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HB Auto I, LLC and C.S.B. Partnership - 2008-12-15 (13)
o MW TO: FROM: DATE: SUBJECT: CITY OF HUNTINGTON BEACH Interdepartmental Communication JOAN FLYNN, City Clerk PATTY ESPARZA, Senior Deputy City Clerk JENNIFER McGRATH, City Attorney January 22, 2009 PURCHASE AND SALE AGREEMENT WITH HB AUTO AUTO I, LLC APPROVED BY THE REDEVELOPMENT AGENCY ON DECEMBER 15, 2008 Pursuant to that certain Purchase and Sale Agreement approved by the Redevelopment Agency Board on December 15, 2008, a condition of close of escrow is for the seller to provide quit claim deeds from Turn -Key Washes, Inc., Michael Todd Carson, and Rosemary Kathleen Carson. In anticipation of the close of escrow early next week, we are providing the attached Certificates of Acceptance that are required in order for the above -referenced quit claim deeds to be recorded in the Office of the Orange County Clerk/Recorder. At your soonest convenience, please arrange for execution of these certificates and return the same to Leonie Mulvihill, Sr. Deputy City Attorney, for delivery to escrow. If you have any questions, do not hesitate to contact Leonie Mulvihill at X5620. JENNIFER McGRATH City Attorney /j n cc: Kellee Fritzal, Deputy Director of Economic Development 08-1446/30306 Council/Agency Meeting Held: J o Deferred/Continued to: 4Appr ve6 ❑ Conditionally Approved ❑ Denied %, City a 's ignatur Council Meeting Date: 12/15/2008 Department ID Number: ED08-55 CITY OF HUNTINGTON BEACH REQUEST FOR REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE CHAIRMAN AND AGENCY MEMBERS SUBMITTED BY: FRED A. WILSON, EXECUTIVE DIRE , JJ PREPARED BY: STANLEY SMALEWITZ, DEPUTY EXECUTIVE DIRECTORIyf SUBJECT: APPROVE AGREEMENT WITH HB AUTO I, LLC FOR PURCHASE OF PROPERTY AND C.S.B PARTNERSHIP FOR PURCHASE OF LEASEHOLD INTEREST LOCATED AT 7872 EDINGER AVENUE Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: An agreement in the amount of $3,431,500 for the purchase of real property at 7872 Edinger Avenue (APN 142-081-28) (Attachment #1 and #2) and an agreement in the amount of $1,350,000 for the purchase of the leasehold interest of the tenant on the same property are submitted for approval (Attachment #3). Acquisition of this property and leasehold interest is necessary to complete Agency consolidation of the property at Edinger Avenue and Parkside Lane for redevelopment. Funding Source: An appropriation of $4,781,500 from the Undesignated Fund Balance, Merged Redevelopment Agency Capital Projects Fund to the Redevelopment Agency business unit account (30580101.81100) is recommended. The Fiscal Impact Statement is attached (Attachment # 4). Recommended Action: Motion to: 1. Approve the Agreement and Escrow Instructions and Addendum for Purchase and Sale of Real Property between the Redevelopment Agency of Huntington Beach and HB Auto I, LLC for the purchase of property located at 7872 Edinger Avenue. 2. Approve as to form the Acquisition of Leasehold Interest Agreement between the Redevelopment Agency of the City of Huntington Beach and C.S.B. Partnership. 3. Authorize Chairman and Agency Clerk to sign and execute the Agreements as approved by the City Attorney's Office. 4. Authorize the Executive Director or designee to take any action and execute any and all documents and agreements necessary to implement this agreement. 5. Appropriate $4,781,500 from the Merged Redevelopment Agency Capital Projects Fund balance into account 30580101.81100. REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING DATE: 12/15/2008 DEPARTMENT ID NUMBER: ED08-55 Alternative Action(s): 1. Do not approve the Agreements; 2. Continue the item and direct staff accordingly. Analysis: On May 5, 2008, the Redevelopment Agency Board approved the purchase of real property at 7872 Edinger Avenue. The acquisition of this property was necessary to complete Agency consolidation of the property at Edinger Avenue and Parkside Lane. The Agency owns five (5) contiguous parcels of land that border the property owned by HB Auto I, LLC located at 7872 Edinger Avenue (Attachment #5 Site Map). On June 16, 2008, the Redevelopment Agency Board approved an Acquisition of Leasehold Interest Agreement with C.S.B. Partnership (Tenant) who leases the property located at 7872 Edinger Avenue. The Tenant operates a "Big O" Tire Store on the property. The Agency parcels and the HB Auto property are located within the boundaries of Subarea No. 1 of the Huntington Beach Merged Redevelopment Project Area. The acquisition of the parcel and leasehold interest will optimize the development of the Agency -owned parcels. The potential benefits are consistent with the goals and objectives of the Redevelopment Plan to assemble land, maximize development opportunities, and remove blight. The Purchase and Sale Agreement was subject to the Agency's completion of due diligence of the property including review of: the Preliminary Title Report; environmental, geological, soil and physical condition of the property and improvements. During the due diligence process, the Agency's environmental consultant performed both a Phase I and Limited Phase II Environmental Study. The studies found hydraulic fluid in the soil under two of the service bays. The City's environmental consultant, Phase 1 Inc., has estimated the clean up cost to not exceed a maximum of $200,000. The Agency and the Seller negotiated for three months to find a mutually agreeable method to address the environmental issues related to the property. During this time, escrow was terminated by mutual agreement of the parties. The Agency has since negotiated a revised Purchase and Sale Agreement with property owner, HB Auto I, LLC for the purchase of the Property. The purchase price has been reduced by $68,500 and the terms and conditions of this agreement reflect the previous agreement and subsequent negotiations. The following are the new terms that address the environmental remediation: 1. As soon as possible after the Close of Escrow, the Agency will complete the remediation with the proceeds of the Holdback Account funded by the Seller ($200,000). 2. At closing, the Seller will fund the escrow holdback account with $200,000 to secure Seller's post -closing obligation to cause the known contamination to be remediated. The Seller's liability for known contamination is capped at the $200,000. 3. At closing, Seller will deliver to the Agency a $50,000 standby letter of credit to be used to remediate any unknown contamination which may be found when the -2- 1214/20081:22 PM REQUEST FOR REDEVELOPMENT AGENCY ACT0ON MEETING DATE: 12/15/2008 DEPARTMENT ID NUMBER: ED08-55 building is eventually demolished. The Seller's liability for the unknown contamination is capped at $50,000. 4. The Agency will purchase an Environmental Insurance Policy to further indemnify the Agency against unknown contamination, which is being funded by the $68,500 (reduction in purchase price). 5. The Agency agrees to release $800,000 to the Seller once all conditions to close escrow have been met. 6. Escrow will close within 30 days if all conditions have been met. The Acquisition of Leasehold Interest Agreement with C.S.B. Partnership (Tenant) previously approved by the Agency on June 16, 2008, expired on August 31, 2008, due to the Property not closing escrow. The Agency Board is being asked to approve an updated agreement substantively the same as the previously -approved agreement with the following terms: 1. Agency shall pay to C.S.B. Partnership the sum of $50,000 within three (3) business days of the execution of this Agreement 2. Until the Agency is ready to redevelop the site, the Tenant will continue to operate on the site and pay the monthly rent of approximately $17,600 to the Agency. 3. At termination of the lease the C.S.B. Partnership will receive the balance of $1,300,000 The potential redevelopment of the site contemplates a hotel, such as a Marriott Springhill Suites which will require a Disposition and Development Agreement ("DDA") to be negotiated with a developer. The DDA will assist with the purchase of the property. In addition, the proposed development is consistent with the long term goals of the Beach and Edinger Corridor Specific Plan and the Redevelopment Plan for the Huntington Beach Merged Project Area. The Beach and Edinger EIR process includes the environmental review of the proposed hotel project. Strategic Plan Goal: L-1 Establish the vision and create a land use plan for reuse of critical parcels so that the next phase of the community investment and improvement can begin. The proposed hotel development on the assembled site has the potential to increase property tax increment to the Agency and transient occupancy tax (TOT) and sales tax revenues to the city. -3- 12/4/2008 1:22 PM REQUEST FOR REDEVELOPMENT AGENCY ACTION MEETING ®ATE: 12/15/2008 DEPARTMENT I® NUMBER: ED08-55 Environmental Status: Not applicable to property purchase. Attachment(s): 1. Agreement and Escrow Instructions for Purchase and Sale of Real Property 2. Addendum to Agreement and Escrow Instructions for Purchase and Sale of Real Property 3. Acquisition of Leasehold Interest Agreement 4. Fiscal Impact Statement 5. Site Map -4- 12/4/2008 1:22 PM 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 , 2008, ("Reference Date") by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic ("Buyer"), and HB AUTO I LLC, a California limited liability company ("Seller"), for Buyer's acquisition of certain real property owned by Seller as hereinafter set forth and on the basis of the following facts, intentions and understandings: RECITALS A. Seller is the present owner of that certain improved real property of approximately 22,521 square feet located at 7872 Edinger Avenue in Huntington Beach, California and within the boundaries of the Subarea No.1 of the Huntington Beach Merged Redevelopment Project Area ("Project Area"). The Property is generally described as Assessor's Parcel No. 142-081- 028, and more particularly described in Exhibit A (the "Property"). The Property is improved with a commercial building, which is leased to C.S.B. Partnership ("Tenant"), who operates a Big O Tires franchise on the Property. B. Buyer owns five parcels adjacent to the Property and desires to acquire the Property as a necessary and essential component to the redevelopment of the Buyer's parcels consistent with the goals and objectives of the Redevelopment Plan for the Project Area. Seller desires to convey fee simple absolute title in the Property to Buyer in accordance with the terms and conditions of this Agreement, and Buyer desires to acquire the Property in accordance with this Agreement. C. Buyer and Seller acknowledge and agree that the purchase and sale of the Property is being undertaken under threat of condemnation by Buyer, and if not for such threat of condemnation, Seller would not agree to sell the Property to Buyer on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, for good and valuable consideration, receipt of which is acknowledged, the parties agree as follows: 1. Purchase and Sale. Upon the terms and conditions contained herein, Buyer hereby agrees to purchase all of Seller's right, title and interest in and to the Property from Seller and Seller agrees to sell, assign and convey all of Seller's right, title and interest in and to the Property to Buyer. 2. Purchase Price; Deposits. The purchase price for the Property shall be Three Million Five Hundred Thousand Dollars ($3,500,000) ("Purchase Price"). 3. Escrow. 3.1 Opening of Escrow. The parties shall open escrow ("Escrow") on the third (3rd) 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 ("FIR -PTA 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. £ 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. Seller 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 and/or 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 mown 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 "Known 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 further agrees to permit access to the Property to the Buyer's consultants and Buyer for purposes of completing the Buyer's Due Diligence and to cooperate with the environmental and other consultants and Buyer in connection therewith. Seller shall provide such access (and cause Tenant to provide such access) to the Property and other items as requested by the consultants necessary to complete the Buyer's Due Diligence, including, without limitation, the use of electrical or other power and water from the Property and sufficient access to permit the performance of a soil and groundwater analysis and, if necessary, the taking of soil and/or groundwater samples. In 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 party. To Seller: HB AUTO I, LLC 3110 Newport Blvd. Newport Beach, California 92663 Attn: Todd Carson Phone: (949) 675-0101 Fax: (949) 675-0107 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: F 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: o h, r "SELLER" IIB AUTO I, LLC, a California limited liability company By: 1— Mic ael Todd C son, M naging Member [PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 1 OF 21 Purchase Sale Agt No 2 7872 Edinger 120108 Date: ECL=7rj� /j , 2008 "BUYER" ATTEST: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairperson APPROVED AS TO FORM: DL2 �6 Agency Counsel 2 I APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Spqcial Couns By: AS//O" t — IB/arbara Zeid Le' 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 Lo 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 GRANT DEED 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: Dated: Dated: SEE ATTACHMENT NO. 1 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE "SELLER" HB AUTO 1, LLC By: Its: By: Its: Purchase Sale Agt No 2 7872 Edinger 120108 Exhibit B ATTACHMENT NO. 1 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 ❑ Individual ❑ Corporate Officer Title(s) Title Or Type of Document ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ 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 16,"" day of December, 2008. ATTEST: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic 6� .4 � By: �� { Its: CHAIRPERSON APPROVED A O �Lt (7 1.08 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. .�.ir.rP L.IWARIA CNTaff) EXHIBIT C TRANSFEROR'S CERTIFICATION OF NON -FOREIGN STATUS To inform the REDEVELOPMENT AGENCY OF THE CITE' 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 LIB AUTO I, LLC (the "Transferor"), the undersigned hereby certify the following: 1. I/we am/are not a nonresident alien for purposes of United States income taxation; 2. My/our United States taxpayer identifying number (Employer Identification Number) is 3. My/our address is Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury, 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. "TRANSFEROR" HB AUTO I, LLC Dated: By: Todd Carson, Managing Member Exhibit C-1 EXHIBIT D CONDITION OF THE PROPERTY 1. None EXHIBIT E DUE DILIGENCE REPORTS [to be inserted within three (3) Business Days of execution of this Agreement by Buyer] Exhibit E EXHIBIT E DUE DILIGENCE REPORTS 1. Title Report Stewart Title dated December 3, 2008 2. Operating Agreement for HB Alto I, LLC dated December 1, 2002 Phase l 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 1, LLC, a California limited liability company 9. Limited Phase II Environmental Site Assessment prepared by Phase One Inc. dated May, 2008 Stewart Title of California, Inc 2010 Main Street, Suite 250 title rjewart Irvine, CA 92614 of California, inc. t (949) 476-0777 Phone (714) 242-9885 Fax PRELIMINARY REPORT Order Number 165821 Title Unit Number 2862 Buyer/Borrower Name: Redevelopment Agency of the City of Huntington Beach Seller Name: HB Auto LLC In response to the above referenced application for a Policy of Title Insurance, Stewart Title of California, hic. hereby reports that it is prepared to issue, or cause to be issued, as of the date hereof, a Policy or Policies of Title Insurance describing the land and the estate or interest therein hereinafter set forth, insuring against loss which may be sustained by reason of any defect, lien or encumbrance not shown or referenced to as an Exception on Schedule B or not excluded from coverage pursuant to the printed Schedules, Conditions, and Stipulations of said Policy forms. The printed Exceptions and Exclusions from the coverage and Limitations on covered Risks of said policy or policies are set forth in Exhibit A attached. The policy to be issued may contain an arbitration clause. When the Amount of Insurance is less than that set forth in the arbitration clause, all arbitrable matters shall be arbitrated at the option of either the Company or the Insured as the exclusive remedy of the parties. Limitations on Covered Risks applicable to the CLTA and ALTA Homeowner's Policies of Title Insurance which establish a Deductible Amount and a Maximum Dollar Limits of Liability for certain coverages are also set forth in Exhibit A. Copies of the policy forms should be read. They are available from the office which issued this report. Please read the exceptions shown or referred to below and the exceptions and exclusions set forth in Exhibit A of this report carefully. The exceptions and exclusions are meant to provide you with notice of matters, which are not covered under the terms of the title insurance policy and should be carefully considered. It is important to note that this preliminary report is not a written representation as to the condition of title and may not list all liens, defects, and encumbrances affecting title to the land. This report, (and any supplements or amendments thereto) is issued solely for the purpose of facilitating the issuance of a policy of title insurance and no liability is assumed hereby. If it is desired that liability be assumed prior to the issuance of a policy of title insurance a binder or commitment should be requested. Dated as of: December 3, 2008 at 7:30 a.m. Chris Maziw-, Title Officer When replying, please contact Grace Kim, Escrow Officer Stewart Title of California, Inc. 2010 Main Street, Suite 220 Irvine, CA 92614 (949) 476-0777 (714) 242-9886 Fax File Number: 165821 Page I of 9 The form of Policy of Title Insurance contemplated by this report is: ❑x California Land Title Association Standard Coverage Policy ❑ American Land Title Association Owners Policy ❑ American Land Title Association Residential Title Insurance Policy ❑ American Land Title Association Loan Policy ❑ California Land Title Association Homeowners Policy ❑ ALTA Short Form Residential Loan Policy (06/16/07) SCHEDULE A The estate or interest in the land hereinafter described or referred to covered by this report is: Fee Title to said estate or interest at the date hereof is vested in: HB Auto I, LLC, a California Limited Liability Company File Number: 165821 Page 2 of 9 LEGAL DESCRIPTION The land referred to herein is situated in the State of California, County of Orange, City of Huntington Beach, and 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(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. (End of Legal Description) File Number: 165921 Page 3 of 9 RUN ff", i At the date hereof, exceptions to coverage in addition to the printed exceptions and exclusions contained in said policy or policies would be as follows: Taxes: A. General and Special City and/or County taxes, including any personal property taxes and any assessments collected with taxes, for the fiscal year 2008 - 2009: 1 s` Installment: $8,500.26, Open 2❑d Installment: $8,500.26, Open Assessment No.: 142-081-28 B. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5 (commencing with Section 75) of the Revenue and Taxation Code of the State of California. C. The lien of any special tax resulting from the inclusion of the property in a special assessment district or Mello -Roos Community Facilities District in accordance with the codes, which may exist by virtue of assessment maps or notices filed and/or recorded by any such district. assessments, if any, arising from such assessment districts will be collected along with the regular county real estate taxes. Exceptions: 1. Water rights, claims or title to water in or under said land, whether or not shown by the public records. 2. An easement for the purpose shown below and rights incidental thereto as set forth in a document: Purpose: pole lines and conduits Recorded: in book 540, page 26 of Deeds Affects: the rear 5 feet of said land 3. An easement for the purpose shown below and rights incidental thereto as set forth in a document: Purpose: road Recorded: in book 7449, page 211, Official Records Affects: the north 20 feet of Lots 22 and 23 4. An easement for the purpose shown below and rights incidental thereto as set forth in a document: Purpose: road Recorded: in book 8121, page 996, Official Records Affects: the north 20 feet of Lot 21 5. An easement for the purpose shown below and rights incidental thereto as set forth in a document: Purpose: pole lines and conduits Recorded: in book 8190, page 760, Official Records Affects: the southerly 5 feet and the northerly 3 feet of the southerly 8 feet of the easterly 10 feet of Lot 21 File Number: 165821 Page 4 of 9 6. An easement for the purpose shown below and rights incidental thereto as set forth in a document: In favor of: The City of Huntington Beach Purpose: street and public utilities Recorded: in book 10706, page 735, Official Records Affects: a portion of said land 7. Deed of Trust to secure an indebtedness in the amount shown below, and any other obligations secured thereby: Amount: $1,470,000.00 Dated: November 1, 2004 Trustor: HB Auto I, LLC, a California Limited Liability Company Trustee: First American Title Insurance Company Beneficiary: Standard Insurance Company, an Oregon corporation Recorded: December 5, 2004, as Instrument/File No. 2004001083691 of Official Records. The beneficial interest under said deed of trust was assigned to United of Omaha Life Insurance Company, a Nebraska corporation, by assignment recorded February 23, 2005, as Instrument/File No. 2005000135592 of Official Records. An unrecorded lease, upon the terms, covenants and conditions therein provided, Dated: November 1, 2004 Lessor: HB Auto I, L LC, a California Limited Liability Company and Michael Todd Carson and Rosemary Kathleen Carson, husband and wife as community property, successors in interest to Jurtwin, Inc., a California corporation Lessee: C.S.B. Partnership Term: as therein provided Disclosed by: Subordination, Attornment and Non -Disturbance Agreement Recorded: December 6, 2004 Instrument No.: 2004001083693, Official Records The present ownership of said leasehold and other matters affecting the interest of the lessee are not shown herein. An assignment of certain of the lessor's interest under the unrecorded lease dated April 19, 2004, which lease is shown above: Assignment: Assignment of Lessor's Interest in Leases Dated: November 1, 2004 Assigned To: Standard Insurance Company, an Oregon corporation Which assignment recites, among other things, that it is given as additional security for the deed of trust: Recorded: December 6, 2004, as Instrument/File No. 2004001083692 of Official Records. Said lease was subordinated to the Deed of Trust referred to in Item No. 9 by a document recorded June 26, 2006 as Instrument No. 2006000426218, Official Records. 9. Deed of Trust to secure an indebtedness in the amount shown below, and any other obligations secured thereby: Amount: $250,000.00 Dated: June 21, 2006 Trustor: HB Auto I, LLC, a California Limited Liability Company File Number: 165821 Page 5 of 9 Trustee: Foreclosure Consultants, Inc., a California corporation Beneficiary: Lantzman Mortgage Fund, LLC, a California Limited Liability Company Recorded: June 26, 2006, as Instrument/File No. 2006000426217 of Official Records. 10. Deed of Trust to secure an indebtedness in the amount shown below, and any other obligations secured thereby: Amount: $3,200,000.00 Dated: March 21, 2008 Trustor: HB Auto I, LLC, a California Limited Liability Company Trustee: Mortgage Income Service, a California corporation Beneficiary: Mortgage Income Fund, a California corporation, its successors and/or assigns Recorded: March 24, 2008, as Instrument/File No. 2008000135161 of Official Records. 11. The matters contained in an instrument entitled "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, by and between the City of Huntington Beach upon the terms therein provided recorded November 9, 2007, as Instrument/File No. 2007000676593 of Official Records. 12. Rights and parties entitled to possession of said land by reason of unrecorded leases. matters affecting the interests of lessees are not shown herein. Please note: If this exception is to be replaced with an exception setting out the specific individual lease(s) on the land, we will require: (A) Copy of said leases and any amendments thereof, and, (B) A statement from the owner of said land that said copies are all of the leases on the property. 13. Matters which may be disclosed by an inspection or by a survey of said land satisfactory to this Company, or by inquiry of the parties in possession thereof. An inspection of said land has been ordered; upon its completion we will advise you of our findings. 14. The requirement as to the limited liability company hereinafter named that we be furnish with: (1) Original certified copies of the filed limited liability company articles of organization (LLC-1) and any amendments thereto (LLC's-2's) for recorded as part of the contemplated transaction. (2) A copy of the operation agreement and any amendments thereof. Limited liability company: HB Auto I, LLC, a California Limited Liability Company These should be supplied to us as soon as possible as the review of this documentation may result in additional requirements. File Number: 165821 Page 6 of 9 (End of Exceptions) File Number: 165921 Page 7 of 9 NOTES AND REQUIREMENTS There are no conveyances affecting said land, recorded with the County Recorder within 24 months of the date of this report. File Number: 165821 Page 8 of 9 CALIFORNIA "GOOD FUNDS" LAW California Insurance Code Section 12413.1 regulates the disbursement of escrow and sub -escrow funds by title companies. The law requires that funds be deposited in the title company escrow account and available for withdrawal prior to disbursement. Funds received by Stewart Title of California, Inc. via wire transfer may be disbursed upon receipt. Funds received via cashier's checks or teller checks drawn on a California. Bank may be disbursed on the next business day after the day of deposit. If funds are received by any other means, recording and/or disbursement may be delayed, and you should contact your title or escrow officer. All escrow and sub -escrow funds received will be deposited with other escrow funds in one or more non - interest bearing escrow accounts in a financial institution selected by Stewart Title of California, Inc.. Stewart Title of California, Inc. may receive certain direct or indirect benefits from the financial institution by reason of the deposit of such funds or the maintenance of such accounts with the financial institution, and Stewart Title of California, Inc. shall have no obligation to account to the depositing party in any manner for the value of, or to pay to such party, any benefit received by Stewart Title of California, Inc.. Such benefits shall be deemed additional compensation to Stewart Title of California, Inc. for its services in connection with the escrow or sub -escrow. If any check submitted is dishonored upon presentation for payment, you are authorized to notify all, principals and/or their respective agents of such nonpayment. Wire Instructions If you anticipate having funds wired to Stewart Title of California, Inc., our wiring information is as follows: Additional Note: Direct wire transfers to: Union Bank of California 1980 Saturn Street Monterey Park, CA Routing Number: 122000496 Credit to Stewart Title of California, Inc. Account Number: 9100750578 Reference Order Number: 165821 Title Unit Number.: 2862 Title Officer Name: Chris Maziar When instructing the financial institution to wire funds, it is very important that you reference Stewart Title of California, Inc.'s order number. Should you have any questions in this regard please contact your title officer immediately. File Number: 165821 Page 9 of 9 Stewart Title Guaranty Company Privacy Policy Notice PURPOSE OF THIS NOTICE Title V of the Gramm -Leach -Bliley Act (GLBA) generally prohibits any financial institution, directly or through its affiliates, from sharing nonpublic personal information about you with nonaffiliated third party unless the institution provides you with a notice of its privacy policies and practices, such as the type of information that it collects about you and the categories of persons or entities to whom it may be disclosed. In compliance with the GLBA, we are providing you with this document, which notifies you of the privacy policies and practices of Stewart Title Guaranty Company. We may collect nonpublic personal information about you from the following sources: ■ Information we receive from you, such as on applications or other forms. • Information about your transactions we secure from our files, or from our affiliates or others. ■ Information we receive from a consumer reporting agency. • Information that we receive from others involved in your transaction, such as the real estate agent or lender. Unless it is specifically stated otherwise in an amended Privacy Policy Notice, no additional nonpublic personal information will be collected about you. We may disclose any of the above information that we collect about our customers or former customers to our affiliates or to nonaffiliates third parties permitted by law. We also may disclose this information about our customers or former customers to the following types of non affiliated companies that perform marketing services on our behalf or with whom we have joint marketing agreements: ■ Financial service providers such as companies engaged in banking, consumer finance, securities and insurance. Non -financial companies such as envelope stuffers and other. fulfillment service providers. WE DO NOT DISCLOSE ANY NONPUBLIC PERSONAL INFORMATION ABOUT YOU WITH ANYONE FOR ANY PURPOSE THAT IS NOT SPECIFICALLY PERMITTED BY LAW. We restrict access to nonpublic personal information about you to those employees who need to know that information in order to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information. ear Nu *d 28621W21-Nip yN.wk SIG Page I of 2 Stewart Title of California, Inc. Privacy Policy Notice PURPOSE OF THIS NOTICE Title V of the Gramm -Leach -Bliley Act (GLBA) generally prohibits any financial institution, directly or through its affiliates, from sharing nonpublic personal information about you with nonaffiliated third party unless the institution provides you with a notice of its privacy policies and practices, such as the type of information that it collects about you and the categories of persons or entities to whom it may be disclosed. In compliance with the GLBA, we are providing you with this document, which notifies you of the privacy policies and practices of Stewart Title of California, Inc. We may collect nonpublic personal information about you from the following sources: ® Information we receive from you, such as on applications or other forms. • Information about your transactions we secure from our files, or from our affiliates or others. ® Information we receive from a consumer reporting agency. ■ Information that we receive from others involved in your transaction, such as the real estate agent or lender. Unless it is specifically stated otherwise in an amended Privacy Policy Notice, no additional nonpublic personal information will be collected about you. We may disclose any of the above information that we collect about our customers or former customers to our affiliates or to nonaffiliates third parties permitted by law. We also may disclose this information about our customers or former customers to the following types of non affiliated companies that perform marketing services on our behalf or with whom we have joint marketing agreements: ■ Financial service providers such as companies engaged in banking, consumer finance, securities and insurance. ® Non -financial companies such as envelope stuffers and other fulfillment service providers. WE DO NOT DISCLOSE ANY NONPUBLIC PERSONAL INFORMATION ABOUT YOU WITH ANYONE FOR ANY PURPOSE THAT IS NOT SPECIFICALLY PERMITTED BY LAW. We restrict access to nonpublic personal information about you to those employees who need to know that information in order to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information. File Nk, 2862-I65821- M—) Mnk� srG Page 2 of 2 CLTA PRELIMINARY REPORT FORM Stewart Title Guaranty Company EXHIBIT A (Revised 11-17-04) CLTA PRELIMINARY REPORT FORM (Revised 06-17-06) SCHEDULE B CLTA PRELIMINARY REPORT FORM LIST OF PRINTED EXCEPTIONS AND EXCLUSIONS CALIFORNIA LAND TITLE ASSOCIATION STANDARD COVERAGE POLICY —1990 EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of: 1. (a) Any law, ordinance or governmental regulation (including but not limited to building or zoning laws, ordinances, or regulations) restricting, regulating, prohibiting or relating (i) the occupancy, use, or enjoyment of the land; (ii) the character, dimensions or location of any improvement now or hereafter erected on the land; (iii) a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part; or (iv) environmental protection, or the effect of any violation of these laws, ordinances or governmental regulations, except to the extent that a notice of the enforcement thereof or a notice of a defect, lien, or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy. (b) Any governmental police power not excluded by (a) above, except to the extent that a notice of the exercise thereof or notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy. 2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at Date of Policy, but not excluding from coverage any taking which has occurred prior to Date of Policy which would be binding on the rights of a purchaser for value without knowledge. 3. Defects, liens, encumbrances, adverse claims or other matters: (a) whether or not recorded in the public records at Date of Policy, but created, suffered, assumed or agreed to by the insured claimant; (b) not known to the Company, not recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to the Company by the insured claimant prior to the date the insured claimant became an insured under this policy; (c) resulting in no loss or damage to the insured claimant; (d) attaching or created subsequent to Date of Policy; or (e) resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the insured mortgage or for the estate or interest insured by this policy. 4. Unenforceability of the lien of the insured mortgage because of the inability or failure of the insured at Date of Policy, or the inability or failure of any subsequent owner of the indebtedness, to comply with the applicable doing business laws of the state in which the land is situated. 5. Invalidity or unenforceability of the lien of the insured mortgage, or claim thereof, which arises out of the transaction evidenced by the insured mortgage and is based upon usury or any consumer credit protection or truth in lending law. 6. Any claim, which arises out of the transaction vesting in the insured the estate of interest insured by this policy or the transaction creating the interest of the insured lender, by reason of the operation of federal bankruptcy, state insolvency or similar creditors' rights laws. EXCEPTIONS FROM COVERAGE - SCHEDULE B, PART I This policy does not insure against loss or damage (and the Company will not pay costs, attorneys' fees or expenses) which arise by reason of: I. Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the public records. Proceedings by a public agency which may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records of such agency or by the public records. 2. Any facts, rights, interests, or claims which are not shown by the public records but which could be ascertained by an inspection of the land or which may be asserted by persons in possession thereof. 3. Easements, liens or encumbrances, or claims thereof, which are not shown by the public records. Rev. 11-7-04 Page I of 7 CLTA PRELIMINARY REPORT FORM Stewart Title Guaranty Company 4. Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records. 5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b) or (c) are shown by the public records. The following matters are expressly excluded from the coverage of this policy and the company will not pay loss or damage, costs, attorneys' fees, or expenses, which arise by reason of: CLTA HOMEOWNER'S POLICY OF TITLE INSURANCE (10/22/03) ALTA HOMEOWNER'S POLICY OF TITLE INSURANCE EXCLUSIONS In addition to the Exceptions in Schedule B, You are not insured against loss, costs, attorneys' fees, and expenses resulting from: i. Governmental police power, and the existence or violation of any law or government regulation. This includes ordinances, laws and regulations concerning: a. building b. zoning c. Land use d. improvements on the Land e. Land division f. environmental protection This Exclusion does not apply to violations or the enforcement of these matters if notice of the violation or enforcement appears in the Public Records at the Policy Date. This Exclusion does not limit the coverage described in Covered Risk 14, 15, 16, 17 or 24. 2. The failure of Your existing structures, or any part of them, to be constructed in accordance with applicable building codes. This Exclusion does not apply to violations of building codes if notice of the violation appears in the Public Records at the Policy Date. 3. The right to take the Land by condemning it, unless: a. a notice of exercising the right appears in the Public Records at the Policy Date; or b, the taking happened before the Policy Date and is binding on You if You bought the Land without Knowing of the taking. 4. Risks: a. that are created, allowed, or agreed to by You, whether or not they appear in the Public Records; b. that are Known to You at the Policy Date, but not to Us, unless they appear in the Public Records at the Policy Date; c. that result in no loss to You; or d. that first occur after the Policy Date - this does not limit the coverage described in Covered Risk 7, 8A, 22, 23, 24 or 25. 5. Failure to pay value for Your Title. 6. Lack of a right: a. to any Land outside the area specifically described and referred to in paragraph 3 of Schedule A; and b. in streets, alleys, or waterways that touch the Land. This Exclusion does not limit the coverage described in Covered Risk 11 or 18. LIMITATIONS ON COVERED RISKS Your insurance for the following Covered Risks is limited on the Owner's Coverage Statement as follows: * For Covered Risk 14, 15, 16 and 18, Your Deductible Amount and Our Maximum Dollar Limit of Liability shown in Schedule A. The deductible amounts and maximum dollar limits shown on Schedule A are as follows: Your Deductible Amount Our Maximum Dollar Limit of Liability Covered Risk 14: 1 % of Policy Amount or $2,500.00 $10,000.00 (whichever is less) Covered Risk 15: 1 % of Policy Amount or $5,000.00 $25,000.00 (whichever is less) Covered Risk 16: 1% of Policy Amount or $5,000.00 $25,000.00 (whichever is less) Covered Risk 18: 1 % of Policy Amount or $2,500.00 $5,000.00 (whichever is Less) AMERICAN LAND TITLE ASSOCIATION RESIDENTIAL TITLE INSURANCE POLICY (6-1-87) EXCLUSIONS In addition to the Exceptions in Schedule B, you are not insured against loss, costs, attorneys' fees, and expenses resulting from: Rev. 11-7-04 Page 2 of 7 CLTA PRELIMINARY REPORT FORM Stewart Title Guaranty Company 1. Governmental police power, and the existence or violation of any law or government regulation. This includes building and zoning ordinances and also laws and regulations concerning: land use improvements on the land land division environmental protection This exclusion does not apply to violations or the enforcement of these matters which appear in the public records at Policy Date. This exclusion does not limit the zoning coverage described in Items 12 and 13 of Covered Title Risks. 2. The right to take the land by condemning it, unless: a notice of exercising the right appears in the public records on the Policy Date the taking happened prior to the Policy Date and is binding on you if you bought the land without knowing of the taking 3. Title Risks: that are created, allowed, or agreed to by you that are known to you, but not to us, on the Policy Date -- unless they appeared in the public records that result in no loss to you that first affect your title after the Policy Date -- this does not limit the labor and material lien coverage in Item 8 of Covered Title Risks 4. Failure to pay value for your title. 5. Lack of a right: to any land outside the area specifically described and referred to in Item 3 of Schedule A OR in streets, alleys, or waterways that touch your land This exclusion does not limit the access coverage in Item 5 of Covered Title Risks. AMERICAN LAND TITLE ASSOCIATION LOAN POLICY (10-17-92) WITH ALTA ENDORSEMENT - FORM 1 COVERAGE The following matters are expressly excluded from the coverage of this policy and the company will not pay loss or damage, costs, attorney's fees or expenses which arise by reason of: 1. (a) Any law, ordinance or governmental regulation (including but not limited to building and zoning laws, ordinances, or regulations) restricting, regulating, prohibiting or relating to (i) the occupancy, use, or enjoyment of the land; (ii) the character, dimensions or location of any improvement now or hereafter erected on the land; (iii) a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part: or (iv) environmental protection, or the effect of any violation of these taws, ordinances or governmental regulations, except to the extent that a notice of the enforcement thereof or a notice of a defect; lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at date of policy. (b) Any governmental police power not excluded by (a) above, except to the extent that a notice of the exercise thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at date of policy. 2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at date of policy, but not excluding from coverage any taking which has occurred prior to date of policy which would be binding on the rights of a purchaser for value without knowledge. 3. Defects, liens, encumbrances, adverse claims or other matters: (a) created, suffered, assumed or agreed to by the insured claimant; (b)Not known to the company, not recorded in the public records at date of policy, but known to the insured claimant and not disclosed in writing to the company by the insured claimant prior to the date the insured claimant became an insured under this policy; (c) resulting in no loss or damage to the insured claimant; (d) attaching or created subsequent to date of policy (except to the extent that this policy insures the priority of the lien of the insured mortgage over any statutory lien for services, labor or material or to the extent insurance is afforded herein as to the assessments for street improvements under construction or completed at date of policy); or (e) resulting in loss or damage, which would not have been sustained if the insured claimant had paid value for the insured mortgage. 4. Unenforceability of the lien of the insured mortgage because of the inability or failure of the insured at date of policy, or the inability or failure of any subsequent owner of the indebtedness, to comply with applicable doing business laws of the state in which the land is situated. 5. Invalidity or unenforceability of the lien of the insured mortgage, or claim thereof, which arises out of the transaction evidenced by the insured mortgage and is based upon usury or any consumer credit protection or truth in lending law. 6. Any statutory lien for services, labor or materials (or the claim of priority of any statutory lien for services, labor or materials over the lien of the insured mortgage) arising from an improvement or work related to the land which is contracted for and commenced subsequent to date of policy and is not financed in whole or in part by proceeds of the indebtedness secured by the insured mortgage which at date of policy the insured has advanced or is obligated to advance. Rev. 11-7-04 Page 3 of 7 CLTA PRELIMINARY REPORT FORM Stewart Title Guaranty Company Any claim, which arises out of the transaction creating the interest of the mortgagee insured by this policy, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that is based on: I. The transaction creating the interest of the insured mortgagee being deemed a fraudulent conveyance or fraudulent transfer; or D. The subordination of the interest of the insured mortgagee as a result of the application of the doctrine or equitable subordination; or III. The transaction creating the interest of the insured mortgagee being deemed a preferential transfer except where the preferential transfer results from the failure: (a) to timely recorded the instrument of transfer; or (b) of such recordation to impart notice to a purchaser for value or a judgment or lien creditor. The above policy forms may be issued to afford either standard coverage or extended coverage. In addition to the above exclusions from coverage, the exceptions from coverage in a standard coverage policy will include the following General Exceptions: EXCEPTIONS FROM COVERAGE This policy does not insure against loss or damage (and the company will not pay costs, attorneys' fees or expenses) which arise by reason of: Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the public records. Proceedings by a public agency which may result in taxes or assessments or notices of such proceedings, whether or not shown by the records of such agency or by the public records. Any facts, rights, interests or claims which are not shown by the public records but which could be ascertained by an inspection of the land or by making inquiry of persons in possession thereof. Easements, liens or encumbrances, or claims thereof, which are not shown by the public records. Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records. (a) unpatented mining claims; (b) reservations or exceptions in patents or in acts authorizing the issuance thereof, (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b) or (c) are shown by the public records. 2006 ALTA LOAN POLICY (06-17-06) EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of: 1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to (1) the occupancy, use, or enjoyment of the Land; (ii) the character, dimensions, or location of any improvement erected on the Land; (iii) the subdivision of land; or (iv) environmental protection; or the effect of any violation of these laws, ordinances, or governmental regulations. This Exclusion I(a) does not modify or limit the coverage provided under Covered Risk 5. (b) Any governmental police power. This Exclusion I(b) does not modify or limit the coverage provided under Covered Risk 6. 2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8. 3. Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; d) attaching or created subsequent to Date of Policy (however, this does not modify or Iimit the coverage provided under Covered Risk 11, 13, or 14); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Insured Mortgage. 4. Unentorceability of the lien of the Insured Mortgage because of the inability or failure of an Insured to comply with applicable doing - business laws of the state where the Land is situated. 5. Invalidity or unenforceability in whole or in part of the lien of the Insured Mortgage that arises out of the transaction evidenced by the Insured Mortgage and is based upon usury or any consumer credit protection or truth -in -lending law. 6. Any claim. by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction creating the lien of the Insured Mortgage, is (a) a fraudulent conveyance or fraudulent transfer, or Rev. 11-7-04 Page 4 of 7 CLTA PRELIMINARY REPORT FORM Stewart Title Guaranty Company (b) a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy. 7. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of Policy and the date of recording of the Insured Mortgage in the Public Records. This Exclusion does not modify or limit the coverage provided under Covered Risk I I (b). AMERICAN LAND TITLE ASSOCIATION OWNER'S POLICY (10-17-92) EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy and the company will not pay loss or damage, cost, attorneys' fees or expenses, which arise by reason of: 1. (a) Any law, ordinance or governmental regulation (including but not limited to building and zoning laws, ordinances, or regulations) restricting, regulating, prohibiting or relating to (i) the occupancy, use, or enjoyment of the land; (h) the character, dimensions or location of any improvement now or hereafter erected on the land; (iii) a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part; or (iv) environmental protection, or the effect of any violation of these laws, ordinances or governmental regulations, except to the extent that a notice of the enforcement thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at date of policy. (B) any governmental police power not excluded by (a) above, except to the extent that a notice of the exercise thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at date of policy. 2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at date of policy, but not excluding from coverage any taking which has occurred prior to date of policy which would be binding on the rights of a purchaser for value without knowledge. 3. Defects, liens, encumbrances, adverse claims or other matters: (A) Created, suffered, assumed or agreed to by the insured claimant; (B) Not known to the company, not recorded in the public records at date of policy, but known to the insured claimant and not disclosed in writing to the company by the insured claimant prior to the date the insured claimant became an insured under this policy; (C) Resulting in no loss or damage to the insured claimant; (D) Attaching or created subsequent to date of policy: or (E) Resulting in loss or damage, which would not have been sustained if the insured claimant had paid value for the estate or interest insured by this policy. 4. Any claim, which arises out of the transaction vesting in the insured the estate or interest insured by this policy, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors rights laws, that is based on: I. The transaction creating the estate or interest insured by this policy being deemed a fraudulent conveyance or fraudulent transfer; or D. The transaction creating the estate or interest insured by this policy being deemed a preferential transfer except where the preferential transfer results from the failure: (A) To timely record the instrument of transfer; or (B) of such recordation to impart notice to a purchaser for value or a judgment or lien creditor. The above policy forms may be issued to afford either standard coverage or extended coverage. In addition to the above exclusions from coverage, the exceptions from coverage in a standard coverage policy will include the following general exceptions: EXCEPTIONS FROM COVERAGE This policy does not insure against loss or damage (and the company will not pay costs, attorneys' fees or expenses) which arise by reason of: 1. Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the public records proceedings by a public agency which may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records of such agency or by the public records. 2. Any facts, rights, interests or claims which are not shown by the public records but which could be ascertained by an inspection of the land or by making inquiry of persons in possession thereof. 1 Easements, liens or encumbrances, or claims thereof, which are not shown by the public records. 4. Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records. 5. (a) unpatented mining claims; (b) reservations or exceptions in patents or in acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b) or (c) are shown by the public records. 2006 ALTA OWNER'S POLICY (06-17-06) Rev. 11-7-04 Page 5 of 7 CLTA PRELIMINARY REPORT FORM Stewart Title Guaranty Company EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys - fees, or expenses that arise by reason of: 1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to (i) the occupancy, use, or enjoyment of the Land; (ii) the character, dimensions, or location of any improvement erected on the Land; (iii) the subdivision of land; or (iv) environmental protection; or the effect of any violation of these laws, ordinances, or governmental regulations. This Exclusion 1(a) does not modify or limit the coverage provided under Covered Risk 5. (b) Any governmental police power. This Exclusion I (b) does not modify or limit the coverage provided under Covered Risk 6. 2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8. 3. Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed, or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting in no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 9 and 10); or (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Title. 4. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction vesting the Title as shown in Schedule A, is (a) a fraudulent conveyance or fraudulent transfer; or (b) a preferential transfer for any reason not stated in Covered Risk 9 of this policy. 5. Any lien on the Title for real estate taxes or assessments imposed by govemmental authority and created or attaching between Date of Policy and the date of recording of the deed or other instrument of transfer in the Public Records that vests Title as shown in Schedule A. ALTA EXPANDED COVERAGE RESIDENTIAL LOAN POLICY (10/13/01) EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys fees or expenses which arise by reason of: I. (a) Any law, ordinance or governmental regulation (including but not limited to building and zoning laws, ordinances, or regulations) restricting, regulating, prohibiting or relating to (i) the occupancy, use, or enjoyment of the Land; (ii) the character, dimensions or location of any improvement now or hereafter erected on the Land; (iii) a separation in ownership or a change in the dimensions or areas of the Land or any parcel of which the Land is or was a part; or (iv) environmental protection, or the effect of any violation of these laws, ordinances or governmental regulations, except to the extent that s notice of the enforcement thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the Land has been recorded in the Public Records at Date of Policy. This exclusion does not limit the coverage provided under Covered Risks 12, 13, 14, and 16 of this policy. (b) Any governmental police power not excluded by (a) above, except to the extent that a notice of the exercise thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the Land has been recorded in the Public Records at Date of Policy. This exclusion does not limit the coverage provided under Covered Risks 12, 13, 14, and 16 of this policy. 2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the Public Records at Date of Policy, but not excluding from coverage any taking which has occurred prior to Date of Policy which would be binding on the rights of a purchaser for value without Knowledge. 3. Defects, liens, encumbrances, adverse claims or other matters: (a) created, suffered, assumed or agreed to by the Insured Claimant; (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; (c) resulting In no loss or damage to the Insured Claimant; (d) attaching or created subsequent to Date of Policy (this paragraph does not limit the coverage provided under Covered Risks 8, 16, 18, 19, 20, 21, 22, 23, 24, 25 and 26); or (e) resulting in loss or damage which would not have been sustained if the Insured Claimant had paid value for the Insured Mortgage. 4. Unenforeeability of the lien of the Insured Mortgage because of the inability or failure of the Insured at Date of Policy, or the inability or failure of any subsequent owner of the indebtedness, to comply with applicable doing business laws of the state in which the Land is situated. 5. Invalidity or unenforceability of the lien of the Insured Mortgage, or claim thereof, which arises out of the transaction evidenced by the Insured Mortgage and is based upon usury, except as provided in Covered Risk 27, or any consumer credit protection or truth in lending law. 6. Real property taxes or assessments of any governmental authority which become a lien on the Land subsequent to Date of Policy. This exclusion does not limit the coverage provided under Covered Risks 7, 8(e) and 26. Rev, 11-7-04 Page 6 of 7 CLTA PRELIMINARY REPORT FORM Stewart Title Guaranty Company 7. Any claim of invalidity, unenforceability or lack of priority of the lien of the Insured Mortgage as to advances or modifications made after the Insured has Knowledge that the vestee shown in Schedule A is no longer the owner of the estate or interest covered by this policy. This exclusion does not limit the coverage provided in Covered Risk 8. S. Lack of priority of the lien of the Insured Mortgage as to each and every advance made after Date of Policy, and all interest charged thereon, over liens, encumbrances and other matters affecting the title, the existence of which are Known to the Insured at: (a) The time of the advance; or (b) The time a modification is made to the terms of the Insured Mortgage which changes the rate of interest charged, if the rate of Interest is greater as a result of the modification than it would have been before the modification. This exclusion does not limit the coverage provided in Covered Risk 8. 9. The failure of the residential structure, or any portion thereof to have been constructed before, on or after Date of Policy in accordance with applicable building codes. This exclusion does not apply to violations of building codes if notice of the violation appears in the Public Records at Date of Policy. Rev. 11-7-04 Page 7 of 7 EXHIBIT "A" LEGAL DESCRIPTION The land referred to herein is situated in the State of California County of Orange, City of Huntington Beach, and 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(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. AFFILIATED BUSINESS ARRANGEMENT DISCLOSURE STATEMENT Date: December 10, 2008 To: 7872 Edinger Avenue Property: Huntington Beach, California From: Stewart Title of California, Inc. This is to give you notice that Stewart Title of California, Inc. ("Stewart Title") has a business relationship with Stewart Solutions, LLC, DBA — Stewart Specialty Insurance Services, LLC ("Stewart Insurance"). Stewart Information Services Corporation owns 100% of Stewart Insurance and Stewart Title of California. Because of this relationship, this referral may provide Stewart Title a financial or other benefit. Set forth below is the estimated charge or range of charges for the settlement services listed. You are NOT required to use the listed provider(s) as a condition for purchase, sale, or refinance of the subject Property. THERE ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE SERVICES. Stewart Insurance Settlement Service Charge or range of charges Hazard Insurance $400.00 to $6,500.00 Home Warranty $255.00 to $ 780.00 Natural Hazard Disclosure Report $ 42.50 to 149.50 ACKNOWLEDGMENT I/we have read this disclosure form, and understand that Stewart Title is referring me/us to purchase the above -described settlement service(s) and may receive a financial or other benefit as the result of this referral. Signature Signature o, aewmnb,,: 2862-165921- ABA Dislosuxe Title Page I of I OPERATING AGREEMENT FOR HB AUTO I, LLC A CALIFORNIA LIMITEID LIABILTI'Y COMPANY This Operating Agreement (this "Agreement"), is made as of December 1, 2002, by TODD CARSON ("Carson" or "Member"), with reference to the following facts: A. The Member has filed Articles of Organization (the "Articles") for HB Auto I, LLC, a limited liability company (the "Company"), formed under the laws of the State of California, with the California Secretary of State. B. The Member desires to adopt and approve an operating agreement for the Company under the Beverly-Killea Limited Liability Company Act (the "Act"). NOW, THEREFORE, the Member by this Agreement sets forth the operating agreement for the Company upon the terms and subject to the conditions of this Agreement. ARTICLE I ORGANIZATIONAL MATTERS 1.1 Name. The name of the Company shall be "HB Auto 1, LLC." The Company may conduct business under that name or any other name approved by the Member. 1.2 Term. The term of the Company will commence as of the date of the filing of the Articles and shall continue in perpetuity unless sooner terminated under Section 7.1. 1.3 Office and Agent. The Company shall continuously maintain an office and registered agent in the State of California as required by the Act. The principal office of the Company shall be at 18881 Von Karman Avenue, Suite 800, Irvine, California, or such location as the Member may determine. The registered agent shall be as stated in the Articles or as otherwise determined by the Member. 1.4 Business of the Company. Notwithstanding the purpose of the Company which is described in the Articles, the Company shall not engage in any business other than the following without the consent of the Member: 1.4.1 acquire that certain real property located at 7872 Edinger Avenue, Huntington Beach, California (the "Property"); 1.4.2 own, develop, operate, and lease the Property; and 1.4.3 such other activities directly related to the foregoing business as may be necessary or advisable in the reasonable opinion of the Member to further such business. ARTICLE II CAPITAL CONTRIBUTIONS 2.1 Initial Capital Contribution. The Member shall initially contribute cash to the Company in the amount required for the Company to acquire the Property. 2.2 Additional Capital Contributions. The Member shall not be required to make any additional contributions to the capital of the Company. Voluntary additional capital contributions may be made by the Member in his sole discretion. 2.3 Capital Accounts. The Company shall establish on its books an individual capital account ("Capital Account") for the Member. The Company shall determine and maintain the Capital Account in accordance with Treasury Regulations Section 1.704- 1(b)(2)(iv). Upon a valid transfer of the Member's interest in the Company ("Membership Interest") in accordance with Article V, the Member's Capital Account shall carry over to the new owner. 2.4 Return of Contribution. Except as otherwise provided in this Agreement, the Member shall not have the right to receive the return of any contribution or withdraw from the Company, except upon the dissolution of the Company. Except as provided in this Agreement, the Member may not withdraw its capital contribution. Except as otherwise required by the Act, the Member shall not have any liability to restore all or any portion of a deficit balance in the Member's Capital Account. 2.5 Interest on Member's Capital Contributions. The Company shall pay no interest on capital contributions of the Member. 2.6 Loans to Company. Nothing in this Agreement shall prevent the Member from making secured or unsecured loans ("Member Loans") to the Company. ARTICLE III MANAGEMENT AND CONTROL OF THE COMPANY 3.1 Management Vested in Member. The overall management and control of the Company shall be vested in the Member. The Member shall have full, complete and exclusive authority, power and discretion to manage and control the business, property and affairs of the Company, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Company's business, property and affairs. The Member shall and need only -2- devote such time and attention to the business of the Company as may be reasonably necessary to carry out its duties hereunder. 3.1.1 Agency Authority of Member. The Member is authorized to (i) endorse checks, drafts, and other evidences of indebtedness made payable to the order of the Company, (ii) to sign all checks, drafts, and other instruments obligating the Company, and (iii) to sign all contracts, applications and other documents on behalf of the Company. 3.1.2 Powers and Duties of Member. Without limiting the generality of Section 3.1 above, the Member shall have all necessary powers and the duty to manage and carry out the purposes, business, property, and affairs of the Company and shall have all of the powers described in Corporations Code Section 17003, including, without limitation, the power to: (i) Acquire, purchase, develop, build, improve, alter, replace, rebuild, own, sell, exchange, lease, or otherwise utilize or dispose of, or any part thereof, or any interest therein, the assets owned by the Company; (ii) Borrow money from any party including the Member and its Affiliates, issue evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend, or change the terms of, or extend the time for the payment of any indebtedness or obligation of the Company, and secure such indebtedness by mortgage, deed of trust, pledge, security interest, or other lien on Company assets; (iii) Sue on, defend, or compromise any and all claims or liabilities in favor of or against the Company; submit any or all such claims or liabilities to arbitration; (iv) Retain legal counsel, auditors, and other professionals in connection with the Company business and to pay therefor such remuneration as the Member may determine; and (v) Raise additional capital by selling Membership Interests to persons admitted as new members at such price and on such terms as the Member may determine in its sole discretion. 3.2 Compensation of Member. The Member shall be entitled to reimbursement for all expenses reasonably incurred by the Member in the performance of the Member's duties. 3.3 Limited Liability. Except as expressly set forth in this Agreement or required by law, the Member shall not be personally liable for any debt, obligation, or liability of the Company, whether that liability or obligation arises in contract, tort, or otherwise. 3.4 Contracts with Company. Notwithstanding the provisions of the Act or any successor thereto, the Member, or any affiliate of the Member, may directly or indirectly, through -3- one or more corporations, partnerships or other forms of entity in which such party has an interest, contract with the Company for any purpose or purposes in furtherance of the business of the Company provided the contract contains arms -length terms and compensation. 3.5 No Exclusive Duty to Company. The Member and its agents, employees and Affiliates may have other business interests and may engage or invest in, independently or with others, any business activity of any type or description, including without limitation, those that might be the same as or similar to the Company's business and that might be in direct or indirect competition with the Company. The Company shall not have any right, by virtue of this Agreement, to share or participate in such other investments or activities of the Member or to the income or proceeds derived therefrom. The Member shall not be obligated to present any investment opportunity or prospective economic advantage to the Company, even if the opportunity is of the character that, if presented to the Company, could be taken by the Company. The Member shall have the right to hold any investment opportunity or prospective economic advantage for its own account or to recommend such opportunity to persons other than the Company. 3.6 Acts Of Member As Conclusive Evidence Of Authority. Any note, mortgage, evidence of indebtedness, contract, certificate, statement, conveyance, or other instrument in writing, and any assignment or endorsement thereof, executed or entered into between the Company and any other person, when signed by the Member, is not invalidated as to the Company by any lack of authority of the Member in the absence of actual knowledge on the part of the other person that the Member had no authority to execute the same. 3.7 Banking. All funds of the Company shall be deposited in one or more accounts with one or more recognized financial institutions in the name of the Company, at such locations as shall be determined by the Member. Withdrawals from such accounts shall require the signature of such person or persons as the Member may designate. 3.8 Admission of Additional Members. Additional members may be admitted in the discretion of the Member. Additional members will participate in the management, "Net Profits", "Net Losses" (as such terms are defined in Section 4.1), and distributions of the Company on such terms as are determined by the Member and the additional member(s). This Agreement shall be amended upon the admission of an additional member to set forth such member's name and capital contribution. ARTICLE IV ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS 4.1 Definitions. When used in this Agreement, the following terms shall have the meanings set forth below: -4- 4.1.1 "Cash Flow" shall mean the excess, if any, of all cash receipts of the Company from all sources, in excess of expenses (including capital expenditures) incurred by the Company and reserves established for the payment of future expenses and capital expenditures. 4.1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, the provisions of succeeding law, and to the extent applicable, the Treasury Regulations. 4.1.3 "Company Minimum Gain" shall have the meaning ascribed to the term "Partnership Minimum Gain" in the Treasury Regulations Section 1.704-2(d). 4.1.4 "Member Nonrecourse Debt" shall have the meaning ascribed to the term "Partner Nonrecourse Debt" in Treasury Regulations Section 1.704-2(b)(4). 4.1.5 "Member Nonrecourse Deductions" shall mean items of Company loss, deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to Member Nonrecourse Debt. 4.1.6 "Net Profits" and "Net Losses" shall mean the income, gain, loss, deductions, and credits of the Company in the aggregate or separately stated, as appropriate, determined in accordance with the method of accounting at the close of each fiscal year employed on the Company's information tax return filed for federal income tax purposes. 4.1.7 "Nonrecourse Liability" shall have the meaning set forth in Treasury Regulations Section 1.752-1(a)(2). 4.1.8 "Treasury Regulations" shall mean the final or temporary regulations that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code, and any successor regulations. 4.2 Allocations of Net Profit and Net Loss. Net Loss and Net Profit shall be allocated to the Member. 4.3 Special Allocations. Notwithstanding Section 4.2, 4.3.1 Minimum Gain Chargeback. If there is a net decrease in Company Minimum Gain during any fiscal year, the Member shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, in subsequent fiscal years) in an amount equal to the portion of the net decrease in Company Minimum Gain that is allocable to the disposition of Company property subject to a Nonrecourse Liability, which net decrease shall be determined in accordance with Treasury Regulations Section 1.704-2(g)(2). Allocations pursuant to this Section 4.3.1 shall be made in proportion to the amounts required to be allocated to the Member under this Section 4.3.1. The items to be so allocated shall be determined in accordance with Treasury -5- Regulations Section 1.704-2(f). This Section 4.3.1 is intended to comply with the minimum gain chargeback requirement contained in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. 4.3.2 Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt. If there is a net decrease in Company Minimum Gain attributable to a Member Nonrecourse Debt, during any fiscal year, the Member shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, in subsequent fiscal years) in an amount equal to that portion of the net decrease in Company Minimum Gain attributable to such Member Nonrecourse Debt that is allocable to the disposition of Company property subject to such Member Nonrecourse Debt (which net decrease shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(5)). Allocations pursuant to this Section 4.3.2 shall be made in proportion to the amounts required to be allocated to the Member under this Section 4.3.2 The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(4). This Section 4.3.2 is intended to comply with the minimum gain chargeback requirement contained in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith. 4.3.3 Nonrecourse Deductions. Any nonrecourse deductions (as defined in Treasury Regulations Section 1.704- 2(b)(1)) for any fiscal year or other period shall be specially allocated to the Member. 4.3.4 Member Nonrecourse Deductions. Those items of Company loss, deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to Member Nonrecourse Debt for any fiscal year or other period shall be specially allocated to the Member in accordance with Treasury Regulations Section 1.704- 2 (i) . 4.3.5 Qualified Income Offset. If the Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Section 1.704- 1 (b) (2) (ii) (d) (4) , (5) or (6) , or any other event creates a deficit balance in the Member's Capital Account in excess of Company Minimum Gain, items of Company income and gain shall be specially allocated to the Member in an amount and manner sufficient to eliminate such excess deficit balance as quickly as possible. Any special allocations of items of income and gain pursuant to this Section 4.3.5 shall be taken into account in computing subsequent allocations of income and gain pursuant to this Article IV so that the net amount of any item so allocated and the income, gain, and losses allocated to the Member pursuant to this Section 4.3.5 to the extent possible, shall be equal to the net amount that would have been allocated to the Member pursuant to the provisions of this Article IV if such unexpected adjustments, allocations, or distributions had not occurred. 4.4 Code Section 704(c) Allocations. Notwithstanding any other provision in this Article IV, in accordance with Code -6- Section 704(c) and the Treasury Regulations promulgated thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated to the Member so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value on the date of contribution. Allocations pursuant to this Section 4.4 are solely for purposes of federal, state and local taxes. As such, they shall not affect or in any way be taken into account in computing the Member's Capital Account or profits, losses, or other items of distributions pursuant to any provision of this Agreement. 4.5 Authorization of Distribution of Assets by the Company. Subject to applicable law and any limitations contained elsewhere in this Agreement, the Member may elect from time to time to cause the Company to make distributions to the Member. No such distribution shall be declared and paid in violation of Section 17254 of the Act. 4.6 Distribution of Cash Flow. After provisions for operating expenses and costs, distributions of cash or other assets by the Company shall be made to the Member. ARTICLE V TRANSFER AND ASSIGNMENT OF INTERESTS 5.1 Transfer and Assignment of Interests. The Member shall be entitled to sell, exchange, assign, transfer, or otherwise dispose of, pledge, hypothecate, encumber or otherwise grant a security interest in, directly or indirectly, all or any part of the Member's Membership Interest or withdraw or retire from the Company. 5.2 Admission of Substituted Members. In the event the Member transfers the Member's Interest to a transferee in accordance with Section 5.1, then such transferee shall not be entitled to be admitted into the Company as a substituted member unless (a) this Agreement is amended in accordance with the Act to reflect such admission; (b) the transferor and transferee named therein execute and acknowledge such other instruments as the Member may deem reasonably necessary to effectuate such admission; (c) the transferee in writing accepts and adopts all of the terms and conditions of this Agreement, as the same may have been amended; and (d) the transferor pays, as the Member may reasonably determine, all reasonable expenses incurred in connection with such admission, including, without limitation, legal fees and costs. An assignee of a Membership Interest who does not become a substituted member shall have no right to require any information or account of the Company's transactions, to inspect the Company books, or to vote on any of the matters as to which a Member would be entitled to vote under this Agreement. An assignee shall only be entitled to share in such Net Profits and Net Losses, to receive such distributions, and to receive such allocations of income, gain, loss, deduction -7- or credit or similar items to which the assignor was entitled, to the extent assigned. ARTICLE VI ACCOUNTING, RECORDS, REPORTING BY MEMBER 6.1 Books and Records. The books and records of the Company shall be kept in accordance with the accounting methods followed for federal income tax purposes. The Company shall maintain at its principal office in California all of the following: 6.1.1 a current list of the full name and last known business or residence address of the Member, together with the capital contribution, capital account and Membership Interest of the Member; 6.1.2 a copy of the Articles and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which the Articles or any amendments thereto have been executed; 6.1.3 copies of the Company's federal, state, and local income tax or information returns and reports, if any, for the six (6) most recent taxable years; 6.1.4 a copy of this Agreement and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have been executed; 6.1.5 copies of the financial statements of the Company, if any, for the six (6) most recent fiscal years; and 6.1.6 the Company's books and records as they relate to the internal affairs of the Company for at least the current and past four (4) fiscal years. 6.2 Reports. The Company shall cause to be filed, in accordance with the Act, all reports and documents required to be filed with any governmental agency. The Company shall cause to be prepared at least annually information concerning the Company's operations necessary for the completion of the Member's federal and state income tax returns. The Company shall send or cause to be sent to the Member within ninety (90) days after the end of each taxable year (i) such information as is necessary to complete the Member's federal and state income tax or information returns and (ii) a copy of the Company's federal, state, and local income tax or information returns for the year. 6.3 Tax Matters for the Company. The Member is designated as "Tax Matters Partner" (as defined in Code Section 6231), to represent the Company (at the Company's expense) in connection with all examination of the Company's affairs by tax authorities -8- and to expend Company funds for professional services and costs associated therewith. 6.4 Tax Elections. The Member shall have the authority to make all Company elections permitted under the Code, including, without limitation, elections of methods of depreciation and elections under IRC Section 754. The decision to make or not make an election shall be at the Member's sole and absolute discretion. ARTICLE VII DISSOLUTION AND WINDING UP 7.1 Conditions of Dissolution. The Company shall dissolve upon the occurrence of any of the following events: 7.1.1 Upon the happening of any event of dissolution specified in the Articles; 7.1.2 Upon the entry of a decree of judicial dissolution pursuant to Section 17351 of the Corporations Code; 7.1.3 Upon the election of the Member; or 7.1.4 Upon the expiration of the term of the Company. 7.2 Winding Up. Upon the dissolution of the Company, the Company's assets shall be disposed of and its affairs wound up. The Company shall give written notice of the commencement of the dissolution to all of its known creditors. 7.3 Order of Payment of Liabilities Upon Dissolution. After determining that all the known debts and liabilities of the Company have been paid or adequately provided for, including liquidation and dissolution expenses, the remaining assets shall. be distributed to the Member. 7.4 Certificates. The Company shall file with the California Secretary of State a Certificate of Dissolution upon the dissolution of the Company and a Certificate of Cancellation upon the completion of the winding up of the Company's affairs. ARTICLE VIII INDEMNIFICATION 8.1 Indemnification of Agents. The Company shall indemnify the Member and may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a Member, officer, employee or other agent of the Company or that, being or having been such a Member, officer, employee or agent, he or she is or was serving -9- at the request of the Company as a manager, director, officer, employee or other agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to hereinafter as an "agent"), to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit. ARTICLE IX MISCELLANEOUS 9.1 Counsel to the Company. Counsel to the Company may also be counsel to the Member or any Affiliate of the Member. The Member may execute on behalf of the Company any consent to the representation of the Company that counsel may request pursuant to the California Rules of Professional Conduct or similar rules in any other jurisdiction ("Rules"). The Company has initially selected Palmieri, Tyler, Wiener, Wilhelm & Waldron LLP ("Company Counsel") as legal counsel to the Company. 9.2 Complete Agreement. This Agreement and the Articles constitute the complete and exclusive statement of agreement of the Member with respect to the subject matter herein and therein and replace and supersede all prior written and oral agreements. To the extent that any provision of the Articles conflict with any provision of this Agreement, the Articles shall control. 9.3 Binding Effect. Subject to the provisions of this Agreement relating to transferability, this Agreement will be binding upon and inure to the benefit of the Member, and its respective successors and assigns. 9.4 Interpretation. All pronouns shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the interpretation of any provision of this Agreement. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement unless otherwise expressly stated. 9.5 Severability. If any provision of this Agreement or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid shall not be affected thereby. 9.6 Notices. Any notice to be given or to be served upon the Company or any party hereto in connection with this Agreement must be in writing (which may include facsimile) and will be deemed to have been given and received when delivered to the address specified by the party to receive the notice. -10- 9.7 Amendments. All amendments to this Agreement shall be in writing and signed by the Member. IN WITNESS WHEREOF, the Member has executed this Agreement, effective as of the date written above. MEMBER: T D CA ON -11- AMENDED AND COMPLETELY RESTATED OPERATING AGREEMENT FOR HB AUTO I, LLC A CALIFORNIA LIMITED L1 ABILITY COMPANY This Amended and Completely Restated Operating Agreement (this "Agreement"), is made effective as of January 1, 2007, by and among TODD CARSON and ROSEMARY CARSON, husband and wife (collectively, "Carson"), and JUZTWIN, INC., a California corporation ("JuAwin") (Carson and Jurtwin shall be referred to collectively herein as the "Members" or individually as a "Member"), with reference to the following facts: A. Carson filed Articles of Organization (the "Articles") for HB Auto I, LLC (the "Company"), a limited liability company under the laws of the State of California, with the California Secretary of State. B . Carson previously adopted and approved that certain Operating Agreement for the Company dated December 1, 2002 ("Original Agreement"), under the Beverly-Killea Limited Liability Company Act (the "Act"). C . The Members desire to amend and completely restate the Original Agreement as set forth in this Agreement, to allow for the admission of Jurtwin as a Member hereof NOW, THEREFORE, the Members by this Agreement set forth the operating agreement for the Company upon the terms and subject to the conditions of this Agreement. ARTICLE I ORGANIZATIONAL MATTERS 1.1 Name. The name of the Company shall be "HB Auto I, LLC." The Company may conduct business under that name or any other name approved by the Members. 1.2 Office and Agent. The Company shall continuously maintain an office and registered agent in the State of California as required by the Act. The principal office of the Company shall be at 3424 Via Oporto, Suite 204, Newport Beach, California, or such locationas the Members may determine. The registered agent shall be as stated in the Articles or as otherwise determined by the Members. 1.3 Business of the Company. Notwithstanding the purpose of the Company which is described in the Articles, the Company shall not, without the consent of all of the Members, engage in any business other than the following: 1.3.1 acquire that certain real property located at 7972 Edinger Avenue, Huntington Beach, California (the "Property"); 1.3.2 own, develop, operate, and lease the Property; and 1.3.3 such other activities directly related to the foregoing business as may be necessary or advisable in the reasonable opinion of the Member to further such business. Z:\REAL\858\33156\001\HB Auto I, LLC\A&R Operating Agt2.doc ARTICLE II CAPITAL CONTRIBUTIONS 2.1 Capital Contributions. The Members shall contribute to the capital of the Company cash in an amount necessary to fund the Company's business. The Members' names and addresses, capital contributions and ownership interests in the Company (the "Membership Interest") shall be listed on Exhibit "A". Except as provided in this Agreement, no Member may withdraw his or her capital contribution. 2.2 Additional Contributions. No Member shall be required to make any additional capital contributions to the Company. If the Members determine that the Company requires additional capital, notice shall be given to each Member of (i) the total amount of additional capital required and each Member's proportionate share thereof, (ii) the reason the additional capital is required, and (iii) the date (which shall be at least ten (10) business days after the mailing of the notice) when the additional capital must be contributed. Each Member may voluntarily contribute his proportionate share of the additional capital required within the time specified in the notice. If any portion of the required capital is not contributed by the Members, the Company may solicit any Members or one or more third parties for such contribution. 2.3 Capital Accounts. The Company shall establish an individual capital account ("Capital Account") for each Member. The Company shall determine and maintain each Capital Account in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv). 2.4 No Interest. The Company shall pay no interest on capital contributions of the Members. 2.5 Form of Return of Capital. If a Member is entitled to receive the return of a contribution, the Company may distribute in lieu of money, notes, or other property having a value equal to the amount of money distributable to such person. No Member shall have the right to receive any distribution in any farm other than money. 2.6 Company Financing. In the discretion of the Members, the Company may obtain a Company Loan (the "Company Loan") on terms and conditions and from a lender (the "Lender") approved by the Members to further the Company's business. ARTICLE III MEMBERS AND MANAGEMENT 3.1 Member Meetings. No annual or regular meetings of the Members are required to be held. However, if such meetings are held, such meetings shall be noticed, held and conducted pursuant to the Act. In any instance in which the approval of the Members is required under this Agreement, such approval may be obtained in any manner permitted by the Act. 3.2 Management of the Company by Members. The business, property and affairs of the Company shall be managed by the Members. Each Member shall have full, complete and exclusive authority, power, and discretion to manage and control the business, property and affairs of the Company, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Company's business, property and affairs. Z:\REAL\858\33156\001\HB Auto 1, LLC\A&R Operating Agt2.doc 3.2.1 Approval of the Members. Unless otherwise provided in this Agreement, approval of the Members shall mean the approval of both Members. 3.2.2 Agency Authority of Members. Notwithstanding the foregoing, any Member is authorized to (i) endorse checks, drafts, and other evidences of indebtedness made payable to the order of the Company for the purpose of deposit into the Company's accounts, (ii) to sign all checks, drafts, and other instruments obligating the Company in connection with the Company's business, and (iii) to sign all contracts and obligations on behalf of the Company; provided that such activities have been approved by both Members. 3.3 Powers of Members. 3.3.1 Powers. Without limiting the generality of Section 3.2, but subject to the restrictions of Section 3.3.2 and to the express limitations set forth elsewhere in this Agreement, the Members shall have all necessary powers to manage and carry out the purposes, business, property, and affairs of the Company, including, without limitation, the power to exercise on behalf and in the name of the Company all of the powers described in Corporations Code Section 17003, including, without limitation, the power to: (a) Acquire, purchase, own, sell, exchange, lease, or otherwise utilize or dispose of, or any part thereof, or any interest therein any property or other assets owned by the Company within the scope of the Company's business purpose described in Section 1.3 above; (b) Borrow money from any party including any Member or their respective Affiliates, issue evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend, or change the terms of, or extend the time for the payment of any indebtedness or obligation of the Company, and, subject to the limitations set forth in Section 3.3.2, secure such indebtedness by mortgage, deed of trust, pledge, security interest, or other lien on Company assets; (c) Guarantee the payment of money or the performance of any contract or obligation of any person if considered necessary for the conduct of the Company's business; (d) Sue on, defend, or compromise any and all claims or liabilities in favor of or against the Company; submit any or all such claims or liabilities to arbitration; (e) Retain legal counsel, auditors, management specialists and other professionals in connection with the operation of the Company business and to pay thereto such remuneration as the Members may determine; and (f) Raise additional capital by selling Membership Interests to existing Members or persons admitted as new Members at such price and on such terms as the Members may determine. New Membership Interests shall first be offered to existing Members pursuant to Section 2.2. 3.3.2 Limitations on Powers. No Member shall have authority hereunder to cause the Company to engage in the following transactions without first obtaining the approval of all Members: 3 z:\REAL\858\33156\0D1\HR Auto 1, LLC\A&R Operating Agt2.doc (a) Sell, exchange or otherwise dispose of all, or substantially all, of the Company's assets occurring as part of a single transaction or plan, or in multiple transactions over a six (6) month period, except in the orderly liquidation and winding up of the business of the Company upon its duly authorized dissolution; (b) Cause the Company to merge with another limited liability company or limited partnership; provided in no event shall a Member be required to become a general partner in a merger with a limited partnership without his express written consent or unless the agreement of merger provides each Member with the dissenter's rights described in the Act; (c) Cause the Company to merge with a corporation or a general partnership or other entity; (d) Dissolve the Company; (e) Confess a judgment against the Company; (f) File a petition in bankruptcy on behalf of the Company or enter into an arrangement among creditors of the Company; (g) Commit any act which would make it impossible to carry on the ordinary business of the Company; (h) Alter the primary purpose or business of the Company as set forth in Section 1.3; (i) Cause the Company to lend money to any Member; 0) Establish different classes of Members; (k) Cause the Company to undertake any other transaction described in this Agreement as requiring the vote, consent, or approval of the Members; and (1) Perform any act in contravention of this Agreement in its present form or as amended. 3.4 Performance of Duties, Liability of the Members. No Member shall be liable to the Company or to any other Member for any loss or damage sustained by the Company or any Member, unless the loss or damage shall have been the result of fraud, deceit, gross negligence, reckless or intentional misconduct, or a knowing violation of law by the Member. Each Member shall perform his management duties in good faith, in a manner he reasonably believes to be in the best interests of the Company and its Members, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. If a Member so performs the duties set forth above, he shall not have any liability by reason of having managed the Company. 3.5 Devotion of Time. Each Member shall devote whatever time or effort as he deems appropriate for the furtherance of the Company's business. 4 Z:\REAL\858\33155\001\HB Auto 1, LLC\A&R operating Agt2.doc 3.6 No Exclusive Duty to Company. The Members may have other business interests and may engage in other activities in addition to those relating to the Company. Neither the Company nor any Member shall have any right, by virtue of this Agreement, to share or participate in such other investments or activities of such Member or to the income or proceeds derived therefrom. The Members shall not be obligated to present any investment opportunity or prospective economic advantage to the Company or the other Members, even if the opportunity is of the character that, if presented to the Company or the other Members, could be taken by the Company or the other Members. The Members shall have the right to hold any investment opportunity or prospective economic advantage for their own account or to recommend such opportunity to persons other than the Company. The Members acknowledge that the Members and their Affiliates own and/or manage other businesses, including businesses that may compete with the Company and for the Members' time. The Members hereby waive any and all rights and claims which they may otherwise have against the other Members, and their officers, directors, shareholders, partners, members, managers, agents, employees, and Affiliates as a result of any of such activities. 3.7 Transactions With The Company. Subject to any limitations set forth in this . Agreement and with the prior approval of all Members, a Member may lend money to and transact other business with the Company. Subject to other applicable law, such Member has the same rights and obligations with respect thereto as a third party who is not a Member. 3.8 Members Are Not Agents. Pursuant to Section 3.2 and the Articles, the management of the Company is vested in the Members. Except as otherwise set forth in Section 3.2, no Member, acting solely in the capacity of a Member, is an agent of the Company nor does any Member have any power or authority to bind or act on behalf of the Company in any way, to pledge its credit, to execute any instrument on its behalf or to render it liable for any purpose. 3.9 Payments to Members. Except as specified in this Agreement, no Member or person or entity controlled by, controlling or under common control with a Member (each such person or entity is defined as an "Affiliate"), is entitled to remuneration for services rendered or goods provided to the Company. The Company shall reimburse the Members and their Affiliates for organizational expenses (including, without limitation, legal and accounting fees and costs) incurred to form the Company, prepare the Articles and this Agreement and any Amendments thereto, as approved by the Members. 3.10 Admission of Additional Members. Additional Members may be admitted only with the approval of all Members. Additional Members will participate in the management, "Net Profits", "Net Losses" (as such terms are defined in Section 4.1), and distributions of the Company on the terms specified by the Members. Exhibit "A" shall be amended upon the admission of each additional Member to set forth such Members name, capital contribution and Membership Interest in the Company. 3.11 Withdrawals or Resignations. No Member may withdraw, retire or resign from the Company without the approval of all Members. ARTICLE IV ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS 4.1 Definitions. When used in this Agreement, the following terms shall have the meanings set forth below: Z:\REAL\858\33156\001\AB Auto I, LLC\A&R Operating Agt2.doc 4.1.1 "Cash Flow" shall mean the excess, if any, of all cash receipts of the Company from all sources, in excess of expenses incurred by the Company in the conduct of the business of the Company. 4.1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, the provisions of succeeding law, and to the extent applicable, the Treasury Regulations. 4.1.3 "Company Minimum Gain" shall have the meaning ascribed to the term "Partnership Minimum Gain" in the Treasury Regulations Section 1.704-2(d). 4.1.4 "Member Nonrecourse Debt" shall have the meaning ascribed to the term "Partner Nonrecourse Debt" in Treasury Regulations Section 1.704-2(b)(4). 4.1.5 "Member Nonrecourse Deductions" shall mean items of Company loss, deduction, or Code Section 7O5(a)(2)(B) expenditures which are attributable to Member Nonrecourse Debt. 4.1.6 "Net Profits" and "Net Losses" shall mean the income, gain, loss, deductions, and credits of the Company in the aggregate or separately stated, as appropriate, determined in accordance with the method of accounting at the close of each fiscal year employed on the Company's information tax return filed for federal income tax purposes. 4.1.7 "Nonrecourse Liability" shall have the meaning set forth in Treasury Regulations Section 1.752-1(a)(2). 4.1.8 "Treasury Regulations" shall mean the final or temporary regulations that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code, and any successor regulations. 4.1.9 "Unreturned Capital" shall mean the total of a Member's Capital Contribution(s) to the Company, if any, pursuant to Sections 2.1 and 2.2, less any distributions to such Member made pursuant to Section 4.6.1. 4.2 Allocations of Net Profit and Net Loss. Net Profits and Net Losses shall be allocated to the Members in proportion to their Membership Interest. 4.3 Special Allocations. Notwithstanding Section 4.2, the Company shall make the following special allocations: 4.3.1 Minimum Gain Char eg back. If there is a net decrease in Company Minimum Gain during any fiscal year, each Member shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, in subsequent fiscal years) in an amount equal to the portion of such Member's share of the net decrease in Company Minimum Gain that is allocable to the disposition of Company property subject to a Nonrecourse Liability, which share of such net decrease shall be determined in accordance with Treasury Regulations Section 1.704-2(g)(2). Allocations pursuant to this Section 4.3.1 shall be made in proportion to the amounts required to be allocated to each Member under this Section 4.3.1. The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(f). This Section 4.3.1 is intended to comply with the minimum gain chargeback requirement contained in Treasury Regulations Section 1.704-2(f) and shall be interpreted 0 Z:\REAL\858\33156\001\HB Auto I, LLC\ASR Operating Agt2.doc consistently therewith. 4.3.2 Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt. If there is a net decrease in Company Minimum Gain attributable to a Member Nonrecourse Debt, during any fiscal year, each Member who has a share of the Company Minimum Gain attributable to such Member Nonrecourse Debt (which share shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(5)) shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, in subsequent fiscal years) in an amount equal to that portion of such Member's share of the net decrease in Company Minimum Gain attributable to such Member Nonrecourse Debt that is allocable to the disposition of Company property subject to such Member Nonrecourse Debt (which share of such net decrease shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(5)). Allocations pursuant to this Section 4.3.2 shall be made in proportion to the amounts required to be allocated to each Member under this Section 4.3.2. The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(4). This Section 4.3.2 is intended to comply with the minimum gain chargeback requirement contained in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith. 4.3.3 Nonrecourse Deductions. Any nonrecourse deductions (as defined in Treasury Regulations Section 1.704-2(b)(1)) for any fiscal year or other period shall be specially allocated to the Members in proportion to their Membership Interests. 4.3.4 Member Nonrecourse Deductions. Those items of Company loss, deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to Member Nonrecourse Debt for any fiscal year or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such items are attributable in accordance with Treasury Regulations Section 1.704-2(i). 4.3.5 Qualified Income Offset. If a Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4), (5) or (6), or any other event creates a deficit balance in such Member's Capital Account in excess of such Member's share of Company Minimum Gain, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such excess deficit balance as quickly as possible. Any special allocations of items of income and gain pursuant to this Section 4.3.5 shall be taken into account in computing subsequent allocations of income and gain pursuant to this Article IV so that the net amount of any item so allocated and the income, gain, and losses allocated to each Member pursuant to this Section 4.3.5 to the extent possible, shall be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of this Article IV if such unexpected adjustments, allocations, or distributions had not occurred. 4.4 Code Section 704(c) Allocations. Notwithstanding any other provision in this Article IV, in accordance with Code Section 704(c) and the Treasury Regulations promulgated thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value on the date of contribution. Allocations pursuant to this Section 4.4 are solely for purposes of federal, state and local taxes. As such, they shall not affect or in any way be taken into account in computing a Member's Capital Account or share of profits, losses, or other items of distributions pursuant to any provision of this Agreement. Z:\REAL\858\33156\001\HB Auto 1, LLC\A&R Operating Agt2.doc 4.5 Distribution of Cash Flow from Operations of the Company. Subject to applicable law and any limitations contained elsewhere in this Agreement, the Members shall cause the Company to make distributions of Cash Flow realized from the operations of the Company within ten (10) days after receipt thereof. Distributions shall be made in cash and shall be distributed to the Members in proportion to their Membership Interests. 4.6 Distribution of Cash Flow Uvon Dissolution of the Company. After determining that all the known debts and liabilities of the Company have been paid or adequately provided for, including liquidation and dissolution expenses, the remaining assets of the Company shall be distributed to the Members in accordance with the following priorities: 4.6.1 First, the assets shall be distributed to the Members, pro-rata in proportion to the Members respective Capital Accounts, until the Member's respective Unreturned Capital is zero; and 4.6.2 The remaining assets, if any, shall be distributed to the Members in proportion to their Membership Interests. ARTICLE V TRANSFER AND ASSIGNMENT OF INTERESTS 5.1 Transfer and Assignment of Interests. Except for a "Permitted Transfer" as described herein or a transfer of an "Economic Interest" pursuant to Section 5.3 below, no Member shall be entitled to transfer, assign, convey, sell, encumber or in any way alienate all or any part of his or her Membership Interest (collectively, "transfer") except with the prior approval of the other Member, which approval may be given or withheld in the sole discretion of the other Member. As used herein, a Permitted Transfer shall refer to a transfer to (i) an Affiliate of the transferor Member, (ii) another Member, or (iii) a transfer to the spouse or issue of the principal of a Member, or to a trust the primary beneficiaries of which are the principal of a Member, his spouse, or his or her issue. 5.2 Substitution of Members. A transferee of a Membership Interest shall have the right to become a substitute Member only if (i) consent of the Members is given in accordance with Section 5.1, (ii) such person executes an instrument satisfactory to the Members accepting and adopting the terms and provisions of this Agreement, and (iii) such person pays any reasonable expenses in connection with his or her admission as a new Member. The admission of a substitute Member shall not release the Member who assigned the Membership Interest from any Iiability that such Member may have to the Company. 5.3 Transfers of Economic Interest. 5.3.1 Conditions of Transfer. A Member may transfer all or any portion of or any interest or rights in the Member's profits and losses of the Company ("Economic Interest") if each of the following conditions ("Conditions of Transfer") is satisfied: (a) The transfer may be accomplished without registration, or similar process, under federal and state securities laws; (b) The transferee delivers to the Company a written agreement to be bound by the terms of Article VI of this Agreement; Z:\REAL\858\33156\001\HB Auto I, LLC\A&R Operating Agt2.8oc (c) The transfer will not result in the termination of the Company pursuant to IRC Section 708; (d) The transfer will not result in the Company being subject to the Investment Company Act of 1940, as amended; (e) The transferor or the transferee delivers the following information to the Company: (i) the transferee's taxpayer identification number; and (ii) the transferee's initial tax basis in the transferred Membership Interest; and (f) The transferor complies with the provisions set forth in Section 5.3.3. 5.3.2 Permitted Transfer. If the Conditions of Transfer are satisfied, the Member may transfer all or any portion of the Member's Economic Interest. The transfer of an Economic Interest pursuant to this Section 5.3 shall not result in the transfer of any of the transferor's other Membership rights. The transferee of the Economic Interest shall have no right to: (i) become a Member; (ii) exercise any Membership rights other than those specifically pertaining to the ownership of an Economic Interest; or (iii) act as an agent of the Company. 5.4 Buy -Sell. 5.4.1 If at any time (a) the Members fail to agree on any aspect of the ownership, management and/or development of the Property as described in Section 3.3.2 above which requires the approval of the Members, or (b) a Member dies or becomes permanently disabled, either Member ("Implementing Member") shall have the right, in addition to its other rights in this Agreement, at law or in equity, to elect to invoke the buy/sell provisions of this Section 5.4 (the "Buy/Sell Rights"). The Buy/Sell Rights shall be triggered by the Implementing Member serving on the other Member (the "Non -Implementing Member") a written notice (the "Buy/Sell Notice") which shall state the price and the other terms and conditions ("Purchase Terms"") offered by the Implementing Member to purchase the Membership Interest of the Non - Implementing Member. The Purchase Terms shall not include non -cash consideration or terms and conditions which are not within the control of or not capable of being exercised by the Non - Implementing Member (excepting financial inability). 5.4.2 The Non -Implementing Member shall have the option to elect by delivery of a written election notice ("Election Notice") to the Implementing Member within fifteen (15) days of receiving the Buy/Sell Notice to either (i) purchase all of the Membership Interest of the Implementing Member on the Purchase Terms; or (ii) to sell all of its Membership Interest to the Implementing Member on the Purchase Terms. 5.4.3 If the Non -Implementing Member fails to timely deliver the Election Notice to the Implementing Member, then the Non -Implementing Member shall be deemed to have elected to sell its interest to the Implementing Member upon the Purchase Terms. The Closing of any purchase and sale pursuant to the Buy/Sell Rights of this Section 6.4 shall occur within forty-five (45) days following the effective date of the last timely and validly delivered Election Notice given by the Non -Implementing Member. 5.4.4 The acquiring Member ("Remaining Member") shall assume all liabilities and obligations of the Company and agrees to protect, indemnify and defend with counsel reasonably satisfactory to the selling Member ("Former Member") and hold the Former Member Z:\REAL\858\33156\001\HB Auto I, LLC\A&R Operating Agt2.doc harmless from any liability or obligation of the Company arising from and after the date of the sale. As a condition precedent to any purchase hereunder, the Former Member must be released from monetary liability under any repayment guaranty given in connection with any financing for the Company or under any indemnity given a surety providing any bond for the Property. 5.4.5 At the closing, the Former Member shall deliver to the Company an instrument of transfer (containing warranties of title and no encumbrances) conveying the Former Member's Interest. The Former Member, the Company and the Remaining Member shall do all things and execute and deliver all papers as may be reasonably necessary fully to consummate such sale and purchase in accordance with the terms and provisions of this Agreement. 5.5 Right of First Refusal. 5.5.1 If a Member (a "Transferor") receives a bona fide written offer which the Member desires to accept (the "Transferee Offer") from any other person, including another Member (a "Transferee"), to purchase all or any portion of or any interest or rights in the Transferor's Economic Interest (the "Transferor's Interest") then, prior to any transfer of the Transferor's Interest, the Transferor shall give the other Members written notice (the "Transfer Notice") containing each of the following: (a) The Transferee's identity; (b) A true and complete copy of the Transferee Offer; and (c) The Transferor's offer (the "Offer") to sell the Transferor Interest to the other Members for consideration equal to that contained in the Transferee Offer or, if the consideration specified in the Transferee Offer is not specified as cash, then for consideration in U.S. dollars equal in value to the consideration specified in the Transferee Offer (the "Transfer Purchase Price"). 5.5.2 The Offer shall be and remain irrevocable for a period (the "Offer Period") ending at 11:59 p.m. local time at the Company's principal office, on the sixtieth (60th) day following the day the Transfer Notice is given to the other Members. At any time during the Offer Period, the other Members may accept the Offer by given written notice to the Transferor of its acceptance (the "Offeree Notice"). If one or more of the other Members accepts the Offer, the Offeree Notice shall fix a closing date (the "Transfer Closing Date") for the purchase, which shall not be earlier than ten (10) or more than sixty (60) days after the expiration of the Offer Period. 5.5.3 If one or more of the other Members accepts the Offer, the Transfer Purchase Price shall be paid on the Transfer Closing Date. 5.5.4 If no other Member accepts the offer (within the time and in the manner specified in this Section), then the Transferor shall be free for a period (the "Permitted Transfer Period") of thirty (30) days after the expiration of the Offer Period to transfer the Transferor Interest to the Transferee, for the same price and on the same terms and conditions as set forth in the Transfer Notice. The Transfer shall be subject, however, to the Conditions of Transfer (other than Section 5.3.1(f)). If the Transferor does not transfer the Transferor Interest within the Permitted Transfer Period, the Transferor's right to transfer the Transferor Interest pursuant to this Section shall cease and terminate. 10 Z:\REAL\858\33156\001\HB Auto I, LLC\A&R Operating Agt2.doc 5.5.5 Any transfer by the Transferor after the last day of the Permitted Transfer Period or without strict compliance with the terms, provisions, and conditions of this Section and the other terms, provisions, and conditions of this Agreement, shall be null and void and of no force or effect. ARTICLE VI ACCOUNTING, RECORDS, REPORTING BY MEMBERS 6.1 Books and Records. The books and records of the Company shall be kept in accordance with the accounting methods followed for federal income tax purposes. The Company shall maintain at its principal office in California all of the following: 6.1.1 A current list of the full name and last known business or residence address of each Member set forth in alphabetical order, together with the capital contributions, capital account and Membership Percentage Interest of each Member; 6.1.2 A copy of the Articles and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which the Articles or any amendments thereto have been executed; 6.1.3 Copies of the Company's federal, state, and local income tax or information returns and reports, if any, for the six (6) most recent taxable years; 6.1.4 A copy of this Agreement and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have been executed; 6.1.5 Copies of the financial statements of the Company, if any, for the six (6) most recent fiscal years; and 6.1.6 The Company's books and records as they relate to the internal affairs of the Company for at least the current and past four (4) fiscal years. 6.2 Reports. The Company shall cause to be filed, in accordance with the Act, all reports and documents required to be filed with any governmental agency. The Company shall cause to be prepared at least annually information concerning the Company's operations necessary for the completion of the Members' federal and state income tax returns. The Company shall send or cause to be sent to each Member within ninety (90) days after the end of each taxable year (i) such information as is necessary to complete the Members' federal and state income tax or information returns and (ii) a copy of the Company's federal, state, and local income tax or information returns for the year. 6.3 Bank Accounts. The Members shall maintain the funds of the Company in one or more separate bank accounts in the name of the Company, and shall not permit the funds of the Company to be commingled in any fashion with the funds of any other person. Any Member, acting alone, is authorized to endorse checks, drafts, and other evidences of indebtedness made payable to the order of the Company, but only for the purpose of deposit into the Company's accounts. 6.4 Tax Matters for the Company. Carson is designated as "Tax Matters Partner" (as 11 2:\REAL\858\33156\001\HB Auto 1, LLC\AIR Operating Agt2.doc defined in Code Section 6231), to represent the Company (at the Company's expense) in connection with all examination of the Company's affairs by tax authorities and to expend Company funds for professional services and costs associated therewith. 6.5 Tax Elections. The Members shall have the authority to make all Company elections permitted under the Code, including, without limitation, elections of methods of depreciation and elections under IRC Section 754. The decision to make or not make an election shall be at the Management Committee's sole and absolute discretion. 6.6 Title to Company Property. All real and personal property acquired by the Company shall be acquired and held by the Company in the Company's name. ARTICLE VII DISSOLUTION AND WINDING UP 7.1 Conditions of Dissolution. The Company shall dissolve upon the occurrence of any of the following events: 7.1.1 Upon the happening of any event of dissolution specified in the Articles or this Agreement; 7.1.2 Upon the entry of a decree of judicial dissolution pursuant to Section 17351 of the Corporations Code; 7.1.3 Upon the unanimous vote of the Members; 7.1.4 Upon the election of any Member at any time after the twentieth (20th) anniversary of the date of this Agreement; or 7.1.5 Upon the sale of all or substantially all of the assets of Company. 7.2 Winding Up. Upon the dissolution of the Company, the Company's assets shall be disposed of and its affairs wound up. The Company shall give written notice of the commencement of the dissolution to all of its known creditors. 7.3 Order of Payment of Liabilities Upon Dissolution. After determining that all the known debts and liabilities of the Company have been paid or adequately provided for, including liquidation and dissolution expenses, the remaining assets shall be distributed to the Members in accordance with the priorities established in Section 4.6 of this Agreement. 7.4 Limitations on Payments Made in Dissolution. Except as otherwise specifically provided in this Agreement, each Member shall be entitled to look only to the assets of the Company for the return of his or her positive Capital Account balance and shall have no recourse for his or her Capital Contribution and/or share of Net Profits ',against any other Member except as provided in Article V111. 7.5 Certificates. The Company shall file vvith the California Secretary of State a Certificate of Dissolution upon the dissolution of the Company and a Certificate of Cancellation upon the completion of the winding up of the Company's affairs. 12 Z:\REAL\858\33156\001\AB Auto I, LLC\A&R Operating Agt2.doc ARTICLE VIII INDEMNIFICATION 8.1 Indemnification of Agents. The Company shall indemnify any Member and may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a Member, officer, employee or other agent of the Company or that, being or having been such a Member, officer, employee or agent, he or she is or was serving at the request of the Company as a manager, director, officer, employee or other agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to hereinafter as an "agent"), to the fullest extent permitted by applicable Iaw in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit. ARTICLE IX INVESTMENT REPRESENTATIONS Each Member hereby represents and warrants to, and agrees with, the Members and the Company as follows: 9.1 Preexisting Relationship or Experience. He has a preexisting personal or business relationship with the Company or one or more of its controlling persons, or by reason of his business or financial experience, or by reason of the business or financial experience of his financial advisor who is unaffiliated with and who is not compensated, directly or indirectly, by the Company or any affiliate or selling agent of the Company, he is capable of evaluating the risks and merits of an investment in the Company and of protecting his own interests in connection with this investment. He is experienced in financial and business matters generally, and in business investment matters specifically, understands the risks involved in investing in the Company including the risk that he could lose all or part of his investment in the Company, and he has the capacity to protect his interests in connection with investing in the Company. He has had the opportunity to conduct all due diligence he has deemed necessary or appropriate, and has received all information and documents he has requested from the other Members and/or the Company concerning the other Members, the Company and its proposed business. He has received no guaranties or assurances from the other Members and/or the Company or any other person concerning profitability of the Company's business, and understands that all projections provided by the other Members or the Company are estimates only based on numerous assumptions that may or may not turn out to be accurate projections of future events. 9.2 No Advertising. He has not seen, received, been presented with, or been solicited by any leaflet, public promotional meeting, article or any other form of advertising or general solicitation with respect to the sale of the Membership Interest. 9.3 Investment Intent. He is acquiring the Membership Interest for investment purposes for his own account only and not with a view to or for sale in connection with any distribution of all or any part of the Membership Interest. No other person will have any direct or indirect beneficial interest in or right to the Membership Interest. 9.4 Authority of Entity. Each Member who is not an individual further represents and warrants that (i) it is a corporation, general partnership, trust, or other entity duly organized and in good standing under the laws of its state of organization, (ii) the execution of this Agreement 13 Z:\REAL\858\33156\001\AB Auto I, LLC\A&R operating Agt2.doc by such Member and its delivery to the Company and the other Members have been duly authorized by its board of directors or any other applicable authorizing boards or committees, and this Agreement constitutes a valid and binding obligation of such Member enforceable in accordance with its terms. ARTICLE X MISCELLANEOUS 10.1 Counsel to the Company. Counsel to the Company may also be counsel to any Member or any Affiliate of a Member. The Members may execute on behalf of the Company and the Members any consent to the representation of the Company that counsel may request pursuant to the California Rules of Professional Conduct or similar rules in any other jurisdiction ("Rules"). The Company has initially selected Palmieri, Tyler, Wiener, Wilhelm & Waldron, LLP ("Company Counsel") as legal counsel to the Company. Each Member acknowledges that Company Counsel does not represent any Member in the absence of a clear and explicit agreement to such effect between the Member and Company Counsel, and that in the absence of any such written agreement Company Counsel shall owe no duties directly to a Member. Notwithstanding any adversity that may develop, in the event any dispute or controversy arises between any Members and the Company, then each Member agrees that Company Counsel may represent either the Company or such Member in any such dispute or controversy to the extent permitted by the Rules, and each Member hereby consents to such representation. Each Member further acknowledges: (a) that Company Counsel has represented the Members in the past on various matters, (b) that Company Counsel has represented the interests of the Members in connection with the formation of the Company and the preparation and negotiation of this Agreement and (c) while communications with Company Counsel concerning the formation of the Company and its Members may be confidential with respect to third parties, no Member has any expectation that such communications are confidential with respect to the other Members. 10.2 Complete Agreement. This Agreement and the Articles constitute the complete and exclusive statement of agreement among the Members with respect to the subject matter herein and therein and replace and supersede all prior written and oral agreements among the Members. To the extent that any provision of the Articles conflict with any provision of this Agreement, the Articles shall control. 10.3 Binding Effect. Subject to the provisions of this Agreement relating to transferability, this Agreement will be binding upon and inure to the benefit of the Members, and their respective successors and assigns. 10.4 Interpretation. All pronouns shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the context in which they are used may require. All headings herein are inserted only for convenience and ease of reference and are not to be considered in the interpretation of any provision of this Agreement. Numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement unless otherwise expressly stated. In the event any claim is made by any Member relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular Member or his or her counsel. 10.5 Severability. If any provision of this Agreement or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Agreement or the application of such provision to persons or circumstances other than those to which it is held 14 Z:\REAL\858\33156\001\HB Auto I, LLC\A&R Operating Agt2.doc invalid shall not be affected thereby. 10.6 Notices. Any notice to be given or to be served upon the Company or any party hereto in connection with this Agreement must be in writing (which may include facsimile) and will be deemed to have been given and received when delivered to the address specified by the party to receive the notice. Such notices will be given to a Member at the address specified in Exhibit "A" hereto. Any party may, at any time by giving five (5) days' prior written notice to the other Members, designate any other address in substitution of the foregoing address to which such notice will be given. 10.7 Amendments. All amendments to this Agreement will be in writing and signed by 0 of the Members. 10.8 Multiple Counterparts. This Agreement may be of which shall be deemed an original, but all of which shall constitute one and the same instrument. 10.9 Arbitration of Disputes. For purposes of this Section 10.9, "Disputes" shall mean all unresolved claims, counterclaims, disputes, controversies, and other matters in question between the Members arising out of or relating to this Agreement or the breach thereof. (a) Arbitration. Unless the parties mutually agree otherwise, disputes not resolved by the parties shall be resolved in Orange County, California by arbitration through the Judicial Arbitration and Mediation Service ("JAMS") or other alternative dispute resolution agency mutually acceptable to the parties, before a retired judge or justice of the California Courts. Such arbitration shall be in accordance with the rules of the American Arbitration Association currently in effect. (i) Within fifteen (15) business days following the forty-five (45) day period allowed for mediation pursuant to Section 10.9(a) above, the initiating party shall file a demand for arbitration with the other party and with the American Arbitration Association. In no event shall such demand for arbitration be made after the date when institution of legal or equitable proceedings based on such Dispute would be barred by the applicable statute of limitations. (ii) The party filing a notice of demand for arbitration must assert in the demand all Disputes then known to that party on which arbitration is permitted to be demanded. (iii) The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof (iv) In the event of any arbitration hereunder or any action or proceeding to enforce any arbitration award hereunder, the prevailing party, as determined by the arbitrator or arbitrators or court, shall be entitled to recover from the other party all costs and expenses, including court costs, arbitration fees and reasonable attorney's fees, incurred by the prevailing party in connection with such arbitration, action or proceeding. (v) The parties mutually promise and agree that, in disputes which they have agreed to arbitrate, they shall, before the hearing, make discovery and disclosure of all matters relevant to the subject matter of such dispute, to the extent and in the manner provided by Section 1283.05 of the California Code of Civil Procedure. All questions 15 Z:\REAL\858\33156\001\HB Auto 1, LLC\A&R Operating Agt2.doc that may arise with respect to the fulfillment of or the failure to fulfill this obligation shall be referred to an arbitrator who is an attorney for his or her determination, which shall be final and binding. This obligation shall be specifically enforceable. 10.10 Attorney Fees. In the event that any dispute between the Company and the Members or among the Members should result in litigation or arbitration, the prevailing party in such dispute shall be entitled to recover from the other party all reasonable fees, costs and expenses of enforcing any right of the prevailing party, including without limitation, reasonable attorneys' fees and expenses, all of which shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. Any judgment or order entered in such action shall contain a specific provision providing for the recovery of attorney fees and costs incurred in enforcing such judgment and an award of prejudgment interest from the date of the breach at the maximum rate allowed by law. For the purposes of this Section: (a) attorney fees shall include, without limitation, fees incurred in the following: (1) postjudgment motions; (2) contempt proceedings; (3) garnishment, levy, and debtor and third party examinations; (4) discovery; and (5) bankruptcy litigation and (b) prevailing party shall mean the party who is determined in the proceeding to have prevailed or who prevails by dismissal, default or otherwise. IN WITNESS WHEREOF, all of the Members of HB Auto I, LLC, an California limited liability company, have executed this Agreement, effective as of the date written above. MEMBERS: /dd Carson &AMeVW, osemary Cars "Carson" JUZTWIN, INC., a California corporation By Its:C�,.� 16 Z.%REAL\858\33156\001\AS Auto I, LLC\A&R Operating Agt2.doc EXHIBIT "A" MEMBERSHIP INTERESTS AND ADDRESSES OF MEMBERS Member's Member's Name Member's Address Membership Interest Todd and Rosemary Carson 3424 Via Oporto, Suite 204 50% Newport Beach, California 92663 Jurtwin, Inc. 6725 Mesa Ridge Road 50% Suite 218 San Diego, California 92121 17 Z:\REAL\858\33156\001\HB Auto I, LLC\A&R Operating Agt2.doc Member's Capital Contribution € f i 716=149 OIL LOS gum',,ro;. I � 4f w s, Y l ♦V # %z n i � tC� � ] � i hit £ � ,f tr" .�" `-✓': rlAepr -. TABLE OF CONTENTS 1.0 INTRODUCTION...................................................... I 1.1 Purpose and Scope of Work ........................................ 1 1.2 Involved Parties/Information Sources ................................ I 2.0 PRINCIPAL FINDINGS ................................................. 2 2.1 Summary of Operations and Environmental Discrepancies .............. 2 2.2 Summary of Building Materials and Environmental Discrepancies ....... 3 2.2.1 Asbestos...................................................3 2.2.2 Building Materials Presumed to Contain Friable Asbestos ......... 5 2.2.3 Building Materials Presumed to Contain Non -Friable Asbestos ..... 5 2.2.4 Poly -Chlorinated Biphenyl (Pcb) .............................. 6 3.0 SITE OVERVIEW......................................................6 3.1 Location........................................................6 3.2 Adjacent Properties...............................................6 3.3 Site Description .................................................. 6 4.0 SITE HISTORY AND OPERATIONS ..................................... 7 4.1 Building Permit History ........................................... 7 4.2 Operations......................................................7 4.3 Operational Permits, Manifests, MSDS ............................... 7 5.0 ENVIRONMENTAL SETTING .......................................... 8 5.1 Regional Physiographic............................................ 8 5.2 Sitellydrogeology ...............................................8 5.3 Soil Conditions .................................................9 5.4 Groundwater Conditions .......................................... 9 6.0 RESULTS OF INVESTIGATIONS.......................................10 6.1 Site Inspection Observations ....................................... 10 6.2 Regulatory Agency Contacts ....................................... 10 6.3 Personal Interviews, Site Records Review ............................ 12 6.4 Historical Aerial Photograph Review ............................... 12 6.5 Synopsis of Previous Environmental Investigations .................... 13 6.6 Summary of Government Records Search ........................... 13 7.0 DISCUSSION OF INVESTIGATION.....................................15 8.0 CONCLUSIONS......................................................18 8.1 Areas of No Apparent Concern .................................... 18 8.2 Areas of Further Concern ......................................... 18 TABLE OF CONTENT'S (continued) 9.0 RECOMMENDATIONS................................................ 18 9.1 Areas of No Action ............................................... 18 9.2 Further Investigation ............................................. 18 10.0 LIMITATION S....................................................... 18 11.0 REFERENCES ........................................................ 20 11.1 Published References ............................................. 20 11.2 Record of Personal Communications ................................ 20 12.0 APPENDICES........................................................21 12.1 Site Location Map...............................................22 12.2 Currentl Aerial Photograph ....................................... 24 12.3 Topographic Map...............................................26 12.4 Environmental Features..........................................28 12.5 California Generator Number ..................................... 30 12.6 Waste Oil & Used Oil Filter Disposal Samples ........................ 32 12.7 Underground Tank Removal "No Further Action" Closure Letter ...... 36 12.8 Hydraulic Lift Unit Storage "Tank Exemption ........................ 38 12.9 Letter from Magnetek ............................................ 41 12.10 Environmental First Search Report ................................. 44 12.11 Certification...................................................106 12.12 Resume.......................................................108 ii November 9, 2004 S&S Job 40004019 LENDER-CILIENT-PRIVILEGED WORK PRODUCT Mr. James P. Mulvihill, Vice President PACIFIC SOUTHWEST REALTY SERVICES, INC. 7071 Convoy Court, Suite 300 San Diego, CA 92111 RE: Phase I Environmental Site Assessment Update 7872 Edinger Avenue Huntington Beach, CA 92647 1.0 INTRODUCTION This report presents the results of our Phase I Environmental Site Assessment, Update performed on the subject property known as 7872 Edinger Avenue in the City of Huntington Beach, County of Orange, California. Authorization for this assessment performed on the subject property was given by Mr. James P. Mulvihill for Pacific Southwest Realty Services, Inc. The site inspection was performed on Monday, November 8, 2004. This Phase I Report Updates a prior Phase I Environmental Report Performed by this Assessor on the subject property in September 2002- Much of that report remains in this report for continuity. Report Organization This report is divided into sections which discuss the field investigation, government records search, regulatory agency contacts and recommendations. Appendices follow the text. 1.1 Purpose and Scope of Work The purpose of a Phase I Environmental Site Assessment Update is to discover any past or present environmentally -related events which may negatively impact the subject property since the prior Phase I. This includes a search of all available records concerning the property as pertinent and the performance of an on -site inspection. Procedures followed in the performance of a Phase I Environmental Site Assessment Update include executing a government records search, researching permits for the site where prudent, interviewing the tenants of the subject property or neighbors in close proximity, studying aerial photographs, interviewing personnel at the appropriate regulatory agencies and conducting a physical survey of the subject property. 1.2 Involved Parties/Information Sources This S&S Commercial Environmental Services, Inc., Phase I Environmental Site Assessment Update is produced through the efforts of a California Registered Environmental Assessor working in conjunction with Federal, State and county 1 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 regulatory agencies. Track Info Services, LLC maintains a comprehensive, computerized data base of pertinent, environmentally -related records, referred to as an Environmental First Search Report, which is updated on a regular basis. This data base is researched for Category I, lI, III and IV sites within a mile of the subject property and a report is generated based upon the available regulatory records. The report is reviewed for sites which might impact the subject property and an inquiry is directed toward those sites within the 2,000 foot hazardous waste disclosure zone. The field investigation includes a site assessment, observations of the neighboring facilities and verification of permits and building records, as necessary. This review and inspection was performed by Stephen A. Quartararo, California Registered Environmental Assessor, California General Engineering Contractor, Hazardous Materials Certified, California Certified Asbestos Contractor and ASPE Certified Professional Estimator. 2.0 PRINCIPAL FINDINGS 2.1 Summary of Operations and Environmental Discrepancies Former Operations - The subject property was agricultural in use or vacant until development of a tire store in 1967. From 1967 until June 2004, the subject property was operated as a tire store with two different names under Goodyear Tire Company. Since August of 2004, the subject property has continued to operate as a tire store under the name of Big O Tires. There are hydraulic lift units on -site with underground reservoirs and a clarifier. The clarifier has only had water and floor wash down dirt and minor oily waste and is not considered a problem. The inground hydraulic lift units are not considered a problem by the State of California as shown in the letter of exemption in the appendix. There was an underground waste oil tank behind the building which was removed in 1987. The removal was accomplished after issuance of a permit and was inspected by the County of Orange Health Care Agency. There was one sample collected under the former waste oil tank which did not identify a problem. The file was closed. As a result of the conclusions to the 2002 Phase I, a request for a closure or "no further action" letter was sent to the Orange County Health Department and the same was issued. A copy is in the appendix. Current Operations - The subject property remains a tire store. There is some waste oil used coolant and used oil filters generated. This waste oil is collected and stored in a marked aboveground container for pickup and recycling by a registered waste hauler. A copy of a recent invoice and pickup sheet is in the appendix along with a 2 Subject Property: 7872 PdingerAvenue Huntington Beach, CA 92647 log for the coolant. Neighboring Properties - To the east and south of the subject property is a vacant parcel owned by the City of Huntington Beach. To the west is a financial institutions branch office and to the north a large retail mall. No significant environmental issues regarding operations formerly and currently on - site were noted. The operations on the subject property were in substantial compliance with applicable rules and regulations and there were no significant neighboring environmental issues noted. 2.2 Summary of Building Materials and Environmental Discrepancies There are minor amounts of presumed friable and non -friable asbestos -containing building materials on the site in the form of wallboard mud and roof mastic materials. Should they be present, they are in good condition and are not expected to be damaged in the business use of the building. There are no remaining flourescent light fixtures with ballasts suspected of containing (Pcb) on -site as all of the flourescent lights were changed out during the summer of 2004 in preparation for the current operations. A summary of the current regulatory status of asbestos and Pcb precedes further description. 2.2.1 Asbestos Background - Asbestos is a natural occurring mineral fiber utilized in a multitude of building material products due to its high tensile strength and excellent fire resistant properties. The EPA has defined asbestos materials as being either friable or non - friable materials. Friable material is defined as being easily broken or crushed by hand pressure (e.g., soft acoustical ceilings or blown -on fireproofing). Non -friable asbestos is generally found in pre -manufactured products that bind the asbestos in an adhesive material, such as roofing felts, floor tile, transite pipe and mastics. This is significant, due to the ability to create a fiber release and cause human exposure during normal activities. The EPA currently does not require the removal of asbestos -containing materials that do not present a problem for human exposure. Most friable asbestos -containing materials were banned in building materials by 1978. In October 1995, a new FED-OSIL4 ruling became effective which redefined building materials perceived as asbestos -containing into four classes of work and modified the way in which these asbestos -containing materials are handled. 3 Subject Property • 7872 Edinger Avenue Huntington reach, CA 92647 Under this ruling, "thermal system insulation and sprayed -on or troweled on or otherwise applied surfacing materials" installed before 1980 are considered PACM (presumed asbestos -containing material) unless sampled and identified by a certified individual as to asbestos content. These materials are considered high risk materials for abatement and their removal is classified under Class I removal activities. Other building materials such as "floor or ceiling tiles, siding, roofing, transite panels [floor sheeting, floor or roof mastics]" are also considered PACM (presumed asbestos -containing material) unless sampled and identified by a certified individual as to asbestos content but are considered low risk materials for abatement and their removal is classified under Class II, III and IV removal and repair and maintenance operations. Significant under these new regulations is the deletion of the category of "Small Scale Short Term Duration" removal activities which regularly allowed Class 1, II, III and IV activities to proceed with less regulatory oversight. Also significant under these regulations is the definition for identified asbestos - containing materials. As stated above, building materials with specific characteristics which were installed during specified time periods are called Presumed Asbestos - Containing Materials (PALM). Once these materials have been identified as containing asbestos, they are referred to asfriable or non friable Regulated Asbestos - Containing Materials (RACM). In July 1996, CAL -OSHA adopted the FED -OSHA guidelines as part of California law subject to some of the more stringent requirements pre-existing in California under Prop 65, the Conelly Bill and various other requirements or legislation passed by the California legislature. Under the NESHAPS laws of 1976 and as later amended, asbestos does not have to be removed from a facility until such time as it undergoes major renovations or is demolished. Until that time, the present emphasis by the EPA is to recommend repair of any damaged areas and management of the asbestos -containing materials. Prior to any renovation work being done involving asbestos -containing materials of 260 lineal feet or 160 square feet in area, the local branch of the EPA must be notified. Prior to the demolition of any building or house, mandatory bulk sampling must be accomplished and, if asbestos is present, notification must be made to the local branch of the EPA and Air Quality Management District. In California, for the removal of any asbestos -containing materials greater than 0.1 % by weight, notifications must also be made to CAL -OSHA and a licensed contractor 4 Subject Property• 7872 Edinger Avenue Huntington Beach, CA 92647 with an asbestos certification is required for any work which exceeds 100 square feet. 2.2.2 Building Materials Presumed to Contain Friable Asbestos Friable asbestos -containing building materials were banned for manufacture and sale in the United States in 1978 and all stocks remaining on the shelves are presumed to have been used up by 1980. As the building was constructed in 1967, there are minor amounts of presumed friable asbestos -containing materials on -site as follows: Wallboard Mud - Per Fed OSHA, all wallboard mud used prior to 1980 is presumed to contain a small amount of friable asbestos. There are minor office walls in one area of the building. The wallboard mud used to smooth the corners of the walls or seams is presumed to contain friable asbestos. This material is in good condition and painted. There are no current issues for the subject property. Prior to such time as this material is disturbed, bulk sampling should be done. If asbestos is identified, the affected material should be handled in accordance with regulations in effect at that time. There is no recommendation for further investigation or bulk sampling at this time. 2.2.3 Building Materials Presumed to Contain Non -Friable Asbestos Asbestos was never banned from use in building materials such as floor tile, cement - based products and roofing materials, as these materials were considered non friable by the EPA and not potentially a great hazard. After friable asbestos was banned, significant labeling requirements went into effect for the non -friable asbestos - containing materials and many substitutes became available. Asbestos -containing flooring materials and mastic were used less and less in construction after 1978 and, by 1984, their use in buildings constructed in the United States was nearly non- existent due to the labeling requirements and potential liability to both the manufacturer and real estate developer. Flooring Materials - The floors are bare concrete with ceramic tile. There were formerly some 12" x 12" floor tiles over concrete in the offices and lobby. Those have been removed. Roof Mastic/Sealants - While never banned from use in roofing materials, asbestos was voluntarily removed from the roof mastic/sealants by their major manufacturers _ in 1989 due to labeling and liability concerns. The building roof has mastic around the penetrations. As such, the roofing mastic materials are presumed to contain non - friable asbestos. The roof is in good condition and out of the way of the occupants of the building. Prior to reroofing or building demolition, bulk sampling should be done per NESHAPS and the samples tested for asbestos. If asbestos is identified, the affected materials should be handled in accordance with regulations in effect at that time. There is no recommendation for bulk sampling at this time. 5 Subject t Property • 7872 Edinger Avenue Huntington Beach, CA 92647 2.2.4 Poly -Chlorinated Biphenyl (Pcb) Pcb was a material widely used in the coolant oil of electrical equipment from the 1920s to the 1970s. Pcb were banned from use in most electrical equipment in the latter part of the 1970s and 1980s, after it was determined that pcb could cause health problems if ingested and cancer when they underwent a chemical change as a result of a fire or explosion. Small amounts of pcb were used as a coolant in fluorescent light fixture ballasts until 1978, at which time they were banned. Fluorescent light fixtures from 1979 forward were all labeled with a "no pcb" label. There should not be any pcb in any of the utility transformers on or near the site, according to Southern California Edison. Due to the summer 2004 remodel, there are no fluorescent lights remaining in the building that are expected to have been installed prior to 1978 in the building on the subject property. . 3.0 SITE OVERVIEW 3.1 Location The subject property, 7872 Edinger Avenue, is located on the southeast corner of Parkside and Edinger Avenue just west of Beach Boulevard across Edinger to the south of the Huntington Beach Mall in the City of Huntington Beach, County of Orange, California. The land use in the general area is a mixture of residential and commercial uses. 3.2 Adjacent Properties East of the subject property is a vacant lot and then a branch for Wells Fargo Bank. South of the subject property is a vacant lot and then residential structures. West of the subject property is Parkside Street and then a Bank Branch for Washington Mutual. North of the subject property across Edinger Avenue is the Huntington Beach Mall. There were no emissions noted from any of the adjoining or adjacent properties to indicate migration of contaminants to the subject property. 3.3 Site Description The subject property is a masonry tire service store with an office, customer lobby with internet access and bathrooms. There are large auto service bay doors on the north and south sides of the building and a wide open interior with hydraulic lift equipment and miscellaneous tire and brake changing machines. t; 6 Subiect Property: 7872 Edinger Avenue Huntington Beach, CA 92647 In the southwest rear of the building is an aboveground vessel for the collection of used oil for recycling. In front of the building is a clarifier inline to the public sewer to keep dirt and oil dust out. There were no underground tanks noted nor operations which would be considered a problem for long-term contamination. 4.0 SITE HISTORY AND OPERATIONS 4.1 Building Permit history The building permit history was formerly researched at the City of Huntington Beach Community Development offices. The first permits for the subject property were in 1967 for a tire service building. There were permits for renovations and additions to the building but nothing significant. There was no indication that the subject property ever was a filling station. There was an underground waste oil tank in the ground until 1987 when it was removed, the soil sampled and the file closed. 4.2 Operations Former Operations - Based upon a former review of aerial photographs dating back to 193 8 and a review of the records, the subject property was a vacant or agricultural parcel of land until 1967, when the current building was constructed for a tire service use. Uses of the subject property have only been tire and brake service with minor tuneups and oil changes. Current Operations - The subject property continues to be occupied by a tire service use. There are only minor amounts of California regulated materials being generated on the subject property in the form of waste oil, tires, used filters and spent coolant. 4.3 Operational Permits, Manifests and Material Safety Data Sheets (MSDS) EPA ID Number - An EPA ID number identifies a facility to the State and Federal governments as a hazardous waste generator. There were no significant amounts of regulated hazardous materials generated on the subject property that required an RCRA EPA number. There are no RCRA EPA ID numbers for the subject property. There is a CA EPA ID number for the disposal of the waste oil. A picture is in the appendix and it is on the representative manifest in the appendix. 7 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 Hazardous Waste Manifests - A hazardous waste manifest file is maintained when hazardous materials are transported and disposed of from a site. The subject property disposes of small quantities of used oil, used tires, used oil filters and spent coolant. This material is transported by licensed haulers using legal manifests. Copies of representative manifests and logs are in the Appendix. There is no manifest yet for oil filters as there has not been a need for a pickup since the store opened in August. Air Emissions - The South Coast Air Quality Management District issues permits for sites that are emitting hazardous waste into the atmosphere from their operations. According to Ms. Patty Olsen, Customer Service Representative, there are no active permits or applications for the subject property. Material Safely Data Sheets - Material Safety Data Sheets are required for chemicals and products being used in businesses which may be of a hazardous nature. There are MSDS on file in the offices on -site. 5.0 ENVIRONMENTAL SETTING 5.1 Regional Physiographic The site is located on the coastal plain of Orange County, a part of the Los Angeles Basin, at an elevation approximately 25 feet above sea level, according to the US Geological Survey. Areas adjacent to the subject property slope to the north. The area is underlain by a Miocene Age structural depression containing a thick sequence of continental and marine sediments ranging in age from Recent to Tertiary (Department of Water Resources, 1967). The site lies within the Newport Inglewood Fault System (Jennings, 1977). Fault zone deposits are typically discontinuous, folded, fractured or otherwise deformed. The Orange County Coastal Plain is underlain by a sedimentary trough which began forming in the Miocene time. The Miocene to Late Pleistocene sediments consist of interbedded marine and non -marine sequences. The Late Pleistocene to Recent deposits are continental alluvial and fluvial sediments which represent changing depositional environments interrupted by erosional events. The principal geologic unit of interest in the area is the recent alluvium consisting of unconsolidated gravel, sand and silt. 5.2 Site Hydrogeology The sedimentary sequence underlying the Orange County Coastal Plain forms an alternating series of aquifers and intervening confining layers to a depth in excess of 1,500 feet below sea level (DWR, 1976). The various aquifers have been extensively developed, with the principal well completion depths occurring between 100 and 800 feet bls (below surface) (USGS, 1959, and OCWD, personal communication). The quality ofthe groundwater within these aquifers varies from brackish (in the shallow, semiperched zone) to naturally fresh groundwater of the Recent and Pleistocene Subject P"ery: 7872 Edinger Avenue Huntington Beach, CA 92647 deposits to saline connate water of the deepest Tertiary deposits (USGS, 1959). The Talbert Aquifer and the semi -perched zone are the principal hydrogeologic units of interest in this investigation (OCWD, 1982). The uppermost water -bearing unit has.been termed the "semi -perched zone" by the USGS. Groundwater in the semi -perched zone occurs in recent deposits of sand and silty sand within 10-50 feet of the land surface. It is unconfined and is present throughout most of the Orange County Coastal Plain. The USGS has reported that the semi -perched zone is almost everywhere separated from the underlying freshwater aquifers by layers of silt and clay. Since the 1930s, the piezometric surface of the underlying freshwater aquifers has been drawn down below the water table of this shallow body by continued heavy withdrawals, causing this shallow body to become artificially perched in some areas (USGS, 1959, and OCWD, 1986). The first productive aquifer underlying the semi -perched zone, from 50-100 feet bls, is the Talbert Aquifer. It is the shallowest of the good quality, water -bearing zones. The Talbert Aquifer occurs as a two to four mile wide zone, which roughly follows the present Santa Aria River and extends from the Pacific Ocean inland to the Santa Ana Canyon. It occurs under confined conditions throughout the Tustin Plain and consists of poorly consolidated gravels and sands. The confining upper layers consist of relatively impermeable silts and clays. The Talbert Aquifer has been estimated to be approximately 50-75 feet thick (OCWDF, 1982). Sea water intrusion occurs near the coast, but generally does not extend past the Newport -Inglewood Fault Zone (DWR, 1967). Fault zone hydrology is highly variable. The Talbert Aquifer is in turn underlain by the Middle and Lower Aquifers. 5.3 Soil Conditions There were no soil reports available in the City of Huntington Beach files previously researched. There are no indicators of soil contamination based upon the past activities of the subject property nor in the record of underground tank leaks in the appendix. There was some soil contamination from the waste oil, that was observed to have been removed and the site was closed after a soil sample under the former tank was collected. A closure letter has been written. Soils are expected to generally consist of interbedded silty clays, sands and clayey silts. 5.4 Groundwater Conditions The area of the subject property is characterized by scattered zones of perched water underlain by the more continuous Talbert Aquifer. 9 Subject Property 7872 Edinger Avenue Huntington Peach, CA 92647 Perched groundwater may be encountered as shallow as 15 feet below ground surface in the area. The first water is from surface runoff which has percolated through the soil. This water is not used for drinking water. There is no evidence in the records researched concerning the subject property that the groundwater is contaminated under the subject property. 6.0 RESULTS OF INVESTIGATION 6.1 Site Inspection Observations Overall, the subject property has generally been kept clean and maintained. The clarifier is clean and is not expected to have had any significant regulated materials run through it over time. There were no aboveground or underground storage tanks or breather pipes noted on the subject property. The surrounding properties appear to be free of any problems which would be a significant source of migratory contamination to the subject property. There is nothing environmentally significant to report concerning the subject property. 6.2 Regulatory Agency Contacts 6.2.1 City of Huntington Beach Water Department Ms. Linda Daily, Senior Department Analyst with the Huntington Beach Public Works Department, Water Division, was formerly contacted concerning the source of the water to the subject site. She said that 70% of the water is obtained from nine wells that range from 200-1,020 feet deep, with the average well pumping water from an 800 foot depth. She also said that the other 30% of the water is purchased from the Metropolitan Water District. All of the water is chlorinated and filtered at the well head, fluoridated and put into the distribution system. Some of the water goes into a reservoir for storage. She finally stated that all water in the system meets the State of California's drinking water standards. 6.2.2 California Department of Conservation, Division of Mines and Geology The California Department of Conservation, Division of Mines and Geology, was formerly contacted regarding the proximity of active earthquake faults. According to Mr. Jerry Tremain, Geologist, the subject property is in an area adjacent to a special studies zones pursuant to the Alquist-Priolo Earthquake Fault Rupture Hazard Zones Act of 1972, which mandated studies of active faults in California. An active fault zone is described by the State Mining and Geology Board as "one which had 10 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 surface displacement within the Holocene time (about the last 11,000 years)." 6.2.3 California Division of Oil and Gas A former review of the 1992 State of California Division of Oil and Gas Munger Maps #204 and #W-66 indicated that the subject property is north of the Huntington Beach Oilfield and there were active wells and dry holes drilled within a one mile radius south of the subject property. There is no indication that any of the wells were surface -drilled into the subject property. 6.2.4 Southern California Edison Company Mr. Don Garza, Service Planner, was formerly contacted concerning Pcb-containing oil in pole and pad -mounted transformers in the Southern California Edison system. He said that it is unlikely that any pcb are present in the transformers, as they were never specified after 1970. He stated that Southern California Edison would be happy to test any transformers for a fee. 6.2.5 South Coast Air Quality Management District (SCAQMD) Ms. Patty Olsen, Customer Service Clerk, was formerly contacted regarding air emission permits on the property. She stated that there are no active permits or applications for the subject property. 6.2.6 Department of Health Services, State Department of Radon Mr. David Quinton, Environmental Health Specialist with the State Department of Radon, was contacted regarding the presence of radon in the area. He said that the most recent studies done predicted less than 2.4% of homes and less than 0.04% of the schools in the State of California would be over the EPA's action level of four picocuries/liter. He stated that this study was performed in existing homes and that there was no effective methodology of correlating soil samples to houses. Mr. Quinton explained that much is dependant upon the soil under a residence and the type of foundation a house is built upon. Additionally, the standard is based upon exposure of 18 hours per day for 70 years, which would not correlate to a business exposure. Mr. Quinton said that, with the exception of Madera County in Northern California, the State of California has nearly concluded all radon testing in the State and has found that there is little likelihood of a significant radon exposure in California. Mr. Quinton said that business exposures had not been within the parameters of any of these studies due to the limited time most business people are in one location. He also said that the State does not plan to study businesses based upon the previous studies and that there is no standard for a commercial enterprise being conducted outside of a home. 6.2.7 Huntington Beach Building Department There is a record of permits for the subject property beginning in 1967 for the current 11 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 tire store building. There was nothing else significant in the file previously reviewed. 6.3 Personal Interviews, Site Records Review 6.3.1 Personal Interviews Former Mr. Robert Velasquez, Just Tires - Mr. Velasquez provided access to the subject property and a review of regulated material disposal records. Mr. Steve Sharp Orange County Health Care Agency - Mr. Sharp stated that there should be no problem with writing a modern "no further action" or closure letter on a closed file such as the subject property. (phone number before appendix) Current Mr. David Gione, Big O Tires - Mr. Gione provided access to the subject property and a review of regulated material disposal records 6.3.2 Site Records Review The subject property disposes of minor amounts of waste oil, spent coolant, used tires and used oil filters. The records regarding those materials are in substantial compliance with applicable rules and regulations. 6.4 Historical Aerial Photograph Review Aerial photographs from 1938, 1953, 1955, 1963, 1972, 1985, 1992 and 1997 along with a 1965 topographic map, photo -revised in 1981, were formerly reviewed. The photographs and topographic map were specifically examined for evidence of hazardous materials, as well as on and off -site features that may affect the environmental quality of the property. These features include sumps, pits, ponds, lagoons, aboveground tanks, landfills, outside storage of hazardous materials and general land use. None of thoes features were noted in the aerial photograph review within a distance that would be a problem for the subject property. The topographic map and copies of the 1938, 1953, 1963, 1972, 1985, 1992 and 1997 aerial photographs were in the Appendix to the 2002 report. The subject property and the surrounding properties were vacant and agricultural land in the 1938, 1953 and 1963 photographs. Residential and barn like structures appear in those photographs with a possible remaining building on the south and west side of the property in 1963. By 1972, the subject property building is shown with residential, commercial and office properties surrounding. The 405 Freeway is now to the northeast crossing Beach Blvd. The area to the east and south is vacant land. There are no significant changes in the 1985, 1992 or 1997 photographs. 12 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 A 2004 Photograph was reviewed for this report. A copy is in the appendix. 6.5 Synopsis of Previous Environmental Investigations There was a prior environmental investigation performed by this Assessor in 2002. There was an underground waste oil tank removed from which a soil sample under the former tank found the soil to meet regulatory guidelines and the file was closed. The conclusions to that report recommended requesting issuance of a "no further action" closure letter. That request was made by the owner and a copy of the "no further action" letter that was issued is in the appendix. 6.6 Summary of Government Records Search (Refer to Government Lasts) NOTE: This government records summary is based, in part, on investigating critical, or "border zone", properties near the subject property. The State of California, Department of Health Services, has defined these sites as being within 2,000 feet (or approximately 0.4 mile) of the subject property. Other sites more distant in proximity may be listed but not considered critical and, therefore, not further investigated. The following is a summarized form ofthe detail provided in the Environmental First Search Report in the Appendix. CATEGORY ONE: NPL, SPL, RCRA-CORRACTS, RCRA-TSD, CERCLIS/NFRAP, SWLF, SCL This category is composed of lists compiled by the US Environmental Protection Agency and the State of California Equivalency lists. This category includes National Priority List sites, RCRA Corrective Actions by the EPA and USEPA permitted treatment, storage and disposal facilities within a one mile radius of the subject property. This includes sites for designation under the Federal SUPERFUND Program, permitted solid waste landfills, incinerator sites or transfer stations and the State Bond Program for sites representing an environmental concern for the discharge of hazardous wastes and sites involved with Federal or State review for possible placement on the NPL or State Bond lists There are eleven Category One sites listed as being within a one mile radius of the subject property as of June 1996-September 2004. These sites are one-half mile or more from the subject property and too far to be of concern for migratory contamination to the subject property. CATEGORY TWO: ('/2 mile) LUST, DEED RSTR, TOXIC PITS, CORTESE, WATER WELLS The sites within this category include sites selected for possible placement on the 13 Subject Property- 7872 EdingerAvenue Huntington Beach, CA 92647 Federal NPL list or the State risks to human health and the environment. This category also includes leaking underground tank sites from both the Regional Water Quality Control Board and the State mandated CORTESE lists of properties with hazardous wastes, sites with DEED restrictions and Toxic Pits Cleanup facilities. Sites within this category are provided within a one-half mile as of May 2004, with other DEED restrictions and Toxic Pits sites from 1994 and 1995. There are fourteen Category Two sites or that have had leaking underground tanks. All of these sites are within the 2,000 foot hazardous waste disclosure zone. All are at 500 feet or more from the subject property with the exception of the subject property which is shown as a LUST site. A prior review of the records at the Orange County Healthcare Agency found this site to be a closed file and a closure letter was issued in November 2002. (See appendix) The other site were further investigated during a neighborhood review and were not deemed potential problems for the subject property due to site closures, actual location and the gradient being away from the subject property. None of the Category Two sites are thought to represent a potential problem for migratory contamination to the subject property based upon their distance and topography or information in the report for the subject property in the appendix. CATEGORY 'THREE: (1/4 mile) RCRA VIOL, TRIS, UST/AST Sites in this list are the result of RCRA enforcement actions, the Toxic release inventory base and registered aboveground or underground tanks. The data bases range from 1994 information for underground tanks to June 2004 concerning information for RCRA actions and registered aboveground storage tanks and sites permitted by the County of Orange. The subject site is permitted by the County of Orange and inspected annually with no problems noted. There are six Category Three sites listed within a one -quarter mile radius of the subject property. Further research did not find any problems for migratory contamination to the subject property for that property or any of the other properties due to their distance, topography or status. CATEGORY FOUR: (1/8 mile) ERNS, GNRTR, SPILLS Sites in this category include ERNS, which is a national database retrieval system of Incident -Notification information as initially reported by any parry regarding incidents of reported releases of oil and hazardous substances. The information in this report combines data from the United States Coast Guard National Response Center data base with data from the 10 EPA regions. ERNS supports the release notification requirements of Section 103 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), as amended; Section 311 of the Clean Water Act; and Sections 300.51 and 300.65 of the National Oil and 14 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 Hazardous Substances Contingency Plan. This data base is current as of December 2003. ERNS/SPILLS - There are no ERNS sites listed within one -eighth mile of the subject property. There are two Spills sites which are one -eighth mile or more from the subject property and of no concern for migratory contamination. GNRTR - Sites which generate regulated hazardous waste above a certain quantity are required to use EPA identification numbers and are called RCRA sites. An EPA identification number does not indicate a problem with a site, but merely that they use or dispose of a minimum quantity of a hazardous waste. The subject site is not a RCRA site. There are three Category Four GNRTR sites listed within a one -eighth mile radius of the subject property as of July 2004. The subject property is not an RCRA Generator site as the quantity of waste is small. A neighborhood review and other information in this report did not find any reason for concern regarding the possibility of migratory contamination to the subject property from any of the GNRTR sites. RCRA NOTIFIERS - The EPA's Resource Conservation and Recovery Act (RCRA) Program identifies and tracks hazardous waste from the point of origin to the point of disposal. The NOTIFIERS contains information on formerly regulated RCRA sites with more complete historical information. This database is current as of July 2004. There are three RCRA NOTIFIER sites listed at one -eighth mile or more from the subject property and of no concern. 7.0 DISCUSSION OF INVESTIGATION Asbestos - There are minor amounts of building materials on the subject property which are presumed to contain asbestos. They are described as follows: Building Materials Presumed to Contain Friable Asbestos Friable asbestos -containing building materials were banned for manufacture and sale in the United States in 1978 and all stocks remaining on the shelves are presumed to have been used up by 1980. As the building was constructed in 1967, there are minor amounts of presumed friable asbestos -containing materials on -site as follows: Wallboard Mud - Per Fed OSHA, all wallboard mud used prior to 1980 is presumed to contain a small amount of friable asbestos. There are minor office walls in one area of the building. The wallboard mud used to smooth the corners of the walls or seams is presumed to contain friable asbestos. This material is in good condition and painted. There are no current issues for the subject property. Prior to such time as this material is disturbed, bulk sampling should be done. If asbestos is identified, the affected material should be handled 15 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 in accordance with regulations in effect at that time. There is no recommendation for further investigation or bulk sampling at this time. Building Materials Presumed to Contain Non -Friable Asbestos Asbestos was never banned from use in building materials such as floor tile, cement -based products and roofing materials, as these materials were considered non friable by the EPA and not potentially a great hazard. After friable asbestos was banned, significant labeling requirements went into effect for the non friable asbestos -containing materials and many substitutes became available. Asbestos -containing flooring materials and mastic were used less and less in construction after 1978 and, by 1984, their use in buildings constructed in the United States was nearly non-existent due to the labeling requirements and potential liability to both the manufacturer and real estate developer. Flooring Materials -The floors are bare concrete with ceramic tile. There were formerly some 12" x 12" floor tiles over concrete in the offices and lobby. Those have been removed. Roof Mastic/Sealants - While never banned from use in roofing materials, asbestos was voluntarily removed from the roof mastic/sealants by their major manufacturers in 1989 due to labeling and liability concerns. The building roof has mastic around the penetrations. As such, the roofing mastic materials are presumed to contain non friable asbestos. The roof is in good condition and out of the way of the occupants of the building. Prior to reroofing or building demolition, bulk sampling should be done per NESHAPS and the samples tested for asbestos. If asbestos is identified, the affected materials should be handled in accordance with regulations in effect at that time. There is no recommendation for bulk sampling at this time. Pcb - There should not be any Pcb in any of the utility transformers on or near the site, according to Southern California Edison. There are no flourescent lights on site which are suspected of having Pcb-containing ballasts due to the summer 2004 renovation. Aboveground Storage Tanks - The physical site survey did not evidence the existence of aboveground storage tanks on the subject property. Underground Storage Tanks - The physical site survey did not evidence the existence of underground storage tanks on the subject property. There was an underground waste oil tank. That tank was removed in 1987 and after contaminated soil was removed, that file was closed and a closure letter was issued in November 2002. Air Emissions - There are no air emissions from the subject property. Water Supplies - Former discussions with the Huntington Beach Water Department 16 Subject Property 7872 Edinger Avenue Huntington Beach, CA 92647 evidenced a water supply to the site which meets all of California's drinking water requirements. Wastewater - Site observations did not evidence any source for illegal disposal of toxic chemicals into the sewer system. Only dirt and oily dirt and soap from floor wash down are run through the clarifier. There did not appear to have ever been any metals or significant solvents disposed of in the sewer based upon the use of the property. Waste Generation, Storage and Disposal - There are minor amounts of California regulated waste oil materials on -site being stored and disposed of. These materials are being handled in substantial compliance with applicable rules and regulations. Pesticides, Herbicides - There was no current use of herbicides or pesticides noted on the subject property. Radon - Radon comes from the natural breakdown (radioactive decay) of uranium. The Environmental Protection Agency (EPA) estimates that the average soil in the United States contains only about one part per million of uranium. Uranium is found in about 150 minerals including granite, phosphate and shale. Granite is a major concern for the presence of radon, as some deposits have been found to contain extremely high levels of uranium. The area of the subject property does not indicate any large deposits of granite material which would be of concern to test for the presence of radon. Phosphorous is an essential ingredient in chemical fertilizers and comes from phosphate rock. There does not appear to ever have been much fertilizer used around the subject property. According to Mr. David Quinton of the State Department of Radon, the chance of radon being a hazard in the State of California is very low. Actual testing for radon content in the structure on the subject property was not conducted and is not included in the scope of this report. Lead -Based Paint - Specific testing is required to determine if paint or other materials used the building on the subject property contaisns lead. These tests are not within the scope of work for this report and no investigation for lead content was, or will be, performed unless agreed to by the property owner as an additional service, incurring additional costs. Regulatory Actions - No evidence of regulatory actions on the subject property were found in any of the records checked. Known Site Problems - There is no evidence of possible site problems. Regional or Adjacent Problems - There was no direct evidence of regional or adjacent problems found in the records checked that indicate a conclusive impact on the subject property during any of the time periods reviewed. 17 Subiect Property 7872 Edinger Avenue Huntington Beach, CA 92647 8.0 CONCLUSIONS 8.1 Areas of No Apparent Concern There is no concern for migration of contaminants from off -site sources to the subject property. The former underground tank was removed, soil sampled, the file was closed and a no further action closure letter was issued in November 2002. There were no concerns for contamination from current or former operations on the subject property observed on the day of the site visit. The presumed asbestos -containing materials are in good condition and are not expected to cause a problem for the subject property. 8.2 Areas of Further Concern Asbestos -containing materials are not a current issue and can wait until the building is renovated or demolished for bulk sampling. 9.0 RECOMMENDATIONS 9.1 Areas of No Action There was no evidence to indicate concern regarding former or present activities on or adjacent to the subject property. The presumed asbestos -containing materials are not a current issue and can wait until the building is renovated or demolished. 9.2 Further Investigation There are no areas of further investigation recommended. 10.0 LIMITATIONS This report is intended to satisfy the requirements of a Phase I Environmental Site Audit Update as outlined in the ASTM standards. This standard is intended to define the scope of due diligence necessary in a real estate transaction to provide for the "innocent buyer's defense" under the SARA amendments to CERCLA. The findings set forth in this Phase I Environmental Site Assessment Update are strictly limited in time and scope to the date of evaluation(s). Government records searched are limited to the accuracy of the agency prepared lists. The conclusions presented in the report are based solely on the services described therein and not on scientific tasks or procedures beyond the scope of the agreed upon Phase I Environmental Site Assessment Update. It is hereby acknowledged that, within the scope of this survey, no level of assessment can ensure the real property is completely free of chemicals or toxic substances. 18 Subject Property • 7872 Edinger Avenue Huntington Beach, CA 92647 This public records search was conducted with available Federal, State, County and City agency departments, according to recognized procedures and current availability of records. Conclusions resulting from these searches are solely a result of the same. S&S Commercial Environmental Services, Inc., assumes no responsibility for events that are not part of these public records. S&S Commercial Environmental Services, Inc. Stephen A. Quartararo, CEO Registered Environmental Assessor No.01486 Expires: 06/30/05 4.1 19 Sub'eI ctPrgpgM 7872 Edinger Avenue Huntington Beach, CA 92647 11.0 REFERENCES 11.1 Published References 11.1.1 Environmental First Search Report- November 2004 11.1.2 Photographic Map Reviews - Enviroware, Rupp Aerial, USGS 11.1.3 Topographic Maps - Earth Visions 11.1.4 DOG Maps/1992 Munger Map Book 11.1.5 Alquist-Priolo Earthquake Fault Rupture Hazard Zones (1972 and revised) 11.1.6 California Code of Regulations Title 22 Chapter 30 Minimum Standards for Management of Hazardous and Extremely Hazardous Wastes; Section 66680(d) ,66699(b), California Department ofHealth Services (DOHS/CAL- EPA); Regulations for Hazardous Waste Transport and Disposal, CHP 11.1.7 FEDERAL, 29 CFR, Part 1910.120; 40 CFR Part 761, DOT; 49 CFR Parts 172.516; Toxic Substance Control Act 11.2 Record of Personal Communications 11.2.1 California Division of Mines and Geology August 2002 Mr. Jerry Tremain, Geologist (213)620-3560 11.2.2 California Division of Oil and Gas August 2002 Cerritos Office (714)816-6847 11.2.3 Southern California Edison Company August 2002 Mr. Don Garza, Service Planner (909)592-3724 11.2.4 South Coast Air Quality Management District August 2002 Ms. Patty Olsen, Customer Service Clerk (909)396-2900 11.2.5 State Department of Radon February 1996 Mr. David Quinton, Env. Health Specialist (916)324-2308 11.2.6 City of Huntington Beach Water Department August 2002 Ms. Linda Daily, Senior Department Analyst (949536-5921 11.2.7 Huntington Beach Building Department August 2002 Ms. Lisa Muir (949)375-5151 11.2.8 Just Tires August 2002 Mr. Roberto Velasquez (714)842-4494 11.2.9 Orange County Health Care Agency August 2002 Mr. Steve Sharp (714)667-3623 11.2.10 Big O Tires November 2004 Mr. David Gione, Manager (714)861-4011 20 Subject Property: 7872 Edinggr Avenue Huntington Beach, CA 92647 APPENDIX 12.1 Site Location Map 12.2 Current Aerial Photograph 12.3 Topographic Map 12.4 Environmental Features 12.5 California Generator Number 12.6 Waste Oil & Used Oil Filter Disposal Samples 12.7 Underground Tank Removal "No Further Action" Closure Letter 12.8 hydraulic Lift Unit Storage Tank Exemption 12.9 Letter from Magnetek 12.10 Environmental First Search Report 12.11 Certification 12.12 Resume 21 Subject Property: 7872 EdingerAvenue Huntington Beach, CA 92647 12.1 Site Location Map 22 Subieet Property• 7872 Edinger Avenue Huntington Beach, CA 92647 �� iirea3gwo�d Cn ��3tJOtr► �� �, �s � Ltdgrilltby :n W Sail{t T racy Ave "sia is �' �s10'� o R�ckv�ell Aire 4 Rd$thxlrr-1 Ave €memonAve w Darwin rive 't Park in � � Ave McFadden Ave 1parkTtres¢ 0Ty,ort,e Par% �` Pak:FaddeP Ave p _ r p � < G? x z €3et€is Ave S � Cannel Gir its Oul Ray Cg. a 3 i eri Ce-11jE r Ave a F#�los ^ cs eider Ave -13 Cutr V3'- Garair>gseAve 3 x Laramrs Cir Srj _ Edinger � a Cody Ave ,cr, � Edinger Ave ^ Ave Avis },aide! Aldrich Air* z Sluesaais Lbrge Cii Dr Volga DI stark St � 00 Sioncwosd Dr .5 Amazon Pr 4, Candlelight Cir Holt F,ve d Starlight Csr 3 Urtsvet5� Ave- m 4 t� Anita Lai Macdonald i4ve QNOs � 0 q � Valemone. Dr 1 � Jtdiette Love Dr � _ � � ' � Z K a ". n N r o Naney 6a Cleruoc Ayr � G� 4f Sunlight Dr r AlharAW& r '# 6 Heil Ave Q r' Rhine Crc kD DarwYie Ot Heil Ave 3 La1s Cif M"dox Dr 1 t• am Df <— Seine br t� ± .. X Liorlal4l Cir Brush [>r s - + Doers Bryant Dr Judy cir Royer Cir C... akatn Dr mot n t i Lamar i�r Parker Cs� Lambeit Dr 4� Rhone Pj C t7rinda Or 2444 P.ta®Que t.rum, fne:; 2004 NAVTEt� Drt�yat Dr 23 Subject Property: 7872 Edin erAvenue Huntington Beach, CA 92647 12.2 Current Aerial Photograph 24 i ?a & . T Y '� ✓ �' [ 4'X' a �3 c � n t i h "W5 N zE 3 ..� 'Y1. 5 f ff -0 r '.I ". { s,< S a i ° `' `".t,. 'c a +a r la iy ✓ a ° i I - .3t iiiii �- r 5 t ¢ eVIA r * i. r r r gs � e t s`� � s r ,,. r � r '• d � .z t d , N tT YNy�x i,�6 ty C i J+ Y 4p k i At r e�Ya irk a A w, 41 eS WM'�.c t two l 1: WAIT; A.f J i t TENTA�, ¢*z "no S fgW: i a �VIMg.: 1 } Ow ' r ,� + l °' i •°� rt�r" i ti m a to c d Subject Property • 7872 Edinger Avenue Huntington Beach, CA 92647 12.3 Topographic Map 26 1.117-1 340mm.N. ;4 New Pq, J11 Sell, -Z in oh 17 1111111;r- OR Ak)VA )4 It -Z Z- i- 7- - 4 76 "N big" Nor 6 Al I j^ r '��`�-' � f"� 2 � � ',� �. I � � � r' � ;yam' a �;, i � �-:-:.�;.��k i � .. � i z Ethap A Vj Sch ji can 6 J8 40 JAI -n Z" 3732 U- \YP N'� 4 West I J'� -Z `'`F i � l .— - =-A4 4) Y Fit, 1 110 VVIVU.V VV 5��j VVII <Default> - 4 Markers, Length = 13 miles, 4243 feet 3110 Newport Blvd 033' 36' 57.4" N, 117' 56 447' W 7872 Edinger Avenue - 033*43'48.1"N, 117*59'25,7"W L — 1120 1124 Bristol Street - 033'40'134' N, 117'53'10.2" W 18435 Bandilier Circle 033'41'42.7"N, 117156122.5''W — Name: NEWPORT BEACH Location: 033' 43' 55.4" N 117' 58' 51.2" W Date: 11/9/104 Caption: 7872 Edinger Avenue Huntington Beach, CA 92647 Scale: 1 inch equals 1333 feet 1966 USGS Map Photo Revised In 1981 CoDvhaht (C) 1996. Earthvisions. Inc. Subject Property; 7872 Edinger Avenue Huntington Beach, CA 92647 12.4 Environmental Features 28 LI d ? Pt h IR ME f Y �- �' �p - { r fy� g3 .re Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 12.5 California Generator Number 30 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 31 Subject Property 7872 Edinger Avenue Huntington Beach, CA 92647 12.6 Waste Oil & Used Oil Filter Disposal Samples 32 ..Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 Waste Tife Manifest Form for Eivc-tronic Datalransfer JEOT) CA LAKIN TIRE WEST, INC. 50M Srg — --iq Santa Ft, Soopi. CAwslo 2-7564 P�ot DAIE- F CDT Wo TIRE WF�Si 5p� 0q." co ra 'ION Df-41Ec,, _no - -WJ3- 64 Atl�: l L Lcmdinn W04,y cb.nt Tiff-S ifWwf H�v r"r-, ilt� ---l--l-----,-,--,.- — I --� I 1 -11 Tq,t-r. Tire& Nay ti x0ft t.� �.,.�.a_.0 ��i t�i t s r$ CD"JA measurement F i VOW e T i rc, Guin t BIG 0 TS ES jo cvt—. Yards DATE Rl CV C) -- Lei`'., 0 -0. # (Vyl ) Uccf)" Plate Nu `as ,C) Wok koin Tom 04-OE600 4 Doc A NunAe- ofivey I ""vc, Fac-ifity Rupre*vml.)4wk'k pnowd N-ntT*l Primed Nxmn Dale:_- 33 Subiect PropeltIL 7872 EdingerAvenue Huntin ton Beach CA 92647 Waste Tire ManifestForto for Electronic MifbT6noer tjbl CA LAKIN TARE WEST, INC. F- Spn�q,CA qo�-lo tam, 40') 0, ,659 eDT J llz - ----- 7,7 Mver I Hauk-r ity Repwtontaftv<-� pmtt-d Name: fuimo Narnp:— K�`>:v —(,7:- 34 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 A'NCH LOGRECORD rk,'Fm4 $tom-xtww -Al 30, }gyp -'- ? T f i 35 Subject Property• 7872 Edinger Avenue Huntington Beach, CA 92647 12.7 Underground 'Tank "No Further Action" Closure Fetter 36 Subject Property • 7872 Edinger Avenue Huntington Beach, CA 92647 COUNTY OF ORANGE juLJE-rre A. PMI-SON, RN, LW SIR HEALTH CARE AGENCY YqiM SPURCCONRGEDN OEPUW AGENCY D?WCTOR REGULATORY HEALTH SERVICES REc uATOHYHEALrH ns ENWRONMENTAL HEALTH WEI—EN V-WO 4REH$, tiPH VIRecToR --NWRON/AENTAL HEALTH CFUfJ7L:EAST MAILING MG RAVEADDR5 F 2 S EASTNA CA 2NS4 2C ��� swrA ANA a 9zr95ir3" _ TeLPhOW p..I "7-3sao - ervicr FwA vurarttra9 Ea.WL- November 25, 2002 Lindon Legin Co & Sher Donald 28815 Grayfox Street Malibu, CA 90265 Subject: Completion ofWaste Oil Tank Removal Rey Goodyear Tire Auto Service Center 7872 Edinger Avenue Fluntington Bench, CA Em ID# 002802 To Whom It May Concern: This is in response to your request for a confirmation of the completion of the wasre oil tank rernoval pr6cm With the provision that the results for the soil samplcs obtained during the tank removal on March 19, 1987 were accurate and representative of existing conditions, it is the position of this office that no significant waste oil Soil contamination, from the operation of a 550 gallon waste oil underground storage tank, has occurred at the above noted facility location. It should be pointed out that this letter does not relieve you of any responsibilities mandated under the California Health and Safety Code if additional or previously unidentified contamination is discovered at the subject site. Ifyou have any questions regarding this matter, please contact Steven Sharp at (714) 667-3621 Sincerely, Seth 7. Dauglt Supervising Hazardous Waste Specialist Hazardous Materials Management Section Environmental Health cc: Ken Williams, Santa Ana Regional Water Quality Control Board Cathy Ferguson, Harding FSB 37 Subject Property:7872 Edinger Avenue Huntington Beach, CA 92647 12.8 Hydraulic Lift Unit Storage 'Tank Exemption 38 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 ���r'15I ��00 l .:tad y49-5e-0-a=i` o�S COR-tNERC:I:L E'b.: `ACE 01 TIE TO Bta80t1RCrtM COfMOL BOARD ., T .Surn 130 _ C'8u - 12 .CA D4244.2120 4 1995 fg93 (6)n7. t 6) 2" 4349 (FAX) r� s i TO: ALL LOCAL_ IMPLEbtBNTiNQ AGENCIhS - E L;G - 141: PCRMANENT tiYDRAUI.IC FUEL, TANK EXEMPTION This ltttar is to inform O%e regulatory Community ;hat the temporary exemption for hydraulic i(fr ranks (HLTs) will becotne permanent on January 1, 1996_ Governor WUMn signed SR 1191 on October 5. 1995 (Chapter 639 of 1995). One of the provisions of tbid bill ww the change in Seciiom 25291(x)(1)(D) which elkrninated the dam talon which the eaemptiou was to eapiro- The previous language stated than an underground utorw tm* does not E!! include: `t Until January 1, 1996, a tank holding hydraulic fluid for a closed loop mechanical system that uses compressed air or hydraulic'laid to operant lifts, elevators, and ocher similar devious. The new laaMiage deleres the phrase 'Until January 1, 1996." This perotar m exemption nicaru that. under sure lase. hydraulic tif. tanks will no longer. require oper3ems permits_ LIAs whicb are regulating HLTs under state authority and decke to voWralc regWiating them must do so under their own authority 1H&SC. Sac" 25299.2(a)). The Stale of California's decision to perrnantntly exempt HLTs from regular under the UST law was eased in part on the SWRCK's recamttmendarton commod In the ZfipQUsm Hydmlir Lift T W> dated Fcbnmq 1995. This report aoactudad tbu lwjm PON HLTs do not pose a signifxAAv risk to water quality in California. Of the tstbnatoti 73,OW RM in the start. 7E Icaks to the environment were rcpogad to regulatory OSC0 ice. Only five of the 17 leaks that reached ground water required cleanup to avoid an adverae unpe" on drinking water or other cutrent uses of ground water. With regard to waiarted cicy. n Iberure search rove" no reported Yummn tonicity assKxi'a with Liar: ingwtiou of petroleum or vegemble base hydraulic oils. envkvnu%-W fife. the report oonrAudcd the following-. 0) The b"O ores are redsdvety i0solubie in . C2) The base oils arts IM dome then waiet, so soy release to ground wam WHI tend to now on bop of the aquifer. 39 Subiect Property • 7872 Edinger Avenue Huntington Beach, CA 92647 K/15/20110 16:04 949-650-4275 S&S COW-EF,CIAL ETFJ RAGE 012 (3) The base oils have km vulaUaety, tend to m%cre to sod parttckt. and are relatively irria iiile in a nksttrt'acc eoviroornm L&A plug vmuld be expmwd to be sttdall ardd m rm cravel far from the point of release. (4) The bast oils are low in wousMi[ oonWmds. such as benrene. which pose a Maard in drinking water- (5) The bane oils will bkftrade. at kart pairs"Wly- after they here been reteas&d ima ttu CovitWteBCnt_ (4} The primary route of eaposuree after a relene will be p]asibiee human ingestion via dep-*i Qd drinkLV wam- (7) 'ties humat► toxicity (neettiated in term or ingestion asstximed with these oils) is waraauy vary low or rAmezimm- (E) It is unlikrty that oWet species of t rW)Smi will be adversely affeOW by HLT rtteases un&r the conditions desetibcd abets. This report was mailed to all LIM and AWQCBs in dze spring of 10". If you nrtd Witiomd copies of the repots, please ourtum lairs. Virginia Lopez at 227-6303_ if you have any gtwstiotts about this icrtcr or the report, phme contwt Airs. Terry Braaze)t at (916) 227-4404 tar "MET 94"-4404_ 5incrMly. zmz�iwoDpMd Underground Storage Tank Protram Manager 40 Subject Property• 7872 Edinger Avenue Huntington Beach, CA 92647 12.9 Letter from Magnetek 41 Subject Pro perty: 7872 EdingerAvenue Huntington Beach, CA 92647 The following is a reprint of: Alfa neTek Universal Manufa tur ng 200 Robin Road :'atone 1201 }')h-"- °600 NJsijhn2 _WdreNti P.0. 6w, _ 1j2% "at2t'7t?n. NJ 074;0,) RE': PCB s RAllasisare used in fluorescent fixtures in business, commercial and industrial esiablishments. s well as in schools. One of the devices used in these ballasts is called a capacitor, which makes the ballasts operate more efficiently. These capacitors, used in ballasts matte by ever 'Y manufacturer in the industry, including Universal. used PCBs in small amounts until 1478, when a change was made to another liquid. Universal ballasts manufactured since January 1979 tto not contain PCBs and the label of all these ballasts contain the statement "No PCB's"_ The capacitor is a hermetically sealed device, which entirety isolates the PCR from human contact. The typical fluorescent ballast contained about 0.05 lbs. of 100'Y, PCB liquid. That represents 1-2 liquid ounces. The weight of PCB used in relationship to the total capacitor weight, was approximately 15%,_ In relationship to the total ballast weight it varied from 0.6%, (Slimline ballasts) to 1.5% (2 lamp, 40 watt ballasts). The degree of chlorination was 42%_ For HID ballasts tvhere larger capacitors were used, it may have been as much as 5-6 ounces of liquid. In all cases the amount of "free PCBs" (the quantity that could leak if the can ruptured). was much less because most ofthe liquid was absorbed by the blotter -like dielectric material. Ballasts occasionally fail in service and sometimes the asphalt (tar) with which they are filled melts anti leaks out. On very rare occasions. the capacitor will also rupture and its contents mix with the tar. Ita leak occurs. it should be cleaned tip with any petroleum -based solvent. 42 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 '.la'aneTek Universal Mfg. Page 2 Such a leak does not represent am- significant immediate or lomgy-terns hazard. The United 4tates Environmental Protection Agents has recognized the existence of PCB-, in ballasts, has carefulh, evaluated the situation anti in the regulations controlling the use and disposal of 't Bs hies concluded that continued use in existing ligbtin, installations is acceptable. also that the occasional ballasts which becomes defeetive in service may be disposed of in compliance with 40 CF R" fart 761 or check with your iocal State Environmental Protection :%gency for instruction. Should ion have any questions regarding this matter. please do not hesitate to call me at your convenience_ Very truly yours. MagneTek Universal Manufacturing Robert E. Babcock vlanager, Marketing Engineering IREB_cp Code of Federal Regulations 43 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 12.10 Environmental First Search Deport 44 Environmental FirstSearch .25 Mile Radius. Non-ASTM Map: FINDS, Spills 90 7872 EDINGER AVE, HUNTINGTON BEACH CA 92647 Source: 1999 U.S. Census TIGER Files Target Site (Latitude- 33 729632 Longitude:-117.99104) _. _. identified Site, Multiple Sites, Receptor ...... ......... ___.._.. ® A NPL, Solid Waste Landfill (SWL.) or Hazardous Waste .____.__.........._... National Historic Sites and Landmark Sites ____.___....._._-___ Railroads _....._...-------._........ Black Rungs Represent 1/4 Mile Radii; Red Ring Represents 500 ft. Radius Cv Environmental FirstSearch .25 Mile Radius r - ASTM Map: RCRAGEN, ERNS,. UST v 7672 EDINGER AVE, HUNTINGTON BEACH CA 92647 Source: 1999 US Census TIGER Files Target Site (Latitude:33.729632 Longitude: -117.99104) r Identified Site, Multiple Sites, Receptor ............ _.... _. NPL, Solid Waste Landfill (SWL) or Hazardous Waste ._._..._.._. Railroads .__........ ._....... _. Black Rings Represent 1/4 Mile Radii, Red Ring Represents 500 ft. Radios k'aJ3' L .'•AA =F w Environmental FirstSearch -- 1 Mile Radius `w it: FIIZSF ASTM Map: NPL, RCRACOR, STATE Sites 7872 EDINGER AVE, HUNTINGTON BEACH CA 92647 -Tk--r i L 0 to y0 , n R tgersi - `� m o a. (n 0 Se A C q a -� .. n 1 la ® o V l \Vi(7 y � � � i CL V/ 1�► _\ L \ A W n / � `-- � n ', - - ,-5- y -+ roj c v CL W1� e y _ �� A) r a+ co d P ^. dy it y y p ® 9 : y ° su ' "' owortj Cir m >v x arner Ave w � � L al ma A e B aaD or n p Ce r � V Ca r a Bst el a Ave Source: 1999 U.S. Census TIGER Files Target Site (Latitude: 33.729632 Longitude:-117.99104) _..._. Identified Site, Multiple Sites, Receptor _- --- - __.._..._.... NPL, Solid Waste Landfill (SWL) or Hazardous Waste ._._._ ...... Railroads----- _....... _...................... _.--------- _........... ....... _...... -..... ..._....._.. Black Rings Represent 1/4 Mile Radii: Red Ring Represents 500 $. Radius TRA CK > INFO SER VICES, LLB' Environmental FirstSeareli'T'Report TARGET PROPERTY: 7872 EDINGER AVE Los W11111101MV1110 Hit Job Number: 0004019 S&S Commercial Environmental Services, Inc. 12960 Central Avenue, Suite E Chino, CA 91710 I 1-09-04 Tel: (323) 664-9981 Fax: (323) 664-9982 Environmental FirstSearch is a registered trademark of First.Search Technology Corporation. All rights reserved. Environmental FirstSearch Search Summary Report Target Site: 7872 EDINGER AVE HUNTINGTON BEACH CA 92647 FirstSearch Summary Database Sel Updated Radius Site 1/8 1/4 1/2 1/2> ZIP TOTALS NPL Y 09-12-04 1.00 0 0 0 0 0 0 0 CERCLIS Y 09-13-04 1.00 0 0 0 0 0 l 1 NFRAP Y 06-23-04 0.25 0 0 0 - - 0 0 RCRA TSD Y 09-12-04 1.00 0 0 0 0 0 0 0 RCRA COR Y 09-12-04 1.00 0 0 0 0 0 0 0 RCRA GEN Y 09-12-04 0.25 0 3 1 - - 2 6 RCRA NLR Y 07-12-04 0.25 0 0 0 - - 0 0 ERNS Y 12-31-03 0.15 0 0 0 - - 0 0 NPDES Y 10-17-04 025 0 0 0 - - 0 0 FINDS Y 07-16-98 0.25 0 5 2 - - 0 7 TRIS Y 08-02-04 0.25 0 0 0 - - 0 0 State Sites Y 03-02-04 1.00 0 0 0 0 0 0 0 Spills-1990 Y 07-01-03 0.25 0 2 1 - - 0 3 Spills-1980 Y NA 0.25 0 0 0 - - 0 0 SWL Y 10-11-04 1.00 0 0 0 0 2 3 5 Permits Y 02-11-04 0.25 0 0 0 - - 0 0 Other N 03-02-04 0.25 - - - - - - - REG UST/AST Y 06-02-04 0.25 0 6 0 - - 0 6 Leaking UST Y 05-26-04 0.50 1 6 2 5 - 0 14 State Wells N NA 0.50 - - - - - - Aquifers N NA 0.50 - - - - - - - ACEC N NA 0.50 - - - - - - - Wetlands N 11-20-00 0.50 - - - - - - - Floodplains N 09-01-98 0.50 - - - - - - - Nuclear Permits N 04-30-99 0.50 - - - - - - - Historic/Landmark N 09-01-02 0.50 - - - - - - - Federal Land Use N 10-07-03 0.50 - - - - - - - Federal Wells N 05-19-03 0.50 - - - - - - - Releases(Air/Water)Y 12-31-03 0.25 0 0 0 - - 1 1 HMIRS N 03-31-03 0.25 - - - - - - - NCDB N 08-30-04 0.25 - - - - - - - PADS N 03-01-04 0.25 - - - - - - - Federal Other N 12-31-02 0.25 - - - - - - - Misc Y NA 0.25 0 0 0 - - 0 0 Towers N 08-16-01 0.25 - - - - - - - Soils N 03-18-97 0.25 - - - - - - - Receptors Y 01-01-95 0.50 0 0 0 0 - 0 0 - TOTALS - 1 22 6 5 2 7 43 Notice of Disclaimer Due to the limitations, constraints, inaccuracies and incompleteness of government information and computer mapping data currently available to CRACK Info Services, certain conventions have been utilized in preparing the locations of all federal, state and local agency sites residing in CRACK Info Services's databases. All EPA NPL and state landfill sites are depicted by a rectangle approximating their location and size. The boundaries of the rectangles represent the eastern and western most longitudes; the northern and southern most latitudes. As such, the mapped areas may exceed the actual areas and do not represent the actual boundaries of these properties. All other sites are depicted by a point representing their rpproximate address location and make no attempt to represent the actual areas of the associated property_ Actual boundaries and locations of ndividual properties can be found in the files residing at the agency responsible for such information. Waiver of Liability Although TRACK Info Services uses its best efforts to research the actual location ofeach site, TRACK Info Services does not and an not warrant the accuracy of these sites with regard to exact location and size. All authorized users of TRACK Info Services's services proceeding are signifying an understanding of TRACK Info Services's searching and mapping conventions, and agree to waive any and all liability claims associated with search and map results showing incomplete and or inaccurate site locations. Environmental FirstSearch Site Information Deport Request Date: I 1-09-04 Search Type: COORD Requestor Name: Stephen A Quartararo Job Number: 0004019 Standard: ASTM Filtered Report TARGET ADDRESS: 7872 EDINGER AVE HUNTINGTON BEACH CA 92647 Demographics Sites: 43 Non-Geocoded: 7 Population: NA Radon: 0.3 PCl/L Site Location Degrees (Decimal) Deuees (Min/Sec) UTMs Longitude:-117.99104-117:59:28 Fasting: 408186.849 Latitude: 33.729632 33:43:47 Northing: 3732426.132 Zone: 11 :omment: Comment Additional Requests/Services Adjacent ZIP Codes: 0 Mile(s) zu� Code City Name ST Dist(Dir Set Services: Sanboms No Aerial Photographs No Topographical Maps No City Directories No Title Search No Municipal Reports No Online Topos No Date Environmental FirstSearch Sites Summary Report TARGET SITE: 7872 EDINGER AVE JOB: 0004019 HUNTINGTON BEACH CA 92647 TOTAL: 43 GEOCODED: 36 NON GEOCODED: 7 SELECTED: 0 ID DB Type Site Name/ID/Status Address DistT iblap ID 1 RCRAGN CLEANING FACTORY THE 7664 EDINGER AVE 0.17 NW 1 CAD982001414/SGN HUNTINGTON BEA CA 92647 2 RCRAGN GREAT INDOORS 1920 7777 EDINGER AVE STE 22 007 NW 2 CAD983614413/LGN HUNTINGTON BEA CA 92647 3 RCRAGN HUNTINGTON CENTER CHEVRON 7777 EDINGER UNIT 98 0.07 NW 2 CAD983605957/SGN HUNTINGTON BEA CA 92647 4 RCRAGN J C PENNEY FACILITY NUMBER 1069 7777 EDINGER AVE UNIT El SE 0.07 NW 2 CAD983670696/SGN HUNTINGTON BEA CA 92647 5 FINDS BROADWAY THE HUNTINGTON BEACH 7777 EDINGER AVE 0.12 NW 5 CAD982026866 HUNTINGTON BEA CA 92647 6 FINDS CLEANING FACTORY THE 7664 EDINGER AVE 0.22 NW 6 CAD982001414 HUNTINGTON BEA CA 92647 7 FINDS FIRESTONE STORE #2732 16171 BEACH BLVD 0.19 SE 7 CAD981976632 HUNTINGTON BEA CA 92647 8 FINDS FIRESTONE STORE #27FE 7777 EDINGER AVE #El 0.12 NW 5 CAD981976699 HUNTINGTON BEA CA 92647 9 FINDS HUNTINGTON CENTER CHEVRON 7777 EDINGER UNIT 98 0.12 NW 5 CAD983605957 HUNTINGTON BEA CA 92647 10 FINDS J C PENNEY FAC NUMBER 1069 7777 EDINGER AVE UNIT El SE 0.12 NW 5 CAD983670696 HUNTINGTON BEA CA 92647 I I FINDS MONTGOMERY WARD 7777 EDINGER UNIT 190 0.12 NW 5 CAD983614413 HUNTINGTON BEA CA 92647 12 SPILLS HUNTINGTON BEACH MALL 7777 EDINGER AVENUE 0.12NW 5 SLC8_I33 HUNTINGTON BEA CA 13 SPILLS RON BEARD (BIG O TIRE) 16091 BEACH BOULEVARD 011 NE 9 SLC8 180 NEWPORT BEACH CA 14 SPILLS THE CLEANING FACTORY 7644 EDINGER AVE 0.24 NW 10 SLC8 131 HUNTINGTON BEA CA ' 15 SWL MCWHORTER & SONS-HUNTINGTON 16320 VENUS DRIVE 0.79 SE 1 I WMUD8 300066NIJR WESTMINSTER CA 16 SWL MCWHOTER & SONS HUNTINGTON 16320 VENUS DRIVE 0.79 SE 12 SWIS30-CR-0069/CLOSED WESTMINSTER CA 17 UST CHEVRON #9-8655 7777 EDINGER 0.12 NW 5 TISID-STATE3291 INACTIVE HUNTINGTON BEA CA 92647 18 UST HUNTINGTON CENTER CAR WASH 16061 BEACH BLVD 0.07 SE 13 ORCOCOMP08502 HUNTINGTON BEA CA 92647 19 UST HUNTINGTON CENTER CAR WASH 16061 BEACH 0.12 SE 14 TISID-STATE33265/ACTIVE HUNTINGTON BEA CA 92647 20 UST HUNTINGTON CENTER CAR WASH INC 16061 BEACH BLVD 0.12 SE 14 TTSID40RC0355 HUNTINGTON BEA CA 21 UST MOBIL (I l-D9R) 16001 BEACH 0.11 NE 15 TISID-STATE32913/ACTTVE IIUNTTNGTON BEA CA 92647 Environmental FirstSearch Sites Summary Report TARGET SITE: 7872 EDINGER AVE JOB: 0004019 HUNTINGTON BEACH CA 92647 TOTAL: 43 GEOCODED: 36 NON GEOCODED- 7 SELECTED: 0 ID DB Type Site Name/ID/Status Address _ Dist/Dir Map ID 22 UST MOBIL (I I-D9R) 16001 BEACH BLVD 0.11 NE 15 TISID40RC0364 HUNTINGTON BEA CA 23 LUST CHEVRON #9-8655 7777 EDINGER AVE OL2 NW 5 T0605900930/POST REMEDIAL ACTION HUNTINGTON BEA CA 92647 24 LUST FIRESTONE 7777 EDINGER AVE 0.12 NW 5 T0605901691 /CASE CLOSED HUNTINGTON BEA CA 92647 25 LUST FIRESTONE TIRE 16171 BEACH BLVD 0.19 SE 7 T0605900410/CASE CLOSED HUNTINGTON BEA CA 92647 26 LUST G T E OF CALIFORNIA 7280 EDINGER AVE 0.50 SW 16 T0605901426/CASE CLOSED HUNTINGTON BEA CA 92647 27 LUST GOODYEAR TIRE 7872 EDINGER AVE 0.01 NE 17 T0605900136/CASE CLOSED HUNTINGTON BEA CA 92647 28 LUST HUNTINGTON BEACH WATER DEPT 16192 SHER LN 026 SW 8 T0605900538/CASE CLOSED HUNTINGTON BEA CA 92647 29 LUST HUNTINGTON CENTER CAR WASH 16061 BEACH BLVD 0.12 SE 14 T0605900669/REMEDIAL ACTION HUNTINGTON BEA CA 92647 30 LUST 7 C PENNEYS 7777 EDINGER AVE 012 NW 5 T0605900438/POST REMEDIAL ACTION HUNTINGTON BEA CA 92647 31 LUST LEVITZ FURNITURE 7444 EDINGER AVE 0.43 SW 18 T0605900641/REMEDIAL ACTION HUNTINGTON BEA CA 92647 32 LUST MIKE MCCARTHY BUICK 15550 BEACH BLVD 0.46 NE 3 T0605901005/CASE CLOSED WESTMINSTER CA 92683 33 LUST MOBIL 16001 BEACH BLVD 0.11 NE 15 T0605900558/REMEDIAL ACTION HUNTINGTON BEA CA 92647 34 LUST MONTGOMERY WARDS 7777. EDINGER AVE S 0.12 NW 5 T06059002261REMEDIAL ACTION HUNTINGTON BEA CA 92647 35 LUST UNOCAL 16172 BEACH BLVD 0.19 SE 4 T0605901476/CASE CLOSED HUNTINGTON BEA CA 92647 36 LUST UNOCAL #5826 7361 EDINGER AVE 0.48 NW 19 T0605901437/CASE CLOSED HUNTINGTON BEA CA 92647 Environmental FirstSearch Sites Summary Report TARGET SITE: 7872 EDINGER AVE JOB: 0004019 BUNTINGTON BEACH CA 92647 TOTAL: 43 GEOCODED: 36 NON GEOCODED: 7 SELECTED: 0 ID DB Type Site Name/ID/Status 37 CERCLIS HUNTINGTON CENTRAL PARK CAN000906000/NOT PROPOSED 38 RCRAGN EXXONMOBIL OIL CORP. CAL000050501ILGN 39 RCRAGN EXXONMOBIL OIL CORP. CAL000050505ILGN 40 SWL ELLIS & GOLDENWEST-HUNTINGTON WMUD8 300017NUR 41 SWL GOTHARD STREET LANDFILL (CLOSE WMUD8 300008NUR 42 SWL TAYLOR STREET STATION #14 SWIS30-CR-0035/CLOSED 43 RELEASES 648379/UNKNOWN (NRC) Address Dist/Dir 18000 GOLDENWEST ST. NON GC HUNTINGTON BEA CA 92647 6012 EDINGER AVE NON GC HUNTINGTON BEA CA 92647 17472 BEACH BLVD NON GC HUNTINGTON BEA CA 92647 CORNER OF ELLIS AND GOLDENWEST NON GC HUNTINGTON BEA CA 92648 GOTHARD SP. 1/4 MILE S/O TALBE NON GC HUNTINGTON BEA CA NW OF TAYLOR & GOLDENWEST NON GC HUNTINGTON BEA CA BETWEEN GOLDEN WEST AND BEACH NON GC HUNTINGTON BEA CA 11) Environmental FirstSearch Site Detail Report TARGET SITE: 7872 EDTNGER AVE JOB: 0004019 HUNTINGTON BEACH CA 92647 Site Details Page - 2 Environmental FirstSearch Site Detail Report TARGET SITE: 7872 EDINGER AVE JOB: 0004019 HUNTINGTON BEACH CA 92647 RCRA GENERATOR SITE SEARCH ID: 3 DIST/DIR: 0.07 NW MAP ID: 2 NAME: HUNTINGTON CENTER CHEVRON REV: 9/13/04 ADDRESS: 7777 EDINGER UNIT 98 IDI: CAD983605957 HUNTINGTON BEACH CA 92647 ID2: ORANGE STATUS: SGN CONTACT: GARY KELLEY PHONE: 7148915596 SITE INFORMATION UNIVERSE TYPE: SQG - SMALL QUANTITY GENERATOR: GENERATES 100 - 1000 KG/MONTH OF HAZARDOUS WASTE SIC MORMATION: ENFORCEMENT INFORMATION: ` VIOLATION INFORMATION: Site Details Page - 3 Environmental FirstSearch Site Detail Report TARGET SITE: 7872 EDINGER AVE JOB: 0004019 HUNTINGTON'BEACH CA 92647 SOLID WASTE LANDFILL SITE SEARCH ID: 41 DIST/DIR• NON GC MAP ID: NAME: GOTHARD STREET LANDFILL (CLOSE REV: 07/03/00 ADDRESS: GOTHARD ST. 1/4 MILE S/O TALBE IDI: WNIM8 300008NUR HUNTINGTON BEACH CA ID2: 30-AB-0167 ORANGE STATUS: CONTACT: SUZANNE MCCLANAHAN PHONE: Site Rank: 3 Leak to Surface Water: U Leak to Ground: U Leak to Vandose Zone: U Site Details Page - 38 Environmental Firs/Search Site Detail Report TARGET SITE: 7872 EDINGER AVE KGB: 00040I9 HUNTINGTON BEACH CA 92647 SOLID WASTE LANDFILL SITE SEARCH ID: 42 DISUDIR: NON GC 1VIAF ID: NAME: TAYLOR STREET STATION # 14 REV: 08/24/00 ADDRESS: NW OF TAYLOR & GOLDENWEST IDI: SWIS30-CR-0035 HUNTINGTON BEACH CA ID2: ORANGE STATUS: CLOSED CONTACT: PHONE: Activity: Solid Waste Disposal Site Accepted Waste: Operational Status: Closed Regulatory Status Pre-regidations Closure Date: Closure Type: Permitted Throughput with Units: 0 Permitted Capacity with Units: 0 Remaining Capacity with Units (landfills only): 0 Permitted Total Acreage: 0 Permitted Disposal Acreage: 0 Last Tire Inspection Count: 0 Last Tire Inspection Count Date: Original Tire Inspection Count: 0 Last Tire Inspection Count Date: Inspection Frequency: None Site Details Page - 39 Environmental FirstSearch Site Detail Report TARGET SITE: 7872 EDINGER AVE JOB: 0004019 HUNTINGTON BEACH CA 92647 RELEASES (AIR/WATER) SEARCH ID: 43 DISTIDIR: NON GC MAP ID: NAME: REV: 11 /10/99 0 ADDRESS: BETWEEN GOLDEN WEST AND BEACH BLVD IDi: 648379 HUNTINGTON BEACH CA ID2: Orange STATUS: UNKNOWN (NRC) CONTACT: PHONE: SPILL INFORMATION DATE OF SPILL: 11/10/99 TIME OF SPILL: 09,30 PRODUCT RELEASED (1): UNKNOWN OIL QUANTITY (1): 0 UNITS (1): UNK PRODUCT RELEASED (2): QUANTITY (2): [.SNITS (2): PRODUCT RELEASED (3): QUANTITY (3): UNITS (3): MEDIUM/NIEDIA AFFECTED AIR: NO GROUNDWATER: NO LAND: NO FIXED FACILITY: NO WATER: YES OTHER: NO WATERBODY AFFECTED BY RELEASE: PACIFIC OCEAN CAUSE OF RELEASE DUMPING: NO EQUIPMENT FAILURE: NO NATURAL PHENOMENON: NO OPERATOR ERROR: NO OTHER CAUSE: NO TRANSP. ACCIDENT: NO UNKNOWN: NO ACTIONS TAKEN: THE STATE LANDS COMNUSSION AND USCG HAVE BEEN ADVISED t WILL NOTIFY A LOCAL CLEAN UP CONTRACTOR RELEASE DETECTION: TIM CALLER IS REPORTING TAR -BALLS WASHING ONTO TIIE BEACH I THEY ARE ABOUT 3 INCHES IN DIAMETER / AT LEAST 2 MILES ARE AFFECTED MISC. NOTES: THE LIFE GUARD DEPT DID NOT LOOK HOW FAR THE TARBALLS EXTENDED OUTSIDE OF THEIR AREA OF RESPONSIBILITY DISCHARGER INFORMATION DISCHARGER ID: 648379 DUN & BRADSTREET #: TYPE OF DISCHARGER: NAME OF DISCHARGER: ADDRESS: Site Details Page - 40 Environmental FirstSearch Federal Databases and Sources ASTM Databases: CERCLIS: Comprehensive Environmental Response Compensation and Liability Information System. The EPA's database of current and potential Superfund sites currently or previously under investigation. Source: Environmental Protection Agency. Updated quarterly. CERCLIS-NFRAP (Archive): Comprehensive Environmental Response Compensation and Liability Information System Archived Sites. The Archive designation means that, to the best of EPA's knowledge, assessment at a site has been completed and that EPA has determined no further steps will be taken to list this site on the National Priorities List (NPL). This decision does not necessarily mean that there is no hazard associated with a given site; it only means that, based upon available information, the location is not judged to be a potential NPL site. Updated quarterly. ERNS: Emergency Response Notification System. The EPA's database of emergency response actions. Source: Environmental Protection Agency. Data since January, 2001,_has been received from the National Response Center as the EPA no longer maintains this data. Updated quarterly. FINDS: The Facility Index System. The EPA's Index of identification numbers associated with a property or facility which the EPA has investigated or has been made aware of in conjunction with various regulatory programs. Each record indicates the EPA office that may have files on the site or facility. Source: Environmental Protection Agency. Updated semi-annually_ NPL: National Priority List. The EPA's list of confirmed or proposed Superfund sites. Source: Environmental Protection Agency. Updated quarterly. RCRIS: Resource Conservation and Recovery Information System. The EPA's database of registered hazardous waste generators and treatment, storage and disposal facilities. Included are RAATS (RCRA Administrative Action Tracking System) and CMEL (Compliance Monitoring & Enforcement List). Source: Environmental Protection Agency_ RCRA TSD: Resource Conservation and Recovery Information System Treatment, Storage, and Disposal Facilities. The EPA's database of RCRIS sites which treat, store, dispose, or incinerate hazardous waste. This information is also reported in the standard RCRIS detailed data. ASTM Databases (continued): RCRA COR: Resource Conservation and Recovery Information System Corrective Action Sites. The EPA's database of RCRIS sites with reported corrective action. This information is also reported in the standard RCRIS detailed data. RCRA GEN: Resource Conservation and Recovery Information System Large and Small Quantity Generators. The EPA's database of RCRIS sites that create more than 100kg of hazardous waste per month or meet other RCRA requirements. Included are RAATS (RCRA Administrative Action Tracking System) and CMEL (Compliance Monitoring & Enforcement List). RCRA NLR: Resource Conservation and Recovery Information System sites No Longer Regulated. The EPA's database of RCRIS sites that create less than 100kg of hazardous waste per month or do not meet other RCRA requirements. All RCRA databases are Updated quarterly Environmental FirstSearch Federal Databases and Sources Non-ASTM Databases: HMIRS: Hazardous Materials Incident Response System. This database contains information from the US Department of Transportation regarding materials, packaging, and a description of events for tracked incidents. Updated quarterly. NCDB: National Compliance Database. The National Compliance Data Base System (NCDB) tracks regional compliance and enforcement activity and manages the Pesticides and Toxic Substances Compliance and Enforcement program at a national level. The system tracks all compliance monitoring and enforcement activities from the time an inspector conducts and inspection until the time the inspector closes or the case settles the enforcement action. NCDB is the national repository of the 10 regional and Headquarters FIFRA/TSCA Tracking System (FITS). Data collected in the regional FITS is transferred to NCDB to support the need for monitoring national performance of regional programs. Updated quarterly NPDES: National Pollution Discharge Elimination System. The EPA's database of all permitted facilities receiving and discharging effluents. Source: Environmental Protection Agency. Updated semi-annually. NRDB: National Radon Database. The NRDB was created by the EPA to distribute information regarding the EPA/State Residential Radon Surveys and the National Residential Radon Survey. The data is presented by zipcode in Environmental FirstSearch Reports. Source: National Technical Information Service (NTIS) Updated Periodically Nuclear: The Nuclear Regulatory Commission's (NRC) list of permitted nuclear facilities. Updated Periodically PADS: PCB Activity Database System The EPA's database PCB handlers (generators, transporters, storers and/or disposers) that are required to notify the EPA, the rules being similar to RCRA. This database indicates the type of handler and registration number. Also included is the PCB Transformer Registration Database. Updated semi-annually. Receptors: 1995 TIGER census listing of schools and hospitals that may house individuals deemed sensitive to environmental discharges due to their fragile immune systems. Updated Periodically Non-ASTM Databases (continued): RELEASES: Air and Surface Water Releases. A subset of the EPA's ERNS database which have impacted only air or surface water. Updated semi-annually. Soils: This database includes the State Soil Geographic (STATSGO) data for the conterminous United States. It contains information regarding soil characteristics such as water capacity, percent clay, organic material, permeability, thickness of layers, hydrological characteristics, quality of drainage, surface, slope, liquid limit, and the annual frequency of flooding. Source: United States Geographical Survey (USGS). Updated quarterly TRIS: Toxic Release Inventory System. The EPA's database of all facilities that have had or may be prone to toxic material releases. Source: Environmental Protection Agency_ Updated semi-annually. ENVIRONMENTAL FIRST SEARCH CALIFORNIA DATABASES (DB) AND SOURCES CAL SITES: DB TYPE = ST (STATE SITES) Source: The CAL EPA, Depart. Of Toxic Substances Control Phone:(916) 323-3400 The CAL EPA Department of Toxic Substances Control (DTSC) maintains a database of information on properties (or sites) in California where hazardous substances have been released, or where the potential for such release exists. The types of properties in the CALSITES database are categorized as: Annual Work Plan, Backlogged Properties, Certified ./ De -listed Sites, No Further Action, Preliminary Endangerment Assessment in Progress, Preliminary Endangerment Assessment Required, Removal Action Required, Expedited Remedial Action Program, Voluntary Cleanup Program, Deed Restricted Properties, and Referred Properties. For more information on individual sites call the number listed above. CORTESE: DB TYPE = ST (STATE SITES) Source: The CAL EPA, Department of Toxic Substances Control Phone:(916) 445-6532 Pursuant to Government Code Section 65962.5, the Hazardous Waste and Substances Sites List has been compiled by Cal/EPA, Hazardous Materials Data Management Program. The CAL EPA Dept. of Toxic Substances Control compiles information from subsets of the following databases to make up the CORTESE list: 1. The Dept. of Toxic Substances Control; contaminated or potentially contaminated hazardous waste sites listed in the CAL Sites database. Formerly known as ASPIS are included (CALSITES formerly known as ASPIS). 2. The California State Water Resources Control Board; listing of Leaking Underground Storage Tanks are included (LTANK) 3. The California Integrated Waste Management Board; Sanitary Landfills which have evidence of groundwater contamination or known migration of hazardous materials (formerly WB-LF, now AB 3750). Note: Track Info Services collects each of the above data sets individually and lists them separately in the following First Search categories in order to provide more current and comprehensive information: CALSITES: SPL, LTANK: LUST, WB-LF: SWL SWIS SOLID WASTE INFORMATION SYSTEM: DB TYPE = SW (SOLID WASTE RELATED SITES) Source: The Integrated Waste Management Board Phone:(916) 255-2331 The California Integrated Waste Management Board maintains a database on solid waste facilities, operations, and disposal sites throughout the state of California. The types of facilities found in this database include landfills, transfer stations, material recovery facilities, composting sites, transformation facilities, waste tire sites, and closed disposal sites. For more information on individual sites call the number listed above. Note: This database contains poor site location information for many sites in the First Search reports; therefore, it may not be possible to locate or plot some sites in First Search reports. WMUDS: DB TYPE = SW (SOLID WASTE RELATED SITES) Source: The State Water Resources Control Board Phone:(916) 227-4365 The State Water Resources Control Board maintained the Waste Management Unit Database System (WMUDS) It is no longer updated. It tracked management units for several regulatory programs related to waste management and its potential impact on groundwater. Two of these programs (SWAT & TPCA) are no longer on -going regulatory programs as described below. Chapter 15 (SC15) is still an on -going regulatory program and information is updated periodically but not to the WMUDS database. The WMUDS System contains information from the following agency databases: Facility, Waste Management Unit (WMU), Waste Discharger System (WDS), SWAT, Chapter 15, TPCA, RCRA, Inspections, Violations, and Enforcement's. Note: This database contains poor site location information for many sites in the First Search reports; therefore, it may not be possible to locate or plot some sites in First Search reports." ORANGE COUNTY LANDFILLS: DB TYPE = SW (SOLID WASTE RELATED SITES) Source: Orange County Health Dept. Phone:(714) 834-3536 LUSTIS: DB TYPE = LU (LEAKING UNDERGROUND STORAGE TANKS) Source: The State Water Resources Control Board Phone:(916) 227-4416 The State Water Resources Control Board maintains a database of sites with confirmed or unconfirmed leaking underground storage tanks. Information for this database is collected from the states regional boards quarterly and integrated with this database. SAN DIEGO COUNTY LEAKING TANKS: DB TYPE = LU (LEAKING UNDERGROUND STORAGE TANKS) Source: San Diego County Dept. of Environmental Health Phone:(619) 338-2242 Maintains a database of sites with confirmed or unconfirmed leaking underground storage tanks within its HE17/58 database. For more information on a specific file call the HazMat Duty Specialist at phone number listed above. SLIC REGIONS 1 - 9: DB TYPE = SP (SPILLS-90) Source: The CAL EPA Regional Water Quality Control Boards 1 - 9 The California Regional Water Quality Control Boards maintain report of sites that have records of spills, leaks, investigation, and cleanups. For phone number listings of departments within each region visit their € web sites at: http://www.swrcb.ca.gov/regions.html SAN DIEGO COUNTY HE17 PERMITS: DB TYPE = PE (PERMITS) Source: The San Diego County Depart. Of Environmental Health Phone:(619) 338-2211 The HE17/58 database tracks establishments issued permits and the status of their permits in relation to compliance with federal, state, and local regulations that the County oversees. It tracks if a site is a hazardous waste generator, TSD, gas station, has underground tanks, violations, or unauthorized releases. For more information on a specific file call the HazMat Duty Specialist at the phone number listed above. SAN BERNARDINO COUNTY HAZARDOUS MATERIALS PERMITS: DB TYPE = PE (PERMITS) Source: San Bernardino County Fire Dept. Phone:(909) 387-3080 Handlers and Generators Permit Information Maintained by the Hazardous Materials Div. LA COUNTY SITE MITIGATION COMPLAINT CONTROL LOG: DB TYPE = OT (OTHER UNIQUE DATABASES) Source: The Los Angeles County Hazardous Materials Division Phone: (323) 890-7806 The County of Los Angeles Public Health Investigation Compliant Control Log ORANGE COUNTY INDUSTRIAL SITE CLEANUPS: DB TYPE = OT (OTHER UNIQUE DATABASES) Source: Orange County Environmental Health Agency Phone:(714) 834-3536 AST ABOVEGROUND STORAGE TANKS: DB TYPE = US (UNDERGROUND STORAGE TANKS) Source: The State Water Resources Control Board Phone:(916) 227-4364 The Above Ground Petroleum Storage Act became State Law effective January 1, 1990. In general, the law requires owners or operators of AST's with petroleum products to file a storage statement and pay a fee by July 1, 1990 and every two years thereafter, take specific action to prevent spills, and in certain instances implement a groundwater monitoring program. This law does not apply to that portion of a tank facility associated with the production oil and regulated by the State Division of Oil and Gas of the Dept_ of Conservation. SWEEPS / FIDS STATE REGISTERED UNERGOROUND STORAGE TANKS: DB TYPE = US Source: CAL EPA Dept of Toxic Substances Control Phone:(916)227-4404 Until 1994 the State Water Resources Control Board maintained a database of registered underground storage tanks statewide referred to as the SWEEPS System. The SWEEPS UST information was integrated with the CAL EPA's Facility Index System database (FIDS) which is a master index of information from numerous California agency environmental databases. That was last updated in 1994. Track Info Services included the UST information from the FIDS database in its First Search reports for historical purposes to help its clients identify where tanks may possibly have existed. For more information on specific sites from individual paper files archived at the State Water Resources Control Board call the number listed above. CUPA DATABASES & SOURCES (DB TYPE = US (UNDERGROUND STORAGE TANKS) DEFINITION OF A CUPA: A Certified Unified Program Agency (CUPA) is a local agency that has been certified by the CAL EPA to implement six state environmental programs within the local agency's jurisdiction. These can be a county, city, or JPA (Joint Powers Authority). This program was established under the amendments to the California Health and Safety Code made by SB 1082 in 1994. A Participating Agency (PA) is a local agency that has been designated by the local CUPA to administer one or more Unified Programs within their jurisdiction on behalf of the CUPA. A Designated Agency (DA) is an agency that has not been certified by the CUPA but is the responsible local agency that would implement the six unified programs until they are certified_ Please Note: Track Info Services, LLC collects and maintains information regarding Underground Storage Tanks from majority of the CUPAS and Participating Agencies in the State of California. These agencies typically do not maintain nor release such information on a uniform or consistent schedule; therefor, currency of the data may vary. Please look at the details on a specific site with a UST record in the First Search Report to determine the actual currency date of the record as provided by the relevant agency. Numerous efforts are made on a regular basis to obtain updated records. ALAMEDA COUNTY CUPA'S * County of Alameda Department of Environmental Health * Cities of Berkeley, Fremont, Hayward, Livermore / Pleasanton, Newark, Oakland, San Leandro, Union ALPINE COUNTY CUPA * Health Department (Only updated by agency annually) AMADOR COUNTY CUPA * County of Amador Environmental Health Department BUTTE COUNTY CUPA * County of Butte Environmental Health Division (Only updated by agency biannually) CALAVERAS COUNTY CUPA * County of Calaveras Environmental Health Department COLUSA COUNTY CUPA * Environmental Health Dept. CONTRA COSTA COUNTY CUPA * Hazardous Materials Program DEL NORTE COUNTY CUPA (US) * Department of Health and Social Services EL DORADO COUNTY CUPA'S * County of El Dorado Environmental Health - Solid Waste Div (Only updated by agency annually) * County of El Dorado EMD Tahoe Division (Only updated by agency annually) FRESNO COUNTY CUPA * Haz. Mat and Solid Waste Programs GLENN COUNTY CUPA * Air Pollution Control District HUMBOLDT COUNTY CUPA (US) * Environmental Health Division IMPERIAL COUNTY CUPA (US) * Department of Planning and Building INYO COUNTY CUPA (US) * Environmental Health Department KERN COUNTY CUPA (US) * County of Kern Environmental Health Department * City of Bakersfield Fire Department KINGS COUNTY CUPA (US) * Environmental Health Services LAKE COUNTY CUPA (US) * Division of Environmental Health LASSEN COUNTY CUPA (US) * Department of Agriculture LOS ANGELES COUNTY CUPA'S (US) * County of Los Angeles Fire Department * County of Los Angeles Environmental Programs Division * Cities of Burbank, El Segundo, Glendale, Long Beach/Signal Hill, Los Angeles,Pasadena, Santa Fe Springs, Santa Monica, Torrance, Vernon MADERA COUNTY CUPA (US) * Environmental Health Department MARIN COUNTY CUPA (US) * County of Marin Office of Waste Management * City of San Rafael Fire Department MARIPOSA COUNTY CUPA (US) * Health Department MENDOCINO COUNTY CUPA (US) * Environmental Health Department MERCED COUNTY CUPA (US) * Division of Environmental Health MODOC COUNTY CUPA (US) * Department of Agriculture MONO COUNTY CUPA (US) * Health Department MONTEREY COUNTY CUPA (US) * Environmental Health Division NAPA COUNTY CUPA (US) * Hazardous Materials Section NEVADA COUNTY CUPA (UST) * Environmental Health Department ORANGE COUNTY CUPA'S (US) * County of Orange Environmental Health Department * Cities of Anaheim, Fullerton, Orange, Santa Ana * County of Orange Environmental Health Department PLACER COUNTY CUPA (US) * County of Placer Division of Environmental Health Field Office * Tahoe City * City of Roseville Roseville Fire Department PLUMAS COUNTY CUPA (UST) * Environmental Health Department RIVERSIDE COUNTY CUPA (US) * Environmental Health Department SACRAMENTO COUNTY (US) * County Environmental Mgmt Dept, Haz_ Mat_ Div. SAN BENITO COUNTY CUPA (US) * City of Hollister Environmental Service Department SAN BERNARDINO COUNTY CUPA'S (US) * County of San Bernardino Fire Department, Haz. Mat. Div. * City of Hesperia Hesperia Fire Prevention Department City of Victorville Victorville Fire Department SAN DIEGO COUNTY CUPA (US) * The San Diego County Dept. of Environmental Health HE 17/58 SAN FRANCISCO COUNTY CUPA (US) * Department of Public Health SAN JOAQUIN COUNTY CUPA (US) * Environmental Health Division SAN LUIS OBISPO COUNTY CUPA'S (US) * County of San Luis Obispo Environmental Health Division * City of San Luis Obispo City Fire Department SAN MATEO COUNTY CUPA (US) * Environmental Health Department SANTA BARBARA COUNTY CUPA (US) * Co Fire Dept Protective Services Div SANTA CLARA COUNTY CUPA'S (US) * County of Santa Clara Hazardous Materials Compliance Division * Santa Clara Co Central Fire Prot. Dist. (Covers Campbell, Cupertino, Los Gatos, & Morgan Hill) * Cities of Gilroy, Milpitas, Mountain View, Palo Alto, San Jose Fire, Santa Clara, Sunnyvale SANTA CRUZ COUNTY CUPA (US) * Environmental Health Department SHASTA COUNTY CUPA (US) * Environmental Health Department SIERRA COUNTY CUPA (US) * Health Department SISKIYOU COUNTY CUPA (US) * Environmental Health Department SONOMA COUNTY CUPA'S (US) * County of Sonoma. Department Of Environmental Health * Cities of Healdsburg / Sebastapol, Petaluma, Santa Rosa STANINSLAUS COUNTY CUPA (US) * Dept. of Env. Rsres. Haz. Mat. Div, SUTTER COUNTY CUPA (US) * Department of Agriculture TEHAMA COUNTY CUPA (US) * Department of Environmental Health TRINITY COUNTY CUPA (US) * Department of Health TULARE COUNTY CUPA (US) * Environmental Health Department TUOLUMNE COUNTY CUPA (US) * Environmental Health VENTURA COUNTY CUPA'S (BWT UST'S & CERTIFIED UST'S) * County of Ventura Environmental Health Division * Cities of Oxnard, Ventura YOLO COUNTY CUPA (US) * Environmental Health Department YUBA COUNTY CUPA (US) * Yuba County of Emergency Services Environmental FirstSearch Street Name Report for Streets within .25 Mile(s) of Target Property TARGET StTE; 7872 EDINGER AVE HUNTINGTON BEACH CA 92647 Street Name Dist/Dir Aldrich Ave 0.08 S- Beach Blvd 0.11 -E Center Ave 0.21 NW Edinger Ave 0.01 NW 1-405 0.20 NE Parkside Ln 0.01 -W Sher Ln 0.19 -W Stark St 0.17 SE Volga Dr 0.23 SW Street Name JOg; 0004019 Dist/Dir Sub'et ct Prop. erty: 7872 Edinger Avenue Huntington Beach, CA 92647 12.11 Certification 106 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 CERTIFICATION I certify that, to the best of my knowledge and belief,: The statements of fact contained in this report are true and correct. The reported analysis, opinions and conclusions are limited only by the reported assumptions and limited conditions and are my personal, unbiased professional analysis, opinions and conclusions. I have no present or prospective interest in the property that is the subject of this report and I have no personal interest or bias with respect to the parties involved. My compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result or the occurrence of a subsequent event. My analysis, opinions and conclusions were developed and this report has been prepared in conformity with Uniform Standards of Level One Environmental Report Updating I have personally inspected the site and reviewed and inspected records available concerning the subject property and conducted the interviews with the agencies so named in the body of this report. No one provijficant professional assistance to the person signing this report. A. Qu*araro, CPE, 107 Subject Property: 7872 Edinger Avenue Huntington Beach, CA 92647 12.12 Resume 108 RESUME STEPHEN A. QUARTARARO Phase I Site Surveys, Environmental Hazard Assessment, Project Cost to Cure Physical Deterioration, Construction Management, Environmental Site Appraisals EXPERIENCE 26 years as asbestos and environmental consultant and abatement contractor direct and subcontract. Performance of site assessment, professional cost estimation, third parry verification of sampling activities, underground tank removal monitoring and property assessment consultant. Coordinator of design and construction in two Los Angeles high rise office buildings for fire safety retrofit under the City of Los Angeles fire life safety ordinance. Develop and Design of affordable housing, including site selection, negotiation, planning and permit process and funding sourcing. MAJOR CONTRACTS UC Santa Barbara (1979) - HVAC system cleaning of five -story Chemistry and Physical Sciences buildings on campus. TEA Medical Center LA Jolla (1980) - After -fire decontamination of surgery HVAC system, TRW (1983) - Bulk materials sampling for asbestos in 65-building facility, Redondo Beach, CA. UC Chancellors Office, UC San Francisco Medical Center (1984) - Survey design, field work completion, report design, report completion for UC Chancellor's office's funding request to State Assembly funding for asbestos abatement and management - 103 buildings - hospital, classrooms, administrative offices. California Hospital Medical Center (1983) - Contract and specification design and completion of asbestos abatement projects. County of Los Angeles (1984) - Approval of specifications, third party monitoring of contractor during Building 5 Asbestos Abatement Project at Rancho Los Amigos Medical Center. JMB Property Management (1985) - Coordination with building management and Med Tox abatement and hygiene personnel on three-story asbestos containment project in high rise office building, Century City, CA. UC Riverside (1985) - Asbestos management and control in utility tunnels under campus. Tishman Construction (1985) - Area containment for electrical work adjacent to occupied areas in asbestos affected Bank of America offices at ARCO Towers, Los Angeles, CA. Equitable heal Estate Investment Management (1986) - Asbestos abatement and containment projects, including elevator lobby doors, full floor abatement and after -fire decontamination projects in First Interstate Bank and Union Bank buildings, Los Angeles, CA. Baxter Pharmaceutical (1988) - Building materials sampling for asbestos and reports for 14 buildings in seven midwest states. Fremont Indemnity (1991) - Independent owner's agent for fire protection citation response to LAFD and construction of tenant improvements for asbestos abatement and fire life safety rehabilitation of I I -story office building in midtown Los Angeles. Included removal of underground diesel tank. Redlands Federal Savings (1990) - Phase I Environmental Assessments of raw land in Inland Empire and San Diego areas of Southern California. SPS Technologies (1993) - "Qualified Risk Assessment"(QRA) for sale of existing 20-acre site in Costa Mesa, CA: Work involved review of commercial appraisals, Environmental Site Remediation work completed, further remediation cost proposals, interviews with responsible government agencies, interviews with banking authorities, preparation of report detailing current conditions and value of property less expected remediation costs, results of interviews with regulatory agencies and financial authorities, four scenarios under which the property might be sold and the anticipated financial return and liability concerns of each scenario. Money Store Investment Corporation (Present) - Related - 400+ Phase I Environmental Assessments of commercial property as collateral for SBA backed commercial loans in California. Bank ofAmerica (Present) - Related - Phase I Environmental Assessments in Southern California. Wells Fargo Bank (Present) - Phase I Environmental Assessments and Asbestos Inspections in Southern California. Coast Federal Savings (Present) - 300+ Phase I Environmental Assessments and Asbestos Inspections of residential apartment buildings, commercial shopping centers and other commercial buildings from California to New York State. Chevron Real Estate Services (1991) - Coordination and management of gasoline contaminated soil remediation project in Blythe, CA; work included shoring to 30 feet along the western perimeter of project to protect adjacent restaurant, removal and bio-remediation of 3,500 cubic feet of contaminated soil, removal of 5,000 gallons of contaminated water, placement of filter over local groundwater, back filling of excavation with remediated soil. Carlsberg Management Company (1989-1995) - Independent owner's agent for fire protection citation response to LAFD and construction of tenant improvements for asbestos abatement and fire life safety rehabilitation of 10-story office building in West Los Angeles. Owner's representative: work included selection and coordination of architect, mechanical, electrical, fire sprinkler, asbestos abatement/containment and industrial hygiene contractors and interface with the City of Los Angeles Building, Electrical and Structural Departments and Inspectors over a five year period under occupied and vacant building conditions. California Federal Bank (1993) - Phase I Environmental Assessments and Asbestos Inspections of commercial and residential buildings in Northern and Southern California. Folger & Levin, Law Firm (1995) - "Environmental Risk Assessment" (ERA) for 3-acre parcel in West Los Angeles. Review of six environmental soil and groundwater studies, practical expansion of research and coordinated explanation of real environmental issues for use by commercial property appraiser. State Farm Insurance Company (1995) - Asbestos expert for client negotiations. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (1996/1997) - Asbestos expert witness. Prestholt, Kleeger, Fidone & hillasenor (1996) - Asbestos expert witness. Pacific Development Company (1997 -1998) - Characterization and Remediation of 2.5 acre TRPH and lead impacted site leading to CUPA closure. Miscellaneous Independent Project Management of soil and groundwater sampling and remediation leading to site closure letter from County and City Fire Departments, Health Departments and Regional Water Boards. Miscellaneous Independent Cost Estimation for required remediation of contaminated sites with commercial and industrial property appraisers. EDUCATION B.S. Urban Environmental Management; Cal State University Dominguez Hills J.D. Candidate Classes in Torts, Contracts, Criminal Law; Western State University, Southern California College of Law Major Emphasis - Tort Theory and the impliations to modern environmental contamination and clean-up problems. "Low Risk Closure Guidelines" - California Regional Water Quality Board - Los Angeles Region Seminar June 1996_ LICENSES California General Engineering, Hazardous Materials Certified California C' 2 Contractors License, Asbestos Certified California Real Estate Broker CERTIFICATIONS Certified Asbestos Consultant (CAC), State of California EPA/AHERA Competent Person, Supervisor/Management Planner/Project Designer Hazwhopper 48 Hour OSHA Certified Field Supervisor Certified Professional Estimator (CPE) Lead Abatement Supervisor REGISTRATIONS Registered Environmental Assessor (REA) Registered Property Manager (RPM) AFFILIATIONS American Society of Professional Estimators (ASPE) California Society of Real Estate Appraisers (CSOREA) American Institute of Plant Engineers (AIPE) California Society of Hospital Engineers (CSHE) National Society of Power Engineers (1NSPE) Kiwanis International, Greater Anaheim, CA (KIIYANIS) PUBLICATIONS Numerous articles on asbestos in "Asbestos Issues", a nationally published magazine, and the "Los Angeles BOMA" magazine. Home Trader Publications, Copyright 1994 - Residential properties for sale or trade. American Industrial Real Estate Association Fall 1997 Newsletter, "The Environmental Report, To Close or Not To Close", 1997 SEMINAR SPEAKER IRS (Internal Revenue Service), "Discounted Value of Asbestos and Environmentally Affected Property" CATL (CA Assoc of Thrift and Loans), "The Affect of Asbestos and Environmental Discounts on Loans" American Society of Professional Estimators - "The Design and Estimate of an Asbestos Abatement Project" Los Angeles Board of Realtors, "Asbestos in Homes and Property" (AIPE) American Institute of Plant Engineers, "Asbestos, History and Challenges" (CSHE) California Society of Hospital Engineers, "Asbestos, History and Challenges" (SCACEO)Southern California Association of Code Enforcement Officials "Single Room Occupancy Hotels, History and Modern Operations" TRAINING CLASSES PRESENTED 8-hour Asbestos Awareness Class presented to: * City of LA Fire Safety Inspectors * Zurn Cosco Supervisors and Workers * Grinnell Fire Protection Supervisors and Workers EDUCATION VIDEOS Installation of Fire Sprinkler Hangers within asbestos affected environments, 1986 SRGs, The Myth and Reality, 1991 DEVELOPMENT DESIGN General Partner - 210-unit Single Room Occupancy (SRO) residential project in Anaheim, CA. General Partner - 55-unit Single Room Occupancy (SRO) residential project in Santa Ana, CA. EMPLOYMENT HISTORY AND OWNERSHIP S&S Commercial Environmental Services, Inc., LLC, Enviroprop, Home Trader Realty, Inc., Equity Funding Mortgage, NATEC International, Inc., McClelland Management Services, National Abatement Corporation, Med-Tox Consultants, Pacific Abatement Group, Asbestos Clean-up and Consultants Corp., William Lovett Filter Company, Baker Consultants, Inc. I COUNTY OF ORANGE�p HEALTH CARE AGENCY REGULATORY HEALTH SERVPCES ENVIRONMENTAL HEALTH xcellence C� regrlty (--� e7"V1Ce November 25, 2002 Lindon Legin Co & Sher Donald 28815 Grayfox Street Malibu, CA 90265 Subject: Completion of Waste Oil Tank Removal Re: Goodyear Tire Auto Service Center 7872 Edinger Avenue Huntington Beach, CA EH ID # 002802 To Whom It May Concern: JULIETTE A. POULSON, RN, MN DIRECTOR MIKE SPUROEON DEPUTY AGENCY DIRECTOR REGULATORY HEALTH SERVICES STEVEN K. WONG, REHS, MPH DIRECTOR ENVIRONMENTAL HEALTH MAILING ADDRESS: 2009 EAST EDINGER AVENUE SANTA ANA, CA 92706.4720 TELEPHONE: (714) 667.3600 - FAX: (714) 972-0749 E-MAIL* onvlronheelth(tghc3-co.oran9c.©-us This is in response to your request for a confirmation of the completion of the waste oil tank removal project. With the provision that the results for the soil samples obtained during the tank removal on March 19, 1987 were accurate and representative of existing conditions, it is the position of this office that no significant waste oil soil contamination, from the operation of a 550 gallon waste oil underground storage tank, has occurred at the above noted facility location. It should be pointed out that this letter does not relieve you of any responsibilities mandated under the California Health and Safety Code if additional or previously unidentified contamination is discovered at the subject site. If you have any questions regarding this matter, please contact Steven Sharp at (714) 667-3623. Sincerely, Seth J. Daugh Supervising Hazardous Waste Specialist Iazardous Materials Management Section Enviromnental Health cc: Ken Williams, Santa Ana Regional Water Quality Control Board Cathy Ferguson, Harding ESE STANIIARI) LEASE AGREEMENT between IIB AUTO I, LLC, a California limited liability company and JUZTWIN, INC., a California corporation "LANDLORD" and C.S.B. PARTNERSHIP, a California general partnership "TENANT" 001219.0001"4572 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 I, 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 9,163 square foot building consisting of five (5) tandem bays and a retail area. O. 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. (ir) 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. 001219.00=6984572 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: NIA 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 (1 st) 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. 001219.00Ol\698457 2 4. MINIMUM 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 (41h) 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. ADDITIONAL. 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 001219.000R69M57.2 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 001219.00011G98457.2 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. It. 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 properly 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 documents) 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 001219.0061\699457-2 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 furnish 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 001219.0001\698457.2 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 001219.00011698457.2 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 full 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. 001219.0001\699457.2 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. 001219.0001%698457.2 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, 001219.0001\698457.2 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\6984572 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. 001219.0001\69"57.2 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. 001219.0001t69&457.2 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 001219.000116984572 16 provision shall constitute the notice required by Section 1161 of the California Code of Civil Procedure. (fi) 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. 001219.0001\6"4572 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. (e) 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 001219.00011699457.2 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 (100/0) 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 (5%) 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 WOIV,98457.2 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 ("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. 00121%000116984572 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 001219.000114994572 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 00121 %0001W8A57.2 22 Lease is binding upon Landlord and Tenant in accordance with its terms. Each party shall deliver to the other party 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 party 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. RELATIONSIRP OF PARTIES. Neither the method of computation of rent nor any other provisions contained in this Lease nor any acts of the parties shall be deemed or construed by the parties or by any third person to create the relationship of principal and agent or 001219.0001\698457.2 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. 001219.OW1169M57.2 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 MAJEURE. 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 parry'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). 001219.000R698457.2 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). 0012M0001\698457.2 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. (d) 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. FRANCHISOR'S 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. 00I219.00D11698457.2 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, �aCaliforniali ' ed liability company By: Name: C A2.C"oAJ Title: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: _ CICItopher R. Phillip , President By: FOUR KYLES, INC., a California rporation, its General Partner By: Virgil Kyle Kyle, 91, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, General Partner //7,// ee� Y24L By: opher R. Phillips, resident By: JYB ENTERPRISES, INC., a California corporation, its General Partner By: Ja Y. Berry, Presi nt 001219.0001\698457.2 28 EXHIBIT "A" LEGAL DESCRIPTION OF PREMISES To be supplied by Landlord at a future time. 001219.0001\698457.2 EXIIIBIT "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 JTJZTWIN, 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: L TENANT'S WORK. 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 THE 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 fiords 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. 001219.0001\698457.2 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: C.S.B. PARTNERSHIP, a California general partnership HB AUTO I, LLC, a California limi d liability company By: By: Nam : �lsPs CScitJ Title: JUZTWIN, INC., a California corporation By: Name: Title: 001219.000P698457.2 C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: - U",- ZA 64- 1 Chr' pher R. Philli , President By: FOUR KYLEINC. , IN, a California orporation, its General Partner aV,By: 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:(9. 2Aa4 Chr' pher R. Phillip President By: JYB ENTERPRISES, INC., a California corporation, its General Partner By: Jas Y. Berry, Pres' en EXHIBIT"B-1" SCHEDULE OF TENANT IMPROVEMENT WORK [to be inserted] 001219.0001\6984572 EXHIBIT 11C" 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. 001219.0001N699457.2 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 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 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 (14) 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.DWM98457.2 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 attom 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] 001219.000116994572 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 001219.0001%698457.2 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 oroption 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. 001219.0001\699457.2 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: 001219.0001%98457.2 OPTION ADDENDUM 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 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"), 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: 1. 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 (ISO) 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 Term 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 1, LLC, a Cal�1*iab' itycompany By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner B Name: :7 —.o ai> By: Title: Cam' pher R. Phillips resident JUZTWIN, California• , • . • By: FOUR KYLES, INC., a California orporation, its General Partner By: l Virgil K le Ky ,'In, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, General Partner By: .a, A" J, — C opher R. Philli , President By: JYB ENTERPRISES, INC., a California Corporation, its General Partner By: I J n Y. Berry, Presi en 001219.0001\69M57.2 2 7872 Edinger Huntington Beach, CA Square Feet 8.163 Bia O Tires RENTSCREDULE 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-04 May-04 Jun-04 Amount $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $ 192,000 $1.96 $1,37 $1.37 $1.37 $1.37 $1.37 $1.37 $1.37 $1.37 $1.37 $1.37 $1.37 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Amounl $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $15000 $16,000 $ 192,000 $1.96 $1.96 $1.96 $1.96 $1.96 $1.96 $196 $1.96 $1.96 $1.96 $1.96 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-06 Aug46 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Amount $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $ 192,000 $1.96 $1.96 $1.96 $1.96 $1.96 $1.96 $1.96 $1.96 $1.96 $1.96 1 2 3 4 5 6 7 8 9 10 11 12 Total escalate 10% Ju1-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Amount $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $ 211,200 1 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-08 Aug-08 Sep-08 Oct-08 Nov -OS Dec -OS Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Amount $17,600 $17,600 $17,600 $17.600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $ 211,200 $2.16 $2,16 $2.16 $2.16 $2.16 $2.16 $2A6 $2,16 $2.16 $2A6 $2.16 $2.16 1 2 3 4 5 6 7 8 9 10 11 12 Total Ju1-09 Aug-08 Sep•09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Amount $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17,600 $17.600 $17,600 $17,600 $17,600 $17,600 $ 211,200 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 $2.16 $2,16 $2.16 $2.16 $2.16 1 2 3 4 5 6 7 8 9 10 11 12 Total escalate 10% Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Amount $19,360 $19.360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $ 232,320 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Amount $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $ 232,320 $2,37 $Z37 $2.37 $2.37 $Z37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 $2.37 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 LJun-13 20 Amount $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,360 $19,31 $ 232,3 $2.37 $2,37 $2.37 $2.37 $2.37 $2.37 $2,37 $2.37 $2.37 $237 $2.37 $2.3l 1 2 3 4 5 6 7 8 9 10 11 12 Total escalate 10% Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 M2y-14 Jun-14 Amount $21,296 $21,296 $21,296 $21,296 $21,296 $21,296 $21,296 $21,296 $21,296 $21,296 $21,296 $21,296 $ 255,552 $Z61 $2.61 $2,61 $2.61 $2.61 $2 61 $2.61 $2.61 $2.61 $2.61 $2.61 $2.61 If Tenant deciced to exercise first 5-year option 1 2 3 4 5 6 7 8 9 10 11 12 1 1 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan•15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Amount $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21.296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 251,11 $ 2.61 $ 2.61 $ 2-61 $ 2.61 $ 2.61 $ 2.61 $ 2.61 $ 2.61 $ Z61 $ 2.61 $ 2.61 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan•16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Amount $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 21,296 $ 255,552 $ 2.61 $ 2.61 $ 2.61 $ 2.61 $ 2,61 $ 2,61 $ 2.61 $ 2,61 $ 261 $ 2.61 $ 2.61 $ 2.61 1 2 3 4 5 6 7 8 9 10 11 12 Total escalate 10% Jul-16 Aug•16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb•17 Mar•18 Apr-18 May-18 Jun-18 Amount S 231425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 281,100 2.87 $ 2.87 $ 2.87 $ 2,87 $ 2.87 $ 2.87 $ 2.87 $ 2.87 $ 2.87 $ 2.87 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul•17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun Amount $ 23,425 S 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23.425 $ 23,425 $ 23,425 $ 23,425 $ 23.425 $ 281,100 $ 2.87 S 2.87 $ 2.87 $ 2,87 $ 2.87 $ Z87 $ 2.87 $ 2.87 $ 2.87 $ 2.87 $ 2.87 $ 2.87 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Amount $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 23,425 $ 281,100 2.87 2.87 287 Z87 Z87 2.87 2.87 2.87 2.87 2.87 2.81 2.87 If Tenant decides to exercise second 5-year option Year 1 2 3 4 5 6 7 8 9 10 M 12 13 14 15 1 2 3 4 5 6 7 6 9 10 11 12 Total Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Amount 1 E�I9Jul-1 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 309,204 $ 3.16 $ 3.16 $ 3.16 $ 3.16 $ 3.16 $ 3.16 $ 3.16 $ 3.16 $ 3.16 $ 3.16 $ I 1 2 3 4 5 6 7 8 9 10 11 12 Total Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Amount $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 309,204 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 1 2 3 4 5 6 7 8 9 10 11 12 1 Total Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Amount $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 25,767 $ 309,2. 3.16 3.16 3.16 3.16 3.16 3.16 3,16 3.16 3.16 3.16 3.16 3.16 1 2 3 4 5 6 7 8 9 10 11 12 Total escalation 10% Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Amount $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 340,116 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3 47 $ 3.47 $ 3.47 $ 3.47 $ 1 2 3 4 5 6 7 8 9 10 11 12 iota) Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Amount $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28,343 $ 28.343 $ 28,343 $ 340,116 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3.47 $ 3A7 $ 3.47 $ 147 16 17 18 19 20 LEASE RIDER AND MODIFICATION THIS AGREEMENT is made effective this 1st 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 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 p�fformance 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 Name: —1-4v6AFr2Sa-4J Title: - I (CORPORATE SEAL) TENANT C.S.B. PARTNERSHIP By: Name: Title: (CORPORATE SEAL) BIG O TIRES, INC. K 0-,-?4 /j� -c-� Name: Joh . Hyduke Title: Senior Vice President — Franchise Development (CORPORATE SEAL) GUARANTY OF LEASE D RM I N A L THIS GUARANTY OF LEASE ("Guaranty") is made and entered into as of the 19th day of April, 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 axe 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 (iu) 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 following: the acceptance hereof; any adverse change in Lessee's financial position; any other fact which 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 (v1i) 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 party. 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 T, LLC; Proposed lease of 7872 Edinger Avenue, Huntington Beach, CA- 6.EML/1 multipart_xF8FF_2 Guaranty.doc/C58EA28C-18C0-4a97-9AF2-036E93DDAFB3/Guaranty.doc?attach=1 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. Reports 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-18C0-4a97-9AF2-036E93DDAFB3/Guaranty.doc?attach=l 13. Parazraph 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: .v CHF&fOPHER R. PHIL IPS 4 http://webmail.svn.com/exchange/todd.carson/inbox/RE: C.S.S. Partnership_xFBFF_HB Auto I, LLC; Proposed lease of 7872 Edinger Avenue, Huntington Beach, CA- 6.EML/1_multipart_xF8FF2_Guaranty. doc/C58EA2 8C- 16CO -4 a97 - 9AF2 -03 6E93DDAFB3 /Guaranty. doc?attach=l 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 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: 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. 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. ASSIGNOR: JUZTWIN, INC., a California corporation By: Name: Title: Authorized Signatory ASSIGNEE: 24Z CHAEL TODD ARSO' ROSEMARY KATHLEEN CARSON -2- 5. Severobility. If any term or Provision of this Assignment or the application thereof to any persons or circumstanecs shrill, 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 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. 5. Counterparts, Faerdrnihe. 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 facsimilc which facsimile signature shall be as binding as an original. IN WITNESS WHERGOr, the undersigned have executed this Assignment as of the date first set forth hereinabove. ASSIGNOR: .rUZTWIN, INC., a California corporation By: / Nam e: 9 Title: Auclaorized Signatory ASSIGNEE: MICHAEL TODD CARS ON -2 - M INN z MK'CWT nylg CoMpAXy neconDINO REUVESTED Sy AND WI-J EU RECORDED MAJL to- MICHAEL WOO CAASON ROSEMARY KATHLEEN CARSON 33L Cwwl Stseac Newport Beach, Ca. 92663 A.P.N: Recardod to offlctai Racarde, Orange County Tom IDily, cWR-Roeordir Nfiidi f'JI �i� Ctii�iil tiliiYlff Ia.-Do tIv a2 Goa d za.10 zany aov coo Baca v.vo o.ao a_eo f Space Mova Thk Ll:ta fin RMcder's Ufc OWy r Nat W13437311•0 Escrow No: 5248$-LR GRANT GEED THE UNDEASIONFo omtvc)Rtel DECLAflFtal THAT b0cliMENTAaY TRANSFEFITAx IS: CQLINTY s 558_30 C 1 computBd on full value of Rtbpedty Convayed, of r X J COft muted an full vale less value of lien; of encumbrar ces remaining at time of Sala, [ I unincurpoisted area; [ ? City of untlnates Beach , and [ 1 CrAhtees ere axpr@ssiy declaring that ttte 'transfer of the proparfy is to be community property with right pf survivorship. as per att:aehad Exhibit iOne. FOR AVALUABLE CONSIDERATION, ftecuipt of which is haftby acknowtedged, JUZTWVIN, INC., a Catifomin corporation harobv GRANTIS► to MICHAM "f ODD CARSON AND ROSEMARY KA-MLEEN CARSON, husband and wife a* community pioperty'wM sighs of survivorship - AS TO AN UN131VIDE D rO% INTEREST IN AND YG: fire folfuv ng destttits+ad property Its jhq City of Huntington Beach, County of Or,angp State of CalliarAiw LOTS 21, 22 AND 23 OF TRACT NO. 417, AS PER MAP RE-MROED IN BOOK 16, PAGE 47 OF MISCELLANEOUS MAPS. IN THE OFFICE OF THE I;pUNN RECORDER OF SAID COUNTY Document Date: June 26_ 2004 sVV wfopy'fr JUZT WINr INC., a Caufarm rporatlon �Carson, Previden, STATE Of CFO N: COUNTY CW �sGl L l on oersnna8y ff"- se3 pureontiNy knDwtt to mo for proved w0 ma oft the basin of vwjofactety w4dehsel to ho %he psrcon�or whnao aQMv SJ (a/�trd subscrfbtd to the mthin lntMununt and toknwMadued (a mts {hat Welhe/#hay axetuvaq Qte earn* in g{h6064 authorized Dowaur YAW and mar by iwidr/ POW6roipnattgoh) on the btiuman apwamIXorth*.halervpoa aohalfof vvhloh the peveon�o anted, eaacu oa 1ho fnrtruntent. wiTNE99 f.m+a and 0f o t. The arsp botaw Is for offiniat norerirt seal. Si >aluru OFRC;IALBFAL JQ�rAf�p1{Q�A iJl. curc � NOT chi 00 MN0IEtdY oC)h" ESA AsCAY 21.2pQ$ Zg 35vtj Mea Tax fitOTOMOnts tot Ur" aw Aboyo or Addroas k4led DetOW n nTri c7cn 1 Ordu No. 14343731-6 JEWbit "A" LOTS 21. 2Z AND 23 OVMACT NC1.417. IN THE CITY OF HUNTINC`TClN BSAC:j1.00iTNTY OF QRAi40B, STATE OF CALLFORNIA. AS PER MAY' YZEC,ORDED W B00R (6 PAGE 47 OF hMCEI I AKEOUS MARS. IN TTM (ffja OE THE COUNTY RECORDER QP $AID COUNTY, EXCEPT ALL OLL, MINERALS AOM 011-MIR krYPROCARBUN SUBSTANCES WMIQUT RIGHT OF SURFACr; j2N7 RY THERETO ABOW: A DEPTH OF ADOYF 500 I•EET FROM 7HE SUAFACEATk=OF. AS REURVED M T 4E DrBD FROM SMMx 1-1, PINLEY, RECORDER? bFCEhMBR 14. IS0 old BOOK $548I-AGE 3S5, c9MCIAL RECORDS. E8 3Ed6 0 9Tp Government code - 2736.I7 i CERTIFY UNDMPENALTY OF FAY THAT THE NOTARY SEAT. ON THE DOCUMENT TO WHICH THIS STATEMENT IS ATTACHED READS AS FOLLOWS: NAME OF NOTARY, -- DATE COMMTSSION MUMS- COUNTY WHERE BOND IS FILED: COMMISSION NO.: MANUFACTL PLACE OF B�X DATE OF RM SIGNATURE: Gcvenuacnt code - 2735.17- I CERTIFY UNDER PENALTY OF PERnMY THAW. THE ILLEGIBLE PORTION OF THIS DOCUMENT, TO WATCH TMS STATEMENT IS AT rAC. HBD, READS AS FOLLOWS: PLACE OF EXBCUTIOM DATE OF BXECiI'3'ION! 6MNATURE: va mra 0 Die aso UOThCF. C- -- A.P.N_ CONTINUATWN Of: GRANT DEED EMBIT ONE Grantees hereby expressly declare and accept the transfer of The herein describers propercy as community prOpe" wish right of surviva►sh;p. Dated' JUng2 fl PIf}tt Q �i r8nie 9 Mi TODD C,b11!$�jii � Geted� ,Tune_ 26. 2{lp4 _ ' prsrtttie i'�' ROSEMARY KATHLEEN CARSON STATE Of CALIFOPNIA )55 COUNTY or 4� i bn Jlpit 28, 9004 barare par¢onalf eppbpted Mlehae3 Todd Caieeoo 1 8 sw-bo,%* tvr proved Ta me on the bade of karyt Anti acknawibdgad to me that' hots" '�avY'G a tb0 �tsSititn9ltt tft9 j1 dtaoitteT ruvrd acid s. wtoty "lanos) iv be the t~,orronfol whop- remolal iaj :ems bccrlban to the rxeouted thtt tomb In trislfi Worisad ospaartvGcal mind They by eedty upon baftaif 61 whtrhthe person O) aaia'Cir exaeNhtA the tntrtrurnont. / Tha atao below is for afti riot ttotatiw saes_ se avd r1 "Ta pa- Govcnunmt coda - 2736J7 I CIERTIFY t T=BR PENALTY OF EERI MY TJI AT THE NOTARY SEAL ON THE 00CUMENT TO WHICH THIS STATEMENT IS ATTACHED READS AS FOLLOWS: NAME OF NOTARY:-'1 DAT13 CDMMISSION EXPTR.ES: e,4 — ,r T COUNTY WHERE BOND IS FAD: CON04USION NO.! MANUFACTURER/ VM0ER NO,: ��► %�'� PLACE OF EXECUTION: DATE OF CUTION.' SIIGNATURE: Qovcmmznt codr. - 2736.17 I CERTIFY UNDER. PENALTY OF PERJURY THAT'TRZ ILLEGIBLE PORnON OF 7MS DDCUMENT, TO WWCH THIS STATEMENT IS. ATTACHED, READS .AS FOLLOWS: PLACE OF EXECUTION; I)ATE Olt PMCUTION: SIGNATURE. 90 3DVd n c,ra 0C=^ 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 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 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 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. 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: _ ' 5-- Title: Authorized Signatory MICHAEL TODD eARSONV ROSEMARY KATHLEEN CARSON -2- transfers to Assignee all of Assignor's right, title, interest and obligations in, to and under the Lease. 4. Acceptance Had Assmnptioii. 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 Assigior harrnless 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. SeverabWty. If any term or provision of this Assigunent or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, ibe remainder of this Assignment or the application of such term or provision to persons or circinnstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this ASsigrnnent shall be valid and enfurcetl to (lie fullest extent permitted by law. 6. Counterparts; Facsimile. 'Phis Assigunent 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. TN 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: MICHAEL TODD CARSON Name: Title: Authorizcd Signatory ROSEMAR THLEEN CARSON -2- -:-'in . = ram,.;-.•�;•-,p RECORDINci REQUESTED BY AND WHEN RECORDED MAIL TO: HB AUTO I, LLC, 331 Canal Street Newport Beach, CA 92663 RBCOrde-d In Ortl Oat Records, Orange County Tom Daly, CrerlYRecorder u B�81011�1u1[iI 1101pDII�aIB;il�ll��99111 12.00 2004001083690 04:1Sptn 12t06/04 203 15 G02 3 359.16 359,15 0.00 0.00 6.00 0.00 0_0D 0.00 A.P_N3� Order No: M•349752- GRANT DEED Above This Line fat Recorder's We Only Escrow No: 53005-LR THE UNDERSIGNED GRANTOR(s) DECLARE(e) THAT DOCUMENTARY TRANSFERTAX IS; COUNTY $,718.30 computed on full value of property conveyed, or computed on full value less value Dt Siens ar encumbrances remaining at time of sale, [ unincorporated area; [ 1 City of Hu 101t1tart Beach , and [ 1 Grantees are expressly declaring that the transfer of the property is to be community property with right of survivorship, as per attached Exhibit One. FOR A VALUABLE CONSIDERATION, receipt of Which is hereby acknowledged, MICHAEL TODD CARSON AND ROSEMARY KATHLEEN CARBON, husband and wife hereby GRANTis) to HS AUTO I, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY AS TO AN UNDIVIDED 50010 INTEREST IN AND TO: the following described property in the City of Huntington Beach, County of Orange State of California; PER LEGAL DESCRIPTION ATTACHED HERETO AND MADE A PART HEREOF AS EXHIBIT "A" Document Date: November 30, 2004 MICHAELTODD CAR�SON OSE ARY ATHLEEN CARBON STATE OF CALIFORNIA )Ss COUNTY OF Or n a ) On December 1, 2004 before me,. A Jason Miller personally appeared Michael Todd Carson and Rosemary Xat hleen Carson St titr t�LtYtD2NXf7f3i.Yrls (or proved to me on tha basis of satisfactory ovidonce) to be the P-orsprifD vrhosa name ifie suhscrileed to the within Instrument and acknowledged to me that [!e/Qfiol 1ey`. executed tRo same in i{ Rr4 authorized capacRyi1g)f and that by his/her(their signatureej on the instrument a person& or the entity upon behalf of which the person@ ootod, executed the instrument, WlTlJESS m and and,a Ic)e) seol. The area below is for oft-iciat notarial seal. Signature .7aGott Miller R. JAS014 MILLER fiomm. q 543402t NL093 A%GE .EZ COUNTY> MY Calm rototra JwtN3, 2o0Y Mal Tax Statements to: same as Above or Address Noted Sotow ORANCTE,CA Document: DD 2004,1093690 Page i of 3 Printed on 3/8l2006 11:07:50 AM Provided by Data Trace System Order No. M349752-6 Exhibit "A" LOTS 21,22 AND 23 OF TRACTISO- 41i, IN T M CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE. STATE OF CALMORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 47 OF MISCELLANEOUS MAPS, IN TM OFFICE OF THE COUNTY RECORDER OF SAID COUNTY- ) -EXCEPT ALL OIL, WMERALS AND OTHER HYDROCARBON SUBSTANCES WITHOUT RIGHT OF SURFACE ENTRY THERETO ABOVE A DEPTH OF ABOVE 500 FEET FROM THE SURFACE TIMREOB. AS kESERVBD IN THE DEED FROM B1 ULAH A. F11CM, RECORDED DECEMBER 14,1960 IN BOOK 5548 PAGE 385, OFFICIAL RECORDS. ORANUE,CA Document: DD 2004.1083690 Page 2 of 3 Printed on 3/8/2006 11:07:51 AM Provided by Data Trace System GGvenunent code - 2736.17 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:R"n'7 6VT f /f tif1l DATE COMMISSION EXPIRES: �d`�te• I ,z_e ate_ COUNTY WHERE BOND IS FILED: COMMISSION NO.: , / `f z o MANUFACTJMR/ VENDF-R 1Nr0.: - -.. . _.. �} ►�/ .._ __-_. _ - - _ PLACE OF EXECUTION- DATE OF EXECUTION: SIGNATURE: Government code - 2736.17 I CERTIFY UNDER PENALTY OF PERJURY THAT THE ILLEGIBLE PORTION OF THIS I.70CUMENT, TO WHICH THIS STATEMENT IS ATTACHED, READS AS FOLLOWS: PLAC$ OF EXECUTION: BATE OF EXECUTION: SIGNATURE: ORANGE,CA Document: DD 2004.1083690 Page 3 of 3 Printed on 3/8/2006 11:07:51 AM Provided by Data Trace System It #014MV1103mi CITY OF HUNTINGTON BEACH PROPERTY LOCATION: APNs: 142-081-06, 142-081-09, 142-081-11 HUNTINGT®N BEACH, CALIFORNIA PHASE ONE INC. 2680 Walnut Avenue, Suite P Tustin, California 92780 (800) 524-8877 r, dyONE P1 c.- N THE NATIONWIDE ENVIRONMENTAL SPECIALISTS "Setting the Due Diligence Industry Standard" Copyright 2008 PHASE ONE INC. All Rights Reserved PHASE ONE INC. Project No. 6886 NA, NATIONWIDE ENVIRONMENTAL SPECIALISTS October 9, 2008 Stanley Smalewitz Director of Economic Development City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 RE: PIIASE ONE INC. Project No. 6886 Limited Phase II Environmental Site Assessment (ESA) Subject Site Location: APNs: 142-081-06, 142-081-09, 142-081-11 Huntington Beach, CA 92648 Dear Mr. Smalewitz: Enclosed is the Limited Phase II ESA Report completed by PHASE ONE INC. for the site referenced above (See Figure 1, Site Location Map). The Limited Phase II ESA was undertaken at your request, in accordance with PHASE ONE INC.'s Standard Terms and Conditions and as outlined in PHASE ONE INC.'s Letters oflntent/Authorization for Project N°' 6886. The findings and conclusions of this investigation are based upon the observations of PHASE ONE INC.'s field personnel and the soil sampling analytical results reported by the contracted analytical laboratory. Our conclusions regarding the investigation are summarized in the final section of this report, Section 5.0 Conclusions and Recommendations Please do not hesitate to contact us should you have any questions regarding this report, or if we can be of additional assistance. Sincerely, Eric Exton Operations Manager, REA Enclosures Copyright 2008 PHASE ONE INC. AN Rights Reserved PHASE ONE INC. Project No. 6886 2680 Walnut Avenue, Suite B. Tustin, CA 92780 Tel: (800) 524-8877 m Fax: (714) 669-8025 http://www.phasei.com LIMITED PHASE II ENVIRONMENTAL SITE ASSESSMENT APNs: 142-081-06,142-081-09,142-081-11 Huntington Beach, CA 92648 m PRASE ONE INC. 2680 Walnut Avenue, Suite B Tustin, California 92780 (800) 524-8877 THIS REPORT WAS PREPARED FOR THE SOLE USE AND BENEFIT OF OUR CLIENT, CITY OF HUNTINGTON BEACH, AND IS BASED, IN PART, UPON DOCUMENTS, WRITINGS, AND INFORMATION OWNED AND POSSESSED BY OUR CLIENT. NEITHER THIS REPORT, NOR ANY OF THE INFORMATION CONTAINED HEREIN, SHALL BE USED OR RELIED UPON FOR ANY PURPOSE BY ANY PERSON OR ENTITY OTHER THAN OUR CLIENT. ALL STANDARD TERMS, CONDITIONS, AND LIMITATIONS BY PHASE ONE INC. APPLY AT ALL TIMES AND FOR THIS REPORT AND ALL REPORTS ISSUED BY PHASE ONE IlNC. Copyright 2008 PHASE ONE INC. All Rights Reserved PHASE ONE INC. Project No 6886 TABLE OF CONTENTS 1.0 BACKGROUND INFORMATION 2.0 PROPOSED FIELD INVESTIGATION 3.0 ACTUAL FIELD INVESTIGATION 4.0 FIELD INVESTIGATION RESULTS 4.1 Subsurface Conditions Encountered 4.2 Analytical Results 5.0 CONCLUSIONS AND RECOMMENDATIONS 6.0 LIMITATIONS 7.0 REPORT SIGNATURE AND CERTIFICATION I!W1W.,W719I. Figure I — Site Location Map Figure 2 — Site Plan APPENDICES APPENDIX A — SAMPLING PROTOCOL APPENDIX B — SOIL BORING LOGS (On File at PHASE ONE INC.) APPENDIX C — ANALYTICAL LABORATORY REPORTS APPENDIX D —SITE PHOTOGRAPHS Copyright 2008 PHASE ONE INC. All Rights Reserved PHASE ONE INC. Project No 6886 1.0 BACKGROUND INFORMATION This report presents the results of the Limited Phase II ESA conducted by PHASE ONE INC. at APNs: 142-081-06, 142-081-09, 142-081-11, Huntington Beach, California (See Figure 1, Site Location Map). This Limited Phase II ESA was undertaken at the request of Stanley Smalewitz, The City of Huntington Beach, in accordance with PHASE ONE INC.'s Standard Terms and Conditions, as outlined MPHASE ONE INC.'s Letter oflntent/Authorization for Project N° 6886 At the time of this assessment, the site specifcs are as follows: • Address: APNs: 142-081-06, 142-081-09, 142-081-11, Huntington Beach, California • Improvements: None • Current Site Use: None: Vacant Land The proposed field investigation, soil sample locations, and analyses were determined based on the concern that the known contamination at the adjacent Big-0 Tire facility located at 7872 Edinger Avenue, may have migrated on to the adjacent properties that are owned by the City of Huntington Beach. 2.0 PROPOSED FIELD INVESTIGATION Conduct a subsurface investigation for potential soil and/or groundwater contamination resulting from the Big O Tire operations at the adjacent site located at 7872 Edinger Avenue in the City of Huntington Beach. The subsurface evaluation will be completed in accordance with current regulatory guidelines. Drill up to four (4) Geoprobe borings to a maximum depth of twenty (20) feet below ground surface (bgs). The surface of the property is soil; if a concrete coring company is required to access the underlying soil (extra cost). Sample collection, analysis, and boring depths are as follows: AP ©1 2 De" th oi.Borin' s' (feet) 20 20 20 m Ie De the feet) „ 5,10, 20 (water) 5,10, 20 (water) 5, l 0, 20 (water) # of Sam°' les 3 3 6 Anlysis� 'ram 8015M for TPH, 8015M for TPH, 8015M for TPH, P Sample with highest level Sample with highest level Sample with highest ' M. of TPH will be analyzed of TPH will be analyzed level of TPH will be =_ for VOCs for VOCs analyzed for VOCs Up to twelve (12) samples will be collected and analyzed for at least one of the following: TPH (Total Petroleum Hydrocarbons) using USEPA Method 8015M, Volatile Organic Compounds (VOCs) using USEPA Method 8260B. All borings/probes will be backfilled with cuttings, bentonite or as local jurisdictions require; holes in the surface will be repaved with concrete/asphalt. Copyright 2008 PHASE ONE INC. AD Rights Reserved I PHASE ONE INC. Project No. 6886 3.0 ACTUAL FIELD INVESTIGATION On September 22, 2008, PHASE ONE INC. completed four (4) Geoprobe soil borings at the subject site The borings were identified as GPI through GP4. The locations of the borings are shown on Figure 2, Site Plan --Poring Locations. Details of the actual borings are as follows: BORING DETAILS Boring ID# Total Depth (FT) Sample Depths (FT) Analyses. Run Boring Location Description (See Figure 2,SitePlace GPI 20 5, 10, 20 TRPH, VOC Western edge of parcel 142-081-06 GP2 20 5, 10, 20 TRPH, VOC Northern edge of parcel 142-081-11 GP3 20 5, 10, 20 TRPH, VOC Northern edge of parcel 142-081-09 GP4 20 5, 10, 20 TRPH, VOC Northem edge of parcel 142-081-09 TOTAL SAMPLES 12 Site photographs are presented in Appendix D. For the investigated areas and the soil boring locations, see Figure 2. All soil samples were collected following the sampling protocol included in Appendix A, Sampling Protocol The proposed Scope of Work detailed in Section 2.0 was completed as outlined except that USEPA Method 418.1, Total Residual Petroleum Hydrocarbons was substituted for USEPA Method 8015M, Total Petroleum Hydrocarbons. 4.0 FIELD INVESTIGATION RESULTS 4.1 Subsurface Conditions Encountered The soils encountered at the subject site within the maximum explored depth of twenty feet below ground surface (bgs) consisted of dark green to black, sandy clays. Groundwater was encountered in all of the borings. A grab groundwater sample was collected from each soil boring. The field personnel did not notice any unusual odors emanating from the soil samples. No other unusual conditions were noted during the field work. The Soil Boring Logs are on file at PHASE ONE INC. 4.2 Analytical Results Copies of the final analytical reports are included in Appendix C, Analytical Laboratory Reports. The principal findings of the analysis of the soil samples are presented in the tables below. The table titled "Summary of Analytical Results" comments on the results of the entire EPA analysis method versus the individual chemicals. The table titled "Analytical Results of Chemicals of Possible Concern" lists only the chemicals that require further discussion and/or investigation, if there are any chemicals of possible Copyright 2008 PHASE ONE INC. All Rights Reserved 2 PHASE ONE INC. Project No. 6986 concern. All the results of all the chemicals identified above Non Detect (ND) are compared with their respective regulatory action levels, (when applicable) such as the United States Environmental Protection Agency Preliminary Remediation Goals (USEPA PRGs) or other applicable regulatory -designated levels. The concentrations of detectable levels of some chemicals and metallic elements are compared with the Total Threshold Limit Concentration (TTLC); and Soluble Threshold Limit Concentration (STLC) values established by the California Code of Regulations (CCR Title 22, Chapter H, Article 3) for hazardous waste characterization. SUMMARY OF ANALYTICAL. RESULTS Sam les Collected on September 22, 2008 Sample ID# Matrix USEPA 418:1 USEPA . TRPH 8260B. VOCs 6886-1-5 Soil ND - 6886-1-10 Soil ND - 6886-1-20 Groundwater ND ND 6886-2-5 Soil ND - 6886-2-10 Soil ND - 6886-2-20 Groundwater ND ND 6886-3-5 Soil ND - 6886-3-10 Soil ND - 6886-3-20 Groundwater ND ND 6886-4-5 Soil ND - 6886-4-10 Soil ND - 68864-20 Groundwater ND ND - Not Analyzed ND Non -Detect above the laboratory detection limit Copyright 2008 PHASE ONE INC. All Rights Reserved i PHASE ONE mC. Project No. 6886 5.0 CONCLUSIONS AND RECOMMENDATIONS The principal findings of PHASE ONE INC.'s Limited Phase II ESA for all the areas sampled are as follows: ® No levels of TRPH (USEPA Method 481.1) were detected that exceed their respective reporting limits. ® No levels of VOCs (USEPA Method 8260B) were detected that exceed their respective reporting limits. Based on the soil and groundwater sample results presented in this report, PHASE ONE INC. does not find evidence of contamination. Therefore, the contamination at the adjacent site does not appear to have impacted the subject parcels and further investigation is not recommended. PHASE ONE INC. attempted to assess the most likely potential sources of contamination; however, it is not possible or feasible to sample all the possible locations where impact from the previous land and/or site use may have occurred. Specific areas of impact may have escaped detection due to: 1) Unknown areas where releases or spills may have occurred, 2) Unknown areas of chemicals storage and handling, 3) Difficulty in accessing suspect locations, or 4) The limited extent of the assessments performed. Copyright 2008 PHASE ONE INC. All Rights Reserved 4 PHASE ONE INC. Project No. 6886 6.0 L,IMITATIONS To achieve the study objectives stated in this report, we were required to base PHASE ONE INC.'s conclusions and recommendations on the best information available during the period the investigation was conducted and within the limits prescribed by PHASE ONE INC.'s client in the contract/authorization agreement and standard term; and conditions PHASE ONE INC.'s professional services were performed using that degree of care and skill ordinarily exercised by environmental consultants practicing in this or similar fields. The findings were mainly based upon examination of historic records, governmental agencies lists, and laboratory analytical reports. Recommendations are based on the historic land use of the subject property, as well as features noted during the site walk and Phase U assessment. The absence of potential gross contamination sources, historic or present, does not necessarily imply that the subject property is free of any contamination. This report only represents a "due diligence" effort as to the integrity of the subject property. No other warranty or guarantee, expressed or implied, is made as to the professional conclusions or recommendations contained in this report. The limitations contained within this report supersede all other contracts or scopes of work, implied or otherwise, except those stated or ackowledged herewith. This report is not a legal opinion. It does not necessarily comply with requirements defined in any environmental law such as the "innocent landowner defense" or "due diligence inquiry" Only legal counsel retained by the client is competent to determine the legal implications of any information, conclusions, or recommendations in this report. The findings, conclusions, recommendations, and professional opinions contained in this report have been prepared by the staff ofPHASE ONE INC., in accordance with gnerally accepted professional practices. Sample results should not be construed as conclusive and binding in any way. All sampling conducted is only for the purposes of general screening and does not imply that all materials, locations, or hazardous materials have been identified nor was the sampling intended to identify every instance of the materials sampled. PHASE ONE INC. only relays the information supplied by the laboratory conducting the analysis. Copyright 2008 PHASE ONE INC. All Rights Reserved 5 PHASE ONE INC. Project No. 6886 7.0 REPORT SIGNATURE AND CERTIFICATION The undersigned hereby certifies that: The following people have prepared, written, and/or reviewed the report for Project #6886. All the below parties have, in good faith, conducted their respective project responsibilities using that degree of care and skill ordinarily exercised by environmental consultants practicing in this or similar fields. All parties have acted in good faith and have no known relationship with the subject site, owners, buyers, or any other entity associated with the subject site. All respective project responsibilities have been conducted independently, and with no conflict of interest. The statements of fact contained in this report are true and correct based on materials reviewed to the best of our abilities. The reported analyses, opinions, and conclusions are personal, unbiased, professional, and limited only by the assumptions and qualifications stated herein. Compensation is not contingent upon an action or an event resulting from the analyses, opinions, or conclusions included in this report nor is it contingent upon the use of this report. The investigation has been performed in accordance with all applicable legal requirements and in accordance with accepted practices prevailing in the environmental assessment and environmental consulting industries. The personnel who performed the investigation (or are under the direct supervision of personnel) whom are properly licensed and certified in accordance with the requirements of all federal, state, and local laws, rules, and regulations. We have no present or prospective interest in the subject property or the parties involved. If necessary, expert testimony and other legal appearances will be provided at our current Standard Schedule of Eric Charles Exton, Operations Manager FIGURES Copyright 2008 PHASE ONE INC. AD Rights Reserved PHASE ONE iNc Project No. 6886 -3 ,. ii''' } aiR'ITI•'P iF :.S ;. #va' _ '?} lilt" IV 14 r ar- ., ,- ----._ spa �, 1 -,-�• �. ,� ,x F ice+! Ads T ® r s T s Ila 4 MAW - e a 5 limit��■■® s_ ,�` ter"'` •':� � ,:t: t, � � o„ T #f � � 1, SITE LOCATION MAP N U.S. Geological Survey. Newport Beach (digital) Quadrangle 7.5 Minute Series, Approximate Scale: 1: 24000 PHASE ONE INC. APN 142-081-06, FIGURE: 1 APN 142-081-09, JOB: 6886 APN 142-081-11 HUNTINGTON BEACH, CA DATE: 10/9/2008 EDINGER AVE I 0 I 0 APN 142-081-06 Big-O Tires 0 I I 0 I 0 GPI �O OGP2 GP4 GP3 Z a a I I w 0 x � a a APN 142-081-09 APN 142-081-11 I I I 0 1 I I 0 I I ALDRICH AVE. KEY ® = SUBJECT SITE N 0 = BORING LOCATION SCALE l " = 75' APN 142-081-06, SITE PLAN - BORING LOCATIONS PHASE ONE INC. APN 142-081-09, APN 142-081-11 FIGURE: 2 JOB: 6886 ENVIRONMENTAL ASSESSMENT SPECIALISTS Huntington Beach, CA DATE: 10/02/2008 DRAWN: EE APPRVD:EE DATE: 10/02l08 APPENDICES Copyright 2008 PHASE ONEINC. All Rights Reserved PHASE ONE INC— Project No. 6886 SAMPLING PROTOCOL. Copyright 2008 PAIASE ONE INC. AD Rights Reserved PHASE ONE vw- Project No. 6886 SAMPLING PROTOCOL 7872 EDINGER AVENUE HUNTINGTON BEACH, CALIFORNIA INTRODUCTION This protocol outlines the field procedures utilized for the collection of soil samples as part of PHASE ONE INC: s project number 6886. PRE -FIELD CONDITIONS AND ACTIVITIES The following activities or procedures were observed as part of the sampling project: l . Sampling intervals were approved by PHASE ONE INC. prior to field operations. An environmental professional observed the work, and collected samples at approved intervals. FIELD PROCEDURES: SUBSURFACE SOIL SAMPLING — DIRECT -PUSH The following procedures were observed during soil sampling operations: 1. The sampler on the direct -push rig was advanced with a hydraulic mechanism to the target depth. Upon reaching the target depth, the sampler was opened with a special tool. The sampler was then driven down two feet and retrieved from the hole. 2. Soil samples from the direct -push rig were collected in a one -inch diameter, two -foot long acetate sleeve. The sample to be submitted for laboratory analysis was cut from the lower portion of the sleeve and capped with Teflon and end caps. 3. After the soil samples were removed, the sampler was disassembled; scrubbed in a water bath with Liquinoxa; rinsed in two separate water baths, the last of which contained double -distilled water; and re -assembled with a new sample sleeve. FIELD PROCEDURES: GROUNDWATER SAMPLING — DIRECT -PUSH The following procedures were observed during groundwater sampling operations: 1. The sampler on the direct -push rig was advanced with a hydraulic mechanism to the target depth. Upon reaching the target depth, the drive rod is then pulled back to expose the inlets of the probe. 2. Small diameter inert tubing with a ball check valve was advanced through the center of the drive rod. 3. The tube was agitated up and down, and a groundwater sample was obtained for laboratory analysis. Copyright 2008 PHASE ONEINC. AD Rights Reserved PHASE ONE INC. Project No. 6886 4. The collected sample was slowly transferred from the tube into forty -milliliter glass VOA sample containers that were supplied by the laboratory. Care was taken to ensure that there was no trapped air within the VOA vials after the sample containers were sealed. SAMPLE COLLECTION AND LABORATORY PROTOCOL After sample collection, protocol required that the following guidelines and sample tracking be followed to maintain sample integrity: 1. After retrieval, each sample container was sealed, labeled, and chilled. Clean ice chests were used to keep the soil samples at approximately four degrees Celsius until they were delivered to the state -certified analytical chemical laboratory. 2. The samples were delivered directly to the laboratory. 3. Sample control was maintained by a Chain -Of -Custody (COC) record, which accompanies the samples. The form documented the time, date, and person responsible during each step in the transportation process. SAMPLE CODING The coded sample numbering system does not reveal the client to the laboratory or other interested parties: 1. A non -water soluble marking pen is used to mark the labels, which are then applied to the sample tubes.. 2. Project Number: The project number allows PHASE ONE INC. to access file and client information. Use of the project number maintains the client's confidentiality to subcontractors, while maintaining PHASE ONE INC: s ability to identify necessary data: Example: PHASE ONE INC. Project Number: 1234 The soil sample tubes have the project number written on the label as follows: 1234 3. Sample Number: PHASE ONE INC. numbers its soil samples in the following manner: Where: T Indicates type of sample symbol (see below) X Indicates boring number Y Indicates depth of sample in feet below ground surface (BGS) Types of sample symbols (T) include: Copyright 2008 PHASE ONEINC. All Rights Reserved PHASE ONE PIC. Project No. 6886 SYMBOL TYPE OF SAMPLE HA or B = Hand auger soil boring GP = Geoprobe or Direct push soil boring For example, if a subsurface soil sample (T=GP) was collected from the first soil boring (X=1) at the three-foot sampling depth (Y=3), the soil sample would be logged as follows: GPl-3 In review, the number indicates a soil sample from soil boring number one, from a depth of three feet BGS. 0 5 Sample Date: Due to holding time limits for most analyses, it is important to include the date the sample was collected. Sample Date: January 1, 2001 Sample Labeled: 01/01/01 The complete labeling of the soil sample tube includes: .lob Number with appropriate number (i.e. 1234) Sample Number as described in point three. Sample Date as labeled on the tube. The sample identification information, as required by PHASE ONE INC. for the three- foot soil sample collected from boring GP-1 would be as follows: 1234 GP1-3 01/01/01 Copyright 2008 PHASE ONE INC. All Rights Reserved PHASE ONE INC. Project No. 6886 SOLI, BOMNG LOGS (Not Included, On File at PHASE ONE INC.) Copyright 2W8 PHASE ONEINC. All Rights Reserved PHASE ONE INC. Project No. 6886 APPENDIX C ANALYTICAL LABORATORY REPORT Copyright 2008 PHASE ONEINC. All Rights Reserved PH" ONE INC. Project No. 6886 ABC Environmental Laboratories, Inc. Mr. Eric E. Phase One, Inc. 2620 Walnut Ave., Suite A Tustin, CA 92780 Project: 6886 Project Site: Big-O-H.B. Sample Date: 9/22/2008 Lab Job No.: P8I031 Dear Mr. Eric E.: 9/26/2008 Enclosed please find the analytical report for the samples received by ABC Environmental Laboratories on 9/24/08 and analyzed by the following EPA methods: EPA 826013(VOCs & Oxygenates) EPA 418.1(TRPH) All analyses have met the QA/QC criteria of this laboratory. The sample(s) arrived in good conditions (i.e., chilled, intact) and with a chain of custody record attached. ABC Environmental Laboratories is certified by the CA DHS (Certificate No.2584). Thank you for giving us the opportunity to serve you. Please feel free to call me at (909) 923-8628 if our laboratory can be of further service to you. Respectfully, ABC Environmental Laboratories, Inc. Ken Zheng, M.S. Laboratory Director Enclosures This cover letter is an integral part of this analytical report. 1640 S. Grove Ave., Suite B Tel: (909)923-8628 Ontario, CA 91761 Fax. (909)923-0938 ABC .environmental Laboratories, Inc. EPA 418.1 (TRPH) Batch QA/QC Report Client: Phase One, Inc. Lab Job No.: P81031 Project: 6886 Lab Sample ID: LCS Matrix: Water Date Analyzed: 9/25/2008 Batch No.: CI25-TRPHW Date Reported: 9/26/2008 MB/LCS/LCSD Report I ]nit mg/1. %RPD %Rec Analyte Method Spike LCS LCSD LCS LCSD %RPD Accept Accept Blank Conc. %Rec. %rec. Limit TRPH ND 150 145 1 152 97 101 5 520 80-120 ND: Not Detected (Below MDL). 1640 S. Grove Ave., Suite B Tel: (909)923-8628 Ontario, CA 91761 Fax: (909)923-0938 ABC Environmental Laboratories, Inc. Client: Phase One, Inc. Lab Job No.: P91031 Project: 6886 Date Sampled: 9/22/2008 Project Site: Big-0-H.B. Date Received: 9/24/2008 Matrix: Water Date Analyzed: 9/25/2008 Batch No.: CI25-TRPHW Date Reported: 9/26/2008 EPA 418.1 (TRPH) Reporting Unit: mg/L (PPM) Client Sample ID Lab ID TRPH Reporting Limit 1 Method Detection Limit 0.5 6886-1-20 P8I031-3 ND 6886-2-20 P8I031-6 ND 6886-3-20 P8I031-9 ND 6886-4-20 P81031-12 ND RL=Reporting Limit; ND --Not Detected (Below MDL); MDL= Method Detection Limit. J= Value Detected Bewteen MDL and RL. 1640 S. Grove Ave., Suite B Tel: (909)923-8628 Ontario, CA 91761 Fax: (909)923-0938 ABC Environmental Laboratories, Inc. Client: Phase One, Inc. Project: 6886 Project Site: Big-0-H.B. Matrix: Soil Batch No.: C125-TRPHS EPA 418.1 (T'RPH) Reporting Unit: mg/kg (PPM) Lab Job No.: P81031 Date Sampled: 9/22/2008 Date Received: 9/24/2008 Date Analyzed: 9/25/2008 Date Reported: 9/26/2008 Client Sample ID Lab ID TRPH Reporting Limit 10 Method Detection Limit 5 6886-1-5 P8I031-1 ND 6886-1-10 P8I031-2 ND 6886-2-5 P81031-4 ND 6886-2-10 P8I031-5 ND 6886-3-5 P8I031-7 ND 6886-3-10 P81031-8 ND 6886-4-5 P8I031-10 ND IL 6886-4-10 P81031-11 ND RL=Reporting Limit; ND --Not Detected (Below MDL); MDL= Method Detection Limit. J= Value Detected Bewteen MDL and RL. 1640 S. Grove Ave., Suite B Tel: (909)923-8628 Ontario, CA 91761 Fax: (909)923-0938 ABC Environmental Laboratories, Inc. Client: Phase One, Inc. Project: 6886 Matrix: Soil Batch No.: CI25-TRPHS EPA 418.1(TRPI) Batch QA/QC Report MB/LCS/LCSD Report Unit: m¢/ke Lab Job No.: P8I031 Lab Sample ID: LCS Date Analyzed: 9/25/2008 Date Reported: 9/26/2008 %RPD %Rec Analyte Method Spike LCS LCSD LCS LCSD %RPD Accept Accept Blank Conc. %Rec. %rec. Limit TRPH ND 150 142 149 95 99 5 520 1 80-120 ND: Not Detected (Below MDL). 1640 S. Grove Ave., Suite B Tel: (909)923-8628 Ontario, CA 91761 Fax: (909)923-0938 ABA' Environmental Laboratories, Inc. Client: Phase One, Inc. Lab Job No.: P8I031 Project: 6886 Date Sampled: 9/22/2008 Project Site: Big-O-H.B. Date Received: 9/24/2008 Matrix: Water Date Analyzed: 9/25/2008 Batch No.: 0925-VOCW Date Reported: 9/26/2008 EPA 8260B (VOCs & ®xy.) by GUMS, Page 1 of 2 Revortinr, Unit: u¢!L (mb) Date Analyzed 09/25/08 09/25/08 09/25/08 09/25/08 Dilution Factor I I I I Lab Sample I.D. P81031-3 P8I031-6 P81031-9 P81031-12 Client Sample I.D. 6886-1-20 6886-2-20 6886-3-20 68964-20 Compound MDL I RL ichlorodifluoromethane 1.5 5 ND ND ND ND Chloromethane 1.5 5 ND ND ND ND Vinyl Chloride 1.5 5 ND ND ND ND romomethane 1.5 5 ND ND ND ND Chloroethane 1.5 5 ND ND ND ND Trichlorofluoromethane 1.5 5 ND ND ND ND 1,1-Dichloroethene 1.5 5 ND ND ND ND Carbon disulfide 1.5 5 ND ND ND ND Methylene chloride 1.5 5 ND ND ND ND cans-1,2-Dichloroethene 1.5 5 ND ND ND ND 1,1-Dichloroethane I 2 ND ND ND ND 2,2-Dichloro roane 1.5 5 ND ND ND ND Cis-1,2-Dichloroethene 1.5 5 ND ND ND ND romochloromethane IT 5 ND ND ND ND Chloroform 1.5 5 ND ND ND ND 1. 1, 1 -Trichloroethane 1.5 5 ND ND ND ND Vinyl acetate 1.5 5 ND ND ND ND Carbontetrachloride 1.5 5 ND ND ND ND 1,1-Dichloro ro ene 1.5 5 ND ND ND ND 1,2-Dichloroethane 1 2 ND ND ND ND Benzene 0.5 1 ND ND ND ND Trichloroethene 1 1 2 ND ND ND ND 1,2-Dichlorpropane 1.5 5 ND ND ND ND Methyl methacrylate 1.5 5 ND ND ND ND ibromomethane 1.5 5 ND ND ND ND Bromodichloromethane 1.5 5 ND ND ND ND 2-Chloroeth 1 Vinyl Ether 1.5 5 1 ND ND ND ND Cis- 1,3-Dichloro ro ne 1.5 5 ND ND ND ND Toluene 0.5 1 ND ND ND ND Trans- 1,3-Dichloro ro ne 1.5 5 ND ND ND ND Ethylmethacrylate 1.5 5 ND ND ND ND 1,1,2-Trichloroethane 1.5 5 ND ND ND ND Dibromochloromethane 1.5 5 ND ND ND ND 1,2-Dibromoethane (EDB) ND ND ND ND Tetrachloroethene 1 2 ND ND ND ND 1,3-Dichloro ro ane 1.5 5 ND ND ND ND Chlorobenzene 1 2 ND ND ND ND RL=Reporting Limit; ND=Not Detected (Below DFx MDL); MDL= Method Detection Limit. J= Value Detected Bewteen MDL and RL. 1640 S. Grove Ave., Suite B Tel: (909)923-8628 Ontario, CA 91761 Fax: (909)923-0938 ABC Environmental Laboratories, Inc. Client: Phase One, Inc. Lab Job No.: P8I031 Project: 6886 Date Sampled: 9/22/2008 Project Site: Big-0-H.B. Date Received: 9/24/2008 Matrix: Water Date Analyzed: 9/25/2008 Batch No.: 0925-VOCW Date Reported: 9/26/2008 EPA 8260B (VOCs & Ozy.) by GUMS, Page 2 of 2 Reportine Unit: ua/L (DDb) Date Analyzed 09/25/08 09/25/08 09/25/08 09/25/08 Dilution Factor 1 1 1 I Lab Sample I.D. P81031-3 P8I031-6 P81031-9 P8I031-12 Client Sample I.D. 6886-1-20 6886-2-20 6886-3-20 68864-20 Lornpound MDL RL 1,1,1,2-Tetrachloroethane 1.5 5 ND ND ND ND th lbenzene 0.5 1 ND ND ND ND Total X lene 1 2 ND ND ND ND Styrene 1.5 5 ND ND ND ND romoform 1.5 5 ND ND ND ND Isopropyl benzene 1 2 ND ND ND ND romobenzene 1.5 5 ND ND ND ND 1,2,3-Trichloropropane 1.5 5 ND ND ND ND 1,1,2,2,-Tetrachloroethane 1.5 5 ND ND ND ND Trans-1,4-dichloro-2-butene 1.5 5 ND ND ND ND -Chlorotoluene 1.5 5 ND ND ND ND n-Propyl benzene 1 2 ND ND ND ND -Chlorotoluene 1.5 5 ND ND ND ND 1,3,5-Trimeth 1 benzene 1 2 ND ND ND ND tert-Butylbenzene 1.5 5 ND ND ND ND -Isopropyl toluene 1.5 5 ND ND ND ND 1,2,4-Trimethyl benzene 1 2 ND ND ND ND sec-Butylbenzene 1.5 5 ND ND ND ND 1,3-Dichlorobenzene 1.5 5 ND ND ND ND 1,4-Dichlorobenzene 1.5 5 ND ND ND ND 1,2-Dichlorobenzene 1.5 5 ND ND ND ND n-Butylbenzene 1.5 1 5 ND ND ND ND 1.2-Dibromo-3-chloro roan 1.5 5 ND ND ND ND 1,2,4-Trichlorobenzene 1.5 5 ND ND ND ND exachlorobutadiene 1.5 5 ND ND ND ND Naphthalene 1 2 ND ND ND ND 1,2,3-Trichlorobenzene 1.5 5 ND ND ND ND ceton 10 25 ND ND ND ND -Butanone MEK 10 20 ND ND ND ND TBE 1 2 ND ND ND ND -Meth 1-2-Pentanone BK 10 20 ND ND ND ND thl-t-bu 1 Ethe TBE 1 2 ND ND ND ND iiso ro 1 ether IPE) 1 2 ND ND ND ND TAME 1 2 ND ND ND ND -Butanol 10 20 ND ND ND ND RL=Reporting Limit; ND --Not Detected (Below DFx MDL); MDL= Method Detection Limit. J= Value Detected Bewteen MDL and RL. 1640 S. Grove Ave., Suite B Tel: (909)923-8628 Ontario, CA 91761 Fax: (909)923-0938 ABC Environmental Laboratories, Inc. Client: Phase One, Inc. Project: 6886 Matrix: Water Batch No.: 0925-VOCW EPA 8260B (VOCs & Ozy.) Batch QA/QC Report MB/L,CS/LCSD Report t v,;+- „on Lab Job No.: P81031 Lab Sample ID: LCS Date Analyzed: 9/25/2008 Date Reported: 9/26/2008 Compound Method Blank Spike Cone. LCS LCSD LCS %Rec. LCSD %Rec. %RPD %RPD Accept Limit %Rec. Accept Limit 1,1-Dichloroethene ND 20 17.2 18.1 86 91 5 520 1 80-120 Benzene ND 20 18.1 19.5 91 98 7 520 80-120 richloroethene ND 20 19.8 20.6 99 103 4 520 80-120 Toluene ND 20 20.4 17.8 102 89 14 520 80-120 Chlorobenzene ND 20 19.5 18.6 98 93 5 :520 80-120 ND: Not Detected (Below MDL). 1640 S. Grove Ave., Suite B Tel: (909)923-8628 Ontario, CA 91761 Fax: (909)923-0938 f' Environmental 3701 San Gabriel River Pkwy., Pico Rivera, CA 90660 A B Tel: 562-413-8343 Laboratories, Inc.' Tell Fax: 562-699-7288 e Client Name Analyses Req e Address _. Report. Attention Phone # 11 - !r Fax: # U S pied By O Project N / ame PrOJ Site y 0 o Client Sample 6olleation Matrix. Sample No., type. & size m ; Sample ID C7fe Time Type Preserve of tx�ntainer a az a a: NO /5 f'I� 5 i= Cl' !j ruile (' C t" G:c/'�. i.i ,,✓' �!._s� . r�: �-?,� t^ C i,}. i 5-%. li �! Page of Lab Job Number., PRI 03 1 Turn Around Time Requested %t 0 Rush 8 12 24 Hours [1 273. days Wormal Sample Receipt Conditions Chilled intact Sample S021 ,Lab Sample ID Remarks. -P9163 —I -'7 ;Aeli wished By //�� L let 1 ' Company � Fire r� e t �° Time ' `l7 Re l By Comp ny, Note Samples are discarded 30 days after results are . y } ..' Relinquished By Company W67 Time Re iced By Company reported: unless other arrangements are made, APPENDIX D PHOTOGRAPHS Copyright 2008 PHASE ONE INC. AD Rights Reserved PHASE ONE INC. Project No. 6886 7 ' D `f^ 5 �* EXHIBIT F ASSIGNMENT AND ASSUMPTION AGREEMENT [see attached] Exhibit F 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 Lease-2 - 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 terns. (b) The executions, 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 Leiseldoc - 3 - 3.1 Lease. The Lease shall remain in frill 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 accordance. with the laws of the State of California. 3.5 Notices. Any approval, disapproval, demand, document or other notice ("Notice") which either party may desire to give to the other party under this Agreement must be in writing and may be given by any commercially acceptable means to the party to whom the Notice is directed at the address of the party as set forth below, or at any other address as that party may later designate by Notice. Any Notice given under this paragraph, whether personally or by mail, shall be deemed received only upon actual receipt by the intended party. To Seller: HB AUTO I, LLC 3110 Newport Blvd., 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 Lease2.docAssignment and Assumption of Lease2.doc - 4 - Atha: 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 tern, 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, shallnot 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: -a Add C son, Managing Member [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 1 OF 21 Assignment and Assumption of Leaseldoe ATTEST: REVIEWE APPROVED: x tive Director "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH � � /,/K r" -4 — 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 [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 2 OF 21 Assignment and Assumption of LeaseldocAssignment and Assumption of Leaseldoc - 2 ATTEST: Agency Clerk REVIEWED AND APPROVED: Executive Director `BI 1 ER" 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: Deputy Execdt 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 `(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 ecial Cou By: -Ago 4a',bara Zeid eibol INITIATED AND APPROVED: Deputy Executive Director [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 2 OF 2] Assignment 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 I-IB 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 I IB Auto I, LLC, a California limited liability company Assignmcnt and Assumption of Leaseldoc 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 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 II 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. ATTACHMENT #2 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 4, 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: 1. 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, L LC, a California limited liability compa;;/ Dated: cZh By:—OA -- Michael Todd rson, anaging Member [ADDENDUM SIGNATURE PAGE 1 OF 21 ATTEST: "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH /� e_z_ Chairperson APPROU-ED AS TO FORM: Agen y Counsel APPROVED AS TO FORM: LEIBOLD CCLENDON & M NN, P Agency S cial County By: INITIATED AND APPROVED: S Deputy Executive Director [ADDENDUM SIGNATURE PAGE 2 OF 21 ATTACHMENT #3-1 ACQUISITION OF LEASEHOLD INTEREST AGREEMENT This ACQUISITION OF LEASEHOLD INTEREST AGREEMENT ("Agreement") is made and entered into as of June 16, 2008 by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency") and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"). Agency and Tenant are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties." RECITALS A. Pursuant to the terms of that certain Standard Lease Agreement dated for reference purposes April 19, 2004 (the "Lease") between Tenant as tenant and HB Auto I, LLC, a California limited liability company ("HB Auto") and Turn -Key Washes, Inc. (formerly known as Jurtwin, Inc., a California corporation) ("Turn - Key") together as landlord, Tenant is leasing that certain improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property") owning and operating a Big O Tires retail store and its business office thereon (the "Edinger Avenue Big O Store") as a franchisee of Big O Tires, LLC, a Nevada limited liability company (formerly known as Big O Tires, Inc., a Nevada corporation) ("Big O" or "Franchisor") pursuant to that certain Franchise Agreement #20466 dated August 1, 2004 (the "Franchise Agreement") between Tenant as franchisee and Big O as franchisor. A copy of the Franchise Agreement is attached hereto as Exhibit A. The obligations of Tenant under the Lease are guaranteed by Christopher R. Phillips ("Guarantor") pursuant to the terms of that certain Guaranty of Lease dated as of April 19, 2004 ("Lease Guaranty"). B. Pursuant to that certain Grant Deed dated June 25, 2004, recorded in the official real estate records of Orange County, California on June 29, 2004, Instrument No. 2004000591428 (the "Turn -Key Grant Deed"), Turn -Key granted to Michael Todd Carson and Rosemary Kathle-en-Carson,-husband-_and-wife;-as-community— - property with right of survivorship (the "Carsons"), Turn-Key's undivided fifty percent (50%) interest in the Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of June 25, 2004 between Turn -Key as assignor and the Carsons as assignee (the "Turn-Key/Carsons Assignment"), effective as of the date of the recording of the Turn -Key Grant Deed, Turn -Key assigned, set over and transferred to the Carsons all of its rights, title, interest as a landlord in, to and under the Lease and the Carsons accepted such assignment and assumed and agreed to perform Turn-Key's obligations under and with respect to the Lease. C. Pursuant to that certain Grant Deed dated November 30, 2004, recorded in the . official real estate records of Orange County, California on December 6, 2004, Instrument No. 2004001083690 (the "Carsons Grant Deed"), the Carsons granted to HB Auto, the Carsons' undivided fifty percent (50%) interest in and to the 001219.0001\844054.7 Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of November 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 owns all rights, title and interest in and to the Property and, is the sole landlord under the Lease. HB Auto shall hereinafter be referred to as the "Landlord." D. Agency has, under the threat of condemnation, completed negotiations with Landlord and, in conjunction therewith, Agency and Landlord have entered into that certain Agreement and Escrow Instructions for Purchase of Real Property dated as of May 5, 2008 (the "Agency/Landlord Property Acquisition Agreement") setting forth the terms and conditions by which Agency shall acquire all of Landlord's rights, title and interest in and to the Property. A copy of the Agency/Landlord Property Acquisition Agreement is attached hereto as Exhibit B. In conjunction with such threat of condemnation and Agency's purchase of the Property pursuant to the Agency/Landlord Property Acquisition Agreement, Agency desires to acquire Tenant's entire leasehold interest in the Property pursuant to the Lease (the "Leasehold Interest") and to make certain payments to Tenant as consideration for the early termination of the Lease and the Lease Guaranty and Tenant's occupancy of Property under the terms of the Lease and the displacement of Tenant from the Property, all on and subject to the terms of this Agreement. E. Pursuant to the terms of the Agency/Landlord Property Acquisition Agreement, upon the satisfaction of all conditions to close, Agency will acquire all of Landlord's rights, title and interest in and to the Property and succeed to all of the rights and obligations of the Landlord under the Lease. As a result of the ---------- --subsequent-proposeitrezlea�topment of tire- rope y, gency as etermme tat it will be necessary for the Lease and the Lease Guaranty to be terminated and for Tenant to permanently cease to occupy the Property on or before the date which is five (5) years from the date Agency acquires the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement (the "Lease Termination/Vacation Date") and is prepared to and willing to pay Tenant the amounts specified below in consideration of Tenant's agreement to assign, transfer and convey to Agency its Leasehold Interest in the Property pursuant to the Lease; and, in conjunction therewith, terminate the Lease and the Lease Guaranty and its occupancy of the Property on the date which is the Lease Termination/Vacation Date. Absent a definitive agreement between Agency and Tenant setting forth the terms and conditions by which Agency will acquire Tenant's Leasehold Interest in the Property pursuant to the Lease, the Lease and the Lease Guaranty will be terminated and Tenant will permanently cease to occupy the Property, and the payment consideration which Agency will pay 001219, 0001 \844054.7 2 Tenant as compensation for such acquisition of Tenant's Leasehold Interest in the Property pursuant to the Lease and termination of the Lease and the Lease Guaranty and Tenant's ceasing to occupy the Property, Agency has the right to initiate condemnation proceedings to acquire Tenant's Leasehold Interest in the Property pursuant to the Lease and terminate the Lease and the Lease Guaranty and Tenant's occupancy of the Property subsequent to Agency's acquisition of the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement. F. In conjunction with the foregoing Recitals and the contemplated transactions pursuant to this Agreement, Agency and Tenant mutually desire to amend the Lease effective on the date Agency acquires the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement as set forth in the form of the First Amendment to Standard Lease Agreement attached hereto as Exhibit C (the "Lease Amendment"). G. The Parties further mutually desire to establish their respective rights and obligations with regard to the terms of (i) Agency's acquisition of (a) all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement and (b) Tenant's Leasehold Interest in the Property under the Lease pursuant to the terms of this Agreement; (ii) the Lease Amendment; and (iii) the eventual termination of the Lease as amended by the Lease Amendment and the Lease Guaranty and Tenant's occupancy of the Property on the date which is the Lease Termination/Vacation Date, all in accordance with and subject to the terms and conditions set forth in this Agreement. H. Agency agrees to make certain payments to Tenant as consideration for the early termination of the Lease as amended by the Lease Amendment and the Lease Guaranty and Tenant's occupancy of the Property under the terms of the Lease as amended by the Lease Amendment and the displacement of Tenant from the Property; and, Tenant agrees to accept the payments as full settlement of all — claims -arising -from -such arlyterminati-on-arrdziispl�cement, inclu - id ng withou 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. 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: 001219.0001 \844054.7 1. Acquisition of Leasehold Interest Subject to the terms and conditions of this Agreement, including, without limitation, the satisfaction of all Conditions Precedent set forth in Section 7, and provided that the Closing (as such term is defined in Section 8) has occurred, effective as of the date which is the Lease Term inationNacation Date and provided that all requirements and actions under Section 4(b) have been satisfied and taken, Tenant agrees to assign, transfer, convey and deliver to Agency and Agency agrees to acquire from Tenant, Tenant's Leasehold Interest in the Property pursuant to the Lease. In conjunction with such acquisition by Agency of Tenant's Leasehold Interest in the Property pursuant to the Lease as of the date which is the Lease TerminationNacation Date, Tenant agrees that as of the date which is the Lease Term inationNacation Date, the Lease as amended by the Lease Amendment and the Lease Guaranty will be terminated and Tenant will terminate its occupancy of the Property. 2. Retention of Assets Agency and Tenant agree that Agency shall only acquire Tenant's Leasehold Interest pursuant to the Lease as amended by the Lease Amendment and that such acquisition by Agency shall not include and Tenant shall retain all rights, title and interest in and to all of the other assets and properties (both tangible and intangible) located on or otherwise used in connection with the operation and conduct of the Edinger Avenue Big O Store, including, without limitation, (i) all inventory; (ii) all supplies; (iii) all displays, telephone/facsimile systems, computer equipment, furniture, fixtures, trade fixtures, equipment, machinery, hoists, lifts, alignment racks, balancers, compressors, signage and other personal property not permanently affixed to the building or property; (iv) all tenant improvements; and (v) except with respect to Big O's intellectual property and proprietary rights as identified below, all intangible assets and properties, including, without limitation, the telephone and facsimile numbers, the trademarks, trade names, service marks, service names, copyrights, patents, processes formulas;-scientifi-c andfor-tech &ai-infmmati n, ra a secre , 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 TerminationNacation Date. Tenant shall have no obligation to repair any damage to the Property resulting from or occasioned by the removal of the Retained Tenant Assets; except that, Tenant agrees to take all commercially reasonable steps and exercise reasonable care to minimize any such damage. In addition, Agency acknowledges and agrees that Tenant's Leasehold Interest in the Property pursuant to the Lease shall also not include and that Big O shall retain all rights, title and interest in and to Big O's trade name, trademarks and service marks and any other items of a proprietary nature, including, without limitation, Big O's proprietary marks, color combinations, designs, slogans and trade secrets, 001219.0001 \844054.7 4 including, the name and mark "Big O Tires," all such rights, title and interest being retained by and remaining the property of Big O. 3. Consideration (a) In consideration of Tenant entering into this Agreement and assigning, transferring, conveying and delivering to Agency Tenant's Leasehold Interest in the Property pursuant to the Lease on the date which is the Lease Term ination/Vacation Date, and agreeing to the early termination of the Lease and the Lease Guaranty and ceasing its occupancy of the Property on the date which is the Lease 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 3(b) (the "Payment Consideration"). The Payment Consideration shall be payable by Agency to Tenant as follows: (i) Agency will deliver to Tenant the amount of Fifty Thousand Dollars ($50,000) within three (3) business days of the execution of this Agreement by the Agency (the "Payment Consideration Deposit"),- and (ii) Agency will pay Tenant the balance in the amount of One Million Three Hundred Thousand Dollars ($1,300,000) on the date which is the Lease Term inationNacation Date (the "Payment Consideration Balance") pursuant to Section 4(b). If requested to by either Party, each Party agrees to execute any other documents as reasonably necessary to effect and carry out the transactions contemplated by this Agreement. (b) Tenant agrees that the Payment Consideration received pursuant to Section 3(a) represents payment in full for all compensatory items (including, without limitation, leasehold interest, tenant improvements, fixtures, bonus value, lease termination, goodwill and relocation assistance) required by the Relocation Assistance Act (Government Code section 7260 et seq.), the Uniform Relocation Assistance and Real Pro�isition4 oFicies Act of1-938-W2-tt& C. Section—l6Ol, ei - seq.), and any other applicable federal, state or local enactment, regulation or practice providing for relocation assistance or compensation for property. The Parties agree that the Payment Consideration will be allocated as follows: (i) the amount of Fifty Thousand Dollars ($50,000) shall be allocated to relocation assistance to cover the expenses the Parties anticipate Tenant will incur in connection with relocation of the Edinger Avenue Big O Store business operations from the Property, and (ii) the amount of One Million Three Hundred Thousand Dollars ($1,300,000) shall be allocated to Tenant's Leasehold Interest pursuant to the Lease as amended by the Lease Amendment. Upon Tenant's receipt of payment in full of the Payment Consideration specified in Section 3(a), Tenant, for itself and on behalf of anyone claiming by, through or under Tenant (collectively, "Tenant Related Parties") (which Tenant Related Parties shall include, with out limitation.. Tenant's partners, members, 001219.0001\844054.7 shareholders, managers, officers, directors, employees, contractors, guarantors (including, without limitation, Guarantor) agents, franchisors, representatives, assigns, administrators, attorneys, heirs, beneficiaries, and successors in interest), hereby forever waives and agrees not to make any claims for any acquisition or relocation related benefits, including, but not limited to, any leasehold interest in the real property, payment for personal property, fixtures and equipment, relocation benefits or assistance or any compensation based upon loss of goodwill, or any other damages of any nature. Any such claims are released as set forth in Section 5 below. Lease; Lease Amendment; Vacation of Property (a) Tenant and Agency hereby covenant and agree that upon the effective date of Agency's acquisition from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement, the Lease Amendment will become effective and Tenant shall recognize Agency as the successor -in -interest landlord and Agency shall recognize Tenant as the tenant under the terms and conditions of the Lease as amended by the Lease Amendment; and, except as expressly modified by the Lease Amendment, the Lease shall continue in full force and effect as between Agency as the successor -in -interest landlord and Tenant as the tenant thereunder. Tenant hereby acknowledges Landlord's assignment and transfer of the Lease to Agency and Agency's acceptance and assumption of the Landlord's rights and obligations under the Lease as amended by the Lease Amendment and the Lease Guaranty in connection with Agency's acquisition from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the terms of the Agency/Landlord Property Acquisition Agreement. Tenant covenants and agrees to timely pay all required monetary payments under the Lease, including rent, to Agency in accordance with the terms of the Lease, as amended by the Lease Amendment, and otherwise acknowledges that Agency shall succeed to all rights and assume all of the obligatimofthe—Landtard-u-n- er a ease as amen e by e ease Amendment and the Lease Guaranty. Agency agrees to succeed to all rights and assume all of the obligations of the Landlord under the Lease as amended by the Lease Amendment and the Lease Guaranty. The foregoing notwithstanding, and in conjunction with the Conditions Precedent set forth in Section 7 of this Agreement, Agency and Tenant agree that the Lease Amendment will not become effective unless and until the acquisition of the Property transaction between Agency and Landlord pursuant to the Agency/Landlord Property Acquisition Agreement is closed and consummated and Agency has acquired all of Landlord's rights, title and interest in and to the Property as evidenced by the recording of the Grant Deed from Landlord to Agency in the official real estate records of Orange County, California (the "Landlord Grant Deed"). 001219.0001 \844054.7 6 (b) Agency shall be obligated to terminate the Lease as amended by the Lease Amendment and the Lease Guaranty on or before the Lease Term ination/Vacation Date and agrees to send written notice of such termination of the Lease as amended by the Lease Amendment and the Lease Guaranty at least ninety (90) days prior to the date which is the Lease Termination/Vacation Date (the "Lease Termination/Vacation Notice"). Concurrently with the delivery of the Lease TerminationNacation Notice, Agency shall deposit the Payment Consideration Balance in the amount of One Million Three Hundred Thousand Dollars ($1,300,000) (the "Escrowed Portion of the Payment Consideration") into an escrow account to be established with First American Title Insurance Company located at 1 First American Way, Santa Ana, California 92707-5913 ("Escrow"), with written instructions requiring the release of the Escrowed Portion of the Payment Consideration to Tenant on the date which is the Lease 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, 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 of vacating the Property and removing the Retained Tenant Assets as provided in Section 2. Agency shall send written notice to the Escrow sufficiently in advance of the Lease Termination/Vacation Date to enable Tenant to timely receive the Escrowed Portion of the Payment Consideration on the Lease TerminationNacation Date. (c) Tenant agrees and covenants to Agency that, subject to the provisions of Section 2, Tenant will vacate the Property on or before the date which is the Lease Term inationNacation Date. As set forth in Section 2, on or e ore the date which is the Lease TerminationNacation 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 Term ination/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 Term ination/Vacation Date. 001219.0001 \844054.7 7 (d) On the date which is the Lease Term ination/Vacation Date, if and as required in accordance with Section 7 of the Lease, Agency shall deliver to Tenant the Security Deposit under the Lease in the amount of Fifteen Thousand Dollars ($15,000). (e) Except as expressly provided otherwise in Section 5(a), all obligations of Agency as the successor -in -interest landlord under the Lease as amended by the Lease Amendment shall terminate and be of no further force and effect as of the date which is the Lease Term ination/Vacation Date and the releases by Tenant and Tenant Related Parties of Agency and Agency Parties set forth in Section 5(a) shall become effective. (f) Except as expressly provided otherwise in Section 5(b), all monetary and non -monetary obligations of Tenant under the Lease as amended by the Lease Amendment and all obligations of Guarantor under the Lease Guaranty shall terminate and be of no further force and effect as of the date which is the Lease Term ination/Vacation Date and the releases by Agency and Agency Parties of Tenant and Tenant Related Parties set forth in Section 5(b) shall become effective. (g) On the date which is the Lease Termination/Vacation Date, Tenant and Agency shall execute a memorandum setting forth the date which is the Lease Termination/Vacation Date. (h) Agency acknowledges that pursuant to the terms of the Agency/Landlord Property Acquisition Agreement, Landlord has granted to Agency and its consultants and other authorized representatives (collectively, "Agency's Authorized Representatives") access to the Property to perform and conduct such inspections, tests, verifications and other due diligence regarding title to the Property and all of the economic, physical and legal attributes and conditions with respect to the Property, including, without limitation, the presence of Hazardous Materials (as such term is defined in -- the-Lease)-or-othertgwironmentaFconditions-on beneath;—igraTory o —or----- emanating from the Property or other real property adjacent thereto. Tenant agrees that Agency and Agent's Authorized Representatives shall have the right to such access to the Property to perform and conduct such due diligence provided that (i) such access to the Property shall be only during regular business hours and upon at least twenty-four (24) hours advance notice; (ii) such access to the Property by Agency and Agency's Authorized Representatives shall be done at the sole expense of Agency and only after Agency has secured all necessary and required permits from the appropriate governmental agencies; (iii) in exercising such rights of access, neither Agency nor Agency's Representatives will interfere with Tenant's use of the Property or the conduct and operations of the Edinger Avenue Big O Store and all activities relating thereto; (iv) Agency will repair any damage to the Property, including, without limitation, the building and improvements thereon caused by or resulting from Agency's 001219.0001 \844054.7 and Agency's Authorized Representatives' entrance and performance and conduct of its. due diligence thereon; and (v) Agency agrees to and will indemnify, protect defend and hold harmless Tenant and its employees, contractors, agents, trustees, settlors, successors, assigns and representatives from and against all claims, suits, proceedings, orders, demands, obligations, actions, causes of actions, liens, judgments, liabilities, losses, damages, costs and expenses (including attorneys' fees and costs) of any nature whatsoever arising out of or in any other manner connected with such entrance on the Property and performance and conduct of due diligence by Agency and Agency's Authorized Representatives thereon. 5. Releases (a) Effective on the date which is the Lease Term ination/Vacation Date, provided that Tenant has received from the Escrow payment in full of the Payment Consideration specified in Section 3(a) and if and as required in accordance with Section 7 of the Lease, the Security Deposit pursuant to Section 4(d), and in consideration of the promises and covenants contained herein, this Agreement shall serve as a full release and discharge by Tenant, on behalf of itself and all Tenant Related Parties, in consideration of the covenants and promises contained herein, of Agency and the members of Agency's Board of Directors, the City of Huntington Beach ("City"), the members of the Huntington Beach City Council and the governing Board of the Agency, and of City's and Agency's officers, agents, representatives, assigns, employees, consultants, insurers, attorneys, and successors in interest (collectively, the "Agency Parties"), from all rights, claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action of every nature, character and description, known or unknown, including those for damages, compensation, relocation assistance, relocation benefits, consequential damages, punitive damages, interest, costs, attorneys' and appraisal fees, injunctive or ec aratory re ref, or for relief by way of writ of mandate, or for demands, damages, refunds, debts, liabilities, reckonings, accounts, obligations, costs, expenses, liens, actions, causes, and causes of action of whatever kind, at law or in equity, which Tenant or any of the Tenant Related Parties now has or may have in the future against the Agency Parties out of or pertaining to any occurrence, event, circumstance or matter of any kind or nature arising out of the acquisition by Agency from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement and the acquisition of the Leasehold Interest in the Property from Tenant pursuant to this Agreement or from the facts and circumstances described in this Agreement, including, but not limited to, claims for further compensation, claims for any acquisition or relocation related benefits, including, but not limited to, compensation for personal property, any leasehold interest in the real property, payment for personal 001219.0001 \844054.7 9 property, fixtures and equipment (if applicable), relocation benefits or assistance or any compensation based upon loss of goodwill, interest, costs, attorneys' and appraisal fees or any other damages of any nature. Tenant, for itself and all Tenant Related Parties, hereby specifically waives and releases any relocation benefits, assistance and/or payments under the Relocation Assistance Act (Government Code section 7260 et seq.), the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. Section 4601, et seq.), and any other applicable federal, state or local enactment, regulation or practice providing for relocation assistance, moving expenses, or compensation for property (including, without limitation, loss of goodwill and/or furnishings, fixtures and equipment); except that, nothing contained in this Section 5(a) shall operate as a release or waiver of Agency's obligations (i) as the successor -in -interest landlord under the Lease as amended by the Lease Amendment pursuant to Section 4(a) up and until the Lease Termination/Vacation Date; and (ii) which, pursuant to the terms of the Lease as amended by the Lease Amendment or applicable law, survive the termination of the Lease as amended by the Lease Amendment, including, without limitation, any debts, liabilities, demands, obligations, costs, expenses, actions or causes of action of every nature, character of description, known or unknown, including those for damages, compensation, consequential damages, punitive damages, interest, costs, attorneys' and appraisal fees, injunctive or declaratory relief, or for relief by way of writ of mandate, or for demands, damages, refunds debts, liabilities, reckonings, accounts, obligations, costs, expenses, liens, actions, causes, causes of action of whatever kind at law or in equity of or relating to the physical conditions of the Property, including, without limitation, the presence of Hazardous Materials (as such term is defined in the Lease) or other environmental conditions on, beneath, migrating to or emanating from the Property or other real property adjacent thereto not caused by Tenant. (b) Effective on the Lease Tenn ination/Vacati on Date and payment in full by Agency to Tenant of the entire Payment Consideration specified in Section 3(a) and the Security Deposit pursuant to Section 4(d), and in consideration of the covenants and promises contained herein, this Agreement shall serve as a full release and discharge by Agency and all of the Agency Parties of Tenant and all of the Tenant Related Parties, from all rights, claims, debts, liabilities, demand, obligations, costs, expenses, actions and causes of action of every nature, character and description known or unknown including those for damages, compensation, consequential damages, punitive damages, interest, costs, attorneys' and appraisal fees, injunctive or declaratory relief by way of writ of mandate, or for demands, damages, refunds, debts, liabilities, reckonings, accounts, obligations, costs, expenses, liens, actions, causes and causes of action of whatever kind, at law or in equity, which Agency or any of the Agency Parties now have or may have in the future against the Tenant and all of 001219.0001\844054.7 10 (c) the Tenant Related Parties out of or pertaining to any occurrence, event, circumstance or matter of any kind or nature arising out of the acquisition by Agency from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement and the acquisition by Agency from Tenant of Tenant's Leasehold Interest in the Property pursuant to this Agreement or from the facts and circumstances described in this Agreement, or other real property adjacent thereto; except that, nothing contained in this Section 5(b) shall operate as a release or waiver of Tenant's obligations (i) under the Lease as amended by the Lease Amendment accruing during the period from and after July 1, 2004, which is the commencement date of the term of the Lease as amended by the Lease Amendment, up and until the Lease 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 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. 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 ave against any other Party arising out of or in any way connected with the acquisition by Agency of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement and the acquisition by Agency of Tenant's Leasehold Interest in the Property pursuant to this Agreement or from the facts and circumstances described in this Agreement, and each of the Parties expressly waives any and all rights and claims under Section 1542 of the California Civil Code, which provides: 001219.0001\844054.7 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. ZZ Initials of Tenant: e . P (Christopher R. Phillip (Virgil i4re Kyle, III) (J n _ Berry) Initials of Agency: (Chaff Executive Director) (Agen n el) (Deputy Executive Direc ) (Agency eJal Counsel) (d) Except as expressly set forth herein, none of the Parties or their respective agents nor any related entities have made any statement, representation, warranty or promise to the other regarding any fact relied upon in entering into this Agreement and the Parties, and each of them, expressly do not rely upon any statement, representation, warranty or promise of any other Party or any Party's agent or related entities in executing this Agreement, except as is expressly set forth herein. Each of the Parties has made such investigation of the facts and law pertaining to the subject matter of this Agreement as it deems necessary, and has consulted with legal counsel of its own choosing concerning these matters. (e) Each Party hereby represents and warrants to the other Party that as of the date of this Agreement and as of the Closing Date (i) to its actual knowledge, no other entity or person now has or will as of the Closing Date have any rights, title, or interest whatsoever in the released claims; and (ii) there has been no and as of the Closing Date there will be no assignment, transfer, conveyance or other disposition by such Party of any of the released claims. -- —�f) I Cis- Bement represents a settement of aims etween the Parties and does not constitute any admission of liability by either Party to the other Party to this Agreement. 6. Representations and Warranties of Parties (a) By Agency. Agency represents and warrants to Tenant that the statements contained in this Section 6(a) are true, correct and complete as of the date of this Agreement and will be true, correct and accurate as of the Closing Date. (i) Agency is a public body, corporate and politic duly organized, authorized to exercise the power of eminent domain, validly existing and in good standing under the laws of the State of California, and has full power and authority and all authorizations 001219.0001 \844054.7 12 necessary to carry out and perform its obligations under this Agreement. (ii) Agency and the person(s) signing this Agreement on behalf of Agency, have full legal capacity, right, power and authority, without any further action or consent required, to execute and deliver this Agreement and to carry out the transactions contemplated hereby. Any actions required to be taken by Agency to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been, or will have been duly taken. (iii) The information contained in the Recitals set forth in the introductory paragraphs hereof regarding Agency is true, correct and accurate. (iv) Except as provided otherwise in this Agreement, neither the execution and delivery of, or the performance by Agency of its obligations under this Agreement, or the consummation of the transactions contemplated hereby are prohibited by, or require Agency to obtain any consent, authorization, approval or registration under any law, rule, regulation, judgment, order, writ, injunction or decree that is binding upon Agency. (v) In conjunction with Section 4(h), Agency acknowledges and represents that it has been provided and will be provided from and after the Closing Date up and through the Lease Termination/Vacation Date full and complete access by Tenant and Landlord to the Property and has had and will have had an opportunity to fully and completely conduct such inspections, tests, verifications and other due diligence regarding title to the Property and all of the economic, physical and legal attributes and condition «.,t�re�peet to -the Property iinduding, w-ithout4irnrtatio , t --- presence of Hazardous Materials (as such term is defined in the Lease) or other environmental conditions on, beneath, migratory to or emanating from the Property or other real property adjacent thereto and is purchasing and acquiring the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement. (b) By Tenant. Tenant represents and warrants to Agency, that the statements contained in this Section 6(b) are true, correct and complete as of the date of this Agreement and will be true, correct and accurate as of the Closing. (i) Tenant is a California general partnership, duly organized, validly existing and in good standing under the laws of the State of 001219-0001\844054.7 13 California. Tenant is duly authorized to conduct and operate its businesses (including, without limitation, the Edinger Avenue Big O Store) and is in good standing under the laws of each jurisdiction where such qualification is required and where the failure to be so qualified would have a material adverse effect on the businesses, operations, results of operation, financial condition or assets and property of Tenant. Tenant has full power and authority and all material licenses, permits and authorizations necessary to carry on the businesses on which it is engaged including, without limitation, its ownership and operation of the Edinger Avenue Big O Store. (ii) Tenant and the persons signing this Agreement on behalf of Tenant, have full legal capacity, right, power and authority, without the consent of any other person required and without any further action required, to execute and deliver this Agreement and to carry out the transactions contemplated hereby. Any actions required to be taken by Tenant to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by Tenant have been, or will have been duly taken. This Agreement and the terms and provisions hereof, constitute the valid and legally binding obligations of Tenant, enforceable in accordance with its terms, conditions and provisions, subject to limitations imposed by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally and to the general principles of equity. (iii) The information contained in the Recitals set forth in the introductory paragraphs regarding Tenant is true, correct and accurate. ivj--T-enant--has-good-and marketable-titleio—Tenant- s-L-eFaseh-ofd Interest free and clear of all liens and encumbrances. (v) Except provided otherwise in this Agreement, neither the execution and delivery of, or the performance by Tenant of its obligations under this Agreement, or the consummation of the transactions contemplated hereby (i) are prohibited by, or require Tenant to obtain any consent, authorization, approval or registration under any law, rule, regulation, judgment, order, writ, injunction or decree that is binding upon Tenant; or (ii) violate any provision of, result in any default or acceleration of any obligations under, result in the creation or imposition of any lien or require any consent under, any material agreement to which Tenant is a party or is otherwise bound. 001 219.0001\844054.7 14 7. Conditions Precedent (a) The obligations of Agency under this Agreement are subject to satisfaction of all of the conditions precedent set forth in this Section 7(a) within the time periods, if any, provided therefor (each a "Condition Precedent" and collectively, the "Conditions Precedent"). Agency may waive any or all of such Conditions Precedent in whole or in part but any such waiver shall be effective only if made in writing. No such waiver shall constitute a waiver by Agency of any of its rights or remedies if Tenant defaults in the performance of any covenant or agreement to be performed by Tenant under this Agreement or if Tenant breaches any representation or warranty made by Tenant in this Agreement. If any Condition Precedent set forth in this Section 7(a) is not fully satisfied or affirmatively waived by Agency in writing by the Closing Date (or by any earlier date provided with respect to such Condition Precedent), Agency shall have the right, provided it is not in default hereunder, to terminate this Agreement and be released from all obligations to Tenant under this Agreement arising after such termination. (i) On the Closing Date, Tenant shall not be in material default in the performance of any covenant or agreement to be performed by Tenant under this Agreement on or before that date. (ii) On the Closing Date, all representations and warranties made by Tenant in this Agreement shall be true and correct in all material respects as if made on and as of the Closing Date. (iii) The acquisition of the Property transaction between Agency and Landlord pursuant to the Agency/Landlord Property Acquisition Agreement shall have been closed and consummated. (iv) Landlord and Tenant shall have executed and delivered the - - Agreement of elease-of'—UI---Claims-datrd-as-aiune--MN-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 Termination and Release Agreement dated as of June 16, 2008 in the form attached hereto as Exhibit F (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 7(b) within the time periods, if any, provided therefor. Tenant may waive any or all of 001219.0001 \844054.7 15 such Conditions Precedent in whole or in part but any such waiver shall be effective only if made in writing. No such waiver shall constitute a waiver by Tenant of any of its rights or remedies if Agency defaults in the performance of any covenant or agreement to be performed by Agency under this Agreement or if Agency breaches any representation or warranty made by Agency in this Agreement. If any condition set forth in this Section 7(b) is not fully satisfied or affirmatively waived by Tenant in writing by the Closing Date (or by any earlier date provided with respect to such Condition Precedent), Tenant shall have the right, provided it is not in default hereunder, to terminate this Agreement and be released from all further obligations to Agency under this Agreement. (i) On the Closing Date, Agency shall not be in material default in the performance of any covenant or agreement to be performed by Agency under this Agreement on or before that date. (ii) On the Closing Date, all representations and warranties made by Agency in this Agreement shall be true and correct in all material respects as if made on and as of the Closing Date. (iii) The acquisition of the Property transaction between Agency and Landlord pursuant to the Agency/Landlord Property Acquisition Agreement shall have been closed and consummated. (iv) Agency shall have delivered the Payment Consideration Deposit into the Escrow. (v) Landlord shall have executed and delivered the Landlord/Tenant Withdrawal/Release in the form attached hereto as Exhibit E. (vi) Big O shall have executed and delivered the Big O/Tenant Termination/Release in the form attached hereto as Exhibit F. (vii) Agency shall have executed and delivered the Lease Amendment in the form attached hereto as Exhibit C. 8. Closing Matters (a) The closing of the transactions contemplated by this Agreement (the "Closing" or "Closing Date") shall be the date all Conditions Precedent have been satisfied or waived by the Party in whose favor the applicable Conditions Precedent have been given as provided in Section 7, but in no event later than August 31, 2008. In the event the Closing does not occur on or before the foregoing date and the Parties have not otherwise agreed in writing to extend the date of the Closing, this Agreement shall terminate and be of no further force and effect. 001219.0001\844054.7 16 (b) Agency shall be responsible for (i) any and all escrow fees charged by Escrow Holder; (ii) any and all costs for all title work with respect to the Property; and (iii) any and all applicable sales and use taxes payable with respect to the transfer of the Property. Agency shall also be responsible for any and all recording fees for the recordation of the Leasehold Interest Assignment/Transfer and any transfer taxes payable with respect to the assignment, transfer and conveyance of Tenant's Leasehold Interest in the Property. Any and all other costs incurred by either Party hereto shall be paid by the Party incurring such costs. (c) All rent, current taxes, assessments, utilities, maintenance and other similar charges associated with Tenant's Leasehold Interest in the Property pursuant to the terms of the Lease, shall be prorated between Tenant and Agency as of the date which is the Lease Term inationNacation Date. Such prorations shall be adjusted, if necessary, and completed after the Lease TerminationNacation 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 Term ination/Vacation Date. Tenant and Agency shall use their commercially reasonable efforts prior to the date which is the Lease Term inationNacation Date to prepare a schedule of prorations covering as many items to be prorated as practicable so that such prorations can be made at the Closing. (d) With regard to the Lease Amendment, in conjunction with Section 4(a) of this Agreement, on or before the Closing Date, Agency and Tenant will each conditionally deliver to the Escrow its originally executed copy of the Lease Amendment, specifically instructing the Escrow in writing not to release copies of the Lease Amendment to either Party unless and until the acquisition transaction between Agency and Landlord pursuant to the Agency/Landlord Property Acquisition Agreement is closed and consumrnat�d-an-d-Agency as�red a Yo4 Landlord's —rights—, i e an - interest in and to the Property as evidenced by the recording of the Landlord Grant Deed in the official real estate records of Orange County, California. 9. Indemnity (a) By Tenant. Tenant shall indemnify, defend, protect and hold the Agency Parties harmless from and against any claims, damages, demands, liabilities, losses, judgments, expenses and attorneys' fees and/or costs resulting from (i) any breach of this Agreement, including, without limitation, the falsity of any representation or warranty made by Tenant in this Agreement; (ii) any third party claims arising in connection with this Agreement; or (iii) any claims between Tenant and any Tenant Related Parties arising in connection with this Agreement. 001219.0001\844054.7 17 (b) By Agency. Agency shall indemnify, defend, protect and hold Tenant and the Tenant Related Parties harmless from and against any claims, damages, demands, liabilities, losses, judgments, expenses and attorneys' fees and/or costs resulting from (i) any breach of this Agreement, including, without limitation, the falsity of any representation or warranty under this Agreement; (ii) any third party claims arising in connection with this Agreement; and (iii) any claims by and among the Agency Parties. 10. Attorneys' Pees In any action or proceeding between the parties to interpret, enforce, award, modify, rescind or otherwise in connection with any of the terms or provisions of this Agreement, the prevailing party in the action shall be entitled, in addition to damages, injunctive relief or any other relief to which it might be entitled, reasonable costs and expenses, including, without limitation, litigation and other costs and reasonable attorneys' fees. 11. Entire Agreement This Agreement contains the entire Agreement of the Parties, and supersedes any prior written or oral agreements between them, concerning the subject matter of this Agreement. 12. Partial Invalidity In the event that any term, covenant, condition or provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid or against public policy, the remaining provisions shall continue in full force and effect. 13. Waiver and/or Modification The provisions of this Agreement may not be waived, altered, amended or repealed, in whole or in part, except upon a written agreement signed by each of the Parties. The waiver by one Party of the performance of any provisions of this Agreement shall not invalidate this Agreement, nor shall it be deemed a waiver of any other provision hereof. 14. Headings The headings, subheadings and numbering of the different paragraphs of this Agreement are inserted for convenience and for reference only and shall not be considered for any purpose in construing this Agreement. 001219.0001\844054 7 18 15. Governing Law The rights and obligations of the Parties under this Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of California. 16. Successors In Interest Subject to any restrictions against assignment contained herein, and to any legal limitations on the power of the signatories to bind non -signatories to this Agreement, this Agreement shall inure to the benefit of, and shall be binding upon, the assigns, successors in interest, personal representatives, executors, estates, heirs, legatees, agents and related entities of each of the Parties. 17. Necessary Acts Each of the Parties agrees to perform such further acts, and execute and deliver such further documents, as may be reasonably necessary to carry out the provisions of this Agreement. 18. Advice of Counsel THE PARTIES, AND EACH OF THEM, AND EACH CONSTITUENT PARTNER OF TENANT, ACKNOWLEDGE THAT IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS AGREEMENT, THEY HAVE EACH BEEN REPRESENTED BY INDEPENDENT COUNSEL OF THEIR OWN CHOOSING AND THE PARTIES, AND EACH OF THEM, AND EACH CONSTITUENT PARTNER OF TENANT, EXECUTED THIS AGREEMENT AFTER REVIEW BY SUCH INDEPENDENT COUNSEL; OR, IF THEY WERE NOT SO REPRESENTED, SAID NON -REPRESENTATION IS AND WAS THE VOLUNTARY, INTELLIGENT AND INFORMED DECISION AND ELECTION OF THE PARTY OR CONSTITUENT PARTNER NOT SO REPRESENTED; AND, PRIOR TO EXECUTING THIS MI;NT, EACI� I�A�TY; A%ID-E�1CFtCON� PiTUEN�PARTNER O GRED TENANT, HAS HAD AN ADEQUATE OPPORTUNITY TO CONDUCT AN INDEPENDENT INVESTIGATION OF ALL THE FACTS AND CIRCUMSTANCES WITH RESPECT TO THE MATTERS WHICH ARE THE SUBJECT OF THIS AGREEMENT INCLUDING BUT NOT LIMITED TO THE ADVISABILITY OF ENTERING INTO THIS AGREEMENT AND THE MEANING OF CALIFORNIA CIVIL CODE SECTION 1542. Initials of Tenant: Initials of Agency: r R. Philp s) it it I , le Kyl� (J o Y. Be era) (Executive Director) ( gency Cqunsel) (Deputy Executive Director) Counsel) 001219.0001\844054 7 19 19. Authority to Execute This Agreement Each person executing this Agreement on behalf of an entity represents that he or she is authorized to execute this Agreement on behalf of that entity and to bind that entity to the terms of this Agreement. 20. Effective Date This Agreement shall become effective upon the signature of all Parties hereto. Upon written notice to Tenant by Agency that Agency has elected not to purchase the Property pursuant to the terms of the Agency/Landlord Property Acquisition Agreement, this Agreement shall be of no further force and effect and the Parties shall have no further rights and obligations hereunder. Such notice shall be signed by the Executive Director of the Agency, acknowledged by Agency counsel and refer to this Section 20. 21. Construction Each Party has cooperated in the drafting and preparation of this Agreement. In any construction to be made of this Agreement, or of any of its terms and provisions, the same shall not be construed against any Party. 22. Counterparts This Agreement may be executed in counterparts, each of which shall be deemed an original and, when taken together with other signed counterparts, shall constitute one (1) Agreement, which shall be binding upon and effective as to all Parties. 23. Voluntary Agreement The Parties, and each of them, and each constituent partner of Tenant, further represent and declare that they have carefully read this Agreement and know the contents thereof, and that they sign the same freely and voluntarily. 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 001219.0001 \844054.7 20 Copy to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary To Tenant: C.S.B. Partnership 7872 Edinger Avenue Huntington Beach, CA 92647 Attn: Christopher R. Phillips Copy to: Richard P. Waxman, Esq. Wendel, Rosen, Black & Dean LLP I I I I Broadway, 24th Floor Oakland, CA 94607 25. Third Party Beneficiaries This Agreement is made and entered into for the sole protection and benefit of the City and Agency, their successors and assigns, and Tenant and its permitted successors and assigns, and no other person or persons shall have any right of action hereon. - IN WITNESS WHEREOF, the Parties have executed this Acquisition of Leasehold Interest Agreement as of the date written above. AGENCY: ATTEST: REDEVELOPMENT A ENCY—O T IF ----- CITY OF HUNTINGTON BEACH, a public body, corporate and politic 9 � B By: Print Na PrintName: bi Title: A e cy Clerk Title: Chairperson REVIEW ND PrROVED: APPROVED AS TO FORM:: 1 By: ( By: Print Name: Print Name: —-tLw Title: Executive Director Title: Agency Counsel JM Ujqjbf [SIGNATURES CONTINUED ON NEXT PAGE] 001 219,0001\844054.7 21 LEIBOLD MCCLENDON & MANN, P.C., Agency Special Counsel s By. arbara Zei eibold INITIATED AND APPROVED: By: Print Name: Title: Deputy Executive Director TENANT: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner By: C r' topher R. Phillips President By: FOUR KYLES, INC., a California corporation, it5l<jeneral Partner Virgil Kyle Kyle, III, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By:C. & E. PHILLIPS, INC., a California corporation, its General Partner By: C r' topher R. Phillip , President 001219.0001 \844054.7 22 EXHIBIT A FRANCHISE AGREEMENT 001219.0001\844054.7 f Original Franchise Agreement #20466 Expiration Date: August 1, 2014 1 Q t'j Un�i ��q�z±Y� UpC3C C"15q�5-t BIG O TIRES, INC. FRANCHISE AGREEMENT ' BIG C)TIRES, INC. FRANCHISE AGREEMENT TABLE 0FCONTENTS SUMMARYPAGES_ ............................................................................... .......... ....................... ............... v 1_ CERTAIN � DEFINITIONS ..................................................... ............. =.......... ..................... ........ 2. GRANT OF FRANCHISE ..................................................... ........................... ............. .......... 3 2.01 Grant ofFranchise ............................................ '---------- ....................................... ......... 3 2.02 Trade Area................................. ................................................................. .......... -4 3. FIRST OPTION RIGHTS ................... ............................................ .............. -........................... -4 3.01 First 4 ' 3.02 Notification 4 3.03 Multiple First -'_-''''4 3.04 Notification of................................ ........... �,�--'_....... .........................4 _ 3.05 of Qption b Franchisee.....'--_--.-. ; ......... .....................................4 3.06 Transfer wYFirst Option Rights .................... ............ ..................................................... 4 3.07 Limitation on First Option Rights -'''--.---.__--............ 3.08 Expiration cfFirst Option Rights. ........................... .......... ............................................ 4 4` . TERM .... ......................................................................... .......................... --................. ..... 4 4lD Term --''_-'.'---..--.-,'_.`..''--._'---'---.-__-'_--'-.--_. 4 5. EXTENSION OFFRANCHISE RIGHTS .__'- -._-_.'-.-___-.-_--'_5 Grant 5 5.02 conditions VoGrant ufSuccessor Franchise ....... ,........ __r_................... ....... 5 �5�03 Notification of ....................................... ............... ........... ................... 5 0. ~` FRANCHISEE'S DEVELOPMENT OBLIGATIONS ......... --,�_--,�.......... .......................... 5 ' 6.61- - FinancingApproval ...... ........................................................ ........................................ 5 ' 6.02 S�e 6 ��R3 ^~~~.'...~~ --'--_---''--_-------~..----�-_-.. 6 6.04 Conditions -----.---_—.-..-'_-_-..'.-.-'-'-'----.,_ 6 `6.05 Commencement ofBusiness ........................................................................ ............... -'S � 8.FEES ........................ --_--.---.--_--..---_-----'--=-_-_,-'_.-.-'_-7 8�i hi��|FrmnchbeFee ..'_.-_---.--..-'_.--__.--_.-._---�__-_'—'...... 7 812 Royalty Feu _--__-.--_-'---..''-_--_-'_-'''-_-_.__-''-.--'_'7 8.03 National Advertising Fee ..................................................... ........ ....... ........... '...... -'7 8�4 Late Fees ............................. ....................... .......... ,......................... ......................7 8.05 Taxes ...................... .................... ................ -....._______=__—_7 8i LICENSEDMARKS .................................. ---'---_-----.---_,''-.�_^-.................... u | �-'------' ---9H)1 _ _ _............. ____'---___--,.............. _--_~-..-~____---.---''--'---' g.02 Limitations on Use. ....................................................................................................... 8 � 9/03 Infringement ... ....................... --'-.---._-'---.-_..'-.._''-._--'.__'.--`8 . 9�4 Franoh�ea�Bum�000Name ----.-_-`._---....-_............ '7�-.'r-_'._-------',8 9.05 Change: ofLicensed Marks ................. ................... .................... __-..-.--................ O 9.00 Franchisor's Rights ....... ...................................... '............................. ........................ '-O � ' Page - 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 O.................................... 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 .................... .................................... 10 14. PRODUCTS AND SERVICES ........ 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 ................. .......... ........................................................ 14.05 Open Account Financing 15_ ADVERTISING, MARKETING AND PROMOTIONAL PLANS:::........:.. .............................................. 15.01 Grand Opening Advertising L :.::--•--:.:.:.....:.:.....:::..::..`.::::......................._........... 11 15.02 National Advertising Program ................................ .............. ........ :-.::.:.........I .......... 11 15.03 Local Fund.......•............................................................................................- ........ ............12 15.04 Approval of Advertising.................:.... ..•..........12:...............:.:...................:......:........._. 16. STATEMENTS AND RECORDS .......................................................... . .......... 13 16.01 Invoices ............................................ ._...._........................... :................................. . 43 16.02 Audit ....................... :....... .................. :................................. ,... .... .::.......---::...I........... .13 16.03 Monthly Reports ......----•-•---=---------=--=--••--...-•-................ ...... . .....13 16.04 Financial Statements ....:...........•. .. 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 Refusal............................................................. .................I ...................... 14 18.03 Transfer Legend ..................... ................ ....-----...._.--------•=---•----•-- ......................... 14 14 . 18.04 Pre -Conditions to Franchisee's Assignment..................................:::......................... 14 18.05 Death of Franchisee-------------------------=-----------------:..:............-----..::...:................-•-........16 Page ii 18.06 NoWaiver --_-_--_--_-.-..'.----- ............................................................... 1G 18�7 ExoephxdTransfers ,'._---_--.-._---'.------.--_'.............................. 18 19. DEFAULT AND TERMINATION ..................... ..................................................... ... -_-_'�'''' 16 19.01 Termination byBig O...................................................... ------ ..................... ............. 16 19.02 ---------------------------------------------* ...—_---...-............................. 1&O8 Tann�mbnobyFreooh�em--._-----'''------^-----.-,---_-..._- 17 1914 Force K4ajeore.................................................................................... ------ _-'-'._.17 20. POST TERMINATION OBLIGATIONS +'.''_--`---....'—_-'__-_�---'--.-_-18 20]01 OW�eUons_''-._--_'-----'—'---'------_'—'-- 18 20.02 Right toRepurchase .................................................... .............................. -_.......... 18 2013 Right ofFirst Refusal ........ ............................ ..................... ....... ............... .................. 1D 20.0 ufAssets Upon Sale ........ -'--.----.-''-`-_-_----..-_18 21. INSURANCE ....................................................... ...... ...................................... '.....'.'............... 21.01 Insurance Coverage ............................................................... ......... ............................... 10 31.02 Proof of|nuurancm-_--_------_--_-'----.�...—'-.�`-'-'--.-�.�=.19 21l�� Svmixo of Indemnification _.--------_--.------_�'-.�^-'--`��'�~_-?9 _ _ 22', TAXES.PERKNTS'AND INDEBTEDNESS '---`'-------_.-------.---....--_19 22�1Payment nfTaxes ............................................... ............ ---- ..... ----------- ................ 1Q 22])2 Compliance with Laws ............................. ................................................................ 19 22.03 Payment ofDebts ....................................................... ................................. ............. 19 23' INDEMNIFICATION AND INDEPENDENT CONTRACTOR STATUS -------------------------------------- 1Q 23.01 '__-----''----................................................. 24. WRITTENAPPROVALS,, WAIVERS, AND AMENDMENT ........................................................ 19 ` 2411 Written Approval ................ ........................................................................................... 1g 24.02 Waiver ............................... ......... ........................................................... ......... ......... 1S - 25` DEALER PLANNING BOARD --.-------__-------.'----.--'-..-.-_-'-.--'2O 251n Dme�rP�nn�ABoard_-.------_`--.''-_-.----.-------..'-._-2D 25.02 Special Interest Issues ...................................... ------------------------------------------------------ m0 25.03 . Disapproval ofManagement Proposal .................................. ..................................... 2O 25.04 Compliance With Modification ........................................... -......................... ............ uu 2l �RIGHT ET -_-.----.-.------.-_-_--.----.--.--_.-'-'�D� 28lM -R�htof(��ot--__'-___—.__--''�-'-__--__-'__-�-`--2O 27. ENFORCEMENT __'-'----------------------------------------------------------------------------------------------------- 27.01 Declaratory and Injunctive Relief ........................ ............. ......................................... 20 28 ' 28 N[]T���S.---.-_'_--.--.---.---_---'-_-------_--.----'�--_--_ � 28.01 Notices ........................... ...................... ............. ....................................................... 28 | � 29GOVERNING LAW ............................................. --------------- .............. -.......... ........................... 21 ` 20]31 Governing Law ........................ .................................................................................. 21 i 29.02 Jurisdiction ........................................................................................ ...................... _un � 31 30 AND -'_-_-_-'-----------'--'----- 30�01 3nverabUdy............ ............................................ .------------------------------------------------------- 21 ponem ` '` .. , . 30.02 Counterparts ....................................................................... ........... ................... '........ � 21 ' 30.03 Construction ............................................... _................. -...................................... -.21 31' GUARANTY ......................................................... '_--.--'--'-...--_..--_-�'_—��--.-_-' 21 ' ' ' 3111 Guaranty .............................................................. .................................................. _.21 ' ' ' 32--ACKNOWLEDGEMENTS ............................................. ............................................................. 21 ANNEX A-TBC Corporation Guaranty of Performance Schedule 1 - Premises and Trade Area ` Schedule 2-Ownership \Aerifioabon ' Schedule 3- Guaranty' Schedule 4 - Lease Rider and K4odJicudwn ' , ' Schedule 5-Renewal Rider ^ ' ScheduleG-Trmdammrks Schedule 7`Converter Rider Schedule 8-Farm. ClanaRider . , ' ' ' . � ' ' ^ . ' . � ` , 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: $10,000m 7. STORE LOCATION: 7872 Edinger .Avenue. Street and Number Huntington Beach, CA 92647 City, State and Zip Code (714)861-4011 Phone Number 8. Franchisee's Operator: Chris Phillips 9. Franchisee's Manager: 10. Franchisee's Agent For Service of Process: Name: CSB Partnership c% Christopher R. Phillips Address: 27131 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 y , :... 12_ Effective Date: August 1, 2004 13_ Commencement Date: Auqust 1, 2004 14. Expiration Date: August 1,.2014 15. Franchisee's Advisor. 16, Send Notices to Big O to: Name: Genera! 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, GA 92675 With a copy to: Name: Address: 18. Business not subject to Section 17.0-1 Name: Address: 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 0 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 O Stores. B_ Franchisee desires, upon the terms and conditions set forth herein, to obtain a license to.operate, a Franchised Business and to offer and sell Big O Products and Services. Franchisee acknowledges that it`is essential,to the preservation of the integrity of the Licensed Marks, and the goodwill of Big.O and the Big 0 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: Advertisino - All advertising, promotional materials and programs, public relations programs and marketing programs, publications,: research; programs or activities.to promote the Big &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. A ---iate---includes-each- Entity,-which-directly,—orindire�tly; through• one or more inerme Janes, con ro s,, 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 morethan fifty percent (50%) of whose Equity or voting control, is held by person(s) or Entities who, jointly; or severally, hold more than fifty percent (50%) .of the.Equity or voting control of Franchisee. Agreement - This Agreement, the Summary Pages and all Riders and Schedules hereto_ Big O - Big O Tires, Inc. Big O Brand Tires —Tires carrying the "Big 0" label, as well as the Prestige, Pathmax and Fulda brands and any other brand(s) Big O subsequently includes in its Big O Brand Tires as part of its marketing programs. Biq_O Store or Store - A retail store operated under the Licensed Marks and pursuant to the Big O System. Big O System or System -The plan -and system developed. by Big O relating to the complete operation of Stores which are authorized to sell Products and Services; which- include some or all of the following: site selection as required, site approval, Store layout and design, product selection and display, purchasing and. inventory control methods, accounting methods, merchandising, advertising, sales and promotional ideas, franchisee training, personnel training, and other matters relating to the efficient operation and supervision of Stores and the maintenance of uniform standards of retail merchandising. Blue Book - See the definition of "Manual Change in Control - The Transfer of fifty percent (50%) or more of the (i) voting. or Equity interests in Franchisee, (ii) the Franchised. Business, or (III) the assets used in the Franchised Business. Change of Control also includes Franchisee's loss of the exclusive right to occupy. the Premises. Commencement Date - The date upon which the Store opens for business or, in the event of transfer, or Conversion, the date designated by Big O Tires, Inc. Conversion — The conversion, by a Converter of an independent retail tire store to Big O Store pursuant to this Agreement_ Converter - A person who converts an independent. retail tire store'to a Big O Store pursuant to this Agreement, regardless_ of whether such person previously operated such independent retail. tire store or recently purchased the assets or business of each store. Dealer Planning Board - The group of franchisee representatives elected from each Local Group which meets periodically with Big O's management to review aspects of Big.O's strategic plans as may be presented�from time to time by gig O and to,d&uss.issues of concern to franchisees. The: functions of the Dealer Planning Board are described in Section 25 of this Agreement. . Due Date - The fifteenth (15') day of each month: the date'by which all royalty fees and advertising contributions must be postmarked and mailed to.Big 0. 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 shall -be referred to as a "Partnership", and any trust, association, corporation or other entity, which is not an individual. E ui — Stock; membership interests; partnership interests; or other equity ownership interests in a Franchisee which is an Entity. 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)_ mite radius of. Franchisee's Premises in the.manner described in Section of this Agreement. Frandhise - The Aghts 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 utifizes.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 alllrevenues from whatever source derived whether inform 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 sate 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 'S61es includes sums paid.for claims made on business interruption. insurance policies, Federal Excise Taxes collected; as 2 welt 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; (4) 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; (A) 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 informa#ion and information created or used by Sig O designated for confidential use withinthe 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 maybe 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 0 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 accoeinting 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 Us : _Flanchise-Gomptiance-and-Procedures-Manuat,-any-tra►nsng-tapes-;-guides and-anyiraimngmoduie--or-a 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). 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 0, which are now or hereafter approved or . designated by Big O for sate 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, orotherentity owned by Big O, Franchisees or. third parties, or an operation, that is part.of .Big 0, which provides accounting, payroll and related services for the purpose of providing such. services at a reasonable cost and providing the financial reporting Big O.requires. Successor Franchise Agreement — A new franchise agreement executed by the parties hereto granting a Franchisee the right to operate the Franchised Business licensed hereunder following the expiration of the. iniiial.term of this Agreement. Summary Pages — The pages of this Agreement, beginning on Page v and ending on Page vi, that summarize stipulated provisions of this Agreement. Survivor A surviving spouse, heir(s) or representative(s) of the estate of any Franchisee who is an individual, . or any deceased person owning Equity, in a.Franchisee which is an Entity: Termination Date - The date upon which this Agreement is canceled or.ended by Big O or the Franchisee in accordance with'the'terms of this. Agreement." Trade Area - The area described on Schedule 1 to this Agreement within which, subject to certain conditions, Big O agrees to limit the number of Stores to one (1) for everyfifty thousand (50,000) persons residing.therein. (See also Section 2.02.) Big O may, from time to time, redefine Franchisee's Trade Area. Trade Dress - Any shop or architectural designs, fixtures, improvements, signs, color schemes or other elements of°the appearance of the Store which, in any:manner suggest affiliation of the Store or Premises with Big O, or the System. rans er - •o give away, s _t assign, p e. ge, lease, sublease, &vise, licerise, sublicense,oherwise. 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, recapitatiiation. or consolidation involving Franchisee or the issuance of additional securities representing Equity in Franchisee, shall also be deemed to be a 'Transfer" for purposes of this Agreement. 2. GRANT OF FRANCHISE 2.01. Grant of Franchise. Subject to all of the terms and conditions herein, including but not limited to, the condition that Franchisee or its Owners or some of them, personally guarantee the obligations of Franchisee to Big 0 under this Agreement* as set forth in Schedule 3 to this Agreement; Big O grants to Franchisee the non-exclusive and non -divisible license to use the Licensed Marks and the exclusive tight to operate a Franchised Business solely at the Premises set forth in Schedule 1 to this Agreement. If, at the time of execution of. this Agreement, the Premises cannot be designated as a specific address because a location has not been selected by Franchisee and approved by Big 0, then Franchisee shalt promptly take steps to 4 T` chbose.and acquire a locationfor its Big O Store vVithiri`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:theterm of this Agreement, Big O agrees not to operate itself of 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 0 may, from -time to time, redefine the Trade Area. Absent Franchisee's prior approval, Big O shall not permit the establishment or operation of another Store within a two (2) mile radius (as determined by Big O in itsreasonable 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 owndrship, 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 ofits 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 0 franchisees with Stores within a five (S) 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 establishthe.new Store within the general vicinity of Franchisees 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 olthe�ite_of_a_proposed-new-Sion Ahe-Franchisee-and--AVsuch-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 Q 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 0 Wil provide Franchisee with written notice that it has thirty (30) days within which to submit an application for the franchise in the manner prescribed by Big O in the notice. Franchisee must submit the application within the prescribed time along with the standard franchise.deposit then required by Big O. Upon approval of the application by Big O, Franchisee must execute Big O's, then current standard Franchise Agreement and pay the remainder of any initial fee due. 3.05. Exercise of Option by Franchisee. If Franchisee is an Entity, the First Option may be exercised only by the Entity itself, or by the individual designated as First Option holder on the Summary Pages. 5 3.06. Transfer of First Option Rights. The First Option is not transfer able without Big O's prior wriften 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-art . 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 orsuch 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 mated a- l.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 SuccessorFranchise. 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 inwhich 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 torefurbish the Premises or relocate the Premises to conform to Big Us 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 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); I -have committed three (3} or (f) Without limiting the generality of Section 5.01, Franchisee shall not more material breaches of this:Agreem"ent during any twelve (12) month period during the Term of this. Agreement for which Big O shallhave delivered notices of default, whether or not such defaults were cured; and (g) Franchisee shall have in all material respects maintained its status as a Franchisee in good standing (e.g., achieving at leastminimum 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 wilting 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 torenewal. If Big 0 intends not to offer Franchisee a Successor'FranchiseAgreement, Big O shall give Franchisee at least one hundred eighty (180) days notice of nonrenewal prior to the Expiration. Date: if Big O has not given Franchisee at least one hundred eighty (1.80) days notice of nonrenewal prior to the Expiration Date, the term of this Agreement will automatically be extended by the amount of time necessary to give Franchisee one hundred eighty (180) days notice of nonrenewal. 6. FRANCHISEE'S DEVELOPMENT OBLIGATIONS 6.01. Financing_ Approval., Unless otherwise agreed to by Big O, Franchisee shall obtain a letter of 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 0.. 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 re1ect the proposed'site. Unless otherwise agreed to in writing by Big O; final site approval will be conditioned upon Big Us receipt of evidence of Franchisee's ownership, lease or control of.the property in such form as Big .O, in its sole discretion shall deem to be acceptable, including, without limitation, a deed to the property, an executed contract to purchase the property, a lease with a duration of not less than ten (10) years, or an option to purchase the property. Big O may, at its sole discretion, retidire that FraQchiseernegatiate-withits landtordthe-right, butpothe ebtigation, #or Big B # -- 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'sapproval 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 Inforovements. Equipment and Signage. Franchisee, agrees to construct. all improvements to the Premises and the Store in compliance with plans and -specifications approved by Big O. Franchisee agrees to purchase; lease or otherwise use in the establishment and operation of the Big O Store only those fixtures, equipment, signs and hardware and/or software that. Big :0 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. . 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-inventoryof tires and supplies in accordance with Section 14.01 and 14.02; (vi.) provide Big.O with copies of all required insurance policies, or such other evidence of coverage and payment as Big O requests; and (vii) provide Big O with any other documents as may reasonably required by Big O, including but not limited to financing statements. 6.05. Commencement of Business- Franchisee agrees to open the Big 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 T01. Pre -Opening Assistance. Prior to Franchisee's Commencement Date, Big O shalt 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 wilt consist of providing criteria for a satisfactory site, an owsite,inspection and determination ofwhether aproposed site fulfills the requisite criteria, prior to format approval of a site selected by Franchisee_: At Big O's option, Big may, without fee or expense to Franchisee, review the proposed Store lease.. The final: -decision about whether to `acquire a given approved. site or ...,-.,.Whether to execute any particular lease -shall be the sole' decision of. Franchisee.= Big O disclaims all liability for the consequencesof 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 Prerises 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 "rototype itoor plan; elevation-and-eWipmentlaj out-for#he-Store= Big-O-may charge FM . oa - its costs (as reasonably determined by Big O) of these. The plans. ust 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 0'.s approval of the revisions or mod cations 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 0 may, in its sole discretion, require Franchisee's Operator to attend and successfully complete another trainirg 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 circumstancesAesignated by Big O in sotediscretion 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 byBig O. Franchisee shall'payfor its own transportation, lodging and living expenses which are incurred while attending such additional training. Big 0, 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 forwhich Big O.vuill 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 tines of Products and -Services and ways to enhance the competitive posture of Big,.. 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 requiredto.sell atany particularprice or at or above any minimum price if:such a:f-equirement would be unlawful:: (b) Big O agrees to make available to Franchisee the following on -going assistance far which .BigO may charge the Franchisee a fee: (i) Additional training for the Operator or other personnel of Franchisee; tit) RegtoJip traininBigg ptoyided,kyD tier�sonnet and field- ssisfaflce, speetiens and dv" pertaining to the Franchisee's Store.provided. by Big .0 area managers: (W).. Monthly point of sale advertising. materials -and wearables -utilizing Big _O:Licensed' Marks will be .purchased through Big O's subsidiary,.0 Advertising, Inc., or such other licensee as . designated by Big O for which Big O -maycharge 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 willsupplyFranchisee with newspaper . mats and radio and television commercial tapes, for which ,Biy O may charge fee to the Local Group or to the Franchisee. 9 Notwithstanding Subsections 7.02(b)(i) and (ii), above, in certain situations where training is being . provided by Big.O.personnel, training will be provided at no cost to the Franchisee for the personnel conducting the training but, the Franchisee may be charged a fee for costs associated with the materials and training location. (c) Big O, in its sole discretion, may provide .other assistance from. time to time under terms and . conditions .and for fees and charges as established by Big O in its sole discretion from time to time. 8. FEES 8,01. 4nitial 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 shaltpay 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#en (1-0.) days after suchpayment 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 taxis imposed upon royalty fees paid by Franchisee to Big O which Big O cannot offset against taxes it is required to pay under the laws of the United States or the state of its domicile; Franchisee agrees to compensate Big 0 inthe mannerprescribed 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 Data of this Agreement. 8.06 Allocation'bf Rg ments: = Unless' other written instructions accompany 'a speck 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 shalt comply with any written instructions for allocation specified_ by Franchisee to the extent, :irr 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 any ownership rights in the Licensed Marks. FrancWee.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 understandsand agrees that any use of theticensed Marks other than as expressly authorized by this Agreement, without Big:O's prior writiten'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 shalt not, directly or indirectly, commit any act of infringement or contest or aid others in contesting the validity of Big Us. right to use the Licensed Marks or take any other action in derogation thereof. 10 9.03. Infringement. Franchisee acknowledges Big O's right to regulate the use of the Licensed Marks and Trade Dress of the Big O System. Franchisee shall promptly notify,Big O if it becomes aware of any use or any attempt by any person or legal entity to use the Licensed Marks or Trade Dress of the Big O System, any colorable variation thereof, or any other mark, name, or indicia in which Big O has or claims a -proprietary interest. Franchisee shall assist Big O, upon request and at Big O's expense, in taking such action, if any, as Big O may deem appropriate to halt such activities, but shall take no action nor incur any expenses on Big 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 per -form 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 withthe use by Franchisee of .any such new, modified, or replacement Licensed Marks shall be the sole responsibility of Franchisee..Any expenses or associated Witt; 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 anytype of tire sales and service business, at;anytocation, which may be the same. as, similar to or different.from. the business of a Big O Store. Big p may use or license these rights on any terms and conditions itdeeli s 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 -qua4tyi-appearance-and-open-abefvf"e-Franchised-Business: For -the purposL—o"-nhan g-the pubtic -- 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 faitfT 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; 11 (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 Us opinion, to enable Franchisee to fulfill property 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 docurrientaryevidence . 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 wtfh tiestandards standards and . requirements established by Big Ofrom 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 guidelines prescril ed'or approved: by Big O, provided°howeever, that (i) Franchisee shalt rtet be subject to any agreement to'fix prJG6s, or allocate customers or territories which would violate any applicable taws; and (H)Franchisee shall not be subject to any capital.investment requirements ar other standards . established by the Local Group which are inconsistent with this Agreement or which have not been approved or prescribed by Big O; 0) Franchisee shall use the Premises and the Store solely for the Franchised Business and for no other purpose; and •(k) _Franchisee and its 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 Pricing. From time to time Big O may establish maximum pricingfor 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 d requirement would be unlawful. 10.03 National Fleet Account Programs. Big O has established national fleet account programs and policies, which it may revise, suspend and reestablish from time to time in its sole discretion. The national fleet account programs may include, but are not limited to: . (a) Big O (or its designated provider) making arrangements with larger. customers with multiple locations and/or multiple vehicle users ("National Account Customers") to have Big O franchisees provide Products and Services that are specified by Big 'O and accepted by National Account Customers; (b) permitting designated buyers of the National Account Customers to purchase. specified Products and Services from Franchisee (and the other he 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 ands Managers are also subject to approval by Big O. Franchisee will notify Big O of each initial and subsequent Operator and Manager prior to his or her appointment to give Big O a reasonable opportunity to determine whether Big O will exercise its right of approval or disapproval as to such Operator or Manager. Big O's approval, if required, will be conditioned upon. the Operator's or Manager's successful completion of any training required by Big O: Big O maywaive some.or all of its initalaraining requirements for Operatoir-s.or: Managers who have already received such training as .a result of their affiliation with another Store or Big 0 franchisee or in other circumstances,. imits_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 Omay reasonably require,or-provide at such time as Wig may reasonably prescribe. - Alt 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 Franchisees request, Sig O has the option, t of not; the duty, to replace franchisee's Operator, Manager, or:both; with►ts ; own employees or agents, to operate. the Franchisee's Storefor the.benefit.of Franchisee, with complete discretion overall matters. relating to its operation.,. _ Franchisee- shall pay. Big ,O's. then current =Store , maipogementfee.as well,as the out -of :pocket expenses _Big O incurs;for travel, food and lodging in the,course of prov-ding such services, provided that such expenses are reasonably related..to ,the services rendered.I Big O moy.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)--Franchisees-Operator-or-Manager becornes-physically ur-mentally-incapablerof-operatirrg-the .; — Franchised Business; or.. (c) Franchisee's Operator or Manager dies and. anew Operator or Manager has not completed initial training: - Notwithstanding the foregoing, prior to.Big.O. operating the Franchisee's Storepursuant to the terms of this Section f 1:03, 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 Franchiseeto 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 inspection; and (b) To remove from the Premises, certain samples of any Products and Services, supplies or goods, in amounts reasonably necessary for testing or examination by Big O or an independent laboratory, to determine whether such samples meet Big O's then current standards and specifications. Big O will grant Franchisee a credit equivalent to the cost of any approved Products and Services or supplies damaged or removed by it. 13. MANUAL; NEW PROCESSES 13.01.: Manual, To protect 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 solelyto Big O and shall be on loan from Big O during the term of this Agreement. Franchisee agrees -to pay Big up, to Five Thousand Dollars ($5,000) for the failure to return the Manual, Big Us Blueprint for Success, otherwise known as the Blue Book, any training module or any other proprietary information to Big O within fire (5).days of -the Expiration Date or Termination Date of this Agreement; or the date upon which controlling interest in the Franchisee, the Franchised Business or its assets is transferred. However, Big-0 will waive the payment if Franchisee notifies Big O that it has lost or mislaid all or part of the Manual at any time prior to six (6) months before the date upon which the Franchise is transferred; terminates, or expires. 13.02. Confidentiality of Information. Franchisee shall at all times use its best efforts to keep Big Us 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 0 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 Agreerent), copy, duplicate, record; transfer, transmit, ovotherwise 'reproducesuch' Information, in any form or by any means; in Whole or in part, or otherwise: m- ake the same availableto any unauthorized person or source Any and all •Infort nation,. 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 Inform atio.n 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 - comptyYwith-all--such- changed -Wire s cch-are w bytheir terms man a o-provided, that -such --- requirements apply in a reasonably nondiscriminatory manner to comparable Big O franchisees. The implementation of such requirements may require the expenditure of I reasonable sums of money by Franchisee. Big 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 a ° 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 dine 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.0) 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 purchasesof 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.alltire sales (in units) at the Store -will be Big O Brand. Tires, excluding sales of snow tires and farm class tires. 14..02.. Awroval of Products and Services. Prior to commencing business at the Premise. s, Franchisee shall stock the Store with Products and Services and supplies ofsuch variety and in such, amounts as Big 0 may:: require.. Franchisee may Trot 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 Bfg 0 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 reliabilityof its product and service; -_ _(e) The_supplier.-must-agreeAo indemnify-and440d-Big-O-and-the-Franchisee-iarmtess-from-anct-- — - 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 comm odity. 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 may reasonably require; and shall offer, all Services which Big may require. 15 14.04. Warranties ano Guaranties. Franchisee agrees to issue anti i ionorwarranties and guaran&s 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. byBig O maybe offered or honored by Franchisee (other than those required by taw). Franchisee and Big O shall only -honor warranties and guaranties on Products and Services that have been sold to and returned byconsumers 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 termsofthe 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 complywith 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 placeFranchisee on C.O.D. as well as notifying the Franchisee of an event of default. of.this Agreement. 15. ADVERTISING, MARKETING, AND PROMOTIONAL PLANS 15.01. Grand Openinct 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 specified on the Summary Pages_ The exact amount to. be spent on Grand Opening Advertising shall be determined by Big O and the Franchisee's Local Group and will depend, in pail, on'Big Us then current presence in the market place, reputation and name recognition. The amount and manner of the Grand Opening Advertising must be approved in advance by Big.O. If no Local Group exists for the region where Franchisee's. Store is located, then the amount of the Grand, Opening Advertising shall be agreed upon by Big O and Franchisee. 15.02. National Advertising Program. Big O has established a National Advertising Program which Big O, in its sole discretion, may decide to terminate.or suspend at anytime. if Big O does terminate or suspend the National Advertising Program, Big O, in its sole discretion, may re establish it at any time.. Big O shall notify Franchisee as to the manner in which it shall function and the amount of contribution required of Franchisee. (a) Not later than the Due Date, Big. 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 shalt be maintained or approved by Big O for Big O system -wide Advertising efforts. Big O shall, limit any increase in Franchisee's contribution to the National Advertising Program from any amount then currently being charged to one - tenth of. one percent (0.1 %) in any twelve (12) consecutive month period and an additional one -tenth of one percent (0.1 %) for each twelve (12) consecutive months thereafter until the one percent (1 %) limitation is reached. Such incremental increases shall not be cumulative so that if Big O fails to adopt an additional incremental increase after any twelve (12) consecutive month period, the next one -tenth of one percent (0.1 %) increment at increase will not accrue until actually adopted by Big O and shall constitute the maximum for the next consecutive twelve (12) months; provided, however, in the event Big O shall determine, in its sole judgment and discretion, that a special advertising circumstance or opportunity is available to Big O and/or its franchisees, Big O may propose. to the Dealer Planning Board a greater increase during any consecutive twelve (12) month period (up to one percent (1%) limit), and if a majority of the members of the Dealer Planning Board agree to such increase, it shall be implemented by Big O, not withstanding Big O's limitation as to the phasing in of any increases. 16 (b) Big O shall, following consultation with the Dealer. Planning Board, direct all system -wide advertising efforts, which is provided through the National Advertising Program with sole discretion over the concepts, materials, -and media used therein. All National Advertising Program contributions paid by Franchisee and other similarly situated Big O System franchisees to 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 beriefits.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 (n) other activities reasonably related to the administration or direction of the National Advertising Program and its related programs. No refund of contributions to the National Fund °shall be due Franchisee upon termination or nonrenewal of this Agreement. (d) Any part of the National Advertising Program contributions paid to Big O, but not spent by Big 0 during Big O's fiscal year, which Big O may change in its sole discretion, shall remain in the National . Advertising Program. Any taxes imposed on the National Advertising Program shall be paid from the National Advertising Program. (e) The Dealer Planning Board shall have .the right to review all expenditures of the National . Advertising Program on a regular basis. 15.03. Local Fund. (a) Franchisee shall also contribute by the Due Date a minimum of four percent (4%) of. its Store's Gross Sales for the previous month to Big O or as directed by. 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 may prescribe or approve or: (n). 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 0-anddo not violate -any applicable laws. From time to time, the Local Groupymayagree 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, nor part thereof shall be used - by Big O to defray its general operating expenses other than (i) those reasonablyallocable 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 0 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 obligation to Franchisee to enfoi-ee payments or contributions (in whole or in part)_by other franchisees. 15.04. Aporoval-of Advertising. Franchisee or the Local Group shall submit (through'the mail, return receipt -requested) to. Big 0 -for its prior written approval (except with. respect to pricesto 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 orrecords 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 :0 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 tenderIpayment of the amount due not later than ten (10)days foil owingreceipt of the auditor's report, plus interest calculated at a rate which is the lower of eighteen percent (180/6) per annum or the -highest -rate "permitted`by`law: It Franchisee has overpaid Big O or -such Local -Group or Local Fund, such amount will credited o 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 0, together with its payments of royalty fees and advertising contributions, monthly reports on forms .proscribed from time to time by Big O, stating the fees or contributions due to Big O on account.of Gross Sales -for. the priormonth, copies. - of all sales tax receipts or returns and such other information as Big O may require, all signed acid certified as true and correct by Franchisee or Franchisee's Operator. Big O reserves the right to require such reporting its-t(ybe jmrformedand-submitted-to-Big-O etectronigt . 16 04. Financial Statements. Franchisee shalt 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 oftheend of such quarter, all of which shall be certified by. Franchisee as true and correct. All such statements shall be prepared in a format,.. that has been prescribed or approved by Big 0.- In addition, Franchisee, as'well as any guarantor(s) of this. Agreement, shall, within. thirty -(30) days after request from Big 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, itwill not be required to do so more than once every four (4) years. is .t_ . ! 16.06.. Retail Accounting �Center. Franchisee maybe required, in Big O's sole discretion, to use.a Retail Accounting Center operated by Big 0-oroperating within the Franchisee's Local Group, as Big O may designate in its discretion for the generation of financial statements and/or for providing accounting, payroll and/or related' services_ If the Franchisee utilizes the services of a Retail Accounting Center, Franchisee will be required to provide sufficient financial information to a Retail Accounting Center to'enable that center to. prepare on an accurate and timely basis the financial statements that the Franchisee is required to deliver to Big O. Franchisee authorizes the Retail Accounting Centers to deliver such financial statements directly to Big O. Franchisee shall be responsible for and pay on a timely basis the fees charged by the Retail Accounting. Centers. 11. COVENANTS 17.01. Noncomoetition 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 fires, wheels, shock absorbers, _ automotive services, or other products or services which compete with Big O Products and Services: The purpose of this covenant is to encourage Franchisee and. any guarantors) hereof to use their best efforts to promote the Big O System, its Products and Services, to protect its information and,trade secrets; and,to generate.a successful business atthe Stole: ' 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 oause for its benefit or the benefit of any other persomor.tegal entity, any trade secrets which are proprietary to Big Gor any Information, knowledge, or ` know-how deemed confidential under Section 13 hereof, except as expressly authorized by Big O. The protection granted hereunder shalt be in addition to and not in lieu of all other protections for such trade secrets anal confidential -Information as may otherwise be afforded in iaw 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 Sys .tem' to any. competitive business, by direct or indirect inducement or otherwise. 1.7.04. Post Termination Covenant Not to Compete. If Franchisee terminates this Agreement other - than in a in annerprescribed bySectiorr,19:03 or if. this Agreement is terminated for "good cause" as defined n Section 19.01, Franchisee, its Owners, officers, directors, -and guarantors covenant that theyshail 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.orwithin a ten (10) mile radius of any other Big O Store which was operational or under construction on the Termination Date. If a former Franchisee or guarantor commits a breach of this Section 17.04, the two yearperiod shall start on the date that the former Franchisee or guarantor is enjoined from competing or stops competing, whichever is later. 17.05. Survivability of Covenants. The parties -agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of .this ,Agreement. If all or any portion of a covenant in this Section 17 is held unenforceable by a court or agency having valid jurisdiction in an unappealed final -decision to which Big O is a.party, :Franchisee expressly agrees to be bound by any lesser covenant imposing the maximum duty permitted by law that is subsumed within the terms of the covenant, as if the resulting covenant were separately stated in and made a part of this Section 17_ Franchisee further expressly agrees: that the existence of any claim it may have.against Big O, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Big O of the covenants in this Section 17.. The covenants in this Section 17 shall survive the Termination Date or Expiration Date of this Agreement. 17.06. Modification of Covenants. Franchisee understands and acknowledges that Big.O shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in this Section 17 or any portion hereof; without Franchisee's consent, effective immediately upon receipt by Franchisee of written notice thereof; and Franchisee agrees that it shall comply immediately with any covenant as so modified. 19 17.07. Anti -Terrorism Laws. Franchisee and each Owner represents, warrants and covenants that gat 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 terrovagainst any person,. entity or government, including acts prohibited by the U.S. PatriotAct 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 maybe 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 shalt. 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. byfranchisee 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. onsuch.stoek, or other said evidence of ownership, contained; in this Agreement and to allow such restrictions to be enforceable. , Such legend: shall appeavin 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. -- - 48_04.--Pre�Oonditions-to-Franchisee-Assignment-.—If- mnchi%e-or-any-Ownef-desimq'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 transfereemust 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 theBig O Store is located. Such agreement shall generally provide for a new term equal to the term of the standard Big O franchise agreement then being offered, and may include, without limitation, different fee structures, modified Trade Areas and/or increased fees; 20 f (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 totime) after the date of the Transfer. Such bond or letter of credit shall- be payable to the order of Big 0 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. 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 Us 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;volurrme or real estate -Value of a padicularStore);.(b).demonstratesao Big O's satisfaction that it or its Operator meets Big Us managerial,_ business, and technical. standards;-(e) 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 0 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' chances of net obtaining-financial-performance>as-good--as-that-achieved--by e 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 safe products of 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. shalt pay all amounts due to Big O and cure all other breaches of this Agreement and. any other agreement or loan document it may have with -Big O; 21 (v) Big O will, as a condition of any Transfer involving an assignment of this Agreement oOa Change in Control,. require Franchisee or transferee to pay a transfer fee (but no initial franchise fee) to reimburse Big 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 Transferor a group of Transfers; . . (vi) Big O may require the transferor and its Owners and guarantors to guarantee the obligations of Transferee under this Agreement or 'under any new Franchise Agreement entered into between transferee and.Big O; (vii) Prior to approving a Transfer involving a Changein Control, Big O may inspect Franchisee's Store and as a result of such inspection, Big Q may prepare a "Punch List" setting forth the necessary repairs, maintenance, or other.upgrading'of the Store which will become a condition of Big Ust approval of the Transfer, (viii) If the Franchisee acquired its -interest in the Franchise as a Pioneer, Converter, or pursuant to a Multi-Unit'13evel6pme0t 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 betweenthe initial franchise -fee paid by Franchisee: and -thirty thousand dollars. ($30,0:00.00), 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 s- S . (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: rio 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 shalt not constitute a waiver of any claims Big O may have against Franchisee or the transferring party or Big Us right -to demand exact compliance with any provision of this Agreement. 1&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.defaulL. 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 obligationpursuant to this Agreement t 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 noticebf default; (ti) 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 fads to commence business on such other Commencement Date as the parties hereto may have agreed. 1 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 materiallyfalse 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 approvator 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, tending 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 0 System generally, (i) If Franchisee or any person owning an interest. in Franchisee is convicted of any felony or crime of moral turpitude regardless of the nature thereof, or any other crime or offense relating. to the operation of the Franchised. Business, or if Franchisee engages in any conduct which reflects materially and unfavorably upon the operation of the Franchised Business; . 0) If Franchisee becomes insolvent or makes a general assignment for the benefit of creditors, or if a petition in bankruptcy is filed by Franchisee, or such a petition is filed against and consented to by Franchisee, or if a bill in equity or other proceeding for the appointment of a receiver of Franchisee or other custodian for Franchisee's business or assets is filed and consented to by Franchisee, or if a receiver or other custodian (permanent or temporary) of Franchisee's assets or property, or any part thereof; other than as described 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 0 including -but not-limited:to, anyrequ'irernentio pay dues or make advertising contributions; and!such default ispot-cured in accordance with the terms of such other agreement, loan document, or lease, or the by-la*s of :the Local Group;. (1) If Franchisee fails, fora period of ten `(10) days after notification of non=compliance, to-complywith any law or regulation applicable to the operation of the Franchised` Business; (m) If Franchisee sells, offers for sate, or gives away at the Premises any products or services which have not been previously approved byBlg O in writing, or which have been subsequently disapproved; (n) . If Franchisee shall have understated its Gross Sales to. Big 0 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 ta pay Big-OTursuant-to the7terms-hereof-is--unlawful;-orthat att or-a-significant-part-cf-Franchisee`s -- --- payment obligations hereunder are void or voidable by Franchisee. Remedies to Big 0. 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 0 has to terminate the. agreement; the Franchisee agrees to pay to Big,O, amongthe many remedies available to Big 0, 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 0 has committed a material breach of any of Big O's obligations under this Agreement and has failed to cure such breach within thirty (30) days after Franchisee has given written notice to Big 0 of such breach. 24 19.04. Force Maieure. Notwithstanding anything contained in this Agreement to the contrary, neither party shalt be in default hereunder. by reason of its delay in performance of, or failure to perform', any of its obligations hereunder, if such delay or failure is caused by... (a) strikes or other labor disturbance; . (b) acts of God, or the public enemy, riots or other civil disturbances, fire, or flood; (c) interference by civil or military authorities; . (d) compliance with governmental laws, rules, or regulations that were not in effect and could not be reasonably anticipated.as of the date of this Agreement; (e) delays in transportation, failure of delivery by suppliers, or inability to secure necessary governmental priorities for materials; - or (f) any other fault beyond its control or without its .fault or negligence. In any such event, the time required for performance of such obligation shall be..the duration of, the. unavoidable delay. 20. POST TERMINATION OBLIGATIONS 20.01.. Post -Termination Obligations. Uporrthe.Expiration,or Terminationof 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 Sig 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:ps 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 tncurredby Big O as a result. of the default: (c) R6tum to BigO the (i)Manual and.any training modules or other proprietary information and supplemenis thereto and.atl trade secrets and confidsniial materials owned or licensed by Big O'and Ai ' - copies thereof `Other than Franchisee's copy of the Franchise Agreement, copies. of apy_ correspondence between the and any other docurnent,which Franc_hiseereason .ablyneedsfor 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 anftr. hardware; and (iii) discohtinue the use of all copyrights,. Licensed: Marks, trade names and patents now :_.UL'iL_ (d) Provide to Big 0, 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 ip 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 for which, delivery, has not been made; (e) Take such action as may be required by Big O to transfer and assign to Big. O or its designee all . telephone numbers, white and yellow page telephone references and advertisements, and ail trade and similar name registrations and business licenses, _and to cancel 'any interest which Franchisee may. have in the same'. The Franchisor is hereby appointed as the Franchisee's. attorney -in -fact for such purpose and such power, being coupled with an interest, shall be irrevocable; PA (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 Licensed Marks, and any other marks and-indicia of operation associated with the'Big O System and remove or change all Trade Dress, Products and Services, and other indicia of operation under the Big O System from the Premises, at Franchisee's expense and in a manner satisfactory to Big 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 Agreementpertaining to post -termination obligations, including, without limitation, those" contained in Sections 13 and 17; and 0) Cease performing any tire; adjustments as of the Teftination'Date and refersuch 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, eight, butnot'the obligation, to purchase:_ (a) Some or all of the Products -and Services and supplies at the Store and the equipment, furnishings, fixtures, or s►gns at the Pre! mises`which bear the Licensed Marks for a mutuallyagreed-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 shati have the right. to enter upon the Prem ises during reasonable hours to:take an inventory ofahe Franchised.Business: 20.03 Right of First Refusal. Upon receipt by Franchisee of an:offer to purchase Franchisee's Products and Services, equipment, su _ lies fixtures or:signs at the Premises, Franchisee herebygranfs Big PP . O a right of first refusal to purchase any of such, items_ by matching the"bona fide, 0 - ary purchase price and payment schedule-terms,.less. any brokerage commission without having to match,ariy-other non -monetary terms of the proposed purchase by Franchisee's buyer(s). , Franchisee must give Big 0 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 noted' Franchisee of its rejection thereof, Franchisee may sell such. items as were covered by the offer,at. the expiration ofthe thirty: (3Q) day period.: 2.0.04. De -Identification" of Assets Upon Sale.. If. Big O determines not to exercise. its., option to repurchase any such 'items, Franchisee;may continue to setl'its remaining -Products and Services, equipment, supplies, and fixtures, but may not identify itself a's a.'Big O Franchisee. Franchisee,shail otherwise,abide by the terms of this Section 20. 21. WSURANCE 21.01. Insurance Coverage. Franchisee shall, . at its expense and no later . than upon the Commencement Date, procure and.m.aintain in full force and effect throughout the term of this Agreement either the approved Big O Dealers.National fnsurarice Program ("Program") then in effect or other insurance that shall be in such coverages, limits and amounts "as may from time to time be required by Big O in the Manual or otherwise and which shall designate Big OJts directors, officers„employees, agents and other Big O designees as additional named insured(§):. 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 timelydelivery of a signed original certificate or certificates of all required insurance coverages to Big 0, 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 0 that the alteration or cancellation is being made. All insurance coverages will be underwritten by a company acceptable to Big 0, 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 0, Big 0 may obtain such insurance for Franchisee, and Franchisee shall pay Big 0 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 0 deems it_ appropriate, Franchisee shall; upon Big O's request, provide to Big 0 attrue, 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 0 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 ail 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 thefranchised 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_olher_related.-fees)-as_a_resuItiAT-arising-out of,-or-connected-watti-the-operation-of the-F-ranchL-,�------- Business, including, without limitation, the failure of Franchisee to comply with anyrelevant environmental and tire disposal laws. Franchisee shall not, however, be liable for claims arising exclusively as a result of Big Us 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 .0. Franchisee shall submit all applications and enterinto all contracts in its designated corporate name or such other fictitious names, which have been approved by Big 0, but not in the name "Big 0 Tires" or in any other name which includes the name "Big O". Nothing in this Agreement is intended by the parties hereto to create a fiduciary relationship between them nor to constitute Franchisee or Franchisee's employees or contractors.as an agent, legal representative, subsidiary, joint venturer, partner, employee, or servant of Big O for any purpose whatsoever. - It is understood and agreed that Franchisee is an independent contractor and is in no way authorized to make any contract, warranty, or representation or to create or imply any obligation on behalf of Big 0. PJII 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 specked in this,Agreement, Big 0 shall respond with its approval or disapproval within fifteen (15) business days. 24.02. Waiver. No failure of Big O to exercise any -power reserved to it by .this Agreement and no custom or practice of the parties at variance with the terms. hereof shall constitute a waiver of. Big O's right to demand exact compliance with any of the terms herein. A waiver or approvalby Big O of any particular default by Franchisee or any other Big.O franchisee or.acceptance by Big O of any -payments due hereunder shall not be considered a waiver or approval by Big O of any preceding or subsequent breach. by Franchisee of any term, covenant, or condition of this Agreement. Big O shalt not be deemed to have waived any of its rights under this Agreement,including any right to receive payment infull for any Productor Service provided, nor shall Franchisee be deemed to have been excused from performance of any of its obligations pursuant to this Agreement, unless such waiver or excuse is written.and executed by an authorized representative of Big O and Franchisee. 24.03. Modification: No amendment, change, or variance from_ this Agreement shall be binding upon either Big O or Franchisee except by -mutual written agreement_ .If an amendment of this:Agreement is executed at Franchisee's request,..any legal fees or costs of preparation of such amendment and any amendment of a franchise registration arising in connection therewith shall* be paid by Franchisee. 25. DEALER PLANNING BOARD 25.01. Dealer Planning Board. Big Q has established a Dealer Planning Board (".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 O and to advise Big O's management on issues of concern to Big,O franchisees.: , Through a representative .elected from Franchisee's Local Group.. Franchisee shall be represented on the DPB. 25.02. Special Interest Issues. Big O has granted the DPB the authority to participate with Big Us management in making policy decisions relating to issues in.which the DPB is deemed to have a special interest. The issues of "Special Interest" include, but may not be liimited 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-Marrs-anticipated-to-requiire:the-major-iVof-franchiseesAo-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 O, the DPB shall disapprove a proposal of Big O's management, the proposal may only become effective if, following a presentation to the Big O policy committee by a representative of the DPB, ;Big O's policy committee votes to adopt management's proposal. 25.04. Compliance with Modification- Franchisee agrees to comply with any and all modifications to Big O's standards .of .operation; procedures, 'or other requirements adopted pursuant to the procedures described in this Section.25. 28 26. RIGHT OF OFFSET 26.01. Right of Offset. Big O shall. have the right at any 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 - 27A1. 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; of . (iv) mayimpair the goodwill associated with the. Licensed. Marks. - 27.02..:.Costs of Enforcement. If Big O secures any declaration, injunction or, order of specific performance:pursuant to Section 27.01 hereof, if any:provision of this Agreement is. enforcer} 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-attorneyat law or collection agency, Franchisee shall be liable to. Big O for. all .costs and expenses of _enforcement and - collection including, but not limited to, court costs -and reasonable attorneys' -fees, including the fair market . value of anytime expended by legal counsel employed by Big O: 28. NOTICES 28.01. Notices. Any notice required. to be given hereunder shall be in writing and shall be mailed by registered or certified mail or overnight courier. Notices to. Franchisee or Big O.shall be addressed to. it attheir . address as listed on the Summary Pages or to such other addresses as: that party may hereafter prescribe by ., notice given in accordance with this Section 28.01. Franchisee shall also simultaneously deliver a copy of each notice, which it delivers to Big O, to the Franchisee's designated regional representative, at the address designated by Big O in writing to Franchisee. Any notice complying with the provisions hereof shair be deemed.to be given on the date of mailing. 29. GOVERNING LAW 29.01. Governing _Law— ._._Tb"greementis_accepted-by-BigAan-the-Stat"f—Colorado-and-sWa 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 i3ONSTRUCTION 30.01. Severabilitv. 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 presentorfuture statute, law, ordinance, or regulation contraryto: law to which the parties have no legal right to contract, the latter shall prevail, buUin 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 shalt continue in full. force and.effect 30.02. Counterparts. This Agreement may be executed in.any number of counterparts, each of which when so executed and delivered shall be deemed an original, but such counterparts together shall constitute one and the same instrument. 30.03. Construction. All terms and words used herein shall be. construed to include the number and gender as the context of this Agreement may require. The parties agree that each section of this Agreement shall be construed independently of any other section or provision of this Agreement. As used.in this Agreement; the words "include", "includes" or "including' are 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 y andecision as to whether any condition or circumstance meets Big Us standards or satisfaction,` Big O may do so in.its sole judgment. Article and Section titles used in this Agreement are for convenience only and-shall- not'be deemed to affect.the meaning or construction of any of-the.terms', provisions, covenants, orcondition's of this Agreerent. 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 Quaranty'by TBC Corporation, the parent corripany-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 -tom bens i o� iEs-franc- isees an to aid in ie promotion afBig rod 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 thanthe 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 30 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 acknowedges that Big,tOr 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 gig 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 represeniat"ionswhich 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 thalBig O.does not represent that all franchise agreements are or will be identical. (i) Franchisee_ acknowledges that except as is specfcally 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. O. FRANCHISEE: C.S.B. PARTNERSHIP,. a California general partnership' By: C.E.P. Developments, Inc., •a California corporation, General Partner By: topher R. Phittop President Date: r' Z t7^ C Home Address:'- '33791 Glocamora Lane San Juan Capistrano, CA. 92675 u 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 ` yle Ky , III, resident' Date: Home Address: .: :35 Ticknor Lane Laguna Niguel, CA 92677 r Home..Bhone Number: (714} 24.0-8059. Office Address: 7872 Edinger Avenue Huntington Beach..CA 92647 Office Phone Number (7141 861=4011 Title: Attest: (Affix Corporate Seal) FRANCHISEE: C,S.(3.. PARTNERSHIP, a California general partnership By;Phillips & Phillips, LLC, a. California corporation, general partner "y C. & E. Phillips, Inc., i <_. =� -.. a California corporation, t ...Managing Member y._ ( By: By: By:. 32 R. Phill" s. !President Christopher R. Phillips.and Emiko J. Phillips, Trustee or Successor Trustee of the Phillips Family Living -Trust dated September 23, 1991 as amended, Member �a Home Address: 33791 Glocamora Lane San Juan Capistrano, CA 92676 Home Phone Number: (714) 661-6188 Office Address: 7872 Edinger Avenue Huntington Beach, CA 92647 Office Phone Number: (714) 861-4011 Title: Attest: Title: (Affix Corporate Seal) FRANCHISEE: C.S.B. PARTNERSHIP, a California general partnership By: JYB Enterprises, Inc., a California corporation, General Partner By: J on Y. Berry; lPre ► 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: Title: (Affix Corporate Seal) BIG O TIRES, INC. By: P. Hyduke, Sen' r Vice President- Franchise Developmerit Date: d� Title: Senior 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-0 Tires, Inc. ("Big O") located at 12650 East Briarwood Avenue, Suite 2-13, Centennial, Colorado 80112 of all of the obligations of Big O under the Franchise Agreements. This Guaranty continues until all obligations of Big 0 under the Franchise Agreement are satisfied.- Big 0 is not discharged from liability if a claim by the franchisee against Big O remains outstanding_ Notice of acceptance is waived. Notice of default on the part of Big 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 0, provided that such entity has a net worth in excess of $ 25 million at the -time of such assignment. TBC executed this Guaranty at Palm Beach Gardens, Florida on the 15th day of April, 2004. TBC CORPORATION By: /s/ Thomas W. 0ar.,ev Printed Name: Thomas W. Garvey Title: EVP/CFO SCHEDULE 1 TO FRANCHISE AGREEMENT BETWEEN BIG O TIRES, INC. AND C.S.B. PARTNERSHIP 1. The Premises of referred to in Section 2.01 of the Franchise Agreement shall be: 7872 Edinger Avenue Huntington Beach, CA 92647 2. Legal Description of Premises: 3. Names(s) and address(es) of holder(s) of record fee title to Premises (the landlord): Name: HB Auto 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. .x_ SCHEDULE 2 OWNERSHIP VERIFICATION 1. Name(s) and address(es) of person(s) owning interest in Franchisee and p_ ercentage of said person(s) interest: Name: C.E.P. Developments, Inc. (c/o Christopher R. Phillips) Address: 27131 Calle Arroyo, Suite 1703 Name: Phillips,&.Phillips `LLC (clo Chris Phillips) Address: 27131 Calle Arroyo, Suite 1703 San:Jian Cabistrano, CA 92675 16.67°ti Name: - Address: Name: JYB Enterprises, Inc. (clo Jason Berry) Address:. :5320 E..Rurai.Ridae 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 Kyies, 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. . DATED: %- 2 8- oy DATED: f Jo C.S.B. PARTNERSHIP, . -a California general partnership By: C.E.P. Developments, Inc., a California corporation as Generai Partner BY: ristopher R. Phillips, resident By: imyK, oration as General Partner BY:Of Ili, 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: 7' 2 8, o!4 BT. ipj stopher R. Phillip , President By:. ;ChristopherR.Phillips and €miko J. Phillips,. Trustee or Successor Trustee of the Phillips Family Living Trust dated September 23; 1991 as amended- Member DATED: By_..: ' ! topher. R. Phill' , Trustee DATED: ,'�� i�7 gy - Emiko J.PhilDp"YTrust&e .:By: JYBEEnterprises,.Inc:, a California corporation; as.General Partner DATED: `L4 0 By. Jas Berry, Presid STATE OF (a L, ) _• ' ) ss. COUNTY OF On g soo -before�Me - -ale ��%z :� � ! � �y ` {� pexsonaBy appeared t �s rb-fee CL� s known to me (or proved.to•me.ciiti the basi!i�6fsetisfa.c ry evidence) to be the pu=(s) w1lose name(s) iskwee-subscribed to the within instr6mentbrid acknowledged!to me that he/fey ezecuted'the same in his/h6n*wir authorized capacity, and that by hisA4i ~jrslgnature on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. (Seal) i . SUSANS: HUMPHREY m Comm *1353M NOTARY RYPUBM-MWORNtA D QRRNGE COUNW MY Carve. E=WesA rl45. 2006 G On.7.�/Y o aor! teford rice Z1)�c.s31 is ./�/ccrfl ,:,-peFsonally appeared y, pP nown to me (or proved tome on the asi.§ sotisfir6tury evidence) to be the: padQn(s) whose name(s) isA-" subscribed to the within.instrurnent-and�acknowledr eed to me that he/she/tl3eyexecuted the same: in W/her/their-aothorized'capacity and=that by+is/her/ti"eirsignature on the instrument the :p=pn(s) _.orahe` entity upoq behalf of: which. the-'. pg%son(s) :acted, executed the instrument. _ STATE OF A. ) ss. Y COUNTY OF SQ. i. lint/Y-� On 4-IY off& 20;m beforee,, :., `I ._ agr,S41� C ,f't, frVc — kaouua2ae (or proven to mepn.tlieasi,.gf.satisfaiory evidence.) to be.the persons) whose:na=(s) is/aF subscrihed to the withinAnstrument and: acknowledged to me. that he/sheAhey executed the same .in his/herftheir authorized capacity, and that.by, hisAj.e#_#wir signature on the. instrument the pgMon(s), or the .entity upon behalf .of which the persons) acted, executed the instrument. WITNES y hand and o c eal. My. Commisst"on Expires: Lei 4, : =.AS. ad OG STATE OF L_a /• 7 ' j ,/� ) ss. COUNTY OF &ka 4 c } (Seal) 408ANS. HUMPHREY TWMvCwmExokftAPd2&2M Cornrn.#t353456 D NOTARYAr,U'^BW CXLWOMLk01: ', � )0.4 r' On ✓a/ : >; �ooy! ;:fore:*rpe cl_ /<s�e.� cS, if" ,P/>� �:y ,�� r.;.f?e p aly.aPpeared da 1 /.: .c; z known to me (or proved to me qqj e t $is J. of sati )actor evidence.) to be the persons) whose rtaW (s) islere-strbscribed to the:within instrument and acknowledged to me that he/shelthey executed thesame in his/herAheir authorized capacity and -that by-hisRlerfiheir_signature on the-- instrument:the _p-sr2n(s), .or; the entity upon behalf, :of, which the<person(s} acted; executed the instrument. My Conan. Exol�aa spa � 2005 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"); Wil'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 an'k 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 _urdersigned hereunder or any liability of any party or parties primarly or secondarily liable on any of the tiabilittes and (c) extend, renew or credit any of the liabilities of the Franchisee to Big O for any period (whether or not longer than the original period), after, amend or exchange any of the liabilities, or give any other form of indulgence, whether under the Franchise Agreement or not. _ The undersigned further waives presentment, demand, notice of dishonor; protest, nonpayment and all other notices whatsoever, including without limitation, notice of acceptance hereof; notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing. Franchise Agreement and of the amount and terms thereof, and notice of all defaults, disputes or controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof, The undersigned .agrees to pay all expenses paid or 'incurred by Big O in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if such enforcement or collection is by or through an attorney -at -law. Any waiver, extension of 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. -- _--— —1fV WITNESS V3iHEREDF, each —of the und&r—sign�e Tias executed this Ouaranty under seat effective as of the date of the foregoing Franchise Agreement. Sign re Date CHRISTOPHER R. PHILLIPS Printed Name Schedule 3 to Franchise Agreement Page .1 . Schedule 3 to Franchise Agreement Page 2 SCHEDULE 3 GUARANTY OF FRANCHISEE'S AGREEMENT in consideration of, and as an inducement to, the execution of the foregoing Franchise Agreement by Big O ,Tires, inc. ("Big O"), each of the undersigned, hereby guarantees unto Big O that C.S.B. PARTNERSHIP, a California general partnership, ("Frangh,i Oe"),_.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 secu mg ariy" A 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 such enforcement or collection is by or through an attorney-at-Iw*,. 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. tN-WiTNESSiNHEREOf,-each-ofthe-undersigned-hasexecuted-this-Guaranty-un-de—r—>eal—effee:tive -- -- -- as of the date of the foregoing Franchise Agreement. Signatur7 , Q D , [ Date EMIKO J. PHILLIPS . Printed Name, Schedule 3 to Franchise Agreement Page 3 Schedule 3 to Franchise Agreement Page 4 Es SCHEDULE 3 GUARANTY OF. FRANCHISEE'S AGREEMENT In consideration of, .and as an inducement to; the execution of the foregoing Franchise Agreement by Big O Tires, Inc. ("Big.O"), each of the undersigned hereby guarantees unto Big O that C.S.B. PARTNERSHIP, a California general partnership ("Franchisee"); will. perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement. Big O, its successors and assigns, may from time to time, without notice to the undersigned (a) resort to the undersigned for payment of any -.of the liabilitiesof the Franchisee to Big O, whether or not Big O or its successors have resorted to any property securing any of the -liabilities or proceeded against any of the undersigned or any party primarily or secondarily liable on any of the liabilities; (b) release or compromise any liability of the Franchisee or of any of the undersigned hereunder or any liability of any party or parties primarily or secondarily liable on any of the liabilities; and (c) extend, renew or credit any of the liabilities of. the Franchisee to Big O for any period (whether or not longer than the original period), alter, amend or exchange any of the liabilities, or give any other form of indulgence, whether under the Franchise Agreement or not. The undersigned further waives presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation, notice of acceptance hereof; notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing Franchise Agreement and of the amount and terms thereof; and notice of all defaults, disputes or controversies between Franchisee and. Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof. The undersigned agrees to pay all expenses paid or incurred by Big O in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and. in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if such enforcement or collection is by or through. an attorney -at -law. Any waiver, extension of time or other indulgence granted from time to time by Big O or its agents, successors or assigns, with respect to the foregoing Franchise Agreement, shall in no way modify or amend this Guaranty, which shall be continuing, absolute, unconditional and irrevocable. If more than one person has executed this Guaranty, the term "the undersigned," as used herein shall refer to each. such person, and the liability of,each of the undersigned hereunder shall be joint and several and primary as sureties. -- --tN-WITNESS WHEREOF each of the undersigned has executed this Guaranty under seal effective as of the date of the foregoing Franchise Agreement. Signature Date VIRGIL KYLE KYLE III Printed Name Schedule 3 to Franchise Agreement Page 5 Schedule 3 to Franchise Agreement Page 6 SCHEDULE 3 . GUARANTY OF FRANCHISEE'S AGREEMENT In consideration of, and as an inducement to, the execution of the foregoing Franchise Agreement by Big O Tires, Inc. ("Big O"), each of the undersigned hereby guarantees unto Big O that C.S:B. PARTNERSHIP, a California general partnership ("Franchisee"),:will-perform during the term of the Franchise Agreement each and every covenant, payment, agreement and undertaking on the part of Franchisee contained and set forth in or arising out of such Franchise Agreement. Big O, its successors and assigns, may from time to time,.without notice to the undersigned (a) resort to the undersigned for payment of any of the 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 collection is by or through an attorney -at -law. Any waiver, extension of time or other indulgence. granted from time to time by Big O or its'agents, successors or assigns, with respect to the foregoing Franchise Agreement, shall in no way modify or amend this Guaranty, which shall be continuing, absolute, unconditional and irrevocable. If more than one person has executed this Guaranty, the term 'the. undersigned," as used herein shall refer to each such person, and the liability of each of the undersigned hereunder shall be joint and several and primary as sureties. IN -WITNESS WHEREOF, each owe 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 Schedule 3 to Franchise Agreement Page 8 SCHEDULE .3 GUARANTY OF FRANCHiSEE'SAGREEMENT In consideration of., and as an inducement to, the execution of the foregoing Franchise Agreement by Big O Tires, Inc. ("Big O"), each of.the undersigned hereby guarantees unto Big-O-that C.S_B. . PARTNERSHIP, a California general partnership ("Franchisee"} •wilt 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 securi6 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 primar I- - secondarily liable on any of the liabilities; and (c) extend; renew or credit any of the liabilities of the Franchisee to Big O for any period (whether or not longer than the original period), after, amend or exchange any of the liabilities, or give any other form of indulgence, whether under the Franchise Agreement -or not. — The undersigned further waives presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation, notice .of acceptance hereof, notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing Franchise Agreement and of the amount and terms thereof; and notice of all defaults, disputes or controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof. The undersigned agrees to pay all expenses paid or incurred by Big 0-in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if such enforcement or collection is by or through an attorney-at-iaw. Any waiver, extension of lime 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. Sign4jre Date JASON Y. BERRY Printed Name Schedule 3 to Franchise Agreement Page 9 . 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"), wilt 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 theundersigned hereunder or any liability of any party or parties primarily or secondarily liable on any of the; liabilities; and (c) extend, renew or credit any of - the liabilities of the Franchisee to Big O for any period (whether or not longer than the original period), alter, amend or exchange any of the liabilities, or give any other form of indulgence, whether under the Franchise Agreement -or not. - The undersigned further waives presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation, notice of acceptance hereof; notice of all contracts and commitments; notice of the existence or creation of any liabilities under the foregoing Franchise Agreement and of the amount and terms thereof, and notice of all defaults, disputes or controversies between Franchisee and Big O resulting from such Franchise Agreement or otherwise, and the settlement, compromise or adjustment thereof. The undersigned agrees to pay all expenses paid or incurred by Big O in attempting to enforce the foregoing Franchise Agreement and this Guaranty against Franchisee and against the undersigned and in attempting to collect any amounts due thereunder and hereunder, including reasonable attorneys' fees if such enforcement or collection is by or through an attorney -at -law. Any waiver, extension of time or other indulgence granted from time to time by Big O or its agents, successors or assigns, with respect to the foregoing Franchise Agreement, shall in no way modify or amend this Guaranty, which shall be continuing, absolute, unconditional and. irrevocable. If more than one person has executed this Guaranty, the term "the undersigned," as used Herein shall refer to each such person, and the liability of each of the undersigned hereunder shall be joint and several and primary as sureties. ----- iN-WITNESS-WHEREOF;-each-ofittfsunderslgn-ed-has executed -this Guaran under seal effec rve — -- as of the date of the foregoing Franchise Agreement. 4ttA_d__ Signal 2re� l0`i Date tAURA BERRY Printed Name Schedule.3 to Franchise Agreement Page 11 Schedule 3 to Franchise Agreement . Page 12 SCHEDULE 4 LEASE RIDER AND MODIFICATION THIS AGREEMENT is made effective this ist day of August, 2004 byznd.between H6 Auto 1; 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 acid Big.O;. and WHEREAS, the parties hereto desire to provide Big O with certain rights in the event of default under the Lease, Franchise Agreement, or other.franehise,agreements. between Tenant .and Big.O, if any, NOW, -THEREEORE, in consideration of the sum: of. one dollar. ($1:0Q);.: in hand paid by -Rig O to Landlord and to Tenant, and other good and sufficient considerati0p, 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") shalt 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,. prilesssuch Event.;is,no# cured Within ten-(1q).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 vrithin t wenty-five.(25) days of ter 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 ,e.period of such-apngth. as is reasonably necessary to cure such Event, provided, however, such period -shall be extended.onty 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,130 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 Landlor.,d requires, such Notice of Default to be mailed to Big O at: Big O Tires, Inc. 12650 East Briarwood Avenue,7Suite 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 shalt 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 shalt 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, temparary'resfraining order, 'summaryprocess 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 Ter►ant tinder the Lease to the ezclusion`of the.Tenant. ` 7. Tenant agrees #hat any -default under the Lease shall constitute a material breacKunder'all Franchise Agreements between Tenant' and Bid. O, or'its'affiliates or successors: 8. Tenant and Landlord understand that Big O is entering into or has entered intoo-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 thkBig O in ibis instance; would not have otherwise'entered into such Franchise Agreement. TENANT (CORPORATE SEAL)., BIG O TIi2ES, INC. By'/ Name: Joh(h4. Hvduke 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 terns 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. I� BY Date: Title: Attest: Title: i (Affix Corporate Seat) — ---- � -`---- FRANCHISEE: - ------- By: Date: Home Address: Home Phone Number: Office Address: Office Phone Number: SCHEDULE 6 TRADEMARKS Big O is the ovGner 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 1,102,069 09/12/78 Big Haul Principal 1,018,800 08/26/75 Big Lift Principal 2,520,443 12/18/01 Big O Principal 994,466 10/01/74 Big-O Principal 993,415 09/24/74 Big O Tires & design Principal 1,61.1,160 08/28/90 Big O Tires Principal 2,411,926 12,112/00 Big Sur Principal 1,219,035 12/07/82 Cost U Less Big O Tires '& design Principal 11952,457 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 Hydro-Trac Legacy Pathmax Procomp High Performance - Wheels & design Sun -Valley www.BigOTires.com & design Principal 1,417,730 11 /18/86 Principal 2,059,554 05/06/97 Principal 1,393,967 05/20/86 Principal 2,281,419 09/28/99 Principal 1,842,854 07/05/94 Principal 871,318 06/17/69 Principal 2,514,975 12104/01 Schedule 6; to Franchise_ Agreemeni,_ , _.Page 1-. STATE REGISTRATIONS Big O Texas 40,967 11/01182. Big O Tires Texas 40,704 ` 09/02/82 Schedule 6 to Franchise Agreement Page 2 1 Y f SCHEDULE 7 CONVERTER RIDER AMENDMENT TO BIG O FRANCHISE AGREEMENT (CONVERSION) BIG O TIRES, INC. ("Big O") and ("Franchisee") entered into a certain Big O Franchise' Agreement ("Agreement") on and desire to supplement and amend certain terms and conditions of such Agreement in consideration of Franchisee's conversion of a currently operating tire store to a Big O Store. The parties therefore agree as follows:. 1. The following provisions are added at the end of the definition of "Gross Sales" in Section 1 of the Agreement: Gross Sales do include revenues from the sale of all 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. 3.. The following provision is added to, Section 4 after the definition of National Advertising Program: Non -Standard Services — See the definition in Section 14.02 of this Agreement. 4. The following paragraphs are hereby added to Section 6.03 of the Agreement: . Subject to Section 14.02 of the Agreement hereof, but notwithstanding;anyother provision herein to the contrary, Franchisee's obligation to comply with Big O's standards -and specifications as are set forth in the Manual shall be phased in fora 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 Us Licensed Marks in its signage, advertising and otherwise, in conjunctiori,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 0; which approval> shalt not be _ _—unr_eas-onably-withheld-Upon-expiration-ofsuch 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: Us request, Franchisee will sign such documents, will take such other actions as reasonably requested by Big O to document and protect Big Us 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:fior 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 0 Store shall be considered to have commenced operation as of the Commencement Date of this Agreement: All modifications required to bring the Premises into compliance with the standards and specifications of Big O must be completed within six (6) months of the Commencement Date. 6:. Section 7.01(a) of the Agreement is hereby deleted in its entirety and the following isinserted. 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 willprovide 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 7.0.1.(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 ou-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 andtorOperatorto attend training at training sites designate&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 eithercase, 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 Cattached 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 incompliance 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, sate 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 Contributions due to the National Advertising Program or the Local Fund pursuant to this Franchise Agreement. 14. Section 17.04 of the Agreement is hereby deleted in its entirety. 15. Section 19.03 of the Agreement is hereby deleted in its entirety and the following language is inserted in its place: 19.03 Termination by Franchisee. (a) Franchisee may terminate this Agreement as of the 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 .. 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. . THIS PAGE INTENTIONALLY LEFT BLANK q Schedule 7 to Franchiise Agreement i 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 prorhises 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 sate.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 defrnedfrom 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 ClassRider. 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'a-commercially reasonable and lcm ful manner to- attain access to Farm 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 anmther_P oducts_and_Services-sold-by-Franchisee-in-a-transaction-involving-ttie�ale 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 a a �4 IN WITNESS WHEREOF, the parties have set #orththeir signatures below. FRANCHISEE: Schedule 8 to`Franchise Agreerh6ht Page 2 EXHIBIT B AGENCY/LANDLORD PROPERTY ACQUISITION AGREEMENT 001219.00011844054.7 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 May O.:�, 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: I. Purchase and Sale. Upon the terms and conditions contained herein, Buyer hereby agrees to purchase all of Seller's right, title and interest in and to the Property from Seller and Seller agrees to sell; assign and convey all of Seller's right, title and interest in and to the Property to Buyer. 2. Purchase Price; Deposits. The purchase price for the Property shall be Three Million Five Hundred Thousand Dollars ($3,500,000) ("Purchase Price"). On or before May 9, 2008, Buyer will deposit into Escrow a refundable deposit in the amount of Fifty Thousand Dollars ($50,000) ("Initial Deposit"). On the next business day immediately following the earlier to occur of (i) the expiration of the Approval Period (as defined in Section 10.2 below) or (ii) the completion by Buyer of its due diligence on the Property, Buyer shall deposit into Escrow an additional refundable deposit in the amount of Three Hundred Fifty Thousand Dollars ($350,000) ("Second Deposit"). The Initial Deposit and the Second Deposit shall be collectively referred to as the "Deposits." On the next business day immediately following the expiration of the Approval Period, Seventy Five Thousand Dollars ($75,000) of the Deposits shall be released to Seller by Escrow Agent and shall become nonrefundable to Buyer except in the event of a default by Seller. The Deposits shall be applied to the Purchase Price upon the Close of Escrow. 3. Escrow. 3.1 Opening of Escrow. Provided that this Agreement has been executed by Buyer, the parties shall open escrow ("Escrow") on May 9, 2008 with Investors Title Company (the "Escrow Agent") located at 4667 MacArthur Boulevard, Suite 150, Newport Beach, California, Attention: Mickey Vandenberg. 3.2 Deliveries. Within three (3) business days of the execution of this Agreement by Buyer, Seller shall deliver to Buyer complete and accurate copies of (i) all reports, surveys and data relating to the environmental, geological, soil and/or physical condition of the Property and/or the improvements thereon in the possession of Seller or its agents, which shall be listed in Exhibit E hereto (collectively, the "Due Diligence Reports"), and (ii) all leases,. amendments, personal guaranties and other agreements related to the occupation of the Property by Tenant or any other party possessing rights with respect to the Property; and (iii) a schedule or schedules of rent paid and due, and all security or other deposits received or due, from any tenant of the Property. Seller makes no representation or warranty whatsoever as to the accuracy or completeness of the Due Diligence Reports, except that Seller warrants that it has no knowledge that such reports contain intentional misrepresentation or intentionally omit material information. 3.3 Escrow Fees, Charges and Costs. 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. Purchase Sale Agi 7872 Edinger FTNAL_doc 4. Close of Escrow; Extensions. 4.1 Close of Escrow. Close of Escrow shall occur on or before June 19, 2008 (the "Outside Date"). If the Outside Date falls on a holiday or weekend, the Outside Date shall be the following business day or Monday. The "Close of Escrow" shall mean the time and day the Grant Deed is filed for record with the Orange County Recorder. The "Closing Date" shall mean the day on which the Close of Escrow occurs. 4.2 Extension of Outside Date. Upon written instruction by the Agency to Escrow Agent and deposit by the Agency of Twenty Five Thousand Dollars ($25,000) (the "Extension Deposit") into Escrow on or prior to the Outside Date, the Outside Date shall be extended for fifteen (15) calendar days (the "Extension Date"). In such event, Escrow Agent shall release the Extension Deposit to Buyer on the next business day immediately following the Outside Date. Upon such release, the Extension Deposit shall become nonrefundable to Buyer except in the event of a default by Seller. The Extension Deposit shall be applied to the Purchase Price upon the Close of Escrow. The Close of Escrow shall occur on the Extension Date. If the Extension Date falls on a holiday or weekend, the Extension Date shall be the following business day or Monday. 5. Conditions of Close of Escrow. Tl-Le 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) if, after review of a preliminary title report issued by Title Company (as hereinafter defined) (the "Title Report") or after issuance of the Pro Forma Title Insurance Policy, (A) Buyer determines that the condition of title is not as represented herein by Seller, or (B) Investor's Title Company ("Title Company"), upon payment of its regularly scheduled Purchase Safe Agi 7872 Edinger FITAL.doc 3 premium, has not agreed to issue the ALTA Standard Coverage Owner's Title Insurance Policy ("Title Policy") for the Property underwritten by First American Title Company upon the Close of Escrow, in the amount of the Purchase Price and in the form specified in the Pro Forma Title Insurance Policy (as hereinafter defined) showing title to the Property vested of record in the name of the Buyer in fee simple subject only to such exceptions as approved by Buyer in writing prior to the Approval Date; (iv) Buyer does not approve the condition of the Property after performing the Buyer's Due Diligence (as hereinafter defined) prior to the Approval Date; (v) in the course of performing the Buyer's Due Diligence, Buyer determines that the cost of Remediation is too high and Buyer and Seller are unable to agree on a purchase price mutually acceptable to the parties prior to the Approval Date; (vi) Tenant does not permit Buyer access to the Property for purposes of conducting the Buyer's Due Diligence; (vii) Seller has not executed and delivered to Escrow the Grant Deed, FIRPTA Certificate or Assignment and Assumption Agreement; (viii) despite consistent good faith efforts by Buyer, Tenant and Buyer have been unable to negotiate and execute a mutually acceptable Acquisition Agreement; (ix) the condition of the Property is not similar in all material respects to the condition of the Property as of the completion of the Buyer's Due Diligence; (x) Seller has not delivered releases executed by Jurtwin, Inc., a California corporation, Michael Todd Carson, and Rosemary Kathleen Carson, in a form mutually acceptable to Buyer and Seller; (xi) Seller has not delivered an acknowledgment of subordination in favor of the Agency (in such form as is reasonably acceptable to the Agency) executed by the Tenant; (xii) Seller has not delivered a Tenant's Estoppel Certificate (in the form attached to the Standard Lease Agreement between Seller, Tenant and Jurtwin, Inc. dated April 19, 2004 (the "Lease")), executed by the Tenant; (xiii) Seller has not delivered a Landlord's Estoppel Certificate (in the form attached to the Lease), executed by the Seller; or (xiv) Buyer's board has not approved the Acquisition Agreement between Tenant and Buyer, or Tenant's franchisor has not signed such Acquisition Agreement. 6. Seller's Obligations. Seller shall deliver to Escrow on or before the expiration of the Approval Period, the following: A. An executed and recordable grant deed sufficient to convey title to Buyer (the "Grant Deed") in substantially the form set forth in Exhibit B subject to no exceptions; and Purchase Sale Agt 7872 Edinger F1NAL.doc 4 B. A certification ("FIRPTA Certificate") duly executed by each party comprising Seller under penalty of perjury in substantially the form of Exhibit C, setting forth Sellers' addresses and social security numbers, and certifying that none of the parties comprising Seller is a "foreign person" for purposes of Section 1445 (as may be amended) of the Internal Revenue Code of 1486, as amended, and any regulation promulgated thereunder and Sellers are resident taxpayers in the State of California for purposes of Revenue and Taxation Code Sections 18805 and 26131. C. An executed assignment and assumption agreement for the Lease substantially in the form of Exhibit F (the "Assignment and Assumption Agreement"). D. Releases executed by Jurtwin, Inc., a California corporation, Michael Todd Carson, and Rosemary Kathleen Carson, in a form mutually acceptable to Buyer and Seller; E. An acknowledgment of subordination in favor of the Agency (in such form as is reasonably acceptable to the Agency) executed by the Tenant; F. A Tenant's Estoppel Certificate (in the form attached to the Lease), executed by the Tenant; G. A Landlord's Estoppel Certificate (in the form attached to the Lease), executed by the Seller; and H. A pro forma ALTA Standard Coverage Owner's Title Insurance Policy for the Property, underwritten by First American Title Company (the "Pro Forma Title Insurance Policy") with such endorsements as may be requested by Agency, in such form as is satisfactory to Agency, issuable without condition upon payment of Title Company's regularly scheduled premium, in the amount of the Purchase Price showing title to the Property vested of record in the name of the Buyer in fee simple subject only to such exceptions as approved by Buyer in writing. 7. Buyer's Obligations. Buyer shall deliver to Escrow on or before noon, one business day before the anticipated Close of Escrow the following: A. The remaining amounts due to make up the Purchase Price; and B. The Certificate of Acceptance (Attachment No. 2 to Exhibit B and any other documents reasonably required of it by the Escrow Agent in order to close Escrow. 8. Representations and Warranties. The representations and warranties set forth herein shall survive the Close of Escrow for a period of eighteen (18) months. 8.1 Representations and Warranties of Seller. Buyer represents that except for the representations, warranties and covenants of Seller contained in this Section 8.1, it has relied and shall rely solely upon (i) its own expertise and that of Buyer's consultants in Purchase Sale Agt 7872 Edinger FINAL.doc 5 purchasing the Property, and (ii) Buyer's own knowledge of the Property based on its investigations and inspections of the Property. Buyer has conducted, or by the Close of Escrow will conduct, such inspections and investigations of the Property as Buyer deemed or shall deem necessary, including, but not limited to, the physical and environmental conditions of the Property and shall rely upon same. Except for the Seller's representations, warranties and covenants and as may be expressly provided in this Section 8.1, upon Closing, Buyer shall assume the risk that adverse matters, including, but not limited to, adverse physical and environmental conditions, may not have been revealed by Buyer's inspections and investigations. Buyer acknowledges and agrees that except for the representations and warranties of Seller in this Section 8.1, upon Closing, Seller shall sell and convey to Buyer and Buyer shall accept the Property "as is, where is,".with all faults and defects (latent and apparent). Except for the representations and warranties of Seller in this Section 8.1 and in any documents executed and delivered by Seller at Closing pursuant to this Agreement, Buyer further acknowledges and agrees that there are no oral agreements, warranties or representations, collateral to or affecting the Property by Seller or any agent, employee or contractor of Seller or any third party. Seller is not liable or bound in any manner by any oral or written statements, representations, or information pertaining to the Property furnished by Seller, or any real estate broker, contractor, agent, employee, servant or other person, unless the same are specifically set forth in this agreement. Buyer acknowledges that the Purchase Price reflects the "as is" nature of this sale and any faults, liabilities, defects or other adverse matters that may be associated with the Property. Buyer has fully reviewed the disclaimers and waivers set forth in this agreement with its counsel and understands the significance and effect thereof. Seller represents and warrants to Buyer as follows: a. Authority. Seller has full right, power and lawful authority to grant, sell and convey the Property as provided herein; and b. Leases. Seller has delivered to Buyer a true and accurate copy of the rental agreement/lease and all related agreements between Seller and Tenant and except for Tenant, there is no other tenant or persons who have a right to possess the Property or any portion of it; and C. Title. Seller, at the time of the execution of this Agreement, is seized of the Property in fee simple and is the lawful owner of and has good indefeasible title to the Property; and d. Litigation. To Seller's knowledge, there are no actions, suits, material claims, legal proceedings, or any other proceedings affecting the Property or any portion thereof, at law, or in equity before any court or governmental entity, domestic or foreign; and e. Condition of Property. To Seller's knowledge, and except as otherwise disclosed on Exhibit D hereto or in the Due Diligence Reports, no defect or condition of the Property or soil exists that may adversely affect Buyer's proposed development of the Property. f. No Environmental Hazard. To Seller's knowledge, and except as otherwise disclosed on Exhibit D hereto or in the Due Diligence Reports, there are not present on or about the Property any Hazardous Substances in quantities in violation of Governmental Requirements, and Seller has not received any written notice from any governmental authority Purchase Sale Agt 7872 Edinger FINAL.doc 6 concerning the removal of any Hazardous Materials from the Property, or concerning any restrictions on the use or development of the Property on account of the presence of any Hazardous Materials on the Property. g. No Violation. Neither the execution of this Agreement nor the performance of the obligations herein will conflict with, or breach any of the provisions of any bond, note, evidence of indebtedness, contract, lease, or other agreement or instrument which affects the Property; and h. FIRPTA. Seller is not a "foreign person" within the parameters of FIRPTA or any similar state statute, or is exempt from the provisions of FIRPTA or any similar state statute, or that Seller has complied and will comply with all the requirements under FIRPTA or any similar state statute; and i. No Conflict. Seller's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Seller is a party or by which it is bound; and j. Governmental Compliance. Seller has not received any notice from any governmental agency or authority alleging that the Property is currently in violation of any law, ordinance, rule, regulation or requirement applicable to its use and operation; and k. No Seller Bankruptcy. Seller is not the subject of a bankruptcy proceeding. 1. Due Diligence. Seller has delivered to Buyer complete and accurate copies of all Due Diligence Reports. M. Corporate Governance. Seller has delivered to Buyer a true, correct and complete copy of Seller's Operating Agreement. Except as set forth herein, references to the "knowledge" of Seller shall refer only to the actual knowledge of Michael Todd Carson, Rosemary Kathleen Carson, and Jurtwin, Inc., a California corporation, and shall not be construed, by imputation or otherwise, to refer to the knowledge any affiliate of Seller or any prior principals of Seller (or any of their affiliates), or to any officers, agent, manager, representative or employee of any affiliate. Except for fraud or intentional misconduct, the individuals named in this Section 8.1 shall have no personal liability with respect to any matters set forth in this Agreement or any of Seller's representations and/or warranties herein being or becoming untrue, inaccurate or incomplete. Seller represents and warrants that the "knowledge" individuals listed above are the individuals in control of the Seller who most possesses substantial and material knowledge of the Property and its operations as compared to any other individual in control of the Seller. 8.2 Representations and Warranties of Buyer. Buyer represents and warrants to Seller as follows: a. Authority. Buyer has full right, power; and lawful authority to purchase the Property as provided herein; and Purchase Sale Agi 7872 Edinger FfNAL.doc b. No Conflict. Buyer's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Buyer is a party or by which it is bound. 8.3 Ongoing Representations and Warranties. Until the Close of Escrow, Seller and Buyer shall, upon learning of any fact or condition which would cause any of the warranties and representations made by them in Sections 8.1 and 8.2, respectively, not to be true as of the Close of Escrow, immediately give written notice of such fact or condition to the other party. Such exception to a representation shall not be deemed a breach by such party hereunder, but shall constitute an exception which the other party shall have a right to approve or disapprove. If Buyer elects to close Escrow following disclosure of information that would have an effect on the value and/or operation of the Property, Seller's representations and warranties contained herein shall be deemed to have been made as of the Close of Escrow, subject to such exception(s). If, following the disclosure of such information, Buyer elects to not close Escrow, then this Agreement and the Escrow shall automatically terminate, and neither party shall have any further rights, obligations or liabilities hereunder. The representations and warranties set forth in Section 8 shall survive the Close of Escrow for a period of eighteen (18) months. 9. Escrow Instructions. This Agreement constitutes the joint escrow instructions of Buyer and Seller, and the Escrow Agent to whom these instructions are delivered is hereby authorized and instructed to act under this Agreement. The Parties hereto agree to use commercially reasonable best efforts to do all acts necessary to close this Escrow in the shortest possible time. Any insurance policies for fire or casualty are not to be transferred, and Seller will cancel its own policies after the Close of Escrow. All funds received in the Escrow shall be deposited with other escrow funds in a general escrow account(s) and may be transferred to any other such escrow trust account in any State or National Bank doing business in the State of California. All disbursements shall be made by wire transfer from such account. If in the opinion of Buyer it is necessary or convenient in order to accomplish the Close of Escrow of this transaction, Buyer may require that the parties sign supplemental escrow instructions as may be recommended by the Escrow Agent; provided that if there is any inconsistency between this Agreement and the supplemental escrow instructions, then the provisions of this Agreement shall control. The parties agree to execute such other and further documents as may be reasonably necessary, helpful or appropriate to effectuate the provisions of this Agreement Escrow Agent is instructed to release Seller's and Buyer's escrow closing statements to the respective parties. 9.1 Tax Adjustment Procedure. Escrow Agent is authorized and is instructed to comply with the following: Purchase Sale Agt 7872 Edinger FINAL doc 8 a. Pay and charge Seller for any unpaid delinquent taxes and/or penalties and interest thereon, and for any delinquent or non -delinquent assessments, or bonds against the Property; and b. Pay and charge Seller for all taxes which will be due at the Close of Escrow and Escrow Agent shall prorate taxes consistent with the requirements of the Orange County Tax Collector's office. 9.2 Authority of Escrow Agent. Escrow Agent is authorized to, and shall: a. Pay and charge Seller for any amount necessary to place title in the condition necessary to satisfy this Agreement; b. Pay and charge Buyer and Seller for any escrow fees, charges, and costs payable under this Agreement; C. Disburse funds, deliver, and record the Grant Deed when Buyer and Seller have fulfilled conditions of this Escrow; d. Do such other actions as necessary, including obtaining the policy of title insurance, to fulfill its obligations under this Agreement; e. If the provisions of FIRPTA or similar state act apply to the transaction memorialized in this Agreement, and unless Seller is not a "foreign person" or an exemption applies, the Escrow Agent shall deduct and withhold from Seller's proceeds ten percent (10%) of the gross sales price and shall otherwise comply with all applicable provisions of FIRPTA and any similar state act. Seller and Buyer agree to execute and deliver as directed by Escrow Agent any instrument, affidavit, and statement, and to perform any act reasonably necessary to comply with the provisions of FIRPTA and any similar state act and regulation promulgated thereunder.- Each Seller expressly agrees to execute a Certificate of Non -Foreign Status by individual transferor (Exhibit C Certification of Compliance with Real Estate Reporting Requirement of the 1986 Tax Reform Act as may be required by Escrow Agent; f. Prepare and file with all appropriate governmental or taxing authorities a uniform settlement statement, closing statement, tax withholding forms including an IRS 1099-S form, and be responsible for withholding taxes, if any such forms are provided for or required by law. All time limits within which any matter herein specified is to be performed may be extended, but only by mutual agreement of the parties hereto, and by amendment of this Agreement. Any amendment of, or supplement to, this Agreement must be in writing, and signed by both parties, hereto. 9.3 Termination. If (except for deposit of the Purchase Price by Buyer, which shall be made by Buyer before the Close of Escrow as provided in Section 7) Escrow is not in condition to close by the Outside Date due to the failure by a party to perform its obligations hereunder, then either party which has fully performed under this Agreement may, in writing, demand the return of money or property and terminate this Agreement. If neither party has fully complied with the provisions of Escrow, no demand for return of documents shall be Purchase Sale Agt 7872 Edinger FINAL.doc 9 recognized until five (5) days after Escrow Agent shall have delivered copies of such demand to all other parties at the respective addresses shown in this Agreement. If any objections are raised within said five (5) day period, Escrow Agent is authorized to hold all papers and documents until instructed by a court of competent jurisdiction or by mutual written instructions of the parties. Buyer, however, shall have the sole option to withdraw any money deposited by it for the acquisition of the Property. If no objections are raised within said five (5) day period, this Agreement shall terminate. Termination of this Agreement shall be without prejudice as to whatever legal rights either party may have against the other arising from this Agreement. If no demands are made, the Escrow Agent shall proceed with the Close of Escrow as soon as possible. 10. Title; Condition of the Property. 10.1 Delivery of Title Report. Within one (1) business day of the execution of this Agreement, the Buyer shall be provided, at Seller's expense, with a Preliminary Title Report on the Property. 10.2 Approval Period. From the Reference Date until 5:00 p.m. on May 16, 2008 (the "Approval Period"), Buyer shall review and approve the Preliminary Title Report and review and investigate the physical and environmental condition of the Property and any other factors or matters relevant to Buyer's decision to purchase the Property (collectively, the "Buyer's Due Diligence"). if the Property or title thereto or any other factors or matters relevant to Buyer's decision to purchase the Property are not acceptable for any reason whatsoever, or the Acquisition Agreement has not been signed by Tenant and its franchisor, Buyer shall have the right, by giving written notice to Seller on or before the last day of the Approval Period, to terminate this Agreement. If Buyer does not deliver written notice terminating this Agreement to Seller on or before the last day of the Approval Period, Buyer shall be deemed to have approved the Property, the Initial Deposit shall be nonrefundable to Buyer except in the event of a failure of a condition to the Close of Escrow described in Section 5.2 below or a default by Seller, and this Agreement shall continue in full force and effect. 11. Loss or Damage. Loss or damage to the Property, by fire or other casualty, occurring prior to the recordation of the Grant Deed shall be at the risk of Seller. In the event that loss or damage to the improvements on the Property, by fire or other casualty, occurs prior to the Close of Escrow, Buyer may elect to (i) require that the Seller pay to Buyer the proceeds of any insurance which may become payable to Seller by reason thereof; or (ii) reduce the total price by an amount equal to the amount of insurance payable to Seller, whichever is greater. 12. Close of Escrow. 12.1 Time. When Title Company is in a position to issue the Title Policy and all required documents and funds have been deposited with Escrow Agent, and Buyer and Seller have advised the Escrow Agent in writing that the Conditions of Close of Escrow set forth herein have been satisfied or waived, Escrow Agent shall immediately close Escrow as provided below. The failure of Seller or Buyer to be in a position to close Escrow by the Outside Date shall constitute a default hereunder by the parry not in a position to close. 12.2 Procedure. Escrow Agent shall close Escrow for the Property as follows: Purchase Sale Aet 7872 Edinecr FINAL.doc 10 (i) Record the Grant Deed with instructions for the Recorder of Orange County, California to deliver the Grant Deed to Buyer; (ii) Pay the Purchase Price to Seller reduced by appropriate charges against Seller hereunder; (iii) Deliver the FIRPTA Certificates to Buyer; (iv) Instruct the Title Company to deliver the Title Policy to Buyer; (v) File any informational reports required by Internal Revenue Code Section 6045(e), as amended; and (vi) Forward to both Buyer and Seller a separate accounting of all funds received and disbursed for each party and copies of all executed and recorded or filed documents deposited into Escrow, with such recording and filing date endorsed thereon. 13. Condition of Lease; Environmental Matters; Indemnification. 13.1 Condition of Lease. Seller hereby permits Buyer to contact Tenant and use commercially reasonable best efforts to negotiate the terms and conditions of Tenant's ongoing occupancy upon and eventual vacation from the Property. Seller covenants not to terminate the Lease or take any action with respect to the Lease or the Tenant without the prior written consent of Buyer. Seller acknowledges that it has been informed that it is Buyer's intent and desire to purchase the Property subject to the Lease. Seller agrees to assign the existing Tenant lease agreement to Buyer by executing and delivering the Assignment and Assumption Agreement. Buyer agrees and acknowledges that Buyer shall take title to the Property subject to the interests of Tenant. Notwithstanding the foregoing, Buyer desires to negotiate lease termination and other related terms and conditions with the Tenant prior to the Close of Escrow. 13.2 Environmental Matters. Buyer desires to investigate the soil and groundwater associated with the Property. By its execution of this Agreement, Seller grants Buyer the right to contact Tenant and to perform such environmental, Hazardous Materials, soils and other testing on the Property as Buyer deems appropriate as part of the Buyer's Due Diligence. In the event Tenant or Seller refuses to permit Buyer to perform such Buyer's Due Diligence as Buyer deems appropriate, Buyer shall have the right to terminate this Agreement. In order to determine whether soil, groundwater, or other contamination exists and whether remediation is required, Buyer agrees to cause an environmental consultant or other party deemed appropriate by Buyer to complete, at Buyer's sole cost and expense, such further environmental surveys as recommended by the environmental or similar consultant and requested by the Buyer, including, without limitation, a soil gas survey, groundwater testing, and any other environmental surveys or investigations recommended by the Environmental Consultant on the Property prior to the Close of Escrow. Purchase Sale Agi 7872 Edinger FINAL.doc I I As part of the Due Diligence Reports, Seller agrees to provide Buyer with copies of all written materials in Seller's possession pertaining to the physical condition, use or occupancy of the Property that Seller received from Tenant and/or any governmental environmental oversight agency, including, without limitation, the Regional Water Quality Control Board. Seller further agrees to permit access to the Property to the Buyer's consultants and Buyer for purposes of completing the Buyer's Due Diligence and to cooperate with the environmental and other consultants and Buyer in connection therewith. Seller shall provide such access (and cause Tenant to provide such access) to the Property and other items as requested by the consultants necessary to complete the Buyer's Due Diligence, including, without limitation, the use of electrical or other power and water from the Property and sufficient access to permit the performance of a soil and groundwater analysis and, if necessary, the taking of soil and/or groundwater samples. In the event Buyer determines prior to the Approval Date that remediation is required due to the acts and/or omissions of Tenant or Seller upon the Property then, notwithstanding anything herein to the contrary, the Close of Escrow shall not occur unless and until Seller has assumed, to Buyer's satisfaction, full and complete financial responsibility for that remediation on the Property that is within a timeframe, and in accordance with a remedial action work plan ("RAW"), acceptable to Buyer and the appropriate environmental oversight agency. Buyer acknowledges and agrees that Seller may agree to assume such responsibility in the exercise of Seller's sole and absolute discretion. Subject to the mutual agreement of the Parties, the implementation of the RAW may occur subsequent to the Close of Escrow. If for any reason Seller fails to assume responsibility for that remediation, then Buyer shall have the right (but not the obligation) to terminate this Agreement on or before the later of (i) the Approval Date, or (ii) the date that is five (5) days after Seller's notification that it will not assume such responsibility. Within 30 days following the delivery of the RAW as provided herein, Buyer shall (i) deliver a notice of Buyer's intent to proceed with the Remedial Work and acquisition of the Property (the "Buyer Notice to Proceed"), or (ii) a notice of Buyer's intent to not proceed which shall terminate this Agreement. Upon Delivery of the Buyer's Notice to Proceed, Buyer shall be responsible for completing the remediation as provided in the RAW at Seller's (and/or, if applicable, Tenant's) sole cost and expense. 13.3 Mutual Representations Each Party may seek written representation from the environmental consultants that the Party may rely on the findings and conclusions ("Reliance Letters") from the environmental consultants of the other Party. Accordingly, the Parties hereby agree to consent to the issuance of Reliance Letters by their respective consultants to the other Party in the event that the consultant is also willing to provide such Reliance Letter. 13.4 Condition of the Property a. Disclosure. Seller has delivered to Buyer copies of Seller's Due Diligence Reports. Other than as may be disclosed in the Seller's Due Diligence Reports or on Exhibit D hereto, Seller hereby represents and warrants to Buyer that Seller has not received any additional written notice or communication from any government agency having jurisdiction over the Property, notifying Seller, Tenant or any third party of, and Seller has no additional Purchase Sale Agt 7872 Edinger FINAL.doc 12 actual knowledge of, the presence of surface or subsurface zone Hazardous Materials in, on, or under the Property, or any portion thereof in violation of Governmental Requirements. b. Buyer's Investigation of the Property. Buyer shall have the right to access the Property during regular business hours and upon reasonable Notice to Seller for the purpose of obtaining data and conducting surveys and tests. Any surveys and tests conducted on the Property by Buyer's representatives shall be done at the sole expense of Buyer and only after Buyer has secured any necessary permits from the appropriate governmental agencies. C. Soils, Groundwater and Engineering Assessment. Buyer shall have the right, at its sole cost and expense, to engage its own consultants ("Buyer's Soils and Engineering Consultants") to conduct a physical assessment and make such investigations as Buyer deems necessary, including having prepared any "Soils and/or Groundwater Reports" and/or "Engineering Reports" on the Property, and Seller shall promptly be provided a copy of all final reports and test results (not including drafts) provided by Buyer's consultants ("Buyer's Soils and Engineering Reports"). Buyer makes no representation or warranty whatsoever as to the accuracy or completeness of Buyer's Soil and Engineering Reports, except that with respect to the Buyer's Soil and Engineering Reports, Buyer warrants that it has no knowledge that such reports contain intentional misrepresentation or intentionally omit material information. d. Environmental Assessment. In addition to conducting a physical assessment of the Property, Buyer shall have the right, at its sole cost and expense, to engage its own environmental consultant ("Buyer's Environmental Consultant") to conduct an environmental assessment and make such investigations as Buyer deems necessary, including any "Phase I" and/or "Phase 2 investigations of the , and Seller shall promptly be provided a copy of all final reports and test results (not including drafts) provided by Buyer's Environmental Consultant ("Buyer's Environmental Reports"). Buyer makes no representation or warranty whatsoever as to the accuracy or completeness of Buyer's Environmental Reports, except that with respect to the Buyer's Environmental Reports, Buyer warrants that it has no knowledge that such reports contain intentional misrepresentation or intentionally omit material information. 13.5 Definitions. For purposes hereof - "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, orders, decrees, requirements, resolutions, policy statements and regulations (including, without limitation, those relating to land use, subdivision, zoning, the environment, labor relations, prevailing wage, notification of sale to employees, Hazardous Materials, occupational health and safety, water, earthquake hazard reduction and building and fire codes; and including all environmental laws) of the United States, the State of California, the County of Orange, the City of Huntington Beach ("City") and of any other political subdivision, agency or instrumentality exercising jurisdiction over the Buyer, the Tenant, the Seller or the Property. "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, the State of California, or the United States Government, or which poses a significant present or potential hazard to human health and safety, or the environment, if released into the environment, or a building, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste", "acutely Purchase Sale Agi 7872 Edinger F1NAL.doc 13 hazardous waste", "extremely hazardous waste", or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter -Presley -Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material", "hazardous substance", or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) polychlorinated byphenyls, (viii) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article I I of Title 22 of the California Code of Regulations, Chapter 20, (ix) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317), (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903), (xi) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., (xii) methyl-tert butyl ether, or (xiii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any Governmental Requirements either requires special handling in its use, transportation, generation, collection, storage, handling, treatment or disposal, or is defined as "hazardous" or harmful to human health or the environment. "Representatives" means the agents, employees, members, independent contractors, affiliates, principals, shareholders, officers, Executive Directors, chairpersons, council members, board members, committee members, and planning and other commissioners, partners, attorneys, accountants, representatives, and staff of the referenced entity and the predecessors, heirs, successors and assigns of all such persons. 14. Release A. The Purchase Price constitutes an all-inclusive payment to Seller by Buyer and Seller agrees, acknowledges and confirms that no additional consideration or payment is due in connection with the Buyer's acquisition of the Property. Seller, on behalf of itself, its agents, representatives, assigns, trustees, administrators, heirs, beneficiaries, and successors in interest, hereby forever releases and discharges Buyer, City, and Buyer's and City's Representatives (collectively, the "Buyer Released Parties") from, and forever waives, any and all claims, debts, liabilities, demands, obligations, costs, expenses, actions and causes of action of every nature, character and description, known or unknown, that Seller has now or may at any time hereafter have against any of the Buyer Released Parties for consideration given by the Buyer for the Property, including but not limited to, any claim to relocation assistance, relocation benefits or compensation for property, fixtures, equipment or loss of goodwill. B. In making this release, Seller intends to and does release, acquit and discharge the Buyer Released Parties and each of them, from any liability of any nature whatsoever for any claim, injury, damages, consequential damages, or equitable or declaratory relief in connection with the foregoing. Purchase Sate Agt 7872 Edinger FINAL_doc 14 15. General Provisions. 15.1 Real Estate Brokerage Commission. Except for Seller's engagement of NAI Capital, Inc., as an agent and any payment due to such agent by Seller, Seller and Buyer each represent and warrant to the other that no broker or finder is entitled to any commission or finder's fee in connection with this transaction, and each agrees to defend and hold harmless the other from any claim to any such commission or fee resulting from any action on its part. 15.2 Assignment. This Agreement shall be binding upon and shall inure to the benefit of Buyer and Seller and their respective heirs, personal representatives, successors and assigns. Buyer shall have the right to assign this Agreement or any interest or right under this Agreement or under the Escrow without obtaining the prior written consent of Seller. The Seller may not assign any of its rights pursuant to this Agreement without the written consent of the Buyer. In no event shall any assignment relieve the assigning party of any of its obligations under this Agreement. 15.3 Attorneys' Fees. In any action between the parties to interpret, enforce, award, modify, rescind, or otherwise in connection with any of the terms or provisions of this Agreement, the prevailing party in the action shall be entitled, in addition to damages, injunctive relief, or any other relief to which it might be entitled, reasonable costs and expenses including, without limitation, litigation and other costs and reasonable attorneys' fees. 15.4 Approvals and Notices. Any approval, disapproval, demand, document or other notice ("Notice") which either party may desire to give to the other party under this Agreement must be in writing and may be given by any commercially acceptable means to the party to whom the Notice is directed at the address of the party as set forth below, or at any other address as that party may later designate by Notice. Any Notice given under this paragraph, whether personally or by mail, shall be deemed received only upon actual receipt by the intended party. To Seller: HB AUTO I, LLC 3110 Newport Blvd. Newport Beach, California 92663 Attn: Todd Carson Phone: (949) 675-0101 Fax: (949)675-0107 Copy to: PALMIERI, TYLER, WIENER, 2603 Main Street East Tower — Suite 1300 Irvine, California 92614 Attn: Stephen A. Scheck, Esq. Phone: (949) 851-7221 Fax: (949) 851-1554 Purchase Sale Am 7872 Edinger FINAL.doc 15 WILHELM & WALDRON LLP To Buyer: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary A copy of all Notices by either party hereunder shall be sent to: Escrow Agent: INVESTORS TITLE COMPANY 4667 MacArthur Boulevard, Suite 150 Newport Beach, California Attention: Mickey Vandenberg 15.5 Jurisdiction and Venue. This Agreement shall be construed under the laws of the State of California in effect at the time of the signing of this Agreement. To the extent permitted by law, the parties consent to the jurisdiction of the California courts with venue in Orange County. 15.6 Titles and Captions. Titles and captions are for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or of any of its terms. References to section numbers are to sections in this Agreement, unless expressly stated otherwise. 5.7 No Waiver. A waiver by either party of a breach of any of the covenants, conditions or agreements under this Agreement to be performed by the other party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement. 15.8 Modifications. Any alteration, change or modification of or to this Agreement, in order to become effective, shall be made in writing and in each instance signed on behalf of each party. 15.9 Severability. If any term; provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is Purchase Sale Agi 7872 Edinger F1NAL.doc 16 held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 15.10 Right of Access. Buyer and its representatives shall be entitled to access to the Property on and after the execution of this Agreement and prior to the Close of Escrow solely in connection with the performance of due diligence investigations, appraisals, the Phase 1 Report and other matters required in connection with this Agreement. 15.11 Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day (such as the day escrow opens), and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If any act is to be done by a particular time during a day, that time shall be Pacific Time Zone time. 15.12 Tax and Legal Advice. SELLER REPRESENTS AND WARRANTS THAT THE BUYER HAS NOT PROVIDED TAX OR LEGAL ADVICE TO SELLER IN CONNECTION WITH THIS AGREEMENT. SELLER FURTHER REPRESENTS AND WARRANTS THAT HE OR SHE HAS BEEN ADVISED OF HIS OR HER RIGHT TO LEGAL COUNSEL AND TAX ADVICE AND HAS EITHER OBTAINED THE ADVICE OF INDEPENDENT LEGAL COUNSEL OR A TAX ADVISOR WITH RESPECT TO THE TERMS OF THIS AGREEMENT AND ALL ATTACHMENTS HERETO AND OTHER AGREEMENTS REQUIRED HEREBY, OR HAS KNOWINGLY AND VOLUNTARILY DECIDED NOT TO CONSULT WITH LEGAL COUNSEL OR A TAX ADVISOR OF HIS/HER CHOOSING. SELLER'S INITIALS: 15.13 Time of Essence. Time is expressly made of the essence with respect to the performance by Buyer and Seller of each and every obligation and condition of this Agreement including, without limitation, the Close of Escrow. 15.14 Cooperation. Each party agrees to cooperate with the other in the closing of this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements. 15.15 Offer. Any delivery of unsigned copies of this Agreement is solely for the purpose of review by the party to whom delivered, and neither the delivery nor any prior communications between the parties shall in any way be construed as an obligation to enter into this Agreement. The signing of this Agreement by Seller constitutes an offer that cannot be revoked for a period of five (5) days. Seller's offer shall be deemed accepted by Buyer and this Agreement shalt 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 Purchase Sale Agt 7872 Edinger FINAL.doc 17 accomplishment of the Exchange be a condition precedent or condition subsequent to any obligations under this Agreement, (ii) the Exchange shall be effected through a qualified intermediary, and Buyer shall not be required to take an assignment of this Agreement or hold title to any real property for purposes of effecting the Exchange, and (iii) the party making the Exchange shall pay any additional costs that would not otherwise have been incurred by the other had the Exchange not been made. The terms of this Section shall not affect or diminish the rights of either party hereto, and Buyer shall not be deemed to have warranted that the Exchange complies with Section 1033 of the Code. 16. Agreement in Total. 16.1 Merger of Prior Agreements and Understandings. This Agreement contains the entire understanding between the parties relating to the transaction contemplated by this Agreement. All prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged in this Agreement and shall be of no further force or effect. 16.2 Counterparts. This Agreement may be signed in multiplecounterparts which, when signed by all parties, shall constitute one binding agreement. 16.3 Exhibits Incorporated by Reference. All Exhibits attached to this Agreement are incorporated in this Agreement by this reference. This Agreement is executed in five (5) duplicate originals, each of which is deemed to be an original. This Agreement includes eighteen (18) pages and seven (7) Exhibits, including Exhibit A (Legal Description), Exhibit B (Grant Deed), Exhibit C (Sellers' Certification of Non -Foreign Status), Exhibit D (Condition of the Property), Exhibit E (Due Diligence Reports), and Exhibit F (Assignment and Assumption Agreement). [SIGNATURE PAGE FOLLOWS] Purchase Sale Agi 7872 Edinger FINAL.doc 18 IN WITNESS WHEREOF, Buyer and Seller have signed this Agreement and Escrow Instructions for Purchase and Sale of Real Property on the dates set forth below. "SELLER" HB AUTO I, LLC, a California limited liability company Dated: Awd O By: Michael To d Cdrson, Managing Member [PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 1 OF 21 Purchase Sale Agt 7872 Edinger FINAL.doc ATTEST: Agency Clerk REVIEWED AND APPROVED: "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairperson APPROVED AS TO FORM: Executive Director Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel By: Barbara Zeid Leibold INITIATED AND Deputy Executive Director [PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 2 OF 21 Purchase Sale Agt 7872 Edinger FINAL.doc ATTEST: hj-WAA—� 79ency'Cl' 0 REVIEWED AND APPROVED: Executive Direogr "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Chairperson APPROVED AS TO FORM: Agency ounsel tq o lm APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency pecial Counse . �"eBY: Ak"& 11, Barbara ZeijkeibMd INITIATED AND APPROVED: Deputy Executive Director [PURCHASE AND SALE AGREEMENT SIGNATURE PAGE 2 OF 21 Purchase Sale Agt 7872 Edinger FINAL ESCROW AGENT'S CONSENT: Escrow Agent hereby acknowledges receipt of this Agreement and consents to the terms and conditions set forth herein. "ESCROW AGENT" INVESTORS TITLE COMPANY Name: Its: Dated: Purchase Sale Agt 7872 Edinger FINAL.doc EXHIBIT A LEGAL DESCRIPTION Real property in the City of Huntington Beach, County of Orange, State of California, described as follows: LOTS 21, 22 AND 23 OF TRACT NO. 417, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 47 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT ALL OIL, MINERALS AND OTHER HYDROCARBON SUBSTANCES WITHOUT RIGHT OF SURFACE ENTRY THERETO ABOVE A DEPTH OF ABOVE 500 FEET FROM THE SURFACE THEREOF, AS RESERVED IN THE DEED FROM BEULAH H. FINLEY, RECORDED DECEMBER 14, 1960 IN BOOK 5548 PAGE 385, OFFICIAL RECORDS. APN: 142-081-28 Purchase Sale Agt 7872 Edinger FINAL docPurchase Sale Agt 7872 Edinger FINAL.docPurchase Sale Agt 7872 Edinger FINAL.doc Exhibit A EXHIBIT B GRANT DEED WHEN RECORDED MAIL AND MAIL TAX STATEMENTS TO: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street 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: Dated: Dated: SEE ATTACHMENT NO. 1 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE "SELLER" HB AUTO I, LLC By: Its: By Its: Purchase Sale Agl 7872 Edinger FINAL.doc Exhibit B ATTACHMENT NO. 1 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: l 42-081-028 Purchase Sale Agi 7872 Edinger FINAL.doc Exhibit B STATE OF CALIFORNIA ) )Ss COUNTY OF } On , before me, , personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the state of California that the foregoing paragraph is true and correct. I WITNESS my hand and official sea]. { 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 D Corporate Officer Title(s) 0 Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact D Trustee(s) ❑ Guardian/Conservator ❑ Other: Signer is representing: Name Of Person(s) Or Entity(ies) Purchase Safe Agt 7872 Edinger FINAL.doc Exhibit B Title Or Type of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above ATTACHMENT NO.2 to EXHIBIT B CERTIFICATE OF ACCEPTANCE CERTIFICATE OF ACCEPTANCE (Government Code, Section 27281) THIS IS TO CERTIFY that the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic, Grantee herein, acting through its Board, by Resolution No. _, adopted on , hereby accepts for public purposes the real property, or interest therein, conveyed by the within deed and consents to the recordation thereof by its duly authorized officer. IN WITNESS WHEREOF, we have hereunto set our hands and affixed the Agency's official seal, this day of , REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic By: Its: CHAIRPERSON ATTEST: By: SECRETARY Purchase Sale Agt 7872 Edinger FINAL.doc Attachment 2-1 STATE OF CALIFORNIA ) )ss COUNTY OF ) On , before me, , personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the state of California that the foregoing paragraph is true and correct. I 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 ❑ 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 Purchase Sale Agt 7872 Edinger FINAL.doc Attachment 2-2 Title Or Type of Document Number Of Pages Date Of Document Signer(s) Other Than Named Above EXHIBIT C TRANSFEROR'S CERTIFICATION OF NON -FOREIGN STATUS To inform the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH ("Transferee") that withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as amended ("Code") will not be required upon the transfer of certain real property described as Assessor's Parcel No. 142-081-028 located in the City of Huntington Beach, California to the Transferee by HB AUTO I, LLC (the "Transferor"), the undersigned hereby certify the following: I . Ywe am/are not a nonresident alien for purposes of United States income taxation; 2. My/our United States taxpayer identifying number (Employer Identification Number) is 3. My/our address is Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. Under penalty of perjury, I/we declare that 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. Dated: "TRANSFEROR" HB AUTO 1, LLC Todd Carson, Managing Member Purchase Sale Agi 7872 Edinger FINAL.dccPurchase Sale Agt 7872 Edinger FINAL.doc Exhibit C-1 EXHIBIT D CONDITION OF THE PROPERTY [to be inserted within three (3) business days of execution of this Agreement by Buyer] Purchase Sale Agt 7872 Edinger FINALdoc Exhibit D EXHIBIT E DUE DILIGENCE REPORTS [to be inserted within three (3) business days of execution of this Agreement by Buyer] Purchase Sale Agr 7872 Edinger F1NAL.doc Exhibit E EXHIBIT F ASSIGNMENT AND ASSUMPTION AGREEMENT [see attached] Purchase Sale Av 7872 Edinger FINAL.doc Exhibit 6 I ASSIGNMENT AND ASSUMPTION OF LEASE This ASSIGNMENT AND ASSUMPTION OF LEASE (this "Agreement") is made and entered into and is effective as of the day of 2008 (the "Effective Date"), by and between HB AUTO I LLC, a California limited liability company ("Assignor"), and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic ("Assignee"), with reference to the following: RECITALS A. On or about . 2008, Assignor and Assignee entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property (the "Sale Agreement") for Assignee's purchase from Assignor of certain improved real property of approximately 22,521 square feet located at 7872 Edinger Avenue in Huntington Beach, California and within the boundaries of the Subarea No.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 THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows: Section 1. Assignment and Assumption. 1.1 Assignment. Assignor does hereby assign, transfer and delegate to Assignee all of Assignor's rights, duties and obligations under the Lease Documents (as hereinafter defined) accruing or arising from and after the Close of Escrow, provided, that, Assignee acknowledges and agrees that Assignor has reserved the right to collect any and all rents due under the Lease for any period prior to Close of Escrow. 1.2 Assumption. Assignee hereby accepts the assignment and assumes the performance of all the terms, covenants and conditions imposed upon the landlord under the Lease Documents accruing or arising on or after the Close of Escrow. 1.3 Payment of Rent. Assignor's contact at the Tenant for the payment of rent is , who, to Assignor's actual knowledge, can be reached at Subsequent to the Close of Escrow, Assignee shall contact Tenant, notify Tenant of Assignee's purchase of the Property and this Assignment, and request that all future payment of rent attributable to the period after the Close of Escrow be remitted to Assignee. Section 2. Representations, Warranties and Covenants. 2.1 Assignor Representations. Assignor represents and warrants that: (a) Assignor, and each and every party signing on behalf of Assignor, each have the power and authority and the legal right to make, deliver and perform this Agreement and to authorize the execution, delivery and performance of this Agreement. No consent or authorization of, filing with, or other act by or in respect of any other party, is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. This Agreement has been duly executed and delivered by Assignor, and each and every party signing on behalf of Assignor, and constitutes a legal, valid and binding obligation of each of the Assignor, enforceable against the Assignor in accordance with its terms. (b) The execution, delivery, and performance by each of the Assignor and each and every party signing on behalf of Assignor of this Agreement and compliance with the provisions hereof have been duly authorized by all requisite action on the part of each of the Assignor and each and every party signing on behalf of Assignor and do not and will not (i) violate or conflict with, or result in a breach of, or require any consent under (A) any organizational or governance documents of Assignor or any party signing on behalf of Assignor, (B) any applicable laws, rules, or regulations or any order, writ, injunction, or decree of any governmental authority or arbitrator, or (C) any contractual obligation of the Assignor or by which the Assignor or any of its property is bound or subject, (ii) constitute a default under any such agreement or instrument, or (iii) result in, or require, the creation or imposition of any lien on any material portion of the Property. Assignment and Assumption of Lease FINAL - 2 - (c) All written agreements entered into between Assignor and the Tenant, or between the Assignor and any third party in connection with the Lease, are listed on Exhibit A hereto (collectively, the "Lease Documents'). True and correct copies of the Lease Documents have been delivered to Assignee. Except for the Lease Documents, there are no other agreements or obligations of Assignor with respect to the Lease. (d) The Lease is in full force and effect and remains in full force and effect as ofthe 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 "elusively by and construed in accordance with the laws of the State of California. 3.5 Notices. Any approval, disapproval, demand, document or other notice ("Notice") which either party may desire to give to the other party under this Agreement must be in writing and may be given by any commercially acceptable means to the party to whom the Notice is directed at the address of the party as set forth below, or at any other address as that party may later designate by Notice. Any Notice given under this paragraph, whether personally or by mail, shall be deemed received only upon actual receipt by the intended party. To Seller: HB AUTO I, LLC 3110 Newport Blvd. Newport Beach, California 92663 Attn: Todd Carson Phone: (949) 675-0101 Fax: (949) 675-0107 Copy to: PALMIERI, TYLER, WIENER, WILHELM & WALDRON LLP 2603 Main Street East Tower — Suite 1300 Irvine, California 92614 Attn: Stephen A. Scheck, Esq. Phone: (949) 851-7221 Fax: (949) 851-1554 To Buyer: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Assignment and Assumption of Lease FINAL - 4 - Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary Copy to: LEIBOLD MCCLENDON & MANN, P.C. Attn: Barbara Zeid Leibold, Esq. 23422 Mill Creek Drive, Suite 105 Laguna Hills, California 92653 3.6 Assignment. This Agreement shall inure to the benefit of and be binding upon the Assignor and the Assignee and their respective successors and assigns. 3.7 Severability. If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. . 3.8 Modifications; Merger. No modification of this Agreement shall be effective for any purpose unless it is in writing and executed by assignor and assignee. This Agreement merges all negotiations, stipulations and provisions relating to the subject matter of this Agreement which preceded or may accompany the execution of this Agreement. The Recitals are a material portion of this Agreement, and are incorporated herein by this reference. [SIGNATURE PAGE FOLLOWS] Assignment and Assumption of Leese FINAL - 5 - In witness whereof, the parties hereto have executed this Agreement as of the date first written above. "SELLER" RB AUTO I, LLC, a California limited liability company Todd Carson, Managing Member [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 1 OF 21 ATTEST: Agency Clerk REVIEWED AND APPROVED: Executive Director "BUYER" REDEVELOPMENT AGENCY OF THE CITY OF RUNTINGTON 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: Deputy Executive Director [ASSIGNMENT AND ASSUMPTION OF LEASE SIGNATURE PAGE 2 OF 2] 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 EXHIBIT C LEASE AMENDMENT 001219.0001 \844054.7 FIRST AMENDMENT TO STANDARD LEASE AGREEMENT THIS FIRST AMENDMENT TO STANDARD LEASE AGREEMENT (this "First Amendment") is entered into and executed as of June 16, 2008 (the "Execution Date"), by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic (the "Landlord") and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"). RECITALS A. Pursuant to the terms of that certain Standard Lease Agreement dated for reference purposes April 19, 2004 (the "Lease") entered into by and between Tenant as tenant and HB Auto I, LLC, a California limited liability company ("HB Auto") and Turn -Key Washes, Inc., a California corporation (formerly known as Jurtwin, Inc., a California corporation) ("Turn - Key") together as predecessor in interest landlord, Tenant is leasing that certain real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property") owning and operating a Big O Tires retail store and its business office thereon (the "Edinger Avenue Big O Store") as a franchisee of Big O Tires, LLC, a Nevada limited liability company (formerly known as Big O Tire, Inc., a Nevada corporation) ("Big O" or "Franchisor") pursuant to that certain Franchise Agreement 420466 dated August 1, 2004 (the "Franchise Agreement"). The obligations of Tenant under the Lease are guaranteed by Christopher R. Phillips ("Guarantor") pursuant to the terms of that certain Guaranty of Lease dated April 19, 2004 ("Lease Guaranty"). The Lease is currently in full force and effect. B. Pursuant to that certain Grant Deed dated June 25, 2004, recorded in the official real estate records of Orange County, California on June 29, 2004, Instrument No. 2004000591428 (the "Turn -Key Grant Deed'), Turn -Key granted to Michael Todd Carson and Rosemary Kathleen Carson, husband and wife, as community property with right of survivorship (the "Carsons"), Turn-Key's undivided fifty percent (50%) interest in the Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of June 25, 2004 between Turn -Key as assignor and the Carsons as assignee (the "Turn- Key/Carsons Assignment") effective as of the date of the recording of the Turn -Key Grant Deed, Turn -Key assigned, set over and transferred to the Carsons all of its rights, title and interest as a landlord in, to and under the Lease to the Carsons and the Carsons accepted such assignment and assumed and agreed to perform Turn-Key's obligations under or with respect to the Lease. C. Pursuant to that certain Grant Deed dated November 30, 2004, recorded in the official real estate records of Orange County, California on December 6, 2004, Instrument No. 2004001083690 (the "Carsons Grant Deed"), the Carsons granted to HB Auto, the Carson's undivided fifty percent (50%) interest in and to the Property. In conjunction therewith, and pursuant to the terms of that certain Assignment of Lease dated November 11, 2004, between the Carsons as assignor and HB Auto as assignee (the "Carsons/HB Auto Assignment") effective as of the date of the recording of the Carsons Grant Deed, the Carsons assigned, set over and transferred to HB Auto all of their rights, title and interest as the landlord in, to and under the Lease and HB Auto accepted such assignment and assumed and agreed to perform the Carsons' 001219.0001 \846899.5 obligations under and with respect to the Lease. As a result of the recording of the Carsons Grant Deed and the Carsons/HB Auto Assignment, HB Auto owns all rights, title and interest in and to the Property and became the sole landlord under the Lease and shall hereinafter be referred to as "Predecessor Landlord." D. Under threat of condemnation, Landlord and Predecessor Landlord completed the negotiations of and entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of May 5, 2008 (the "Landlord/Predecessor Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Landlord shall acquire all of Predecessor Landlord's rights, title and interest in and to the Property on and subject to the terms of the Landlord/Predecessor Landlord Property Acquisition Agreement, in consideration of the payment by Landlord to Predecessor Landlord of certain compensation for such acquisition of the Property. This First Amendment will become effective as of the date the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, upon which date, Landlord will acquire all of Predecessor Landlord's rights, title and interest in and to the Property and succeed to all of the rights and assume all of the obligations of Predecessor Landlord under the Lease and the Lease Guaranty (the "Effective Date"). In the event the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is not closed and consummated, this First Amendment will not become effective and will be null and void and of no force and effect. E. In conjunction with Landlord's acquisition from Predecessor Landlord of all Landlord's rights, title and interest in and to Property, pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement, Landlord has determined that it will be necessary for Tenant to permanently cease to occupy the Property prior to the expiration of the Lease; and, as such, Landlord and Tenant have entered into that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 (the "Landlord/Tenant Leasehold Interest Acquisition Agreement") setting forth the terms and conditions by which Landlord shall acquire Tenant's entire leasehold interest in the Property (the "Leasehold Interest") pursuant to the Lease and pay certain compensation as consideration for such acquisition of the Leasehold Interest and the termination of the Lease and the Lease Guaranty and Tenant's occupancy of the Property prior to the expiration of the Lease. As required under the terms of Landlord/Tenant Leasehold Interest Acquisition Agreement, Landlord and Tenant are entering into this First Amendment which, as provided in Recital D, will not become effective nor of any force and effect unless and until the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, and Landlord acquires all of Predecessor Landlord's rights, title and interesting and to the Property. F. Section 35 of the Lease provides that any alteration, change or modification of or to the Lease, in order to become effective, shall be made in writing and executed by Tenant and Landlord as the successor -in -interest landlord under the Lease. G. In conjunction with the foregoing Recitals, Landlord and Tenant mutually desire to enter into this First Amendment, thereby amending the Lease on and subject to the terms and conditions as shall hereinafter be set forth. 001219.0001\846899.5 H. Capitalized terms not otherwise defined herein shall have the meanings given them in the Lease and the Landlord/Tenant Leasehold Interest Acquisition Agreement. NOW, THEREFORE, in consideration of the foregoing Recitals, and for such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant agree as follows: AGREEMENT 1. ACKNOWLEDGEMENTS AND AGREEMENTS OF LANDLORD AND TENANT As of the Effective Date, each of Landlord and Tenant acknowledges and agrees that: (a) The Recitals set forth in the introductory paragraphs of this First Amendment are a material component of and integral part of this First Amendment and are incorporated herein by this reference and made a part hereof. (b) The Lease is in full force and effect. (c) Landlord will succeed to all rights and assume all obligations as the successor -in -interest landlord under the Lease; and, Tenant will recognize Landlord as the successor -in -interest landlord under the Lease. In the event the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, Landlord and Tenant shall execute a memorandum setting forth the date which is the Effective Date of this First Amendment. The foregoing notwithstanding, in the event the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is not closed and consummated, this First Amendment will not become effective and will be null and void and of no force and effect. (d) The acquisition of the Property by Landlord pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement does not constitute either a full or a partial "condemnation," nor a "taking" for purposes of Section 22 of the Lease. Accordingly, the Lease shall not terminate as a result of Agency's purchase of the Property, nor shall Tenant be entitled to any abatement of rent; provided that, the Lease as amended by this First Amendment, shall terminate as provided in Section 1(e) below. (e) Pursuant to the terms of the Landlord/Tenant Leasehold Acquisition Agreement, and notwithstanding anything contained in the Lease as amended by this First Amendment to the contrary, in the event the acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated, Landlord and Tenant acknowledge and agree that the Lease as amended by this First Amendment will terminate on or before the date which is five (5) years from the Effective Date (defined as the "Lease Ten-ninationNacation Date" in the Landlord/Tenant Leasehold Interest Acquisition Agreement). Landlord and Tenant covenant and agree to take all required action and to perform each and all of their respective obligations, agreements and undertakings under the Landlord/Tenant Leasehold Interest Acquisition Agreement, including, without limitation, to fully and completely effect the termination of the Lease as amended by this First Amendment 001219,0001 \846899.5 and the Lease Guaranty and Tenant's occupancy of the Property and the payment in full by Landlord to Tenant of the "Payment Consideration" (as such term is defined in the Landlord/Tenant Leasehold Interest Acquisition Agreement). (f) Landlord and Tenant hereby reaffirm each and all of their respective representations, warranties, covenants, agreements, obligations and undertakings under the Landlord/Tenant Leasehold Interest Acquisition Agreement. 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. 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, 24`h Floor Oakland, CA 94607 001219.0001 \846899.5 4 To Landlord: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary 4. RATIFICATION AND REAFFIRMATION OF LEASE Except as hereby expressly amended by this First Amendment, the Lease shall remain in full force and effect up and until the Lease as amended by this First Amendment is terminated on the date which is the Lease Termination Vacation Date, and the Lease as amended by this First Amendment, is hereby ratified and confirmed. 5. INTERPRETATION In the event of any conflict between the provisions of the Lease as originally in effect, and the provisions of this First Amendment, the provisions of this First Amendment shall control. This First Amendment shall be governed by, and interpreted in accordance with, the laws of the State of California. 6. EXECUTION IN COUNTERPARTS; FACSIMILE; DELIVERY TO ESCROW This First Amendment may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Landlord and Tenant agree that a facsimile copy of an authorized signature of a party to this First Amendment will have the same force and effect as the original signature. In conjunction with Recital D and Section 1(c) of this First Amendment and Section 8(d) of the Landlord/Tenant Leasehold Interest Acquisition Agreement, Landlord and Tenant will each deliver to the Escrow (as such term is defined in Section 8(d) of the Landlord/Tenant Leasehold Interest Acquisition Agreement) its executed copy of this First Amendment, specifically instructing the Escrow in writing not to release copies of this First Amendment to either Landlord or Tenant unless and until the acquisition transaction between Landlord and Predecessor Landlord pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement is closed and consummated and the Grant Deed from Predecessor Landlord to Landlord is duly recorded in the official real estate records of Orange County, California. 001219.0001 \846899.5 7. INCORPORATION OF EXHIBITS All Exhibits and other instruments attached to this First Amendment are incorporated herein by this reference and made a part hereof. 8. AUTHORITY Each person signing this First Amendment on behalf of a party to this First Amendment, warrants and represents that such person is fully authorized to enter into and execute this Amendment for and on behalf of such party and that this Amendment is a binding obligation on such party. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the dates set forth below. ATTEST: By: Name: Title: Agency Clerk REVIEWED AND APPROVED: By: Name: Title: Executive Director "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH By: Name: Title: Chairperson APPROVED AS TO FORM: By: Name: Title: Agency Counsel APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel Lo Barbara Zeid Leibold [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \846899.5 6 INITIATED AND APPROVED: Name: Title: 001219.0001\846899.5 7 Deputy Executive Director "TENANT" C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner Lo Christopher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its General Partner Virgil Kyle Kyle, III, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: Christopher R. Phillips, President By: JYB ENTERPRISES, INC., a California corporation, its General Partner Jason Y. Berry, President EXHIBIT D LEASEHOLD INTEREST ASSIGNMENT/TRANSFER 00 1219.000 1 \844054-7 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Richard P. Waxman, Esq. Wendel, Rosen, Black & Dean LLP I I I I Broadway, 2e Floor Oakland, CA 94607-4036 (THIS SPACE FOR RECORDER'S USE ONLY) ASSIGNMENT, TRANSFER AND CONVEYANCE OF LEASEHOLD INTEREST THIS PAGE ADDED TO PROVIDE ADEQUATE SPACE FOR RECORDING INFORMATION (GOVT. CODE 27361.6) (additional recording fee applies) 001219.0001\848103.2 ASSIGNMENT, TRANSFER AND CONVEYANCE OF LEASEHOLD INTEREST THIS ASSIGNMENT, TRANSFER AND CONVEYANCE OF LEASEHOLD INTEREST ("Assignment/Transfer") is made and entered into effective as of 520 (Effective Date"), by and between C.S.B. PARTNERSHIP, a California general partnership ("Assignor/Transferor"), and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Assignee/Transferee"), who agree as follows: 1. RECITALS. This Assignment/Transfer is made with reference to the following facts and objectives: 1.1 Assignee/Transferee owns that certain improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property"). Under threat of condemnation, Assignee/Transferee and HB Auto I, LLC, a California limited liability company (collectively, the "Predecessor Landlord") completed the negotiation of and entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of May 5, 2008 ("Landlord/Predecessor Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Assignee/Transferee would acquire all of Predecessor Landlord's rights, title and interest in and to the Property on and subject to the terms of the Landlord/Predecessor Landlord Property Acquisition Agreement. The acquisition transaction pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement was closed and consummated on June 16, 2008, upon which date Assignee/Transferee acquired all of Predecessor Landlord's rights, title and interest in and to the Property (the "Property Acquisition Date"). Effective as of the Property Acquisition Date, Assignee/Transferee succeeded to all of the rights and assumed all of the obligations of Predecessor Landlord under that certain Standard Lease Agreement for the Property dated for reference purposes April 19, 2004 as amended by that certain First Amendment to Standard Lease Agreement effective as of June 16, 2008 (collectively, the "Lease"). Assignor/Transferor is the tenant under the Lease, owning and operating a Big O Tires retail store and its business office on the Property (the "Edinger Avenue Big O Store"). The obligations of Assignor/Transferor under the Lease are guaranteed by Christopher R. Phillips ("Guarantor") pursuant to the terms of that certain Guaranty of Lease dated April 19, 2004 ("Lease Guaranty"). The Lease is currently in full force and effect. 1.2 In conjunction with Assignee/Transferee's acquisition from Predecessor Landlord of all of Predecessor Landlord's rights, title and interest in and to the Property pursuant to the Landlord/Predecessor Landlord Property Acquisition Agreement, and Assignee/Transferee's proposed redevelopment of the Property, Assignee/Transferee determined that it will be necessary for Assignor/Transferor to permanently cease to occupy the Property prior to the expiration of the Lease; and, as such, Assignee/Transferee and Assignor/Transferor entered into that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 (the "Landlord/Tenant Leasehold Interest Acquisition Agreement"), setting forth the terms and conditions by which Assignee/Transferee shall acquire Assignor/Transferor's entire leasehold interest in the Property (the "Leasehold Interest") pursuant to the Lease and pay certain compensation as consideration for such acquisition of the Leasehold Interest and the termination of the Lease and the Lease Guaranty and Assignor/Transferor's occupancy of the Property prior to the expiration of the Lease. A copy of the Landlord/Tenant Leasehold Interest Acquisition 001219.0001 \848103.2 Agreement is attached hereto as Exhibit A. As required by the terms and conditions of the Landlord/Tenant Leasehold Interest Acquisition Agreement, the Lease was amended by the terms of that certain First Amendment to Standard Lease Agreement dated as of June 16, 2008 ("Lease Amendment") by and between Assignor/Transferor as tenant and Assignee/Transferee as landlord. The Lease as amended by the Lease Amendment shall hereinafter be collectively referred to as the "Lease." 1.3 Under the terms of the Landlord/Tenant Leasehold Interest Acquisition Agreement, Assignee/Transferee is obligated to acquire Assignor/Transferor's Leasehold Interest pursuant to the Lease on or before the date which is five (5) years following the Property Acquisition Date (defined as the "Lease Termination/Vacation Date" in the Landlord/Tenant Leasehold Interest Acquisition Agreement) by giving Assignor/Transferor notice at least ninety (90) days prior to the date which is the Lease Termination/Vacation Date (defined as the "Lease Termination/Vacation Notice" in the Landlord/Tenant Leasehold Interest Acquisition Agreement). In conjunction with the foregoing, Assignee/Transferee has given Assignor/Transferor the Termination/Vacation Notice and, in connection therewith, Assignor/Transferor desires to assign, transfer and convey Assignor/Transferor's Leasehold Interest to Assignee/Transferee and Assignee/Transferee desires to acquire Assignor/Transferor's Leasehold Interest pursuant to the Lease from Assignor/Transferor, all in accordance with and subject to the terms and conditions of this Assignment/Transfer. 1.4 Capitalized terms in this Assignment/Transfer and not otherwise defined herein will have the definitions given such terms in the Landlord/Tenant Leasehold Interest Acquisition Agreement, and such definitions are hereby incorporated by reference herein and made a part hereof. 2. ASSIGNMENT AND ASSUMPTION. Effective as of the Effective Date, and on and subject to the terms, conditions, representations, warranties, covenants and agreements set forth in the Landlord/Tenant Leasehold Interest Acquisition Agreement, Assignor/Transferor hereby assigns, transfers and conveys to Assignee/Transferee a]I of its rights, title and interest in, to and under Assignor/Transferor's Leasehold Interest pursuant to the Lease and Assignee/Transferee hereby accepts such assignment, transfer and conveyance of Assignor/Transferor's Leasehold Interest pursuant to the Lease. 3. SUBJECT TO LANDLORD/TENANT LEASEHOLD INTEREST ACQUISITION AGREEMENT. Nothing contained in this Assignment/Transfer will operate or have the effect of expanding, constricting or otherwise modifying the terms and provisions of the Landlord/Tenant Leasehold Interest Acquisition Agreement, all of the terms and provisions of which are hereby reaffirmed by Assignee/Transferee and Assignor/Transferor. 4. MISCELLANEOUS. 4.1 If either party commences an action against the other party arising out of or in connection with this Assignment, the prevailing party will be entitled to recover from the losing party reasonable attorneys' fees and costs of suit. 001219.0001\848103.2 4.2 This Assignment will be binding on and inure to the benefit of the parties and their respective successors, assigns, administrators, personal representatives, executors, and heirs. 4.3 The Recitals set forth above are incorporated herein by this reference and made a part hereof. 4.4 All Exhibits attached to this Assignment/Transfer are incorporated herein by this reference and made a part hereof. 4.5 The parties agree that this Assignment/Transfer may be signed in two (2) or more counterparts, each of which will be deemed an original, but all of which together will be deemed one and the same agreement. 4.6 This Assigninent/Transfer will be recorded in the official real estate records of Orange County, California as soon as reasonably practical following the execution of this Assignment/Transfer by Assignor/Transferor and Assignee/Transferee. 4.7 Assignor/Transferor and Assignee/Transferee agree to execute all documents and instruments and take such further action as may be reasonably required in order to consummate the transactions contemplated in this Assignment/Transfer. 4.8 Each person signing this Assignment/Transfer on behalf of a party to this Assignment/Transfer is fully authorized to enter into and execute this Assignment/Transfer for and on behalf of such party and that this Assignment/Transfer is a binding obligation on such party. IN WITNESS WHEREOF, the parties hereto have executed this Assignment/Transfer as of the dates set forth below. ATTEST: ASSIGNEE/TRANSFEREE: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic Agency Clerk Chairperson REVIEW AND APPROVED: APPROVED AS TO FORM: �// 1V . W A' . Executive Dire or ! g � _cy C unsel u� [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001\848103.2 APPROVED AS TO FORM: LEIBOLD MCCLENDON & MANN, P.C. Agency Special Counsel By: 4-eqq' Barbara Zeid Leibold INITIATED AND APPROVE : Deputy Executive Director ASSIGNORITRANSFEROR: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner LE Christopher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its General Partner Virgil Kyle Kyle, III, President By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner Christopher R. Phillips, President By: JYB ENTERPRISES, INC., a California corporation, its General Partner Jason Y. Berry, President 001219.0001\848103.2 4 State of California County of On , 20_, before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Seal) Notary Public State of California County of On , 20, before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Seal) Notary Public 001219.0001 \848103.2 State of California County of On , 20_, before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. (Seal) Notary Public 001219.0001 \848103.2 6 EXHIBIT A LANDLORD/TENANT LEASEHOLD INTEREST ACQUISITION AGREEMENT 001219.0001 \848103.2 EXHIBIT E LANDLORD/TENANT WAIVER/RELEASE 00 1219.000 1\844054.7 AGREEMENT OF RELEASE OF ALL CLAIMS This AGREEMENT OF RELEASE OF ALL CLAIMS ("Agreement") dated as of June 16, 2008, is made by and between HB AUTO I, LLC, a California limited liability company ("Landlord"), and C.S.B. PARTNERSHIP, a California general partnership ("Tenant"). Landlord and Tenant are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties." RECITALS A. Pursuant to the terms of that certain Standard Lease Agreement dated for reference purposes, April 19, 2004 (the "Lease") between Tenant as tenant and Landlord and, TURN -KEY WASHES, INC., a California corporation (formerly known as JUZTWIN, INC., a California corporation) ("Turn -Key") together as landlord, Tenant is leasing that certain improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property") owning and operating a Big O Tires retail store and its business office therein (collectively, "Tenant's Business"). The Lease is currently in full force and effect. B. The obligations of Tenant under the Lease are guaranteed by Christopher R. Phillips, an individual ("Phillips"), pursuant to the terms of that certain Guaranty of Lease dated April 19, 2004 (the "Lease Guaranty"). C. Pursuant to that certain Grant Deed dated June 25, 2004, recorded in the official real estate records of Orange County, California on June 29, 2004, Instrument No. 2004000591428 (the "Turn -Key Grant Deed"), Turn -Key granted to Michael Todd Carson and Rosemary Kathleen Carson, husband and wife as community property with right of survivorship (the "Carsons") Turn-Key's undivided fifty percent (50%) interest in the Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated as of June 25, 2004, between Turn -Key as assignor and the Carsons as assignee (the "Turn- Key/Carsons Assignment") effective as of the date of the recording of the Turn -Key Grant Deed, Turn -Key assigned, set over and transferred to the Carsons all of its right, title and interest as a landlord in, to and under the Lease to the Carsons, and the Carsons accepted such assignment and assumed and agreed to perform Turn-Key's obligations under or with respect to the Lease. D. Pursuant to that certain Grant Deed dated November 30, 2004, recorded in the official real estate records of Orange County, California on December 6, 2004, Instrument No. 2004001083690 (the "Carsons Grant Deed"), the Carsons granted to Landlord the Carson's undivided fifty percent (50%) interest in and to the Property. In conjunction therewith and pursuant to the terms of that certain Assignment of Lease dated November 11, 2004, between the Carsons as assignor and Landlord as assignee (the "Carsons/Landlord Assignment"), effective as of the date of the recording of the Carsons Grant Deed, the Carsons assigned, set over and transferred to Landlord all of their right, title and interest as the landlord in, to and under the Lease and Landlord accepted such assignment and assumed and agreed to perform the Carsons' obligations under and with respect to the Lease. As a result of the recording of the Carsons 001219.0001 \845367.7 Grant Deed and the Carson/Landlord Assignment, Landlord owns all rights, title and interest in and to the Property and is the landlord under the Lease. E. The Redevelopment Agency of the City of Huntington Beach, California, a public body, corporate and politic ("Agency"), under the threat of condemnation, has completed negotiations with Landlord, and Agency and Landlord have entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of May 5, 2008 (the "Agency/Landlord Property Acquisition Agreement"), setting forth the terms and conditions by which Agency shall acquire all of Landlord's rights, title and interest in and to the Property on and subject to the terms of the Agency/Landlord Property Acquisition Agreement, in consideration of the payment by Agency to Landlord of certain compensation for such acquisition of the Property. A copy of the Agency/Landlord Acquisition Agreement is attached hereto as Exhibit A. F. In connection with the Agency's acquisition from Landlord of all of the Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement, Agency will succeed to all of the rights and assume all of the obligations of the landlord under the Lease and the Lease Guaranty. As part of the threat of condemnation and as a result of the subsequent proposed redevelopment of the Property, Agency has determined that it will be necessary for Tenant to permanently cease to occupy the Property on or before the Lease TerminationNacation Date (as such term is defined below) and is prepared to pay Tenant certain compensation as consideration for Tenant's agreement to terminate the Lease and the Lease Guaranty and Tenant's occupancy of the Property prior to the expiration of the Lease. In conjunction therewith, Agency and Tenant have entered into that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 (the "Agency/Tenant Leasehold Interest Acquisition Agreement") setting forth the terms and conditions by which Agency shall acquire Tenant's entire leasehold interest in the Property (the "Leasehold Interest") pursuant to the Lease and pay certain compensation as consideration for such acquisition of the Leasehold Interest and the termination of the Lease and the Lease Guaranty and Tenant's occupancy of the Property prior to the expiration of the Lease. The terms of the Agency/Tenant Leasehold Interest Acquisition Agreement provide that the acquisition of the Leasehold Interest pursuant to the Lease and the corresponding termination of the Lease and the Lease Guaranty and Tenant's occupancy of the Property shall occur on or before the date which is five (5) years from the date Agency acquires the Property from Landlord pursuant to the terms of the Agency/Landlord Property Acquisition Agreement (defined as the "Lease TerminationNacation Date" in the Agency/Tenant Leasehold Interest Acquisition Agreement). A copy of the Agency/Tenant Leasehold Interest Acquisition Agreement is attached hereto as Exhibit B. G. In conjunction with the foregoing Recitals, the Parties mutually desire to establish their respective rights and obligations and undertakings with regard to (i) Agency's acquisition of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Acquisition Agreement; and (ii) Agency's acquisition of Tenant's Leasehold Interest in the Property pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement; and, the payment of certain compensation as consideration (a) to Landlord for the acquisition of all of Landlord's rights, title and interest in and to the Property and (b) to Tenant for the eventual acquisition of Tenant's Leasehold Interest pursuant to the Lease and the 001219.0001\845367.7 2 termination of the Lease and the Lease Guaranty and Tenant's occupancy of the Property prior to the expiration of the Lease pursuant to the Agency/Tenant Acquisition Agreement, all on and subject to the terms and conditions as shall hereinafter be set forth. NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and terms, conditions and covenants hereinafter set forth and such other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by the Parties, the Parties, intending to be legally bound, hereby agree as follows: AGREEMENT 1. Incorporation of Recitals. The Recitals set forth in the introductory paragraphs of this Agreement are incorporated into this Agreement and made a part hereof as if stated in full herein. 2. Waiver of Tenant's Award by Landlord. Landlord hereby acknowledges and agrees that Tenant shall be entitled to that portion of the consideration set forth in the Agency/Tenant Leasehold Interest Acquisition Agreement as consideration for Tenant's agreement to assign, transfer and convey to Agency, Tenant's Leasehold Interest in the Property pursuant to the Lease and terminate the Lease and the Lease Guaranty and its occupancy of the Property on or before the Lease TerminationNacation Date (collectively, "Tenant's Consideration") as negotiated and mutually agreed to by and between Tenant and Agency pursuant to the terms of the Agency/Tenant Leasehold Acquisition Agreement; and, Landlord fully and forever and completely, absolutely and unconditionally waives any and all claims and rights to Tenant's Consideration, including, but not limited to, all claims and rights to Tenant's Consideration specifically set forth in Section 22 of the Lease or as may otherwise be set forth in the Lease. 3. Waiver of Landlord's Award by Tenant. Tenant hereby acknowledges and agrees that Landlord shall be entitled to that portion of the consideration set forth in the Agency/Landlord Property Acquisition Agreement as consideration for Landlord's agreement to assign, transfer and convey to Agency, all of Landlord's rights, title and interest in and to the Property ("Landlord's Consideration") as negotiated and mutually agreed to by and between Landlord and Agency pursuant to the terms of the Landlord/Agency Property Acquisition Agreement; and, Tenant fully and forever and completely, absolutely and unconditionally waives all claims and rights to Landlord's Consideration, including, without limitation, all claims and rights to Landlord's Consideration that may be set forth in the Lease. 4. Mutual Waiver. The Parties, in consideration of the mutual promises, agreements, obligations, undertakings and representations set forth in this Agreement, agree to fully and forever and completely, absolutely and unconditionally waive and release any and all actions, causes of actions, claims, demands, rights, obligations, and liabilities of any kind whatsoever of every nature and character, whether known or unknown, arising from any matter, cause or thing, 001219.0001 \845367.7 whatsoever occurred, done or omitted, and the matters arising out of (i) the acquisition by Agency from Landlord of all of Landlord's rights, title and interest in and to the Property pursuant to the terms and conditions of the Landlord/Agency Property Acquisition Agreement; and, (ii) the acquisition by Agency of Tenant's Leasehold Interest in the Property pursuant to the Lease, pursuant to the terms and conditions of the Agency/Tenant Leasehold Interest Acquisition Agreement (collectively, the "Released Claims"). Landlord and Tenant, on behalf of themselves and their respective affiliated corporations, partnerships, limited liability companies or other entities, partners, members, managers, shareholders, officers, directors, employees, guarantors, (including, without limitation, Phillips, pursuant to the Lease Guaranty), contractors, agents, franchisors, franchisees, representatives, trustees, administrators, attorneys, heirs, beneficiaries, and successors in interest and assigns and any and all persons or entities who may claim through or on behalf of any of them, hereby release and forever discharge each other and their respective affiliated corporations, partnerships, limited liability companies or other entities, partners, members, managers, shareholders, officers, directors, employees, guarantors, (including, without limitation Phillips, pursuant to the Lease Guaranty), contractors, agents, franchisors, franchisees, representatives, trustees, administrators, attorneys, heirs, beneficiaries, and successors in interest and assigns and any and all other persons or entities who may claim through or on behalf of any of them from each and all of the Released Claims. 5. Waiver of Unknown Claims. Landlord and Tenant covenant and agree that they will forever refrain from instituting, prosecuting or maintaining any lawsuit, action and/or administrative or governmental proceeding against each other arising out of or relating to the Released Claims. It is intended that this Agreement shall be effective as a bar to each and every action, cause of action, claim, loss and damage whether now known or unknown, foreseen or unforeseen, suspected or unsuspected that any Party may have against any other Party arising out of (i) the acquisition by Agency of all of Landlord's rights, title and interest in and to the Property pursuant to and the Agency/Landlord Property Acquisition Agreement; and (ii) the acquisition by Agency of Tenant's entire Leasehold Interest in the Property pursuant to the Lease pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement, and each of the Parties expressly waives any and all rights and claims under Section 1542 of the California Civil Code, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her, must have materially affected his or her settlement with the debtor. Provided, however, nothing contained in this Section 5 shall release or relieve the Parties from their respective representations, warranties, covenants, agreements, obligations, or undertakings under this Agreement which the Parties shall remain fully liable and responsible therefor and shall survive the execution and delivery of this Agreement. 6. Effectiveness of Agreement. Landlord and Tenant agree that the effectiveness of this Agreement and the releases and waivers by and the representations, warranties, covenants, agreements, obligations and 001219.0001\845367.7 4 undertakings of the Parties under this Agreement are expressly conditioned upon the closing and consummation of (i) the acquisition by Agency of all of Landlord's rights, title and interest in and to Property pursuant to the Agency/Landlord Property Acquisition Agreement; and (ii) the "Closing" (as such term is defined in the Agency/Tenant Leasehold Interest Acquisition Agreement) of the transactions pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement (collectively, the "Conditions Precedent"). In the event both of the Conditions Precedent are not satisfied, this Agreement shall be of no further force and effect. In the event both of the Condition's Precedents are satisfied, the effective date of this Agreement shall be the date both Condition's Precedent are satisfied. 7. Entire Agreement; Amendments. This Agreement (including all Exhibits attached hereto) is the final expression of and contains the entire agreement between the Parties with respect to the matters which are the subject of this Agreement, including, without limitation, the apportionment of the consideration pursuant to Sections 2 and 3 of this Agreement and rights of each Party with respect to such apportionment of the consideration and supersedes all prior understandings with respect thereto. This Agreement may not be modified, changed, supplemented or terminated, nor may any rights or obligations hereunder be waived, except by written instrument signed by the Parties. The Parties do not intend this Agreement to confer any benefit hereunder on any person, firm or corporation, partnership, limited liability company or other entity other than the Parties hereto. 8. Professional Fees. Each Party shall be responsible for paying its own costs and expenses incurred in the preparation of this Agreement. However, in the event of the bringing of any action or suit by a Party hereto against the other Party hereunder by reason of any breach of any of the representations, warranties, covenants, agreements, obligations, undertakings, or provisions on the part of the other Party arising out of this Agreement, then, in that event the prevailing Party shall be entitled to have and recover of and from the other Party all costs and expenses of the action or suit, including reasonable attorneys' accounting, engineering and other professional fees and costs rendered to such Party. 9. Governing Law; Consent to Jurisdiction. The parties hereto acknowledge that this Agreement has been negotiated and entered into in the State of California. The parties hereto expressly agree that this Agreement shall be governed by, interpreted under, and construed and enforced in accordance with the laws of the State of California. The Parties hereto consent to and agree that any legal action or proceeding brought by either Party hereto and arising from or in connection with this Agreement or any breach hereunder shall be brought (i) with respect to the federal district court, in the Southern District of California in the County of Orange, State of California; and (ii) with respect to any state court, in the Superior Court of the State of California for the County of Orange, California. 10. Counterparts; Facsimile. This Agreement may be executed in counterparts, all of which when taken together shall constitute one (1) complete instrument. The Parties agree that a facsimile copy of an authorized 001219.0001\845367.7 5 signature of a Party to this Agreement will have the same force and effect as the original signature. 11. Mutual Contribution. Both Parties to this Agreement have been represented by separate and independent legal counsel in the negotiation and preparation of this Agreement. This Agreement has been drafted on the basis of the Parties' mutual contributions of language and this Agreement shall not to be construed against any Party as being the drafter of this Agreement. 12. Notices. Notices and other deliveries pursuant to this Agreement may be delivered by private messenger service, mail, overnight courier or delivery service, or facsimile. Any notice or document required or permitted to be delivered by either Party shall be in writing and shall be deemed to be given on the date received by (or on the date receipt was refused by) the Party; provided, however, that all notices and documents (i) mailed to a Party in the United States Mail, postage prepaid, certified mail, return receipt requested, shall be deemed to have been received three (3) days after mailing; or (ii) delivered by overnight courier or delivery service shall be deemed received the next business day after deposit with a reputable overnight courier or delivery service for overnight delivery. The address of the Parties shall for all purposes be the following, unless otherwise changed by the Party by notice to the other as provided in this Section 12: If to Landlord: c/o HB Auto I, LLC 3111 Newport Boulevard, 2°d Floor Newport Beach, CA 92663 Attention: Todd Carson Telephone: (949) 675-0101 Facsimile: (949) 675-0107 If to Tenant: C.S.B. Partnership 7872 Edinger Avenue Huntington Beach, CA 92675 Attention: Christopher R. Phillips Telephone: (714) 500-4575 Facsimile: (714) 500-4578 13. Authority. Each person executing this Agreement on behalf of a Party hereby represents and warrants that such person is duly authorized and empowered to execute this Agreement on behalf of a Party and that this Agreement is a binding obligation of such Party. 14. Severability. If for any reason, any provision of this Agreement is determined to be invalid, unenforceable or contrary to any existing or future law to any extent, such provisions shall be enforced to the extent permissible under the law and such invalidity, unenforceability or illegality shall not impair the operation of or otherwise effect those provisions of this Agreement which are valid, enforceable and legal. 001219.0001\845367.7 6 15. Binding Effect. This Agreement is and shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, affiliates, predecessors, successors and assigns. 16. Waiver. No waiver in any instance by any Party of any provision of this Agreement shall be deemed a waiver by such Party of such provision in any other instance or a waiver of any other provisions hereunder in any instance. 17. 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. 18. Incorporation of Exhibits. Any Exhibits attached to this Agreement are incorporated herein by this reference and made a part hereof. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date written in the introductory paragraph of this Agreement. LANDLORD: hB AUTO I, LLC, a California limited liability company Lo Todd Carson, Managing Member TENANT: C.S.B. PARTNERSHIP, a California general partnership By: C.E.P. DEVELOPMENTS, INC., a California corporation, its General Partner M. Christopher R. Phillips, President [SIGNATURES CONTINUED ON NEXT PAGE] 001219.0001 \845367.7 By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. PHILLIPS, INC., a California corporation, its General Partner By: Christopher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its General Partner Virgil Kyle Kyle, III, President By: JYB ENTERPRISES, INC., a California corporation, its General Partner Jason Y. Berry, President 001219.0001 \845367.7 EXHIBIT F BIG O/TENANT TERMINATIONIRELEASE 001219.0001\844054J TERMINATION AND RELEASE AGREEMENT This TERMINATION AND RELEASE AGREEMENT ("Agreement"), is made and entered into as of the 161h day of June, 2008 by and between BIG O TIRES, LLC, a Nevada limited liability company (formerly known as Big O Tires, Inc., a Nevada corporation), ("Big O") and C.S.B. PARTNERSHIP, a California general partnership ("Franchisee") and CHRISTOPHER R. PHILLIPS, an individual ("C. Phillips"), EMIKO J. PHILLIPS, an individual ("E. Phillips"), VIRGIL KYLE KYLE, III, an individual ("V. Kyle"), DIANE R. KYLE (also known as Diane Rose Kyle), an individual ("D. Kyle"), JASON Y. BERRY, an individual ("J. Berry") and LAURA BERRY (also known as Laura Frances Aguayo -Berry), an individual ("L. Berry") ("C. Phillips, E. Phillips, V. Kyle, D. Kyle, J. Berry, and L. Berry shall sometimes hereinafter be referred to individually as a "Franchisee Guarantor" and collectively as the "Franchisee Guarantors"). Big O, Franchisee and the Franchisee Guarantors are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties." RECITALS A. Big O and Franchisee are parties to that certain Franchise Agreement #20466 dated effective as of August 1, 2004 (the "Franchise Agreement"), pursuant to which Franchisee has been granted certain rights as a franchisee to own and operate a Big O Tires retail store (the "Edinger Avenue Big O Store") on the improved real property commonly known as 7872 Edinger Avenue, Huntington Beach, California 92647 (the "Property"). The Franchise Agreement expires by its own terms on August 1, 2014. A copy of Franchisee's Franchise Agreement is attached hereto as Exhibit A. B. In conjunction with the requirements under the terms of the Franchise Agreement, Big O as secured party and Franchisee as debtor are parties to that certain Security Agreement dated as of August 1, 2004 (the "Security Agreement"), whereby Franchisee has granted to Big O a security interest in such assets of Franchisee identified and described in Schedule 3 of the Security Agreement (collectively, the "Collateral") as security for all obligations of Franchisee to Big O, including any obligations due under the terms of the Franchise Agreement, and including any future advances made by Big O to Franchisee. A copy of the Security Agreement is attached hereto as Exhibit B. C. The Franchisee Guarantors have, pursuant to the terms of that certain Guaranty of Franchisee's Agreement documents attached to the Franchise Agreement as Schedule 3 (collectively, the "Franchisee Guarantors' Guaranties"), personally guaranteed the performance of Franchisee's obligations under the Franchise Agreement. D. Big O as franchisor and Franchisee, directly or indirectly by and through affiliated entities as franchisee, are parties to those certain other franchise agreements (each an "Other Franchise Agreement" and collectively, the "Other Franchise Agreements") pursuant to which Franchisee or an affiliated entity of Franchisee has been granted certain rights to own and operate other Big O retail stores (each as an "Other Big O Store" and collectively, the "Other Big O Stores"). The Parties acknowledge and agree that this Agreement and the terms thereof shall have no application to such other Franchise Agreements or other Big O Stores and that the 001219.0001\845563.6 terms, conditions and provisions of this Agreement are only applicable to the Franchise Agreement and the Edinger Avenue Big O Store. E. Pursuant to the terms of that certain Standard Lease Agreement dated April 19, 2004 (the "Lease") entered into with HB Auto I, LLC, a California limited liability company ("HB Auto"), and Jurtwin, Inc., a California corporation ("Jurtwin") together as landlord and Franchisee as tenant, Franchisee leases the entire Property for the purpose of owning and operating the Edinger Avenue Big O Store and as its business office and other related uses as permitted by the terms of the Lease. The obligations of Franchisee under the Lease are guaranteed by C. Phillips pursuant to the terms of that certain Guaranty of Lease dated as of April 19, 2004 ("Lease Guaranty"). Copies of the Lease and the Lease Guaranty are attached hereto as Exhibit C. Pursuant to the terms of (i) that certain Assignment of Lease dated as of June 25, 2004 by and between Jurtwin as assignor and Michael Todd Carson and Rosemary Kathleen Carson, husband and wife as community property with right of survivorship as assignee (the "Carsons") and (ii) that certain Assignment of Lease dated as of November 11, 2004 by and between the Carsons as assignor and HB Auto as assignee (collectively, the "Lease Assignments"), HB Auto is owner of all rights, title and interest in and to the Property and is the sole landlord under the Lease ("Landlord"). F. Under the applicable terms of the Franchise Agreement, including, without limitation, Section 18.02 of the Franchise Agreement, Big O has certain rights of first refusal to acquire (i) Franchisee's leasehold rights in and to the Property pursuant to the Lease; and (ii) Franchisee's franchise rights and interest under the Franchise Agreement, in the event Franchisee decides to make a "Transfer" (as such term is defined in the Franchise Agreement (collectively, "Big O's First Refusal Rights"). In addition, under Section 51 of the Lease, Big O has certain rights to cure a default by Franchisee as the tenant under the Lease and assume Franchisee's rights and obligations as the Tenant under the Lease; and, has the right to sublease the Property to another authorized franchisee of Big O subject to the reasonable approval of Landlord upon the occurrence of certain triggering events (collectively, the "Big O Lease Rights"). G. The Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic ("Agency"), under the threat of condemnation, has completed its negotiations with the Landlord to acquire all of Landlord's rights, title and interest in and to the Property. In conjunction therewith, Agency and Landlord have entered into that certain Agreement and Escrow Instructions for Purchase and Sale of Real Property dated as of May 5, 2008 (the "Agency/Landlord Property Acquisition Agreement") setting forth the terms and conditions by which Agency shall acquire all of Landlord's rights, title and interest in and to the Property for the acquisition consideration set forth in the Agency/Landlord Property Acquisition Agreement. H. In connection with Agency's acquisition of all of Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement, Agency will succeed to all of the rights and obligations of the Landlord under the Lease and the Lease Guaranty, and Franchisee will continue to operate the Edinger Avenue Big O Tire Store on the Property pursuant to the Lease as amended by that certain First Amendment to Lease in the form attached hereto as Exhibit D (the "Lease Amendment") for a period of time not to exceed 001219.0001\845563.6 2 the date which is five (5) years following the effective date of Agency's purchase and acquisition of the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement (the "Continuing Operation Period"). The Lease as amended by the Lease Amendment shall hereinafter be collectively referred to as the "Lease." As a result of the subsequent proposed redevelopment of the Property, Agency has determined that it will be necessary for Franchisee to permanently cease to occupy the Property at the expiration of the Continuing Operation Period and is prepared to pay Franchisee certain compensation in consideration of Franchisee's agreement to relinquish its leasehold rights and interest in the Property pursuant to the Lease and terminate the Lease and the Lease Guaranty and Franchisee's occupancy of the Property prior to the expiration of the Lease and the Franchise Agreement, all on and subject to the terms of that certain Acquisition of Leasehold Interest Agreement dated as of June 16, 2008 (the "Agency/Tenant Leasehold Interest Acquisition Agreement"). A copy of the Agency/Tenant Leasehold Interest Acquisition Agreement is attached hereto as Exhibit E. 1. 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 (90t11) day after receipt of Termination/Vacation Notice. The date upon which the Lease terminates and Franchisee vacates the Property shall hereinafter be referred to as the "Lease Termination/Vacation Date." J. In conjunction with the acquisition by Agency of the Property from Landlord pursuant to the Agency/Landlord Property Acquisition Agreement and the relinquishment by Franchisee of its leasehold rights and interest in the Property pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement all as a result of the Agency's threat to exercise its rights of condemnation with respect to the Property, the Parties mutually desire (i) to terminate the Franchise Agreement, the Franchisee Guarantors Guaranties, the Security Agreement and all other ancillary agreements entered into by and between Big O and Franchisee and/or the Franchisee Guarantors in conjunction with the Franchise Agreement and the franchise relationship between Big O and Franchisee (collectively, the "Ancillary Agreements") effective as of the Lease Termination/Vacation Date; (ii) that Big O fully and forever waive Big O's First Refusal Rights and Big O's Lease Rights; and (iii) to unconditionally and fully and forever waive, release and relieve each other from and against any and all past or present claims arising out of or in any way connected with the Lease, the Franchise Agreement, the Franchisee Guarantors Guaranties, the Security Agreement, the Ancillary Agreements and their business relationship created thereunder, all effective as of the Lease Termination/Vacation Date. NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants hereinafter set forth, it is hereby agreed by and among the Parties as follows: AGREEMENT 1. Termination of Franchise Agreement (a) Pursuant to Section 19.04 of the Franchise Agreement, Big O and Franchisee acknowledge and agree that the acquisition (i) by Agency from Landlord of all of 001219.0001\845563.6 Landlord's rights, title and interest in and to the Property pursuant to the Agency/Landlord Property Acquisition Agreement; and (ii) by Agency from Tenant of all of its leasehold rights and interest in the Property pursuant to the Lease and termination of the Lease and the Lease Guaranty and Franchisee's occupation of the Property as of the Lease Termination/Vacation Date prior to the expiration of the Lease and the Franchise Agreement pursuant to the Agency/Tenant Leasehold Interest Acquisition Agreement, all in conjunction with the threat by Agency to exercise its rights of condemnation, is beyond the control of Big O and Franchisee, is not the fault of either Big O or Franchisee; and, that the termination by the Agency of the Lease and the Lease Guaranty and Franchisee's occupation of the Property as of the Lease Termination/Vacation Date will result in Big O and Tenant being unable to perform their respective obligations under the Franchise Agreement for the period from and after the Lease Terinination/Vacation Date. (b) Big O acknowledges and agrees that the threat by Agency to exercise its rights of condemnation pursuant to the Agency/Landlord Property Acquisition Agreement and the Agency/Tenant Leasehold Interest Acquisition Agreement does not trigger any rights or give Big O any rights with respect to (i) Big O's First Refusal Rights or (ii) Big O's Lease Rights; and Big O fully, completely and forever absolutely and unconditionally waives all claims and rights with respect to Big O's First Refusal Rights and Big O's Lease Rights. Big O acknowledges and agrees that Agency and the Agency Parties (as such term is defined in Section 2 below) are third party beneficiaries of the foregoing waivers. (c) Within ten (10) business days following Franchisee's receipt of the Termination/Vacation Notice from Agency, Franchisee will notify Big O of its receipt of the Termination/Vacation Notice and provide Big O with the date which will be the Lease Termination/Vacation Date with respect to the Lease and the Lease Guaranty and Franchisee's leasing and occupancy rights with respect to the Property. Big O and Franchisee agree that except for those obligations which by their terms survive the termination of the Franchisee Agreement, the Franchisee Agreement, the Franchisee Guarantors Guarantees, the Security Agreement and the Ancillary Agreements will terminate effective as of the date which is the Lease Termination/Vacation Date. (d) Franchisee agrees to pay to Big O on the Lease Termination/Vacation Date, all amounts then due and owing to Big O or its affiliates pursuant to the Franchise Agreement or any other agreement, whether written or oral up and through the Lease Termination/Vacation Date. 2. Waiver of Claims in Eminent Domain By Big O. Big O acknowledges that, pursuant to the terms of the Agency/Tenant Leasehold Interest Acquisition Agreement, Franchisee is entitled to that portion of the consideration payable for Franchisee's agreement to assign, transfer and convey to Agency its leasehold rights and interest under the Lease and to terminate the Lease and the Lease Guaranty and its occupancy of the Property prior to the expiration of the Lease and the Franchise Agreement ("Franchise's Payment Consideration") as negotiated between Franchisee and Agency, and Big O fully, completely and forever absolutely and unconditionally waives all claims and rights to the Franchisee's Payment Consideration. Big O acknowledges that Franchisee has waived claims for any further 001219.0001\845563.6 4 compensation for it and its related and affiliated corporations, partnerships, limited liability companies or other entities or affiliated parties, including, without limitation, Big O and the Big O Affiliated Parties (as such term is defined below). In addition, Big O acknowledges that, as the franchisor, it is not entitled to compensation in eminent domain pursuant to Redevelopment Agency v. International House of Pancakes, Inc. (1992) 9 Cal.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, partnership, limited liability companies or other entities, partners, managers, members, shareholders, officers, directors, agents, spouses, assigns, employees, contractors, consultants, insurers, attorneys, predecessors and successors -in -interest (collectively, the "Franchisee/Franchisee Guarantors Affiliated Parties"); and (ii) Agency and Agency's Board of Directors, the City of Huntington Beach, California, the members of the Huntington Beach, California City Council and their respective officers, directors, agents, representatives, assigns, employees, contractors, consultants, insurers, attorneys and successors -in -interest (collectively, the "Agency Parties") all claims and any and all actions, causes of actions, claims, demands, rights, obligations, and liabilities of any kind whatsoever of every nature and character, whether known or unknown, arising from any matter, cause or thing, whatsoever occurred, done or omitted, and any and all matters arising out of the acquisition of the Property by Agency, including but not limited to claims for compensation, claims for any acquisition or relocation related benefits, including, but not limited to, compensation for personal property, any leasehold interest in the real property, payment for personal property, fixtures and equipment (if applicable), relocation benefits or assistance or any compensation based upon loss of goodwill, interest, costs, attorneys' and appraisal fees or any other damages of any nature. Big O acknowledges and agrees that the Agency Parties are third party beneficiaries of the foregoing waivers and releases. 3. Release. (a) By Franchisee and Franchisee Guarantors. Effective as of the Lease Termination/Vacation Date, for good and valuable consideration, the adequacy and sufficiency of which is hereby acknowledged, Franchisee and the Franchisee Guarantors, on behalf of themselves, and the Franchisee/Franchisee Guarantors Affiliated Parties and any and all persons or entities who may claim through or on behalf of any of them, fully, completely and forever absolutely and unconditionally relieve, release, remise, acquit and discharge Big O, and its affiliated corporations, partnerships, limited liability companies or other entities, officers, directors, managers, partners, members, shareholders, employees, guarantors, contractors, agents, predecessors, successors and assignors, and any and all persons or entities who may claim through or on behalf of any of them (collectively, the "Big O Affiliated Parties") from any and all actions, causes of action, suits, claims, rights, liabilities, contracts, duties, obligations, losses, debts, damages, costs, expenses, attorneys' fees, controversies, agreements and demands of every kind, nature, character or description whatsoever, in law or in equity, whether known or unknown, whether anticipated or unanticipated, whether direct or indirect, which either of them may now have against Big O or the Big O Affiliated Parties or which may hereafter be discovered, in connection with, as a result of, or in any way arising from, any relationship or transaction with Big O or the Big O Affiliated Parties, however characterized or described, which relates in any way to the Franchise Agreement, the Franchisee Guarantor Guarantees, the Security Agreement, the Ancillary Agreements and/or the former franchise relationship created 001219.0001 \845563.6 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 in Big O's or Big O Affiliated Parties' duties, liabilities, obligations (including, without limitation, indemnification obligations), undertakings, covenants and agreements to be fulfilled and performed pursuant to this Agreement. (b) By Big O. Effective as of the Lease TerminationNacation Date, for good and valuable consideration, the adequacy and sufficiency of which is hereby acknowledged, Big O, on behalf of itself, and the Big O Affiliated Parties and their respective heirs, executors, administrators, representatives, trustees, affiliated corporations, partnerships, limited liability companies or other entities, officers, directors, managers, partners, members, shareholders, employees, guarantors, contractors, agents, predecessors, successors and assigns and any and all persons or entities who may claim through or on behalf of any of them, fully completely, and forever absolutely and unconditionally relieves, releases, remises, acquits and completely and forever discharges Franchisee and the Franchisee Guarantors and Franchisee/Franchisee Guarantors Affiliated Parties from any and all actions, causes of action, suits, claims, rights, liabilities, contracts, duties, obligations, losses, debts, damages, costs, expenses, attorneys' fees, controversies, agreements and demands (including all amounts presently owed to Big O by Franchisee) and damages of every kind, nature, character or description whatsoever, in law or in equity, whether known or unknown, whether anticipated or unanticipated, whether direct or indirect, which it may now have against Franchisee, the Franchisee Guarantors or Franchisee/Franchisee Guarantors Affiliated Parties, or which may hereafter be discovered, in connection with, as a result of, or in any way arising from, any relationship or transaction with Franchisee, the Franchisee Guarantors or Franchisee/Franchisee Guarantors Affiliated Parties, however characterized or described, which relates in any way to the Lease, including, without limitation, Big O's Lease Rights, the Franchise Agreement, including, without limitation, Big O's First Refusal Rights, the Franchisee Guarantors Guarantees, the Security Agreement, the Ancillary Agreements and/or the former franchise relationship created thereby, from the beginning of time until the Lease TerminationNacation Date, except and unless such claim, demand, obligation, action, liability or damage arises from a breach or default in Franchisee's or the Franchisee Guarantors' duties, liabilities, obligations (including, without limitation, indemnification obligations), undertakings, covenants and agreements to be fulfilled and performed pursuant to this Agreement. (c) Release of Unknown Claims. Effective as of the Lease TerminationNacation Date, Franchisee and the Franchisee Guarantors, on the one hand, and Big O on the other hand, covenant and agree that they/it will forever refrain from instituting, prosecuting or maintaining any lawsuit, action and/or administrative or governmental proceeding against the other arising out of or relating to the releases set forth in this Section 3. It is intended that this Agreement shall be effective as a bar to each and every action, cause of action, suit, claim, right, liability, contract, duty, obligation, loss, debt, damage, cost, expense, attorneys' fees, controversy, agreement, trespass, judgment, execution and demand and claim, whether known or unknown, whether foreseen or unforeseen, whether suspected or unsuspected, that Franchisee and the Franchisee Guarantors, on the one hand, and Big O on the other hand, may have against the other and expressly waive any and all rights under Section 1542 of the California Civil Code, which provides: 001219.0001\845563.6 6 A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor. Provided, however, nothing contained in Section 3(a) and 3(b) and this Section 3(c) shall release or relieve Franchisee and the Franchisee Guarantors, on the one hand, and Big O on the other hand from its/their respective representations, warranties, covenants, obligations, undertakings and agreements under this Agreement or with respect to the Other Franchisee Agreements for the Other Big O Stores, which Franchisee and the Franchisee Guarantors on the one hand, and Big O, on the other hand shall remain fully liable and responsible therefor and shall survive the execution and delivery of this Agreement. 4. Indemnification. (a) Indemnification of Big O. Franchisee and Franchisee Guarantors agree to indemnify, protect, defend and hold harmless Big O and Big O Affiliated Parties from and against the entirety of any charges, complaints, actions, suits, judgments, damages, claims, costs, amounts paid in settlement, taxes, liens, encumbrances, expenses or fees, including all attorneys' fees and court costs, which Big O or Big O Affiliated Parties may suffer resulting from, arising out of or relating to or caused by the breach of any of Franchisee's or the Franchisee Guarantors' representations, warranties, covenants, agreements, duties, liabilities, undertakings and obligations under the terms of this Agreement. (i) Indemnification of Franchisee and Franchisee Guarantors. Big O agrees to indemnify, protect, defend and hold harmless, Franchisee and Franchisee Guarantors and Franchisee/Franchisee Guarantors Affiliates from and against the entirety of any charges, complaints, actions, suits, judgment, damages, claims, costs, amounts paid in settlement, taxes, liens, encumbrances, expenses or fees, including all attorneys' fees and court costs, which Franchisee and Franchisee Guarantors and Franchisee/Franchisee Guarantors Affiliates may suffer resulting from, arising out of or related to or caused by the breach of any of Big O's representations, warranties, covenants, agreements, duties, liabilities, undertakings and obligations under the terms of this Agreement. (b) Other Indemnification. The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory or common law remedy any party may have for breach of representation, warranty, covenant or contract. 5. Notice. Any notice, request, demand, statement or consent made under this Agreement shall be in writing and shall be delivered personally or sent (a) by registered or certified mail, return receipt requested or (b) by a nationally recognized overnight courier (e.g., FedEx or UPS); and shall be deemed given (i) when personally delivered; (ii) three (3) days after deposit in the United States Mail, postage prepaid, and properly addressed to the other Party at its address as set forth below; or (iii) the next business day after deposit with a nationally recognized overnight courier delivery, charges prepaid and properly addressed to the other Party as set forth below. Each Party may designate a change of address by written notice to the other Party given in accordance with this Section 5. 001219.0001\845563.6 If to Franchisee or the Franchisee Guarantors If to Big O: C.S.B. Partnership 7872 Edinger Avenue Huntington Beach, California 92647 Attention: Christopher R. Phillips Big O Tires, LLC 12650 East Briarwood Avenue Suite 2-D Englewood, Colorado 80112 Attention: Legal Department In conjunction with the third party beneficiary rights of Agency under Sections 1(b) and 2, in the event either Party provides any notice, request, demand, statement or consent in connection with the waivers and releases set forth in Sections 1(b) and 2 to the other Party, such Party shall also provide a copy of such notice, request, demand, statement or consent in the manner set forth in this Section 5 to Agency as follows: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: Executive Director Copy to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: City Attorney Copy to: The Redevelopment Agency of the City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attn: Agency Secretary To Tenant: C.S.B. Partnership 7872 Edinger Avenue Huntington Beach, CA 92647 Attn: Christopher R. Phillips Copy to: Richard P. Waxman, Esq. Wendel, Rosen, Black & Dean LLP I 1 l 1 Broadway, 241h Floor Oakland, CA 94607 6. California Laws. This Agreement shall be interpreted by the laws of the State of California. The Parties herein consent to and agree that any legal action or proceeding brought by any Party to the Agreement, and arising from or in connection with this Agreement or any breach hereunder shall be brought (i) with respect to the Federal District Court in the Southern District of California in the County of Orange, State of California; and (ii) with respect to any state court, in the Superior Court of the State of California for the County of Orange, California. 001219.0001 \845563.6 7. Counterparts; Facsimile. This Agreement may be executed in counterparts, all of which when taken together shall constitute one (1) complete instrument. The Parties agree that a facsimile copy of an authorized signature will have the same force and effect as the original signature. 8. Mutual Contribution. The Parties to this Agreement have been represented by separate and independent legal counsel in the negotiation and preparation of this Agreement. This Agreement has been drafted on the basis of the Parties' mutual contribution of the language and this Agreement shall not be construed against any Party as being the drafter of this Agreement. 9. Authority. Each person executing this Agreement on behalf of a Party hereby represents and warrants that such person is duly authorized and empowered to execute this Agreement on behalf of a Party and that this Agreement is a binding obligation of such Party. 10. Severability. If for any reason any provision of this Agreement is determined to be invalid, unenforceable or contrary to any existing or future law to any extent, such provisions shall be enforced to the extent permissible under the law and such invalidity, unenforceability or illegality shall not impair the operation of or otherwise effect those provisions of this Agreement which are valid, enforceable and legal. 11. Waiver. No waiver in any instance by any Party of any provisions of this Agreement shall be deemed a waiver by such Party if such provision in any other instance or a waiver of any other provisions hereunder in any instance. 12. Binding Effect. This Agreement is and shall be binding upon and inure to the benefit of the Parties hereto and their respective predecessors, successors, affiliates, assigns, trustees, receivers, personal representatives, heirs, legatees and devisees of the Parties. 13. Attorneys' Fees. Each Party shall be responsible for paying its and his or her own costs and expenses incurred in the preparation of this Agreement. However, in the event of any litigation between the Parties based upon an alleged breach or default in their respective obligations to be fulfilled pursuant to this Agreement, the prevailing Party in the action shall be entitled to recover attorneys' fees and court costs from the non -prevailing Party(ies). 14. Entirety of Agreement; Amendment. This Agreement embodies the entire agreement and understanding between the Parties with respect to the matters which are the subject of this Agreement and supersedes all prior agreements and understandings related to the subject matter hereof. This Agreement may not be modified, changed, amended, supplemented or terminated nor may any obligations hereunder be waived, except by written instrument signed by the Parties; except that, the waivers and releases set forth in Sections 1(b) and 2 of this Agreement which confer onto the Agency Parties certain third party beneficiary rights and benefits, may not be amended without the prior written consent of Agency, which consent shall not be unreasonably withheld. Except as expressly provided in Section I (b) and 2 of this Agreement, the Parties do not intend to confer any benefit hereunder on any person, firm, corporation, partnership, limited liability company or other entity other than the Parties hereto. 001219.0001\845563.6 9 15. Exhibits. All Exhibits referenced in this Agreement are attached to this Agreement, and incorporated herein by this reference and made a part hereof. IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties hereby execute this Agreement as of the date first set forth by their names. BIG O: FRANCHISEE: BIG O TIRES, LLC, a Nevada limited C.S.B. PARTNERSHIP, a California general liability company (formerly known as partnership Big O Tires, Inc., a Nevada corporation) By: C.E.P. Developments, Inc., a California corporation, its General Partner By: By: Kevin Kormandy, Executive Christopher R. Phillips, President Vice President and Chief Operating Officer Date: Date: By: PHILLIPS & PHILLIPS, L.P., a California limited partnership, its General Partner By: C. & E. Phillips, Inc., a California corporation, its General Partner LI-A Date: Christopher R. Phillips, President By: FOUR KYLES, INC., a California corporation, its General Partner Virgil Kyle Kyle, III, President Date: By: JYB ENTERPRISES, INC., a California corporation, its General Partner Jason Y. Berry, President SIGNATURES CONTINUED ON FOLLOWING PAGE 001219.0001 \845563.6 10 FRANCHISEE GUARANTORS: Christopher R. Phillips, Individually Date: Emiko J. Phillips, Individually Date: Virgil Kyle Kyle, III, Individually Date: Diane R. Kyle (also known as Diane Rose Kyle), Individually Date: Jason Y. Berry, Individually Date: Laura Berry (also known as Laura Frances Aguayo -Berry), Individually Date: 001219.0001\845563.6 11 EXHIBIT A Franchisee's Franchise Agreement 001219.0001\845563.6 EXHIBIT B Security Agreement 001219.0001\845563.6 EXHIBIT C Lease and the Lease Guaranty 001219.0001 \845563.6 EXHIBIT D Lease Amendment 001219.0001\845563.6 EXHIBIT E Agency/Tenant Leasehold Interest Acquisition Agreement 001219.0001 \845563.6 ATTAC H M E N T #4 i /� ✓�UNiINGTp� r \`cF �UNTV�CP���o�l CITY OF HUNTINGTON BEACH INTERDEPARTMENTAL COMMUNICATION FINANCE DEPARTMENT TO: FRED A. WILSON, CITY ADMINISTRATOR FROM: DAN T. VILLELLA, CPA SUBJECT: FIS 2008-09-04 Approve Agreement for Purchase of Property and Leasehold Interest for 7872 Edinger Avenue DATE: DECEMBER 8, 2008 As required by Resolution 4832, this Fiscal Impact Statement has been prepared for "Approve Agreement for Purchase of Property and Leasehold Interest for 7872 Edinger Avenue." If the City Council approves this action (total appropriation $4,781,500), the total of the estimated undesignated fund balances available in the Redevelopment Merged Project Area at September 30, 2009 will be reduced to $3,714,000. an T. Villella, CPA DTV/rs ATTACHMENT #5 Site Map INITIATING DEPARTMENT: Economic Development SUBJECT: Approve Agreement for Purchase of Property and Leasehold Interest for 7872 Edinger Avenue COUNCIL MEETING DATE: December 15, 2008 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Resolution (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Tract Map, Location Map and/or other Exhibits Attached ❑ Not Applicable Contract/Agreement (w/exhibits if applicable) Attached (Signed in full by the City Attorney) Not Applicable ❑ Subleases, Third Party Agreements, etc. Attached ❑ (Approved as to form by City Attorney) Not Applicable Certificates of Insurance (Approved by the City Attorney) Attached ❑ Not Applicable ❑ Fiscal Impact Statement (Unbudgeted, over $5,000) Attached ❑ Not Applicable Bonds (If applicable) Attached ❑ Not Applicable Staff Report (If applicable) Attached ❑ Not Applicable Commission, Board or Committee Report (If applicable) Attached ❑ Not Applicable Findings/Conditions for Approval and/or Denial Attached Not Applicable ❑ EXPLANATION FOR MISSING ATTACHMENTS REVIEWED RE RIVED FOR ARDED Administrative Staff ). . Deputy City Administrator (Initial) ( ) ( ) City Administrator (Initial) ( ) ( ) City Clerk ( ) EXPLANATION FOR RETURN OF ITEM: J RCA Author: Powell/Fritzal