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HomeMy WebLinkAboutHB Auto I, LLC and C.S.B. Partnership - 2008-12-15TO: 1WR17" DATE: CITY OF IIUNTINGTON BEACH Interdepartmental Communication JOAN FLYNN, City Clerk JENNIFER McGRATH, City Attorney CF�,rr�t November 9, 2011 SUBJECT: HB Auto I, LLC v. Redevelopment Agency of the City of Huntington Beach, Orange County Superior Court Case No. 30-2011-00485047 At the December 15, 2008 City Council meeting, the Agency approved on the Agenda an agreement to purchase the HB Auto property. Subsequently, HB Auto sued the City regarding this Purchase Agreement. The lawsuit was settled by way of a Settlement Agreement. The City Council approved the Settlement Agreement at the October 17, 2011 closed session. The City Manager and HB Auto have signed the Agreement. Attached is the signed, original Agreement for your files. JENNIFER McGRATH City Attorney Attachments c: Kellee Fritzal, Deputy Director of Economic Development Luis Gomez, Economic Development Project Manager 72647.doc SETTLEMENT AGREEMENT REGARDING HB AUTO I, LLC v. REDEVELOPMENTAGENCY OF THE CITY OF HUNTINGTON BEACH HB AUTO I, LLC, a California limited liability company ("HB Auto") and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a municipal corporation, hereinafter referred to as "Agency," hereby enter into this Agreement. In consideration of the promises made herein, the Parties agree as follows: RECITALS 1. HB Auto was owner of the property located at 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property"). For all times relevant to this Agreement, a car repair and tire shop was and is operating on the Property known as Big O Tires. 2. Prior to purchasing the Property, the Agency obtained a "Phase I Environmental Site Assessment Report, Project No. 6824, dated April 21, 2008, prepared by Phase One, Inc.," and a "Limited Phase II Environmental Site Assessment dated May 12, 2008, prepared by Phase One, Inc.," which documented contamination resulting from petroleum hydrocarbons in the form of hydraulic fluid located on the Property (collectively referred to as the "Assessments"). 3. On December 15, 2008, the Agency approved an Agreement entitled "Agreement And Escrow Instructions For Purchase And Sale Of Real Property" to purchase the Property from HB Auto (the "Purchase Agreement"). 4. Section 12.3 of the Purchase Agreement provides that $200,000 of the purchase price was to be held back in a separate escrow account "to cover costs incurred after the Close of Escrow to remediate Known Environmental Matters," which are defined as the contamination described in the Assessments. 5. Section 12.3 of the Purchase Agreement provides that the Agency "shall use commercially reasonable efforts" to remediate the contamination identified in the Assessments. Section 12.3 further provides that when remediating the contamination described in the Assessments, the Agency "shall use commercially reasonable efforts not to interfere with the operations of the business of the tenant of the Property." 6. Section 12.3 further provides that upon completion of the remediation and issuance of a closure letter issued by the lead governing agency, the unused balance of the Holdback Amount is to be disbursed to HB Auto. 7. Section 12.4 provides that an additional $50,000 was to be held back in the escrow to remediate "any Unknown Environmental Matters," which are defined to mean any environmental matter not identified in the Assessments. This holdback money must be spent by the Seventh Anniversary of the Close of Escrow, which date is January 27, 2016, with the unexpended remainder to be released to HB Auto. Page 1 of 5 71981.DOC 8. Escrow closed on the Agency's purchase of the Property on January 28, 2009. 9. On June 8, 2010, the Agency circulated a Request for Proposal for Soil Remediation at the Property, which stated that the "Agency's goal is to remediate the site without significantly impacting the operations of the businesses." However, all proposals received required demolition of the service bays of Big O Tires in order to excavate the contaminated soil. 10. After the close of escrow, the Parties authorized the release of Thirteen Thousand Fifty Two Dollars ($13,052.00) to pay for additional soils investigations. 11. As of March 31, 2011, Stewart Title Company, the escrow agent under the Purchase Agreement (the "Escrow"), is holding Two Hundred Thirty -Nine Thousand, Eight Hundred Sixty Dollars and 86/100 Dollars ($239,860.86) in both holdback accounts, which amount includes accrued interest. 12. The Parties dispute whether the Agency has used commercially reasonable efforts to remediate the Property. 13. On June 17, 2011, HB Auto filed a complaint in the Orange County Superior Court, Case Number 30-2011-00485047, entitled HB Auto I, LLC v. Redevelopment Agency of the City of Huntington Beach, et al. (the "Action"). AGREEMENT The Parties to this Agreement, for and in consideration of the mutual covenants, promises, and conditions set forth herein and subject to the terms and provisions hereof, agree to the following terms: 1. Pursuant to the stay issued by the California Supreme Court on August 11, 2011 in California Redevelopment Association v. Matosantos, Case No. S 194861, 2011 Daily Journal D.A.R. 12,412, and pursuant to Health and Safety Code § 34163(c), the Agency may not amend or modify existing agreements, obligations, or commitments with any entity. Although the Parties contend that this Agreement does not amend or modify the Purchase Agreement, but merely resolves a dispute as to the terms of the Agreement, the Parties agree that this Agreement is conditional upon Court approval. The Parties shall immediately ask the Court to approve this Agreement to allow this Agreement to be effectuated. The Court shall retain jurisdiction until all funds are disbursed from the Escrow. Should the Court not approve this Agreement, then this Agreement is terminated and shall be considered null and void under all circumstances. 2. In consideration of the terms and conditions of this Agreement, the Parties have agreed that Escrow shall disburse to HB Auto, One Hundred Twenty -Five Thousand Dollars ($125,000.00), and shall disburse the entire remaining funds in Escrow of approximately One Hundred Fourteen Thousand Eight Hundred Sixty Dollars and 86/100 Dollars ($114,860.86) to the Agency. Page 2 of 5 71981.DOC 3. The Parties agree that upon execution of this Agreement, all outstanding obligations each Party owes to the other Parry under the Purchase Agreement are satisfied and extinguished. 4. Upon disbursement of all funds from the Escrow, HB Auto shall dismiss the Action with prejudice. 5. Each of the Parties to this Agreement shall be responsible for the payment of his, her, or its own attorneys' fees, court costs, litigation expenses and other sums which have been expended, are currently due, or may become due in conjunction with the matters referenced herein. Each of the Parties to this Agreement agrees to waive any claims for malicious prosecution arising from the prosecution of the Action. 6. In consideration of the recitals, covenants and agreements set forth in this Agreement, and other good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, each Party to this Agreement hereby irrevocably, unconditionally, and mutually releases and forever discharges each other and each of their respective trusts, trustees, successors, assigns, executors and administrators, agents, employees, representatives, attorneys, principals, affiliates, and all persons acting by, through, under or in concert with any of them, or any of them, of and from any and all claims, demands, actions, causes of action, suits, liens, debts, obligations, promises, agreements, costs, damages, liabilities, and judgments of any kind, nature, or amount whether in law or equity, whether known or unknown, anticipated or unanticipated, liquidated or unliquidated, including any and all claimed or unclaimed compensatory damages, consequential damages, interest, costs, expenses and fees (including reasonable or actual attorneys' fees) arising from or related to the events as described in the Action or regarding or relating to the Purchase Agreement. 7. All Parties acknowledge and warrant that their respective execution of this Agreement is free and voluntary. 8. It is understood and agreed that this Agreement and the consideration set forth herein affect the settlement of claims which are denied and contested, and nothing in this Agreement shall be construed as an admission by any Party of any liability of any kind to any Party to this Agreement or any other person, and such liability is expressly denied. 9. This Agreement constitutes and contains the entire Agreement and understanding concerning this subject matter between the Parties and supersedes and replaces all prior negotiations, proposed agreements or agreements, written or oral. Each of the Parties acknowledges that no other Party or any agent or attorney of any other Party made any promise, representation or warranty whatsoever, express or implied, or oral, not contained in this Agreement, concerning its subject matter to induce any Party to execute this Agreement, and each of the Parties acknowledges that it/he/she has not executed this Agreement in reliance on any promise, representation or warranty that is not contained in this Agreement. Page 3 of 5 71981.DOC 10. Each of the Parties hereto specifically acknowledges that it is familiar with the provisions of California Civil Code section 1542, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. Each of the Parties, being aware of section 1542, hereby expressly waives any and all rights they may have thereunder, as well as under any other statutes, or rules of law or equity of similar effect. 11. The terms of this Agreement are contractual and not merely recital. 12. The Parties acknowledge that they have been represented by independent legal counsel of their own choice throughout all of the negotiations which preceded the execution of this Agreement. The Parties further acknowledge that they or their counsel have had adequate opportunity to make whatever investigation or inquiry they may deem necessary or desirable in connection with the subject matter of this Agreement prior to its execution and the delivery and acceptance of the specified consideration. 13. This Agreement shall in all respects be interpreted, enforced and governed by and under the laws of the State of California. 14. In the event that any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision of this Agreement. 15. Each Party agrees to execute any documents as may be reasonably necessary and to cooperate in any reasonable manner to effectuate the terms of this Agreement. 16. The undersigned have carefully read, discussed with their attorneys, and understood the contents and effect of this Agreement and have signed it as their own free act. 17. All parties shall be deemed to have cooperated in the drafting and preparation of this Agreement. Hence, any construction to be made of this Agreement shall not be construed against any Party. Page 4 of 5 71981.DOC 18. This Agreement may be executed in counterparts and each executed counterpart shall be effective as the original. READ THE ABOVE CAREFULLY BEFORE SIGNING November Dated-/W& f' 1 , 2011 By: Dated: October , 2011 By: FRE Iteloent ON, Executive Director Red . p Agency of the City of Huntington Beach (Print Name) Authorized Agent for HB AUTO I, LLC CITY OF HUNTINGTON BEACH Dated: October 26 , 2011 B y� r Il L�9NIFER McGRATH, City Attorney Yd - Redevelopment Agency of the City of l �` Huntington Beach Dated: October , 2011 PALMIERI TYLER WIENER WILHELM & WALDRON, LLP Michael L. D'Angelo, Esq. Attorneys for HB Auto I, LLC Page 5 of 5 71981.DOC 18. This Agreement may be executed in counterparts and each executed counterpart shall be effective as the original. READ THE ABOVE CAREFULLY BEFORE SIGNING Dated: October , 2011 By: FRED WILSON, Executive Director Redevelopment Agency of the City of Huntington Beach ..-, Dated: October, 2011 By: Se, 6(Print Name) Authorized Agent for HB AUTO I, LLC APPROVED AS TO FORM: CITY OF HUNTINGTON BEACH Dated: October , 2011 By: JENNIFER McGRATH, City Attorney Redevelopment Agency of the City of Huntington Beach Dated: October2011 PALMIERI TYLER WIE R WILHELM & W RQN, Lk-P/J M. Michael L. ngelo, Esq. Attorneys for HB Auto I, LLC Page 5 of 5 E, t art title of California, inc. January 29, 2009 Attn: Doris Powell Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA. 92648 Stewart Title of California, Inc T r 2010 Main Street, Suite 220 Irvine, CA 92614 (949) 476-0777 Phone (714) 242-9886 Fax RE: Escrow Number 165821 Escrow Unit No. 2857 Property Address 7872 Edinger Avenue Huntington Beach, California The above escrow closed on January 28, 2009; in connection therewith we enclose the following: --Final Closing Statement --Original Recorded Release of Lien (copy enclosed) ✓Original Recorded Grant Deed (copy enclosed) ,i Original Recorded Quitclaim Deed (3) (Copy enclosed) r/Original Seller's Affidavit of Non -Foreign Status ✓ Copy of Seller's 2009 Real Estate Withholding Certificate ✓One Original Assignment and Assumption of Lease, signed ,—Original Release and Waiver signed by Rosemary Kathleen Carson. Agency to counter sign and please forward a copy when fully executed. ✓ Original Release and Waiver signed by Turn -Key Washes, Inc. Agency to counter sign and please forward a copy when fully executed. ,,.-,'Original Release and Waiver signed by Michael Todd Carson. Agency to counter sign and please forward a copy when fully executed. Copy of fully executed Tenant's Estoppel Certificate .,-Original Landlord's Estoppel Certificate Thank you for the opportunity to be of service to you in this transaction. We look forward to working with you again. Sincerely, Stewart Title of California, Inc. Grace Kim Escrow Officer enclosures Escrow Number I65321 -Close Lv —Buyer EZ So. Page 1 of 1 Buyer's Final Closing Statement File 165821 1/29/09 1:53 PM Stewart Title of California, Inc. (949) 476-0777 Buyer's Final Closing Statement Buyer(s) Redevelopment Agency of the City of Huntington Beach, a public body corporate and politic Seller(s) HB AUTO I, LLC, a California limited liability company Lender * Lender of Borrower's choice Property 7872 Edinger Avenue, Huntington Beach, CA Closing date 1/28/2009 Proration date 1/28/2009 Bank ORGUBC - Union Bank of California 13-100573 Escrow Unit 2857 - SC - Grace Kim Escrow Officer Grace Kim Debit Credit Contract Sales Price....................................................................................................................... 3,431,500.00 Additional Credits: Additional Deposit from Redevelopment Agency of the City of Huntington Beach .............................. 3,426,266.70 Prorations: Lease payment for January 2009 From 1/28/2009 to 2/1/2009 @ $586.66667/day........................................................................... 1,760.00 Other Adjustments: Security Deposit credit to Buyer........................................................................................................ 15,000.00 Title Charges: Settlement or closing fee to Stewart Title of California, Inc................................................................. Title insurance to Stewart Title of California, Inc.$5,882.00.............................................................. Owner's coverage to Stewart Title of California, Inc. Liability amount$3,431,500.00..................................................................................................... Endorsement fees: #116.7 & #101.12 @$647.20/Ea to Stewart Title of California, Inc .................... Wire processing fee $17 each to Stewart Title of California, Inc ......................................................... Courier/Delivery processing fee to Stewart Title of California, Inc ...................................................... Endorsement Fee for 106 $25.00/ 110.9 Mod $50.00 to Stewart Title of California, Inc .................... Maintaing & Processing Holdback Amount to Stewart Title of California, Inc ..................................... Recording Fees/Transfer Charges: Recording fees: to Stewart Title of California, Inc. Other$10.00................................................................................................................................. Subtotal: Balance due to Buyer: Totals: 3,990.30 5,882.00 1,294.40 85.00 40.00 75.00 150.00 10.00 3,443,026.70 3,443,026.70 3,443,026.70 3,443,026.70 Page 1 Buyer's Final Closing Statement File 165821 1/29/09 1:53 PM Stewart Title of California, Inc. (949) 476-0777 Buyer's Final Closing Statement Buyer(s) Redevelopment Agency of the City of Huntington Beach, a public body corporate and politic Seller(s) HB AUTO I, LLC, a California limited liability company Lender ' Lender of Borrower's choice Property 7872 Edinger Avenue, Huntington Beach, CA Closing date 1/28/2009 Proration date 1/28/2009 Bank ORGUBC - Union Bank of California 13-100573 Escrow Unit 2857 - SC - Grace Kim Escrow Officer Grace Kim Debit Credit ContractSales Price....................................................................................................................... 3,431,500.00 Additional Credits: Additional Deposit from Redevelopment Agency of the City of Huntington Beach .............................. 3,426,266.70 Prorations: Lease payment for January 2009 From 1/28/2009 to 2/1/2009 @ $586.66667/day........................................................................... 1,760.00 Other Adjustments: Security Deposit credit to Buyer........................................................................................................ 15,000.00 Title Charges: Settlement or closing fee to Stewart Title of California, Inc................................................................ Title insurance to Stewart Title of California, Inc.$5,882.00.............................................................. Owner's coverage to Stewart Title of California, Inc. Liability amount$3,431,500.00...................................................................................................... Endorsement fees: #116.7 & #101.12 @$647.20/Ea to Stewart Title of California, Inc .................... Wire processing fee $17 each to Stewart Title of California, Inc ......................................................... Courier/Delivery processing fee to Stewart Title of California, Inc ...................................................... Endorsement Fee for 106 $25.00/ 110.9 Mod $50.00 to Stewart Title of California, Inc .................... Maintaing & Processing Holdback Amount to Stewart Title of California, Inc ...................................... Recording Fees/Transfer Charges: Recording fees: to Stewart Title of California, Inc. Other$10.00................................................................................................................................ Subtotal: Balance due to Buyer: Totals: 3,990.30 5,882.00 1,294.40 85.00 40.00 75.00 150.00 10.00 3,443,026.70 3,443,026.70 3,443,026.70 3,443,026.70 Page 1 • A& This Document was electronically recorded by Stewart Title RECORDING REQUESTED BY: St�wart Title of California WHEN RECORDED MAIL TO: City Attorney City of Huntington Beach 2000 Main Street Huntington Beach, CA. 92648 ORDER NO. 2862-83137 ESCROW NO. 2857-83137 ! (65T2 ( A Recorded in Official Records, Orange County Tom Daly, Clerk -Recorder 2009000038955 04:28pm 01/28/09 113 48 R13 2 0.00 0.00 0.00 0.00 3.00 0.00 0.00 0.00 SPACE ABOVE THIS LINE FOR RECORDER'S USE RELEASE OF LIEN APN: 142-081-28 The lien established by the recordation of that certain Resolution No. 2007-74 for a Resolution of the City Council of the City of Huntington Beach Certifying Special Assessments for Collecting Delinquent Civil Fines for Municipal Code Violations dated November 5, 2007, and recorded on November 9, 2007 as Instrument No. 2007-676593in the Official Records of Orange County, California is hereby released as to the following property: 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(s) 47 of Miscellaneous Maps, in the office of the County Recorder of said County. Excepting therefrom all oil, oil rights, natural gas rights, mineral rights and other hydrocarbon substances by whatever name known, together with appurtenant rights thereto, without, however, any right to enter upon the surface of said land nor any portion of the subsurface lying above a depth of 500 feet, as excepted or reserved in instruments of record. Commonly known as 7872 Edinger Avenue, Huntington Beach, CA. 92648 DATE: STATE Or CALIFORNIA COUNTY OF On e/og before me, _ �_ �il 2-A (here insert name and title of the officer), personally appeared who proved to me on the basis of satisfactory evidence to be the personf�, whose name( is/are subscribed to the within instrument and acknowledged to me that she they executed the same in-h44E-fA4e-ir authorized capacity(K, and that by ' ' ter lair signature on the instrument the persorVor the entity upon behalf of which the person acted, executed the instrument. 1 certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. City of Huntington Beach IIy/�!� �IrQM /L.GCJ� Natna'_/ SA,a F2e1cICn�, Its: C 4 y 'Trc4 te— J /� Cris of 44v.,—j T �Je4C4 A WITNESS rnv han t d official sea . Signature (Seal) This standard form covers most usial prob/ears ' the field indicated Before you sign, read it, fill in all blanks, and make changes proper to yozir transaction. Consult a lawyer if you doubt the form's fitness for your purpose GOVERNMENT CODE SECTION 27361.7 I CERTIFY UNDER PENALTY OF PERJURY THAT THE NOTARY SEAL ON THE DOCUMENT TO WHICH THIS STATEMENT IS ATTACHED READS AS FOLLOWS: NAME OF NOTARY: P.L. ESPARZA DATE COMMISSION EXPIRES: AUGUST 4, 2009 COUNTY WHERE BOND IS FILED: ORANGE COMMISSION NO.: 1599179 VENDOR NO.: NNA1 PLACE OF EXECUTION: IRVINE DATE: 1 /28/09 Stewart Title,California Chris Maziar This Document was electronically recorded by Stewart Title WHEN RECORDED MAIL AND MAIL TAX STATEMENTS TO: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street CA 92648 Recorded in Official Records, Orange County Tom Daly, Clerk -Recorder IIIIIIIIIIIIIIISISI 1111111111IIIIIIIISIIIIIII SSIIIIIII111 NO FEE 2009000039036 04:30pm 01/28/09 13 48 G02 A04 5 ).00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 FREE RECORDING REQUESTED PURSUANT TO GOVERNMENT CODE SECTION 27383 DOCUMENTARY TRANSFER TAX $ NONE GRANT DEED FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, HB AUTO I, LLC, a California limited liability company, 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 Avenue in the City of Huntington Beach, County of Orange, State of California, referred to as APN 142-081-028 and described as: SEE ATTACHMENT NO. 1 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE "SELLER" HB AUTO I, LLC, a California limited liability company Dated: 7 ®� By: 6a Its: e- Grant Deed to Agency.doc STATE OF CALIFORNIA )ss COUNTY OF ORANGE On ix--c i7, I-CVS , before me, V. rs-AW,151zIGil personally appeared TODp G�4iLyq.V , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(j) is/a*e subscribed to the within instrument and acknowledged to me that he/she/tlp-y executed the same in his/l'or/their authorized capacity(i�s), and that by his/h4-,;Aheif- signature($) on the instrument the person($), or the entity upon behalf of which the person(%) 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. �..Mom V. aW* �cKV. conunlwlon # 1 "7166 Notay PubUC . caUtOM1 , Signature orange comer 4,20A 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 ❑ Individual Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entity(ies) Grant Deed to Agency.doc DESCRIPTION OF ATTACHED DOCUMENT Title Or Type of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above GOVERNMENT CODE SECTION 27361.7 I CERTIFY UNDER PENALTY OF PERJURY THAT THE NOTARY SEAL ON THE DOCUMENT TO WHICH THIS STATEMENT IS ATTACHED READS AS FOLLOWS: NAME OF NOTARY: V. EMERICK DATE COMMISSION EXPIRES: JUNE 4, 2010 COUNTY WHERE BOND IS FILED: ORANGE COMMISSION NO.: 1667166 VENDOR NO.: NNA 1 PLACE OF EXECUTION: IRVINE DATE: 1/28/09 Stewart Title,California Chris Maziar ATTACHMENT NO. 1 TO GRANT DEED 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 Grant Deed to Agency.doc 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. 51, adopted on October 4, 1982, 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 J&"' day of December, 2008. ATTEST: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic By: G Its: CHAIRPERSON APPROVED n�`'sS T O FOR'", .-�i r 0CRy A ACKNOWLEDGMENT STATE OF CALIFORNIA ss COUNTY OF ORANGE On December 16, 2008 before me, P. L. Esparza, Notary Public, personally appeared Joan L. Flynn and Keith Bohr who proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons 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. W6 7�- (Notary Signatur GOVERNMENT CODE SECTION 27361.7 I CERTIFY UNDER PENALTY OF PERJURY THAT THE NOTARY SEAL ON THE DOCUMENT TO WHICH THIS STATEMENT IS ATTACHED READS AS FOLLOWS: NAME OF NOTARY: P.L. ESPARZA DATE COMMISSION EXPIRES: AUGUST 4, 2009 COUNTY WHERE BOND IS FILED: ORANGE COMMISSION NO.: 1599179 VENDOR NO.: NNA 1 PLACE OF EXECUTION: IRVINE DATE: 1/28/09 Stewart Title,California Chris Maziar -i" — . 136E-502-A (FRONT) REV. 10 (8-07) FOR RECORDER'S USE ONLY PRELIMINARY CHANGE OF OWNERSHIP REPORT [To be completed by transferee (buyer) prior to transfer of subject property in accordance with Section 480.3 of the Revenue and Taxation Code.] A Preliminary Change of Ownership Report must be filed with each conveyance in the County Recorder's office for the county where the property is located; this particular form may be used in all 58 counties of California THIS REPORT IS NOT A PUBLIC DOCUMENT SELLER/TRANSFEROR: I IB Auto LL,C BUYER/TRANSFEREE: Redevelopment Agency of the City of Huntington Beach ASSESSOR'S PARCEL NUMBER(S): 142-081-28 PROPERTY ADDRESS OR LOCATION: 7872 l dinger Avenue, Huntington Beach, California MAIL TAX INFORMATION TO: Name: Redevelopment Agency of the City of I luntington Beach Address: }eCt_ Mt�t s i 1�1�1t ing tZY1 wt'$�'+� NOTICE: A lien for property taxes applies to our ro} ertt on January 1 of each year for the taxes owing in the following fiscal year, P P Y PP Y P P Y Y Y g g Y July 1 through June 30. One-half of these taxes is due November 1, and one- half is due February 1. The first installment becomes delinquent on December 10, and the second installment becomes delinquent on April 10. One tax bill is mailed before November 1 to the owner of record. You may be responsible for the current or upcoming property taxes even if you do not receive the tax bill.. The property which you acquired may be subject to a supplemental assessment in an amount to be determined by the Orange County Assessor. For further information on your supplemental roll obligation, please call the Orange County Assessor. PART I: TRANSFER INFORMATION (please answer all questions) YES NO ❑ 0 A. Is this transfer solely between husband and wife (addition of a spouse, death of a spouse, divorce settlement, etc.)? ❑ j B. Is this transaction only a correction of the name(s) of the person(s) holding title to the property (for example, a name change upon marriage)? Please explain ❑ Q C. Is this document recorded to create, terminate or reconvey a lender's interest in the property? ❑ ❑ D. Is this transaction recorded only as a requirement for financing purposes or to create, terminate, or reconvey a security interest (e.g. cosigner)? Please explain ❑ E. Is this document recorded to substitute a trustee of a trust, mortgage or other similar document? ❑ ❑ F. Did this transfer result in the creation of a joint tenancy in which the seller (transferor) remains as one on the joint tenants? ❑ ❑ G. Does this transfer return property to the person who created the joint tenancy (original transferor)? H. Is this transfer of property: ❑ ❑ 1. to a revocable trust that may be revoked by the transferor and is for the benefit of the ❑ transferor ❑ transferor's spouse ? ❑ 2. to a trust that may be revoked by the Creator/Grantor who is also a joint tenant, and which names the other joint V tenant(s) as beneficiaries when the Creator/Grantor dies? ❑ El 3. to an irrevocable trust for the benefit of the ❑ Creator/Grantor and/or ❑ Grantor's spouse? ❑ 4. to an irrevocable trust from which the property reverts to the Creator/Grantor within 12 years? ❑ Q I. If this property is subject to a lease, is the remaining lease term 35 years or more including written options? ❑ ID *J. Is this transfer between ❑ parent(s) and child(ren)? ❑ or from grandparent(s) to grandchild(ren)? ❑ i *K. Is this transaction to replace a principal residence by a person 55 years of age or older? Within the same county? ❑ Yes ❑ No ❑ 0 *L. Is this transaction to replace a principal residence by a person who is severely disabled as defined by Revenue and Taxation Code section 69.5? Within the same county? ❑ Yes ❑ No ❑ ❑ M. Is this transfer solely between domestic partner currently registered with the California Secretary of State? *If you checked yes to J, K, or L, you may qualify for a property tax reassessment exclusion, which may result in lower taxes on your property. If you do not file a claim, your property will be reassessed. Please provide any other information that will help the Assessor to understand the nature of the transfer. If the conveying document constitutes an exclusion from a change in ownership as defined in section 62 of the Revenue and Taxation Code for any reason other than those listed above, set forth the specific exclusions claimed: Please answer all questions in each section. If a question does not apply, indicate with "N/A." Sign and date at bottom of second page. PART II: OTHER TRANSFER INFORMATION A. Date of transfer if other than recording date B. TTyp�.of transfer (please check appropriate box): C3' Purchase ❑ Foreclosure ❑ Gift ❑ Trade or Exchange ❑ Merger, Stock or Partnership Acquisition ❑ Contract of Sale - Date of Contract ❑ Inheritance - Date of Death ❑ Other (please explain): ❑ Creation of Lease ❑ Assignment of a Lease ❑ Termination of a Lease ❑ Sale/Leaseback ❑ Date lease began ❑ Original term in years (including written options) ❑ Remaining term in years (including written options) Monthly Payment Remaining Term C. Was only a partial interest in the property transferred? 0 Yes 40 No If yes, indicate the percentage transferred %. 130E-502-A (BACK) REV. 10 (8-07) Please write Assessor's Parcel Number(s): Please answer, to the best of your knowledge, all applicable questions, then sign and date, if a question does not apply, indicate with "N/A." PART III: PURCHASE PRICE AND TERMS OF SALE A. CASH DOWN PAYMENT OR value of trade or exchange (excluding closing costs) Amounts B. FIRST DEED OF TRUST @ % interest for years. Pymts./Mo.=$ (Prin. & Int. only) Amount $ ❑ FHA ( Discount Points) ❑ Fixed rate ❑ New loan ❑ Conventional ❑ Variable rate ❑ Assumed existing loan balance ❑ VA ( Discount Points) ❑ All inclusive D.T. ($ Wrapped) ❑ Bank or savings & loan ❑ Cal -Vet ❑ Loan carried by seller ❑ Finance company Balloon payment ❑ Yes ❑ No Due Date Amount $ C. SECOND DEED OF TRUST @ % interest for _years. Pymts./Mo.=$ (Prin. & Int. only) Amount $ ❑ Bank or savings & loan ❑ Fixed rate ❑ New loan ❑ Loan carried by seller ❑ Variable rate ❑ Assumed existing loan balance Balloon payment ❑ Yes ❑ No Due Date Amount $ D. OTHER FINANCING: Is other financing involved not covered in (b) or (c) above? ❑ Yes ❑ No Amount $ Type @ % interest for years. Pymts./Mo.=$ (Prin. & Int. only) ❑ Bank or savings & loan ❑ Fixed rate ❑ New loan ❑ Loan carried by seller ❑ Variable rate ❑ Assumed existing loan balance Balloon payment ❑ Yes ❑ No Due Date Amount $ E. WAS AN IMPROVEMENT BOND ASSUMED BY THE BUYER? ❑ Yes ❑ No Outstanding Balance: Amount $ F. TOTAL PURCHASE PRICE (or acquisition price, if traded or exchanged, include real estate commission if paid.) Total Items A through E I $"f.� . 411 rj�CJ u G. PROPERTY PURCHASED ❑ Through a broker ❑ Direct from seller ❑ From a family member ❑ Other (please explain): If purchased through a broker, provide broker's name and phone number: Please explain any special terms, seller concessions or financing and any other information that would help the Assessor understand the purchase price and terms of sale PART IV: PROPERTY INFORMATION A. TYPE OF PROPERTY TRANSFERRED: ❑ Single-family residence ❑ Agricultural ❑ Timeshare ❑ Multiple -family residence (no. of units: ) ❑ Co-op/Own-your own ❑ Manufactured home W Commercial/Industrial ❑ Condominium ❑ Unimproved lot ❑ Other (Description: i.e., timber, mineral, water rights, etc. B. IS THIS PROPERTY INTENDED AS YOUR PRINCIPAL RESIDENCE? ❑ Yes 191 No If yes, enter date of occupancy / , 20 or intended occupancy / 20 (month) (day) (year) (month) (day) (year) C. IS PERSONAL PROPERTY INCLUDED IN PURCHASE PRICE (i.e., furniture, farm equipment, machinery, etc.) (other than a manufactured home subject to local property tax)? ❑ Yes 1�1 No If yes, enter the value of the personal/business property included in the purchase price $ (Attach itemized list). D. IS A MANUFACTURED HOME INCLUDED IN PURCHASE PRICE? ❑ Yes `P No If yes, how much of the purchase price is allocated to the manufactured home? $ Is the manufactured home subject to local property tax? ❑ Yes ❑ No What is the decal number ? E. DOES THE PROPERTY PRODUCE INCOME? ❑ Yes ❑ No If yes, is the income from: P Lease/Rent ❑ Contract ❑ Mineral Rights ❑ Other (please explain): F. WHAT WAS THE CONDITION OF THE PROPERTY AT THE TIME OF SALE? ❑ Good ❑ Average ❑ Fair ❑ Poor Please explain the physical condition of the property and provide any other information (such as restrictions, etc.) that would assist the Assessor in determining the value of the property. CERTIFICATION OWNERSHIP TYPE (X) Proprietorship ❑ I certify that the foregoing is true, correct and complete to the best of my knowledge and belief. Partnership ❑ This declaration is binding on each and every co-owner and/or partner. Corporation ❑ Other ❑ NAME OF NEW WN /CORPORATE OFFICER TITLE Executive Director -Wilson r-, `SIGNATUR WNER/CORPORATE OFFICER DATE 12-15-08 NAME OF yped or printed) FEDERAL EMPLOYER ID NUMBER ADDRESS (typed or printed) PHONE NUMBER (8 a.m. — 5 p.m.) E-MAIL ADDRESS (optional) (Note: The Assessor may contact you for further information) If a document evidencing a change of ownership is presented to the recorder for recordation without the concurrent filing of a preliminary change of ownership report, the recorder may charge an additional recording fee of twenty dollars ($20). This Document was electronically recorded by Stewart Title Recorded in Official Records, Orange County RECORDING REQUESTED BY AND I Tom Daly, Clerk -Recorder WHEN RECORDED RETURN TO: 1111111111111111111111111111111111111111111111111111111III11 NO FEE 2009000039037 04:30prn 01/28/09 THE REDEVELOPMENT AGENCY OF I 113 48 Q01 A04 5 THE CITY OF HUNTINGTON BEACH 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Main Street Huntington Beach, CA 92648 i Space Above This Line for Recorder's Use DOCUMENTARY TRANSFER TAX - $ NONE X Computed on the consideration or value of property conveyed; OR FREE RECORDING REQUESTED PURSUANT TO Computed on the consideration or value less liens or encumbrances GOVERNMENT CODE SECTION 27383 remaining at time of sale. The undersigned Grantor Signature of Declarant or Agent Determining Tax - Firm Name QUITCLAIM DEED FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, TURN -KEY WASHES, INC., a California corporation, does hereby REMISE, RELEASE AND FOREVER QUITCLAIM to the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic, the real property located at 7872 Edinger Avenue in the City of Huntington Beach, County of Orange, State of California, referred to as APN 142-081-028 and described as: SEE ATTACHMENT NO. 1 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE Dated: May, 2008 TURN -KEY WASHES, INC., a California corporation By: Bo ie arson, President MAIL TAX STATEMENTS TO: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 STATE OF CALIFORNIA ) )ss COUNTY OF SAN DIEGO ) On / i p q,,j O, before me, ttr,�4a r h Lt UY— , personally appeared V 1olp; �z, who proved to me on the basis of satisfactory evidence to be the person(*) whose name(.&) is/aw subscribed to the within instrument and acknowledged to me that-,ke/she/9+,-rexecuted the same in.hi'§/her/14eirauthorized capacitykies), and that by,.Wher/their signature(s'on the instrument the perso*' or the entity upon behalf of which the person(R) 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. aL qn"a;t-�- 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 ❑ Individual CRY Corporate Of icer Title(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Person(:) Or Entity(.ies) UA14 V DESCRIPTION OF ATTACHED DOCUMENT �41 Title Or Type of Document Number Of Pages Mft 1 2 J'44 ate Of Document Signer(s) Other Than Named Above GOVERNMENT CODE SECTION 27361.7 I CERTIFY UNDER PENALTY OF PERJURY THAT THE NOTARY SEAL ON THE DOCUMENT TO WHICH THIS STATEMENT IS ATTACHED READS AS FOLLOWS: NAME OF NOTARY: LEA MARHULIK DATE COMMISSION EXPIRES: NOVEMBER 13, 2008 COUNTY WHERE BOND IS FILED: SAN DIEGO COMMISSION NO.: 1526463 VENDOR NO.: NNA 1 PLACE OF EXECUTION: IRVINE DATE: 1/28/09 Stewart Title,California Chris Maziar I ATTACHMENT NO. I TO QUITCLAIM DEED 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 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. 51, adopted on October 4, 1982, 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 26thday of January , 2009 . ATTEST: may. SUMEETARY REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic IN Its: CHAIRPERSON J APPROVED AS TO FORM E IqlL-- City AttormY J eh I22•o`I Sr. Deputy City A ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) On January 26, 2009 before me, P. L. Esparza, Notary Public, personally appeared Joan L. Flynn and Keith Bohr who proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons 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.' cOfnlnl t" * 18"179 o=Wc*U* raVCW n.a sAQ4. (Notary Signature Vl GOVERNMENT CODE SECTION 27361.7 I CERTIFY UNDER PENALTY OF PERJURY THAT THE NOTARY SEAL ON THE DOCUMENT TO WHICH THIS STATEMENT IS ATTACHED READS AS FOLLOWS: NAME OF NOTARY: P.L. ESPARZA DATE COMMISSION EXPIRES: AUGUST 4, 2009 COUNTY WHERE BOND IS FILED: ORANGE COMMISSION NO.: 1599179 VENDOR NO.: NNA1 PLACE OF EXECUTION: IRVINE DATE: 1/28/09 Stewart Title,California Chris Maziar Ex This Document was electronically recorded by Stewart Title RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: THE REDEVELOPMENT AGENCY OF Recorded in Official Records, Orange County Tom Daly, Clerk -Recorder 111111111111111111111111111111111111111111111111111111111 NO FEE 2009000039038 04:30pm 01/28/09 113 48 Q01 "A 5 THE CITY OF HUNTINGTON BEACH 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Main Street Huntington Beach, CA 92648 ...,_.. Space Above This Line for Recorder's Use DOCUMENTARY TRANSFER TAX - $ X Computed on the consideration or value of property conveyed; OR FREE RECORDING REQUESTED PURSUANT TO Computed on the consideration or value less liens or encumbrances GOVERNMENT CODE SECTION 27383 remaining at time of sale. The undersigned Grantor Signature of Declarant or Agent Determining Tax - Firm Name QUITCLAIM DEED FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, MICHAEL TODD CARSON, does hereby REMISE, RELEASE AND FOREVER QUITCLAIM to the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic, the real property located at 7872 Edinger Avenue in the City of Huntington Beach, County of Orange, State of California, referred to as APN 142-081-028 and described as: SEE ATTACHMENT NO ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE r Dated: May _M, 2008 MICHAEL TODD CARSON MAIL TAX STATEMENTS TO: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 ATTACHMENT NO. I TO OUITCLAIM DEED 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 STATE OF CALIFORNIA ) )ss COUNTY OF ORANGE ) On §. /q bef_o me, �i E(. �/� [ . 1� / �C� �C�t rq P.9b personally appeared [ '( f who proved to e on the basis of satisfactory evidenc to be the person& whose name is e subscribed to the within instrument d acknowledged to me thaw executed the same i his authorized capacity(, and that b his :r signature( on the instrument the person(), or the entity upon behalf of which the person() 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. VICKI L. RANCK signature 4�— COMM. # 1782272 NOTARY PUBLIC • CALIFORNIA Z4 OPTIONAL m ORANGE COUNTY O My Comm. Expires December 20, 2011 Thu aw, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER ❑ Individual ❑ Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entity(ies) DESCRIPTION OF ATTACHED DOCUMENT Title Or Type of Document Number Of Pages Date Of Document No Signer(s) Other Than Named Above 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. 51, adopted on October 4, 1982, 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 26thday of January , 2009 . REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic By: Its: CHAIRPERSON ATTEST: ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) On January 26, 2009 before me, P. L. Esparza, Notary Public, personally appeared Joan L. Flynn and Keith Bohr who proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons 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. P. L. EESSpq�gjl~ Comftwon #t 1 w9179 ; nroy NhCovr - EVfiftAug 4,=9 (Notary Signatu 3& This Document was electronically recorded by Stewart Title Recorded in Official Records, Orange County Tom Daly, Clerk -Recorder RECORDING REQUESTED BY WHEN RECORDED D D RETURN TO: II IIIIIIII��IIIIIIII��IIIIIIIIIIIIII�I�IIIIIIIIIII�IIIIIIIIII NO FEE 2009000039039 04:30pm 01/28/09 THE REDEVELOPMENT AGENCY OF 113 48 Q01 A04 5 THE CITY OF HUNTINGTON BEACH 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Main Street Huntington Beach, CA 92648 NnNF Space Above This Line for Recorder's Use DOCUMENTARY TRANSFER TAX - $ X Computed on the consideration or value of property conveyed; OR FREE RECORDING REQUESTED PURSUANT TO Computed on the consideration or value less liens or encumbrances GOVERNMENT CODE SECTION 27383 remaining at time of sale. The undersigned Grantor Signature of Declarant or Agent Determining Tax - Firm Name QUITCLAIM DEED FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, ROSEMARY KATHLEEN CARSON, does hereby REMISE, RELEASE AND FOREVER QUITCLAIM to the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic, the real property located at 7872 Edinger Avenue in the City of Huntington Beach, County of Orange, State of California, referred to as APN 142-081-028 and described as: SEE ATTACHMENT NO. 1 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE Dated: 2008 &jjVLLJ.88 �h&l &�ao ROSEMA KATHLEEN CARSON MAIL TAX STATEMENTS TO: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 ATTACHMENT NO. 1 TO QUITCLAIM DEED 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 STATE OF CALIFORNIA ) )ss COUNTY OF ORANGE On A4qu"421, 204 before ; e, (.1/1'Aia- L (�U(i S S $ VI personally appearecSemr,,j };cA eery c,r..5o, who proved to me on the basis of satisfactory evidence to be the person(4 whose n meX is/ar-e-subscribed to the within instrument and acknowledged to me that he/she/they executed the same in =lass/her r authorized capacity(-ie*), and that by leis/her/their signature(.R) on the instrument the person(s), or the entity upon behalf of which the persono)-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. IQC+ YNITH AL 600SSEN �r COmmibtion # 1698a80 Signat e Notary Pubuc - Caifornia 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 ❑ Individual ❑ Corporate Officer Title(s) ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entity(ies) DESCRIPTION OF ATTACHED DOCUMENT Title Or Type of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above C 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. 51, adopted on October 4, 1982, 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 26th day of January , 2009 ATTEST: /1 REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic By: _ Its: CHAIRPERSON ILURe Deputy aty fta ,VA ACKNOWLEDGMENT STATE OF CALIFORNIA ss COUNTY OF ORANGE On January 26, 2009 before me, P. L. Esparza, Notary Public, personally appeared Joan L. Flynn and Keith Bohr who proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons 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. (Notary Signature) ESPARZA CoMMbSlon #E 1599179 MC MY Comm. EXF* tAu8 e. 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/,weam/are not a nonresident alien for purposes of United States income taxation; My/gaf"' United States taxpayer identifying number (Employer Identification Number) is 90- i 0;3 � 3. My/ r address is 31 I G 0 -6�vok 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 I/we 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. "TRANSFEROR" HB AUTO I, LLC Dated: 20 0 By T dd Carson Managing Member YEAR CALIFORNIA FORM 2009 Real Estate Withholding Certificate 593•C � Pt,1 — Seller's Information Rpturn this fnrm fn vnur perrnw rmmnane ame N or ITIN t1�.' L �.�, pouse's/RDP's Nam/ e� (if jointly owned) y Spouse's/RDP's SSN or ITIN (if jointly owned) Q, Yt/> Address (including suite, room, PO Box, or PM/B no.) ❑ FEIN ❑ CA Corp no. City State IMP Code Ownership Percentage % Property address (if no street address, provide parcel number and county) � d To determine whether you qualify for a full or partial withholding exemption, check all boxes that apply to the property being sold or transferred. (See line -by-line notes in the Instructions) Part 11— Certifications which fully exempt the sale from withholding: 1. • ❑ The property qualifies as the seller's (or decedent's, if being sold by the decedent's estate) principal residence within the meaning of Internal Revenue Code (IRC) Section 12. 2. • ❑ The seller (or decedent, if being sold by the decedent's estate) last used the property as the seller's (decedent's) principal residence within the meaning of IRC Section 121 without redrd to the two-year time period. 3. • ❑ The seller has a loss or zero gain for California income tax purposes on this sale. To check this box you must complete Form 593-E, Real Estate ltholding-Computation of Estimated Gain or Loss, and have a loss or zero gain on line 16. 144. • The property is being compulsorily or involuntarily converted and the seller intends to acquire property that is similar or related in service or use to qualify for nonrecognition of gain for California income tax purposes under IRC Section 1033. 5. • ❑ The transfer qualifies for nonrecognition treatment under IRC Section 351 (transfer to a corporation controlled by the transferor) or IRC Section 721 ,, contribution to a partnership in exchange for a partnership interest). e seller is a corporatior�(or a limited liability company (LLC) classified as a corporation for federal and California income tax purposes) that is either qualified through the California Secretary of State or has a permanent place of business in California. \ 7. ®❑ The seller is a California partnership, or qualified to do business in California (or an LLC that is classified as a partnership for federal and California J\ income tax purposes and is not a single member LLC) that is not disregarded for federal and California income tax purposes. If this box is checked, the partnership or LLC must still withhold on nonresident partners or members. S.. ❑ The seller is a tax-exempt entity under California or federal law. + 9. • ❑ The seller is an insurance company, individual retirement account, qualified pension/profit sharing plan, or charitable remainder trust. Part 111— Certifications that may partially or fully exempt the sale from withholding: Real Estate Escrow Person (BEEP): See instructions for amounts to withhold. 10. • El The transfer qualifies as a simultaneous like -kind exchange within the meaning of IRC Section 1031. 11. • ❑The transfer qualifies as a deferred like -kind exchange within the meaning of IRC Section 1031. 12. • ❑The transfer of this property is an installment sale where the buyer is required to withhold on the principal portion of each installment payment. Copies of Form 593-I, Real Estate Withholding Sale Acknowledgement, and the promissory note are attached. Under penalties of perjury, I hereby certify that the information provided above is, to the best of my knowledge, true and correct. If conditions change, I will promptly inform the withholding agent. I understand that the Franchise Tax Board may review relevant escrow documents to ensure withholding compliance and that completing thisfop does n pt from filing a California income or franchise tax return to report this sale. Seller's Name and Title Seller's Signature Date _,- Spouse's(RDP's Name Spouse's/RDP's Signature Date Please verify that the SSN or ITIN listed above in Part I of this form is correct. Seller: If you checked any box in Part II, you are exempt from real estate withholding. If you checked any box in Part III, you may qualify for a partial or complete withholding exemption. If you did not check any box in Part II or Part III, the withholding will be 3 1/3% (.0333) of the total sales price or the optional gain on sale withholding amount certified by seller on Form 593, Real Estate Withholding Tax Statement. If you are withheld upon, the withholding agent should give you one copy of Form 593. Attach a copy to the lower front of your California income tax return and make a copy for your records. Keep Form 593-C for five years following the close of the transaction. You must furnish the form to the FTB upon request. For Privacy Notice, get form FTB 1131 ® 1 7131093 Form 593-C C2 2008 ASSIGNMENT AND ASSUMPTION OF LEASE This ASSIGNMENT AND ASSUMPTION OF LEASE (this "Agreement") is made and entered into and is effective as of the 15TH day of December, 2008 2009- (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 December 15, 2008, Assignor and Assignee entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property, together with an Addendum thereto (collectively 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.1 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 Assignment and Assumption of Lease2 - Slip Page EXHIBIT A 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 Chris Phillips, who, to Assignor's actual knowledge, can be reached at (714) 307-4427 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. (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 Assignment and Assumption of LeaseldocAssignment and Assumption of Leaseldoc - 2 - 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 Seventeen Thousand Six Hundred Dollars ($17,600.00) per month. (e) Assignor has the power and authority and the legal right to own the Property. Assignor represents and warrants that Turn -Key Washes, Inc., a California corporation, formerly known as Jurtwin, Inc. ("Car Wash"), has no ownership or other interest in the Property (except in its capacity as a member of Assignor) 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. Assignment and Assumption of LeaseldocAssignment and Assumption of Leaseldoc - 3 - 3.1 Lease. The Lease shall remain in full force and effect subsequent to the Close of Escrow. 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 Car Wash. 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 accordancewith 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., Second Floor 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 Assignment and Assumption of LeaseldocAssignment and Assumption of Leaseldoc - 4 - 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 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 LeaseldocAssignment and Assumption of Leaseldoc - 5 - In witness whereof, the parties hereto have executed this Agreement as of the date first written above. "SELLER" HB AUTO I, LLC, a California limited liability company By, dd C son, Managing Member [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 1 OF 21 Assignment and Assumption of Leaseldoc ATTEST: REVIEWE APPROVED: 4 ff-Acktive Director A "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH ��I'IK01-4— 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 21 Assignment and Assumption of LeaseldocAssignment and Assumption of Leaseldoc - 2 (Uq� 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 Barbara Zeid Leibold INITIATED AND APPROVED: �i�.._ Deputy Execu irector [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 2 OF 21 Assignment and Assumption of Lease FINAL - 2 ATTEST: Agency Clerk REVIEWED AND APPROVED: Executive Director `4BUYER" 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 V ecial Cou By: - " (AU4-r%,yad-,�- arbara Zeid jkibol INITIATED AND APPROVED: Deputy Executive Director [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 2 OF 21 Assignmcnt and Assumption of LeaseldocAssignment and Assumption of Leaseldoc - 2 EXHIBIT A DESCRIPTION OF LEASE 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" Lease Rider and Modification dated August 1, 2004, between C.S.B. Partnership, a California general partnership, as "Tenant," and IIB Auto I, LLC, a California limited liability company, as "Landlord", and Big O Tires, Inc. Guaranty of Lease dated April 19, 2004 executed by Christopher R. Phillips, as "Guarantor," in favor of HB Auto I, LLC, a California limited liability company, and Jurtwin, Inc., a California corporation, as "Landlord" Assignment of Lease dated June 25, 2004, pursuant to which Jurtwin, Inc., a California corporation, assigned all of its right, title, interest, and obligations under the Lease to Michael Todd Carson and Rosemary Carson Assignment of Lease dated November 30, 2004, pursuant to which Michael Todd Carson and Rosemary Carson, assigned all of their right, title, interest, and obligations under the Lease to HB Auto I, LLC, a California limited liability company Assignment and Assumption of Lease2.doe EXHIBIT A EXHIBIT B DEPOSITS AND OTHER FUNDS HELD BY ASSIGNOR Security Deposit in the amount of $15,000.00 Assignment and Assumption of LeaseldocAssignment and Assumption of Leaseldoc - 4 - RELEASE AND WAIVER This RELEASE AND WAIVER ("Agreement") dated as of • 2-, 2008 is made by and between the REDEVELOPMENT A CY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency") and ROSEMARY KATHLEEN CARSON, an individual ("Carson"). Agency and Jurtwin are hereinafter sometimes referred to collectively as the "Parties" or individually as a "Party." RECITALS A. Together with her husband, Michael Todd Carson, Carson formerly owned an undivided fifty percent (50%) interest in certain improved real property located at 7872 Edinger Avenue, Huntington Beach, California. (the "Property"), which was acquired from Jurtwin, Inc., a California corporation ("Jurtwin"). B. Agency is currently in negotiations to purchase the Property. Together with her husband, Michael Todd Carson, Carson assumed all right, title interest and obligations of Jurtwin as landlord under the terms of that certain Standard Lease Agreement dated April 19, 2004 (the "Lease") between C.S.B. Partnership, a California general partnership, as tenant, and HB Auto I, LLC, a California limited liability company ("Owner"), and Jurtwin, both as landlord, the subject of which is the Property. Carson's status as a landlord under the lease was terminated on November 30, 2004, on which date Carson, together with her husband, Michael Todd Carson, conveyed her interest in the Property and assigned her interest under the Lease to Owner. C. Together with her husband, Michael Todd Carson, Carson owns a fifty percent (50%) membership interest in Owner. In connection with the Agency's purchase of the Property from Owner, Agency will succeed to the rights and obligations of Owner as landlord under the Lease. As a condition to Agency's purchase of the Property, Owner must deliver this Agreement. 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 that: 1. Waiver. Carson, for herself and on behalf of anyone claiming by, through or under Carson (collectively, "Related Parties") (which such Related Parties shall include, without limitation, Carson's employees, 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, compensation for personal property, any ownership or leasehold interest in real property, payment for personal property, fixtures and equipment (if applicable), relocation benefits or assistance or any compensation based upon loss of goodwill, or any other damages of any nature (collectively, the "Waived Claims"). Any such claims are released as set forth in paragraph 2 below. 2. Release (a) This Agreement shall serve as a full release and discharge by Carson, on behalf of herself and all Related Parties, of Agency, the members of Agency's Board of Directors, the City of Huntington Beach ("City"), the members of the Huntington Beach City Council, and of City's and Agency's officers, agents, representatives, assigns, employees, consultants, insurers, attorneys, and successors in interest (collectively, the "Released Parties") with respect to the Waived Claims. Carson, for herself and all Related Parties, hereby forever releases and discharges the Released Parties and forever waives any claim against the foregoing parties, from any and all 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, that Carson or any Related Party has now or may at any time hereafter have against Agency or City or any of the Released Parties with respect to the Waived Claims. Carson, for herself and all 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). (b) In making this release, Carson intends to and does, for herself and all Related Parties, release, acquit and discharge the Released Parties, and each of them, from any liability of any nature whatsoever for any claim, injury, damages, or equitable or declaratory relief of any kind with respect to the Waived Claims, whether the claim, or any facts on which such claim might be based, is known or unknown to the party possessing the claim. Carson, for herself and all Related Parties, expressly acknowledges and waives, any and all rights under Section 1542 of the California Civil Code, which Carson understands provides as follows: 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 Page 2 of 9 HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. By signing below, Carson, for herself and all Related Parties, expressly waives the provisions of Section 1542 solely in connection with the matters which are the subject of the foregoing waivers and releases. WK-V w IV %J 69W - osemary Car n Carson, for herself and all Related Parties, acknowledges the foregoing waiver of the provisions of California Civil Code § 1542 was separately bargained for and expressly consents that this Agreement shall be given full force and effect in accordance with each and all of its express terms and provisions, including those terms and provisions relating to unknown or unsuspected claims, demands and causes of action, if any, to the same effect as those terms and provisions relating to any other claims, demands and causes of action hereinabove specified. (c) Carson, for herself and all Related Parties, acknowledges that she may hereafter discover facts or law different from or in addition to those which she now believes to be true with respect to the release of claims. Carson, for herself and all Related Parties, agrees that the foregoing release shall be and remain effective in all respects notwithstanding such different or additional facts or law or any Party's discovery thereof. Neither Carson nor any Related Party shall be entitled to any relief in connection therewith, including, but not limited to any damages or any right or claim to set aside or rescind this Agreement. (d) Except as set forth herein, none of the Parties or their respective agents nor any related entities or Related Parties have made any statement or representation 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 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) Carson hereby represents and warrants as of the date of this Agreement that (a) to her actual knowledge, no other entity or person has any right, title, or interest whatsoever in the released claims; (b) there has been no assignment, transfer, conveyance or other disposition by Carson of any of the released claims; (c) all consents of third parties required to enter into this Agreement have been obtained by Carson; and (d) Carson's entry into this Agreement will not constitute a breach under any law, contract or agreement to which Carson or any Related Party is bound, including, Page 3 of 9 without limitation, any agreement of partnership or any franchise agreement to which Carson is a party. Carson acknowledges that City and Agency have relied and are relying upon such representations and warranties in entering into this Agreement and in agreeing to purchase the Property from Owner. (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. 4. Attorney's Fees; Joint and Several Liability In the event of litigation relating to or arising out of this Agreement, each Party shall bear its own costs and expenses related thereto, including, but not limited to, actual attorneys' fees and costs for services rendered to such Party. 5. )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. The Recitals are a material portion of this Agreement, and are incorporated herein by this reference. 6. 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. 7. 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. 8. 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. 9. 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. Page 4 of 9 10. 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, j estates, heirs, legatees, agents and related entities of each of the Parties. 11. 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. 12. Advice of Counsel THE PARTIES, AND EACH OF THEM, 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 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 NOT SO REPRESENTED; AND, PRIOR TO EXECUTING THIS AGREEMENT, EACH PARTY 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 Carson: Vt Initials of Agency: 13. 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. 14. Effective Date This Agreement shall become effective upon the signature of all Parties hereto. Page 5 of 9 15. 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. 16. 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 Agreement, which shall be binding upon and effective as to all Parties. 17. Voluntary Agreement The Parties, and each of them, 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. 18. 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 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 Party: To Agency: 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 Carson: Rosemary C on 3110 Ne ort Boulevard, Second FloorhL��� Newp Beach, CA 92663 � P Page 6 of 9 20. 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 Carson and its permitted successors and assigns, and no other person or persons shall have any right of action hereon. [SIGNATURE PAGE FOLLOWS] Page 7 of 9 IN WITNESS WHEREOF, the Parties have executed this Acquisition Agreement as of the date written above. "AGENCY" ATTEST: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Agency Clerk REVIEWED AND APPROVED: Executive Director Chairperson APPROVED AS TO FORM: Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel Barbara Zeid Leibold INITIATED AND APPROVED: Deputy Executive Director [CARSON RELEASE AND WAIVER SIGNATURE PAGE 1 of 21 Page 8 of 9 CARSON: [CARSON RELEASE AND WAIVER SIGNATURE PAGE 2 of 2] Page 9 of 9 RELEASE AND WAIVER This RELEASE AND WAIVER ("Agreement") dated as of , 2008 is made by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency") and TURN -KEY WASHES, INC., a California corporation, formerly known as "Jurtwin, Inc." ("Turn -Key"). Agency and Turn -Key are hereinafter sometimes referred to collectively as the "Parties" or individually as a "Party." RECITALS A. Turn -Key formerly owned an undivided fifty percent (50%) interest in certain improved real property located at 7872 Edinger Avenue, Huntington Beach, California. (the "Property"). B. Agency is currently in negotiations to purchase the Property. Turn -Key was a landlord under the terms of that certain Standard Lease Agreement dated April 19, 2004 (the "Lease") between C.S.B. Partnership, a California general partnership, as tenant, and HB Auto I, LLC, a California limited liability company ("Owner"), and Turn -Key (under its former name of "Jurtwin, Inc."), both as landlord, the subject of which is the Property. Turn-Key's status as a landlord under the lease was terminated on June 29, 2004, which Turn -Key sold its interest in the Property and assigned its interest under the Lease to Michael Todd Carson and Rosemary Carson. C. Turn -Key owns a fifty percent (50%) membership interest in Owner. In connection with the Agency's purchase of the Property from Owner, Agency will succeed to the rights and obligations of Owner as landlord under the Lease. As a condition to Agency's purchase of the Property, Owner must deliver this Agreement. 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 that: 1. Waiver. Turn -Key, for itself and on behalf of anyone claiming by, through or under Turn -Key (collectively, "Related Parties") (which such Related Parties shall include, with out limitation, Turn-Key's shareholders, board members, officers, employees, 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, compensation for personal property, any ownership or leasehold interest in real property, payment for personal property, fixtures and equipment (if applicable), relocation benefits or assistance or any compensation based upon loss of goodwill, or any other damages of any nature (collectively, the "Waived Claims"). Any such claims are released as set forth in paragraph 2 below. 2. Release (a) This Agreement shall serve as a full release and discharge by Turn -Key, on behalf of itself and all Related Parties, of Agency, the members of Agency's Board of Directors, the City of Huntington Beach ("City"), the members of the Huntington Beach City Council, and of City's and Agency's officers, agents, representatives, assigns, employees, consultants, insurers, attorneys, and successors in interest (collectively, the "Released Parties") with respect to the Waived Claims. Turn -Key, for itself and all Related Parties, hereby forever releases and discharges the Released Parties and forever waives any claim against the foregoing parties, from any and all 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, that Turn -Key or any Related Party has now or may at any time hereafter have against Agency or City or any of the Released Parties with respect to the Waived Claims. Turn -Key, for itself and all 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). (b) In making this release, Turn -Key intends to and does, for itself and all Related Parties, release, acquit and discharge the Released Parties, and each of them, from any liability of any nature whatsoever for any claim, injury, damages, or equitable or declaratory relief of any kind with respect to the Waived Claims, whether the claim, or any facts on which such claim might be based, is known or unknown to the party possessing the claim. Turn -Key, for itself and all Related Parties, expressly acknowledges and waives, any and all rights under Section 1542 of the California Civil Code, which Turn -Key understands provides as follows: 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 Page 2 of 9 LAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. By signing below, Turn -Key, for itself and all Related Parties, expressly waives the provisions of Section 1542 solely in connection with the matters which are the subject of the foregoing waivers and releases. TURN -KEY, INC., a California corporation Bobbie Carson, President Turn -Key, for itself and all Related Parties, acknowledges the foregoing waiver of the provisions of California Civil Code § 1542 was separately bargained for and expressly consents that this Agreement shall be given full force and effect in accordance with each and all of its express terms and provisions, including those terms and provisions relating to unknown or unsuspected claims, demands and causes of action, if any, to the same effect as those terms and provisions relating to any other claims, demands and causes of action hereinabove specified. (c) Turn -Key, for itself and all Related Parties, acknowledges that it may hereafter discover facts or law different from or in addition to those which it now believes to be true with respect to the release of claims. Turn -Key, for itself and all Related Parties, agrees that the foregoing release shall be and remain effective in all respects notwithstanding such different or additional facts or law or any Party's discovery thereof. Neither Turn -Key nor any Related Party shall be entitled to any relief in connection therewith, including, but not limited to any damages or any right or claim to set aside or rescind this Agreement. (d) Except as set forth herein, none of the Parties or their respective agents nor any related entities or Related Parties have made any statement or representation 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 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) Turn -Key hereby represents and warrants as of the date of this Agreement that (a) to its actual knowledge, no other entity or person has any right, title, or interest whatsoever in the released claims; (b) there has been no assignment, transfer, conveyance or other disposition by Turn -Key of any of the released claims; (c) all consents of third parties required to enter Page 3 of 9 into this Agreement have been obtained by Turn -Key; and (d) Turn-Key's entry into this Agreement will not constitute a breach under any law, contract or agreement to which Turn -Key or any Related Party is bound, including, without limitation, any agreement of partnership of Turn -Key or any franchise agreement to which Turn -Key is a party. Turn -Key acknowledges that City and Agency have relied and are relying upon such representations and warranties in entering into this Agreement and in agreeing to purchase the Property from Owner. (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. 4. Attorney's Fees; Joint and Several Liability In the event of litigation relating to or arising out of this Agreement, each Party shall bear its own costs and expenses related thereto, including, but not limited to, actual attorneys' fees and costs for services rendered to such Party. 5. 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. The Recitals are a material portion of this Agreement, and are incorporated herein by this reference. 6. 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. 7. 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. 8. 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. Page 4 of 9 9. 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. 10. 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. 11. 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. 12. Advice of Counsel THE PARTIES, AND EACH OF THEM, 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 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 NOT SO REPRESENTED; AND, PRIOR TO EXECUTING THIS AGREEMENT, EACH PARTY 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 Turn -Key: Initials of Agency:___9_4_�- 13. 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. Page 5 of 9 14. Effective Date This Agreement shall become effective upon the signature of all Parties hereto. 15. 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. 16. 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 Agreement, which shall be binding upon and effective as to all Parties. 17. Voluntary Agreement The Parties, and each of them, 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. 18. 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 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 Party: To Agency: 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 Page 6 of 9 To Turn -Key: Turn -Key, Inc. 6725 Mesa Ridge Road Suite 218 San Diego, California 92121 Attn: Bobbie Carson 19. 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 Turn -Key and its permitted successors and assigns, and no other person or persons shall have any right of action hereon. [SIGNATURE PAGE FOLLOWS] Page 7 of 9 IN WITNESS WHEREOF, the Parties have executed this Acquisition Agreement as of the date written above. "AGENCY" ATTEST: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Agency Clerk REVIEWED AND APPROVED: Executive Director Chairperson APPROVED AS TO FORM: Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel IN Barbara Zeid Leibold INITIATED AND APPROVED: Deputy Executive Director [TURN -KEY RELEASE AND WAIVER SIGNATURE PAGE 1 of 2] Page 8 of 9 TURN -KEY: TURN -KEY, INC., a California corporation By o bie Carson, President [TURN -KEY RELEASE AND WAIVER SIGNATURE PAGE 2 of 21 Page 9 of 9 RELEASE AND WAIVER This RELEASE AND WAIVER ("Agreement") dated as of , 2008 is made by and between the REDEVELOPMENT AGE CV OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency") and MICHAEL TODD CARSON, an individual ("Carson"). Agency and Jurtwin are hereinafter sometimes referred to collectively as the "Parties" or individually as a "Party." RECITALS A. Together with his wife, Rosemary Kathleen Carson, Carson formerly owned an undivided fifty percent (50%) interest in certain improved real property located at 7872 Edinger Avenue, Huntington Beach, California. (the "Property"), which was acquired from Jurtwin, Inc., a California corporation ("Jurtwin"). B. Agency is currently in negotiations to purchase the Property. Together with his wife, Rosemary Kathleen Carson, Carson assumed all right, title interest and obligations of Jurtwin as landlord under the terms of that certain Standard Lease Agreement dated April 19, 2004 (the "Lease") between C.S.B. Partnership, a California general partnership, as tenant, and HB Auto I, LLC, a California limited liability company ("Owner"), and Jurtwin, both as landlord, the subject of which is the Property. Carson's status as a landlord under the lease was terminated on November 30, 2004, on which date Carson, together with his wife, Rosemary Kathleen Carson, conveyed his interest in the Property and assigned his interest under the Lease to Owner. C. Together with his wife, Rosemary Kathleen Carson, Carson owns a fifty percent (50%) membership interest in Owner. In connection with the Agency's purchase of the Property from Owner, Agency will succeed to the rights and obligations of Owner as landlord under the Lease. As a condition to Agency's purchase of the Property, Owner must deliver this Agreement. 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 that: 1. Waiver. Carson, for himself and on behalf of anyone claiming by, through or under Carson (collectively, "Related Parties") (which such Related Parties shall include, with out limitation, Carson's employees, 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, compensation for personal property, any ownership or leasehold interest in real property, payment for personal property, fixtures and equipment (if applicable), relocation benefits or assistance or any compensation based upon loss of goodwill, or any other damages of any nature (collectively, the "Waived Claims"). Any such claims are released as set forth in paragraph 2 below. 2. Release (a) This Agreement shall serve as a full release and discharge by Carson, on behalf of himself and all Related Parties, of Agency, the members of Agency's Board of Directors, the City of Huntington Beach ("City"), the members of the Huntington Beach City Council, and of City's and Agency's officers, agents, representatives, assigns, employees, consultants, insurers, attorneys, and successors in interest (collectively, the "Released Parties") with respect to the Waived Claims. Carson, for himself and all Related Parties, hereby forever releases and discharges the Released Parties and forever waives any claim against the foregoing parties, from any and all 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, that Carson or any Related Party has now or may at any time hereafter have against Agency or City or any of the Released Parties with respect to the Waived Claims. Carson, for himself and all 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). (b) In making this release, Carson intends to and does, for himself and all Related Parties, release, acquit and discharge the Released Parties, and each of them, from any liability of any nature whatsoever for any claim, injury, damages, or equitable or declaratory relief of any kind with respect to the Waived Claims, whether the claim, or any facts on which such claim might be based, is known or unknown to the party possessing the claim. Carson, for himself and all Related Parties, expressly acknowledges and waives, any and all rights under Section 1542 of the California Civil Code, which Carson understands provides as follows: A GENERAL RELEASE DOES NOT EXTENT) 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 Page 2 of 9 HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. By signing below, Carson, for himself and all Related Parties, expressly waives the provisions of Section 1542 solely in connection with the matters which are the subject of the foregoing waivers and releases. ;ddCarson Carson, for himself and all Related Parties, acknowledges the foregoing waiver of the provisions of California Civil Code § 1542 was separately bargained for and expressly consents that this Agreement shall be given full force and effect in accordance with each and all of its express terms and provisions, including those terms and provisions relating to unknown or unsuspected claims, demands and causes of action, if any, to the same effect as those terms and provisions relating to any other claims, demands and causes of action hereinabove specified. (c) Carson, for himself and all Related Parties, acknowledges that he may hereafter discover facts or law different from or in addition to those which he now believes to be true with respect to the release of claims. Carson, for himself and all Related Parties, agrees that the foregoing release shall be and remain effective in all respects notwithstanding such different or additional facts or law or any Party's discovery thereof. Neither Carson nor any Related Party shall be entitled to any relief in connection therewith, including, but not limited to any damages or any right or claim to set aside or rescind this Agreement. (d) Except as set forth herein, none of the Parties or their respective agents nor any related entities or Related Parties have made any statement or representation 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 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) Carson hereby represents and warrants as of the date of this Agreement that (a) to his actual knowledge, no other entity or person has any right, title, or interest whatsoever in the released claims; (b) there has been no assignment, transfer, conveyance or other disposition by Carson of any of the released claims; (c) all consents of third parties required to enter into this Agreement have been obtained by Carson; and (d) Carson's entry into this Agreement will not constitute a breach under any law, contract or agreement to which Carson or any Related Party is bound, including, Page 3 of 9 without limitation, any agreement of partnership or any franchise agreement to which Carson is a party. Carson acknowledges that City and Agency have relied and are relying upon such representations and warranties in entering into this Agreement and in agreeing to purchase the Property from Owner. (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. 4. Attorney's Fees, Joint and Several Liability In the event of litigation relating to or arising out of this Agreement, each Party shall bear its own costs and expenses related thereto, including, but not limited to, actual attorneys' fees and costs for services rendered to such Party. 5. ]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. The Recitals are a material portion of this Agreement, and are incorporated herein by this reference. 6. 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. 7. 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. S. 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. 9. 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. Page 4 of 9 10. 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. 11. 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. 12. Advice of Counsel THE PARTIES, AND EACH OF THEM, 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 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 NOT SO REPRESENTED; AND, PRIOR TO EXECUTING THIS AGREEMENT, EACH PARTY 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 Carson: Initials of Agency: 13. 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. 14. Effective Date This Agreement shall become effective upon the signature of all Parties hereto. Page 5 of 9 15. 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. 16. 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 Agreement, which shall be binding upon and effective as to all Parties. 17. Voluntary Agreement The Parties, and each of them, 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. 18. 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 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 Party: To Agency: 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 Carson: Todd Carson 3110 Newport Boulevard, Second Floor Newport Beach, CA 92663 Page 6 of 9 20. 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 Carson and its permitted successors and assigns, and no other person or persons shall have any right of action hereon. [SIGNATURE PAGE FOLLOWS] Page 7 of 9 IN WITNESS WHEREOF, the Parties have executed this Acquisition Agreement as of the date written above. "AGENCY" ATTEST: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Agency Clerk REVIEWED AND APPROVED: Executive Director Chairperson APPROVED AS TO FORM: Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel Barbara Zeid Leibold INITIATED AND APPROVED: Deputy Executive Director [CARSON RELEASE AND WAIVER SIGNATURE PAGE 1 of 21 Page 8 of 9 CARSON: T D CARSO [CARSON RELEASE AND WAIVER SIGNATURE PAGE 2 of 21 Page 9 of 9 TENANT'S ESTOPPEL. CERTIFICATE THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director RE: That certain Standard Lease Agreement dated for reference purposes April 19, 2004 and Option Addendum to Standard Lease Agreement dated April _, 2004 (collectively, the "Lease"), by and between 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"), collectively as landlord ("Landlord") and C.S.B. Partnership, a California general partnership, as tenant ("Tenant") for an initial ten (10)-year term which commenced on July 1, 2004, and which initial term will terminate on June 30, 2014, plus two (2) five (5)-year options to extend the initial ten (10)-year term of the premises commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Premises") containing an approximately eight thousand one hundred sixty-three (8,163) square foot building consisting of five (5) tandem bays and a retail area on approximately fifty-two hundredths (0.52) acres of land. The obligations of Tenant under the Lease are guaranteed by Christopher R. Phillips ("Phillips") pursuant to that certain Guaranty of Lease dated as of April 19, 2004 ("Lease Guaranty"). Ladies and Gentlemen: The undersigned Tenant is informed that pursuant to the terms of (a) that certain Assignment of Lease dated as of June 25, 2004 by and betwegn Turn -Key as assignor and Michael Todd Carson and Rosemary Kathleen Carson, husband and wife, as community property with right of survivorship as assignee (the "Carson"); and (in) that certain Assignment of Lease dated as ofNovember 11, 2004 by and between the Carsons as assignor and HB Auto as assignee (the "Lease Assignment"), HB Auto is the sole owner in fee of all rights, title and interest in and to the Property and is the sole landlord under the Lease. All references to "Landlord" under this Tenant's Estoppel Certificate ("Certificate') shall mean and refer to HB Auto. Tenant is further informed that under threat of condemmation, the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic ("Agency") is proposing to (a) acquire from Landlord all of Landlord's rights, title and interest as the owner in fee in and to the Premises pursuant to that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property and Addendum to Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of December 15, 2008 (the "New Agency/Landlord Property Acquisition Agreement") by and between Landlord as seller and Agency as buyer; and (b) acquire from Tenant, Tenant's entire leasehold interest in the Premises pursuant to the Lease pursuant to the terms of that certain Reinstated Acquisition of Leasehold Interest Agreement dated as of December 29, 2008 by and between Agency and Tenant (the "Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement"). In connection therewith, Tenant is delivering this 001219.0001 \849486.6 Certificate. Tenant has been advised and understands that Agency will act in material reliance upon this Certificate and the representations, warranties, certifications, acknowledgments and agreements of Tenant set forth herein in the closing and constrn*nation of the acquisition of the Premises from Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement. This Certificate shall be for the benefit of, and shall be relied upon by, 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"). Tenant hereby certifies that the above description of the Lease, and the description of the Premises therein demised, is a true and correct description of the same and that (1) the Lease and that certain Agreement of Release of All Claims dated as of January 23, 2009 (the "Landlord/ Tenant Release Agreement's constitute the only agreements between Landlord and Tenant with respect to the Premises; and (ii) the guaranty of the Lease pursuant to the Lease Guaranty is the only guaranty of the Tenant's obligations under the Lease. Further, 'Tenant hereby represents, warrants, certifies, acknowledges and agrees as follows: 1. True and complete copies of the Lease, the Landlord/Tenant Release Agreement and the Lease Guaranty are attached hereto as Exhibits A-1, A-2 and A-3, respectively and incorporated herein by this reference and made a part hereof. There have been no amendments, modifications, extensions, renewals or replacements of the Lease, except as follows: Nmne: provided that, under the terns of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement, effective as of the date Agency acquires the Premises from Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement, the Lease will be amended by that certain First Amendment to Lease in the form attached to the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement as Exhibit C (the "First Amendment to Lease"). Tenant has no right, title or interest with respect to the Premises other than as tenant under the Lease. 2. The initial term of the Lease commenced on July 1, 2004, and such initial term of the Lease shall expire on June 30, 2014. Under the terms of the Lease, Tenant is entitled to the following renewal options under the Lease: Two (2) options to extend for period of five (5) years each, pursuant to the terms of the Option Addendum to Standard Lease Agreement attached to the Lease. The foregoing notwithstanding, under the terms of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement and First Amendment to Lease, the Lease as amended by the First Amendment to Lease and the Lease Guaranty will terminate on or before the date which is five (5) years from the date Agency acquires the Premises from Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement (defined as the "Lease TerminationNacation Date" in the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement), 3. Tenant has not assigned the Lease nor sublet all or any portion of the Premises, except as follows: None. 001219.00011849486.6 2 4. Other than those representations and warranties set forth in writing in the Lease and the Landlord/Tenant Release Agreement, there have been no representations, warranties or covenants made by Landlord to Tenant, either oral or in writing. 5. The Lease is in full force and effect. Tenant has accepted the Premises, presently occupies the same, and is paying rent and other amounts due pursuant to the Lease on a current basis; Tenant has no knowledge of any set -offs, claims or defenses to the enforcement of the Lease; and, there are no periods of free rental applicable to the term of the Lease. 6. Tenant is not, to Tenant's knowledge, in default in the performance of the Lease, has not, to Tenant's knowledge committed any breach of the Lease that has not been fully cured, no notice of default has been given to Tenant; and, Tenant is not the subject of any federal or state bankruptcy, insolvency or liquidation proceeding. The foregoing notwithstanding, Tenant acknowledges receipt from Landlord of that certain Limited Phase II Environmental Site Assessment dated May 2008 with respect to the Premises prepared by Phase One Inc. on behalf of and for Agency (the "Environmental Report") in conjunction with the Agency's acquisition of (i) the Premises pursuant to the New Agency/Landlord Property Acquisition Agreement; and (ii) Tenant's leasehold interest in the Premises pursuant to the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement, which Environmental Report has identified certain potential environmental conditions which may be deemed "Hazardous Materials," as such term is defined in the Lease, and which may require remediation or other related action (the "Potential Environmental Condition"), the liability and obligation for which has not been determined. 7. Landlord is not, to Tenant's knowledge, in default in the performance of the Lease; Landlord has not, to Tenant's knowledge, committed any breach of the Lease that has not been fully cured; no notice of default has been given to Landlord; and Landlord has fulfilled all representations and warranties and all finish work on the Premises required of Landlord. The foregoing notwithstanding, and, in conjunction with the Environmental Report received by Landlord from Agency and the Potential Environmental Condition, a Potential Environmental Condition may arise which may require remediation or other related action, the liability and obligation. for which has not been determined. 8. Tenant's Minimum Rent under the Lease is currently Seventeen Thousand Six Hundred Dollars ($17,600) per month. Tenant's last payment of Minimum Rent was wade on or about January 1, 2009. 9. The next increase in monthly Minimum Rent is scheduled to occur on July 1, 2010, after which the monthly Minimum Rent under the Lease will be determined pursuant to Section 4(b) of the Lease. 10. No rent has been paid by Tenant in advance under the Lease except for Zero Dollars ($0) applicable to the zero (0) months of the term, and to Tenant's knowledge, Tenant has no claim of offset or credits against rentals under the Lease. 11. A security deposit has been made with Landlord in the amount of Fifteen Thousand Dollars ($15,000.00) which is refimdable under the terms of Section 7 of the Lease. 001219.0001\849486.6 3 12. Tenant is not entitled to any option or right of first refusal to purchase all or any part of the Premises or all or any part of the Building or other property of which the Premises is a part. 13. Tenant shall sign any and all documents reasonably necessary to amend or further confirm the terms of this Certificate within ten (10) days following request therefor by Landlord. 14. If Agency acquires the Premises pursuant to the New Agency/Landlord Property Acquisition Agreement, then Tenant shall not, without the prior written consent of Agency, pay Minimum Rent or its pro rats share of the estimated monthly Operating Expenses more than one (1) month in advance, nor agree to any modifications to the terms of the Lease or other material economic provisions of the Lease, except pursuant to a written amendment to the Lease executed by Agency and Tenant. The foregoing notwithstanding, since Tenant has paid the Minimum Rent for the month of January, 2009 as provided in Paragraph 8 above, in the event the closing and consummation of the sale and purchase of the Premises transaction pursuant to the New Agency/Landlord Property Acquisition Agreement occurs prior to February 1, 2009, or thereafter on any day other than the first day of the month, Landlord and Agency will be responsible for any required prorations of the Minimum Rent for the month of January, 2009 or a later month, as applicable; and, Landlord and Agency shall also be responsible for any required prorations of Additional Rent. 15. In the event that any lender with a security interest in the Premises or any portion thereof succeeds to the interest of Landlord under the Lease or in the Premises, Tenant shall, on and subject to the terms and requirements under Section 28 of the Lease, attorn to such successor and recognize such successor as the new landlord under the Lease and make all payments of Minimum Rent, Additional Rent and other sums under the Lease to such successor. 16. Tenant has not relied upon any representation (either oral or in writing) of Landlord or Agency in executing the Lease or this Certificate, except as expressly set forth respectively in the Lease, the Landlord/Tenant Release Agreement, the Agency/Tenant Leasehold Interest Acquisition Agreement and/or this Certificate. The persons signing this Certificate hereby represent and warrant that they are authorized to execute this Certificate on behalf of the undersigned. Dated this 23rd day of January, 2009 Very truly yours, C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner Lin Christopher R. Phillips, President [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001\849486.6 4 12. Tenant is not entitled to any op n or right of fiYst zQ hsal to purchase all or any part of the Premises or a11.or anypartof the BL, Wing or other prope tyofwkWhth*Premis%i38 parL 13. Tenant shall sign any and all do eats reasonably to macrid or farther conikm the teams of this Cettificate� wit hin ten 10) days followingj7ary t therefor by Landlor& . 14. If Agency acquires the Preauisa pursuant to the NeF ey/I.andlord Property Acquisition Agreement, then Tenant shall not; thout the prior wri consent ofAgeanoy, pay Mini�aan Rant or its pro rate share of the ted monthly Opera Bxpenses more than one (1) month in advaucr, nor agree to any m ' 'orts to the tuns c Lease or odw material ecoanomic.provisions of the Lease, except pum rat to a writUm am end to the Lease executed by Agency and Tenant. The foregoing aolwith�andmg, siren Tenn has paid Ihb Mmiomnm Reef for the month of J'abWxy, 2009 as pmvid. m Paa igraph 8 al: e, in the event tim closing and consumm.Ition of the sale -and purcba�se of Premises n pmsuant to the New Agenay/Landlord Property Acquisition t ooaus prior bo 1 1, 2009, or ibeteafb on any day other than the fast day of iLa=dkxd and Aga wi11 be poponsible for ' any required proration of the NImimum Rent the month of Jmwj y, 2M or a later montb, as applicable; and, Landlord and Agency shalt alsm be responsible far;&r;i y required proratioas of Additional Rent. 15. In the event that any lender with a security interest inVS:UrCCMtW- ses or anyportion thereof succeeds to the interest of Landlord the Lease ca in th, Tenant shall, on and subject to the twins and requ hhnds>T Section 28 of the LROOM to such successor and recognize such successor as the new tamdlo�Cl hmdea the Lease a payments of Minimum Rent; Additional Rent and other 7 under the Lease to 16, Tenant has not relied upon any resentation (either or in VM*i$) of Landlord or Agency in,exemxb$ t0 Lease or - Certificate, excep expressly set forth respectively in the Lease, the Landlord/Teaenase t leAgreement I u Agwyl Tenant Leasehold Interest Acquisition Agreement and/ r this Certificate. The persons signing this Certificate h y represent and wai that they are authorized to exeoute this Certificate ou behalf of the un . Dated this 23rd day ofranuary, 2009 Very truly yours, C.S.B. ]PARTNERSHIP, a California general parta=Ship By: C.R.P. DEVELOPIVIFIVM$, IN+ ., a California corporation, its General Partner , 5;iitopher Phillips, Bhsidcr [SIGNATURES CO ON NEXT P BJ. 001219"I1849411U TO/TO 39Vd dIHS213tlbVd SS3 842VO0SPILT I£:171 60OULUT0 01/27/2009 13:53 17145004578 CSB PARTNERSHIP PAGE 18/19 es�coa��ttzoa `�IIiRd'ti���8 im4md Slt `aoypem �my��WD 7:11w.: B `,ota %. A =lmo4 qz v �a :xg nqm,e `a SaTma T say um :xa aI lo.#?TgJ a 'd"I `gzMaxgum (In v sma :sH ����.��(� �{�� ,TM w.�iwrr�.wbQ �f"�7 g `va7LWl `s� ',�LXJL �7yf7A�aQWB.InL�C4 �LAA ^^H •"'C �Sac�a.'Fd 4 ��� SM VtLLITJ �Q d I��J P11�n'Jn.�� �w . `�✓1�1R �aut R �A1�1� �� 17 '�`il Sw/�{� V A sj d v sa a RA a ;99 f%-:SEE s "Uma lFv==WD Im! Sao. � V `'�Ng `S�[']fKX WICW :aa EXHIBIT A 1 LEASE 001219.0001 \849486.6 EXHIBIT A-z LANDLORD/TENANT RELEASE AGREEMENT 001219.0001\849496.6 EXHIBIT A-3 LEASE GUARANTY (Christopher R. Phillips) 001219.0001 \849486.6 4k. LANDLORD'S ESTOPPEL CERTIFICATE THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Ladies and Gentlemen: The undersigned, HB AUTO I, LLC, a California limited liability company ("Landlord"), as Landlord under that certain Standard Lease Agreement dated April 19, 2004 (the "Lease") entered into with C.S.B. Partnership, a California general partnership, as "Tenant," for certain premises located at 7872 Edinger Avenue, Huntington Beach, California (the "Premises"), hereby states, declares, represents and warrants to the addressee of this Estoppel Certificate and its successors and assigns as follows: 1. The copy of the Lease (with all amendments, riders or side agreements attached thereto) attached to this Estoppel Certificate as Attachment A is a true and correct copy of the Lease, constitutes the only agreement between Landlord and Tenant with respect to the Premises, is in -full force and effect, and has not been otherwise amended, supplemented or modified except, if at all, as follows: 2. Landlord has delivered possession of the Premises to Tenant and any improvements required by the terms of the Lease to be made by Landlord have been completed in accordance with the terms of the Lease. 3. Rental and other amounts due and payable from Tenant under the Lease have been paid to the date of Landlord's execution of this Estoppel Certificate. 4. Tenant is not in default under any of the terms, conditions or covenants of the Lease, except, if at all, as follows: 5. No notice has been received or given by Landlord of any default under the Lease by either Landlord or Tenant that has not been cured, and there are no circumstances that with the passage of time or giving of notice, or both, would constitute a default by Landlord or Tenant in the performance of any of the terms, conditions and/or covenants under the Lease, except, if at all, as follows: 6. The address for notices to Landlord is as follows: FIB AUTO I, LLC 3110 Newport Blvd., Second Floor Newport Beach, California 92663 Attn: Todd Carson 7. Tenant has no charge, lien, or claim of offset under the Lease or against rent or other charges due under the Lease, and Tenant has no outstanding claim for credit or reimbursement on account of Tenant's improvements to the Premises, except as follows: 8. Except as otherwise expressly set forth in the Lease, Tenant has no right or option to purchase the Premises or any part or all of the Building of which they are a part, or to renew or extend the Lease, or to expand the Premises, except, if at all, as follows: 9. Landlord has not received notice of any assignment, sublease, hypothecation, mortgage or pledge of Tenant's interest in the Lease, except, if at all, as follows: 10. The amount of any security or other deposit returnable to the Tenant pursuant to the Lease is set forth in the Lease and the amount of any Rent and other amounts paid more than thirty (30) days prior to the date on which they are due under the Lease are also set forth in the Lease. 11. Landlord is not in default under any mortgage, deed of trust, ground lease or other security instrument secured by Landlord's interest in the Premises. The person(s) signing this Certificate hereby represent and warrant that it he is authorized to execute this Certificate on behalf of the undersigned. Dated this 23rd day of January, 2009. HB Auto I, LLC, a California limited liability company By: Name: r Its: STANDARD LEASE AGREEMENT between RB AUTO I, LLC, a California limited liability company and J UZTWIN, INC., a California corporation "LANDLORD" and C.S.B. PARTNERSHIP, a California general partnership "TENANT" 001219.000AM457.2 ORIGINAL BASIC LEASE PROVISIONS Each reference in this Lease to any of the terms described in these Basic Lease Provisions shall mean and refer to the following; however, the other Sections of this Lease contain numerous other terms which are defined therein as well as numerous refinements and exceptions which qualify the provisions of the following Paragraphs: A. Date of Lease for Reference Purposes: April 19, 2004 B. Landlord: HB Auto 1, LLC, a California limited liability company, and Jurtwin, Inc., a California corporation C. Tenant: C.S.B. Partnership, a California general partnership D. Tenant's Trade Name: Big O Tires E. Intentionally Omitted. F. Premises: The property located at the following address and containing the following approximate measurements (Section 2): Address: 7872 Edinger Avenue, Huntington Beach, California Acreage: Approximately 0.52 acres. Floor Area of Improvements: Approximately 8,163 square foot building consisting of five (5) tandem bays and a retail area. G. Term (Section 3): Ten (10) Lease Years (as defined in Section 4 hereof), plus two (2) five (5) year options to extend (as described in the Option Addendum to Standard Lease Agreement ("Addendum") attached hereto). H. Monthly Minimum Rent (Section 4): (i) $16,000.00 per month subject to adjustment on the third (3rd) anniversary of the Commencement Date and on every third (3rd) anniversary thereafter. Upon the execution hereof, Tenant shall pay the first full month's installment of Minimum Rent to Landlord. (fi) Minimum Rent shall commence on the Commencement Date. I. Percentage Rental Rate: None. J. Security Deposit (Section 7): $15,000.00 which shall be deposited with Landlord upon the execution hereof. 001219.00011699457.2 K. Use (Section 8): Automotive repair and service facility and uses ancillary and incidental thereto, including, without limitation, sales and service of tires, wheels, undercar parts and accessories, and use of the office space located within the Premises. L. Intentionally Omitted. M. Guarantor(s): Christopher R. Phillips. N. Landlord's Address, Telephone and Facsimile Numbers for Notices (Section 37): HB Auto I, LLC 3424 Via Oporto, Suite 204 Newport Beach, California 92663 Attention: Todd Carson Telephone: (949) 574-7112 Facsimile: (949) 574-7113 ®. Tenant's Address, Telephone and Facsimile Numbers for Notices (Section 37): C.S.B. Partnership 27131 Calle Arroyo, Suite 1703 San Juan Capistrano, California 92675 Attention: Christopher Phillips Telephone: (949) 443-4155 Facsimile: (949) 443-4160 P. Guarantor's Address, Telephone and Facsimile Numbers for Notices (Section 37): Christopher R. Phillips, c/o C.S.B. Partnership 27131 Calle Arroyo, Suite 1703 San Juan Capistrano, California 92675 Telephone: (949) 443-4155 Facsimile: (949) 443-416 Q. Brokers or Finders (Section 38): Landlord's Broker - Yvonne V. Fleming, VR Business Brokers Tenant's Broker - None. R. Other: N/A S. Addendum Attached: X Yes No If an Addendum is attached, same is incorporated herein by this reference. 001219.0001\698457.2 2 STANDARD LEASE AGREEMENT 1. PARTIES. THIS STANDARD LEASE AGREEMENT is dated for reference purposes as the date set forth in the Basic Lease Provisions, and is made and entered into by and between HB AUTO I, LLC, a California limited liability company, and JUZTWIN, INC., a California corporation (collectively, "Landlord"), and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"). 2. LEASED PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, that certain real property more particularly described on Exhibit "A" attached hereto and all improvements now or hereafter constructed thereon (the "Premises"), including, without limitation, the building presently located on the Premises (the `Building") . Wherever the term "square feet" or "square footage" is used in this Lease with respect to the Premises, it shall mean the area of the Premises measured from the boundary line of the legal lot comprising the Premises to the opposite boundary line. Wherever the term "square feet" or "square footage" is used in this Lease with respect to the Building, it shall mean the area of the Building measured from the outside of exterior walls to the center of the interior demising walls of the Building, without deduction for openings, columns, sprinkler risers, roof drains, vents, piping, wastelines, conduit, ventilation shafts and other such items serving the Building. Any statement of square footage set forth in this Lease, or that may have been used in calculating rental, is an approximation which Landlord and Tenant agree is reasonable, and the rental based thereon is not subject to change whether or not the actual square footage is more or less. Tenant hereby accepts the Premises in the condition existing as of the date of possession hereunder, "as - is", subject to all applicable zoning, municipal, county, state and federal laws, statutes, ordinances, orders, rules and regulations (collectively "Laws") affecting the Premises and/or the use thereof, and accepts this Lease subject thereto. Tenant acknowledges that Landlord has not made any representation or warranty as to the suitability of the Premises for the conduct of Tenant's business. 3. TERM. The term of this Lease shall be as specified in Paragraph G of the Basic Lease Provisions or until this Lease is earlier terminated as provided herein. As used herein, the "Commencement Date" shall be July 1, 2004. In the event that the Commencement Date does not occur on the first (1st) day of a calendar month, the term of this Lease shall be extended by the number of days of the partial month at the commencement of the term such that the Lease shall end on the last day of a calendar month ("Termination Date"). Notwithstanding the foregoing, all of Tenant's obligations hereunder, except the payment of Minimum Rent and Additional Rent, shall commence upon the execution of this Lease. Within five (5) business days following the Commencement Date, upon Landlord's request, Landlord and Tenant shall execute and acknowledge an estoppel certificate setting forth the Commencement Date and the Termination Date. Notwithstanding the foregoing, failure of Tenant to execute such certificate shall not affect Landlord's determination of the Commencement Date in accordance with the provisions of this Lease. The "Term" shall also include any extensions or renewals of the initial Term to the extent expressly authorized pursuant to the terms of this Lease or agreed to in writing by Landlord and Tenant. Tenant shall have the right to start making its improvements and alterations to the Premises pursuant to the Tenant Work Letter attached hereto as Exhibit "B", after Landlord delivers the Premises to Tenant. 001219,0001\69M57.2 3 4. MINIIVDUM RENT; RENT INCREASES. (a) Tenant shall pay to Landlord as base monthly rent ("Minimum Rent") the amount described in Paragraph H(i) of the Basic Lease Provisions, which Minimum Rent shall be due and payable without prior notice or demand, in advance, without deduction or offset except as provided herein, beginning on the date set forth in Paragraph H(ii) of the Basic Lease Provisions, and continuing on or before the first day of each calendar month thereafter throughout the Term. Tenant shall pay the first month's installment of Minimum Rent to Landlord on the Commencement Date. Minimum Rent for any period during the Term which is for less than one month shall be prorated on the basis of a thirty (30) day month. No payment by Tenant or receipt by Landlord of an amount less than the monthly Minimum Rent herein stipulated shall be deemed to be other than on account of the earliest amounts owing under this Lease. No endorsement or statement on any check or any letter accompanying any check or payment shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of any amount owing to Landlord or to pursue any other remedy available to Landlord under this Lease or at law or in equity. (b) Commencing as of the beginning of the fourth (4th) Lease Year (as hereinafter defined) and every thirty-six (36) months thereafter, including during the extension period(s), if any, pursuant to the Addendum, "Minimum Rent" per month for the Premises shall be increased by ten percent (10%) from the Minimum Rent paid during the immediately preceding month. In the event any moratorium is imposed on such increases in rent, such that no regularly scheduled adjustment can be made or only a partial adjustment may be made, an adjustment shall immediately take effect on the lifting of such moratorium, and regular adjustments thereafter shall be made as above provided. For the purposes of this Lease, a Lease Year is each twelve (12) month period of the Term beginning on the Commencement Date, provided that if the Commencement Date does not fall on the first day of a month, the first Lease Year shall be the period commencing upon the Commencement Date and terminating one year after the last day of the month in which the Commencement Date occurs. Each subsequent Lease Year shall begin on the day after the end of the preceding Lease Year. 5. AID3ITI®NAI, RENT. This Lease is what is commonly called a "net, net, net Lease," it being understood that Landlord shall receive the Minimum Rent free and clear of any and all other impositions, taxes, liens, charges or expenses of any nature whatsoever in connection with the ownership and operation of the Premises. In addition to the Minimum Rent payable hereunder, Tenant shall pay to the parties respectively entitled thereto all taxes, impositions, insurance premiums, operating charges, maintenance charges, security costs, and other charges, costs and expenses which arise or may be contemplated under any provision of this Lease or otherwise becoming due by virtue of the activities and/or business of Tenant prior to and during the Term hereof (collectively "Additional Rent"). In the event Tenant fails to pay any Additional Rent, Landlord shall have the same rights and remedies as otherwise provided in this Lease for the failure of Tenant to pay Minimum Rent. It is the intention of the parties hereto that this Lease shall not be terminable for any reason by Tenant except as expressly set forth herein, and that Tenant shall in no event be entitled to any abatement of or reduction in Minimum Rent or Additional Rent payable under this Lease, except as expressly provided herein. The covenants of Landlord and Tenant hereunder are independent, except that Tenant's 001219.0001\699457.2 4 performance of its obligations under this Lease shall be a condition to Landlord's performance under this Lease. Any present or future law to the contrary shall not alter this agreement of the parties. 6. INTENTIONALLY OMITTED. 7. SECURITY DEPOSIT. Upon the execution thereof, Tenant shall deposit with Landlord the Security Deposit described in Paragraph J of the Basic Lease Provisions (the "Security Deposit") for the performance by Tenant of its obligations hereunder. If Tenant is in default, Landlord may use the Security Deposit, or any portion thereof, to cure such default, or to compensate Landlord for any damage sustained by Landlord resulting from Tenant's default. Tenant shall pay to Landlord immediately upon demand an amount equal to the portion of the Security Deposit expended or applied by Landlord so as to maintain the Security Deposit in the amount initially deposited with Landlord. Landlord's obligations with respect to the Security Deposit are those of a debtor and not a trustee. Landlord may commingle the Security Deposit with Landlord's general and/or other funds, and Landlord shall have no obligation to pay Tenant interest upon the Security Deposit. Notwithstanding the foregoing, exercise of any one or more of the rights given Landlord under this Section 7 in no way shall affect or abrogate any other claim or remedy available to Landlord hereunder or as provided by law or equity. Upon the expiration or any sooner termination of the term hereof, (i) if Tenant is not then in default of any of the provisions of this Lease, Landlord shall refund to Tenant any unappropriated balance remaining of the said Security Deposit; (ii) if Landlord has a claim upon the Security Deposit only for possible defaults in the payment of monthly rent, then any remaining portion of the Security Deposit shall be returned to the Tenant no later than two (2) weeks after the date the Landlord receives possession of the Premises; and (iii) if Landlord has a claim upon the Security Deposit which includes amounts reasonably necessary to repair damages to the Premises caused by the Tenant or to clean the Premises, then any remaining portion of the Security Deposit shall be returned to the Tenant at a time as may be mutually agreed upon by Landlord and Tenant, but in no event later than thirty (30) days from the date the Landlord receives possession of the Premises. 8. USE; CONDUCT OF BUSINESS. (a) The Premises shall be used and occupied only for the use described in Paragraph K of the Basic Lease Provisions and for no other use or purpose whatsoever, and Tenant shall operate at the Premises only under the trade name set forth in Paragraph D of the Basic Lease Provisions. Notwithstanding the foregoing, Tenant may change the use of the Premises from that described in Paragraph K of the Basic Lease Provisions or the trade name set forth in Paragraph D of the Basic Lease Provisions with Landlord's prior written approval, which approval shall not be unreasonably withheld. (b) No use shall be made or permitted to be made by Tenant of the Premises and no acts shall be done by Tenant or the Tenant Parties (as defined in Section 9 below) in, on or about the Premises which will in any way conflict with any Laws (including, without limitation, those affecting the occupancy or use thereof now in effect or which may hereafter be enacted or promulgated by any public authority), or which will increase the existing rate of insurance upon the Premises, or cause a cancellation of any existing rate of insurance upon the 001219. 0001 \69845 7.2 Premises. In no event shall Tenant's use as set forth in Paragraph K of the Basic Lease Provisions be deemed to increase the existing rate of insurance upon the Premises or cause a cancellation of any existing rate of insurance upon the Premises. No drug paraphernalia or pornographic materials shall be sold on or from the Premises. Tenant shall neither sell nor permit to be kept, used or sold in or about the Premises any article which may be prohibited by any insurance policies maintained by Landlord or Tenant. Tenant shall not commit, or suffer to be committed, any waste upon or about the Premises, or any public or private nuisance. 9. COMPLIANCE WITH LAW. Tenant shall, at its sole cost and expense, promptly comply with all Laws applicable to the Premises and/or the use thereof, including, without limitation, the obligation to alter, maintain, or restore the Premises in compliance with such Laws, and Tenant shall promptly comply with all governmental orders or directives for the correction, prevention or abatement of a nuisance in, upon, or connected with the Premises. Notwithstanding the foregoing, Tenant shall not be obligated to make any structural alterations to the Premises unless required as a result of the use or proposed use of the Premises by Tenant or its officers, directors, shareholders, partners, joint ventures, members, agents, employees, contractors, licensees, invitees, customers, sublessees and assignees (collectively the "Tenant Parties"). In the event structural alterations to the Premises are required as a result of any Laws applicable to the Premises which are not required as a result of the use or proposed use of the Premises by Tenant or Tenant Parties, Landlord shall undertake such structural alterations at its cost; provided, however, that the cost of such structural alterations shall be amortized (including interest on the unamortized cost at the rate of ten percent (10%) per annum) over its useful life as determined according to generally accepted accounting principles and such amortized cost passed through to Tenant on a monthly basis during the Term hereof. Such amounts shall be deemed Additional Rent hereunder. 10. INTENTIONALLY OMITTED. 11. SIGNS. Tenant shall have the right to place, construct, or maintain on the glass panes or supports of the show windows, the doors, exterior walls or the roof of the Building, or anywhere else upon the Premises, any signs, advertisements, names, insignia, trademarks, descriptive material or any other items provided that such signage is in conformance with any applicable zoning requirements and other applicable Laws. All signs that are permanently attached to the Premises shall become the property of Landlord at the expiration or earlier termination hereof; provided, however, that Tenant (i) may remove the portions of such signs which identify Tenant's business, (ii) shall promptly remove all such signs if Landlord so elects, and (iii) shall promptly repair all damage to the Premises or the Building caused by such removal. 12. ALTERATIONS, ADDITIONS AND IMPROVEMENTS. (a) Tenant shall not create any openings in the roof or exterior walls of the Building, nor shall Tenant make any exterior or structural alterations, additions or improvements to the Building (other than painting), nor shall Tenant construct any new structures on the Premises, without the prior written consent of Landlord, which consent shall not be unreasonably withheld. In addition, except as otherwise provided in Section 3 and the Tenant Work Letter, Tenant shall not make interior alterations, additions or improvements to the Building having a 001219.0001\698457.2 6 cost that exceeds $25,000.00 in the aggregate during any twelve (12) month period during the Term without Landlord's prior written consent thereto, which consent shall not be unreasonably withheld. Tenant shall, at Landlord's option, remove at the expiration or earlier termination of this Lease such items so installed or constructed by Tenant and shall repair all damage to the Premises or the Building caused by such removal. Tenant shall deliver plans and specifications of the alterations, additions and improvements proposed to be made by Tenant at the Premises, together with required permits and any other documents and information reasonably required by Landlord (collectively, the "Tenant's Plans") at least thirty (30) days prior to commencement of construction thereof. If such alterations, additions or improvements require Landlord's written consent before Tenant may commence construction thereof, then Tenant shall accompany the Tenant's Plans with written notice requesting Landlord's written consent thereto, and Tenant shall not commence such alterations, additions or improvements until Landlord has consented thereto in writing. All alterations, additions or improvements made by Tenant shall, unless Landlord requires their removal as provided above, become the property of Landlord at the expiration or earlier termination hereof, without compensation of any kind to Tenant. Any trade fixtures which are installed and paid for by Tenant shall remain the property of. Tenant, but Tenant shall not remove any trade fixtures or personal property from the Premises at any time in which Tenant is in default of this Lease or an event has occurred which, with the passage of time or the giving of notice, or both, would become a default by Tenant; provided, however, that if Tenant has pledged such trade fixtures and/or personal property as collateral to any lender not affiliated with Tenant, such unaffiliated lender may remove such trade fixtures or personal property from the Premises upon reasonable prior notice. If Tenant otherwise has the right to remove trade fixtures installed and paid for by Tenant, such right shall be conditioned upon Tenant repairing any damage to the remaining portions of the Premises or the Building caused by the removal of such trade fixtures. Any trade fixtures, moveable furniture or personal property that Tenant does not remove, or is not allowed to remove, at the expiration or earlier termination of this Lease shall, at Landlord's option, either become the property of Landlord or be removed by Landlord at Tenant's sole cost and expense. Tenant hereby grants Landlord a security interest in all trade fixtures, merchandise, equipment, supplies, furniture and all other personal property owned by Tenant and used or located at the Premises at any time during the Term and, if requested, Tenant shall on demand execute any document(s) required to perfect Landlord's interest therein; provided, however, that Landlord shall subordinate its security interest in such trade fixtures, merchandise, equipment, supplies, furniture and all other personal property to any lender not affiliated with Tenant who takes a security interest in such items. (b) Tenant shall keep the Premises free from any and all liens arising out of any work performed, materials furnished or obligations incurred by Tenant. Tenant shall provide Landlord at least ten (10) days' prior written notice of Tenant's commencement of any alterations, additions or improvements at the Premises, and Landlord shall have the right to file, post and/or record all appropriate notices of nonresponsibility or other documents having the effect of protecting the Landlord from any mechanics' or materialmen's liens arising from Tenant's alterations, additions or improvements. 13. UTILITY SERVICES. (a) Tenant shall be solely responsible for obtaining, and shall promptly pay when due, all charges for gas, water, sewer, telephone, electricity, and all other utilities used by 001219.0001\698457.2 7 Tenant or consumed at the Premises during the Term. If Tenant refuses or neglects to pay any such utility charges, Landlord may, at Landlord's option, pay such charges, and Tenant shall, upon demand, pay to Landlord the amount paid by Landlord and all other costs incurred in connection therewith. (b) At all times during the Lease Term, Tenant shall have the right to select the utility company or companies that shall provide electric services to the Premises and, subject to all applicable Laws, Tenant shall have the right at any time and from time to time during the Lease Term to either (a) contract for services from electric service provider(s) other than the provider with which Landlord has a contract as of the date of this Lease (the "Current Provider"), or (b) continue to contract for services from the Current Provider. Tenant shall at all times cooperate with Landlord and any electric service provider with which Landlord has contracted and, as reasonably necessary, shall allow Landlord or such electric service provider reasonable access to any electric lines, feeders, risers, wiring and any other machinery upon the Premises. Landlord shall not be liable in damages or otherwise for any loss, damage or expense that Tenant may sustain or incur by reason of any change, failure, interference, interruption or defect in the electric services provided to the Premises unless such change, failure, interference, interruption or defect is caused by Landlord's active negligence or willful misconduct. No such change, failure, interference, interruption or defect shall entitle Tenant to terminate this Lease or to abate the payments Tenant is required to make under this Lease unless such interference is caused by Landlord's active negligence or willful misconduct, and, with respect to Tenant's right to terminate this Lease, such change, failure, interference, interruption or defect continues for a period of seven (7) days after written notice to Landlord. 14. INTENTIONALLY OMITTED. 15. INTENTIONALLY OMITTED. 16. TAXES AND ASSESSMENTS. (a) Tenant shall pay before delinquency all taxes, assessments, license fees and other charges that accrue during the Term and which are levied or assessed against Tenant's Improvements, personal property, fixtures and equipment installed or located in, on or about the Premises. On demand by Landlord, Tenant shall ftunish Landlord with satisfactory evidence of such payment. (b) Tenant shall also pay all "Taxes" applicable to the Premises accruing during the Term of this Lease which are levied or assessed against the Premises. The term "Taxes" shall mean all general, special, ordinary, supplemental and extraordinary real and personal property taxes and assessments, license fees and taxes, rental taxes, levies, charges, penalties, sewer or water charges (hook-up or otherwise), improvement bonds and other governmental levies imposed by any authority having direct or indirect power to tax, including, but not limited to, any city, county, state or federal government, or any school, agricultural, sanitary, fire, street, lighting, drainage or other improvement district, on, against, or with respect to the Premises, together with any taxes or assessments imposed in addition to, in substitution of or as a supplement to any taxes or assessments previously included within the definition of Taxes, but excluding any federal, state or local personal income, estate or inheritance tax of 001219.00011699457.2 8 Landlord. The term "Taxes" shall also include any tax, fee, levy, assessment or charge: (i) the nature of which was hereinbefore included within the definition of Taxes, (ii) which was imposed for a service or right not charged prior to June 1,1978, or, if previously charged, has been increased since June 1, 1978, (iii) which is imposed or assessed during the Term as a result of any and all changes in ownership (as that term is used in Article 13A of the California Constitution and/or California Revenue and Taxation Code Sections 60, et seq.) of the Premises, or which is added to a tax or charge hereinbefore included within the definition of Taxes by reason of such transfer(s), or (iv) which is imposed by any assignments or transfers of this Lease. (e) Landlord and Tenant shall use good faith efforts to cause Tenant to be billed directly by the taxing authority for Taxes applicable to the Premises. If, however, Tenant cannot be billed directly by the taxing authority for the Taxes that are applicable to the Premises despite the parties good faith efforts, then Landlord shall notify Tenant each year of the Taxes due and, together with such notice, must furnish Tenant with a copy of the underlying tax bill. Tenant must pay semiannually to the taxing authority the Taxes due not later than ten (10) days before the taxing authority's delinquency date for such semiannual payment or ten (10) days after receipt of the tax bill, whichever is later, and such payments by Tenant to the taxing authority will be construed as "Additional Rent." If Tenant fails to pay the Taxes on or before the date that is ten (10) days before the taxing authority's delinquency date for such semiannual payment or within ten (10) days after receipt of the tax bill, whichever is later, then Landlord may make such payment of Taxes on behalf of Tenant, and such amount shall accrue interest pursuant to Section 26(e) below until paid by Tenant to Landlord. (d) In the event Tenant desires to contest any Taxes which it is obligated to pay hereunder, Landlord agrees to cooperate and will allow Tenant on behalf of Landlord to contest any such Taxes; provided, however, that Tenant must pay all costs of such contest, including attorneys' fees. Tenant may not allow any delinquencies in the payment of Taxes by reason of such contest, and if Tenant is unsuccessful in any such contest, the Taxes due together with any and all interest and penalties thereon as a result of such contest must be forthwith discharged by Tenant. Tenant agrees to indemnify, protect, defend and hold Landlord harmless from and against any and all costs, penalties, and expenses resulting from Taxes contested by Tenant. (e) Tenant's liability to pay personal property taxes and Taxes will be prorated on the basis of a three hundred sixty-five (365)-day year to account for any fractional portion of a fiscal tax year included in the Term at its commencement and at its expiration. Tenant will only be obligated to pay personal property taxes and Taxes for the period of time occurring during the Term, and Landlord shall promptly pay its share of Taxes. 17. MAINTENANCE, REPAIRS AND OPERATING EXPENSES. (a) Tenant shall, at its sole cost and expense, maintain, repair, repaint and clean all of the interior and all of the exterior areas of the Premises and the Building, including, without limitation, the roof, foundation, exterior walls, and all structural portions of the Building, the heating, ventilating and air conditioning systems and equipment servicing all or any portion of the Building, the plumbing, electrical wiring, windows, window glass, plate glass, doors, floors, ceilings, painting and all other portions of the Building and any other improvements 001219.OWIIA 457.2 9 located upon the Premises (collectively, the `Building Expenses"). Tenant shall install and maintain in the Premises fire extinguishers of the size and type required by each fire prevention authority having jurisdiction over the Premises. If Tenant does not maintain or repair the Premises as required herein, Landlord shall have the right (but not the obligation) to cause maintenance, repairs, replacements and/or corrections to be made thereto, and all reasonable costs thereof shall be immediately due and payable by Tenant to Landlord. Landlord first shall give three (3) days' written notice to Tenant before any such maintenance, repairs, replacements and/or corrections are made by Landlord, except in the case of an emergency, in which case no prior notice shall. be necessary. (b) Tenant shall maintain and repair the roof using a licensed contractor (or contractors) of which Landlord has approved, which approval shall not be unreasonably withheld or delayed. All repair and maintenance work performed by or on behalf of Tenant shall be in frill compliance with applicable Laws, shall be done by contractors approved in writing by Landlord, which approval shall not be unreasonably withheld or delayed, and shall be accompanied by a guaranty approved by Landlord from the contractors performing the work which guaranty shall name Landlord as an additional beneficiary thereof. Tenant shall indemnify, defend and hold Landlord harmless from and against all costs, damages and liabilities caused by, or incurred in connection with, all activities on the roof conducted by or on behalf of Tenant. (c) Tenant's obligations set forth in this Section 17 form a material part of the consideration for this Lease, and Tenant hereby waives all rights to make repairs at the expense of Landlord as provided by any Laws now or hereafter in effect, including, but not limited to, California Civil Code Sections 1941 and 1942. 18. INSURANCE. (a) Landlord shall obtain and maintain an insurance policy or policies covering fire, lightning, vandalism, malicious mischief, extended coverage, boiler and machinery, commercial or comprehensive general liability coverage, and such other risks which Landlord or its lender shall reasonably require for the full replacement value of the Premises. Landlord's lender shall be named as an additional insured under such policy(ies) and shall be named as the loss payee/mortgagee. Such policy(ies) shall also include rental interruption insurance coverage for any period up to twelve (12) months during which the Building is partially or totally untenantable. Such insurance is sometimes referred to as the "Insurance." Tenant shall reimburse Landlord for the cost of such Insurance coverage as Additional Rent in the manner set forth in Section 18(b) below. Tenant acknowledges it will not be an additional insured or loss payee under such Insurance. (b) Landlord shall furnish to Tenant, annually, a statement setting forth the actual costs for Insurance incurred by Landlord for the annual period covered by the statement Tenant shall, within ten (10) days after delivery of such statement to Tenant, pay Landlord the amount of such Insurance. The failure or delay by Landlord to furnish any one or more statements setting forth the actual costs for Insurance shall in no way excuse Tenant from its obligation to pay such costs within ten (10) days after delivery of such statement to Tenant or constitute a waiver of Landlord's rights to bill and collect such costs from Tenant. 001219.00011696457.2 10 (c) At all times during the Term, Tenant shall, at Tenant's sole cost and expense, procure and maintain in full force and effect Two Million Dollars ($2,000,000) combined single limit commercial or comprehensive general liability insurance covering death or injury to one or more persons and damage to property, and also covering the performance by Tenant of the indemnity provisions of this Lease, with insurance companies licensed to do business in the State of California rated A-X or better by Best's Insurance Guide. Said Two Million Dollars ($2,000,000.00) minimum coverage shall be subject to adjustment by the "CPI Adjustment." The term "CPI Adjustment" means adjustments at five (5) year intervals, commencing on the first (1 st) day of the fifth year of the Term and continuing on each fifth (5th) anniversary of such date ("Adjustment Dates") by a percentage equal to the percentage increase from the "Base Period" of the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index, All Urban Consumers (All Items) for the Los Angeles -Anaheim - Riverside Metropolitan Area (1982-1984 =100). Said Consumer Price Index (the "CPI") for January, 2004 shall be considered the "Base Period." Said adjustment shall be made by comparing the CPI for the Base Period to the CPI for the month of January preceding each such Adjustment Date. If at any time there shall not exist the CPI, Landlord and Tenant shall substitute any official index published by the Bureau of Labor Statistics, or successor or similar governmental agency, as may then be in existence, and shall be most nearly equivalent thereto. For purposes of the level of coverage, the result of such calculation shall be rounded up to the nearest one hundred thousand dollar increment. Such insurance policy or policies shall name Landlord and Landlord's lender as additional insureds, and certificate(s) indicating such coverage issued by the insurer(s) shall be delivered to Landlord and Landlord's lender prior to the date on which Landlord tenders delivery of the Premises to Tenant and renewal certificate(s) shall be delivered to Landlord at least ten (10) business days prior to the expiration of such policy or policies. Such certificates of insurance shall require thirty (30) days' prior written notice to Landlord before the policy or policies can be terminated or coverage reduced for any reason. Landlord may periodically require that Tenant reasonably increase the coverage required by this Section 18(c). If Tenant fails to maintain the insurance required by this Section 18(c), Landlord shall have the right (but not the obligation) to obtain such insurance on Tenant's behalf, and all reasonable costs thereof shall be due and payable by Tenant to Landlord as described in Section 18(b) above. Landlord first shall give three (3) days' written notice to Tenant before any such insurance is obtained by Landlord, during which time Tenant may obtain such insurance. (d) Tenant shall be entitled to fulfill its insurance obligations hereunder by maintaining a so-called "blanket" policy or policies of insurance in such form as to provide by specific endorsement coverage not less than that which is required hereunder for the particular property or interest referred to herein. (e) Tenant shall not do, bring, or keep anything in or about the Premises that will cause the cancellation of or an increase in the cost of any insurance covering the Premises. In no event shall Tenant's use as set forth in Paragraph K of the Basic Lease Provisions be deemed to cause the cancellation of or an increase in the cost of any insurance covering the Premises. (f) Each party shall cause each insurance policy obtained by it pertaining to the Premises to provide that the insurance company waives in writing all right of recovery by way of subrogation against either party in connection with any damage covered by any policy. 001219.0001W98457.2 11 Neither party shall be liable to the other for any damage caused by fire or any of the risks insured against under any insurance policy required by this Lease. The parties hereto release each other and their respective authorized representatives from any claims for damage to any person or to the Premises and other improvements located in the Premises, and to the fixtures, personal property, improvements and alterations of either Landlord or Tenant in or upon the Premises, that are caused by or result from risks insured against under any insurance policies carried by the parties and in force at the time of any such damage. 19. INTENTIONALLY OMITTED. 20. INDEMNIFICATION; WAIVER. (a) Tenant hereby agrees to indemnify and hold Landlord and the Landlord Parties harmless from and against any and all liabilities, damages, losses, demands, claims, costs, expenses (including reasonable attorneys' fees and costs), obligations, liens, actions, causes of action and lawsuits (herein collectively "Liabilities"), which Landlord may suffer or incur arising out of, in connection with or resulting from this Lease, including, but not limited to, Tenant's and the Tenant Parties' failure to observe or comply with any Laws, the conduct of Tenant's business, any activity, work or other things done, permitted or suffered by Tenant or the Tenant Parties in or about the Premises, or the breach or default of any of Tenant's obligations under this Lease. Tenant further agrees that in case of any one or more Liabilities, threatened or actual, arising against Landlord, Tenant shall, upon notice from Landlord, defend Landlord at Tenant's sole cost and expense by counsel satisfactory to Landlord. Tenant's indemnification shall not include an indemnification for liability to the extent arising from the willful misconduct or active negligence of Landlord. (b) Tenant, as a material part of the consideration to Landlord for this Lease, hereby assumes all risk of damage to property or injury to or death of persons, in, upon or about the Premises from any cause, including, but not limited to, fire, explosion, falling plaster, steam, gas, electricity, dampness, water or rain (whether same may leak from any part of the Building or from the pipes, appliances or plumbing works therein, or from the roof, street or subsurface, or from any other place), and Tenant hereby waives any and all claims with respect thereof against Landlord and the Landlord Parties. Landlord and the Landlord Parties shall not be liable for interference with the light or other incorporeal hereditaments, loss of business or profits of Tenant, damage to property entrusted to Landlord or the Landlord Parties, or for loss of or damage to any property, by theft or otherwise, resulting from any cause whatsoever, except to the extent arising from the willful misconduct or active negligence of Landlord or Landlord's agents or employees. Landlord and the Landlord Parties shall not be liable for any one or more latent or patent defect(s) in the Premises. Tenant shall give prompt notice to Landlord in case of fire or accidents occurring in, on or about the Premises. (c) Landlord hereby agrees to indemnify and hold Tenant and the Tenant Parties harmless from and against any and all Liabilities, which Tenant may suffer or incur arising out of, in connection with or resulting from Landlord's and the Landlord Parties' failure to observe or comply with any Laws, any activity, work or other things undertaken by Landlord or the Landlord Parties in or about the Premises, or the breach or default of any of Landlord's obligations under this Lease. Landlord further agrees that in case of any one or more Liabilities, 001219.000A688457.2 12 threatened or actual, arising against Tenant, Landlord shall, upon notice from Tenant, defend Tenant at Landlord's sole cost and expense by counsel satisfactory to Tenant. Landlord's indemnification shall not include an indemnification for liability to the extent arising from the willful misconduct or negligence of Tenant. 21. DAMAGE OR DESTRUCTION. (a) If the Premises or the Building are totally or partially damaged or destroyed by a risk covered by the insurance expressly set forth in Section 18(a), rendering the Premises totally or partially inaccessible or unusable, Landlord shall promptly repair, replace or restore the Premises or the Building to substantially the same condition as they were in immediately before such damage or destruction. Such damage or destruction shall not terminate this Lease. However, if the Premises or the Building do not appear to be capable of being repaired, replaced or restored within six (6) months after the date of damage or destruction, as determined by Landlord in the exercise of its reasonable judgment within sixty (60) days following such damage or destruction, then either party may terminate this Lease. Such termination shall occur, if at all, by written notice thereof delivered to the other party within ten (10) days after written notice of Landlord's determination is delivered to Tenant. If this Lease is so terminated, then all insurance proceeds relating to the Premises or the Building and any other property of Landlord shall be paid to Landlord, and neither party shall be liable to the other except with respect to accrued but unpaid obligations, and except as provided in Section 18(d). During any period that the Premises are totally or partially inaccessible or unusable, there shall be equitable abatement of Minimum Rent and Additional Rent. (b) If the Premises or the Building are totally destroyed or materially damaged by a risk not covered by the insurance expressly described in Section 18(a) or such additional insurance as was then actually in effect, Landlord shall have the right to either repair, replace or restore the Premises or Building or to terminate this Lease. However, if the Premises or the Building do not appear to be capable of being repaired, replaced or restored by Landlord within six (6) months after the date of such uninsured damage or destruction, as determined by Landlord in the exercise of its reasonable judgment within sixty (60) days following such uninsured damage or destruction, then either party may terminate this Lease. Such termination shall occur, if at all, by written notice thereof delivered to the other party within ten (10) days after written notice of Landlord's determination is delivered to Tenant. If this Lease is so terminated, then neither party shall be liable to the other except with respect to accrued but unpaid obligations, and except as provided in Section 18(d). Notwithstanding the foregoing, Tenant, within thirty (30) days after receiving Landlord's notice to terminate, may provide Landlord with notice of its intent to fund such shortfall in insurance proceeds, in which case Landlord shall promptly repair, replace or restore the Premises or the Building to substantially the same condition as they were in immediately before such damage or destruction and this Lease shall continue in full force and effect. (c) Nothing contained in this Section shall obligate Landlord to repair or restore any of Tenant's equipment, materials, supplies, inventory or other personal property. (d) Notwithstanding anything herein to the contrary, if the Premises or the Building are damaged during the final two years of the Term to the extent that the cost of repair, 001219.0001%N457.2 13 replacement or restoration of the damaged areas as reasonably estimated by Landlord exceeds thirty percent (30%) of the replacement cost of the Premises or the Building respectively, then either Landlord or Tenant may terminate this Lease upon ten (10) days' written notice to the other party; provided, however, that Landlord's election to terminate this Lease as provided herein shall be automatically withdrawn if Tenant delivers notice to Landlord of Tenant's election to exercise its option to extend the Term (if applicable) within five (5) days after receipt of Landlord's election to terminate. (e) Tenant waives the provisions of California Civil Code Sections 1932(2) and 1933(4) with respect to any damage to or destruction of the Premises. 22. CONDEMNATION. (a) If all or any part of the Premises or any interest therein is taken by condemnation, or is sold to the condemning authority under threat of condemnation (collectively a "taking"), the rights and obligations of Landlord and Tenant shall be determined pursuant to this Section 22, and the parties hereby waive the provisions of California Code of Civil Procedure Section 1265.130. If there is a total taking of the Premises, this Lease shall terminate on the date of such taking. If there is not a total taking of the Premises, but there has been a partial taking of the Premises, Landlord may, in its sole discretion, either (i) restore the remaining portion of the Premises to the extent of severance damages actually received by Landlord (excluding the amount applied to the outstanding amounts owing to a lienholder with an encumbrance upon all or any portion of the Premises), in which case this Lease shall remain in full force and effect, or (ii) terminate this Lease at any time thereafter upon ten (10) days' written notice to Tenant. (b) If any portion of the Premises is taken and this Lease remains in full force and effect, the Minimum Rent shall be abated in proportion to the degree to which Tenant's reasonable use of the Premises is impaired. Except for such abatement, if any, Tenant shall have no claim against Landlord in the event of any taking, and Tenant hereby assigns to Landlord all awards and other consideration paid with respect to any taking of all or any portion of the Premises , except any award, or portion thereof, relating to the unamortized value of improvements (including trade fixtures) that Tenant has a right to remove at the expiration or earlier termination of this Lease, but elects not to remove. 23. ASSIGNMENT AND SUBLETTING. Except as otherwise set forth herein, Tenant shall not assign, transfer or encumber (collectively, "assign") this Lease, or any interest herein, and shall not sublet the Premises, or any part thereof, or permit any other person or entity (except the employees of Tenant) to occupy or use the Premises, or any portion thereof, without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld. In determining whether to consent or object to an assignment or sublease, it shall be deemed reasonable for Landlord to object to a proposed assignment or subletting if: (a) The proposed assignee or sublessee has inadequate financial strength or lacks business or management experience or reputation. 001219.0001W98457,2 14 (b) The proposed assignee or sublessee would, in Landlord's sole discretion, likely violate one or more of the terms, covenants, conditions or restrictions imposed upon Tenant under this Lease or on Landlord as set forth in any other lease, license, occupancy or other agreement for the lease or use of space within, or other agreement entered into with respect to, the Premises. The foregoing shall not restrict Landlord from reasonably deciding not to consent for any reason other than those designated above. Consent by Landlord to any assignment or subletting shall not be deemed to be a consent to any subsequent assignment or subletting. Consent by Landlord to an assignment or subletting shall not release the original Tenant or any of Tenant's permitted successors or assigns from liability hereunder, and the original Tenant and all successors and assigns shall be primarily liable, jointly and severally, for all obligations of Tenant under this Lease. Notwithstanding the foregoing, Landlord hereby consents to any assignment or sublease by Tenant to an assignee or subtenant in which Tenant or its principals has an ownership interest or affiliated business arrangement and which is engaged in the business of automotive repair or wholesale sales to entities affiliated with Tenant. Tenant shall promptly notify Landlord in writing of any such assignment or sublease and deliver Landlord a copy of the documentation evidencing such assignment or sublease. As a condition to Landlord's consent to an assignment of this Lease or a subletting of the Premises, Landlord shall have the option to require that seventy-five percent (75%) of any increased rental or other payments or consideration payable to Tenant pursuant to such assignment or subletting (excluding any payments or consideration associated with or pursuant to any related transactions, such as the sale of Tenant's business in the Premises) be paid to Landlord as additional rent hereunder; provided, however, that the foregoing shall not apply to any increased rental or other payments or consideration payable to Tenant pursuant to an assignment or sublease entered into with an assignee or subtenant in which Tenant or its principals has an ownership interest or affiliated business arrangement and which is engaged in the business of automotive repair or wholesale sales to entities affiliated with Tenant. Tenant shall reimburse Landlord for Landlord's reasonable expenses (including, without limitation, all reasonable attorneys' fees incurred by Landlord) relating to any assignment or subletting or the activities of Landlord in considering whether to consent to the same, not to exceed one thousand dollars ($1,000). Such sums shall be payable whether or not Landlord consents to Tenant's request to assign or sublet and shall be deemed Additional Rent hereunder. Any attempted assignment or subleasing without Landlord's consent shall be null and void, and any acceptance of rent from any person other than Tenant shall not be construed as Landlord's consent to any assignment or sublease. If Tenant is a partnership or limited liability company, a withdrawal or change, whether voluntary, involuntary, or by operation of law, of any partner of an interest in the partnership or members of an interest in a limited liability company of more than fifty percent (50%), or the dissolution (voluntarily or by court order) of the partnership or limited liability company (as applicable), will be deemed a voluntary assignment. 001219.0001\69"57.2 15 If Tenant is a corporation, any dissolution, merger, consolidation, or other reorganization of Tenant, or the sale or other transfer of a controlling percentage of the capital stock of Tenant, or the sale of more than fifty percent (50%) of the value of the assets of Tenant, will be deemed a voluntary assignment. The phrase "controlling percentage" means the ownership of, and the right to vote, and stock possession of more than fifty percent (50%) of the total combined voting power of all classes of Tenant's capital stock issued, outstanding, and entitled to vote for the election of directors. This paragraph does not apply to corporations, the stock of which is traded through an exchange or over the counter. 24. SURRENDER OF PREMISES BY TENANT. Upon the expiration or earlier termination hereof, Tenant shall surrender the Premises to Landlord in broom clean condition, and all of Tenant's Improvements and alterations shall be in good condition (except for ordinary wear and tear, and except for alterations that Tenant has the right or is obligated to remove under the provisions of Section 12 hereof). Any damage or deterioration shall not be considered ordinary wear and tear if same could have been prevented by good maintenance and repair practices of Tenant. Prior to the expiration or earlier termination of this Lease, Tenant shall remove all of its personal property from the Premises and shall perform all repairs and restoration of the Premises made necessary by the removal of any of Tenant's Improvements, alterations or personal property in order to cause the Premises to be restored to its original condition at the time the Tenant's Improvements were completed. 25. HOLDING OVER. If Tenant, with Landlord's consent, remains in possession of the Premises after expiration or earlier termination of the Term, or after the date set forth in any notice given by Landlord to Tenant terminating this Lease, such possession by Tenant shall, in the absence of a written notice to the contrary from Landlord, be deemed to create a month -to - month tenancy on all of the terms hereof applicable to a month -to -month tenancy, including, without limitation, the payment of all Minimum Rent, Additional Rent and all other fees, costs and charges required hereunder; provided, however, that the Minimum Rent shall be increased to one hundred twenty-five percent (125%) of the Minimum Rent in effect immediately prior to such expiration or earlier termination. If Tenant fails to surrender possession of the Premises to Landlord on the expiration or earlier termination of this Lease, and Landlord does not consent thereto in writing, then Tenant hereby agrees to indemnify, defend, protect and hold Landlord harmless from and against any and all Liabilities arising out of or resulting from such failure, including, without limitation, the claims by any succeeding tenant or tenants, delays in Landlord's ability to deliver the Premises or any portion thereof to a succeeding tenant or tenants and all consequential damages relating thereto. 26. DEFAULT. (a) The occurrence of any of the following shall constitute a material default by Tenant: (i) Tenant fails to pay any installment of the Minimum Rent, Additional Rent, or any other fee, cost or charge payable by Tenant hereunder (collectively, 'Rent"), on the date that same is due, and such failure shall continue for a period of five (5) business days after written notice thereof to Tenant. Any notice given pursuant to the foregoing 001219.OWI\699457.2 16 provision shall constitute the notice required by Section 1161 of the California Code of Civil Procedure. (ii) Tenant fails to comply with any term, covenant or condition of this Lease, other than the payments described in Section 26(a)(i) above or as otherwise specifically provided herein and does not cure such failure within thirty (30) days after written notice thereof to Tenant. If such failure cannot reasonably be cured within thirty (30) days, Tenant shall not be in default hereof if Tenant commences to cure the default within the thirty (30) period and diligently and in good faith prosecutes such cure to completion within a reasonable period thereafter. (iii) The failure by Tenant to pay its obligations as they become due; the making of any general assignment or general arrangement for the benefit of creditors by Tenant; Tenant becomes insolvent or makes a transfer in fraud of creditors; the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or of a petition for reorganization or arrangement under bankruptcy law or law affecting creditor's rights unless, in the case of a petition filed against Tenant, such petition is dismissed within one hundred twenty (120) days; the appointment of a trustee or a receiver to take possession of the Premises, where possession is not restored to Tenant within sixty (60) days; or the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such seizure is not discharged in sixty (60) days. (iv) The failure by Tenant to make any payment of Rent required to be made by Tenant hereunder, or to satisfy any other obligation imposed on it under this Lease, as and when due, and whether or not subsequently cured, where such failure occurs on more than three (3) occasions during any consecutive period of twelve (12) months during the Term of the Lease. Tenant acknowledges that the purpose of this provision is to prevent repetitive defaults by Tenant hereunder, because such repetitive defaults likely will impose a hardship upon Landlord. (b) Upon the occurrence of a default by Tenant, Landlord shall have the option to pursue any one or more of the following remedies: (i) Landlord may continue this Lease in full force and effect as long as Landlord does not terminate Tenant's right to possession, and Landlord shall have the right to collect any and all Rent as and when it becomes due or payable hereunder. During the period Tenant is in default, Landlord can enter the Premises and relet them, or any portion thereof, to third parties for Tenant's account. Tenant shall be liable immediately to Landlord for all costs that Landlord incurs in reletting the Premises, including, without limitation, costs of recovering possession, advertising costs, brokers' commissions, expenses of remodeling the Premises required by the reletting, and like costs. Reletting can be for a period shorter or longer than the remaining Term. Tenant shall pay to Landlord all Rent due hereunder on the dates same is due, reduced by any net amount that Landlord receives from any reletting. No act by Landlord allowed by this Section 26 shall terminate this Lease unless Landlord notifies Tenant in writing that Landlord elects to terminate this Lease. 001219.0MA698457.2 17 (ii) Landlord may terminate Tenant's right to possession of the Premises at any time. However, no act by Landlord other than giving written notice of termination to Tenant shall terminate this Lease. Upon termination, Landlord may recover any damages proximately caused by Tenant's failure to perform under this Lease, or which are likely in the ordinary course of business to be incurred, including any amount expended or to be expended by Landlord in an effort to mitigate damages, as well as any other damages to which Landlord is entitled to recover under any statute now or later in effect (including, without limitation, California Civil Code Section 1951.2). Landlord's damages include the worth, at the time of any award, of the amount by which the unpaid Minimum Rent, Percentage Rent, if any, Additional Rent and all other fees, costs and charges for the balance of the Term after the time of the award exceeds the amount of the rental loss that the Tenant proves could be reasonably avoided. The worth at the time of award shall be determined by discounting to present value such amount at one percent (1%) more than the discount rate of the Federal Reserve Bank in San Francisco in effect at the time of the award. Other damages to which Landlord is entitled shall bear interest at the maximum rate allowed by law. (iii) Landlord, at any time after Tenant commits a default, may have a receiver appointed to collect Rent, and to conduct Tenant's business. Neither the filing of a petition for the appointment of a receiver nor the appointment itself shall constitute an election by Landlord to terminate this Lease. (iv) Landlord, at any time after Tenant commits a default, may cure the default at Tenant's cost. If Landlord at any time, by reason of Tenant's default, incurs any costs, including, without limitation, attorney's fees and/or costs to cure any defaults of Tenant, the costs so incurred by Landlord shall be immediately due and payable from Tenant to Landlord. (v) If Tenant becomes a debtor under any bankruptcy law or otherwise becomes subject to any bankruptcy law, Landlord shall have the right to apply the Security Deposit first toward the payment of unpaid pre -petition Rent, and the balance of such Security Deposit, if any, shall be applied toward post -petition administrative claims for such amounts owing hereunder. (c) In accordance with California Civil Code Section 1951.4 (or any successor statute), Tenant acknowledges that in the event Tenant breaches this Lease and abandons the Premises, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce all of its rights and remedies under this Lease, - including, without limitation, the right to recover Rent as it becomes due under this Lease. Acts of maintenance or preservation or efforts to re -let the Premises or the appointment of a receiver upon initiative of Landlord to protect Landlord's interests under this Lease shall not constitute a termination of Tenant's right to possession. (d) Pursuit of any of the foregoing remedies set forth in Subsection 26(b) shall not preclude pursuit of any of the other remedies provided in this Lease, or any other remedies currently or hereafter provided by law or equity, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any Rent due to Landlord hereunder, or of any damages accruing to Landlord by reason of the violation of any of the terms, covenants or conditions 001219.00011698457.2 18 contained herein. No notice given to Tenant by Landlord under this Section 26 shall be deemed a forfeiture or termination hereof unless Landlord expressly so states in writing. (e) Any sum accruing to Landlord under the terms and provisions of this Lease which is not paid when due shall bear interest until paid at the rate of ten percent (10%) per annum; provided, however, interest will not accrue on the amount owed as a late charge. Accrual of a late charge as provided under the terms and provisions of this Lease shall not be construed as prohibiting accrual of interest as stated herein. Acceptance of such interest shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. (f) Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Landlord by the terms of any mortgage or deed of trust covering the Premises or any portion thereof. Accordingly, if any installment of Rent due from Tenant or any portion thereof shall not be received by Landlord or Landlord's designee within ten (10) days following the date same is due, then Tenant shall pay to Landlord a late charge equal to five percent (S%) of such overdue amount. Acceptance of such late charges by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder or at law or equity. 27. WAIVER. Failure by Landlord to insist upon compliance with any of the provisions of this Lease shall not be deemed a waiver by Landlord of such provisions nor shall any waiver by Landlord of any right or power hereunder at any one or more times be a waiver by Landlord of such rights or powers at any other time(s) or under any other circumstances. No waiver by the parties hereto of the default of any term, covenant or condition of this Lease shall be deemed to be a waiver of any subsequent default of the same or any other term, covenant or condition contained herein. The subsequent acceptance by Landlord of Rent or any other payment hereunder shall not be deemed to be a waiver of any preceding default by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent or other payment so accepted, regardless of Landlord's knowledge of such preceding default at the time of acceptance of such Rent or other payment. 28. SUBORDINATION. (a) Tenant accepts this Lease subject to and subordinate to any recorded mortgage, deed of trust, ground or master lease, or other lien presently encumbering the Premises. Landlord is hereby vested with full power and authority to subordinate Tenant's interest hereunder to any mortgage, deed of trust, ground or master lease, or other lien hereafter placed on the Premises, in which event, Tenant agrees to attorn to the holder of such mortgage, deed of trust, ground or master lease in the event such holder assumes the rights of Landlord hereunder pursuant to such document; provided, however, that as a condition to such subordination of Tenant's interest hereunder, the holder of such recorded mortgage, deed of trust, ground or master lease, shall execute a commercially reasonable non -disturbance agreement which provides substantially the following: 001219.000„6W457.2 19 As long as Tenant performs its obligations under this Lease, no foreclosure of, deed given in lieu of foreclosure of, or sale under the encumbrance, and no steps or procedures taken under the encumbrance, will affect Tenant's rights under this Lease. Subject to the foregoing, Tenant agrees upon demand to execute and deliver to Landlord such instruments subordinating this Lease as Landlord may reasonably request or, if Landlord shall so request, Tenant shall upon demand execute and deliver to Landlord such instruments making this Lease prior to any mortgage, deed of trust, ground or master lease, or other lien affecting the Premises. In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of trust made by Landlord covering the Premises, or eviction of Landlord or its successors or other termination of their rights under any ground lease, Tenant shall attorn to the purchaser upon any such foreclosure or sale or ground lessor under such ground lease, respectively, and recognize such purchaser or ground lessor, as the case may be, as Landlord under this Lease. Landlord agrees that, so long as Tenant shall continue to duly perform all of its obligations hereunder, Tenant's right of possession of the Premises shall not be disturbed unless this Lease is otherwise terminated pursuant to its terms. If Tenant fails to execute and deliver to Landlord any instruments required to effectuate such subordination or to make this Lease prior to the lien of any mortgage, deed of trust, ground or master lease, or other lien, as the case may be, and such failure continues for fifteen (15) days after written demand, then notwithstanding the provisions of Section 26(a)(ii) above, Tenant shall be in default of this Lease for failure to timely deliver such instruments. (b) Tenant shall not cause or allow to be filed or recorded any Uniform Commercial Code C'UCC") financing statements which encumber Tenant's removable personal property, fixtures or other property and which contain the legal description of the Premises, unless such UCC financing statements expressly disclose that the security interest is limited to Tenant's interest in the assets and property of the Tenant, now owned or hereinafter acquired and all additions and accessions thereto and substitutons and replacements thereof, and does not extend to the interests of Landlord in the Premises. Tenant represents and warrants that Tenant has not, prior to the date of this Lease, entered into, caused to be filed or recorded, or allowed to be filed or recorded, any such UCC financing statement. In the event any such UCC financing statement is filed or recorded against the Premises or any portion thereof or against any of Landlord's property or any property in which Landlord may have an interest, Tenant shall, within five (5) days after a written or oral request from Landlord, immediately cause such UCC financing statement to be released from Landlord's property and from the Premises. (c) Except as otherwise set forth herein, in no event shall this Lease, or any of Landlord's rights and remedies hereunder, be subject or subordinate to any lien, leasehold deed of trust, chattel mortgage or other encumbrance against Tenant's interest in the leasehold created by this Lease or encumbering any property of Tenant located in or about the Premises, it being expressly understood and agreed that nothing contained in this Lease shall expressly or impliedly obligate Landlord to subordinate or waive any of Landlord's rights under this Lease or under the laws of the jurisdiction in which the Premises are located. 29. TRANSFER BY LANDLORD; LANDLORD'S LIMITED LIABILITY. 001219.0001\6M572 20 (a) If Landlord sells or transfers its interest in the Premises, Landlord on consummation of the sale or transfer shall be released from any and all liability thereafter accruing hereunder provided the transferee assumes all obligations of Landlord hereunder from and after the date of such transfer. If any Security Deposit, prepaid rent or other sums have been paid by Tenant, Landlord can transfer the Security Deposit, prepaid rent or other sums to Landlord's successor, and on such transfer Landlord shall be discharged from any further liability relating to such Security Deposit, prepaid rent or other sums. (b) Tenant agrees that if Landlord is a general or limited partnership, a limited liability partnership or a joint venture, or if Landlord at any time becomes a general partnership, limited partnership, limited liability partnership or joint venture, Tenant shall not make any claims against any partner (whether general or limited) or joint venturer thereof by reason of any matter arising under the terms of this Lease or arising in connection with the use or occupancy of the Premises. No personal asset of any partner (whether general or limited) in such partnership or joint venturer in such joint venture shall be subject to levy, execution, attachment or other enforcement procedures by Tenant or any successor or assignee of Tenant on account of any matter whatsoever relating to this Lease or the use or occupancy of the Premises. Consistent with the intention expressed in the preceding portion of this Section, and notwithstanding anything to the contrary contained in this Lease, Tenant agrees that in all events it shall look solely to the estate and property of Landlord in the Premises, regardless of whether the entity constituting Landlord is a corporation, partnership, limited liability partnership, limited liability company, joint venture, trust, individual or otherwise, for the collection of any judgment or other judicial process requiring the payment of money by Landlord with respect to any of the terms, covenants or conditions of this Lease, and no other property or assets of Landlord shall become subject to levy, execution, attachment or other enforcement procedures for the satisfaction of Tenant's remedies. 30. ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS. (a) Tenant shall upon fifteen (15) days' written notice from Landlord execute, acknowledge before a notary public and deliver to Landlord or any then existing or potential lessor, purchaser, or encumbrancer of the Premises a Tenant's Estoppel Certificate in the form of or containing the information and covenants set forth in Exhibit "C" attached hereto and incorporated herein by this reference, together with such other information and covenants as reasonably requested by Landlord or any then existing or prospective lessor, purchaser or encumbrancer of the Premises. Any such statement may be relied upon by a then existing or prospective lessor, purchaser or encumbrancer of all or any portion of the Premises. Tenant's failure to deliver such statement within such time period shall constitute an acknowledgement by Landlord that the statements included in the estoppel certificate are true and correct, without exception. If Tenant thereafter fails to deliver such a statement within fifteen (15) days after written notice from Landlord of Tenant's failure to timely deliver the statement, then Tenant does hereby make, constitute and irrevocably appoint Landlord as Tenant's attorney -in -fact and in Tenant's name, place and stead to execute such a statement; provided, however, such appointment shall not relieve Tenant of its obligation to provide such a statement. (b) Landlord shall upon fifteen (15) days' written notice from Tenant execute, acknowledge before a notary public and deliver to Tenant a Landlord's Estoppel Certificate in OO1219.0001\699457.2 21 the form of or containing the information and covenants set forth in Exhibit "D" attached hereto and incorporated herein by this reference, together with such other information and covenants as reasonably requested by Tenant. Landlord's failure to deliver such statement within such time period shall constitute an acknowledgement by Landlord that the statements included in the estoppel certificate are true and correct, without exception. If Landlord thereafter fails to deliver such a certificate within fifteen (15) days after written notice from Tenant of Landlord's failure to timely deliver the certificate, then Landlord does hereby make, constitute and irrevocably appoint Tenant as Landlord's attorney -in -fact and in Landlord's name, place and stead to execute such a statement; provided, however, such appointment shall not relieve Landlord of its obligation to provide such a statement. (c) From time to time after the date of execution of this Lease and continuing until the end of the Term, Tenant shall, upon fifteen (15) days' prior written notice from Landlord, provide Landlord with the most recent annual financial statement of Tenant, and annual financial statements of Tenant for the two (2) years preceding the period covered by the current financial statement, all of which financial statements shall be certified in writing by Tenant, as applicable, to be true and correct. Such financial statements shall be prepared in accordance with generally accepted accounting principles, consistently applied, and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. In addition, Tenant hereby authorizes Landlord to submit for and obtain credit reports at any time and from time to time from any one or more credit reporting agencies which will disclose the credit worthiness and payment histories of Tenant. 31. INTENTIONALLY OMITTED. 32. LANDLORD'S RIGHT OF ENTRY. Landlord, or its authorized agents, shall have the right, upon reasonable notice, to enter the Premises during normal working hours (or at any time in the case of an emergency) for the following purposes: (a) inspecting the general condition and state of repair of the Premises, (b) making repairs required by Landlord, and (c) showing the Premises to any prospective purchaser or lessee. If Tenant has not renewed or extended this Lease prior to the final ninety (90) days of the Term, Landlord, or its authorized agents, shall have the right to erect on or about the Premises a customary sign advertising the Premises for lease or for sale: At all times Landlord shall have a key or keys with which to unlock the doors on the Premises, excluding Tenant's vaults and safes. 33. SUCCESSORS. The terms, covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon the parties hereto and their respective successors in interest and legal representatives, except as otherwise expressly provided herein. All rights, powers, privileges and duties of Landlord under this Lease, including, but not limited to, any notice required or permitted to be delivered by Landlord to Tenant hereunder may, at Landlord's option, be exercised or performed by Landlord's agent or attorney. . 34. AUTHORITY TO EXECUTE. Landlord and Tenant each represents and warrants: (a) that the individual(s) signing on behalf of such party is/are duly authorized to execute and deliver this Lease on behalf of such party in accordance with: (i) a duly adopted resolution of such party's board of directors, (ii) in accordance with such party's by-laws, or (iii) pursuant to such party's partnership agreement or other controlling documents, and (b) that this 001219.0001\6MS7.2 22 Lease is binding upon Landlord and Tenant in accordance with its terms. Each party shall deliver to the other parry upon request a copy of such documents establishing the authority of the signatories of such party. 35. ENTIRE AGREEMENT; LEASE NOT OFFER. This Lease, together with any exhibits, attachments or addenda, contains all of the agreements of the parties with respect to the subject matter hereof. No prior agreement or understanding pertaining to the subject matter hereof shall be effective unless set forth herein. Statements, agreements, representations or warranties, if any, by any agents or brokers of Landlord shall have no effect whatsoever and shall not be binding upon Landlord unless expressly contained in this Lease. This Lease may be amended in writing only, signed by the parties in interest at the time of such amendment. Preparation of this Lease by Landlord and the submission of same to Tenant shall not be deemed an offer to lease the Premises or any other premises to Tenant. This Lease shall become binding upon Landlord and Tenant only when fully executed by both parties. 36. ATTORNEYS' FEES. In the event suit is brought to enforce or interpret any part of this Lease, the prevailing party shall be entitled to recover as an element of its costs of suit, and not as damages, all attorneys' fees and costs of suit (including, without limitation, expert witness fees) actually incurred (regardless of any otherwise applicable court schedule for the determination thereof). In addition, should it become necessary for Landlord to utilize legal counsel to collect any sums from Tenant or to enforce any of the provisions contained herein, Tenant agrees to pay all reasonable legal fees and other third party costs incurred by Landlord, whether or not a suit is instituted or prosecuted to final judgment. 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 sent by mail. 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 in Paragraphs M and N of the Basic Lease Provisions, 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 given as required hereunder) shall be deemed to be receipt of the notice when sent. 38. BROKERS. Each parry hereby represents and warrants to the other party that it has not had dealings with any broker, finder, or other person except those persons or entities described in Paragraph Q of the Basic Lease Provisions in locating the Premises or negotiating this Lease and that it knows of no other person who is or might be entitled to a commission, finder's fee or other like payment in connection herewith. 39. RELATIONSIUP OF PARTIES. Neither the method of computation of rent nor any other provisions contained in this Lease nor any acts of the parries shall be deemed or construed by the parties or by any third person to create the relationship of principal and agent or 001219.000116MS7.2 23 of partnership or of joint venture or of any association between Landlord and Tenant, other than the relationship of landlord and tenant. 40. RECORDING. Concurrently with the execution of this Lease, Landlord and Tenant shall execute and acknowledge a short form memorandum of this Lease for recording purposes. On termination of this Lease, Tenant shall execute and deliver to Landlord immediately upon Landlord's request a quitclaim deed in recordable form transferring to Landlord all interest, if any, of Tenant in the Premises. 41. INTENTIONALLY OMITTED. 42. SECURITY. Landlord does not assume any responsibility to provide any security measures, and shall not have any liability for failure to provide same or for any inadequacy thereof with respect to the Premises. 43. TENANT'S RESPONSIBILITY REGARDING HAZARDOUS MATERIALS. Tenant shall not (either with or without negligence) cause or permit the escape, disposal or release of any biologically or chemically active or other hazardous substances or materials or substances or materials now or subsequently found to have an adverse effect on the environment or the health or safety of persons (collectively, "Hazardous Materials"). Tenant shall not allow the storage or use of Hazardous Materials in any manner not sanctioned by law. Landlord's approval shall not be required for (i) ordinary cleaning products which are not regulated by governmental authorities and are used in the ordinary course of Tenant's business, or (ii) those items and amounts which are reasonably necessary to the business of Tenant at the Premises, which items and amounts Tenant agrees to properly use, store and dispose of in the manner required by law. Without limitation, the term "Hazardous Materials" shall include those described in the Comprehensive Environmental Response, compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 6901, et seq., any applicable state or local laws, and the regulations adopted under those acts. If Tenant or the Tenant's Parties cause any Hazardous Materials contamination of the Premises, Tenant shall, at its sole cost and expense, remove such Hazardous Materials and remediate the Premises in compliance with all Laws. If any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release of Hazardous Materials during the term of this Lease, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as additional rent if such requirement applies to the Premises. In addition, Tenant shall execute affidavits, representations and the like from time to time at Landlord's request concerning Tenant's best knowledge and belief regarding the presence of Hazardous Materials on the Premises. In all events, Tenant shall indemnify, defend and hold Landlord and the Landlord Parties harmless from and against any and all liabilities, costs, expenses, claims, actions, causes or action, judgments, damages, penalties, fines or losses (including, without limitation, diminution in value of the Premises, damages arising from any adverse impact on marketing of the Premises, and sums paid in settlement of claims, attorneys' fees, consultants' fees and experts' fees) if caused by Tenant, the Tenant Parties or persons acting under Tenant. Tenant shall not be liable for any Hazardous Materials located on the Premises as of the Commencement Date or migrating onto the Premises from adjacent property. The within covenants shall survive the expiration or earlier termination of the Term of this Lease. 001219AOOMM57.2 24 44. SPECIFIC PERFORMANCE. With respect to any provision of this Lease which provides, in effect, that Landlord shall not unreasonably withhold or unreasonably delay any consent or any approval, Tenant, in no event, shall be entitled to make, nor shall Tenant make, any claim for, and Tenant hereby waives any claim for, money damages; nor shall Tenant claim any money damages by way of setoff, rent abatement, counterclaim or defense, based upon any claim or assertion by Tenant that Landlord has unreasonably withheld or unreasonably delayed any consent or approval; Tenant's sole remedy shall be an action or proceeding for specific performance, injunction or declaratory relief to enforce such provision. 45. WAIVER OF TRIAL. BY JURY. LANDLORD AND TENANT DO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER, ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE RELATIONSHIP OF LANDLORD AND TENANT, OR TENANT'S USE OR OCCUPANCY OF THE PREMISES. 46. GUARANTOR. If any guarantor(s) are listed in the Basic Lease Provisions, then the obligations of Tenant under this Lease shall be guaranteed by such guarantor(s) on the Guaranty of Lease form attached hereto as Exhibit "E" and incorporated herein by this reference, or such other form as is acceptable to Landlord in its sole discretion. 47. NONDISCRIMINATION. Tenant herein covenants by and for itself, its heirs, executors, administrators and assigns, and all persons claiming under or through it, and this Lease is made and accepted upon and subject to the following conditions: There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, handicap, ancestry or national origin in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the Premises herein leased nor shall Lessee itself, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants or vendees in the Premises herein leased. 48. FORCE MA.IEURE. Except for the payment of monetary obligations hereunder, neither Landlord nor Tenant shall be chargeable with, liable for, or responsible to the other party for anything or in any amount for any delay caused by fire or other casualty, earthquake, flood, inclement weather, explosion, acts of God or the public enemy, any action, inaction, delay or interference by governmental authorities (including, without limitation, delays in promptly obtaining the permits and approvals required for any construction), war, invasion, insurrection, rebellion, riots, strikes or lockouts, acts or omissions of the other party or any other cause, whether similar or dissimilar to the foregoing, which is beyond the reasonable control of such party (collectively, "Force Majeure Delays"). Any delay in either party's performance of non -monetary obligations under this Lease arising out of or in connection with Force Majeure Delays shall not be deemed to be a breach by such party under this Lease, and any time period within which such party is obligated to perform under the Lease shall be extended for a period of time which is reasonable in light of such Force Majeure Delays (which extension shall in no event be less than the duration of the events causing such delay). 001219.=1\698457.2 25 49. MISCELLANEOUS PROVISIONS. The invalidity, illegality, or unenforceability of any provision of this Lease shall in no way affect the validity, legality or enforceability of any other provision hereof. If more than one person or entity is Tenant, the obligations imposed on each such person or entity shall be joint and several. This Lease shall be construed and interpreted in accordance with the laws of the State of California in force from time to time. Time is of the essence in this Lease. The captions of the paragraphs of this Lease are for convenience only and are not a part of this Lease and do not in any way limit or amplify the terms and provisions of this Lease. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subtenancies or may, at the option of Landlord, operate as an assignment to Landlord of any or all of such subtenancies. Any uncertainty or ambiguity existing herein shall not be interpreted against either party because such party prepared any portion of this Lease, but shall be interpreted according to the application of rules of interpretation of contracts generally. Where the context so indicates, references to the singular includes the plural; references to the masculine includes the feminine and neuter, and references to the neuter includes the masculine and feminine. Each term and provision of this Lease performable by Tenant shall be deemed both a covenant and a condition to Landlord's performance hereunder. 50. CONTINGENCIES. (a) Tenant's obligation to enter into this Lease is contingent upon Tenant, through its reasonable and diligent efforts, being able to obtain all necessary government approvals (collectively "Approvals") necessary to allow Tenant's permitted use in the Premises as described in Paragraph K of the Basic Lease Provisions. Upon request by Tenant, Landlord shall take reasonable steps to assist and cooperate with Tenant's efforts to obtain necessary Approvals. If Tenant is unable to obtain all Approvals on or before May 17, 2004 ("Contingency Date"), Tenant, in its sole discretion, may elect to terminate this Lease by written notice to Landlord delivered on or before the Contingency Date. If Tenant elects to terminate this Lease pursuant to this Section 50(a), such termination shall become effective upon Landlord's receipt of Tenant's termination notice. Tenant's failure to deliver such notice on or before the Contingency Date shall constitute Tenant's waiver of Tenant's right to terminate the Lease pursuant to this Section 50(a). (b) Landlord and Tenant acknowledge that Tenant has been unable to conduct a satisfactory inspection and review of the Premises prior to delivery of the Premises to Tenant, and that Landlord has been unable to provide Tenant with as -built and/or City -approved plans of the Building and other improvements on the Premises. Prior to the Contingency Date, Tenant may perform such due diligence of the Premises as Tenant shall reasonably desire. If Tenant determines, through such due diligence, that the Premises and/or the condition thereof is not satisfactory, Tenant, in its sole discretion, may elect to terminate this Lease by written notice to Landlord delivered on or before the Contingency Date. If Tenant elects to terminate this Lease pursuant to this Section 50(b), such termination shall become effective upon Landlord's receipt of Tenant's termination notice. Tenant's failure to deliver such notice on or before the Contingency Date shall constitute Tenant's waiver of Tenant's right to terminate the Lease pursuant to this Section 50(b). 001219.0001\69 57.z 26 (c) If Tenant exercises its rights to terminate the Lease under Sections 50(a) or 50(b), Landlord agrees to reimburse Tenant an amount equal to (i) Tenant's reasonable costs incurred in preparing its plans for the tenant improvements, and (ii) the cost of any improvements installed by Tenant prior to the termination hereof. The provisions of this Section 50(c) shall survive termination of this Lease. (dl) Tenant's obligation to enter into this Lease is further contingent upon Tenant, through its reasonable efforts, being able to obtain all necessary approvals from Big O Tires, Inc., a Nevada corporation for (i) use of the Premises as a site for a Big O Tire store, and (ii) execution of a franchise agreement between Big O Tires, Inc., and Tenant for such use. If Tenant is unable for any reason to obtain such approvals within thirty (30) days from the date this Lease is signed by Landlord and Tenant, this Lease shall terminate and be of no further force and effect. 51. FRANCHISOWS RIGHT TO CURE. It is expressly understood and agreed by Landlord and Tenant that in accordance with that certain Big O Tires, Inc. Franchise Agreement by and between Tenant, as Franchisee, and Big O Tires, Inc., as Franchisor, with respect to the Premises, that in the event of any breach or claim of breach hereunder by Tenant, Landlord is obligated to notify Big O Tires, Inc. at 12650 East Briarwood Avenue, Suite ##2-D, Englewood, Colorado 80112 or at such other address as Big O Tires, Inc. may notify Landlord of in writing from time to time, of any such breach or claim of breach, of which Landlord has knowledge. Within fifteen (15) days after its receipt of such notice and so long as it has cured all breaches and defaults with respect to this Lease, Big O Tires, Inc. shall be obligated to: (i) assume Tenant's rights and obligations under this Lease, including but not limited to the payment to Landlord of any accrued and unpaid rent and Additional Rent and the curing of Tenant's other obligations required under the terms and provisions of this Lease; and (ii) have the right to sublease the Premises to another authorized franchisee of Big O Tires, Inc. subject to the approval of Landlord, which approval by Landlord may not be unreasonably withheld. 001219.0001\698457.2 27 IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date set forth beneath each party's respective signature hereon, but such execution shall be as of the date first mentioned above. Landlord: C.S.B. PARTNERSHIP, a California general partnership HB AUTO I, LLC, aCa�hiform'a li ' ed liability company By: Name: C-Arkc-v/tJ Title: JUZTWIN, INC., a California corporation By Name: d eAl Title: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: _ C . topher R. Phillip(, President By: FOUR KYLES, INC., a California rporation, its General Partner By: & ---- Virgil Kyle Kyle, Al,President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, General Partner /--)I fz-o dJJ4�� By: opher R. Phillips, resident By: JYB ENTERPRISES, INC., a California corporation, its General Partner By: L— Ja Y. Berry, Presi t 001219,0001\698457,2 28 EXHIBIT "A" LEGAL, DESCRIPTION OF PREMISES To be supplied by Landlord at a future time. 001219.0001\6994572 EXHIBIT "B" TENANT WORK LETTER AGREEMENT This TENANT WORK LETTER AGREEMENT ("Work Letter Agreement") is entered into as of April _, 2004 by and between HB AUTO I, LLC, a California limited liability company, and JUZTWIN, INC., a California corporation (collectively, "Landlord! ), and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"). RECITALS: A. Concurrently with the execution of this Tenant Work Letter Agreement, Landlord and Tenant have entered into a lease (the "Lease") covering certain premises (the "Premises") more particularly described in Exhibit "A" attached to the Lease. All terms not defined herein have the same meaning as set forth in the Lease. To the extent applicable, the provisions of the Lease are incorporated herein by this reference. B. In order to induce Tenant to enter into the Lease and in consideration of the mutual covenants hereinafter contained, Landlord and Tenant agree as follows: ' 1. TENANT'S WORD. Subject to Force Majeure Delays as described in Section 48 of the Lease and subject to any Landlord Delays as described below, Tenant shall, at its sole cost and expense, undertake construction of the Tenant Improvements. As used herein, "Landlord Delays" shall mean any delays in the completion of the Tenant Improvements which is caused by or results from Landlord's failure to timely perform any of its obligations pursuant to the Lease or this Work Letter. 2. TENANT IMPROVEMENTS. Reference herein to "Tenant Improvements" shall mean the improvements attached hereto as Exhibit "B-1". 3. DESIGN AND APPROVAL OF TENANT IMPROVEMENTS. The Tenant Improvements to be constructed on the Premises by Tenant shall be constructed at Tenant's sole cost and expense, in a good and workmanlike manner, using all new materials, in compliance with all applicable laws, statutes, rules, regulations and building codes, and in accordance with plans and specifications for such improvements that have been approved by the applicable governmental authorities and by Landlord pursuant to the provisions of this Section 3. (a) Tenant shall prepare final plans, specifications and working drawings for construction of the Tenant Improvements and submit said final plans, specifications and working drawings to Landlord for approval. Landlord shall provide written approval within fifteen (15) business days of receipt of the final plans, which approval shall not be unreasonably withheld, or shall provide written objections to those final plans within that time period. The failure of Landlord to provide approval or written objections to the final plans within such fifteen (15) business day period shall be deemed Landlord's approval of the final plans. (b) Following approval of the final plans by Landlord, the final plans shall be submitted by Tenant to the City for approval, to the extent such approval is required under applicable law. The final plans approved by Landlord and the City shall be referred to 001219.00011698457.2 1 hereinafter as the "Approved Plans". All construction of the Tenant Improvements by Tenant shall be substantially in accordance with the Approved Plans, and no change may be made in the Approved Plans that constitutes a material change to the Tenant Improvements without Landlord's prior written approval, which approval shall not be unreasonably withheld. Upon completion of the construction of the Tenant Improvements, Tenant shall provide Landlord with two (2) sets of "as built" plans. C. CONSTRUCTION OF TIIE IMPROVEMENTS. After Tenant has obtained all required governmental approvals and permits allowing construction of the Tenant Improvements on the Premises, Tenant shall contract with a general contractor (the "Contractor") licensed by the State of California to construct the Tenant Improvements on the Premises in accordance with the Approved Plans. Tenant shall furnish Landlord with a true copy of Tenant's contract with the Contractor, together with evidence of the Contractor's financial condition and evidence that Tenant has sufficient funds committed to complete the construction. Tenant's contract with the Contractor shall (i) give Landlord the right, but not the obligation, to assume Tenant's obligations and rights under that contract if Tenant is in material default under the contract or this Lease after the expiration of all applicable cure periods, if any; and (ii) provide that in the event of such default by Tenant then Landlord, its agents and representatives, may enter the Premises at any reasonable time thereafter to cause completion of the construction. In the event Landlord exercises the foregoing right to cause completion of the construction, Tenant shall assign to Landlord for its use the general contract, and Tenant shall deliver to Landlord an acknowledgment and acceptance by the Contractor to the assignment to Landlord, said acknowledgment and acceptance to be in such form as Landlord in its commercially reasonable discretion may require. Landlord shall have the right to post and maintain on the Premises any notice of non -responsibility provided for under applicable law, and to inspect the Premises or the Tenant Improvements in relation to such work at any reasonable time upon prior notice to Tenant. The Tenant Improvements shall be completed by Tenant in a good and workmanlike manner, free of liens and substantially in accordance with the Approved Plans and applicable laws using quality materials. Tenant shall obtain and deliver to Landlord upon completion of the Tenant Improvements unconditional lien releases from the Contractor and all subcontractors who constructed the Tenant Improvements and from materialmen which supplied materials as part of the construction of the Tenant Improvements. D. MISCELLANEOUS CONSTRUCTION COVENANTS. (a) Diligent Construction. Tenant will promptly, diligently and continuously pursue construction of the Tenant Improvements to successful completion in full compliance with the Lease. Landlord and Tenant shall cooperate with one another during the construction of the Tenant Improvements to effectuate such work in a timely and compatible manner. (b) Compliance with Laws. Tenant will construct the Tenant Improvements in a safe and lawful manner. Tenant shall, at its sole cost and expense, comply with all applicable laws and all regulations and requirements of, and all licenses and permits issued by, all municipal or other governmental bodies with jurisdiction which pertain to the construction of the Tenant Improvements. 001219.000M98457.2 2 (c) Coordination with Lease. Nothing herein contained shall be construed as (i) constituting Tenant as Landlord's agent for any purpose whatsoever, or (ii) a waiver by Landlord or Tenant of any of the terms or provisions of this Lease. IN WITNESS WHEREOF, the undersigned Landlord and Tenant have caused this Tenant Work Letter Agreement to be duly executed by their duly authorized representatives as of the date of the Lease. Landlord: HB AUTO I, LLC, C.S.B. PARTNERSHIP, a California general partnership a California limi d liabili company By: By: ---- Nam : —,—ZO 3 CA-v<rntJ Title: alit-4s p� California corporation �_ ��/ / • �A 001219.0001\699457.2 C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: Chr' pher R. Philli , President By: FOUR KYLE ,1NC., a California rporation, its General Partner By: t V rgil Kyle Kyle, III, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, General Partner By: C ' pher R. Phillip President By: JYB ENTERPRISES, INC., a California corporation, its General Partner By: Jas Y. Berry, Pres' en EXHIBIT "D-1" SCHEDULE OF TENANT IMPROVEMENT WORK [to be inserted] 001219.0001\699457.2 EXHIBIT "C" TENANT'S ESTOPPEL, CERTIFICATE TO: , or its assigns ("Landlord"); RE: That certain Lease dated , or its assigns ("Buyer"); and or its assigns ("Lender"); by and between as "Landlord" and as "Tenant" for a year term which commenced on and will terminate on (the "Lease") of the premises commonly referred to as (the "Premises") containing square feet of the project commonly referred to as (the "Project"). Tenant understands that [Buyer is proposing to purchase the Project from Landlord pursuant to that certain Agreement of Purchase and Sale, dated , as amended (the "Purchase Agreement") by and between Landlord, as "Seller" and Buyer as "Buyer"], [Lender is proposing to make a loan secured by Landlord's interest in the Project], and in connection therewith Tenant is delivering this Estoppel Certificate (the "Certificate"). Tenant has been advised and understands that Buyer and/or Lender will act in material reliance upon this Certificate and the representations, warranties, certifications, acknowledgments and agreements of Tenant set forth herein in the consummation of the [acquisition of the Project from Landlord and] [loan to Landlord]. This Certificate shall be for the benefit of, and shall be relied upon by, Buyer, its partners, successors and assigns, and any lender or group of lenders designated by Buyer, including, without limitation, Lender and its successors and assigns. Tenant hereby certifies that the above description of the Lease, and the description of the Premises therein demised, is a true and correct description of the same and that the Lease constitutes the only agreement between Landlord and Tenant with respect to the Premises. Further, Tenant hereby represents, warrants, certifies, acknowledges and agrees as follows: 1. A true and complete copy of the Lease is attached hereto. There have been no amendments, modifications, extensions, renewals or replacements of the Lease, except as follows: . Tenant has no right, title or interest with respect to the Premises other than as tenant under the Lease. 2. The Lease commenced on , and the term of the Lease shall expire on . Tenant is entitled to the following renewal options under the Lease: options to extend for period of years each, pursuant to the terms of Paragraph of the Lease. 001219.0001\698457.2 3. Tenant has not assigned the Lease nor sublet all or any portion of the Premises, except as follows: 4. Other than those representations and warranties set forth in writing in the Lease, there have been no representations, warranties or covenants made by Landlord to Tenant, either oral or in writing. 5. The Lease is in fall force and effect. Tenant has accepted the Premises, presently occupies the same, and is paying rent and other amounts due pursuant to the Lease on a current basis; Tenant has no knowledge of any set -offs, claims or defenses to the enforcement of the Lease; and there are no periods of free rental applicable to the term of the Lease. 6. Tenant is not in default in the performance of the Lease, has not committed any breach of the Lease that has not been fully cured, no notice of default has been given to Tenant, and Tenant is not the subject of any federal or state bankruptcy, insolvency or liquidation proceeding. 7. Landlord is not, to Tenant's knowledge, in default in the performance of the Lease; Landlord has not, to Tenant's knowledge, committed any breach of the Lease that has not been fully cured; no notice of default has been given to Landlord; and Landlord has fulfilled all representations and warranties and all finish work on the Premises required of Landlord. 8. Tenant's Minimum Rent under the Lease is $ per month. Tenant's last payment of Minimum Rent was made on or about 9. The next increase in monthly Minimum Rent is scheduled to occur on after which the monthly Minimum Rent under the Lease will be $ 10. No rent has been paid by Tenant in advance under the Lease except for $ applicable to the _ months of the term, and to Tenant's knowledge, Tenant has no claim of offset or credits against rentals under the Lease. 11. A security deposit has been made with Landlord in the amount of $ which is refundable under the terms of the Lease. 12. Tenant is not entitled to any option or right of first refusal to purchase all or any part of the Premises or all or any part of the Building or other property of which the Premises is a part. 13. Tenant shall sign any and all documents necessary to amend or further confirm the terms of this Certificate within ten (10) days following request therefor by Landlord. 14. If Buyer acquires the Premises and/or if Lender makes the loan to Landlord, then Tenant shall not, without the prior written consent of Lender and any and all other lenders with a security interest against any portion of the Project, pay Minimum Rent or its pro rata share of the estimated monthly Operating Expenses more than one (1) month in advance, nor agree to any modifications to the term of the Lease or other material economic provisions of the Lease. 001219.000698457.2 2 15. In the event that Lender or any other lenders with a security interest in the Project or any portion thereof succeeds to the interest of Landlord under the Lease or in the Project, Tenant shall attorn to such successor and recognize such successor as the new landlord under the Lease and make all payments of Minimum Rent, Operating Expenses and other sums under the Lease to such successor. 16. Tenant has not relied upon any representation (either oral or in writing) of Landlord or Buyer in executing the Lease or this Certificate, except as expressly set forth respectively in the Lease or this Certificate, if any. The person(s) signing this Certificate hereby represent and warrant that it [he] [she] [they] is [are] authorized to execute this Certificate on behalf of the undersigned. Dated this day of Very truly yours, By: Name: Title: Name: Title: "Tenant" [provide evidence of signature authority] 001219.000 M9&457.2 3 EXHIBIT "D" LANDLORD'S ESTOPPEL, CERTIFICATE Ladies and Gentlemen: The undersigned, , a ("Landlord"), as Landlord under a lease (the "Lease") of certain premises (the "Premises") dated , executed by Landlord and , a ("Tenant"), hereby states, declares, represents and warrants to the addressee of this Estoppel Certificate and its successors and assigns as follows: 1. The copy of the Lease (with all amendments, riders or side agreements attached thereto) attached to this Estoppel Certificate as Attachment A is a true and correct copy of the Lease, constitutes the only agreement between Landlord and Tenant with respect to the Premises, is in full force and effect, and has not been otherwise amended, supplemented or modified except, if at all, as follows: 2. Landlord has delivered possession of the Premises to Tenant and any improvements required by the terms of the Lease to be made by Landlord have been completed in accordance with the terms of the Lease. 3. Rental and other amounts due and payable from Tenant under the Lease have been paid to the date of Landlord's execution of this Estoppel Certificate. 4. Tenant is not in default under any of the terms, conditions or covenants of the Lease, except, if at all, as follows: 5. No notice has been received or given by Landlord of any default under the Lease by either Landlord or Tenant that has not been cured, and there are no circumstances that with the passage of time or giving of notice, or both, would constitute a default by Landlord or Tenant 001219=01\6984372 in the performance of any of the terms, conditions and/or covenants under the Lease, except, if at all, as follows: 6. The address for notices to Landlord is set forth in the Lease. 7. Tenant has no charge, lien, or claim of offset under the Lease or against rent or other charges due under the Lease, and Tenant has no outstanding claim for credit or reimbursement on account of Tenant's improvements to the Premises, except as follows: 8. Tenant has no right or. option to purchase the Premises or any part or all of the Building of which they are a part, or to renew or extend the Lease, or to expand the Premises, except, if at all, as follows: 9. Landlord has not received notice of any assignment, sublease, hypothecation, mortgage or pledge of Tenant's interest in. the Lease, except, if at all, as follows: 10. The amount of any security or other deposit returnable to the Tenant pursuant to the Lease is set forth in the Lease and the amount of any Rent and other amounts paid more than thirty (30) days prior to the date on which they are due under the Lease are also set forth in the Lease. 11. Landlord is not in default under any mortgage, deed of trust, ground lease or other security instrument secured by Landlord's interest in the Premises. 001219A001\6994572 2 The person(s) signing this Certificate hereby represent and warrant that it [he] [she] [they] is [are] authorized to execute this Certificate on behalf of the undersigned. Dated this day of EXECUTED: By: Name: Its: OD1219.00DI\698457.2 OPTION ADDENDUM Ice STANDARD LEASE AGREEMENT THIS OPTION ADDENDUM TO STANDARD LEASE AGREEMENT ("Addendum") is attached to and made a part of that certain Lease between HB AUTO 1, LLC, a California limited liability company, and JUZTWIN, INC., a California corporation (collectively, "Landlord"), and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"), which is dated April _, 2004 ("Lease"). Landlord and Tenant desire to modify the Lease in the following particulars only. As such, Landlord and Tenant hereby agree that the following shall be included as part of said Lease: R. Tenant is hereby granted two (2) option(s) to extend the term of this Lease upon all of the provisions contained in the Lease, except for Minimum Rent, for a period of five (5) years per option. Such options shall be exercised, if at all, by Tenant giving written notice to Landlord of the exercise of each of such options ("Option Notice') at least ninety (90) days but not more than one hundred eighty (180) days before the expiration of the initial Term or previously exercised extension period (if any), as the case may be. Tenant cannot exercise more than one option at a time, and Tenant can only exercise the option for the extension period arising immediately following the end of the existing Term. Reference to the "Term" of the Lease as used in the Lease shall include all extension period(s) for which options to extend are exercised in accordance herewith. Tenant shall have no other right to extend the Term except as set forth in this Addendum. 2. MINIMUM RENT DURING EXTENSION PERIOD(S). In the event Tenant exercises one or both of its options to extend the Term of the Lease, Minimum Rent during such extension periods shall be adjusted as necessary in accordance with Section 4(b) of the Lease. 3. INTENTIONALLY OMITTED. 4. MULTIPLE OPTIONS. in the event that Tenant has multiple options to extend the Tenn of the Lease, a later option cannot be exercised unless the prior option to extend has been so exercised. 5. EFFECT OF DEFAULT ON OPTIONS. (a) Tenant shall have no right to give Landlord the written notice referred to in Section 1 above, notwithstanding any provision herein to the contrary, at any time when Tenant is in default of any of the terms, conditions or covenants contained in Lease beyond any applicable cure period, and Tenant's right to extend the Lease pursuant to this Addendum shall not be valid if, at the time such extended term would commence, (i) Tenant is in default of any of the terms, conditions or covenants contained in Lease beyond any applicable cure period or (ii) Landlord has given to Tenant three or more notices of default under Section 26 of the Lease during the prior twelve (12) month period, whether or not such defaults are cured. 001219.00011698457.2 (b) The period of time within which an option may be exercised shall not be extended or enlarged by reason of Tenant's inability to exercise an option because of the provisions of Section 6(a) hereinabove. 6. MISCELLANEOUS. All terms used herein shall have the same meanings as used in the Lease. In the event of a conflict between the terms of the Lease and those of this Addendum, the terms of this Addendum will control. Except as hereinabove provided, said Lease shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Addendum, as of the date of the Lease. Landlord: C.S.B. PARTNERSHIP, a California general partnership HB AUTO I, LLC, a California li iab' ity company By: C.E.P. DEVELOPMENTS, INC., B , / a California corporation, its General Partner Name: A By: Title: !Q_V k.Lc�e C pher R. Phillips resident CaliforniaJ-UZTWIN, INC., • ... • By: FOUR KYLES, INC., a California orporation, its General Partner By: Virgil K le Ky , I , President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, General Partner By: 1/j) /,� AU — C opher R. Philli 01 President By: JYB ENTERPRISES, INC., a California corporation, its General Partner By: J n Y. Berry, Presi en 001219.0001\698451.2 2 LEASE RIDER AND MODIFICATION THIS AGREEMENT is made effective this 1 st day of August, 2004 by and between HB Auto I, LLC ("Landlord"), C.S.B. PARTNERSHIP ('Tenant"), and Big O Tires, Inc., its affiliates, successors and assigns ("Big O"). 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 Big 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 franchise agreements between Tenant and Big O, if any; NOW, THEREFORE, in consideration of the sum of one dollar ($1.00), in hand paid by Big O to Landlord and to Tenant, and other good and sufficient consideration, 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 Lease so 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, unless such Event is not cured within ten (10) days after Notice of Default (as hereinafter defined) has been received by Big O; (b) if the Event is anything other than the non-payment of rent, unless such Event is not cured within twenty-five (25) days after Notice of Default (as hereinafter defined) has been received by Big O, 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 at 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 pWormance required under the Lease. Nothing herein shall be construed as requiring Big O 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 Us 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 Us 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, injunction, temporary restraining 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 Tenant. 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 or successors. 8. Tenant and Landlord understand that Big O is entering into or has entered into a Franchise Agreement with Tenant for a Big O Tire Store 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 into such Franchise Agreement. IN WITNESS WHEREOF, the parties hereto have duly execute and delivered this agreement as of the date first above -listed. HBiAUTO, I,. LLC �Yz" Name: _,,d1� Q Title:/�%�Ae•�1 (CORPORATE SEAL) TENANT C.S.B. PARTNERSHIP By: 0-4- e`, A&-� Name: Title: (CORPORATE SEAL) BIG O TIRES, INC. By - Name: Joh . Hvduke Title: Senior Vice President — Franchise Development (CORPORATE SEAL) GUARANTY OF LEASE ®R 4 "�.� 1 b A L --- THIS GUARANTY OF LEASE ("Guaranty") is made and entered into as of the 19th day of Apri1, 2004, by CHRISTOPHER R. PHILLIPS ("Guarantor") in favor of HB AUTO I, LLC, a California limited liability company, and JUZTWIN, INC., a California corporation (collectively, "Lessor"), with respect to certain obligations of C.S.B. PARTNERSHIP, a California general partnership ("Lessee"). RECITALS Guarantor is financially interested in Lessee, and in order to induce Lessor to enter into that certain Lease dated April 19, 2004 ("Lease"), by and among Lessor and Lessee with regard to the real property described therein, Guarantor is willing to enter into this Guaranty. NOW, THEREFORE, for good and valuable consideration, the parties hereto agree as follows: 1. Guaranty. In order to induce Lessor to enter into the Lease, Guarantor unconditionally, absolutely and irrevocably guarantees and promises to Lessor full and complete performance by Lessee of all covenants, terms and conditions of the Lease, as the same may hereafter be modified, amended, extended or renewed, including, but not limited to, payment when due of rent and other sums due under the Lease, and payment of any and all legal fees and expenses incurred by Lessor in endeavoring to collect or enforce any of the foregoing against Lessee, Guarantor or any other person liable thereon (whether or not suit be brought), or in connection with any property securing any or all of the foregoing or this Guaranty. All sums due under this Guaranty shall bear interest from the date due until the date paid at the maximum contract rate permitted by law. This is a continuing guaranty which shall remain in full force and effect during the term of the Lease, as renewed or extended, and thereafter until Lessee's obligations are fully satisfied. 2. Consents. Guarantor consents and agrees that Lessor may, without notice or demand and without affecting its liability hereunder, from time to time (a) renew, compromise or settle, extend, accelerate or otherwise change the Lease or any of Lessee's obligations thereunder; (b) take, hold, release, waive, exchange, modify or enforce any security for the payment and performance of this Guaranty or the performance of the Lease and make elections under the federal bankruptcy laws concerning any such security; (c) apply such security and direct the order or manner of sale thereof as Lessor in its discretion may determine and (d) release or substitute any one or more of the persons liable for Lessee's obligations under the Lease or guarantors of the Lease. Lessor may without notice assign this Guaranty in whole or in part. The Lease may be assigned or the premises sublet in whole or in part without Guarantor's consent and without affecting the liability of Guarantor hereunder. 3. Waivers. (a) Guarantor waives and relinquishes any right to require Lessor to (i) proceed against Lessee; (ii) proceed against or exhaust any security for the Lease or this Guaranty or (iii) pursue any other remedy in Lessor's power whatsoever. (b) Until all of Lessee's obligations to Lessor shall have been paid and performed in full, Guarantor shall not have, and hereby waives (i) any right of subrogation, (ii) any right to any remedy which Lessor now has or may hereafter have against Lessee and (iii) any benefit of any security now or hereafter held by Lessor. (c) Guarantor waives (i) all presentments, demands for performance, notices of non-performance, protests, notices of protests and notices of dishonor; (ii) all other notices and demands to which Guarantor might be entitled, including, without limitation, notice of all of the followin the acceptance hereof; any adverse change in Lessee's financial position; any other fact w ch might increase Guarantor's risk; any default, partial payment or non-payment under the Lease; any and all agreements and arrangements between Lessor and Lessee and any changes, modifications or extensions thereof; and any revocation, modification or release of any guaranty of any or all of the Lease by any person; (iii) any defense arising by reason of any failure of Lessor to obtain, perfect, maintain or keep in force any security interest in any property of Lessee, Guarantor or any other person; (iv) any defense based upon or arising out of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against Lessee or any other guarantor or any person liable under the Lease, including, without limitation, any discharge of, or bar against collecting, any of the obligations guaranteed hereby in or as a result of any such proceeding; (v) any defense arising by reason of any disability or other defense of Lessee or any other guarantor or any other person or by reason of the cessation from any cause whatsoever of the liability of Lessee or any other guarantor or any other person; (vi) the right to a jury trial in any action hereunder or relating hereto, and (vii) the benefit of any and all statutes of limitation with respect to any action based upon, arising out of or related to this Guaranty. Without limiting the generality of the foregoing or any other provision hereof, Guarantor hereby expressly waives any and all benefits which might otherwise be available to Guarantor under California Civil Code Sections 2809, 2810, 2815, 2819, 2839, 2845, 2849, 2850, 2899 and 3433 and California Code of Civil Procedure Sections 580(a), 580(b), 580(d) and 726. 4. Independent Liability; Joint and Several Liability. Guarantor hereby agrees that one or more successive or concurrent actions may be brought hereon against Guarantor, in the same action in which Lessee may be sued or in separate actions, as often as deemed advisable by Lessor. The obligations hereunder are joint and several, and independent of the obligations of Lessee. 5. Remedies Cumulative; No Waiver. Lessor shall have the right to seek recourse against Guarantor to the full extent provided for herein and in any other instrument or agreement evidencing obligations of Guarantor to Lessor, and against Lessee to the full extent of the obligations guaranteed hereby. No election in one form of action or proceeding, or against any party, or on any obligation, shall constitute a waiver of Lessor's right to proceed in any other form of action or proceeding or against any other parry. The failure of Lessor to enforce any of the provisions of this Guaranty at any time or for a period of time shall not be construed to be a waiver of any such provision or the right thereafter to enforce the same. All remedies hereunder shall be cumulative and shall be in addition to all rights, powers and remedies given to Lessor by law or under any other instrument or agreement. 6. Financial Condition of Lessee. Guarantor acknowledges that certain facts concerning Lessee and Lessee's financial condition may be known or become known to Lessor. Guarantor waives any right to require Lessor to furnish such information to Guarantor and agrees not to assert any defense Guarantor may have based upon Lessor's failure to furnish such information. Guarantor acknowledges that, in executing this Guaranty and at all times hereafter, Guarantor relies and will continue to rely upon its own investigation and sources other than Lessor for all information and facts relating to Lessee and Lessee's financial condition. 7. Subordination. Any indebtedness of Lessee now or hereafter held by Guarantor is hereby subordinated to Lessee's obligations under the Lease. Such indebtedness of Lessee to Guarantor, if Lessor so requests, shall be collected, enforced and received by Guarantor as trustee for Lessor and be paid over to Lessor on account of the obligations owed by Lessee to Lessor but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty; provided, however, that Lessee shall be entitled to make, and Guarantor shall be entitled to receive, payments on any such indebtedness of Lessee held by http://webmail.svn.com/exchange/todd.carson/Inbox/RE: C.S.B. Partnership_xF8FF HB Auto I, LLC, Proposed lease of 7872 Edinger Avenue, Huntington Beach, CA- 6.EML/1 multipart_xFBFF 2_Guaranty.doc/C58EA28C-18C0-4a97-9AF2-036E93DDAFB3/Guaranty.doc?attach=l Guarantor and incurred in the ordinary course of Lessee's business, so long as no event of default under the Lease has occurred and is continuing. 8. Successors and Assigns, Amendment. All rights, benefits and privileges hereunder shall inure to the benefit of and be enforceable by Lessor and its successors and assigns and shall be binding upon Guarantor and each of its heirs, representatives, successors and assigns. The terms and provisions hereof may not be waived or amended except in a writing executed by Guarantor and a duly authorized representative of Lessor. 9. ReeDorts and Financial Statements of Guarantor. Guarantor shall, at its sole cost and expense, at any time and from time to time, but not more often than once annually, deliver to Lessor upon Lessor's request (a) such financial statements and reports concerning Guarantor for such periods of time as Lessor may designate and (b) copies of any and all foreign, federal, state and local tax returns and reports of or relating to Guarantor as Lessor may from time to time request. Guarantor shall immediately give written notice to Lessor of any adverse change in Guarantor's financial condition and of any condition or event which constitutes a default of any of Guarantor's obligations under this Guaranty. Whenever requested, Guarantor shall further deliver to Lessor a certificate signed by Guarantor and by the president and chief financial officer of Guarantor in their individual capacities, warranting and representing that all reports, financial statements and other documents and information delivered or caused to be delivered to Lessor under this Guaranty are complete, correct and thoroughly and accurately present the financial condition of Guarantor, and that there exists on the date of delivery of said certificate to Lessor no condition or event which constitutes a default of Guarantor's obligations under this Guaranty. Guarantor shall also be required to deliver estoppel certificates, in the form and at the times when Lessee shall be required to deliver estoppel certificates under the Lease, which may include a statement to the effect that this Guaranty remains in effect and that Guarantor has no rights of offset or defenses to enforcement of this Guaranty. 10. Representations and Warranties. Guarantor hereby represents and warrants to Lessor that (a) Guarantor is duly organized, validly existing and in good standing under the laws of the State of California, (b) it is in Guarantor's direct interest to assist Lessee in procuring the Lease, because Lessee has a direct or indirect corporate or business relationship with Guarantor, (c) this Guaranty has been duly and validly authorized, executed and delivered and constitutes the binding obligation of Guarantor, enforceable in accordance with its terms, and (d) the execution and delivery of this Guaranty does not violate (with or without the giving of notice, the passage of time or both) any order, judgment, decree, instrument or agreement to which Guarantor is a party or by which it and/or its assets are affected or bound. 11. Construction; Severability, Integration. Words used herein in the masculine or neuter gender shall include the masculine, neuter and feminine gender, and words used herein in the singular shall include the plural and vice versa, wherever the context so reasonably requires. If any provision of this Guaranty or the application thereof to any party or circumstance is held invalid, void, inoperative or unenforceable, the remainder of this Guaranty and the application of such provision to other parties or circumstances shall not be affected thereby, the provisions of this Guaranty being severable in any such instance. This Guaranty is the entire and only agreement between Guarantor and Lessor respecting the guaranty of the Lease, and all representations, warranties, agreements or undertakings heretofore or contemporaneously made, which are not set forth herein, are superseded hereby. 12. Governing Law; Jurisdiction. This Guaranty shall be governed by and construed according to the laws of the State of California. In order to induce Lessor to accept this Guaranty, and as a material part of the consideration therefor, Guarantor (a) agrees that all actions or proceedings relating directly or indirectly hereto shall, at the option of Lessor, be litigated in courts located within the County of Orange, State of California, and (b) consents to the jurisdiction of any such court and consents to the service of process in any such action or proceeding.by personal delivery or any other method permitted by law. http://webmail.svn.com/exchange/todd.carson/Inbox/RE: C.S.B. Partnership_xFBFF HB Auto I, LLC; Proposed lease of 7872 Edinger Avenue, Huntington Beach, CA- 6.EML/1_multipart_xFBFF 2_Guaranty.doc/C58EA28C-18C0-9a97-9AF2-036E93DDAFB3/Guaranty.doc?attach-1 13. Paragraph Headings. Paragraph headings are used herein for convenience only and shall not be used in any manner to construe, limit, define or interpret any term or provision hereof. 14. Time of Essence. Time is of the essence in the performance by Guarantor of each and every obligation under this Guaranty. 15. Notices. Any notice which a party shall be requested or shall desire to give to the other hereunder shall be given by personal delivery or by depositing the same in the United States mail, first class postage pre -paid, addressed to Lessor at the address set forth in the Lease or to Guarantor at the last known address of Lessee, and such notices shall be deemed duly given on the date of personal delivery or three (3) days after the date of mailing as aforesaid. Lessor and Guarantor may change their address for purposes of receiving notices hereunder by giving written notice thereof to the other party in accordance herewith. Guarantor shall give Lessor immediate written notice of any change in its address. IN 'WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and year first above written. GUARANTOR: 2a .,v CAVOPBER R. PHIL IPS 4 http://webmail.svn.com/exchange/todd.carson/Inbox/RE: C.S.H. Partnership_xFBFF_AB Auto I, LLC; Proposed lease of 7872 Edinger Avenue, Huntington Beach, CA- 6.EML/1 multipart_xF8rF_2_Guaranty.doe/C58EA28C-18CO-9a97-9AF2-036E93DDAFB3/Guaranty.doc?attach=1 } ASSIGNMENT OF LEASE THIS ASSIGNMENT OF LEASE (this "Assignment"), is made as of June 25, 2004, by and between JUZTWIN, INC., a California corporation ("Assignor"), and MICHAEL TODD CARSON and ROSEMARY KATHLEEN CARSON, husband and wife as community property with right of survivorship ("Assignee"), with reference to the following: RECITALS A. Together with HB Auto I, LLC, a California limited liability company ("HB Auto Assignor, as "Landlord", and C.S.B. Partnership, a California general partnership, as "Tenant", are parties to that certain Standard Lease Agreement dated April 19, 2004 (the "Lease") pursuant to which Landlord leased to Tenant that certain real property located at 7872 Edinger Avenue, Huntington Beach, California, as described more fully in the Lease ("Premises"). B. Concurrently herewith, Assignor has agreed to sell and convey its undivided fifty percent (50%) fee simple ownership interest in the Premises ("Property Interest") to Assignee. C. In connection with the sale of the Property Interest by Assignor to Assignee, Assignor desires to Assign to Assignee, and Assignee desires to accept and assume from Assignor, all of Assignor's right, title, interest and obligations as "Landlord" under the Lease. AGREEMENTS NOW, THEREFORE, in consideration other good and valuable consideration, the acknowledged, the parties agree as follows: of the mutual covenants contained herein and receipt and sufficiency of which is hereby 1. Incorporation of Recitals. All of the recitals set forth above are hereby made an integral part of this Assignment. 2. Definitions. All capitalized terms not otherwise defined in this Assignment shall have the meaning ascribed to them in the Lease. 3. Assignment. Effective as of the date upon which Assignor acquires fee simple title Assignor's Property Interest ("Effective Date"), Assignor hereby assigns, sets over and transfers to Assignee all of Assignor's right, title, interest and obligations in, to and under the Lease. 4. Acceptance and Assumption. Assignee hereby accepts the foregoing assignment of the Lease and hereby assumes and agrees to perform all of Assignor's obligations under or with respect to the Lease arising from and after the Effective Date. Assignor hereby agrees to indemnify, defend and hold Assignee harmless from and against any and all loss, liability, damage or claim related to Assignor's failure to comply with its obligations under the Lease arising prior to the Effective Date. Assignee hereby agrees to indemnify, defend and hold Assignor harmless from and against any and all loss, liability, damage or claim related to Assignee's failure to comply with its obligations under the Lease arising after the Effective Date. S. Severability. If any term or provision of this Assignment or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Assignment or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Assignment shall be valid and enforced to the fullest extent permitted by law. 6, Counterparts Facsimile. This Assignment may be executed in counterparts, each of which shall be an original and all of which counterparts taken together shall constitute one and the same agreement. This Assignment may be executed via facsimile which facsimile signature shall be as binding as an original. IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date first set forth hereinabove. ASSIGNOR: JUZTWIN, INC., a California corporation By: Name: //�' /' , C<Aej Title: Authorized Signatory -2- ASSIGNEE: CHAEL TODD CZARSON ROSEMARY KATHLEEN CARSON 5. Scycrability. If any term or provision of this Assignment or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Assignment or the application of such terns or provision to persons or circumstances other than those as to which it is held invalid or unenforceable sha11 not be affected thereby, and each term and provision of this Assignment shall be 'valid and enforced to the fullest extent permitted by law. 6. Counteroarts., Facsimile, This Assignment may be executed in counterparts, each of which shall be an original and all of which counterparts taken together shall constitute one and the same agreement, This Assignment may be executed via facsimile which facsimile signature shall be as binding as an original. TILT WITNESS WHEREOF, the undersigned have executed this Assignment as ofthe date first set forth hereinabove. A.SSIGWOR: JUZTWIN, INC., a Califos-,Yia corporation By. Name: Title: Authorized Signatory -Z- ASSIGNEE: MICHAEL TODD CARS ON ASSIGNMENT OF LEASE THIS ASSIGNMENT OF LEASE (this "Assignment"), is made as of November 11, 2004, by and between MICHAEL TODD CARSON and ROSEMARY KATHLEEN CARSON, husband and wife as community property with right of survivorship ("Assignor"), and HB AUTO I, LLC, a California limited liability company ("Assignee"), with reference to the following: RECITALS A. Assignee and Jurtwin, Inc., a California corporation ("Jurtwin"), collectively as "Landlord", and C.S.B. Partnership, a California general partnership, as "Tenant", entered into that certain Standard Lease Agreement dated April 19, 2004 (the "Lease") pursuant to which Landlord leased to Tenant that certain real property located at 7872 Edinger Avenue, Huntington Beach, California, as described more fully in the Lease ("Premises"). B. By Grant Deed dated June 25, 2004, and recorded June 29, 2004, in the Official Records of Orange County California as Instrument No. 2004000591428, Jurtwin sold and conveyed an undivided fifty percent (50%) fee simple ownership interest in the Premises ("Property Interest") to Assignor. C. Pursuant to the terms of that certain Assignment of Lease dated June 25, 2004, entered into between Jurtwin and Assignor, Jurtwin assigned all of its right, title, interest and obligations as "Landlord" under the Lease to Assignor. D. Concurrently herewith, Assignor has agreed to contribute its Property Interest to Assignee in consideration for membership interests in Assignee. E. In connection with the contribution of the Property Interest by Assignor to Assignee, Assignor desires to Assign to Assignee, and Assignee desires to accept and assume from Assignor, all of Assignor's right, title, interest and obligations as "Landlord" under the Lease. AGREEMENTS NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: I , Incorporation of Recitals. All of the recitals set forth above are hereby made an integral part of this Assignment. 2. Definitions. All capitalized terms not otherwise defined in this Assignment shall have the meaning ascribed to them in the Lease. 3. Assignment. Effective as of the date upon which Assignor acquires fee simple title Assignor's Property Interest ("Effective Date"), Assignor hereby assigns, sets over and — 4V . transfers to Assignee all of Assignor's right, title, interest and obligations in, to and under the Lease. 4. Acceptance and AssumRtion. Assignee hereby accepts the foregoing assignment of the Lease and hereby assumes and agrees to perform all of Assignor's obligations under or with respect to the Lease arising from and after the Effective Date. Assignor hereby agrees to indemnify, defend and hold Assignee harmless from and against any and all loss, liability, damage or claim related to Assignor's failure to comply with its obligations under the Lease arising prior to the Effective Date. Assignee hereby agrees to indemnify, defend and hold Assignor harmless from and against any and all loss, liability, damage or claim related to Assignee's failure to comply with its obligations under the Lease arising after the Effective Date. 5. Severability. If any term or provision of this Assignment or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Assignment or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Assignment shall be valid and enforced to the fullest extent permitted by law. 6. Counterparts; Facsimile. This Assignment may be executed in counterparts, each of which shall be an original and all of which counterparts taken together shall constitute one and the same agreement. This Assignment may be executed via facsimile which facsimile signature shall be as binding as an original. IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date first set forth hereinabove. ASSIGNEE: ASSIGNOR: HB AUTO I, LLC, a California limited liability company By: �r Name:s•�-•-- Title: Authorized Signatory MICHAEL TODD CARSONV ROSEMARY KATHLEEN CARSON -2- transfers to Assignee all of Assignor's right, title, interest and obligations in, to and under the Lease. 4. Acceptance and Assmnptfion Assignee hereby accepts the foregoing assignment of the Lease and hereby assumes and agrees to perform all of Assignor's obligations under or with respect to the Lease arising from and after the Effective Date. Assignor hereby agrees to indemnify, defend and hold Assignee harmless from and against any and all loss, liability, damage or claim related to AtisiLmor's failure to comply with its obligations under the Lease arising prior to the Effective Date. Assignee hereby agrees to indemnify, defend and hold Assignor harmless from and against any and all loss, liability, damage or claim related to Assignee's failure to comply with its obligations under the Lease arising after the Effective Date. 5_ Seyerability. If any term or provision of this Assignment or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Assignment or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Assignment shall be valid and enroruea lu tile; fullest extent permitted by law. 6. Counterparts, Facsimile, 11is Assignment may be executed in counterparts, each of which shall be an original and all of which counterparts taken together shall constitute one and the same agreement. This Assignment may be executed via facsimile which facsimile signature shall he as binding as an original. IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date first set forth hereinabove. ASSIGNF,E: HB AUTO I, LLC, a California limited liability company 13y: Name: Title: Authorized Signatory ASSIGNOR: MICHAEL TOD'D CARSON -2- LEIB®LD MCCLEND®N & MANN A PROFESSIONAL CORPORATION 23422 MILL CREEK DRIVE, SUITE 105 LAGUNA HILLS, CALIFORNIA 92653 (949) 457-6300 FAX: (949) 457-6305 February 12, 2009 VIA MESSENGER Ms. Leome Mulvihill Senior Deputy City Attorney City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Re: 7872 Edinger Tenant Documents Dear Leonie: Enclosed with respect to the above referenced transaction please find: I . Copies for the Agency's Records: Copies of the originally executed Tenant's Estopel Certificate and Resolutions of Partners of C.S.B. Partnership Authorizing Assignment, Transfer and Conveyance of Leasehold Interest, to be kept for the Agency's records. 2. Escrow Signature Package: After having one (1) copy of the Assignment, Transfer and Conveyance of Leasehold Interest notarized for the Chairperson's signature, this originally executed package should be submitted to escrow. 3_ AgencSignature Package: This originally executed package of documents can be delivered to the City Clerk. As we discussed certain of the exhibits to the exhibits are not inserted ecause they e already included elsewhere in the Agency signature eackage. If acce table to Your City Clerk these 12ages can be stamped or noted with "Col2y on File with City Clerk" or somed in- to that e ct If you have any questions, please do not hesitate to call. Very truly yours, LEIBOLD MCCLENDON & MANN, P.C. By: .Toy euser Otsuki JHO:co Enclosures cc: Barbara Zeid Leibold (w/o enclosures) TENANT'S ESTOPPEL, CERTIFICATE THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director RE: That certain Standard Lease Agreement dated for reference purposes April 19, 2004 and Option Addendum to Standard Lease Agreement dated April , 2004 (collectively, the "Lease"), by and between 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"), collectively as landlord ("Landlord") and C.S.B. Partnership, a California general partnership, as tenant ("Tenant") for an initial ten. (10)-year term which commenced on July 1, 2004, and which initial term will terminate on June 30, 2014, plus two (2) five (5)-year options to extend the initial ten (10)-year term of the premises commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Premises") containing an approximately eight thousand one hundred sixty-three (8,163) square foot building consisting of five (5) tandem bays and a retail area on approximately fifty-two hundredths (0.52) acres of land. The obligations of Tenant under the Lease are guaranteed by Christopher R. Phillips ("Phillips") pursuant to that certain Guaranty of Lease dated as of April 19, 2004 ("Lease Guaranty"). Ladies and Gentlemen: The undersigned Tenant is informed that pursuant to the terms of (i) that certain Assignment of Lease dated as of June 25, 2004 by and between Turn -Key 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 (the "Lease Assignment"), HB Auto is the sole owner in fee of all rights, title and interest in and to the Property and is the sole landlord under the Lease. All references to "Landlord" under this Tenant's Estoppel Certificate ("Certificate") shall mean and refer to HB Auto. Tenant is further informed that under threat of condemnation, the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic ("Agency") is proposing to (a) acquire from Landlord all of Landlord's rights, title and interest as the owner in fee in and to the Premises pursuant to that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property and Addendum to Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of December 15, 2008 (the "New Agency/Landlord Property Acquisition Agreement") by and between Landlord as seller and Agency as buyer; and (b) acquire from Tenant, Tenant's entire leasehold interest in the Premises pursuant to the Lease pursuant to the terms of that certain Reinstated Acquisition of Leasehold Interest Agreement dated as of December 29, 2008 by and between Agency and Tenant (the "Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement"). In connection therewith, Tenant is delivering this 001219.0001 \849486.6 Certificate. Tenant has been advised and understands that Agency will act in material reliance upon this Certificate and the representations, warranties, certifications, acknowledgments and agreements of Tenant set forth herein in the closing and consummation of the acquisition of the Premises from Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement. This Certificate shall be for the benefit of, and shall be relied upon by, 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"). Tenant hereby certifies that the above description of the Lease, and the description of the Premises therein demised, is a true and correct description of the same and that (i) the Lease and that certain Agreement of Release of All Claims dated as of January 23, 2009 (the "Landlord/ Tenant Release Agreement") constitute the only agreements between Landlord and Tenant with respect to the Premises; and (ii) the guaranty of the Lease pursuant to the Lease Guaranty is the only guaranty of the Tenant's obligations under the Lease. Further, Tenant hereby represents, warrants, certifies, acknowledges and agrees as follows: 1. True and complete copies of the Lease, the Landlord/Tenant Release Agreement and the Lease Guaranty are attached hereto as Exhibits A-1, A-2 and A-3, respectively and incorporated herein by this reference and made a part hereof. There have been no amendments, modifications, extensions, renewals or replacements of the Lease, except as follows: None; provided that, under the terms of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement, effective as of the date Agency acquires the Premises from Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement, the Lease will be amended by that certain First Amendment to Lease in the form attached to the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement as Exhibit C (the "First Amendment to Lease"). Tenant has no right, title or interest with respect to the Premises other than as tenant under the Lease. 2. The initial term of the Lease commenced on July 1, 2004, and such initial term of the Lease shall expire on June 30, 2014. Under the terms of the Lease, Tenant is entitled to the following renewal options under the Lease: Two (2) options to extend for period of five (5) years each, pursuant to the terms of the Option Addendum to Standard Lease Agreement attached to the Lease. The foregoing notwithstanding, under the terms of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement and First Amendment to Lease, the Lease as amended by the First Amendment to Lease and the Lease Guaranty will terminate on or before the date which is five (5) years from the date Agency acquires the Premises from Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement (defined as the "Lease Termination/Vacation Date" in the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement). 3. Tenant has not assigned the Lease nor sublet all or any portion of the Premises, except as follows: None. 001219.0001 \849486.6 2 4. Other than those representations and warranties set forth in writing in the Lease and the Landlord/Tenant Release Agreement, there have been no representations, warranties or covenants made by Landlord to Tenant, either oral or in writing. 5. The Lease is in full force and effect. Tenant has accepted the Premises, presently occupies the same, and is paying rent and other amounts due pursuant to the Lease on a current basis; Tenant has no knowledge of any set -offs, claims or defenses to the enforcement of the Lease; and, there are no periods of free rental applicable to the term of the Lease. 6. Tenant is not, to Tenant's knowledge, in default in the performance of the Lease, has not, to Tenant's knowledge committed any breach of the Lease that has not been fully cured, no notice of default has been given to Tenant; and, Tenant is not the subject of any federal or state bankruptcy, insolvency or liquidation proceeding. The foregoing notwithstanding, Tenant acknowledges receipt from Landlord of that certain Limited Phase II Environmental Site Assessment dated May 2008 with respect to the Premises prepared by Phase One Inc. on behalf of and for Agency (the `Environmental Report") in conjunction with the Agency's acquisition of (i) the Premises pursuant to the New Agency/Landlord Property Acquisition Agreement; and (h) Tenant's leasehold interest in the Premises pursuant to the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement, which Environmental Report has identified certain potential environmental conditions which may be deemed "Hazardous Materials," as such term is defined in the Lease, and which may require remediation or other related action (the "Potential Environmental Condition"), the liability and obligation for which has not been determined. 7. Landlord is not, to Tenant's knowledge, in default in the performance of the Lease; Landlord has not, to Tenant's knowledge, committed any breach of the Lease that has not been fully cured; no notice of default has been given to Landlord; and Landlord has fulfilled all representations and warranties and all finish work on the Premises required of Landlord. The foregoing notwithstanding, and, in conjunction with the Environmental Report received by Landlord from Agency and the Potential Environmental Condition, a Potential Environmental Condition may arise which may require remediation or other related action, the liability and obligation for which has not been determined. 8. Tenant's Minimum Rent under the Lease is currently Seventeen Thousand Six Hundred Dollars ($17,600) per month. Tenant's last payment of Minimum Rent was made on or about January 1, 2009. 9. The next increase in monthly Minimum Rent is scheduled to occur on July 1, 2010, after which the monthly Minimum Rent under the Lease will be determined pursuant to Section 4(b) of the Lease. 10. No rent has been paid by Tenant in advance under the Lease except for Zero Dollars ($0) applicable to the zero (0) months of the term, and to Tenant's knowledge, Tenant has no claim of offset or credits against rentals under the Lease. 11. A security deposit has been made with Landlord in the amount of Fifteen Thousand Dollars ($15,000.00) which is refundable under the terms of Section 7 of the Lease. 001219.0001 \849486.6 3 12. Tenant is not entitled to any option or right of first refusal to purchase all or any part of the Premises or all.or any part of the Building or other property of which the Premises is a part. 13. Tenant shall sign any and all documents reasonably necessary to amend or further confirm the terms of this Certificate within ten (10) days following request therefor by Landlord. 14. If Agency acquires the Premises pursuant to the New Agency/Landlord Property Acquisition Agreement, then Tenant shall not, without the prior written consent of Agency, pay Minimum Rent or its pro rata share of the estimated monthly Operating Expenses more than one (1) month in advance, nor agree to any modifications to the terms of the Lease or other material economic provisions of the Lease, except pursuant to a written amendment to the Lease executed by Agency and Tenant. The foregoing notwithstanding, since Tenant has paid the Minimum Rent for the month of January, 2009 as provided in Paragraph 8 above, in the event the closing and consummation of the sale and purchase of the Premises transaction pursuant to the New Agency/Landlord Property Acquisition Agreement occurs prior to February 1, 2009, or thereafter on any day other than the first day of the month, Landlord and Agency will be responsible for any required prorations of the Minimum Rent for the month of January, 2009 or a later month, as applicable; and, Landlord and Agency shall also be responsible for any required prorations of Additional Rent. 15. In the event that any lender with a security interest in the Premises or any portion thereof succeeds to the interest of Landlord under the Lease or in the Premises, Tenant shall, on and subject to the terms and requirements under Section 28 of the Lease, attorn to such successor and recognize such successor as the new landlord under the Lease and make all payments of Minimum Rent, Additional Rent and other sums under the Lease to such successor. 16. Tenant has not relied upon any representation (either oral or in writing) of Landlord or Agency in executing the Lease or this Certificate, except as expressly set forth respectively in the Lease, the Landlord/Tenant Release Agreement, the Agency/Tenant Leasehold Interest Acquisition Agreement and/or this Certificate. The persons signing this Certificate hereby represent and warrant that they are authorized to execute this Certificate on behalf of the undersigned. Dated this 23rd day of January, 2009 Very truly yours, C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: _ -6 A A4AL - opher R. Phillips, Pr6sident [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001\849486.6 4 By: FOUR KYLES, INC., a California corporation, its General Partner By: li Virgi Kyle Kyle, t, President By: PHILLIPS & PHILLIPS L.P., a California limited partnership, its General Partner . By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: topher R. Phillips, President By: .➢YYB ENTERPRISES, INC., a California corporation, its General Partner rr By: J soon Y. Berry, President u By: THREENVIId MS, INC., a California corporation, its General Partner By: ' , .� Michael J)Humbach, President By: CHRIS & TAD ENTERPRISES, L.P., a California limited partnership, its General Partner By: PHILLIPS & PHILLIPS L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General P er By: Cl&&er R. Phillips, President 001219.0001 \849486.6 EXHIBIT A-1 LEASE 001219.0001 \849486.6 EXHIBIT A-2 LANDLORD/TENANT RELEASE AGREEMENT eol,ly D/LJ lk Lle sWC- 001219.0001 \849486.6 EXHIBIT A-3 LEASE GUARANTY (Christopher R. Phillips) i� /J �� 7-1 t 001219.0001 \849486.6 RESOLUTIONS OF PARTNERS OF C.S.B. PARTNERSHIP AUTHORIZING ASSIGNMENT, TRANSFER AND CONVEYANCE OF LEASEHOLD INTEREST WHEREAS, C.E.P. Developments, Inc., a California corporation ("C.E.P."), Phillips & Phillips L.P., a California limited partnership ("Phillips"), Four Kyles, Inc., a California corporation ("Kyle"), JYB Enterprises, Inc., a California corporation ("JYB"), THREEMMMs, Inc., a California corporation ("THREEMMMs") and Chris & Tad Enterprises, L.P., a California limited partnership ("C.T.") are all of the partners (each a "Partner" and collectively, the "Partners") of C.S.B. Partnership, a California general partnership ("Partnership); and WHEREAS, the Partners and the Partnership are-governed'by the terms of that certain Fourth Amended and Restated Partnership Agreement of C.S.B. Partnership effective as of January 1, 2007 (the "C.S.B. Partnership Agreement"); and WHEREAS, the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic ("Agency") and HB Auto I, LLC, a California limited liability company ("Landlord") under the threat of condemnation have entered into that certain Agreement and Escrow Instructions For Purchase and Sale of Real Property and Addendum to Agreement and Escrow Instructions For Purchase and Sale of Real Property dated as of December 15, 2008 (collectively, the "New Agency/Landlord Property Acquisition Agreement") setting forth the terms and conditions by which Agency shall acquire from Landlord, Landlord's ownership in fee of the improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property"); and WHEREAS, the Partnership leases the entire Property from Landlord pursuant to the terms of that certain Standard Lease Agreement dated for reference purposes, April 19, 2004 and Option Addendum to Standard Lease Agreement dated April , 2004 (collectively, the "Lease") and operates and conducts a Big O Tires retail store and its business office therein. The Lease is guaranteed by Christopher R. Phillips, a principal of C.E.P., Phillips and C.T. ("C. Phillips") pursuant to the terms of that certain Guaranty of Lease dated as of April 19, 2004 (the "Lease Guaranty"); and WHEREAS, in connection with Agency's threat of condemnation and acquisition of all of Landlord's rights, title and interest as the sole owner in fee in and to the Property pursuant to the New Agency/Landlord Property Acquisition Agreement, Agency has determined that it will be necessary for the Partnership to permanently cease to occupy the Property; and, in conjunction therewith, desires that the Partnership agree to such termination in consideration of Agency making certain payments to the Partnership. In connection therewith, Agency and the Partnership mutually desire to enter into that certain Reinstated Acquisition of Leasehold Interest Agreement dated as of December 29, 2008 (the "Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement") setting forth the terms by which Agency shall acquire the Partnership's entire leasehold interest in the Property pursuant to the Lease (the "Leasehold Interest") and pay certain compensation to the Partnership as consideration for such acquisition of the Partnership's ,Leasehold Interest and the termination of the Lease and the Lease Guaranty and the Partnership's 001219.0001 \1130092.1 occupancy of the Property on or before the date which is five (5) years from the date Agency acquires the Property from Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement; and WHEREAS, a copy of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement is attached herewith as Exhibit A and incorporated herein by this reference and made a part hereof; and WHEREAS, the Partners deem it to be in the best interests of the Partnership and the Partners to enter in the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement and close and consummate the acquisition by Agency of the Partnership's Leasehold Interest in the Property on and subject to the terms and conditions of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement. THEREFORE, BE IT RESOLVED, that the Partnership is hereby authorized to enter into and execute and deliver the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement in the form attached hereto as Exhibit A, thereby agreeing to assign, transfer and convey the Partnership's Leasehold Interest in the Property to Agency on and subject to the terms of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement; and RESOLVED FURTHER, that Partners C.E.P., Phillips, Kyle and JYB be and are hereby authorized, empowered and directed to negotiate the final terms and conditions of and execute and deliver, on behalf of the Partnership and its Partners, the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement and such other documents and instruments, as necessary and required in conjunction therewith on such terms and conditions as they deem appropriate, and to take such actions as they deem necessary or appropriate, to consummate the transactions under the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement; and RESOLVED FURTHER, that any actions taken or document executed by any Partner or agent of the Partnership which relate to the assignment, transfer and conveyance of the Partnership's Leasehold Interest in the Property prior to the adoption of these resolutions are hereby ratified, affirmed and confirmed by the undersigned Partners. CERTIFICATION OF PARTNERS The undersigned Partners of the Partnership do hereby certify for the benefit of Agency as follows: The above resolutions were enacted by the unanimous vote of the Partners of the Partnership at a properly convened special meeting of the Partners or by the Partners without a meeting, in accordance with the terms and conditions of the Partnership Agreement or such similar organizational documents of the Partnership (collectively, the "Organization Documents"); and the authorizations and ratifications contained therein are consistent with and sufficient to constitute the action of the Partnership under the terms of the Partnership's Organization Documents. 001219.0001 \I 130092.1 2 The undersigned, constituting all of the Partners of the Partnership hereby execute these Resolutions of Partners of C.S.B. Partnership Authorizing Assignment,'Transfer and Conveyance of Leasehold Interest as of the 29th day of December, 2008. By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By:'A ji. A stopher 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 By: .0j2" - stopher R. Phillip , President By: FOUR KYLE , INC., a California corporation, ' General Partner r By: Virgil (Tad) yl Ky e, III, President By: JYB ENTERPRISES, INC., a California corporation, its Gen eral Partner By: L Y Jason Y. Berry, Presided By: THRE MMMS, INC., a California corporation, its General Partner By: �. Michael' J. Humbach, President Signatures Continued on Next Page 001219.0001\1130092.1 3 By: CHRIS & TAD ENTERPRISES, L.P., a California limited partnership, its General Partner By: PHILLIPS & PHILLIPS ]L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: A6#1- ChristbOer R. Phillips, President 001219,0001\1130092.1 4 EXHIBIT A Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement (?O/y &A) 001219.0001 \ 113 0092.1 REINSTATED ACQUISITION OF LEASEHOLD INTEREST AGREEMENT This REINSTATED ACQUISITION OF LEASEHOLD INTEREST AGREEMENT ("Agreement") is made and entered into as of December 29, 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") and shall amend and restate and supersede and replace in its entirety that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 between Agency and Tenant (the "Original Agency/Tenant Leasehold Acquisition Agreement"). 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 and Option Addendum to Standard Lease Agreement dated April , 2004 (collectively, 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/Carson 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. 00 1219.0001 \844054.1 1 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 Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of 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 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, as the sole owner in fee of the Property, 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 and Addendum to Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of December 15, 2008 (collectively, the "New Agency/Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Agency shall acquire all of Landlord's rights, title and interest as the sole owner in fee in and to the Property. A copy of the New Agency/Landlord Property Acquisition Agreement is attached hereto as Exhibit B. In conjunction with the foregoing, at the City of Huntington Beach City Council/Redevelopment Agency meeting which was held on December 15, 2008 ("City Council/Redevelopment Agency Meeting"), the City Council for the City of Huntington Beach, California and Agency approved the terms of the New Agency/Landlord Property Acquisition Agreement (the "City Council/Redevelopment Agency Approval"). As part of such threat of condemnation and Agency's purchase of the Property pursuant to the New Agency/Landlord Property Acquisition Agreement and the City Council/Redevelopment Agency Approval, 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. The Parties acknowledge that under threat of condemnation, (i) Agency and Landlord had previously engaged in negotiations regarding the terms and conditions by which Agency would acquire all of Landlord's rights, title and interest as the sole owner in fee in and to the Property, which resulted in Agency and Landlord entering into that certain Agreement and Escrow Instructions for Purchase of Real Property dated as of May 5, 2008 (the "Original 00 1219.000 1 \844054.1 1 2 Agency/Landlord Property Acquisition Agreement"); and (ii) Agency and Tenant engaged in negotiations regarding the terms and conditions by which the Agency would acquire Tenant's entire Leasehold Interest in the Property, which resulted in Agency and Tenant entering into the Original Agency/Tenant Leasehold Acquisition Agreement. The transactions pursuant to the Original Agency/Landlord Property Acquisition Agreement and the Original Agency/Tenant Leasehold Interest Acquisition Agreement were not consummated, which resulted in the termination of the Original Agency/Landlord Property Acquisition Agreement and the Original Agency/Tenant Leasehold Interest Acquisition Agreement. In conjunction with Recital D, the Parties mutually desire to reinstate the transactions pursuant to the Original Agency/Tenant Leasehold Interest Acquisition Agreement by entering into this Agreement, on and subject to the terms and conditions as shall hereinafter be set forth. F. Pursuant to the terms of the New Agency/Landlord Property Acquisition Agreement, upon the satisfaction of all conditions to close, Agency will acquire all of Landlord's rights, title and interest as the sole owner in fee, 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 New Agency/Landlord Property Acquisition Agreement (the "Lease Termination/Vacation Date") and is prepared to and willing to pay Tenant the amounts specified in Section 4 below in consideration of Tenant's agreement to assign, transfer and convey to Agency its Leasehold Interest in the Property pursuant to the Lease as amended by the Lease Amendment (as such term is hereinafter defined); and, in conjunction therewith, terminate the Lease as amended by the Lease Amendment 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 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 New Agency/Landlord Property Acquisition Agreement. G. In conjunction with the foregoing Recitals and the contemplated transactions pursuant to this Agreement, Agency and Tenant mutually desire to amend the 00 1219.000 1 \844054.1 1 3 Lease effective on the date Agency acquires the Property from Landlord pursuant to the New 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"). H. 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 New 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 TerminationNacation Date, all in accordance with and subject to the terms and conditions set forth in this Agreement. I. 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. J. 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: AGREEMENT 1. Reinstatement of Agreement. The Parties acknowledge and agree that the Original Agency/Tenant Leasehold Interest Agreement terminated by its own terms on August 31, 2008, and the transactions contemplated by the terms and conditions of the Original Agency/ Tenant Leasehold Interest Acquisition Agreement are hereby reinstated and amended on a subject to the terms and conditions of this Agreement. In conjunction with the foregoing, the Parties agree that this Agreement shall amend and restate and supersede and replace in its entirety, the Original Agency/Tenant Leasehold Interest Acquisition Agreement. 001219.0001 \844054.11 4 2. 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 8, and provided that the Closing (as such term is defined in Section 9) has occurred, effective as of the date which is the Lease Termination/Vacation Date and provided that all requirements and actions under Section 5(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; and, Tenant and Agency agree to be bound by the terms and conditions of the First Amendment concurrently with such assignment, transfer, conveyance and delivery by Tenant and such acquisition by Agency. In conjunction with such acquisition by Agency of Tenant's Leasehold Interest in the Property pursuant to the Lease as amended by the Lease Amendment as of the date which is the Lease Termination/Vacation Date, Tenant agrees that as of the date which is the Lease Termination/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. 3. Retention of Assets Agency and Tenant agree that Agency shall only acquire Tenant's Leasehold Interest pursuant to the Lease 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 Termination/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, 001219.0001 \844054.11 Big O's proprietary marks, color combinations, designs, slogans and trade secrets, including, the name and mark "Big O Tires," all such rights, title and interest being retained by and remaining the property of Big O. 4. 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 as amended by the Lease Amendment on the date which is the Lease TerminationNacation Date, and agreeing to the early termination of the Lease as amended by the Lease Amendment and the Lease Guaranty and ceasing its occupancy of the Property on the date which is the Lease TerminationNacation 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 4(b) (the "Payment Consideration"). The Payment Consideration shall be payable by Agency to Tenant as follows: (i) Agency will deliver to the Escrow Agent (as such tern is hereinafter defined) the amount of Fifty Thousand Dollars ($50,000) within five (5) business days of the execution of this Agreement by the Agency (the "Payment Corisideration Deposit") and instruct the Escrow Agent to release the Payment Consideration deposit to Tenant on the Closing Date (as such term is hereinafter defined); 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 TerminationNacation Date (the "Payment Consideration Balance") pursuant to Section 5(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 4(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 001219.0001 \844054.11 6 amended by the Lease Amendment. Upon Tenant's receipt of payment in full of the Payment Consideration specified in Section 4(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, 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 6 below. 5. 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 as the owner in fee in and to the Property pursuant to the New 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 New 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 8 of this Agreement, Agency and Tenant agree that the Lease Amendment will not become effective unless and until (i) the acquisition by Agency of the Property transaction between Agency and Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement is closed and consummated and Agency 00 1219.000 1 \844054.11 7 has acquired all of Landlord's rights, title and interest as the owner in fee 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"); and (ii) the acquisition by Agency of Tenant's Leasehold Interest in the Property is closed and consummated pursuant to the terms and conditions of this Agreement. (b) Agency shall be obligated to terminate the Lease as amended by the Lease Amendment and the Lease Guaranty on or before the Lease Termination/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 Termination/Vacation Date (the "Lease Termination/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 Stewart Title of California, Inc., 2010 Main Street, Suite 250, Irvine, California 92614, Grace Kim, Escrow Officer, Telephone: (949) 476-0777; Facsimile: (714) 242-9886; Escrow No. 165821 ("Escrow Agent"), with written instructions requiring the release of the Escrowed Portion of the Payment Consideration to Tenant on the date which is the Lease Termination/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 as.amended by the First Amendment, 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 Termination/Vacation Date. Tenant shall bear all costs incurred by it in connection with its obligation to vacate the Property and removing the Retained Tenant Assets as provided in Section 3. 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 Termination/Vacation Date. (c) Tenant agrees and covenants to Agency that, subject to the provisions of Section 3, Tenant will vacate the Property on or before the date which is the Lease Termination/Vacation Date. As set forth in Section 3, 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 001219.0001 \844054.11 Termination/Vacation Date. On the date which is the Lease Termination/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 Assignment/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 Termination/Vacation Date. (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 6(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 6(a) shall become effective. (f) Except as expressly provided otherwise in Section 6(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, 6(b) shall become effective. _ (g) On the date which is the Lease Termination/Vacation Date, Tenant and Agency shall execute a written memorandum setting forth the date which is the Lease Termination/Vacation Date. (h) Agency acknowledges that pursuant to the terms of the New 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 00 1 2M000 1 \844054.1 1 9 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 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. 6. Releases (a) Effective on the date which is the Lease TerminationNacation Date, provided that Tenant has received from the Escrow Agent payment in full of the Payment Consideration specified in Section 4(a) and if and as required in accordance with Section 7 of the Lease, the Security Deposit pursuant to Section 5(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 001219.0001 \844054.11 10 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 New 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 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 6(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 5(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 4(a) and the Security Deposit pursuant to Section 5(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 001219.0001 \844054.11 11 the Agency Parties of Tenant and all of the Tenant Related 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, 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 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 New 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 6(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 TerminationNacation 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 New Agency/Landlord Property Acquisition Agreement and the acquisition by Agency of Tenant's Leasehold Interest in the Property pursuant to this Agreement or 00 1219.000 1 \844054.11 12 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: 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 / Initials of Tenant: Initials of Agency: on Y. Berry) (Michael J. l:,116mbach) (Deputy Executive Director) (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. 7. Representations and Warranties of Parties (a) By Agency. Agency represents and warrants to Tenant that the statements contained in this Section 7(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. 001219.0001\844054.11 13 (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 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 5(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 TerminationNacation 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 teal property adjacent thereto and is purchasing and acquiring the Property from Landlord pursuant to the New Agency/Landlord Property Acquisition Agreement. (b) By Tenant. Tenant represents and warrants to Agency, that the statements contained in this Section 7(b) are true, correct and complete as 001219.0001 \844054.11 14 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 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 001219.0001 \844054.11 15 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. 8. 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 8(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 8(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 New 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 January 23, 2009, 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 Termination/Release) shall have executed the First Amendment to Termination and Release Agreement dated as of December 29, 2008 ("First Amendment to Big O/Tenant Termination/Release), in the forms attached hereto as Exhibit F thereby amending that certain Termination and Release Agreement 00 1219.000 1 \844054.1 1 16 dated as of June 16, 2008 (collectively, the "Big O/Tenant Termination/Release"). (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 8(b) within the time periods, if any, provided therefor. Tenant 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 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 8(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. (Ili) 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 New 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 Waiver/Release in the form attached hereto as Exhibit E. (vi) Big O shall have executed and delivered the First Amendment to 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. 001219.0001 \844054.11 17 9. 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 8, but in no event later than February 27, 2009. 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. (b) Agency shall be responsible for (i) any and all escrow fees charged by Escrow Agent; (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. In conjunction with the foregoing, Tenant and Agency agree to jointly execute and deliver to the Escrow Agent the joint escrow instructions in the form attached hereto as Exhibit G ("Joint Escrow Instructions"). (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 Termination/Vacation Date. Such prorations shall be adjusted, if necessary, and completed after the Lease Termination/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 5(a) of this Agreement, on or before the Closing Date, Agency and Tenant will each conditionally deliver to the Escrow Agent its originally executed copy of the Lease Amendment, specifically instructing the Escrow Agent 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 New Agency/Landlord Property Acquisition Agreement is closed and consummated and Agency has acquired all of Landlord's 001219.0001\844054.11 18 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. 10. 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. (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. 11. 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. 12. 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. 13. 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. 001219.0001 \844054.11 19 14. 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. 15. 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. 16. 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. 17. 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. 18. 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. 19. 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 00 1219.000 1 \844054.1 1 20 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 ODE SECTION 1542. Initials of Tenant: e . 0 (Chri o er R. Phillips) (vlrgil Kyle Kyle, (Ja�,n Y. Berry) (M' hael JjHumbach) Initials of AgencY. (Chaff �p .) (Exec 've Director) (A engy ounsel) (Deputy Executive ' ector) 20. 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. 21. 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 New 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 21. 22. 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. 23. 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. 24. 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. 001219.0001\844054.11 21 25. 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 Party: To Agency: 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, 24th Floor Oakland, CA 94607 26. 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. 001219.0001 \844054.11 22 IN WITNESS WHEREOF, the Parties have executed this Acquisition of Leasehold Interest Agreement as of the date written above. ATTEST: By: Print Narde• Job Title: A/ee&v Clerk REVIEWS AND APPROVED: By:y Print471 Fred Wilson Title: Exve Director AGENCY: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic By: Print Nafne: Keith Bohr Title: Chairperson APPROVED AS TO FORM: By. Print e: Jennifer McG ath Title: Agency CounselGj LEIBOLD MCCLENDON & MANN, P.C., Agency Special Counsel By: //. 4'1j, Y-- )7 � -_1; U v�' Barbara Zeid Leibold INITIATED AND APPROVED: By: Print Name: Stanl ev Smal ewi tz Title: Deputy Executive Director [SIGNATURES CONTINUED ON FOLLOWING PAGE] 00 1219.000 1 \844054.1 1 23 TENANT: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: W'8Aa— Cb6dopher R. Phillips, President By: FOUR KYLES, INC., a California cor"'sPartner By:,,President By: PHILLIPS & PHILLIPS L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: 2 T !t'4/- topher R. Phillip , President By: JYB ENTERPRISES, INC., a California corporation, its General Partner A j By. I 'X ilori Y. Be j/ P,resident By: THREEMMMS, INC., a California corporation, its General Partner By: Michael 1. Humbach, President [SIGNATURES CONTINUED ON FOLLOWING PAGE] 00 1219,0001 \844054.1 1 24 By: CHRIS & TAD ENTERPRISES, L.P., a California limited partnership, its General Partner By: PHILLIPS & PHILLIPS L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: A44 (LbOfstopher R. Phillip , President 00 1219.000 1 \844054.1 1 25 EXHIBIT A FRANCHISE AGREEMENT 00 1219.000 1 \844054.11 Original Franchise Agreement #20466 BIG O TIRES, INC. FRANCHISE AGREEMENT l Expiration Date: August 1, 2014 BIG O TIRES, INC. FRANCHISE AGREEMENT TABLE OF CONTENTS SUMMARYPAGES....................................................................................................................................v 1. CERTAIN DEFINITIONS.............................................................................................................. 1 2. GRANT OF FRANCHISE.................................................................. ................------ ---. 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 0..................................................................................................... 4 3.03 Multiple First Option Rights.......................................................................................... 4 3.04 Notification of Qualification.......................................................................................... 4 3.05 Exercise of Option by Franchisee................................................................................. 4 3.06 Transfer of First Option Rights ................................. :................................................... 4 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 5.03 Notification of Non-Renewal......................................................................................... 5 6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS...................................................................... 5 6.01 Financing Approval....................................................................................................... 5 6.02 Site Selection................................................................................................................ 6 6.03 Equipment and Signage............................................................................................... 6 6.04 Conditions to Opening.................................................................................................. 6 6.05 Commencement of Business....................................................................................... 6 7. PRE -OPENING AND ONGOING ASSISTANCE.......................................................................... 6 7.01 Pre -Opening Assistance:.............................................................................................. 6 7.02 ; On -Going Assistance................................................................................................... 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 8.06 Allocation of Payments................................................................................................. 7 9. LICENSED MARKS...................................................................................................................... 8 -9:01 Licensed--Marks............................................................................................................ 8 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 }. r . .T 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............................................................................................... 11 14.04 Warranties and Guaranties........................................................................................ 11 14.05 Open Account Financing............................................................................................ 11 15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS ................................................... 11 15.01 Grand Opening Advertising........................................................................................ 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 ....................... .......................................................:....................................... 13 16.02 Audit........................................................................................................................... 13 16.03 Monthly Reports.................................................................................:....................... 13. 16.04 Financial Statements.................................................................................................. 13 16.05 Management Systems................................................................................................. 13 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 R... efusal............................................................................................... 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 22.02 ..................... 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........................................................................................................................19 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 . , I, 3002 Counterparts ....................................................................... ............. .......................... � 21 3003' C8n8butbon--.'................-............................-... 21 ' __._. 31. GUARANTY ................................................................................................... ___......... 21 ' 31.01 Guaranty ..................................................................................................................... 21 32. ACKNOWLEDGEMENTS ................................... .................................. .................................... 21 ANNEX A -T8C Corporation Guaranty ofPerformance Schedule 1 -PremiseuandTradaArea Schedule 2-Ownership Verification Schedule 3-Guaranty Schedule 4-Lease Rider and Modification Schedule 5-Renewal Rider Schedu/eG-Trademarkn Schedule 7-Converter Rider Sohedu/eO- Farm- Class Rider 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 Sales 4. LOCAL ADVERTISING Minimum of four percent (4%) of Gross Sales CONTRIBUTION: 5. NATIONAL ADVERTISING See Sections 15 and 25 CONTRIBUTION: 6. INITIAL ADVERTISING REQUIREMENT: $10,000.00 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/o Christopher R. Phillips Address: 27131 Calle 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 I.... 12. Effective Date: August 1, 2004 13. Commencement Date: August 1, 2004 14. Expiration Date: August 1, 2014 15. Franchisee's Advisor: 16. Send Notices to Big O to: Name: General 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 Partnership c/o Christopher R. Phillips Address: 27131 Calle Arroyo, Suite 1703 San Juan Capistrano, CA 92675 With a copy to: Name: Address: 18. Business not subject to Section 17.01 Name: 19. Farm 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 O"), 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 O 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 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 that it is 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, in consideration 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 - All 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, or which 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 0 - Big O Tires, Inc. Big O Brand Tires — Tires carrying the "Big O" 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. Biq O Store or Store - A retail store operated under the Licensed Marks and pursuant to the Big O System. Biq 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. Blue Book - See the definition of "Manual" Change in ntrol - The Transfer of fifty percent (50%) or more of the (i) voting or Equity 6iterests 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. Dearer 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"h) 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. Entity— Any limited liability company or partnership, general or limited, each of which shalt be referred to as a "Partnership", and any trust, association, corporation or other entity, which is not an individual. Equity — Stock; membership interests; partnership interests; or other equity ownership interests in a Franchisee which is an Entity. Expiration Date - The date on which the initial term of the Agreement expires. First Option - Franchisee's right to acquire a franchise for a new Store planned for development within a five (5) mile radius of Franchisee's Premises in the manner described in Section 3 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 all revenues 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 well 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 Big 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-to-day 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 O's 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 and/or any Owner in the event of certain proposed Transfers, pursuant to Section 18.04(a)(iii). r 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 O, which provides accounting, payroll and related services for the purpose of providing such services at a reasonable cost and providing the financial reporting Big 0.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 every fifty 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 is .an 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 O under this Agreement as set forth in Schedule 3 to this Agreement, Big 0 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 O, then Franchisee shall promptly take steps to 4 3 1 choose and acquire a location for its 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 specific location for the Premises, which shall hereinafter be set 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 agrees not to operate itself or grant to any other person the right to operate any more than one (1) Store for every fifty 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 may be defined within the boundaries of a county line. Big O 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 or any 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) at the time Big O notifies Franchisee of the proposal for the new Store, Franchisee is in full compliance with all the terms of this Agreement and any other agreements it has with Big O; (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) mile 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 general vicinity 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 O to exercise their First Option rights; but if two (2) or more such franchisees apply for 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. If Franchisee qualifies for the First Option pursuant to this Section 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. 0 1 3.06. Transfer of First option Rights. The First Option is not transfe, able without Big O's prior wriitesn 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 Rights. 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 O 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 O 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 of the 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 Manual, upon its 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. Big O will only offer to execute a Successor Franchise Agreement with Franchisee in accordance with its then current terms and conditions for granting successor franchises, which may include any or all of the following: (a) That Franchisee executes a Successor Franchise Agreement on the then current form being offered to franchisees in the State in which the Big O Store is located, which may include, among other 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 O and its Affiliates and their officers, directors, agents, Owners and employees; (e) That at the time Franchisee delivers its renewal notice to Big O 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); �l (f) Without limiting the generality of Section 5.01, 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 shall have 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 the Big 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 all other terms and conditions agreed upon as a prerequisite to renewal. If Big O intends not to offer Franchisee a Successor Franchise Agreement, 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 (180) 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 commitment for 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 O. 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 O shall approve or reject the proposed site. Unless otherwise agreed to in writing by Big O, final site approval will be conditioned upon Big O's 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 0- 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 be reasonably required by Big O, including but not limited to financing statements. 6.05. Commencement of Business. Franchisee agrees to open the Big O Store for business within fourteen (14) days after -Big 0 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 comply with 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 -Opening 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 time 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 to formal approval of a site selected by Franchisee. At Big O's option, Big O 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 sole decision 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 Franchised Business will be profitable or otherwise successful. Big O's written approval of the Premises and Store must be obtained by Franchisee before the Store may 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 unreasonably withheld. (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 other managerial personnel as are designated by Big O must attend and successfully complete the Initial Training Program. Franchisee shall pay the training fees charged by Big O from time to time and shall pay for its 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 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 O's sole discretion, Franchisee's Operator fails 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 in training 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-Going Assistance. (a) Big O agrees to make available to Franchisee the following ongoing assistance for which Big O will not charge the Franchisee a fee for such 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 and Services 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 Franchisee will not be required to sell at any particular price or at or above any minimum price if such a requirement would 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 O personnel and field assistance, inspections and advice pertaining to the Franchisee's Store provided by Big O area managers. (iii) Monthly point of sale advertising materials and wearables utilizing Big O Licensed Marks will be purchased through Big O's subsidiary, O 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 O will supply Franchisee with newspaper mats and radio and television commercial tapes, for which Big O may charge a fee to the Local Group or to the Franchisee. E 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 Nit, 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. In consideration 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 (10.) days after such payment is due, Franchisee shall pay Big O interest equal to the lesser of the daily equivalent of eighteen percent (18%) per annum 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 O in the manner prescribed by Big O so that the net amount or 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 Payments. Unless other written instructions accompany a specific payment, all payments made by Franchisee pursuant to this Agreement shall be 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 extent, in Big O's opinion, it is reasonable to do so. 9. LICENSED MARKS 9.01. Licensed Marks. Franchisee expressly acknowledges that Big O is the sole and exclusive licensor of the Licensed Marks. Franchisee shall not represent in any manner that Franchisee has acquired any ownership rights in the Licensed Marks. Franchisee shall 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 O 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 extend beyond 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. 11 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 O's 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 a way, 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 (v) to observe such requirements with respect to trademark and service mark registrations, copyright notices, and other notices as Big O 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 by franchisees 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 or costs associated with a change from the name "Big O" 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 to use, 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; (iii) use the Licensed Marks and the Big O System with other services or products, or in alternative channels of distribution, including the Internet, without regard to location; and (iv) use and license the use of other proprietary 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 operation of any type of tire sales and service business, at any location, which may be the same 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; (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 modifications thereto as Big O may require; I (d) Franchisee shall at all times 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 O's 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 well 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 O without Big O'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 Big 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 Local Group makes to the extent they are approved by Big O and are consistent with the standards and within the quidelines prescribed or approved by Big O, provided however, that (i) Franchisee shall hat be subject to any agreement to fix prices, or allocate customers or territories which would violate any applicable laws; and (ii) 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; 6) Franchisee shall use the Premises and the Store solely for the Franchised Business and for no other purpose; and (k) Franchisee and its guarantor(s) 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 may be prescribed by Big 0, in its sole discretion, from time to time. 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 specked 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 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 complywith 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 and 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 initial training requirements for Operators 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 all training programs Big O may reasonably require 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 travel, room and board, as well as wages of the person(s) receiving such training shall be borne by the Franchisee except as provided in Section 7.01(c). 11.03. Operation of Store by Big O. Under the circumstances described below, upon Franchisee's request, Big O has the option, but not the duty, to replace Franchisee's Operator, Manager, or both, with its own employees or agents, to operate the Franchisee's Store for the benefit of Franchisee with complete discretion over all matters relating to its operation. Franchisee shall pay Big O's then current Store management fee as well as the out-of-pocket expenses Big O incurs for travel, food and lodging in the course of providing such services, provided that such expenses are reasonably related to the services rendered. Big O may operate Franchisee's Store if: (a) Franchisee's Operator or Manager has failed to 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 O's request, Franchisee agrees to render such assistance as 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 inspertion; 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 the reputation 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 solely to Big O and shall be on loan from Big O during the term of this Agreement. Franchisee agrees to pay Big O up to Five Thousand Dollars ($5,000) for the failure to return the Manual, Big O's Blueprint for Success, otherwise known as the Blue Book, any training module or any other proprietary 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 O 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. Confidentiality of Information. Franchisee shall at all 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 acknowledges that the unauthorized use or disclosure of Big O's Information will cause irreparable injury to Big O and that damages are not an adequate remedy. Franchisee accordingly covenants that it shall not at any time, without Big O's prior written consent, disclose, use, permit the use thereof (except as may be required by applicable law or authorized by this Agreement), copy, duplicate, record, transfer, transmit, or otherwise reproduce such Information, in any form or by any means, in whole 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 as 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. 13.03. 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 reasonable sums of money by Franchisee. Big O will not alter the basic rights and obligations of the parties 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 O private brand tires, shock absorbers, related merchandise, and other Products and Services in such quantities as Big O 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 tire sales (in units) at the Store will be Big O Brand Tires, excluding sales of snow tires and farm class tires. 14.02. Approval 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 inventory of 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 ana Guaranties. Franchisee agrees to issue ano I lonor 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 nondiscriminatory basis. 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 only honor 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 all 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 to, 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 th&Franchisee of an event of default. of this Agreement. 15. ADVERTISING, MARKETING AND PROMOTIONAL PLANS 15.01. Grand Opening Advertising. 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 specked 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 O's 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 its sole discretion, may decide to terminate or suspend at any time. 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 O 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 shall 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 (10/6) limit), and if a majority of the members of the Dealer Planning Board agree to such increase, it shall be implemented by Big O, not withstanding Big O's limitation as to the phasing in of any increases. (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 Big O 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 other benefits for 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 O 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 Big 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 all or 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 O, 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 O 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 Local Group to insure that all or any portion of the Local Funds are used in the local area or region of the Store location identified in the Summary Pages or, to insure that any particular franchisee benefits directly or pro rata 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 Big 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 (ii) 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 O, but Big O has no obtiyation to Franchisee to enf4ce 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 O 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 approved in all respects by Big O or its designated agents, such approval by Big O shall not be unreasonably withheld. Franchisee shall submit tear sheets, 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 O for use by the Local Group. Franchisee shall not cause or allow the Licensed Marks, or any of them, to be used or displayed, in whole or in part, as an Internet domain name, or on or in connection with any Internet home page, website or other Internet -related activity 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 O 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 shall 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 O may require. Big O 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 shall 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 due not later than ten (10) days following, receipt of the auditor's report, plus interest calculated at a rate which is the lower of eighteen percent (18%) per annum or the highest rate permitted by law. If Franchisee has overpaid Big O or such Local Group or Local Fund, such amount will be credited to Franchisee against monthly royalty fees or advertising contributions due to Big O, 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 shall mail to Big O, together with its payments of royalty fees and advertising contributions, monthly reports on forms prescribed from time to time by Big O, stating the fees or contributions due to Big O 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 O reserves the right to require such reporting and payments to be performed and submitted to Big O electronically. 16.04. Financial Statements. Franchisee shall deliver to Big O, 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 the 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 O. In addition, Franchisee, as well as any guarantor(s) of this. Agreement, shall, within thirty (30) days after request from Big O, deliver to Big O a financial statement, certified as correct and current, in a form which is satisfactory to Big O and which fairly represents the total assets and liabilities of Franchisee and any such guarantor(s). 16.05. 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 16.06. Retail Accounting Center_ Franchisee may be required, in Big O's sole discretion, to use a Retail Accounting Center operated by Big O or operating 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. 11. 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 guarantor(s) 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 guarantor(s) 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. Confidentiality. 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 legal 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 in lieu of all other protections for such trade secrets and confidential Information as may otherwise be afforded in law or in equity_ 17.03. No Interference with Business. Franchisee agrees that during the term of this Agreement that it shall not divert or 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 by Section 19.03 or if this Agreement is terminated for "pond 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 year period 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. 19 17.07. Anti -Terrorism Laws. Franchisee and each Owner represents, warrants and covenants that at all times during the term of 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 who conspires 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 make a Transfer, Franchisee agrees to offer in writing to make the Transfer to Big O, and describe the 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 O. if Franchisee does not consummate, in accordance with the terms offered to Big O, the 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 transfer restrictions 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 law to constitute notice of the restrictions on such stock, 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 Agreement dated 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 assignment 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 transferee must apply for a Big O franchise and 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; FIE (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 same 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 O, including the name, 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 Option to 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's approval will be granted only if the prospective transferee, its Owners, and/or Operator: (a) meets Big O's then current standards for new franchisees, which standards need not be in writing and which standards may vary with the circumstances (such as 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 similar 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 x. (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 O 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 O's 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 to 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 Transfer or 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 O 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 a Multi -Unit Development Agreement, or otherwise paid less than the standard initial franchise fee (that is, the initial franchise fee charged by Big O for new franchises when the Franchisee executed this Agreement) when it acquired its interest in the Franchise, and the Franchisee makes a Transfer of its interest within two (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 franchise fee 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 comply 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 notice of default; (b) If Franchisee fails to perform or breaches any covenant, obligation, term, condition, warranty, or certification herein and fails to cure such non-compliance within thirty (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 the Franchisee can demonstrate to Big O's reasonable satisfaction that 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; (e) 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 receives from 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 (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 approval 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; 6) 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 in Section 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 O 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 requirement to pay dues or make advertising contributions, and such default is not cured in accordance with the terms of such other agreement, loan document, or lease, or the by-laws of the Local Group; (1) If Franchisee fails, for a period often (10) days after notification of non-compliance, to comply with any law or regulation applicable to the operation of the Franchised Business; (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 subsequently disapproved; (n) If Franchisee shall have understated its Gross Sales to Big O on two (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 terms 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 O 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 law, it shall apply to a termination of this Agreement_ 19.03. Termination by Franchisee. Franchisee may only terminate this Agreement 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. 24 19.04. Force Majeure. 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 u voidable delay. 20. POST TERMINATION OBLIGATIONS 20.01. Post -Termination Obligations. Upon the Expiration or Termination of this Agreement by any means or for any reason, Franchisee shall immediately: (a) Cease to be a Franchisee of Big O and cease to operate the former Franchised Business under the Big O System. Franchisee shall not thereafter, directly or indirectly, 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 present or former Franchisee of Big O; (b) Pay all sums owing to Big O. Upon termination for any default by Franchisee, such sums shall include actual and consequential damages, costs, and expenses incurred by Big O as a result of the default; (c) Return to Big O the (i) Manual and any training modules or other proprietary information and supplements thereto and all trade secrets and confidential materials owned or licensed by Big O and all copies thereof other than Franchisee's copy of the Franchise Agreement, copies of any correspondence between the parties, and any other document which Franchisee reasonably needs for compliance with any applicable law; (ii) return or discontinue use of all forms, advertising matter, marks, devises, insignias, slogans, designs, signs, any computer systems including software and/or hardware; and (iii) discontinue the use of all copyrights, Licensed Marks, trade names and 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 outstanding obligations that Franchisee may have to any third parties including outstanding customer orders. Big O shall have the right, but not 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 Franchisee forwhich 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 a5 the Franchisee's attorney -in -fact for such purpose and such power, being coupled with an interest, shall be irrevocable; PAI t. (f) Cease to use in Advertising, or in any manner whatsoever, 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 I icensed 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 O. 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 all of 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 such rights, 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 first refusal to purchase any of such items by matching the bona fide monetary 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 give Big O written notice of any such bona fide offer. If within thirty (30) days after receipt of such notice, Big O has neither exercised its right of first refusal nor notified Franchisee of its rejection thereof, Franchisee may sell such items as were covered by the offer at 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, Franchisee may continue to sell its remaining Products and Services, equipment, supplies, and fixtures, but may not 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 O, its 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. 26 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 shall contain the authorized agent's business name, address and phone number, together with a statement by the insurer that the policy will 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 in the Program shall not relieve Franchisee of any liability to Big O assumed under any indemnification requirement of this.Agreement. If Big O deems it appropriate, Franchisee shall, upon Big O's request, provide to Big O a true, 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 days before 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 disposal. 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 the 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 noway 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 0 shall respond with its approval or disapproval within fifteen (15) business days. 24.02. Waiver. No failure of Big 0 to exercise any power reserved to it by this Agreement and no custom or practice of the parties at variance with the terms hereof shall constitute a waiver of Big O's right to demand exact compliance with any of the terms herein. A waiver or approval by Big 0 of any particular default by Franchisee or any other Big 0 franchisee or acceptance by Big 0 of any payments due hereunder shall not be considered a waiver or approval by Big 0 of any preceding or subsequent breach by Franchisee of any term, covenant, or condition of this Agreement. Big 0 shall 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 0 and Franchisee. 24.03. Modification. No amendment, change, or variance from this Agreement shall be binding upon either Big 0 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 0 has established a Dealer Planning Board ("DPB"), consisting of franchisee representatives, which is designed to review aspects of Big O.'s strategic business plan as may be presented from time to time by Big 0 and to advise Big O's management on issues of concern to Big 0 franchisees. Through a representative elected from Franchisee's Local Group, Franchisee shall be represented on the DPB. 25.02. Special Interest Issues_ Big 0 has granted the DPB the authority to participate with Big O's management in making policy decisions relating to issues in which the DPB is deemed to have a special interest. The issues of "Special 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 implementation 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 of the Local Groups, vote to disapprove a proposal of Big O's management_ If, pursuant to established procedures which have been approved by Big 0, the DPB shall disapprove a proposal of Big O's management, the proposal may only become effective if, following a presentation to the Big 0 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. 28 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 or relationship 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) may impair 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 any time 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 at their 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 law, 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 the 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 other party; 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 1 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 or future statute, law, ordinance, or regulation contrary to 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 the remaining 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 beconstrued 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 used in a non-exclusive sense. Unless otherwise expressly provided herein to the contrary, any consent, approval or authorization of Big O which 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 hereunder to make any judgment or determination, including any decision as to whether any condition or circumstance meets Big O's standards or satisfaction, Big O may do so in its sole judgment. Article and Section titles used in this Agreement are for convenience only and shall not be 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 parent company of 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. ACKNOWLEDGEMENTS (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 Services. (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, any warranty or guaranty, express or implied, as to the obligation of Big O to provide Franchisee with any specific 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 I 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 Franchisee has had 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 representations which are inconsistent with the terms of this instrument and its accompanying Franchise Offering Circular. (h) Franchisee acknowledges and recognizes 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: Dale: " aher R. Phillip President — 2-0- 4 Home Address: 33791 Glocamora Lane San Juan Capistrano, CA 92675 017 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 1 yle Ky , 111, Vresident Date:-1-���b'1 Home Address: 35 Ticknor Lane Laguna Niguel, CA 92677 Home Phone Number: (714) 240-8059 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: Phillips & Phillips, LLC, a California corporation, general partner C. & E. Phillips, Inc., a California corporation, ,Managing Member WEBy: ristopher R. Phil►' 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 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 son 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: BIG O TIRES, INC. �Q By:JQbA r/P. H�ydduuke, Date: ' d / Title: (Affix Corporate Seal) Vice President — Franchise Development 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 O 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 Big O Tires, Inc. ('Big O") located at 12650 East Briarwood Avenue, Suite 2-D, Centennial, Colorado 80112 of all of the obligations of Big O under the Franchise Agreements. This Guaranty continues until all obligations of Big O under the Franchise Agreement are satisfied. Big O 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 O is not waived. This Guaranty is binding on TBC and on its successors and assignees. TBC shall 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 O from TBC or all or substantially all of the assets of Big O, 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 SCHEDULE1 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 I 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. SCHEDULE 2 OWNERSHIP VERIFICATION 1 _ Name(s) and address(es) 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 Arroyo, Suite 1703 San Juan Capistrano, CA 92675 60% Name: Phillips & Phillips LLC (c/o Chris Phillips) Address: 27131 Calle Arroyo, Suite 1703 San Juan Capistrano, CA 92675 16.67% Name: Four Kyles, Inc. (c/o Virgil Kyle Kyle, 111) Address: 27131 Calle Arroyo Suite 1703 San Juan Capistrano, CA 92675 13.33% Name: JYB Enterprises Inc. (c/o Jason Berry) Address: 5320 E. Rural Ridge Circle Anaheim CA 92807 10% 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: %­ Z g - o `/ BY: (2-1/ /�' :P J�_� ristopher R. Phillips, resident By: Four Kyle , Inc_, �j a Califor is corporation as General Partner DATED: BY: / irgil kyle K , III, resident Schedule 2 to Franchise Agreement Page 1 By: Phillips & Phillips, LLC a California limited liability company, as General Partner By: C. & E_ Phillips, Inc., a California corporation, Managing Member DATED: %- 2 S - o `/ By: -� (SVstopher R. Phillip , President By:, Christopher R. Phillips and Emiko J. Phillips, Trustee .or Successor Trustee of the Phillips Family Living Trust y dated September 23, 1991 as amended, Member DATED: / -' Z S _ p t� By: topher R. Phill' , Trustee DATED: %'p�� ' �� By: Emiko J. PhillipU Trustee By: JYB Enterprises, Inc., a California corporation, as General Partner DATED: `� By: - CD / Jas T Berry, Presid STATE OF OQ G ) ss. COUNTY OF ) On -ia/ �k moo before lne \ saw �i�4 �+� ! personally appeared X1.57-010,Y05— &,IL�ts known to me (or proved to me on the"basig of satisfactory evidence) to be the person(s) w1fose name(s) is/awe subscribed to the within instrument and acknowledged to me that hef4heAt4ey executed the same in his/#er-/their authorized capacity, and that by hisA 4eFAheir signature on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNWmy hand arrci offic}al seal. My Commission Expires: STATE OF. r ) ) ss. COUNTY OF .200 6 (Seal) SUSAN S. HUMPHREY Q Comm. #13534W > Q NOTARY PUBLIC - CALIFORNIA D ORANGE COUNTY MY Comm. Exolreo-A44 25, 2006 _ On,j- X and before m• cc e s9 t-,S �J , personally appeared z,;;-, rccy U known to me (or proved to me on the basis Of satisfactory evidence) to be the DP^Son(s) whose name(s) isA&Fe subscribed to the within instrument and acknowledged to me that Wshe/tlwy executed the same in Isis/her/their authorized capacity, and that by4iis/her/their signature on the instrument the ppzwn(s), or the entity upon behalf of which the Person(s) acted, executed the ,nstrurn. cnt. WITNE y hand a offic' I seal. My Commission Expires: (Seal) SUSAN S. HUMPHREY Q Comm. #1353456 D Q NOTARY PUBLIC - CALIFORNIA D ORANGE COUNTY —' My Cortvn. Exokeo ADN 25. 2006 STATE OF ) ss. COUNTY OF ) , On —20W before,me_ �4.Sa .'- .. JAL //f� c'i . - ;,;personally appeared C e, /r Y /c k atn.me (or proved tome on-Ahe basis. of satisfactory evidence) to be the person(s) whose rw=(s) is/aFe subscribed to the within` -instrument and acknowledged to me that he/-%4oA4ey executed the same in his/tierkheir authorized capacity, and that by his/ Heir signature on the instrument the pgr on(s), or the entity upon behalf of which the erson(s) acted, executed the instrument. WITNES y hand and =ceal. My Commission Expires: A- i57Dale STATE OF 1. COUNTY OF t11*1Q., 4 c ) (Seal) .-.$USAN S. HUMPHREY < Comm.01353456 D co NOTARY PUBLIC - CALIFORNIA D ORANGE COUNTY My Cormm ExDtro* Apri125. 2006 On ,% / o? S .2001 before ipe �J_-a s¢.,�. eJ 4—flx'e£ y, - _ •:,_ Pe�so�a11,Y appeared �cscal iy known tome (or proved to me ori'the,liasis of satisfactory evidence) to be the person(s) whose rj=e(s) is/i3r bscribed to the within instrume nt and acknowledged to me that he/sf7eftheq executed the same in his/herA+teir authorized.capacity, and that^by hisfherftheir.signature on the instrument the p—e=n(s), or the entity upon behalf of which the persons) acted, executed the ;Instrument. WITNES hand and oWiat s (Seal) t: My Commission Expires: _ SUSAN S. HUMPHREY T j Comm. #1353456 A m NOTARY PUBLIC - CALIFORNIA DD Q ORANGE COUNTY My Comm. Etokae Apc 12S. 2006 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 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 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 cvncliUvll Is by UI U11VUg11 all attorney -at -law. /'111y WdIVGI, exteIlJIV11 0l 11111C QI 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-0 Date CHRISTOPHER R. PHILLIPS Printed Name Schedule 3 to Franchise Agreement Page 1 33791 Glocamora Lane San Juan Capistrano, CA 92675 Home Address (714) 661-6188 Home Telephone 7872 Edinger Avenue Huntinqton Beach, CA 92647 Business Address (714) 861-4011 Business Telephone 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 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 parry 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 sLich enforcement or roftertinn is by nr thrni tgh an aftnrney_nf-km; Any ;;iaiwr r oxt-Si— of bme 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. &Ii� Whalo-�D Signatur� , n O Date V `� EMIKO J. PHILLIPS Printed Name Schedule 3 to Franchise Agreement Page 3 33791 Glocamora Lane San Juan Capistrano, CA 92675 Home Address (714)661-6188 Home Telephone 7872 Edinger Avenue Huntington Beach, CA 92647 Business Address (714) 861-4011 Business Telephone 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 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 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 yr callectioi � is by or through ougi 1 an � aitGr i �ey-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 35 Ticknor Lane Laguna Niquel, CA 92677 Home Address (714)240-8059 Home Telephone 7872 Edinger Avenue _Huntington Beach, CA 92647 Business Address (714) 861-4011 Business Telephone Schedule 3 to Franchise Agreement Page 6 SCHEDULE3 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 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 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 s:ch enforcement or collection is by or t'irough 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 DIANE R. KYLE Printed Name Schedule 3 to Franchise Agreement Page 7 r 35 Ticknor Lane Laguna Niguel, CA 92677 Home Address (714)240-8059 Home Telephone 7872 Edinger Avenue Huntington Beach, CA 92647 Business Address (714) 861-4011 Business Telephone Schedule 3 to Franchise Agreement 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 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 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 enfOr cement or collection is by or through an ailorney-ai-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. Sig ure Date JASON Y. BERRY Printed Name Schedule 3 to Franchise Agreement Page 9 5320 E. Rural Ridge Circle Anaheim, A 92807 Home Address (714) 283-1147 Home Telephone 7872 Edinger Avenue Huntington Beach, CA 92647 Business Address (714)861-4011 Business Telephone - 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"), 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 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 limitatibn, 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 1 el %%I Vr cel I let Il or collectioi I is by or through r 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. re J� I"! Srr�� I Date LAURA BERRY Printed Name Schedule 3 to Franchise Agreement Page 11 5320 E_ Rural Ridge Circle Anaheim, A 92807 Home Address (714) 283-1147 Home Telephone 7872 Edinger Avenue Huntington Beach, CA 92647 Business Address (714) 861-4011 Business Telephone Schedule 3 to Franchise Agreement Page 12 SCHEDULE 4 LEASE RIDER AND MODIFICATION THIS AGREEMENT is made effective this 1 st day of August, 2004 by and between HB Auto I, LLC ("Landlord"), C.S_B. PARTNERSHIP ("Tenant"), and Big O Tires, Inc., its affiliates, successors and assigns ("Big O")_ 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 Big 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 franchise agreements between Tenant and Big O, if any; NOW, THEREFORE, in consideration of the sum of one dollar ($1.00), in hand paid by Big O to Landlord and to Tenant, and other good and sufficient consideration, 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 Lease so 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, unless such Event is not cured within ten (10) days after Notice of Default (as hereinafter defined) has been received by Big O; (b) if the Event is anything other than the non-payment of rent, unless such Event is not cured within tii1enaj =five (25) dayi after Notice of Default (as hereinafter defined) has been received by Big O, 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 O 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, injunction, temporary restraining 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 Tenant. 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 or successors. 8. Tenant and Landlord understand that Big O is entering into or has entered into a Franchise Agreement with Tenant for a Big O Tire Store 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 into such Franchise Agreement. IN WITNESS WHEREOF, the parties hereto have duly execute and delivered this agreement as of the date first above -listed. LANDLORD HB AUTO I, LLC By: Name: O,'U Title: %Y%a,-f !R-T 1 4&P 'be� (CORPORATE SEAL) TENANT C.S.B. PARTNERSHIP By: (VzAU - Name: Title: (CORPORATE SEAL) BIG O TIRES, INC. By: Name: Joh . Nyduke 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: Title: Attest: Title: (Affix Corporate Seal) SCHEDULE 6 TRADEMARKS 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-0 Principal 993,415 09/24/74 Big O Tires & design Principal 1,611,160 08/28/90 Big O Tirec Principal 2,411,026 1211-�, ...,unn 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 STATE REGISTRATIONS Big O , Texas 40,967 11/01/82 Big O Tires Texas 40,704 09/02/82 Schedule 6 to Franchise Agreement Page 2 SCHEDULE? 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 Non -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. 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 any other 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 (6) months from the Commencement Date 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 Licensed Marks in its signage, advertising and otherwise, in conjunction with any other previous signage or identifying 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 of signage or displays (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 Big O'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 other documents, without Franchisee's signature, to protect Big O's 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 O 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 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 O 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, (i) 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 or near the Franchisee's site without charging an additional training fee or additional transportation, lodging or living expenses to the Franchisee; or (ii) Big O will require Franchisee's Manager and/or Operator to attend training at the training sites designated by Big O for which Big O will not charge a training fee for training at Big O's national training center but may charge a fee for field training and certification, but, in either case, Franchisee shall pay for its own 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 O's 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 C attached 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 shall conduct the Non -Standard Services in compliance with all applicable laws, rules and regulations 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 all claims 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 Surety 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 shall be payable to the order of Big O or the Local Group, as the case may be, for any nonpayment by the Franchisee of rnntrihuifinnS A s� to the Kinfi-n I A' w-rti in Program n the 1 I Fund t to Ithis Fra�cr+-10sue a. S ..g . vyr a r r w� ar r unv pvrSiiairi w Ithis r r ar noc 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 third anniversary 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 17.-___ __. The terms and- conditions- of -this -Converter Amendment -are-in addition to -or in explanation of the existing terms and conditions of the Agreement and shall prevail over and supersede any inconsistent terms and conditions thereof. 18. Effective this day of 20 BIG O TIRES, INC. By: Title: FRANCHISEE: (Print Name) By: Title: 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 Sales unless otherwise indicated as excluded. Schedule 7 to Franchise Agreement Page 5 e 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 sale 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 directly from 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 w c. mm.ercially reasonable and iavVii;i manner to outain 'access to Farai Class Tires that it shall be 'deemed in compliance with its obligations hereunder. 4. If Big O fails to comply 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 Sales 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: Home Address: Home Phone Number: Office Address: Office Phone Number. -- Title: - Attest: Title: (Affix Corporate Seal) BIG O TIRES, INC. By:_ Date:- Title: — Attest: (Affix Corporate Seal) Schedule 8 to Franchise Agreement Page 2 EXHIBIT B NEW AGENCY/LANDLORD PROPERTY ACQUISITION AGREEMENT 00 1219.000 1 \844054.11 OWNER(S): HB Auto I, LLC APN: 142-081-028 ESCROW NO.: TITLE REPORT NO.: 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 December 15, 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.l 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"). 3. Escrow. 3.1 Opening of Escrow. The parties shall open escrow ("Escrow") on the third (3`d) Business Day after execution hereof by Buyer with Stewart Title Company (the "Escrow Agent") located at 2010 Main Street, Suite 250, Irvine, California 92614, Attention: Grace Kim. "Business day" means Monday through Friday, and excludes all holidays as specified in Section 6700 and 6701 of the California Government Code. 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. a. 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. 4. Close of Escrow; Extensions. 4.1 Close of Escrow. Close of Escrow shall occur on or before such date that is thirty (30) days after the date of execution hereof by the Buyer (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, the Outside Date shall be extended for thirty (30) calendar days (the "Extension Purchase Sale Agt No 2 7872 Edinger 120108 2 Date"). 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 Buyer's 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) Seller is not in good standing in the State of California; (iv) 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) Stewart Title Company ("Title Company"), upon payment of its regularly scheduled premium, has not unconditionally agreed to issue the ALTA Standard Coverage Owner's Title Insurance Policy ("Title Policy") for the Property 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; (v) Escrow is not in receipt of demand statements from all creditors of Seller indicated on the Title Report and requested by Agency, indicating that upon payment of a sum certain, that creditor's lien on the Property will be released, and Escrow has demonstrated to Agency that the proceeds of the Purchase Price to Seller upon Closing will be sufficient to obtain lien releases in connection with closing; (vi) Tenant does not permit Buyer access to the Property for purposes of assessing the condition of the Property prior to the Close of Escrow; Purchase Sale Agt No 2 7872 Edinger 120108 3 (vii) Seller has not executed and delivered to Escrow the Grant Deed, FIRPTA Certificates (as hereinafter defined) (duly executed by each party comprising Seller) 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, including all attachments thereto determined to be necessary and appropriate by the parties, and all signatures of Seller required in connection therewith; (ix) the condition of the Property is not similar in all material respects to the condition of the Property as of the date of execution of this Agreement by Buyer; (x) Seller has not delivered to Escrow releases originally executed by Turn -Key Washes, Inc., a California corporation, Michael Todd Carson, and Rosemary Kathleen Carson, in a form mutually acceptable to Buyer; (xi) Seller has not delivered to Escrow 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; (xii) Seller has not delivered to Escrow a Landlord's Estoppel Certificate (in the form attached to the Lease), executed by the Seller; (xiii) Seller has not delivered to escrow quit claim deeds executed by Turn -Key Washes, Inc., a California corporation, Michael Todd Carson and Rosemary Kathleen Carson, in a form acceptable to Buyer; (xiv) Buyer's board has not approved the Acquisition Agreement between Tenant and Buyer, or Tenant's franchisor has not signed such Acquisition Agreement; (xv) Buyer has not obtained, at Buyer's sole cost and expense, an environmental insurance policy covering the environmental condition of the Property on terms approved by Buyer in Buyer's sole discretion ("Environmental Policy"). Notwithstanding anything to the contrary set forth herein, Buyer's failure to obtain the Environmental Policy shall not constitute a default by Buyer or Seller hereunder. Buyer shall provide Seller, upon Seller's request, with evidence of Buyer's activities to obtain the Environmental Policy and an explanation as to any delays in obtaining such Environmental Policy; or (xvi) Seller has not delivered to Escrow resolutions of Seller, executed by all members of Seller, approving the sale of the Property pursuant to the terms and conditions of this Agreement. 6. Seller's Obligations. Seller shall deliver to Escrow within fourteen (14) days of Buyer's execution of this Agreement, the items enumerated below. If such items are not delivered to Escrow within such time frame, Buyer shall have the right to terminate this Agreement. Seller shall delver the following to Escrow: A. An originally 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 No 2 7872 Edinger 120108 4 B. A certification (">F'IRPTA Certificate") originally 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 originally executed assignment and assumption agreement for the Lease substantially in the form of Exhibit F (the "Assignment and Assumption Agreement"). D. Releases originally executed by Turn -Key Washes, Inc., a California corporation, Michael Todd Carson, and Rosemary Kathleen Carson, in a form acceptable to Buyer; E. Quit claim deeds originally executed by Turn -Key Washes, Inc., a California corporation, Michael Todd Carson, and Rosemary Kathleen Carson, in a form acceptable to Buyer; F. Resolutions of Seller, executed by all members of Seller, approving the sale of the Property pursuant to the terms and conditions of this Agreement. G. A Tenant's Estoppel Certificate (in the form attached to the Lease), originally executed by the Tenant; and H. A Landlord's Estoppel Certificate (in the form attached to the Lease), originally executed by the Seller. 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 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 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 Purchase Sale Agt No 2 7872 Edinger 120108 5 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 or prior to 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 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. Purchase Sale Agt No 2 7872 Edinger 120108 6 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 or its members is a party or by which they are 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 and conveyance of the Property pursuant hereto will not constitute a fraudulent transfer. 1. Due Diligence. Seller has delivered to Buyer complete and accurate copies of all Due Diligence Reports. in. Corporate Governance. Seiler has delivered to Buyer a true, correct and complete copy of Seller's Articles of Organization and 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 Turn -Key Washes, 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 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. Purchase Sale Agt No 2 7872 Edinger 120108 7 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: a. Pay and charge Seller for any unpaid delinquent taxes andJor penalties and interest thereon, and for any delinquent or non -delinquent assessments or bonds against the Property; and Purchase Sale Agt No 2 7872 Edinger 120108 8 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 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 1099-5 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 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 Purchase Sale Agt No 2 7872 Edinger 120108 9 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. Within one (1) Business Day of the execution of this Agreement by Buyer, the Buyer shall order from Title Company, at Seller's expense, a Preliminary Title Report on the Property. Buyer shall review and approve the Preliminary Title Report and may 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 Buyer's Board has not approved the Acquisition Agreement, or the Environmental Policy is not available to Buyer for any reason, or the Acquisition Agreement has not been signed by Tenant and its franchisor, Buyer shall have the right, by giving written notice to Seller prior to the Outside Date, to terminate this Agreement. 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 due to the failure of Buyer or Seller to fulfill its obligations hereunder 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: (i) Record the Grant Deed with instructions for the Recorder of Orange County, California to deliver the recorded Grant Deed to Buyer; (ii) Record the quit claim deeds (three) executed by Michael Todd Carson, Rosemary Carson and Turn -Key Washes, Inc. with instructions for the Recorder of Orange County, California to deliver to recorded quit claim deeds to Buyer; (iii) Pay to Seller the Purchase Price less the Holdback Amount, the LOC Amount and appropriate charges against Seller hereunder; Purchase Sale Agt No 2 7872 Edinger 120108 10 (iv) Pay to the Holdback Account the Holdback Amount and the LOC Amount; (v) Deliver to Buyer originally signed copies of the following: the FIRPTA Certificates, releases executed by Turn -Key Washes, Inc., Michael Todd Carson and Rosemary Kathleen Carson, the Tenant's Estoppel Certificate, the Landlord's Estoppel Certificate, and any other documents delivered to Escrow for Buyer's benefit; (vi) Instruct the Title Company to deliver the Title Policy to Buyer; (vii) File any informational reports required by Internal Revenue Code Section 6045(e), as amended; (viii) Deliver one originally signed Assignment and Assumption Agreement to each of Buyer and Seller; and (ix) 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; and (x) Upon confirmation with Buyer that an LOC acceptable to Buyer has been established in the LOC Amount, pay to Seller the LOC Amount. 12.3 Holdback of Purchase Price for Known Contamination; Remediation of Known Contamination. Buyer's due diligence on the Property has indicated that the Property is contaminated as set forth in Exhibit G hereto (the "Down Environmental Matters"). Concurrently with the Closing, the parties shall cause Two Hundred Thousand Dollars ($200,000.00) ("Holdback Amount") to be held back from the proceeds otherwise distributable to Seller at the Close of Escrow in a separate escrow holdback account ("Holdback Account") to cover costs incurred after the Close of Escrow to remediate Known Environmental Matters. Buyer and Seller shall provide instructions to the holder of the Holdback Account stating that the funds shall be released to Buyer to pay for costs of remediating the known contamination on the Property and performing the other activities related thereto as set forth in this Section. Buyer shall use commercially reasonable efforts to complete such remediation with the proceeds of the Holdback Account as soon as possible after the Close of Escrow. Buyer shall complete the remediation to its reasonable satisfaction, and anticipates that such remediation activites may include, without limitation, assessment activities (e.g., excavation of soil and additional sampling), preparation and submittal of a remedial action plan ("RAP") to the appropriate governing agency(ies), performance of remediation activities in accordance with a RAP approved by the appropriate governing agency(ies), and the request of a closure letter from the lead governing agency. Buyer shall provide Seller with evidence reasonably satisfactory to the Seller of its efforts and compliance with the foregoing requirements, and written explanation of any delays in completion of the remediation. All work performed by the Buyer or its contractors or other third parties and any test results with respect to the foregoing remediation may be supervised and confirmed by Seller's environmental consultants at Seller's sole cost. Notwithstanding anything to the Purchase Sale Agt No 2 7872 Edinger 120108 11 contrary set forth herein, Buyer's failure to meet the foregoing schedule for any reason other than Buyer's failure to use commercially reasonable efforts shall not constitute an event of default by Buyer hereunder. In performing such activities, Buyer shall use commercially reasonable efforts not to interfere with the operations of the business of the Tenant of the Property, and shall regularly inform both Seller and Tenant of any expected disruption to Tenant's business. Upon written notice from Buyer accompanied by appropriate supporting documentation, delivered monthly, and upon the written approval of Seller (whose approval shall not be unreasonably withheld or delayed and who shall use best efforts to approve such documentation within five (5) Business Days of receipt thereof), Escrow Agent shall disburse sums from the Holdback Account to cover costs incurred in undertaking the preparation of the RAP, remediating the Known Environmental Matters, and in obtaining a closure letter issued by the lead governing agency. Copies of all notices from Buyer and supporting documentation related thereto shall be provided concurrently to Escrow Agency and Seller. To the extent the cost of undertaking the foregoing exceeds the Holdback Amount, Buyer shall fund the balance, and in connection therewith, Buyer shall be entitled to use its consultants and otherwise control the nature and manner of the remediation. Upon completion of the RAP and issuance of a closure letter issued by the lead governing agency, the balance of the Holdback Amount shall be disbursed by Escrow Agent to Seller without further instruction from the parties. In the event the cost of completing the RAP and obtaining a closure letter from the lead governing agency exceeds the balance of the Holdback Amount, then Buyer shall fund such costs. In the event the cost of completing the RAP and obtaining a closure letter from the lead governing agency is less than the balance of the Holdback Amount, then the balance of the Holdback Amount shall be disbursed by Escrow Agent to Seller upon Buyer's receipt of a closure letter from the lead governing agency and after reimbursement to Buyer of all costs to which it is entitled hereunder. Notwithstanding anything to the contrary set forth herein, Buyer acknowledges and agrees that Seller's liability with respect to the Known Environmental Matters as they exist on the Property shall be capped at the Holdback Amount, and Buyer, on behalf of itself, its agents, representatives, assigns, trustees, administrators, heirs, beneficiaries, and successors in interest, hereby forever releases and discharges Seller and its members, managers, officers, partners, heirs, beneficiaries, and successors in interest (collectively, the "Seller 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, solely with respect to the Property, that Seller has now or may at any time hereafter have against any of the Seller Released Parties for cost, liability, damage or expense arising out of or relating to the Known Environmental Matters existing on the Property that is in excess of the Holdback Amount. The foregoing release shall not release the Seller Released Parties for any claims arising out of or relating to the Known Environmental Matters which may exist on any other property. To the extent the cost of remediating the Property for the Known Environmental Matters exceeds the Holdback Amount, Buyer shall bear such additional cost. 12.4 Holdback for Unknown Environmental Matters. Concurrently with the Close of Escrow, Seller shall fund a letter of credit or escrow holdback account ("LOC") with Fifty Thousand Dollars ($50,000.00) ("LOC Amount"). The LOC shall name Buyer as beneficiary and shall be maintained by a bank, escrow company or other independent third party. Purchase Sale Agt No 2 7872 Edinger 120108 12 Seller agrees that Buyer shall be entitled to remediate any Unknown Environmental Matters (as hereinafter defined) as it and its environmental consultants determines to be appropriate, and that Buyer shall control the nature and extent of any such remediation of Unknown Environmental Matters. For purposes hereof, "Unknown Environmental Matters" shall mean any environmental matter that is not a Known Environmental Matter. Buyer shall be permitted to draw upon the LOC to pay any costs incurred by Buyer in remediating Unknown Environmental Matters at any time prior to the seventh (7th) anniversary of the Close of Escrow ("LOC Termination Date"). The LOC Amount shall be used by Buyer prior to (y) making any claim on Buyer's Environmental Policy or (z) the use of the proceeds of Buyer's Environmental Policy. Upon the earlier of (i) the LOC Termination Date, or (ii) the date that is five (5) days after the date on which a closure letter has been issued by the lead governing agency with respect to Buyer's remediation of any Unknown Environmental Matters, the LOC shall be cancelled (or the balance of the LOC Amount shall be disbursed by Escrow Agent to Seller without further instruction from the parties). In the event the cost of remediating any Unknown Environmental Matters exceeds the LOC Amount, then Buyer shall fund such additional costs, and in connection therewith, Buyer shall be entitled to use its consultants and otherwise control the nature and manner of the remediation. Notwithstanding anything to the contrary set forth herein, Buyer acknowledges and agrees that Seller's liability with respect to the Unknown Environmental Matters on the Property shall be capped at the LOC Amount, and Buyer, on behalf of itself, its agents, representatives, assigns, trustees, administrators, heirs, beneficiaries, and successors in interest, hereby forever releases and discharges the Seller 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 Seller Released Parties for cost, liability, damage or expense arising out of or relating to the Property for Unknown Environmental Matters that is in excess of the LOC Amount. The foregoing release shall not release the Seller Released Parties for any claims arising out of or relating to the Unknown Environmental Matters which may exist on any other property. To the extent the cost of remediating the Property for Unknown Environmental Matters exceeds the LOC Amount and the coverage of Buyer's Environmental Policy, Buyer shall bear such additional cost, and in connection therewith, Buyer shall be entitled to use its consultants and otherwise control the nature and manner of the remediation. 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. Purchase Sale Agt No 2 7872 Edinger 120108 13 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 has investigated, but desires the right to continue, at its option, 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 the extent of any soil, groundwater, or other contamination and any remediation required, Buyer may 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. 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 fuuther 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 connection with the foregoing, Phase One Inc. prepared a Limited Phase II Environmental Site Assessment for the Property on behalf of Buyer dated May, 2008 ("Phase II") which set forth certain Known Environmental Matters. Subject to the terms, conditions and limitations of this Agreement, Buyer shall be responsible for remediating the Known Environmental Matters subsequent to the Closing Date. 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 Party in the event that the consultant is also willing to provide such Reliance Letter. Purchase Sale Agt No 2 7872 Edinger 120108 14 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 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 additional 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 Purchase Sale Agt No 2 7872 Edinger 120108 15 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 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 11 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 payment of Purchase Price less the Holdback Amount and the LOC Amount 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, except that in the event the remediation of the Property contemplated by this Agreement for Known Environmental Matters does not exceed the Holdback Amount, any excess Holdback Amount funds shall be promptly refunded to Seller in accordance with Section 12.3. 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 Purchase Sale Agt No 2 7872 Edinger 120108 16 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. 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 ply. To Seller: HB AUTO I, LLC 3110 Newport Blvd. Newport Beach, California 92663 Attn: Todd Carson Phone: (949) 675-0101 Fax: (949) 675-0107 Purchase Sale Agt No 2 7872 Edinger 120108 17 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 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: STEWART TITLE COMPANY 2010 Main Street, Suite 250 Irvine, California 92614 Attn: Grace Kim 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. Purchase Sale Agt No 2 7872 Edinger 120108 18 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 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 Purchase Sale Agt No 2 7872 Edinger 120108 19 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 as part of a so-called like kind exchange (the "Exchange') pursuant to Section 1033 of the 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 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), Exhibit F (Assignment and Assumption Agreement), and Exhibit G (Known Environmental Matters). [SIGNATURE PAGE FOLLOWS] Purchase Sale Agt No 2 7872 Edinger 120108 20 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. Dated: h jo KSE 7 EW' HB AUTO 1, LLC, a California limited liability company By: Mic ael Todd C son, M aging Member [PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 1 OF 21 Purchase Sale Agt No 2 7872 Edinger 120108 Date: �,b /�,, 2408 "BUYER" ATTEST: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairperson APPROVED AS TO FORM: l� c _ f `- Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Spscial Couns 0 By: Warbara Zeid LAW old INITIATED AND APPROVED: Deputy Executive Dir for [PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 2 OF 21 Purchase Sale Agt No. 2 7872 Edinger 120108.doc ESCROW AGENT'S CONSENT: Escrow Agent hereby acknowledges receipt of this Agreement and consents to the terms and conditions set forth herein. "ESCROW AGENT" STEWART TITLE COMPANY Name: Its: Dated: Purchase Sale Agt No 2 7872 Edinger 120108 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 Exhibit A EXHIBIT B �l�17��f li1-1130W WHEN RECORDED MAIL AND MAIL TAX STATEMENTS TO: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 DOCUMENTARY TRANSFER TAX $ 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: SEE ATTACHMENT NO. 1 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE "SELLER" HB AUTO I, LLC Dated: By: Its: Dated: By: Its: Purchase Sale Agt No 2 7872 Edinger 120108 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 No 2 7872 Edinger 120108 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. 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. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT 0 Individual ❑ Corporate Officer Title(s) Title Or Type of Document ❑ Partner(s) 0 Limited ❑ General ❑ Attorney -In -Fact 0 Trustee(s) Number Of Pages ❑ Guardian/Conservator ❑ Other: Date Of Document Signer is representing: Name Of Person(s) Or Entity(ies) Signer(s) Other Than Named Above 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. 51, adopted on October 4, 1982, 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 December, 2008. ATTEST: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic By: 2� Its: CHAIRPERSON APPROVED AS TO FOR\1 iiy Att+ornj r 1-D8 Ci*Y Attcureey ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) On December 16, 2008 before me, P. L. Esparza, Notary Public, personally appeared Joan L. Flynn and Keith Bohr who proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons 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. ���P�7 . . . . . . _ e/ 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. Uwe 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, Uwe 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 Uwe have authority to sign this document on behalf of the Transferor. Dated: "TRANSFEROR" HB AUTO I, LLC Todd Carson, Managing Member Exhibit C- l EXHIBIT D CONDITION OF THE PROPERTY 1. None EXHIBIT E DUE DILIGENCE REPORTS 1. Title Report Invertors Title dated April 10, 2008 2. Operating Agreement for HB Alto I, LLC dated December 1, 2002 3. Phase 1 Report conducted by S&S Commercial Environmental Services, Inc. November 8, 2004 4. 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" 5. Lease Rider and Modification dated August 1, 2004, between C.S.B. Partnership, a California general partnership, as "Tenant," and HB Auto I, LLC, a California limited liability company, as "Landlord", and Big O Tires, Inc. 6. Guaranty of Lease dated April 19, 2004 executed by Christopher R. Phillips, as "Guarantor," in favor of HB Auto I, LLC, a California limited liability company, and Jurtwin, Inc., a California corporation, as "Landlord" 7. Assignment of Lease dated June 25, 2004, pursuant to which Jurtwin, Inc., a California corporation, assigned all of its right, title, interest, and obligations under the Lease to Michael Todd Carson and Rosemary Carson 8. Assignment of Lease dated November 30, 2004, pursuant to which Michael Todd Carson and Rosemary Carson, assigned all of their right, title, interest, and obligations under the Lease to HB Auto I, LLC, a California limited liability company 9. Limited Phase II Environmental Site Assessment prepared by Phase One Inc. dated May, 2008 EXHIBIT F ASSIGNMENT AND ASSUMPTION AGREEMENT [see attached] Exhibit F ASSIGNMENT AND ASSUMPTION OF LEASE This ASSIGN TENT 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 DB 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.l 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 TBEREFORE, 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 oftme 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 ("Notie) 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: BB 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" HB AUTO I, LLC, a California limited liability company By: Todd Carson, Managing Member [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 1 OF 21 "BUYER" REDEVELOPMENT AGENCY OF THE ATTEST: CITY OF HUNTINGTON BEACH Agency Clerk Chairperson REVIEWED AND APPROVED: APPROVED AS TO FORM: Executive Director Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel By: Barbara Zeid Leibold MTIATED AND APPROVED: Deputy Executive Director [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 2 OF 21 Assignment and Assumption of Lease FINAL - 2 - EXHIBIT A DESCRIPTION OF LEASE 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 G KNOWN ENVIRONMENTAL MATTERS [see attached] Exhibit G EXHIBIT G KNOWN ENVIRONMENTAL MATTERS Contamination as set forth in that certain "Phase I Environmental Site Assessment Report, Project No. 6824, dated April 21, 2008 prepared by Phase One, Inc." and that certain "Limited Phase it Environmental Site Assessment dated May 12, 2008 prepared by Phase One, Inc." and contamination resulting from petroleum hydrocarbons in the form of hydraulic fluid located on the Property. ADDENDUM TO AGREEMENT AND ESCROW INSTRUCTIONS FOR PURCHASE AND SALE OF REAL PROPERTY THIS ADDENDUM TO AGREEMENT AND ESCROW INSTRUCTIONS FOR PURCHASE AND SALE OF REAL PROPERTY ("Addendum") is made and entered into as of December _, 2008, and constitutes an agreement 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"), and is attached to and made a part of that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property of even date herewith ("Purchase Agreement"), pursuant to which Seller agreed to sell to Buyer, and Buyer agreed to purchase from Seller, that certain real property ("Property") in the City of Huntington Beach, County of Orange, State of California, more particularly described in the Purchase Agreement. To the extent there exist any conflicts between the terms of this Addendum and the terms of the Purchase Agreement, the terms of this Addendum shall control. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Buyer and Seller agree as follows: l . Purchase Price. Section 2 of the Purchase Agreement is hereby amended to provide that the Purchase Price for the Property shall be Three Million Four Hundred Thirty One Thousand Five Hundred Dollars ($3,431,500). 2. Close of Escrow. Section 4.1 of the Purchase Agreement is hereby amended to provide that the Outside Date shall be January 23, 2009. 3. Deposit. Within two (2) business days of (a) the satisfaction or waiver by Buyer in writing of the conditions to the Close of Escrow described in Section 5.2 of the Purchase Agreement, and (b) the deposit by Seller into escrow of an originally signed and notarized (i) deed of trust in the amount of the Deposit naming Buyer as beneficiary and in such form as is acceptable to Buyer (the "Deed of Trust"), and (ii) Memorandum of Agreement, providing notice of the Purchase Agreement and this Addendum and in such form as is acceptable to Buyer (the "Memorandum"), Buyer will deposit into Escrow cash or other immediately available funds in the amount of Eight Hundred Thousand Dollars ($800,000) ("Deposit"), which sum shall, upon recordation of the Deed of Trust and Memorandum in the official records of the Orange County Recorder's Office but without further instruction from the parties, be immediately released to Seller by Escrow Agent and shall become nonrefundable to Buyer if Escrow fails to close due to a default by Buyer. The Deposit shall be applied to the Purchase Price upon the Close of Escrow. Notwithstanding anything to the contrary set forth herein or in the Purchase Agreement, in the event that any one of the conditions to the Close of Escrow described in Section 5.2 of the Purchase Agreement has not been satisfied or waived in writing by Buyer and the Deposit released to Seller on or before December 22, 2008, then Seller shall have the right at any point thereafter to terminate the Purchase Agreement by delivering written PSA Addendum v4 120308.doc / notice to Buyer and Escrow Agent. Notwithstanding anything to the contrary set forth herein or in the Purchase Agreement, in the event the conditions set forth in this Section 3 are not satisfied by December 22, 2008, Seller's termination of the Purchase Agreement, as amended by this Addendum, shall be Seller's sole remedy. 4. Real Estate Brokerage Commission. Section 15.1 of the Purchase Agreement is hereby amended to provide that, in addition to the commission payable to NAI Capital, Inc., Seller shall also be responsible for the payment of a real estate brokerage commission to Michael Todd Carson (who also represents Seller) in an amount equal to 8% of the Purchase Price. 5. Covenant Not to Transfer, Distribute or Encumber Property. Seller hereby covenants and agrees that from and after the date of Seller's signature of this Addendum, Seller shall not make any total or partial sale, transfer, conveyance, encumbrance to secure financing (including, without limitation, the grant of a deed of trust to secure funds, but excluding the Deed of Trust referred to in paragraph 3 above), distribution, assignment or lease of the whole or any part of the Property. Any purported transfer or encumbrance, voluntary or by operation of law, in violation of this Section shall constitute a default hereunder and Buyer shall have the cumulative options to terminate this Agreement and to seek all remedies available at law or equity. 6. Counterparts. This Addendum may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument. IN WITNESS WHEREOF, Buyer and Seller have signed this Addendum on the dates set forth below. "SELLER" HB AUTO I, LLC, a California limited liability company 01 Dated: 02 3 0 By: Michael Tod son, anaging Member [ADDENDUM SIGNATURE PAGE 1 OF 21 /f- ATTEST: "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairperson APPR D AS TO FORM: �Agedcy Counsel jZ � APPROVED AS TO FORM: LEIBOLD CCLENDON & M,4NN, P Agency S ial Couns By: arbara Ze Leibo d INITIATED AND APPROVED: S Deputy Executive erector [ADDENDUM SIGNATURE PAGE 2 OF 21 EXHIBIT C LEASE AMENDMENT 001219.0001 \844054.11 FIRST AMENDMENT TO STANDARD LEASE AGREEMENT THIS FIRST AMENDMENT TO STANDARD LEASE AGREEMENT (this "First Amendment") is entered into and executed as of January 23, 2009 (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 and Option Addendum to Standard Lease Agreement (collectively, 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 001219.0001 \846899.8 Lease 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 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 and Addendum to Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of December 15, 2008 (the "New Landlord/Predecessor Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Landlord will acquire all of Predecessor Landlord's rights, title and interest as the owner in fee in and to the Property on and subject to the terms of the New Landlord/Predecessor Landlord Property Acquisition Agreement, in consideration of the payment by Landlord to Predecessor Landlord of the purchase price consideration for such acquisition of the Property on and subject to the terms of the New Landlord/Predecessor Landlord Property Acquisition Agreement. This First Amendment will become effective as of the date the acquisition transaction pursuant to the New 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 as the owner in fee 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 New 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 as the owner in fee in and to Property, pursuant to the New 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 Reinstated Acquisition of Leasehold Interest Agreement dated as of December 29, 2008 (the "Reinstated 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 Reinstated 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 New Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, and Landlord acquires all of Predecessor Landlord's rights, title and interest as the owner in fee in 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. 001219.0001\846899.8 2 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. H. Capitalized terms not otherwise defined herein shall have the meanings given them in the Lease and the Reinstated 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 hereby 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) Pursuant to the terms of the New Landlord/Predecessor Landlord Property Acquisition Agreement, 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 New Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated,. Landlord and Tenant shall execute a written 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 New 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 New 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 Reinstated 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 New 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 001219.0001\846899.8 3 and the Lease Guaranty will terminate on or before the date which is five (5) years from the Effective Date (defined as the "Lease TerminationNacation Date" in the Reinstated 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, covenants, agreements and undertakings under the Reinstated 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 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 Reinstated 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 Reinstated Landlord/Tenant Leasehold Interest Acquisition Agreement. 2. 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. 001219.0001\846899.8 4 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 1111 Broadway, 24th Floor Oakland, CA 94607 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 reaffirmed. 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 one (1) or more 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 001219.0001 \846899.8 5 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 Reinstated 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 Reinstated 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 New 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. 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 First Amendment for and on behalf of such party and that this First Amendment is a binding obligation on such party. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the dates set forth below. ATTEST: Name. Title: ncy Clerk REVIEWR14ND APPROVED: By: Name Fred Wi 1 son Title: Executive Director "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH �� l By: Name: Keith Bohr Title: Chairperson APPROVED AS TO FORM: By: lam. / 1 J - e jennif er McGratW Title: Agency Counsel N Z12-10q [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \846899.8 6 APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel By: � 1 l c Barbara Zeid ibold INITIATED AND A PROVED: Name: Stanley Sma z Title: Deputy Executive Director [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \846899.8 "TENANT" C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: Cbdo-pher R. Phillips, P esiderit By: FOUR. KYLES, INC., a California corporation, its eneral Partner By: Virgil Kyle K e, , President By: PHILLIPS & PHILLIPS L.P.; a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: cy topher R. Phillips, President By: .IYB ENTERPRISES, INC., a California corporation, its General Partner By: Jason Y. Berry, President By: THR.EEMMMS, INC., a California corporation, its General Partner Michael J. Numbach, President [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \946899.8 By: CHRIS & TAD ENTERPRISES, L.P., a California limited partnership, its General Partner By: PHILLIPS & PHILLIPS L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: topher R. Phillips, President 001219.0001 \846899.8 EXHIBIT D LEASEHOLD INTEREST ASSIGNMENUTRANSFER 00 1219.000 1 \844054.11 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Richard P. Waxman, Esq. Wendel, Rosen, Black & Dean LLP I I I I Broadway, 24`h 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\848103.5 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 , 20_ (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 is the owner in fee that certain improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property") as such Property is more particularly described on Exhibit A, attached hereto. 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 and Addendum to Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of December 15, 2008 (collectively, the "New Landlord/Predecessor Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Assignee/Transferee will acquire all of Predecessor Landlord's rights, title and interest as the owner in fee in and to the Property on and subject to the terms of the New Landlord/Predecessor Landlord Property Acquisition Agreement. The acquisition transaction pursuant to the New Landlord/Predecessor Landlord Property Acquisition Agreement was closed and consummated on January _, 2009, upon which date Assignee/Transferee acquired all of Predecessor Landlord's rights, title and interest as the owner in fee 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, and Option Addendum to Standard Lease Agreement dated April , 2004 (collectively, the "Original Lease"). Assignor/Transferor is the tenant under the Original 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 Original 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 as the owner in fee in and to the Property pursuant to the New Landlord/Predecessor Landlord Property Acquisition Agreement, and Assignee/Transferee's proposed redevelopment of the Property, Assignee/Transferee has determined that it will be necessary for Assignor/Transferor to permanently cease to occupy the Property prior to the expiration of the Original Lease; and, as such, Assignee/Transferee and Assignor/Transferor have entered into that certain Reinstated Acquisition of Leasehold Interest Agreement dated as of December 29, 2008 (the "Reinstated Landlord/Tenant Leasehold Interest Acquisition Agreement"), setting forth the terms and 001219.0001 \848103.5 conditions by which Assignee/Transferee shall acquire Assignor/Transferor's entire leasehold interest in the Property (the "Leasehold Interest") pursuant to the Original 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 Reinstated Landlord/Tenant Leasehold Interest Acquisition Agreement is attached hereto as Exhibit B. As required by the terms and conditions of the Reinstated Landlord/Tenant Leasehold Interest Acquisition Agreement, the Original Lease was amended by the terms of that certain First Amendment to Standard Lease Agreement dated as of January 23, 2009 (the "Lease Amendment") by and between Assignor/Transferor as tenant and Assignee/Transferee as landlord. The Original Lease as amended by the Lease Amendment shall hereinafter be collectively referred to as the "Lease." 1.3 Under the terms of the Reinstated 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 Reinstated 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 Reinstated 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 agrees to assign, transfer and convey Assignor/Transferor's Leasehold Interest to Assignee/Transferee and Assignee/Transferee agrees 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 Reinstated 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 Reinstated 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 REINSTATED 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 Reinstated Landlord/Tenant Leasehold Interest Acquisition Agreement, all of the terms and provisions of which are hereby reaffirmed by Assignee/Transferee and Assignor/Transferor. 001219.0001 \848103.5 2 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. 4.2 This Assignment/Transfer will be binding on and inure to the benefit of the parties hereto and their respective successors, assigns, administrators, personal representatives, executors, and heirs. 4.3 The Recitals set forth above in this Assignment/Transfer 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 effectuate and consummate the transactions contemplated by this Assignment/Transfer. 4.8 Each person signing this Assignment/Transfer on behalf of a party to this Assignment/Transfer warrants and represents that such person 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: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic By: ✓ By: Print Name L. Print Name: Keith Bohr Title: Age cy Clerk Title: Chairperson [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \848103.5 REVIEW D APPROVED: By: �- Print Na e: Fred Wilson Title: Executive Director APPRO DAIS TO FORM: BY: y Pri1 Naue: Jennifer McGrath Title: Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel �* k Print lName: Ci7{ Title: S (tri l INITIATED AND APPROVED: By: o Print Name: Title: Deputy Executive Director [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001\848103.5 4 ASSIGNOR/TRANSFEROR: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: &4 j �z Cj�idopher R. Phillips, Pr sident BY:YOUR KYLES, INC., a_California corporation, 'ts General Partner By: Virgi yl y e, 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 By: J C169opher R. Phillips, President By: JYB ENTERPRISES, INC., a California corporation, its General Partner By: J on Y. Berry, President J By: THREEMMMS, INC., a California corporation, its General Partner By: rw Michael J. Hlumbach, President [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001\848103.5 5 By: CHRIS & TAD ENTERPRISES, L.P., a California limited partnership, its General Partner By: PHILLIPS & PHILLIPS L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: _ C opher R. Phillips, President 001219.0001\848103.5 6 State of California County of 12 On3 iq n � )�q& , 20-0 g, before me,0U�J'I2�i &0 5bm Z Notary Public, personally appeared C a-0 J 6-oh A,,t_ Y__ i l.,l,;9s, 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. State of California County ofnCI, �-- U (Seal) COURTN BLOSSOM aoROo Commission * 1801600 Notary Public - California Orange County Comm. Ex Tres Jun 1412 �'i)y,\ a On J1ny;ay m �� , 20Zj% before me, ��Yi2,h �jl�S�hrh , Notary Public, personally appeared 1 fa iL k �i��S1a. , who proved to me on the basis of satisfactory evidence to be the persons) 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. 001219.0001\848103.5 7 (Seal) COURTNEY BLOSSOM ROMO Commission # 1801600 Notary Public - California Orange County M Comm. Ex Tres Jun I .2012 State of California County of �/ DZj'Jh (� On 209! , before me, -T1 r)z , F)LD! fi ,- �, Notary Public, personally appeared yaTU-p, 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. - State of California County of 0noA-.,- 0 (Seal) COIbt3TR1Ev ILOSSOt R00 Cawmisni®n 01801600 Notary Public - California ®© Orange County my Comm. Ex i(es Jun 14, 2012 On`JAn- t) Ay�i n ') -, 200' before me,�i�3U�fY1 �&-/ 5X -)re,' otary Public, personally appeared}'1 � \:/ f32-2.y-L, , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(sl 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. NotaryPublic 001219.0001\848103.5 8 (Seal) State of California County of�14 20R , before, Notary Public, personally appeared �} �'�t�, ; r�D ,c_ '-- 9) iLLj T, 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) -`�— C iasfon 1001600 8 Notary Public Nary Public - Cal itornia g Oran®e County ffb Comm. Ex iron Jun 14 2012 State of California County of J rti On �)Pr) Qgtu Zi� , 200'), before me, ) �.,, 5 �• , 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(§), 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. Notary' • 001219.0001\848103.5 9 (Seal) Commis8ion California "ot8ry public orange County Comm. Ett ices Jun 1412 ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) On February 11, 2009 before me, P. L. Esparza, Notary Public, personally appeared Joan L. Flynn and Keith Bohr who proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons 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. P L. ES�Aau Commission # 1599179 Notary Public - California orange County 61my Comm. Expires Aug 4, 2009 (Notary Signat e) 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\848103.5 10 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\848103.5 11 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 061219.0001 \948103.5 12 EXHIBIT A LEGAL DESCRIPTION OF PROPERTY Cap' o, j i-� wcTtf TV y 001219.0001\848103.5 13 EXHIBIT B REINSTATED LANDLORD/TENANT LEASEHOLD INTEREST ACQUISITION AGREEMENT oole9y 0A) W/7-y- a,�'7 001219.0001\848103.5 14 EXHIBIT E LANDLORD/TENANT WAIVER/RELEASE 001219.0001 \844054.11 AGREEMENT OF RELEASE OF ALL CLAIMS This AGREEMENT OF RELEASE OF ALL CLAIMS ("Agreement") dated as of January 23, 2009, 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 and Option Addendum to Standard Lease Agreement dated April , 2004 (collectively, 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, 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 00 1219.000 1 \845367.11 Grant Deed and the Carsons/Landlord Assignment, Landlord is the sole owner in fee of 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 and Addendum to Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of December 15, 2008 (the "New Agency/Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Agency shall acquire from Landlord as the sole owner in fee of the Property, all of Landlord's rights, title and interest in and to the Property on and subject to the terms of the New Agency/Landlord Property Acquisition Agreement, in consideration of the payment by Agency to Landlord of certain purchase consideration for such acquisition of the Property. A copy of the New Agency/Landlord Acquisition Agreement is attached hereto as Exhibit A. F. In connection with the Agency's threat of condemnation and acquisition from Landlord of all of the Landlord's rights, title and interest as the sole owner in fee in and to the Property pursuant to the New 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 Reinstated Acquisition of Leasehold Interest Agreement dated as of December 29, 2008 (the "Reinstated 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 Reinstated 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 New Agency/Landlord Property Acquisition Agreement (defined as the "Lease Termination/Vacation Date" in the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement). A copy of the Reinstated 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 as the owner in fee in and to the Property pursuant to the New Agency/Landlord Property Acquisition Agreement; and (ii) Agency's acquisition of Tenant's Leasehold Interest in the Property pursuant to the Reinstated Agency/Tenant Leasehold 001219.0001 \845367.11 2 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 as the owner in fee in and to the Property and (b) to Tenant for the eventual acquisition of Tenant's Leasehold Interest pursuant to the Lease and the 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 Reinstated Agency/Tenant Acquisition Agreement, all on and subject to the terms and conditions as shall hereinafter be set forth. H. The Parties hereto acknowledge that it is not the intent of the Parties hereto that Agency, as a result of becoming the successor -in -interest landlord pursuant to the New Agency/ Landlord Property Acquisition Agreement, succeed to any of the rights or obligations of Landlord under this Agreement, nor that Agency be bound in any manner whatsoever by the terms of this Agreement. The rights and obligations of Agency as successor -in -interest Landlord shall be on and subject to the terms of the Lease as amended by the "Lease Amendment" (as such term is defined in the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement) and the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement. I. Capitalized terms not otherwise defined herein shall have the meanings given them in the Lease. 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 the entirety of the compensation payable by Agency to Tenant as set forth in the Reinstated 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 on and subject to the terms of the Reinstated 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. 00 1219.0001 \845367.1 1 3 3. Waiver of Landlord's Award by Tenant. Tenant hereby acknowledges and agrees that Landlord shall be entitled to the purchase price payable by Agency to Landlord as set forth in the New Agency/Landlord Property Acquisition Agreement as consideration for Landlord's agreement, as the sole owner in fee of the Property, 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 New 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. Further Covenants and Agreements. In consideration of the mutual promises, agreements, obligations, undertakings and representations set forth in this Agreement, the Parties hereby agree to the following covenants and agreements: (a) Tenant's Continuing Obligations Regarding Hazardous Materials. Tenant hereby acknowledges and affirms its indemnification and other obligations with regard to "Hazardous Materials" (as such term is defined below) as set forth in Section 43 of the Lease. (b) Landlord's Obligations Regarding Hazardous Materials. Landlord hereby agrees to indemnify, protect, defend and hold harmless Tenant from and against any and all debts, liabilities, obligations, losses, damages, judgments, fines, demands, claims, actions or causes of action of whatever kind at law or equity, recoveries, deficiencies, costs and expenses (including, but not limited to, reasonable attorneys' fees and court costs) arising out of or related to: (i) the presence, use, generation, storage, treatment, disposal, transportation, or migration or emanation of Hazardous Materials in, onto, beneath or about the Premises; or (ii) the presence of any underground storage tanks under or about the Premises or other real property adjacent thereto, except to the extent such Hazardous Materials are brought onto the Premises by Tenant or Tenant's Parties, arising or accruing during any period prior to the date Agency acquires Landlord's rights, title and interest as the sole owner in fee, in and to the Property, on and subject to the terms of the New Agency/Landlord Property Acquisition Agreement. (c) Definition of Hazardous Materials. For purposes of this Section 4, the term "Hazardous Materials" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the state in which the Premises are located or the United States. Hazardous Materials include, without limitation, the following: (i) any pollutant, oil or hazardous substance, identified or listed pursuant to Sections 307, 311 or 502 of the Federal Water Pollution Control Act (33 U.S.C. § 1317, § 1321 and § 1362); (ii) any element, compound, mixture, solution or substance designated pursuant to Section 102 of the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") (42 U.S.C. §9602); (iii) any substance or material having the characteristics identified under or listed pursuant to Section 3001 of the Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. §6921) or equivalent law or regulation in the state in which the Premises are located; (iv) any petroleum, crude oil, or any fraction of either which is not otherwise specifically listed or designated under items (i)-(iii); (v) any hazardous waste, extremely hazardous waste, hazardous substance or hazardous material, as defined or listed under Applicable Laws; and (vi) any waste, 001219.0001 \845367.11 4 material or building contaminant, including asbestos, lead, and mold, which is listed or meets any identification or toxicity criterion under Applicable Laws. (d) Tenant Share of Environmental Insurance. Tenant acknowledges that it has been informed by Landlord and Agency that Agency will, upon its acquisition of the Property pursuant to the New Agency/Landlord Property Acquisition, obtain the environmental protection insurance policy identified and described on Exhibit C, attached hereto ("Landlord's Environmental Protection Insurance") and that the cost of such insurance is the amount of Sixty - Eight Thousand Five Hundred Dollars ($68,500) ("Insurance Premium Charge"). In conjunction with Agency's requirement that Landlord pay the entire Insurance Premium Charge, Tenant agrees, in consideration of Landlord's agreement to indemnify Tenant as provided in Section 4(b), to pay to Landlord that portion only of the Insurance Premium Charge which equals the amount of Thirty -Two Thousand Dollars ($32,000) ("Tenant's Portion of the Insurance Premium Charge"). Landlord and Tenant agree that Tenant shall pay Tenant's Portion of the Insurance Premium Charge out of the proceeds from Tenant's Consideration when Tenant receives such proceeds from Agency on the Lease Termination/Vacation Date. 5. Mutual Waiver and Release of Claims. As provided in the following sentence, Landlord and Tenant, in consideration of the mutual promises, agreements, obligations, undertakings and representations set forth in this Agreement, mutually 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, whatsoever occurred, done or omitted, and the matters arising out of (i) the acquisition by Agency from Landlord, as the sole owner in fee of the Property, of all of Landlord's rights, title and interest in and to the Property pursuant to the terms and conditions of the New 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 terms and conditions of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement (collectively, the "Released Claims"). In conjunction with the foregoing and except with respect to their respective representations, warranties, covenants, agreements, obligations (including, without limitation, indemnification obligations) and undertakings under this Agreement, which Landlord and Tenant shall each remain fully liable and responsible therefor and shall survive the execution and delivery of this Agreement, 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, accountants, 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 001219.000 1\845367.1 1 5 entities who may claim through or on behalf of any of them from each and all of the Released Claims. 6. 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 either Party may have against the 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 New 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 Reinstated 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 6 shall release or relieve the Parties from their respective representations, warranties, covenants, agreements, obligations (including, without limitation, indemnification obligations), or undertakings under this Agreement which the Parties shall each remain fully liable and responsible therefor and shall survive the execution and delivery of this Agreement. 7. 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 undertakings of the Parties under this Agreement are expressly conditioned upon (i) the closing and consummation of the acquisition by Agency of all of Landlord's rights, title and interest as the owner in fee, in and to Property, pursuant to the New Agency/Landlord Property Acquisition Agreement; and (ii) the "Closing" (as such term is defined in the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement) of the transactions pursuant to the Reinstated 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 Conditions Precedent are satisfied, the effective date of this Agreement shall be the date both Conditions Precedent have been satisfied. 8. 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 001219.0001 \845367.11 6 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. 9. 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. 10. 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. 11. 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 of a Party to this Agreement will have the same force and effect as the original signature. 12. 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. 13. 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 001219.0001 \845367.11 7 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 13: 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 14. 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. 15. 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. 16. 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. The foregoing notwithstanding, and in conjunction with Recital H above, Landlord and Tenant acknowledge and agree that this Agreement and the terms, rights, obligations, agreements, waivers, releases and undertakings of Landlord and Tenant under this Agreement shall not be binding on Agency as the successor -in -interest landlord under the Lease or for any other reason; and, that the terms, rights, obligations, waivers, releases and undertakings of Tenant and Agency shall be on and subject to the terms and conditions set forth in the Lease and Lease Amendment and the Agency/Tenant Leasehold Interest Acquisition Agreement. 17. 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. 001219.0001\845367.11 8 18. Headings 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. 19. 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. HB AUTO I, LLC, a California limited liability company By: Todd Varson (als known as Michael Todd arson), Mbriaging Member [SIGNATURES CONTINUED ON NEXT PAGE] 001219,0001\845367.11 9 TENANT: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner ,/w) PAa By: topher R. Phillips, 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: - el z A-1A CjfrW opJier R. Phillips, P sident By: FOUR IDYL , INC., a California corporation, its General P er. By:Z"- Vwirgil yle Ky e, , resident By: JYB ENTERPRISES, INC., a California corporation, its General Partner By: ! 1 ("A' l' ,1 Jas n Y. t Berry resident 1 By: MS, INC., a California corporation, its General Partner I By: Michael J. Humbach, President [SIGNATURES CONTINUED ON NEXT PAGE] 001219,0001\845367.11 10 By: CHRIS & TAD ENTERPRISES, L.P., a California limited partnership, its General Partner By: PHILLIPS & PHILLIPS L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By:140 C ' opher R. Phillips, P esident 00 1219.0001 \845367.1 1 11 EXHIBIT A NEW AGENCY/LANDLORD ACQUISITION AGREEMENT 001219.0001 \8 45367.11 EXHIBIT B REINSTATED AGENCY/TENANT LEASEHOLD INTEREST ACQUISITION AGREEMENT 001219.0001\845367.11 EXHIBIT F BIG O/TENANT TERMINATION/RE]LEASE 001219.0001\944054.11 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 of Franchisee 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 \845563.8 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 \845563.8 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 (90th) day after receipt of Lease 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 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/or any affiliated entity of 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: 001219.0001 \845563.8 3 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 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 excepting only those obligations which by their terms survive the termination of the Franchisee Agreement and which surviving obligations have not otherwise been expressly waived by the Party or Parties to whom the obligation in question is owed under the terms of this Agreement, the Franchisee Agreement, the Franchisee Guarantors' Guaranties, 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 O. Big O acknowledges that, pursuant to the terms of the Agency/Tenant Leasehold Interest Acquisition Agreement, 001219.0001 \845563.8 4 Franchisee is entitled to the entire consideration payable by Agency to Franchisee 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 ("Franchisee'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 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.AppAth 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, partnerships, 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") from and against 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, 001219.0001 \845563.8 5 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 (excepting only those obligations of Big O under the Franchise Agreement which, by their terms, survive the termination of the Franchise Agreement, including, without limitation, any indemnification obligations of Big O under the Franchise Agreement, and which surviving obligations of Big O under the Franchise Agreement have not otherwise been expressly waived by Franchisee and the Franchisee Guarantors under the terms of this Agreement), the Franchisee Guarantors' Guaranties, the Security Agreement, the Ancillary Agreements and/or the former franchise relationship created thereby, from the beginning of time until the Lease TerminationNacation Date, except and unless such claim, demand, obligation, action, liability or damage arises from a breach or default of 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 ®. 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 (excepting only those obligations of Franchisee and the Franchisee Guarantors under the Franchise Agreement which, by their terms, survive the termination of the Franchise Agreement, including, without limitation, the indemnification obligations of Franchisee and Franchisee Guarantors under Section 23.01 of the Franchise Agreement, and which surviving obligations of Franchisee and the Franchisee Guarantors under the Franchise Agreement have not otherwise been expressly waived by Big O under the terms of this Agreement), including, without limitation, Big O's First Refusal Rights, the Franchisee Guarantors' Guaranties, the Security Agreement, the Ancillary Agreements and/or the former franchise relationship created thereby, from the beginning of time until the 001219.0001 \845563.8 6 Lease Termination/Vacation Date, except and unless such claim, demand, obligation, action, liability or damage arises from a breach or default of 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: 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 ®. 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, judgments, damages, claims, costs, amounts paid in 0012 M0001\845563.8 7 settlement, taxes, liens, encumbrances, expenses or fees, including all attorneys' fees and court costs, which Franchisee and Franchisee Guarantors and Franchisee/Franchisee Guarantors Affiliated Parties 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. If to Franchisee or the C.S.B. Partnership Franchisee Guarantors: 7872 Edinger Avenue Huntington Beach, California 92647 Attention: Christopher R. Phillips If to Big O: Big O Tires, LLC 12650 East Briarwood Avenue Suite 2-D Centennial, 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 001219.0001 \845563.8 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. • 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 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 provision hereunder in any instance. 001219.0001 \845563.8 9 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 Sections 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. 15. Incorporation of Recitals. The Recitals set forth in the introductory paragraphs of this Agreement form an integral part of this Agreement and are incorporated herein by this reference and made a part hereof. 16. Incorporation of 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) By: �049;:: �_ evin Kormondy, Executive Vice President and Chief Operating Officer Date: _�SGlo 16 . 4 0o g FRANCHISEE: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. Developments, Inc., a California corporation, its General Partner Date: 10 Christopher R. Phillips, President SIGNATURES CONTINUED ON FOLLOWING PAGE 001219.0001\845563.8 10 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 Sections 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. 15. Incorporation of Recitals. The Recitals set forth in the introductory paragraphs of this Agreement form an integral part of this Agreement and are incorporated herein by this reference and made a part hereof. 16. Incorporation of 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 Kormondy, 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 By: 4 i . z topher R. Phillips resident Date: 7 // o ) o R SIGNATURES CONTINUED ON FOLLOWING PAGE 001219.0001 \845563.8 10 By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. Phillips, Inc., a California corporation, its General Partner By: v stopher R. Phill' s, President Date: 7-/v- o$ By: FOUR KYLES, INC., a California corporation s General Partner By: Virgil Kyle YIII, President Date: % f,-5-- o J By: JYB ENTERPRISES, INC., a California corporation, its General Partner By: C Ja Y. Be , Preside t Date:7� Ic FRANCHISEE GUARANTORS: Christ6Fer R. Phillips, Indikidually Date: % /y - o - && �MAU�b — Emiko J. Philtips, Indivi ually Date: ,/ 7— /D -09 7 / 1--'<j'/1 ",//- V rgil Kyle Kyl , III, dividually Date: SIGNATURES CONTINUED ON FOLLOWING PAGE 001219.0001 \845563.8 11 Diane R. Kyle (also known as Diane Rose Kyle), Individually Date: Vate- Be , Individual Laura Berry (also kno as Laura Frances Aguayo -Berry), Indi ually Date: ��Ja 001219.0001 \845563.8 12 EXHIBIT A Franchisee's Franchise Agreement (70,0,V d /) &7-1 eef-ex-,,� 001219.0001 \845563.8 Security Agreement 001219.0001 \845563.8 y EXHIBIT C Lease and the Lease Guaranty 001219.0001 \845563.8 EXHIBTI' D Lease Amendment l -7,1-�- Gs1 i j7� 001219.0001 \845563.8 EXHIBIT E Agency/Tenant Leasehold Interest Acquisition Agreement O/L) 174, Ov Grz-/ 001219.0001 \845563.8 FIRST AMENDMENT TO TERMINATION AND RELEASE AGREEMENT This FIRST AMENDMENT TO TERMINATION AND RELEASE AGREEMENT ("First Amendment") is entered into this 291h day of December, 2008, by and among 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.". This First Amendment is made with reference to the following facts and understandings of the Parties: RECITALS A. Big O, Franchisee and Franchisee Guarantors are parties to that certain Termination and Release Agreement dated as of June 16, 2008 (the "Termination/Release Agreement"). A copy of the Termination/Release Agreement is attached hereto as Exhibit A and incorporated herein by this reference and made a part hereof. B. Capitalized terms not otherwise defined herein shall have the meanings given them in the Termination/Release Agreement. C. The Termination/Release Agreement was entered into by and among Big O, Franchisee and the Franchisee Guarantors in conjunction with (i) the acquisition by Agency of the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement; and (ii) the relinquishment by Franchisee of its leasehold rights and interest in the Property pursuant to the Agency/Tenant Leasehold Acquisition Agreement, all pursuant to Agency's threat to exercise its right of condemnation with respect to the Property. D. In connection with the foregoing and on and subject to the terms of the Termination/Release Agreement, Big O, Franchisee and the Franchisee Guarantors agreed (i) to terminate the Franchise Agreement, the Franchisee Guarantors' Guaranties, the Security Agreement and all 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. 001219.0001 \l 114110.2 E. Big O acknowledges that Franchisee and the Franchisee Guarantors have notified Big O that as a result of the failure of the transactions pursuant to the Agency/Landlord Property Acquisition Agreement and the Agency's/Tenant Leasehold Interest Acquisition Agreement to be consummated, (i) the Agency/Landlord Property Acquisition Agreement was terminated by Agency and Landlord; and (ii) the Agency/Tenant Leasehold Interest Acquisition Agreement terminated by its own terms on August 31, 2008. F. Big O acknowledges that Franchisee and the Franchisee Guarantors have further notified Big O that the contemplated transactions pursuant to the Agency/Landlord Property Acquisition Agreement and the Agency/Tenant Leasehold Interest Acquisition Agreement have been reinstated as a result of (i) Agency and Landlord agreeing to the terms of that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property and Addendum to Agreement and Escrow Instruction for Purchase and Sale of Real Property dated as of December 15, 2008 (the "New Agency/Landlord Property Acquisition Agreement") a copy of which is attached to this First Amendment as Exhibit B; (ii) Agency and Tenant agreeing to reinstate the Agency/Tenant Leasehold Interest Acquisition Agreement pursuant to the terms of that certain Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement dated as of December 29, 2008 (the "Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement") a copy of which is attached to this First Amendment as Exhibit C; and (iii) the approval by Agency of the terms of the New Agency/Landlord Property Acquisition Agreement and the terms of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement and the transactions contemplated thereby at the City Council/Agency meeting held on December 15, 2008. In conjunction with the foregoing, Franchisee and the Franchisee Guarantors have requested that Big O agree to amend the Termination/Release Agreement by the terms and conditions 'of this First Amendment, and Big O is willing to amend the Termination/Release Agreement by this First Amendment, all on and subject to the terms and conditions as shall hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing Recitals and of the mutual promises and covenants hereinafter set forth, the receipt and adequacy of which is hereby acknowledged, it is hereby agreed by and among the Parties as follows: AGREEMENT 1. New Agency/Landlord Property Acquisition Agreement. The Parties hereby acknowledge that the Agency/Landlord Property Acquisition Agreement has been superseded and replaced in its entirety by the New Agency/Landlord Property Acquisition Agreement attached hereto as Exhibit B. 2. Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement. The Parties hereby acknowledge and agree that the Agency/Tenant Leasehold Interest Acquisition Agreement which is attached as Exhibit E to the Termination/Release Agreement is reinstated and, in conjunction therewith, is being amended and restated and superseded and replaced in its entirety by the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement attached hereto as Exhibit C. 001219.0001 \ 11141102 2 3. Binding Termination/Release Agreement. The Parties agree that notwithstanding (i) the termination of the Agency/Landlord Property Acquisition Agreement and the Agency/Landlord Property Interest Purchase Agreement being superseded and replaced in its entirety by the New Agency/Landlord Property Interest Purchase Agreement; and (ii) the termination of the Agency/Tenant Leasehold Interest Acquisition Agreement and the reinstatement of the Agency/Tenant Leasehold Interest Acquisition Agreement and, in conjunction therewith, the Agency/Tenant Leasehold Interest Acquisition Agreement being amended and restated and superseded and replaced in its entirety by the terms of the Reinstated Agency/Tenant Leasehold Interest Acquisition Agreement as set forth on Exhibit C attached hereto, that except as expressly amended and modified by this First Amendment, the terms and provisions of the Termination/Release Agreement shall remain in full force and effect, are hereby reaffirmed by the Parties and the Parties covenant and agree to be fully bound thereby. The Parties further agree that in the event of a conflict between the terms of the Termination/Release Agreement and this First Amendment, the terms of this First Amendment shall control and prevail. 4. Counterparts. This First Amendment may be executed in any number of counterparts each of which shall be deemed an original but all of which together shall constitute one (1) and the same instrument. 5. Facsimile Signatures. A copy of this First Amendment transmitted via facsimile by any Party to the other Parties will be binding on the signatory thereto. 6. Incorporation of Recitals. The Recitals set forth in the introductory paragraphs of this First Amendment are incorporated herein by this reference and made part hereof. 7. Incorporation of Exhibits. The Exhibits attached to this First Amendment are incorporated herein by this reference and made a part hereof. 8. Notification and Acknowledgment and Consent of Agency. In conjunction with the third party beneficiary rights of Agency under Sections 1(b) and 2 of the Termination/Release Agreement, the Parties agree to provide notification of the amendment to the Termination/Release pursuant to this First Amendment to Agency and shall obtain the acknowledgment and consent to this First Amendment of Agency by causing the duly authorized representatives of Agency to execute "Acknowledgment and Consent" set forth at the end of this First Amendment. [Remainder of Page Intentionally Left Blank] 001219.0001 \1114110.2 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 below: BIG O: BIG O TIRES, LLC, a Nevada limited liability company (formerly known as Big O Tires, Inc., a Nevada corporation) FRANCHISEE: C.S.B. PARTNERSHIP, a California general partnership i C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: lri opher R.01-4pi Phillips, Pr sident /-A /4 f B y' - - evit Kok londy, Execu il Vice President and Chief -Operating Officer- Date: , Date: }�[%��el�,z©GU [SIGNATURES CONTINUED ON NEXT PAGE] 001219 0001 ,1 1 141 10 December 29 2008 By: PHILLIPS &PHI California limited p LLIPS, L.P., a artnership, its General Partner By: C. & E. Phillips, Inc., a California corporation, its General Partner By: istopher R. Phillips, resident 008 Date: December 29 2 By: FOUR KYLES, INC., a California corporation, i Gen ral Partner By: Virgil Kyle Kyl II, esident 08 Date: December 29, 20 By: JYB ENTERPRISES, INC., a California eral Partner corporation, its Gen J on Y. Be reside Date: December 29 202!51 08 FRANCHISEE GUARANTORS: Chrit her R. Phillips, Ind' idually Date: December 29, 2008 &A MV&M Emiko J. Ph lips, Individually D2,�lecember 29, 2008 r / irgil Kyle leyle, Tfl, Individually Date: December 29 2008 Diane R. Kyle (also known as Diane Rose Kyle), Individually Date: December 29, 2008 I JVn. Y. BerryVndividu(lly Date: December 29, 2008 I f� i\ A Laura Berry (also known as Laura Frances Aguayo -Berry), Individually aV Date: December 29, 2008 [Remainder of Page Intentionally Left Blank] 001219.0001 \1114110.2 ACKNOWLEDGMENT AND CONSENT The undersigned, authorized representatives of the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic hereby acknowledge'the foregoing terms and conditions of the foregoing First Amendment and consent to such terms and conditions. ATTEST: By: Print Title REV*.Fred APPROVED: By: Print Wilson Title: Executive Director AGENCY: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, ,corporate and politic Print Name: Keith Bohr Title: Chairperson APPROVED AS TO FORM: 13 (yy Pr3Tame: Jennifer Grath Title: Agency Counsel LEIBOLD MCCLENDON & M[ANN, P.C., Agency Special Counsel By: Aim Itvv%j, ,/"Ef(�f arbara Zed Leibold INITIATED AND APPROVED: By: Print Name: Stanley S w.i tz Title: Deputy Executive Director 001219.0001\1114110.2 6 EXHIBIT A TERMINATI®N/RELEASE AGREEMENT ODPY 00 1219.000 1 \ 1114110.2 EXHIBIT B NEW AGENCY/LANDLORD PROPERTY ACQUISITION AGREEMENT 01-0 ✓=- .lam= &,-s y 0_-Z� Z- 0012 M0001 \I 114110.2 EXHIBIT C REINSTATED AGENCY/TENANT LEASEHOLD INTEREST ACQUISITION AGREEMENT 0 d� 001219.0001 \1114110.2 EXHIBIT G JOINT ESCROW INSTRUCTIONS 001219.0001 \844054.11 January 23, 2009 Ms. Grace Kim Escrow Officer Stewart Title of California, Inc. 2010 Main Street, Suite 250 Irvine, CA 92614 Telephone: (949) 476-0777 Facsimile: (714) 242-9885 RE: Leasehold Interest in 7872 Edinger Avenue, Huntington Beach, California 92647 Property APN 142-081-28 — Joint Escrow Instructions Dear Ms. Kim: Pursuant to the terms of that certain Reinstated Acquisition of Leasehold Interest Agreement dated as of December 29, 2008 ("Agreement") by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency") and C.S.D. PARTNERSHIP, a California general partnership ("Tenant"), a copy of which is attached to these joint escrow instructions as Attachment I and incorporated herein by this reference and made a part hereof ("Joint Escrow Instructions"), the undersigned hereby jointly provide you as escrow agent ("Escrow Agent") these Joint Escrow Instructions with respect to the leasehold interest of Tenant (the "Leasehold Interest") in the improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property"), Except as expressly defined in these Joint Escrow Instructions, all capitalized terms defined in the Agreement shall have the same meaning when set forth herein. As soon as reasonably possible after receipt by you of these Joint Escrow Instructions, please establish an escrow on behalf of Agency and Tenant pursuant to the Agreement and these Joint Escrow Instructions (the "Escrow") and email wire transfer instructions to the escrow account opened by you in connection with the Escrow and these Joint Escrow Instructions to Doris Powell of Agency at dpowell@surfcity-hb.org. No later than five (5) business days after receipt of the wire instructions, Agency will wire transfer to you the amount of Fifty Thousand Dollars ($50,000), which shall constitute the "Payment Consideration Deposit" as required pursuant to Section 4(a) of the Agreement. The Payment Consideration Deposit shall be deposited into an interest bearing cash account approved by Agency and Tenant, with the interest earned less the Escrow Fees/Other Costs (as such term is defined below in these Joint Escrow Instructions) to be paid to Agency upon the disbursement of the Payment Consideration Deposit to Tenant in accordance with these Joint Escrow Instructions on the Closing pursuant to Section 9 of the Agreement. 001219.0001\1114329.4 Ms. Grace Kim January 23, 2009 Page 2 Pursuant to Section 9(b) of the Agreement, Agency is responsible for (I) any and all escrow fee charges by Escrow Agent; (II) any and all costs for all title work with respect to the Property; (III) any and all sales and use taxes payable with respect to the transfer of the Leasehold Interest in the Property; and (IV) any and all recording fees for the recordation of the Leasehold Interest Assignment/Transfer attached to the Agreement as Exhibit D and any transfer taxes payable with respect to the assignment, transfer and conveyance of Tenant's Leasehold Interest in the Property to Agency pursuant to the terms and conditions the Agreement (collectively, the "Escrow Fees/Other Costs"). The obligations of the Agency and Tenant are subject to the satisfaction of the "Conditions Precedent" set forth in Section 8 of the Agreement. In conjunction therewith, and pursuant to Sections 4(a) and 8(a) of the Agreement, obligations of Agency under the Agreement to deliver the payment of the Payment Consideration are subject to the satisfaction of the Conditions Precedent to the Closing set forth in Section 8(a) of the Agreement; and, that although the Agreement has been executed by Agency and Tenant, the Conditions Precedent in favor of Agency as set forth in Sections 8(a) and the Conditions Precedent in favor of Tenant as set forth in Section 8(b) of the Agreement have not yet been satisfied. Pursuant to Sections 8(a) and 8(b) of the Agreement, prior to the Closing Date (as hereinafter defined): (i) Tenant shall have delivered to you the Landlord/Tenant Waiver/Release attached to the Agreement as Exhibit E executed by Tenant and Landlord. (ii) Tenant shall have delivered to you the Big O/Tenant Termination/Release attached to the Agreement as Exhibit F executed by Big O and Tenant and the Franchisee Guarantors. (iii) Each of Tenant and Agency shall have executed and delivered to you the Lease Amendment, attached to the Agreement as Exhibit C. (iv) Agency shall have delivered to you a written instrument stating that provided that the documents set forth in clauses (i) through (iii) above have been delivered, all of the Conditions Precedent set forth in Section 8(a) of the Agreement are waived or satisfied. (v) Tenant shall have delivered to you a written instrument stating that provided that the documents set forth in clauses (i) through (iii) above have been delivered, all of the Conditions Precedent set forth in Section 8(b) are waived or satisfied. The documents set forth in clauses (i) through (iii) above shall, upon receipt, be held in trust by Escrow Agent until the Closing Date. Upon the date following the Closing Date that you as Escrow Agent have been advised by Agency and Tenant in writing that all of the Conditions Precedent set forth in Sections 8(a) 001219.0001 \ 1114329.4 Ms. Grace Kim January 23, 2009 Page 3 and 8(b) of the Agreement have been satisfied or waived, Agency and Tenant, hereby jointly instruct Escrow Agent to: (A) Release the Payment Consideration Deposit to Tenant. (B) Release any interest earned on the Payment Consideration Deposit, less any Escrow Fees/Other Costs due by Agency to Escrow Agent, to Agency. (C) Release to Escrow Agent any Escrow Fees/Other Costs due by Agency to Escrow Agent. (D) Release fully executed copies of the Lease Amendment to Agency and Tenant. (E) Retain in trust the fully executed copies of the Landlord/Tenant Waiver/Release and the Big O/Tenant Termination/Release in accordance with the Agreement until the Lease TerminationNacation Date. Unless instructed to the contrary in a writing signed by Agency and Tenant, if the Closing Date does not occur by February 29, 2009, then the Agreement and this Escrow shall automatically terminate, and: (1) The Payment Consideration Deposit, plus any interest earned thereon, less any Escrow Fees/Other Costs, shall promptly be returned to the Agency. (2) The signature pages of the documents delivered to you by Agency shall be returned to the Agency. (3) The signature pages of the documents delivered to you by Tenant shall be returned to Tenant. Sincerely, S�� Stanley Smalewitz Director of Economic Development CC: Kellee Fritzal, Deputy Director Leonie Mulvihill, Senior Deputy City Attorney [SIGNATURE PAGES FOLLOW] 001219.0001 \ 11143 29.4 Ms. Grace Kim January 23, 2009 Page 4 THE UNDERSIGNED HEREBY AGREES TO AND ACKNOWLEDGES THE FOREGOING ESCROW INSTRUCTIONS AND AGREEMENTS: TENANT: By: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: -- C16dopher R. Phillips, P sident By: FOUR KYLES, IN ., a California corporation, its General Partner By. Virgil Kyle K e, II , President 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—Yold— (6Zstopher R. Phillips, resident By: JYB ENTERPRISES, INC., a California corporation, its General Partner I By: Jason Y. Berry, Pr" sident [Signatures continued on next page] 001219.0001 \1114329.4 Ms. Grace Kim January 23, 2009 Page 5 By: THREEMMMS, INC., a California corporation, its General Partner B Y: Michael J. Humbach, President By: CHRIS & TAD ENTERPRISES, L.P., a California limited partnership, its General Partner By: PHILLIPS & PHILLIPS L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: C s pher R. Phillips, Pr sident 001219.0001 \1114329.4 .Ms. Grace Kim January 23, 2009 Page 6 Acceptance Of Escrow Instructions Your acceptance of this Escrow shall create a contractual obligation between you, Agency and Tenant for complete compliance with these Joint Escrow Instructions. Agency and Tenant reserve the right to jointly revoke in writing this Escrow at any time upon Agency's payment to you of the Escrow Fees/Other Costs in accordance with the terms of these Joint Escrow Instructions. Your obligations as Escrow Agent under these Joint Escrow Instructions shall be subject to the following provisions: You are not responsible as to the sufficiency or correctness as to form, manner of execution, or validity of any instrument deposited in this Escrow or as to the authority or rights of any person executing such instrument. Except as otherwise provided in these Joint Escrow Instructions, your duties as Escrow Agent are limited to the proper handling of monies and the proper safekeeping of instruments and other items received by you as Escrow Agent, and for the performance of your obligations as specifically provided under these Joint Escrow Instructions. You are responsible for the sufficiency of any instruments or documents prepared by you for this Escrow. Agency and Tenant jointly and severally agree to indemnify and hold you harmless from damages incurred as a result of your good faith and diligent performance of your duties under these Joint Escrow Instructions. Upon your acceptance of these Joint Escrow Instructions, return the executed counterparts of these joint escrow instructions to Agency and Tenant. ACKNOWLEDGED AND AGREED: STEWART TITLE OF CALIFORLNIA, INC. Grace Kim, Escrow Officer 001219.0001\1114329.4 ATTACHMENT AGREEMENT 001219.0001 \1114329.4 0 7�1 LZ---2c<