BUYING, SELLING, AND LEASING CONVENIENCE … selling, and leasing convenience stores. j. mark freeland. ... selling, and leasing convenience stores chapter 17. i. 5)

BUYING, SELLING, AND LEASING CONVENIENCE STORES

J. MARK FREELAND Law Offices of Mark Freeland

806 Pecan

McAllen, Texas 78501

(956) 682-8316 (Tel.)

(956) 682-8653 (Fax)

[email protected]

State Bar of Texas

32ND

ANNUAL ADVANCED REAL ESTATE LAW COURSE

July 8 - 10, 2010

San Antonio

CHAPTER 17

J. MARK FREELANDLAW OFFICES OF MARK FREELAND

806 PECAN McALLEN, TEXAS

(956) 682-8316 (telephone)(956) 682-8653 (facsimile)

[email protected]

BIOGRAPHICAL INFORMATION

Education:

University of Texas at Austin (B.A. with honors, 1975)

St. Mary’s University School of Law (J.D., 1978)

Bar Admission:

State Bar of Texas (1979)

Memberships:

American Bar AssociationState Bar of TexasHidalgo County Bar AssociationHidalgo County Bar Association (Real Estate Section)

Board Certification:

Commercial Real Estate (1987)Farm and Ranch Real Estate (1987)Residential Real Estate (1987)

Employment Experience:

Mr. Freeland has been in private practice in McAllen, Texas, since being admitted to theState Bar of Texas in May, 1979.

BUYING, SELLING, AND LEASING CONVENIENCE STORES32 Annual Advanced Real Estate Law Coursend

J. MARK FREELAND

TABLE OF CONTENTS

I.CONVENIENCE STORES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Before Self-Service Gasoline Pumps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

C-Store Retrofitting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Early Design Build . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Modern C-Store Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1) STRUCTURING THE DEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2) CHOICE OF ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A) Limited Liability Companies (LLCs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B) Limited Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

C) S Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

II. REAL ESTATE ACQUISITION (UNIMPROVED PROPERTY) . . . . . . . . . . . . . . . . . . . . . 4

1) Roll Back Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 4

2) Subdivision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3) Zoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4) Building Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

5) Signage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

6) Use Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

7) Planned Unit Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

8) Alcoholic Beverage Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

9) Flood Plains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

10) Expansion of Road Right of Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

11) Controlled Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

12) Title\survey Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

13) Phase I Environmental Site Assessment (ESA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

14) Sanitary Sewer \ Septic Tank - Drain Field System . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

15) Deed Restrict Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

III. REAL ESTATE ACQUISITION (IMPROVED PROPERTY) . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

1) Subdivision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2) Zoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 8

3) Title and Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

4) Co-branded Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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5) Demolition or Renovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

6) Underground Storage Tanks (USTs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

7) Phase II and Phase III Environmental Site Assessments (ESA) . . . . . . . . . . . . . . . . . . 12

IV. PURCHASE \ SALE OF ON-GOING C-STORE BUSINESS (ASSET PURCHASE) . . . 12

1) Branding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2) Brand Growth Program Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3) Bill of Sale (Who Is the Seller?) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4) Non-compete Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

5) Employment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

6) Intangible Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

7) Seller Vendor Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

8) License and Permit Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

9) Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 .5

V. LEASEHOLDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 5

1) USTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2) Indemnification Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 6

3) Co-branded Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4) Inventory and Equipment . . . . . . .. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

5) Structuring The Deal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

6) Personal Lease Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 77) Non-compete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

8) Non-disturbance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

9) Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

VI. UNDERGROUND STORAGE TANKS (USTS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

1) Federal Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

2) State Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3) Financial Assurance Requirements for USTs . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 19

4) Petroleum Storage Tank Remediation (PSTR) Account . . . . . . . . . . . . . . . . . . . . . . . .. 20

5) Pollution Liability Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 20

6) Ethanol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

6) Energy Policy Act of 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

VII. SECURED CREDITOR EXEMPTIONS (USTs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

1) Federal Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2) State Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 23

3) Loan Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

VIII. THE BROWNFIELDS AMENDMENT \ A SAFE HARBOR? . . . . . . . . . . . . . . . . . . . . . . . 25

IX. PETROLEUM MARKETING PRACTICE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

X. C-STORE ASSOCIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

XI. INDUSTRY RECOMMENDED PRACTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

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I. CONVENIENCE STORES

The sale, purchase or lease of a convenience store(a/k/a C-Store) location is not unlike any othercommercial real estate transaction from a real estateacquisition perspective. However, transactions involvingthe acquisition of convenience store locations sometimescross the line of a pure real estate transaction by bringinginto play a host of other issues that relate to theoperational requirements of a convenience store.

BEFORE SELF-SERVICE GASOLINE PUMPS.The convenience store industry has evolved over theyears. It started out with small locally owned storesselling a basic array of grocery items, milk, coldbeverages and ice. The C-Store’s main attribute was theconvenience of being able to get in and out of the storequickly. Gasoline sales were not part of the product mix;rather, gasoline was sold primarily at full servicegasoline stations. The C-Store’s main competition wasthe supermarket or large grocery store that carried morevariety but were burdened with long lines and parkingproblems. Then self-service gasoline pumps came on thescene. The addition of self-service gasoline sales to thetraditional product mix of the C-Store marked thebeginning of the demise of the full-service gasolinestation.

C-STORE RETROFITTING. As a way to increasethe number of gallons sold, enterprising gasolinewholesale distributors began vying for existing C-Storelocations and entering into contractual arrangementswith C-Store owners to install, at the distributor’s cost,underground storage tanks, self-service pumps andcanopies on existing C-Store properties. In return the C-Store owners would monitor the gasoline sales from aremote console, and collect and remit the gasoline saleproceeds to the distributor on a periodic basis in returnfor a negotiated price per gallon for every gallon sold.

EARLY DESIGN BUILD. With the advent of selfservice gasoline pumps, the franchise or chain C-Storeconcept also began to proliferate wherein C-Stores weredesigned from the start with self-service gasoline islands.Early stores still had small inside store space with fewself-service gasoline pumps on rather small propertiesthat did not allow for expansion; nonetheless, they beganto compete aggressively with the locally ownedretrofitted C-Store concept and the full service gasolinestation, primarily because they owned their own gasolinedistribution equipment and could buy fuel at wholesaleprices.

MODERN C-STORE CONCEPT. Today, mostsuccessful C-Store operators have sized up theirlocations and have located their properties on strategiccorners. The inside store square footage has increased aswell as the number of canopied pump islands sellingbranded gasoline and diesel fuel. Inside store sales haveexpanded beyond the conventional C-Store productmixes to include lottery tickets, money orders, coffeebars, and fast food counters with food items for salemade fresh on premises. The trend is also towards welllighted facilities with expanded restroom facilities toaccommodate the traveling public. Often, C-Stores arecombined with the added retail power of a carwash or anational/regional fast food restaurant in the samelocation, which is referred to as “co-branding” in theindustry. Operational hours have expanded, and 24 houroperations have become the norm.

1) STRUCTURING THE DEAL

Generally, the owner of the land and the operatorof the store operation are two distinct legal entities, eventhough they may have the same or related ownership.The land owning entity is the “passive” entity and hasobtained the financing for the acquisition of the land, theconstruction of the improvements, and the installation ofthe fixtures and equipment. Upon completion of thestore improvements, the land owning entity then leasesthe improved property to the store operating entity,usually on a triple-net lease. The store operating entityis the “active” entity. It finances the inventory, entersinto a branding agreement with a major oil company,obtains all of the required permits\licenses for storeoperations, staffs the store with personnel, and runs thestore operations. While the store operating entity isusually the same entity for each location, the landowning entity is often times a single asset company or,if not a single asset company, it only owns a limitednumber of locations relative to the number of locationsoperated by the operating entity.

Reasons to split the ownership between the landand the store operations include: a) to facilitate the saleand lease back of the land at a future date while keepingthe store operation or vice versa; b) to try to limit orcontain exposure to tort liability (asset protection) byputting land and equipment into a passive entity andleasing the package to the active operating entity ; c) tominimize cross collateralization and cross default issuesin loan transactions; d) to allow for one entity to survivewithout the other; and e) to permit, for federal incometax purposes, the land owning entity to be taxeddifferently (e.g. a flow-through entity taxed at the

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owner’s level) from the operating entity (e.g. taxed atthe entity level). It can however, be somewhatcumbersome for the client to maintain separate entitiesand this structure does create additional costs to theclient.

2) CHOICE OF ENTITIES.

Texas affords owners a number of legal entitiesfrom which to choose. Most investors focus on liability,management, and tax issues when choosing an entity;however, entity choice can also involve capitalization,transferability of ownership, limited or unlimited life,costs for forming and maintaining the entity, whetherprofits will be distributed or reinvested, and assetprotection issues.

For owning and holding real estate the threeentities of choice are: limited liability companies (taxedas a partnership), limited partnerships, andS Corporations. These three entity forms share,generally, the characteristics that they are not subject tofederal income taxation, with all gains and lossesflowing through and taxed at the owner level, and eachentity provides limited liability protection for itsinvestors. These entities differ primarily in the areas ofmanagement and ownership.

If the purpose is to build working capital asopposed to distribution of income to the owners, then theC Corporation or the LLC, which elects to be taxed as acorporation, may be the preferred choice of entityparticularly for the operating entity. Both the CCorporation and the LLC, which elects to be taxed as acorporation, can be converted to a S Corporation at alater date, if such an election becomes moreadvantageous to the taxpayer.

The following is an overview and generaldiscussion of the different characteristics of theseentities you may wish to consider when deciding whichentity best meets your client’s criteria.

A) Limited Liability Companies (LLCs).

The LLC is probably the entity of choice todaybecause of its flexibility and versatility.

Limited liability companies have characteristicsof both partnerships and corporations. The owners arereferred to as “members” and generally have no personalliability for the debts and obligations of the LLC. Theirrisk is limited to their capital contribution. While LLCs

can elect to be taxed as a corporation under the InternalRevenue Service’s (IRS) “check the box election”, theprevailing choice is to elect to be taxed as a partnership.If the LLC elects to be taxed as a partnership, the LLC isnot taxed at the entity level for federal income taxes; allgains and losses for income tax purposes flow-throughand are taxed at the member’s level and will be reportedon the member’s tax return. One disadvantage is thatindividual taxation cannot be deferred with a pass-through entity classification; taxes are owed on taxableincome whether there has been a distribution of incometo the members or not.

LLCs have flexibility of structure and can bestructured with a centralized or decentralizedmanagement. A centralized management can be vestedin less than all of the members. A decentralizedmanagement is where each member has certain rights ofmanagement as may be defined in the company’soperating agreement.

LLCs generally have two or more members, arelimited in duration, and restrict the free transferability ofownership interests.

LLCs were first created in 1991 under the TexasLimited Liability Company Act, Art. 1528n, TexasMiscellaneous Corporation Laws Act, Chapter 18. ThisAct expired on January 1, 2010. Limited LiabilityCompanies are now governed by Title 3 of the BusinessOrganization Code.

B) Limited Partnerships.

Limited partnerships have two types of partners,general partners and limited partners. While the generalpartner is jointly and severally liable for the debts andobligations of the partnership, the limited partners haveno personal liability. Generally, the limited partner’sliability is limited to the amount of capital contributed tothe partnership, unless they agree otherwise. Limitedpartnerships are not taxed at the entity level for federalincome tax purposes. All gains and losses for incometax purposes flow-through and are taxed at the partner’slevel and will be reported on the partner’s tax return;taxes are owed on taxable income whether there has beena distribution of income to the partners or not.

Limited partners generally do not have the rightto participate in the management of the limitedpartnership. Management of the limited partnership is inthe hands of the general partner, subject to whateverrestrictions are placed on the general partner in the

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limited partnership agreement. Properly structured, thegeneral partner should also be an entity with limitedliability characteristics. However, this may necessitatethe creation of another entity (the general partner’sentity) in order to form the limited partnership.

When limited partnerships were exempt fromTexas franchise taxes, limited partnerships were apopular vehicle in which to own real estate. Now thatthe exemption has been removed, limited partnershipshave lost some of their attractiveness. Limitedpartnerships appear best suited for use when you aretrying to raise capital from a class of investors (silentpartners) who are not intended to have any managementrights.

C) S Corporations.

Most corporations are C corporations underfederal tax law, unless the corporation qualifies andelects to be an S Corporation under Subchapter S of theInternal Revenue Code of 1986 (the “Code”). Unlike CCorporations, which pay federal income tax at the entitylevel, S Corporations are generally not taxed at the entitylevel for federal income tax purposes. All gains andlosses for income tax purposes flow-through and aretaxed at the shareholder’s level and will be reported onthe shareholder’s tax return; taxes are owed on taxableincome whether there has been a distribution ofdividends to the shareholder or not. In the context of aC Corporation, the shareholders only pay taxes upon thereceipt of dividends.

S Corporations are restricted in the number ofshareholders it can have to 75 shareholders, have onlyone class of stock, and limit who can be an eligibleshareholder (to US citizens and residents, estates, andcertain types of qualified trusts). Other technical rulesunder the Code apply to S Corporations and must beadhered to.

An S Corporation is a tax designation only; in allother respects, it is a corporation formed under state lawwith all of the corporate characteristics and qualitiesallowed under state law. All shareholders of acorporation are protected from personal liability for thedebts and obligations of the corporation. Management ofa corporation is centralized in a board of directorselected by its shareholders. Its duration can be unlimitedand, unless subject to a shareholder agreement withprovisions to the contrary, the corporate stock is fullytransferable.

Until the advent of LLCs, S Corporations werethe nearest thing to being able to have the protectionfrom personal liability provided by corporations while atthe same time having the advantage of pass-throughtreatment for income tax purposes that partnershipsenjoyed. LLCs combine both of these characteristicswith added flexibility and versatility.

II. R E A L E S T A T E A C Q U I S I TI O N(UNIMPROVED PROPERTY)

The following is a general discussion of somekey issues that can come into play in a purchaseagreement involving an unimproved tract of land to beacquired for use as a C-Store location.

1) ROLL BACK TAXES. Roll back taxesshould be addressed in the purchase agreement, if theproperty is being carried on the ad valorem tax roles withan agricultural use exemption. Roll back taxes can besignificant and need to be considered when making theoffer to buy property. When appraising land designatedfor agricultural use, the chief appraiser for the county taxappraisal district also appraises the land at its marketvalue. The difference in the tax actually imposed onland designated for agricultural use and the amount oftax that would have been imposed at the property’smarket value is the amount of additional tax (roll backtax) for that tax year. The chief appraiser determineswhether the land has been diverted to a nonagriculturaluse. If such determination is not protested or is upheldafter a proper protest is filed, each taxing unit preparesand delivers a bill as soon as practical for the additionaltaxes owed, plus interest at an annual rate of 7%calculated from the dates on which the differences wouldhave become due. The additional taxes becomedelinquent and incur penalties and interest if not paidbefore the next February 1 that is at least 20 days afterthe date the bill is delivered to the landowner. Roll backtaxes are calculated for each of the five years precedingthe year in which the change of use occurred. Texas TaxCode §23.55.

2) SUBDIVISION. The Texas LocalGovernment Code Section 212.004 (dealing with landsin the limits of a municipality or in its extraterritorialjurisdiction) and Section 232.001 (dealing with landsoutside the extraterritorial jurisdiction of a municipality)require a subdivision plat to be prepared and recordedwhen a tract of land is divided into two or more parts. Ifthe property is within the city limits or extraterritorialjurisdiction (ETJ) of a city or town, the city’ssubdivision ordinances control the subdivision process.

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If the property is outside the ETJ of a city, then thecounty’s subdivision ordinances control. Generally, theproperty has to be subdivided of record in order to obtaina building permit. The plat must conform to theminimum standards set forth in the applicablesubdivision ordinance and commonly addressesstandards, including but not limited to, potable water,sanitary sewer, storm water drainage, public access, andfire protection. A preliminary plat is generally reviewedby the city’s engineering department for compliance andis thereafter submitted with staff’s recommendations tothe city planning commission and subsequently to thecity commission for approval. Once a subdivision platmeets the government’s standards, it must be approved.Whether a property needs to be platted or re-platted isimportant because of the direct or indirect impact ontotal costs, time delays, and development flexibility.

If the property has not been subdivided, then thepurchase agreement should be drafted subject to thebuyer being able to obtain subdivision approval prior toclosing the purchase of the property. The subdivisionapproval process involves two kinds of costs: offsite andonsite costs. Offsite costs to be recognized mightinclude the added cost to bring potable water, sanitarysewer, storm water drainage, fire mains, public access,and utilities to the property. Onsite issues thatfrequently arise include public dedications for additionalhighway right of way, landscaping requirements, buffers,sidewalks, on-site storm water detention requirements,set-backs, and highway access (i.e. the number andlocation of curb cuts). Normally, the subdivision will bea one lot subdivision; however, if excess land is beingpurchased because the property is being developed as amulti-use project, a multi-lot subdivision generally worksbetter because it will facilitate financing the differentuses and the sale at a later date of all or part of the totalproject.

If the property is already a subdivided lot, thesubdivision plat should be reviewed. In particular, theplat notes setting forth any requirements affecting theuse of the property, including use restrictions, buildingrestrictions, on site storm water detention plans,landscaping requirements, and sidewalk requirementsshould be closely scrutinized. If a multi-lot subdivisionis under consideration, controlled access to a publicthoroughfare may have restricted access to the project.The access issue highlights the issue of whether there isa need for a joint access easement between lots. If ajoint access agreement exists, it needs to be reviewed forcosts and maintenance allocations together with its otherterms and conditions.

3) ZONING. Section 211.004 of the TexasLocal Government Code provides that all zoningregulations must be adopted by a municipality inaccordance with a comprehensive plan. Acomprehensive plan is generally understood to be a guideto future development in the context of urbandevelopment. The city’s zoning ordinances and zoningmaps (together with any proposed amendments) shouldbe consulted relative to the development of a piece ofproperty for C-Store purposes. Request a zoningverification letter identifying the property to bedeveloped verifying the current zoning for the property.Also obtain a copy of the zoning regulations applicableto the verified zoning classification. All property withinthe corporate city limits of a city is subject to the zoningordinances of that city. If the property is not zoned forC-Store use, a re-zoning application should be submittedfor city approval. Usually the zoning application issubmitted in conjunction with the subdivision request;however, if the zoning will be contested, it might bebetter to resolve the zoning issue before incurring theengineering costs associated with the subdivision platapproval process. The application to re-zone a propertymust go before the city’s zoning commission and the citycommission for approval; it also requires notices toproperty owners of the surrounding property elicitingtheir comments. Zoning tends to be neighborhoodsensitive and generally attempts to protect existingresidential neighborhoods.

4) BUILDING PERMIT. Generally, theproperty has to be subdivided of record in order to obtaina building permit. Cities issue building permits forprojects within its city limits. Counties issue buildingpermits for projects located outside the city limits.Additional permit requirements may be required formechanical, electrical, plumbing, demolition, andsignage. Renovations of existing facilities may requirea building permit and trigger requirements to upgrade theproject to meet current building codes.

5) SIGNAGE. C-Stores rely heavily onhighway signage and in particular signage to advertisetheir brand of motor fuel and its pricing. For those citieswith signage ordinances, be aware of the signagelimitations and permit requirements. Signage ordinancesset forth procedures for obtaining a permit for theerection of a free standing sign. Signage ordinances canaddress, among other matters, signage dimensions,height, illumination, moveable parts, and separation fromother signs. If a freestanding sign is within 660 feet ofan Interstate Highway, the Texas Department ofTransportation (TXDOT) has jurisdiction for control of

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signage under the Highway Beautification provisions ofthe Texas Transportation Code, Chapter 391. Licensesare administered through the Austin office of TXDOTand permits are administered through the applicableTXDOT district office.

6) USE RESTRICTIONS. Once a titlecommitment is issued, verify that no recorded userestrictions prevent commercial development, the sale ofgasoline, the sale of alcohol, or pornography (if the C-Store operator sells adult magazines). If the sale of beerand wine is a part of the C-Store product mix, verify thatthe property is not in a “dry” area as described bymunicipal or county ordinance.

7) PLANNED UNIT DEVELOPMENT. Ifthe title commitment reveals that the property is part ofa Planned Unit Development or subject to architecturalcontrol committee approvals, all building plans willnecessarily have to follow the processes established inthe subdivision declaration. Pre-approval of the plansand specifications should be obtained during any duediligence period under the purchase agreement.

8) A L C O H O L I C B E V E R A G ERESTRICTIONS. Most C-Stores sell beer and wineunless they are situated in dry areas. The TexasAlcoholic Beverage Code, Section 109.33 allowscounties to enact regulations applicable to areas in thecounty outside of an incorporated city or town to prohibitalcoholic beverages from being sold within 300 feet of achurch, public or private school or public hospital; or1,000 feet from a public or private school, if requestedby the school. The measurement of the distance betweenthe place of business where alcoholic beverages are soldand the church, school, or hospital is defined in Section109.33(b) of the statute. City ordinances place their owndistance restrictions on the sale of alcoholic beverages.If there is a church, school or hospital in close proximity,consult the applicable ordinances and, if necessary,verify the distances. Design modifications may benecessary to conform with applicable ordinancesdepending on how distances are required to be measured.

9) FLOOD PLAINS. The project engineershould determine whether the property lies in a floodplain. The Federal Emergency Management Agency(FEMA) has published Flood Insurance Rate maps thatidentify risk and special hazard low lying areas. Thesemaps are used to rate flood insurance offered under theNational Flood Insurance Program. Cities often havemore detailed maps. To offset the risk of being in a lowlying area, the project may incur additional costs

involved in bringing in sufficient fill dirt to raise theproject elevation. The additional cost of flood insurancewill also affect the bottom line profitability of the store.

10) EXPANSION OF ROAD RIGHT OFWAY. Road expansion can become an issue. Certainhighway intersections are on the drawing board at theTexas Department of Transportation (TXDOT) for majorexpansion including new on-off ramp systems eventhough the necessary right of way acquisitions have notbeen acquired or condemned. What looks like a primecorner may not be buildable even though there is no timeframe for when or if the expansion will occur. In someinstances the right of way has been acquired, but the roadsystem has not yet been expanded. Then the issuesbecome how far back from the present highway must thestore be located and for how long and, when the roadsystem expansion commences, the negative impact onthe C-Store business caused by restricted or limitedaccess during the construction period.

11) CONTROLLED ACCESS. All accesson state or federal highways is controlled. Cities alsoregulate access to public streets. The size, location andnumber of access points\curb cuts need to be determinedas soon as possible and may need to be negotiated withthe applicable agency, if possible, should the initialrecommendation be insufficient. Current trends pointtowards backing curb cuts further away from thehighway intersection. This impacts the thought processin picking the best corner at an intersection. In the past,conventional wisdom preferred the “downstream” cornerbecause of easier access out of the store; now thethinking prefers the “upstream” corner if the curb cutaccess is required to be moved further back from theintersection.

12) TITLE\SURVEY ISSUES. As in allreal estate transactions, thorough reviews of the titlecommitment and survey are critical . There should beagreement between both the title commitment and surveyas to what does and does not apply to the property. Ofparticular concern are the existence and/or location ofunderground easements for gas transmission pipelines,utilities, and TXDOT drainage facilities that are notreadily visible to a surface inspection. Surveys shouldshow all recorded easements. Sometimes surveys willpick up indications of easements, the location of whichcannot be ascertained from the public record. Theseindicators can include items such as irrigation standpipes and utility markers located on highway right ofways. If the area is known for oil and gas production,the location of nearby wells and tank batteries could be

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an indication of possible unmarked natural gas or oilgathering lines crossing the property. ContactDIGTESS at 1-800-344-8377 and at www.digtess.org tolocate and mark all underground pipelines. In the lowerRio Grande Valley of Texas, the applicable irrigationdistrict should be contacted as to all rights they claimagainst the property, if any.

If the property is burdened with a “blanket”easement, try to contact the easement holder in order toremove the easement from the property or at least restrictit to its actual location.

The Texas Natural Resources Code §111.0194creates the “presumption” that a pipeline laid under grantor judgment in eminent domain prior to January 1, 1994,has a width of fifty feet (50') as to each pipeline laid.

13) PHASE I ENVIRONMENTAL SITEASSESSMENT (ESA). The objective of a Phase I ESAis to evaluate a property for current and historicalinformation that indicate sources of environmentalconcern, evidence of disposal or release of hazardousmaterial onto the property, evidence of environmentalthreats from adjoining or proximate properties, andwhether additional testing (Phase II and Phase III) of theproperty should be done. Such assessment is based oninquiry into public records, historical aerial photos,regulatory filings, visual inspection of the property andadjacent properties, and interviews of individualsfamiliar with the area and the property. A Phase I ESAis a non-intrusive inspection and does not entail testingof the soil, air or water. Prudent buyers, who maypotentially claim protection from CERCLA (TheComprehens ive Envi ronmenta l Response ,Compensation, and Liability Act) liability as an innocentlandowner, a bona fide prospective purchaser, or acontiguous property owner should conduct a Phase IESA prior to closing on any real estate acquisition.Prudent buyers should also get a representation from theseller that it knows of no release of hazardous substancesonto the property. Buyers should avoid agreeing toindemnify the seller for any pre-existing environmentalliabilities.

In 2002, Congress passed the “Small BusinessLiability Relief and Brownfields Revitalization Act”(Brownfields Amendments). The BrownfieldsAmendments, in addition to amending other provisionsin CERCLA, required the Environmental ProtectionAgency (EPA) to promulgate regulations establishingstandards and practices for conducting Phase I ESAs(referred to as “All Appropriate Inquiries”) to replace the

interim rules. The new rules became effective November1, 2006 (70FR66070). The final rules do not differsignificantly from the interim rule standards in effectprior to November 1, 2006. The EPA recognizes that theguidelines for conducting a Phase I ESA which havebeen established by the American Society for Testingand Materials (ASTM) under the “ASTM E1527-05Standard Practice for Environmental Site AssessmentsProcess” fully complies with the “All AppropriateInquiry” (AAI) final rules that became effectiveNovember 1, 2006.

The final rules adopted by the EPA enhanced theinquiries required under the interim rules by extendingthe scope of a few of the environmental due diligenceactivities and now require that significant data gaps oruncertainties be documented. The Phase I ESA mustalso be conducted within one year prior to the date ofacquisition of a property, and, if conducted more than180 days prior to the acquisition date, certain aspects ofthe inquiry must be updated. For more information seethe U. S. EPA’s website at www.epa.gov/brownfields.

14) SANITARY SEWER\SEPTIC TANK -DRAIN FIELD SYSTEM. Public sanitary sewer isgenerally available in urban areas, but not generally inrural locations. For the most part, public sanitary sewersystems are always preferred over a septic tank - drainfield system, which often times has to be augmented byan expensive packaged sewer treatment facility in areasof high demand. If a C-Store operation is to be servicedwith a septic tank-drain field system, enough additionalland must be acquired to handle the demands put on thedrain field. Factors such as soil type (porosity) and anestimation of the amount of effluent that will begenerated will need to be determined. If it is possible, atthe developer’s cost, to extend a public sanitary sewerline to the property, a proper cost benefit analysis shouldbe conducted to determine which system would be morecost effective in the long run. A septic tank permit willbe required in order to construct a septic tank and drainfield.

15) DEED RESTRICT COMPETITION.Often times, when buying an unimproved corner, theseller also owns the land behind and on either or bothsides of the corner. If so, the buyer should try andbargain for use restrictions on the remainder of seller’sproperty prohibiting the sale of gasoline/diesel fuel (andgrocery items). The sale of gasoline is highlycompetitive in many markets, and having a large retailerthat also sells gasoline come in as a competitor, after

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having made the investment to build and open a C-Store,is tough.

Sometimes, even if your client is not interested inbuying the property, you can bargain with a landownerto purchase a deed restriction prohibiting the sale ofgasoline/diesel fuel (and grocery items) on a strategiccorner property in order to protect an existing nearbystore. It may even make sense to purchase a strategiccorner, and re-sell it with a use restriction in place.

Obviously, if a C-Store developer is selling offexcess property around its C-Store, deed restrict thesurplus property to prevent competition.

III. REAL ESTATE ACQUISITION (IMPROVEDPROPERTY)

The following is a general discussion of some keyissues that can come into play in a purchase agreementinvolving an improved tract of land to be acquired foruse as a C-Store location.

1) SUBDIVISION. Generally, improvedproperties are located on subdivided properties, but notalways. If the property has been properly subdivided,review the plat for any special notes, restrictions orreservations. Check the plat for any private easements“created by plat”, which are not supported by writtenagreements. These private easements should be reducedto a written agreement which, among all of the otherbusiness issues that must be addressed, makes it clearthat the easement created by plat and the recordedeasement are one and the same.

If the property is not subdivided, it would bepreferable to subdivide the property prior to closing.There are the risks however, that in order to obtainsubdivision approval, additional costs will be incurred tobring the property up to subdivision standards and thatthe city or county will exact additional road right of waydedications for subdivision approval. Failure tosubdivide the property may result in delays or denials offuture building \ remodeling permits.

2) ZONING. If the property is within thecity limits, request a zoning verification letter that setsforth the current zoning for the property and a copy ofthe zoning regulations for that zoning classification.

3) TITLE AND SURVEY. Review thesurvey for set back compliance, especially the canopyareas over the fuel islands. If the property is serviced by

a septic tank and drain field, locate the systemcomponents and make sure they are wholly within thesubject property. If the property is part of a co-brandeddevelopment, the original developer may not have beenvery careful about the placement of signage, landscaping,access and parking arrays. The survey should show theentire project, not just the property being acquired, inorder to make sure you have identified all on-site andoff-site issues that must be documented for usage rights.Have the surveyor locate all underground storage tanks.

4) CO-BRANDED LOCATIONS. Often,co-branded properties are initially built and operated bya single developer\operator with no appreciation orrecognition that the project will later be financed, soldoff or leased in parts. Commonly, a co-branded siteoriginally developed by a single developer \ operator(who was focused on efficiency and keeping costs down)frequently shares amenities such as pylon signage, utilitylines, access, parking, storm water detention areas,sanitary sewer drain fields, and landscaping. When amulti-use project is being split up, a common areamaintenance agreement may be required to address theissues created by the joint usage, or, at a minimum,specific easement agreements that document the statusquo regarding joint use, maintenance, and costs shouldbe considered.

In a lease situation, the issues raised above for aco-branded location are still relevant, particularly if thelandlord no longer owns the other co-branded site or hasalready leased it.

Sometimes, each co-brand store is owned by adifferent entity controlled by the same ownership group.Even with common control, the players and theirrespective properties and rights must be identified andseparated. This becomes especially important if each co-brand store is separately financed because each lenderwill expect each co-brand property to function andoperate independent of the other.

This necessarily means that all legal rights thatare shared or required by one or the other co-brand storebe properly documented of record and expresslyconsented to and subordinated to by all existingmortgagees.

5) DEMOLITION OR RENOVATION.The purchaser of an existing facility may intend toremodel or demolish the improvements upon acquisition.However, the presence of asbestos or lead-based paint inolder structures can have a negative effect on property

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values because of the additional costs incurred inhandling or disposing of said contaminants due toregulatory requirements imposed under federal and statelaw. Both asbestos and lead have become highlyregulated because of the deleterious harm to humanhealth caused by exposure to such materials.

The Occupational Safety and HealthAdministration (OSHA) has promulgated workerprotection rules and standards regarding asbestosabatement. See 29 C.F.R. §1926.1101 et seq. Asbestosis a defined hazardous substance under the FederalComprehensive Environmental Response Compensationand Liability Act (CERCLA).

Facilities constructed before 1980 are presumedto contain asbestos or must be tested to eliminate thepossibility. See definition of Presumed AsbestosContaining Material 29 C.F.R. §1926.1101(b). Asbestoswas incorporated into many different building materialsprior to 1980. Asbestos also comes under state regulationthrough the Texas Asbestos Health Protection Act(TAHPA). The Texas Department of State HealthServices has promulgated rules and standards under 25TX. ADMIN. CODE §295.31-295.73. Abatement ofasbestos requires an authorized asbestos contractor todispose the materials at a designated asbestos disposalsite.

Requesting a demolition or remodeling (building)permit under applicable city or county ordinances willgenerally trigger the requirement for an asbestosassessment. Failure to conduct a thorough asbestosinspection is in violation of 25 TX. ADMIN. CODE§295.34 (c) and 40 CFR Part 61, Subpart M, § 61.145(a)and carries a penalty in the amount of $5,000.00.

The Texas Department of State Health Services(formerly the Texas Board of Health), Division forRegulatory Services (P. O. Box 149347, Austin, Texas78714-9347, 1-888-963-7111, www.dshs.state.tx.us) isauthorized to enforce the Texas Asbestos HealthProtection Act, Texas Occupations Code, Chapter 1954(“Act”); the Texas Asbestos Health Protection Rules(“Rules”), Title 25, TAC, Part 1, Chapter 295; theNational Emission Standards for Hazardous Pollutants(NESHAP), 40 CFR Part 61, Subpart M; and theAsbestos Hazard Emergency Response Act (AHERA),40 CFR 763, Subpart E.

Buildings constructed before 1978 may also runthe risk of containing lead based paint. OSHA haspromulgated rules requiring workers to take protective

measures when cleaning, preparing the surface forrepainting, removing or disturbing lead based paint orany lead-containing materials. 29 C.F.R. 1926.62 et seq.The rules are applicable to all construction activities.Lead is defined as a toxic substance under Title IV of theToxic Substance Control Act (15 U.S.C. Section 2681 etseq.). Lead based paint abatement comes under thejurisdiction and enforcement authority of the TexasDepartment of State Health Services pursuant to theTexas Lead-Based Paint Abatement Act, TexasOccupations Code, Chapter 1955.

6) UNDERGROUND STORAGE TANKS(USTs). Section 334.9 of 30 TEX. ADMIN. CODEstates that effective September 29, 1989:

[A]ny person who sells orotherwise legally conveys a tank (or tanksystem) which is designed or intended tobe installed as an underground storagetank shall provide the purchaser (orgrantee) with written notification of a tankowner’s obligations relative to thecommission’s tank registration andconstruction notification provisions under§334.7 of this title (relating toRegistration for Underground StorageTanks (USTs); §334.127 of this title(relating to Registration for AbovegroundStorage Tanks (ASTs)); §334.8 of thistitle (relating to Certification forUnderground Storage Tanks (USTs);§334.6 of this title (relating toConstruct i on Not i f ica t ion) forUnderground Storage Tanks (USTs) andUST Systems); and §334.126 of this title(relating to Installation Notification forAboveground Storage Tanks (ASTs)).

(1) The written notification shallinclude the names and addressesof the seller (or grantor) and thepurchaser (or grantee), thenumber of tanks involved, adescription of each tank(capacity, tank material, andproduct stored, if applicable),and the agency’s designatedfacility identification number (ifthe entire facility is beingconveyed).

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(2) This notification requirementshall apply to any transfers orconveyances of a new or usedtank from one person to anotherperson, and shall also apply tothe sales of real property whereUnderground Storage Tanksand/or Aboveground StorageTanks are located.

(3) The written notification shall beprovided by the seller (orgrantor) to the purchaser (orgrantee) prior to the conveyanceof the tanks, or prior to the timeof the real property closing, asapplicable.

(4) For the purpose of fulfilling thedisclosure requirements of this section asto USTs, the following language (togetherwith the information in paragraph (1) ofthis section) is deemed sufficient: “Theunderground storage tank(s) which areincluded in this conveyance are presumedto be regulated by the Texas Commissionon Environmental Quality and may besubject to certain registration, compliances e l f -ce r t i f i ca t i o n , c o n s t r uc t i o nnotification, and other requirementsfound in Title 30 Texas AdministrativeCode, Chapter 334.

The preferred practice would be to put therequired notification in the purchase agreement and,failing that, in a separate notice delivered prior toclosing.

During the buyer’s due diligence period, thebuyer should have a tank and line (piping) tightness testperformed in order to verify that the UST system is notleaking petroleum product.

A seller should warrant, effective as of theclosing date: as to the history of the underground storagetank system (i.e. whether there have been any leaks); theUST registration and ownership; the age and type of tankconstruction; compliance with current standards andregulations governing tank construction, installation,cathodic protection, spill and overflow preventiondevices, leak detection equipment; and, all requiredrecord keeping has been maintained and is both accurateand current. The buyer should obtain a copy of seller’s

complete file on the UST system. The buyer should alsoverify that the UST registration matches the seller’sname.

A buyer inherits the compliance history rating ofthe facility. Ratings are maintained by the TCEQ. Poorratings can cause denial of permits, stricter regulations,and higher penalties in the future.

If there is a history of a prior leak, the sellershould provide the buyer with all documentation made atthe time of the spill by a licensed Corrective ActionProject Manager (CAPM) as to whether the spill wasreportable to the TCEQ. If the spill was not reportableto the TCEQ, the documented spill report should setforth the corrective action taken to contain and remediatethe spill. Otherwise, the TCEQ should have on fileunder the tank registration number any spill reports andremediation efforts undertaken.

The buyer will want to be indemnified by theseller for spills occurring prior to the closing date; theseller will want to be indemnified by the buyer for spillsoccurring after the closing date. Both parties have avested interest in ascertaining the condition of all tanksand existing hydrocarbon contamination, if any, at thetime of closing. This can generally be accomplishedwith a Phase II and, if necessary, a Phase III ESA. Thereis no substitute for soil and groundwater sampling todetermine if there is subsurface contamination.

Generally, a party cannot contract awayenvironmental liability once a release has beendiscovered; and TCEQ is not bound by any agreementsbetween the parties.

If the tanks are going to be removed and replaced,the seller should preferably take responsibility for thetank removal by a licensed Underground Storage TankContractor. Soil samples should be taken by a licensedCorrective Action Project Manager from the bottom ofthe hole and sent to a laboratory for analysis. TheCorrective Action Project Manager will be able tointerpret the lab results.

An owner/operator who installs, modifies orremoves a UST facility must submit constructionnotification to the TCEQ at least 30 days prior tocommencement of the work using form TCEQ-00495.

If the UST is currently being monitored becauseof a prior event, the seller will want the buyer to take

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over and assume the on-going monitoring obligation.This is a matter of negotiation between the parties.

Most sellers and buyers, who are in the businessof operating convenience stores that sell gasoline fromself-service pumps, are generally very familiar withTCEQ registration requirements, tank construction andinstallation, tank insurance, and remediationresponsibilities when encountering a hydrocarbonrelease; it’s just part of the business dynamics of beinga C-Store operator.

7) PHASE II AND PHASE IIIENVIRONMENTAL SITE ASSESSMENTS (ESA). APhase II ESA is used to determine whether there hasbeen a hydrocarbon release. In a Phase II ESA, soilsamples are collected where known leaks have occurredor are suspected, and these samples are usually chilledfor express shipment to an analytical laboratory foranalysis to determine the presence of any contaminants,and, if contaminants are present, whether thecontaminants exceed any applicable TCEQ action orprotective limits. Soil samples are accompanied bychain of custody documents.

A Phase III ESA may be employed to provide acomprehensive determination of the extent and degree ofhydrocarbon contamination if actionable hydrocarboncontamination is verified in the Phase II ESA. ACorrective Action Project Manager (CAPM), licensedpursuant to Section 26.366 of the Texas Water Code, isrequired to conduct the Phase II and Phase III ESA. Ifthe results require corrective action, the CAPM willsupervise the corrective action and will file all necessaryreports with TCEQ. A licensed Underground StorageTank Contractor will perform all required excavationsand tank removals, pursuant to Section 26.452 of theTexas Water Code. A closure letter issued by TCEQ,should be obtained upon satisfactory completion of anyrequired remediation effort. See, Section 26.3572 of theTexas Water Code.

IV. PURCHASE \ SALE OF ON-GOING C-STORE BUSINESS (ASSET PURCHASE).

Usually both parties involved in the sale andpurchase of the assets of an on-going C-Store businessare seasoned operators. They have generally agreed onthe purchase price for the land and building with the onlyvariable being the cost of the inventory on hand atclosing. Neither party wants to shut the business down.For the time being, the buyer probably wants to hireseller’s employees and managers and keep seller’s

vendors in place. There are, however, other issues toconsider.

1) BRANDING. Branding may be anissue, especially if the buyer does not already have abranding agreement to purchase fuel from the samemajor oil company presently supplying the seller.Branding agreements basically allow the C-Storeoperator to use the brand trade mark and purchase thebrand name fuel from the fuel provider. Brandingagreements generally call for letters of credit that can bedrawn against in the event a C-Store operator fails totimely pay for its fuel purchases according to the termsof the branding agreement. Even if the buyer already hasa branding agreement in place, approval of the major oilcompany is still required, and approval may comesubject to increasing the existing letter of credit, whichmay take some time to do. Obviously, if the buyer wantsto keep the existing brand and does not have an existingbranding agreement to sell the branded fuel, the buyerwill have to make application for branding approval, andthat necessarily takes time and a new letter of credit.

On the other hand, if the buyer wants to re-brandthe C-Store, that normally requires a shutting down ofbusiness as new signage has to be ordered and installed,and existing fuel inventories have to be removed andreplaced with the proper branded fuel. If the buyeralready has a branding agreement in place so that it cancontinue to operate under the existing brand, then thebuyer can re-brand after closing at its own pace;otherwise, the buyer will be under pressure during thedue diligence period to obtain the branding agreementapprovals and new signage ready to install after closing.Re-branding a C-Store necessarily means all new signagewhich can be extensive, expensive, and prone to delays.

2) B R A N D G ROW T H PROG R A MLOANS. There are brand incentive programs that allowretailers to borrow money from the major oil companythat supplies their branded fuel. The monies are used tohelp C-Stores keep up with upgrades (modernization) ofits branding signage and other franchisor brandingrequirements. Generally, if the retailer remainsexclusively a branded outlet and continues to buy all ofthe fuel requirements from the franchisor during the termof the program loan, then the loan repayments may bewaived or reduced as they come due. However, if at anytime during the amortization period of the loan the C-Store ceases being a branded outlet, then the loanagreement generally has an acceleration clause causingthe unpaid balance of the loan to become due and

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payable. This can become a problem for the seller if thebuyer intends to re-brand the location. If the buyer is notre-branding the location, then the seller will want thebuyer to assume the loan program.

3) BILL OF SALE (WHO IS THESELLER?). If the land owner and store operator are twodifferent entities (multiple sellers), then you have theadded complication of determining the ownership of thefixtures, equipment, and tanks. It doesn’t necessarilyfollow that it all goes with one seller or the other. Things occur over time, and while at the time there wasa logical reason why something was “booked” under onecompany and not the other, when operating stores arebeing sold, you need to know who the seller of thepersonal property is. If you have two buyers (one for theland and one for the operations), you need to know howthe buyers want to “book” the purchases. The buyersmay want to book the equipment, fixtures and tanksdifferently than how the sellers did.

4) NON-COMPETE AGREEMENTS. Thebuyer will want the seller to agree to a Non-CompeteAgreement particularly if the acquired C-Store would beadversely impacted by the seller’s operation of orparticipation in a competing C-Store in the same areaafter the sale. The covenant not to compete needs to beancillary to or part of an otherwise enforceableagreement at the time it is made (ie., the purchaseagreement). The restraints as to time, geographical area,or scope of activity restrained should be reasonable andnot impose a restraint that is greater than necessary toprotect the good will or other business interest of thebuyer; otherwise, a court may reform the covenant,pursuant to Section 15.51(c) of the Texas Business andCommerce Code. If the court deems it necessary toreform the covenant not to compete, it may not award thepromisee damages for a breach of the covenant before itsreformation; the relief that can be granted is limited toinjunctive relief.

5) EMPLOYMENT CONTRACTS. In aneffort to promote a smooth transition, the buyer mayconsider hiring the seller’s employees and managers fora limited or indeterminate period of time. Separateemployment agreements should be entered into with eachemployee. A covenant not to compete should beconsidered for key employees. See, Section 15.51(c)Texas Business and Commerce Code.

Sellers however may be reluctant to let employeesknow about the sale until the last possible minute. Aseller does not want to stir up its employee base until the

deal is reasonably certain to close. This may make anycontract negotiations between the buyer and seller’semployees somewhat difficult and last minute.

6) INTANGIBLE PROPERTY RIGHTS.Intangible property rights that may be important inacquiring a C-Store include trade names and trademarks.Depending on the sales area, the buyer may choose tokeep the seller’s trade name and trade mark. Even if thebuyer does not plan on using it, the buyer should want toacquire the trade name and trade mark if for no otherreason than to keep someone else from using it.

If the buyer intends to use the seller’s trade name,an “assumed name certificate” will need to be filed withthe county clerk’s office and the secretary of state’soffice. The seller will need to terminate any assumedname certificates.

On the other hand, if the seller has otheroperations that are not being sold, the seller will haveneed of its trade name and trade mark, and they will notbe for sale.

7) SELLER VENDOR ACCOUNTS. Aseller should make clear to each vendor account thename of the new store owner and the effective closingdate; any personal or corporate guaranties should bereleased after the account is paid in full. The buyer willneed to establish in advance its own vendor accounts inits name and be prepared to provide whatever guarantiesmay be required. The sales proceeds attributable to theinventory on hand at closing should be escrowed to payall recognized outstanding accounts payable.Coordination and cooperation with seller’s staff and itsvendors is imperative.

8) L I C E N S E A N D P E R M I TREQUIREMENTS. C-Store operations have grown incomplexity driven by the varied product mix they carryas well as the rules and regulations governing the sale ofsuch products. A modern C-Store could easily find itselfhaving to obtain the following permits or licenses:

(a) Sales Tax Permit – issued by the TexasComptrollers Office.

(b) Fuel Delivery Certificate – issued by TCEQon an annual basis; requires owner or operator re-certifythat the UST system is in compliance with TCEQregulations.

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(c) TABC License (Wine and Beer - Off-Premises Permit) – issued by the Texas Alcohol andBeverage Commission. (See Appendix A).

(d) City Wine and Beer Permit – required only ifstore is within the city limits.

(e) Cigarette Permit – issued by the TexasComptrollers Office.

(f) Abusable Volatile Chemical (AVC) SalesPermit – issued by the Department of State HealthServices. (See Appendix B).

(g) Lottery Ticket Sales License– issued by theTexas Lottery Commission. (See Appendix C).

(h) City Health Permit – issued by the city.

(i) County Health Permit – if the city and state donot inspect the store, it falls under county.

(j) State Health Permit – issued by theDepartment of State Health Services only if the city orcounty does not inspect the stores.

(k) Retail Food Operation Permit – issued by theTexas Department of State Health Services. (SeeAppendix D).

(l) TDHS Food Manufacturer Permit – issued toall stores that manufactures and packages their own ice.(See Appendix E).

(m) Alarm Permit – some cities require thepermit.

(n) Food Stamp Certificate – recommended forstores that are located close to communities.

(o) Certificate of Occupancy

(p) Conditional Use Permit – if there is an issuewith the city zoning.

(q) Septic Tank Permit – if project does not havesanitary sewer.

(r) Weight and Measures Permit – for each fueldispenser; issued by the Texas Department ofAgriculture (TDA). A TDA sticker is required to bedisplayed on all retail fuel dispensers. Dispensers are

inspected at least every three (3) years. (See AppendixF).

This list is not all inclusive.

The lawyer should determine which licenses andpermits are transferable and which are not. A conditionto closing should require that all transferable licensesand permits be transferred at closing, and that the buyerobtain all nontransferable licenses and permits prior toclosing.

When a UST system changes ownership, theexisting fuel-delivery certificate is only good for 30days. Pursuant to 30 Tex. Admin. Code Section 334.7,the USTs will need to be re-registered with the TCEQwith the name of the new owner and operator and anychanges that are made to the UST system. Until thebuyer submits for TCEQ approval a new self-certification form (TCEQ-00724), the owner or operatorcannot obtain a valid fuel-delivery certificate. Withouta valid fuel-delivery certificate an owner or operatorcannot receive fuel .

9) ALLOCATION OF PURCHASEPRICE. The sale of the assets of a business for taxpurposes is considered as the sale of separate assets. Animportant aspect of the purchase agreement is to allocatethe sales price between the various assets being sold.The tax interests of the buyer and seller may conflictwhen it comes time to allocate values to the assetsidentified in the purchase agreement. High-income, non-corporate sellers generally want to characterize as muchto capital gains rather than to ordinary income becauseof the lower maximum rate currently attributable tocapital gains. Corporate taxpayers are generally not asconcerned about capital gain recognition (unless theyhave capital losses which can only be offset by capitalgains) because the tax rate for capital gains and ordinaryincome are the same for corporate taxpayers.

For the high income, non-corporate seller, to takeadvantage of the lower capital gains tax rates, the sellerwill want to allocate as much of the purchase price togood will, trademarks and trade names, and otherintangibles that are generally categorized as capitalassets. The same goes for land and improvements; theseller will want to place more value on the land asopposed to the improvements. Covenants not tocompete, which are included as part of the sale/purchasetransaction, are subject to various technical rules andneed the attention of a tax expert.

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The buyer will want to allocate as much value tothe purchase price of the inventory or depreciablefixtures, equipment and personal property, whichprovides the buyer with more immediate deductionsagainst income. This goal can be accomplished throughhigher inventory costs and an increase in the value ofdepreciable assets to increase depreciation deductions.Buyers who acquire “good will” generally can depreciateit over a fifteen year period, which is considerably longerthan most depreciable fixtures, equipment and personalproperty that enjoy a 3 to 5 year depreciation schedule.

This is generally the point in the deal when thetax attorneys and tax accountants get involved.

V. LEASEHOLDS.

From the landlord’s perspective, it is looking foran income stream and to be rid of the headaches that gowith operating a C-Store; i.e. a triple net lease where thetenant pays the rent, ad valorem taxes, insurance andmaintenance. From the tenant’s perspective, leasing anexisting C-Store facility is not much different thanpurchasing one. The same due diligence applies. Onceagain all amenity packages (e.g. signage, septictanks/drain fields, access to public highway, etc.) mustbe self-contained within the leasehold description, and,if not wholly within the leasehold description, must beaccounted for in a binding written agreement signed byall interested parties. A current survey and leaseholdtitle policy provide good protections against potentialproblems that are not apparent otherwise.

1) USTs. Both the landlord and tenantshould be keen to perform a tank and line (piping)tightness tests and establish a base line Phase IIenvironmental site assessment of the property. Ifhydrocarbon contamination is present, the parties mustundertake a Phase III ESA. A tank and line tightness testis required by law if the UST system has beentemporarily out of service for 6 months or more. 30 Tex.Admin. Code §334.54(c)(3)(A). If a leak or spill isdiscovered, the landlord should take all appropriateactions to contain it and report the matter to TCEQ if itis at actionable levels. An accurate base line siteassessment benefits both parties to establish liability forpre-existing or future hydrocarbon contamination.

Much like a lender would do in a secured loantransaction, a landlord should obtain lease covenantsfrom the tenant that the tenant operate and maintain theUST system in accordance with Subchapter I of the

Texas Water Code, that the tenant will maintain thefinancial assurance (tank insurance) required under 30Tex. Admin. Code §37.815 and name the landlord as anadditional insured, that the tenant will notify landlord ofany spills and the corrective action taken to contain thespill and remediate the activity, and that at the end of thelease another Phase II ESA will be conducted todetermine if a material change from the original base linesite assessment has occurred.

Both parties to the lease need to address whetherthe tanks are to be pulled at the end of the lease term. Alot depends on whether the landlord believes anyresidual value to the tanks exists. Pulling the tanks maybe the only practical way of documenting the presence ofany contamination.

The tenant will want the landlord to give thetenant the same representations and warranties regardingthe UST systems as if it were purchasing the property. The landlord should warrant, as of the effective date ofthe lease: the history of the UST system; the USTregistrations and ownership; the age and type of tankconstruction; compliance with current standards andregulations governing tank construction, installation,cathodic protection, spill and overflow preventionequipment, and leak detection equipment; and, allrequired record keeping has been maintained and is bothaccurate and current. The tenant should request copiesof all portions of landlord’s records it deems relevant tomaintenance and operation of the UST system.

The UST registration will need updating to showthe new operator (tenant) and any changes to the USTsystem made by the landlord or tenant. 30 Tex. Admin.Code §334.7.

The tenant will need to get its own fuel deliverycertificate.

USTs do not last forever. Attention should to begiven to any disparity between the term of the lease andthe estimated life of the tanks. To replace all or part ofthe UST system during the term of the lease is a majorexpense and undertaking that should be of concern toboth parties and should not be ignored.

2) INDEMNIFICATION PROVISION.Similar to a purchase/sale situation, the landlord willwant to be indemnified and held harmless by the tenantfrom any hydrocarbon contamination occurring duringthe tenant’s occupancy, and the tenant will want to be

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indemnified and held harmless by the landlord from anypre-existing hydrocarbon contamination.

3) CO-BRANDED PROJECTS. If theproject is co-branded, particular attention should begiven to any joint operating or maintenance agreementsthat the tenant is expected to assume the landlord’sresponsibility to perform.

4) INVENTORY AND EQUIPMENT. Ifthe tenant is purchasing the inventory and assets of theon-going business operating on the leased premises, suchassets may not be owned by the landlord, but rather byanother affiliated operating company. Make sure youdistinguish and identify all parties to the transaction.

5) STRUCTURING THE DEAL. Thesame consideration for splitting the ownership of theland and improvements into a passive entity, and theoperations into a active entity are applicable to a leasesituation. The tenant consequently may want the right to“sublease” the premises to an affiliated operating entity.

6) PERSONAL LEASE GUARANTIES.If possible, the landlord should try to get the principalowners of the tenant entity to guaranty the lease.

7) NON-COMPETE AGREEMENT. Anon-compete agreement from the landlord is just asrelevant in a lease situation as it is in a purchase of anon-going business. (See Section IV above).

8) NON-DISTURBANCE AGREEMENT.If a mortgage lender is involved, the tenant shouldrequire the landlord to obtain from the lender a non-disturbance agreement, providing that, if the landlorddefaults on its loan, the tenant’s possession will not beinterrupted so long as all rents are current. The lenderwill probably cooperate with a Subordination, NonDisturbance, and Attornment Agreement (SNDA) thataddresses its concerns as well.

9) RIGHT OF FIRST REFUSAL. It wouldnot be uncommon for the landlord, once it has aseasoned lease with a good rental history, to want to sellthe leasehold property to a third party investor who isalso looking for a particular return on its investment.Regardless, the tenant should negotiate a right of firstrefusal to purchase the property at the offering priceotherwise acceptable to the landlord. This right gives thetenant a little more control over its destiny. The landlordon the other hand may not want to grant such a right offirst refusal for fear of dampening any offers to purchase

it might receive. However, the fact that we are dealingwith property with underground storage tanks holdingthousands of gallons of motor fuel (and thus a potentialenvironmental risk) takes the property out of the typicalcommercial lease context that poses little or noenvironmental risk. A landlord may find that noteveryone wants to assume that kind of environmentalrisk, except someone else in the C-Store business.Consequently, a landlord’s sales opportunities may belimited as a practical matter, and the tenant may be thebest opportunity for a sale of the property, if and whenthe landlord decides to sell.

VI. UNDERGROUND STORAGE TANKS (USTs)

In the old days (before regulations) when gasolinewas cheap, operators were not overly concerned withleaking tanks because the cost to remove and replace thetanks was more than the cost of the lost inventory. Itwasn’t until carcinogenic compounds found in gasolinestarted showing up in public water supplies that thegovernment took action. The major reason USTs leakedgasoline and diesel fuel was because the USTs wereconstructed of steel, and over time electrolysis would setin and unprotected steel tanks would slowly corrodeunderground. Eventually the corrosion wouldcompromise the integrity of the UST and cause the tankto leak fuel. The environmental concern occurs when theleaking hydrocarbons reach and contaminate the watertable. Whether the water table becomes contaminatedoften depends on factors such as the duration andquantity of the leak, soil type (tight or porous), and thelocation of the water table (shallow or deep). Whetherthe release is actionable may also depend on theproximity of the nearest water well.

1) FEDERAL LAW. Federal lawregulates underground storage tanks (USTs) used forpetroleum (gasoline and diesel) storage under theResource Conservation and Recovery Act (RCRA) andin particular 42 U.S.C. §6991 Subchapter IX -Regulation of Underground Storage Tanks. TheEnvironmental Protection Agency (EPA) haspromulgated regulations affecting USTs at 40 C.F.R.parts 280 and 281.

2) STATE LAW. Authority under Texaslaw to regulate USTs is found in Chapter 26 of the TexasWater Code and went into effect September 1, 1987.The Texas Commission on Environmental Quality(TCEQ), formerly known as the Texas NaturalResources and Conservation Commission (TNRCC),under delegation of authority, oversees and implements

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the federal UST program. State law requires that allUSTs used for storing motor fuels be registered. TexasWater Code Section 26.346. USTs are now required tomeet certain TCEQ adopted technical standardsconcerning design, construction, installation andoperation. Id. Section 26.347.

A tank in an underground storage tank systemmust also comply with TCEQ requirements for tankrelease (leak) detection equipment, spill and overfillequipment, and tank integrity assessment and corrosionprotection. Id. Section 26.3475.

The TCEQ promulgated rules and regulationsaffecting USTs under 30 Tex. Admin. Code §334,Subchapter C include but are not limited to the followingtopics:

i) Registration for USTs; Section 334.7ii) Seller’s Disclosure; Section 334.9iii) Reporting and Record Keeping; Section 334.10iv) Limits on Liability of Lender; Section 334.15v) Fee Assessment; Section 334.21vi) Technical Standards for New USTs; Section

334.45vii) Installation Standards for New USTs; Section

334.46viii) Technical Standards for USTs installed prior to

December 22, 1988; Section 334.47ix) Corrosion Protection; Section 334.49x) Release Detection; Section 334.50xi) Spill and Overfill Prevention; Section 334.51xii) Reporting Suspected Leaks; Section 334.72xiii) Corrective Action Plan; Section 334.81

You may search for TCEQ publications online atwww.tceq.state.tx.us/publications. Forms can bedownloaded from the TCEQ’s website atwww.tceq.state.tx.us/forms.

If your tank system is located in Kinney, Uvalde,Medina, Bexar, Comal, Hays, Travis, or WilliamsonCounty, additional requirements related to protection ofthe Edwards or the Trinity Aquifer may apply. See, 30Tex. Admin. Code, Chapters 213 and 214.

Cities can also have regulations\ordinancesaffecting UST installation and operation requirementsseparate from federal or state regulations. Whether it isa federal, state, or local regulation, the most stringentapplies.

Cathodic protection, which is the process ormethod for reducing or minimizing the effect ofcorrosion on USTs and the piping connecting the tank toeach Multiple Product Dispenser (MPD), is now requiredon all USTs and related piping susceptible to corrosion.Texas Water Code, Section 26.3475. All components ofthe UST system must be (i) cathodically protectedagainst corrosion, (ii) constructed of non-corrodiblematerial, (iii) constructed of a steel material which hasbeen clad with a non-corrodible material, or (iv) must beotherwise designed and constructed in a manner thatprevents the release of any petroleum product. 30 Tex.Admin. Code §334.5 (a)(2). It is not uncommon for a C-Store owner or operator to have used different types oftanks at different locations as costs, technology, andexperience factors changed. The reason a lot of the olderC-Stores went out of the gasoline business was due to thecost of upgrading their USTs to meet the performancestandards adopted by TCEQ for USTs brought into usebefore December 22, 1988. See, 30 Tex. Admin. Code§334.47.

For UST systems installed after January 1, 2009,owners and operators must install secondary containment(ie. double walled) for new and replacement tanks andnew piping.

UST owner\operators must comply with theTCEQ standards and implement a statistical inventoryreconciliation (SIR) and inventory control system fordetecting leaks. Texas Water Code, Section 26.348. AllUST systems are required to have a monthly release-detection (leak detection) monitoring procedure/process.Inventory control systems can vary from periodic manualtank gauging to constant monitoring of inventory viaelectronic systems or a combination of methods. See, 30Tex. Admin. Code §334.50. If a disparity occursbetween what is in the tank to what should be in the tank,the discrepancy may be the result of a problem in takingthe inventory or a leak. See, 30 Tex. Admin. Code§334.72. If the overage or shortage of fuel productpersists for two consecutive months, a suspected releaseshould be reported to the TCEQ Remediation Division(512-239-2200). See Tex. Admin. Code §334.72(3)(B).Depending on soil condition, vapor detection devicesthat can detect hydrocarbon vapors can also be placed inmonitoring wells strategically located under or around aUST to detect hydrocarbon vapor. An owner or operatorof a UST must investigate any suspected leaks. Id.§334.72. A tank and line tightness test must beperformed within thirty (30) days of a suspected release.Id. §334.71-85.

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All USTs must also be fitted with spill andoverflow prevention devices. These devices capture anyexcess fuel that would otherwise spill in the event of anoverfill situation. See, 30 Tex. Admin. Code §334.51.The three pieces of equipment required to meet spill andoverfill prevention are a tight-fill fitting, a spillcontainer, and an overfill device.

If a release of hydrocarbon product has occurred,the services of a certified correction action specialist(Corrective Action Project Manager or CAPM) will beneeded to determine the extent of the spillage andwhether any remediation and corrective actions arerequired. If the release exceeds 25 gallons or if there isfree product or vapor, the owner or operator is requiredto file a report with the TCEQ within twenty-four (24)hours of the spillage in addition to taking necessaryactions to contain immediately the spillage, prevent anyfuture release, and mitigate fire and explosion hazards.30 Tex. Admin. Code §334.72 and 334.75. If a UST hasto be removed, removal is required to be handled by alicensed and registered Underground Storage TankContractor. Texas Water Code, Section 26.452. Seealso, 30 Tex. Admin. Code §334.401, 334.407, and334.424.

The TCEQ uses risk-based corrective action whendetermining the corrective action necessary to remediatea release of hydrocarbon product from a UST - TexasWater Code, Sections 26.341(b)(2), 26.342 (15), and26.351(a). Corrective action may include:

a) site cleanup, including the removal,treatment, and disposal of surface andsubsurface contamination;

b) removal of UST;c) measures to halt release in progress or

to prevent future or threatened releasesof hydrocarbon product;

d) well monitoring, taking of soil borings,and any other actions reasonablynecessary to determine extent ofcontamination;

e) providing alternate water supplies; andf) any other action reasonably necessary to

protect the public health and safety orthe environment from harm orthreatened harms from hydrocarbonreleases.

3) F I N A N C I A L A S S U R A N C EREQUIREMENTS FOR USTs. 30 Tex. Admin. Code§37.815 sets forth the financial assurance requirements

for underground storage tanks. Owners and operators ofpetroleum USTs must demonstrate financial assurancefor a) taking corrective action, and b) compensating thirdparties for bodily injury and property damage whetherdue to sudden or non sudden accidental releases. Theassurance is required on a tank by tank basis.

The “per-occurrence” amount is $500,000.00, or$1,000,000.00 if the UST handles more than 10,000gallons of petroleum product per month or $1,000,000.00in sales per year. “Per occurrence” refers to the amountof funds that must be available to pay the costs fromeach occurrence of a leaking UST.

The “annual aggregate” amount is $1,000,000.00,or $2,000,000.00 for owners and operators of 101 ormore petroleum USTs within the United States. “Annual aggregate” is the total amount of fundsavailable for all accidental leaks that might occur in oneyear.

The amount of financial assurance excludes legaldefense costs. Id. at §37.815(g).

These coverage requirements do not in any waylimit the liability of the owner or operator. Id. at§37.815(h).

Most owners and operators satisfy the financialassurance requirements by obtaining tank insurance thatconforms to 30 Tex. Admin. Code §37.241. There isalso a financial test for self-insurance under 30 Tex.Admin. Code §37.825, which is used by only the largestcompanies. Other options include: a corporate guaranty(self insurance provided by a parent company), a suretybond (obtained from an insurance company, a letter ofcredit (obtained from a financial institution such as abank), and a trust (set up with a financial institution suchas a bank).

4) PETROLEUM STORAGE TANKREMEDIATION (PSTR) ACCOUNT. TCEQadministers the PSTR Account under 30 Tex. Admin.Code §334.302. Fees paid at the refinery level onrefined gasoline fund the account, but the cost wasultimately passed down to the consumer. The PSTRAccount reimburses owners and operators of USTs forthe costs to clean up hydrocarbon contamination causedby leaking USTs and piping. It was basically a no faultsystem that arose at a time when the industry wasevolving to modernize and upgrade its UST systems,and the PSTR Account was created in part to encouragecompliance with new state and federal mandates. When

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tanks were pulled from the ground in order to replacethem with new code compliant USTs, soil samples weretaken from the bottom of the hole. If hydrocarboncontamination above action levels was found, the owneror operator took what corrective actions were necessaryto remediate the site and submitted the bill to TCEQ forreimbursement.

By 1993, the fund was going bankrupt because ofthe tremendous demand for corrective actionreimbursements. Eventually the shortfall came out of theState’s general fund. This was not politically acceptable.As a consequence, no payments out of the PSTRAccount program will be made on or after September 1,2012. Id. at §334.302(c)(6). The fund is still availableto clean up releases discovered and reported prior toDecember 22, 1998. Id. at §334.302(a)(3).Reimbursement by TCEQ cannot exceed $1 million peroccurrence. Id. at §334.302(c)(2). All claims forreimbursement filed with the TCEQ are subject to theavailability of funds in the PSTR Account. Id. at§334.302(f). Allowable costs which can be reimbursedare defined in 30 Tex. Admin. Code Section 334.309.

5) P O L L U T I O N L I A B I L I T YINSURANCE. After December 22, 1998, the C-Storeindustry has to a large extent resorted to private pollutionliability insurance for underground storage tanks (tankinsurance) for its UST systems to protect itself from thehigh costs of remediating a spill event and to provideTCEQ with evidence of financial responsibility(assurance) 30 Tex. Admin. Code §37.815. No systemis perfect, and tank insurance is no exception. Policiesare generally claim-made-and-reported policies (meaningthe claim has to be made during the term of the policy),and they carry a site specific deductible. Tank insurancegenerally covers corrective action (ie. the cost of actionsto correct the results of an accidental release arising fromthe operation of a UST) and third party liability (ie.compensation to third parties for bodily injury andproperty damage caused by an accidental release arisingfrom the operation of a UST).

The owner/operator of a UST is still liable if thecost of remediation exceeds the insurance policy limits.Issues can also arise between insurer and the insured asto how and when the contamination occurred wheneverthe source of the leak cannot be determined. Furthermore, if tanks are taken out of service, the“corrective action” coverage may be dropped onlyleaving “third party” coverage. You must maintain thecorrective action coverage until the tanks are properly

removed from service or, if corrective action is required,until the action is completed.

Pre-existing contamination may also negatecoverage for cleanup; be sure to investigate the propertycondition thoroughly before obtaining tank insurance.

If your client has a claims-made-and-reportedpolicy and your client wants to change insurancecarriers, ask for a “retroactive date”, otherwise, therewill be no coverage for pre-existing hydrocarboncontamination.

Generally, make sure that the information on thecertificate of insurance regarding the tank owner oroperator and the number and location of the tank exactlymatches the information on the owner/operator’sregistration forms.

Regarding a third party claim, demands generallyhave to be made against the insured and reported to theinsurance company within the policy period orapplicable extended reporting period. What constitutesa “demand” if the third party adjacent land owner isunaware that its property has been contaminated is acommon issue. A C-Store operator, thus, faces thedilemma of notifying an adjacent land owner ofcontamination in order to trigger a demand when theextent and cleanup cost is unknown and could exceed theinsurance coverage.

Lenders and landlords should be added to thepolicy as an additional insured.

6) ETHANOL. On December 19, 2007,President Bush signed into law the Energy Independenceand Security Act (H.R.6) that required that at least 36billion gallons of renewable fuel be used by themarketplace by 2022. The new law dramaticallyincreases the previous goal of 7.5 billion gallons by2012. The legislation, however, does not require anymonitoring of the total fuel supply requirements of thecountry.

Why is this relevant? Currently motor fuels thatare blended with ethanol come in the followingconcentrations: E-10 (10% ethanol, 90% gasoline) whichis suitable for all gasoline-engineered vehicles; and E85(70% - 85% ethanol, 30% - 15% gasoline) suitable onlyfor flexible fuel vehicles.

Presently, demand for gasoline is down.Depressed sales of gasoline put pressure to increase the

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percentage of the ethanol blend in gasoline in order tomeet federal mandates. A petition is currently beforethe EPA to authorize the sale and use of E-15 (15%ethanol and 85% gasoline) in non-flexible fuel vehicles.

This proposal raises all sorts of potential legalproblems for the industry and retail marketers ofgasoline.

Currently with gasoline prices relatively high andethanol prices relatively low, retailers can increase theirprofit margins on gasoline sales by using E-10. If thatis true for E-10, then all the more so if E-15 is authorizedto be used.

The problem lies with understanding thecharacteristics of ethanol and their effects on retailers’dispensing equipment and consumers’ conventionalgasoline engines.

Ethanol is a solvent. Two of its characteristicsare that it picks up any residual moisture in storage tanks(e.g. USTs and gas tanks in automobiles) as well as itdissolves any solids/impurities that come to settle intanks over time; the moisture and dissolved impuritiesare then routed through an automobile’s fuel system. Without proper filtration, conventional gasoline engineswill suffer damage if ethanol concentrations are raised.

A host of other unresolved issues face retailers inthe sale and use of E-15 if it is authorized, including butnot limited to:

a) Whether new car warranties providecoverage for gasoline blends above E-10;

b) Small engines (lawn mowers, chainsaws, weed eaters, etc.) and marineengines probably cannot handlegasoline blends above E-10;

c) Local fire codes require retailers to sellfuel through equipment that is certifiedas compatible by UnderwriterLaboratories (UL); currently nodispensers (MPDs) are certified ascompatible for gasoline blends above E-10;

d) Retailers who sell gasoline blendsabove E-10 through dispensers that arenot UL certified could be exposed to

gross negligence liability, regulatoryfines, and consumer actions; and

e) There are some indications thatheightened concentrations of ethanolincrease corrosion; this may impactUST insurance costs and availability,and equipment compatibility.

The push towards energy independence andrenewable fuels may have many unintended negativeconsequences for C-Store operators.

7) ENERGY POLICY ACT OF 2005.Title XV, Section B of the Energy Policy Act of 2005(Public Law 109-058, August 8, 2005) amended SubtitleI of the Solid Waste Disposal Act which created thefederal UST program. Section 1523 of the EnergyPolicy Act requires that states receiving funding fromEPA under Subtitle I conduct on-site inspections of USTsystems to check for compliance with UST regulatoryrequirements.

States were required to inspect all tanks (notinspected since December 22, 1998) by August 8, 2007.Thereafter, states are required to inspect UST systems ona three-year inspection cycle. The first three yearinspection cycle was to have been completed by August8, 2010. Not all states will be able to meet this deadline.Texas is one which is not expected to meet this deadlinefor various reasons. Texas has over 20,000 facilities toinspect and only 20-30 inspectors.

More pertinent to C-Store operators is Section1524 of the Energy Policy Act that requires statesreceiving funding from EPA under Subtitle I to createregulations which follow promulgated EPA “guidelines”for Operator Training.

The purpose of the training is to increase the“operator” awareness and knowledge of the maintenanceand operation of UST systems. States have until August8, 2012 to ensure that all three classes of operators aretrained according to state specific training requirements.Texas has yet to develop any specific trainingrequirements.

The three classifications of operators are A)general managers (usually those persons who oversee theUST systems for the operator), B) those persons orcontractors who perform the periodic inspections of therelease detection, corrosion protection, and overfillprotection systems, and C) the C-Store employees who

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are onsite during UST operations. Class A and BOperator training will focus on their respectiveresponsibilities and will be technical in nature; oncetrained, Class A or B Operators will be able to train theClass C Operator. The Class C Operator training is notintended to be overly technical or demanding, but theTexas regulations have yet to be written. For morei n f o r m a t i o n s e ehttp://www.epa.gov/oust/fedlaws/epact_05.htm.

VII. SECURED CREDITOR EXEMPTIONS (USTs)

1) FEDERAL LAW. The federal lawdealing with secured creditor exemptions is underCERCLA Section 101(20) which provides protection tolenders holding a security interest in a contaminatedfacility from “owner/operator” liability. Like state lawdiscussed below, the lender cannot have participated inthe management of the property and must take certainsteps to divest itself of the property after obtaining titlethrough foreclosure or other means.

2) STATE LAW. A “lender” is defined inthe Texas Water Code (the TWC) §26.342(7)and in 30Tex. Admin. Code (the TAC) §334.2 (54). The types oflenders that come under the limited liability protectionsunder TWC §26.3514 are limited to and specificallyinclude: a state or national bank; a state or federalsavings bank; a credit union; a state or federal savingsand loan association; a state or federal governmentagency that customarily provides financing; or an entitythat is registered with the Office of Consumer CreditCommissioner if the entity is regularly engaged in thebusiness of extending credit and if extending creditrepresents the majority of the entity’s total businessactivity. This list omits a lot of the lenders that areregularly involved in real estate financing and inparticular C-Store lending; it also omits sellers whoowner finance. The statutes define “operator” as anyperson in day-to-day control of, and havingresponsibility for, the daily operation of the UST system. TWC §26.342(8) and TAC §334.2(70). An “owner” isdefined as any person who holds legal possession orownership of an interest in a UST system. TWC§26.342(9) and TAC §334.2 (73). If the ownership isuncertain, the fee simple owner of the surface estate onwhich the UST is located will be considered to be theowner of the UST unless the person can demonstrate byappropriate documentation (e.g. a deed reservation,invoice, bill of sale or other legally acceptable means)that the UST is owned by another person. Id. For USTsregistered after September 1, 1987, the registered owner

on file with the TCEQ will be considered to be the USTowner until such time as additional documentation isreceived by TCEQ which transfers title of the UST toanother person. Id.

Section 26.3514 of the Texas Water Code (andTAC §334.15) states that a lender will not be liable as anowner or operator for actions taken to protect its securityinterest before and after foreclosure of its securityinterest or its acceptance of a deed in lieu of foreclosureof a property on which a UST is located.

The Texas Water Code §26.3514 (a) (1) and (2)extends the lender liability protection to cover thefollowing types of loans: a loan to finance theacquisition and development of the property; a loan tofinance the removal ,repair, replacement, or upgrading ofan UST; a loan to finance the performance of acorrective action in response to a release of petroleumproduct; or in a situation in which the real propertyconstitutes collateral for a commercial loan. (See also,TAC §334.15 (a) (1) and (2)). The lender’s securityinterest or lienhold interest can extend to the UST, thereal property on which an UST is located, or in anypersonal property attached to or located on the propertyon which an UST is located. Id.

Generally, a lender prior to foreclosure oracceptance of a deed in lieu of foreclosure can takewhatever actions it deems necessary to protect itscollateral, so long as it does not cause or exacerbate anyhydrocarbon contamination. TWC §26.3514(c) andTAC § 334.15 (b).

After the lender takes title to the property onwhich the UST is located through foreclosure oracceptance of a deed in lieu of foreclosure, a lender canonly avoid being classified as an owner or operator undertwo different scenarios set out in TWC §26.3514 (e) and(f).

First, the lender avoids being classified as anowner or operator if the lender within 90 days ofacquiring title to the property on which the UST islocated permanently removes the UST from serviceeither by removing the UST from the ground (accordingto TAC §334.55(b)) or abandoning the UST in place(according to TAC §334.55(c)). In either case, thelender needs to determine whether or not any priorrelease occurred which requires corrective action. Alender is required to take corrective action with all duediligence, if the release is within actionable limitsestablished by TCEQ. TWC §26.3514(d). See also,

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TAC §334.15(c) and (d). All USTs that are “removed”from service are required to be emptied of all petroleumproduct and accumulated sludge or residues and purgedof all residual vapors. TAC §334.55 (a) (4). Any USTthat is “abandoned” in place is required to be filled withan acceptable solid inert material. Id. at §334.55(c).Prior to the sale of a real property on which anabandoned UST is located, the seller must give the buyerwritten documentation of the abandonment. Id. at§334.55(c) (3) (C).

Second, provided the lender did not participate inthe management of the UST, the lender avoids beingclassified as an owner or operator if the lender withintwelve (12) months after it acquires marketable titlethrough foreclosure or acceptance of a deed in lieu offoreclosure, disposes of the collateral provided the lendereither lists the property with a “broker, dealer, or agentwho deals in that type of property” or advertises the USTproperty for “sale or other disposition” at least monthlyin “a real estate publication; a trade or other publicationappropriate for the UST being advertised; or anewspaper of general circulation in the area in which theUST is located”. TWC §26.3514(f) and (g), and TAC§334.15 (e) and (f). The lender becomes liable as anowner and/or operator at the earlier of the end of the 12month period to dispose of the collateral or when thelender “... no longer holds ownership indicia primarily toprotect its security interest....”. The TWC §26.3514 (i)states that “if a lender outbids, rejects, or does not act onan offer of fair consideration” for the UST or the facilityor property on which the UST is located, it will bepresumed that the lender is no longer holding ownershipindicia in order to protect its security interest. See TAC§334.15 (h). There is no definition for what constitutes“fair consideration”.

The code and regulations are silent about what thelender is to do with these USTs during said 12 monthholding period. The prudent action would be to followthe rules for temporarily removing a UST from serviceset forth at TAC §334.54 which requires that all ventlines be kept open; that all piping, pumps, and tanksaccess points be capped, plugged, locked or otherwisesecured; that the corrosion protection system bemaintained; and, that all petroleum product be removed,or else be prepared to monitor the UST system for leaks.

In conclusion, in the event it becomes necessaryto take title to property containing a UST system, alender cannot be passive and do nothing, or else it risksbeing categorized as an owner or operator, which wouldexpose it to third party liability plus keep it on the list of

possible responsible parties to pay or reimburse futurecleanup costs.

3) LOAN DOCUMENTATION. Prior tomaking the loan, the lender should require the borrowerto obtain a Phase I ESA.

If the property is an existing facility, prior tomaking the loan the lender should require: a) all reportson file with TCEQ, b) all written reports involving priorcorrective actions, c) a tank and line tightness test, d) aPhase II ESA, and e) a Phase III ESA when backgroundchecks indicate the need.

If any of the site assessments show actionablecontamination, a pre-condition to making the loan shouldbe the removal of all contaminants and receipt of aTCEQ closure letter.

Lenders in their loan agreements and/or mortgagedocuments should obtain covenants from the borrowerthat:

a) the UST system will be built andmaintained in accordance withSubchapter I of the Texas Water Code;

b) the borrower will maintain the financialassurances required under 30 Tex.Admin. Code §37.815 and that thelender be named as an additionalinsured;

c) the borrower will maintain and retain allTCEQ required documentation andrecords regarding the UST systems, andwill provide lender a copy of same;

d) the borrower will notify the lender of allspills and corrective actions taken andwill provide lender with written reportsof same together with copies of any andall correspondence by and betweenTCEQ and borrower; and

e) the borrower will provide lender withcopies of all Phase I, II, and III ESAs.

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VIII. THE BROWNFIELDS AMENDMENTS- ASAFE HARBOR?

The Comprehensive Environmental Response,Compensation, and Liability Act (CERCLA orSuperfund) authorizes the U. S. EnvironmentalProtection Agency (EPA) to promulgate rules andregulations in the enforcement of CERCLA in order toprotect human health and environmental hazards causedby hazardous substances located on a property or site.EPA can require the liable party to clean up thecontaminated property, or EPA can conduct the cleanupand pursue the liable party to collect the cleanup costs.Property remediation can include removal ofcontaminated soil, and extractions and treatment ofcontaminated groundwater.

Section 101 (20) (A) of CERCLA defines an“owner or operator” of a property to be that person who:(1) owns or operates the facility; or (2) owned, operated,or otherwise controlled activities at the facility. Section107 of CERCLA defines a “liable party” as: 1) thecurrent owner and operator of a contaminated property;2) any owner or operator at the time of disposal of anyhazardous substances; 3) any person who arranged forthe disposal or treatment of hazardous substances; or 4)any person who accepts hazardous substances fortransport to the property and selects the disposal site.Lenders who take a security interest in real property aregenerally exempt from owner/operator liability if thelender meets the criteria set out in CERCLA Section 101(20).

The Small Business Liability Relief andBrownfields Revitalization Act (the BrownfieldsAmendments) was passed by Congress in 2002.

These amendments created certain landownerdesignations that are protected from CERCLA liability.The Brownfields Amendments created three types oflandowners that must meet certain pre- and post-purchase requirements, to wit: 1) Bona Fide ProspectivePurchasers (BFPPs); 2) Contiguous Property Owners(CPOs); and 3) Innocent Land Owners (ILOs).

To be a Bona Fide Prospective Purchaser onemust meet the following requirements:

A) Purchase the property after January 11,2002;

B) Not be potentially liable for thecontamination on or at the property;

C) Be able to establish that all disposal ofhazardous substances occurred beforethe acquisition of the property;

D) Have performed an “all appropriateinquiries” prior to purchasing theproperty; and

E) Not be “affiliated” with a partyresponsible for the contamination of theproperty.

Even if the “all appropriate inquiries” turns upevidence of the existing or possible propertycontamination, a BFPP may still purchase the propertyand avoid any CERCLA liability as an “owner oroperator”, provided that after closing the BFPP must:

1) provide all legally required notices withrespect to the discovery or release ofhazardous substances; See RCRA§9002 (Underground Storage TanksModification Provisions); and CERCLA§103 (Notification RequirementsRegarding Released Substances); and

2) exercise appropriate care with respect tothe hazardous substances by takingreasonable steps to stop or preventcontinuing or threatened releases andexposures, and prevent or limit humancontact and environmental exposure toprevious releases;

3) provide full cooperation, assistance, andaccess to persons authorized to conductresponse actions or natural resourcerestoration;

4) comply with land use restrictions andnot impede the effectiveness ofinstitutional controls; and

5) comply with information requests andadministrative subpoenas.

Thus, a BFPP can knowingly purchase acontaminated property. On the contrary, both theContiguous Property Owner and the Innocent LandOwner refers only to “unknowing purchasers” as definedin CERCLA §101 (35)(A)(i).

To be a Contiguous Property Owner, one mustmeet the following requirements:

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A) A person must meet the criteria set forthin CERCLA§107(q)(1)(A);

B) A person must be the owner of aproperty that is not the source of thecontamination;

C) The property is contiguous to orotherwise similarly situated to thecontaminated property that is the sourceof the contamination;

D) A person must have performed an “allappropriate inquiries” that did not showthe existence or possible existence ofcontamination;

E) A person must purchase the propertywithout knowing, or having reason toknow, of contamination on the property;and

F) A person must not be “affiliated” withany person responsible for thecontamination of the property.

After closing on the property, once the existenceof hazardous materials contaminating the property comesto the attention of a CLO, in order to avoid CERCLAliability as an “owner or operator” the CLO is obliged tofollow the same post-purchase requirements set outabove for the BFPP.

To be an Innocent Land Owner, one must meetthe following requirements:

A) A person must meet the criteria set forthin CERCLA §107 (b)(3) and §101 (35);

B) ILOs must have performed an “allappropriate inquiries” that did not showthe existence or possible existence ofcontamination;

C) A person must purchase the propertywithout knowing, or having reason toknow, of contamination on the property;and

D) An ILO cannot have a “contractual”relationship with a liable party.

After closing on the property, once the existenceof hazardous materials contaminating the property comesto the attention of an ILO, in order to avoid anyCERCLA liability as an “owner and operator”, the ILOis obligated to follow the following post-purchaserequirements:

1) no legally required notices are requiredas a statutory criterion for achieving andmaintaining the Section 101 (35) (A) (i)innocent landowner liability protection;

2) exercise appropriate care with respect tothe hazardous substances by takingreasonable steps to stop or preventcontinuing or threatened releases orexposures, and prevent or limit humancontact and environmental exposure toprevious releases;

3) provide full cooperation, assistance, andaccess to persons authorized to conductresponse actions or natural resourcerestoration;

4) comply with land use restrictions andnot impede the effectiveness ofinstitutional controls; and

5) compliance with information requestsand administration subpoenas is notspecified as a statutory criterion forachieving and maintaining the Section101 (35)(A)(i) innocent landownerliability protection.

The threshold criteria to qualify as a BFPP, CPO,or ILO is the requirement to perform “all appropriateinquiry” before buying the property. An ASTM Phase Ireport satisfies the “all appropriate inquiry” requirement.

As stated above, BFPPs and CPOs must not beaffiliated with any person who is potentially liable forthe site cleanup costs. “Affiliated with” includes director indirect familial relationship and various contractual,corporate, and financial relationships.

Notwithstanding, if the actions of a BFPP, CLO,or ILO give rise to new contamination, full CERCLAliability will attach.

Even though a property owner qualifies as aBFPP, CLO, or ILO, you still have the problem of the

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property’s marketability and value in the future as wellas the costs of taking reasonable steps to stop a present,continuing, or threatened release or exposure tohazardous substances.

IX. PETROLEUM MARKETING PRACTICEACT.

The Petroleum Marketing Practice Act (PMPA)15 U.S.C. §2800 et seq. is a federal statute thatestablishes minimum federal standards governing the“termination” and “nonrenewal” of a petroleumfranchise. A “franchise” is defined under PMPA as anycontract that authorizes a franchisee to use thefranchisor’s trademark, as well as any associatedagreement providing for the supply of motor fuel. 15U.S.C. §2801 (1). Under the PMPA a franchisor mayterminate a franchise during the term of the franchise andmay fail to renew the franchise at the conclusion of theterm only if the franchisor takes the actions requiredunder the PMPA under certain enumerated situations. 15U.S.C. §2802, 2804. If the franchisor wrongfullyterminates or fails to renew a petroleum franchise, apetroleum franchisee may file suit in federal court andthe range of remedies includes compensatory damages,punitive damages, reasonable attorney’s fees, expertcosts, and equitable relief. See 15 U.S.C. §2805 (b) and(d). The PMPA also requires the federal district court togrant preliminary injunctive relief if merited. 15 U.S.C.§2805 (b) (2).

On March 2, 2010 Mac’s Shell Service, Inc. v.Shell Oil Products (Cause No. 08-240, 08-372) wasdecided by the United States Supreme Court. JusticeAlito wrote the opinion. This case involved a situationwhere the petroleum franchisor made substantial changesto the economic terms of the petroleum franchiseagreement up for renewal. Even though the changeswere detrimental to the franchisees, they went ahead andsigned the new franchise agreement and continued tooperate; some of the franchisees signed “under protest”.Later, the franchisees filed suit under PMPA allegingthat the petroleum franchisor had constructively“terminated” their franchise and had constructively“failed to renew” their franchises by substantiallychanging the terms of their franchise agreements. TheCourt noted that these franchisees had asserted theseclaims even though they had not been compelled toabandon the franchise, and even though they had beenoffered and had accepted the renewal agreements.

The Court strictly construed the PMPA and heldthat a franchisee cannot recover for “constructive

termination” under the PMPA if the franchisor’sallegedly wrongful conduct did not compel thefranchisee to abandon its franchise. Justice Alito statedthat “the Act prohibits only franchisor conduct that hasthe affect of ending a franchise.” The Court respondedto the franchisees’ claim, that this strict interpretation ofthe PMPA would not protect franchisees from unfair andcoercive franchisor conduct that does not force an end tothe franchise, by saying that the franchisees can still seekstate-law remedies to address such wrongful conductwhich are not inconsistent with the PMPA. While somestates, including Iowa, New Jersey, Rhode Island, andWisconsin have laws that prohibit a franchisor fromeither terminating or refusing to renew a franchiseagreement without good cause, Texas does not.

The Court went on to hold that a franchisee whosigns and operates under a renewal agreement with afranchisor may not maintain a “constructive non-renewal” claim under PMPA. It also said that “[s]igningtheir renewal agreements ‘under protest’ did not preservethe dealer’s ability to assert non-renewal claims. Whena franchisee signs a renewal agreement even ‘underprotest’ there has been no ‘failure to renew’, and thus noviolation of the Act.”

The dealers argued that the Court’s reading of theterm “termination” would require franchisees to go outof business before they could obtain a preliminaryinjunction, because to obtain a preliminary injunction thefranchisee must show that “the franchise of which he isa party has been terminated”. 15 USC§2805(b)(2)(A)(i). The Court said that was notnecessarily so because, since the PMPA requires thefranchisors to give written notice of termination inadvance of the date on which the termination “takeseffect”, notice to terminate constituted a terminationwithin the meaning of §2805(b)(2)(A)(i), “even thoughthe termination ‘takes effect’ on a later date....”. Thusreceiving a “notice of termination” is tantamount to“termination” under the Court’s interpretation of thePMPA’s preliminary injunction provisions.

X. C-STORE ASSOCIATIONS.

A national association of convenience storeoperators operates under the name of the “NationalAssociation of Convenience Stores” (NACS). It, likesimilar state associations, is a lobbying organization thatalso tries to keep its members abreast of what ishappening in the industry. NACS is located at 1600

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Duke Street, Alexandria, VA 22314; its website iswww.nacsonline.com.

The state association is the Texas PetroleumMarketers and Convenience Store Association (TPCA).It is located at 401 West 15 Street, Suite 510, Austin,th

Texas 78701; telephone (512) 476-9547; fax (512) 477-4239.

Either organization is a good go-to resource if youhave an industry related issue.

XI. INDUSTRY RECOMMENDED PRACTICES.

There are two publications that can provideadditional information on industry recommendedpractices regarding installation of USTs. They are:

Petroleum Equipment Institution Publication RP-100,Recommended Practices for Installation of UndergroundLiquid Storage Systems. <www.pei.org/> ; and

American Petroleum Institute Publication 1615,Installation of Underground Petroleum Storage Systems.<www.api.org/> .

Chapter 17

Off-Premise Prequalification Packet L-OFF (5/2009)Please complete this Prequalification Packet with information concerning your proposed business

location for which you are applying to sell alcoholic beverages. This information will be used to obtain your prequalification to hold a license/permit. You will submit this information to the proper governmental entities for certification that your proposed location is legal for the type of license/permit for which you are applying. Permit applicants will also provide this packet to their local newspaper for certification that you have published the required notice. Please contact your local TABC office for more information.

LOCATION INFORMATION Type of Off-Premise License/Permit

BQ Wine and Beer Retailer’s Off-Premise Permit LP Local Distributor’s Permit BF Beer Retail Dealer’s Off-Premise License E Local Cartage Permit P Package Store Permit ET Local Cartage Transfer Permit Q Wine Only Package Store Permit PS Package Store Tasting Permit

Indicate Primary Business at this Location Grocery/Market Convenience Store without Gas Liquor Store Miscellaneous Convenience Store with Gas

Trade Name of Location

Location Address

City County State Zip Code

- Mailing Address City State Zip Code

- Business Phone No. Alternate Phone No. E-mail Address

( ) - ( ) -

OWNER INFORMATION Type of Owner

Individual Corporation City/County/University Partnership Limited Liability Company Other Limited Partnership Joint Venture Limited Liability Partnership Trust

Entity/Applicant

If Applicant Is/Who Must Be Listed Below (attach L-OIC if additional space is needed). Individual/Individual Owner Limited Liability Company/All Officers or Managers Partnership/All Partners Joint Venture/Venturers Limited Partnership/All General Partners Trust/Trustee(s) Corporation/All Officers City, County, University/Official

Last Name First Name MI Title



Page 1 of 3 Form L-OFF

MEASUREMENT INFORMATION Will your business be located within 300 feet of a church or public hospital? Yes No NOTE: For churches or public hospitals measure from front door to front door, along the property lines of the

street fronts and in a direct line across intersections. Will your business be located within 300 feet of any private/public school? Yes No NOTE: For private/public schools measure in a direct line from the nearest property line of the school to the

nearest property line of the place of business, and in a direct line across intersections. NOTE: If located on or above the fifth story of a multistory building: measure in a direct line from the property

line of the private/public school to property line of your place of business in a direct line across intersections vertically up the building at the property line to the base of the floor on which your business is located.

Will your business be located within 1,000 feet of a private school? Yes No Will your business be located within 1,000 feet of a public school? Yes No

If Applicant Is/Who Must SignIndividual/Individual Owner Corporation/OfficerPartnership/Partner Limited Liability Company/ Officer or Manager

WARNING AND SIGNATURE

Limited Partnership/General Partner

WARNING: Section 101.69 of the Texas Alcoholic Beverage Code states: “…a person who makes a false statement or false representation in an application for a permit or license or in a statement, report, or other instrument to be filed with the Commission and required to be sworn commits an offense punishable by imprisonment in the penitentiary for not less than 2 nor more than 10 years.”

BY SIGNING YOU ARE SWEARING TO ALL INFORMATION AND ATTACHMENTS TO THIS PACKET.

PRINTNAME

SIGN HERE

TITLE

Before me, the undersigned authority, on this day of , 20 , the person whose name is signed to the foregoing application personally appeared and, duly sworn by me, states under oath that he or she has read the said application and that all the facts therein set forth are true and correct.SIGN HERE

NOTARY PUBLICS E A L

CERTIFICATE OF CITY SECRETARY (FOR P, Q, BF & BQ) CHECK HERE IF NOT IN CITY LIMITS

I hereby certify on this day of , 20 , that the location for which the license/permit is sought is inside the boundaries of this city or town, in a “wet” area for such license/permit, and not prohibited by charter or ordinance in reference to the sale of such alcoholic beverages. SIGN HERE , TEXAS

City Secretary/Clerk S E A LIf location can not be certified above, please complete the following:

I hereby certify on this day of , 20 , that the location is prohibited by

Charter or Ordinance No. , in reference to the sale of alcoholic beverages. SIGN HERE , TEXAS

City Secretary/Clerk S E A L



CERTIFICATE OF COUNTY CLERK (FOR P, Q & BF) I hereby certify on this day of , 20 , that the location for which the

license/permit is sought is in a “wet” area for such license/permit, and is not prohibited by any valid order of the Commissioner’s Court. SIGN HERE COUNTY

County Clerk S E A L

CERTIFICATE OF COUNTY CLERK (FOR BQ) I hereby certify on this day of , 20 , that the location for which the

license/permit is sought as the place of business is in a “wet” area and is not prohibited by any valid order of the Commissioner’s Court for a Wine and Beer Retailer’s Off-Premise Permit. Most current election for given location was held for:

legal sale of all alcoholic beverages for off-premise consumption legal sale of all alcoholic beverages

legal sale of all alcoholic beverages except mixed beverages legal sale of all alcoholic beverages including mixed beverages legal sale of mixed beverages legal sale of mixed beverages in restaurants by food and beverage certificate holders legal sale of wine on the premises of a holder of a winery permit

legal sale of wine/beer (17%) on-premise or wine/beer off-premise AFTER Sept. 1,1999 legal sale of wine/beer (14%) on-premise or wine/beer off-premise BEFORE Sept. 1,1999

SIGN HERE COUNTY

County Clerk S E A L

COMPTROLLER OF PUBLIC ACCOUNTS CERTIFICATE This is to certify on this day of , 20 , the applicant holds or has

applied for and satisfies all legal requirements for the issuance of a Sales Tax Permit under the Limited Sales, Excise and Use Tax Act or the applicant as of this date is not required to hold a Sales Tax Permit.

Sales Tax Permit Number Outlet Number Print Name of Comptroller Employee Print Title of Comptroller Employee SIGN HERE FIELD OFFICE

S E A L

PUBLISHER’S AFFIDAVIT (FOR P & Q) Name of newspaper

City, County Dates notice published in daily/weekly

newspaper (mm/dd/yyyy) / / Publisher or designee certifies attached notice was published in

newspaper stated on dates shownSignature of publisher or designee

Sworn to and subscribed before me on this date / /

Signature of Notary Public

S E A L

ATTACH PRINTED

COPY OF THE

NOTICE HERE

Ownership Information Continued for Prequalification Packet L-OIC (4/2009)

Please complete this Ownership Information Continued for Prequalification Packet to be included with your prequalification packet if you have more than three individuals to be disclosed as required under Owner Information. Ensure you list all individuals as necessary for your type of entity. Use the chart below. Please contact your local TABC office for more information.

LOCATION INFORMATION Trade Name of Location

Location Address

City County State Zip Code

-

OWNER INFORMATION If Applicant Is/Who Must Be Listed Below

Individual/Individual Owner Limited Liability Company/All Officers or Managers Partnership/All Partners Joint Venture/Venturers Limited Partnership/All General Partners Trust/Trustee(s) Corporation/All Officers City, County, University/Official












Page 1 of 1 Form L-OIC

Application for 2-YearAbusable Volatile Chemical (AVC) Sales Permit

Under Texas Health and Safety Code, Chapter 485

Return this completed application form and a $59.00 permit fee for each retail sales location, made payable by check or money order to: DSHS AVC Program ZZ109 125. Mail to: Cash Receipts Branch - MC 2003, Texas Department of State Health Services, AVC Permit Program ZZ109 125, PO Box 149347, Austin, Texas 78714-9347. For additional assistance in completing this application, contact the AVC Permit Program at (512) 834-6600, ext. 2440 or visit our website at: http://www.dshs.state.tx.us/avc

To apply online for a new or renewal AVC Sales Permit, please go to: http://www.dshs.state.tx.us/avc & follow the TexasOnline instructions.

Abusable Volatile Chemicals Sales Permit Application Form Revised 8/2007 Publication # EF49-11290 Page 1

TEXAS DEPARTMENT OF STATE HEALTH SERVICES Regulatory Licensing Unit / AVC Permit Program ZZ109 125

(512) 834 - 6600, ext. 2440 www.dshs.state.tx.us/avc

Reason For Applying(Check all that apply. Enter Permit Number if application is for a Renewal Application)

New permit Permit Renewal Change of Name / Ownership / Location Permit Number:

Business Location Information (actual physical location at which an Abusable Volatile Chemical is sold)

Retail Location Name: Sales Tax ID #:

Retail Location Address: (street address)

City: State: Zip:

Parent Company Information The following information is required of all corporations/companies that own or operate multiple retail locations in Texas that require AVC Sales Permits. To facilitate renewal of multiple permits under a single parent company, the AVC Permit Program has assigneda common expiration date and issued a parent company number for your corporation/company in order for all of your retail locations’ permits to expire at the same time. Please provide the following information:

Parent Company Name:

Mailing Address And Contact Information (address where permit will be mailed, e.g., address of corporation, company, or home)

Mailing Address: (if different from business location)

City: State: Zip:

Contact Name: Contact Phone:

Contact Email: Contact Fax:

Certification Statement I swear or affirm that all information in this completed application is true and correct. I further certify by signature hereon that I

am an officer of this company or am otherwise authorized to sign this document on behalf of this company/corporation. I furthercertify that I have read and understood the requirements of the AVC (Abusable Volatile Chemical) Act, Texas Health & Safety Code,Chapter 485.

Signature: Title:

Name (printed): Date:

OFFICE USE ONLYBudget / Fund ZZ109-125

Rec’d date: Aprv Date: Issue Date By:Remit#Remit Date Permit #

Permit Procedures

Any company offering to the retail market in the State of Texas any product regulated under the Health and Safety Code, Chapter 485, is required to have an AVC Sales permit and an AVC Warning Sign displayed for public inspection at each location of business. Until the application process has been completed and the permit has been issued (2 to 3 weeks from the received date), the company must not sell AVC products in the State of Texas. The following steps are required to receive a permit for your company:

� A completed application for a permit (page 1 of this form) must be submitted with the appropriate filing

fees and received by the AVC Permit Program.

� A $59.00 Permit Fee is required (for a 2-year permit) for each location.

� Please make checks or money orders payable to: DSHS AVC Program ZZ109 125.

� If you have multiple applications you may submit your payment in one check.

� Fees may be paid by money order, certified check, personal check, or business check. Cash

CANNOT be accepted by mail.

� The application will be reviewed and either approved or denied within 15 days of received date.

� Should your application be incomplete or if an incorrect fee is received, we will mail you a deficiency

letter or email to that effect within 10 business days of the received date.

� You will be given 15 business days from the date of issue of any deficiency letter to contact our office

by telephone at (512) 834-6600 ext. 2440 to make arrangements to resolve the deficiencies.

Applicants who fail to resolve deficiencies within 15 days of the deficiency letter’s issue date shall

forfeit any permit filing fees that have been paid to DSHS.

� Upon completion of the review and approval, a permit will be printed and mailed to the mailing address

provided in the application.

Complete and return to:

Cash Receipts Branch – MC 2003 Texas Department of State Health Services

AVC Permit Program ZZ109 125 PO Box 149347

Austin, Texas, 78714-9347

Privacy NotificationWith few exceptions, you have the right to request and be informed about information that the State of Texas collects about you. You are entitled to receive and review the information upon request. You also have the right to ask the state agency to correct any information that is determined to be incorrect. See www.dshs.state.tx.us for information on Privacy Notification. (Reference: Government Code, Section 552.021, 552.023, 559.003 and 559.004).

TLC Pub #8643 AP-165-x (Rev. 1/09) Page 1 of 8

APPLICATION FOR TEXAS LOTTERY® TICKET SALES LICENSE

HOW TO APPLY FOR A TEXAS LOTTERY TICKET SALES LICENSE

Complete this application, including fingerprint cards and a check or money order payable to the State Treasury, and send to:

Texas Lottery Commission P.O. Box 16660 Austin, Texas 78761-6660

Application fee is $125.00 for the first location and $50.00 for each additional location.

FOR ASSISTANCE

Read the “Texas Lottery Retailer Application Instructions” (Form 55-300) included in this packet. For additional assistance, please call the Texas Lottery at 512-344-5000 or toll free at 1-800-37-LOTTO (1-800-375-6886). Application instructions and forms, except fingerprint cards, are available at www.txlottery.org.

GENERAL INSTRUCTIONS

electronic fund transfers. You may set up a new account or use an existing account. Please fill out the Electronic Funds Transfer (EFT) Authorization Form included with this application and attach a voided check for the account to the EFT form. You may download the form from www.txlottery.org. Go to Retailers/Retailer Forms.

Safety, the Federal Bureau of Investigation or any other law enforcement agency.

Records Act.

PROHIBITIONS TO HOLDING A LICENSE

The following people are prohibited from holding a Texas Lottery Ticket Sales License: 1. Persons convicted of a felony, criminal fraud, gambling or a gambling-related offense whose sentence,

parole, mandatory supervision or probation ended less than 10 years ago. 2. Persons convicted of a misdemeanor involving moral turpitude whose sentence, parole, mandatory

supervision or probation ended less than 10 years ago. 3. Persons who are or have been professional gamblers. 4. Persons currently delinquent in the payment of certain state taxes or student loans. 5. The spouses of those people named above.

Also, a business is prohibited from holding a Texas Lottery Ticket Sales License if that business includes a person identified in items 1-5 above and that person:


TEXAS LOTTERY APPLICATION FEE WORKSHEET

1. Legal name of owner (sole owner, partnership or corporation)

2. Texas taxpayer or vendor ID number

3. Is the applicant currently licensed to sell Texas Lottery tickets at another location? YES NO If yes, what is the Texas Lottery retailer number?

call the Texas Lottery Commission at 1-800-37-LOTTO (1-800-375-6886). Using a touch tone phone, press 2 (Texas Lottery), then press 1 (Retailer Services). If calling from a rotary phone, wait for an operator, then ask for Retailer Services.

Use the worksheet below to determine the total amount of your application fee. Mark the fees you will be paying and indicate the number of locations for each. Include this completed worksheet with your application and fee payment.

TYPE OF FEES NUMBER OF FEES AMOUNT

Base application fee (Initial location) ................................................. ________ X $125 = $ _____________

Additional location fee (Each extra location) ..................................... ________ X $50 = $ _____________

(To be considered an Additional Location, the state taxpayer

number for each location must be the same as initial application.)

TOTAL NUMBER OF LOCATIONS ________

TOTAL FEE PAID .............................................................. $ _____________

Make check or money order payable to State Treasury.

APPLICATION CHECKLIST

Complete checklist and submit with application information to: Texas Lottery Commission P.O. Box 16660 Austin, Texas 78761-6660 Application (pages 5, 6, 7 and 8)

Business Location and Marketing Information (pages 7 and 8) for each additional location (if any) Number of additional locations (if any) _________

Fingerprint cards for each person listed in PROPRIETORS section

Electronic Fund Transfer (EFT) Authorization Form

Void Check for EFT account

W-9 Request for Taxpayer Identification Number and Certification

Application Fee worksheet (page 2)

Check or Money Order for Application fee(s) payment

APPLICATION FOR TEXAS LOTTERY TICKET SALES LICENSE


LICENSE TERMS AND CONDITIONS

By applying for a Texas Lottery license, you agree that you will abide by the following terms and conditions. Violation of any of these terms and conditions will result in the Texas Lottery Commission suspending or revoking your license to sell Texas Lottery tickets.

Compliance

1. The retailer will operate in a manner that is consistent with the State Lottery Act, applicable federal, state and local laws, rules adopted by the Texas Lottery Commission, and these terms and conditions.

2. The retailer will notify the Texas Lottery Commission within 10 days of any change of information since the application or renewal of license was submitted.

3. The retailer will notify the Texas Lottery Commission within 10 days of changes in ownership, the officers, directors or partners required to be listed on the application, the location or financial status. A change in ownership involving less than 10 percent of a corporation’s stock need not be reported unless that change results in someone who previously owned less than 10 percent of the corporation’s total stock acquiring more than 10 percent of the total stock.

4. If the retailer is convicted of a crime or becomes delinquent in the payment of any state tax, the Texas Lottery Commission must be notified in writing within 10 days.

Sale of Tickets

5. The retailer will make Texas Lottery tickets available for sale during the retailer’s normal business hours and provide for the redemption of winning tickets during the same hours, subject to Texas Lottery Commission’s approved validation hours.

6. The retailer will offer no less than two instant games for sale to the public at all times. 7. The retailer must sell the minimum number of tickets per week as determined by the Texas Lottery

Commission. 8. Tickets may not be sold to anyone under 18 years of age. 9. Tickets may not be sold for more than the price established by the Texas Lottery Commission. 10. The retailer may not extend credit, lend money or accept in payment food stamps or credit cards

for Texas Lottery tickets. 11. The retailer may not permit the purchase of Texas Lottery tickets over the telephone or by mail.

Cooperation with Texas Lottery and Players

12. The retailer will prominently display the Texas Lottery Ticket Sales License where tickets are sold. Tickets may be sold only at the licensed location and may not be transferred.

13. The retailer will utilize a ticket dispenser for the sale of tickets in a prominent location near the cash register or checkout. An equipment deposit may be required for any dispensers or other equipment provided to the retailer by the Texas Lottery Commission.

14. The retailer will prominently display point-of-sale materials provided by the Texas Lottery Commission, including door decals, game posters, display tickets and other materials supplied by the Texas Lottery, unless exceptions are obtained from the Texas Lottery Commission.

15. The retailer is responsible for all tickets delivered upon acknowledgement of receipt. The retailer is expected to provide reasonable security for all tickets and Texas Lottery Commission property.

16. The retailer will notify the appropriate local law enforcement officials of any stolen tickets. The retailer will notify the Texas Lottery Commission within 24 hours of any lost, missing or stolen tickets.



Acceptance of Tickets

17. The retailer will make a full financial settlement in a timely manner with the Texas Lottery Commission for all tickets received.

18. The retailer authorizes the Texas Lottery Commission to transfer funds due through an Electronic Funds Transfer (EFT). Failure to have sufficient funds available at the time of the EFT sweep may be cause for fines, license suspension or license revocation.

19. The retailer shall offer for sale to the public at all times at least two instant games.

Bond Requirement

20. The retailer shall pay into a fund to reimburse the Texas Lottery Commission for losses from the operation of retailers. The initial payment is $25.00 and is included in the application fee. The amount and frequency of future payments shall be established by the Texas Lottery Commission.

21. The Texas Lottery Commission may request a credit report from the retailer. The retailer may be required to obtain a certificate of deposit (CD) or other financial guarantee in an amount determined by the Texas Lottery Commission.

22. The State Lottery Act requires that the application fee be enough to pay for processing the application. It is possible with some applicants that the cost of background and financial checks will be more than the $100.00 allocated for this purpose. If the cost of processing your application exceeds this amount, the Texas Lottery reserves the right to offer you the choice of withdrawing your application or paying an additional sum.

Other Retailer Obligations

23. The retailer will comply and remain in compliance with the Americans with Disabilities Act during the term of the license.

24. The retailer is responsible for all proceeds from the sale of Texas Lottery tickets. The proceeds shall constitute a trust fund in favor of the Texas Lottery Commission.

25. The retailer may not use a Texas Lottery insignia, logo, trademark or name of a Texas Lottery game in an advertisement without Texas Lottery Commission authorization.

26. The retailer will maintain accurate and complete records of all transactions with the Texas Lottery Commission and will make such records available as required by the State Lottery Act.

27. If the retailer is not an individual, each officer, director or owner is personally liable for proceeds from the sale of lottery tickets until the Texas Lottery Commission is notified in writing that they are no longer an officer, director or owner.

1. Corporation or Legal Business Name

Doing business as (d.b.a.)

2. Business Ownership (check one) Sole Owner Partnership Texas Corporation Foreign Corporation

Other (explain) _______________________________________________________________

3. If Texas corporation, enter the Charter Number Charter Date (MM/DD/YYYY)

4. If your business is a foreign corporation, enter the Home State

and Charter Number Texas Certificate of Authority Number Texas Certificate of Authority Date (MM/DD/YYYY)

5. If limited partnership, enter the and Home State Identification Number

6. Enter the Federal Employer’s Identification (FEI) Number, if any.

7. Taxpayer number for reporting any Texas tax OR your Texas Vendor Identification Number if you now have, or have ever had, one.

8. The following question is optional. Your response will help the Texas Lottery provide accurate information to the Texas Legislature and Governor on minority business participation. Is your business minority-owned? YES NO If "YES," indicate the type of minority business.

1 African-American 2 American-Indian 3 Asian-American 4 Mexican-American or other American of Hispanic origin

Other _________________________________________________________________________________________________



9. List sole owner(s), all partners, officers and directors of your business. (Attach additional sheets if necessary.)

/ /

/ /

OW

NE

RS

HIP

PR

OP

RIE

TO

RS

Name (First, middle initial, last) Social Security or FEI Number

Home Address (Street & number, P.O. Box or Rural Route and box number)

City State ZIP Code

Home phone (Area code and number) Driver license (State and number)

Title Date of Birth (MM/DD/YYYY)

I have read and understand the License Terms and Conditions in this application.

Signature Date

- -

/ /

-


APPLICATION FOR TEXAS LOTTERY TICKET SALES LICENSE P

RO

PR

IET

OR

S



City State ZIP Code




Signature Date

- -

/ /

-



City State ZIP Code




Signature Date

- -

/ /

-



City State ZIP Code




Signature Date

- -

/ /

-



LOCATION CONTACTS AND MARKETING

10. Corporation or Legal Business Name

11. Mailing address (Street & number, P.O. Box or Rural Route and box number) City State ZIP Code County Business phone (Area code and number)

12. d.b.a. (Store name or actual name under which you operate)

13. Physical location for UPS shipments (NOT P.O. Box or Rural Route) City State ZIP Code County Business phone – not cell (Area code and number)

Is phone Touch Tone? YES NO

14. Does this business location comply with the Americans with Disabilities Act? YES NO

15. Contact for Texas Lottery business Contact person phone (Area code and number) Email address

16. Primary contacts at this location for general lottery business Name Title / function Name Title / function Name Title / function

17. Enter your normal business hours for each day of the week. Enter "Closed" for any day that you are not open for business.

Monday – Friday Saturday Sunday

Open - ______________________ Open - _____________________ Open - ______________________

Close - ______________________ Close - _____________________ Close - ______________________

18. Principal Trade Style (check one)

Grocery Store/Supermarket (5411) Liquor Store (5921) Specialty Merchandise (5999)

Convenience Store with gas (5412) Service Station (5541) Other (Describe) ____________________________________

Convenience Store no gas (5400) Drug Store (5912) ______________________________________________________

General Merchandise (5399) Restaurant (5812) ______________________________________________________

19. Do you allow customers or employees to smoke inside your business/building? YES NO

- -

- -

- -

-

-

State Tax Payer ID



20. Has applicant(s) ever been licensed to sell Texas Lottery tickets? YES NO

If YES, enter the most recent six-digit Texas Lottery retailer number

21. Does applicant(s) owe any money to the Texas Lottery? YES NO

22. Does applicant hold a Texas Alcoholic Beverage Commission (TABC) permit? YES NO

If YES, what type of permit? _______________________________________________________________

If YES, what is the permit number? _________________________________________________________

ELIGIBILITY STANDARDS An individual is not eligible for a sales license if:

a. The individual or the individual’s spouse has been convicted of a felony, criminal fraud, gambling or a gambling-related

offense, or a misdemeanor involving moral turpitude and less than 10 years have passed since the end of the sentence,

parole, mandatory supervision or probation served for the conviction.

b. The individual or the individual’s spouse is a professional gambler.

c. The individual’s spouse is currently delinquent in the payment of any state tax.

d. The individual is an officer or employee of the Texas Lottery Commission or a Texas Lottery operator.

e. The individual’s spouse, child, brother, sister or parent (1) lives in the same principal place of residence as the individual and

(2) is an officer or employee of the Texas Lottery Commission or a Texas Lottery operator.

f. The individual is delinquent in the payment of a tax or other money collected to the Texas Comptroller of Public Accounts,

the Texas Workforce Commission, or the Texas Alcoholic Beverage Commission; in default on a loan made under Chapter 52

of the Texas Education Code; or in default on a loan guaranteed under Chapter 57 of the Texas Education Code

An entity is not eligible for a sales license if any of the following individuals would be ineligible for a sales license under item a, b, c, d or e above:

An applicant is not eligible for a sales license if the proposed ticket sales location is:

° This state, or

° On which is located a public primary or secondary school, an institution of higher education, or an agency of the state;

By signing below, I certify, under penalty of law, that the information provided on this form is correct to the best of my knowledge and that, to the best of my knowledge, the applicant is not ineligible for a sales license under the eligibility standards described above. I understand that providing false or incomplete information may be grounds for denial of this application and revocation or suspension of the license(s) issued as a result of this application. Applicant has read and agrees to abide by the license terms and conditions stated in this application. I understand that the owners/officers/partners/directors of an entity applying for a Texas Lottery sales license must furnish a complete legible set of fingerprints, and that failure to do so will result in the denial of this application. The Texas Lottery is authorized to obtain financial records, credit reports and criminal history records.

Corporation or Legal Business Name Texas taxpayer or vendor ID

Signature of authorized owner/officer/director Title Date

RETAIL

REGULATORY LICENSING UNIT BUDGET: ZZ106 FUND: 167 PERMIT #:

RETAIL FOOD OPERATION PERMIT APPLICATION INITIAL, RENEWAL, OR CHANGE OF OWNERSHIP

(Health and Safety Code, Chapter 437) Return both the completed application and non-refundable fee to:

TEXAS DEPARTMENT OF STATE HEALTH SERVICES Foods Licensing Group MC 2003, PO Box 149347, Austin, Texas 78714-9347

You may contact our office at: (512) 834-6626

If you are a school food establishment, roadside food vendor (mobile food store), or mobile unit, contact this office at (512) 834-6626 for the correct application.

Name Under Which Business is Conducted (DBA): Physical Address to be Licensed: City, County, State, Zip Code: Telephone # at address: ( ) Is physical address within the city limits? � Yes � No

Exemptions � Licensed by the Texas Department of State Health Services as a food manufacturer AND paying a higher fee; or from Retail � Inspected and permitted by County or Public Health District; or permitting: � Non-Profit as a 501(C) organization. Please sign, date and return application. FEE SCHEDULE FOR INITIAL/RENEWAL PERMIT OR CHANGE OF OWNERSHIP Fees for food service establishments and retail food stores are based on the gross annual volume of food sales. Mark the appropriate volume category and remit fee accordingly. Fee amounts will be verified with the Texas Comptroller of Public Accounts.

GROSS ANNUAL VOLUME OF FOOD SALES

� $ 0.00 - $ 49,999.99 - $258.00 � $ 50,000.00 - $149,999.99 - $515.00 � $150,000.00 - or more - $773.00

Fees are non-refundable

� Food Establishment- any place where food is prepared and intended for individual portion service. This includes the site at which individual portions are provided for consumption on or off the premises and regardless of whether there is a charge for the food, bed & breakfasts with >7 rooms, restaurants, bars, cafes, snack bars, hospitals that serve food to the general public, correctional facilities (jails) that contract with professional food management corporations for food preparation, privately-owned correctional facilities, etc.

� Retail Food Store- a food establishment or section of an establishment where food and food products are offered to the consumer and intended for off-premise consumption. This includes delicatessens that offer prepared food in bulk quantities only, grocery stores, markets, etc.

� Late Fee - A person who files a renewal application after the expiration date must pay an additional $100.00. ANY RETURNED CHECKS RECEIVED AFTER EXPIRATION DATE WILL BE ASSESSED THE $100.00 LATE FEE.

VERIFICATION: I SWEAR OR AFFIRM THAT ALL INFORMATION IN THIS APPLICATION IS TRUE AND CORRECT. I FURTHER CERTIFY BY SIGNATURE HEREON, THAT I AM AUTHORIZED TO EXECUTE THIS DOCUMENT ON BEHALF OF THE CORPORATION AND AM ELIGIBLE TO RECEIVE A LICENSE. IF SIGNING THIS AS OWNER OF A SOLE PROPRIETORSHIP, I AM NOT DELINQUENT IN THE PAYMENT OF ANY CHILD SUPPORT OWED UNDER CHAPTER 232, FAMILY CODE. IF SIGNING AS A SOLE PROPRIETOR, I CERTIFY I HAVE FILED THE ASSUMED NAME CERTIFICATE IN APPROPRIATE COUNTIES PURSUANT TO BUSINESS AND COMMERCE CODE, CHAPTER 36. I FURTHER CERTIFY THAT I HAVE READ AND UNDERSTAND CHAPTER 437 OF THE HEALTH & SAFETY CODE, THE APPLICABLE PROVISIONS OF 25 TEXAS ADMINISTRATIVE CODE, CHAPTER 229, AND AGREE TO ABIDE BY THEM.

� OWNER Signature � PARTNER Date

� PRESIDENT � CORPORATE DESIGNEE / AGENT Printed Name & Title

EF23-10597 04/14/10 BE CERTAIN TO COMPLETE ALL PAGES OF THIS FORM

PAGE 1 OF 3

PURPOSE OF THIS APPLICATION: Mark appropriate box to indicate purpose of application, and/or any change in status of firm.

Please Note: Initial licenses will expire two years from date of payment receipt by the Department.

� New (Initial) - Start Date of Regulated Activity: � Change of Ownership (Including legal entity) Previous owner: Effective Date: Change of ownership (including change of legal entity) requires submission of a new application and fee as listed on Page 1. Initial licenses will expire two years from date of payment receipt by the Department. � Amended - � Change of Location [previous location: ] Enter the date the change � Change of Name [previous name: ]} was effective: � Other: ] Date: Any minor amendment including change of name or change in the location of a licensed place of business, requires submission of a new application and fee as listed on Page 1. The current expiration date remains in effect. � Renewal - Renewals are valid from the anniversary date. Failure to submit the renewal fee before the expiration date will result in a delinquency fee for each location and must be remitted before the license or permit will be issued. � Notice that firm is out of business. Date: � Not required to license/permit. Sign and date. Return for deletion from our records. Reason:

RESPONSIBLE INDIVIDUAL IN CHARGE AT PHYSICAL ADDRESS A license cannot be issued for manufacturing or holding of foods for distribution in any room used as living or sleeping quarters and shall be separated from any living or sleeping quarters by complete partitioning. Food prepared in a private home may not be used or offered for human consumption in a food establishment. Name & Title Residence Address Drivers License Number BUSINESS HOURS OF OPERATION: m. to m. WEBSITE/ INTERNET ADDRESS: http://www. BILLING INFORMATION (The license and/or courtesy renewal notice will be sent to the following): Billing Name: Billing Address: City, State, Zip Code: Name of Application Preparer (Contact Person): Telephone Number of Application Preparer (Contact Person): Fax Number of Application Preparer (Contact Person): E-mail Address of Application Preparer:

PRIVACY NOTIFICATION: With few exceptions, you have the right to request and be informed about information that the State of Texas collects about you. You are entitled to receive and review the information upon request. You also have the right to ask the state agency to correct any information that is determined to be incorrect. You may visit our website listed below for more information on the Privacy Notification (Reference: Government Code, Section 522.021, 522.023 and 559.004).

ALL THREE PAGES OF THE APPLICATION FORM MUST BE COMPLETED BEFORE A LICENSE WILL BE ISSUED. Please allow 4-6 weeks for processing.

Visit our website at: www.dshs.state.tx.us

Please address correspondence only to: Texas Department of State Health Services

RLU, Food and Drug Licensing Group, MC 2835 PO Box 149347

Austin, Texas 78714-9347

BE CERTAIN TO COMPLETE ALL PAGES OF THIS FORM PAGE 2 OF 3

REVISED 06-18-09

LICENSE HOLDER INFORMATION: Please enter the 11 digit State Tax Payer’s Identification number on file with the Texas

mptroller of Public Accounts. �-��-� Co Complete the one box below that relates to the type of ownership of your business. � Sole Owner / Proprietorship Name of Sole Owner: ______________________________________________________________________________________________ Residence Address Drivers License Number � Partnership � LP � LLP � LTD Name of Partnership: ___________________________________________________________________________________ Partnership Address: _______________________________/____________________/_______/___________ ADDRESS CITY ST ZIP Partner Name:__________________________________________________________________________________________ Residence Address Drivers License Number Partner Name:__________________________________________________________________________________________ Residence Address Drivers License Number Partner Name:__________________________________________________________________________________________ Residence Address Drivers License Number � Association � State Agency Name of Association / State Agency: ____________________________________________________________ Address: ____________________________________________/__________________________/________/______________ ADDRESS CITY ST ZIP

Name: ________________________________________________________________________________ Residence Address Drivers License Number Name: ________________________________________________________________________________ Residence Address Drivers License Number � Corporation � LLC Corporation Name: _____________________________________________________________________________________ Date and Place of Incorporation Corporation Address: ___________________________ /______________________/________/___________ ADDRESS CITY ST ZIP President Name: __________________________________________________________________________ Residence Address Drivers License Number Officer’s Name: __________________________________________________________________________ Residence Address Drivers License Number Officer’s Name: __________________________________________________________________________ Residence Address Drivers License Number Name of Registered Agent: ___________________________________________________________________ Residence Address Drivers License Number

BE CERTAIN TO COMPLETE ALL PAGES OF THIS FORM REVISED 06-18-09 PAGE 3 OF 3

BUDGET ZZ104 FUND: 183 LICENSE #:

MFG FOOD

REGULATORY LICENSING UNIT FOOD MANUFACTURER LICENSE APPLICATION

INITIAL, RENEWAL, OR CHANGE OF OWNERSHIP (Health and Safety Code, Chapter 431) Return both the completed application and fee to: TEXAS DEPARTMENT OF STATE HEALTH SERVICES PO Box 12008, Austin, Texas 78711 You may contact our office at: (512) 834-6626

If you are a food wholesaler only (you do not private-label, manufacture, or repack food), contact this office at (512) 834-6626 for the correct application.

Name Under Which Business is Conducted (DBA):

Physical Address to be Licensed:

City, County, State, Zip Code:

Telephone # at address: FEE SCHEDULE FOR FOOD MANUFACTURERS, PRIVATE LABELERS, AND REPACKERS The fee is based on gross annual sales for ALL food manufactured at the licensed place of business. This includes private labeled food, manufactured food, wholesaled food, and repacked food from the licensed location. This includes facilities where food is held for limited periods of time. Note: If a food manufacturer operates food warehousing locations that are physically separate from the manufacturing location, the food warehouses must be individually licensed as warehouse operators. ype of Manufacturer (Check all that apply): T � Processor/Packer � Re-packer � Water Store � Water Vending Machine � Ice / Water Vending Machine � Private Labeler - Name/Address of Co-Packer:

ype of Sales: T � Wholesale and/or Retail � Retail Only

GROSS ANNUAL FOOD SALES FEE FOR INITIAL/RENEWAL LICENSE OR CHANGE OF OWNERSHIP

� � � � � � �

$ 0.00 $ 10,000.00 $ 25,000.00 $ 100,000.00 $ 200,000.00 $ 1,000,000.00 $ 10,000,000.00

$ 9,999.99 $ 24,999.99 $ 99,999.99 $ 199,999.99 $ 999,999.99 $ 9,999,999.99

Or more

- $ 104.00 for each place of business - $ 156.00 for each place of business - $ 258.00 for each place of business - $ 577.00 for each place of business - $ 927.00 for each place of business - $ 1,154.00 for each place of business - $ 1,731.00 for each place of business

� LATE FEE - A person who files for renewal after the license expiration date must pay an additional $100.00. ANY RETURNED CHECKS RECEIVED AFTER EXPIRATION DATE WILL BE ASSESSED THE $100.00 LATE FEE.

VERIFICATION: I SWEAR OR AFFIRM THAT ALL INFORMATION IN THIS APPLICATION IS TRUE AND CORRECT. I FURTHER CERTIFY BY SIGNATURE HEREON, THAT I AM AUTHORIZED TO EXECUTE THIS DOCUMENT ON BEHALF OF THE CORPORATION AND AM ELIGIBLE TO RECEIVE A LICENSE. IF SIGNING THIS AS OWNER OF A SOLE PROPRIETORSHIP, I AM NOT DELINQUENT IN THE PAYMENT OF ANY CHILD SUPPORT OWED UNDER CHAPTER 232, FAMILY CODE. IF SIGNING AS A SOLE PROPRIETOR, I CERTIFY I HAVE FILED THE ASSUMED NAME CERTIFICATE IN APPROPRIATE COUNTIES PURSUANT TO BUSINESS AND COMMERCE CODE, CHAPTER 36. I FURTHER CERTIFY THAT I HAVE READ AND UNDERSTAND CHAPTER 431 OF THE HEALTH & SAFETY CODE, THE APPLICABLE PROVISIONS OF 25 TEXAS ADMINISTRATIVE CODE, CHAPTER 229, AND AGREE TO ABIDE BY THEM.

� OWNER Signature � PARTNER Date

� PRESIDENT � CORPORATE DESIGNEE / AGENT Printed Name & Title

EF23-10853 06/18/09 BE CERTAIN TO COMPLETE ALL PAGES OF THIS FORM

PAGE 1 OF 3

PURPOSE OF THIS APPLICATION: Mark appropriate box to indicate purpose of application, and/or any change in status of firm.

Please Note: Initial licenses will expire two years from date of payment receipt by the Department.

� New (Initial) - Start Date of Regulated Activity: � Change of Ownership (Including legal entity) Previous owner: Effective Date: Change of ownership (including change of legal entity) requires submission of a new application and fee as listed on Page 1. Initial licenses will expire two years from date of payment receipt by the Department. � Amended - � Change of Location [previous location: ] Enter the date the change � Change of Name [previous name: ]} was effective: � Other: ] Date: Any minor amendment including change of name or change in the location of a licensed place of business, requires submission of a new application and fee as listed on Page 1. The current expiration date remains in effect. � Renewal - Renewals are valid from the anniversary date. Failure to submit the renewal fee before the expiration date will result in a delinquency fee for each location and must be remitted before the license or permit will be issued. � Notice that firm is out of business. Date: � Not required to license/permit. Sign and date. Return for deletion from our records. Reason:

RESPONSIBLE INDIVIDUAL IN CHARGE AT PHYSICAL ADDRESS A license cannot be issued for manufacturing or holding of foods for distribution in any room used as living or sleeping quarters and shall be separated from any living or sleeping quarters by complete partitioning. Food prepared in a private home may not be used or offered for human consumption in a food establishment. Name & Title Residence Address Drivers License Number BUSINESS HOURS OF OPERATION: m. to m. WEBSITE/ INTERNET ADDRESS: http://www. BILLING INFORMATION (The license and/or courtesy renewal notice will be sent to the following): Billing Name: Billing Address: City, State, Zip Code: Name of Application Preparer (Contact Person): Telephone Number of Application Preparer (Contact Person): Fax Number of Application Preparer (Contact Person): E-mail Address of Application Preparer:

PRIVACY NOTIFICATION: With few exceptions, you have the right to request and be informed about information that the State of Texas collects about you. You are entitled to receive and review the information upon request. You also have the right to ask the state agency to correct any information that is determined to be incorrect. You may visit our website listed below for more information on the Privacy Notification (Reference: Government Code, Section 522.021, 522.023 and 559.004).

ALL THREE PAGES OF THE APPLICATION FORM MUST BE COMPLETED BEFORE A LICENSE WILL BE ISSUED. Please allow 4-6 weeks for processing.

Visit our website at: www.dshs.state.tx.us

Please address correspondence only to: Texas Department of State Health Services

RLU, Food and Drug Licensing Group, MC 2835 PO Box 149347

Austin, Texas 78714-9347

BE CERTAIN TO COMPLETE ALL PAGES OF THIS FORM PAGE 2 OF 3

REVISED 06-18-09

LICENSE HOLDER INFORMATION: Please enter the 11 digit State Tax Payer’s Identification number on file with the Texas

mptroller of Public Accounts. �-��-� Co Complete the one box below that relates to the type of ownership of your business. � Sole Owner / Proprietorship Name of Sole Owner: ______________________________________________________________________________________________ Residence Address Drivers License Number � Partnership � LP � LLP � LTD Name of Partnership: ___________________________________________________________________________________ Partnership Address: _______________________________/____________________/_______/___________ ADDRESS CITY ST ZIP Partner Name:__________________________________________________________________________________________ Residence Address Drivers License Number Partner Name:__________________________________________________________________________________________ Residence Address Drivers License Number Partner Name:__________________________________________________________________________________________ Residence Address Drivers License Number � Association � State Agency Name of Association / State Agency: ____________________________________________________________ Address: ____________________________________________/__________________________/________/______________ ADDRESS CITY ST ZIP

Name: ________________________________________________________________________________ Residence Address Drivers License Number Name: ________________________________________________________________________________ Residence Address Drivers License Number � Corporation � LLC Corporation Name: _____________________________________________________________________________________ Date and Place of Incorporation Corporation Address: ___________________________ /______________________/________/___________ ADDRESS CITY ST ZIP President Name: __________________________________________________________________________ Residence Address Drivers License Number Officer’s Name: __________________________________________________________________________ Residence Address Drivers License Number Officer’s Name: __________________________________________________________________________ Residence Address Drivers License Number Name of Registered Agent: ___________________________________________________________________ Residence Address Drivers License Number

BE CERTAIN TO COMPLETE ALL PAGES OF THIS FORM REVISED 06-18-09 PAGE 3 OF 3

P.O. Box 12076 Austin, Texas 78711 � (800) 835-5832 � (512) 463-7476 �Hearing impaired: (800) 735-2988 voice � www.TexasAgriculture.gov

This document becomes public record and is subject to disclosure. With few exceptions, you have the right to request and be informed about the information that the State of Texas collects about you. You are entitled to receive and review the information upon request. You also have the right to ask the state agency to correct any information that is determined to be incorrect. (Reference: Government Code, Sections 552.021, 552.023, and 559.004.)

Licensing Department Revised 01/01/2010 Administrative Services Division Nonoccupational

Texas Department of Agriculture Device Registration Certificate Application

1 TYPE OF APPLICATION New Business Change of Ownership – previous account number: _________________

2 BUSINESS TYPE TDA USE ONLY Client No.

Account No.

Corporation Limited Liability Co. Limited Partnership General Partnership

Sole Proprietorship Government Organization Date (mm/dd/yy)

/ / Initials

3 CLIENT INFORMATION Full legal business name (owner’s name if sole proprietor – no aliases)

D.B.A. (if applicable) Comptroller Taxpayer ID No. (In-state businesses)

Federal ID No. (Out-of-state businesses and nonprofit org. )

SOLE PROPRIETORSHIP ONLY

SEC

TIO

N A

Driver License No. ____________________ (required) State Issued ID No. ____________________ (if DL is not available)

TX Other

1 RESPONSIBLE PERSON INSTRUCTIONSPlease list the full legal name (no aliases or nicknames) of the primary person responsible for the business, as indicated:

�� For a corporation, limited liability company, or cooperative, the president or CEO, �� For a limited or general partnership, the managing partner or general manager, �� For a sole proprietorship, the owner, �� For any other type of business, the general manager.

2 RESPONSIBLE OFFICER, PARTNER, MANAGER, OR OWNER First Name

M. I.

Last Name

SEC

TIO

N B

Phone No. ( ) - Ext.

E-mail

TODD STAPLES, COMMISSIONERRWM-700

RWM-700 Device Registration Certificate Application Page 2 of 4

Legal Business Name _________________________


1 PERSON TO CONTACT FOR LICENSE-RELATED MATTERS First Name

M. I.

Last Name

Primary Phone ( ) - Ext.

Secondary Phone (optional) ( ) - Ext.

Fax (optional) ( ) - Ext. E-mail (optional)

Would you prefer to be contacted by E-mail? Yes No

2 MAILING ADDRESS Address

SEC

TIO

N C

City

State

Zip

1 FACILITY INFORMATIONFacility Name 2 PHYSICAL ADDRESS OF LOCATION OF LICENSEE, LICENSED ACTIVITIES OR EQUIPMENTAddress (No P.O. Box) City

State

Zip

County

SEC

TIO

N D

Directions to Physical Location if address above is difficult to find

3 RESPONSIBLE PERSON MAILING ADDRESS Address City

State

Zip

SEC

TIO

N B

(con

t’d.

)

Web Address of Business (optional)




1 OUT-OF-STATE APPLICANTS ONLY An applicant for a Device Registration whose principal place of business is situated outside the State of Texas must appoint and designate a resident citizen of Texas as said applicant’s resident agent within Texas. If the address provided in Section C is out of state resident agent information is REQUIRED. Who do you wish to designate as resident agent? The Texas Secretary of State Other (list below) Resident Agent Name Resident Agent Address

SEC

TIO

N E

City

Zip

Business Phone ( ) -

1 DEVICE CLASSIFICATION Device Type Fee per

DeviceTotal No. of

DevicesTotal Fees

Fuel Pump – Gasoline (one product per nozzle) $11.80 a

Fuel Pump – Diesel or other non-gasoline product (one product per nozzle) $9.30 b

Fuel Pump – E85 – Fuel Ethanol (one product per nozzle) $9.30 b

Fuel Pump (multiple products per nozzle) $34.90 c

Bulk Meter (rated flow 20 GPM – 100 GPM) $30.80 d

Bulk Meter (rated flow > 100 GPM) $30.80 d

Liquid Petroleum Gas (LPG) Meter $30.00

Scale (0-4,999 pound capacity) $15.00

Ranch Scale (5,000 pounds and up) $15.00

Livestock Scale (5,000 pounds and up) $120.00

Truck Scale $120.00

Other Scale (5,000 pounds and up) $120.00

TOTAL FEES DUE $

SEC

TIO

N F

a Fee includes applicable motor fuel testing fee of $3.30 (Calculation: $8.50 device registration fee + $3.30 motor fuel testing fee)

b Fee includes applicable motor fuel testing fee of $0.80 (Calculation: $8.50 device registration fee + $0.80 motor fuel testing fee)

c Fee includes applicable motor fuel testing fee of $9.90 (Calculation: $25.00 device registration fee + $9.90 motor fuel testing fee)

d Fee includes applicable motor fuel testing fee of $0.80 (Calculation: $30.00 device registration fee + $0.80 motor fuel testing fee)




1 PAYMENT Please see instructions for applicable fees.

REGISTRATION IS NOT VALID UNTIL APPROVED BY TDA.

Method of Payment (payable to Texas Department of Agriculture) Check # Cashier’s Check # Money Order #

Amount remitted $

Mail to: Texas Department of Agriculture P.O. Box 12076, Austin, TX 78711-2076

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TDA USE ONLY Receipt No. Date Receipt Issued1 SIGNATURE The applicant, by and through their personal or agent's signature below (1) certifies that all information provided in connection with this application at any time is true and correct to the best of the applicant's knowledge; (2) acknowledges that any misrepresentation or false statement made by the applicant, or an authorized agent of the applicant, in connection with this application, whether intentional or not, will constitute grounds for denial, revocation, or non-renewal of any license issued pursuant to this application and/or assessment of monetary administrative penalties; and (3) if applying as an individual, further acknowledges that this application may be denied and that any license issued pursuant to this application may be suspended, revoked, or denied renewal due to delinquency in payment of a guaranteed student loan and that any license issued pursuant to this application may be suspended or denied renewal for failure to pay child support. If signed by an agent (including employee) of the applicant, the person signing certifies that he or she is authorized to make the preceding certifications on behalf of the applicant. Applicant Name

Title

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Applicant Signature

Date / / month day year

1 CHECKLIST Please use this checklist to ensure you are sending all of the necessary information and documents.

Device Registration Certificate Application Fee (see instructions for assistance with calculating the correct fee.)

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Please note that an incomplete application may result in processing delays.

Documents

BUYING, SELLING, AND LEASING CONVENIENCE … selling, and leasing convenience stores. j. mark freeland. ... selling, and leasing convenience stores chapter 17. i. 5)