2022-02-15 CC Agenda - Additional Information related to Item #D11 - TopGolf{.,rVoy City Council Agenda Statement
ELSEGUNDO Meeting Date: February 15, 2022
Agenda Heading: Staff Presentations
Item Number: D.11
TITLE:
Amendment to Topgolf Agreement to Modify Golf Course Improvements to Delete the
Requirement for One Par 4 Hole and Add a Periodic Increase to the Annual Topgolf
"Payment for Public Good; and Discussion of Golf Course and Driving Range User
Rates
RECOMMENDATION:
Approve an amendment to the agreement with Topgolf allowing Topgolf to
modify the golf course improvements portion of the Topgolf project at the Lakes
at El Segundo (400 S. Pacific Coast Highway, El Segundo, CA 90245), and
approve and authorize the City Manager and City Attorney to negotiate final
language to add a periodic increase to the annual Topgolf "Payment for Public
Good."
2. Discuss golf course and driving range user rates.
FISCAL IMPACT:
No fiscal impact in FY 2021-2022. Increased Community Benefit revenue (General
Fund) in subsequent years.
BACKGROUND:
The last day the Lakes at El Segundo golf course operated was February 14, 2021.
Topgolf took possession of the Lakes facility on February 15, 2021. The Lakes facility
has been closed since Topgolf took possession of the facility and will remain closed
during the construction of the Topgolf facility and the simultaneous improvements to the
golf course that will provide an enhanced experience to golfers once completed. While
the demolition and construction to the areas adjacent to the golf course began in
February 2021, the improvements to the golf course did not begin until July 2021. The
completion of the improvements to the golf course are nearing completion. The Topgolf
facility is anticipated to be completed by mid -April 2022. The grand opening of the entire
facility is anticipated to be mid to late April 2022.
Amendment to Topgolf Agreement
February 15, 2022
Page 2 of 4
Topgolf remains committed to be a community partner and keep the commitments they
agreed to in the formal agreement signed with the City. The City's and Topgolf's
commitment per the agreement is that the golf course, the new club house, and the
Topgolf facility will all be ready to open concurrently in Spring 2022.
DISCUSSION:
CenterCal and Topgolf completed upgrades to the golf course portion of the property
beyond those required by the current Agreement. The enhancements included laying
down new fairways, greens, and tee boxes. These play areas will have new and high -
quality grass that is consistent with the Topgolf brand. The completion of the golf course
improvements and its opening must still occur prior to or concurrently with the opening
of the Topgolf facility. Staff sees no downside to the benefit of Topgolf enhancing the
improvements currently required to be made to the golf course and related facilities.
Because of safety concerns, some of which involve state health and safety regulations,
while members of the public have expressed the desire to reopen as soon as possible,
realistically the facilities will likely open concurrently. Since construction is expected to
commence in the next week on the Topgolf course portion of the property, for these
same health and safety reasons it was necessary to pause operations at the golf course
on February 14th.
Justification for Removing the Par 4 Requirement
Prior to engaging the redesign of The Lakes at El Segundo, Topgolf's golf course
architect spent several days observing play around the course. Two significant concerns
became clear:
Safety
First, the Par 4 created a significant safety concern as many golfers were hitting their
tee shots wildly off line. A short yardage Par 4 by its very nature encourages players of
all abilities to attempt harder, faster swings with longer clubs (hybrids, fairway woods,
and drivers) to try and reach the green from their tee shot. These swings with longer
clubs create a much wider shot dispersion with much higher ball speeds. Further, short
courses often attract less -skilled (novice) players, and when coupled with the increased
number of rounds due to the introduction of night golf, more errant shots will naturally
result.
Lastly, Topgolf designed the Par 4 to be the first hole played so proper behavior and
pace of play can be monitored by staff from the clubhouse and starter stand.
Unfortunately, this resulted in the hole being immediately adjacent to the Pacific Coast
Highway (PCH) given the location of the new clubhouse. The result of this is more
novice players, using longer clubs on a hole next to a high traffic corridor. If a Par 4 is
required, then due to this elevated liability exposure for Topgolf and the City, Topgolf
would require tall barrier netting in excess of 100' in order to mitigate that liability.
Amendment to Topgolf Agreement
February 15, 2022
Page 3 of 4
Therefore, Topgolf believes that due to the small land area (16 acres) and the
associated safety risks, a Par 4 hole should be removed from the course.
Pace of Play
The second item of concern is Topgolf's architect noted there was a bottleneck created
at the tee box of the old Par 4 hole. There were significant delays (sometimes 30+
minutes) while players waited for the group(s) in front to clear the green so they could
try and reach it. As noted above, a short Par 4 encourages this behavior. Not only does
a slower pace reduce the number of rounds that can be played, but it is also one of the
single biggest determinants in a player's decision to return to the course in the future.
According to the National Golf Foundation, as of March 2020, there are roughly 700 Par
3 courses ("short courses") around the U.S.. These courses are becoming increasingly
popular and attractive to both experienced and novice golfers alike. Some of the most
notable championship golf courses around the country such as Pinehurst, Bandon
Dunes, Pebble Beach, Augusta and PGA National have a Par 3 course for their guests
(none of these courses have Par 4s, as it inherently contradicts the whole concept of a
short course). Pinehurst, as one of the most legendary golf courses that frequently
holds major amateur and professional tournaments, has created a Par 3 experience
called The Cradle. This course plays to a total of 789 yards (300+ yards shorter than our
new Lakes at El Segundo design), with the shortest hole playing 56 yards and the
longest at 127 yards.
As Topgolf is a leader in the golfing industry, they are seeing firsthand that golf is
transforming into an experience enjoyed by all ages and skill levels as more and more
people are wanting to take part in a fun, competitive and unintimidating sport. Topgolf is
a big part of this transformation and is one of the primary reasons they have
partnerships with the LPGA, PGA, 1 st Tee, PGA of America, and most notably, one of
the principal reasons Topgolf was acquired by one of the world's largest golf brands;
Callaway Golf. As soon as a Par 4 is introduced into a short course like The Lakes, the
skill level to successfully play the Par 4 increases dramatically. This then immediately
discourages and/or intimidates novice players which ultimately leads to a reduced
number of guests who walk away from the experience looking forward to playing the
course again.
Topgolf's success is built on listening to their guests, creating fun experiences, and
removing the traditional barriers of entry to learning this great game of golf. They've
created an experience inside their venues around the world that is welcoming to all age
groups and skill levels.
Regarding the price index inflator on the Community Benefit Fund payment, the total
compensation package for the City as outlined in the lease was looked at as a whole
and includes escalators, especially on rent payments. However, a price index escalator
was not included on the Community Benefit Fund payment. The City reached out to
Topgolf and requested a price index escalator be included with this annual payment.
Topgolf agreed. The Community Benefit Fund payment will be tied to the annual
Amendment to Topgolf Agreement
February 15, 2022
Page 4 of 4
escalation that matches Topgolf's pricing adjustments each year on resident golf course
rates. The Community Benefit Fund payment adjusts accordingly by the same
percentage amount but never drops below $200K. If Topgolf does not raise resident golf
course rates in a particular year, then payment remains the same as the previous year.
The City, Topgolf, and CenterCal are all working towards the same outcome: ultimately
providing a unique customer experience and ensuring the golf course remains as a
community asset available to the public and El Segundo -based youth groups as soon
as feasibly possible.
CITY STRATEGIC PLAN COMPLIANCE:
Goal 5: Champion Economic Development and Fiscal Sustainability
Objective 5B: El Segundo approaches its work in a financially strategic and responsible
way.
PREPARED BY:
Joseph Lillio, Chief Financial Officer
REVIEWED BY:
Joseph Lillio, Chief Financial Officer
APPROVED BY:
Barbara Voss, Deputy City Manager
ATTACHED SUPPORTING DOCUMENTS:
1. Resolution - Topgolf Lease Amendment
2. Topgolf - Amended Exhibit D
3. Redline of Topgolf Lease Amendment
4. Revised Amendment No 1 to Topgolf Lease
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL
SEGUNDO APPROVING AMEDNMENT NO.1 TO THE DUE DILIGENCE
AND RECREATION GROUND LEASE AGREEMENT BETWEEN THE
CITY OF EL SEGUNOD AND ES CENTERCAL, LLC AND FINDING
THAT THE AMENDMENT IS EXEMPT FROM REVIEW UNDER THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT
The City Council of the City of El Segundo does hereby resolve as follows:
SECTION 1: The City Council finds and declares as follows:
A. Lessor and Lessee (collectively, the "Parties") entered into a Due Diligence and
Recreation Ground Lease Agreement (the "Lease") on February 6, 2021. Among other things,
the Lease contemplates modifications and improvements to the City's existing municipal golf
course and the construction of a new golf course recreation facility ("Topgolf') on the adjacent
property.
B. Paragraph 3.7 of the Lease obligates ES CenterCal, LLC to make cash "Payments
for Public Good" to the City in the amount of $200,000 per calendar year during the term of the
Lease. The City and ES CenterCal, LLC wish to amend the Lease to require the annual
Payments for Public Good to be increased each year by a percentage equal to the percentage
change in the Consumer Price Index, as specified.
C. Exhibit D to the Lease ("Golf Course Improvements") requires, among other
things, that the golf course shall have a minimum of one Par 4 hole. The parties wish to amend
the Lease to delete this requirement.
D. The accompanying staff report, together with the oral report presented by staff,
provide additional supporting information upon which the findings and declarations set forth in
this Resolution are based.
SECTION 2: CEQA. The City Council finds and determines that there is no possibility that the
minor amendments to the Lease may have a significant effect on the environment. The
elimination of the Par 4 hole will not require any grading, import/export of soil, or additional
truck trips. The change will only require the siting and location of a 4.25-inch circular hole in an
existing green. Consequently, the project is exempt from further review under CEQA pursuant
to State CEQA Guidelines sections 15061(b)(3). In addition, the City Council finds that the
project is exempt from review pursuant to sections 15301 (Existing Facilities) and 15304 (Minor
Alterations to Land) of the State CEQA Guidelines and that no exception set forth in section
15300.2 of the CEQA Guidelines applies to the project.
SECTION 3: The City Council hereby approves Amendment No. 1 to the Due Diligence and
Recreation Ground Lease Agreement in the form attached hereto as Exhibit A and authorizes the
Acting City Manager to execute the same on behalf of the City.
SECTION 4: The City Clerk is directed to file a Notice of Exemption pursuant to State CEQA
Guidelines section 15062.
SECTION 5: This Resolution will become effective immediately upon adoption and will
remain effective unless superseded or repealed.
PASSED AND ADOPTED this 15th day of February, 2022.
Drew Boyles, Mayor
ATTEST:
Tracy Weaver, City Clerk
APPROVED AS TO FORM:
Mark D. Hensley, City Attorney
CERTIFICATION:
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS
CITY OF
I, Tracy Weaver, City Clerk of the City of , California, do hereby certify that the whole
number of members of the City Council of said City is five; that the foregoing Resolution No.
was duly passed and adopted by said City Council, approved and signed by the Mayor of
said City, and attested to by the City Clerk of said City, all at a regular meeting of said Council
held on the day of , 2022, and the same was so passed and adopted by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
City Clerk
EXHIBIT A
[Amendment No. 1 to Due Diligence and Recreation Ground Lease Agreement]
Exhibit D
GOLF COURSE AND PREMSIES IMPROVEMENTS
GOLF COURSE IMPROVEMENTS
Lessee and a Task Force appointed by the City Council shall work together and
reasonably cooperate for purposes of preparing a preliminary and conceptual design of
the following golf course and clubhouse improvements to be presented to the City
Council for approval consistent with the Lease provisions. The final design shall be
consistent with the conceptual design. During the course of design and ultimate
construction, a "standard of quality" shall be maintained throughout the newly
constructed facility as mutually agreed upon by both parties. The use of the word
"Quality" in this agreement is intended to mean that the building, building materials and
furnishings shall convey design interest and coordination, craftsmanship and use of
durable and visually attractive finishes and materials. With respect to the design of the
improvements to the course itself, "Quality" is intended to mean that, in consultation with
an approved golf course architect, the safety of the facility shall be maintained or
improved, that the level of difficulty in playing the course shall be maintained or
improved. In both the case of the buildings and the course improvements, the City's
intent is that they shall be of the same, or better quality than what currently exist. This
exhibit contains photos of the existing facility as examples of the current level of quality.
The facility is intended to be in "turn -key" condition at the time of completion meaning
that the Lessee shall provide a facility that is furnished and ready for operations.
➢ Construction of new pro shop at approximately 2,500 square feet interior
usable/lease able area. Detailed below are some of the key building
improvements anticipated:
o Facility Generally — Facility shall include a security camera system that
provides surveillance of the interior and exterior of the facility to the
satisfaction of the ESPD.
o Limited Golf Shop Area/Starter Desk — The newly constructed structure
shall contain a segregated area for a pro -shop and starter/check-in desk
as one combined unit. Generally, this facility will be equipped with
sufficient desk space to facilitate placement of a computer, phone and
cash register with desk space providing glass surfaces such that display
shelving is readily accessible by employees and for display of soft goods
as a part of pro -shop operations. This facility will include internet and
phone cabling along with standard electrical outlets installed as provided
for in the latest version of the California Building and Electrical Code.
There will be sufficient space for both the retail storage and display of
retail goods within the pro shop.
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o Restrooms — separate male and female restrooms, fully ADA compliant to
specifications that are current as of construction year. Restrooms shall
contain the amount of fixture units consistent with city code and capacity
for the facility and be consistent with the existing clubhouse (including
installation of soap dispensers, hand drying devices and trash
enclosures). Restrooms shall be accessed from the interior of the newly
constructed facility.
o Management Office — within the described (structure) a separate office
for management operations shall be included. This office shall include a
door and adequate space for a wall safe as required by current
permitting policy.
o Cafe/Bar with seating area — The facility shall be sufficiently constructed
to include wiring for sound and wi-fi capabilities. Additionally, televisions
of sufficient size (55") shall be included and mounted on the interior and
potentially on the exterior patio areas. Exterior television equipment shall
be constructed with exterior placement/waterproof integrity. Indoor snack
bar portion of facility shall consist of sufficient square footage to maintain
and operate a small commercial kitchen with equipment, such as a
commercial grade reach -in freezer and cooling units, a three
compartment sink, mop closet, griddle (with grill), microwave, dishwasher
and/or fryer. New facility shall also contain sufficient space for and include
an ice making machine and soft drink dispenser (typically vendor
provided) as well as a counter with sufficient space to refrigerate and
serve numerous beer choices. All equipment shall be included and will be
further outlined through the collaborative efforts with the Taskforce during
the design process. Dining area should be able to accommodate 20-30
guests and in accordance with established LA County Health Department
guidelines.
o To the extent practical, all equipment that is in good repair at the existing
facility, not past its useful life shall be utilized and installed at the new
facility.
o Outdoor patio space with seating area — Outdoor space shall include hard
floor surfaces (i.e. concrete or other approved material) and maintain
position directly adjacent to the snack bar entry. Generally this will be at
least 750 square feet with some or all the area covered. The Covered
outdoor area shall be of sufficient size to accommodate adequate seating
for 15-20. The balance of outdoor dining area (which may not be covered)
shall accommodate seating for at least an additional 20-35 This area shall
also be equipped with appropriate space heaters, lighting and outdoor
furniture/seating.
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➢ Construction of a practice putting green and practice chipping/bunker area with
the putting green surface area being no less than 4,500 square feet with the intent
being that the area shall be the maximum allowable by the physical constraints of
the site. Prior to construction, the existing putting green surface area shall be given
sole and exclusive priority to the golf course putting green. Any remainder putting
green may be utilized as a putting green within the TopGolf site.
➢ Screening poles and safety netting will be installed to ensure the safety of golfers,
the public, automobiles, and surrounding properties and rights of way per golf course
architect recommendations
➢ Golf course modifications:
o Upon completion of construction, the golf course with described
improvements shall maintain or increase in degree of difficulty compared
to its current condition. The approved Golf Course Architect shall provide
an assessment of difficulty of the course before and after; Lessee will
maintain and or improve the difficulty of the golf course.
o The overall final design of the golf course after modifications shall
maintain a level of safety consistent or safer than existing conditions. For
the purposes of determining golf course safety, the golf course architect
will determine the degree of safety through the use of industry -accepted
guidelines including dispersion analysis and assumptions that 90% of golf
shots are within 14 degrees from the intended target line in any given golf
hole.
o The course shall have a minimum of one Par 4 hole. While no specific
definition has been established in yardage for distinguishing a range for a
Par 4 hole, effective length as defined by the USGA in conjunction with
consultation by a golf course architect shall prevail. In general, a Par 4 is
considered to maintain yardage with a range of 230-270 yards. In
developing yardage, the Lessee and City will maintain an objective
approach while providing flexibility.
o Construction of new Hole #1 tee box.
o Construction of new Hole #2 green and bunkers.
o Construction of new Hole #3 green, bunkers and tee box.
o Hole #3 will be redesigned in such a fashion to maintain a minimum Par 3
and incorporate the northern body of water feature.
o Construction of new Hole #5 tee box.
o Construction of new Hole #8 tee box.
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o Construction of new Hole #9 green, bunkers, and tee box.
o Where possible, the existing tee boxes shall be leveled and lengthened.
Lessee shall make every effort (within the project scope and budget) in
consultation with an approved golf course architect (approved mutually by
the Lessee and City), to expand tee boxes. The intention of this effort is to
increase yardage from tee boxes to holes to achieve the yardage for a
nine hole course within the footprint as possible. The total current
yardage of play for the existing nine -hole course is approximately 1,340
yards from the white tee line (Men's).
o Lessee to add bunkers and/or sand traps to the north side of hole number
8 with the intention of increasing speed of play. Placement, sizing and
number of bunkers and/or sand traps will be based upon approved golf
course architect recommendations.
o When possible, Lessee shall utilize existing and available poles and netting
not otherwise repurposed by TopGolf project.
o Lessee shall install lighting on the golf course to allow for night time play on
the course.
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PREMISES IMPROVEMENTS
• Construction of the Top Golf Driving Range and Facility in accordance with
Sections 4.1 and 12.1 of the Lease.
• Replacement/relocation of the existing net poles with the Top Golf required
poles, which will adhere to all building and safety codes, SCE safety standards
and other applicable safety standards. Any/all poles not specifically used in the
construction of the TopGolf facility shall be repurposed, to the extent possible, for
the golf course modifications.
• Expansion of the existing parking which shall extend over the area where Hole #1
is currently located on the golf course and provide adequate parking per city code.
During the design process, the City shall determine the number and location of
parking spaces that will be reserved (during the hours of operation of the Lakes)
for patrons of the Lakes golf course, consistent with Section 5.4 of this Lease and
subject to the terms and conditions of the approved Required Project Entitlements
(as defined in the Lease). Should parking conflicts arise after the commencement
of joint use of the parking facility, the City and the Lessee shall mutually
cooperate and work together to implement parking control measures to further
reserve parking spaces by use of patrons of the Lakes.
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3.7 Lessee shall make cash payments to Lessor i the sum of Two Hundred Thetis.,,,a
Dollars ($200,000per-each calendar year during the Term of this Lease following the Fixed Rent
Commencement Date (the "Payments for Public Good"). The amount of the annual payment
shall be Two Hundred Thousand Dollars ($200,000) in the first year and shall increase by ten
percent (10%) at the commencement of each five-year period during the term of this Lease
(including M option periods that may be exercised by Tenant) commencing with the day
following the fifth anniversary of the Fixed Rent Commencement Date. Lessor shall in its sole
discretion use the proceeds of the foregoing Payments for Public Good to create a fund
controlled by Lessor and used to develop or improve public facilities and amenities, to foster
educational and other programs and otherwise to promote the benefit and support the public good
with regard to the City of El Segundo and its residents. Each installment of the foregoing
Payments for Public Good shall be due and payable by Lessee within one hundred twenty (120)
days after the end of each calendar year during the Term of this Lease following the Fixed Rent
Commencement Date. In computing the Payments for Public Good for the first calendar year or
portion thereof following the Fixed Rent Commencement Date (and any calendar year that
includes the date of termination of this Lease), if such calendar year shall contain less than 365
days, then the Payments for Public Good shall be multiplied by fraction, the numerator of which
shall be the number of days in such shorter calendar year, and the denominator of which shall be
365. The Payments for Public Good shall not be subject to escalation hereunder.
AMENDMENT NO. 1 to the
DUE DILIGENCE AND RECREATION GROUND LEASE AGREEMENT between the
City of El Segundo ("Lessor") and ES CenterCal, LLC ("Lessee") dated February 6, 2021
This Amendment No.1 to Due Diligence and Recreation Ground Lease Agreement (this
"Amendment") is entered into this 15th day of February, 2022, by and between Lessor and
Lessee.
RECITALS
1. Lessor and Lessee (collectively, the "Parties") entered into a Due Diligence and
Recreation Ground Lease Agreement (the "Lease") on February 6, 2021.
2. Paragraph 3.7 of the Lease obligates Lessee to make cash "Payments for Public
Good" to Lessor in the amount of $200,000 per calendar year during the Term of the
Lease. The Parties wish to amend the Lease to require the annual Payments for
Public Good to be increased each year by a percentage equal to the annual percentage
increase in the resident golf rates charged at the Lakes at El Segundo course, if any.
3. Exhibit D to the Lease ("Golf Course Improvements") requires, among other things,
that the golf course shall have a minimum of one Par 4 hole. The parties wish to
amend the Lease to delete this requirement.
4. Capitalized terms used but not otherwise defined herein shall have the same meanings
as set forth for such terms in the Lease.
5. The Parties desire to amend the Lease as provided herein.
NOW, THEREFORE, in consideration of the foregoing, the Parties agree as follows:
1. Section 3.7 of the Lease is hereby amended to read as follows:
"3.7 Lessee shall make cash payments to Lessor each calendar year
during the Term of this Lease following the Fixed Rent Commencement Date (the
"Payments for Public Good"). The amount of the annual payment shall be Two
Hundred Thousand Dollars ($200,000) in the first year and shall increase by ten
percent (10%) at the commencement of each five-year period during the term of
this Lease (including any option periods that may be exercised by Tenant)
commencing with the day following the fifth anniversary of the Fixed Rent
Commencement Date. Lessor shall in its sole discretion use the proceeds of the
foregoing Payments for Public Good to create a fund controlled by Lessor and used
to develop or improve public facilities and amenities, to foster educational and other
programs and otherwise to promote the benefit and support the public good with
regard to the City of El Segundo and its residents. Each installment of the foregoing
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Payments for Public Good shall be due and payable by Lessee within one hundred
twenty (120) days after the end of each calendar year during the Term of this Lease
following the Fixed Rent Commencement Date. In computing the Payments for
Public Good for the first calendar year or portion thereof following the Fixed Rent
Commencement Date (and any calendar year that includes the date of termination
of this Lease), if such calendar year shall contain less than 365 days, then the
Payments for Public Good shall be multiplied by fraction, the numerator of which
shall be the number of days in such shorter calendar year, and the denominator of
which shall be 365. The Payments for Public Good shall not be subject to escalation
hereunder."
2. Exhibit "D" to the Lease is hereby amended. The amended Exhibit "D" is attached
hereto and is dated February 15, 2022.
3. Except as modified by this Amendment, all other terms and conditions of the Lease shall
remain the same.
4. This Amendment may be executed in counterparts each of which shall be deemed an
original.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Amendment to be executed
by their duly authorized representatives as of this 15th day of February, 2022.
Lessor: THE CITY OF EL SEGUNDO, a general law City
and Municipal corporation
By:.
Name: Joe Lillio, Acting City Manager
Attest:
Tracy Weaver, City Clerk
Approved as Form:
Mark D. Hensley, City Attorney
Lessee: ES CENTERCAL, LLC,
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a Delaware limited liability company
By: CENTERCAL, LLC,
a Delaware limited liability company
By: CENTERCAL ASSOCIATES, LLC,
a Delaware limited liability company
By:
Print Name:
Print Title:
By:
Print Name:
Print Title:
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