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HomeMy WebLinkAboutC.S.B. Partnership - Big O Tires - 2008-06-16City ®f Huntington Beach 2000 Main Street ® Huntington Beach, CA 92648 DEPARTMENT OF ECONOMIC DEVELOPMENT Business Development - Housing - Real Estate Redevelopment 714.536.5582 www.hbbiz.com fax - 714.375.5087 August 21, 2008 Mickey Vandenberg Investors Title Company 4667 MacArthur Blvd., Suite 150 Newport Beach, CA 92660 Dear Ms. Vandenberg, Attached please find the signed copy of the Cancelation Instructions for escrow number 00108122-316-MV property address 7278 Edinger Avenue. Please remit funds and return all documents held in escrow immediately. Sincerely, Kellee Fritzal Deputy Director of Economic Development Attachment: 1 C: Barbara Leibold Doris Powell Sister Cities: Anjo, Japan o Waitakere, New Zealand Data. July 2k 2bos To: lhir6stpm TWO. i�bmpan ,, . y 400TAkWth4r.'J3Nd Sulto 156' 0ewpo"It Beach, CA' Oni-So phom vo,, 04*7w-mi-,;�Fwr No. *q; m-a7so Ref-. 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RUCEPT OF COPY OF THESE MTRUcn6ws; Tho, 1he Cw of Pr- Paul Emery,,,*' APPROVED AS TO FORM "Y A7 J Counpi'f/Agency Meeting Held: GY�� Deferred/Continued to: )dAparoved ❑ Conditionally Approved ❑ Denied S�PlerkA Sign re Council Meeting Date: 6/16/2008 Department ID Number: ED08-25 CITY OF HUNTINGTON BEACH REQUEST FOR REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE CHAIRMAN AND AGENCY MEMBERS s SUBMITTED BY: PAUL EMERY, INTERIM EXECUTIVE DIRECTOR PREPARED BY: STANLEY SMALEWITZ, DEPUTY EXECUTIVE DIRECTOR SUBJECT: APPROVE AGREEMENTS WITH C.S.B. PARTNERSHIP FOR LEASEHOLD INTEREST (7872 EDINGER AVENUE) Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: On May 5, 2008 the Agency entered in to an agreement for the purchase of real property at 7872 Edinger Avenue (APN 142-081-28). As a result of the proposed redevelopment of the property, it will be necessary for the tenant to permanently cease to occupy the property in the future. Submitted for approval is an agreement in the amount of $1,350,000 as consideration for the displacement of tenant, C.S.B. Partnership (Big O Tires), from the property (Attachment #1). Funding Source: An appropriation of $1,350,000 from the Undesignated .Fund Balance Merged Redevelopment Agency Capital Projects Fund to the Redevelopment Agency business unit account (30580101.81100) is recommended. The Fiscal Impact Statement is attached (Attachment # 2). Recommended Action: Motion to: 1. Approve the Acquisition of Leasehold Interest Agreement between the Redevelopment Agency of the City of Huntington Beach and C.S.B. Partnership. 2. Authorize Chairperson and Agency Clerk to sign and execute the Acquisition of Leasehold Interest Agreement. 3. Authorize the Executive Director or designee to take any action and execute any and all documents and agreements necessary to implement this agreement. 4. Appropriate $1,350,000 from the Merged Redevelopment Agency Capital Projects Fund balance into account 30580101.81100. REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: 6/16/2008 DEPARTMENT ID NUMBER: ED08-25 Alternative Action(s): 1. Do not approve the Acquisition of Leasehold Interest Agreement and; 2. Continue the item and direct staff accordingly. Analysis: On May 5, 2008 the Agency entered into an Agreement with HB Auto I, LLC for the purchase of real property located at 7872 Edinger Avenue. The Agency is currently in escrow and anticipates closing on June 19, 2008. The Agency owns five (5) contiguous parcels of land that border the property owned by HB Auto I, LLC. The Agency parcels and the HB Auto property are located within the boundaries of Subarea No. 1 of the Huntington Beach Merged Redevelopment Project Area. Purchase of the HB Auto property was necessary to optimize the development of the Agency -owned parcels. The potential benefits are consistent with the goals and objectives of the Redevelopment Plan to: assemble land; maximize development opportunities; and remove blight. Concurrently, the Agency and OTO Development are negotiating the terms and conditions of a Disposition and Development Agreement (DDA) for the redevelopment of the site subsequent to the purchase of the property by the Agency. OTO Development has submitted a proposal to develop the site for an approximately 144-room Marriott Springhill Suites Hotel. This proposal is consistent with the land use recommendation being made in the Beach and Edinger Corridor Specific Plan and will provide additional property tax increment to the Agency and transient occupancy tax (TOT) to the City. If approved, the Agency will enter into an Acquisition of Leasehold Interest Agreement with C.S.B. Partnership (Tenant) who leases the property located at 7872 Edinger Avenue, Huntington Beach, California. The Tenant operates a "Big O" Tire Store on the property. In connection with the Agency's purchase of the property, the Agency will assume the rights and obligations of the landlord under the lease. As a result of the subsequent proposed redevelopment of the property, the Agency determined that it will be necessary for the Tenant to permanently cease to occupy the property some time within the next five years. Until the Agency is ready to redevelop the site, the Tenant will continue to operate on the site and pay the monthly rent of approximately $17,600 to the Agency. In consideration of the Tenant entering into this Agreement, the Agency shall pay to the Tenant the sum of $50,000 within three (3) business days of the execution of this Agreement and $1,300,000 upon the vacation of the property. The sum of $1,350,000 is total compensation for any leasehold interest in the real property, payment for personal property, fixtures and equipment, relocation benefits or assistance or any compensation based upon loss of goodwill, or any other damages of any nature. If the Agency had been unable to purchase the Property, the Agency could take steps toward condemning the Property. However the property owner and the tenant have agreed to sell at fair market value subject to the terms of the relevant agreements and acquisition becomes a "friendly condemnation." Both parties have requested that the Agency pursue this path due to the tax advantages that a friendly condemnation will provide. -2- 6/3/2008 3:43 PM REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: 6/16/2008 DEPARTMENT ID NUMBER: ED08-25 Strategic Plan Goal: L-1 Establish the vision and create a land use plan for reuse of critical parcels so that the next phase of the community investment and improvement can begin. The proposed hotel development on the assembled site has the potential to increase property tax increment to the Agency and transient occupancy tax (TOT) and sales tax revenues to the city. In addition, the proposed development is consistent with the long term goals of the Beach and Edinger Corridor Specific Plan and the Redevelopment Plan for the Huntington Beach Merged Project Area. Environmental Status: Not applicable. Attachment(s): 1. Acquisition of Leasehold Interest Agreement 2. Fiscal Impact Statement -3- 6/3/2008 11:02 AM ACQUISITION OF LEASEHOLD INTEREST AGREEMENT This ACQUISITION OF LEASEHOLD INTEREST AGREEMENT ("Agreement") is made and entered into as of June 16, 2008 by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency") and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"). Agency and Tenant are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties." RECITALS A. Pursuant to the terms of that certain Standard Lease Agreement dated for reference purposes April 19, 2004 (the "Lease") between Tenant as tenant and HB Auto I, LLC, a California limited liability company ("HB Auto") and Turn -Key Washes, Inc. (formerly known as Jurtwin, Inc., a California corporation) ("Turn - Key") together as landlord, Tenant is leasing that certain improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property") owning and operating a Big O Tires retail store and its business office thereon (the "Edinger Avenue Big O Store".) as a franchisee of Big O Tires, LLC, a Nevada limited liability company (formerly known as Big O Tires, Inc., a Nevada corporation) ("Big O" or "Franchisor") pursuant to that certain Franchise Agreement #20466 dated August 1, 2004 (the "Franchise Agreement") between Tenant as franchisee and Big O as franchisor. A copy of the Franchise Agreement is attached hereto as Exhibit A. The obligations of Tenant under the Lease are guaranteed by Christopher R. Phillips ("Guarantor") pursuant to the terms of that certain Guaranty of Lease dated as of April 19, 2004 ("Lease Guaranty"). B. Pursuant to that certain Grant Deed dated June 25, 2004, recorded in the official real estate records of Orange County, California on June 29, 2004, Instrument No. 2004000591428 (the "Turn -Key Grant Deed"), Turn -Key granted to Michael Todd Carson and Rosemary Kathleen Carson, husband and wife, as community property with right of survivorship (the "Carsons"), Turn-Key's undivided fifty percent (50%) interest in the Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of June 25, 2004 between Turn -Key as assignor and the Carsons as assignee (the "Turn-Key/Carsons Assignment"), effective as of the date of the recording of the Turn -Key Grant Deed, Turn -Key assigned, set over and transferred to the Carsons all of its rights, title, interest as a landlord in, to and under the Lease and the Carsons accepted such assignment and assumed and agreed to perform Turn-Key's obligations under and with respect to the Lease. C. Pursuant to that certain Grant Deed dated November 30, 2004, recorded in the official real estate records of Orange County, California on December 6, 2004, Instrument No. 2004001083690 (the "Carsons Grant Deed"), the Carsons granted to HB Auto, the Carsons' undivided fifty percent (50%) interest in and to the 001219.0001\844054.7 Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of November It, 2004, between the Carsons as assignor and HB Auto as assignee (the "Carsons/HB Auto Assignment") effective as of the date of the recording of the Carsons Grant Deed, the Carsons assigned, set over and transferred to HB Auto all of their rights, title and interest as a landlord in, to and under the Lease to HB Auto and HB Auto accepted such assignment and assumed and agreed to perform the Carsons' obligations under and with respect to the Lease. As a result of the recording of the Carsons Grant Deed and the Carsons/HB Auto Assignment, HB Auto owns all rights, title and interest in and to the Property and, is the sole landlord under the Lease. HB Auto shall hereinafter be referred to as the "Landlord." D. Agency has, under the threat of condemnation, completed negotiations with Landlord and, in conjunction therewith, Agency and Landlord have entered into that certain Agreement and Escrow Instructions for Purchase of Real Property dated as of May 5, 2008 (the "Agency/Landlord Property Acquisition Agreement") setting forth the terms and conditions by which Agency shall acquire all of Landlord's rights, title and interest in and to the Property. A copy of the Agency/Landlord Property Acquisition Agreement is attached hereto as Exhibit B. In conjunction with such threat of condemnation and Agency's purchase of the Property pursuant to the Agency/Landlord Property Acquisition Agreement, Agency desires to acquire Tenant's entire leasehold interest in the Property pursuant to the Lease (the "Leasehold Interest") and to make certain payments to Tenant as consideration for the early termination of the Lease and the Lease Guaranty and Tenant's occupancy of Property under the terms of the Lease and the displacement of Tenant from the Property, all on and subject to the terms of this Agreement. E. Pursuant to the terms of the Agency/Landlord Property Acquisition Agreement, upon the satisfaction of all conditions to close, Agency will acquire all of Landlord's rights, title and interest in and to the Property and succeed to all of the rights and obligations of the Landlord under the Lease. As a result of the subsequent proposed redevelopment of the Property, Agency has determined that it will be necessary for the Lease and the Lease Guaranty to be terminated and for Tenant to permanently cease to occupy the Property on or before the date which is five (5) years from the date Agency acquires the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement (the "Lease Term ination/Vacation Date") and is prepared to and willing to pay Tenant the amounts specified below in consideration of Tenant's agreement to assign, transfer and convey to Agency its Leasehold Interest in the Property pursuant to the Lease; and, in conjunction therewith, terminate the Lease and the Lease Guaranty and its occupancy of the Property on the date which is the Lease Termination/Vacation Date. Absent a definitive agreement between Agency and Tenant setting forth the terms and conditions by which Agency will acquire Tenant's Leasehold Interest in the Property pursuant to the Lease, the Lease and the Lease Guaranty will be terminated and Tenant will permanently cease to occupy the Property, and the payment consideration which Agency will pay 001219.0001 \844054.7 2 Tenant as compensation for such acquisition of Tenant's Leasehold Interest in the Property pursuant to the Lease and termination of the Lease and the Lease Guaranty and Tenant's ceasing to occupy the Property, Agency has the right to initiate condemnation proceedings to acquire Tenant's Leasehold Interest in the Property pursuant to the Lease and terminate the Lease and the Lease Guaranty and Tenant's occupancy of the Property subsequent to Agency's acquisition of the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement. F. In conjunction with the foregoing Recitals and the contemplated transactions pursuant to this Agreement, Agency and Tenant mutually desire to amend the Lease effective on the date Agency acquires the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement as set forth in the form of the First Amendment to Standard Lease Agreement attached hereto as Exhibit C (the "Lease Amendment"). G. The Parties further mutually desire to establish their respective rights and obligations with regard to the terms of (i) Agency's acquisition of (a) all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement and (b) Tenant's Leasehold Interest in the Property under the Lease pursuant to the terms of this Agreement; (ii) the Lease Amendment; and (iii) the eventual termination of the Lease as amended by the Lease Amendment and the Lease Guaranty and Tenant's occupancy of the Property on the date which is the Lease Termination/Vacation Date, all in accordance with and subject to the terms and conditions set forth in this Agreement. H. Agency agrees to make certain payments to Tenant as consideration for the early termination of the Lease as amended by the Lease Amendment and the Lease Guaranty and Tenant's occupancy of the Property under the terms of the Lease as amended by the Lease Amendment and the displacement of Tenant from the Property; and, Tenant agrees to accept the payments as full settlement of all claims arising from such early termination and displacement, including without limitation, any applicable claims for relocation benefits pursuant to the laws and regulations of the State of California, all on and subject to the terms and conditions set forth in this Agreement. I. Capitalized terms not otherwise defined herein shall have the meanings given them in the Lease. NOW, THEREFORE, in consideration of the foregoing Recitals and of the mutual promises and terms, conditions and covenants hereinafter set forth and such other good and valuable consideration, the receipt, adequacy and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows: 00 1219.000 1 \844054.7 3 Acquisition of Leasehold Interest Subject to the terms and conditions of this Agreement, including, without limitation, the satisfaction of all Conditions Precedent set forth in Section 7, and provided that the Closing (as such term is defined in Section h) has occurred, effective as of the date which is the Lease Term inationNacation Date and provided that all requirements and actions under Section 4(b) have been satisfied and taken, Tenant agrees to assign, transfer, convey and deliver to Agency and Agency agrees to acquire from Tenant, Tenant's Leasehold Interest in the Property pursuant to the Lease. In conjunction with such acquisition by Agency of Tenant's Leasehold Interest in the Property pursuant to the Lease as of the date which is the Lease Term inationNacati on Date, Tenant agrees that as of the date which is the Lease Term ination/Vacation Date, the Lease as amended by the Lease Amendment and the Lease Guaranty will be terminated and Tenant will terminate its occupancy of the Property. 2. Retention of Assets Agency and Tenant agree that Agency shall only acquire Tenant's Leasehold Interest pursuant to the Lease as amended by the Lease Amendment and that such acquisition by Agency shall not include and Tenant shall retain all rights, title and interest in and to all of the other assets and properties (both tangible and intangible) located on or otherwise used in connection with the operation and conduct of the Edinger Avenue Big O Store, including, without limitation, (i) all inventory; (ii) all supplies; (iii) all displays, telephone/facsimile systems, computer equipment, furniture, fixtures, trade fixtures, equipment, machinery, hoists, lifts, alignment racks, balancers, compressors, signage and other personal property not permanently affixed to the building or property; (iv) all tenant improvements; and (v) except with respect to Big O's intellectual property and proprietary rights as identified below, all intangible assets and properties, including, without limitation, the telephone and facsimile numbers, the trademarks, trade names, service marks, service names, copyrights, patents, processes, formulas, scientific and/or technical information, trade secrets, licenses, franchises, plans, reports, samples, customer and vendor lists and similar items (collectively, the "Retained Tenant Assets"). Tenant shall have the right to and shall remove all of the Retained Tenant Assets and other personal property owned by Tenant from the Property on or before the date which is the Lease Term ination/Vacation Date. Tenant shall have no obligation to repair any damage to the Property resulting from or occasioned by the removal of the Retained Tenant Assets; except that, Tenant agrees to take all commercially reasonable steps and exercise reasonable care to minimize any such damage. In addition, Agency acknowledges and agrees that Tenant's Leasehold Interest in the Property pursuant to the Lease shall also not include and that Big O shall retain all rights, title and interest in and to Big O's trade name, trademarks and service marks and any other items of a proprietary nature, including, without limitation, Big O's proprietary marks, color combinations, designs, slogans and trade secrets, 00 1219.000 1 \844054.7 4 including, the name and mark "Big O Tires," all such rights, title and interest being retained by and remaining the property of Big O. 3. Consideration (a) In consideration of Tenant entering into this Agreement and assigning, transferring, conveying and delivering to Agency Tenant's Leasehold Interest in the Property pursuant to the Lease on the date which is the Lease Term ination/Vacation Date, and agreeing to the early termination of the Lease and the Lease Guaranty and ceasing its occupancy of the Property on the date which is the Lease Termination/Vacation Date, Agency shall pay to Tenant the sum of One Million Three Hundred and Fifty Thousand Dollars ($1,350,000) as total compensation for relocation assistance and any and all related compensation and expenses as more fully described in Section 3(b) (the "Payment Consideration"). The Payment Consideration shall be payable by Agency to Tenant as follows: (i) Agency will deliver to Tenant the amount of Fifty Thousand Dollars ($50,000) within three (3) business days of the execution of this Agreement by the Agency (the "Payment Consideration Deposit"); and (ii) Agency will pay Tenant the balance in the amount of One Million Three Hundred Thousand Dollars ($1,300,000) on the date which is the Lease Termination/Vacation Date (the "Payment Consideration Balance") pursuant to Section 4(b). If requested to by either Party, each Party agrees to execute any other documents as reasonably necessary to effect and carry out the transactions contemplated by this Agreement. (b) Tenant agrees that the Payment Consideration received pursuant to Section 3(a) represents payment in full for all compensatory items (including, without limitation, leasehold interest, tenant improvements, fixtures, bonus value, lease termination, goodwill and relocation assistance) required by the Relocation Assistance Act (Government Code section 7260 et seq.), the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. Section 4601, et seq.), and any other applicable federal, state or local enactment, regulation or practice providing for relocation assistance or compensation for property. The Parties agree that the Payment Consideration will be allocated as follows: (i) the amount of Fifty Thousand Dollars ($50,000) shall be allocated to relocation assistance to cover the expenses the Parties anticipate Tenant will incur in connection with relocation of the Edinger Avenue Big O Store business operations from the Property, and (ii) the amount of One Million Three Hundred Thousand Dollars ($1,300,000) shall be allocated to Tenant's Leasehold Interest pursuant to the Lease as amended by the Lease Amendment. Upon Tenant's receipt of payment in full of the Payment Consideration specified in Section 3(a), Tenant, for itself and on behalf of anyone claiming by, through or under Tenant (collectively, "Tenant Related Parties") (which Tenant Related Parties shall include, with out limitation, Tenant's partners, members, 001219.0001\844054.7 shareholders, managers, officers, directors, employees, contractors, guarantors (including, without limitation, Guarantor) agents, franchisors, representatives, assigns, administrators, attorneys, heirs, beneficiaries, and successors in interest), hereby forever waives and agrees not to make any claims for any acquisition or relocation related benefits, including, but not limited to, any leasehold interest in the real property, payment for personal property, fixtures and equipment, relocation benefits or assistance or any compensation based upon loss of goodwill, or any other damages of any nature. Any such claims are released as set forth in Section 5 below. 4. Lease; Lease Amendment; Vacation of Property (a) Tenant and Agency hereby covenant and agree that upon the effective date of Agency's acquisition from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement, the Lease Amendment will become effective and Tenant shall recognize Agency as the successor -in -interest landlord and Agency shall recognize Tenant as the tenant under the terms and conditions of the Lease as amended by the Lease Amendment; and, except as expressly modified by the Lease Amendment, the Lease shall continue in full force and effect as between Agency as the successor -in -interest landlord and Tenant as the tenant thereunder. Tenant hereby acknowledges Landlord's assignment and transfer of the Lease to Agency and Agency's acceptance and assumption of the Landlord's rights and obligations under the Lease as amended by the Lease Amendment and the Lease Guaranty in connection with Agency's acquisition from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the terms of the Agency/Landlord Property Acquisition Agreement. Tenant covenants and agrees to timely pay all required monetary payments under the Lease, including rent, to Agency in accordance with the terms of the Lease, as amended by the Lease Amendment, and otherwise acknowledges that Agency shall succeed to all rights and assume all of the obligations of the Landlord under the Lease as amended by the Lease Amendment and the Lease Guaranty. Agency agrees to succeed to all rights and assume all of the obligations of the Landlord under the Lease as amended by the Lease Amendment and the Lease Guaranty. The foregoing notwithstanding, and in conjunction with the Conditions Precedent set forth in Section 7 of this Agreement, Agency and Tenant agree that the Lease Amendment will not become effective unless and until the acquisition of the Property transaction between Agency and Landlord pursuant to the Agency/Landlord Property Acquisition Agreement is closed and consummated and Agency has acquired all of Landlord's rights, title and interest in and to the Property as evidenced by the recording of the Grant Deed from Landlord to Agency in the official real estate records of Orange County, California (the "Landlord Grant Deed"). 001219-0001 \844054.7 6 (b) Agency shall be obligated to terminate the Lease as amended by the Lease Amendment and the Lease Guaranty on or before the Lease Term ination/Vacation Date and agrees to send written notice of such termination of the Lease as amended by the Lease Amendment and the Lease Guaranty at least ninety (90) days prior to the date which is the Lease Term ination/Vacation Date (the "Lease Term ination/Vacation Notice"). Concurrently with the delivery of the Lease Termination/Vacation Notice, Agency shall deposit the Payment Consideration Balance in the amount of One Million Three Hundred Thousand Dollars ($1,300,000) (the "Escrowed Portion of the Payment Consideration") into an escrow account to be established with First American Title Insurance Company located at 1 First American Way, Santa Ana, California 92707-5913 ("Escrow"), with written instructions requiring the release of the Escrowed Portion of the Payment Consideration to Tenant on the date which is the Lease Term ination/Vacation Date. Tenant agrees to continue to pay all monetary payment obligations under the Lease as amended by the Lease Amendment, including rent, and perform all of its other obligations under the Lease as amended by the Lease Amendment through the date which is the Lease Termination/Vacation Date. As the successor -in -interest Landlord under the Lease, Agency shall perform all of the obligations of the Landlord under the Lease as amended by the Lease Amendment through the date which is the Lease TerminationNacation Date. Tenant shall bear all costs of vacating the Property and removing the Retained Tenant Assets as provided in Section 2. Agency shall send written notice to the Escrow sufficiently in advance of the Lease Termination/Vacation Date to enable Tenant to timely receive the Escrowed Portion of the Payment Consideration on the Lease Term inationNacation Date. (c) Tenant agrees and covenants to Agency that, subject to the provisions of Section 2, Tenant will vacate the Property on or before the date which is the Lease Term ination/Vacation Date. As set forth in Section 2, on or before the date which is the Lease Termination/Vacation Date, Tenant agrees to remove all of the Retained Tenant Assets from the Property. Tenant waives all rights pursuant to California Civil Code section 1980 et seq. and hereby transfers to Agency any and all rights, title and interest in any personal property remaining on the Property after the Lease Termination/Vacation Date. On the date which is the Lease Term ination/Vacation Date, Tenant shall (i) assign, transfer, convey and deliver to Agency its Leasehold Interest by a duly executed and acknowledged assignment, transfer and conveyance of leasehold interest agreement executed by Tenant in substantially the form attached hereto as Exhibit D (the "Leasehold Interest Ass ignment/Transfer"); and (ii) pay all outstanding rent and other monetary obligations accruing under the Lease for any period prior to the date which is the Lease Term ination/Vacation Date. 00 1219.000 1 \844054.7 (d) On the date which is the Lease Termination/Vacation Date, if and as required in accordance with Section 7 of the Lease, Agency shall deliver to Tenant the Security Deposit under the Lease in the amount of Fifteen Thousand Dollars ($15,000). (e) Except as expressly provided otherwise in Section 5(a), all obligations of Agency as the successor -in -interest landlord under the Lease as amended by the Lease Amendment shall terminate and be of no further force and effect as of the date which is the Lease Termination/Vacation Date and the releases by Tenant and Tenant Related Parties of Agency and Agency Parties set forth in Section 5(a) shall become effective. (f) Except as expressly provided otherwise in Section 5(b), all monetary and non -monetary obligations of Tenant under the Lease as amended by the Lease Amendment and all obligations of Guarantor under the Lease Guaranty shall terminate and be of no further force and effect as of the date which is the Lease Termination/Vacation Date and the releases by Agency and Agency Parties of Tenant and Tenant Related Parties set forth in Section 5(b) shall become effective. (g) On the date which is the Lease Termination/Vacation Date, Tenant and Agency shall execute a memorandum setting forth the date which is the Lease Term ination/Vacation Date. (h) Agency acknowledges that pursuant to the terms of the Agency/Landlord Property Acquisition Agreement, Landlord has granted to Agency and its consultants and other authorized representatives (collectively, "Agency's Authorized Representatives") access to the Property to perform and conduct such inspections, tests, verifications and other due diligence regarding title to the Property and all of the economic, physical and legal attributes and conditions with respect to the Property, including, without limitation, the presence of Hazardous Materials (as such term is defined in the Lease) or other environmental conditions on, beneath, migratory to or emanating from the Property or other real property adjacent thereto. Tenant agrees that Agency and Agent's Authorized Representatives shall have the right to such access to the Property to perform and conduct such due diligence provided that (i) such access to the Property shall be only during regular business hours and upon at least twenty-four (24) hours advance notice; (ii) such access to the Property by Agency and Agency's Authorized Representatives shall be done at the sole expense of Agency and only after Agency has secured all necessary and required permits from the appropriate governmental agencies; (iii) in exercising such rights of access, neither Agency nor Agency's Representatives will interfere with Tenant's use of the Property or the conduct and operations of the Edinger Avenue Big O Store and all activities relating thereto; (iv) Agency will repair any damage to the Property, including, without limitation, the building and improvements thereon caused by or resulting from Agency's 001219.000 1 \844054.7 and Agency's Authorized Representatives' entrance and performance and conduct of its due diligence thereon; and (v) Agency agrees to and will indemnify, protect defend and hold harmless Tenant and its employees, contractors, agents, trustees, settlors, successors, assigns and representatives from and against all claims, suits, proceedings, orders, demands, obligations, actions, causes of actions, liens, judgments, liabilities, losses, damages, costs and expenses (including attorneys' fees and costs) of any nature whatsoever arising out of or in any other manner connected with such entrance on the Property and performance and conduct of due diligence by Agency and Agency's Authorized Representatives thereon. 5. Releases (a) Effective on`the date which is the Lease Termination/Vacation Date, provided that Tenant has received from the Escrow payment in full of the Payment Consideration specified in Section 3(a) and if and as required in accordance with Section 7 of the Lease, the Security Deposit pursuant to Section 4(d), and in consideration of the promises and covenants contained herein, this Agreement shall serve as a full release and discharge by Tenant, on behalf of itself and all Tenant Related Parties, in consideration of the covenants and promises contained herein, of Agency and the members of Agency's Board of Directors, the City of Huntington Beach ("City"), the members of the Huntington Beach City Council and the governing Board of the Agency, and of City's and Agency's officers, agents, representatives, assigns, employees, consultants, insurers, attorneys, and successors in interest (collectively, the "Agency Parties"), from all rights, claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action of every nature, character and description, known or unknown, including those for damages, compensation, relocation assistance, relocation benefits, consequential damages, punitive damages, interest, costs, attorneys' and appraisal fees, injunctive or declaratory relief, or for relief by way of writ of mandate, or for demands, damages, refunds, debts, liabilities, reckonings, accounts, obligations, costs, expenses, liens, actions, causes, and causes of action of whatever kind, at law or in equity, which Tenant or any of the Tenant Related Parties now has or may have in the future against the Agency Parties out of or pertaining to any occurrence, event, circumstance or matter of any kind or nature arising out of the acquisition by Agency from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement and the acquisition of the Leasehold Interest in the Property from Tenant pursuant to this Agreement or from the facts and circumstances described in this Agreement, including, but not limited to, claims for further compensation, claims for any acquisition or relocation related benefits, including, but not limited to, compensation for personal property, any leasehold interest in the real property, payment for personal 001219,0001 \844054.7 9 property, fixtures and equipment (if applicable), relocation benefits or assistance or any compensation based upon loss of goodwill, interest, costs, attorneys' and appraisal fees or any other damages of any nature. Tenant, for itself and all Tenant Related Parties, hereby specifically waives and releases any relocation benefits, assistance and/or payments under the Relocation Assistance Act (Government Code section 7260 et seq.), the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. Section 4601, et seq.), and any other applicable federal, state or local enactment, regulation or practice providing for relocation assistance, moving expenses, or compensation for property (including, without limitation, loss of goodwill and/or furnishings, fixtures and equipment); except that, nothing contained in this Section 5(a) shall operate as a release or waiver of Agency's obligations (i) as the successor -in -interest landlord under the Lease as amended by the Lease Amendment pursuant to Section 4(a) up and until the Lease Termination/Vacation Date; and (ii) which, pursuant to the terms of the Lease as amended by the Lease Amendment or applicable law, survive the termination of the Lease as amended by the Lease Amendment, including, without limitation, any debts, liabilities, demands, obligations, costs, expenses, actions or causes of action of every nature, character of description, known or unknown, including those for damages, compensation, consequential damages, punitive damages, interest, costs, attorneys' and appraisal fees, injunctive or declaratory relief, or for relief by way of writ of mandate, or for demands, damages, refunds debts, liabilities, reckonings, accounts, obligations, costs, expenses, liens, actions, causes, causes of action of whatever kind at law or in equity of or relating to the physical conditions of the Property, including, without limitation, the presence of Hazardous Materials (as such term is defined in the Lease) or other environmental conditions on, beneath, migrating to or emanating from the Property or other real property adjacent thereto not caused by Tenant. (b) Effective on the Lease Termination/Vacation Date and payment in full by Agency to Tenant of the entire Payment Consideration specified in Section 3(a) and the Security Deposit pursuant to Section 4(d), and in consideration of the covenants and promises contained herein, this Agreement shall serve as a full release and discharge by Agency and all of the Agency Parties of Tenant and all of the Tenant Related Parties, from all rights, claims, debts, liabilities, demand, obligations, costs, expenses, actions and causes of action of every nature, character and description known or unknown including those for damages, compensation, consequential damages, punitive damages, interest, costs, attorneys' and appraisal fees, injunctive or declaratory relief by way of writ of mandate, or for demands, damages, refunds, debts, liabilities, reckonings, accounts, obligations, costs, expenses, liens, actions, causes and causes of action of whatever kind, at law or in equity, which Agency or any of the Agency Parties now have or may have in the future against the Tenant and all of 00 1219.000 1 \844054.7 10 the Tenant Related Parties out of or pertaining to any occurrence, event, circumstance or matter of any kind or nature arising out of the acquisition by Agency from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement and the acquisition by Agency from Tenant of Tenant's Leasehold Interest in the Property pursuant to this Agreement or from the facts and circumstances described in this Agreement, or other real property adjacent thereto; except that, nothing contained in this Section 5(b) shall operate as a release or waiver of Tenant's obligations (i) under the Lease as amended by the Lease Amendment accruing during the period from and after July 1, 2004, which is the commencement date of the term of the Lease as amended by the Lease Amendment, up and until the Lease Term inationNacation Date; and (ii) which, pursuant to the terms of the Lease as amended by the Lease Amendment or applicable law, survive the termination of the Lease as amended by the Lease Amendment, including, without limitation, any debts, liabilities, demands, obligations, costs, expenses, actions or causes of action of every nature, character or description, known or unknown, including those for damages, compensation, consequential damages, punitive damages, interest, costs, attorneys' and appraisal fees, injunctive or declaratory relief, or for relief by way of writ of mandate or for demands, damages, refunds, debts, liabilities, reckonings, accounts, obligations, costs, expenses, liens, actions, causes, causes of action of whatever kind, at law or in equity of or relating to the physical conditions of the Property, including, without limitation, the presence of Hazardous Materials (as such term is defined in the Lease) or other environmental conditions on, beneath, migrating or emanating from the Property or other real property adjacent thereto caused by Tenant. (c) It is intended that this Agreement shall be effective as a bar to each and every action, cause of action, claim, loss and damage whether now known or unknown, foreseen or unforeseen, suspected or unsuspected that any Party may have against any other Party arising out of or in any way connected with the acquisition by Agency of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement and the acquisition by Agency of Tenant's Leasehold Interest in the Property pursuant to this Agreement or from the facts and circumstances described in this Agreement, and each of the Parties expressly waives any and all rights and claims under Section 1542 of the California Civil Code, which provides: 00 1219.000 1 \844054.7 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. n Initials of Tenant: L' , (�L ' I 0 (Chr&,tohncr. Phillips) W(.yirgil Kyle Kyle, III) (J o Y. Berry) Initials of Agency: SAR (Chairperson) (Executive Director) (Agency unp sel) (Deputy Execut ve Director) (A y pecial Counsel) (d) Except as expressly set forth herein, none of the Parties or their respective agents nor any related entities have made any statement, representation, warranty or promise to the other regarding any fact relied upon in entering into this Agreement and the Parties, and each of them, expressly do not rely upon any statement, representation, warranty or promise of any other Party or any Party's agent or related entities in executing this Agreement, except as is expressly set forth herein. Each of the Parties has made such investigation of the facts and law pertaining to the subject matter of this Agreement as it deems necessary, and has consulted with legal counsel of its own choosing concerning these matters. (e) Each Party hereby represents and warrants to the other Party that as of the date of this Agreement and as of the Closing Date (i) to its actual knowledge, no other entity or person now has or will as of the Closing Date have any rights, title, or interest whatsoever in the released claims; and (ii) there has been no and as of the Closing Date there will be no assignment, transfer, conveyance or other disposition by such Party of any of the released claims. (f) This Agreement represents a settlement of claims between the Parties and does not constitute any admission of liability by either Party to the other Party to this Agreement. 6. Representations and Warranties of Parties (a) By Agency. Agency represents and warrants to Tenant that the statements contained in this Section 6(a) are true, correct and complete as of the date of this Agreement and will be true, correct and accurate as of the Closing Date. (i) Agency is a public body, corporate and politic duly organized, authorized to exercise the power of eminent domain, validly existing and in good standing under the laws of the State of California, and has full power and authority and all authorizations 00 1219.000 1 \844054.7 12 necessary to carry out and perform its obligations under this Agreement. (ii) Agency and the person(s) signing this Agreement on behalf of Agency, have full legal capacity, right, power and authority, without any further action or consent required, to execute and deliver this Agreement and to carry out the transactions contemplated hereby. Any actions required to be taken by Agency to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been, or will have been duly taken. (iii) The information contained in the Recitals set forth in the introductory paragraphs hereof regarding Agency is true, correct and accurate. (iv) Except as provided otherwise in this Agreement, neither the execution and delivery of, or the performance by Agency of its obligations under this Agreement, or the consummation of the transactions contemplated hereby are prohibited by, or require Agency to obtain any consent, authorization, approval or registration under any law, rule, regulation, judgment, order, writ, injunction or decree that is binding upon Agency. (v) In conjunction with Section 4(h), Agency acknowledges and represents that it has been provided and will be provided from and after the Closing Date up and through the Lease Term ination/Vacation Date full and complete access by Tenant and Landlord to the Property and has had and will have had an opportunity to fully and completely conduct such inspections, tests, verifications and other due diligence regarding title to the Property and all of the economic, physical and legal attributes and condition with respect to the Property, including, without limitation, the presence of Hazardous Materials (as such term is defined in the Lease) or other environmental conditions on, beneath, migratory to or emanating from the Property or other real property adjacent thereto and is purchasing and acquiring the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement. (b) By Tenant. Tenant represents and warrants to Agency, that the statements contained in this Section 6(b) are true, correct and complete as of the date of this Agreement and will be true, correct and accurate as of the Closing. (i) Tenant is a California general partnership, duly organized, validly existing and in good standing under the laws of the State of 001219.0001 \844054.7 13 California. Tenant is duly authorized to conduct and operate its businesses (including, without limitation, the Edinger Avenue Big O Store) and is in good standing under the laws of each jurisdiction where such qualification is required and where the failure to be so qualified would have a material adverse effect on the businesses, operations, results of operation, financial condition or assets and property of Tenant. Tenant has full power and authority and all material licenses, permits and authorizations necessary to carry on the businesses on which it is engaged including, without limitation, its ownership and operation of the Edinger Avenue Big O Store. (ii) Tenant and the persons signing this Agreement on behalf of Tenant, have full legal capacity, right, power and authority, without the consent of any other person required and without any further action required, to execute and deliver this Agreement and to carry out the transactions contemplated hereby. Any actions required to be taken by Tenant to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by Tenant have been, or will have been duly taken. This Agreement and the terms and provisions hereof, constitute the valid and legally binding obligations of Tenant, enforceable in accordance with its terms, conditions and provisions, subject to limitations imposed by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally and to the general principles of equity. (iii) The information contained in the Recitals set forth in the introductory paragraphs regarding Tenant is true, correct and accurate. (iv) Tenant has good and marketable title to Tenant's Leasehold Interest free and clear of all liens and encumbrances. (v) Except provided otherwise in this Agreement, neither the execution and delivery of, or the performance by Tenant of its obligations under this Agreement, or the consummation of the transactions contemplated hereby (i) are prohibited by, or require Tenant to obtain any consent, authorization, approval or registration under any law, rule, regulation, judgment, order, writ, injunction or decree that is binding upon Tenant; or (ii) violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien or require any consent under, any material agreement to which Tenant is a party or is otherwise bound. 00 1219.000 1 \844054.7 14 7. Conditions Precedent (a) The obligations of Agency under this Agreement are subject to satisfaction of all of the conditions precedent set forth in this Section 7(a) within the time periods, if any, provided therefor (each a "Condition Precedent" and collectively, the "Conditions Precedent"). Agency may waive any or all of such Conditions Precedent in whole or in part but any such waiver shall be effective only if made in writing. No such waiver shall constitute a waiver by Agency of any of its rights or remedies if Tenant defaults in the performance of any covenant or agreement to be performed by Tenant under this Agreement or if Tenant breaches any representation or warranty made by Tenant in this Agreement. If any Condition Precedent set forth in this Section 7(a) is not fully satisfied or affirmatively waived by Agency in writing by the Closing Date (or by any earlier date provided with respect to such Condition Precedent), Agency shall have the right, provided it is not in default hereunder, to terminate this Agreement and be released from all obligations to Tenant under this Agreement arising after such termination. (i) On the Closing Date, Tenant shall not be in material default in the performance of any covenant or agreement to be performed by Tenant under this Agreement on or before that date. (ii) On the Closing Date, all representations and warranties made by Tenant in this Agreement shall be true and correct in all material respects as if made on and as of the Closing Date. (iii) The acquisition of the Property transaction between Agency and Landlord pursuant to the Agency/Landlord Property Acquisition Agreement shall have been closed and consummated. (iv) Landlord and Tenant shall have executed and delivered the Agreement of Release of All Claims dated as of June 16, 2008 in the form attached hereto as Exhibit E (the "Landlord/Tenant Waiver/Release"). (v) Big O and Tenant and the "Franchisee Guarantors" (as such term is defined in the Big O Term ination/Release) shall have executed the Termination and Release Agreement dated as of June 16, 2008 in the form attached hereto as Exhibit F (the "Big O/Tenant Term ination/Re Iease"). (vi) Tenant shall have executed and delivered the Lease Amendment in the form attached hereto as Exhibit C. (b) The obligations of Tenant under this Agreement are subject to satisfaction of all of the Conditions Precedent set forth in this Section 7(b) within the time periods, if any, provided therefor. Tenant may waive any or all of 001219.0001 \844054.7 15 such Conditions Precedent in whole or in part but any such waiver shall be effective only if made in writing. No such waiver shall constitute a waiver by Tenant of any of its rights or remedies if Agency defaults in the performance of any covenant or agreement to be performed by Agency under this Agreement or if Agency breaches any representation or warranty made by Agency in this Agreement. If any condition set forth in this Section 7(b) is not fully satisfied or affirmatively waived by Tenant in writing by the Closing Date (or by any earlier date provided with respect to such Condition Precedent), Tenant shall have the right, provided it is not in default hereunder, to terminate this Agreement and be released from all further obligations to Agency under this Agreement. (i) On the Closing Date, Agency shall not be in material default in the performance of any covenant or agreement to be performed by Agency under this Agreement on or before that date. (ii) On the Closing Date, all representations and warranties made by Agency in this Agreement shall be true and correct in all material respects as if made on and as of the Closing Date. (iii) The acquisition of the Property transaction between Agency and Landlord pursuant to the Agency/Landlord Property Acquisition Agreement shall have been closed and consummated. (iv) Agency shall have delivered the Payment Consideration Deposit into the Escrow. (v) Landlord shall have executed and delivered the Landlord/Tenant Withdrawal/Release in the form attached hereto as Exhibit E. (vi) Big O shall have executed and delivered the Big O/Tenant Termination/Release in the form attached hereto as Exhibit F. (vii) Agency shall have executed and delivered the Lease Amendment in the form attached hereto as Exhibit C. 8. Closing Matters (a) The closing of the transactions contemplated by this Agreement (the "Closing" or "Closing Date") shall be the date all Conditions Precedent have been satisfied or waived by the Party in whose favor the applicable Conditions Precedent have been given as provided in Section 7, but in no event later than August 31, 2008. In the event the Closing does not occur on or before the foregoing date and the Parties have not otherwise agreed in writing to extend the date of the Closing, this Agreement shall terminate and be of no further force and effect. 001219.0001\844054.7 16 (b) Agency shall be responsible for (i) any and all escrow fees charged by Escrow Holder; (ii) any and all costs for all title work with respect to the Property; and (iii) any and all applicable sales and use taxes payable with respect to the transfer of the Property. Agency shall also be responsible for any and all recording fees for the recordation of the Leasehold Interest Assignment/Transfer and any transfer taxes payable with respect to the assignment, transfer and conveyance of Tenant's Leasehold Interest in the Property. Any and all other costs incurred by either Party hereto shall be paid by the Party incurring such costs. (c) , All rent, current taxes, assessments, utilities, maintenance and other similar charges associated with Tenant's Leasehold Interest in the Property pursuant to the terms of the Lease, shall be prorated between Tenant and Agency as of the date which is the Lease Term ination/Vacation Date. Such prorations shall be adjusted, if necessary, and completed after the Lease Term ination/Vacation Date as soon as final information becomes available. Tenant and Agency agree to cooperate and to use their commercially reasonable efforts to complete such prorations no later than thirty (30) days after the date which is the Lease Termination/Vacation Date. Tenant and Agency shall use their commercially reasonable efforts prior to the date which is the Lease Termination/Vacation Date to prepare a schedule of prorations covering as many items to be prorated as practicable so that such prorations can be made at the Closing. (d) With regard to the Lease Amendment, in conjunction with Section 4(a) of this Agreement, on or before the Closing Date, Agency and Tenant will each conditionally deliver to the Escrow its originally executed copy of the Lease Amendment, specifically instructing the Escrow in writing not to release copies of the Lease Amendment to either Party unless and until the acquisition transaction between Agency and Landlord pursuant to the Agency/Landlord Property Acquisition Agreement is closed and consummated and Agency has acquired all of Landlord's rights, title and interest in and to the Property as evidenced by the recording of the Landlord Grant Deed in the official real estate records of Orange County, California. 9. Indemnity (a) By Tenant. Tenant shall indemnify, defend, protect and hold the Agency Parties harmless from and against any claims, damages, demands, liabilities, losses, judgments, expenses and attorneys' fees and/or costs resulting from (i) any breach of this Agreement, including, without limitation, the falsity of any representation or warranty made by Tenant in this Agreement; (ii) any third party claims arising in connection with this Agreement; or (iii) any claims between Tenant and any Tenant Related Parties arising in connection with this Agreement. 001219.0001 \844054.7 17 (b) By Agency. Agency shall indemnify, defend, protect and hold Tenant and the Tenant Related Parties harmless from and against any claims, damages, demands, liabilities, losses, judgments, expenses and attorneys' fees and/or costs resulting from (i) any breach of this Agreement, including, without limitation, the falsity of any representation or warranty under this Agreement; (ii) any third party claims arising in connection with this Agreement; and (iii) any claims by and among the Agency Parties. 10. Attorneys' Fees In any action or proceeding between the parties to interpret, enforce, award, modify, rescind or otherwise in connection with any of the terms or provisions of this Agreement, the prevailing party in the action shall be entitled, in addition to damages, injunctive relief or any other relief to which it might be entitled, reasonable costs and expenses, including, without limitation, litigation and other costs and reasonable attorneys' fees. 11. Entire Agreement This Agreement contains the entire Agreement of the Parties, and supersedes any prior written or oral agreements between them, concerning the subject matter of this Agreement. 12. Partial Invalidity In the event that any term, covenant, condition or provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid or against public policy, the remaining provisions shall continue in full force and effect. 13. Waiver and/or Modification The provisions of this Agreement may not be waived, altered, amended or repealed, in whole or in part, except upon a written agreement signed by each of the Parties. The waiver by one Party of the performance of any provisions of this Agreement shall not invalidate this Agreement, nor shall it be deemed a waiver of any other provision hereof. 14. Headings The headings, subheadings and numbering of the different paragraphs of this Agreement are inserted for convenience and for reference only and shall not be considered for any purpose in construing this Agreement. 001219M01 \844054 7 18 15. Governing Law The rights and obligations of the Parties under this Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of California. 16. Successors In Interest Subject to any restrictions against assignment contained herein, and to any legal limitations on the power of the signatories to bind non -signatories to this Agreement, this Agreement shall inure to the benefit of, and shall be binding upon, the assigns, successors in interest, personal representatives, executors, estates, heirs, legatees, agents and related entities of each of the Parties. 17. Necessary Acts Each of the Parties agrees to perform such further acts, and execute and deliver such further documents, as may be reasonably necessary to carry out the provisions of this Agreement. 18. Advice of Counsel THE PARTIES, AND EACH OF THEM, AND EACH CONSTITUENT PARTNER OF TENANT, ACKNOWLEDGE THAT IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS AGREEMENT, THEY HAVE EACH BEEN REPRESENTED BY INDEPENDENT COUNSEL OF THEIR OWN CHOOSING AND THE PARTIES, AND EACH OF THEM, AND EACH CONSTITUENT PARTNER OF TENANT, EXECUTED THIS AGREEMENT AFTER REVIEW BY SUCH INDEPENDENT COUNSEL; OR, IF THEY WERE NOT SO REPRESENTED, SAID NON -REPRESENTATION IS AND WAS THE VOLUNTARY, INTELLIGENT AND INFORMED DECISION AND ELECTION OF THE PARTY OR CONSTITUENT PARTNER NOT SO REPRESENTED; AND, PRIOR TO EXECUTING THIS AGREEMENT, EACH PARTY, AND EACH CONSTITUENT PARTNER OF TENANT, HAS HAD AN ADEQUATE OPPORTUNITY TO CONDUCT AN INDEPENDENT INVESTIGATION OF ALL THE FACTS AND CIRCUMSTANCES WITH RESPECT TO THE MATTERS WHICH ARE THE SUBJECT OF THIS AGREEMENT INCLUDING BUT NOT LIMITED TO THE ADVISABILITY OF ENTERING INTO THIS AGREEMENT AND THE MEANING OF CALIFORNIA CIVIL CODE SECTION 1542. Initials of Tenant: I -- / c� r> (Ch sto her R. Phillip rgd yle yle (Jas . Be Initials of Agency: ( hairp so (Executive Director) (Age y o nsel) (Deputy Executivetive Director) �Po (Agel(vypecial Counsel) 001219.0001 \844054.7 19 19. Authority to Execute This Agreement Each person executing this Agreement on behalf of an entity represents that he or she is authorized to execute this Agreement on behalf of that entity and to bind that entity to the terms of this Agreement. 20. Effective Date This Agreement shall become effective upon the signature of all Parties hereto. Upon written notice to Tenant by Agency that Agency has elected not to purchase the Property pursuant to the terms of the Agency/Landlord Property Acquisition Agreement, this Agreement shall be of no further force and effect and the Parties shall have no further rights and obligations hereunder. Such notice shall be signed by the Executive Director of the Agency, acknowledged by Agency counsel and refer to this Section 20. 21. Construction Each Party has cooperated in the drafting and preparation of this Agreement. In any construction to be made of this Agreement, or of any of its terms and provisions, the same shall not be construed against any Party. 22. Counterparts This Agreement may be executed in counterparts, each of which shall be deemed an original and, when taken together with other signed counterparts, shall constitute one (1) Agreement, which shall be binding upon and effective as to all Parties. 23. Voluntary Agreement The Parties, and each of them, and each constituent partner of Tenant, further represent and declare that they have carefully read this Agreement and know the contents thereof, and that they sign the same freely and voluntarily. 24. Notices All notices, requests, demands and other communications required or permitted to be given under this Agreement shall be in writing and shall either be delivered personally or be sent by (i) a nationally recognized overnight courier (e.g., FedEx or UPS) or (ii) certified first class mail, postage prepaid, return receipt requested, deposited in the United States mail, and properly addressed to the Party at its address set forth below, or at any other address that such Party may designate by written notice to the other Parry: To Agency: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director 001219.0001 \844054.7 20 Copy to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary To Tenant: C.S.B. Partnership 7872 Edinger Avenue Huntington Beach, CA 92647 Attn: Christopher R. Phillips Copy to: Richard P. Waxman, Esq. Wendel, Rosen, Black & Dean LLP 1111 Broadway, 241h Floor Oakland, CA 94607 25. Third Party Beneficiaries This Agreement is made and entered into for the sole protection and benefit of the City and Agency, their successors and assigns, and Tenant and its permitted successors and assigns, and no other person or persons shall have any right of action hereon. IN WITNESS WHEREOF, the Parties have executed this Acquisition of Leasehold Interest Agreement as of the date written above. ATTEST: By:; Print Na . ` 7 c� Title: Ag ncy Clerk REVIEW D VPP VED: By: Print Na -. 111 Title: Executive Director AGENCY: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic By: Print Name: D,P�%i iG Title: Chairperson APPROVED AS TO FORM: Print Name: Title: Agency Counsel W ('51 D [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \844054.7 21 LEIBOLD MCCLENDON & MANN, P.C., Agency Special Counsel By: arbara Zei Leibold INITIATED AND APPROVED: : B n/ C 12 Y Print Name: Title: Deputy Executive Director TENANT: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: Ch opher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its eneral Partner By: -e Virgil Ky e Ky e, A I, resident By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: 0"// Al"o, C ri opher R. Phillips, P sident 001219.0001 \844054.7 22 EXHIBIT A FRANCHISE AGREEMENT 001219,0001 \844054.7 Original Franchise Agreement #20466 Expiration Date: August 1, 2014 BIG O TIRES, INC. FRANCHISE AGREEMENT 3 BIG O TIRES, INC. FRANCHISE AGREEMENT TABLE OF CONTENTS SUMMARYPAGES--•................•------...._......._......----••---••-•---........-----....---.....---•--......................-----•...,._......v 1 _ CERTAIN DEFINITIONS •--...---•••--•.......................•-•---....•---------•-.......::..•----•••........._..-------•-..........1 2. GRANT OF FRANCHISE .... ..................................................... ......I ........................ ........................ 3 2.01 Grant of Franchise ...... ........... ................ ........... ........ -............. .......................... ............. 3 2.02 Trade Area .................................................................................................................... 4 3: FIRST OPTION RIGHTS..................................................•--•----•--••------------...-----...-- ..................... 4 3.01 First Option Rights..... .:.:_... ...........:::..::... 4 3.02 Notification by Big O..................................... ...........................:..:....................•...... 4 3.03 Multiple First Option Rights ...................................... .......................;....:........... .... 4 3.04 Notification of Qualification ............................................. :.4........ ........;..::................ ... 4 3.05 Exjercise of Option by Franchisee......................:::.......---......................................... 4 3.06 Transfer of First Option Rights ..................................................................................... 3.07 Limitation on First Option Rights ................................:.......... ....... :.....:............:........... 4 3.08 Expiration of First Option Rights ........................... ....>....._..._..;....................................... 4 4. TERM .................................. ........................................... :.:............ .:..:.:....... .............:_:.. 4 4.01 Term..................••--•----......_...................---....:........:. ..:................ ,�......... 4 5. RENEWAL: EXTENSION OF FRANCHISE RIGHTS.................................................................. 5 5.01. Grant of Successor Franchise Rights_:.:...:.:.............::..._.......;_.::._..........;._ .:.............:... 5 5.02 Conditions to Grant of Successor Franchise ...... .._....... ............ 5.03. Notification of Non -Renewal ........... ........ ................... ....... .--....--.............................. 5 6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS .................. :........... ....:............ :...._..:..........:_..... 5 6.61 ... Financing Approval .--•................................•-..._........................._...:...I._..........••-•-.....:_.... 5 . 6.02 Site Selection...................................................................::...--::....._::....::::....::...-:_........ 6 6.03 Equipment and Signage .......................................................•-••---......:::........_.............. 6 6.04 Conditions to Opening ............... 6.05 Commencement of Business.......................................•-•-•-•-------............._...:..•--........:.. 6 7. PRE -OPENING AND ONGOING ASSISTANCE...: :................... .......................... :.....:.:................. 6 7.01 Pre -Opening Assistance .............................................. ........................... _...................... 6 7.02 ,; On -Going Assistance ............................................. 7 8.. FEES ............................................... ........:.........----....---...._.................:::...--•-•--------••-..............7 8.01 Initial Franchise Fee ......... ................ ........ ............................. :.......... .............. ............ 7 . 8:02 Royalty Fee ..................................................................................... .........----..........-•--•...7 8.03 National Advertising Fee............................................................... ......... ..................... 7 8.04 Late Fees.. ................................ ........................................................ .........:7 8.05 Taxes ................................. ..:---..................................•---•-....._...:---.....7 . 9.06 Allocation of Payments .............. ............... :............................. ................................... 7 9: LICENSED MARKS.....................................................••----......----................-:.............................. 8 _941 -Licensed-Marks __:............................... .............. ......... . ........................--.............................................. 9.02 Limitations on Use ........................................................ :.............................. ................ 8 9.03 Infringement --•--• ..................... ........................ .......................... ;........ ------------••------_. 8 9.04 Franchisee's Business Name ....................................................................................... 8 9.05 Change of Licensed Marks ... - ....................... --------------:..-.-._--...-------•------.._---------------------- 8 9.06 Franchisor's Rights..................................................:...........•-•----.....:..............--••-.........8 Page i - 10. STANDARDS OF OPERATION ........................... :...... ::..::........................................... ........... .... 8 10.01 Standards of Operations ............................. ........ ................................ :................ ........ 8 10.02 Maximum Pricing------....'................................------•-----................................---...--.....9 10.03 National Fleet Account Programs .................................. .................................. .............. 9 11. STORE MANAGEMENT-------------------.................................... ................. .............. ...................... 9 11.01 Store Management..:......................................................:..........:::.................................9 11.02 Completion of Training by Operator or. Manager.......................................................... 9 11.03 Operation of Store by Big 0..--•••-•------••-•...................................................................... 9 12. QUALITY CONTROL. ................... ........ ........................... ......................................... :........ _.10 12.01 Inspections......................•--._.............................-..-...-.-•.-•---------.-•---------......---------•-•- 10 13. MANUAL; NEW PROCESSES .... _....... --....-•-----•...................::......:.....................•..........._....10 13.01 Manual .................................................... ..................................................... .............. 10 13.02 Confidentiality of Information ..................... .............. :.................... ............................. 10 13.03 Revisions to Manual :....:.::...................................:...........::_.. 10 13.04 Improvements -to System..............................................::.....::......::.............................10 14. PRODUCTS AND SERVICES._........:.....................:..:..........:_..........,....................................... 10 14.01 Products and Services ..................... .10 14.02 Approval of Products and Services ............................. -...... :.......... ......... ........... ...._..._ 11 14.03 Inventory and Services ................. . , 14.04 Warranties and Guaranties....................................._.......__.............:..:.:.__.........._.:...... 14.05 Open Account Financing------------ -------------------------------------- ----------- --------........ --------•• -11 .. 15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS' ........... :............... ................... 11 15.01 Grand Opening Advertising%:..:::.....`..:.:...............::...:..:::::.:........*...........r"".... :.... ,..... 11 15.02 National Advertising Program... ............•-----......_........................:.................__.._.........11 15.03 Local Fund ............ :....... ........................ ,................................................ . ..............12 15.04 Approval of Advertising ....... .............. .......... ........................... ..12 16. STATEMENTS AND RECORDS .............................. .................................................................. .13% 16.01 Invoices ..................... :.., 16.02 Audit...........................................................................:.:........:::.:...............................13 16.03 Monthly Reports ....................•....................... ........... ........................ ::...................... : 13 16.04 Financial Statements ... ............................................................. ............;...._.......,......... 13 16.05 Management Systems ... ............ ............................... ....•-_-..:. 16.06 Retail Accounting Center ............................. ....................... _............................................ 13 17. COVENANTS.........................................:.........--------•----•----------..............-----•-•--•--•-•--....-----...13 17.01 Noncompetition During Term......................................................................................13 17.02 Confidentiality................................................................:............................................13 17.03 No Interference with Business ............ .............................................................---...:.,:._.13 17.04 Post Termination Covenant Not to Compete ... ............................................ ................ 13 17.05 Survivability of Covenants....................•--...................................................................14 17.06 Modification of Covenants...........................................................:...............................14 17.07 Anti -Terrorism Laws.:--------------•--•-•--------.......---------.......------......................................... 14 18. TRANSFER AND ASSIGNMENT............: ......................... ........... ............................................. _. 14 18.01 Assignment by Big 0.................................................................................................. 14 18.02 Right of First Refusal ....... ................. ..................................... ...................................... 14 18.03 Transfer Legend .................... ............. :................ = ---.........:......... 14 . 18.04 Pre -Conditions to Franchisee's Assignment ................... .................. .:........ ................. 14 18.05 Death of Franchisee--............................................................................... ..................... 16 Page ii 18.06 No Waiver............................................................... ...............................................16 18.07 Excepted Transfers ..................... ........................ ................ .............................. ....16 19. DEFAULT AND TERMINATION----•--------•......................:..•--.......__...........-•----....--•-:.....-•-......- ...: 16 19.01 Termination by Big 0 ---------------------------------------------------- ---------------------------------------------16 19.02 Governing State Law ..................................... .......................................... 17 19.03 Termination by Franchisee..............................._------...:............. ............................. 17 19.04 Force Majeure.......................... ..................... ............................. :................. ......... :_.:.:17 20. POST TERMINATION OBLIGATIONS... ....................................... - ........... ­ ............................. 18 20.01 Post -Termination Obligations ..... ........... ..................................................................... 18 20.02 Right to Repurchase ............. ................... ....................................... ......... ._.._................. 18 20.03 Right of First Refusal .................................... .......................... --........................... :.:.__...18 20.04 De -Identification of Assets Upon Sale .................... ....................... :...... :...................... 18 21. INSURANCE.......... _............................... :............. 19 21.01 Insurance Coverage ............... ...................... ................. ;............. 19 21.02 Proof of Insurance ............................... ...........................................:............:.....::..::::.:19 21.03 Survival of Indemnification ........... ............................... :................................................ .,..:19 22. , TAXES, PERMITS, AND INDEBTEDNESS ....... ....................................... ..................... :.......... 19 22.01 Payment of Taxes.......................................................................................................19 2202 Compliance with Laws....................................................................... ......................... 19 22.03 Payment of Debts ............... ....................`.---.........................---..................•-•-•.............19 23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS......................................19 23.01 Indemnification ............................. ............................ :......................... ................19 23.02 Independent Contractor ............................................ ............. .---................. ................ 19 24. WRITTEN APPROVALS,, WAIVERS, AND AMENDMENT...................................•..__..._._......_....19 24.01 Written Approval ............... .................... ................................................. ........... ........... 19 24.02 Waiver .................•• ...................... 24.03 Modification........................................................ .:......................... ............................. 20 25. DEALER PLANNING BOARD..................................................................................................... 20 25.01 Dealer Planning Board.......................................................................•••-•••---•............ 20 25.02 Special Interest Issues ........................................ ,.............................. .... .................. . 20 25.03 _ Disapproval of Management Proposal....................................................................... 20 25.04 Compliance with Modification ............. .................................. ..................................... . 20 26. RIGHT OF OFFSET.......-•.................................................-......----.............................._-*............... 20 26.01 -'Right of Offset ..... ..................... ........................... :............ ------- --............. ................... 20 27. ENFORCEMENT........................................................ ..................... ------._........... .............. 20 27.01 Declaratory and Injunctive Relief .................................................................. .............. 20 27.02 Costs of Enforcement ................................ ..................... 20 28. NOTICES ........................... ........................................ ....................... •..... ................... :................ 20 28,01. Notices .................................................. ....... ......... ...................................................... 20 29. • GOVERNING LAW ......................... ............ :.....------ .............................:.................................... 21 29.01 Governing Law...............................................................------------------------------------------- 21 29.02 Jurisdiction.. .................................... --------------------------------------------------------------------------- 21 30. SEVERABILITY AND CONSTRUCTION.................................................................................... 21 30.01 Severability.......................... ....... .......................... .................... ------- ....--•-................ 21 Page iii - 30�2 Coun�spmdo----.-.._----'----�.--.---_''--__—_—'--'__—.'---'.�-.. '. '` .. , . 21 ' 30]]3 Construction .... ....... .......................................................... ,........................................... Z1 � 31' �GUARANTY ............................................................ ................................................................ .......... 21 ' 31.01 Guaranty ....... .......... .................................. ................................................................. �1 ' 32 |S�--._---.------.—'--------_-----_—_-____ 21 ANNEX A-T8C Corporation Guaranty mfPerformance SohoduleY-PremisnsandTmade/rem ` Schedule 2-Ownership \Aerifioabun Schedule 3- Schedule 4'Lease Rider and Modification ' Schedule 5'Renewal Rider SoheduleG-Trmdamarks Schedule 7`Converter Rider � Schedule 8'Farm. Class Rider ' ` ` � ' ' � ^ ' � ' ' Page iv � ` � `^ BIG O TIRES, INC. FRANCHISE AGREEMENT SUMMARY PAGES These pages summarize the attached Franchise Agreement, the details of which shall control in the event of any conflict. 1. FRANCHISEE: CSB PARTNERSHIP, a California general partnership 2. INITIAL FRANCHISE FEE: Amount Due: -with Application: $4,583.50 -upon signing Agreement: $4,583.50 Total: $9,167.00 3. ROYALTY FEE Two percent (2%) of Gross Sates 4. LOCAL ADVERTISING— Minimurn:of four percent (4%) of Gross Sales CONTRIBUTION: 5. NATIONAL ADVERTISING See Sections 15 and 25. CONTRIBUTION: 6. INITIAL ADVERTISING REQUIREMENT: $10.000.00 7. STORE LOCATION: 7872 Edinger Avenue Street and Number Huntington Beach, CA 92647 City, State and Zip Code (714) 861-4011 Phone Number 8. Franchisee's Operator: Chris Phillips 9. Franchisee's Manager: 10. Franchisee's Agent for Service of Process: Name: CSB Partnership c% Christopher R. Phillips Address: 27131 Catle Arroyo. Suite 1703 San Juan Capistrano, CA 92675 11. Big O's Agent for Service of Process: Name: CT Corporation Address: 1675 Broadway. Suite 1200 Denver Colorado 80290 Page v >:... 12. Effective Date: August 1, 2004 13. Commencement Date: August 1. 2604 14. Expiration Date: August 1..2014. 15. Franchisee's Advisor: 16. Send Notices to Big O to: Name: Gener6l Counsel .Address: Big O Tires, Inc. . 12650 East Briarwood Avenue Suite 2D Englewood Colorado. 80112 17. Send Notices to Franchisee to the Store at: -Name: CSB Partriership c/o Christopher R. Phillips Address: - 27131 CalleArroyo..Suite.9703 San Juan Capistrano, CA 92676 With a copy to: Name: Address: 18. Business not subject to Section 17.01 Name: Address: 19. Faun Class Franchise: Yes No Page vi ` BIG O TIRES, INC. FRANCHISE AGREEMENT This Franchise Agreement ("Agreement") is made by and between Big -O Tires, Inc_ ("Big.0 ), a - Nevada corporation; with its principal place of business at 12650 E. Briarwood Avenue, Suite 2-D, Englewood; Colorado 80112, and CSB Partnership ("Franchisee"), a(n) California general partnership with a place of business at 7872 Edinger Avenue, Huntington Beach, CA 92647,'with reference to the. following facts. RECITALS A. Big O.has developed and provides franchisees with access to Products and Services and a System for marketing and servicing such Products and Services to retail customers through Big.O Stores. Since its inception, Big has added to the Product and Services and System to enhance the competitive posture of its franchisees. Big O has developed and owns certain Licensed Marks which are licensed to franchisees for use in the Big O Stores. ✓ B. Franchisee desires, upon the terms and conditions set forth herein, to obtain a license to_operate a Franchised Business and to offer and sell Big O Products and Services. Franchisee acknowledges thafitis essential, to the preservation .of the integrity of the Licensed Marks, and the goodwill of Big.O and the Big O System, that Franchisee maintain and adhere to certain standards, procedures and policies described hereinafter and in the Manual. C. Big O is willing, upon the terms and conditions set forth herein; to license Franchisee to operate a Franchised Business which will utilize the Licensed Marks and the Big O System. NOW THEREFORE, inconsideration of the promises and the mutual provisions herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS Some words will from time to time be defined in other Sections -of this Agreement. However, the following capitalized words shall have the following meanings when used in this Agreement - Advertising - Ail advertising, promotional materials and programs, public relations programs and marketing programs, publications;: research, .programs or activities to promote the Big O System and/or the Licensed Marks and other activities, which are approved or administered by Big O or by Franchisee, orwhich utilize the resources of the National Advertising Program or local franchisee cooperatives or franchisee associations or which pertain.to.the Big O Store, the Big O System or the Licensed Marks generally_ - Affiliate — Includes each Entity, which directly, or indirectly, through one or more intermediaries, controls, is controlled. by, or Is under common control with Big O. or Franchisee, as applicable. Without limiting the foregoing, the term "Affiliate" when used herein in connection with Franchisee includes any Entity more than fifty percent (50%) of whose Equity or voting control, is held by person(s) or Entities who, jointly; or severally, hold more than fifty percent (50%)..of the:Equity or voting control of Franchisee_ Agreement - This Agreement, the Summary Pages and all Riders and Schedules hereto_ Big O - Big O Tires, Inc. Big O Brand Tires —Tires canying the "Big.0" label, as well as the Prestige, Pathmax and Fulda brands and any other brand(s) Big O subsequently includes in. its Big O Brand Tires as part of its marketing programs. Big O Store or Store - A retail store operated under the Licensed Marks and pursuant to the Big O System - Big O System or System - The plan and system developed. by Big O relating to the complete operation of Stores which are authorized to sell Products and, Services; which. include some or all of the following: site selection as required, site approval, Store layout and design, product selection and display, purchasing and. inventory control methods, accounting methods, merchandising, advertising, sales and promotional ideas, franchisee training, personnel training, and other matters relating to the efficient operation and supervision of Stores and the maintenance of uniform standards of retail merchandising. W.-- Blue Book - See the definition of "Manual'... Change in Control - The Transfer of fifty percent (50%) or more of the (i) voting or Equity interests in Franchisee, (ii) the Franchised. Business, or (iii) the assets used .in the Franchised Business. Change of Control also includes franchisee's loss of the exclusive right to occupy the Premises. Commencement Date - The date upon which the Store opens for business or, in the event of transfer, or Conversion, the date designated by Big O Tires, Inc. Conversion — The conversion by a Converter of an independent retail tire store to Big O Store pursuant to this Agreement. Converter - A person who converts an independent .retail tire store ' to a Big O Store pursuant to this Agreement, regardless of whether such person previously operated such independent retail. tire store or recently purchased the assets or business of each store. Dealer Planning Board - The group of franchisee representatives elected from each Local Group which meets periodically with Big O's management to review aspects of Big O's strategic plans as may be presented -from time to time by Big O and to, discuss issues of concern to franchisees. The:functions of the Dealer Planning Board are described in Section 25 of this Agreement. Due Date - The fifteenth (15') day of each month: the date'by which all royalty fees and advertising contributions must be postmarked and mailed to Big O. Effective Date - The date upon which the Franchise Agreement has been executed in full by both the Franchisee and Big O. Enti - Any limited liability company or partnership, general or limited, each of which shaltbe referred to:as a "Partnership", and any trust, association, corporation or other entity, which is not an individual E ui — Stock; membership interests; partnership interests; or other equity ownership interests in a Franchisee which is an Entity. Ex0ration Date - The date .on which the initial term of the Agreement expires_ First OD.tibn - Franchisee's right to acquire a franchise fora new Store planned for development within a five (5). mile radius of Franchisee's Premises in the.manner described in Section of this Agreement. Franchise - The rights granted by this Agreement,. subject to the terms and conditions set forth in the Agreement. Franchised .Business - The business .of operating a big O Store pursuant to this license granted by Big O which utilizes the Licensed Marks -and the Big O.System. Franchisee - The individual(s), or Entity to which the -Franchise is granted.. Depending on the context of this - Agreement, the term Franchisee may include the Owners or guarantors of an Entity Franchisee. Grand Opening Advertising - Advertising conducted within the first 120 days following the Commencement Date to promote the opening of the Store. Gross Sales - The aggregate gross amount of allrevenues from whatever source derived whether in form of cash, credit, agreements to pay or other consideration including the actual retail value of any goods or services traded, bartered, or otherwise received by Franchisee (whether or not payment is. received at the time of sale or any such amount is proved uncollectible) from or derived by Franchisee or any other person from business conducted or which originated in, on, from or through the Premises, whether such business is conducted in compliance with or in violation of the terms.of the Franchise Agreement. Gross Sales includes sums paid for claims made on business interruption .insurance policies, Federal Excise Taxes collected, as . 2 N wdif as payments received from employees of Franchisee for products purchased at a discounted price. However, Gross Sales does not include: (i) sales or use taxes collected by Franchisee and paid to the appropriate governmental taxing authority; (ii) the amount of any refunds or allowances made on Products'and Services returned by customers; (iii) sums received on account of returns to shippers, vendors- and manufacturers; (iv) proceeds derived from the sale of equipment or supplies used by Franchisee in the operation of the Store and not acquired -for resale; (v) sums received on account of sales of Products and Services to other Big O Stores; (vi) tire disposal fees to the extent the fees charged do not exceed the highest fee recommended.by any applicable governmental agency; and (vii) sums received in settlement of claims for loss or damage to fixtures, equipment or leasehold improvements, other than sums received from business interruption insurance. Information - The contents of the Manual or any other manual, computer software, materials, goods, training module and any other proprietary information and information created or used by gig O designated for confidential use within the Big O System, the information contained therein and passwords or other means of access to any other of the foregoing. Licensed Marks —The trademarks and trade names, service marks and associated logos and symbols which Big,O may from time to time authorize or direct Franchisee to use and display in connection with the operation and promotion of the Franchised Business licensed hereunder, including, but not limited to, those enumerated on Schedule 6, attached hereto. Local Fund. - The fund, which may be an account at a bank. or other financial institution or a trust fund, corporation or other Entity, derived from -contributions by Big O franchisees which shall be maintained by Big O or a Local Group for Advertising or related expenditures pursuant to such guidelines as Big O may approve or prescribe. Local Group - A cooperative, association or other entity of Big O franchisees formed and operating in their marketing area pursuant to a structure approved or prescribed by Big O for. the purpose of promoting Big:O Stores and their Products and Services, and providing Management Systems. and related services to :its members to the extent approved by Big O. Management Systems - Computer hardware, software, cash registers, bookkeeping and accounting services or systems, point of sale systems and inventory control systems, and other systems designed to provide information for the management of Big O Stores. Manager - An individual who is responsible for the day -today operation of a Store. This individual could be the Operator or could be a different person. Manual The various written, electronic, audio and video instructions and manuals, including amendments thereto relating to the operation of the Franchised Business which are provided to Franchisee by Big O.and. identified as such, including but not limited .to A Blueprint For Success, also known as the `Blue Book", Big Us Franchise Compliance and Procedures Manual; any training tapes; guides and any training module or any other proprietary information. Multi -Unit Development Agreement - An agreement between Big O and a person or Entity pursuant to which , the person or Entity ("Multi -Unit Developer") agrees to open and to continue to operate an agreed number of Big O Stores pursuant to a development schedule and within a defined territory. Multi -Unit Developers must execute_ Franchise Agreements prior to commencing business at any Store developed pursuant to a Multi -Unit Development Agreement. National Advertising Program - The advertising program described in. and conducted in accordance with Section 15.02. Operator - The individual -who shall be responsible for the operation of the Franchised Business. The Operator may be the Franchisee if the Franchisee. is an individual... Option - Big O's right to purchase the interest being offered by the Franchisee andfor any Owner in the event of certain proposed Transfers, -pursuant to Section 18.04(a)(iii). 3 t, Owner —Any partner, limited partner, member, shareholder, individual or sole proprietor, trustee, or any other person possessing a legal or beneficial interest or holding Equity of any kind or nature in a Franchisee which is an Entity or sole proprietorship. Pioneer - A person or Entity who owned at least twenty-five percent (25%) Equity interest in a Big O franchisee on March 1, 1987, provided such Equity interest appeared on Big.O's records as.of July 1, 1987. Premises - The site from which a Franchised :Business will be operated at the Store Location described on the Summary Pages, or where applicable, on Schedule 1 to the Franchise Agreement. Products and Services - All tires (including but not limited. to. Big O Brand _Tires), products and services produced, organized or distributed under a license. granted by Big:O, which are now or hereafter approved or designated by Big O for sale or lease in Stores. When used separately; "Products" means the. products and "Services" means the services that, in each case, are included within the definition of Products and Services. Retail Accounting -Center - A cooperative, association, or other entity owned by Big O, Franchisees or third parties, or an operation. that is part of Big 0, which provides accounting, payroll and related services for the purpose of providing suchservices at a reasonable cost and providing the financial reporting Big O.requires. Successor Franchise Agreement — A new franchise agreement executed by the parties hereto granting a Franchisee the right to operate the Franchised Business licensed hereunder following the expiration of the, initial.term of this Agreement. Summary Pages —The pages of this Agreement, beginning on Page v and ending on Page vi, that summarize stipulated provisions of this Agreement. Survivor - A surviving spouse, heir(s) or representative(s) of the estate of any Franchisee who is an individual, or any deceased person owning Equity in a.Franchisee which is an Entity. Termination Date - The date upon which this Agreement is canceled or -ended by Big O or the Franchisee in accordance with the terms of'this.Agreement.' Trade Area - The area described on Schedule 1 to this Agreement within which, subject to certain conditions, Big O agrees to limit the number of Stores to one (1) for everyfifty thousand (50,000) persons residing. therein. (See also' Section 2.02.) Big O may, from time to time, redefine Franchisee's Trade Area. Trade Dress - Any shop or architectural designs, fixtures, improvements, signs, color schemes or other elements of'the appearance of the Store which. in any.manner suggest affiliation of the Store or Premises with Big O, or the System. Transfer - To give away, -sell, assign, pledge, lease, sublease, devise, license, sublicense, or otherwise transfer, either directly or by operation of law or in any other manner: this Agreement, any of Franchisee's rights or obligations hereunder, any interest or Equity in Franchisee, Franchisee's exclusive right to occupy the Premises or a substantial portion of Franchisee's assets used in the Franchised Business. In the case of a Franchisee which Kan .Entity,. any -merger, reorganization, recapitalization or consolidation involving Franchisee or the issuance of additional securities representing Equity in Franchisee, shall also be deemed to be a "Transfer" for purposes of this Agreement. 2. GRANT OF FRANCHISE 2.01. Grant of Franchise. Subject to all of the terms and conditions herein, including but not limited to, the condition that Franchisee or its Owners or some of them, personally guarantee the obligations of Franchisee to Big 0 under this Agreement: as set forth in Schedule 3 to this Agreement; Big O grants -to Franchisee the non-exclusive and non -divisible license to use the Licensed Marks and the exclusive right to operate a Franchised Business solely at the Premises set forth in Schedule 1 to this Agreement. If, at the time of execution of. this Agreement, the Premises cannot be designated as a specific address because a location has not been selected by Franchisee and approved by Big 0, then Franchisee shall promptly take steps to 4 choose and acquire a location for 4ts Big O Store Within `the following city, county or other geographical. area: ("Designated Area"). In such circumstances, Franchisee shall select and submit to Big O for approval a specificlocation for the Premises, which shall hereinafter beset forth_ in Schedule 1. Franchisee may not change the Store Location, except with Big O's prior written consent, which Big O may grant or withhold in its sole discretion. Regardless of whether the Franchisee changes its Store Location, it will remain obligated for all liabilities and obligations arising out of or in connection with"any prior locations- 2 ' 02 Trade Area. During :the term of this Agreement, Big O agreesnot to operate itself of grant to any other peson the right to operate any more than one (1) Store for every-ftfty thousand (50,000) persons residing in the Trade Area described on Schedule 1. Generally, Schedule 1 will define Trade Areas in metropolitan areas as the Metropolitan Statistical Area ("MSA"). For Franchised Businesses located in more rural areas, the Trade Area maybe defined within the boundaries of a county line. Big.0 may, from time to time, redefine the Trade Area. Absent Franchisee's prior approval, Big O shall not permit the establishment or operation of another Store within a two (2) mile radius (as determined. by Big O in its reasonable discretion) -of Franchisee's Store. After the Franchisee gives approval to another Store within the two mile radius, such approval is irrevocable and remains in effect for such Store location, regardless of any change of ownership,': Transfer, closing and re -opening or other changes regarding such Store location. Big O shall offer Products and Services bearing the Licensed Marks at retail only through Big O Stores. 3. FIRST OPTION RIGHTS 3.01. First Option Rights. Subject to the conditions described below, if Big O orany.prospective Big O franchisee should propose to open a Store within a five (5) mile radius (as determined by Big O in its reasonable discretion) of Franchisee's Store, Franchisee shall be notified of its First Option to acquire a Franchise for an additional Store within the five (5) mile radius of its Store. Franchisee. may exercise the First Option only if: (a) aUthe time Big O notifies Franchisee of the proposal tot the new :Store, Franchisee is in full compliance with all the terms of this Agreement and any other agreements it has with Big 0; (b) Franchisee meets. Big O's then current criteria for new franchisees; and (c) There are not two (2) or more Big O franchisees with Stores within a five (5) rnile:radius:of the site of a proposed new Store,. except in accordance with Section 3.03 below. 3.02. Notification by Big O. When notifying Franchisee of a proposal to establish a new Store in accordance with Franchisee's First Option, Big O may notify Franchisee of the proposal.to establish the new Store within the generaivicinity of Franchisee's Store without identifying a specific site or sites-: .. 3.03. Multiple First Option Rights. If two (2) or.more Big O franchisees have Stores within 'a five (5) mile radius of the site of a proposed new Store, the Franchisee and all such franchisees will be invited simultaneously by written notice from Big 0-to exercise their. First Option rights; but if two (2) or more such franchisees applyfor the same franchise, it shall be awarded to the qualified franchisee:which.has a Store that is closest to the site of the proposed new Store or, if two qualified -franchisees have Stores that are equidistant from such site, it shall be awarded to the qualified franchisee which owns- the franchised Big O. Store which was first licensed as a Big O Store by the current or a previous owner. 3.04. Notification of Qualification. 0 Franchisee qualifies for the First,Option pursuant to this Sec tion.3, Big O will provide Franchisee with written notice that it has thirty (30) days within which to submit an application for the franchise in the manner prescribed by Big O in the notice. Franchisee must submit the application within the prescribed time. along with the standard franchise.deposit then required by Big O. Upon approval of the application by Big O, Franchisee must execute Big O's. then current standard Franchise Agreement and pay the remainder of any initial fee due. - 3.05. Exercise of Option by Franchisee. If Franchisee is an Entity, the First Option may be exercised only by the Entity itself, or by the individual designated as First Option holder on the Summary Pages. 5 - 3,06. Transfer of First option Rights. The First Option is not transfer able without Big O's prior written approval, which may be withheld for any reason, in Big O's-sole discretion. Notwithstanding the foregoing, Big O's discretionary approval process will be in accordance with its established. procedures. 3.07. Limitation on First Option Ricthts_ The First Option, rights described above are void -and unenforceable with respect to: (a)- a site proposed for development in an area which is at the time of the proposal subject to a Development Agreement between Big 0 and Multi -Unit Developer; and (b) .a Conversion. 3.08.. Expiration of First Option Rights. If a Franchisee has failed to qualify for or otherwise.submit.an . application for a Franchise pursuant to this Section 3 for a proposed franchise to be granted within the area in which Franchisee holds First Option rights; Franchisee's First Option rights for that proposed franchise shall lapse regardless of whether the site actually selected for development by Big 0 is'different from the site which . was initially proposed for development. 4. TERM 4.01. Term. This Agreement shall take effect upon the earlier of the Effective Date or ofthe Commencement Date and, unless previously terminated pursuant to Section 19 hereof, its term shall extend until the earlier of the tenth anniversary of the Commencement Date or such other Expiration Date as is stated on the Summary Pages. . 5, RENEWAL: EXTENSION OF FRANCHISE RIGHTS 5.01. Grant of Successor Franchise Rights. If Franchisee is not in default under this Agreement and has complied with all of its provisions during the initial term, and has complied in all material. respects with all of the provisions. of this Agreement and the Franchise Compliance and Procedures Manuai; upon 6-expiration Big O will offer a Successor.Franchise Agreement with Franchisee, provided the parties mutually agree. to the terms of a Successor Franchise Agreement at least one hundred eighty (180) days before the Expiration Date. 5.02. Conditions to Grant of Successor Franchise. IBig O will - only offer to execute a Successor Franchise Agreement with Franchisee in accordance'Ah its then current terms and conditions for grariting successor franchises, which may include any or all of the following: (a) That- Franchisee, executes :a Successor Franchise Agreementpnthe then current form being offered to franchisees in the State in which the _Big O Store. is located, which may include, among.oiher .matters, a different fee structure, increased fees, a modified Trade Area and different purchase requirements; (b) That Franchisee must agree to refurbish the Premises or relocate the Premises to conform to -Big O's then current standards for similar Stores; (c) That Franchisee shall pay Big O's renewal administration fee of One Thousand Dollars ($1,000); (d) That Franchisee, and its Owners shall execute a general release in favor of Big O and its representatives on a form prescribed by Big O, of any and all known and unknown claims against Big 0 and its Affiliates and their officers, directors, agents, Owners and employees; (e) That at -the time Franchisee delivers its renewal notice to Big 0 and at all times thereafter until the commencement of the renewal term, Franchisee shall have fully performed all- of its `material obligations under this Agreement, the Manuals and all other agreements then in effect between Franchisee and Big O (or its.Affiliates), I (f) Without limiting the generality of Section 5.0.1, Franchisee shall not -have committed three (3) or more material breaches of this Agreement during any twelve (12) month period during the Term of this. Agreement for which Big O shallhave delivered notices of default, whether or not such defaults were cured; and (g) Franchisee shall have in all material respects maintained its status as a Franchisee in good standing (e.g., achieving at least minimum scores on inspections', and have substantially complied with all material obligations of theBig O System throughout the Term). 5.03. Notification of Non -Renewal. If Big O is willing to execute a new franchise agreement with Franchisee, at least one (1) year before the Expiration Date, Big O shall notify Franchisee of the Expiration Date and the terms and conditions upon which Big O is willing to execute a new franchise agreement with Franchisee. Franchisee must execute a Successor Franchise Agreement within sixty (60) days of its receipt. The Franchise Agreement will expire on the Expiration Date and the franchise relationship will terminate unless Franchisee and Big O have executed a Successor Franchise Agreement at least one hundred eighty (180) days prior to the Expiration Date, and Franchisee has satisfied allother terms and conditions agreed upon as a prerequisite torenewal. If Big O intends not to offer Franchisee a Successor'FranchiseAgreement, Big O shall give Franchisee at least -one hundred eighty (180) days notice of nonrenewal prior to the Expiration Date. If Big O has not given franchisee at least one hundred eighty (1.80) days notice of nonrenewal prior to the Expiration Date, the term of this Agreement will automatically be extended _ by the amount of time necessary to give Franchisee one hundred eighty (180) days notice of nonrenewal. 6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS 6.01. Financing Approval.- Unless otherwise agreed to by Big O, Franchisee shall obtain a -letter of commitmentfor the provision of financing through a lender approved by Big O and with minimum credit terms, . also approved by Big O, no later than one hundred twenty (120) days from the Effective Date of this Agreement. 6.02. Site Selection. Franchisee shall obtain the written approval of Big O of the site for the Store within one hundred twenty (120) days from the Effective Date of this Agreement: Franchisee -shall propose sites for approval by Big O on forms and in.the manner designated from time to time by Big 10.. A proposed site shall only be submitted to Big O for approval after Franchisee has evaluated the site and -determined that it meets Big O's then current criteria for sites which Big O shall have communicated to Franchisee. Franchisee shall be responsible for .obtaining Big O's then current site: criteria : prior to submitting a .site approval. application_ Big 0 shall review the site approval. application_ and within thirty (30) days of Big.O's receipt thereof, Big Q: shall approve or reject the proposed'site. Unless otherwise agreed. to in writing by Big O; final site approval will be conditioned upon Big Us receipt of evidence of Franchisee's ownership, lease or control of the property in such form as Big O, in its sole discretion shall deem to be acceptable,. including, without limitation, a deed to the property, an executed contract to purchase the property, a lease with a duration of not less than ten (10) years, or an option to purchase the property. Big O may, at its sole discretion, require that the Franchisee negotiate with its landlord the right, but not the obligation, for Big O to cure any Franchisee breaches and/or .the right for Big. O: to assume the franchisee's lease obligations. Franchisee acknowledges and agrees that Big O's approval of a site or provision of criteria regarding the site do not constitute a representation or warranty of any kind; express or implied, as to the suitability of the site for a Big O Store or for any other purpose. Big O's. approval of the site indicates only that.Big O believes that a site falls within the acceptable criteria -established by Big O as of that time. In the case of a Converter, Big O shall deem execution of this Agreement approval of the Store location, unless additional.obligations to convert or upgrade the premises are described in Schedule 7. to -this Agreement. 6.03. Real Estate Improvements. Equipment and Signage. Franchisee- agrees to construct all improvements to the Premises and the Store in compliance with plans and -specifications approved by Big O. Franchisee agrees to purchase; lease or otherwise use in the establishment and operation of the Big O Store only those fixtures, equipment, signs and hardware and/or software that Big:O has approved as meeting its specifications and standards for quality, design, appearance, function and performance. Franchisee shall purchase or lease approved brands, types or models of fixtures, equipment, and signs only from suppliers designated or approved by Big O. Franchisee agrees to place or display at the.Premises only such signs, logos and display materials that Big O, approves from time to time. . 7 6.04. Conditions to Opening. Franchisee agrees, at its sole expense, to do or cause to be done the following prior to opening the Big O Store for business:.(i) secure all required financing; (ii) obtain all required permits and licenses; (iii) construct all required improvements and decorate the Store in compliance with approved plans and specifications approved by Big O pursuant to Section 7.01(b) below; (iv) purchase (or lease) and install all fixtures, equipment and signs required by Big O for the Big O Store; (v) purchase an . opening inventory -of tires and supplies in accordance with Section 14..01 and 14.02; (vi) provide Big.O with copies of all required insurance policies, or such other evidence of coverage and payment as Big O requests; and (vii) provide Big O with any other documents as may reasonably required by Big O, including but not limited to financing statements. . . 6.05_ Commencement of Business. Franchisee agrees to open the Big OStore for business within fourteen (14) days after Big'O notifies Franchisee that the conditions set forth in this.Section 6 have been satisfied. Unless otherwise agreed in writing by Big O and Franchisee, Franchisee has sixteen (16) months from the Effective Date of this Agreement within which to have its Big O Store opened and operating ("Development Period")- Big O will extend the Development Period for- a reasonable period of time in,the event that factors beyond Franchisee's reasonable control prevent Franchisee from meeting this Development Period, so long as Franchisee has made reasonable and continuing effort to complywith,such development obligations and Franchisee requests, in writing; an. extension of time in which to have its Big O-Store open and operating before the Development Period lapses. 7. PRE -OPENING AND ONGOING ASSISTANCE 7.01. Pre-Openinq_Assistance. Prior to Franchisee's Commencement Date, Big O shall provide Franchisee with such -of the following and on the same basis as it will from time to-Jime provide .to similarly situated franchisees of Big O: (a) Assistance to Franchisee related to approval of a site for the Store, although Franchisee acknowledges -that Big O shall have no obligation to select or acquire a.site on behalf of Franchisee. Big O's assistance will consist of providing criteria for a satisfactory site, an on -site. inspection and determination of whether a proposed site fulfills the requisite criteria, prior toformat approval of a site selected by Franchisee:: At Big O's option'. Big may, without fee or expense to Franchisee. review the proposed Store lease., The final decision about whether to acquire a given approved: site or whether to execute any particular lease -shall be the soledecision of: Franchisee. -Big O disclaims all liability for the consequences' of approving a -given site. Big O's participation in site selection in noway is meant to constitute.a warranty or guaranty that.the FranchisedBusiness will .be profiiabie or "oiherwise successful-. Big 'O's written approval' of the Premises' and Store must'be .obtained by Franchisee before theSt. -nay be opened or relocated:: Big O may condition its approval of a Store .lease upon. Franchisee's execution of a conditional lease assignment in a form„which:is the same. as, or similar to the one found on Schedule 4. (b) A prototype floor plan, elevation and equipment layout for -the Store. Big O may. charge Franchisee its costs (as reasonably determined by Big O) of these. The plans must be modified by Franchisee's architect -or contractor to adapt them to conditions at ,the Premises and to satisfy all local code requirements. Revisions or modifications to the plans must be approved by Big O. Big O's approval of the revisions or modifications to.the' plans will not be unreasonablywithheld. (c) Seven (7) weeks of training for one person in the operation of the Franchised Business ("Initial Training Program"). This Initial Training Program consists of five (5) consecutive weeks of training at one or more locations designated by Big O and two (2) weeks of field training -and certification by an existing franchisee designated by.Big. O at one or more of this -existing franchisee's Big O Stores. Unless Big O waives the training requirement, the Manager of the Franchisee's Store or Franchisee's Operator and such I other managerial personnel. as are designated - by. Big O must attend and successfully complete the Initial Training Program. Franchisee shall pay training fees charged by Big O from time to time and -shall payfor As -own employee costs (such as salaries and wages, benefits and uniforms), transportation, lodging, and living expenses which are incurred while attending any Big O training program, except that the training fee and the costs of lodging approved by Big O for the first .person to attend the five (5) week portion of the Initial Training Program and the training fee for that 8 same first person to attend the two (2) week portion of the Initial Training Program are included in the initial franchise fee required by Section 8.01 below. In the event that, in Big Us sole discretion,. Franchisee's Operatorfalls to successfully complete the Initial Training Program, Big O may, in -its sole discretion; require Franchisee's Operator to attend and successfully complete another training program at Franchisee's cost or terminate this Agreement and, upon receipt from Franchisee of a° general release in a form approved by Big O, refund the initial franchise fee paid by Franchisee, less any amounts necessary to reimburse Big O for the costs it incurred. in approving Franchisee and intraining Franchisee's Operator and Manager. In some circumstances -designated by Big O in its sole discretion from time to time (for instance, for Stores with real estate costs or past sales at high. levels designated by Big O from time to time in its sole discretion), Big O may require and provide or arrange for certain additional training of Franchisee's Operator or Manager and such of its managerial personnel or Owners as are designated by Big O: Franchisee shall pay for its own transportation, lodging and living expenses which are incurred while'attending such additional training. Big O, in its sole discretion, may charge a reasonable fee for such additional training: (d) One (1) copy of the Big O Manual or other such proprietary information. (e) Assistance in selecting Franchisee's initial inventory- (f) .Assistance in the layout, merchandising and display of the Store. 7.02. On-Goiric Assistance. (a) Big O agrees to make available to Franchisee the following ongoing assistance forwhich Big O.will not charge the Franchisee a fee forsuch assistance: (i) To the extent available to Big O, a source from which Franchisee may purchase Big O private brand tires; (ii) Ongoing marketing research into new tire selections and other lines of Products andZervices and ways to enhance the competitive posture: of Big.O Stores; (iii) Nationally recommended prices for Big O brands and other Products and Services sold at the Franchisee's Store, provided that Franch'►see.:wili not be required to. sell at any particularprice or at or above any minimum price if such a_ requirementmpuld be unlawful. (b) Big O agrees to make available to Franchisee the .following on -going assistance for which .Big_:O may charge the Franchisee a fee: (i) Additional training for the Operator or other personnel of Franchisee; (ii). Regional training provided by Big, 0 personnel and field assistance,: inspections and advice pertaining to the Franchisee's .Store- .provided. by Big-O area managers_ 00. Monthly point of sale advertising materials -and weanables utilizing Big;O Licensed'Marks will be .purchased through Big. O's subsidiary, Q Advertising, Inc_, or such other licensee as . designated by Big O for which Big O may charge the franchisee a fee, and from time to time,_ local advertising plans and materials, special promotions and similar. advertising; (iv) At the request of Franchisee's Local..Group,. Big 0 will -supply Franchisee with newspaper mats and radio and television: commercial tapes, for w(iich Big O may charge a fee to the Local Group or to the Franchisee. 6 Notwithstanding Subsections 7.02(b)(i) and (ii), above, in certain situations where training is being provided by Big.O.personnel, training will be provided at no cost to the Franchisee for the personnel conducting the training but, the Franchisee may be charged a fee for costs associated with the materials and training location (c) Big O, in its sole discretion, may provide .other assistance from. time to time under terms and . conditions and for fees and charges as established by Big O in its sole discretion from time to time. 8. FEES . 8,01. Initial Franchise Fee. Inconsideration of the execution of this Agreement, Franchisee -agrees to pay Big O an initial franchise fee in the amount and at the times specified on the Summary Pages. Except as described in Section 7.01(c) above, the initial franchise fee is not refundable. . .8.02. Royalty Fee. After the Commencement Date, Franchisee shall pay to Big O a monthly royalty fee equal to two percent (2%) of Gross Sales. The royalty fee for each month must be postmarked and mailed to Big O by no later than the Due Date in the following month. 8.03. National.Advertising Fee. Franchisee shall pay to Big O a monthly contribution to :the National Advertising Program pursuant to Section 15.02(a) below. 8.04 Late Fees. If any fee or any other amount due under this Agreement, including payments for Products and Services, is not received:within'ten (1-0.) days aftersuchpayment is due, Franchisee shall pay Big O interest equal to the lesser of the daily equivalent of eighteen percent (18%) per antrum -of such overdue amount per year, or the highest rate then permitted by applicable law, for each day such amount is past due. 8.05. Taxes. If any federal, state, or local tax other than an income tax is imposed upon royalty fees paid by Franchisee to Big O which Big O cannot offset against taxes it is required to pay under the laws of the United States or the state of its domicile.', Franchisee agrees to compensate Big 0 in the manner prescribed by Big O so that the net amountor net rate received by Big O is no less than that which` has been established by this Agreement and which was due Big O on the Effective Date of this Agreement. 8.06. Allocation -of Rayments. " Unless` other written; instructions accompany a specific payment, all payments made by Franchisee pursuant -to .this Agreement shall tie applied in such order as Big O may designate from time to time. Big O shall comply with any written instructions for allocation. specified by Franchisee to the extentJo Big O's opinion; it s: reasonable to do so: 9. LICENSED MARKS 9.01. Licensed Marks. Franchisee expressly acknowledges that Big O is the sole and exclusive lice.nsor.of the Licensed'Mar ks: Franchisee shall not represent in any'manneuthat Franchisee has acquired any ownership rights in the Licensed Marks: Franchiseeshall not use any of the licensed Marks or any marks, names, or indicia which are or may"be confusingly similar in its own Entity or _business name. Franchisee further acknowledges and agrees _that any and all goodwill associated with the Big O System and identified by the Licensed Marks -shall inure:directly and exclusively to the benefit of Big 0 and that, upon the expiration or termination of this Agreement for any reason; no monetary amount shall be° assigned as attributable to any goodwill associated with .Franchisee's use of Licensed -Marks: 9.02. Limitations on .Use. Franchisee understands 'and agrees that any use of the Licensed Marks other than as expressly authorized by this Agreement, without Big'O's prior written consent, is an infringement of Big O's rights therein and that the right to use the Licensed Marks granted herein does not extendbeyond the termination or expiration of this Agreement. Franchisee expressly covenants that, during the term of this Agreement and thereafter, Franchisee shall not, directly or indirectly, commit any act of infringement or contest or aid others in contesting the validity of Big O's.right to use the Licensed Marks or take any other action in derogation thereof. 10 9.03. Infringement. Franchisee acknowledges Big O's right to regulate the use of the Licensed Marks and Trade Dress of the Big O System. Franchisee shall promptly notify Big O if it becomes aware of any use or any attempt by any person or legal entity to use the Licensed Marks or Trade Dress of the Big O System, any colorable variation thereof, or any other mark, name, or indicia in which Big O has or claims a proprietary interest. Franchisee shall assist Big O, upon request and at Big O's expense, in taking such action, if any, as Big O may deem appropriate to halt such activities, but shall take no action nor incur any expenses on Big Us behalf without Big O's prior written approval 9.04. _ Franchisee's .Business Name. Franchisee. further agrees and covenants (i) to operate and advertise only under the name or names from time to time designated by Big O for use by similar Big O System -franchisees; _(ii) to refrain from .using the Licensed Marks to perform any activity or to incur any obligation or indebtedness in.such a manner as may, in away, subject Big O to liability -therefor, (iii) to observe all laws with respect to the registration of trade names and assumed or fictitious names; (iv) to include in any application for the above a statement that Franchisee's use of the Licensed Marks is limited by the terms of this Agreement, and to provide.:Big O with a copy of. any such application and other registration document(s), and (y) to -observe such requirements with respect to trademark and service mark registrations, copyright notices, and other notices as Big 0 may, from time to time, require. 9.05. Change of Licensed Marks. Subject to the requirements of Section 25 of this Agreement, Big O reserves the right, in its sole discretion, to designate one -or more new, modified, or replacement Licensed Marks or trade names for use byfranchisees and to require the use by Franchisee of any such new, modified; or replacement Licensed Marks or trade names in addition to or in lieu of any previously designated Licensed Marks. Any expenses or costs associated with the use by Franchisee of .any such new, modified, or replacement Licensed Marks shall be the sole responsibility of Franchisee. Any expenses oncosts associated with ` a change from the name : "Big 0" to an unrelated name will be allocated between Big O and the Franchisee in proportionate amounts to be determined by Big O and, if applicable in accordance with Section 25 of this Agreement. 9.06. Franchisor's Rights.. Big O retains the -right to, among others:.(i) use, and license others touse, the Licensed Marks and the Big O System for other Big O Stores or company -owned Stores; (ii) solicit,. sell to and service local, regional or national accounts wherever located; (li) use the Licensed Marks. and the Big O System with other services of products, or in alternative channels of distribution, including the Internet, without regard to location; and (iv) use and license the use of other prop_ riefary-marks or methods which are not the same as or confusingly similar to the Licensed Marks, whether in alternative channels of distribution or with the.operationof any type of tire sales and service business, at;anyloaation, which may be thesame.as, similar to or different -from the business of a Big O Store. Big O may use or license these rights on any terms and conditions it deems advisable, and without granting Franchisee'any rights in them_ 10. STANDARDS OF OPERATION 10.01.. Standards of Operations. Big O shall establish and Franchisee shall maintain high standards of quality; appearance and operation for the Franchised Business. For the purpose of enhancing the public image.and reputation of the businesses. operating under. the System and for the purpose of increasing the demand for Products and Services provided by Franchisee and Big O, the parties agree as follows: (a) Franchisee shall not open the Store for business until Big O has provided Franchisee with written authorization to do so; I (b) Franchisee shall make such modifications and improvements to the Store and Premises as required by Big O from time to time but may not make any modifications to the Store and Premises without Big O's prior approval. (c) Franchisee shall comply in good faith with all published Big O System rules,. regulations, policies, and standards,. including, without limitation, those contained in the Manual. Franchisee shall operate and maintain the Franchised Business solely in accordance with high standards of quality, appearance and operation for the Franchised Business, and in the manner and pursuant to the standards prescribed herein, in the Manual and in other materials provided. by Big O to Franchisee, and shall make such modfcations thereto as Big O may require; (d) Franchisee shall at all tirnes operate the Store diligently and in a manner, which is consistent with sound -business practices so as to maximize the revenues therefrom; (e) Franchisee shall at all times maintain working capital and a net worth which is sufficient, in Big Us opinion, to enable Franchisee to .fulfill properly all of Franchisee's responsibilities under this Agreement; (f) Franchisee shall at all times maintain the Premises and its Store in the image:of and according to the standards of Big O as prescribed in the, Manual. These standards and specifications may include, but are not limited to the safety, maintenance, cleanliness, sanitation, function and appearance of the Premises, the Store and the Store's equipment and signs, . as welt ' as the requirement that the employees of the Store shall be required to wear uniforms -and to'maintain a standard of appearance while employed at the Store. Moreover, Franchisee agrees to cooperate with Big O. at Franchisee's . expense, to the extent building and site limitations permit, in the implementation of new programs, including those which may require the addition of new equipment or fixtures for the Store. In its sole discretion, Big O may waive some or all of any of its franchisees' obligations to comply with such . programs; (g) Prior to opening, .Franchisee shall provide Big O with written certificates or documentary evidence . from. an insurance company or companies that Franchisee has obtained the insurance coverage prescribed by Section 21; (h) If Franchisee maintains a customer list, such lists or parts thereof shall be disclosed to no one other than Franchisee's employees or Big Omllhout BigO's prior written consent; (i) Big O will assign Franchisee to a Local' Group and Franchisee must become a member of that Local Group. Big O may, in its sole discretion, require Franchisee and the other franchisees in the same marketing -area (as determined by O) to form a Local .Group, continue the Local Group in operation- and manage the Local Group in accordance with the. standards and. requirements . established by Big'O from time to time. Franchisee shall be bound by any decisions the Loeb[ Group makes to the extentthey are approved by Big O and are consistent with the standards and within the guidelines prescribed or approved. by :Big O, provided however, that (i) Franchisee shall not be subject to any agreement to fix, prices, or allocate customers or territories which would violate any applicable ..faws; and:Oi) Franchisee shall not be subject to any capital investment requirements or other standards . established by the `Local Group which are inconsistent with this Agreement or which have not been approved or prescribed by Big O; 0) Franchisee shall use the Premises and the Store solely for the Franchised Business and for no other purpose; and (k) Franchisee and its guarantors) shall not engage in or open any business. at any location that is located less than a prescribed distance from Franchisee's Store. Such distance maybe prescribed by Big. O, in its sole discretion, .from time to lime. 10.02 Maximum Pricinq. From time to time Big O may establish maximum pricing for certain Products and Services, for certain customers and/or for certain situations. Franchisee shall adhere to such maximum pricing as so established by Big O,. provided that Franchisee shall not be required to sell Products and Services at any particular price or at or above any minimum price if such a. requirement would be unlawful. 10.03 National Fleet Account Programs. Big O has established national fleet account programs and policies, which it may revise, suspend and reestablish from time to time in its sole discretion. The national fleet account programs may include, but are not limited to:. (a) Big O (or its designated provider) making arrangements with larger customers with multiple locations and/or multiple vehicle users ("National Account Customers') to have -Big O franchisees provide Products and Services that are specified by Big 'O and accepted by National Account Customers; (b) permitting designated buyers of the National Account Customers to purchase. specified Products and Services from Franchisee (and the other franchisees) at prices not more than those negotiated by Big O and the National Account Customer; (c) central billing by Big O (or its 12 W-- designated provider) of National -Account Customers for -such specified Products and Services; and/or (d) fees to be paid by franchisees for administrative services (such as central billing) provided by Big O (or its designated provider) in connection with the national fleet account programs. Franchise agrees to comply with the national fleet account policies and participate in the national fleet account programs as established by Big O from time to time. Such participation will include, among other things, carrying the inventory and making the services available as are necessary to provide the specified Products and Services to. National Account Customers. 11. STORE MANAGEMENT 11.01. Store Management. Franchisee's Store shall only be operated by the Operator or a Manager employed by the Franchisee who are subject to approval by Big O. All initial. and subsequent -Operators ands Managers are also subject to approval by Big O. Franchisee will notify Big O of each initial and subsequent Operator and Manager prior to his or her appointment to give Big O a reasonable opportunity to. determine whether Big O will exercise its right of approval or disapproval as to such Operator or Manager. -Big O's approval, if required, will be conditioned upon. the Operator's or Manager's successful completion of any ` training required by Big O: Big O may -waive some.or all of its initialaraining requirements forOperatom or.: Managers who have already received such training as a result of their affiliation with another Store or Big O franchisee or in other circumstances,in_its sole. discretion. If Franchisee or Franchisee's Operator has not .already successfully completed ,such :training, he shall be. required to successfully complete the training described in Section 7.01 (c)above. 11.02. Completion of Training, by Operator or Manager. Franchisee's Operator or Manager.and such' of its managerial personnel or Owners as are designated by Big O, shall complete, to Big O's reasonable satisfaction, any and alllraining programs Big O:may reasonably requirIe.:or provide at such time,as Big.O may reasonably prescribe.. All training.fees and all expenses incurred by.persons receiving such training; including,. without .limitation, costs of Aravel, room -and board, as well as:wages of..the person(s): receiving .such -training: shall be home by the Franchisee. except as:provide.d in Section 7.01(c): 11.:03..Operation of Store by Big.O. Under the`circurnstances described below, upon Franchisee's . request, Big O.has the option, but not the duty', to replace franchisee's Operator. Manager, or both, withits:;- own employees or agents, to operate the Franchisee's Store for the, benefit .of Franchisee, with complete. discretion:. overall matters :relating to. its operation..., Franchisee: shall pay, Big A's then cuOent =Store . managementfee as well.as the out-of-pocket expenses Big O.incurs:for travel, food and lodging in the:eourse of providing such services, provided that such exM. ses are reasonably related.to the services rendered -•:Big O may.operate Franchisee's Store i#:. - (a) Franchisee's Operator or Manager has failed Jo satisfactorily complete any training required by this Section 11; or (b) Franchisee's Operator or Manager becomes physically -or mentally incapable of. operating the Franchised Business; or. . (c) Franchisee's Operator or Manager dies and a new Operator or Manager has not completed initial .training: Notwithstanding the foregoing, prior to Big.O. operating the Franchisee's Store,pursuant to the terms of this Section 11.03, Big O shall have provided .the Franchisee with. notice of the nature -and .extent of Franchisee's failure to comply with the operational requirements of this Section 11 and the reasonable opportunity to cure the failure by the Franchisee to comply with -the operational requirements of this Section 11. 12. QUALITY CONTROL 12.01. Inspections. Franchisee hereby grants to Big O and its authorized agents the right to enter the Premises during regular business hours: 13 (a) To conduct inspections and; upon Big Us request, Franchisee agrees to render such assistanceas may reasonably be requested and to take such steps as may be necessary immediately to correct any deficiencies in the operation of its Franchised Business pursuant to this Agreement which are detected during such an inspection; and (b) To remove from the Premises, certain samples of any Products and Services, supplies or goods, in amounts reasonably necessary for testing or examination by Big O or an independent laboratory, -to determine whether such samples meet Big O's then current standards and specifications. Big O will grant Franchisee a credit equivalent to the cost of any approved Products and Services or supplies damaged or removed by it. 13. MANUAL, NEW PROCESSES 13.01.: Manual. To protect thereputation and goodwill of the businesses operating under the System and to maintain high standards of operation under the Licensed Marks; Franchisee shall conduct the Franchised Business strictly in accordance with the Manual, which Franchisee acknowledges belongs solelyto Big O and shall be on loan from Big O during the term of this Agreement. Franchisee agrees_to pay Big up to Five Thousand Dollars ($5,000) for the failure to return the Manual, Big Us Blueprint for Success, otherwise known as the Blue Book, any training module or any otherproprietary information to Big O within five (5) days of the Expiration Date or Termination Date of this Agreement, or the date upon which controlling interest in the Franchisee, the Franchised Business or its assets is transferred. However, Big-0 will waive the payment if Franchisee notifies Big O that it has lost or mislaid all or part of the Manual at any time prior to six (6) months before the date upon which the Franchise is transferred; terminates, or expires. 13.02. Confrdentialityof Information. Franchisee shall at Olt times use its best efforts to keep Big O's Information confidential and shall limit access to the Information to employees and independent contractors of Franchisee on a need -to -know basis. Franchisee acknowledgesthat the unauthorized use or disclosure of Big O's Information will cause irreparable injury to Big 0- and that damages are not an adequate remedy. Franchisee accordingly covenants that it shall not at anytime, without Big O's prior written consent, disclose, use, permit the use thereof (except as may be required by applicablelawor authorized by thisAgreement), copy,._duplicate, record; -transfer, transmit, or.otherM!sd reproduce such Information in anyform or by aoy means; inwhole or in part, or otherwise make the same available to any unauthorized person or source Any and all Information,, knowledge, and. know-how not generally known about the System and Big O's: Products ` and Services, standards, procedures, techniques, and such other Information or material s. Big 'O may designate as confidential shall be deemed confidential for purposes of this Agreement, except Information which Franchisee can demonstrate was lawfully in Franchisee's possession prior to disclosure by Big O, or, which legally is or has become a part of the public domain by lawful publication or communication by others. 1103. " Revisions' to Manual. Franchisee understands and acknowledges "that subject. to the requirements of Section 25, Big O may, from time to time, revise the contents of the Manual to implement new or different requirements for the operation of the Franchised Business, and Franchisee expressly agrees to comply with all "such changed requirements which "are by their terms mandatory, provided, that such requirements apply in a reasonably nondiscriminatory manner to comparable Big O franchisees. The implementation of such requirements may require the expenditure of I reasonable sums of money by Franchisee. Big O will :not alter the basic rights and obligations of the parries arising _under this Agreement through changes to the Manual. 13.04. Improvements to System. `if Franchisee develops any concept, process, service, or improvement "in the operation or promotion of the Store, Big O may itself use or disclose it to. other Big O franchisees without any obligation to compensate Franchisee therefor. If the concept, process, service, or " improvement is adopted for use by the majority of Big O Stores, such concept, process, service; or improvement shall become the property of Big O and Big O may itself use or disclose it to other Big O franchisees without any obligation to compensate Franchisee therefor. 14 14: PRODUCTS AND SERVICES 14.01. Products and Services. Franchisee acknowledges that its principal interest in acquiring a Big O Franchise is to sell Big O private brand tires and related merchandise and benefit from Big O's Products and Services selection, purchasing programs, including programs for the purchase of major brand tires, and marketing expertise.. The consuming. public expects Big O Stores to.offer the full line of Big=O Products and: Services and advertised warranty services. Accordingly, Franchisee shall. at all times have, in stock and on the Premises; a complete representative .line of Big Q private brand tires, shock absorbers, related merchandise, and other Products and Services in such quantities as"Big 0 may prescribe from time to time. Franchisee agrees that from the date at :the end of the .one hundred eighty (180) day period from the Commencement Date (or in the case of a transferee or a -Converter, from a date designated by Big-O) for the rest of the calendar year.after such date and for. each calendar year thereafter during the term (including renewal terms) of this Agreement: (a) it will have purchased at least seventy-five percent (75%) (cumulative amount in dollars, not units) of all of its purchases of products for resale in the Franchised Business from the regional service centers (RSC) or through other supply programs; if any; designated by Big O from time to time in its discretion, and (b) fifty percent (50%) or more of. all lire sales (in units) at the Store -will be Big O Brand. Tires, excluding sales of snow tires and farm class tires. 14..02.. Awroval of Products and Services. Prior to commencing business at the Premises, Franchisee shall stock the Store with -Products and Services and supplies of. such variety and in such. amounts as Big O may. require.. Franchisee may not sell any product or service that has not been selected, designated .or :. approved by'Big O. , Big O is not obliged to approve -any product, service,or merchandise selected by -the Franchisee. Franchisee may purchase Products and Services only from Big O or sources approved by Big O. Big O.will not give its approval of suppliers selected by the Franchisee which' are not at the time listed in the. Manual as approved by Big O for use by the Franchisee, except in accordance with the following.procedure: (a) The Franchisee must submit a -written request, to Big O for approval of the supplier; (b) .The Franchisee must demonstrate to Big O the' existence:of a need for the product or service and that the product or service does not conflict with Big O's existing marketing program of Products and Services; (c) The supplier must. demonstrate to Big O's reasonable satisfaction; that it is able to supply a commodity to the Franchisee meeting Big O's specifications for such commodity and that it is able to do so on a timely basis; (d) The supplier must demonstrate to Big O's reasonable satisfaction that the supplier is of good standing in the business community with respect to its financial soundness and reliability of its product and service; (e) The supplier must. agree to indemnify and hold Big O and the Franchisee harmless from and against any claim or liability by reason of the supplier's products, including without limitation, defects in materials- and workmanship and supplier must _provide to Big O certificates or other. evidences of insurance coverage with coverage limits .sufficient to cover the risks and an -endorsement reflecting that Big O and Franchisee.are named as additional insureds under the supplier's insurance policies; and. (f) Big O must be reasonably satisfied: that the commodity is priced competitively. Big O's current practice is to notify the Franchisee of its approval. or disapproval in writing as soon as practicable. Big O may revoke its approval of an approved supplier at any time in its sole discretion. 14.03. Inventory and Services* Franchisee shall at all times maintain an inventoryof Products in such amounts and of such variety as Big.O may reasonably require; and shall offer all Services which Big O may require. 15 14.04. Warranties ano Guaranties. Franchisee agrees to issue anti ►►onor warranties and guarantees written on certain Products and Services sold to consumers in accordance with the terms and procedures prescribed. in the Manual. Any such warranty or guaranty will be offered through all Big O Tire Stores on a nondiscriminatorybasis. Only warranties or guarantees sponsored or approved. by Big O maybe offered or honored by Franchisee (other than those -required by law). Franchisee and Big O shall onlyhonor warranties and guaranties on Products,and Services that have been sold to and returned by -consumers in accordance with the terms and procedures prescribed in the Manual..Franchisee acknowledges that it will honor any and a11- warranties and guarantees sponsored or approved by Big O, regardless of where or by whom. they were issued. Franchisee shall make no charge to a customer for honoring such a warranty or guaranty unless the charge is permitted by.the express terms,of the warranty or guaranty or the then current Manual. Big O. agrees not to change or alter any warranty or guaranty without giving Franchisee at least thirty(30) days prior written notice. Warranties or guarantees issued -prior to any such revocation or modification shall be honored according to their terms as interpreted in the Manual.. 14.05. Open Account. Financing. in- its sole discretion, Big O may provide Franchisee with open account financing.for some or all of the Products and Services it sells Franchisee. Whether or not such credit is offered, Franchisee will be required to execute a security agreement and comply with all other requirements of Big O to secure Franchisee's obligations to Big O.under the. Franchise Agreement and perfect -its security, interest therein. If such credit is offered, Franchisee will be required to execute a credit agreement and security agreement and comply with all.other requirements of Big O to secure such payments and perfect its security interest therein. Franchisee's failure tq comply with any credit terms set forth above may cause Big O to terminate these credit terms or, where appropriate, Big O reserves:the right to place Franchisee on C.O.D. as well as notifying the -Franchisee of an event -of default.of.this Agreement. 15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS 15.01. Grand OpeningAdvertising. Recognizing the value of standardized Advertising programs to the furtherance of the goodwill and public image of the Big O System, within the first year of business; Franchisee is required to spend on Grand Opening Advertising, in addition to the required four percent (4%), the amount specified on the Summary Pages_ The exact amount, to. be spent on Grand Opening Advertising shall be determined by Big O and the Franchisee's Local Group and will depend, in part, on 'Big Us then current presence in the market place, reputation and name recognition. The amount and manner of the Grand Opening Advertising must be approved in advance by Big,O. If no Local Group exists for the region where Franchisee's.Store is located, then the amount of the Grand. Opening Advertising shall be agreed upon by Big O and Franchisee. 15.02. National Advertising Program. Big O has established a National Advertising Program which Big O, in its7 sole discretion, may decide to terminate.or suspend at anytime. if Big O does terminate or suspend the National Advertising Program, Big O, in its sole discretion, may re-establish it at any time.. Big O shall notify Franchisee as to the manner in which it shall function and the amount of contribution required of Franchisee. (a) Not later than the Due Date, Big. 0 or its designee must have received from Franchisee such amount as Big O shall designate, but not more than one percent (1 %) of its previous month's Gross Sales; as a contribution to the National Advertising Program which shalt be maintained or approved by Big O for Big O system -wide Advertising efforts. Big O shall limit any increase in Franchisee's contribution to the National Advertising Program from any amount then currently being charged to one - tenth of one percent (0.1 %) in any twelve (12) consecutive month period and an additional one -tenth of one percent (0.1%) for each twelve (12) consecutive months thereafter until the`one percent (1%) limitation is reached. Such incremental increases shall not be cumulative so that if Big O fails to adopt an additional incremental increase after any twelve (12) consecutive month period, the next one -tenth of one percent (0.1 %) incremental increase will not accrue until actually adopted by Big O and shall constitute the maximum for the next consecutive twelve (12) months; provided, however, in the event Big O shall determine, in its sole judgment and discretion; that a special advertising circumstance or opportunity is available to Big O" and/or its -franchisees, Big O may propose. to the Dealer Planning Board a greater increase during any consecutive twelve (12) month period (up to one percent (1%) limit), and if a majority of the members of the Dealer Planning Board agree to such increase, it shalt be implemented by Big O, not withstanding Big O's limitation as to the phasing in of any increases. 16 (b) Big O shall, following consultation with the Dealer. Planning Board, direct all system -wide advertising efforts, which is provided through the National Advertising Program with sole discretion over the concepts, materials, -and media used therein. All National Advertising Program contributions .paid by Franchisee and other similarly situated Big O System franchisees to BigO shall be part of the National Advertising Program_ (c) Franchisee understands and acknowledges that the National Advertising Program is intended to maximize general public_ recognition and acceptance of the Licensed Marks and for otherbenefits. the System and that Big O undertakes no obligation in administering the National Advertising Program to insure that any particular franchisee benefits directly or pro rata from the national Advertising.. Franchisee agrees that the National Advertising Program may otherwise be used to meet -any and all costs incident to such Advertising; provided that no part thereof shall be used by Big O. to defray its general operating expenses other than (i) those reasonably allocable to such Advertising, or (ii) other activities reasonably related to the administration or direction of the National Advertising Program and its related programs. No refund of contributions to the National Fund°shall be due Franchisee upon termination or nonrenewal of this Agreement. (d) Any part of the National Advertising Program contributions paid to Big O, but not spent by Big 0 during Big O's fiscal year, which Big O may change in its sole discretion, shall remain in the National Advertising Program. Any taxes imposed on the National Advertising Program shall be paid from the National Advertising Program. (e) The Dealer Planning Board shall have the right to review all. expenditures of the National Advertising Program on a regular basis. 15.03. Local Fund. (a) Franchisee shall also contribute by the Due Date a minimum -of four percent.(4%) of. its. Store's Gross Sales for. the previous month to Big O or as directed by.119 O. If a -Local Fund has been. established by a. Local Group. in Franchisee's'marketing.area, Big O may, in its discretion, direct that allor any part of that contribution be (i) paid to the Local Fund formed. by the Local Group_for ,the purpose of local advertising and operated pursuant to such structure and guidelines as Big.O may prescribe or approve or, (ii).. paid to .Big Q. which may, include all or some of such payment in a Local .Fund administered by it or may. forward all or some of such payment to the Local Fund formed by the Local -Group:. Franchisee :agrees to be bound by the decisions of Big O (or its .designee) and its Local Group; if -.one has been established in Franchisee's marketing area, pertaining to local Advertising, provided such decisions have been approved by Big. Cr and do not violate any applicable laws. From time to time; the Local Group may:agree to. increase the -amount Franchisee is_required.to spend for Advertising (by contributions to the Local Fund or otherwise), but, subject to the terms of certain documents.already effective_ on this Agreement's. Effective Date, not by more . than one percent (1 %) of Franchisee's Gross Sales on an annual basis. (b) Franchisee understands and acknowledges that the Local Fund to;which it contributes will generally be used for Advertising in local areas or regions where Big O- Stores. are -located, but Big O undertakes no obligation with regard to any Local Funds administered by it or by any Locat Group to insure that all or any portion of the Local Funds are used in the local` area or region.of the Store location identfied in the Summary Pages or-- to Insure that any particular franchisee benefits directly or pro 1rata from the expenditures by the Local Fund. The Local Funds may be used'to meet any and all costs incident to the Advertising it supports; provided that, as to Local Funds administered by Pig O, no part thereof shall be used by Big O to defray its general operating expenses other than (i) those reasonably -allocable to such Advertising, . or (n) other activities reasonably related to the administration or direction "of the -Local Funds and related programs. No refund of contributions to the Local Fund shall be due Franchisee upon termination or nonrenewal of this Agreement. Any part of the Local Fund contributions not spent by Big O or a Local Group during its fiscal year, shall remain in the Local Fund. Any taxes imposed on.the Local. Fund shall be paid from the Local Fund. Big O retains the discretion to take such action or refrain from taking action as it deems appropriate to enforce the obligation of Franchisee to contribute to a Local Fund as provided in this Agreement and to enforce or refrain from enforcing the obligation of other franchisee to contribute to Local Funds as 17 provided in their franchise agreements with Big 0, but Big 0 has no obligation to Franchisee to enforce payments or contributions (in whole or in part) 'by other franchisees. 15.04. Approval of Advertising. Franchisee or the Local Group shall -submit (through the mail, return receipt requested) to. Big 0 for its prior written approval (except with. respect to prices to be charged), samples of all marketing materials and advertising to be used by Franchisee that have not been prepared or previously approvedin all respects by Big O or its designated agents, such approval by Big 0 shall not be unreasonably withheld._ Franchisee shall submit tearsheets, receipts, and other evidence of such Advertising in the manner prescribed. by Big O. Franchisee will not be required to submit to Big.O copies of any proposed Advertising which has been adopted for use by the Local Group and which was previously approved by Big 0 for use by the Local Group. Franchisee shall not cause or allow the Licensed Marks, or any of them, tobe used or displayed, in whole or in part, as an Intemet.domain name —or- on or in connection with any Internet home page, website or other Internet -related acfivity without Big O's express prior written consent, and then only in such manner and in accordance with such procedures, standards and specifications as Big O establishes. 16. STATEMENTS AND RECORDS. - 16.01. invoices. Every sale of Products and Services from the Franchisee's Store shall be accurately recorded on a consecutively numbered invoice or in such other format as Big 0 may reasonably approve. All invoices; whether voided or used, shall.be accounted for by Franchisee. 16.02. Audit. Throughout the term of this Agreement and for two (2) years thereafter, Franchisee shah maintain for not less than three (3) years original, full, and complete records, accounts, books, data, licenses, and contracts which shall accurately reflect all particulars relating to the Franchised Business and such other statistical and other information or records as Big 0 may require. Big 0 or its designated agent shall have the right to examine and. audit such records, accounts, books, and data during regular. business hours or at reasonable times. If any such examination or audit discloses that Franchisee has understated its Store's Gross Sales by more than two percent (2%), Franchisee shalt be obliged to reimburse Big O for the cost and expense of such examination or audit. If Franchisee has understated any amount due Big O or any Local. Group or Local Fund; it shall tender payment of the amount not later than ten (10) daysfollowing.receiptof the auditor's report, plus interest calculated at a rate which is the lower of eighteen percent (180/6) per annum or the highest -rate permitted`by`1 If Franchisee has overpaid Big O or such Local -Group or Local Fund, such amount Will.be credited to.Franchisee against monthly royaltyfees or advertising contributions due olgh . 0, the Local Group or -the Local; Fund beginning with the month following receipt of the auditor's report and continuing until the credit is exhausted. 16.03. Monthly Reports_ On or before each Due Date, Franchisee shalt mail'to Big 0, together with its payments of royaltyfees and advertising contributions, monthly reports on forms.prescribed from time to time by Big. 0, stating the fees or contributions due to Big 0 on account.of Gross Sales for the prior month, copies. - of all sales tax receipts or returns and such other information as Big O may require, all signed and certified. as true and correct by Franchisee or Franchisee's Operator. Big 0 reserves the right to require such reporting and payments to`be performed and submitted to Big 0 electronically. 16:04: Financial Statements. Franchisee shall deliver to 0, no later than sixty (60.) days from the . end of each of Franchisee's fiscal quarters, an unaudited profit and loss statement covering the Franchised , Business for such quarter and a balance sheet of the Franchised Business as of end of such quarter, all of which shall be certified by. Franchisee as. true. and correct. All such statements shall be prepared in a format. . that has been prescribed or approved by Big 0. In addition, Franchisee, as`well as any guarantor(s).of this. Agreement, shall, within. thirty (30) days after request from Big 0, deliver to Big .0 a .financial statement, certified as correct and current, in a form.which is satisfactory to Big 0 and which fairly represents .the total assets and liabilities of Franchisee and any such guarantor(s). 1.6.05.. Management Systems. Franchisee must implement any Management Systems required by Big O. Notwithstanding -the foregoing, if.Franchisee is required to implement a management system, it will not be required to do so more than once every -four (4) years. 18 t 16.06. Retail Accounting Center. Franchisee maybe required, in Big O's sole discretion, to use a Retail Accounting Center operated by Big 0-oroperating within the Franchisee's Local Group, as Big O may designate in its discretion for the generation of financial statements and/or for providing accounting, payroll and/or related services. If the Franchisee utilizes the services of a Retail Accounting Center, Franchisee will be required to provide sufficient financial information to a Retail Accounting Center to'enable that center to prepare on an accurate and timely basis the financial statements that the Franchisee is required to deliver to Big O. Franchisee authorizes the Retail Accounting Centers to deliver such financial statements directly to Big O. Franchisee shall be responsible for and pay on a timely basis the fees charged by the Retail Accounting. Centers. 1?. COVENANTS 17-01. Noncompetition During Term. Except for any businesses already operating and identified on the Summary Pages, during the term of this Agreement, Franchisee and any guarantors) hereof covenant, individually, not. to engage in or open any business, at any location, other than as a Franchisee of the Big O System, which` offers or sells tires, wheels, shock absorbers, . automotive services, or other products or services which compete with Big O Products and Services: The purpose of this covenant is to encourage Franchisee and any guarantors) hereof to use their best efforts to promote the Big O System, its Products ` and Services, to protect its Information and,trade secrets-, and to generate.a successful business at the Store. 17.02. Confidentialiftv. During the term of this Agreement and thereafter, Franchisee covenants not to communicate.either directly or indirectly, divulge or provide access to or use for its benefit or the benefit of any: other person•or.tegal entity, any trade secrets which are proprietary to Big O`or any Information, knowledge, or know-how deemed confidential under Section 13 hereof, except as expressly authorized by Big O. The protection granted hereunder shall be in addition to and not !n lieu of all other protections for such trade secrets and confidential- information as may otherwise be afforded in iaw or in equity. 17:03.:No Interference with Business. Franchisee agrees that duringthe term of this Agreement that it shalt- not divertor attempt to divert any business of or any actual customers 'of the Big O System to any_ competitive business, by direct or indirect inducement or otherwise. 17.04. Post Termination Covenant Not to Compete. If Franchisee terminates this Agreement other than in a -manner prescribed bySection'19.03 or if this Agreement is terminated for "good cause" as defined'in Section 19.01, Franchisee, its Owners,. officers, directors, -and guarantors covenant that they shall not directly or indirectly, for a period of two (2) years after the Termination Date of this Agreement, engage in any business, other than .as a Franchisee of the Big O System', which- offers or sells tires, wheels, shock absorbers, automotive services, or other products or services which compete with Big O Products and Services within a ten (10) mile radius of the Premises or within a ten (10) mile radius of any other Big O Store which was operational or under construction on the Termination Date. If a former Franchisee or guarantor commits a breach of this Section 17.04, the two yearperiod shall start on the date that the former Franchisee or guarantor is enjoined from competing or stops competing, whichever is later. 17.05. Survivability of Covenants. The parties -agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of .this ,Agreement. if all or any portion of a covenant in this Section 17 is held unenforceable by a court or agency .having valid jurisdiction in an unappealed final. decision to which Big O is a party, .Franchisee expressly agrees to be bound by any lesser covenant imposing the maximum duty permitted by law that is subsumed within the terms of the covenant, as if the resulting covenant were separately stated in and made a part of this Section 17. Franchisee further expressly agrees that the existence of any claim it may have.against Big O, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Big O of the covenants in this Section 17. The covenants in this Section 17 shall survive the Termination Date or Expiration Date of this Agreement. 17.06. Modification of Covenants.. Franchisee understands and acknowledges that Big-O shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Section 17 or any portion hereof; without Franchisee's consent, effective immediately upon receipt by Franchisee of written notice thereof, and Franchisee agrees that it shall comply immediately with any covenant as so modified. l9 .17.07. Anti -Terrorism Laws. Franchisee and each Owner represents, warrants and covenants than at all times during thetermof, this Agreement, neither Franchisee, the Operator nor. any executive officer of Franchisee will violate. any law prohibiting money laundering or, the aid or support of anyone whaconspires to commit acts of terror against any person,_ entity or government, including acts prohibited by the U.S. Patriot Act or U.S. Executive Order. 13224_ Franchisee ..shall immediately notify. Big O. in writing of any event or circumstance that might render any of the. foregoing representations and warranties false, inaccurate or misleading. 18. TRANSFER AND ASSIGNMENT 18.01. Assignment by Big O. This Agreement and all rights and duties hereunder may be freely assigned or transferred by Big O and shall be binding upon and inure to the benefit of Big O's successors and assigns_ .. 18.02. Right of First Refusal. Because Big O or someone known to Big.O may be interested in purchasing Franchisee's Franchised Business, the Premises, or an interest in either, if Franchisee decides to rnake,a Transfer, Franchisee agrees to offer in writing to make the Transfer to Big O, and describe fhe terms under which Franchisee. offers to make such a Transfer. If. Big O has not offered to purchase what the Franchisee. has offered.to Transfer to Big O within thirty.(30) days after. Big O receives the notice from Franchisee, Franchisee may then offer to make the Transfer -to third parties on the same or not more favorable.terms and conditions as were.offered :to Big 0.. If Franchisee does not consummate, in accordance with the terms offered to Big Oj thie Transfer:within six (6) months after Franchisee gives notice of the Transfer to Big O, Franchisee shall. not make the Transfer without again first offering to make the.Transfer .to Big O. . 18.03. Transfer Legend, Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Big O has granted the Franchise in reliance on Franchisee's personal background, business skills, experience, and financial capacity. it is important to Big O that Franchisee be known to Big O and always meet Big O's standards.and.requirements. Accordingly, neither Franchisee nor, any Owner shall .be permitted or have the, power, -without the prior written consent of_ Big O; to make any Transfer. To. assure compliance by -Franchisee with the transferrestrictions contained in this Section 18, all share or stock certificates of Franchisee, or other evidence of ownership in a Franchisee which is an Entity, shall: at all times contain a.legend sufficient under applicable lawto constitute notice of the restrictions on such.stoek, or other said evidence of ownership,contained. in this Agreement and to allow such- " restrictions to be enforceable., Such legend: shall. appear in substantially the following form: 'The sale, transfer, pledge, or hypothecation of this [stock. is restricted pursuant to the terms of Section 18 of a Franchise Agreementdated -between Big O Tires, Inc., and. the issuer of these [shares)." Any Transfer that does not comply with the terms of this Section 18 shall be null and void. 18.04. Pre -Conditions to Franchisee's Assignment. If Franchisee or any Owner desires. to make a Transfer, such person or Entity must comply with the following terms, conditions, and procedures:to effectuate a valid. Transfer:_ (a) If any proposed.assignme.nt of any rights under this Agreement, or if any other Transfer which would in the reasonable opinion of Big O. result in a Change of Control: (i) The transfereemust apply for a Big O franchiseand: must meet all of Big O's then current standards and requirements for becoming a Big O franchisee; which standards and requirements need not .be written and which standards may vary with the circumstances (such as past or anticipated sales volume or real estate value of a particular Store). (ii) The transferee or Franchisee shall, at Big O's election, execute the then current form of Franchise Agreement generally being.offered to franchisees in the State in which the Big O Store is located. Such agreement shall generally provide for a new term equal to the term of the standard Big O franchise agreement then being offered, and may include, without limitation, different fee structures, modified Trade Areas and/or increased fees; 20 (iii) Notwithstanding the foregoing, Big O or its assignee may, within thirty (30) days after receipt of notice as provided in Section 18.04(b)(i), below, elect the Option to purchase the interest being offered by Franchisee or any Owner at the saute terms, conditions and fees set forth in such notice; and (iv) The transferee or Franchisee shall, at Big O's election, have -obtained prior to the Transfer a surety bond or letter of credit in an amount not less than $10,000 (or such other amount as designated by Big O from time to time) per each Big O Store which is subject to the Transfer issued by a surety company or bank reasonably acceptable to Big O in favor of Big O or, at Big O's election, to the Local Group designated by Big O, which surety bond or -letter of credit may not be revoked, terminated or modified until two years (or such other time.period as designated by Big O from time to time) after the date of the Transfer. Such bond or letter of credit shall- be payable to the order of Big O or the Local Group, as the case may be, for any nonpayment by the transferee or Franchisee of contributions due to the National Advertising Program or the Local Fund pursuant. to the Franchise Agreement. to which the transferee or Franchisee' is a party; or (b) Regardless of the degree of control which would be affected by a proposed Transfer: (i). Franchisee shall first notify Big O in writing of any bona fide proposed Transfer.and set forth a complete description of all terms, conditions and fees of the proposed Transfer in the manner prescribed by Big.6 including the narne, address, financial qualifications, and previous five (5) years business experience of the :prospective transferee and its owners, officers; directors, partners, members and management, in the case of an Entity;: (ii) If Big O or its assignee fails to exercise the Optionjo purchase: the interest as provided in Section 18:04(a)(iii) or if. the. Option right is not available to Big O due to a transfer of less than fifty percent (50%) of .Franchisee's ownership, .Franchisee. shall be required to obtain Big O's approval of the proposed Transfer and the proposed transferee. Big O shall;-within.thirty (30) days after receipt of the notice as provided in Section 18.04(b)(i), above, notify Franchisee in writing of its approval or disapproval of the prospective Transfer and transferee. .Big O'sapproval will be granted only if the prospective transferee, its Owners, and/or Operator_ (a) meets Big -Os then current standards.for new franchisees; which standards need.not be in writing and which standards may vary with the circumstances (suchas past or anticipated sales volume or real estate -Value of a particular Store); (b)demonstrates.to Big O's satisfaction that it or its Operator meets Big O's managerial,. business, and technical. standards;-(c) possesses a.good moral character, business reputation, and satisfactory- credit rating; and (d). has the aptitude, ability, and financial capacity to operate the Franchised Business (as may be evidenced _by prior related business experience or otherwise). Big O also reserves the right to disapprove a Transfer or a particular transferee where such Transfer or transferee would result in Big O having any material increased risk, burden, chance of not obtaining performance of .all the provisions ;of this Agreement or chance of not obtaining financial performance:as good as that achieved by the Franchised Business prior to the prospective Transfer. Big O also reserves the right to disallow a transfer of the Premises (without a transfer of the Franchised Business) to a person which would operate a business from the Premises which sells or offers for sale products 'or services which are the same as or simlar to those offered for sale.through the Franchised Business; (iii) If Big O approves the proposed transferee, Franchisee or the Owner may transfer the interest to the .proposed transferee at a price and under terms and conditions which. are not �more favorable than the terms offered to Big O. Big O's approval is conditioned upon the proposed transferee or its Operator having completed (to the satisfaction of.Big O).the training program. then currently required of Big O franchisees or Operators, and, in some circumstances (such as high past sales volume) additional training as required by Big O from time to time; (iv) Prior to the consummation of any such Transfer, Franchisee_ shall pay all amounts due to Big O and cure all other breaches of this Agreement and any other agreement or loan document it may have with -Big O; 21 (v) Big O will, as a condition of any Transfer involving an assignment of this Agreement ora Change in Control,. require Franchisee or transferee to pay a transfer fee (but no initial franchise fee) to reimburse Big .0 for any expenses which may be incurred in its review, analysis, and preparation of any documentation relating to the Transfer, including legal and accounting fees, and additional assistance as may be requested by the Franchisee related to the Franchisee's resale -of the Store. The transfer fee will be one thousand five hundred dollars ($1,500). In addition, if the transferee requires training, the Franchisee or transferee will also be charged a training fee of up to four thousand dollars>($4,000) plus, in Big Us discretion, a reasonable additional training fee if additional training is required as described in Section 18.04(b)(iii). Big O shall be the sole arbiter of whether a Change in Control occurred as a result of a single Transfer or a group of Transfers. For any Transfer not involving an assignment of this Agreement or.a Change of. Control, Big O will, as a condition of any such Transfer, require the Franchisee or the transferee to pay a transfer fee (but no. initial franchise fee) equal to Big O's expenses that it incurs in its review, analysis and preparation. of any documentation relating Ao.the Transfer,. including legal and accounting fees and additional assistance as may be requested by the Franchisee related to the resale of the Store, but not more than one thousand five hundred dollars ($1,500). Big O shall be the sole arbiter of whether a Change in Control will occur as a result of a single Transferor a group of Transfers; (vi) Big O may require the transferor and its Owners and guarantors to guarantee the obligations of Transferee under -this Agreement or under any new Franchise Agreement entered into between transferee and.Big O; (vii) Prior to approving a Transfer involving a Change in Control, Big O may inspect Franchisee's Store and as a result of such inspection, Big Q may prepare a "Punch List" setting forth the necessary repairs, maintenance, or other.upgrading'of the Store which will become a condition of Big O's approval of the Transfer; (viii) If the Franchisee acquired its�interest in the Franchise as a Pioneer, Converter; or pursuant, to afVlulti-Unit-Development Agreement,'or otherwise paid less than -the standard initiaffranchise fee (that is; the initial franchise fee charged by Big O for: new franchises when the Franchisee executed. this Agreement) when it acquired °iEs interest in -the Franchise; and the Franchisee. makes a Transfer of its interest within twa`(2)=years`of the Effective Date of this Agreement, the `Franchisee must pay Big .O as a condition of °such Transfer the .difference between. the initial franchisefee paid by Franchisee and -thirty thousand dollars. ($30,000.00), which is the standard initial franchisee- fee charged by Big O for neW .franchises when Franchisee executed this Agreement;, and -(ix) Franchisee shall cornply with all other applicable transfer requirements as designated in the Manual or otherwise in writing: 18:05: Death -of Franchisee. Notwithstanding any other provision in this Section 18, if a Survivor desires to acquire or retain the interest of a decedent of a Franchisee or. in a Franchisee and :continues to operate the Franchised Business pursuant to the System, the Survivor may do so under the terms of this Agreement subject only to: (a) The Survivor's execution and delivery to Big O of a written agreement to be bound: (i) By the terms of this Agreement; and (ii) By the terms of any guaranty of this Agreement; (b) Satisfactory completion of training by the Survivor, Survivor's Operator, or Manager and such other . managerial personnel as Big O may designate within the time periods prescribed by Big O; and 22 (c) The Survivor's payment of all training fees, travel, lodging, food, and similar expenses incurred by it or its Operator or managerial personnel in attending the training prescribed by Section 11.02. If the Survivor does not desire to acquire or retain such interest, then the Survivor shall have a reasonable period of time, but: no more than six (6) months, to make a Transfer -to a transferee acceptable to Big O subject to compliance with the procedures set forth in this Section 18, provided, the Survivor throughout such period fulfills all duties of.Franchisee under this Agreement. 18.06. No Waiver. Big O's consent to a Transfer hereunder shall not constitute a waiver of any claims Big O may have against Franchisee or the transferring party or Big O's right -to demand exact compliance with any provision of this Agreement. . 18:.07. Excepted Transfers. The provisions of Sections 18.02 and-18.04(b)(ii) shall not apply to: (a) any Transfer to a spouse, parent, child, or sibling of Franchisee or any Owner; (b) a Transfer to a spouse, parent, child, or sibling of Franchisee or any Owner which, in the aggregate, amounts to a Transfer of less than a controlling interest. in Franchisee, the Franchised Business or the Premises; or (c) any Transfer to a Manager or Operator of the Franchised Business pursuant to an equity acquisition program or agreement of Franchisee approved by Big O prior to such Transfer. 19. ._ DEFAULT AND TERMINATION 19.01. Termination by Big O. Big O: may terminate this Agreement for good'cause, without prejudice to the enforcement of any legal or- equitable; right. or remedy, immediately upon .giving written notice of such termination and the reason or cause for the termination,'and, except as hereinafter provided, without providing Franchisee an opportunity to cure the default.- Without in anyway limiting_the generality of the meaning of the term "good cause;" the following occurrences shall constitute sufficient basis for Big O to terminate the Agreement: (a) If Franchisee fails to pay any financial obligation pursuant to this Agreement including, but not limited, to, payments to Big O or any -other supplier for Products and Services, and fails to cure such failure to pay within five (5) days after Big O gives Franchisee a written notice7of default; (0) If Franchisee faits to perform or breaches any covenant, obligation, term, condition; warranty, or certification herein and fails to cure such non-compliance .within1hirty -(30) days after Big O gives Franchisee written notice of default; (c) If Franchisee fails to open the Store and.commence business within eighteen (18) months of the Effective Date of this Agreement, or if Franchisee fails to commence business on such other Commencement Date as the parties hereto may have agreed. Notwithstanding. the foregoing, Big O will agree to extend the time period to commence business so long as theFranchisee can demonstrate to -Big O's reasonable satisfactionthat the -need. to extend.the time -period is a result of factors beyond the Franchisee's reasonable control; (d) If Franchisee makes, or has made, any materially false statement or report to Big O in -connection with this Agreement or the application therefor; Je) If Franchisee operates the Franchised Business or uses the Licensed Marks in a manner contrary to or inconsistent with this Agreement, specifications by Big O, or, as stated in the Manual, and Franchisee fails to cure such deficiency within thirty (30) days after Big O gives a written notice of default; (f) If Franchisee, a Owner, guarantor, or transferee violates any transfer or assignment provision contained in Section 18 of this Agreement; (g) If Franchisee receivesfrom Big O more than three (3) valid notices of default of this Agreement in the same twelve (12) month period, regardless of whether previous defaults have been cured; 23 s e (h) If Franchisee fails to operate or keep the. Franchised Business open for more than five (5) consecutive business days other than with Big O's express written approvat.or due to an event beyond the Franchisee's reasonable control (e.g.: damage or destruction, flooding, civil disturbance), or if Franchisee ceases to operate all or any part of the Franchised Business conducted under this . Agreement or defaults under any" loan, lending agreement, mortgage, deed of trust or lease with any party covering the Premises, and such party treats such act or omission as a default, and Franchisee fails to cure such default to the satisfaction of such party within any applicable.cure period granted Franchisee by such party and such default with a third party has or would likely have an adverse impact to the Franchisee or the Big O System generally; (i) If Franchisee or any person owning an interest. in Franchisee is convicted of any felony or crime of moral turpitude regardless of the nature thereof, or any other crime or offense relating to the operation of the Franchised Business, or if Franchisee engages in any conduct which reflects materially and unfavorably upon the operation of the Franchised Business; . 0) If Franchisee becomes insolvent or makes a general assignment for the benefit of creditors, or if a petition in bankruptcy is filed by Franchisee, or such a petition is filed against and consented to by Franchisee; or if a bill in equity or.other proceeding for the appointment of a receiver of Franchisee or other custodian for Franchisee's business or assets is filed and consented to by Franchisee, or if a receiver or other custodian (permanent or temporary) of Franchisee's assets -or property, or any part thereof; other than as described imSection 18.05,- is appointed; (k) if Franchisee, any. Affiliate:. of- Franchisee or any guarantor(s) hereof defaults in.any other agreement or loan document with- Big 0 or -if franchisee, or:any Affiliate of. Franchisee, defaults. under the terms of any lease or sublease of the Premises or if Franchisee fails to comply. with °the requirements of any Local Group operating pursuant to standards prescribed or approved by Big O including,.but not -limited :to, -any requiirementto pay dues or make advertising contributions; an&such default is;not-cured in accordance with the terms of such other agreement, loan document, or lease, or the by -lads of :the Local: Group; (1) If Franchisee fails, for.a period of ten'(10) days after notification of rion=compliance, tocomplywith any law of regulation applicable to the operation of the FranchisedBusiness; (m) If Franchisee sells, offers for sale, or gives away at the Premises any products or services which have not been previously.approved by Big O in writing, or which have been subsequentlydisapproved; (n) If Franchisee shall have understated its Gross Sales to. Big O-ontwo (2) or more occasions; or (o) If a court of competent jurisdiction or an arbitration tribunal in a final . and unappealed judgment determines that any significant amount of the payments or compensation which Franchisee has agreed to pay Big O pursuant to the terns hereof is unlawful, or that all or a significant part of Franchisee's payment obligations hereunder are void or voidable by Franchisee. Remedies to Big O. if the Franchisee is in default and has failed to cure such default in a manner prescribed by. the Franchise Agreement, in addition to the rights Big G has to terminate the agreement, the Franchisee agrees to pay to Big O, among -the many remedies available to Big O, royalties and any lost gross profits. . 19.02. Governing State Law- If a different notice or cure period or good cause standard is prescribed by applicable taw, it shall apply to a termination of this Agreement. 19.03. Termination by Franchisee. Franchisee may only terminate this Agreement if Big has committed a material breach of any of Big O's obligations under this Agreement and has failed to cure such breach within thirty (30) days after Franchisee has given written notice to Big 0 of such breach. 24 19.04. Force Maieure. Notwithstanding anything -contained in this Agreement to the contrary, neither party shall be in default hereunder. by reason.of its delay in performance of, or failure to perform, any of its obligations hereunder, if.such .delay or failure is caused by:.. (a) strikes or other labor disturbance; (b) acts of God, or the public enemy, riots or other civil disturbances, fire, or flood; (c) interference by civil or military authorities; (d) compliance with governmental laws, rules, or regulations that were not in effect and could not be reasonably anticipated. as of .the date of this Agreement; (e) delays .in transportation, failure of delivery by suppliers, or inability to secure necessary governmental priorities for materials; or (f) any other fault beyond its control or without its fault or negligence. in any such event, the time required for performance of such obligation shall be -the duration of. the. unavoidable delay. . 20. POST TERMINATION OBUGATiONS --20.01... Post -Termination Obligations. Upon the Expiration.or Termination of this Agreementby any means or for any reason, Franchisee shall immediately: (a): Cease to be a Franchisee.of Big O and.ceaseto operate.the. former Franchised Business under the Big `O System. Franchisee shall not thereafter, directly or lndireefly, represent to the public.that the former Franchised Business is or was operated or in any way connected with the Big O System or hold - itself out,as a presenuor former Franchisee of .Big O; (b) Pay all sums owing to. Biig. O. Upon termination for any default by Franchisee, such. sUrns.shall include actual and `consequential damages, costs, and expenses incurred by Big :Q as a result of the default; (c) Return to Big O the (i) Manual and any training modules ,or other proprietaryinformation and,. n, supplements thereto arid.all trade. secrets and confidential materials owned or Licensed by Btg Q and all copies "thereof ' other'than Franchisee's copy of . the Franchise Agreement,: 'copies: of any., correspondence between the parties, and any other ifocumentwhich Franchisee reasonably needs, or compliance with any applicable law; (ii) return or discontinue:us`e,of all forms, advertisirtg. matter, marks, devises, insignias, slogans, designs, sigris,, any compufer systems including: software and/or. hardware; and (iii) discontinue the use of all copyrights, Licensed, Marks, trade .names an patents now or hereafter applied for or granted in connection with the operation of the Franchise; (d) -Provide to Big O, upon its request, a complete list of any outst6nding-obligations that Franchisee. may have to any third parties including outstanding customer orders. Big 0 shall have the right, but no:,t the obligation, to fill any such outstanding customer orders generated by Franchisee and in such event;.. Franchisee shall immediately reimburse Big O for any costs or expenses incurred by Big O in doing so. In addition, Big O shall have the right to cancel any orders placed by Franchiseefor which delivery has not been made; (e) Take such action as may be required by Big O to transfer and assign to Big. O or its designee all telephone numbers, white and yellow page telephone references and advertisements, and all trade and similar name registrations and business licenses,.and to cancel `any interest which Franchisee may - have in the same. The Franchisor is hereby appointed as, the Franchisee's.attorney-in-fact. for such purpose and such power; being coupled with an interest,, shall be irrevocable; S S (f) Cease to use in Advertising, or in any mannerWhatsoever, any methods, procedures, or techniques associated with the Big O System in which Big O has'a proprietary right, title, or interest; cease to use the Licensed Marks, and any other marks and-indicia of operation associated with the Big O System. and remove or change all Trade Dress, Products and Services, and other indicia of operation under the Big O System from the Premises, at Franchisee's expense and in a manner satisfactory to Big 0- Unless otherwise approved in writing by Big O, Franchisee shall return to Big O all copies of materials bearing the Licensed Marks; (g) Cease accepting the Big O credit card Franchisee has with Bank One, or any other designated lender; (h) Franchisee shall immediately make available to Big O all customer lists as such was developed while a Franchisee; (i) - Strictly comply with all other provisions of this Agreement -pertaining to post -termination obligations, including, without limitation, those contained in Sections 13 and 17; and 0) Cease performing any tire'adjustments as of the Termination Date and refer'such adjustments to other existing RSCs or other Stores for processing. Franchisee shall receive no allowance for tire adjustments upon termination. 20.02. Right to Repurchase. Big O shall`have the.right, but not the obligation, to purchase: (a) Some or altof the Products and Services and supplies at the Store and the equipment, furnishings, fixtures, -or signs at the Premises which bear the Licensed Marks for a mutually -agreed upon price within thirty (30) days of the Termination. Date or the Expiration Date.:. (b) if Big O elects to exercise such a right, it may offset the purchase price against any other amounts owed by Franchisee to Big O pursuant to this or any agreement or loan document. Before exercising any suclirights; Big O shall' have the right to enter upon the Premises during reasonable hours to take an inventory of.the Franchised Business 20.03. Right of First Refusal.. -Upon receipt by Franchisee of an offer to,purchase: Franchisee's Products and Services, equipment supplies, fixtures or_ signs at the Premises, Franchisee hereby. grants Big O a right of firstrefusal to purchase anypf such items by matching the bona fidetnonetary purchase price and payment.schedule-terms,.less. any brokerage commission without having to match any-other;non-monetary terms of the proposed purchase by Franchisee's buyer(s). Franchisee must Big 0 written notice of any, such bona fide offer. if within thirty (30)day s after receipt of such notice. Big-O has neither exercised its right of first:refusal nor notified Franchisee of ks'rejectionthereof, Franchisee may sell such, items as were covered by the offerat.the expiration of'the thirty. (30) day period. 20.04. De -Identification of Assets Upon Sale. If Big O determines not to exercise.. its.. option to repurchase any such items :Franchise@,may continue to sell its remaining Products and Services, equipment, supplies, and fixtures, but may pot identify itself as a_Big O Franchisee. Franchisee,shall otherwise, abide by the terms of this Section 20. 21. INSURANCE 21.01. Insurance Coverage. Franchisee shall, at its expense and no later than upon the Commencement Date, procure and -.maintain in full force and effect throughout the term of. this Agreement either the approved Big O Dealers National insurance Program ("Program"} then in effect or other insurance that shall be in such coverages, limits and amounts as may from time to time be required by Big O in the Manual or otherwise and which shall designate Big OJts directors, officers, :employees, agents and other Big O designees as additional named insured(s).. Unless otherwise agreed to by Big O, Franchisee shall procure and maintain whichever limits and coverages are greater in a comparison of the insurance enumerated in the Manual and the insurance enumerated in the Program. 21.02. Proof of Insurance. Prior to the Commencement Date, Franchisee shall make timely delivery of a signed original certificate or certificates of all required insurance coverages to Big O, which shalt contain the authorized agent's business name, address and phone number; together with a statement by the insurer that the policywill not be canceled or materially changed without at least sixty (60) days prior written notice to Big O that the alteration or cancellation is being made. All insurance coverages will be underwritten by a company acceptable to Big O, with a Best's Rating of no less than "A-" or a financial statement of the insurer approved by Big O. if Franchisee fails to purchase required insurance conforming to the standards prescribed by -Big O, Big O may obtain such insurance for Franchisee, and Franchisee shall pay Big O the cost of such insurance plus a ten percent (10%) administrative surcharge. 21.03. Survival of indemnification. The procurement and maintenance of the greater of the prescribed insurance coverages set forth in the Manual or those set -forth inthe Program shall notrelieve Franchisee of any liability to Big O assumed.under any indemnification requirement of this.Agreement. If Big O deems it_ appropriate, Franchisee shalt, upon gig Us request, provide to Big O atrue, complete certified copy of all, or a part of the Franchisee's insurance policies within 10 days of receiving such request. In addition, upon Big O's request, the Franchisee shall provide to Big O renewal certificates of insurance, or certified insurance binders, for all required coverages no fewer than 10 daysbefore the indicated anniversary date(s) of such insurance coverages. 22.. TAXES, PERMITS, AND INDEBTEDNESS 22.01. Payment of Taxes. Franchisee shall promptly pay when due any and all federal, state, and local taxes including without limitation, unemployment and sales taxes, levied or assessed with respect to any Products and Services distributed or sold pursuant to -this Agreement and all accounts or other indebtedness of every kind incurred by Franchisee in,the operation of the Franchised Business. 22.02. Compliance with -Laws- Franchisee shall comply with all applicable federal; state; and local laws, rules and regulations, including, without limitation, environmental laws related to tire disposat. Franchisee shall obtain any and all permits, certificates, and licenses required for the full and proper conduct of the Franchised Business. 22.03. Payment of Debts. Franchisee hereby expressly covenants and agrees to accept full and -sole responsibility for any and all debts and obligations incurred in the operation of the Franchised Business. 23. INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS 23.01. indemnification. Franchisee agrees to protect, defend,: indemnify, and hold Big O 'and its Affiliates, their directors, officers, shareholders, employees and agents jointly and -severally, harmless from and against all claims,- actions, proceedings, damages,.costs, expenses. and other losses (including death) and liabilities, consequently, directly or indirectly incurred (including, without limitation, attorneys', accountants' and other related.. fees) as a result' of, arising out of, or connected with operation of the Franchised Business, including, without limitation, the failure of Franchisee to comply With any relevant environmental and tire disposal laws. Franchisee shall not, however, be liable for claims arising exclusively as a result of Big O's intentional or fraudulent acts or omissions or to the extent such acts are Big O's sole negligence. ,. 23.02. Independent Contractor. . In all dealings with third parties, including, .without limitation, customers, employees, and suppliers, Franchisee shall disclose in an appropriate manner acceptable to Big O that it is an independent entity operating under a franchise granted by Big O. Franchisee. shall- submit all applications and enter into all contracts in its designated corporate name or such other fictitious names, which have been approved by Big O, but not in the name "Big O Tires" or in any other name which includes the name "Big O". Nothing in this Agreement is intended by the parties hereto to create a fiduciary relationship between them nor to constitute Franchisee or Franchisee's employees or contractors as an agent, legal representative, subsidiary, joint venturer, partner, employee, or servant of Big O for any purpose whatsoever. It is understood and agreed that Franchisee is an independent contractor and is in no way authorized to make any contract, warranty, or representation or to create or imply any obligation on behalf of Big O. 27 24. WRITTEN APPROVALS, WAiVERS,.AND AMENDMENT 24.01. Written Approval.. Whenever this Agreement requires Big O's prior approval, Franchisee shall make a timely written request... Unless a different time period is specified in this.Agreement, Big O shall respond with its .approval or disapproval within fifteen (15) business days. 24.02. Waiver: No failure of Big O to exercise any- power reserved to it by .this Agreement and no custom or practice -of the parties at variance with the terms hereof shalt constitute a waiver of. Big O's right to demand exact compliance with any of the terms herein. A waiver or approval by Big O of any particular default by Franchisee or -any other Big.O franchisee or.acceptance by Big O of anypayments due hereunder shall not be considered a waiver or approval by Big O of any preceding or subsequent- breach- by Franchisee of any term, covenant, or condition of this Agreement. Big O shalt not be deemed to have waived any of its rights under this Agreement, including :any right to receive payment in full for any Product or Service provided, nor shall Franchisee be deemed to have been excused from performance of any of its obligations pursuant to this Agreement, unless such waiver or excuse is written.and executed by an authorized representative of Big O and Franchisee. 24.03. -Modification: No amendment, change, or variance from this Agreement shalt be binding upon either Big O or Franchisee except by- mutual written agreement- .If an amendment of this:Agreement is executed at Franchisee's request, -any legal fees or costs of preparation of such amendment and any amendment of a franchise registration arising in connection therewith shall'be paid -by Franchisee.. 25. DEALER PLANNING BOARD 25.01. Dealer Planning Board. Big Q has established a Dealer Planning Board("APB"),'consisting of franchisee representatives, which is designed to review aspects of Big O's strategic business.plan as maybe presented from time to time by Big O and to advise Big O's management on issues of concern to Big'O . franchisees.: Through arepresentative. _elected from Franchisee's Local Group,. Franchisee shall be represented on the DPB. 25.02. Special Interest Issues. Big O has granted the DPB the authority to participate with Big Us management in making policy decisions relating to issues in which the DPB is deemed to have a special interest. The issues of "Speciar Interest" include, but may not be limited to: (a) advertising policies and the creation of.a National Advertising. Program; (b) standards of operation; and the.imptementation of new programs which may require the addition of new equipment and fixtures for the store; (c) selection of Products and Services offered at Big O. Stores;° (d) changes in the Licensed Marks anticipated to require .the majority of franchisees to expend more than five thousand dollars ($5,000.00) per Store; and (e) input in establishment of warranties and guaranties. 25.03. Disapproval of Management Proposal. With respect to those issues in which the DPB has a Special Interest, the DPB may, after consulting with the members ofthe. Local Groups, vote to disapprove a proposal of Big O's management. If, pursuant to established procedures which have been approved by Big O, the DPB shall disapprove a proposat of Big Us management, the proposal may only become effective if, following a presentation to the Big O policy committee by a representative of the DPB, Big O's policy committee votes to adopt management's proposal. 25.04. Compliance with Modification. Franchisee agrees to comply with any and all modifications to Big O's standards of.operation; procedures,"or other requirements adopted -pursuant to the procedures described in this Section.25. 29 26. RIGHT OF OFFSET 26.01. Right of Offset. Big O shall, have the right at any time before or after termination of this Agreement, without notice to Franchisee, to offset any amounts or liabilities that may be owed by the Franchisee to Big O against any amounts or liabilities that may be owed by Big-O to Franchisee under. this Agreement or any other agreement, loan, transaction ourelationship between the parties_ 27. ENFORCEMENT 27.01. Declaratory and Injunctive Relief. Big O.or its designee shall be entitled to obtain without bond, declarations, temporary and permanent injunctions, and orders of specific performance_ (a)- To enforce .the provisions of this Agreement relating :to: (i) .Franchisee's use.of the Licensed Marks; (ii) the obligations of Franchisee upon termination or expiration of this Agreement; or (iii) the Transfer and Assignment requirements of Section 18; or - (b) to prohibit any act or omission by Franchisee or its employees that: (i) constitutes a. violation of any applicable law or regulation; (ii) is dishonest or misleading to prospective -or current customers or< clients of businesses operated under the System; (iii) constitutes a danger to other. Big O franchisees. - their employees, customers, clients or the public•, or (iv) mayimpair the goodwill associated with the Licensed. Marks. . 27.02... Costs of Enforcement. if Big O secures. any declaration; injunction or order of specific performance pursuant to Section 27.01 hereof, if any provision of: this Agreement is enforced at any time -by Big O or if any amounts due from Franchisee to Big O are, at any time, collected by or through -an -attorney at law or collection agency,. Franchisee shall be liable to: Big O for -all costs and expenses of enforcement and collection including,but not limited to, court costs and reasonable attorneys' -fees, including the fair market value of anytime expended by legal counsel employed by Big O. 28. NOTICES 28.01. Notices. Any notice required. to be given hereunder shall be in writing and shall be mailed by registered or certified mail or overnight courier. Notices to Franchisee or Big O.shall be addressed to.it attheir address as listed on the Summary Pages or to such,. other addresses as that party may hereafter prescribe by notice given in accordance with this Section 28.01. Franchisee shall also simultaneously deliver a copy of each notice, which it delivers to Big O, to the Franchisee's designated regional representative, at the address designated by Big O in writing to Franchisee. Any notice complying with the provisions hereof shall' be deemed to be given on the date of mailing. 29. GOVERNING LAW - 29.01. Governing Law... This Agreement is accepted by Big O in the State of. Colorado and shall be governed by and interpreted in accordance with Colorado taw, which law shall prevail in the event of any conflict of law. Big O and Franchisee consent to personal and subject matter jurisdiction and venue in Denver, Colorado. 29.02. Jurisdiction_ The parties hereto agree that it is in their best interest to resolve disputes between them -in. an orderly fashion and in a consistent manner... Therefore, .the parties. consent to .the exclusive jurisdiction of either Colorado state courts .or the United States Federal District:Court for.tlie District.of Colorado for any litigation relating to this Agreement or the operation of the Franchised. Business thereunder. Franchisor and Franchisee irrevocably constitute and appoint the persons designated on paragraphs 10 and 11 of the Summary Pages to be their true and lawful agents, to receive service of any lawful process in any civil litigation or proceeding arising under this Agreement, and service upon such agent shall have the same force and validity as if personal service had been effected on the otherparty;.. provided that notice of service and a copy of any process served shall be sent by registered or certified mail, addressed to the other party at the address specified pursuant to Section 28.01. 29 30. SEVERABILITY AND %-ONSTRUCTION I , s 30.01. Severability. ' Nothing contained in this Agreement shall be -construed. as requiring the commission of any act contrary to law. Whenever there: is any conflict between any provisions of this.: Agreement -or the Manual and any applicable present orfuture-statute, taw, ordinance, or regulation contraryto . law to which the parties have no legal right to contract, the latter -shall prevail, but 'in such event: of the. provisions of this Agreement or the Manual thus affected, those provisions shall be curtailed and limited only to the extent necessary to bring it within the requirements of the law. If any part,'Article; Section, sentence or clause of this Agreement or the Manual shall be held to be indefinite, invalid or otherwise unenforceable, the provision which is indefinite, invalid or: unenforceable shall be deemed deleted, and thexemaining part of this Agreement shall continue in full force and.effect. 30.02. Counterparts. This Agreement may be executed in.any number of counterparts, each of which when so executed and delivered shall be deemed an original, but such counterparts together shall constitute one and the same instrument. 30.03. Construction. All .terms and words used herein shall be -construed to include the number and gender as the context of this Agreement. may require. The parties agree that each section of this Agreement shall be construed independently of any other section or provision of this Agreement. As used. in this Agreement; the words "include","includes" or "including' are usedin a non-exclusive sense. Unless othenwise expressly provided herein to the contrary, any consent, approval or -authorization of Big Owhich Franchisee may be required to obtain hereunder may be given or withheld by Big O in its sole discretion, and on any occasion where Big O is required or permitted hereunderto make any -judgment or determination, including any decision as to whether any condition or circumstance meets Big Us standards or satisfaction,. Big O may do so in its sole judgment Article and Section titles used in this Agreement are for convenience onlyand-sWI. notbe deemed to.affect.the meaning or construction of any of the_terms, provisions, covenants; or conditions' of this Agreement. Schedules 3, 4, 5; 7 and 8 shall not be.effective as part of this Agreement unless signed by the party or parties thereto.' 31. . GUARANTY 31.01 Guaranty. Attached as Annex A `to this Agreement is a copy of the Guaranty 'by`TBC Corporation; the parentcompanyof Big O, of the performance by Big O of all of the obligations of'Big.O under this Agreement. Such Guaranty is incorporated by reference -to -this Agreement. 32. �` `ACKNOWLED.GEMENTS (a) Big O acknowledges that Franchisee's principal interest in obtaining the Franchise granted herein is to obtain Big O Brand Tires and a competitive source of supply for Products and Services. Big O acknowledges its obligation to have products available to its franchisee's that enhance and support the Big O System, and further acknowledges its obligation to seek to attempt to maintain a competitive source- of supply for the benefit of its franchisees and to aid in the promotion of Big O Products and Servicesr (b) Franchisee understands and acknowledges- that the business licensed under this Agreement involves business risks and. that Franchisee's volume, profit, income and success is dependent primarily upon Franchisee's ability as an independent business operator. (c) Big O expressly disclaims the making of, and Franchisee acknowledges that it has not received from any representative of.Big O, anywarrantyor guaranty; express or implied, as to the'obligationof Big O to provide Franchisee with any speck or sufficient amount of Products and Services or as to the potential volume, profit, income or -success of the Franchised Business. (d) Franchisee acknowledges that Big O or its agent has .provided Franchisee with a Franchise Offering Circular not later than the earlier of the first personal meeting with.a Big O representative held to discuss the sale of the Franchise, ten (10) business°days before the execution of this Agreement, or ten (10) business days before any payment of any consideration connected to the purchase of this Franchise. Franchisee further acknowledges that Franchisee has read such Franchise- Offering Circular and understands its contents: (e) Franchisee acknowledges that Big O has provided Franchisee with a copy of this Agreement and all related documents, fully completed, for at least five (5) business days prior to Franchisee's execution hereof. (f) Franchisee acknowledges that Big,O- has advised it to consult with its own attorneys, accountants, or other advisers, that.Francfiise .boshad ample opportunity to do so, and that the attorneys for Big O have not advised or represented Franchisee with respect to this Agreement or the relationship hereby created. The name and address of Franchisee's adviser, if any, is set forth on the Summary. Pages. (g) Franchisee acknowledges that this Agreement, the documents referred to -herein, the attachments hereto, and other agreements signed concurrently with this Agreement, if any, constitute the entire, full and complete Agreement between Big O` and Franchisee concerning the subject matter hereof. This Agreement terminates and supersedes any prior agreement between the parties concerning the same subject matter and any oral or written representatiionswhich are inconsistent with the terms of this instrument and its accompanying Franchise Offering Circular. (h). Franchisee acknowledges and_ reeognizes.that different terms and conditions, including a different fee structure and investment requirements may pertain to different Big O franchises offered in the past, contemporaneously herewith, or in the future; and that Big O .does not represent that all franchise agreements are or will be identical. (i) Franchisee acknowledges that except as is specifically set forth in this Agreement, that Franchisee is not nor is it intended to be a third party beneficiary of this Agreement or any other agreement or contractual *relationship to which Big O is a party. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to become effective on the date it is executed by the last of Franchisee or.Big. 0. - FRANCHISEE: C.S.B. PARTNERSHIP,, . a California general partnership By: C.E.P. Developments, Inc., -a California corporation, General Partner By: topher R. Phillip President Date: Home Address:'- 33791 Glocamora Lane San Juan Capistrano, CA. 92675 Home Phone Number: ) 661-6188 Office Address: 7872 Edinger Avenue _ Huntington Beach, CA 92647 Office Phone Number:_ (714) 861-4011 Title: Attest: Title: (Affix Corporate Seal) 31 FRANCHISEE: C.S.B. PARTNERSHIP, a California general partnership By::. Four Ky s, Inc., a Calif rnia corporation, General Partner By: Virgil y16 Ky , III, PriGident Date:. Home Address:. :35 Ticknor Lane Laguna Niguel, CA 92677 Home.Phone Number:. (7:1.4) 24.0-8059. Office Address: 7872 Edinger Avenue Huntington Beach:, CA 92647 Office Phone Number: (71418614011 Title: Attest: Title (Affix Corporate Seal) FRANCHISEE: ,CrS.B. PARTNERSHIP, a California general partnership Y. Phillips & Phillips, LLC, _ a. California corporation, general partner i.► .. ''` B-y ',. C. & E. Phillips, Inc., a California corporation, t .. _:Managing Member By: .6c4ristopher R. Phi' s, President By: Christopher R. Phillips and Emiko J. Phillips, Trustee or Successor Trustee of the Phillips Family Living .Trust dated September 23, 1991 as amended, Member By: By:. 32 k. Home Address: 33791 Glocamora Lane San Juan Capistrano, CA 92675 Home Phone Number: (714) 661-6188 Office Address: 7872 Edinger Avenue Huntington Beach, CA 92647 Office Phone Number: (714) 861-4011 Title: Attest: Title: (Affix Corporate Seal) FRANCHISEE: C.S.B. PARTNERSHIP, a California general partnership By: JYB Enterprises, Inc., a California corporation, General Partner By: J on Y. Berry, Pre i nt Date: Home Address: 5320 E. Rural Ridge Circle Anaheim, CA 92807 Home Phone Number: (714) 283-1147 Office Address: 7872 Edinger Avenue Huntington Beach, CA 92647 Office Phone Number: (714) 861-4011 Title: Attest: Title: (Affix Corporate Seal) BIG O TIRES, INC. By: 76 JQtA P. Hyduke, Senr Vice President — Franchise Development Date: a V Title: Senior Vice President —Franchise Develo ment Attest: Susa D. Hendee, General Counsel and Secretary 33 34 ANNEX A (Conformed Copy) TBC CORPORATION Guaranty of Performance This Guaranty is applicable to each franchise agreement of Big 0 as franchisor that makes specific reference to this Guaranty and incorporates this Guaranty by reference (collectively, the "Franchise Agreements") but to no other franchise agreement. The Guaranty in regard to any one Franchise Agreement is solely.for the benefit of the franchisee that is a party to that Franchise Agreement. For value received TBC Corporation ('TBC"), located at 7111 Fairway Drive, Suite 201, Palm Beach Gardens, Florida 33418, absolutely and unconditionally guarantees the performance by BigO Tires, Inc. ("Big O") located at 12650 East Briarwood Avenue, Suite 2-0, Centennial, Colorado 80112 of all of the obligations of Big 0 under the Franchise Agreements. This Guaranty continues until all obligations of Big 0 under the Franchise Agreement are satisfied. Big 0 is not discharged from liability if a claim by the franchisee against Big O remains outstanding. Notice of acceptance is waived. Notice of default on the part of Big 0 is not waived. This Guaranty. is binding on TBC and on its successors and assignees. TBC shalt have the right to assign its obligations under this Guaranty, Without further recourse to TBC, to any entity not affiliated with TBC which either acquires the capital stock of Big 0 from TBC or all or substantially all of the assets of Big `0, provided that such entity has a net worth in excess of $ 25 million at the time of such assignment. TBC executed this Guaranty at Palm Beach Gardens, Florida on the 15th day of April, 2004. TBC CORPORATION By: /s/ Thomas W_ Garvey Printed Name: Thomas W. Garvey Title: EVP/CFO ,, . SCHEDULE 1 TO FRANCHISE AGREEMENT BETWEEN BIG O TIRES, INC. AND C.S_B. PARTNERSHIP 1. The Premises of referred to in Section 2.01 of the Franchise Agreement shall be: 7872 Edinger Avenue Huntington Beach, CA 92647 2. Legal Description of Premises: 3. Names.(s) and address(es) of holder(s) of record fee title to Premises (the landlord): Name: HB Auto f LLC & Jurtwin Inc. Address: 3424 Via Oporto Suite 204 Newport Beach, CA 92663 Name: Address:. Name: Address: 4. Description of Trade Area: The trade area shall consist of the Metro Market Statistical Area for Orange County, CA. .x- SCHEDULE 2 OWNERSHIP VERIFICATION 1. Name(s) and addresses) of person(s) owning interest in Franchisee and percentage of said person(s) interest: Name: C.E.P. Developments, Inc. (c/o Christopher R. Phillips) Address: 27131 Calle ArrgW, Suite 1703 San:Juan._Capistrano. CA . 92675 60% Name: Phillips'& Phillips.LLC (c/o Chris Phillips) Address: 2.7131 Catle Arroyo. Suite 1703 -San' J(-Jan Cab'rstrano, CA, 92675 16.67°fo Name: Address: Name: JYB Enterprises, Inc.. (e/o Jason Berry) Address:: 5320 E.•Rural.Ridge Circle - STATE OF CALIFORNIA ) COUNTY OF ) C.E:P. Developments, Inc., a California corporation, Phillips & Phillips LLC, a California limited liability company, Four Kyles, Inc., a California corporation and JYB Enterprises, Inc., a California corporation, being first duly sworn, say that they are respectively, the Partners of C.S.B. PARTNERSHIP, the above - named general partnership and execute this instrument for and in its behalf, by authority of its partners and that they have read the foregoing Agreement and all Exhibits attached thereto. . C.S.B. PARTNERSHIP, a California general partnership By. C.E.P. Developments, Inc., a California corporation as General Partner DATED: %- 2 S- BY. ristopher R. Phillips, resident By: Four Kyle Inc., T f a Califor �a corporation as General Partner DATED: 1 -d BY: r .lid, I k -- w - 'Virgil kyle KyK III, resident Schedule 2 to Franchise Agreement Rage By. Phillips & Phillips, LLC a California limited liability company, as General Partner By. C. ili E_ Phillips, Inc., a California corporation, Managing Member DATED: 7- 2 By. stopher R. Phillip , President BT..:Chris4oph6f R.;Phillipsand Emiko J. Phillips,.Trustee or Successor Trustee of the Phillips Family Living Trust dated September 23; 1991 as amended- Member y n DATED: pBY; t6pher R. Phill" , Trustee DATED: 7"n�� . d7 By42 - Emiko:.J..'Phillip Trustee. By: JYB;Entefprises,.Ine:�;: ; a.California..corporationi.as:Generat Partner DATED: `Z 0 By: Jas Berry, Presid STATE OF ) ss- COUNTY OF On :7LI/V jy .20o V • tefo "M e az �,,peRsonally appeared -5TtiPt/ex i CL� s -known to me (or proved.tome.c5iti the bast o`fsatisfact©ry evidence) to be the pgisQp(s) w ose name(s) is/are subscnbed'to"the %dthin instrument.and acknowledged- to me that he./4he # -ey executed'the same in hisiher�ir authorized capacity, and that by hisflfe~rsignature on the instrument the person(.$), or=the entity upon behalf of which the person(s) acted, executed `-the instrument. WITN my hand a offic" I seal. W:tmy - (Seal) • " .. � _ �' . - My Comm►sslon Ekplres:R CDD 6. ' SUSAN`S: HUMPHREY Q Comm 01353456 W Q NOTARY �P�U��BM�-GAUFORNIA D 0RANGEgOUH Y,.- My Coaem. ExDMasAwd 25. 2006 STATE OF . j ) ss. COUNTY OF�4 t_ ) GOr)— ti and befdre'tKi �ks9�3: , AL"7rq��ur'', peFsonally appeared m h cT LLB. known to �r p (or proved tome on the basis.;�f satisfactory evidence) to bethe: oerson(s) whose name(s) isla€e subsaJbed to the within-instrument.andacknowledged to, me that Wshe/"yexec uted..the same:in Wlher/thek-aoth6rikedsgpacity, and:that°by�is/herItFie'irsignature on the instrument the- pgra.pn(s), or ahe` entity upon behalf of .which. the= persons) ;acted, executed the instrument. W ITNES"y hand anepbffici8l seal. My Comm i;s!on Expires: c 4=PS-:)0V f (Seal) .SUSAN S HUMPHREY • . - Q Comm: �I11353456 " D Q NOTARY PUBM - CAUFOPMA D . ORANGE COUNTY My c "M ExpMes Awl 25. 20D8 STATE OF ) ss. \ COUNTY OF ,v ) °.;k On 1. '! �$ aDo`% before,ncte„ -5a a �r�rit� ` `"► .: .- p�rtst?Aa![y appeared C� lc . W: �w.3a.i�e (or proved to me qn ilie asis;Of satisfactory evidence) to be the persons) whose_nam�(s) islaFe subscrit�ed to the within�insirument and acknowledged to me that he/sha4hey executed the same in hisli-erkheir authorized capacity,. and that;.by-hislfter{ -~'-signature ~signature on .the: ,instrument the pgrzon(s), or the .entity upon behalf .of which the persons) acted,- executed the instrument. W NES y hand and o c eat. My. Commission- Expires: - 9•s ea- I-ssSTATE OF (Seat) - t !` .',.4QSAN &-HUMPHREY comet: #135M56 D Q NOTARY YUBM - CAUFORNIA ORANGE COUNW MY Corron. E%Pt� Agri i5.2006 COUNTY OF 6ka ► 5 c r , appeared known to me (or proved to me q� tk$is of sa{l�jaictQt�r evidence,):to:be the p— n(s) whose rtaMe($-) isf subscribed to the .w►thin insttument and-ackno..Wbdged to me that.he/shmihey:executed.the-same in his/herAhat authorized-zapacity, and that" yhisffierkheir_signatore on the instrument.the. _p sQn(s) or. the entity upon behalf :of. which the person(s} act ' executed the instrument. — M353 58 EY DORANGE COUINTY . my came Ex&n AwB 25.2006 SCHEDULE 3.: GUARANTY OF FRANCHISEE'SAGREEMENT In consideration of; and as an inducement to, the execution of the foregoing Franchise Agreement by Big O Tires, Inc._ ("Big O"), each of. the undersigned hereby guarantees unto Big O that C.S.B. PARTNERSHIP, a California general partnership ("Franchisee") -Will'perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement. Big O, its successors and assigns, may from time to time, without notice to the undersigned (a) resort to the undersigned for payment of any of the liabilities of the Franchisee to Big O, whether or not Big O or its successors -have resorted to any property securing any of the.liabilities or proceeded against any of the undersigned or any party primarily or secondarily liable on any of the liabilities; (b) release or compromise any liability of the Franchisee or of any of the irdersigned hereunder or any liability of any party or parties primarily or secondarily liable on any of the -liabilities; and (c) extend, renew or credit any of the liabilities of the Franchisee to Big O for any period (whether or not longer than the original period), after, amend or exchange any of the liabilities, or give any other form of indulgence, whether under the Franchise Agreement or not. The undersigned further waives presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation, notice of acceptance hereof, notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing. Franchise Agreement and of the amount and terms thereof; and notice of all defaults, disputes or controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof, The undersigned agrees to pay all expenses paid or incurred by Big O in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if such enforcement or collection is by or through an attorney -at -law. Any waiver, extension of tima or other indulgence granted from -time to time by Big O or its agents, successors or assigns, with respect to the foregoing Franchise Agreement, shall in no way modify or amend this Guaranty, which shall be continuing, absolute, unconditional and irrevocable. If more than one person has executed this Guaranty, the term "the undersigned," as used herein shall refer to each such person, and the liability of each of the undersigned hereunder shall be joint and several and primary as sureties. IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under seal effective as of the date of the foregoing Franchise Agreement. Sign re 7--zo-a� Date CHRISTOPHER R. PHILLIPS Printed Name Schedule 3 to Franchise Agreement Page 1 Schedule 3 to Franchise Agreement Page 2 .SCHEDULE 3 GUARANTY OF FRANCHISEE'S. AGREEMENT In consideration of, and as an inducement to, the execution of the foregoing Franchise Agreement by Big O Tires, inc. ("Big O"), each of the undersigned, hereby.guarantees unto Big O that C.S.B. PARTNERSHIP, a California general partnership ("Franchisee")� •will perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement. Big O, its successors and assigns, may from time to time, without notice to the undersigned (a) - resort to the undersigned for payment -of any of the,heibili6es of the Franchisee to Big O, whether or not Big O or its successors have resorted to any property secUring any of the liabilities or proceeded against any of the undersigned or any party primarily or secondarily liable on any of the liabilities; (b) release or compromise any liability of the Franchisee or of any of,the:unders.igned hereunder or any liability of any .parry or parties primarily or secondarily liable on any of the liabilities; and (c) extend, renew or credit any of the lia_ bilities .of the Franchisee to .Big O for any period (whether or not longer than the original period), alter, amend or exchange any of the liabilities, or give any other form of indulgence, whether under the. Franchise Agreement or not. The undersigned further waives presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation, notice of acceptance hereof.; notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing Franchise Agreement and of the amount and terms thereof, and notice of all defaults, disputes or controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof. . The undersigned agrees to pay all expenses paid or incurred by Big O in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and in attempting to collect any amounts due thereunder and hereunder, including. reasonable attorneys' fees if such enforcement or collection is by or tlhioa, gh an attorney -at -law. Any waiver, extension of time or other . indulgence granted from time to time by Big O or its agents, successors or assigns, with respect to the. foregoing Franchise Agreement, shall in no way modify or amend this Guaranty, which shall be continuing, absolute, unconditional and irrevocable. If more than one person has executed this Guaranty, the term "the undersigned," as used herein shall refer to each such person, and the liability of each of the undersigned hereunder shall be joint and several and primary as sureties. . iN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under seal effective as of the date of the foregoing Franchise Agreement. Signatur`7 , d O, ` Date EMIKO J. PHILLIPS Printed Name. Schedule 3 to Franchise Agreement Page -3 Schedule 3 to Franchise Agreement Page 4 . SCHEDULE 3 GUARANTY OF. FRANCHISEE'S AGREEMENT In consideration of, and as an inducement to, the execution of the foregoing Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned hereby guarantees unto Big O that C.S.B. PARTNERSHIP, a California general partnership ("Franchisee") will. perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement. Big O, its successors and assigns,, may from time to time, without notice to the undersigned (a) resort to the undersigned for payment of anyof the liabilities_ of the Franchisee to Big O, whether or not Big O or its successors have resorted to any property securing any of the liabilities or proceeded against any ofthe- undersigned or any party primarily or secondarily liable on any of the liabilities; (b) release or compromise any liability of the Franchisee or of any of the undersigned hereunder or any liability of any party or parties primarily or secondarily liable on any of the liabilities; and (c) extend, renew or credit any of the liabilities of. the Franchisee to Big O for any period (whether or not longer than the original period), alter, amend or exchange any of the liabilities, or give any other form of indulgence, whether under the Franchise Agreement or not. _ The undersigned further waives presentment, demand, notice of dishonor, protest; nonpayment and all other notices whatsoever, including without limitation, notice of acceptance. hereof, notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing Franchise Agreement and of the amount and terms thereof; and notice of all defaults, disputesor controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof. The undersigned agrees to pay all expenses paid or incurred by Big O in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and. in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if such enforcement or collection is by or through. an attorney -at -law. Any waiver, extension of time or other indulgence granted from time to time by Big O or its agents, successors or assigns, with respect to the foregoing Franchise Agreement, shall in no way modify or amend this Guaranty; which shall be continuing, absolute, unconditional and irrevocable. If more than one person has executed this Guaranty, the term "the undersigned," as used herein shall refer to each. such person, and the liability of,each of the undersigned hereunder shall be joint and several and primary as sureties. IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under seal effective as of the date of the foregoing Franchise Agreement. Signature Date VIRGIL KYLE KYLE III Printed Name Schedule 3 to Franchise Agreement Page 5 Schedule 3 to Franchise Agreement Page 6 } SCHEDULE 3 . . GUARANTY OF FRANCHISEE'S AGREEMENT In consideration of, and as an inducement to, the execution of the foregoing Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned hereby, .guarantees unto Big O that C_S'B. PARTNERSHIP, a California general partnership ("Franchisee"), will perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement. Big O, its successors and assigns, may from time to time, without notice to the undersigned (a) resort to the undersigned for payment of any of the liabilitiesof.the, Franchisee to Big O, whether or not Big O or its successors have resorted to any property securing; any:of the liabilities or proceeded against any of the undersigned or any party primarily or secondarily liable on any of the liabilities; (b) release or compromise any liability of the Franchisee or of any of the undersigned hereunder or any liability of any party or parties primarily or secondarily liable on any. of .the liabilities; and (c) extend, renew or credit any of the liabilities of the Franchisee to Big O for any period (whether or not longer than the original period), alter, amend'or exchange any of the liabilities, or give any other form of indulgence, whether under the Franchise Agreement or not. The undersigned further waives presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation, notice of acceptance hereof; notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing Franchise Agreement and.of_the amount and terms thereof; and notice of all defaults, disputes or controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof. The undersigned agrees to pay all expenses paid or incurred by Big O in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if such enforcement or collection Is by or through an attorney -at -law. Any waiver, extension of time or other indulgence. granted from time to time by Big O or its agents, successors or assigns, with respect to the foregoing Franchise Agreement, shall in no way modify or amend this Guaranty, which shall be continuing, absolute, unconditional and irrevocable. If more than one person has executed this Guaranty, the term "the. undersigned," as used herein shall refer to each such person, and the liability of each of the undersigned hereunder shall be joint and several and primary as sureties. IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under seal effective as .of the date of the foregoing Franchise Agreement. Signature r�r 7- Date DIANE R. KYLE Printed Name Schedule 3 to Franchise Agreement Page 7 Schedule 3 to Franchise Agreerrrent Page 8 SCHEDULE .3 GUARANTY OF FRANCHISEE'S AGREEMENT In consideration of, and as an inducement to, the execution of the foregoing Franchise Agreement by Big O Tires, Inc. ("Big O"), each of.the undersigned fier`eby guarantees unto Big-0-that C.S.B. . PARTNERSHIP, a California general partnership ("Franchisee"}; -will perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement. Big O, its. successors and assigns, may from tune to time, without notice to the undersigned (a) resort to the undersigned for payment of any of the liabilities of the Franchisee to Big O, whether or not Big O or its successors_ have resorted to any -property seeuririg.any of: the liabilities or proceeded against any of the undersigned or any party primarily or secondarily liable on anyof the liabilities; (b) release or compromise any liability of the Franchisee or of any of'the undersigned hereunder or any liability of any party or parties primarily or secondarily liable on any of the liabilities; and (c) extend; renew or credit any of the liabilities of the Franchisee to Big O for any period (whether ornot longer than the original period), alter, amend or exchange any of the liabilities, or give any other form of indulgence, whether under the Franchise Agreement -or not. — The undersigned further waives presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation, notice of acceptance hereof; notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing Franchise Agreement and of the amount and terms thereof, and notice of all defaults, disputes or . controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof. The undersigned agrees to pay all expenses paid or incurred by Big Orin attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if such enforcement or collection is by or through an attorney -at -law. Any waiver, extension of time or other indulgence granted from time to time by Big O or its agents, successors or assigns, with respect to the foregoing Franchise Agreement, shall in no way modify or amend this Guaranty, which shall be continuing, absolute, unconditional and irrevocable. if more than one person has executed this Guaranty, the term "the undersigned," as used herein shall refer to each such person, and the liability of each of the undersigned hereunder shall be joint and several and primary as sureties. IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under seal effective as of the date of the foregoing Franchise Agreement_ Sig ure Date JASON Y. BERRY Printed Name Schedule 3 to Franchise Agreement Page 9 . � r Schedule 3 to Franchise Agreement Page 10 SCHEDULE 3 . GUARANTY OF FRANCHISEE'S AGREEMENT In consideration of, and as an inducement to, the execution of the foregoing Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned.hereby:guarantees unto Big O that C.S.B. PARTNERSHIP, a California general partnership ("Franchisee"),twill perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement. Big O, its successors and assigns, may from time to time, without notice to.the undersigned (a) resort to the undersigned for payment of any of the liabilities of :the Franchisee to Big O, whether or not Big O or its successors have resorted to any property securing -any of the liabilities or proceeded against any -of the undersigned or any party primarily or secondarily liable on any of the liabilities; (b) release or compromise any liability of the Franchisee or of any of theeundersigned hereunder -or any liability of any . party or parties primarily or secondarily liable on any of the; liabilities; and (c) extend, renew or credit any of the liabilities of the Franchisee to Big O for any period (whether or not longer than the original period), alter, amend or exchange any .of the liabilities, or give any. other form of indulgence, whether under the Franchise Agreement -or riot. — The undersigned further waives presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation, notice of acceptance hereof; notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing Franchise Agreement and of the amount and terms thereof, and notice of all defaults, disputes or controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof. The undersigned agrees to pay all expenses paid or incurred by Big O in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if .such enforcement or collection is by or through an attorney-at-iaw. Any waiver, extension of time or other indulgence granted from time to time by Big O or its agents, successors or assigns, with respect to the foregoing Franchise Agreement, shall in no way modify or amend this Guaranty, which shall be continuing, absolute, unconditional and.irrevocable. If more than one person has executed this Guaranty, the term "the undersigned," as used herein shall refer to each such person, and the liability of each of the undersigned hereunder shall be joint and several and primary as sureties. IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty under seal effective as of the date of the foregoing Franchise Agreement_ Sig7re PM14104 Date— LAURA BERRY Printed Name Schedule 3 to Franchise Agreement Page 11 Schedule 3 to Franchise Agreement .. Page 12 SCHEDULE 4 LEASE RIDER AND MODIFICATION . THIS AGREEMENT is made effective this 9st dayof August, 2004 by and betweerr HB Auto l; LLC ("Landlord"), C.S.B_ PARTNERSHIP ('Tenant"), and Big O Tires, Inc., its affiliates, successors and assigns ("Big Q') WHEREAS, Landlord leases or will lease certain premises to Tenant at 7872 Edinger Avenue, Huntington Beach, CA 92647 ("Premises") under that certain lease agreement dated April 19, 2004 between Landlord and Tenant ("Lease"); and WHEREAS, Tenant will operate a Bag O:Tire Store at such Premises under a Franchise Agreement ("Franchise -Agreement") between Tenant and Big. O; and WHEREAS, the parties hereto desire to provide Big O with certain rights in the event of default under the Lease, Franchise Agreement, or other:franehise.agreements between Tenant and Big:,O, if any, NOW, THEREFORE, inconsideration of the sum.: of one dollar, .($:1:00),.,in, hand paid by.:Bjgl 0.. to Landlord and to Tenant, and other good and sufficient:considerption; the: receipt -and sufficiency-of:which are hereby acknowledged, the parties hereto agree as follows: 1. No act, failure to act, event, condition, non-payment or other occurrence ("Event") shall constitute a breach or .default under. the Leaseso as, to allow to Landlord any right of acceleration of obligations thereunder, termination, cancellation or rescission: (a) if the Event.is the non-payment,of rent,. urfless'such Event js;not cured within ten.(10) days., after Notice of Default (as hereinafter defined) has been'rece'ived by Big O; (b) if the Event is anything other than the non-payment of rent, unless such Event is not cured wiVn hventy-five.(25) days after Notice of befautt (as hereinafter defined) has been received by Big 0, provided; however, if the Event is of such nature that it cannot reasonably be cured within such twenty-five.(25) day period, then, in that case such twenty-five (25) day period shall be extended to a period of such -length as is reasonably necessary to cure such Event, provided, however, such period shall be extended.only so long as Tenant and/or Big O diligently pursues the cure of such Event. 2. Landlord agrees to accept from Big O any payment or performance required under.the Lease. Nothing herein shall be construed as requiring.Big 0 to make any payments or perform any obligation under the Lease. 3. As used herein, Notice of Default means written, notice mailed by registered or certified mail or overnight courier specifying the Event claimed and specifically describing, in each instance of a claimed Event, the particular Event and the cure Landlord requires, such Notice of Default to be mailed to Big, O at: Big O Tires, inc. 12650 East Briarwood Avenue,' Suite 2-D Centennial, Colorado 80112 Attention: Vice President of Real Estate Development 4. In the event Landlord claims that an Event has occurred, or in the event Big O notifies Landlord in writing that Big O is exercising a right to take over possession of the Premises, then, at Big O's option, Landlord shall accept Big O as substitute tenant under the Lease and will cooperate with Big O in turning actual, immediate possession of the Premises over to Big O. in such case, the Lease shall remain in full force and effect, but with Big 0 as the tenant thereunder. Big O's option, hereinabove granted, may be exercised only if Big O agrees to assume the obligations of the Tenant to Landlord under the Lease as of the date Big O or its affiliate or successor is given actual.possession of the Premises. 5. Landlord agrees that Big O, or its affiliate or successor may sublet or assign the Premises to a. new. Big O Franchisee on the same terms and. conditions as are contained in the Lease. . 6. Tenant agrees that if Landlord claims that an Event has occurred, or. if any material breach occurs under any Franchise Agreement between Tenant and Big O (whether for the Premises or not), then, Big O shall have the right to. (a) immediate and actual possession of the Premises, and all equipment and.inventory therein, which such possession Tenant agrees to give peaceably, and which may be otherwise obtained by Big O by warrant, 'injuxiction, ternporary'resfraWng order, `summary.process or such other immediate legal, summary or equitable proceeding or: action as Big O may choose. Tenant hereby waives any right to a jury in any such proceeding or action. (b) become the Tenant under the Lease to the exclusion `of the.Tenarit_ 7. Tenant agrees that any -default under the Lease shall constitute a material breach' under all Franchise Agreements between Tenant and Big O, or?°its affiliates oesuccessors: 8. Tenant and Landlord understand that Big O is entering into or has entered into -a Franchise Agreement with Tenant -for a Big 0 TireStore at the Premises in reliance on the:agreements of Tenant and Landlord as herein contained and that Big O; in this instance; would not have otherwise_ entered I-nto such Franchise Agreement. IN WITNESS WHEREOF, the parties hereto' hav-e'duly execute. and delivered this agreement as of the date first above -listed. (CORPORATE SEAL) BIG O TIRES, INC. By_---� G�-, Name: Joh . Hyduke Title: Senior Vice President — Franchise Development (CORPORATE SEAL) SCHEDULE 5 RIDER FOR EXISTING FRANCHISEES EXECUTING THE FRANCHISE AGREEMENT PRIOR TO THE EXPIRATION OF THEIR PRE-EXISTING FRANCHISE AGREEMENT Franchisee is the owner of a Store that is the subject of a franchise agreement that has not yet expired. Franchisee's execution of the attached Franchise Agreement is subject to the following: 1. Unless otherwise provided herein, the attached Franchise Agreement shall expire on the tenth anniversary of the Effective Date, to wit: 2. Prior to the expiration of the Franchisee's present franchise agreement, to wit the monthly continuing services fees (or their functional equivalent) provided in the present franchise agreement shall continue to be the only such fees due to Big O. In all other respects the, terms of the attached Franchise Agreement. shall be applicable as of the Effective. Date of this Franchise Agreement. In Witness Whereof, the parties have set forth their signature below. BIG O TIRES, INC. By - Date: Title: Attest: Title: (Affix Corporate Seal) FRANCHISEE: By: Date: Home Address: Home Phone Number: Office Address: Office Phone Number. SCHEDULE 6 Big O is the owner of the following trademarks and service marks .in the United States: Trademark, Service Mark, Trade Where Registration Registration_ Name or Logotype Registered Number Date A Reputation You Can Ride On Principal 1,845,544 07/19/94 Aspen Principal 1,508,041 10/11/88 Big Foot Principal 1,904,955 07/11/95 Big Foot 60 Principal 1,102,058 09/12/78 Big Foot 70 Principal 1,102,059 09/12/78 Big Haul Principal 1,018,800 08/26/75 Big Lift Principal 2,520,443 12/18/01 Big O Principal 994,466 10/01/74 Big-O Principal 993,415 09/24/74 Big O Tires & design Principal 1,61.1,160 08/28/90 Big O Tires Principal 2,411,926 12,12100 Big Sur Principal 1,219,035 12/07/82 Cost U Less Big O Tires'& design Principal 1,952,457 01/30/96 Dare to Compare Principal "2,492,236 09/25/01 Design of Big Foot Principal 2,314,775 02/01/00 Extra Care & design Principal 1,417,730 11/18/86 Hydro-Trac Principal 2,059,554 05/06/97 Legacy Principal 1,393,967 05/20/86 Pathmax Principal 2,281,419 09/28/99 Procomp High Performance Principal 1,842,854 07/05/94 Wheels & design Sun -Valley Principal 871,318 06/17/69 www.BigOTires.com & design Principal 2,514,975 12/04/01 Schedule 6: to Franchise Agreement _ , Page 1. SCHEDULE 7 CONVERTER RIDER AMENDMENT TO BIG O FRANCHISE AGREEMENT (CONVERSION) BiG O TIRES, INC. ("Big O") and ("Franchisee") entered into a certain Big O Franchise Agreement ("Agreement") on and desire to supplement and amend certain terms and conditions of such Agreement in consideration of Franchisee's conversion of a currently. operating tire store to a Big O Store. The parties therefore agree as follows 1. The following provisions are added at the end of the definition of "Gross Sales" in Section 1 of the Agreement: Gross Sales do include revenues from the sale of all Nbn-Standard Services. 2. The following sentence is added to the definition of "Products and Services" in Section 1 of the Agreement: Notwithstanding the foregoing, "Products and Services" do not include Non -Standard Services. 3.. The following provision is added to Section 1 after the definition of National Advertising Program: Non -Standard Services — See the definition in Section 14.02 of this Agreement. 4. The following paragraphs are hereby added to Section 6.03 of the Agreement:. Subject to Section 14.02 of the Agreement hereof, but notwithstanding;anyother provision herein to the contrary; Franchisee's obligation to comply with Big O's standards and specifications as are set forth in the Manual shall be phased in for a period of six (t?) months.from the Commencement. Nte..of this Agreement in accordance with Schedule A.- attached_ hereto° and by -this _reference incorporated .herein. Franchisee will be permitted to'use Big O's LicensedWarks in its. signage; advertising and otherwise; in conjunction, With any other previous signage of" entifying symbols or names for sixty(60) days (or such longer time.as approved by Big O) from the Commencement Date of this Agreement, in a manner which shall be approved by Big O; which approval shall not be unreasonably withheld. Upon expiration of such sixty-day or other approved period, Franchisee must use Big O's signage exclusively and remove all other previous signage. If Big O provides assistance to Franchisee for the purchase ofsignage ordisplays (byway of matching funds or other financial. contribution) at any one or more -Big O Stores operated by Franchisee, then, Big O, at its discretion, may retain title to such. signage and displays.. At BigO's request, Franchisee will sign such documents, will take such other actions as reasonably requested by Big O to document and protect Big O's title to the same, and will not take any actions contrary to such title. Franchisee also authorizes Big O to sign and file all financing statements, amendments, continuation statements and otherdocuments, without Franchisee's signature, to protect Big Us title to such signage and displays. if Franchisee remains a Big O franchisee at the Big O Store(s.) where such signs and displays are located, in good standing ten years after such assistance is provided and has the contractual right to continue as a Big O Franchisee at such Big O Store or Big 0 Stores: for not less than five additional years, then Big O shall transfer to Franchisee title to such.signs and ' displays at each Big O Store meeting such qualifications within a reasonable time after the end of such ten year period. Notwithstanding the foregoing, if Big O or one of its Affiliates sells or leases signs and/or related equipment .to you pursuant to a sign agreement or lease agreement, the Schedule 7. to Franchise Agreement Page 1 n foregoing paragraph will not be applicable and the parties' rights and obligations with regard to such signs and related equipment shall be governed by such sign agreement or lease agreement. 5. Section 6.05 of the Agreement is deleted in its entirety and the following is inserted in its place: 6.05 Commencement of Business. The Big 0 Store shall be considered to have commenced operation as of the Commencement Date of this Agreement. All modifications required to bring the Premises into compliance with the standards and specifications of Big O must be completed within six (6) months of the Commencement Date. 6: Section 7.01(a) of the Agreement is hereby deleted in its entirety and the following is inserted. in its. place: (a) Franchisee acknowledges that Big O is under no obligation to provide site selection assistance and Big O does not guarantee the success or profitability of the Franchisee's current site in any. manner whatsoever. If Franchisee leases . the Premises upon which the Store is to be operated, Franchisee agrees to use its best efforts to negotiate with its landlord for execution of a conditional lease assignment in a form which_ is the same as or similar- to the -.one found on Schedule 4 of the Agreement. 7. The following language shall be added to Section 7.01(b) of the Agreement: Big O will. provide Franchisee with the services of a store opening specialist to provide assessment and guidance for modification of the interior and exterior of Franchisee's Premises,_ if applicable, but makes no representations. or guarantees regarding the suitability of such assessment or guidance. 8. Section 7.01(c) of the Agreement is amended.by adding the following sentence immediately after the third sentence of Section 7 01.(c): Notwithstanding the foregoing, at Big O's discretion, (1) Big O will provide -such training as it deems appropriate. (in addition to or in replacement of any part of the Initial Training Program) at ornear the Franchisee's site Wthout charging an additional training fee or additional.transportation;, lodging or living; expenses to the Franchisee; or (ii) Big O will require Franchisee's Manager andtor Operator to attend training•at the training sites designated.by Big O for which Big O will not charge atraining fee for training at Big O-s national training center but. may charge a fee for field training and cert�cation, but, in either case; Franchisee shall pay for its owr> transportation, lodging and living expenses which are incurred while attending the Initial Training Program.. 9. The following language shall be added as Section 7.03 of the Agreement: 7.03 Other Discretionary Assistance. Big O may, in its, discretion, offer further assistance to the Franchisee in accordance with Big Us Conversion programs as in effect from time to time or as otherwise negotiated by Big O and the. Franchisee. 10. The following language shall be added to Section 8.01-of the Agreement: Notwithstanding the foregoing provisions of this Section 8.01, Big O will waive all but $1,500.00 of the initial franchise fee. 11. The second sentence of Section 14.02 of this Agreement is deleted in its entirety and the following is inserted in its place: Franchisee may not sell any product or service that has not been selected, designated or approved by Big O except. that during the four (4) year period starting on the Commencement Date of this Schedule 7 to Franchise Agreement Page 2 Agreement, Franchisee may provide services (herein referred to as "Non -Standard Services") that meet both: of the following: (a) were provided by it at the Premises immediately prior to the Commencement Date of this Agreement, and (b) are listed on Schedule Gattached to. this Agreement and incorporated by reference herein. 12. The following language shall be added as Section 14.06 of the Agreement: 14.06 Non -Standard Services. Franchisee may not use the Licensed Marks for or. in connection with the Non -Standard Services, except that the same may be offered from the Premises to the extent permitted under Section 14.02 of this Agreement. If Franchisee provides any Non - Standard Services, it will provide conspicuous notice to the public by signage, disclaimers on: invoices and/or other means that such Non -Standard Services are not provided by nor affiliated with Big O. Franchisee acknowledges that Big O does not provide training, supervision or support in connection with the Non -Standard Services. Franchisee shalt conduct the Nor} -Standard Services in compliance with all applicable laws, rules and rpOulations and in a safe and appropriate manner. Franchisee shall immediately cease or modify any Non -Standard Services that present a threat to the health or safety of the public or any individual and/or that could cause the occurrence of any damages. Franchisee hereby agrees to indemnify and hold Big O harmless from and against any and allclaims or liabilities arising out of or in connection with Franchisee's offer, sale or provision. of Non -Standard Services. 13. The following language shall be added as Section 15.05 of the Agreement: 15.05 SurpW Bond/ Letter of Credit. Franchisee shall, at Big O's election, have obtained prior to the Commitment Date, a surety bond or letter of credit in an amount not less than $10,000.(or such other amount as designated by. Big O from time to time) for each Big O Store of Franchisee issued by a surety company or bank reasonably acceptable to Big O in favor of Big O or, at Big O's election, to the Local Group designated by Big O, which surety -bond or letter of credit may not be revoked, terminated or modified until two years (or such other time period as designated by Big O from time to time) after the Commencement Date. Such bond or letter of credit shalt be payable to the order of Big O or the Local Group, as the case may be, for any nonpayment by the Franchisee of contributions due to the National Advertising Program or the Local Fund pursuant to this Franchise Agreement. 14. Section 17.04 of the -Agreement is hereby deleted in its entirety. 15. Section .19.03 of the Agreement is hereby deleted in its entirety and the following language is inserted in its place: 19.03 Termination by Franchisee. (a) Franchisee may terminate this Agreement as of the thirdanniversary of the Commencement Date by giving Big O.written notice of its decision to do so at least 60 days prior to the effective date of such termination. (b) Otherwise, Franchisee may terminate this Agreement.only if Big O has committed a material breach of any of Big O's obligations under this Agreement and has failed to cure such breach within thirty (30) days after Franchisee has given written notice to Big O of such breach. 16. Franchisee agrees to convert all other tire stores owned or controlled by it into Big O Stores, in the manner prescribed in Schedule B, attached hereto and by this reference incorporated herein. Schedule 7 to Franchise Agreement Page 3 Schedule 7 to Franchise.Agreement - Page 4 Schedule A Phase -in Requirements Schedule B Phase -In of Other Stores Schedule C Prior Services Note: Revenues from these services are included in Gross Safes unless otherwise indicated as excluded. Schedule 7 to Franchise_ Agreement Page 5. 4w THIS PAGE INTENTIONALLY LEFT BLANK Schedule 7 to Franchise Agreement Page 6 .. SCHEDULE 8 FARM CLASS RIDER Big O TIRES, INC. ("Big O") and ("Franchisee") entered into a certain Big O Franchise Agreement ("Agreement") on and desire to supplement and amend certain terms and conditions of such Agreement in consideration of the mutual promises contained in this Farm Class Rider. The parties therefore agree as follows: 1. The capitalized terms used in this Farm Class Rider have the meanings set forth in the Agreement and, in addition, the following capitalized words shall have the following meanings when used in this Farm Class Rider: Farm Class Store - A Store with twenty-five percent (25%) or more of its average Gross Sales during any twelve (12) month period arising directly from the saie.of Farm Class Tires. Farm Class Tires - Farm tires, off road tires, large double bead truck tires and similar select tires, as may be more specifically defined from time to time, by Big O. 2. Franchisee represents that it reasonably anticipates that at least twenty-five percent (25%) of its Store's Gross Sales on an annual basis will be: derived directly from the sale of Farm Class Tires. In reliance on Franchisee's representations, and its consideration for Franchisee to become or remain a Big O franchisee, Big.O has offered Franchisee the opportunity to execute this Farm Class Rider. 3. So long as at least twenty-five percent (25%) of Franchisee's Gross Sales on an annual basis are derived directlyfrom Farm Class Tires, Big O agrees to exercise its commercially reasonable efforts to provide Franchisee with access to a supply of Farm Class Tires.. Franchisee acknowledges that production and distribution: problems occasionally cause supplies to be limited, and that so long as Big O acts in good faith and in a -commercially reasonble and lawiful manner to ottain access to Farm Ciass Tires that it shall be deemed in compliance with its obligations hereunder. 4. if Big O fails to corriply'with its obligations pursuant to Section 3 of this Farm Class Rider and -cannot or will not provide Franchisee with access to Farm Class Tires for sixty (60) days following written notice of such failure from Franchisee, as its sole and exclusive remedy, Franchisee shall be relieved of its obligation to pay Big O monthly royalty fees on that portion of its Gross Sates derived directly from the sale of Farm Class Tires until Big O begins or resumes supplying Franchisee with access to a reasonably sufficient supply of Farm Class Tires. Any services provided by Franchisee in connection with the sale of Farm Class Tires, and any other Products and Services sold by Franchisee in a transaction involving the sale of Farm Class Tires, shall be included in the portion of Franchisee's Gross Sales upon which monthly royalty fees are payable, even when and if Franchisee is relieved of its obligation to pay Big O royalty fees on that portion of its Gross Sales derived directly from the sale of.Farm Class Tires. Big O may require Franchisee to provide it with documentation to support any exclusion claimed by Franchisee. 5. Big O may terminate Franchisee's rights under this Farm Class Rider without in anyway affecting Franchisee's obligations under the Franchise Agreement if the Store's sales of Farm Class Tires during any twelve (12) month period have been less than twenty-five percent (25°%) of its Gross Sales. Schedule.8-to Franchise Agreement . Page 1 . :.. IN WITNESS WHEREOF, the parties have set forth their signatures below. = FRANCHISEE: By:_ Date: Schedule 8 to Frarichise Agteement Page 2 EXHIBIT B AGENCY/LANDLORD PROPERTY ACQUISITION AGREEMENT 001219.0001 \844054.7 OWNER(S): APN: ESCROW NO.: TITLE REPORT NO.: HB Auto I, LLC 142-081-028 AGREEMENT AND ESCROW INSTRUCTIONS FOR PURCHASE AND SALE OF REAL PROPERTY THIS AGREEMENT AND ESCROW INSTRUCTIONS FOR PURCHASE AND SALE OF REAL PROPERTY (this "Agreement") is entered into as of May Q�, 2008, ("Reference Date") by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic ("Buyer"), and HB AUTO I LLC, a California limited liability company ("Seller"), for Buyer's acquisition of certain real property owned by Seller as hereinafter set forth and on the basis of the following facts, intentions and understandings: RECITALS A. Seller is the present owner of that certain improved real property of approximately 22,521 square feet located at 7872 Edinger Avenue in Huntington Beach, California and within the boundaries of the Subarea No.1 of the Huntington Beach Merged Redevelopment Project Area ("Project Area"). The Property is generally described as Assessor's Parcel No. 142-081- 028, and more particularly described in Exhibit A (the "Property"). The Property is improved with a commercial building, which is leased to C.S.B. Partnership ("Tenant"), who operates a Big O Tires franchise on the Property. B. Buyer owns five parcels adjacent to the Property and desires to acquire the Property as a necessary and essential component to the redevelopment of the Buyer's parcels consistent with the goals and objectives of the Redevelopment Plan for the Project Area. Seller desires to convey fee simple absolute title in the Property to Buyer in accordance with the terms and conditions of this Agreement, and Buyer desires to acquire the Property in accordance with this Agreement. C. Buyer and Seller acknowledge and agree that the purchase and sale of the Property is being undertaken under threat of condemnation by Buyer, and if not for such threat of condemnation, Seller would not agree to sell the Property to Buyer on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, for good and valuable consideration, receipt of which is acknowledged, the parties agree as follows: 1. Purchase and Sale. Upon the terms and conditions contained herein, Buyer hereby agrees to purchase all of Seller's right, title and interest in and to the Property from Seller and Seller agrees to sell, assign and convey all of Seller's right, title and interest in and to the Property to Buyer. 2. Purchase Price; Deposits. The purchase price for the Property shall be Three Million Five Hundred Thousand Dollars ($3,500,000) ("Purchase Price"). On or before May 9, 2008, Buyer will deposit into Escrow a refundable deposit in the amount of Fifty Thousand Dollars ($50,000) ("Initial Deposit"). On the next business day immediately following the earlier to occur of (i) the expiration of the Approval Period (as defined in Section 10.2 below) or (ii) the completion by Buyer of its due diligence on the Property, Buyer shall deposit into Escrow an additional refundable deposit in the amount of Three Hundred Fifty Thousand Dollars ($350,000) ("Second Deposit"). The Initial Deposit and the Second Deposit shall be collectively referred to as the "Deposits." On the next business day immediately following the expiration of the Approval Period, Seventy Five Thousand Dollars ($75,000) of the Deposits shall be released to Seller by Escrow Agent and shall become nonrefundable to Buyer except in the event of a default by Seller. The Deposits shall be applied to the Purchase Price upon the Close of Escrow. 3. Escrow. 3.1 Opening of Escrow. Provided that this Agreement has been executed by Buyer, the parties shall open escrow ("Escrow") on May 9, 2008 with Investors Title Company (the "Escrow Agent") located at 4667 MacArthur Boulevard, Suite 150, Newport Beach, California, Attention: Mickey Vandenberg. 3.2 Deliveries. Within three (3) business days of the execution of this Agreement by Buyer, Seller shall deliver to Buyer complete and accurate copies of (i) all reports, surveys and data relating to the environmental, geological, soil and/or physical condition of the Property and/or the improvements thereon in the possession of Seller or its agents, which shall be listed in Exhibit E hereto (collectively, the "Due Diligence Reports"), and (ii) all leases, amendments, personal guaranties and other agreements related to the occupation of the Property by Tenant or any other party possessing rights with respect to the Property; and (iii) a schedule or schedules of rent paid and due, and all security or other deposits received or due, from any tenant of the Property. Seller makes no representation or warranty whatsoever as to the accuracy or completeness of the Due Diligence Reports, except that Seller warrants that it has no knowledge that such reports contain intentional misrepresentation or intentionally omit material information. 3.3 Escrow Fees, Charges and Costs. Seller shall pay: (i) the cost of any documentary transfer taxes on the Grant Deed; and (ii) fees for recording the Grant Deed. b. Buyer shall pay: (i) Escrow Agent's fee; (ii) fees for recording and filing any documents required to close escrow other than the Grant Deed; (iii) the cost of a premium for a California Land Title Association Standard Policy of title insurance insuring the Property in the amount of the Purchase Price; and (iv) the costs of any extended coverage, American Land Title Association insurance coverage, including any land survey costs, or other title policy in excess of the premium for the standard coverage (CLTA) policy. Purchase Sale Agt 7872 Edinger FiNAL.doc 2 4. Close of Escrow; Extensions. 4.1 Close of Escrow. Close of Escrow shall occur on or before June 19, 2008 (the "Outside Date"). If the Outside Date falls on a holiday or weekend, the Outside Date shall be the following business day or Monday. The "Close of Escrow" shall mean the time and day the Grant Deed is filed for record with the Orange County Recorder. The "Closing Date" shall mean the day on which the Close of Escrow occurs. 4.2 Extension of Outside Date. Upon written instruction by the Agency to Escrow Agent and deposit by the Agency of Twenty Five Thousand Dollars ($25,000) (the "Extension Deposit") into Escrow on or prior to the Outside Date, the Outside Date shall be extended for fifteen (15) calendar days (the "Extension Date"). In such event, Escrow Agent shall release the Extension Deposit to Buyer on the next business day immediately following the Outside Date. Upon such release, the Extension Deposit shall become nonrefundable to Buyer except in the event of a default by Seller. The Extension Deposit shall be applied to the Purchase Price upon the Close of Escrow. The Close of Escrow shall occur on the Extension Date. If the Extension Date falls on a holiday or weekend, the Extension Date shall be the following business day or Monday. 5. Conditions of Close of Escrow. The Close of Escrow is conditioned upon the satisfaction of the following terms and conditions: 5.1 Seller's Conditions to Close of Escrow. The Seller, at its election, shall not be obligated to close escrow if (i) Buyer is in material default of this Agreement; (ii) any of Buyer's representations and warranties contained herein shall be proven materially untrue; (iii) Buyer shall not have deposited the Purchase Price and Buyers share of costs described in Section 3.2(b) herein with Escrow Agent; or (iv) Buyer shall not have deposited with Escrow Agent any document reasonably required of it by Escrow Agent to close the Escrow. 5.2 Buyer's Conditions to Close of Escrow. The Buyer, at its election, shall not be obligated to close escrow if- (i) Seller is in material default of this Agreement; (ii) any of Seller's representations and warranties contained herein shall be proven materially untrue; (iii) if, after review of a preliminary title report issued by Title Company (as hereinafter defined) (the "Title Report") or after issuance of the Pro Forma Title Insurance Policy, (A) Buyer determines that the condition of title is not as represented herein by Seller, or (B) Investor's Title Company ("Title Company"), upon payment of its regularly scheduled Purchase Sale Aet 7872 Edinger FINAL.doc 3 premium, has not agreed to issue the ALTA Standard Coverage Owner's Title Insurance Policy ("Title Policy") for the Property underwritten by First American Title Company upon the Close of Escrow, in the amount of the Purchase Price and in the form specified in the Pro Forma Title Insurance Policy (as hereinafter defined) showing title to the Property vested of record in the name of the Buyer in fee simple subject only to such exceptions as approved by Buyer in writing prior to the Approval Date; (iv) Buyer does not approve the condition of the Property after performing the Buyer's Due Diligence (as hereinafter defined) prior to the Approval Date; (v) in the course of performing the Buyer's Due Diligence, Buyer determines that the cost of Remediation is too high and Buyer and Seller are unable to agree on a purchase price mutually acceptable to the parties prior to the Approval Date; (vi) Tenant does not permit Buyer access to the Property for purposes of conducting the Buyer's Due Diligence; (vii) Seller has not executed and delivered to Escrow the Grant Deed, FIRPTA Certificate or Assignment and Assumption Agreement; (viii) despite consistent good faith efforts by Buyer, Tenant and Buyer have been unable to negotiate and execute a mutually acceptable Acquisition Agreement; (ix) the condition of the Property is not similar in all material respects to the condition of the Property as of the completion of the Buyer's Due Diligence; (x) Seller has not delivered releases executed by Jurtwin, Inc., a California corporation, Michael Todd Carson, and Rosemary Kathleen Carson, in a form mutually acceptable to Buyer and Seller; (xi) Seller has not delivered an acknowledgment of subordination in favor of the Agency (in such form as is reasonably acceptable to the Agency) executed by the Tenant; (xii) Seller has not delivered a Tenant's Estoppel Certificate (in the form attached to the Standard Lease Agreement between Seller, Tenant and Jurtwin, Inc. dated April 19, 2004 (the "Lease")), executed by the Tenant; (xiii) Seller has not delivered a Landlord's Estoppel Certificate (in the form attached to the Lease), executed by the Seller; or (xiv) Buyer's board has not approved the Acquisition Agreement between Tenant and Buyer, or Tenant's franchisor has not signed such Acquisition Agreement. 6. Seller's Obligations. Seller shall deliver to Escrow on or before the expiration of the Approval Period, the following: A. An executed and recordable grant deed sufficient to convey title to Buyer (the "Grant Deed") in substantially the form set forth in Exhibit B subject to no exceptions; and Purchase Sale Agt 7872 Edinger FINAL.doc 4 B. A certification ("FIRPTA Certificate") duly executed by each party comprising Seller under penalty of perjury in substantially the form of Exhibit C, setting forth Sellers' addresses and social security numbers, and certifying that none of the parties comprising Seller is a "foreign person" for purposes of Section 1445 (as may be amended) of the Internal Revenue Code of 1986, as amended, and any regulation promulgated thereunder and Sellers are resident taxpayers in the State of California for purposes of Revenue and Taxation Code Sections 18805 and 26131. C. An executed assignment and assumption agreement for the Lease substantially in the form of Exhibit F (the "Assignment and Assumption Agreement"). D. Releases executed by Jurtwin, Inc., a California corporation, Michael Todd Carson, and Rosemary Kathleen Carson, in a form mutually acceptable to Buyer and Seller; E. An acknowledgment of subordination in favor of the Agency (in such form as is reasonably acceptable to the Agency) executed by the Tenant; F. A Tenant's Estoppel Certificate (in the form attached to the Lease), executed by the Tenant; G. A Landlord's Estoppel Certificate (in the form attached to the Lease), executed by the Seller; and H. A pro forma ALTA Standard Coverage Owner's Title Insurance Policy for the Property, underwritten by First American Title Company (the "Pro Forma Title Insurance Policy") with such endorsements as may be requested by Agency, in such form as is satisfactory to Agency, issuable without condition upon payment of Title Company's regularly scheduled premium, in the amount of the Purchase Price showing title to the Property vested of record in the name of the Buyer in fee simple subject only to such exceptions as approved by Buyer in writing. 7. Buyer's Obligations. Buyer shall deliver to Escrow on or before noon, one business day before the anticipated Close of Escrow the following: A. The remaining amounts due to make up the Purchase Price; and B. The Certificate of Acceptance (Attachment No. 2 to Exhibit B and any other documents reasonably required of it by the Escrow Agent in order to close Escrow. 8. Representations and Warranties. The representations and warranties set forth herein shall survive the Close of Escrow for a period of eighteen (18) months. 8.1 Representations and Warranties of Seller. Buyer represents that except for the representations, warranties and covenants of Seller contained in this Section 8.1, it has relied and shall rely solely upon (i) its own expertise and that of Buyer's consultants in Purchase Sale Agt 7872 Edinger FINAL.doc 5 purchasing the Property, and (ii) Buyer's own knowledge of the Property based on its investigations and inspections of the Property. Buyer has conducted, or by the Close of Escrow will conduct, such inspections and investigations of the Property as Buyer deemed or shall deem necessary, including, but not limited to, the physical and environmental conditions of the Property and shall rely upon same. Except for the Seller's representations, warranties and covenants and as may be expressly provided in this Section 8.1, upon Closing, Buyer shall assume the risk that adverse matters, including, but not limited to, adverse physical and environmental conditions, may not have been revealed by Buyer's inspections and investigations. Buyer acknowledges and agrees that except for the representations and warranties of Seller in this Section 8.1, upon Closing, Seller shall sell and convey to Buyer and Buyer shall accept the Property "as is, where is," with all faults and defects (latent and apparent). Except for the representations and warranties of Seller in this Section 8.1 and in any documents executed and delivered by Seller at Closing pursuant to this Agreement, Buyer further acknowledges and agrees that there are no oral agreements, warranties or representations, collateral to or affecting the Property by Seller or any agent, employee or contractor of Seller or any third party. Seller is not liable or bound in any manner by any oral or written statements, representations, or information pertaining to the Property furnished by Seller, or any real estate broker, contractor, agent, employee, servant or other person, unless the same are specifically set forth in this agreement. Buyer acknowledges that the Purchase Price reflects the "as is" nature of this sale and any faults, liabilities, defects or other adverse matters that may be associated with the Property. Buyer has fully reviewed the disclaimers and waivers set forth in this agreement with its counsel and understands the significance and effect thereof. Seller represents and warrants to Buyer as follows: a. Authority. Seller has full right, power and lawful authority to grant, sell and convey the Property as provided herein; and b. Leases. Seller has delivered to Buyer a true and accurate copy of the rental agreement/lease and all related agreements between Seller and Tenant and except for Tenant, there is no other tenant or persons who have a right to possess the Property or any portion of it; and C. Title. Seller, at the time of the execution of this Agreement, is seized of the Property in fee simple and is the lawful owner of and has good indefeasible title to the Property; and d. Litigation. To Seller's knowledge, there are no actions, suits, material claims, legal proceedings, or any other proceedings affecting the Property or any portion thereof, at law, or in equity before any court or governmental entity, domestic or foreign; and e. Condition of Property. To Seller's knowledge, and except as otherwise disclosed on Exhibit D hereto or in the Due Diligence Reports, no defect or condition of the Property or soil exists that may adversely affect Buyer's proposed development of the Property. f. No Environmental Hazard. To Seller's knowledge, and except as otherwise disclosed on Exhibit D hereto or in the Due Diligence Reports, there are not present on or about the Property any Hazardous Substances in quantities in violation of Governmental Requirements, and Seller has not received any written notice from any governmental authority Purchase Sale Agt 7872 Edinger FINAL.doc 6 concerning the removal of any Hazardous Materials from the Property, or concerning any restrictions on the use or development of the Property on account of the presence of any Hazardous Materials on the Property. g. No Violation. Neither the execution of this Agreement nor the performance of the obligations herein will conflict with, or breach any of the provisions of any bond, note, evidence of indebtedness, contract, lease, or other agreement or instrument which affects the Property; and h. FIRPTA. Seller is not a "foreign person" within the parameters of FIRPTA or any similar state statute, or is exempt from the provisions of FIRPTA or any similar state statute, or that Seller has complied and will comply with all the requirements under FIRPTA or any similar state statute; and i. No Conflict. Seller's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Seller is a party or by which it is bound; and j. Governmental Compliance. Seller has not received any notice from any governmental agency or authority alleging that the Property is currently in violation of any law, ordinance, rule, regulation or requirement applicable to its use and operation; and k. No Seller Bankruptcy. Seller is not the subject of a bankruptcy proceeding. 1. Due Diligence. Seller has delivered to Buyer complete and accurate copies of all Due Diligence Reports. M. Corporate Governance. Seller has delivered to Buyer a true, correct and complete copy of Seller's Operating Agreement. Except as set forth herein, references to the "knowledge" of Seller shall refer only to the actual knowledge of Michael Todd Carson, Rosemary Kathleen Carson, and Jurtwin, Inc., a California corporation, and shall not be construed, by imputation or otherwise, to refer to the knowledge any affiliate of Seller or any prior principals of Seller (or any of their affiliates), or to any officers, agent, manager, representative or employee of any affiliate. Except for fraud or intentional misconduct, the individuals named in this Section 8.1 shall have no personal liability with respect to any matters set forth in this Agreement or any of Seller's representations and/or warranties herein being or becoming untrue, inaccurate or incomplete. Seller represents and warrants that the "knowledge" individuals listed above are the individuals in control of the Seller who most possesses substantial and material knowledge of the Property and its operations as compared to any other individual in control of the Seller. 8.2 Representations and Warranties of Buyer. Buyer represents and warrants to Seller as follows: a. Authority. Buyer has full right, power, and lawful authority to purchase the Property as provided herein; and Purchase Sale Agi 7872 Edinger FINAL.doc 7 b. No Conflict. Buyer's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Buyer is a party or by which it is bound. 8.3 Ongoing Representations and Warranties. Until the Close of Escrow, Seller and Buyer shall, upon learning of any fact or condition which would cause any of the warranties and representations made by them in Sections 8.1 and 8.2, respectively, not to be true as of the Close of Escrow, immediately give written notice of such fact or condition to the other party. Such exception to a representation shall not be deemed a breach by such party hereunder, but shall constitute an exception which the other party shall have a right to approve or disapprove. If Buyer elects to close Escrow following disclosure of information that would have an effect on the value and/or operation of the Property, Seller's representations and warranties contained herein shall be deemed to have been made as of the Close of Escrow, subject to such exception(s). If, following the disclosure of such information, Buyer elects to not close Escrow, then this Agreement and the Escrow shall automatically terminate, and neither party shall have any further rights, obligations or liabilities hereunder. The representations and warranties set forth in Section 8 shall survive the Close of Escrow for a period of eighteen (18) months. 9. Escrow Instructions. This Agreement constitutes the joint escrow instructions of Buyer and Seller, and the Escrow Agent to whom these instructions are delivered is hereby authorized and instructed to act under this Agreement. The Parties hereto agree to use commercially reasonable best efforts to do all acts necessary to close this Escrow in the shortest possible time. Any insurance policies for fire or casualty are not to be transferred, and Seller will cancel its own policies after the Close of Escrow. All funds received in the Escrow shall be deposited with other escrow funds in a general escrow account(s) and may be transferred to any other such escrow trust account in any State or National Bank doing business in the State of California. All disbursements shall be made by wire transfer from such account. If in the opinion of Buyer it is necessary or convenient in order to accomplish the Close of Escrow of this transaction, Buyer may require that the parties sign supplemental escrow instructions as may be recommended by the Escrow Agent; provided that if there is any inconsistency between this Agreement and the supplemental escrow instructions, then the provisions of this Agreement shall control. The parties agree to execute such other and further documents as may be reasonably necessary, helpful or appropriate to effectuate the provisions of this Agreement Escrow Agent is instructed to release Seller's and Buyer's escrow closing statements to the respective parties. 9.1 Tax Adjustment Procedure. Escrow Agent is authorized and is instructed to comply with the following: Purchase Sale Agt 7872 Edinger FINAL.doc 9 a. Pay and charge Seller for any unpaid delinquent taxes and/or penalties and interest thereon, and for any delinquent or non -delinquent assessments or bonds against the Property; and b. Pay and charge Seller for all taxes which will be due at the Close of Escrow and Escrow Agent shall prorate taxes consistent with the requirements of the Orange County Tax Collector's office. 9.2 Authority of Escrow Agent. Escrow Agent is authorized to, and shall: a. Pay and charge Seller for any amount necessary to place title in the condition necessary to satisfy this Agreement; b. Pay and charge Buyer and Seller for any escrow fees, charges, and costs payable under this Agreement; C. Disburse funds, deliver, and record the Grant Deed when Buyer and Seller have fulfilled conditions of this Escrow; d. Do such other actions as necessary, including obtaining the policy of title insurance, to fulfill its obligations under this Agreement; e. If the provisions of FIRPTA or similar state act apply to the transaction memorialized in this Agreement, and unless Seller is not a "foreign person" or an exemption applies, the Escrow Agent shall deduct and withhold from Seller's proceeds ten percent (10%) of the gross sales price and shall otherwise comply with all applicable provisions of FIRPTA and any similar state act. Seller and Buyer agree to execute and deliver as directed by Escrow Agent any instrument, affidavit, and statement, and to perform any act reasonably necessary to comply with the provisions of FIRPTA and any similar state act and regulation promulgated thereunder: Each Seller expressly agrees to execute a Certificate of Non -Foreign Status by individual transferor (Exhibit C Certification of Compliance with Real Estate Reporting Requirement of the 1986 Tax Reform Act as may be required by Escrow Agent; f. Prepare and file with all appropriate governmental or taxing authorities a uniform settlement statement, closing statement, tax withholding forms including an IRS 1099-S form, and be responsible for withholding taxes, if any such forms are provided for or required by law. All time limits within which any matter herein specified is to be performed may be extended, but only by mutual agreement of the parties hereto, and by amendment of this Agreement. Any amendment of, or supplement to, this Agreement must be in writing, and signed by both parties, hereto. 9.3 Termination. if (except for deposit of the Purchase Price by Buyer, which shall be made by Buyer before the Close of Escrow as provided in Section 7) Escrow is not in condition to close by the Outside Date due to the failure by a party to perform its obligations hereunder, then either party which has fully performed under this Agreement may, in writing, demand the return of money or property and terminate this Agreement. If neither party has fully complied with the provisions of Escrow, no demand for return of documents shall be Purchase Sale Agi 7872 Edinger FINAL.doc 9 recognized until five (5) days after Escrow Agent shall have delivered copies of such demand to all other parties at the respective addresses shown in this Agreement. If any objections are raised within said five (5) day period, Escrow Agent is authorized to hold all papers and documents until instructed by a court of competent jurisdiction or by mutual written instructions of the parties. Buyer, however, shall have the sole option to withdraw any money deposited by it for the acquisition of the Property. If no objections are raised within said five (5) day period, this Agreement shall terminate. Termination of this Agreement shall be without prejudice as to whatever legal rights either party may have against the other arising from this Agreement. If no demands are made, the Escrow Agent shall proceed with the Close of Escrow as soon as possible. 10. Title; Condition of the Property. 10.1 Delivery of Title Report. Within one (1) business day of the execution of this Agreement, the Buyer shall be provided, at Seller's expense, with a Preliminary Title Report on the Property. 10.2 Approval Period. From the Reference Date until 5:00 p.m. on May 16, 2008 (the "Approval Period"), Buyer shall review and approve the Preliminary Title Report and review and investigate the physical and environmental condition of the Property and any other factors or matters relevant to Buyer's decision to purchase the Property (collectively, the "Buyer's Due Diligence"). If the Property or title thereto or any other factors or matters relevant to Buyer's decision to purchase the Property are not acceptable for any reason whatsoever, or the Acquisition Agreement has not been signed by Tenant and its franchisor, Buyer shall have the right, by giving written notice to Seller on or before the last day of the Approval Period, to terminate this Agreement. If Buyer does not deliver written notice terminating this Agreement to Seller on or before the last day of the Approval Period, Buyer shall be deemed to have approved the Property, the Initial Deposit shall be nonrefundable to Buyer except in the event of a failure of a condition to the Close of Escrow described in Section 5.2 below or a default by Seller, and this Agreement shall continue in full force and effect. 11. Loss or Damage. Loss or damage to the Property, by fire or other casualty, occurring prior to the recordation of the Grant Deed shall be at the risk of Seller. In the event that loss or damage to the improvements on the Property, by fire or other casualty, occurs prior to the Close of Escrow, Buyer may elect to (i) require that the Seller pay to Buyer the proceeds of any insurance which may become payable to Seller by reason thereof; or (ii) reduce the total price by an amount equal to the amount of insurance payable to Seller, whichever is greater. 12. Close of Escrow. 12.1 Time. When Title Company is in a position to issue the Title Policy and all required documents and funds have been deposited with Escrow Agent, and Buyer and Seller have advised the Escrow Agent in writing that the Conditions of Close of Escrow set forth herein have been satisfied or waived, Escrow Agent shall immediately close Escrow as provided below. The failure of Seller or Buyer to be in a position to close Escrow by the Outside Date shall constitute a default hereunder by the party not in a position to close. 12.2 Procedure. Escrow Agent shall close Escrow for the Property as follows: Purchase Sale Agt 7872 Edinger FINAL.doc 10 (i) Record the Grant Deed with instructions for the Recorder of Orange County, California to deliver the Grant Deed to Buyer; (ii) Pay the Purchase Price to Seller reduced by appropriate charges against Seller hereunder; (iii) Deliver the FIRPTA Certificates to Buyer; (iv) Instruct the Title Company to deliver the Title Policy to Buyer; (v) File any informational reports required by Internal Revenue Code Section 6045(e), as amended; and (vi) Forward to both Buyer and Seller a separate accounting of all funds received and disbursed for each party and copies of all executed and recorded or filed documents deposited into Escrow, with such recording and filing date endorsed thereon. 13. Condition of Lease; Environmental Matters; Indemnification. 13.1 Condition of Lease. Seller hereby permits Buyer to contact Tenant and use commercially reasonable best efforts to negotiate the terms and conditions of Tenant's ongoing occupancy upon and eventual vacation from the Property. Seller covenants not to terminate the Lease or take any action with respect to the Lease or the Tenant without the prior written consent of Buyer. Seller acknowledges that it has been informed that it is Buyer's intent and desire to purchase the Property subject to the Lease. Seller agrees to assign the existing Tenant lease agreement to Buyer by executing and delivering the Assignment and Assumption Agreement. Buyer agrees and acknowledges that Buyer shall take title to the Property subject to the interests of Tenant. Notwithstanding the foregoing, Buyer desires to negotiate lease termination and other related terms and conditions with the Tenant prior to the Close of Escrow. 13.2 Environmental Matters. Buyer desires to investigate the soil and groundwater associated with the Property. By its execution of this Agreement, Seller grants Buyer the right to contact Tenant and to perform such environmental, Hazardous Materials, soils and other testing on the Property as Buyer deems appropriate as part of the Buyer's Due Diligence. In the event Tenant or Seller refuses to permit Buyer to perform such Buyer's Due Diligence as Buyer deems appropriate, Buyer shall have the right to terminate this Agreement. In order to determine whether soil, groundwater, or other contamination exists and whether remediation is required, Buyer agrees to cause an environmental consultant or other party deemed appropriate by Buyer to complete, at Buyer's sole cost and expense, such further environmental surveys as recommended by the environmental or similar consultant and requested by the Buyer, including, without limitation, a soil gas survey, groundwater testing, and any other environmental surveys or investigations recommended by the Environmental Consultant on the Property prior to the Close of Escrow. Purchase Sale Agt 7872 Edinger FINAL.doc I I As part of the Due Diligence Reports, Seller agrees to provide Buyer with copies of all written materials in Seller's possession pertaining to the physical condition, use or occupancy of the Property that Seller received from Tenant and/or any governmental environmental oversight agency, including, without limitation, the Regional Water Quality Control Board. Seller further agrees to permit access to the Property to the Buyer's consultants and Buyer for purposes of completing the Buyer's Due Diligence and to cooperate with the environmental and other consultants and Buyer in connection therewith. Seller shall provide such access (and cause Tenant to provide such access) to the Property and other items as requested by the consultants necessary to complete the Buyer's Due Diligence, including, without limitation, the use of electrical or other power and water from the Property and sufficient access to permit the performance of a soil and groundwater analysis and, if necessary, the taking of soil and/or groundwater samples. In the event Buyer determines prior to the Approval Date that remediation is required due to the acts and/or omissions of Tenant or Seller upon the Property then, notwithstanding anything herein to the contrary, the Close of Escrow shall not occur unless and until Seller has assumed, to Buyer's satisfaction, full and complete financial responsibility for that remediation on the Property that is within a timeframe, and in accordance with a remedial action work plan ("RAW"), acceptable to Buyer and the appropriate environmental oversight agency. Buyer acknowledges and agrees that Seller may agree to assume such responsibility in the exercise of Seller's sole and absolute discretion. Subject to the mutual agreement of the Parties, the implementation of the RAW may occur subsequent to the Close of Escrow. If for any reason Seller fails to assume responsibility for that remediation, then Buyer shall have the right (but not the obligation) to terminate this Agreement on or before the later of (i) the Approval Date, or (ii) the date that is five (5) days after Seller's notification that it will not assume such responsibility. Within 30 days following the delivery of the RAW as provided herein, Buyer shall (i) deliver a notice of Buyer's intent to proceed with the Remedial Work and acquisition of the Property (the `Buyer Notice to Proceed"), or (ii) a notice of Buyer's intent to not proceed which shall terminate this Agreement. Upon Delivery of the Buyer's Notice to Proceed, Buyer shall be responsible for completing the remediation as provided in the RAW at Seller's (and/or, if applicable, Tenant's) sole cost and expense. 13.3 Mutual Representations Each Party may seek written representation from the environmental consultants that the Party may rely on the findings and conclusions ("Reliance Letters") from the environmental consultants of the other Party. Accordingly, the Parties hereby agree to consent to the issuance of Reliance Letters by their respective consultants to the other Parry in the event that the consultant is also willing to provide such Reliance Letter. 13.4 Condition of the Property a. Disclosure. Seller has delivered to Buyer copies of Seller's Due Diligence Reports. Other than as may be disclosed in the Seller's Due Diligence Reports or on Exhibit D hereto, Seller hereby represents and warrants to Buyer that Seller has not received any additional written notice or communication from any government agency having jurisdiction over the Property, notifying Seller, Tenant or any third party of, and Seller has no additional Purchase Sale Agt 7872 Edinger FINAL.doc 12 actual knowledge of, the presence of surface or subsurface zone Hazardous Materials in, on, or under the Property, or any portion thereof in violation of Governmental Requirements. b. Buyer's Investigation of the Property. Buyer shall have the right to access the Property during regular business hours and upon reasonable Notice to Seller for the purpose of obtaining data and conducting surveys and tests. Any surveys and tests conducted on the Property by Buyer's representatives shall be done at the sole expense of Buyer and only after Buyer has secured any necessary permits from the appropriate governmental agencies. C. Soils, Groundwater and Engineering Assessment. Buyer shall have the right, at its sole cost and expense, to engage its own consultants ("Buyer's Soils and Engineering Consultants") to conduct a physical assessment and make such investigations as Buyer deems necessary, including having prepared any "Soils and/or Groundwater Reports" and/or "Engineering Reports" on the Property, and Seller shall promptly be provided a copy of all final reports and test results (not including drafts) provided by Buyer's consultants ("Buyer's Soils and Engineering Reports"). Buyer makes no representation or warranty whatsoever as to the accuracy or completeness of Buyer's Soil and Engineering Reports, except that with respect to the Buyer's Soil and Engineering Reports, Buyer warrants that it has no knowledge that Such reports contain intentional misrepresentation or intentionally omit material information. d. Environmental Assessment. In addition to conducting a physical assessment of the Property, Buyer shall have the right, at its sole cost and expense, to engage its own environmental consultant ("Buyer's Environmental Consultant") to conduct an environmental assessment and make such investigations as Buyer deems necessary, including any "Phase 1" and/or "Phase 2" investigations of the , and Seller shall promptly be provided a copy of all final reports and test results (not including drafts) provided by Buyer's Environmental Consultant ("Buyer's Environmental Reports"). Buyer makes no representation or warranty whatsoever as to the accuracy or completeness of Buyer's Environmental Reports, except that with respect to the Buyer's Environmental Reports, Buyer warrants that it has no knowledge that such reports contain intentional misrepresentation or intentionally omit material information. 13.5 Definitions. For purposes hereof: "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, orders, decrees, requirements, resolutions, policy statements and regulations (including, without limitation, those relating to land use, subdivision, zoning, the environment, labor relations, prevailing wage, notification of sale to employees, Hazardous Materials, occupational health and safety, water, earthquake hazard reduction and building and fire codes; and including all environmental laws) of the United States, the State of California, the County of Orange, the City of Huntington Beach ("City") and of any other political subdivision, agency or instrumentality exercising jurisdiction over the Buyer, the Tenant, the Seller or the Property. "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, the State of California, or the United States Government, or which poses a significant present or potential hazard to human health and safety, or the environment, if released into the environment, or a building, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste", "acutely Purchase Sale Agi 7872 Edinger FINAL.doc 13 hazardous waste", "extremely hazardous waste", or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter -Presley -Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material", "hazardous substance", or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) polychlorinated byphenyls, (viii) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article 1 l of Title 22 of the California Code of Regulations, Chapter 20, (ix) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317), (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903), (xi) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., (xii) methyl-tert butyl ether, or (xiii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any Governmental Requirements either requires special handling in its use, transportation, generation, collection, storage, handling, treatment or disposal, or is defined as "hazardous" or harmful to human health or the environment. "Representatives" means the agents, employees, members, independent contractors, affiliates, principals, shareholders, officers, Executive Directors, chairpersons, council members, board members, committee members, and planning and other commissioners, partners, attorneys, accountants, representatives, and staff of the referenced entity and the predecessors, heirs, successors and assigns of all such persons. 14. Release A. The Purchase Price constitutes an all-inclusive payment to Seller by Buyer and Seller agrees, acknowledges and confirms that no additional consideration or payment is due in connection with the Buyer's acquisition of the Property. Seller, on behalf of itself, its agents, representatives, assigns, trustees, administrators, heirs, beneficiaries, and successors in interest, hereby forever releases and discharges Buyer, City, and Buyer's and City's Representatives (collectively, the "Buyer Released Parties") from, and forever waives, any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action of every nature, character and description, known or unknown, that Seller has now or may at any time hereafter have against any of the Buyer Released Parties for consideration given by the Buyer for the Property, including but not limited to, any claim to relocation assistance, relocation benefits or compensation for property, fixtures, equipment or loss of goodwill. B. In making this release, Seller intends to and does release, acquit and discharge the Buyer Released Parties and each of them, from any liability of any nature whatsoever for any claim, injury, damages, consequential damages, or equitable or declaratory relief in connection with the foregoing. Purchase Sale Agi 7872 Edinger FINAL.doc 14 15. General Provisions. 15.1 Real Estate Brokerage Commission. Except for Seller's engagement of NAI Capital, Inc., as an agent and any payment due to such agent by Seller, Seller and Buyer each represent and warrant to the other that no broker or finder is entitled to any commission or finder's fee in connection with this transaction, and each agrees to defend and hold harmless the other from any claim to any such commission or fee resulting from any action on its part. 15.2 Assignment. This Agreement shall be binding upon and shall inure to the benefit of Buyer and Seller and their respective heirs, personal representatives, successors and assigns. Buyer shall have the right to assign this Agreement or any interest or right under this Agreement or under the Escrow without obtaining the prior written consent of Seller. The Seller may not assign any of its rights pursuant to this Agreement without the written consent of the Buyer. In no event shall any assignment relieve the assigning party of any of its obligations under this Agreement. 15.3 Attorneys' Fees. In any action between the parties to interpret, enforce, award, modify, rescind, or otherwise in connection with any of the terms or provisions of this Agreement, the prevailing party in the action shall be entitled, in addition to damages, injunctive relief, or any other relief to which it might be entitled, reasonable costs and expenses including, without limitation, litigation and other costs and reasonable attorneys' fees. 15.4 Approvals and Notices. Any approval, disapproval, demand, document or other notice ("Notice") which either party may desire to give to the other party under this Agreement must be in writing and may be given by any commercially acceptable means to the party to whom the Notice is directed at the address of the party as set forth below, or at any other address as that party may later designate by Notice. Any Notice given under this paragraph, whether personally or by mail, shall be deemed received only upon actual receipt by the intended party. To Seller: HB AUTO I, LLC 3110 Newport Blvd. Newport Beach, California 92663 Attn: Todd Carson Phone: (949) 675-0101 Fax: (949) 675-0107 Copy to: PALMIERI, TYLER, WIENER, WILHELM & WALDRON LLP 2603 Main Street East Tower — Suite 1300 Irvine, California 92614 Attn: Stephen A. Scheck, Esq. Phone: (949) 851-7221 Fax: (949) 851-1554 Purchase Sale Am 7872 Edinger FINAL.doc 15 To Buyer: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary A copy of all Notices by either party hereunder shall be sent to: Escrow Agent: INVESTORS TITLE COMPANY 4667 MacArthur Boulevard, Suite 150 Newport Beach, California Attention: Mickey Vandenberg 15.5 Jurisdiction and Venue. This Agreement shall be construed under the laws of the State of California in effect at the time of the signing of this Agreement. To the extent permitted by law, the parties consent to the jurisdiction of the California courts with venue in Orange County. 15.6 Titles and Captions. Titles and captions are for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or of any of its terms. References to section numbers are to sections in this Agreement, unless expressly stated otherwise. 15.7 No Waiver. A waiver by either party of a breach of any of the covenants, conditions or agreements under this Agreement to be performed by the other party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement. 15.8 Modifications. Any alteration, change or modification of or to this Agreement, in order to become effective, shall be made in writing and in each instance signed on behalf of each party. 15.9 Severability. If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is Purchase Sale Agt 7872 Edinger FINAL.doc 16 held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 15.10 Right of Access. Buyer and its representatives shall be entitled to access to the Property on and after the execution of this Agreement and prior to the Close of Escrow solely in connection with the performance of due diligence investigations, appraisals, the Phase I Report and other matters required in connection with this Agreement. 15.11 Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day (such as the day escrow opens), and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If any act is to be done by a particular time during a day, that time shall be Pacific Time Zone time. 15.12 Tax and Legal Advice. SELLER REPRESENTS AND WARRANTS THAT THE BUYER HAS NOT PROVIDED TAX OR LEGAL ADVICE TO SELLER IN CONNECTION WITH THIS AGREEMENT. SELLER FURTHER REPRESENTS AND WARRANTS THAT HE OR SHE HAS BEEN ADVISED OF HIS OR HER RIGHT TO LEGAL COUNSEL AND TAX ADVICE AND HAS EITHER OBTAINED THE ADVICE OF INDEPENDENT LEGAL COUNSEL OR A TAX ADVISOR WITH RESPECT TO THE TERMS OF THIS AGREEMENT AND ALL ATTACHMENTS HERETO AND OTHER AGREEMENTS REQUIRED HEREBY, OR HAS KNOWINGLY AND VOLUNTARILY DECIDED NOT TO CONSULT WITH LEGAL COUNSEL OR A TAX ADVISOR OF HIS/HER CHOOSING. SELLER'S INITIALS: 15.13 Time of Essence. Time is expressly made of the essence with respect to the performance by Buyer and Seller of each and every obligation and condition of this Agreement including, without limitation, the Close of Escrow. 15.14 Cooperation. Each party agrees to cooperate with the other in the closing of this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements. 15.15 Offer. Any delivery of unsigned copies of this Agreement is solely for the purpose of review by the party to whom delivered, and neither the delivery nor any prior communications between the parties shall in any way be construed as an obligation to enter into this Agreement. The signing of this Agreement by Seller constitutes an offer that cannot be revoked for a period of five (5) days. Seller's offer shall be deemed accepted by Buyer and this Agreement shall be binding only upon execution by or on behalf of Buyer following approval by the governing board of the Buyer at an open and agendized meeting. 15.16 Section 1033 Exchange. Seller may consummate the sale of the Property ,I as part of a so-called like kind exchange (the "Exchange") pursuant to Section 1033 of the r Internal Revenue Code of 1986, as amended (the "Code"), provided that: (i) the Close of Escrow shall not be delayed or effected by reason of the Exchange, nor shall the consummation or ; Purchase Sale Agt 7872 Edinger f1NAL.doc 17 accomplishment of the Exchange be a condition precedent or condition subsequent to any obligations under this Agreement, (ii) the Exchange shall be effected through a qualified intermediary, and Buyer shall not be required to take an assignment of this Agreement or hold title to any real property for purposes of effecting the Exchange, and (iii) the party making the Exchange shall pay any additional costs that would not otherwise have been incurred by the other had the Exchange not been made. The terms of this Section shall not affect or diminish the rights of either party hereto, and Buyer shall not be deemed to have warranted that the Exchange complies with Section 1033 of the Code. 16. Agreement in Total. 16.1 Merger of Prior Agreements and Understandings. This Agreement contains the entire understanding between the parties relating to the transaction contemplated by this Agreement. All prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged in this Agreement and shall be of no further force or effect. 16.2 Counterparts. This Agreement may be signed in multiple counterparts which, when signed by all parties, shall constitute one binding agreement. 16.3 Exhibits Incorporated by Reference. All Exhibits attached to this Agreement are incorporated in this Agreement by this reference. This Agreement is executed in five (5) duplicate originals, each of which is deemed to be an original. This Agreement includes eighteen (18) pages and seven (7) Exhibits, including Exhibit A (Legal Description), Exhibit B (Grant Deed), Exhibit C (Sellers' Certification of Non -Foreign Status), Exhibit D (Condition of the Property), Exhibit E (Due Diligence Reports), and Exhibit F (Assignment and Assumption Agreement). [SIGNATURE PAGE FOLLOWS] Purchase Sale Agt 7872 Edinger FINAL.doc 18 IN WITNESS WHEREOF, Buyer and Seller have signed this Agreement and Escrow Instructions for Purchase and Sale of Real Property on the dates set forth below. "SELLER" HB AUTO I, LLC, a California limited liability company Dated: 4 d d By: Michael To d C son, Managing Member [PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 1 OF 21 Purchase Sale Agt 7872 Edinger FINAL.doc ATTEST: Agency Clerk REVIEWED AND APPROVED: Executive Director "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairperson APPROVED AS TO FORM: Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel MI - Barbara Zeid Leibold INITIATED AND Deputy [PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 2 OF 2] Purchase Sale Agt 7872 Edinger FINAL.doc Director ATTEST: gency lerk REVIEWED AND APPROVED: - / /I/ /- -'r Executive DireqWr `BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairperson APPROVED AS TO FORM: Agency'Counsel 044 4 log APPROVED AS TO FORM: LEIB OLD MCCLENDON & MANN, P.C. Agency pecial Counse By: Barbara Zeijkeibgd INITIATED AND APPROVED: Deputy Executive Director (PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 2 OF 21 Purchase Sale AZ 7872 Edinger FINAL ESCROW AGENT'S CONSENT: Escrow Agent hereby acknowledges receipt of this Agreement and consents to the terms and conditions set forth herein. "ESCROW AGENT" INVESTORS TITLE COMPANY Name: Its: Dated: Purchase Sale Agt 7872 Edinger FINAL.doc EXHIBIT A LEGAL DESCRIPTION Real property in the City of Huntington Beach, County of Orange, State of California, described as follows: LOTS 21, 22 AND 23 OF TRACT NO. 417, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 47 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT ALL OIL, MINERALS AND OTHER HYDROCARBON SUBSTANCES WITHOUT RIGHT OF SURFACE ENTRY THERETO ABOVE A DEPTH OF ABOVE 500 FEET FROM THE SURFACE THEREOF, AS RESERVED IN THE DEED FROM BEULAH H. FINLEY, RECORDED DECEMBER 14, 1960 IN BOOK 5548 PAGE 385, OFFICIAL RECORDS. APN: 142-081-28 Purchase Sale Agt 7872 Edinger FINAL.docPurchase Sale Agt 7872 Edinger FINAL.docPurchase Sale Agt 7872 Edinger F1NAL.doc Exhibit A EXHIBIT B GRANT DEED WHEN RECORDED MAIL AND MAIL TAX STATEMENTS TO: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street CA 92648 DOCUMENTARY TRANSFER TAX S NONE FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION 27383 GRANT DEED FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, HB AUTO I, LLC hereby GRANT(S) to the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic, the real property located at 7872 Edinger in the City of Huntington Beach, County of Orange, State of California, referred to as APN 142-081-028 and described as: Dated: Dated: SEE ATTACHMENT NO. 1 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE "SELLER" HB AUTO I, LLC By: Its: By. - Its: Purchase Sale Agt 7872 Edinger FINAL.doc Exhibit B ATTACHMENT NO. I TO EXHIBIT B LEGAL DESCRIPTION Real property in the City of Huntington Beach, County of Orange, State of California, described as follows: LOTS 21, 22 AND 23 OF TRACT NO. 417, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 47 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT ALL OIL, MINERALS AND OTHER HYDROCARBON SUBSTANCES WITHOUT RIGHT OF SURFACE ENTRY THERETO ABOVE A DEPTH OF ABOVE 500 FEET FROM THE SURFACE THEREOF, AS RESERVED IN THE DEED FROM BEULAH H. FINLEY, RECORDED DECEMBER 14, 1960 IN BOOK 5548 PAGE 385, OFFICIAL RECORDS. APN: 142-081-028 Purchase Sale Agt 7872 Edinger FINAL.doc Exhibit B STATE OF CALIFORNIA ) )SS COUNTY OF ) On , before me, , personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. CI certify under PENALTY OF PERJURY under the laws of the state of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT ❑ Individual ❑ Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attomey-In-Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entity(ies) Purchase Sale Agt 7872 Edinger FINAL.doc Exhibit B Title Or Type of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above ATTACHMENT NO.2 to EXHIBIT B CERTIFICATE OF ACCEPTANCE CERTIFICATE OF ACCEPTANCE (Government Code, Section 27281) THIS IS TO CERTIFY that the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic, Grantee herein, acting through its Board, by Resolution No. _, adopted on , hereby accepts for public purposes the real property, or interest therein, conveyed by the within deed and consents to the recordation thereof by its duly authorized officer. IN WITNESS WHEREOF, we have hereunto set our hands and affixed the Agency's official seal, this day of , REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic Bv: Its: CHAIRPERSON ATTEST: By: SECRETARY Purchase Sale Agt 7872 Edinger FINAL.doc Attachment 2-1 STATE OF CALIFORNIA ) )SS COUNTY OF ) On , before me, , personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the state of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. ❑ 0 CAPACITY CLAIMED BY SIGNER Individual Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General 0 Attorney -In -Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entity(ies) DESCRIPTION OF ATTACHED DOCUMENT Purchase Sale Agt 7872 Edinger FINAL.doc Attachment 2-2 Title Or Type of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above EXHIBIT C TRANSFEROR'S CERTIFICATION OF NON -FOREIGN STATUS To inform the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH ("Transferee") that withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended ("Code") will not be required upon the transfer of certain real property described as Assessor's Parcel No. 142-081-028 located in the City of Huntington Beach, California to the Transferee by HB AUTO I, LLC (the "Transferor"), the undersigned hereby certify the following: 1. I/we am/are not a nonresident alien for purposes of United States income taxation; 2. My/our United States taxpayer identifying number (Employer Identification Number) is 3. My/our address is Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury, I/we declare that Uwe have examined this Certification and to the best of my/our knowledge and belief it is true, correct, and complete, and we further declare that I/we have authority to sign this document on behalf of the Transferor. Dated: "TRANSFEROR" HB AUTO I, LLC Todd Carson, Managing Member Purchase Sale Agt 7872 Edinger FINALAcCurchase Sale Agt 7872 Edinger FINAL.doc Exhibit C-1 EXHIBIT D CONDITION OF THE PROPERTY [to be inserted within three (3) business days of execution of this Agreement by Buyer] Purchase Sale Agt 7872 Edinger FINAL.doc Exhibit D EXHIBIT E DUE DILIGENCE REPORTS [to be inserted within three (3) business days of execution of this Agreement by Buyer] Purchase Sale Ap 7872 Edinger FINAL.doc Exhibit E EXHIBIT F ASSIGNMENT AND ASSUMPTION AGREEMENT [see attached] Purchase Sale Agi 7872 Edinger FINAL.doc Exhibit G ASSIGNMENT AND ASSUMPTION OF LEASE This ASSIGNMENT AND ASSUMPTION OF LEASE (this "Agreement") is made and entered into and is effective as of the day of 2008 (the . "Effective Date"), by and between HB AUTO I LLC, a California limited liability company ("Assignor"), and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic ("Assignee"), with reference to the following: RECITALS A. On or about . 2008, Assignor and Assignee entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property (the "Sale Agreement") for Assignee's purchase from Assignor of certain improved real property of approximately 22,521 square feet located at 7872 Edinger Avenue in Huntington Beach, California and within the boundaries of the Subarea No.I of the Huntington Beach Merged Redevelopment Project Area, generally described as Assessor's Parcel No. 142-081-028, and more particularly described in Exhibit A (the "Real Property") attached to the Sale Agreement. The Real Property and all improvements thereon shall be referred to herein as the "Property." All capitalized terms not defined herein shall have the meaning set forth in the Sale Agreement. B. The Property is improved with a commercial building, which is leased to C.S.B. Partnership ("Tenant"), who operates a Big O Tires franchise on the Property. Tenant occupies the Property pursuant to that certain Standard Lease Agreement dated April 19, 2004 between C.S.B. Partnership, a California general partnership, as "tenant," and HB Auto I, LLC, a California limited liability company, and Jurtwin, Inc., a California corporation, as "landlord" (the "Original Lease"). The Original Lease, as amended to date, and any other written or oral agreements between the Assignor and Tenant with respect to the Tenant's occupation and use of the Property, if any, shall collectively be referred to herein as the "Lease." C. The Sale Agreement sets forth the terms and conditions for the Assignee's acquisition of the Property. A condition of Assignee's purchase of the Property is the assignment by Assignor of all of its rights under the Lease from and after the date Assignee has purchased the property from Assignor pursuant to the Sale Agreement ("Close of Escrow"). D. In satisfaction of the condition set forth in the Sale Agreement, Assignor desires to assign and delegate to Assignee all of Assignor's rights, duties and obligations under the Lease accruing or attributable to the period from and after the Close of Escrow, and Assignee desires to accept such assignment. AGREEMENT NOW THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows: Section 1. Assignment and Assumption. 1.1 Assignment. Assignor does hereby assign, transfer and delegate to Assignee all of Assignor's rights, duties and obligations under the Lease Documents (as hereinafter defined) accruing or arising from and after the Close of Escrow, provided, that, Assignee acknowledges and agrees that Assignor has reserved the right to collect any and all rents due under the Lease for any period prior to Close of Escrow. 1.2 Assumption. Assignee hereby accepts the assignment and assumes the performance of all the terms, covenants and conditions imposed upon the landlord under the Lease Documents accruing or arising on or after the Close of Escrow. 1.3 Payment of Rent. Assignor's contact at the Tenant for the payment of rent is , who, to Assignor's actual knowledge, can be reached at Subsequent to the Close of Escrow, Assignee shall contact Tenant, notify Tenant of Assignee's purchase of the Property and this Assignment, and request that all future payment of rent attributable to the period after the Close of Escrow be remitted to Assignee. Section 2. Representations, Warranties and Covenants. 2.1 Assignor Representations. Assignor represents and warrants that: (a) Assignor, and each and every party signing on behalf of Assignor, each have the power and authority and the legal right to make, deliver and perform this Agreement and to authorize the execution, delivery and performance of this Agreement. No consent or authorization of, filing with, or other act by or in respect of any other party, is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. This Agreement has been duly executed and delivered by Assignor, and each and every party signing on behalf of Assignor, and constitutes a legal, valid and binding obligation of each of the Assignor, enforceable against the Assignor in accordance with its terms. (b) The execution, delivery, and performance by each of the Assignor and each and every party signing on behalf of Assignor of this Agreement and compliance with the provisions hereof have been duly authorized by all requisite action on the part of each of the Assignor and each and every party signing on behalf of Assignor and do not and will not (i) violate or conflict with, or result in a breach of, or require any consent under (A) any organizational or governance documents of Assignor or any party signing on behalf of Assignor, (B) any applicable laws, rules, or regulations or any order, writ, injunction, or decree of any governmental authority or arbitrator, or (C) any contractual obligation of the Assignor or by which the Assignor or any of its property is bound or subject, (ii) constitute a default under any such agreement or instrument, or (iii) result in, or require, the creation or imposition of any lien on any material portion of the Property. Assignment and Assumption of Lease FINAL - 2 - (c) All written agreements entered into between Assignor and the Tenant, or between the Assignor and any third party in connection with the Lease, are listed on Exhibit A hereto (collectively, the "Lease Documents"). True and correct copies of the Lease Documents have been delivered to Assignee. Except for the Lease Documents, there are no other agreements or obligations of Assignor with respect to the Lease. (d) The Lease is in full force and effect and remains in full force and effect as of the Close of Escrow. As of the date of this Agreement, Assignor continues to collect rent from Tenant in the amount of Dollars ($_ per month. (e) Assignor has the power and authority and the legal right to own the Property. Assignor represents and warrants that Jurtwin, Inc., a California corporation, has no ownership or other interest in the Property and has no rights or obligations under the Lease Documents. (f) No litigation, investigation or proceeding of or before an arbitrator, court or governmental authority is pending or threatened by or against the Assignor, the Property or the Lease. (g) The execution, delivery and performance by Assignor of this Agreement does not constitute a "fraudulent conveyance," "fraudulent obligation" or "fraudulent transfer" within the meanings of the Uniform Fraudulent Conveyances Act or Uniform Fraudulent Transfer Act, as enacted in any jurisdiction, or under any other applicable law. (h) Concurrently herewith, Assignor is delivering to Assignee all deposits and other funds held by Assignor in connection with the Lease, a complete and accurate list of which is set forth on Exhibit B hereto. Except for the deposits and other funds set forth on Exhibit B hereto, there are no other deposits or other funds held by Assignor with respect to the Lease. 2.2 Assignee Representations. Assignee represents and warrants that: (a) It has the power and authority and the legal right to enter into this Agreement and the legal right to make, deliver and perform this Agreement and to authorize the execution, delivery and performance of this Agreement. No consent or authorization of, filing with, or other act by or in respect of any governmental authority, is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. This Agreement has been duly executed and delivered by Assignee, and constitutes a legal, valid and binding obligation of Assignee enforceable against Assignee in accordance with its terms, except as enforceability may be limited by applicable laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. Section 3. Miscellaneous Provisions. 3.1 Lease. The Lease shall remain in full force and effect subsequent to the Close of Escrow. Assignment and Assumption of Lease FINAL - 3 - 3.2 Indemnification. Assignor hereby agrees that it shall indemnify, defend, and hold harmless Assignee, its directors, officers, officials, members, employees, agents, consultants, and representatives from and against any and all claims, liabilities, damages, losses, suits, costs and expenses of every kind, nature and type (including but not limited to expert witness fees and reasonable attorneys' fees and costs) arising directly or indirectly out of this Agreement, including, without limitation, any claims under the Lease Documents arising prior to the Close of Escrow, the falsity of any representation or warranty, and any actions or claims which may be made by Jurtwin, Inc., a California corporation. 3.3 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 3.4 Governing Law. This Agreement shall be governed exclusively by and construed in accordance with the laws of the State of California. 3.5 Notices. Any approval, disapproval, demand, document or other notice ("Notice") which either party may desire to give to the other party under this Agreement must be in writing and may be given by any commercially acceptable means to the party to whom the Notice is directed at the address of the party as set forth below, or at any other address as that party may later designate by Notice. Any Notice given under this paragraph, whether personally or by mail, shall be deemed received only upon actual receipt by the intended party. To Seller: HB AUTO I, LLC 3110 Newport Blvd. Newport Beach, California 92663 Attn: Todd Carson Phone: (949) 675-0101 Fax: (949) 675-0107 Copy to: PALMIERI, TYLER, WIENER, WILHELM & WALDRON LLP 2603 Main Street East Tower — Suite 1300 Irvine, California 92614 Attn: Stephen A. Scheck, Esq. Phone: (949) 851-7221 Fax: (949) 851-1554 To Buyer: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Assignment and Assumption of Lease FINAL - 4 - Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary Copy to: LEIBOLD MCCLENDON & MANN, P.C. Attn: Barbara Zeid Leibold, Esq. 23422 Mill Creek Drive, Suite 105 Laguna Hills, California 92653 3.6 Assignment. This Agreement shall inure to the benefit of and be binding upon the Assignor and the Assignee and their respective successors and assigns. 3.7 Severability. If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 3.8 Modifications; Merger. No modification of this Agreement shall be effective for any purpose unless it is in writing and executed by assignor and assignee. This Agreement merges all negotiations, stipulations and provisions relating to the subject matter of this Agreement which preceded or may accompany the execution of this Agreement. The Recitals are a material portion of this Agreement, and are incorporated herein by this reference. [SIGNATURE PAGE FOLLOWS] Assignment and Assumption of Lease FINAL - 5 - In witness whereof, the parties hereto have executed this Agreement as of the date first written above. "SELLER" RB AUTO I, LLC, a California limited liability company By: Todd Carson, Managing Member [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 1 OF 21 ATTEST: Agency Clerk REVIEWED AND APPROVED: Executive Director "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairperson APPROVED AS TO FORM: Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel By: Barbara Zeid Leibold INITIATED AND APPROVED: Deputy Executive Director [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 2 OF 2] Assignment and Assumption of Lease FINAL -2- Standard Lease Agreement dated April 19, 2004 between C.S.B. Partnership, a California general partnership, as "Tenant," and HB Auto I, LLC, a California limited liability company, and Jurtwin, Inc., a California corporation, as "Landlord" [list any amendments] [list Guaranty] EXHIBIT A EXHIBIT B DEPOSITS AND OTHER FUNDS HELD BY ASSIGNOR [to come] Assignment and Assumption of Lease FINAL � - 4 - EXHIBIT C LEASE AMENDMENT 00 1219.000 1 \844054.7 FIRST AMENDMENT TO STANDARD LEASE AGREEMENT THIS FIRST AMENDMENT TO STANDARD LEASE AGREEMENT (this "First Amendment") is entered into and executed as of June 16, 2008 (the "Execution Date"), by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic (the "Landlord") and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"). RECITALS A. Pursuant to the terms of that certain Standard Lease Agreement dated for reference purposes April 19, 2004 (the "Lease") entered into by and between Tenant as tenant and HB Auto I, LLC, a California limited liability company ("HB Auto") and Turn -Key Washes, Inc., a California corporation (formerly known as Jurtwin, Inc., a California corporation) ("Turn - Key") together as predecessor in interest landlord, Tenant is leasing that certain real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property") owning and operating a Big O Tires retail store and its business office thereon (the "Edinger Avenue Big O Store") as a franchisee of Big O Tires, LLC, a Nevada limited liability company (formerly known as Big O Tire, Inc., a Nevada corporation) ("Big O" or "Franchisor") pursuant to that certain Franchise Agreement #20466 dated August 1, 2004 (the "Franchise Agreement"). The obligations of Tenant under the Lease are guaranteed by Christopher R. Phillips ("Guarantor") pursuant to the terms of that certain Guaranty of Lease dated April 19, 2004 ("Lease Guaranty"). The Lease is currently in full force and effect. B. Pursuant to that certain Grant Deed dated June 25, 2004, recorded in the official real estate records of Orange County, California on June 29, 2004, Instrument No. 2004000591428 (the "Turn -Key Grant Deed"), Turn -Key granted to Michael Todd Carson and Rosemary Kathleen Carson, husband and wife, as community property with right of survivorship (the "Carsons"), Turn-Key's undivided fifty percent (50%) interest in the Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of June 25, 2004 between Turn -Key as assignor and the Carsons as assignee (the "Turn- Key/Carsons Assignment") effective as of the date of the recording of the Turn -Key Grant Deed, Turn -Key assigned, set over and transferred to the Carsons all of its rights, title and interest as a landlord in, to and under the Lease to the Carsons and the Carsons accepted such assignment and assumed and agreed to perform Turn-Key's obligations under or with respect to the Lease. C. Pursuant to that certain Grant Deed dated November 30, 2004, recorded in the official real estate records of Orange County, California on December 6, 2004, Instrument No. 2004001083690 (the "Carsons Grant Deed"), the Carsons granted to HB Auto, the Carson's undivided fifty percent (50%) interest in and to the Property. In conjunction therewith, and pursuant to the terms of that certain Assignment of Lease dated November 11, 2004, between the Carsons as assignor and HB Auto as assignee (the "Carsons/HB Auto Assignment") effective as of the date of the recording of the Carsons Grant Deed, the Carsons assigned, set over and transferred to HB Auto all of their rights, title and interest as the landlord in, to and under the Lease and HB Auto accepted such assignment and assumed and agreed to perform the Carsons' 001219.0001 \846899.5 obligations under and with respect to the Lease. As a result of the recording of the Carsons Grant Deed and the Carsons/HB Auto Assignment, HB Auto owns all rights, title and interest in and to the Property and became the sole landlord under the Lease and shall hereinafter be referred to as "Predecessor Landlord." D. Under threat of condemnation, Landlord and Predecessor Landlord completed the negotiations of and entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of May 5, 2008 (the "Landlord/Predecessor Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Landlord shall acquire all of Predecessor Landlord's rights, title and interest in and to the Property on and subject to the terms of the Landlord/Predecessor Landlord Property Acquisition Agreement, in consideration of the payment by Landlord to Predecessor Landlord of certain compensation for such acquisition of the Property. This First Amendment will become effective as of the date the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, upon which date, Landlord will acquire all of Predecessor Landlord's rights, title and interest in and to the Property and succeed to all of the rights and assume all of the obligations of Predecessor Landlord under the Lease and the Lease Guaranty (the "Effective Date"). In the event the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is not closed and consummated, this First Amendment will not become effective and will be null and void and of no force and effect. E. In conjunction with Landlord's acquisition from Predecessor Landlord of all Landlord's rights, title and interest in and to Property, pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement, Landlord has determined that it will be necessary for Tenant to permanently cease to occupy the Property prior to the expiration of the Lease; and, as such, Landlord and Tenant have entered into that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 (the "Landlord/Tenant Leasehold Interest Acquisition Agreement") setting forth the terms and conditions by which Landlord shall acquire Tenant's entire leasehold interest in the Property (the "Leasehold Interest") pursuant to the Lease and pay certain compensation as consideration for such acquisition of the Leasehold Interest and the termination of the Lease and the Lease Guaranty and Tenant's occupancy of the Property prior to the expiration of the Lease. As required under the terms of Landlord/Tenant Leasehold Interest Acquisition Agreement, Landlord and Tenant are entering into this First Amendment which, as provided in Recital D, will not become effective nor of any force and effect unless and until the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, and Landlord acquires all of Predecessor Landlord's rights, title and interesting and to the Property. F. Section 35 of the Lease provides that any alteration, change or modification of or to the Lease, in order to become effective, shall be made in writing and executed by Tenant and Landlord as the successor -in -interest landlord under the Lease. G. In conjunction with the foregoing Recitals, Landlord and Tenant mutually desire to enter into this First Amendment, thereby amending the Lease on and subject to the terms and conditions as shall hereinafter be set forth. 001219.0001 \846899.5 2 H. Capitalized terms not otherwise defined herein shall have the meanings given them in the Lease and the Landlord/Tenant Leasehold Interest_ Acquisition Agreement. NOW, THEREFORE, in consideration of the foregoing Recitals, and for such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows: AGREEMENT 1. ACKNOWLEDGEMENTS AND AGREEMENTS OF LANDLORD AND TENANT As of the Effective Date, each of Landlord and Tenant acknowledges and agrees that: (a) The Recitals set forth in the introductory paragraphs of this First Amendment are a material component of and integral part of this First Amendment and are incorporated herein by this reference and made a part hereof. (b) The Lease is in full force and effect. (c) Landlord will succeed to all rights and assume all obligations as the successor -in -interest landlord under the Lease; and, Tenant will recognize Landlord as the successor -in -interest landlord under the Lease. In the event the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, Landlord and Tenant shall execute a memorandum setting forth the date which is the Effective Date of this First Amendment. The foregoing notwithstanding, in the event the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is not closed and consummated, this First Amendment will not become effective and will be null and void and of no force and effect. (d) The acquisition of the Property by Landlord pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement does not constitute either a full or a partial "condemnation," nor a "taking" for purposes of Section 22 of the Lease. Accordingly, the Lease shall not terminate as a result of Agency's purchase of the Property, nor shall Tenant be entitled to any abatement of rent; provided that, the Lease as amended by this First Amendment, shall terminate as provided in Section 1(e) below. (e) Pursuant to the terms of the Landlord/Tenant Leasehold Acquisition Agreement, and notwithstanding anything contained in the Lease as amended by this First Amendment to the contrary, in the event the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, Landlord and Tenant acknowledge and agree that the Lease as amended by this First Amendment will terminate on or before the date which is five (5) years from the Effective Date (defined as the "Lease Termination/Vacation Date" in the Landlord/Tenant Leasehold Interest Acquisition Agreement). Landlord and Tenant covenant and agree to take all required action and to perform each and all of their respective obligations, agreements and undertakings under the Landlord/Tenant Leasehold Interest Acquisition Agreement, including, without limitation, to fully and completely effect the termination of the Lease as amended by this First Amendment 001219.0001 \846899.5 and the Lease Guaranty and Tenant's occupancy of the Property and the payment in full by Landlord to Tenant of the "Payment Consideration" (as such term is defined in the Landlord/Tenant Leasehold Interest Acquisition Agreement). (f) Landlord and Tenant hereby reaffirm each and all of their respective representations, warranties, covenants, agreements, obligations and undertakings under the Landlord/Tenant Leasehold Interest Acquisition Agreement. INSURANCE Section 18 (a) of the Lease shall be amended to add the following sentence at the end of that Section: "Notwithstanding anything contained in the foregoing to the contrary, Landlord shall have the right to provide the foregoing Landlord required insurance through the Big Independent Cities Excess Pool (`BICEP'), providing for self insured retention in the amount applicable to all of the members of BICEP." 3. NOTICES Section 37 of the Lease shall be deleted in its entirety and replaced with the following: 37. NOTICE. Except as otherwise required by law, any notice or document required or permitted to be delivered hereunder shall be delivered personally, sent by a responsible overnight courier (i.e., FedEx or UPS), or sent by registered or certified mail, return receipt requested. Any notice, demand, request, consent, approval, or other communication that either party desires or is required to give to the other party must be addressed to the other party at the respective addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith. Notices will be deemed communicated upon receipt if personally delivered, or the next business day if sent by responsible overnight courier, or within seventy-two (72) hours from the time of mailing if mailed as provided in this Section 37. Rejection or other refusal to accept notice or the inability to deliver notice because of a changed address (of which no notice was required hereunder) shall be deemed to be receipt of the notice when sent. To Tenant: C.S.B. PARTNERSHIP 7872 Edinger Avenue Huntington Beach, CA 92675 Attention: Christopher R. Phillips Copy to: Richard P. Waxman, Esq. Wendel, Rosen, Black & Dean LLP I I I I Broadway, 241h Floor Oakland, CA 94607 001219.0001 \846899.5 4 To Landlord: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary 4. RATIFICATION AND REAFFIRMATION OF LEASE Except as hereby expressly amended by this First Amendment, the Lease shall remain in full force and effect up and until the Lease as amended by this First Amendment is terminated on the date which is the Lease Termination Vacation Date, and the Lease as amended by this First Amendment, is hereby ratified and confirmed. 5. INTERPRETATION In the event of any conflict between the provisions of the Lease as originally in effect, and the provisions of this First Amendment, the provisions of this First Amendment shall control. This First Amendment shall be governed by, and interpreted in accordance with, the laws of the State of California. 6. EXECUTION IN COUNTERPARTS; FACSIMILE; DELIVERY TO ESCROW This First Amendment may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Landlord and Tenant agree that a facsimile copy of an authorized signature of a party to this First Amendment will have the same force and effect as the original signature. In conjunction with Recital D and Section 1(c) of this First Amendment and Section 8(d) of the Landlord/Tenant Leasehold Interest Acquisition Agreement, Landlord and Tenant will each deliver to the Escrow (as such term is defined in Section 8(d) of the Landlord/Tenant Leasehold Interest Acquisition Agreement) its executed copy of this First Amendment, specifically instructing the Escrow in writing not to release copies of this First Amendment to either Landlord or Tenant unless and until the acquisition transaction between Landlord and Predecessor Landlord pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated and the Grant Deed from Predecessor Landlord to Landlord is duly recorded in the official real estate records of Orange County, California. 001219.0001 \846899.5 7. INCORPORATION OF EXHIBITS All Exhibits and other instruments attached to this First Amendment are incorporated herein by this reference and made a part hereof. 8. AUTHORITY Each person signing this First Amendment on behalf of a party to this First Amendment, warrants and represents that such person is fully authorized to enter into and execute this Amendment for and on behalf of such party and that this Amendment is a binding obligation on such party. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the dates set forth below. ATTEST: By: _ Name: Title: Agency Clerk REVIEWED AND APPROVED: BY: Name: Title: Executive Director "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH By: Name: Title: Chairperson APPROVED AS TO FORM: By: Name: Title: Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel Barbara Zeid Leibold [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \846899.5 6 INITIATED AND APPROVED: Name: Title: Deputy Executive Director "TENANT" C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner LOW Christopher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its General Partner Lo Virgil Kyle Kyle, III, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner M. Christopher R. Phillips, President By: JYB ENTERPRISES, INC., a California corporation, its General Partner URI 001219.0001 \846899.5 7 Jason Y. Berry, President EXHIBIT D LEASEHOLD INTEREST ASSIGNMENT/TRANSFER 00 1219.000 1 \844054.7 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Richard P. Waxman, Esq. Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24"' Floor Oakland, CA 94607-4036 (THIS SPACE FOR RECORDER'S USE ONLY) ASSIGNMENT, TRANSFER AND CONVEYANCE OF LEASEHOLD INTEREST THIS PAGE ADDED TO PROVIDE ADEQUATE SPACE FOR RECORDING INFORMATION (GOVT. CODE 27361.6) (additional recording fee applies) 001219.0001 \848103.2 ASSIGNMENT, TRANSFER AND CONVEYANCE OF LEASEHOLD INTEREST THIS ASSIGNMENT, TRANSFER AND CONVEYANCE OF LEASEHOLD INTEREST ("Assignment/Transfer") is made and entered into effective as of 520 (Effective Date"), by and between C.S.B. PARTNERSHIP, a California general partnership ("Assignor/Transferor"), and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Assignee/Transferee"), who agree as follows: 1. RECITALS. This Assignment/Transfer is made with reference to the following facts and objectives: 1.1 Assignee/Transferee owns that certain improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property"). Under threat of condemnation, Assignee/Transferee and HB Auto I, LLC, a California limited liability company (collectively, the "Predecessor Landlord") completed the negotiation of and entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of May 5, 2008 ("Landlord/Predecessor Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Assignee/Transferee would acquire all of Predecessor Landlord's rights, title and interest in and to the Property on and subject to the terms of the Landlord/Predecessor Landlord Property Acquisition Agreement. The acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement was closed and consummated on June 16, 2008, upon which date Assignee/Transferee acquired all of Predecessor Landlord's rights, title and interest in and to the Property (the "Property Acquisition Date"). Effective as of the Property Acquisition Date, Assignee/Transferee succeeded to all of the rights and assumed all of the obligations of Predecessor Landlord under that certain Standard Lease Agreement for the Property dated for reference purposes April 19, 2004 as amended by that certain First Amendment to Standard Lease Agreement effective as of June 16, 2008 (collectively, the "Lease"). Assignor/Transferor is the tenant under the Lease, owning and operating a Big O Tires retail store and its business office on the Property (the "Edinger Avenue Big O Store"). The obligations of Assignor/Transferor under the Lease are guaranteed by Christopher R. Phillips ("Guarantor") pursuant to the terms of that certain Guaranty of Lease dated April 19, 2004 ("Lease Guaranty"). The Lease is currently in full force and effect. 1.2 In conjunction with Assignee/Transferee's acquisition from Predecessor Landlord of all of Predecessor Landlord's rights, title and interest in and to the Property pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement, and Assignee/Transferee's proposed redevelopment of the Property, Assignee/Transferee determined that it will be necessary for Assignor/Transferor to permanently cease to occupy the Property prior to the expiration of the Lease; and, as such, Assignee/Transferee and Assignor/Transferor entered into that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 (the "Landlord/Tenant Leasehold Interest Acquisition Agreement"), setting forth the terms and conditions by which Assignee/Transferee shall acquire Assignor/Transferor's entire leasehold interest in the Property (the "Leasehold Interest") pursuant to the Lease and pay certain compensation as consideration for such acquisition of the Leasehold Interest and the termination of the Lease and the Lease Guaranty and Assignor/Transferor's occupancy of the Property prior to the expiration of the Lease. A copy of the Landlord/Tenant Leasehold Interest Acquisition 001219.0001 \848103.2 Agreement is attached hereto as Exhibit A. As required by the terms and conditions of the Landlord/Tenant Leasehold Interest Acquisition Agreement, the Lease was amended by the terms of that certain First Amendment to Standard Lease Agreement dated as of June 16, 2008 ("Lease Amendment") by and between Assignor/Transferor as tenant and Assignee/Transferee as landlord. The Lease as amended by the Lease Amendment shall hereinafter be collectively referred to as the "Lease." 1.3 Under the terms of the Landlord/Tenant Leasehold Interest Acquisition Agreement, Assignee/Transferee is obligated to acquire Assignor/Transferor's Leasehold Interest pursuant to the Lease on or before the date which is five (5) years following the Property Acquisition Date (defined as the "Lease Termination/Vacation Date" in the Landlord/Tenant Leasehold Interest Acquisition Agreement) by giving Assignor/Transferor notice at least ninety (90) days prior to the date which is the Lease Termination/Vacation Date (defined as the "Lease Termination/Vacation Notice" in the Landlord/Tenant Leasehold Interest Acquisition Agreement). In conjunction with the foregoing, Assignee/Transferee has given Assignor/Transferor the Termination/Vacation Notice and, in connection therewith, Assignor/Transferor desires to assign, transfer and convey Assignor/Transferor's Leasehold Interest to Assignee/Transferee and Assignee/Transferee desires to acquire Assignor/Transferor's Leasehold Interest pursuant to the Lease from Assignor/Transferor, all in accordance with and subject to the terms and conditions of this Assignment/Transfer. 1.4 Capitalized terms in this Assignment/Transfer and not otherwise defined herein will have the definitions given such terms in the Landlord/Tenant Leasehold Interest Acquisition Agreement, and such definitions are hereby incorporated by reference herein and made a part hereof. 2. ASSIGNMENT AND ASSUMPTION. Effective as of the Effective Date, and on and subject to the terms, conditions, representations, warranties, covenants and agreements set forth in the Landlord/Tenant Leasehold Interest Acquisition Agreement, Assignor/Transferor hereby assigns, transfers and conveys to Assignee/Transferee all of its rights, title and interest in, to and under Assignor/Transferor's Leasehold Interest pursuant to the Lease and Assignee/Transferee hereby accepts such assignment, transfer and conveyance of Assignor/Transferor's Leasehold Interest pursuant to the Lease. 3. SUBJECT TO LANDLORD/TENANT LEASEHOLD INTEREST ACQUISITION AGREEMENT. Nothing contained in this Assignment/Transfer will operate or have the effect of expanding, constricting or otherwise modifying the terms and provisions of the Landlord/Tenant Leasehold Interest Acquisition Agreement, all of the terms and provisions of which are hereby reaffirmed by Assignee/Transferee and Assignor/Transferor. 4. MISCELLANEOUS. 4.1 If either party commences an action against the other party arising out of or in connection with this Assignment, the prevailing party will be entitled to recover from the losing party reasonable attorneys' fees and costs of suit. 001219.0001\848103.2 4.2 This Assignment will be binding on and inure to the benefit of the parties and their respective successors, assigns, administrators, personal representatives, executors, and heirs. 4.3 The Recitals set forth above are incorporated herein by this reference and made a part hereof. 4.4 All Exhibits attached to this Assignment/Transfer are incorporated herein by this reference and made a part hereof. 4.5 The parties agree that this Assignment/Transfer may be signed in two (2) or more counterparts, each of which will be deemed an original, but all of which together will be deemed one and the same agreement. 4.6 This Assignment/Transfer will be recorded in the official real estate records of Orange County, California as soon as reasonably practical following the execution of this Assignment/Transfer by Assignor/Transferor and Assignee/Transferee. 4.7 Assignor/Transferor and Assignee/Transferee agree to execute all documents and instruments and take such further action as may be reasonably required in order to consummate the transactions contemplated in this Assignment/Transfer. 4.8 Each person signing this Assignment/Transfer on behalf of a party to this Assignment/Transfer is fully authorized to enter into and execute this Assignment/Transfer for and on behalf of such party and that this Assignment/Transfer is a binding obligation on such party. IN WITNESS WHEREOF, the parties hereto have executed this Assignment/Transfer as of the dates set forth below. ATTEST: ASSIGNEE/TRANSFEREE: Agency Clerk REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic Chairperson REVIEWIDA ND APPROVED: APPROVED AS TO FORM: Executive Director ` ancy Counsel (o 17• a 43 [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \848103.2 APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel 1� 'Pi f Barbara rr r INITIATED AND APPRO Deputy Executive Dire or ASSIGNOR/TRANSFEROR: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner am Christopher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its General Partner Virgil Kyle Kyle, III, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner Christopher R. Phillips, President By: JYB ENTERPRISES, INC., a California corporation, its General Partner LOW 001219.0001 \848103.2 4 Jason Y. Berry, President State of California County of On , 20_, before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Seal) Notary Public State of California County of On , 20, before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Seal) Notary Public 001219.0001 \848103.2 5 State of California County of On , 20before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Seal) Notary Public 001219.0001\848103.2 EXHIBIT A LANDLORD/TENANT LEASEHOLD INTEREST ACQUISITION AGREEMENT 001219.0001 \848103.2 EXHIBIT E LANDLORD/TENANT WAIVER/RELEASE 00 1219.000 1 \844054.7 AGREEMENT OF RELEASE OF ALL CLAIMS This AGREEMENT OF RELEASE OF ALL CLAIMS ("Agreement") dated as of June 16, 2008, is made by and between HB AUTO I, LLC, a California limited liability company ("Landlord"), and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"). Landlord and Tenant are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties." RECITALS A. Pursuant to the terms of that certain Standard Lease Agreement dated for reference purposes, April 19, 2004 (the "Lease") between Tenant as tenant and Landlord and, TURN -KEY WASHES, INC., a California corporation (formerly known as JUZTWIN, INC., a California corporation) ("Turn -Key") together as landlord, Tenant is leasing that certain improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property") owning and operating a Big O Tires retail store and its business office therein (collectively, "Tenant's Business"). The Lease is currently in full force and effect. B. The obligations of Tenant under the Lease are guaranteed by Christopher R. Phillips, an individual ("Phillips"), pursuant to the terms of that certain Guaranty of Lease dated April 19, 2004 (the "Lease Guaranty"). C. Pursuant to that certain Grant Deed dated June 25, 2004, recorded in the official real estate records of Orange County, California on June 29, 2004, Instrument No. 2004000591428 (the "Turn -Key Grant Deed"), Turn -Key granted to Michael Todd Carson and Rosemary Kathleen Carson, husband and wife as community property with right of survivorship (the "Carsons") Turn-Key's undivided fifty percent (50%) interest in the Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of June 25, 2004, between Turn -Key as assignor and the Carsons as assignee (the "Turn- Key/Carsons Assignment") effective as of the date of the recording of the Turn -Key Grant Deed, Turn -Key assigned, set over and transferred to the Carsons all of its right, title and interest as a landlord in, to and under the Lease to the Carsons, and the Carsons accepted such assignment and assumed and agreed to perform Turn-Key's obligations under or with respect to the Lease. D. Pursuant to that certain Grant Deed dated November 30, 2004, recorded in the official real estate records of Orange County, California on December 6, 2004, Instrument No. 2004001083690 (the "Carsons Grant Deed"), the Carsons granted to Landlord the Carson's undivided fifty percent (50%) interest in and to the Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated November 11, 2004, between the Carsons as assignor and Landlord as assignee (the "Carsons/Landlord Assignment"), effective as of the date of the recording of the Carsons Grant Deed, the Carsons assigned, set over and transferred to Landlord all of their right, title and interest as the landlord in, to and under the Lease and Landlord accepted such assignment and assumed and agreed to perform the Carsons' obligations under and with respect to the Lease. As a result of the recording of the Carsons 001219.0001 \845367.7 Grant Deed and the Carsons/Landlord Assignment, Landlord owns all rights, title and interest in and to the Property and is the landlord under the Lease. E. The Redevelopment Agency of the City of Huntington Beach, California, a public body, corporate and politic ("Agency"), under the threat of condemnation, has completed negotiations with Landlord, and Agency and Landlord have entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of May 5, 2008 (the "Agency/Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Agency shall acquire all of Landlord's rights, title and interest in and to the Property on and subject to the terms of the Agency/Landlord Property Acquisition Agreement, in consideration of the payment by Agency to Landlord of certain compensation for such acquisition of the Property. A copy of the Agency/Landlord Acquisition Agreement is attached hereto as Exhibit A. F. In connection with the Agency's acquisition from Landlord of all of the Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement, Agency will succeed to all of the rights and assume all of the obligations of the landlord under the Lease and the Lease Guaranty. As part of the threat of condemnation and as a result of the subsequent proposed redevelopment of the Property, Agency has determined that it will be necessary for Tenant to permanently cease to occupy the Property on or before the Lease Termination/Vacation Date (as such term is defined below) and is prepared to pay Tenant certain compensation as consideration for Tenant's agreement to terminate the Lease and the Lease Guaranty and Tenant's occupancy of the Property prior to the expiration of the Lease. In conjunction therewith, Agency and Tenant have entered into that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 (the "Agency/Tenant Leasehold Interest Acquisition Agreement") setting forth the terms and conditions by which Agency shall acquire Tenant's entire leasehold interest in the Property (the "Leasehold Interest") pursuant to the Lease and pay certain compensation as consideration for such acquisition of the Leasehold Interest and the termination of the Lease and the Lease Guaranty and Tenant's occupancy of the Property prior to the expiration of the Lease. The terms of the Agency/Tenant Leasehold Interest Acquisition Agreement provide that the acquisition of the Leasehold Interest pursuant to the Lease and the corresponding termination of the Lease and the Lease Guaranty and Tenant's occupancy of the Property shall occur on or before the date which is five (5) years from the date Agency acquires the Property from Landlord pursuant to the terms of the Agency/Landlord Property Acquisition Agreement (defined as the "Lease TerminationNacation Date" in the Agency/Tenant Leasehold Interest Acquisition Agreement). A copy of the Agency/Tenant Leasehold Interest Acquisition Agreement is attached hereto as Exhibit B. G. In conjunction with the foregoing Recitals, the Parties mutually desire to establish their respective rights and obligations and undertakings with regard to (i) Agency's acquisition of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Acquisition Agreement; and (ii) Agency's acquisition of Tenant's Leasehold Interest in the Property pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement; and, the payment of certain compensation as consideration (a) to Landlord for the acquisition of all of Landlord's rights, title and interest in and to the Property and (b) to Tenant for the eventual acquisition of Tenant's Leasehold Interest pursuant to the Lease and the 001219.0001\845367.7 2 termination of the Lease and the Lease Guaranty and Tenant's occupancy of the Property prior to the expiration of the Lease pursuant to the Agency/Tenant Acquisition Agreement, all on and subject to the terms and conditions as shall hereinafter be set forth. NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and terms, conditions and covenants hereinafter set forth and such other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by the Parties, the Parties, intending to be legally bound, hereby agree as follows: AGREEMENT 1. Incorporation of Recitals. The Recitals set forth in the introductory paragraphs of this Agreement are incorporated into this Agreement and made a part hereof as if stated in full herein. 2. Waiver of Tenant's Award by Landlord. Landlord hereby acknowledges and agrees that Tenant shall be entitled to that portion of the consideration set forth in the Agency/Tenant Leasehold Interest Acquisition Agreement as consideration for Tenant's agreement to assign, transfer and convey to Agency, Tenant's Leasehold Interest in the Property pursuant to the Lease and terminate the Lease and the Lease Guaranty and its occupancy of the Property on or before the Lease Termination/Vacation Date (collectively, "Tenant's Consideration") as negotiated and mutually agreed to by and between Tenant and Agency pursuant to the terms of the Agency/Tenant Leasehold Acquisition Agreement; and, Landlord fully and forever and completely, absolutely and unconditionally waives any and all claims and rights to Tenant's Consideration, including, but not limited to, all claims and rights to Tenant's Consideration specifically set forth in Section 22 of the Lease or as may otherwise be set forth in the Lease. 3. Waiver of Landlord's Award by Tenant. Tenant hereby acknowledges and agrees that Landlord shall be entitled to that portion of the consideration set forth in the Agency/Landlord Property Acquisition Agreement as consideration for Landlord's agreement to assign, transfer and convey to Agency, all of Landlord's rights, title and interest in and to the Property ("Landlord's Consideration") as negotiated and mutually agreed to by and between Landlord and Agency pursuant to the terms of the Landlord/Agency Property Acquisition Agreement; and, Tenant fully and forever and completely, absolutely and unconditionally waives all claims and rights to Landlord's Consideration, including, without limitation, all claims and rights to Landlord's Consideration that may be set forth in the Lease. 4. Mutual Waiver. The Parties, in consideration of the mutual promises, agreements, obligations, undertakings and representations set forth in this Agreement, agree to fully and forever and completely, absolutely and unconditionally waive and release any and all actions, causes of actions, claims, demands, rights, obligations, and liabilities of any kind whatsoever of every nature and character, whether known or unknown, arising from any matter, cause or thing, 00 1219.000 1 \845367.7 whatsoever occurred, done or omitted, and the matters arising out of (i) the acquisition by Agency from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the terms and conditions of the Landlord/Agency Property Acquisition Agreement; and, (ii) the acquisition by Agency of Tenant's Leasehold Interest in the Property pursuant to the Lease, pursuant to the tenns and conditions of the Agency/Tenant Leasehold Interest Acquisition Agreement (collectively, the "Released Claims"). Landlord and Tenant, on behalf of themselves and their respective affiliated corporations, partnerships, limited liability companies or other entities, partners, members, managers, shareholders, officers, directors, employees, guarantors, (including, without limitation, Phillips, pursuant to the Lease Guaranty), contractors, agents, franchisors, franchisees, representatives, trustees, administrators, attorneys, heirs, beneficiaries, and successors in interest and assigns and any and all persons or entities who may claim through or on behalf of any of them, hereby release and forever discharge each other and their respective affiliated corporations, partnerships, limited liability companies or other entities, partners, members, managers, shareholders, officers, directors, employees, guarantors, (including, without limitation Phillips, pursuant to the Lease Guaranty), contractors, agents, franchisors, franchisees, representatives, trustees, administrators, attorneys, heirs, beneficiaries, and successors in interest and assigns and any and all other persons or entities who may claim through or on behalf of any of them from each and all of the Released Claims. 5. Waiver of Unknown Claims. Landlord and Tenant covenant and agree that they will forever refrain from instituting, prosecuting or maintaining any lawsuit, action and/or administrative or governmental proceeding against each other arising out of or relating to the Released Claims. It is intended that this Agreement shall be effective as a bar to each and every action, cause of action, claim, loss and damage whether now known or unknown, foreseen or unforeseen, suspected or unsuspected that any Party may have against any other Party arising out of (i) the acquisition by Agency of all of Landlord's rights, title and interest in and to the Property pursuant to and the Agency/Landlord Property Acquisition Agreement; and (ii) the acquisition by Agency of Tenant's entire Leasehold Interest in the Property pursuant to the Lease pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement, and each of the Parties expressly waives any and all rights and claims under Section 1542 of the California Civil Code, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her, must have materially affected his or her settlement with the debtor. Provided, however, nothing contained in this Section 5 shall release or relieve the Parties from their respective representations, warranties, covenants, agreements, obligations, or undertakings under this Agreement which the Parties shall remain fully liable and responsible therefor and shall survive the execution and delivery of this Agreement. 6. Effectiveness of Agreement. Landlord and Tenant agree that the effectiveness of this Agreement and the releases and waivers by and the representations, warranties, covenants, agreements, obligations and 00 1219.000 1\845367.7 4 undertakings of the Parties under this Agreement are expressly conditioned upon the closing and consummation of (i) the acquisition by Agency of all of Landlord's rights, title and interest in and to Property pursuant to the Agency/Landlord Property Acquisition Agreement; and (ii) the "Closing" (as such term is defined in the Agency/Tenant Leasehold Interest Acquisition Agreement) of the transactions pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement (collectively, the "Conditions Precedent"). In the event both of the Conditions Precedent are not satisfied, this Agreement shall be of no further force and effect. In the event both of the Condition's Precedents are satisfied, the effective date of this Agreement shall be the date both Condition's Precedent are satisfied. 7. Entire Agreement; Amendments. This Agreement (including all Exhibits attached hereto) is the final expression of and contains the entire agreement between the Parties with respect to the matters which are the subject of this Agreement, including, without limitation, the apportionment of the consideration pursuant to Sections 2 and 3 of this Agreement and rights of each Party with respect to such apportionment of the consideration and supersedes all prior understandings with respect thereto. This Agreement may not be modified, changed, supplemented or terminated, nor may any rights or obligations hereunder be waived, except by written instrument signed by the Parties. The Parties do not intend this Agreement to confer any benefit hereunder on any person, firm or corporation, partnership, limited liability company or other entity other than the Parties hereto. 8. Professional Fees. Each Party shall be responsible for paying its own costs and expenses incurred in the preparation of this Agreement. However, in the event of the bringing of any action or suit by a Party hereto against the other Party hereunder by reason of any breach of any of the representations, warranties, covenants, agreements, obligations, undertakings, or provisions on the part of the other Party arising out of this Agreement, then, in that event the prevailing Party shall be entitled to have and recover of and from the other Party all costs and expenses of the action or suit, including reasonable attorneys' accounting, engineering and other professional fees and costs rendered to such Party. 9. Governing Law; Consent to Jurisdiction. The parties hereto acknowledge that this Agreement has been negotiated and entered into in the State of California. The parties hereto expressly agree that this Agreement shall be governed by, interpreted under, and construed and enforced in accordance with the laws of the State of California. The Parties hereto consent to and agree that any legal action or proceeding brought by either Party hereto and arising from or in connection with this Agreement or any breach hereunder shall be brought (i) with respect to the federal district court, in the Southern District of California in the County of Orange, State of California; and (ii) with respect to any state court, in the Superior Court of the State of California for the County of Orange, California. 10. Counterparts; Facsimile. This Agreement may be executed in counterparts, all of which when taken together shall constitute one (1) complete instrument. The Parties agree that a facsimile copy of an authorized 001219.0001 \845367.7 signature of a Party to this Agreement will have the same force and effect as the original signature. 11. Mutual Contribution. Both Parties to this Agreement have been represented by separate and independent legal counsel in the negotiation and preparation of this Agreement. This Agreement has been drafted on the basis of the Parties' mutual contributions of language and this Agreement shall not to be construed against any Party as being the drafter of this Agreement. 12. Notices. Notices and other deliveries pursuant to this Agreement may be delivered by private messenger service, mail, overnight courier or delivery service, or facsimile. Any notice or document required or permitted to be delivered by either Party shall be in writing and shall be deemed to be given on the date received by (or on the date receipt was refused by) the Party; provided, however, that all notices and documents (i) mailed to a Party in the United States Mail, postage prepaid, certified mail, return receipt requested, shall be deemed to have been received three (3) days after mailing; or (ii) delivered by overnight courier or delivery service shall be deemed received the next business day after deposit with a reputable overnight courier or delivery service for overnight delivery. The address of the Parties shall for all purposes be the following, unless otherwise changed by the Party by notice to the other as provided in this Section 12: If to Landlord: c/o HB Auto I, LLC 3111 Newport Boulevard, 2nd Floor Newport Beach, CA 92663 Attention: Todd Carson Telephone: (949) 675-0101 Facsimile: (949) 675-0107 If to Tenant: C.S.B. Partnership 7872 Edinger Avenue Huntington Beach, CA 92675 Attention: Christopher R. Phillips Telephone: (714) 500-4575 Facsimile: (714) 500-4578 13. Authority. Each person executing this Agreement on behalf of a Party hereby represents and warrants that such person is duly authorized and empowered to execute this Agreement on behalf of a Party and that this Agreement is a binding obligation of such Party. 14. Severability. If for any reason, any provision of this Agreement is determined to be invalid, unenforceable or contrary to any existing or future law to any extent, such provisions shall be enforced to the extent permissible under the law and such invalidity, unenforceability or illegality shall not impair the operation of or otherwise effect those provisions of this Agreement which are valid, enforceable and legal. 001219.0001\845367.7 6 15. Binding Effect. This Agreement is and shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, affiliates, predecessors, successors and assigns. 16. Waiver. No waiver in any instance by any Party of any provision of this Agreement shall be deemed a waiver by such Party of such provision in any other instance or a waiver of any other provisions hereunder in any instance. 17. Readings for Reference Only. The headings of Sections and subsections herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 18. Incorporation of Exhibits. Any Exhibits attached to this Agreement are incorporated herein by this reference and made a part hereof. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date written in the introductory paragraph of this Agreement. LANDLORD: RB AUTO I, LLC, a California limited liability company Todd Carson, Managing Member TENANT: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: Christopher R. Phillips, President [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \8453 67.7 By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: Christopher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its General Partner Virgil Kyle Kyle, III, President By: JYB ENTERPRISES, INC., a California corporation, its General Partner Jason Y. Berry, President 001 219.0001\845367.7 EXHIBIT F BIG OITENANT TERMINATIONIRELEASE 001219.0001\844054.7 TERMINATION AND RELEASE AGREEMENT This TERMINATION AND RELEASE AGREEMENT ("Agreement"), is made and entered into as of the 161h day of June, 2008 by and between BIG O TIRES, LLC, a Nevada limited liability company (formerly known as Big O Tires, Inc., a Nevada corporation), ("Big O") and C.S.B. PARTNERSHIP, a California general partnership ("Franchisee") and CHRISTOPHER R. PHILLIPS, an individual ("C. Phillips"), EMIKO J. PHILLIPS, an individual ("E. Phillips"), VIRGIL KYLE KYLE, III, an individual ("V. Kyle"), DIANE R. KYLE (also known as Diane Rose Kyle), an individual ("D. Kyle"), JASON Y. BERRY, an individual ("J. Berry") and LAURA BERRY (also known as Laura Frances Aguayo -Berry), an individual ("L. Berry") ("C. Phillips, E. Phillips, V. Kyle, D. Kyle, J. Berry, and L. Berry shall sometimes hereinafter be referred to individually as a "Franchisee Guarantor" and collectively as the "Franchisee Guarantors"). Big O, Franchisee and the Franchisee Guarantors are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties." RECITALS A. Big O and Franchisee are parties to that certain Franchise Agreement #20466 dated effective as of August 1, 2004 (the "Franchise Agreement"), pursuant to which Franchisee has been granted certain rights as a franchisee to own and operate a Big O Tires retail store (the "Edinger Avenue Big O Store") on the improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property"). The Franchise Agreement expires by its own terms on August 1, 2014. A copy of Franchisee's Franchise Agreement is attached hereto as Exhibit A. B. In conjunction with the requirements under the terms of the Franchise Agreement, Big O as secured party and Franchisee as debtor are parties to that certain Security Agreement dated as of August 1, 2004 (the "Security Agreement"), whereby Franchisee has granted to Big O a security interest in such assets of Franchisee identified and described in Schedule 3 of the Security Agreement (collectively, the "Collateral") as security for all obligations of Franchisee to Big O, including any obligations due under the terms of the Franchise Agreement, and including any future advances made by Big O to Franchisee. A copy of the Security Agreement is attached hereto as Exhibit B. C. The Franchisee Guarantors have, pursuant to the terms of that certain Guaranty of Franchisee's Agreement documents attached to the Franchise Agreement as Schedule 3 (collectively, the "Franchisee Guarantors' Guaranties"), personally guaranteed the performance of Franchisee's obligations under the Franchise Agreement. D. Big O as franchisor and Franchisee, directly or indirectly by and through affiliated entities as franchisee, are parties to those certain other franchise agreements (each an "Other Franchise Agreement" and collectively, the "Other Franchise Agreements") pursuant to which Franchisee or an affiliated entity of Franchisee has been granted certain rights to own and operate other Big O retail stores (each as an "Other Big O Store" and collectively, the "Other Big O Stores"). The Parties acknowledge and agree that this Agreement and the terms thereof shall have no application to such other Franchise Agreements or other Big O Stores and that the 001219.0001\845563.6 terms, conditions and provisions of this Agreement are only applicable to the Franchise Agreement and the Edinger Avenue Big O Store. E. Pursuant to the terms of that certain Standard Lease Agreement dated April 19, 2004 (the "Lease") entered into with HB Auto I, LLC, a California limited liability company ("HB Auto"), and Jurtwin, Inc., a California corporation ("Jurtwin") together as landlord and Franchisee as tenant, Franchisee leases the entire Property for the purpose of owning and operating the Edinger Avenue Big O Store and as its business office and other related uses as permitted by the terms of the Lease. The obligations of Franchisee under the Lease are guaranteed by C. Phillips pursuant to the terms of that certain Guaranty of Lease dated as of April 19, 2004 ("Lease Guaranty"). Copies of the Lease and the Lease Guaranty are attached hereto as Exhibit C. Pursuant to the terms of (i) that certain Assignment of Lease dated as of June 25, 2004 by and between Jurtwin as assignor and Michael Todd Carson and Rosemary Kathleen Carson, husband and wife as community property with right of survivorship as assignee (the "Carsons") and (ii) that certain Assignment of Lease dated as of November 11, 2004 by and between the Carsons as assignor and HB Auto as assignee (collectively, the "Lease Assignments"), HB Auto is owner of all rights, title and interest in and to the Property and is the sole landlord under the Lease ("Landlord"). F. Under the applicable terms of the Franchise Agreement, including, without limitation, Section 18.02 of the Franchise Agreement, Big O has certain rights of first refusal to acquire (i) Franchisee's leasehold rights in and to the Property pursuant to the Lease; and (ii) Franchisee's franchise rights and interest under the Franchise Agreement, in the event Franchisee decides to make a "Transfer" (as such term is defined in the Franchise Agreement (collectively, "Big O's First Refusal Rights"). In addition, under Section 51 of the Lease, Big O has certain rights to cure a default by Franchisee as the tenant under the Lease and assume Franchisee's rights and obligations as the Tenant under the Lease; and, has the right to sublease the Property to another authorized franchisee of Big O subject to the reasonable approval of Landlord upon the occurrence of certain triggering events (collectively, the "Big O Lease Rights"). G. The Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic ("Agency"), under the threat of condemnation, has completed its negotiations with the Landlord to acquire all of Landlord's rights, title and interest in and to the Property. In conjunction therewith, Agency and Landlord have entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of May 5, 2008 (the "Agency/Landlord Property Acquisition Agreement") setting forth the terms and conditions by which Agency shall acquire all of Landlord's rights, title and interest in and to the Property for the acquisition consideration set forth in the Agency/Landlord Property Acquisition Agreement. H. In connection with Agency's acquisition of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement, Agency will succeed to all of the rights and obligations of the Landlord under the Lease and the Lease Guaranty, and Franchisee will continue to operate the Edinger Avenue Big O Tire Store on the Property pursuant to the Lease as amended by that certain First Amendment to Lease in the form attached hereto as Exhibit D (the "Lease Amendment") for a period of time not to exceed 001219.0001\845563.6 2 the date which is five (5) years following the effective date of Agency's purchase and acquisition of the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement (the "Continuing Operation Period"). The Lease as amended by the Lease Amendment shall hereinafter be collectively referred to as the "Lease." As a result of the subsequent proposed redevelopment of the Property, Agency has determined that it will be necessary for Franchisee to permanently cease to occupy the Property at the expiration of the Continuing Operation Period and is prepared to pay Franchisee certain compensation in consideration of Franchisee's agreement to relinquish its leasehold rights and interest in the Property pursuant to the Lease and terminate the Lease and the Lease Guaranty and Franchisee's occupancy of the Property prior to the expiration of the Lease and the Franchise Agreement, all on and subject to the terms of that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 (the "Agency/Tenant Leasehold Interest Acquisition Agreement"). A copy of the Agency/Tenant Leasehold Interest Acquisition Agreement is attached hereto as Exhibit E. I. Agency is obligated to give Franchisee at least ninety (90) days prior written notice of the termination of the Lease and Franchisee's duty to vacate the Property by delivery of a termination notice to Franchisee as required under the terms of the Agency/Tenant Leasehold Interest Acquisition Agreement (the "Lease Termination/Vacation Notice"). Franchisee will be obligated to vacate the Property on or prior to the ninetieth (90t) day after receipt of Termination/Vacation Notice. The date upon which the Lease terminates and Franchisee vacates the Property shall hereinafter be referred to as the "Lease Termination/Vacation Date." J. In conjunction with the acquisition by Agency of the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement and the relinquishment by Franchisee of its leasehold rights and interest in the Property pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement all as a result of the Agency's threat to exercise its rights of condemnation with respect to the Property, the Parties mutually desire (i) to terminate the Franchise Agreement, the Franchisee Guarantors Guaranties, the Security Agreement and all other ancillary agreements entered into by and between Big O and Franchisee and/or the Franchisee Guarantors in conjunction with the Franchise Agreement and the franchise relationship between Big O and Franchisee (collectively, the "Ancillary Agreements") effective as of the Lease Termination/Vacation Date; (ii) that Big O fully and forever waive Big O's First Refusal Rights and Big O's Lease Rights; and (iii) to unconditionally and fully and forever waive, release and relieve each other from and against any and all past or present claims arising out of or in any way connected with the Lease, the Franchise Agreement, the Franchisee Guarantors Guaranties, the Security Agreement, the Ancillary Agreements and their business relationship created thereunder, all effective as of the Lease Termination/Vacation Date. NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants hereinafter set forth, it is hereby agreed by and among the Parties as follows: AGREEMENT 1. Termination of Franchise Agreement (a) Pursuant to Section 19.04 of the Franchise Agreement, Big O and Franchisee acknowledge and agree that the acquisition (i) by Agency from Landlord of all of 001 219.0001\845563.6 Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement; and (ii) by Agency from Tenant of all of its leasehold rights and interest in the Property pursuant to the Lease and termination of the Lease and the Lease Guaranty and Franchisee's occupation of the Property as of the Lease Termination/Vacation Date prior to the expiration of the Lease and the Franchise Agreement pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement, all in conjunction with the threat by Agency to exercise its rights of condemnation, is beyond the control of Big O and Franchisee, is not the fault of either Big O or Franchisee; and, that the termination by the Agency of the Lease and the Lease Guaranty and Franchisee's occupation of the Property as of the Lease Termination/Vacation Date will result in Big O and Tenant being unable to perform their respective obligations under the Franchise Agreement for the period from and after the Lease Termination/Vacation Date. (b) Big O acknowledges and agrees that the threat by Agency to exercise its rights of condemnation pursuant to the Agency/Landlord Property Acquisition Agreement and the Agency/Tenant Leasehold Interest Acquisition Agreement does not trigger any rights or give Big O any rights with respect to (i) Big O's First Refusal Rights or (ii) Big O's Lease Rights; and Big O fully, completely and forever absolutely and unconditionally waives all claims and rights with respect to Big O's First Refusal Rights and Big O's Lease Rights. Big O acknowledges and agrees that Agency and the Agency Parties (as such term is defined in Section 2 below) are third party beneficiaries of the foregoing waivers. (c) Within ten (10) business days following Franchisee's receipt of the Termination/Vacation Notice from Agency, Franchisee will notify Big O of its receipt of the Termination/Vacation Notice and provide Big O with the date which will be the Lease Termination/Vacation Date with respect to the Lease and the Lease Guaranty and Franchisee's leasing and occupancy rights with respect to the Property. Big O and Franchisee agree that except for those obligations which by their terms survive the termination of the Franchisee Agreement, the Franchisee Agreement, the Franchisee Guarantors Guarantees, the Security Agreement and the Ancillary Agreements will terminate effective as of the date which is the Lease Termination/Vacation Date. (d) Franchisee agrees to pay to Big O on the Lease Termination/Vacation Date, all amounts then due and owing to Big O or its affiliates pursuant to the Franchise Agreement or any other agreement, whether written or oral up and through the Lease Termination/Vacation Date. 2. Waiver of Claims in Eminent Domain By Big ®. Big O acknowledges that, pursuant to the terms of the Agency/Tenant Leasehold Interest Acquisition Agreement, Franchisee is entitled to that portion of the consideration payable for Franchisee's agreement to assign, transfer and convey to Agency its leasehold rights and interest under the Lease and to terminate the Lease and the Lease Guaranty and its occupancy of the Property prior to the expiration of the Lease and the Franchise Agreement ("Franchise's Payment Consideration") as negotiated between Franchisee and Agency, and Big O fully, completely and forever absolutely and unconditionally waives all claims and rights to the Franchisee's Payment Consideration. Big O acknowledges that Franchisee has waived claims for any further 001219.0001 \845563.6 4 compensation for it and its related and affiliated corporations, partnerships, limited liability companies or other entities or affiliated parties, including, without limitation, Big O and the Big O Affiliated Parties (as such term is defined below). In addition, Big O acknowledges that, as the franchisor, it is not entitled to compensation in eminent domain pursuant to Redevelopment Agency v. International House of Pancakes, Inc. (1992) 9 Cal.App.4th 1343. Thus, Big O hereby fully, completely and forever absolutely and unconditionally waives, relieves, releases, remises, acquits and discharges (i) Franchisee and Franchisee's Guarantors and their respective heirs, executors, administrators, trustees, affiliated corporations, partnership, limited liability companies or other entities, partners, managers, members, shareholders, officers, directors, agents, spouses, assigns, employees, contractors, consultants, insurers, attorneys, predecessors and successors -in -interest (collectively, the "Franchisee/Franchisee Guarantors Affiliated Parties"); and (ii) Agency and Agency's Board of Directors, the City of Huntington Beach, California, the members of the Huntington Beach, California City Council and their respective officers, directors, agents, representatives, assigns, employees, contractors, consultants, insurers, attorneys and successors -in -interest (collectively, the "Agency Parties") all claims and any and all actions, causes of actions, claims, demands, rights, obligations, and liabilities of any kind whatsoever of every nature and character, whether known or unknown, arising from any matter, cause or thing, whatsoever occurred, done or omitted, and any and all matters arising out of the acquisition of the Property by Agency, including but not limited to claims for compensation, claims for any acquisition or relocation related benefits, including, but not limited to, compensation for personal property, any leasehold interest in the real property, payment for personal property, fixtures and equipment (if applicable), relocation benefits or assistance or any compensation based upon loss of goodwill, interest, costs, attorneys' and appraisal fees or any other damages of any nature. Big O acknowledges and agrees that the Agency Parties are third party beneficiaries of the foregoing waivers and releases. 3. Release. (a) By Franchisee and Franchisee Guarantors. Effective as of the Lease TerminationNacation Date, for good and valuable consideration, the adequacy and sufficiency of which is hereby acknowledged, Franchisee and the Franchisee Guarantors, on behalf of themselves, and the Franchisee/Franchisee Guarantors Affiliated Parties and any and all persons or entities who may claim through or on behalf of any of them, fully, completely and forever absolutely and unconditionally relieve, release, remise, acquit and discharge Big O, and its affiliated corporations, partnerships, limited liability companies or other entities, officers, directors, managers, partners, members, shareholders, employees, guarantors, contractors, agents, predecessors, successors and assignors, and any and all persons or entities who may claim through or on behalf of any of them (collectively, the "Big O Affiliated Parties") from any and all actions, causes of action, suits, claims, rights, liabilities, contracts, duties, obligations, losses, debts, damages, costs, expenses, attorneys' fees, controversies, agreements and demands of every kind, nature, character or description whatsoever, in law or in equity, whether known or unknown, whether anticipated or unanticipated, whether direct or indirect, which either of them may now have against Big O or the Big O Affiliated Parties or which may hereafter be discovered, in connection with, as a result of, or in any way arising from, any relationship or transaction with Big O or the Big O Affiliated Parties, however characterized or described, which relates in any way to the Franchise Agreement, the Franchisee Guarantor Guarantees, the Security Agreement, the Ancillary Agreements and/or the former franchise relationship created 001219.0001\845563.6 5 thereby, from the beginning of time until the Lease Termination/Vacation Date, except and unless such claim, demand, obligation, action, liability or damage arises from a breach or default in Big O's or Big O Affiliated Parties' duties, liabilities, obligations (including, without limitation, indemnification obligations), undertakings, covenants and agreements to be fulfilled and performed pursuant to this Agreement. (b) By Big O. Effective as of the Lease Termination/Vacation Date, for good and valuable consideration, the adequacy and sufficiency of which is hereby acknowledged, Big O, on behalf of itself, and the Big O Affiliated Parties and their respective heirs, executors, administrators, representatives, trustees, affiliated corporations, partnerships, limited liability companies or other entities, officers, directors, managers, partners, members, shareholders, employees, guarantors, contractors, agents, predecessors, successors and assigns and any and all persons or entities who may claim through or on behalf of any of them, fully completely, and forever absolutely and unconditionally relieves, releases, remises, acquits and completely and forever discharges Franchisee and the Franchisee Guarantors and Franchisee/Franchisee Guarantors Affiliated Parties from any and all actions, causes of action, suits, claims, rights, liabilities, contracts, duties, obligations, losses, debts, damages, costs, expenses, attorneys' fees, controversies, agreements and demands (including all amounts presently owed to Big O by Franchisee) and damages of every kind, nature, character or description whatsoever, in law or in equity, whether known or unknown, whether anticipated or unanticipated, whether direct or indirect, which it may now have against Franchisee, the Franchisee Guarantors or Franchisee/Franchisee Guarantors Affiliated Parties, or which may hereafter be discovered, in connection with, as a result of, or in any way arising from, any relationship or transaction with Franchisee, the Franchisee Guarantors or Franchisee/Franchisee Guarantors Affiliated Parties, however characterized or described, which relates in any way to the Lease, including, without limitation, Big O's Lease Rights, the Franchise Agreement, including, without limitation, Big O's First Refusal Rights, the Franchisee Guarantors Guarantees, the Security Agreement, the Ancillary Agreements and/or the former franchise relationship created thereby, from the beginning of time until the Lease Termination/Vacation Date, except and unless such claim, demand, obligation, action, liability or damage arises from a breach or default in Franchisee's or the Franchisee Guarantors' duties, liabilities, obligations (including, without limitation, indemnification obligations), undertakings, covenants and agreements to be fulfilled and performed pursuant to this Agreement. (c) Release of Unknown Claims. Effective as of the Lease Termination/Vacation Date, Franchisee and the Franchisee Guarantors, on the one hand, and Big O on the other hand, covenant and agree that they/it will forever refrain from instituting, prosecuting or maintaining any lawsuit, action and/or administrative or governmental proceeding against the other arising out of or relating to the releases set forth in this Section 3. It is intended that this Agreement shall be effective as a bar to each and every action, cause of action, suit, claim, right, liability, contract, duty, obligation, loss, debt, damage, cost, expense, attorneys' fees, controversy, agreement, trespass, judgment, execution and demand and claim, whether known or unknown, whether foreseen or unforeseen, whether suspected or unsuspected, that Franchisee and the Franchisee Guarantors, on the one hand, and Big O on the other hand, may have against the other and expressly waive any and all rights under Section 1542 of the California Civil Code, which provides: 001219.0001 \845563.6 6 A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor. Provided, however, nothing contained in Section 3(a) and 3(b) and this Section 3(c) shall release or relieve Franchisee and the Franchisee Guarantors, on the one hand, and Big O on the other hand from its/their respective representations, warranties, covenants, obligations, undertakings and agreements under this Agreement or with respect to the Other Franchisee Agreements for the Other Big O Stores, which Franchisee and the Franchisee Guarantors on the one hand, and Big O, on the other hand shall remain fully liable and responsible therefor and shall survive the execution and delivery of this Agreement. 4. Indemnification. (a) Indemnification of Big O. Franchisee and Franchisee Guarantors agree to indemnify, protect, defend and hold harmless Big O and Big O Affiliated Parties from and against the entirety of any charges, complaints, actions, suits, judgments, damages, claims, costs, amounts paid in settlement, taxes, liens, encumbrances, expenses or fees, including all attorneys' fees and court costs, which Big O or Big O Affiliated Parties may suffer resulting from, arising out of or relating to or caused by the breach of any of Franchisee's or the Franchisee Guarantors' representations, warranties, covenants, agreements, duties, liabilities, undertakings and obligations under the terms of this Agreement. (i) Indemnification of Franchisee and Franchisee Guarantors. Big O agrees to indemnify, protect, defend and hold harmless, Franchisee and Franchisee Guarantors and Franchisee/Franchisee Guarantors Affiliates from and against the entirety of any charges, complaints, actions, suits, judgment, damages, claims, costs, amounts paid in settlement, taxes, liens, encumbrances, expenses or fees, including all attorneys' fees and court costs, which Franchisee and Franchisee Guarantors and Franchisee/Franchisee Guarantors Affiliates may suffer resulting from, arising out of or related to or caused by the breach of any of Big O's representations, warranties, covenants, agreements, duties, liabilities, undertakings and obligations under the terms of this Agreement. (b) Other Indemnification. The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory or common law remedy any party may have for breach of representation, warranty, covenant or contract. 5. Notice. Any notice, request, demand, statement or consent made under this Agreement shall be in writing and shall be delivered personally or sent (a) by registered or certified mail, return receipt requested or (b) by a nationally recognized overnight courier (e.g., FedEx or UPS); and shall be deemed given (i) when personally delivered; (ii) three (3) days after deposit in the United States Mail, postage prepaid, and properly addressed to the other Party at its address as set forth below; or (iii) the next business day after deposit with a nationally recognized overnight courier delivery, charges prepaid and properly addressed to the other Party as set forth below. Each Party may designate a change of address by written notice to the other Party given in accordance with this Section 5. 001219.0001\845563.6 7 If to Franchisee or the Franchisee Guarantors If to BigO: C.S.B. Partnership 7872 Edinger Avenue Huntington Beach, California 92647 Attention: Christopher R. Phillips Big O Tires, LLC 12650 East Briarwood Avenue Suite 2-D Englewood, Colorado 80112 Attention: Legal Department In conjunction with the third party beneficiary rights of Agency under Sections 1(b) and 2, in the event either Party provides any notice, request, demand, statement or consent in connection with the waivers and releases set forth in Sections 1(b) and 2 to the other Party, such Party shall also provide a copy of such notice, request, demand, statement or consent in the manner set forth in this Section 5 to Agency as follows: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Copy to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary To Tenant: C.S.B. Partnership 7872 Edinger Avenue Huntington Beach, CA 92647 Attn: Christopher R. Phillips Copy to: Richard P. Waxman, Esq. Wendel, Rosen, Black & Dean LLP 1111 Broadway, 241h Floor Oakland, CA 94607 6. California Laws. This Agreement shall be interpreted by the laws of the State of California. The Parties herein consent to and agree that any legal action or proceeding brought by any Party to the Agreement, and arising from or in connection with this Agreement or any breach hereunder shall be brought (i) with respect to the Federal District Court in the Southern District of California in the County of Orange, State of California; and (ii) with respect to any state court, in the Superior Court of the State of California for the County of Orange, California. 001219.0001\845563.6 8 7. Counterparts; Facsimile. This Agreement may be executed in counterparts, all of which when taken together shall constitute one (1) complete instrument. The Parties agree that a facsimile copy of an authorized signature will have the same force and effect as the original signature. 8. Mutual Contribution. The Parties to this Agreement have been represented by separate and independent legal counsel in the negotiation and preparation of this Agreement. This Agreement has been drafted on the basis of the Parties' mutual contribution of the language and this Agreement shall not be construed against any Party as being the drafter of this Agreement. 9. Authority. Each person executing this Agreement on behalf of a Party hereby represents and warrants that such person is duly authorized and empowered to execute this Agreement on behalf of a Party and that this Agreement is a binding obligation of such Party. 10. Severability. If for any reason any provision of this Agreement is determined to be invalid, unenforceable or contrary to any existing or future law to any extent, such provisions shall be enforced to the extent permissible under the law and such invalidity, unenforceability or illegality shall not impair the operation of or otherwise effect those provisions of this Agreement which are valid, enforceable and legal. 11. Waiver. No waiver in any instance by any Party of any provisions of this Agreement shall be deemed a waiver by such Parry if such provision in any other instance or a waiver of any other provisions hereunder in any instance. 12. Binding Effect. This Agreement is and shall be binding upon and inure to the benefit of the Parties hereto and their respective predecessors, successors, affiliates, assigns, trustees, receivers, personal representatives, heirs, legatees and devisees of the Parties. 13. Attorneys' Fees. Each Party shall be responsible for paying its and his or her own costs and expenses incurred in the preparation of this Agreement. However, in the event of any litigation between the Parties based upon an alleged breach or default in their respective obligations to be fulfilled pursuant to this Agreement, the prevailing Party in the action shall be entitled to recover attorneys' fees and court costs from the non -prevailing Party(ies). 14. Entirety of Agreement; Amendment. This Agreement embodies the entire agreement and understanding between the Parties with respect to the matters which are the subject of this Agreement and supersedes all prior agreements and understandings related to the subject matter hereof. This Agreement may not be modified, changed, amended, supplemented or terminated nor may any obligations hereunder be waived, except by written instrument signed by the Parties; except that, the waivers and releases set forth in Sections 1(b) and 2 of this Agreement which confer onto the Agency Parties certain third party beneficiary rights and benefits, may not be amended without the prior written consent of Agency, which consent shall not be unreasonably withheld. Except as expressly provided in Section 1(b) and 2 of this Agreement, the Parties do not intend to confer any benefit hereunder on any person, firm, corporation, partnership, limited liability company or other entity other than the Parties hereto. 001219.0001 \845563.6 9 15. Exhibits. All Exhibits referenced in this Agreement are attached to this Agreement, and incorporated herein by this reference and made a part hereof. IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties hereby execute this Agreement as of the date first set forth by their names. BIG O: BIG O TIRES, LLC, a Nevada limited liability company (formerly known as Big O Tires, Inc., a Nevada corporation) Date: Kevin Kormandy, Executive Vice President and Chief Operating Officer FRANCHISEE: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. Developments, Inc., a California corporation, its General Partner LOW Date: Christopher R. Phillips, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. Phillips, Inc., a California corporation, its General Partner LI-M Date: Christopher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its General Partner Virgil Kyle Kyle, III, President Date: By:.IYB ENTERPRISES, INC., a California corporation, its General Partner Date: Jason Y. Berry, President SIGNATURES CONTINUED ON FOLLOWING PAGE 001219.0001\845563.6 10 FRANCHISEE GUARANTORS: Christopher R. Phillips, Individually Date: Emiko J. Phillips, Individually Date: Virgil Kyle Kyle, III, Individually Date: Diane R. Kyle (also known as Diane Rose Kyle), Individually Date: Jason Y. Berry, Individually Date: Laura Berry (also known as Laura Frances Aguayo -Berry), Individually Date: 001219.0001 \845563.6 EXHIBIT A Franchisee's Franchise Agreement 001219.0001 \845563.6 EXHIBIT B Security Agreement 001219.0001 \845563.6 EXHIBIT C Lease and the Lease Guaranty 001219.0001\845563.6 EXHIBIT D Lease Amendment 001219.0001\845563.6 EXHIBIT E Agency/Tenant Leasehold Interest Acquisition Agreement 001219,0001 \845563.6 ATTACHMENT #2 CITY OF HUNTINGTON BEACH INTERDEPARTMENTAL COMMUNICATION FINANCE DEPARTMENT TO: PAUL EMERY, INTERIM CITY ADMINISTRATOR FROM: DAN T. VILLELLA, CPA, FINANCE DIRECTOR SUBJECT: FIS 2007-08-24 Approve Agreements with C.S.B. Partnership for Leasehold Interest (7872 Edinger Avenue) DATE: JUNE 2, 2008 As required by Resolution 4832, this Fiscal Impact Statement has been prepared for "Approve Agreements with C.S.B. Partnership for Leasehold Interest (7872 Edinger Avenue)." If the City Council approves this action (total appropriation $1,350,000 the unreserved fund balance of the Merged Project Area will be reduced to $7,081,000. an T. Villella Finance Director DTV /rs jmij `^ Icy - - - - -- INITIATING DEPARTMENT: Economic Development SUBJECT: Approve Agreements with C.S.B. Partnership for Leasehold Interest (7872 Edinger Avenue) COUNCIL MEETING DATE: June 16, 2008 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Resolution (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Tract Map, Location Map and/or other Exhibits Attached ❑ Not Applicable Contract/Agreement (w/exhibits if applicable) Attached (Signed in full by the City Attorney) Not Applicable ❑ Subleases, Third Party Agreements, etc. Attached ❑ (Approved as to form by City Attorney) Not Applicable Certificates of Insurance (Approved by the City Attorney) Attached ❑ Not Applicable ❑ Fiscal Impact Statement (Unbudgeted, over $5,000) Attached ❑ Not Applicable Bonds (If applicable) Attached ❑ Not Applicable Staff Report (If applicable) Attached ❑ Not Applicable Commission, Board or Committee Report (If applicable) Attached ❑ Not Applicable Findings/Conditions for Approval and/or Denial Attached Not Applicable ❑ EXPLANATION FOR MISSING ATTACHMENTS The Agreement is being signed and is expected to be delivered on Thursday. RCA Author: Doris Powell