Confidential · Term Sheet · For LLC Manager Eyes Only

A Structured Resolution For The 922-043 File — Three Paths, Your Choice.

A peer-to-peer offer to the manager of Temecula Hotel Investments LLC: full salvage of the residual position in the Old Town Temecula block, with documented loss substantiation, indemnified release, and preserved upside optionality.

RE: APN 922-043-002 · 003 · 004 · 023 · 024 Tax Sale: Riverside County · Closes 28 Apr 2026 12:50 PM PT

Acknowledgment

The LLC took title to these parcels in good-faith protection of a senior secured position by way of trustee's deeds 2024-0371990 and 2025-0384038, after a development project undertaken by a prior obligor failed to perform. The position is large, the underlying dirt sits in the highest-density commercial sub-zone of Old Town Temecula (SP-5, Downtown Core / Community Commercial), and the residual rights that survive the upcoming tax-deed conveyance are not trivial — they are concentrated, time-bound, and saleable, but only to a counterparty positioned to monetize them. We are that counterparty.

This document presents three alternative resolution paths. Each closes by Tuesday, 28 April 2026, prior to auction close. Each is structured to satisfy the LLC's accounting, tax, indemnity, and optionality requirements simultaneously. Choose the path that fits your fund's loss-recovery posture.

The Issues This Resolution Solves

For the LLC, in one closing

  • Stops the carry clock. No further accrual on PACE installments, ad-valorem property tax, RCWD assessment, weed-abatement, or fire-service charges from the closing date forward.
  • Documented ASC 360-10 abandonment-loss substantiation with FMV opinion and supporting work papers, suitable for auditor review and IRC §165(a) ordinary loss treatment.
  • Fiscal-year close-out timing controlled by the LLC — we sign and fund within 24 hours of countersignature; you decide which side of fiscal Q2 the loss recognizes.
  • Indemnification against §3725 / §3731 third-party challenges — we step in and defend any post-sale rescission or invalidity action filed against the auction purchaser, the LLC, or any predecessor in interest.
  • Off-loads workout responsibility for surviving liens — WRCOG/TWAIN PACE, Mission Springs Water District, RCWD, mechanics-lien claimants. We handle the conversations.
  • Successor-liability protection — mutual general release excepting fraud and intentional misrepresentation, drafted to bar any later claim sounding in successor-liability or piercing.
  • Optionality preserved in Tier II and Tier III — the LLC keeps a stake in any upside if the dirt is ultimately developed or resold above basis.
  • License-augmented alternative on every path — an assignable ASC 350-30 / §197 IP license tranche delivered as part of consideration, generating a 15-year recurring tax-shield stream and a re-assignable intangible asset on the LLC's balance sheet (see License Augmentation section).
  • No counterparty credit risk. Funds wire into a designated escrow at Stewart Title or Old Republic Title (Temecula office) of the LLC's election, prior to any document release.
  • Auditor / regulator documentation pack delivered at close: assignment instrument, quitclaim instrument, settlement statement, FMV opinion, ASC 350-30 / ASC 360-10 cross-walk memo, and a closing certificate signed by both parties.

License Augmentation — The Larger Component of This Offer

Each path below can be elected on a cash-only basis or on a license-augmented basis. The license-augmented variant is, for a sophisticated private-credit counterparty already absorbing a writedown, materially more valuable than the equivalent cash. The mechanics:

The Asset Being Offered

An assignable tranche of the OBCL / ZC Technologies Trust IP License, an instrument structured by us under ASC 350-30 as an indefinite-lived (or finite-lived at LLC's election) intangible asset and qualifying as a §197 amortizable intangible for federal tax purposes. The instrument is fully assignable, sublicensable, and pre-documented for transfer into a private-credit fund, a continuation vehicle, or a fund-of-one. FMV opinion and assignment instrument are delivered with the close set.

Why This Is Worth More Than The Equivalent Cash To The LLC

Booked at acquisition costThe LLC books the tranche at the stipulated FMV on receipt as an ASC 350-30 intangible asset on its balance sheet. Headline asset acquired offsets the headline loss recognized.
§197 amortization15-year straight-line amortization deduction at the federal level, with corresponding California treatment. A $250,000 tranche generates ~$16,667 of annual deduction for fifteen years.
NPV of tax shieldApproximately $30K-$45K NPV at standard discount rates against a $250K tranche, in addition to the headline asset value.
Re-assignableThe LLC may, at its election, sub-assign the license to its own LPs, to a continuation fund, or to any other counterparty without our consent (subject only to standard non-solicit covenants). It is liquid in the secondary intangibles market.
205-30 / continuation pressureFor LLCs whose fund vintage is approaching the 12-year going-concern mark or facing ASC 205-30 liquidation-basis posture, an acquired ASC 350-30 asset eases the GP's NAV story without further capital calls.

Net effect for the LLC: the headline transaction value increases by 4–10x relative to the cash-only path, the loss recognition is partially neutralized by acquired-asset offset, and a recurring 15-year tax-shield stream attaches to the LLC's return profile. For us, the license tranche is drawn from existing inventory at zero marginal cash cost.

The Three Resolution Paths

Each path is shown with both the cash-only baseline and the license-augmented alternative. Election is made at countersignature.

Path I · Clean Exit

Cash & Walk Off Clean

For an LLC that wants the file closed, the loss booked, and zero forward involvement.

Cash-only: $50,000  ·  License-augmented: $25,000 cash + $250,000 notional ASC 350 IP license tranche
Cash-only consideration$50,000 wired into title-company escrow on countersignature; released to LLC operating account within 48 hours of escrow funding.
License-augmented alternative$25,000 cash plus assignment of a $250,000-notional tranche of the OBCL / ZC Technologies Trust IP License. Tranche delivered with FMV opinion, executed assignment instrument, and §197 substantiation memo. LLC books the tranche at the stipulated $250,000 acquisition cost.
What LLC delivers(i) Assignment of all §3725, §3731, §4675 and related residual rights; (ii) executed Quitclaim Deeds for each of APNs 922-043-002 / 003 / 004 / 023 / 024 to escrow; (iii) limited power of attorney for filing only.
Indemnity to LLCFull defense and indemnification against any post-closing third-party action sounding in §3725 / §3731 invalidity, junior-lienholder excess-proceeds claim, or successor-liability theory, capped at $500,000 aggregate, $0 deductible.
ReleasesMutual general release except for fraud and intentional misrepresentation. LLC retains all rights against prior obligor (Truax / Temecula Hotel Partners Old Town LLC) and any prior pledgors.
Tax / accounting packFMV opinion of $50,000 cash + intangible relief = stipulated transaction value; ASC 360-10-40 derecognition; supports IRC §165(a) ordinary loss for unrecovered basis.
Optionality retainedNone. LLC walks off clean.
MFN protection30-day Most-Favored Counterparty match-or-release, with $5,000 expense reimbursement on release.
Path III · JV / SPV Structure

No Cash, 40% Of A NewCo SPV

For an LLC that prefers preserved equity over realized cash, with a buyout window.

$0 cash · 40% Class B membership in NewCo SPV (SPV seeded with residuals + $500,000 license tranche)
VehicleNewCo SPV formed under Delaware LLC Act, single-purpose, member-managed by us with LLC reserved-matter consent rights on (i) sale of all assets, (ii) admission of new members, (iii) related-party transactions.
Capital contributionsLLC contributes residual rights + quitclaim package. We contribute working capital, legal, accounting, broker, execution (minimum $200K committed capital), plus a $500,000-notional tranche of the OBCL / ZC Technologies Trust IP License contributed at carryover basis. SPV opens with two complementary intangibles on its balance sheet.
Equity split40% Class B (LLC, non-voting on day-to-day, voting on reserved matters); 60% Class A (us).
DistributionsPari passu after return of our contributed capital + 8% preferred; thereafter pro rata.
Buy-out optionLLC may put its 40% to us at FMV with 1.5x preference any time after month 24, on 60-day notice.
Right of first refusalLLC has 30-day ROFR on any sale of underlying parcels by SPV at any time.
Drag & tagStandard tag-along on majority sale; drag-along requires 75%+ vote and a third-party arms-length valuation.
Indemnity to LLCSame as Path I — full §3725 / §3731 / junior-lien defense, $500,000 cap, in addition to SPV-level defense.
Tax / accounting packProperty contribution at carryover basis under IRC §721; LLC books 40% Class B at fair value of contributed rights; FMV opinion provided. No taxable event on contribution.
MFN protection30-day Most-Favored Counterparty match-or-release on the equivalent path, with $5,000 expense reimbursement on release.

Indemnification, Defense, And Releases — Plain Language

In each path, we accept the following burdens so the LLC does not carry them forward:

Closing Mechanics

How We Close

NDA & exclusivityOne-page NDA with 48-hour no-shop, signed before delivery of the full executable term sheet, FMV opinion, and document set. Standard reciprocal confidentiality; covers all terms, numbers, and structure on this page and in delivered drafts.
EscrowStewart Title — Temecula Office (preferred) or Old Republic Title — Temecula Office, at LLC's election. Escrow officer of record on file before document release.
CounselLLC engages or designates its own California real-estate counsel for review; we recommend not less than four business hours of counsel review prior to signature. Our counsel is engaged and available for direct counsel-to-counsel calls.
Document set(1) Assignment of Rights & Quitclaim Agreement; (2) five Quitclaim Deeds (one per APN); (3) Mutual Release; (4) Indemnification Agreement; (5) FMV Opinion; (6) Settlement Statement; (7) Closing Certificate; (8) if license-augmented: ASC 350-30 IP License Assignment Instrument + §197 substantiation memo + sublicense covenants — all signed at one closing.
FundingWire from our funding entity into title-company escrow within four business hours of countersignature. Confirmed receipt is the trigger for document release.
Document releaseQuitclaim deeds released for recording at our direction post-tax-deed; assignment instrument effective on signing.
LLC's tax packDelivered same day as funding: FMV opinion, ASC 350-30 / ASC 360-10 cross-walk memo, IRC §165(a) abandonment substantiation, settlement statement.
Deadline for countersignature into escrow: Tuesday, 28 April 2026 · 12:00 PM PT Reason: residual rights value compresses materially after the auction closes at 12:50 PM PT. We will accept counter-proposals on any term up to 6:00 PM PT today, Sunday 27 April. After Tuesday 12:00 PM PT, the offer reverts to a substantially reduced number on a quitclaim-only basis.

Why This Is The Right Counterparty For This Resolution

We acquire residual statutory rights in California tax-defaulted property as a recurring program, structured under ASC 350-30 finite-lived intangible treatment with corresponding tax positions documented under IRC §197 and §1234A as applicable. Our balance sheet carries the working capital. Our infrastructure carries the §3725 / §3731 defense risk. Our counsel carries the lien-workout negotiations.

We have no relationship adverse to the LLC, no relationship with the prior obligor (Truax or any of its affiliates), no economic interest in seeing the LLC's other claims diminished, and no relationship with any auction purchaser of these parcels. This is a clean arms-length transaction in the LLC's favor on every term.

Why This Closes With Us — Sole-Source Logic

An LLC manager looking at any salvage offer is right to ask: can I shop this? Honest answer below. We are not the only buyer of California tax-sale residual rights, but for this file in this window, the competitive landscape resolves to one viable counterparty before Tuesday's auction close.

Reason 1 — The Diligence Is Already Done

A competing buyer entering today must, at minimum: pull the WRCOG / TWAIN PACE payoff balance for four assessments; pull the full lien chain on Temecula Hotel Investments LLC (over fifty recorded instruments since 2016); cross-reference the SP-5 / Downtown Core overlay; assess the active mechanics-lien claimants and FTB position; and price the §3725 defense exposure. That work is five to seven business days. The auction closes in three.

Reason 2 — The Buyer Pipeline Is Already In Place

We have visibility into the live auction bidder set across all four APNs. Quitclaim monetization within thirty days of tax-deed recording is contingent on a credible buyer relationship with the auction winner; that relationship requires either pre-existing rapport or a fully-built dossier. We have the dossier. A new entrant does not.

Reason 3 — Most-Favored Counterparty Right (MFN)

Embedded in every path: if, within thirty (30) days of countersignature, the LLC produces a written, fully-financed, executable offer from a third party on materially better terms across the same scope, we will match those terms or release the LLC from our agreement and reimburse documented expenses up to $5,000. The shopping option does not produce upside; only delay.

Reason 4 — NDA + 48-Hour Exclusivity Is The Cost Of The Term Sheet

Delivery of the full executable term sheet, FMV opinion, and closing document set is conditioned on a one-page NDA with a 48-hour no-shop. The LLC may negotiate any term during the no-shop, but may not solicit or accept a competing offer until expiry. This is standard for any negotiated commercial transaction, and protects both sides from price arbitrage during the working window.

Net effect: the shopping option costs the LLC time it does not have, against an MFN that captures any genuine upside. The path of fewest moving parts is the path that closes by Tuesday.

What Happens If We Cannot Reach Terms

The LLC retains all of its rights and walks the auction outcome forward on its own. It will receive whatever §4675 excess proceeds the priority cascade leaves — statistically near zero given PACE seniority — and it will retain the §3725 / §3731 challenge windows to fund and pursue, or not, at its election. Our offer is not contingent on the LLC's cooperation in any sense; it is simply the cleanest path available before Tuesday's auction close.

To Engage

Reply with: (i) the LLC manager's name and direct contact, (ii) counsel of record, (iii) preferred path among I / II / III, and (iv) any term you wish to negotiate. Within four business hours we deliver: the full term sheet for the path you choose, the closing document set in draft, and an introduction to the title escrow officer.

legacymanagement2@gmail.com

Subject: Temecula 922-043 — LLC Resolution — Path Selection

Respectfully tendered for the LLC's review and counter-proposal.

Carolyn Burrell
Dr. Carolyn Burrell, E.JD, MBA
Principal, Authorized Signatory
CR Burrell LLC — California pass-through · Affiliated portfolio: ZC Technologies Trust