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 FREELAND LAW 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 Association State Bar of Texas Hidalgo County Bar Association Hidalgo 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 the State Bar of Texas in May, 1979.

BUYING, SELLING, AND LEASING CONVENIENCE STORES Chapter 17

BUYING, SELLING, AND LEASING CONVENIENCE STORES 32nd Annual Advanced Real Estate Law Course

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 BUYING, SELLING, AND LEASING CONVENIENCE STORES Chapter 17

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 7 7) 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 BUYING, SELLING, AND LEASING CONVENIENCE STORES Chapter 17

I. CONVENIENCE STORES MODERN C-STORE CONCEPT. Today, most successful C-Store operators have sized up their The sale, purchase or lease of a convenience store locations and have located their properties on strategic (a/k/a C-Store) location is not unlike any other corners. The inside store square footage has increased as commercial real estate transaction from a real estate well as the number of canopied pump islands selling acquisition perspective. However, transactions involving branded gasoline and diesel fuel. Inside store sales have the acquisition of convenience store locations sometimes expanded beyond the conventional C-Store product cross the line of a pure real estate transaction by bringing mixes to include lottery tickets, money orders, coffee into play a host of other issues that relate to the bars, and fast food counters with food items for sale operational requirements of a convenience store. made fresh on premises. The trend is also towards well lighted facilities with expanded restroom facilities to BEFORE SELF-SERVICE GASOLINE PUMPS. accommodate the traveling public. Often, C-Stores are The convenience store industry has evolved over the combined with the added retail power of a carwash or a years. It started out with small locally owned stores national/regional fast food restaurant in the same selling a basic array of grocery items, milk, cold location, which is referred to as “co-branding” in the beverages and ice. The C-Store’s main attribute was the industry. Operational hours have expanded, and 24 hour convenience of being able to get in and out of the store operations have become the norm. quickly. Gasoline sales were not part of the product mix; rather, gasoline was sold primarily at full service 1) STRUCTURING THE DEAL gasoline stations. The C-Store’s main competition was the supermarket or large grocery store that carried more Generally, the owner of the land and the operator variety but were burdened with long lines and parking of the store operation are two distinct legal entities, even problems. Then self-service gasoline pumps came on the though they may have the same or related ownership. scene. The addition of self-service gasoline sales to the The land owning entity is the “passive” entity and has traditional product mix of the C-Store marked the obtained the financing for the acquisition of the land, the beginning of the demise of the full-service gasoline construction of the improvements, and the installation of station. the fixtures and equipment. Upon completion of the store improvements, the land owning entity then leases C-STORE RETROFITTING. As a way to increase the improved property to the store operating entity, the number of gallons sold, enterprising gasoline usually on a triple-net lease. The store operating entity wholesale distributors began vying for existing C-Store is the “active” entity. It finances the inventory, enters locations and entering into contractual arrangements into a branding agreement with a major oil company, with C-Store owners to install, at the distributor’s cost, obtains all of the required permits\licenses for store underground storage tanks, self-service pumps and operations, staffs the store with personnel, and runs the canopies on existing C-Store properties. In return the C- store operations. While the store operating entity is Store owners would monitor the gasoline sales from a usually the same entity for each location, the land remote console, and collect and remit the gasoline sale owning entity is often times a single asset company or, proceeds to the distributor on a periodic basis in return if not a single asset company, it only owns a limited for a negotiated price per gallon for every gallon sold. number of locations relative to the number of locations operated by the operating entity. EARLY DESIGN BUILD. With the advent of self service gasoline pumps, the franchise or chain C-Store Reasons to split the ownership between the land concept also began to proliferate wherein C-Stores were and the store operations include: a) to facilitate the sale designed from the start with self-service gasoline islands. and lease back of the land at a future date while keeping Early stores still had small inside store space with few the store operation or vice versa; b) to try to limit or self-service gasoline pumps on rather small properties contain exposure to tort liability (asset protection) by that did not allow for expansion; nonetheless, they began putting land and equipment into a passive entity and to compete aggressively with the locally owned leasing the package to the active operating entity ; c) to retrofitted C-Store concept and the full service gasoline minimize cross collateralization and cross default issues station, primarily because they owned their own gasoline in loan transactions; d) to allow for one entity to survive distribution equipment and could buy fuel at wholesale without the other; and e) to permit, for federal income prices. tax purposes, the land owning entity to be taxed differently (e.g. a flow-through entity taxed at the

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owner’s level) from the operating entity (e.g. taxed at can elect to be taxed as a corporation under the Internal the entity level). It can however, be somewhat Revenue Service’s (IRS) “check the box election”, the cumbersome for the client to maintain separate entities prevailing choice is to elect to be taxed as a partnership. and this structure does create additional costs to the If the LLC elects to be taxed as a partnership, the LLC is client. not taxed at the entity level for federal income taxes; all gains and losses for income tax purposes flow-through 2) CHOICE OF ENTITIES. and are taxed at the member’s level and will be reported on the member’s tax return. One disadvantage is that Texas affords owners a number of legal entities individual taxation cannot be deferred with a pass- from which to choose. Most investors focus on liability, through entity classification; taxes are owed on taxable management, and tax issues when choosing an entity; income whether there has been a distribution of income however, entity choice can also involve capitalization, to the members or not. transferability of ownership, limited or unlimited life, costs for forming and maintaining the entity, whether LLCs have flexibility of structure and can be profits will be distributed or reinvested, and asset structured with a centralized or decentralized protection issues. management. A centralized management can be vested in less than all of the members. A decentralized For owning and holding real estate the three management is where each member has certain rights of entities of choice are: limited liability companies (taxed management as may be defined in the company’s as a partnership), limited partnerships, and operating agreement. S Corporations. These three entity forms share, generally, the characteristics that they are not subject to LLCs generally have two or more members, are federal income taxation, with all gains and losses limited in duration, and restrict the free transferability of flowing through and taxed at the owner level, and each ownership interests. entity provides limited liability protection for its investors. These entities differ primarily in the areas of LLCs were first created in 1991 under the Texas management and ownership. Limited Liability Company Act, Art. 1528n, Texas Miscellaneous Corporation Laws Act, Chapter 18. This If the purpose is to build working capital as Act expired on January 1, 2010. Limited Liability opposed to distribution of income to the owners, then the Companies are now governed by Title 3 of the Business C Corporation or the LLC, which elects to be taxed as a Organization Code. corporation, may be the preferred choice of entity particularly for the operating entity. Both the C B) Limited Partnerships. Corporation and the LLC, which elects to be taxed as a corporation, can be converted to a S Corporation at a Limited partnerships have two types of partners, later date, if such an election becomes more general partners and limited partners. While the general advantageous to the taxpayer. partner is jointly and severally liable for the debts and obligations of the partnership, the limited partners have The following is an overview and general no personal liability. Generally, the limited partner’s discussion of the different characteristics of these liability is limited to the amount of capital contributed to entities you may wish to consider when deciding which the partnership, unless they agree otherwise. Limited entity best meets your client’s criteria. partnerships are not taxed at the entity level for federal income tax purposes. All gains and losses for income A) Limited Liability Companies (LLCs). tax purposes flow-through and are taxed at the partner’s level and will be reported on the partner’s tax return; The LLC is probably the entity of choice today taxes are owed on taxable income whether there has been because of its flexibility and versatility. a distribution of income to the partners or not.

Limited liability companies have characteristics Limited partners generally do not have the right of both partnerships and corporations. The owners are to participate in the management of the limited referred to as “members” and generally have no personal partnership. Management of the limited partnership is in liability for the debts and obligations of the LLC. Their the hands of the general partner, subject to whatever risk is limited to their capital contribution. While LLCs restrictions are placed on the general partner in the

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limited partnership agreement. Properly structured, the Until the advent of LLCs, S Corporations were general partner should also be an entity with limited the nearest thing to being able to have the protection liability characteristics. However, this may necessitate from personal liability provided by corporations while at the creation of another entity (the general partner’s the same time having the advantage of pass-through entity) in order to form the limited partnership. treatment for income tax purposes that partnerships enjoyed. LLCs combine both of these characteristics When limited partnerships were exempt from with added flexibility and versatility. Texas franchise taxes, limited partnerships were a popular vehicle in which to own real estate. Now that II. REAL ESTATE ACQUISITION the exemption has been removed, limited partnerships (UNIMPROVED PROPERTY) have lost some of their attractiveness. Limited partnerships appear best suited for use when you are The following is a general discussion of some trying to raise capital from a class of investors (silent key issues that can come into play in a purchase partners) who are not intended to have any management agreement involving an unimproved tract of land to be rights. acquired for use as a C-Store location.

C) S Corporations. 1) ROLL BACK TAXES. Roll back taxes should be addressed in the purchase agreement, if the Most corporations are C corporations under property is being carried on the ad valorem tax roles with federal tax law, unless the corporation qualifies and an agricultural use exemption. Roll back taxes can be elects to be an S Corporation under Subchapter S of the significant and need to be considered when making the Internal Revenue Code of 1986 (the “Code”). Unlike C offer to buy property. When appraising land designated Corporations, which pay federal income tax at the entity for agricultural use, the chief appraiser for the county tax level, S Corporations are generally not taxed at the entity appraisal district also appraises the land at its market level for federal income tax purposes. All gains and value. The difference in the tax actually imposed on losses for income tax purposes flow-through and are land designated for agricultural use and the amount of taxed at the shareholder’s level and will be reported on tax that would have been imposed at the property’s the shareholder’s tax return; taxes are owed on taxable market value is the amount of additional tax (roll back income whether there has been a distribution of tax) for that tax year. The chief appraiser determines dividends to the shareholder or not. In the context of a whether the land has been diverted to a nonagricultural C Corporation, the shareholders only pay taxes upon the use. If such determination is not protested or is upheld receipt of dividends. after a proper protest is filed, each taxing unit prepares and delivers a bill as soon as practical for the additional S Corporations are restricted in the number of taxes owed, plus interest at an annual rate of 7% shareholders it can have to 75 shareholders, have only calculated from the dates on which the differences would one class of stock, and limit who can be an eligible have become due. The additional taxes become shareholder (to US citizens and residents, estates, and delinquent and incur penalties and interest if not paid certain types of qualified trusts). Other technical rules before the next February 1 that is at least 20 days after under the Code apply to S Corporations and must be the date the bill is delivered to the landowner. Roll back adhered to. taxes are calculated for each of the five years preceding the year in which the change of use occurred. Texas Tax An S Corporation is a tax designation only; in all Code §23.55. other respects, it is a corporation formed under state law with all of the corporate characteristics and qualities 2) SUBDIVISION. The Texas Local allowed under state law. All shareholders of a Government Code Section 212.004 (dealing with lands corporation are protected from personal liability for the in the limits of a municipality or in its extraterritorial debts and obligations of the corporation. Management of jurisdiction) and Section 232.001 (dealing with lands a corporation is centralized in a board of directors outside the extraterritorial jurisdiction of a municipality) elected by its shareholders. Its duration can be unlimited require a subdivision plat to be prepared and recorded and, unless subject to a shareholder agreement with when a tract of land is divided into two or more parts. If provisions to the contrary, the corporate stock is fully the property is within the city limits or extraterritorial transferable. jurisdiction (ETJ) of a city or town, the city’s subdivision ordinances control the subdivision process.

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If the property is outside the ETJ of a city, then the 3) ZONING. Section 211.004 of the Texas county’s subdivision ordinances control. Generally, the Local Government Code provides that all zoning property has to be subdivided of record in order to obtain regulations must be adopted by a municipality in a building permit. The plat must conform to the accordance with a comprehensive plan. A minimum standards set forth in the applicable comprehensive plan is generally understood to be a guide subdivision ordinance and commonly addresses to future development in the context of urban standards, including but not limited to, potable water, development. The city’s zoning ordinances and zoning sanitary sewer, storm water drainage, public access, and maps (together with any proposed amendments) should fire protection. A preliminary plat is generally reviewed be consulted relative to the development of a piece of by the city’s engineering department for compliance and property for C-Store purposes. Request a zoning is thereafter submitted with staff’s recommendations to verification letter identifying the property to be the city planning commission and subsequently to the developed verifying the current zoning for the property. city commission for approval. Once a subdivision plat Also obtain a copy of the zoning regulations applicable meets the government’s standards, it must be approved. to the verified zoning classification. All property within Whether a property needs to be platted or re-platted is the corporate city limits of a city is subject to the zoning important because of the direct or indirect impact on ordinances of that city. If the property is not zoned for total costs, time delays, and development flexibility. C-Store use, a re-zoning application should be submitted for city approval. Usually the zoning application is If the property has not been subdivided, then the submitted in conjunction with the subdivision request; purchase agreement should be drafted subject to the however, if the zoning will be contested, it might be buyer being able to obtain subdivision approval prior to better to resolve the zoning issue before incurring the closing the purchase of the property. The subdivision engineering costs associated with the subdivision plat approval process involves two kinds of costs: offsite and approval process. The application to re-zone a property onsite costs. Offsite costs to be recognized might must go before the city’s zoning commission and the city include the added cost to bring potable water, sanitary commission for approval; it also requires notices to sewer, storm water drainage, fire mains, public access, property owners of the surrounding property eliciting and utilities to the property. Onsite issues that their comments. Zoning tends to be neighborhood frequently arise include public dedications for additional sensitive and generally attempts to protect existing highway right of way, landscaping requirements, buffers, residential neighborhoods. sidewalks, on-site storm water detention requirements, set-backs, and highway access (i.e. the number and 4) BUILDING PERMIT. Generally, the location of curb cuts). Normally, the subdivision will be property has to be subdivided of record in order to obtain a one lot subdivision; however, if excess land is being a building permit. Cities issue building permits for purchased because the property is being developed as a projects within its city limits. Counties issue building multi-use project, a multi-lot subdivision generally works permits for projects located outside the city limits. better because it will facilitate financing the different Additional permit requirements may be required for uses and the sale at a later date of all or part of the total mechanical, electrical, plumbing, demolition, and project. signage. Renovations of existing facilities may require a building permit and trigger requirements to upgrade the If the property is already a subdivided lot, the project to meet current building codes. subdivision plat should be reviewed. In particular, the plat notes setting forth any requirements affecting the 5) SIGNAGE. C-Stores rely heavily on use of the property, including use restrictions, building highway signage and in particular signage to advertise restrictions, on site storm water detention plans, their brand of motor fuel and its pricing. For those cities landscaping requirements, and sidewalk requirements with signage ordinances, be aware of the signage should be closely scrutinized. If a multi-lot subdivision limitations and permit requirements. Signage ordinances is under consideration, controlled access to a public set forth procedures for obtaining a permit for the thoroughfare may have restricted access to the project. erection of a free standing sign. Signage ordinances can The access issue highlights the issue of whether there is address, among other matters, signage dimensions, a need for a joint access easement between lots. If a height, illumination, moveable parts, and separation from joint access agreement exists, it needs to be reviewed for other signs. If a freestanding sign is within 660 feet of costs and maintenance allocations together with its other an Interstate Highway, the Texas Department of terms and conditions. Transportation (TXDOT) has jurisdiction for control of

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signage under the Highway Beautification provisions of involved in bringing in sufficient fill dirt to raise the the Texas Transportation Code, Chapter 391. Licenses project elevation. The additional cost of flood insurance are administered through the Austin office of TXDOT will also affect the bottom line profitability of the store. and permits are administered through the applicable TXDOT district office. 10) EXPANSION OF ROAD RIGHT OF WAY. Road expansion can become an issue. Certain 6) USE RESTRICTIONS. Once a title highway intersections are on the drawing board at the commitment is issued, verify that no recorded use Texas Department of Transportation (TXDOT) for major restrictions prevent commercial development, the sale of expansion including new on-off ramp systems even gasoline, the sale of alcohol, or pornography (if the C- though the necessary right of way acquisitions have not Store operator sells adult magazines). If the sale of beer been acquired or condemned. What looks like a prime and wine is a part of the C-Store product mix, verify that corner may not be buildable even though there is no time the property is not in a “dry” area as described by frame for when or if the expansion will occur. In some municipal or county ordinance. instances the right of way has been acquired, but the road system has not yet been expanded. Then the issues 7) PLANNED UNIT DEVELOPMENT. If become how far back from the present highway must the the title commitment reveals that the property is part of store be located and for how long and, when the road a Planned Unit Development or subject to architectural system expansion commences, the negative impact on control committee approvals, all building plans will the C-Store business caused by restricted or limited necessarily have to follow the processes established in access during the construction period. the subdivision declaration. Pre-approval of the plans and specifications should be obtained during any due 11) CONTROLLED ACCESS. All access diligence period under the purchase agreement. on state or federal highways is controlled. Cities also regulate access to public streets. The size, location and 8) ALCOHOLIC BEVERAGE number of access points\curb cuts need to be determined RESTRICTIONS. Most C-Stores sell beer and wine as soon as possible and may need to be negotiated with unless they are situated in dry areas. The Texas the applicable agency, if possible, should the initial Alcoholic Beverage Code, Section 109.33 allows recommendation be insufficient. Current trends point counties to enact regulations applicable to areas in the towards backing curb cuts further away from the county outside of an incorporated city or town to prohibit highway intersection. This impacts the thought process alcoholic beverages from being sold within 300 feet of a in picking the best corner at an intersection. In the past, church, public or private school or public hospital; or conventional wisdom preferred the “downstream” corner 1,000 feet from a public or private school, if requested because of easier access out of the store; now the by the school. The measurement of the distance between thinking prefers the “upstream” corner if the curb cut the place of business where alcoholic beverages are sold access is required to be moved further back from the and the church, school, or hospital is defined in Section intersection. 109.33(b) of the statute. City ordinances place their own distance restrictions on the sale of alcoholic beverages. 12) TITLE\SURVEY ISSUES. As in all If there is a church, school or hospital in close proximity, real estate transactions, thorough reviews of the title consult the applicable ordinances and, if necessary, commitment and survey are critical . There should be verify the distances. Design modifications may be agreement between both the title commitment and survey necessary to conform with applicable ordinances as to what does and does not apply to the property. Of depending on how distances are required to be measured. particular concern are the existence and/or location of underground easements for gas transmission pipelines, 9) FLOOD PLAINS. The project engineer utilities, and TXDOT drainage facilities that are not should determine whether the property lies in a flood readily visible to a surface inspection. Surveys should plain. The Federal Emergency Management Agency show all recorded easements. Sometimes surveys will (FEMA) has published Flood Insurance Rate maps that pick up indications of easements, the location of which identify risk and special hazard low lying areas. These cannot be ascertained from the public record. These maps are used to rate flood insurance offered under the indicators can include items such as irrigation stand National Flood Insurance Program. Cities often have pipes and utility markers located on highway right of more detailed maps. To offset the risk of being in a low ways. If the area is known for oil and gas production, lying area, the project may incur additional costs the location of nearby wells and tank batteries could be

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an indication of possible unmarked natural gas or oil interim rules. The new rules became effective November gathering lines crossing the property. Contact 1, 2006 (70FR66070). The final rules do not differ DIGTESS at 1-800-344-8377 and at www.digtess.org to significantly from the interim rule standards in effect locate and mark all underground pipelines. In the lower prior to November 1, 2006. The EPA recognizes that the Rio Grande Valley of Texas, the applicable irrigation guidelines for conducting a Phase I ESA which have district should be contacted as to all rights they claim been established by the American Society for Testing against the property, if any. and Materials (ASTM) under the “ASTM E1527-05 Standard Practice for Environmental Site Assessments If the property is burdened with a “blanket” Process” fully complies with the “All Appropriate easement, try to contact the easement holder in order to Inquiry” (AAI) final rules that became effective remove the easement from the property or at least restrict November 1, 2006. it to its actual location. The final rules adopted by the EPA enhanced the The Texas Natural Resources Code §111.0194 inquiries required under the interim rules by extending creates the “presumption” that a pipeline laid under grant the scope of a few of the environmental due diligence or judgment in eminent domain prior to January 1, 1994, activities and now require that significant data gaps or has a width of fifty feet (50') as to each pipeline laid. uncertainties be documented. The Phase I ESA must also be conducted within one year prior to the date of 13) PHASE I ENVIRONMENTAL SITE acquisition of a property, and, if conducted more than ASSESSMENT (ESA). The objective of a Phase I ESA 180 days prior to the acquisition date, certain aspects of is to evaluate a property for current and historical the inquiry must be updated. For more information see information that indicate sources of environmental the U. S. EPA’s website at www.epa.gov/brownfields. concern, evidence of disposal or release of hazardous material onto the property, evidence of environmental 14) SANITARY SEWER\SEPTIC TANK - threats from adjoining or proximate properties, and DRAIN FIELD SYSTEM. Public sanitary sewer is whether additional testing (Phase II and Phase III) of the generally available in urban areas, but not generally in property should be done. Such assessment is based on rural locations. For the most part, public sanitary sewer inquiry into public records, historical aerial photos, systems are always preferred over a septic tank - drain regulatory filings, visual inspection of the property and field system, which often times has to be augmented by adjacent properties, and interviews of individuals an expensive packaged sewer treatment facility in areas familiar with the area and the property. A Phase I ESA of high demand. If a C-Store operation is to be serviced is a non-intrusive inspection and does not entail testing with a septic tank-drain field system, enough additional of the soil, air or water. Prudent buyers, who may land must be acquired to handle the demands put on the potentially claim protection from CERCLA (The drain field. Factors such as soil type (porosity) and an Comprehensive Environmental Response, estimation of the amount of effluent that will be Compensation, and Liability Act) liability as an innocent generated will need to be determined. If it is possible, at landowner, a bona fide prospective purchaser, or a the developer’s cost, to extend a public sanitary sewer contiguous property owner should conduct a Phase I line to the property, a proper cost benefit analysis should ESA prior to closing on any real estate acquisition. be conducted to determine which system would be more Prudent buyers should also get a representation from the cost effective in the long run. A septic tank permit will seller that it knows of no release of hazardous substances be required in order to construct a septic tank and drain onto the property. Buyers should avoid agreeing to field. indemnify the seller for any pre-existing environmental liabilities. 15) DEED RESTRICT COMPETITION. Often times, when buying an unimproved corner, the In 2002, Congress passed the “Small Business seller also owns the land behind and on either or both Liability Relief and Brownfields Revitalization Act” sides of the corner. If so, the buyer should try and (Brownfields Amendments). The Brownfields bargain for use restrictions on the remainder of seller’s Amendments, in addition to amending other provisions property prohibiting the sale of gasoline/diesel fuel (and in CERCLA, required the Environmental Protection grocery items). The sale of gasoline is highly Agency (EPA) to promulgate regulations establishing competitive in many markets, and having a large retailer standards and practices for conducting Phase I ESAs that also sells gasoline come in as a competitor, after (referred to as “All Appropriate Inquiries”) to replace the

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having made the investment to build and open a C-Store, a septic tank and drain field, locate the system is tough. components and make sure they are wholly within the subject property. If the property is part of a co-branded Sometimes, even if your client is not interested in development, the original developer may not have been buying the property, you can bargain with a landowner very careful about the placement of signage, landscaping, to purchase a deed restriction prohibiting the sale of access and parking arrays. The survey should show the gasoline/diesel fuel (and grocery items) on a strategic entire project, not just the property being acquired, in corner property in order to protect an existing nearby order to make sure you have identified all on-site and store. It may even make sense to purchase a strategic off-site issues that must be documented for usage rights. corner, and re-sell it with a use restriction in place. Have the surveyor locate all underground storage tanks.

Obviously, if a C-Store developer is selling off 4) CO-BRANDED LOCATIONS. Often, excess property around its C-Store, deed restrict the co-branded properties are initially built and operated by surplus property to prevent competition. a single developer\operator with no appreciation or recognition that the project will later be financed, sold III. REAL ESTATE ACQUISITION (IMPROVED off or leased in parts. Commonly, a co-branded site PROPERTY) originally developed by a single developer \ operator (who was focused on efficiency and keeping costs down) The following is a general discussion of some key frequently shares amenities such as pylon signage, utility issues that can come into play in a purchase agreement lines, access, parking, storm water detention areas, involving an improved tract of land to be acquired for sanitary sewer drain fields, and landscaping. When a use as a C-Store location. multi-use project is being split up, a common area maintenance agreement may be required to address the 1) SUBDIVISION. Generally, improved issues created by the joint usage, or, at a minimum, properties are located on subdivided properties, but not specific easement agreements that document the status always. If the property has been properly subdivided, quo regarding joint use, maintenance, and costs should review the plat for any special notes, restrictions or be considered. reservations. Check the plat for any private easements “created by plat”, which are not supported by written In a lease situation, the issues raised above for a agreements. These private easements should be reduced co-branded location are still relevant, particularly if the to a written agreement which, among all of the other landlord no longer owns the other co-branded site or has business issues that must be addressed, makes it clear already leased it. that the easement created by plat and the recorded easement are one and the same. Sometimes, each co-brand store is owned by a different entity controlled by the same ownership group. If the property is not subdivided, it would be Even with common control, the players and their preferable to subdivide the property prior to closing. respective properties and rights must be identified and There are the risks however, that in order to obtain separated. This becomes especially important if each co- subdivision approval, additional costs will be incurred to brand store is separately financed because each lender bring the property up to subdivision standards and that will expect each co-brand property to function and the city or county will exact additional road right of way operate independent of the other. dedications for subdivision approval. Failure to subdivide the property may result in delays or denials of This necessarily means that all legal rights that future building \ remodeling permits. are shared or required by one or the other co-brand store be properly documented of record and expressly 2) ZONING. If the property is within the consented to and subordinated to by all existing city limits, request a zoning verification letter that sets mortgagees. forth the current zoning for the property and a copy of the zoning regulations for that zoning classification. 5) DEMOLITION OR RENOVATION. The purchaser of an existing facility may intend to 3) TITLE AND SURVEY. Review the remodel or demolish the improvements upon acquisition. survey for set back compliance, especially the canopy However, the presence of asbestos or lead-based paint in areas over the fuel islands. If the property is serviced by older structures can have a negative effect on property

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values because of the additional costs incurred in measures when cleaning, preparing the surface for handling or disposing of said contaminants due to repainting, removing or disturbing lead based paint or regulatory requirements imposed under federal and state any lead-containing materials. 29 C.F.R. 1926.62 et seq. law. Both asbestos and lead have become highly The rules are applicable to all construction activities. regulated because of the deleterious harm to human Lead is defined as a toxic substance under Title IV of the health caused by exposure to such materials. Toxic Substance Control Act (15 U.S.C. Section 2681 et seq.). Lead based paint abatement comes under the The Occupational Safety and Health jurisdiction and enforcement authority of the Texas Administration (OSHA) has promulgated worker Department of State Health Services pursuant to the protection rules and standards regarding asbestos Texas Lead-Based Paint Abatement Act, Texas abatement. See 29 C.F.R. §1926.1101 et seq. Asbestos Occupations Code, Chapter 1955. is a defined hazardous substance under the Federal Comprehensive Environmental Response Compensation 6) UNDERGROUND STORAGE TANKS and Liability Act (CERCLA). (USTs). Section 334.9 of 30 TEX. ADMIN. CODE states that effective September 29, 1989: Facilities constructed before 1980 are presumed to contain asbestos or must be tested to eliminate the [A]ny person who sells or possibility. See definition of Presumed Asbestos otherwise legally conveys a tank (or tank Containing Material 29 C.F.R. §1926.1101(b). Asbestos system) which is designed or intended to was incorporated into many different building materials be installed as an underground storage prior to 1980. Asbestos also comes under state regulation tank shall provide the purchaser (or through the Texas Asbestos Health Protection Act grantee) with written notification of a tank (TAHPA). The Texas Department of State Health owner’s obligations relative to the Services has promulgated rules and standards under 25 commission’s tank registration and TX. ADMIN. CODE §295.31-295.73. Abatement of construction notification provisions under asbestos requires an authorized asbestos contractor to §334.7 of this title (relating to dispose the materials at a designated asbestos disposal Registration for Underground Storage site. Tanks (USTs); §334.127 of this title (relating to Registration for Aboveground Requesting a demolition or remodeling (building) Storage Tanks (ASTs)); §334.8 of this permit under applicable city or county ordinances will title (relating to Certification for generally trigger the requirement for an asbestos Underground Storage Tanks (USTs); assessment. Failure to conduct a thorough asbestos §334.6 of this title (relating to inspection is in violation of 25 TX. ADMIN. CODE Construction Notification) for §295.34 (c) and 40 CFR Part 61, Subpart M, § 61.145(a) Underground Storage Tanks (USTs) and and carries a penalty in the amount of $5,000.00. UST Systems); and §334.126 of this title (relating to Installation Notification for The Texas Department of State Health Services Aboveground Storage Tanks (ASTs)). (formerly the Texas Board of Health), Division for Regulatory Services (P. O. Box 149347, Austin, Texas (1) The written notification shall 78714-9347, 1-888-963-7111, www.dshs.state.tx.us) is include the names and addresses authorized to enforce the Texas Asbestos Health of the seller (or grantor) and the Protection Act, Texas Occupations Code, Chapter 1954 purchaser (or grantee), the (“Act”); the Texas Asbestos Health Protection Rules number of tanks involved, a (“Rules”), Title 25, TAC, Part 1, Chapter 295; the description of each tank National Emission Standards for Hazardous Pollutants (capacity, tank material, and (NESHAP), 40 CFR Part 61, Subpart M; and the product stored, if applicable), Asbestos Hazard Emergency Response Act (AHERA), and the agency’s designated 40 CFR 763, Subpart E. facility identification number (if the entire facility is being Buildings constructed before 1978 may also run conveyed). the risk of containing lead based paint. OSHA has promulgated rules requiring workers to take protective

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(2) This notification requirement complete file on the UST system. The buyer should also shall apply to any transfers or verify that the UST registration matches the seller’s conveyances of a new or used name. tank from one person to another person, and shall also apply to A buyer inherits the compliance history rating of the sales of real property where the facility. Ratings are maintained by the TCEQ. Poor Underground Storage Tanks ratings can cause denial of permits, stricter regulations, and/or Aboveground Storage and higher penalties in the future. Tanks are located. If there is a history of a prior leak, the seller (3) The written notification shall be should provide the buyer with all documentation made at provided by the seller (or the time of the spill by a licensed Corrective Action grantor) to the purchaser (or Project Manager (CAPM) as to whether the spill was grantee) prior to the conveyance reportable to the TCEQ. If the spill was not reportable of the tanks, or prior to the time to the TCEQ, the documented spill report should set of the real property closing, as forth the corrective action taken to contain and remediate applicable. the spill. Otherwise, the TCEQ should have on file under the tank registration number any spill reports and (4) For the purpose of fulfilling the remediation efforts undertaken. disclosure requirements of this section as to USTs, the following language (together The buyer will want to be indemnified by the with the information in paragraph (1) of seller for spills occurring prior to the closing date; the this section) is deemed sufficient: “The seller will want to be indemnified by the buyer for spills underground storage tank(s) which are occurring after the closing date. Both parties have a included in this conveyance are presumed vested interest in ascertaining the condition of all tanks to be regulated by the Texas Commission and existing hydrocarbon contamination, if any, at the on Environmental Quality and may be time of closing. This can generally be accomplished subject to certain registration, compliance with a Phase II and, if necessary, a Phase III ESA. There self-certification, construction is no substitute for soil and groundwater sampling to notification, and other requirements determine if there is subsurface contamination. found in Title 30 Texas Administrative Code, Chapter 334. Generally, a party cannot contract away environmental liability once a release has been The preferred practice would be to put the discovered; and TCEQ is not bound by any agreements required notification in the purchase agreement and, between the parties. failing that, in a separate notice delivered prior to closing. If the tanks are going to be removed and replaced, the seller should preferably take responsibility for the During the buyer’s due diligence period, the tank removal by a licensed Underground Storage Tank buyer should have a tank and line (piping) tightness test Contractor. Soil samples should be taken by a licensed performed in order to verify that the UST system is not Corrective Action Project Manager from the bottom of leaking petroleum product. the hole and sent to a laboratory for analysis. The Corrective Action Project Manager will be able to A seller should warrant, effective as of the interpret the lab results. closing date: as to the history of the underground storage tank system (i.e. whether there have been any leaks); the An owner/operator who installs, modifies or UST registration and ownership; the age and type of tank removes a UST facility must submit construction construction; compliance with current standards and notification to the TCEQ at least 30 days prior to regulations governing tank construction, installation, commencement of the work using form TCEQ-00495. cathodic protection, spill and overflow prevention devices, leak detection equipment; and, all required If the UST is currently being monitored because record keeping has been maintained and is both accurate of a prior event, the seller will want the buyer to take and current. The buyer should obtain a copy of seller’s

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over and assume the on-going monitoring obligation. vendors in place. There are, however, other issues to This is a matter of negotiation between the parties. consider.

Most sellers and buyers, who are in the business of operating convenience stores that sell gasoline from 1) BRANDING. Branding may be an self-service pumps, are generally very familiar with issue, especially if the buyer does not already have a TCEQ registration requirements, tank construction and branding agreement to purchase fuel from the same installation, tank insurance, and remediation major oil company presently supplying the seller. responsibilities when encountering a hydrocarbon Branding agreements basically allow the C-Store release; it’s just part of the business dynamics of being operator to use the brand trade mark and purchase the a C-Store operator. brand name fuel from the fuel provider. Branding agreements generally call for letters of credit that can be 7) PHASE II AND PHASE III drawn against in the event a C-Store operator fails to ENVIRONMENTAL SITE ASSESSMENTS (ESA). A timely pay for its fuel purchases according to the terms Phase II ESA is used to determine whether there has of the branding agreement. Even if the buyer already has been a hydrocarbon release. In a Phase II ESA, soil a branding agreement in place, approval of the major oil samples are collected where known leaks have occurred company is still required, and approval may come or are suspected, and these samples are usually chilled subject to increasing the existing letter of credit, which for express shipment to an analytical laboratory for may take some time to do. Obviously, if the buyer wants analysis to determine the presence of any contaminants, to keep the existing brand and does not have an existing and, if contaminants are present, whether the branding agreement to sell the branded fuel, the buyer contaminants exceed any applicable TCEQ action or will have to make application for branding approval, and protective limits. Soil samples are accompanied by that necessarily takes time and a new letter of credit. chain of custody documents. On the other hand, if the buyer wants to re-brand A Phase III ESA may be employed to provide a the C-Store, that normally requires a shutting down of comprehensive determination of the extent and degree of business as new signage has to be ordered and installed, hydrocarbon contamination if actionable hydrocarbon and existing fuel inventories have to be removed and contamination is verified in the Phase II ESA. A replaced with the proper branded fuel. If the buyer Corrective Action Project Manager (CAPM), licensed already has a branding agreement in place so that it can pursuant to Section 26.366 of the Texas Water Code, is continue to operate under the existing brand, then the required to conduct the Phase II and Phase III ESA. If buyer can re-brand after closing at its own pace; the results require corrective action, the CAPM will otherwise, the buyer will be under pressure during the supervise the corrective action and will file all necessary due diligence period to obtain the branding agreement reports with TCEQ. A licensed Underground Storage approvals and new signage ready to install after closing. Tank Contractor will perform all required excavations Re-branding a C-Store necessarily means all new signage and tank removals, pursuant to Section 26.452 of the which can be extensive, expensive, and prone to delays. Texas Water Code. A closure letter issued by TCEQ, should be obtained upon satisfactory completion of any 2) BRAND GROWTH PROGRAM required remediation effort. See, Section 26.3572 of the LOANS. There are brand incentive programs that allow Texas Water Code. retailers to borrow money from the major oil company that supplies their branded fuel. The monies are used to IV. PURCHASE \ SALE OF ON-GOING C- help C-Stores keep up with upgrades (modernization) of STORE BUSINESS (ASSET PURCHASE). its branding signage and other franchisor branding requirements. Generally, if the retailer remains Usually both parties involved in the sale and exclusively a branded outlet and continues to buy all of purchase of the assets of an on-going C-Store business the fuel requirements from the franchisor during the term are seasoned operators. They have generally agreed on of the program loan, then the loan repayments may be the purchase price for the land and building with the only waived or reduced as they come due. However, if at any variable being the cost of the inventory on hand at time during the amortization period of the loan the C- closing. Neither party wants to shut the business down. Store ceases being a branded outlet, then the loan For the time being, the buyer probably wants to hire agreement generally has an acceleration clause causing seller’s employees and managers and keep seller’s the unpaid balance of the loan to become due and

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payable. This can become a problem for the seller if the deal is reasonably certain to close. This may make any buyer intends to re-brand the location. If the buyer is not contract negotiations between the buyer and seller’s re-branding the location, then the seller will want the employees somewhat difficult and last minute. buyer to assume the loan program. 6) INTANGIBLE PROPERTY RIGHTS. 3) BILL OF SALE (WHO IS THE Intangible property rights that may be important in SELLER?). If the land owner and store operator are two acquiring a C-Store include trade names and trademarks. different entities (multiple sellers), then you have the Depending on the sales area, the buyer may choose to added complication of determining the ownership of the keep the seller’s trade name and trade mark. Even if the fixtures, equipment, and tanks. It doesn’t necessarily buyer does not plan on using it, the buyer should want to follow that it all goes with one seller or the other. acquire the trade name and trade mark if for no other Things occur over time, and while at the time there was reason than to keep someone else from using it. a logical reason why something was “booked” under one company and not the other, when operating stores are If the buyer intends to use the seller’s trade name, being sold, you need to know who the seller of the an “assumed name certificate” will need to be filed with personal property is. If you have two buyers (one for the the county clerk’s office and the secretary of state’s land and one for the operations), you need to know how office. The seller will need to terminate any assumed the buyers want to “book” the purchases. The buyers name certificates. may want to book the equipment, fixtures and tanks differently than how the sellers did. On the other hand, if the seller has other operations that are not being sold, the seller will have 4) NON-COMPETE AGREEMENTS. The need of its trade name and trade mark, and they will not buyer will want the seller to agree to a Non-Compete be for sale. Agreement particularly if the acquired C-Store would be adversely impacted by the seller’s operation of or 7) SELLER VENDOR ACCOUNTS. A participation in a competing C-Store in the same area seller should make clear to each vendor account the after the sale. The covenant not to compete needs to be name of the new store owner and the effective closing ancillary to or part of an otherwise enforceable date; any personal or corporate guaranties should be agreement at the time it is made (ie., the purchase released after the account is paid in full. The buyer will agreement). The restraints as to time, geographical area, need to establish in advance its own vendor accounts in or scope of activity restrained should be reasonable and its name and be prepared to provide whatever guaranties not impose a restraint that is greater than necessary to may be required. The sales proceeds attributable to the protect the good will or other business interest of the inventory on hand at closing should be escrowed to pay buyer; otherwise, a court may reform the covenant, all recognized outstanding accounts payable. pursuant to Section 15.51(c) of the Texas Business and Coordination and cooperation with seller’s staff and its Commerce Code. If the court deems it necessary to vendors is imperative. reform the covenant not to compete, it may not award the promisee damages for a breach of the covenant before its 8) LICENSE AND PERMIT reformation; the relief that can be granted is limited to REQUIREMENTS. C-Store operations have grown in injunctive relief. complexity driven by the varied product mix they carry as well as the rules and regulations governing the sale of 5) EMPLOYMENT CONTRACTS. In an such products. A modern C-Store could easily find itself effort to promote a smooth transition, the buyer may having to obtain the following permits or licenses: consider hiring the seller’s employees and managers for a limited or indeterminate period of time. Separate (a) Sales Tax Permit – issued by the Texas employment agreements should be entered into with each Comptrollers Office. employee. A covenant not to compete should be considered for key employees. See, Section 15.51(c) (b) Fuel Delivery Certificate – issued by TCEQ Texas Business and Commerce Code. on an annual basis; requires owner or operator re-certify that the UST system is in compliance with TCEQ Sellers however may be reluctant to let employees regulations. know about the sale until the last possible minute. A seller does not want to stir up its employee base until the

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(c) TABC License (Wine and Beer - Off- inspected at least every three (3) years. (See Appendix Premises Permit) – issued by the Texas Alcohol and F). Beverage Commission. (See Appendix A). This list is not all inclusive. (d) City Wine and Beer Permit – required only if store is within the city limits. The lawyer should determine which licenses and permits are transferable and which are not. A condition (e) Cigarette Permit – issued by the Texas to closing should require that all transferable licenses Comptrollers Office. and permits be transferred at closing, and that the buyer obtain all nontransferable licenses and permits prior to (f) Abusable Volatile Chemical (AVC) Sales closing. Permit – issued by the Department of State Health Services. (See Appendix B). When a UST system changes ownership, the existing fuel-delivery certificate is only good for 30 (g) Lottery Ticket Sales License– issued by the days. Pursuant to 30 Tex. Admin. Code Section 334.7, Texas Lottery Commission. (See Appendix C). the USTs will need to be re-registered with the TCEQ with the name of the new owner and operator and any (h) City Health Permit – issued by the city. changes that are made to the UST system. Until the buyer submits for TCEQ approval a new self- (i) County Health Permit – if the city and state do certification form (TCEQ-00724), the owner or operator not inspect the store, it falls under county. cannot obtain a valid fuel-delivery certificate. Without a valid fuel-delivery certificate an owner or operator (j) State Health Permit – issued by the cannot receive fuel . Department of State Health Services only if the city or county does not inspect the stores. 9) ALLOCATION OF PURCHASE PRICE. The sale of the assets of a business for tax (k) Retail Food Operation Permit – issued by the purposes is considered as the sale of separate assets. An Texas Department of State Health Services. (See important aspect of the purchase agreement is to allocate Appendix D). the sales price between the various assets being sold. The tax interests of the buyer and seller may conflict (l) TDHS Food Manufacturer Permit – issued to when it comes time to allocate values to the assets all stores that manufactures and packages their own ice. identified in the purchase agreement. High-income, non- (See Appendix E). corporate sellers generally want to characterize as much to capital gains rather than to ordinary income because (m) Alarm Permit – some cities require the of the lower maximum rate currently attributable to permit. capital gains. Corporate taxpayers are generally not as concerned about capital gain recognition (unless they (n) Food Stamp Certificate – recommended for have capital losses which can only be offset by capital stores that are located close to communities. gains) because the tax rate for capital gains and ordinary income are the same for corporate taxpayers. (o) Certificate of Occupancy For the high income, non-corporate seller, to take (p) Conditional Use Permit – if there is an issue advantage of the lower capital gains tax rates, the seller with the city zoning. will want to allocate as much of the purchase price to good will, trademarks and trade names, and other (q) Septic Tank Permit – if project does not have intangibles that are generally categorized as capital sanitary sewer. assets. The same goes for land and improvements; the seller will want to place more value on the land as (r) Weight and Measures Permit – for each fuel opposed to the improvements. Covenants not to dispenser; issued by the Texas Department of compete, which are included as part of the sale/purchase Agriculture (TDA). A TDA sticker is required to be transaction, are subject to various technical rules and displayed on all retail fuel dispensers. Dispensers are need the attention of a tax expert.

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The buyer will want to allocate as much value to Texas Water Code, that the tenant will maintain the the purchase price of the inventory or depreciable financial assurance (tank insurance) required under 30 fixtures, equipment and personal property, which Tex. Admin. Code §37.815 and name the landlord as an provides the buyer with more immediate deductions additional insured, that the tenant will notify landlord of against income. This goal can be accomplished through any spills and the corrective action taken to contain the higher inventory costs and an increase in the value of spill and remediate the activity, and that at the end of the depreciable assets to increase depreciation deductions. lease another Phase II ESA will be conducted to Buyers who acquire “good will” generally can depreciate determine if a material change from the original base line it over a fifteen year period, which is considerably longer site assessment has occurred. than most depreciable fixtures, equipment and personal property that enjoy a 3 to 5 year depreciation schedule. Both parties to the lease need to address whether the tanks are to be pulled at the end of the lease term. A lot depends on whether the landlord believes any This is generally the point in the deal when the residual value to the tanks exists. Pulling the tanks may tax attorneys and tax accountants get involved. be the only practical way of documenting the presence of any contamination. V. LEASEHOLDS. The tenant will want the landlord to give the From the landlord’s perspective, it is looking for tenant the same representations and warranties regarding an income stream and to be rid of the headaches that go the UST systems as if it were purchasing the property. with operating a C-Store; i.e. a triple net lease where the The landlord should warrant, as of the effective date of tenant pays the rent, ad valorem taxes, insurance and the lease: the history of the UST system; the UST maintenance. From the tenant’s perspective, leasing an registrations and ownership; the age and type of tank existing C-Store facility is not much different than construction; compliance with current standards and purchasing one. The same due diligence applies. Once regulations governing tank construction, installation, again all amenity packages (e.g. signage, septic cathodic protection, spill and overflow prevention tanks/drain fields, access to public highway, etc.) must equipment, and leak detection equipment; and, all be self-contained within the leasehold description, and, required record keeping has been maintained and is both if not wholly within the leasehold description, must be accurate and current. The tenant should request copies accounted for in a binding written agreement signed by of all portions of landlord’s records it deems relevant to all interested parties. A current survey and leasehold maintenance and operation of the UST system. title policy provide good protections against potential problems that are not apparent otherwise. The UST registration will need updating to show the new operator (tenant) and any changes to the UST 1) USTs. Both the landlord and tenant system made by the landlord or tenant. 30 Tex. Admin. should be keen to perform a tank and line (piping) Code §334.7. tightness tests and establish a base line Phase II environmental site assessment of the property. If The tenant will need to get its own fuel delivery hydrocarbon contamination is present, the parties must certificate. undertake a Phase III ESA. A tank and line tightness test is required by law if the UST system has been USTs do not last forever. Attention should to be temporarily out of service for 6 months or more. 30 Tex. given to any disparity between the term of the lease and Admin. Code §334.54(c)(3)(A). If a leak or spill is the estimated life of the tanks. To replace all or part of discovered, the landlord should take all appropriate the UST system during the term of the lease is a major actions to contain it and report the matter to TCEQ if it expense and undertaking that should be of concern to is at actionable levels. An accurate base line site both parties and should not be ignored. assessment benefits both parties to establish liability for pre-existing or future hydrocarbon contamination. 2) INDEMNIFICATION PROVISION. Similar to a purchase/sale situation, the landlord will Much like a lender would do in a secured loan want to be indemnified and held harmless by the tenant transaction, a landlord should obtain lease covenants from any hydrocarbon contamination occurring during from the tenant that the tenant operate and maintain the the tenant’s occupancy, and the tenant will want to be UST system in accordance with Subchapter I of the

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indemnified and held harmless by the landlord from any it might receive. However, the fact that we are dealing pre-existing hydrocarbon contamination. with property with underground storage tanks holding thousands of gallons of motor fuel (and thus a potential 3) CO-BRANDED PROJECTS. If the environmental risk) takes the property out of the typical project is co-branded, particular attention should be commercial lease context that poses little or no given to any joint operating or maintenance agreements environmental risk. A landlord may find that not that the tenant is expected to assume the landlord’s everyone wants to assume that kind of environmental responsibility to perform. risk, except someone else in the C-Store business. Consequently, a landlord’s sales opportunities may be 4) INVENTORY AND EQUIPMENT. If limited as a practical matter, and the tenant may be the the tenant is purchasing the inventory and assets of the best opportunity for a sale of the property, if and when on-going business operating on the leased premises, such the landlord decides to sell. assets may not be owned by the landlord, but rather by another affiliated operating company. Make sure you VI. UNDERGROUND STORAGE TANKS (USTs) distinguish and identify all parties to the transaction. In the old days (before regulations) when gasoline 5) STRUCTURING THE DEAL. The was cheap, operators were not overly concerned with same consideration for splitting the ownership of the leaking tanks because the cost to remove and replace the land and improvements into a passive entity, and the tanks was more than the cost of the lost inventory. It operations into a active entity are applicable to a lease wasn’t until carcinogenic compounds found in gasoline situation. The tenant consequently may want the right to started showing up in public water supplies that the “sublease” the premises to an affiliated operating entity. government took action. The major reason USTs leaked gasoline and diesel fuel was because the USTs were 6) PERSONAL LEASE GUARANTIES. constructed of steel, and over time electrolysis would set If possible, the landlord should try to get the principal in and unprotected steel tanks would slowly corrode owners of the tenant entity to guaranty the lease. underground. Eventually the corrosion would compromise the integrity of the UST and cause the tank 7) NON-COMPETE AGREEMENT. A to leak fuel. The environmental concern occurs when the non-compete agreement from the landlord is just as leaking hydrocarbons reach and contaminate the water relevant in a lease situation as it is in a purchase of an table. Whether the water table becomes contaminated on-going business. (See Section IV above). often depends on factors such as the duration and quantity of the leak, soil type (tight or porous), and the 8) NON-DISTURBANCE AGREEMENT. location of the water table (shallow or deep). Whether If a mortgage lender is involved, the tenant should the release is actionable may also depend on the require the landlord to obtain from the lender a non- proximity of the nearest water well. disturbance agreement, providing that, if the landlord defaults on its loan, the tenant’s possession will not be 1) FEDERAL LAW. Federal law interrupted so long as all rents are current. The lender regulates underground storage tanks (USTs) used for will probably cooperate with a Subordination, Non petroleum (gasoline and diesel) storage under the Disturbance, and Attornment Agreement (SNDA) that Resource Conservation and Recovery Act (RCRA) and addresses its concerns as well. in particular 42 U.S.C. §6991 Subchapter IX - Regulation of Underground Storage Tanks. The 9) RIGHT OF FIRST REFUSAL. It would Environmental Protection Agency (EPA) has not be uncommon for the landlord, once it has a promulgated regulations affecting USTs at 40 C.F.R. seasoned lease with a good rental history, to want to sell parts 280 and 281. the leasehold property to a third party investor who is also looking for a particular return on its investment. 2) STATE LAW. Authority under Texas Regardless, the tenant should negotiate a right of first law to regulate USTs is found in Chapter 26 of the Texas refusal to purchase the property at the offering price Water Code and went into effect September 1, 1987. otherwise acceptable to the landlord. This right gives the The Texas Commission on Environmental Quality tenant a little more control over its destiny. The landlord (TCEQ), formerly known as the Texas Natural on the other hand may not want to grant such a right of Resources and Conservation Commission (TNRCC), first refusal for fear of dampening any offers to purchase under delegation of authority, oversees and implements

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the federal UST program. State law requires that all Cathodic protection, which is the process or USTs used for storing motor fuels be registered. Texas method for reducing or minimizing the effect of Water Code Section 26.346. USTs are now required to corrosion on USTs and the piping connecting the tank to meet certain TCEQ adopted technical standards each Multiple Product Dispenser (MPD), is now required concerning design, construction, installation and on all USTs and related piping susceptible to corrosion. operation. Id. Section 26.347. Texas Water Code, Section 26.3475. All components of the UST system must be (i) cathodically protected A tank in an underground storage tank system against corrosion, (ii) constructed of non-corrodible must also comply with TCEQ requirements for tank material, (iii) constructed of a steel material which has release (leak) detection equipment, spill and overfill been clad with a non-corrodible material, or (iv) must be equipment, and tank integrity assessment and corrosion otherwise designed and constructed in a manner that protection. Id. Section 26.3475. prevents the release of any petroleum product. 30 Tex. Admin. Code §334.5 (a)(2). It is not uncommon for a C- The TCEQ promulgated rules and regulations Store owner or operator to have used different types of affecting USTs under 30 Tex. Admin. Code §334, tanks at different locations as costs, technology, and Subchapter C include but are not limited to the following experience factors changed. The reason a lot of the older topics: C-Stores went out of the gasoline business was due to the cost of upgrading their USTs to meet the performance i) Registration for USTs; Section 334.7 standards adopted by TCEQ for USTs brought into use ii) Seller’s Disclosure; Section 334.9 before December 22, 1988. See, 30 Tex. Admin. Code iii) Reporting and Record Keeping; Section 334.10 §334.47. iv) Limits on Liability of Lender; Section 334.15 v) Fee Assessment; Section 334.21 For UST systems installed after January 1, 2009, vi) Technical Standards for New USTs; Section owners and operators must install secondary containment 334.45 (ie. double walled) for new and replacement tanks and vii) Installation Standards for New USTs; Section new piping. 334.46 viii) Technical Standards for USTs installed prior to UST owner\operators must comply with the December 22, 1988; Section 334.47 TCEQ standards and implement a statistical inventory ix) Corrosion Protection; Section 334.49 reconciliation (SIR) and inventory control system for x) Release Detection; Section 334.50 detecting leaks. Texas Water Code, Section 26.348. All xi) Spill and Overfill Prevention; Section 334.51 UST systems are required to have a monthly release- xii) Reporting Suspected Leaks; Section 334.72 detection (leak detection) monitoring procedure/process. xiii) Corrective Action Plan; Section 334.81 Inventory control systems can vary from periodic manual tank gauging to constant monitoring of inventory via You may search for TCEQ publications online at electronic systems or a combination of methods. See, 30 www.tceq.state.tx.us/publications. Forms can be Tex. Admin. Code §334.50. If a disparity occurs downloaded from the TCEQ’s website at between what is in the tank to what should be in the tank, www.tceq.state.tx.us/forms. the discrepancy may be the result of a problem in taking the inventory or a leak. See, 30 Tex. Admin. Code If your tank system is located in Kinney, Uvalde, §334.72. If the overage or shortage of fuel product Medina, Bexar, Comal, Hays, Travis, or Williamson persists for two consecutive months, a suspected release County, additional requirements related to protection of should be reported to the TCEQ Remediation Division the Edwards or the Trinity Aquifer may apply. See, 30 (512-239-2200). See Tex. Admin. Code §334.72(3)(B). Tex. Admin. Code, Chapters 213 and 214. Depending on soil condition, vapor detection devices that can detect hydrocarbon vapors can also be placed in Cities can also have regulations\ordinances monitoring wells strategically located under or around a affecting UST installation and operation requirements UST to detect hydrocarbon vapor. An owner or operator separate from federal or state regulations. Whether it is of a UST must investigate any suspected leaks. Id. a federal, state, or local regulation, the most stringent §334.72. A tank and line tightness test must be applies. performed within thirty (30) days of a suspected release. Id. §334.71-85.

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All USTs must also be fitted with spill and for underground storage tanks. Owners and operators of overflow prevention devices. These devices capture any petroleum USTs must demonstrate financial assurance excess fuel that would otherwise spill in the event of an for a) taking corrective action, and b) compensating third overfill situation. See, 30 Tex. Admin. Code §334.51. parties for bodily injury and property damage whether The three pieces of equipment required to meet spill and due to sudden or non sudden accidental releases. The overfill prevention are a tight-fill fitting, a spill assurance is required on a tank by tank basis. container, and an overfill device. The “per-occurrence” amount is $500,000.00, or If a release of hydrocarbon product has occurred, $1,000,000.00 if the UST handles more than 10,000 the services of a certified correction action specialist gallons of petroleum product per month or $1,000,000.00 (Corrective Action Project Manager or CAPM) will be in sales per year. “Per occurrence” refers to the amount needed to determine the extent of the spillage and of funds that must be available to pay the costs from whether any remediation and corrective actions are each occurrence of a leaking UST. required. If the release exceeds 25 gallons or if there is free product or vapor, the owner or operator is required The “annual aggregate” amount is $1,000,000.00, to file a report with the TCEQ within twenty-four (24) or $2,000,000.00 for owners and operators of 101 or hours of the spillage in addition to taking necessary more petroleum USTs within the United States. actions to contain immediately the spillage, prevent any “Annual aggregate” is the total amount of funds future release, and mitigate fire and explosion hazards. available for all accidental leaks that might occur in one 30 Tex. Admin. Code §334.72 and 334.75. If a UST has year. to be removed, removal is required to be handled by a licensed and registered Underground Storage Tank The amount of financial assurance excludes legal Contractor. Texas Water Code, Section 26.452. See defense costs. Id. at §37.815(g). also, 30 Tex. Admin. Code §334.401, 334.407, and 334.424. These coverage requirements do not in any way limit the liability of the owner or operator. Id. at The TCEQ uses risk-based corrective action when §37.815(h). determining the corrective action necessary to remediate a release of hydrocarbon product from a UST - Texas Most owners and operators satisfy the financial Water Code, Sections 26.341(b)(2), 26.342 (15), and assurance requirements by obtaining tank insurance that 26.351(a). Corrective action may include: conforms to 30 Tex. Admin. Code §37.241. There is also a financial test for self-insurance under 30 Tex. a) site cleanup, including the removal, Admin. Code §37.825, which is used by only the largest treatment, and disposal of surface and companies. Other options include: a corporate guaranty subsurface contamination; (self insurance provided by a parent company), a surety b) removal of UST; bond (obtained from an insurance company, a letter of c) measures to halt release in progress or credit (obtained from a financial institution such as a to prevent future or threatened releases bank), and a trust (set up with a financial institution such of hydrocarbon product; as a bank). d) well monitoring, taking of soil borings, and any other actions reasonably 4) PETROLEUM STORAGE TANK necessary to determine extent of REMEDIATION (PSTR) ACCOUNT. TCEQ contamination; administers the PSTR Account under 30 Tex. Admin. e) providing alternate water supplies; and Code §334.302. Fees paid at the refinery level on f) any other action reasonably necessary to refined gasoline fund the account, but the cost was protect the public health and safety or ultimately passed down to the consumer. The PSTR the environment from harm or Account reimburses owners and operators of USTs for threatened harms from hydrocarbon the costs to clean up hydrocarbon contamination caused releases. by leaking USTs and piping. It was basically a no fault system that arose at a time when the industry was 3) FINANCIAL ASSURANCE evolving to modernize and upgrade its UST systems, REQUIREMENTS FOR USTs. 30 Tex. Admin. Code and the PSTR Account was created in part to encourage §37.815 sets forth the financial assurance requirements compliance with new state and federal mandates. When

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tanks were pulled from the ground in order to replace removed from service or, if corrective action is required, them with new code compliant USTs, soil samples were until the action is completed. taken from the bottom of the hole. If hydrocarbon contamination above action levels was found, the owner Pre-existing contamination may also negate or operator took what corrective actions were necessary coverage for cleanup; be sure to investigate the property to remediate the site and submitted the bill to TCEQ for condition thoroughly before obtaining tank insurance. reimbursement. If your client has a claims-made-and-reported By 1993, the fund was going bankrupt because of policy and your client wants to change insurance the tremendous demand for corrective action carriers, ask for a “retroactive date”, otherwise, there reimbursements. Eventually the shortfall came out of the will be no coverage for pre-existing hydrocarbon State’s general fund. This was not politically acceptable. contamination. As a consequence, no payments out of the PSTR Account program will be made on or after September 1, Generally, make sure that the information on the 2012. Id. at §334.302(c)(6). The fund is still available certificate of insurance regarding the tank owner or to clean up releases discovered and reported prior to operator and the number and location of the tank exactly December 22, 1998. Id. at §334.302(a)(3). matches the information on the owner/operator’s Reimbursement by TCEQ cannot exceed $1 million per registration forms. occurrence. Id. at §334.302(c)(2). All claims for reimbursement filed with the TCEQ are subject to the Regarding a third party claim, demands generally availability of funds in the PSTR Account. Id. at have to be made against the insured and reported to the §334.302(f). Allowable costs which can be reimbursed insurance company within the policy period or are defined in 30 Tex. Admin. Code Section 334.309. applicable extended reporting period. What constitutes a “demand” if the third party adjacent land owner is 5) POLLUTION LIABILITY unaware that its property has been contaminated is a INSURANCE. After December 22, 1998, the C-Store common issue. A C-Store operator, thus, faces the industry has to a large extent resorted to private pollution dilemma of notifying an adjacent land owner of liability insurance for underground storage tanks (tank contamination in order to trigger a demand when the insurance) for its UST systems to protect itself from the extent and cleanup cost is unknown and could exceed the high costs of remediating a spill event and to provide insurance coverage. TCEQ with evidence of financial responsibility (assurance) 30 Tex. Admin. Code §37.815. No system Lenders and landlords should be added to the is perfect, and tank insurance is no exception. Policies policy as an additional insured. are generally claim-made-and-reported policies (meaning the claim has to be made during the term of the policy), 6) ETHANOL. On December 19, 2007, and they carry a site specific deductible. Tank insurance President Bush signed into law the Energy Independence generally covers corrective action (ie. the cost of actions and Security Act (H.R.6) that required that at least 36 to correct the results of an accidental release arising from billion gallons of renewable fuel be used by the the operation of a UST) and third party liability (ie. marketplace by 2022. The new law dramatically compensation to third parties for bodily injury and increases the previous goal of 7.5 billion gallons by property damage caused by an accidental release arising 2012. The legislation, however, does not require any from the operation of a UST). monitoring of the total fuel supply requirements of the country. The owner/operator of a UST is still liable if the cost of remediation exceeds the insurance policy limits. Why is this relevant? Currently motor fuels that Issues can also arise between insurer and the insured as are blended with ethanol come in the following to how and when the contamination occurred whenever concentrations: E-10 (10% ethanol, 90% gasoline) which the source of the leak cannot be determined. is suitable for all gasoline-engineered vehicles; and E85 Furthermore, if tanks are taken out of service, the (70% - 85% ethanol, 30% - 15% gasoline) suitable only “corrective action” coverage may be dropped only for flexible fuel vehicles. leaving “third party” coverage. You must maintain the corrective action coverage until the tanks are properly 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 to gross negligence liability, regulatory meet federal mandates. A petition is currently before fines, and consumer actions; and the EPA to authorize the sale and use of E-15 (15% ethanol and 85% gasoline) in non-flexible fuel vehicles. e) There are some indications that heightened concentrations of ethanol This proposal raises all sorts of potential legal increase corrosion; this may impact problems for the industry and retail marketers of UST insurance costs and availability, gasoline. and equipment compatibility.

Currently with gasoline prices relatively high and The push towards energy independence and ethanol prices relatively low, retailers can increase their renewable fuels may have many unintended negative profit margins on gasoline sales by using E-10. If that consequences for C-Store operators. is true for E-10, then all the more so if E-15 is authorized to be used. 7) ENERGY POLICY ACT OF 2005. Title XV, Section B of the Energy Policy Act of 2005 The problem lies with understanding the (Public Law 109-058, August 8, 2005) amended Subtitle characteristics of ethanol and their effects on retailers’ I of the Solid Waste Disposal Act which created the dispensing equipment and consumers’ conventional federal UST program. Section 1523 of the Energy gasoline engines. Policy Act requires that states receiving funding from EPA under Subtitle I conduct on-site inspections of UST Ethanol is a solvent. Two of its characteristics systems to check for compliance with UST regulatory are that it picks up any residual moisture in storage tanks requirements. (e.g. USTs and gas tanks in automobiles) as well as it dissolves any solids/impurities that come to settle in States were required to inspect all tanks (not tanks over time; the moisture and dissolved impurities inspected since December 22, 1998) by August 8, 2007. are then routed through an automobile’s fuel system. Thereafter, states are required to inspect UST systems on Without proper filtration, conventional gasoline engines a three-year inspection cycle. The first three year will suffer damage if ethanol concentrations are raised. inspection cycle was to have been completed by August 8, 2010. Not all states will be able to meet this deadline. A host of other unresolved issues face retailers in Texas is one which is not expected to meet this deadline the sale and use of E-15 if it is authorized, including but for various reasons. Texas has over 20,000 facilities to not limited to: inspect and only 20-30 inspectors.

a) Whether new car warranties provide More pertinent to C-Store operators is Section coverage for gasoline blends above E- 1524 of the Energy Policy Act that requires states 10; receiving funding from EPA under Subtitle I to create regulations which follow promulgated EPA “guidelines” b) Small engines (lawn mowers, chain for Operator Training. saws, weed eaters, etc.) and marine engines probably cannot handle The purpose of the training is to increase the gasoline blends above E-10; “operator” awareness and knowledge of the maintenance and operation of UST systems. States have until August c) Local fire codes require retailers to sell 8, 2012 to ensure that all three classes of operators are fuel through equipment that is certified trained according to state specific training requirements. as compatible by Underwriter Texas has yet to develop any specific training Laboratories (UL); currently no requirements. dispensers (MPDs) are certified as compatible for gasoline blends above E- The three classifications of operators are A) 10; general managers (usually those persons who oversee the UST systems for the operator), B) those persons or d) Retailers who sell gasoline blends contractors who perform the periodic inspections of the above E-10 through dispensers that are release detection, corrosion protection, and overfill not UL certified could be exposed to protection systems, and C) the C-Store employees who

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are onsite during UST operations. Class A and B on file with the TCEQ will be considered to be the UST Operator training will focus on their respective owner until such time as additional documentation is responsibilities and will be technical in nature; once received by TCEQ which transfers title of the UST to trained, Class A or B Operators will be able to train the another person. Id. Class C Operator. The Class C Operator training is not intended to be overly technical or demanding, but the Section 26.3514 of the Texas Water Code (and Texas regulations have yet to be written. For more TAC §334.15) states that a lender will not be liable as an information see owner or operator for actions taken to protect its security http://www.epa.gov/oust/fedlaws/epact_05.htm. interest before and after foreclosure of its security interest or its acceptance of a deed in lieu of foreclosure of a property on which a UST is located. VII. SECURED CREDITOR EXEMPTIONS (USTs) The Texas Water Code §26.3514 (a) (1) and (2) 1) FEDERAL LAW. The federal law extends the lender liability protection to cover the dealing with secured creditor exemptions is under following types of loans: a loan to finance the CERCLA Section 101(20) which provides protection to acquisition and development of the property; a loan to lenders holding a security interest in a contaminated finance the removal ,repair, replacement, or upgrading of facility from “owner/operator” liability. Like state law an UST; a loan to finance the performance of a discussed below, the lender cannot have participated in corrective action in response to a release of petroleum the management of the property and must take certain product; or in a situation in which the real property steps to divest itself of the property after obtaining title constitutes collateral for a commercial loan. (See also, through foreclosure or other means. TAC §334.15 (a) (1) and (2)). The lender’s security interest or lienhold interest can extend to the UST, the 2) STATE LAW. A “lender” is defined in real property on which an UST is located, or in any the Texas Water Code (the TWC) §26.342(7)and in 30 personal property attached to or located on the property Tex. Admin. Code (the TAC) §334.2 (54). The types of on which an UST is located. Id. lenders that come under the limited liability protections under TWC §26.3514 are limited to and specifically Generally, a lender prior to foreclosure or include: a state or national bank; a state or federal acceptance of a deed in lieu of foreclosure can take savings bank; a credit union; a state or federal savings whatever actions it deems necessary to protect its and loan association; a state or federal government collateral, so long as it does not cause or exacerbate any agency that customarily provides financing; or an entity hydrocarbon contamination. TWC §26.3514(c) and that is registered with the Office of Consumer Credit TAC § 334.15 (b). Commissioner if the entity is regularly engaged in the business of extending credit and if extending credit After the lender takes title to the property on represents the majority of the entity’s total business which the UST is located through foreclosure or activity. This list omits a lot of the lenders that are acceptance of a deed in lieu of foreclosure, a lender can regularly involved in real estate financing and in only avoid being classified as an owner or operator under particular C-Store lending; it also omits sellers who two different scenarios set out in TWC §26.3514 (e) and owner finance. The statutes define “operator” as any (f). person in day-to-day control of, and having responsibility for, the daily operation of the UST system. First, the lender avoids being classified as an TWC §26.342(8) and TAC §334.2(70). An “owner” is owner or operator if the lender within 90 days of defined as any person who holds legal possession or acquiring title to the property on which the UST is ownership of an interest in a UST system. TWC located permanently removes the UST from service §26.342(9) and TAC §334.2 (73). If the ownership is either by removing the UST from the ground (according uncertain, the fee simple owner of the surface estate on to TAC §334.55(b)) or abandoning the UST in place which the UST is located will be considered to be the (according to TAC §334.55(c)). In either case, the owner of the UST unless the person can demonstrate by lender needs to determine whether or not any prior appropriate documentation (e.g. a deed reservation, release occurred which requires corrective action. A invoice, bill of sale or other legally acceptable means) lender is required to take corrective action with all due that the UST is owned by another person. Id. For USTs diligence, if the release is within actionable limits registered after September 1, 1987, the registered owner established by TCEQ. TWC §26.3514(d). See also,

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TAC §334.15(c) and (d). All USTs that are “removed” possible responsible parties to pay or reimburse future from service are required to be emptied of all petroleum cleanup costs. product and accumulated sludge or residues and purged of all residual vapors. TAC §334.55 (a) (4). Any UST 3) LOAN DOCUMENTATION. Prior to that is “abandoned” in place is required to be filled with making the loan, the lender should require the borrower an acceptable solid inert material. Id. at §334.55(c). to obtain a Phase I ESA. Prior to the sale of a real property on which an abandoned UST is located, the seller must give the buyer If the property is an existing facility, prior to written documentation of the abandonment. Id. at making the loan the lender should require: a) all reports §334.55(c) (3) (C). on file with TCEQ, b) all written reports involving prior corrective actions, c) a tank and line tightness test, d) a Second, provided the lender did not participate in Phase II ESA, and e) a Phase III ESA when background the management of the UST, the lender avoids being checks indicate the need. classified as an owner or operator if the lender within twelve (12) months after it acquires marketable title If any of the site assessments show actionable through foreclosure or acceptance of a deed in lieu of contamination, a pre-condition to making the loan should foreclosure, disposes of the collateral provided the lender be the removal of all contaminants and receipt of a either lists the property with a “broker, dealer, or agent TCEQ closure letter. who deals in that type of property” or advertises the UST property for “sale or other disposition” at least monthly Lenders in their loan agreements and/or mortgage in “a real estate publication; a trade or other publication documents should obtain covenants from the borrower appropriate for the UST being advertised; or a that: newspaper of general circulation in the area in which the UST is located”. TWC §26.3514(f) and (g), and TAC a) the UST system will be built and §334.15 (e) and (f). The lender becomes liable as an maintained in accordance with owner and/or operator at the earlier of the end of the 12 Subchapter I of the Texas Water Code; month period to dispose of the collateral or when the lender “... no longer holds ownership indicia primarily to b) the borrower will maintain the financial protect its security interest....”. The TWC §26.3514 (i) assurances required under 30 Tex. states that “if a lender outbids, rejects, or does not act on Admin. Code §37.815 and that the an offer of fair consideration” for the UST or the facility lender be named as an additional or property on which the UST is located, it will be insured; presumed that the lender is no longer holding ownership indicia in order to protect its security interest. See TAC c) the borrower will maintain and retain all §334.15 (h). There is no definition for what constitutes TCEQ required documentation and “fair consideration”. records regarding the UST systems, and will provide lender a copy of same; The code and regulations are silent about what the lender is to do with these USTs during said 12 month d) the borrower will notify the lender of all holding period. The prudent action would be to follow spills and corrective actions taken and the rules for temporarily removing a UST from service will provide lender with written reports set forth at TAC §334.54 which requires that all vent of same together with copies of any and lines be kept open; that all piping, pumps, and tanks all correspondence by and between access points be capped, plugged, locked or otherwise TCEQ and borrower; and secured; that the corrosion protection system be maintained; and, that all petroleum product be removed, e) the borrower will provide lender with or else be prepared to monitor the UST system for leaks. copies of all Phase I, II, and III ESAs.

In conclusion, in the event it becomes necessary to take title to property containing a UST system, a lender cannot be passive and do nothing, or else it risks being categorized as an owner or operator, which would expose it to third party liability plus keep it on the list of

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VIII. THE BROWNFIELDS AMENDMENTS- A C) Be able to establish that all disposal of SAFE HARBOR? hazardous substances occurred before the acquisition of the property; The Comprehensive Environmental Response, D) Have performed an “all appropriate Compensation, and Liability Act (CERCLA or inquiries” prior to purchasing the Superfund) authorizes the U. S. Environmental property; and Protection Agency (EPA) to promulgate rules and E) Not be “affiliated” with a party regulations in the enforcement of CERCLA in order to responsible for the contamination of the protect human health and environmental hazards caused property. by hazardous substances located on a property or site. EPA can require the liable party to clean up the Even if the “all appropriate inquiries” turns up contaminated property, or EPA can conduct the cleanup evidence of the existing or possible property and pursue the liable party to collect the cleanup costs. contamination, a BFPP may still purchase the property Property remediation can include removal of and avoid any CERCLA liability as an “owner or contaminated soil, and extractions and treatment of operator”, provided that after closing the BFPP must: contaminated groundwater. 1) provide all legally required notices with Section 101 (20) (A) of CERCLA defines an respect to the discovery or release of “owner or operator” of a property to be that person who: hazardous substances; See RCRA (1) owns or operates the facility; or (2) owned, operated, §9002 (Underground Storage Tanks or otherwise controlled activities at the facility. Section Modification Provisions); and CERCLA 107 of CERCLA defines a “liable party” as: 1) the §103 (Notification Requirements current owner and operator of a contaminated property; Regarding Released Substances); and 2) any owner or operator at the time of disposal of any hazardous substances; 3) any person who arranged for 2) exercise appropriate care with respect to the disposal or treatment of hazardous substances; or 4) the hazardous substances by taking any person who accepts hazardous substances for reasonable steps to stop or prevent transport to the property and selects the disposal site. continuing or threatened releases and Lenders who take a security interest in real property are exposures, and prevent or limit human generally exempt from owner/operator liability if the contact and environmental exposure to lender meets the criteria set out in CERCLA Section 101 previous releases; (20). 3) provide full cooperation, assistance, and The Small Business Liability Relief and access to persons authorized to conduct Brownfields Revitalization Act (the Brownfields response actions or natural resource Amendments) was passed by Congress in 2002. restoration;

These amendments created certain landowner 4) comply with land use restrictions and designations that are protected from CERCLA liability. not impede the effectiveness of The Brownfields Amendments created three types of institutional controls; and landowners that must meet certain pre- and post- purchase requirements, to wit: 1) Bona Fide Prospective 5) comply with information requests and Purchasers (BFPPs); 2) Contiguous Property Owners administrative subpoenas. (CPOs); and 3) Innocent Land Owners (ILOs). Thus, a BFPP can knowingly purchase a To be a Bona Fide Prospective Purchaser one contaminated property. On the contrary, both the must meet the following requirements: Contiguous Property Owner and the Innocent Land Owner refers only to “unknowing purchasers” as defined A) Purchase the property after January 11, in CERCLA §101 (35)(A)(i). 2002; B) Not be potentially liable for the To be a Contiguous Property Owner, one must contamination on or at the property; meet the following requirements:

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A) A person must meet the criteria set forth After closing on the property, once the existence in CERCLA§107(q)(1)(A); of hazardous materials contaminating the property comes to the attention of an ILO, in order to avoid any B) A person must be the owner of a CERCLA liability as an “owner and operator”, the ILO property that is not the source of the is obligated to follow the following post-purchase contamination; requirements:

C) The property is contiguous to or 1) no legally required notices are required otherwise similarly situated to the as a statutory criterion for achieving and contaminated property that is the source maintaining the Section 101 (35) (A) (i) of the contamination; innocent landowner liability protection;

D) A person must have performed an “all 2) exercise appropriate care with respect to appropriate inquiries” that did not show the hazardous substances by taking the existence or possible existence of reasonable steps to stop or prevent contamination; continuing or threatened releases or exposures, and prevent or limit human E) A person must purchase the property contact and environmental exposure to without knowing, or having reason to previous releases; know, of contamination on the property; and 3) provide full cooperation, assistance, and access to persons authorized to conduct F) A person must not be “affiliated” with response actions or natural resource any person responsible for the restoration; contamination of the property. 4) comply with land use restrictions and After closing on the property, once the existence not impede the effectiveness of of hazardous materials contaminating the property comes institutional controls; and to the attention of a CLO, in order to avoid CERCLA liability as an “owner or operator” the CLO is obliged to 5) compliance with information requests follow the same post-purchase requirements set out and administration subpoenas is not above for the BFPP. specified as a statutory criterion for achieving and maintaining the Section To be an Innocent Land Owner, one must meet 101 (35)(A)(i) innocent landowner the following requirements: liability protection.

A) A person must meet the criteria set forth The threshold criteria to qualify as a BFPP, CPO, in CERCLA §107 (b)(3) and §101 (35); or ILO is the requirement to perform “all appropriate inquiry” before buying the property. An ASTM Phase I B) ILOs must have performed an “all report satisfies the “all appropriate inquiry” requirement. appropriate inquiries” that did not show the existence or possible existence of As stated above, BFPPs and CPOs must not be contamination; affiliated with any person who is potentially liable for the site cleanup costs. “Affiliated with” includes direct C) A person must purchase the property or indirect familial relationship and various contractual, without knowing, or having reason to corporate, and financial relationships. know, of contamination on the property; and Notwithstanding, if the actions of a BFPP, CLO, or ILO give rise to new contamination, full CERCLA D) An ILO cannot have a “contractual” liability will attach. relationship with a liable party. Even though a property owner qualifies as a BFPP, CLO, or ILO, you still have the problem of the

22 BUYING, SELLING, AND LEASING CONVENIENCE STORES Chapter 17

property’s marketability and value in the future as well termination” under the PMPA if the franchisor’s as the costs of taking reasonable steps to stop a present, allegedly wrongful conduct did not compel the continuing, or threatened release or exposure to franchisee to abandon its franchise. Justice Alito stated hazardous substances. that “the Act prohibits only franchisor conduct that has the affect of ending a franchise.” The Court responded IX. PETROLEUM MARKETING PRACTICE to the franchisees’ claim, that this strict interpretation of ACT. the PMPA would not protect franchisees from unfair and coercive franchisor conduct that does not force an end to The Petroleum Marketing Practice Act (PMPA) the franchise, by saying that the franchisees can still seek 15 U.S.C. §2800 et seq. is a federal statute that state-law remedies to address such wrongful conduct establishes minimum federal standards governing the which are not inconsistent with the PMPA. While some “termination” and “nonrenewal” of a petroleum states, including Iowa, New Jersey, Rhode Island, and franchise. A “franchise” is defined under PMPA as any Wisconsin have laws that prohibit a franchisor from contract that authorizes a franchisee to use the either terminating or refusing to renew a franchise franchisor’s trademark, as well as any associated agreement without good cause, Texas does not. agreement providing for the supply of motor fuel. 15 U.S.C. §2801 (1). Under the PMPA a franchisor may The Court went on to hold that a franchisee who terminate a franchise during the term of the franchise and signs and operates under a renewal agreement with a may fail to renew the franchise at the conclusion of the franchisor may not maintain a “constructive non- term only if the franchisor takes the actions required renewal” claim under PMPA. It also said that “[s]igning under the PMPA under certain enumerated situations. 15 their renewal agreements ‘under protest’ did not preserve U.S.C. §2802, 2804. If the franchisor wrongfully the dealer’s ability to assert non-renewal claims. When terminates or fails to renew a petroleum franchise, a a franchisee signs a renewal agreement even ‘under petroleum franchisee may file suit in federal court and protest’ there has been no ‘failure to renew’, and thus no the range of remedies includes compensatory damages, violation of the Act.” punitive damages, reasonable attorney’s fees, expert costs, and equitable relief. See 15 U.S.C. §2805 (b) and The dealers argued that the Court’s reading of the (d). The PMPA also requires the federal district court to term “termination” would require franchisees to go out grant preliminary injunctive relief if merited. 15 U.S.C. of business before they could obtain a preliminary §2805 (b) (2). injunction, because to obtain a preliminary injunction the franchisee must show that “the franchise of which he is On March 2, 2010 Mac’s Shell Service, Inc. v. a party has been terminated”. 15 USC Shell Oil Products (Cause No. 08-240, 08-372) was §2805(b)(2)(A)(i). The Court said that was not decided by the United States Supreme Court. Justice necessarily so because, since the PMPA requires the Alito wrote the opinion. This case involved a situation franchisors to give written notice of termination in where the petroleum franchisor made substantial changes advance of the date on which the termination “takes to the economic terms of the petroleum franchise effect”, notice to terminate constituted a termination agreement up for renewal. Even though the changes within the meaning of §2805(b)(2)(A)(i), “even though were detrimental to the franchisees, they went ahead and the termination ‘takes effect’ on a later date....”. Thus signed the new franchise agreement and continued to receiving a “notice of termination” is tantamount to operate; some of the franchisees signed “under protest”. “termination” under the Court’s interpretation of the Later, the franchisees filed suit under PMPA alleging PMPA’s preliminary injunction provisions. that the petroleum franchisor had constructively “terminated” their franchise and had constructively “failed to renew” their franchises by substantially changing the terms of their franchise agreements. The X. C-STORE ASSOCIATIONS. Court noted that these franchisees had asserted these claims even though they had not been compelled to A national association of convenience store abandon the franchise, and even though they had been operators operates under the name of the “National offered and had accepted the renewal agreements. Association of Convenience Stores” (NACS). It, like similar state associations, is a lobbying organization that The Court strictly construed the PMPA and held also tries to keep its members abreast of what is that a franchisee cannot recover for “constructive happening in the industry. NACS is located at 1600

23 BUYING, SELLING, AND LEASING CONVENIENCE STORES Chapter 17

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

The state association is the Texas Petroleum Marketers and Convenience Store Association (TPCA). It is located at 401 West 15th Street, Suite 510, Austin, Texas 78701; telephone (512) 476-9547; fax (512) 477- 4239.

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

XI. INDUSTRY RECOMMENDED PRACTICES.

There are two publications that can provide additional information on industry recommended practices regarding installation of USTs. They are:

Petroleum Equipment Institution Publication RP-100, Recommended Practices for Installation of Underground Liquid Storage Systems. ; and

American Petroleum Institute Publication 1615, Installation of Underground Petroleum Storage Systems. .

24 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

Last Name First Name MI Title

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 Sign WARNING AND Individual/Individual Owner Corporation/Officer SIGNATURE Partnership/Partner Limited Liability Company/ Officer or Manager 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.

PRINT SIGN NAME 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 PUBLIC S 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 L If 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 Page 2 of 3 Form L-OFF 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) / / ATTACH PRINTED Publisher or designee certifies attached notice was published in newspaper stated on dates shown COPY OF THE Signature of publisher or designee Sworn to and subscribed NOTICE HERE before me on this date / / Signature of Notary Public S E A L Page 3 of 3 Form L-OFF 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 Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Last Name First Name MI Title

Page 1 of 1 Form L-OIC TEXAS DEPARTMENT OF STATE HEALTH SERVICES OFFICE USE ONLY Regulatory Licensing Unit / AVC Permit Program ZZ109 125 Budget / Fund ZZ109-125 (512) 834 - 6600, ext. 2440 Rec’d date: www.dshs.state.tx.us/avc Aprv Date: Issue Date By: Application for 2-Year Remit# Abusable Volatile Chemical (AVC) Sales Permit Remit Date Under Texas Health and Safety Code, Chapter 485 Permit #

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.

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 assigned a 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 further certify that I have read and understood the requirements of the AVC (Abusable Volatile Chemical) Act, Texas Health & Safety Code, Chapter 485.

Signature: Title: Name Date: (printed):

Abusable Volatile Chemicals Sales Permit Application Form Revised 8/2007 Publication # EF49-11290 Page 1 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 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. See www.dshs.state.tx.us for information on Privacy Notification. (Reference: Government Code, Section 552.021, 552.023, 559.003 and 559.004). 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
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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:
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TLC Pub #8643 AP-165-x (Rev. 1/09) Page 1 of 8 TEXAS LOTTERY APPLICATION FEE WORKSHEET 1MFBTF
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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? OYES ONO

If yes, what is the Texas Lottery retailer number?

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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 O Application (pages 5, 6, 7 and 8) O Business Location and Marketing Information (pages 7 and 8) for each additional location (if any) Number of additional locations (if any) ______O Fingerprint cards for each person listed in PROPRIETORS section O Electronic Fund Transfer (EFT) Authorization Form O Void Check for EFT account O W-9 Request for Taxpayer Identification Number and Certification O Application Fee worksheet (page 2) O Check or Money Order for Application fee(s) payment

TLC Pub #8643 AP-165-x (Rev. 1/09) Page 2 of 8 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.

TLC Pub #8643 AP-165-x (Rev. 1/09) Page 3 of 8 APPLICATION FOR TEXAS LOTTERY TICKET SALES LICENSE

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.

TLC Pub #8643 AP-165-x (Rev. 1/09) Page 4 of 8 APPLICATION FOR TEXAS LOTTERY TICKET SALES LICENSE 1MFBTF
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1. Corporation or Legal Business Name

Doing business as (d.b.a.)

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

OWNERSHIP 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? O YES O NO

If "YES," indicate the type of minority business. 1 O African-American 2 O American-Indian 3 O Asian-American 4 O Mexican-American or other American of Hispanic origin O Other ______

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

° 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

- - PROPRIETORS 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

TLC Pub #8643 AP-165-x (Rev. 1/09) Page 5 of 8 APPLICATION FOR TEXAS LOTTERY TICKET SALES LICENSE 1MFBTF
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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

° 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) PROPRIETORS / / Title Date of Birth (MM/DD/YYYY)

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

Signature Date

° 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

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LOCATION CONTACTS AND MARKETING State Tax Payer ID

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? O YES O NO 14. Does this business location comply with the Americans with Disabilities Act? O YES O 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) O Grocery Store/Supermarket (5411) O Liquor Store (5921) O Specialty Merchandise (5999) O Convenience Store with gas (5412) O Service Station (5541) O Other (Describe) ______O Convenience Store no gas (5400) O Drug Store (5912) ______O General Merchandise (5399) O Restaurant (5812) ______19. Do you allow customers or employees to smoke inside your business/building? O YES O NO TLC Pub #8643 AP-165-x (Rev. 1/09) Page 7 of 8 APPLICATION FOR TEXAS LOTTERY TICKET SALES LICENSE t
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20. Has applicant(s) ever been licensed to sell Texas Lottery tickets? O YES O NO If YES, enter the most recent six-digit Texas Lottery retailer number 21. Does applicant(s) owe any money to the Texas Lottery? O YES O NO 22. Does applicant hold a Texas Alcoholic Beverage Commission (TABC) permit? O YES O 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:

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

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° 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.

Signature of authorized owner/officer/director Title Date

Corporation or Legal Business Name Texas taxpayer or vendor ID TLC Pub #8643 AP-165-x (Rev. 1/09) Page 8 of 8 RETAIL

REGULATORY LICENSING UNIT BUDGET: ZZ106 FUND: 167 RETAIL FOOD OPERATION PERMIT APPLICATION INITIAL, RENEWAL, OR CHANGE OF OWNERSHIP PERMIT #: (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. Food Establishment- any place where food is prepared and intended for GROSS ANNUAL VOLUME OF FOOD SALES individual portion service. This includes the site at which individual portions are provided for consumption on or off the premises and $ 0.00 - $ 49,999.99 - $258.00 regardless of whether there is a charge for the food, bed & breakfasts $ 50,000.00 - $149,999.99 - $515.00 with >7 rooms, restaurants, bars, cafes, snack bars, hospitals that serve $150,000.00 - or more - $773.00

food to the general public, correctional facilities (jails) that contract with Fees are non-refundable professional food management corporations for food preparation, Late Fee - A person who files a renewal application after privately-owned correctional facilities, etc. the expiration date must pay an additional $100.00.

Retail Food Store- a food establishment or section of an establishment ANY RETURNED CHECKS RECEIVED AFTER where food and food products are offered to the consumer and intended EXPIRATION DATE WILL BE ASSESSED THE $100.00 for off-premise consumption. This includes delicatessens that offer LATE FEE. prepared food in bulk quantities only, grocery stores, markets, etc.

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 Comptroller of Public Accounts. --

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 MFG FOOD

BUDGET ZZ104 REGULATORY LICENSING UNIT FUND: 183 FOOD MANUFACTURER LICENSE APPLICATION INITIAL, RENEWAL, OR CHANGE OF OWNERSHIP LICENSE #: (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.

Type of Manufacturer (Check all that apply): Type of Sales:

Processor/Packer Re-packer Water Store Wholesale and/or Retail

Water Vending Machine Ice / Water Vending Machine Retail Only Private Labeler - Name/Address of Co-Packer:

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

$ 0.00 $ 9,999.99 - $ 104.00 for each place of business $ 10,000.00 $ 24,999.99 - $ 156.00 for each place of business $ 25,000.00 $ 99,999.99 - $ 258.00 for each place of business $ 100,000.00 $ 199,999.99 - $ 577.00 for each place of business $ 200,000.00 $ 999,999.99 - $ 927.00 for each place of business $ 1,000,000.00 $ 9,999,999.99 - $ 1,154.00 for each place of business $ 10,000,000.00 Or more - $ 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 Comptroller of Public Accounts. --

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

Texas Department of Agriculture Device Registration Certificate Application RWM-700 TODD STAPLES, COMMISSIONER 1 TYPE OF APPLICATION New Business Change of Ownership – previous account number: ______2 BUSINESS TYPE TDA USE ONLY Corporation Sole Proprietorship Client No. Account No. Limited Liability Co. Government Limited Partnership Organization Date (mm/dd/yy) Initials General Partnership / / 3 CLIENT INFORMATION Full legal business name (owner’s name if sole proprietor – no aliases)

SECTION A 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 Driver License No. ______(required) TX State Issued ID No. ______(if DL is not available) Other

1 RESPONSIBLE PERSON INSTRUCTIONS Please 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 SECTION B First Name M. I. Last Name

Phone No. E-mail ( ) - Ext.

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 RWM-700 Device Registration Certificate Application Page 2 of 4

Legal Business Name ______3 RESPONSIBLE PERSON MAILING ADDRESS Address

City State Zip

Web Address of Business (optional)

SECTION B (cont’d.)

1 PERSON TO CONTACT FOR LICENSE-RELATED MATTERS First Name M. I. Last Name

Primary Phone Secondary Phone (optional) ( ) - Ext. ( ) - Ext. Fax (optional) ( ) - Ext. E-mail (optional) Would you prefer to be contacted by E-mail?

SECTION C Yes No 2 MAILING ADDRESS Address

City State Zip

1 FACILITY INFORMATION Facility Name

2 PHYSICAL ADDRESS OF LOCATION OF LICENSEE, LICENSED ACTIVITIES OR EQUIPMENT Address (No P.O. Box)

SECTION D City State Zip County

Directions to Physical Location if address above is difficult to find

Licensing Department Revised 01/01/2010 Administrative Services Division Nonoccupational RWM-700 Device Registration Certificate Application Page 3 of 4

Legal Business Name ______

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

SECTION E Resident Agent Address

City Zip Business Phone ( ) -

1 DEVICE CLASSIFICATION Device Type Fee per Total No. of Total Fees Device Devices Fuel Pump – Gasoline (one product per nozzle) $11.80 a Fuel Pump – Diesel or other non-gasoline product (one product b per nozzle) $9.30

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 SECTION F 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 $ 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)

Licensing Department Revised 01/01/2010 Administrative Services Division Nonoccupational RWM-700 Device Registration Certificate Application Page 4 of 4

Legal Business Name ______

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 #

SECTION G Amount remitted Mail to: Texas Department of Agriculture $ P.O. Box 12076, Austin, TX 78711-2076 TDA USE ONLY Receipt No. Date Receipt Issued

1 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

SECTION H applicant, the person signing certifies that he or she is authorized to make the preceding certifications on behalf of the applicant. Applicant Name Title

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

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