CONTRIBUTION AGREEMENT

 

(2)            As HSRE’s initial capital contribution to HSRE-ESP, HSRE will contribute cash in the amount specified in the Pool 2 Contribution Agreement in exchange for membership interests in HSRE-ESP (the “ HSRE HSRE-ESP Interests ”), which HSRE HSRE-ESP Interests are more particularly described in the HSRE-ESP Operating Agreement; and

 

(3)            HSRE-ESP will distribute cash to Extra Space in the amount specified in the Pool 2 Contribution Agreement;

 

WHEREAS , subject to the terms and conditions of this Agreement, Extra Space and HSRE desire to engage in a series of transactions pursuant to which:

 

(1)            Extra Space will contribute cash in the amount specified in this Agreement and all of Extra Space’s right, title, and interest in and to the ESP Interests in exchange for additional membership interests in HSRE-ESP (the “ Additional ESS HSRE-ESP Interests ”), which Additional ESS HSRE-ESP Interests are more particularly described in the HSRE-ESP Operating Agreement;

 

(2)            As an additional capital contribution to HSRE-ESP, HSRE will contribute cash in the amount specified in this Agreement in exchange for additional membership interests in HSRE-ESP (the “ Additional HSRE HSRE-ESP Interests ”), which Additional HSRE HSRE-ESP Interests are more particularly described in the HSRE-ESP Operating Agreement; and

 

(3)            HSRE-ESP will distribute cash to Extra Space in the amount specified in this Agreement;

 

WHEREAS , the Facilities are subject to the Existing Indebtedness (defined below) in the aggregate approximate amount of $112,000,000.00 and after contribution of the ESP Interests to HSRE-ESP, the Facilities will continue to be subject to the Existing Indebtedness.

 

THEREFORE , in consideration of the terms and conditions contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Extra Space and HSRE agree as follows:

 

1.              AGREEMENT TO CONTRIBUTE .  Subject to the conditions and on the terms contained in this Agreement, HSRE agrees to contribute to HSRE-ESP cash in the amount specified in Section 2.2.3 below and Extra Space agrees to (i) contribute, assign, convey and transfer to HSRE-ESP the ESP Interests, on the terms and conditions set forth in this Agreement and in the Assignment Agreement (as defined in Section 4.2.2.2 below) and (ii) contribute to HSRE-ESP cash in the amount specified in Section 2.2.4 below.

 

2.              TRANSFER OF ESP INTERESTS .

 

2.1            Recitals .  The foregoing recitals are hereby incorporated by this reference.

 

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2.2            Consideration and Closing Structure .

 

2.2.1         Contribution Value .  The parties hereby agree that the gross fair value of the ESP Interests (which include the value of all of the Facilities), for all purposes of this Agreement, is equal to $155,500,000 (the “ Contribution Value ”).

 

2.2.2         Distribution Amount .  Immediately after the Closing Extra Space and HSRE shall cause HSRE-ESP to distribute to Extra Space cash in an amount (the “ Extra Space Distribution Amount ”) equal to the sum of: (i) the “Initial HSRE Contribution Amount” (hereinafter defined) minus (ii) any closing costs and prorations described in Section 4.3 below (including the costs described in Section 4.3.4 below) (collectively, the “ Prorations ”) and credited, as of the Proration Date (as defined below), to HSRE-ESP, plus (iii) any Prorations credited, as of the Proration Date, to Extra Space.  As used herein, the term “ Initial HSRE Contribution Amount ” shall mean eighty percent (80%) of the difference between (A) the Contribution Value, minus (B) the sum of the aggregate unpaid principal balance of the Existing Indebtedness plus all accrued and unpaid interest with respect to the Existing Indebtedness as of the Proration Date.  Extra Space and HSRE agree that for purposes of determining the balance of Extra Space’s “Capital Account” (as defined in the HSRE-ESP Operating Agreement) and Extra Space’s “Adjusted Capital Account” (as defined in the HSRE-ESP Operating Agreement), the gross amount of Extra Space’s initial “Capital Contribution” to HSRE-ESP shall be reduced by the Initial HSRE Contribution Amount notwithstanding the fact that the amount actually distributed to Extra Space by HSRE-ESP is adjusted (either increased or decreased) pursuant to the provisions of this Section 2.2.2.  The parties hereby agree that the provisions of this Section 2.2.2  are intended to cause the Adjusted Capital Accounts of HSRE and Extra Space to be in an 80.00%/20.00% ratio, respectively, following the contribution of the ESP Interests by Extra Space and the Initial HSRE Contribution Amount by HSRE and the distribution of the Extra Space Distribution Amount to Extra Space and the pro-rations and credits provided for herein.

 

2.2.3         Cash to be Contributed by HSRE .  At Closing, HSRE shall contribute to HSRE-ESP cash in an amount (the “ Total HSRE Contribution Amount ”) equal to the sum of (i) the Initial HSRE Contribution Amount, plus (ii) Eighty Percent (80.00%) of the total Prorations charged to HSRE-ESP.

 

2.2.4         Cash to be Contributed by Extra Space .  At Closing, Extra Space shall contribute to HSRE-ESP cash in an amount (the “ Total Extra Space Contribution Amount ”) equal to the sum of Twenty Percent (20.00%) of the Prorations charged to HSRE-ESP.

 

3.              THE PROPERTY; EXISTING INDEBTEDNESS .

 

3.1            Property .  As used herein, “ Property ” shall mean and include all of the following:

 

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3.1.1         Land .  Those certain tracts of real estate underlying the Facilities, as more particularly described on Schedules 3.1(a) 1 through 23 , together with all easements, covenants, rights, privileges, tenements, hereditaments and appurtenances thereunto now or hereafter belonging or appertaining thereto (collectively, the “ Land ”);

 

3.1.2         Improvements . All of the buildings, structures, fixtures and other improvements located on or used in connection with the Land, including, without limitation, any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, parking lots and facilities, landscaping, roadways, sidewalks, security devices, signs and light fixtures (the “ Improvements ”) (the Land and the Improvements are collectively referred to as the “ Premises ”);

 

3.1.3         Tangible Personal Property .  To the extent owned by either ESP 52 or ESP Maryland Two, all furniture, furnishings, fixtures, equipment, machinery, maintenance vehicles and equipment, tools, parts, recreational equipment, carpeting, window treatments, stationery and other office supplies and other tangible personal property of every kind situated in, on, over and under the Premises or used in connection therewith, which is not owned by tenants under the Leases (defined below), together with all replacements and substitutions therefor between the date hereof and Closing (the “ Tangible Personal Property ”), including but not limited to those items set forth on Schedule 3.1(c)   attached hereto;

 

3.1.4         Leases and Contracts .  All right, title and interest of ESP 52 or ESP Maryland Two (as applicable) in and to the Contracts, if any, and the Leases (as such terms are defined below); and

 

3.1.5         Intangibles .  All transferable warranties or guaranties issued in connection with the Improvements or Tangible Personal Property, and any other intangible personal property, and used exclusively in connection with the Premises or the business transacted thereon (collectively, the “ Intangible Personal Property ”), including, without limitation, to the extent assignable, all land use entitlements, development rights, licenses, permits, authorizations, names, and telephone exchange numbers; provided, however, that notwithstanding anything to the contrary set forth in this Section 3.1, the terms Property and Intangible Personal Property shall expressly exclude any and all trade names and trademarks owned, directly or indirectly, by Extra Space Storage Inc. regardless of whether such trade names or trademarks are used on or with respect to the Property and nothing in this Agreement shall be construed to either convey or to create any obligation on the part of Extra Space to convey, to HSRE-ESP any rights in or rights to use any such trade names or trademarks.

 

Notwithstanding anything to the contrary set forth above or otherwise contained herein, “ Property ” expressly excludes (i) all property owned by tenants or other users or occupants of the Premises (other than ESP 52 and ESP Maryland Two), (ii) all property

 

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owned by the property manager of the Premises, (iii) all property owned by any vendor under any Contract, (iv)  all rights and liabilities of either ESP 52 or ESP Maryland Two in, to and under those litigation matters, if any, described in Schedule 3.1 attached hereto.

 

3.2            Existing Indebtedness .  As used in this Agreement, the term “ Existing Indebtedness ” shall mean those certain loans evidenced by separate Promissory Notes with respect to each of the Facilities in which either ESP 52 or ESP Maryland Two appears as Borrower and Wachovia Bank N.A. appears as Lender (each a “ Third Party Note ” and collectively the “ Third Party Notes ”).  The Third Party Notes are secured by one or more mortgages or deeds of trust against the Property (each a the “ Third Party Mortgage ” and collectively the “ Third Party Mortgages ”).  Extra Space and HSRE agree as follows with respect to the Existing Indebtedness:

 

3.2.1         The obligations of Extra Space and HSRE under this Agreement shall be subject to the following:

 

3.2.1.1                  HSRE’s approval, prior to the expiration of the Due Diligence Period (defined below) of the Existing Indebtedness, including, but not limited to, HSRE’s approval of the amount, interest rate, payment schedule, repayment term and other terms of the Existing Indebtedness, and the form of the documents evidencing and or securing the Existing Indebtedness, including, but not limited to, any guarantees of the Existing Indebtedness (the “ Third Party Loan Documents ”), which approvals shall be in HSRE’s sole and absolute discretion.

 

3.2.1.2                  The current holder or holders of the Existing Indebtedness (the “ Lender ”) and each servicer of the Existing Indebtedness consenting to the transaction which is the subject of this Agreement and HSRE-ESP’s assumption of the Existing Indebtedness, all on terms that are acceptable to HSRE and Extra Space, in their respective sole discretions (the “ Lender Conditions ”).  The parties acknowledge that the Lender may require as a Lender Condition that the Existing Indebtedness be guaranteed by HSRE-ESP and that Extra Space continue to provide certain guarantees and/or indemnifications with respect to the Existing Indebtedness.  Subject to the terms and conditions of this Agreement, Extra Space agrees to provide such guarantees and/or indemnifications.  The Parties also acknowledge that (i) any required guaranties or indemnifications from either HSRE-ESP or Extra Space that are more burdensome or onerous, in any material respects, than the existing guarantees and indemnifications provided by Extra Space shall not be acceptable, (ii) any Lender Conditions that require any guaranties or indemnifications from HSRE or any Affiliate of HSRE (other than HSRE-ESP) are not acceptable to HSRE.

 

3.2.2         Extra Space agrees that, within ten (10) days of the execution of this Agreement, Extra Space will apply for and will thereafter pursue with

 

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reasonable diligence Lender’s consent to the transaction which is the subject of this Agreement.  Extra Space will advance the non-refundable amounts charged by the Lender as a condition to processing the request that Lender consent to the transaction which is the subject of this Agreement.  Extra Space agrees, from time to time, to inform HSRE as to the status of the approval process and Extra Space and HSRE each agree to use commercially reasonable efforts to cooperate with each other and with Lender and any servicer in seeking such approval and consent and in responding to the reasonable requests of Lender and/or such servicer.  Provided that the Closing occurs, HSRE-ESP shall be responsible for and pay all fees, costs, expenses, and other charges charged by Lender and/or any servicer of the Existing Indebtedness or incurred in the satisfaction of any condition or requirement imposed by Lender or such servicer with respect to Lender’s consenting to the transaction which is the subject of this Agreement (“ Lender Expenses ”) and any party advancing such costs prior to Closing shall be reimbursed for such costs at Closing.  If the Closing does not occur, neither Extra Space nor HSRE shall be reimbursed for any of the Lender Expenses advanced by such party.  The obligations of this Section 3.2.2 shall survive the Closing and shall survive the termination of this Agreement.

 

3.2.3         Notwithstanding anything to the contrary in this Agreement, if at the Closing Date, Lender and/or any servicer of Existing Indebtedness has not consented to the transaction which is the subject of this Agreement and provided that HSRE has not terminated this Agreement pursuant to Section 8.3 below, HSRE shall have the option to either (A) extend the Closing for an additional sixty (60) days (hereinafter the “ Lender Approval Extension Period ”) to permit Extra Space to continue to pursue with reasonable diligence Lender’s consent to the transaction which is the subject of this Agreement or (B) terminate this Agreement.  Such option shall be exercised by HSRE giving Extra Space written notice of HSRE’s election to either extend the Closing or terminate this Agreement pursuant to this Section 3.2.3 at any time on or before the date on which the Closing Date would be scheduled to occur but for such extension.  If HSRE fails to give such written notice to Extra Space, such failure shall be deemed to be an election to terminate this Agreement.

 

3.2.4         During the Due Diligence Period, Extra Space will make available to HSRE true and correct copies of all of the material Third Party Loan Documents for inspection, copying and review.

 

4.              CLOSING .

 

4.1            Closing Date .  The “ Closing Date ” or “ Closing ” of the transaction contemplated by this Agreement shall be on or before the date which is fifteen (15) days from the end of the Due Diligence Period.  The “ Closing Date ” shall be the date on which the “ Closing ” occurs.  The Closing shall occur at the office of HSRE’s Counsel, DLA Piper LLP (US), 203 North LaSalle Street, 19th Floor, Chicago, IL, 60601.  The “ Closing ” shall be deemed to have occurred when all of the conditions to Closing (as set forth in this Agreement) have either been satisfied or waived, the Escrow Agent (defined

 

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below) holds a settlement statement signed by Extra Space, a settlement statement signed by HSRE, and all of the funds and all of the other documents required by this Agreement, and Extra Space and HSRE have authorized Escrow Agent to disburse such funds and deliver such documents in accordance with the provisions of this Agreement.

 

4.2            Closing Documents .

 

4.2.1         Coordination with Closing Under Pool 2 Contribution Agreement .  It is the anticipation of the parties to this Agreement that the Closing under the Pool 2 Contribution Agreement will occur prior to the Closing under this Agreement.  If the Closing under the Pool 2 Contribution has not occurred prior to the Closing under this Agreement, the parties will, in connection with the Closing under this Agreement, proceed to (a) form HSRE-ESP, (b) make such modifications to the HSRE-ESP Operating Agreement and the Pool 2 Contribution Agreement to reflect the fact that the Closing is occurring under this Agreement prior to the Closing under the Pool 2 Contribution Agreement, and (c) execute the HSRE-ESP Operating Agreement (as modified pursuant to the provisions of this Section 4.2.1 ) as part of the Closing under this Agreement.

 

4.2.2         Extra Space .  At Closing, Extra Space shall deliver each of the following:

 

4.2.2.1                  [ RESERVED ].

 

4.2.2.2                  two counterparts of an Assignment and Assumption of the Membership Interests in ESP 52 and ESP 58 (the “ Assignment Agreement ”) executed by Extra Space in the form of Exhibit B attached hereto and by this reference made a part hereof [at Closing, one counterpart will be delivered to Extra Space and one counterpart will be delivered to HSRE-ESP];

 

4.2.2.3                  if the Closing under the Pool 2 Contribution Agreement has not occurred, three counterparts of the HSRE-ESP Operating Agreement (as modified pursuant to Section 4.2.1 above), executed by Extra Space [at Closing, one counterpart will be delivered to Extra Space, one counterpart will be delivered to HSRE and one counterpart will be delivered to HSRE-ESP];

 

4.2.2.4                  any and all affidavits, undertakings, certificates or other documents customarily required by Title Insurer in order to cause it to issue the Title Policy or the Endorsements (as defined in Section 11.1.1 hereto), as applicable, to HSRE-ESP or any applicable subsidiary of HSRE-ESP including, without limitation, ESP 52 or ESP Maryland Two;

 

4.2.2.5                  Extra Space’s affidavit stating Extra Space’s U.S. taxpayer identification number and that Extra Space is not a disregarded entity or foreign person within the meaning of Section 1445 of the Internal

 

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Revenue Code (and any similar affidavit that may be required under state law);

 

4.2.2.6                  to the extent not provided to HSRE prior to Closing, copies of all Contracts, if any, and all Leases (each of which may be delivered at the Facility which is the subject of such Lease) [to be delivered to HSRE-ESP];

 

4.2.2.7                  evidence reasonably satisfactory of termination of the existing property management agreements for the Property [to be delivered to HSRE-ESP];

 

4.2.2.8                  two counterparts of a new property management agreement with respect to each Facility executed by Extra Space Management, Inc. (“ ESMI ”), in the form of Property Management Agreement attached as Exhibit C to the HSRE-ESP Operating Agreement and by this reference made a part hereof (each a “ Property Management Agreement ” and collectively the “ Property Management Agreements ”) [at Closing, one counterpart of each Property Management Agreement will be delivered to ESMI and one counterpart of each Property Management Agreement will be delivered to HSRE-ESP];

 

4.2.2.9                  if the Closing under the Pool 2 Contribution Agreement has not occurred, two counterparts of a Non-Competition and Right of First Opportunity Agreement in the form attached hereto as Exhibit C and by this reference made a part hereof (the “ ROFO Agreement ”) [at Closing, one counterpart will be delivered to Extra Space and one counterpart will be delivered to HSRE];

 

4.2.2.10                Cash in the amount specified in Section 2.2.4 above [to be delivered to HSRE-ESP]; and

 

4.2.2.11                all other documents reasonably and customarily required in order to complete the conveyance, transfer and assignment of the ESP Interests to HSRE-ESP.

 

4.2.3         HSRE .  At Closing, HSRE shall deliver each of the following:

 

4.2.3.1                  Cash in the amount specified in Section 2.2.3 above [to be delivered to HSRE-ESP];

 

4.2.3.2                  if the Closing under the Pool 2 Contribution Agreement has not occurred, three counterparts of the HSRE-ESP Operating Agreement (as modified pursuant to Section 4.2.1 above), executed by Extra Space [at Closing, one counterpart will be delivered to Extra Space, one counterpart will be delivered to HSRE and one counterpart will be delivered to HSRE-ESP]

 

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4.2.3.3                  if the Closing under the Pool 2 Contribution Agreement has not occurred, two counterparts of the ROFO Agreement executed by Harrison Street Real Estate Capital, LLC [at Closing, one counterpart of the ROFO Agreement will be delivered to Extra Space and one counterpart of the ROFO Agreement will be delivered to HSRE]; ;

 

4.2.4         HSRE-ESP .  At Closing, Extra Space and HSRE shall cause HSRE-ESP to deliver the following:

 

4.2.4.1                  if the Closing under the Pool 2 Contribution Agreement has not occurred, the Additional ESS HSRE-ESP Interests and the Additional HSRE HSRE-ESP Interests (the delivery of which shall be evidenced by the execution and delivery of the HSRE-ESP Operating Agreement by HSRE and Extra Space);

 

4.2.4.2                  two counterparts of the Assignment Agreement [at Closing, one counterpart will be delivered to Extra Space and one counterpart will be delivered to HSRE-ESP];

 

4.2.4.3                  two counterparts of a Property Management Agreement with respect to each of the Facilities executed, as applicable, by either ESP 52 or ESP Maryland Two [at Closing, one counterpart of each Property Management Agreement will be delivered to ESMI and one counterpart of each Property Management Agreement will be delivered to HSRE-ESP];

 

4.2.4.4                  To Extra Space, cash in the amount of the Extra Space Distribution Amount;

 

4.2.4.5                  any and all affidavits, undertakings, certificates or other documents customarily required by Title Insurer in order to cause it to issue the Title Policy or the Endorsement, as applicable; and

 

4.2.4.6                  copies of resolutions authorizing this transaction and an incumbency certificate evidencing the authority of HSRE’s signatories.

 

4.3            Credits and Prorations .

 

4.3.1         Prorations .  Subject to the Proration Review (as defined in Exhibit D ), the following shall be apportioned between Extra Space and HSRE-ESP with respect to the Property, such prorations to be computed based on the number of days Extra Space and HSRE-ESP each own the Property in the month in which the Closing occurs, as of 12:01 a.m. on the third day prior to the Closing Date (the “ Proration Date ”), as if Extra Space were selling the Property to HSRE on the Proration Date, and such prorations shall increase or decrease the amount of cash disbursed to Extra Space at Closing:

 

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4.3.1.1                  all collected rents and other sums received under Leases (“ Rents ”) (including prepaid Rents) (to the extent that collected rents or other sums are distributed by either ESP 52 or ESP Maryland Two to Extra Space, the applicable prorated portion of such collected rents and other sums shall be a credit to HSRE-ESP and to the extent that such collected rents or other sums are retained by ESP 52 and/or ESP Maryland Two, the applicable prorated portion of such collected rents or other sums shall be a credit to Extra Space);

 

4.3.1.2                  taxes and assessments (including, without limitation, personal property taxes on the Personal Property and rent taxes) levied against the Property;

 

4.3.1.3                  pre-payments and accrued amounts due under any contracts relating to the Property;

 

4.3.1.4                  accrued income and expenses (including, without limitation, gas, electricity and other utility charges for which ESP 52 or ESP Maryland Two is liable, if any, with such charges to be apportioned as of the Proration Date on the basis of the most recent meter reading occurring prior to the Proration Date or, if unmetered, on the basis of a current bill for each such utility);

 

4.3.1.5                  all other expenses pertaining to the Property;

 

4.3.1.6                  premiums under insurance policies; and

 

4.3.1.7                  a credit to Extra Space for the amount of any reserve accounts held by the Lender to the extent retained for the benefit of HSRE-ESP after Closing.

 

4.3.2         Method of Prorations .  Notwithstanding anything contained in the foregoing provisions:

 

4.3.2.1                  Real estate and personal property taxes and assessments will be prorated between Extra Space and HSRE-ESP for the period for which such taxes are assessed, regardless of when payable.  If the current tax bill is not available at Closing, then the proration shall be made on the basis of 100% of the most recent ascertainable tax bill.  Any taxes paid at or prior to Closing shall be prorated based upon the amounts actually paid.  If taxes and assessments for the fiscal year in which Closing occurs or any prior years have not been paid before Closing, HSRE-ESP shall be credited by Extra Space at the time of Closing with an amount equal to that portion of such taxes and assessments which are ratably attributable to the period before the Proration Date and HSRE-ESP shall pay the taxes and assessments prior to their becoming delinquent.  If taxes and assessments for the fiscal year in which Closing occurs have been paid before Closing, Extra Space shall be credited by HSRE-ESP at the time of

 

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Closing with an amount equal to that portion of such taxes and assessments which are ratably attributable to the period from and after the Proration Date.  For each Facility for which a current tax bill for the year in which the Closing occurs is not available at Closing, at such time as the current tax bill for the year in which the Closing occurs becomes available, Extra Space and HSRE-ESP shall re-prorate real estate taxes and each agrees to pay to the other such amounts as are determined to be due and owing by such party pursuant to such re-proration within twenty (20) days written notice from the other.

 

4.3.2.2                  “Delinquent Rents” (as defined below) owed by tenants who have no Delinquent Rents which are more than thirty (30) days delinquent as of the Proration Date shall be prorated as of the Proration Date as if fully collected on the Proration Date.  Except as provided in the preceding sentence, Delinquent Rents shall not be prorated and all Delinquent Rents shall be the property of HSRE-ESP as of the Closing Date.  As used herein, “ Delinquent Rents ” means all rent due and payable as of the Proration Date and applicable, on an accrual basis, to any period of time preceding the Proration Date, including, but not limited to, checks received after the Proration Date, but prior to the Closing Date.

 

4.3.3         Proration Review .  Within sixty (60) days after the Closing, Extra Space and HSRE-ESP shall review the prorations as specified in Sections 4.3.1 and 4.3.2 above in accordance with the provisions of Exhibit D attached hereto and by this reference made a part hereof, with any payments that are called for by such review to be made by the applicable party in cash.  The provisions of this Section 4.3.3 shall survive the Closing.

 

4.3.4         Closing Costs .  At the Closing, the following costs shall be paid by HSRE-ESP and/or reimbursed to Extra Space or HSRE, as applicable: (i) the cost of the Survey, all recording costs and all escrow costs; (ii) all actual out of pocket costs incurred or paid to unaffiliated third parties by HSRE in connection with its due diligence investigation of the Property, the ESP Interests, the ESP Maryland Interests and Extra Space; (iii) all fees, costs, expenses, and other charges charged by Lender and/or any servicer of the Existing Indebtedness or incurred in the satisfaction of any condition or requirement imposed by Lender or such servicer with respect to Lender’s consenting to the transaction which is the subject of this Agreement; (iv) all attorney’s fees and costs incurred by either Extra Space or HSRE in connection with the negotiation and documentation of the transaction which is the subject of this Agreement and the performance of due diligence for the benefit of HSRE.  At Closing, the following costs shall be paid by Extra Space and/or HSRE-ESP in accordance with local practice and custom in the area applicable to each Property:  (A) the cost of the base title policy, endorsements, reinsurance or coinsurance, (B) transfer, documentary and similar taxes related to the purchase of the ESP Interests, if any; provided, however, that in the absence of local practice and custom relating to the payment of such costs, such costs shall be paid by HSRE-ESP.  Notwithstanding anything to the contrary

 

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in this Section 4.3.4, if the Closing does not occur, no party to this Agreement shall be responsible for reimbursing any other party to this Agreement for fees, expenses costs incurred by or for the benefit of such party except as expressly provided otherwise in Section 13.1.2 below.

 

4.3.5         Survival .  The obligations under this Section 4.3 shall survive Closing.

 

5.              REPRESENTATIONS AND WARRANTIES OF EXTRA SPACE .

 

5.1            Warranties and Representations   Extra Space represents and warrants to HSRE that, as of the date of this Agreement and at the Closing:

 

5.1.1         Authority, etc .  Extra Space is a limited liability company, duly organized and validly existing under the laws of the State of Delaware and is in good standing under the laws of the State of Delaware.  Extra Space has full power and lawful authority under its organizational documents to enter into and carry out the terms and provisions of this Agreement and to execute and deliver all documents which are contemplated by this Agreement.  All actions necessary to confer such power and authority upon the persons executing this Agreement (and all documents which are contemplated by this Agreement to be executed on behalf of Extra Space) have been taken.  Extra Space’s execution, delivery and performance of this Agreement will not result in any violation of, or default under, or require any notice or consent under Extra Space’s organizational documents.

 

5.1.2         No Other Agreements .  Extra Space has not entered into any agreement to dispose of its interest in the Property or any part thereof.  Extra Space has not entered into any agreement to dispose of the ESP Interests, except for this Agreement.

 

5.1.3         Title and Survey .  At Closing, ESP 52 or ESP Maryland Two (as applicable) shall own a fee simple estate in and to the Property relating to the Direct Facilities and ESP Maryland Two shall own a fee simple estate in and to the Property relating to the Maryland Facilities, subject only to: (i) the Approved Title Matters (as defined in Section 8.2.3 hereto), (ii) the lien of general real estate taxes which are not yet due or payable as of Closing, (iii) the rights of tenants, as tenants only, under the Leases (with no options to purchase or rights of first refusal to purchase thereunder), (iv) acts of, by or through HSRE, (v) matters disclosed by the surveys of the Premises and more particularly described on Schedule 5.1.3 attached hereto (collectively, the “ Surveys ”), and (vi) standard exceptions which cannot be waived or deleted from the Title Policy (defined below) in the jurisdiction in which the Property is located (collectively, the “ Permitted Exceptions ”).

 

5.1.4         Leases .  Extra Space has made available to HSRE at the Facilities true and complete copies of all leases set forth in the rent rolls described on

 

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Schedule 5.1.4 attached hereto (the “ Leases ”) and all of Extra Space’s files and correspondence relating to the Leases.  The rent rolls described in Schedule 5.1.4 are true, correct and complete.  As of Closing, ESP 52 or ESP Maryland Two (as applicable) shall be the landlord under each Lease and shall not have assigned any interest therein to any entity or person.  The information set forth on Center Shift (as defined in Section 8.2.1) relating to the Property and the Leases is true and correct in all material respects.

 

5.1.5         Contracts .  With the exception of the Permitted Exceptions, the Third Party Loan Documents, the Leases, and the existing property management contracts between ESMI and either ESP 52 or ESP Maryland Two, as applicable, all of which property management contracts will be terminated at Closing, there are no service, maintenance, repair, parking, employment, union, construction, leasing or other similar contracts to which either ESP 52 or ESP Maryland Two is a party and relating to the ownership or operation of the Property (the “ Contracts ”).

 

5.1.6         Litigation .  Except as set forth on Schedule 5.1.6 attached hereto and neither ESP 52 nor ESP Maryland Two has been served with any litigation (including eminent domain proceedings) which, as of the date of this Agreement, is still pending against any of such parties with respect to the ownership or operation of the Property.  Neither ESP 52 nor ESP Maryland Two has been served with any litigation which is still pending against such party with respect to the ESP Interests, the ESP Maryland Interests.

 

5.1.7         Violations .  Neither Extra Space, ESP 52 nor ESP Maryland Two has received from any governmental authority written notice of, nor does Extra Space have any Knowledge of, any pending, threatened or currently existing material violation of any zoning, building, fire, environmental or health code or any other statute, ordinance, rule, regulation or order applicable to Extra Space, ESP 52, ESP Maryland Two or the Property or any part thereof.

 

5.1.8         Brokerage Agreements .  There are no leasing brokerage agreements, leasing commission agreements or other agreements providing for the payment of any amount for leasing activities with respect to the Property or any portion thereof.

 

5.1.9         Licenses .  Extra Space, ESP 52 or ESP Maryland Two (as applicable) has obtained and kept in force any necessary licenses to carry on its business now conducted in the States in which the Property is located. To Extra Space’s Knowledge, any necessary business certificates or fictitious name certificates, or both, required to be filed by Extra Space, ESP 52 or ESP Maryland Two (as applicable) under the laws of any state have been duly filed and are in full force and effect in accordance with the respective terms thereof.

 

5.1.10       Other Property .  Neither ESP 52 nor ESP Maryland Two owns, nor has it ever owned, directly or indirectly, any real or personal property other

 

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than the Direct Facilities (as to ESP 52) or the Maryland Facilities (as to ESP Maryland Two).

 

5.1.11       Employees .  Neither ESP 52 nor ESP Maryland Two have, nor have they ever had, any employees.  All employees working at the Facilities are employees of the existing property manager.

 

5.1.12       Securities .  Neither ESP 52 nor ESP Maryland Two have sold any securities from and after the date of its formation or have been obligated to file any reports, schedules, forms, statements and other documents with the SEC through the date hereof.

 

5.1.13       Tax Status .  Each of ESP 52 and ESP Maryland Two has been at all times since its inception a partnership or disregarded entity for federal income tax purposes and (ii) as of the Closing, shall be treated for federal income tax purposes as a “disregarded entity”.  There have been properly completed and filed on a timely basis all tax returns required to be filed (if any) by ESP 52 and ESP Maryland Two and its subsidiaries.  As of the time of filing, the foregoing tax returns (if any) correctly reflected in all material respects the facts regarding the income, business, assets, operations, activities, status and other matters of or information regarding the ESP 52 or ESP Maryland Two (as applicable) required to be shown thereon and all such tax returns have been filed on a timely basis (including extensions).

 

5.1.14       Condemnation .  Neither Extra Space, ESP 52 nor ESP Maryland Two has received written notice of any pending condemnation action with respect to any Facility.

 

5.1.15       Bankruptcy .  There are no attachments, executions, assignments for the benefit of creditors or voluntary or involuntary proceedings in bankruptcy pending against Extra Space, ESP 52, ESP 58 or ESP Maryland Two.

 

5.1.16       Rezoning and Property Assessments .  To Extra Space’s Knowledge and except as set forth on Schedule 5.1.16 , none of Extra Space, ESP 52 or ESP Maryland Two has received written notice of any pending or proposed proceeding to change or redefine the zoning classification of all or any part of any Facility.

 

5.1.17       Tangible Personal Property .  As of Closing, the Tangible Personal Property will be owned by ESP 52 or ESP Maryland Two free and clear of any conditional bills of sale, chattel mortgages, security agreements or financing statements or other security interests of any kind.

 

5.1.18       ESP 52, ESP Maryland Two and Storage Facilities In Compliance with Laws, Regulations, Etc .   Each of ESP 52, ESP Maryland Two and the Facilities are in compliance in all material respects with any and all applicable federal, state and local laws, regulations, ordinances and rules pertaining to the operating of the Facilities.

 

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5.1.19       Environmental Laws .  To the Knowledge of Extra Space and except as disclosed in any environmental site assessment provided by Extra Space to HSRE, none of Extra Space, ESP 52 or ESP Maryland Two are in violation in any material respect, in connection with its respective ownership, use, maintenance or operation of the Property and the conduct of the business related thereto, of any applicable federal, state, county or municipal or local statutes, laws, regulations, rules, ordinances, codes, standards, orders or licenses or permits of any governmental authorities relating to environmental matters, including, without limitation, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act and the Occupational Health Act (being hereinafter collectively referred to as the “ Environmental Laws ”) and all other applicable environmental standards or requirements.  Schedule 5.1.19 is a true, correct and complete, in all material r