

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

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

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

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

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

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

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

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

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

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

$3.5 million loan.36

29 CR 289.

3o CR 289.

31 CR 290-291.

32 CR 291.
33 CR. 292.

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

36 CR 292.

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

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

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

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

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

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

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

                the Bank would refrain from foreclosing before the end of2015;

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

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

                 Water Parks through the end of2015;

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

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

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

37 CR. 293; Appendix Tab 2.

3g CR. 291.

39 Appendix Tab 2.

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

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

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

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

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

Settlement.42

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

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

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

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

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

the success ofthe Workout Agreement.4`~

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

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

43 CR. 294.
44 CR. 294.

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

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

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

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

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

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

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

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

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

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

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

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

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

4s CR. 294.

46
     CR. 294.

`~~ CR. 295.

48 CR. 295.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

sl CR. 295.

52 CR. 296.

s3 CR. 296.

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

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

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

the financial commitment to the water park:

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

              service and operation ofthe Seven Water Parks;

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

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

              purposefully not paid;

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

              diverted to support the other six water parks in Texas;

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

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

              resulting in mechanic's liens;

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

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

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

s6 CR. 297.

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

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

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

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

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

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

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

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

                          SUMMARY OF THE ARGUMENT

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

Verified Special Appearance because both Emmons and Source Capital had

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

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

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

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

s9 See CR. 286-307.

6o CR. 301-305.

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

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

Capital's Special Appearance.

                          ARGUMENT &AUTHORITIES

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

   A.        Standard of review

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

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

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

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

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

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

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

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

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

Worth, no pet.).

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

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

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

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

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

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

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

jurisdiction. Id.

       3.     The general statement that the nonresident defendant has not

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

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

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

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

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

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

2005).

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

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

necessary to support the judgment. BMC Software Belg. N. V. v. Marchand, 83
S.W.3d 789, 795 (Tex. 2002). The implied findings of the trial court may be

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

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

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

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

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

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

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

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

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

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

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

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

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

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

non-resident defendant "does business" if it:

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

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

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

TEX. CIV.PRAC. &REM.CODE §17.042

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

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

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

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

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

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

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

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

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

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

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

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

Texas.Id. at 785.

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

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

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

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

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

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

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

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

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

subjective intent ofthe defendants cannot negate their contacts. Id.

             i.     General Jurisdiction

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

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

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

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

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

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

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

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

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

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

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

which is applicable in this case.

             ii.    Specific Jurisdiction

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      10.    Appellants' Second Amended Petition asserts the following claims

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

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

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

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

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

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

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

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

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

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

agent are deemed the acts ofthe entity." Id.

       12.   Atrial court may exercise jurisdiction if a nonresident business

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

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

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

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

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

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

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

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

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

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

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

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

out a Texas seller and Texas assets. Id.

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

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

meetings in Texas regarding a potential joint venture in Texas. Monc~iefOillntern,
414 S.W.3d at 156. The Court in Moncrief Oil Intern held that the defendants

purposely availed themselves to jurisdiction in Texas when they attended two

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

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

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

confer specific jurisdiction." Id. at 153.

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

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

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

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

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

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

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

deriving from that meeting might be heard by a Texas court." Horizon Shipbuilding,
324 S.W.3d at 848-49.

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

special appearance when the non-resident defendants made fraudulent statements

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

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

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

factually sufficient evidence to establish that the representations were made while

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

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

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

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

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

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

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

Capital's letterhead.

61 Appendix Tab 2

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

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

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

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

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

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

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

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

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

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

initiated' and participated in numerous telephone and email communications with

representatives from the City regarding the Workout Agreement and the various

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

62 CR. 605.

63
     CR. 603-617.

64 CR. 148.

6s CR. 148.

66
     CR. 701-723.

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

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

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

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

give rise to specific jurisdiction.

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

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

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

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

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

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

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

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

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

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

67 CR. 676-681.

68 CR. 152.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

by this Court.

69
     CR. 155.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

~~ CR. 156.

71 CR. 303.

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

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

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

state of Texas.

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

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

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

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

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

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

director had purposefully availed themselves ofjurisdiction in Texas based on their

participation in telephone meetings where representations were made which were

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

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

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

the State of Texas.Id.

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

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

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

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

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

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

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

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

appearance denial ofthe non-resident chieffinancial officer. No~st~ud v. Cicur,2015
WL 4878716 at *11 (Tex.App.-Fort Worth Aug. 13, 2015, no pet.). The Court held

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

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

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

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

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

numerous phone calls into Texas and exchanged many emails with representatives

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

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

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

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

73 CR. 946-958.

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

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

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

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

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

Worth April 10, 2014, pet.denied).

        31.   Emmons is an experienced businessman who knew that the

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

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

Emmons has purposefully availed himself ofjurisdiction in Texas.

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

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

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

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

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

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

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

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

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

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

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

exercise ofjurisdiction over the nonresident not comport with traditional notions of

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

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

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

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

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

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

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

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

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

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

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

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

unreasonable result should not be permitted by the Court.

~`~ CR. 161.

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

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

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

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

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

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

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

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

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

and substantial justice.

                           CONCLUSION &PRAYER

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

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

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

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

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

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

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

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

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

Source Capital were breached which caused damage to the City.

      Both Source Capital and Emmons have more than enough purposeful contacts

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

Emmons have purposefully availed themselves of jurisdiction, the Court should

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

Source Capital.

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

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

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

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

entitled, in law or equity.

APPELLANTS'BRIEF                                                          PAGE 38
                   Respectfully submitted,

                   MARIs & LAtv~x,P.C.

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

                   ATTORNEYS FOR APPELLANTS

APPELLANTS'BRIEF                             PAGE 39
                      CERTIFICATE OF COMPLIANCE

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

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

      This brief has been prepared in proportionally spaced typeface using:

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

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

                          CERTIFICATE OF SERVICE

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

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

                                              /s/Robert F. Maris
                                              Robert F. Maris

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

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

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

                                                     Appellants,

                                                             v.

                       Benjamin S. Emmons,and Source Capital, LLC,

                                                      Appellees.

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

                                       APPELLANTS' APPENDIX

Contents                                                                                                            Page

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

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

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

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

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

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

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

             Plaintiffs,                       §

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

             Defendants.                       §
                                                      T~~RRAN'T COUNTY,Z`EXAS

                  PLAINTIFFS'SECOND AMENDED PETITION

TO THE HONORABLE JUDGE OF SAID COURT:

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

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

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

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

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

Plaintiffs respectfully show the following:

                                                                                 •~
                                            I.

                                 Discovei~Control Plan

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

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

                                           II.

                                         Parties

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

 home rule municipality.

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

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

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

 as amended,specifically Chapters 501 and 502 thereof.

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

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

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

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

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

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

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

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

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

 been served with process.

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

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

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

and Remedies Code who has already been served with process.

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

with process.

                                                III.

                                  Venue and Jurisdiction

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

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

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

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

personal jurisdiction over Defendants as they have purposefully availed themselves to

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

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

offend the traditional notices of fair play and substantial justice.

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

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

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

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

Texas, based on false pretenses.

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

 numerous communications and visits within Texas made by Source Capital

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

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

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

                                                                                       ..
                                          N.

                             Statement of Relevant Facts

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

affiliate, HParks.

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

Horizon, LLC,is the controlling owner of Horizon.

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

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

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

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

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

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

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

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

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

 sorely needed in the City.

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

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

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

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

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

 and was to be completed by May 24, 2014.

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

 by White Settlement.

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

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

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

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

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

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

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

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

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

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

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

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

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

 X6108.3

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

 the waterparks at White Settlement and Pflugerville and for additional operating

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

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

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

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

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

 Appropriate documents to reflect the subordination agreement were executed by

 Capital One and the Source Capital Lenders.

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

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

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

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

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

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

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

the Park available only during the summer.

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

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

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

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

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

Paragraph 3o below.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Horizon.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                                                                  293
Agreement including the following:

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

            Bank would refrain from foreclosing before the end of 2015;

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

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

            Parks through the end of 2015;

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

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

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

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

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

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

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

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

White Settlement in connection with the Workout Agreement.

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

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

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

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

leases even though the ground leases were in default.

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

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

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

to consider approving certain matters regarding the Lease and Operating Agreement

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

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

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

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

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

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

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

Settlement's signed Consent to Mortgage.

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

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

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

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

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

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

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

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

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

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

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

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

that Mr. Busch would remain the CEO.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 injection representations, the operating representations and key management

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

 Ownership Consent, White Settlement would not have executed the Ownership

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

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

Lease.

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

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

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

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

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

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

             Settlement;

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

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

             rental payment due to White Settlement in October 2015 purposefully was

             not paid;

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

             diverted to the support of the other Seven Water Parks;

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

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

             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, 2016. HParks was given

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

Settlement subsequently terminated the Lease and Operating Agreement.

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

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

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

 normally exercised by a parent entity over a subsidiary entity.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 Settlement's Park property are not released.

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

5 F~hibit"i" at Paragraph 6.6.3

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

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

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

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

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

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

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

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

the property insurance was $43$2.50•

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

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

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

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

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

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

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

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

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

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

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

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

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

$290,62.00.

                                              1~

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

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

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

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

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

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

reasons:

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

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

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

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

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

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

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

shows itselfjustly entitled.

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

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

promissory estoppel as follows:

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

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

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

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

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

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

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

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

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

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

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

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

law, attorneys' fees and costs of court. In addition, should it become necessary to

impose equitable remedies to collect its damages, such as the imposition of a

constructive trust or injunction, White Settlement requests that this Court grant all

such relief to which White Settlement shows itselfjustly entitled.

              c.   Third Cause of Action: Conversion(Emmons and Hill)

       44. The City sues Emmons and Hill for conversion as follows:

       45• Emmons and Hill unlawfully, and without authorization, assumed

dominion and control over property,including:

         a. Arcade games owned by the City; and

         b. Other equipment,including by not limited to, computer equipment and

            TVs,lockers, picnic tables, chairs, shade sails and power equipment and

            tools, owned by the City.

      46.   Emmons and Hill assumed dominion over this property to the exclusion of

                                                                                301
the City's rights in the property.

       47.     The City sues Emmons and Hill for the value of its property at the time

and place of Emmon's and Hill's conversion. The City is entitled to interest on the

amount at the prejudgment rate of interest.

       48.     In addition, Emmons and Hill maliciously converted property that

belonged to the City because they specifically intended to cause substantial injury to

the City. Accordingly, the City seeks exemplary damages against Emmons and Hill for

conversion.

      d.      Fourth Cause of Action: Texas Theft Liability Act(Emmons and Hill)

       49•     The City sues Emmons and Hill pursuant to the Texas Theft Liability Act

as follows:

       50.     The City had a possessory right to the property described in paragraph 35•

       51.     Emmons and Hill unlawfully appropriated this property with the intent to

deprive the City of the property.

       52.     As a result of Emmons and Hill's theft, the City has sustained damages and

sues Emmons and Hill for its actual damages and $l,000.00 in statutory damages

under Tex.Civ.Prac. &Rem. Code §134.005(a)(1). In addition, the City is entitled to

attorney's fees pursuant to Tex.Civ.Prac.&Rem. Code §134•oo5~)•

                     e.     Fifth Cause of Action: Fraud(Emmons and Source Capital)

       53•     Emmons and Source Capital made a representation to White Settlement

that if White Settlement agreed to the Workout Agreement, the outstanding and the

future lease payments, and particularly the lease payment of $600,000.00 which was

due on October 1, 2015, would be made to White Settlement.

       54.     Emmons and Source Capital represented to White Settlement that if White

                                                                                   302
Settlement agreed to the Workout Agreement, Source Capital would inject up to

$5,000,000 in Horizon Family Holdings, LLC and/or HParks.

      55•      Mr. Emmons and Source Capital further represented that this cash

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

and Capital One Bank, would ensure that Horizon would have enough cash to resolve

all of the 2014 hold over obligations, handle the 2015 commitments as they became

due, and carry enough reserves into the off-season for operating expenses. Emmons

also represented that Mr. Busch would remain the CEO.

      56.      Emmons and Source Capital also represented that all needed maintenance

and repairs would be made at the Parlc.

      5~.      Emmons and Source Capital represented that the mechanics liens would

be resolved.

      58.      Emmons and Source Capital either knew each of the representations was

false or made the representations recl~lessly without knowledge of its truth. Emmons,

and Source Capital intended for White Settlement to rely on these representations and

White Settlement did rely on these representations.

      59•      Due to Emmons'and Source Capital's blatant fraud, White Settlement was

injured. White Settlement seeks recovery of its actual damages, exemplary damages,

interest and court costs from Emmons and Source Capital.

                    f.   Smith Cause of Action: Negligent Misrepresentation

                                (Emmons and Source Capital)

      60.      Pleading further and in the alternative, White Settlement sues Emmons

and Source Capital for negligent misrepresentation.

       61. Emmons and Source Capital made a representation to White Settlement

                                                                               303
that if White Settlement agreed to the Workout Agreement, the outstanding and the

future lease payments, and'particularly the lease payment of $600,000.00 which was

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
      g.    Seventh Cause of Action: Breach of Contract(Emmons and Source Capital)

      6g.    Pleading further and in the alternative, White Settlement sues Emmons

and Source Capital for breach of contract.

      ~o.    As stated above, Emmons and Source Capital made certain promises to

White Settlement which are contained in the Workout Agreement. Emmons and

Source Capital may contend that they believed, in good faith, that the terms of the

Workout Agreement would be performed.

      71.    Emmons and Source Capital failed to perform as promised. This failure to

perform constitutes a breach of contract which has caused damage to White

Settlement. Therefore, White Settlement sues Emmons and Source Capital to recover

its actual damages caused by the breach.

      h.    Eighth Cause of Action: Promisso ,Estoppel(Emmons and Source Capital)

      ~2.    Pleading further. and in the alternative, White Settlement sues Emmons

and Source Capital on a promissory estoppel theory.

      73.    Emmons and Source Capital made promises to White Settlement.

      74.    White Settlement reasonably relied on these promises to its detriment.

      75.    White Settlement's reliance was foreseeable by Emmons and Source

Capital.

      ~6.    A material injustice will befall White Settlement unless the terms of the

Workout Agreement are enforced through a judgment of this case. Therefore, White

Settlement sues Emmons and Source Capital to recover its actual damages.

       '7'7. Punitive Damages. Per Civil Practices and Remedies Code Section 41 with

regard to the fraud and conversion claims.

       ~8. Attorney's Fees. Pursuant to Civil Practices and Remedies Code Section

                                                                                 305
 _~

                                         PTa

      WHEREFORE, premises considered, White Settlement respectfully requests that

a judgment be entered against Defendants and in favor of White Settlement requiring

Defendants to pay to White Settlement the actual damages, exemplary damages, pre-

and postjudgment interest, attorneys'fees and costs of court as well as any and all other

relief to which White Settlement may show itselfjustly entitled.

                                                Respectfully submitted,

                                                MARIS & LANIER,P.C.

                                                /s/Robert F. Maris
                                                Robert F. Maris
                                                rmaris@marislanier.com
                                                State Bar No. 12986300
                                                Alise N.Abel
                                                aabel@marislanier.com
                                                State Bar No. 24082596
                                                3710 Rawlins Street, Suite 1550
                                                Dallas, Texas 75219
                                                214-X06-0920 telephone
                                                214-~06-0921 facsimile
                                                ATTORNEYS FOR PLAINTIFF CITY
                                                OF WHITE SETTLEMENT,TEXAS
                                                AND THE WHITE SETTLEMENT
                                                ECONOMIC DEVELOPMENT
                                                CORPORATION

                                                                                   306
                            CERTIFICATE OF SERVICE

      This is to certify that a true, correct and complete copy of the foregoing
instrument has been served in accordance with Rule 21a of the Texas Rules of Civil
Procedure on the 5th day of May,201 to:

C. Michael Moore
Matthew T. Nickel
Blake J. Brownshadel
DErrTONs Us LLP
200o McKinney Avenue, Suite 1900
Dallas, Texas 75201
E-Filing

Clinton Hill
2912 Appalachian Lane
Frisco, Texas X5033
VIA CMRR#~oo8 i83o 000i 6456 gi69

                                        fs/ Robert F. Maris
                                        Robert F. Maris

                                                                                     307
     C

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                               C                                           ~~

          'WATER AND ADVENTUZtE ~'ART~ GR0Y7ND LEASE ADD'OP~T2A.T]NG
                                AGItE~MENT

         'Phis A.greeme~t is :made and entered into thzs tl~e 2btla day o~ September, 2013, by and
 between the City of White Settlement, Texas, the White Settlement Economic Development
 Corporation (he~ei.nafter ~efinecl as "LAC"), ar~d Hawaiian Parks ~ White Seftlement, LLC,
 (he~eiiiafter defined as"H~AR~~"),

                                                    WZTNESS~TH;

 The paxties hereto agree as follows;

          1,        GRANT,AEFTNITIONS, AND WARREIN'z'ZES;

                    1,1      De~nition of Terms;

                           1,1.1 Affiliate; T~PARKS ox airy parson or entity oon~xolling HPART~S,
ox a:ny pexson ox e~atity other than ~II'A.RX~S in which. ~-TPARKS, or any person or entity
co~fa~olli~g I~PART~.S, ludivaduall~ o~~ collectzve~y with ~PAIZI~S,ohms oi~ bas tie right to vote at
Xeast a fifty ~ercant (50%) capital o~ votz~g ~atexest of the common stock, ~al~nership twits oz'
l~.i~~ite~ liability eo~ipany interests, as applicable,

                              I,1,2 Agreement; Tl~~s Watez~ and Adventuz'a Pat'k Ground Tease and
Oper~til~g Agt~eenaent.

                      l,1,3 l7ebt Obli ate ions; The Debt Obligat~obs issued by tb.a CXTY o~
-the ADC to finance the CITY's Oxiginal ~vesttnent. City or EDP wi11 piesant Debt Obligation
terms to HPARKS for xeview and disousslon ~rzor to issuance,      ~                     .

           •            ~,~,q~ Capital Jmprovement; Subse~ueat to the co~apletaon o~'the Water
and Adventure Park, ariy new cons~tructlon, improvement or addition (as opposed to Maintenance
and Repays to, or the St~uctuial Replacement off', existing Water and Adventure Pa~~C
Tm~rovaxi~ents) costing move than $5,000 in and one instance and having a pro~ec-~e~ useful life
of at least ~tve years,

                      x,1,5 City and EDC;•
                             a.      CITY; Tlie City ~ of Wl~te Settlement, Ta~as, a '~'e~as
home-sula mux~icipali#y,                                                              '
                             b.      EDC; 'Jae White Settlement Econorrzic Development
Coxpo~atioz~, a Texas non~proftt aot~ox~at~on cz~eated and operating pursuant to V,T.C,A,, Zocal
Groveialment Code,Title 12, Subtitle C1, as amended, s~acifically Chapters 50~,502 and thereof,

                       1,1,6 Ori~mal Ynvestment; 'I`l~e original~investment by the CITY and/or
FAC fog construction costs of the Water and Adr~enttar,~e Pack ~nprovements and costs of
issuance of the Dobt Obligatzans, ~n tl~.e azr~ount uat to exceed $12;650,000,

                                                                                      P~ga l of 3A~
Wa(er and Adventure Park Ground Lease &operating Agreement
Clly of Whlte settlement, Texas ~ Hawallan Par(cs •White Sefllement, LLC
                          1,1,7 Cons~.~uction Agreement; The Agreement between the CITY' and
 ~iL'ARRS fox' the const~~uation 'o£ tae Water. and Ad~v~nture park Xinprovements, executed'
 eoncur~,~ently with tl~s Agreement,

                          1,1,8 Effective D'atec The date the CZTX issues a tem~o~~ary or final
 cel~ti~icate o~ occupancy to HPAkKS fox the Water and Adventure paxk provided HPARI~S is in
 eo~npliance with tk~e provisions offlee Construction Agreement.

                        1,1,9 Envirorunental Re lat~on; and+ law, statute, regulation, order or
 ~u1e now or hereafter p~~omulgated by and+ Gove~.~nmental Authority, wl~ethex local, state or
federal, r@lating to a7.r' pollution, water pollution, noise control and/ox traz~spoz~ting, storing,
Dandling, discharge, disposal or reeovexy of onLsite ox offsite hazardous substances of matet7als,
 as same xnay be amended from t7me to time, including without limitationtlae following; (x) the
 Clean Air ,A.at(42 U,S,C, § 7401 et seq,); (u) Maxine ??rotectzon, Reseaich and Sanctuaries .A.ct
(33 ~(J,S~C, § ~40~-1445); (ui) ~e Clean Water Act (33 U,S,C, § 1251 et seq,); (iv) Resource
 Conservation and Recovery Act, as amended by the hazardous and Solid Waste Amendments of
198 (42 ~(J,S,C, § 6901 et seq.);(v) Comprel~e~sive E;~vxxonmenta~ Respa~se Coin~ensation and
~.iabi~ity Act, as ~.uaended by the Superfund AmencLnents and Reauthorization. Act of 1986 (42
U,S,C, § 9601 et seq,); (vi) Toxic Substances Control Act (15 U,S,C, § 2601 at seq,)3 (vii) the
Federal Insecticide, Fungic~c~e at~d Rodenticide Act as amended(7 U,S,C § 135 et seq,); (~zix) the
Safe Dri~ki~g Wate~~ Act(42 U,S,C, § 300(~ et seq,); (~~) Occupational Health an~~ Safety .A,cf
(29 U,S,C, § 6S~ at seq,); (x) -t1~e hazardous Liquid Pipeline Safety Act (q-9 U,S,C, § 2001 et
seq,);(xz) khe ~Sazardous Matex*ials Txat~sportation Aat (q~9 U',S,C, § ]80 ~, et sack); (iii) the Noise
Control Act of 19'12(42 U,S,C § 4901 st seq,); (xiii) Binexgency Planning and Corzamunity Right
to Kno+,v Act(42 (7,S,C §§ ~ 1001~~ 1050); and (xiv) the National Environvsentaa Policy .A.ct (42
U,S,C §§ 4321-X347).

                         1,x.,10 ~oxce Majeuxa Event: Declaxed ox~ undae~ared way, sabotage,
~~evolutions, :riot ox acts of ter~orlsm or oivil disobedienoe; acts o~ omissions of governmental
age~tc~es; accidents, fires o~ explosions; Moods, eaz~.qualtes ox' other acts of God; s~txikas or labor
disputes; sb~oz~tages of materials; oz~ any atlaex event ;not wifif~~n the control of HPARKS, the
CZ`~'Y, 4x the EDC and not caused by tk~a x~eglige~7t act or omission or int~ntio~tal ~nongful
conduct ofHPARKS,the C7~"X, ox the EDC,

                        1.1.11 Gross Revenues; All modes ax noz~-cas1~ cons;ide~:atzv~ xecei~+ed
by HPARKS, or any A:Cfiliata ox any party having an ownex~shxp interest in HPARK.S or azi
Affiliate ax any coz~cesszonaire, sublessee, or licensee ralatiug to or derive~.frorn the operatzoz~ of
tie 1~ater and Ad~rezlture ~'axlt du~riug any calendar year fiom the Rer~-t Cornrnenceme~t Dade a~ad
continuing through the Texm of this Agreement oz~ any renewal terix~, without any deductzoxzs
except for;

                   •          a.      and sales texas or othez~ admiss~ons and/or amusement taxes
imposed by at~y gover:~r~ental entities and collected by HPARI~.,S, o~

                                                                                         Page 2 of 34
Water and Adventure Park Ground Lease & Opataling Agteetylent
City of Whlte Se(tlement, Texas — Hawallan Parks .White settlement, l.l,c

                                                                                                       310
                                b,     "trade-outs" oi~ other ~ ai7angazx~ents whereby ~-IPAIZI~S
 engages in advertising, promotion or other Made of,the Water and Ad~ventu~e dark in exck~an~e
 ~o~~ non-cash benefits unless tha arrangement is with an .A.f~.lzate; az~

                               c,     the amount of any sales initially included in Gross
 12evenues that are subsequently subject to refund or credit,

 Gross Revenues shah include sales o~ tzekats and passes fox entrance to the Water aid Adventure
 ~a~k via iraternet sales and sales Uy mail,.

                           1.1,12 Hazardous .Material, Any nlatexzal, subs~anca, wasta or z~aatker
  which is flammable, ea~losi~ve, corrosiva,~radiaactive ox to~c, or which contains asbestos, or is a
  pesticide, or is a clzeinical known to cause cancer ox zeproductive toxicity or which is defined as
• a hazardous substance, material or waste, or as a toxin substance, material o~ waste, ~n any
  Envu~oiunental Regulation,

                        1,1,13 HPARKS; I~awauan ~atks —White Settlement, LLC, a Missouri
limited liability eo~pat~y,

                         1,x.14 Le a~ ]Requirements; A111aws, statutes, ordinances, oxders, z'ules,
regulations,~eraxaits, licenses, authorizat~ons, directives.and a~equzxaz~en~s of all governments and
governmental autharitjes, which now oz he~eaftex n~ay.ba applicable to HPARK.S, tlae dater and
Adventure park or the operation ofthe Water a~~d .A.dventuz~e Pa~.~k.

                        x,1,15 Maintenanve and ~Zepaixs; ,AJI routine and o~'din~~y- maintenance
and repairs to the Water and A~ves~tw~e ~'arlc required to ~reser~ve the mater and Adventut~e T'ark
Zm~~o~vements ire good working ~.~epaix during their projected useful lifa'which do zaot constitute
Stru-ctut~al Replacements,

                        1,1.~ 6 Opei~ati~~ Tn~vei~tor~; Conswnable items used or ~.eld i~ storage
for use In kbe opezation of tie Water and Adventure Paris, which naay 1z~clude xefail shod
me~~ohandisa, food and ~bevexage inventory, kitchen supplies, paper and plastzc wawa, bathroo.rn.
supplies, paper towels, fuel, cleaning materials, fe:rtilizexs, pes~ici.des, chem~aals, intiar tubes and
life safety vests, maintenance parts at~d supplies, office supplies and other sunilar items and
opaxataonal supplies ;fox rides and attractions,

                      1,1,17 Opexat~n~,Season;                      The paz~zod duri~,g which the Water ar~d
Ad~entu~~e 'ark is open for business aacb yaax,

                       1,1,18 Parlciug Area; The paved perking areas constructed consistent
w~th.tk~e City of White Settlement's code of ordinances for par~ir~g up to five ~iu~dxed (500) cars
for the exclusive use oP employees, vendor's and custo~.ers of HPAI~S~S dluizig •the Opezating
Season,located in the crass indicated,on ExltibitB,                            .

                                                                                                Page 3 of3~
Water and Adventure Park around Lease & Operaling Agreement
Clfyof Whits Setflement~ Texas ~ Hawaiian Parks -While Settlement, LI.0

                                                                                                               311
                       X,1,19 Premises; The tract o~ tracts of land with the di~n.ensions,
 boundaries, and~loaation depicted in Exhibit A, attached hereto and ir~corpoxated herein, Onoe
 stuveyed,the final premises including p~ld~g areas shall measare approximately 14 acres,

                         1,1,20 Profit and Loss Statement; ,A. statement that sets foz~tk~ gross
 ~•evenues and expenses fox the calendar ~eaC just concluded; the statement sl~al] be in tk~e forz~a
 attached as Exlttbit C,

                        1,X;21 Purchase Rei~butsernent Obligation: 'Z'l~e obligatloz~ o~ CX'I"~
 under Saetzon 6,6,2 hereof to pay HPARI~.S for one ox more Capital Tmproveznents wha]Iy paid
 fox by HP.ARX~S at an amount egx~al to the z~amaining undep~eciated value of tie Capital
 Tnlpxovements if' depxecia~ed on a straight line basis in accoxdance with, Generally Accapted
 A.ceounting Principles (ths"~urahase Reim~bursament Obligatiozi"),

                        1,1,22 Rest Commencement Date; The fibirtieth (30th)day_ after a
 cez~ificate of oacupaa~cy xs issued to~ HPA.IZKS with ~esp~e~ to the Wataz and A.dvez~ture Park
rxnpxovements to be oonstruated upon the Premises b~ HI'.A.~T~.S pursuant to the Construction
.A.greema~xt,

                        1,X,23 Sti~uct~u~al Realacexnents; The replacement, major xepari nr
z~econstxucfion of Water and Adver~tux~e Park Impi~o~emer~ts, including (a) building xoo~s, slabs,
foundations and walls; ~aeatiza~, ve~tzlation, air condif~oning, ~lumb~ng, sawa~~, utility, 1~~gation
and d~ainaga systez~as; ~oo7.s and slides; paved axaas, including parking dots aid oaxculatidn
walkways; landscaping and xides a7id athaotlons and (b) cost moxe tb.ara $5,000 i~. auy one
instance at~d have a pxojBated usaful life ofat least ~t-ve(5) yeas,

                        1,1,24 Unforeseen Site Condition; ,A, potentiaa ox actual enviro~ztental
mitigation issue, or other conditions x~equi~ing eoxiection or remedia~ion undei the environmental
haws, or additional co~ist~~uct~o~. casts ~z~ add~tzo~a to the costs .in the Co~struct~o~t.A,gxaement, but
exclud{ng problams with soils unrelated to Hazardous Matauals and ~toz7n. water con.dztious,

                       1,1,25 Water and Adventure park: The aquatic ~laygzound and wate~~
ar~d adve~ature park cgnsistiug of ~va~~oUs paz~lc ~ldas, amezuties and ~'aoilities as generally
desoxibed in .E~lttbitD,to be oonstrncted on the Premises and operated anal mazxatained puxsuant
to this Agreement,

                         1,x,26 ~V'ater 'and. Adventure Park 7m~rovements; The • bu~ld~i~gs,
s~ructuras, ad~vartising displags, landscapi~ag, zn~'rast~~uctura, utilities, parking lots, driveways and
walkways, and other inn~rovements or facilii~es eonsta~ucted or jnstalled or to be constructed ox
zusta~led oa the premises pursuar~'t to the Conshuction Agreamen~, except for Capital
Improvements,

                 1,2     Grant of Ri hits,; CITY, in considez~atzon of the pTOV151g11S of this
Ag~~earraent, a;nd subject to the teams ~Zaxeo~, gratrts, bets atzd leases fo HPAS~I~S foi the pu~'~oses
st~.ted ha~ein, the exclusive eight to design, flan, coustruc~, equip, operate aid maintain a Water

                                                                                           Page 4 of34
Water end Adventure petit Ground Lease & Operaiing Agreement
city of Whfte settlement, 7exas~ --Hawaiian Parka -White Seitlamenf, LL.R

                                                                                                         312
                              (.

  acid Adve~tu~~e ~'aik at the ~x~e~,ises, as part of kl~e CIT~Y's park and xecxeation system, This
 Agreement is subject to such l~mitatzous and restrictions as uiay,front tithe to time, be imposed
 b~ any governmental entity other than the CITY' and subject to Ef~e iequireme~ts of flee Teas
 COI]StltLif1011, Zt is expressly ag~'eed that the CYTY retai~ls'tha ownership o~ the Water and
 Adventure ka~k'and tl~a Px~znises and tJ~at the z~~ghts granted fo HP,A.RKS do not exte.~d ~o any
 ownership night whatsoever, other than ownership o~ lts leasehold interest, any parsona~ pz~operty
 paid for solely with ~TPA~tSCS'funds and ~-IPARKS Funded TinprovemeYlts(as defined in Sect~o~
 6.6,2).

               • 1,3    CITY Warranties; CITY makes the following representations, warranties
 and aclrnowledgements as o:f the data of this Agreeax~e~;t at~.d agrees that such rapxesentations,
 wai~antias acid aclrnorxrledgemants shall sul^viva and continue therea~er;

                        1,3,1 ~Ri~htto Transfer; CITY ~va~~ants that ~t leas the power to txans£ex~
 the rights a~~d giant quiet enjoy~azent aid exclusive use of the ~'~~emis~s as provided under this
 Agreeme~'t,

                         1,3,2, Envixo~u~le~tal Condrtioa; CITY wa~~rarats that to the best of its
knowledge, there are no Haza~~dous Materials on or about the proposed site and;there axe no
Unfo;raseen Site Conditions with regaj~d io the ~iro~osed szta £or tl~e Watez~ and .A,dvea~tu~e Pa~~k ox
~rifh respect to t}~e premises, existing o~ o~~ prior to the date o£tbis Agreement,

                  1,~     Unforeseen Site condition; zf either party becomes aware o~ an
'(7nforeseon Site Gond~tion with, respept to tho P~er~:tses of a ta~agnitude that will materially
interfere vt~t~ tk~e operation o:~ the ~Natar and Adventure dark,the CTTY and HPA~KS agree to
consider t1~..a costs to remedy the ~l'nfozeses~ Szte Condition, The CITY, at its sole discretion,
mad terminate this Agz~eameut on 90 days pxioz~ wxitten notzce to HPARKS, given within X 80
c1a~s of t1~.e identification o:F tk~a ue~rl~ ~isco~rered condition; provided, however, that,o:~ the
effective date of such termination, aid pxovxded HPART~S is not in default of this Agreement,
t~.a C7T'Y s$all pay H~.ARK~ an amount equal to the sum o~ HPA~S's total expe~dituras for
const~~uction of the Watez~ and .A.dventura dark, including the Water and Adventure ~az'k
7~pxo~veme~ats and the Capital Impro~veinants, plus HPA.RI~S's actual ~x~ancing costs incuixed to
~'u~d these expenditures, calculated from the date o~'pay~nent fox' each such ~Natez~ and Advautu~e
Pail{ Improvame~xt or Capitat Tm~~ovament-(this payment, is referred to laez~ein as t ie "HPARI~.S
Cap~tallZeimbt~rsement"),

                       1.4.1 HPARKS 0 Lion; xf CITY uoti~ies H~ARX~S of termination o~this
Agreement pursualit to this Seotion l ,4.J., HPARKS sha11 have i~ha option, at its.expense, to
xemed~ the Unforeseen Site Concli~ion avd thereby nullify the termination of this Agreement by
the CITY, ~ Tf I~.A_RK,S elects to continue this T.,ease a~te~ ~oti~ication of te~miiiatio~. puxsuant to
this Section, b~ x~ezned~ix~g tk~e Unforeseen Site Coz~dztiozl at HPAItKS's expe~s~,.ARKS
shad notify tl~e CITX of such election wzthin 60 days following notice fa'om. tkze CITY o~
ter~~natio~ due to an Unfoi~0seen Site Condition and proceed d~ligeu~ly to cotr~plete the
remediation of the Premises.

                  •                                                                      Page 5 of 34
Water and Adventure Park Ground lease & oparatin~ Agreemeht
Oity of White settlement, Texas —Hawaiian Parks -White Settlement, LLC

                                                                                                        313
                           (                                              (~

                ~,S ~Si'ARKS Wat~ranfies: HPART~S makes the following xepiesentations,
 waxxarzties and acknowledgments as of the date of -this Agreement and a~~ees ~laat such
 xepresentatio~s, ~wai`ranties and acknowledgments sha11 survive abd continue thereafterc

                          1,5,1 Sfatus; HPARK,S is a limited liability eorn~a~y duly fo~nec~ in the
 state of Missouri and validly e~sting and authorized to do business~undeL the laws of tkaa.State'o~'
 Texas, arzd laas all powe~~ and. authority to eoi~summatetie ~sansac~,ox~s~ conterriplated hez~eby,

                        x,5,2 ~ Authoxi    HPARKS has complied with all haws and regulatio~,s
 conee~~ning its oxganizatio~, existence and transaction of busi~~ess. HPARI~.S, has or at all
 app~~opriate times shall lava pro~erl~ obtained, alb pe~inits, licenses anal app~~ovals necessary to
 occupy'and operate the Watex and Adventuxe Park ar~d ixi so doing has, or shall have (as
 approprzate), substantially complied with all applicable statutes, laws, regulations and
 ordfnanaes,

                        1.5,3 No Liti ate; Theme 1s no litigat~ort, action, suit, o~ other
proceeding pending•or threatened against HPAR.KS, or, upon cozn~letior~~o#'t1~e cozzstructzon of
the ~7V'ater and Adventure k'aik, the Watex and Adventure Parr which may substantially adve~~sely
affaot the validity, prioxi~ty, oz' enfo.~ceability of tJais .A.greement or the cons~:act~o~a, use,
occupancy ox opexat~on ofthe 'Water and Adventuxs Pa~~k,

                        1.5,4 Enfoxceability; HP.ARKS has full right, pour aid authority fo
e~:eeute and deliver this Agxe~melit and ail instruments executed pursuant }aexeto, a~.d to pexfoz~zn
the undertakings o~HPARF~S contained in this Agreement,

                        1,5,5 N'o Breaah: Iona o~ tl~e.undex~takings of HPARKS contained in
this A~~earnent or any agreement,executed pursuant ~.ereta vao~ates any applicable statute, law,
regulation ox~ ordinance or any order of iuli~g of any court o~~ governmental entity, ox conflicts
with, oi~ constitutes a bieaoh ox default uz~dar, any agreemea~t bq which HPARr~S is bound or
regulated,

                          1.5,6 Accurae ; All documents, reports, instruments, papers, data,
in~oznlatiov. and foz~u~s of evidence delivered to CITY by HPARI~S w~tk~ respect to this
Ag~'eement are aocurate and aorreet, era complete inso#'at' as co;r~p~efeness maa~ be necessary to
gzve the CIT~S~' t1'tte and ~cetu~ata knowledge of the subject matted thexeo#', and do not eo~ntairi at1~
rx~atexial ~x~~srep~esantatzon or omission,

                       1,5,7 Taxes; HP.ARKS has filed all federal and state tax retw~s required
to have bean filed, and have laid all taxes whi~eh have beoome dua.putsuant to such retut~ns,

         2,TERM;

                 2.1     rnitial Tei7n. Tlie rnitial 'berm o~ ~kus Agxeeme~t co~xzxrxences on the
Effective Date arzd continues until ~e exp~zation o£ foxfy (DLO) years from the Rent
Cotrarrxe~ce~a~e~at Date (the "Z~aztial Te~7n"),

                                                                                           Page 6 of3~
Water and Adventure•park oround ~.easa & operating Agreement
Clly of While Settlement, Texas —Hawaiian Parks .White Seftlameni, I.LC

                                                                                                        3-14
                2.2      Renewal Tern.; CITY giants to T~PARKS options fo extend this
 Agreement for  Four  (4) addztlonal five (5) dear periods (tk~e Initial Tenn and any xanewal pez~iods
shall be z~efe~~ed to l~e:~ein as fhe "Term"), Eaeb.z~enewal option may be e~ezcxsed o ily if at tha
time of caxnmer~cezneizt of that option HPA~S zs not ~~ default ox beach a#~ any term or
condition contained in~ tbis Agreement (beyond any applicable notice and cure period),
HPARZ~S s~a11 del~var wrztten notice to the -CIT-Y-...~~i~ving notice of i~anevval or non~Penewal at
feast sxghteen (18) months prior to the expiration of the then, current te;t~n, Tf no notice is
p~~ovided this Agreement sha1.1 be deez~ned to be xenewed :Foz' the'applica~le option period. If the
rane~al option is exercised; the extended lease term shall be subject to. all the terzz~s aad
conditions of this Agteeinent, ~ Annual 7.ease paynle~ts during ata~ renevt+al period s~a11 be
payable as provided In Sectio~~. 8 hereof,                                         ,

         3,      QUITCLAIM DEEb; ~lPART~S acicno~lvledges that no right of owne~sh~p fes o~
 estate is granted by this Lease, At the #ermxz~atzo~~. of this Agreem_eizt, ~TP.A.RZ~S sha11 execute
 aid deliver to CZ'z'~'' wi~~n thirty (30) days a good and suft"~c~exit Quitclai~a Deed to at~~ rights to
 and possessory ox puz~oY~ted ownez~ship rights or ala~ns to 'the real estate arising he~~eunder,

          ~,       pARI~ING AND ACCESS TO ~REMTSES;

               4,1     TIPARKS to provide Parking Access and use; Tn accoxdarzce wztli the site
plan attached hereto as Exlttbit B, HPART~S shall control a1i parking on the premises, CITY
acknowledges at~d agrees that HP.c~RT~S may ehazge a fee for any ox all paz~~dng spaces with paid
~arkzng spaces to be ma~~l~ed in Exhibit B,no o~vex~~.ow parking will be chaxged a lea,

                4,2     Pedeshla.n Access; CTT~Y shall p~~ovide designated,pedestrian acoess to the
'~7later and Adventure S'axk fox custornexs, employees and sa~vica persont~..el related to
HPAIZT~.S's activztzes puj:suan~ to this Agi~eemant in accordance with the Mans attached hereto as
~~rtt~i~t13, Px~ox to the E;f~ective Aate, the CXT~'shah use its best efforts to secuxe commitments
fiom ail appx~o~ziate governmental authorities to place, prior to the o~er~ing of the Mater end
Ad~entuxe ~axk, appropriate roadway signage and signals, txa~zc abatement aid speed x~eduetion
signage and• devices, and othex appropriate signage 'arad sa~et~ zne~su~es, to a11ow for safe and
adequate pedestrian. foot traffic, allowing for heavy foot tra~£ia at pea~~ usage, to and fxorxt the
Watez~ arzd Adventure Pa~~k,

          5,       RIGHTS OF HPARKS;

                  5,1 ~ Permitted Activities; HPARKS may use tl~.e VJatex and ,Advent~.ue Park
~xemisas for commercial ~tuposes only as follows; all activities noi~nally associated wiih Wader
and Adventure Park entei~taiz~ment facilities, including, witk~out limitation, v~ious mater-orze~~.ted
entartaiz~x~aer~ts, rides, sides, pools, and attractions, zzplznes, cl~~a.bing walXs, ropes aau~ses, sky
aides, games, competitions, promotions, aett~vity based entertainment, special occasions at~d
group gatherings, concessions, and musical concerts, dramatic or othax~ sfage shows of sianzla~
presentations, open and available to the general public, ,

                                                .                                         Page 7 of 3~4
Watep and Adventure Park ~raund Lease & operating Agteement
City of Whlfe Settlement, TeXas —Hawaiian Parka -White Seltlemanl, LLC

                                                                                                        315
                     5,2      New .A.otivities; Any othez~ aides o~' attractions'not within the scope of the
 abo~~e described aativfdes which HFARZ~,~ p~.~oposes to conduct at the Water and Advex~tu~e Parlc
 shall xequire tha appxoval of CITY, wUick~ a~proval~ shall not be unreasor~abl~ withheld,
 co~d~t~oned or delayed,

                    5.3       Exclusive Commercial Rights on the 1'ramises;

                           5,3,1 Uses; The rights conveyed under' tkus Agreement 3~iclude the
 exalusiva right to comn~excial use of the Prenuses for the purposes set forth herein, except as
 liinited~ by this ,Ag~~eeinent.

                        5,3,E Entiv into Other Agreements; HPAR~S shall have the sole and
 exclusive xight to enter into concession, promotion o;r spoz~soxship agreernenfs, o~~ exclusive use
 a~angemants relating to t1~e latex acid Adventure Park so long as the agxeements do not e~~tend
beyond the Tartu o:F•this Agxeement. Any such agreement shall be subject to and liuuted b~the
app~icab~e te~xzs o~ this Agreement, S~~,A_RKS shall submit any significant or material
co~cessioa~, pxo~otion .or sponsorship agreements that depart ~iom the past and ordinaxy
~z~actices in opeYati~g ~'arnily ~orianted water and adventure park facilities for tk~e approval of
CTz`Y, which ap~rova~ s1~aI1 not be unz~easoz~ablq withheld, conditioned or delayed,

                         5,3,3 Limitations; The parties recognize and acknowledge that cextain
types o~ advertising might contain material inap~ropiiate fox a public ~^acreationa~ ~acxlzty, The
paz~Eies acknowledge that signs, photo~~aphs o~.~ graphic advertising ~zaterial z~alating to me~xcal
pxoduafs or cex~ta~~ fiypes of oontcm~orary clothing might create issues with community noxxzas
tk~at would be unacceptable in a ~aik facility HPARKS.shall notify CZ'z'Y MANAC~BR or
desxgx~ee of its intent to ~laca advez~tisix~g or dis~la~ material and shall provide the content o£t~is
proposed and/or intended advertising az~d/ar naoc~C-up ofthe display Uaatexials at least two weeks
prior to placerne~t~ If ~:ha CITY objects to adv~z~isi~g a~~ dispJ.a~ materials to ire placed ~~ the
facility,it shall do so in w~'zti~g witl~ln one(1) week of the placexne~t o~the ad~e~~tising to which
objection is taken, ~PAk~S~S shall n~ofi e~,tex into any ~romot3onal or s~onsoiship arrangern.ents
involving tobacco products,

                             5,3.3,1 Alcoholic beverages mad be
allowed on tl~e Pxeinises, subject to eom~l~anee with ail applicable gvvez~mental laws axzd
regulations,

                              5,3,3,2 CITY recognizes that S~~A1~.S does not knave co~p~ete
cont~~o1 oven ambzez~t noise or incidental visibility, While the volume of pubic address
announcements mill be modulated to the level necessary to be audible to Tatar and Adventure
Park patrons, it is ~ossibls that tl~esa annourzeements z~.ay be audible outside the Water at~d
Adventure ~ar1c, Noise volume and charaoter shall co~foxm to the requirements o~ any
rnun~cipal noise regulation then applicable to the Pram9ses,

                   S,4       ~PARKS's Right to Lev~Chax eg s Approval by CTTY;

                                                                                              Page 8 of 3~
Water and Adventure Park around Lease & operating Agreement
City of White Selllement, Texas —Hawaiian Parks ~ White Battlement, LLC

                                                                                                           3'16
                             5,4.7       ees; HPARKS may charge fees,Fates or prices as follows;

                                 a,      for the initial adzx~~ssiox~ to tl~e Watex and/or A.~.~venture
Pa~~1< (except as limited by this .A.greement);

                                       b,.       .for amusezaaeut facilities ~vitl~in the Water and Adventure
S'a~Xc;

                                       c,        for use of all other facili-Cies opez~atec~ b~' HPARI~S upon the
 Watar aid Adventure Park;

                                       d.        fox sales o~food and other cgncessxox~ items at the Park;

                                e,      for use of the 'remises by concesslonaixes, licensees, and
other third pat~taes otherwise ailthorizad by this Agxeemant; and                            '

                               f                 for parking,including, with
 limitation, VIP or valet paz'king,

                               g,      any fees z~e~afed to items (a) through (fl including, but not
Iitnited to, fees xalated to ticket pu~~chases via tk~e Internet a~zd ot~ex fees that axe usual aid
custo~aty to the entextainmen~ ii~dusfxy,

                         5,4,2 ~.evzsion o~Fees; HPAI~K.S shad pa.~ovideto CITY a complete list
o~ its fees, xates and prices at the ~Iatei' and ~.d~venture Park. ~ARI~S ~ese~~ves the right to add
additional concession items o~ tickets dut7ng tie season that mad iaot ba on tl~e list initially
pxovide~ to the CTTX but agz~ees that a~~ prices will be simila~~ to those alt~eady provided to CITY,
HPARKS shall post schedules of przaes and chaxgas at tic~Cet boxes, concession outlets, anc~ other
conspicuous places,

                      5,4,3 ~ench~aark fot~ Fees; All fees, charges aad prices fox services• at
f1~a Water ~~d Adves~tuxe ~ax1c sha11 ba sefi by ~TpARKS anal shall be on a generally app~xcabla
rate schedule eompaxabXe to those of ofher water and adve~tux•e paa~lcs its. Texas of similai size,
scope acid quality,

                       5.4,4 biscounted Admissions;            Notwithstanding anything to tl~e
co~ztraxy, residents, cu~sent WSISD Students, arzd em~loy~es of ~e CITX sk~akl receive a 25%
discount o~the staffed front gate daily tttzd season pass rates by slowing proof ofxesidenca in the
City, or employment by the CJT~'ox currant WSZSD photo ID,

               S.5    Control of Ticket Salese ~IPARI~S sba11 operate tielcet sales for -its
operations, ~.PART~S vt~il~ follow reasonable revenue control procedures to monitor xsvenues,
T~PA~tKS wi11 fouow ~'easonabls ~evept~e cont~'ol ~z'ocedures approved by Cz'~'Y to naonitax
revenues, CZTX shall have aeess, upon reasortab~e notice to the ticket safe operations, to review
and audit records ofreceipts anal ~ezi~y accu~~acy of the operations themselves,

                                             .                                                    Page 9 of 3~
Walar and Adventure Park Around Lease &operating Agreement
C1ty of Whlta Settlement, Texas ~ Hawaiian Parks •White 5ettlemant, LLC

                                                                                                                317
                                     ~          ~                                ~   ~

                          5,6 ., Identifyi~~~ns

                              5~.~,1. ~ Water and A~ventuze Park Sins: ~TPARI~S will erect a
      monument ox pylon sign identifying the Water and 'Adventure Par~C with associated logo, This
      cost is included ~in the Construction Agreement. CITY will gzve HPART~.S the option, at
      ~SP:ARKS's e~peuse, to erect additional szgrzs. CZTX sha11 lave the right to review anal approve
      these signs, iricl~ding, but not limited ta, loeat~o~t, size, design, co~.tent, mefhod of attachment(if
      any) and matex~als used to znar~ufactura th.e sign; provided, l~owe~ve~, CITY's approval shall not
      ba uru~easonabl~ vvlthheld, conditlone~ oz' delayed.. A]1 signs must conform to tho CITY's
      ordinances regarding signaga,                                                                 .

               _          5.6,2 Other Sins; HPARKS, subject to the reasonable ap~:taval of
      CITY, may locate othex 'identifying or direetiaiial signs at other points on the Pa~emiaes,
      T~PAR~S sha11 have the right to main~tai~ ent~~y signs attk~e pedestrian ent~~ance of t~.e Watax az~d
      Ad~entu~'e Parr,

                               5,6.3 'Di~~ectional Sins; CITY agrees to ~o ooze than- fen (10)
      dii~actional (~wa~~finder) signs to be pXaced ou higb. traf~xc thoroughfares wltl~in the CITY,
      di~~ecti~g guests to the mater aad Ad~velltux'e Park,

                             5,6,q~ Texas Department of Zz~.suxance Aanusement Rids I~speetion
     Certiftcation; ~PART~S agrees to buzld and operate tk~s Wate~~ aid Adventure Park in accordance
     with tk~e State off'Texas Amusement Ride A,et to include passing annual iuspeations and hosting
     s~gllage xequixed ~~ the A.et, ~peoifta requirements by the Act may be fiound at
     http;//www,tcli,sta~e,hc,us/commercial/inde~ainusament.h-tnn~~

                     5,7    Promotion and Advei~tisin~; Except as othez~wise expx~essly provzded
     herein, HPARKS shall have control oven a~vert~sing and p~~omotxon o~the Mater and Adventure
     Park, CI~'X vt~i11 use all reasonable ef~oxts to promote the use of the Water and A.dwenture Park
     through the use of city~co~h~o~lad media, publications, utility mailings, aid othar~ materials or
     fliers fntended far general distrlbut~on, .Any ~SS~A~S~S coupon oz~ inserts will be prepared aid
     p~uited at HPA12~S's expezase, and ~nc~u.c~ed by the CX'I'~ wzt~ utility bill rnailyngs at CTTY's
     cost. 'i'he CITY shall have tk~e right to prepa~~e and dissezni~aate such additional material as it
     xeasonably deems appxopriate for promotion ofthe Watex and Ad~vontura Pant as a feature o~ the
     CYT'~''s parrs and recreation system, provzded tk~is material is consistent ~vi~h tlae natuxe and
     charaoter of the. Water a.~d Adventure Park, CITX, iz~ ids sole discxetzon.; may pxovide to
     HPA.RKS tba rightto advertise or pxamote, on other CZTX property, its :Facilities and activities at
     t~ia Watex and AdventuxeParl~,

•-                         5,'7,1 CITY's Allocation: Wjthout limit~n~~the provisions set forth in
      Section 5.7 above, CITY uid HPARKS sha11 collaborate ~ and meet at least once- a~uallp to
      discuss maxketiug stxat~gy and carx~paagt~, CITY shall, as appropriated by the City Council,
      allocate $35,000 annually to advertise, promote and otherwise market tie Water and Adventu~'e
      Pa~l~, H~'ARKS slia~l provide neeessa~~+ mazketing guidance to CITY and pextnissio~ to use

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

                                                                                                            318
                              ~                                          ~~

   HPARKS logos in any marketing campaign, CZTX shall follow a~ applicable rules and
   guidelines issued b~ 1'-~1~ARKS franchise, HPA.RKS sha11 have the ability to re~t~iew and
   app~~o~ve all marketing n~atexzals and advertisements for compliance wzth HPA.RT~S's fi~anchise
   agreements,                                                                     .

           6,       D~[J1'IES OF I~PARKS;

                    6,~      Quality o~ Opexation;

                          6,1,1 Opexatin~ Season; HPARI~S shall operate the Water and
.A.dventl~re I'arlc foi~ a commerc~all~ reasonable pe~~od dutx~g its Opexatt~~ Season., The
 opexations shall be offirst class quality in all respects, as compared to similat~size operations in
Texas, HPARKS shall puz~sue a promotionaX program to incz~ease the Use of its services a~.d
~'acilzt~es which shall 1~e comparable its scope and cost to ~'omotional activities of H~.ARI~S or
ifs afC~liafes £ox other wafex and ad'ventuie ~arlcs,

                      6,1.2 Operating ~Iouxs,; HP.ARKS shall establis~~ its Ope~atin.g Se~so~
and Schedule o~ Operating Hours pursuatat to opa~rafiz~g plans that wi11 maximize economic
return from operations, in ~TPARK.S's reasonable business judgment, Prior to eaoh Operating
Season; HEARI~S sha11 prepaie and submit ~o CITX the Schedule o;F Operating Hou~:s,

                        ~-      6,1.2.1 Th~~o~ughout the Term, and any renewals tUarso~, duzing
each Operating Season ~-Il'ARI~ shall deep the ~Jater and Adventut~e Pelt open fox business
during ordinary business hours for comparable facilities; provided, however, that this provision
sha11 no-t apply if ~ha Water at~d Adventure Park xs closed clue to i~cle~a.ent weafher ar Water and
A.dventuxe S'ari's business is te~.pot~ariJ.~ shut dog.due to casualty, condemnation,fire or othai
causes beyond the reasonable control ofI~PARKS,

                               6,1,2,2 Z3ours of operation that exceed noxma~ o~erating hours,
shall be subject to the review and co~se~t ofthe ~IT`Y' Manages ox designee, whie~i oor~sent shall
~aot be unseasonably wit~eld, coriditzo~ed ar delayed,

                   6,2      HPARKS Pexsonuel;

                       6,2,1 Compensation; The z~urnbez~ o~ e~.ployees wanking at the Water
,aid A.dvanture.Park, and the compensation (salaries oz~ wages, benefits and commissions) paid to
them, shall be reasonably es~af~lished .b~ ~ART~S, but mi~unal sta;Ffing levels shah be
eon~paxabls to tlxosa established b~ watez~ and adventure parks of similar size and scope ~n other
locations in Teas,

                     6.2.2 Trainin ; ~'A.RI~.S agrees that at all times tts employees shall be
clean in appearance and aouz~eous :l~ ~azvaea~ and shall ba trained so t~aat the public and patrons
at the site shall be heated and served v,~th ever reasonable co~s~deration and oouttesy~
~-~'Ak~S agrees thaf it sha11 maintain tt~ained and competent aquatic s~af~ in accordance with

                                        •                                            gage 1 I of 34
Wafer and Adventure park around Lease &Operating Agreement
City of While Sel(lement, Texas —Hawaiian Farks •White Settlement, LLC

                                                                                                    319
                               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 oflatent defects or latent ~'ault~ installation o~ faulty construction uzadarfialcen puxsuant to
the Construction Agt~eeznent ox by a contractor or subconh~aotor,

                         6.3,2 Capital Improvements Plan; HPAIu~S sha11 annually pz~epa~e or
revise and submit to C7T~'' a curxent capital Stnp~ovements Ian that identifies eo~templated
 Capital Iruprovements and Structural Replacements to tlaa ~'reinises, ir~c~uding any substantial
 cha~iges or altarat~ons zu any axisiir~g inlproveir,.ents, pxojeated to ocour during the nest twenty
~foui (24) months, The CITY acicnowledgas that ~P.A,RZ~S will, ~i~om time to time over the Texzn
 o£ this Ag~~aama~tt, steed to xeplace certain odes and attractions r~i~Ykh na~w acid different x~des and
attractions to iriainfain and attract continued intexest in the Water and Adventure Paxk, The
 CITY fuz~er acknowledges that because of the rapidly ck~anging nature o£the teal~nologies anal
imp~ovezne~ts a~vailab~e ~ the watex and advax~tule park tiidustxy,the Capital Itriprovernents P]an
w~l~ eontazn genexal daseri~tioi~s o~ ant~czpated ~n~roverrxe.~ts and rna~ need to have substantial
flexibility, with xegard to ~lis exact speci~.cations for the i:mprovau~ents and capital itarn~,s and tkaa
 vendors for saz~e, Except as ~~~ovided in Sec-~ax~ 6,3,3 haxeof, I~P,A~t2KS shall gat be required to
carry out any improvements proposed in the Capital Im~rove~xzer~ts Plan. unless the Capital
Tmprovsments and Structural Replacements described tha~ain are a~provad by the CXTY and t1~e
CITY agrees to Ruud its 50% sh~xe as herea£~ar p~ovzded, ~ X~ CXT~' and H~'ARKS dgxee t~ fund
new Capital Im~io~a~nents and/oi Sttuetutal Replacements, the CITY and S~PA~S~S s1aa11 each
~a~ ~:E~y pexce~t (50%) 'of the cost of suol~ Capital Impi~ovaments and/or Straetural
R,e~laoenaents; p~o~vided, howevex, CIT~''s share ofthe post of said Capjtal Im~iovemants and/or
Structural Rep~aeemezlts s~iall be Funded from the Sales Tax Escrow .A.ccount(da~i~ed iu Section
12,3 below),                             ~                                                          '

                          6,3,2,E Im~rovaments Funded by I3PATtI~S; Tf the CITY ~a~Is to
approve a request from ~TPARI~S to fu~zd proposed Ca~ifal In~pro~vements at~,d/ox Structural
Replacements, HPAIZKS inaq request that the CYTY p~xmit T3PARKS ~o construct such Capital
Impraveinents at HPARKS's expense, CITY agrees ~t +,yil1 not un~.easonably withhold, condition
ox de]ay such oonsent.

                                                                                          Page 12 0~ 34
Water and Adventure Park ground lease &operating Agreement
City of While Selllemant, Texas ~ Hawaiian Parks -White Setilemenl, LLC

                                                                                                         320
                                                                             ~,
                                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 ofHPARKS under this Section, '

                       .,6,3,4 Maintenance and Repaia~ Sexvices, Subject to the terms of this
 Agreement, HPARRS at its cost and•expense sha11 secure or provide Maintenance and Repaixs of
 the ~Jater and Adventure parlt 7mpz~ovanxa~ts and Capital Trnpro~vements to keep thez~a in good
 opexating oo~dztxon 'and in good repaia' ~ (damage by casualty or bonderr~nation excepted)
 tl~~oughout theix us~:Ful life and ire aceordan.ce with all ap~licable.laws, To the e~ctent available,
 ~S~.A~ZKS may pay khe cost's of Ma~nte~ance and Repa~~s from funds da~osxtad by HPARKS into
 the Mainte~aanea Reserve Escxow Account pursuant to Sectiort ~ 2,4 hereof,                         `

                          b,3,5 ~exnnit and Other'Fees; The CITY will waive a1T CITY buz~dix~g
permit and CITY license fees associated witlx the development oftha Watex and Adventure Paxk,
The CITY agrees .hat H~ART~.S shall got be requixed to pay any other fees, taxes, o~~ suxcliaxges
to the CITY iu eoznaection with this project,~ addition, the CZT~'' will use its best af~orts to see
that the Water and Adven~tuxe ~'a~.k aid BP         S ai:e not subjeot to any othex pezmitting Fees,
Iica~se fees, stucharges, speazal faxes oz~ assessments, or other fees ox claaa~ges, in cozwection with
tUe o~exat~on. o~ the latex and Adventuxa Park, that would not be assessed, if the Watex and
Adventure park wexa a CITY operated pai.k facility, CITY and HPARKS agree to woxk togetk~er
to joix~.tly prepa~~e and submit any t~eoessar~ pa~artivorlt to inform airy applicable governmental
authorities a~~d/oz~ taping ar licans~g aut~oxities that the Water and Adventure ParX~ at~d au
irnpxovements associated with Water and Adventure Park are and will ~~ema~n city~owned
pxoperty, except as otharw~se expi~ossly provided lierei~, S~p.A1~S agxess to defend City should
any texas be assessed and ~TPARICS wilX agree to pay az~y tax assessme~zt, SPARKS will ba
subject to fees ofthe City o~Fort Wo:~h ir~cludi~g Impact Fees aid Pass Thiough fees,

                      6,3.6 Timing o~ Jmp~oveznants; Bxce~t as specifically described ~.exeX~n,
the timing of any Capital Improvements shall be entirely wiCh~n the discretion ofHP.ARKS,

                          6,3,7 ~'~~tas; I~P.ARKS agues and aonvnits to the inclusion in the initial
V,ratez'~and Ac~ve~t-tuxe ~ar~ deve~opmeut of sim-'tJ.az' am~r~itl.es and plans as ide~ti~.ed inExlitbit
D, The partie's acknowledge tJlat the attractions, ~'acilitzes and impxove~er~ts wxl~ not be static
and veil] change from time to time over tl~e ~'errn o~ this Agreement,

                6,4 ~ ~2.estrictio~as on Subletting and Concessions; H~'.ARKS sha11 got sublet or
allow occupancy of any portion of the ~rem.is~s to or by concessionaires or otl~ax third parties
except 1z~ coznpliazlce with t~.e ~ol~o~v{r1g conditions

                         a,     HPARK~ ~na~ grant the operation of specialized shops andJor
facilities, restaurants 'and other food providexs, to concessionaizes ore tl~e following conditions;
and

                                                                                        Page 13 0~ 34
Water and Adventure Park Ground Lease &operating Agraemen!
Clly oP Whlfe Selflement, Texas — Hawallail Parks -White Settlamenf, I.I.0

                                                                                                       321
                                ~                                            ~..

                         b, ~ Each concession g~•anted shall b~ subject to tie applicable terms
  and conditions o~'this Agreerner~t, and S~PAItT~S shall ~~st notify CITY' that a concession has
  been g~~anted in compliance vaitli this subsection,                               ,

                  6,5      Non,d~sczimination;       Neithe~~ HPA~I~S nar , its ernp~oyees or
 concessionaires shall dzsariminate 1~ecause ofrace, religion, color, ancestry, age, rational origin,,
 or disability against any person by refusing to ~~lix.~ish any such ~exson any accommodation,
 ~acllity, sez~vice o~ pt~i~ilege offered to or enjoyed by the general public, Nox shall ~LPA.RI~.S or
 ifs employees publicize the accomt~iodations, Facilities, sei`vices oz' pi~.vilsges in any annex that
 would d~reetly or inferentially ieflect upon ox questzoz~ the acceptability ofthe patronage o~ any
 person because ofrace, religio~a, color, ancestry, age, national oi}gin or physical kandicap,

                          6,5,1 Access; ~ARI~S shall provide disabled persons access to its
 tides or otl~er ei~tai~tainments as requixed by 1~-vv,              -   ,~

                           6,5,2 ~ubltc Areas; HPARKS mad occaszona~ly conduct ox engage i~
 public religious act~~yities iii the areas o~ the 'Watex and Adventure Park open to tl~e pnh~ta
 (inClut~vlg, but riot ~ilxzited to, p~'oselytizi~g, preaching, baptizing, passing out religious utexature,
playing musk with ovez~tly religious massages,inviting members ofthe public to attend religious
activi~ias or services, and praying o~e:r tk~e speaka~~ system o~~ in any other manner designed to be
heard colleotively b~ vxs~toz~s to the park, whether or not any or a~10~ suo~Z pax~soz~s actually hear
suchpxayex). Tkais Section 6,5,2 is not intended to, nor it shall xt ba construed to, ~xakubitpxi~vate
expressions of xaligious faith by either patxons, employees or eontraators ,o£ tk~e Water and
Advez~tui;~e ~'a~~k, noi~ s11a11 this Section 6,5,2 be interpreted ix~ any way to condone o~ ~errnit
d:iscxlmination against ati~ ~erson or group on t~~e basis " of religion ox roligious beliefs ox'
pxactices, Mozeover, nothing in dais Agrean~ant is intended to, nor slaall be construed to, inhibit
or i~fri~ige on any i~idi~vidual o~ g~~oup's freedom of association,fxeedorn of xeligion, or freedom
ofspeech,

                          6,5,3 Special Events; HPART~S shall not disca~~ninate lea any mannex
p~~ohib~ted by law ua making the Water and Advez~tuxe ~'a~k available to an entity ox gtou~ on a
p~~~vate paxt~ basis o~~ aftei normal o~ex~atf~g hours,.

                       6,5,4 Access; ~xespt as limited b~ tins paragz~aph anal by ap~~icable la~,v,
HPARKS may limit access to the Pi~ernises as necessary to prevent d~srupt~an of to promote the
safety ofits castoxners dz~ emp~o~ees,

             6,6   Acltnowledgmezzt of CITY'S Title to Premises, Acquiescence in
Ownership by CITY; HPARKS Funded S~n~ro~ve~ants; HPA.RKS Slaal~ Commit No Waste;

                      6.6,1 Title; Except as otherwise expressly provided herein, HP.A.RK~
herrab~ ackr~ow~edges the tine of CITY irz a~.d to th~,a ]at~d constituting the )?remises and the deal
property improvements, at~x~aotions, ~~idas, aid facilities acid fixtuxe,~ and appiu~tenances
cons~xucted by eithe~~ pai~t~ on the pxemises dux~ng the Term o~ this A.g~'eeznex~t and ~ie~~eby~
covenants and agrees nevez~ to contest said title, Notwitl~sfanding~the foregoing or an~tlaing to

                                                                                          Page 1~{ of 34
Water and Adventure park Ground Lease &operating Agreement
City of White settlement, Texas — Hawaiian Parks - Whlla Settlement, l.l.0

                                                                                                         322
 tha cos~txaiy in fhis Agreement, if CITY dec]ines to fund Its portion of anq Capital Impxovemant
 and H~'ARr~,S instead prooeecl~ with the fu11 funding of such C~~ital Improvement utilizing its
 owt~ funds, HPAI~T~S shall take title to and such Capital Improvement upon termination of this
 Agreement in accordance'with Sect~o~ 6.6,2 below,unless CYTY males the payrr~ents ~equi~ed in
 Section 6,6.2 below,

                      6,6.2 T~PARKS funded Tm~provements; 'At least ninety (90) da~s~~xior
to te~mvnat~on of this Agreema~t, CITE' skaal~ pay HPARKS the Purchase Rai~bursenient
Ob~i~ation fox any Capital 7mprovementa r~vk~olly funded by HPART~S ~u~suant to Section
6,3,2,1(`°~iFA~2Z~S ~u~.ded Tinprovements"). HPARI~,S Funded ~npz'ovar~ents sk~a~. trot izlclude
and CapitaX TYnpxovements £ended by HPARKS~puxsuanf fio its abUgations under Section 6,3,3,
Zf the CITY declines to ~pa~ the Purchase Rezrs~buz'sement ~Obligatio~, the full ~;ight and title to
st~clz ~mpxovements sha11 ~i~ansfer to ~iPART~S, axed HPA.RT~,~ shall have t11~ ~3gh't to~talte title to
such impxovements and remove such I]7~.pTOVerilerifS from. tlae ~?xemises to the extent 1khat
~il.'.ARKS can do so w3thont and damage to the o-lhea~ improvements on the ~'xe~nzses, Zn
addition,the CITX aclrngwledges and agiees that it does not and sha11 not hold title to any leased
oz~ rented im~rovaments, attzactions, rides and facilities.

                         6.6.3 Ownership On Terxninatiori; At the texrr~i~ation of this A~'eement
 fox any z~eason;(i)title to any ~~xsonal property puxchased in connection nth,and integral to,the
 o~exataon. of the Water and Advantut~e Pant and paid fo~~ ~ whole or in part b~ the CITY shall
 vest (or z~emain vested) ~n the C7T~', r~vhich perso~.al pzoperty includes, without livaitat~o~, all
 goods, Opez~atir~g Xnven~to~y, mex~cbandise, co~nputei~s, software, vehicles, and machinery owned
 i~ co~nectio~ ~rfti~.the operation of the Wa~ar and Adventure Park;(ix) CITY shaJ.l xetai~n ~u~~ title
 and owz~axship o~ any and all Capjtal Trripi~ova~.ants, Stxuctural Replacements, Water and
 Adveni:ure Park Impx~ovemer~ts, and all otl~e~ btuldin~s, equipmar~t and ~ac~lities pa~,d fox :l~n
 whole or in part by the CITY; and (iii) HPARKS shall take tithe and ownership of any (a)
I~P.~RT~S Funded S~rn~rovements acid (b)pexsonal prope~~ty which k~as baer~ paid for entirely by
~-TZ'A~2S~S, ~'.A~RT~S may z~emove the p~opei~fy referred to in clause (ui) above at and time prior
to the expiration of thirty (3Q) dais after such termination, In removi~.g HP.A.1~~S's pro~er~y,
~I~ART~.S sha11 spot damage or ren.de~~ inoperable any of tl~e otk~er Watex and .A.dve~atura Park
Tnl~rovements ox Ca~ztal Ir~pxovements, attx~aetzons, rides and facilities at the Water and
.A.dvei~~tue Park,                '

                         6.6,4 .Condition of Water and Adventure Paxk at Terminatzos~; At the
ax~i~ation or ea~~lier termination of tl~e Tema, HPARKS shall teuninate its service and vacate tk~e
Wate~~ ar~d Ad~eratuta Park, leaving atI rexna~ning i~npiovements, equipment, ~ixtuz~es and ix~ade
~xtuies iz~ good and xeasoi~ably clean co~nditia~, subJectto o~~di~ary -wea~ and tear,

                        6,6,5 Waste; HPAIZT~S shad cox~~mit Sao waste of -tbe Pxeinises and shall
be responsibly ~oz~ ax~y damages to the premises caused by the activities of H~'AR.T~S, its agents,
amplogaes, guests, and i~ivitees,

                      6,6.6 Hazardous Materials; H~'A~S~,S s}aaJl at no time,d~sehaige any
waste or Hazai~daus Mate~~ials on the pxemises, ~iPARKS shad at no time during the Tartu o~

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

                                                                                                       323
                               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<
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                                                 'UVl~ite Settzement
                                              prat and doss Statement

 Ordinary Tncoiroa/E~tponsa ~,
                                  Tncowe                                                 Jan -Dec
                                            .100 Admission Income                               0.00
                                            200 Food &Beverage                                .0,'00
                                            225 CooleP lncouta                                 0.00
                                            251 Cabanas 1 Pavilions                            0,00
                                            2S~ T~oekar Rentals                      ~       ~ O,Od
                                            27S Retail Income                                  0.00
                                            2901viiseeJlaneous.[ueome                          0.00
                                            299 Sponsorship Lncoma                             O,QO
                                            interest ~ Cp            ~                         0,00
                                 Total Income                                                  OAO

                      Gross Profit                                                             0,00

                                 Expense
                                            300 Cost of Snles ~.~&B                            0,00
                                            300 Cost ofSAles -Retail                           0,00
                                            301 Corporate overhead ,                           O,Op
                                            x{00 AdvertisingE~peuse                            0,00
                                            S00 Igsuranoe                                      0,00
                                            6D0 Genera( Expenses                              ~ 0,40
                                            650 Repa)r & Ivlaintenane~                          0.00
                                            C>7S Sifpplies               ~                      0,00
                                            700 PayraU ~~penses                                 0,00
                                            750 Fringes/Tapes                                   0.00
                                            800 Profassional Fees                               0.00
                                             900 Texas & l,icensas               ~             0,00
                                            925 Transaction~ees                                O,QO
                                            950 Traval Expense                                 0.00
                                            975 Uttlifies & Te(epl~one                         0,00
                                            Miscellaneous Expense AP                           0,00
                                            Property Rent                                      0,00
                                 Total E;cpensa                                                0,00

Net Ordlnn~y Y~icome ~                                                                         0,00

                                                                                                       345
346
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    X47
                         Hawaiian falls Receives'Investment frnm Source Capital,!LC
         •Horizon Family Holdings, LLC, the owner and operator of seven Hawa(ian ~a~lis water parks and two adventure
  parks in Texas, received an additional investment from~an affiliate of Source,Capltal, I.LC, ah Atlanta-based private equity
  firm, the company announced"today, Davld Busch,the founder and CEO of Horizon, wilt continue in his current position.
         In announcingthe acquisition Source Capital Partner Bin Emmons said "we are excited to expand'ourrelationship
 with Hawaiian Falls and look forward to pursul~g a number of Initiatives with management to Improve upon the 14-year
 operating history of Naw~ilan~ Falls, Ne said,"When the parks open on Memorial Weekend, we want to make certain our
 guests have a fun and safe experience. Hawaiian Falls represents quality, wholesome entertainmehtfor Ilterally hundreds
 of thousands of Texas famlllEs and we look forward to continuing and even enhancing the high standards of service set'by
 the parks' employees,"
         He•continued,"Another high priority fs to ensure our staff of 2,000 Ambassadors have a goad work environment
.and are trained and ready to give our. guests the best experience possible:'
         In commenting on the acquisition David Busch, Hawaiian Fails CEO,said,"We are fortunate to have investors that
 areas committed as we always have been to serving our Hawaiian Falls guests, ourcommUllitles and~out' employees. Our
 parks' philosophy of"serving the community by bringing families closer together' will continue and thrive under our new
 ownership:'                                                                                                     .

         Busch stated Source capital has been an investor in Horizon since December, zols and has been a supportive
 partner during the company's eXpanslon over the last two years. "The Source Capital team has observed our operation
 over two operating seasons at~d concluded that,the parks represent a solid investment fortheir pbrtFolio," Busch said.
 "We are thrilled in every way to be a part of their fam(iy."

         All parks open to the public Saturday; May 23. For specific operating hours and directions gq to hfails,com or
 facebook.com/hfalls,

 About Hawaiian Falls
_Hawaiian Falfs opened its first dark in 2003 in Garland'and currently has water parks in The Colony, Mansfield, Roanoke
 and Waco. In 2014 the company premiered a new family entertainment concept in White'Settlement~an~d Pflugerville
 respecfiively, which includes Hawaiian F~IIs water park, HatNailan High Adventures challenge and adventure park and th'~
 22,500 square foot Aloha Event Center.
• About Source Capital
Source Capital, LI.0 is a private.equity firm founded in 2002 which makes both equity and~deb~ Investments ~n mature,
lower m(ddle-market U,S, companies across a range of Industries, source capital tias~completed 49'transactions aver the
last 13 years and [nvested across a broad selection of industries Including: business services, light manufacturing,
consumer products &services, healfihcare, and value-ad-dad distribution, Source Capital has offices In Atlanta and San
Frandsen.                           ~                             ~~                                                 '

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      SOUZ'C8C~i~1t~

            '                    7i 14th Strxt Suite 2700 Allanlq Georsa 30309 ~ ofjjce; 404,' 49.8330, ~ fps: 770.73.1.4152 ~ ivww,aouroe-cap,com

                                                                                                                         March 31,2015

            Mr. Phfl Bray.
            Director of Finance
            Clty Of,Whfte Settlement
            White SetYlement,lX 76108

            bear Phil, ,

            Thanks again forfihe time you provided to myself and the Hawaiian Falls team last week.- It was good to
            meet with you and J(m as we felt a fare to'face introduction was the best path to rnakirig sure all the
            parties operate.on the same page. I think we~can both agree~that 2014 did not play nut as eJther of us
            anticipated: That being said, we feel the Issues.were external and tied to the poor execution of expansIon
            and not related to the operation of the waterparks, This point has been validated by the strong
            performance of season pass, group sales and events at all the parks (up 20%). With the new parks fully
            completed and ready for 2015, management has refocused its'efforts on marketing and sales,
            As you requested, I have outlined below our plan going forward to stabiilze the company and mosfi
            importantly make good on the obllgations'owed to the ctty of White Settlement,
                • Source Capital and Capital One Bank have agreed to provide up to $1,000,OQO ("Initial Cap{tal
                   Agreement")to ensure that all the parks are prepared for the opening in mid-May.The
                   documentation Is flna(and we will be•closing on Apri(3.
                t Source and bavld 6usch signed a Letter of Intent ("Source/Busch Capital Agreement") in which
                   source will be injecting up to $5,000,D00 Into the Company. The documentation is in the legal
                   process and we are targeting an April 30th close.
                • 'Upon closing of'the Source/Busch Capital Agreemenfi,Source Capital w111 be the controlling
                   owner of Horizon Family Entertainment, and speciflcalfy as It relates to your team,,the sole
                   owner of Hawaiian Parks, White Settlement LLC,
                •, 5ource will need a consentfrom the'c(ty of ahfhite Settlement prior to close allowing for the
                  'change of control. We will be providing a standard consent document in•the next couple of
                   weeks.
                   Dade Busch will be re'm~ining in his role as CEO and you should see no change 1n the day today
                  operations.                                 ~                   '•
                • Upon the closing of khe Source/Busch Capital Agreement we will make the 1~ of 3 payme~lts
                  (May 15~'/June 15'h/July 15~}-each payment v~,~ill be for $191,333 for a total of $575,000. This
                  will cover all the 2014 past due lease payments ($375,000)and the amounts owed to date for
                  2015($200,000).
                • The remaining 2015 payment- $600,000- will be made as required in October of 2015,

                                                                                                                                                350
                                       1,
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       SOUZ`C8C1p1~~.

                                 7~ 14th Street Suite 3700 Atlanta, Georgia~0309 ~ ~oJjlce; 404349.9330, ~ joz; 770.23#,4153 ~' wiyw,souroe-cap,cont

             As outlined, this process Is a 2 step path in which the Initial Cap(tal Agreement wil( ensure we are•ready
             for the 2015 season and the Source/Busch Capital Agreement, along with the 2015 season performance,
             will ensure we have enough cash toresolve all the 2014 hold over obligations, handle the 2015
             commitments as they come due, and carry~enough reserves into the offseason.

              look forward to working wFth•you and your team in getting th(s completed, Please feel.free to contact,
             me at your convenience with any questions ar concerns. ~~

             All the best,

             Benjamin Emmons                                                                                                       ',
             Managing Director
             Source Capital Partners
             7514'Street
             Atlanta GA X0309
             404~294~9249

                                                                                                                                                  351
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     SouxceCapita~.
     [   ~.
                              7514th Sheet Suite 2700 Atlanta, Georgia 30309 ~ oJ~ice: 404.249.9330, ~ Ji~z; 77d.23