Exhibit 10.27
PURCHASE AND SALE
AGREEMENT
(AAAAA
Rent-A-Space)
THIS PURCHASE AND SALE AGREEMENT
(“ Agreement ”) is made and entered into the 8th
day of December, 2006 (hereinafter the “ Effective
Date ”), by, between, and among those entities identified
as sellers on the signature pages of this Agreement, (each a
“ Seller ”, and collectively “
Sellers ”) and EXTRA SPACE STORAGE LLC , a
Delaware limited liability company (“ Purchaser
”).
R E C I T A L S
:
A.
Each of the Sellers operates and owns either fee title to, or a
leasehold estate pursuant to the Ground Leases (hereinbelow
defined) in, one or more of the following self storage facilities
listed on Exhibit “A” (each a “
Property ” and collectively the “
Properties ”). Each of the Properties are more
fully described on Exhibit “A-1” through
“A-14” , inclusive ”.
B.
Purchaser desires to purchase all of Sellers’ right, title,
and interest in and to the Properties from Sellers in their as-is,
where-is condition and subject to the terms and conditions of this
Agreement, Sellers are willing to sell to Purchaser all of
Sellers’ right, title, and interest in and to the
Properties.
NOW, THEREFORE
, for and in consideration of the
mutual covenants set forth in this Agreement, the receipt and
sufficiency of which are hereby acknowledged by the parties to this
Agreement, the parties to this Agreement do hereby agree as
follows:
1.
Agreement of Sale . Subject to, and on the terms and
conditions herein set forth, Sellers hereby agree to sell to
Purchaser all of Sellers’ right, title, and interest in and
to the Properties and Purchaser agrees to purchase from Sellers all
of Sellers’ right, title, and interest in and to the
Properties. Subject to any provision contained herein that
expressly permits the termination of this Agreement as to a
particular Property, Purchaser expressly acknowledges and agrees
that Purchaser has no right to purchase and Sellers have no
obligation to sell, less than all of the Properties, it being the
express agreement and understanding of Purchaser and Sellers that,
as a material inducement to Purchaser and Sellers to enter into
this Agreement, Purchaser has agreed to purchase, and Sellers have
agreed to sell, all of the Properties in accordance with the terms
and conditions hereof.
2.
Property Description .
A.
Subject to the provisions of this Section 2, each Property includes
all of the right, title and interest of the applicable Seller in
and to (i) all buildings, structures, fixtures, easements, rights
of way and improvements located thereon or appurtenant thereto
(collectively, the “ Improvements ”), (ii) the
Personal Property (hereinafter defined), (ii) the Intangible
Personal (hereinafter defined), (iii) the Leases (hereinafter
defined), (iv) the Designated Contracts (hereinafter defined), (v)
the Security Deposits (hereinafter defined) and the Ground Leases
(hereinafter defined). In addition, the Kapolei Property (as
defined on Exhibit “A” also includes all of the
right, title, and interest of AAAAA Maui in and to that certain
loan described more fully in the Kapolei Ground Lease (as defined
on Exhibit “A” ) and the letter agreement
attached hereto as Exhibit “B” (hereinafter the
“ Kapolei Loan ”). Notwithstanding
anything to the contrary in the preceding sentence, the term
“Property” shall not include any of the Excluded
Property (hereinafter defined) with respect to any of the
Properties.
B.
For purposes of this Agreement “ Personal
Property “ means, as to each Property, all fixtures,
furniture, carpeting, draperies, appliances, building supplies,
equipment, machinery, inventory and other tangible items of
personal property which are owned by the Seller of such Property
and presently
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affixed, attached to, placed or
situated upon such Property and/or used exclusively in connection
with the ownership, operation and occupancy of such
Property.
C.
For purposes of this Agreement, “ Intangible Property
” means, as to each Property, all assignable intangible
personal property, if any, now or through the date of Closing owned
by the Seller of such Property and arising out of or in connection
with such Seller’s ownership of such Property and the
Personal Property, including (to the extent any such items exist):
(i) such Seller’s rights to use all plans, specifications and
drawings relating to the Improvements located on such Property
(subject to the rights of the parties who prepared the same), (ii)
transferable licenses, permits and certificates of occupancy issued
by governmental authorities relating to the use, maintenance,
occupancy and/or operation of such Property and the Personal
Property, and (iii) any presently effective and assignable
warranties and guaranties with respect to such Property.
D.
For purposes of this Agreement, “ Leases ”
means, as to each Property, all leases and rental agreements (other
than the Ground Leases) now or hereafter entered into for occupancy
of space within the improvements or other portions of such
Property.
E.
For purposes of this Agreement, “ Designated Contracts
” means, as to each Property, all Contracts (hereinafter
defined) which Purchaser chooses to have assigned to Purchaser
pursuant to Section 8.D, below. Designated Contracts also
includes any such contracts hereafter approved by Purchaser
pursuant to the provisions of Section 12.C below.
F.
For purposes of this Agreement, “ Security Deposits
” means, as to each Property, all security deposits of
tenants under Leases (“ Tenants ”), if any,
which as of the Closing Date have not been applied by Seller in
accordance with the terms of the applicable Leases.
G.
For purposes of this Agreement, “ Ground Leases
” means: the Berkeley II Ground Lease, the Castro Valley
Ground Lease, the Kapolei Ground Lease, and the San Pablo Ground
Lease, each as defined on Exhibit
“A”.
H.
For purposes of this Agreement, “ Excluded Property
” means: (i) any bank accounts of any Seller, (ii) any motor
vehicles or aircraft owned by any Seller, (iii) any business forms,
employee training manuals, proprietary Seller software and other
intellectual property owned and used by any of the Sellers in the
operation of a self storage business at any of the Properties, (iv)
except as provided in Section 22 below, the right to use the name
“AAAAA Rent-A-Space”, (v) any operating accounts,
replacement or reserve accounts or other accounts maintained by or
on behalf of Seller or Seller’s affiliates with respect to
the Properties, excepting however, reserve accounts under the Third
Party Loans that are assumed by Purchaser, which reserve accounts
shall be assigned by Seller to Purchaser at closing of the
applicable Property; (vi) any refundable cash or other security
deposits or any bonds posted by or on behalf of Seller with any
governmental authorities, utilities or other parties, other than
those for which an adjustment is made pursuant to Section 11,
below; (vii) subject to any obligation of Seller to remit such
refunds to Tenants, any refunds of real estate taxes and
assessments, personal property taxes and similar payments
attributable to the period prior to the applicable Closing
(provided, however, any refunds for the fiscal tax year in which
the Closing occurs shall be prorated in accordance with Section 11,
below); (viii) subject to Section 13, below, any claims under
Seller’s insurance policies; and (ix) Seller’s
agreements with any of Seller’s on-site property
managers.
3.
Purchase Price . The “ Purchase Price
” to be paid by Purchaser to Sellers for the Properties shall
be a sum equal to the aggregate of ONE HUNDRED FIFTY MILLION TWO
HUNDRED THOUSAND AND NO/100 DOLLARS ($150,200,000.00).
The portion of the Purchase Price allocated to each Property, which
shall be paid at Closing to the Seller of such Property pursuant to
Section 11.A, below,
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is set forth on Exhibit
“C” attached hereto (with respect to each Property,
such portion of the Purchase Price so allocated to such Property as
aforesaid, shall hereinafter be referred to as the “
Allocated Purchase Price ”). The Purchase Price
shall be paid by Purchaser at Closing (defined below) as follows:
(i) Assumption of the aggregate outstanding balance of unpaid
principal on the Third Party Loans (defined below) owing as of the
Closing Date (which amount shall be credited to the Purchase Price
at Closing), the current balances owing with respect to the Third
Party Loans are estimated to be approximately $16,580,243.00; plus
(ii) Payment of the aggregate outstanding balance of the Prepaid
Loans (defined below) (including unpaid principal and interest and
any related charges and other fees and expenses, but specifically
not including any prepayment fees or penalties payable with respect
to the any Prepaid Loan) owing as of the Closing (which aggregate
amount shall be credited to the Purchase Price at Closing;
provided, however, that any prepayment fees or penalties payable
with respect to the prepayment of an Prepaid Loan shall not be a
credit towards the Purchase Price), the current balances owing with
respect to the Third Party Loans are estimated to be approximately
$2,785,030; plus (iii) cash or other immediately available funds
for the balance of the Purchase Price, which amount is estimated to
be approximately $130,834,727. At the Closing, Purchaser
shall, subject to the requirements of Section 4 below, assume the
Third Party Loans. As used herein, the terms “ Third
Party Loans ” and “ Prepaid Loans ”
shall mean the loans identified as such on the attached Exhibit
“D” . Each Property that is security for a
Third Party Loan is hereinafter referred to as a “ Third
Party Loan Property ” and all of the Properties that are
security for a Third Party Loan are hereinafter collectively
referred to as the “ Third Party Loan Properties
”.
4.
Assumption of Third Party Loans .
A.
The obligations of Sellers and Purchaser under this Agreement shall
be subject to the following:
(i)
Purchaser’s approval of each of the Third Party Loans,
including, but not limited to, Purchaser’s approval of the
amount, interest rate, payment schedule, repayment term and other
terms of each Third Party Loan and the form of the documents
evidencing and or securing each Third Party Loan, including, but
not limited to, any guarantees of each Third Party Loan
(hereinafter collectively the “ Third Party Loan
Documents ”), which approvals shall be in
Purchaser’s sole and absolute discretion. If Purchaser
delivers the Approval Notice (hereinbelow defined), Purchaser will
be deemed to have irrevocably approved each Third Party Loan and
the Third Party Loan Documents.
(ii)
Each Third Party Lender and each loan servicer of a Third Party
Loan (if any) consenting to the transaction which is the subject of
this Agreement and Purchaser’s assumption of each Third Party
Loan, all on terms that are reasonably acceptable to Purchaser (the
“ Lender Conditions ”). Seller has
informed Purchaser that KN Productions, Inc. (hereinafter the
“ Seller Guarantor ”) has executed an Indemnity
and Guaranty Agreement with respect to each of the Third Party
Loans and that each such Third Party Lender may require Purchaser
to provide a financially responsible person to provide a similar
guaranty and indemnity with respect to such Third Party
Lender’s Third Party Loan (hereinafter a “
Replacement Guarantor ”). Purchaser agrees to
offer a Replacement Guarantor who shall, in Purchaser’s
reasonable determination, satisfy the financial conditions required
to be maintained by the applicable Seller Guarantor pursuant to the
Third Party Loan Documents; provided, however, that the parties
acknowledge that Purchaser may, at Purchaser’s option,
require that the assumption and/or guaranties of the Third Party
Loans be provided by, one or more affiliates of Purchaser who
satisfy the foregoing criteria. In the event that the Third
Party Loan Documents do not specify financial conditions required
to be maintained by the applicable Seller Guarantor, then, in the
event so required by the applicable Third Party Lender, Purchaser
agrees to offer a Replacement Guarantor who shall have a minimum
net worth of at least $100,000,000.00. Notwithstanding the
foregoing, in no event shall Purchaser be required to approve any
Lender Conditions which require Purchaser or any affiliate of
Purchaser to execute any guaranties or to incur any obligations
with respect to a Third Party Loan which are materially more
onerous or burdensome than the guaranties and/or
obligations
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undertaken by the applicable Seller
or such Seller’s affiliates (including, but not limited to,
the Seller Guarantor) under the applicable Third Party
Loan.
B.
Promptly after the Effective Date, Purchaser and Sellers shall
apply to each Third Party Lender and servicer of a Third Party Loan
for such Third Party Lender and servicer’s consent to the
transaction which is the subject of this Agreement and
Purchaser’s assumption of such Third Party Loan in accordance
with Lender Conditions that area reasonably acceptable to
Purchaser. Sellers and Purchaser each agree to use
commercially reasonable efforts to cooperate with each other and
with each Third Party Lender and servicer in seeking such approval
and consent and in responding to the reasonable requests of such
Third Party Lender and/or servicer. Notwithstanding anything
to the contrary contained herein, provided that Sellers and
Purchaser shall have satisfied their respective obligations under
this Section, the failure of a Third Party Lender to approve the
assignment and assumption of a Third Party Loan by the expiration
of the Due Diligence Period shall not constitute a default by
either Seller or Purchaser.
C.
Notwithstanding anything to the contrary in this Agreement, if at
the expiration of the Due Diligence Period (1) any Third Party
Lender and/or the servicer of such Third Party Lender’s Third
Party Loan has not consented to the transaction which is the
subject of this Agreement and to Purchaser’s assumption of
such Third Party Loan in accordance with Lender Conditions that are
reasonably acceptable to Purchaser and (2) Purchaser gives Sellers
an Approval Notice in accordance with the provisions of Section 8.H
below, the following provisions of this Section 4.C shall
apply:
(i)
Purchaser may, by written notice to Sellers given either
concurrently with the giving of the Approval Notice or at any time
after the giving of a notice pursuant to Section 4.C(ii) below with
respect to such Third Party Loan, elect to waive the condition that
such Third Party Lender and servicer consent to the transaction
which is the subject of this Agreement and to Purchaser’s
assumption of the such Third Party Loan and proceed to Closing, in
which event, the provisions of Section 16.C below shall apply to
such Third Party Loan, or
(ii)
Purchaser may, by written notice to Sellers given concurrently with
the giving of the Approval Notice, elect to proceed to the Closing
with respect to all of the Properties other than one or more of the
Third Party Loan Properties with respect to which Purchaser has not
received such consent, in which event, Purchaser and Seller shall
continue to seek the consent of such Third Party Lender and/or the
servicer of such Third Party Lender’s Third Party Loan to the
transaction which is the subject of this Agreement and
Purchaser’s assumption of such Third Party Loan in accordance
with the provisions of Section 4.B above and the provisions of
Sections 4.D and 11.H below shall apply to the Third Party Loan
Property which secures such Third Party Loan.
If at the expiration of the Due
Diligence Period more than one Third Party Lender and/or the
servicer of such Third Party Lender’s Third Party Loan have
not consented to the transaction which is the subject of this
Agreement and Purchaser’s assumption of such Third Party
Loan, Purchaser may, in Purchaser’s sole discretion, make a
different election with respect to each such Third Party
Loan.
D.
As to each Third Party Loan with respect to which Purchaser has
made an election pursuant to Section 4.C(ii) above, upon Third
Party Lender’s approval of Purchaser’s assumption of
the Third Party Loan in accordance with Lender Conditions which are
reasonably acceptable to Purchaser, Seller and Purchaser agree to
execute such documentation as may be reasonably required by Third
Party Lender pursuant to and in accordance with the terms of the
Third Party Loan Documents and such Lender Conditions and to take
all other steps reasonably necessary to promptly Close the loan
assumption and Purchaser’s acquisition of the Third Party
Loan Property which secures such Third Party Loan as soon as
reasonably possible, but in no event later than the tenth (10th)
business day after the Lender shall have approved such
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loan assumption, the completion of
which shall include such Third Party Lender’s release of
Seller and each Seller Guarantor from future liability with respect
to the Third Party Loan.
E.
If Purchaser initially makes an election pursuant to Section
4.C(ii) above with respect to a Third Party Loan and thereafter
makes an election pursuant to Section 4.C(i) above with respect to
such Third Party Loan, the Closing with respect to
Purchaser’s acquisition of the Third Party Loan Property that
secures such Third Party Loan shall occur as soon as reasonably
possible after the date on which Purchaser gives Sellers written
notice of Purchaser’s election pursuant to Section 4.C(i)
above with respect to such Third Party Loan, but in no event later
than ten (10) business days after the giving of such written
notice.
F.
Concurrently with the Closing of the assumption of the Third Party
Loan and provided the applicable Third Party Lender shall agree,
all reserve accounts maintained by such Third Party Lender on
behalf of Seller in connection with the Third Party Loan, if any,
shall be assigned by the applicable Seller to Purchaser at the
Closing of the applicable Third Party Loan Property and such Seller
shall receive a credit at Closing equal the amounts so
assigned. If the applicable Third Party Lender shall not
agree to the assignment and assumption of existing reserves at
Closing as aforesaid, such Seller shall not receive a credit
therefor at Closing, and, if required by such Third Party Lender,
Purchaser shall establish replacement reserves in the amounts
required by the Third Party Lender, and Purchaser shall upon such
Seller’s request, reasonably cooperate with such
Seller’s efforts to recover such Seller reserves from
Lender.
G.
Purchaser shall be responsible for and pay all fees, costs,
expenses, and other charges charged by any Third Party Lender with
respect to its consenting to the transaction which is the subject
of this Agreement and the assumption of any Third Party Loan in
accordance with the provisions of this Section 4 including, without
limitation, any loan assumption fees.
5.
Earnest Money Deposit .
A.
Within three (3) business days after the Effective Date, Purchaser
shall deposit with Chicago Title Insurance Company, National
Office, at 171 N. Clark Street, 3 rd Floor, Chicago, IL 60601, Attention:
Ronald K. Szopa, as the “ Escrow Agent ” and
“ Title Company ,” an earnest money deposit in
cash in the amount of FOURTEEN MILLION NINE HUNDRED THOUSAND AND
NO/100 DOLLARS ($14,900,000.00) (“ Earnest Money
Deposit ”). The Earnest Money Deposit shall be refundable
during the Due Diligence Period (as defined in Section 8) and as
otherwise set forth in this Agreement and shall be credited to the
Purchase Price upon the Closing as set forth herein.
B.
Purchaser acknowledges time is of the essence with respect to the
delivery of the Earnest Money Deposit and the balance of that
portion of the Purchase Price due and owing at the Closing.
If Purchaser fails to timely deliver the Earnest Money Deposit
and/or the balance of the Purchase Price when due, such failure
shall constitute a material default by Purchaser hereunder and in
addition to Sellers’ other remedies hereunder, Sellers may
terminate this Agreement by delivering written notice to Purchaser
and Escrow Agent.
C.
Upon receipt, Escrow Agent shall deposit the Earnest Money Deposit
into an interest bearing money market account maintained at a bank
customarily used by Escrow Agent for such purposes. All
interest earned on the Earnest Money Deposit while held by Escrow
Agent shall be added to and increase the amount of Earnest Money
Deposit and shall be reported to the Internal Revenue Service as
income of Purchaser. Purchaser and Sellers agree to provide
Escrow Agent with their respective tax identification numbers upon
execution of this Agreement and Purchaser and Sellers shall
promptly execute all forms reasonably requested by Escrow Agent in
connection with depositing the Earnest Money Deposit in an
interest-bearing account as provided above.
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D.
A portion of the Earnest Money Deposit shall be applied to the
satisfaction of the Allocated Purchase Price for each Property,
with such portion of the Earnest Money Deposit being determined in
accordance with the following provisions of this Section
5.D:
(i)
With respect to the Closing for each of the Properties other than
the last three (3) Properties to Close, the portion of the Earnest
Money Deposit to be applied to the Allocated Purchase Price for
each such Property shall be equal to the product of $7,400,000.00
multiplied by a fraction the numerator of which is the Allocated
Purchase Price for such Property and the denominator of which is
the aggregate Allocated Purchase Prices for all of the Properties
other than the last three (3) Properties to Close.
(ii)
$2,500,000.00 of the Earnest Money Deposit shall be allocated to
each of the last three (3) Properties to Close; provided, however,
that at the Closing of the last Property, the entire remaining
balance of the Earnest Money Deposit (including interest) shall be
applied to the Allocated Purchase Price for such
Property
Except for a disbursement to Sellers
as part of the Allocated Purchase Price upon the Closing of a
Property as provided above, if either Purchaser or any Seller makes
a written demand upon Escrow Agent for payment of the Earnest Money
Deposit (or a portion thereof), Escrow Agent shall give written
notice to the other party of such demand. If Escrow Agent
does not receive a written objection from the other party to the
proposed payment of the Earnest Money Deposit (or a portion
thereof) within three (3) business days after that party’s
receipt of such notice, Escrow Agent shall make the payment of the
Earnest Money Deposit (or a portion thereof) pursuant to the
demand. If Escrow Agent does receive such written objection
within such three (3) business day period, Escrow Agent shall
continue to hold the Earnest Money Deposit (or a portion thereof)
as provided in Section 5.C until otherwise directed by joint
written instructions from Purchaser and Sellers or a final,
non-appealable judgment of a court of competent jurisdiction.
However, Escrow Agent shall have the right to deposit the Earnest
Money Deposit with the clerk of the Superior Court of Alameda
County, California. If Escrow Agent so deposits the Earnest
Money Deposit with the clerk of the court, Escrow Agent shall give
written notice thereof to Sellers and Purchaser and, upon such
deposit and notice, Escrow Agent shall be relieved and discharged
of all further obligations hereunder.
6.
Items from Sellers .
A.
Documents . To the extent not already provided to
Purchaser, within three (3) business days after the Effective Date,
each Seller shall, with respect to each Property owned by such
Seller, make available to Purchaser at such Seller’s
principal place of business during normal business hours, all of
the following (collectively, the “ Documents ”),
to the extent that they exist and are within the control of any of
the Sellers or any of their respective affiliates, employees or
agents and to the extent the same do not constitute Excluded
Documents, as defined below:
(i)
All inspections, studies, assessments, reports, audits, and surveys
affecting or relating to such Property, including, but not limited
to, all title reports, title policies, land surveys, environmental,
mechanical, electrical, structural, soils, and similar reports,
assessments, and/or audits, traffic studies, and appraisals.
(Purchaser acknowledges that a substantial number of such title
reports, surveys, engineering reports and environmental reports
have already been received).
(ii)
All site plans, as-built plans, drawings, environmental,
mechanical, electrical, structural, soils, and similar plans and
specifications relating to such Property.
(iii)
All certificates, inspections, permits, compliance letters, and
certificates of occupancy relating to such Property or
Seller’s business on such Property.
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(iv)
A rent roll for such Property (each hereinafter a “ Rent
Roll ) together with a copy of the standard form of lease
agreement, amendments, and side agreements and tenant insurance
sales materials used in connection with the operation of such
Property, and a true and correct copy of each non-self storage
lease affecting such Property,
(v)
A list of all real estate contracts, including service contracts,
license agreements, warranties, management, maintenance, leasing
commission or other agreements affecting such Property, if any,
together with copies of the same. The contracts which are
included on the lists delivered to Purchaser pursuant to this
Section 6.A(v) are hereinafter collectively referred to as the
“ Contracts ”.
(vi)
Copies of all real and personal property tax statements relating to
such Property, or any part thereof, for each of the two years prior
to the current year and, if available, for the current
year.
(vii)
A schedule of all litigation affecting such Property or such Seller
during the past twelve (12) months, together with a “loss
run” of all claims submitted to the Seller’s insurance
carriers for the past five (5) years.
(viii)
Copies of financial statements for such Property for 2004, 2005,
and year to date 2006, together with copies of monthly
delinquency reports, unit mix/occupancy statistics report, monthly
management reports, non-rented unit reports ( collectively the
“ Financial Reports ”). Prior to the
Closing, each Seller shall provide Purchaser with monthly updates
to Seller’s Financial Reports within five (5) business days
after the end of each month.
(ix)
Copies of the organizational documents for such Seller.
(x)
Copies of all Third Party Loan Documents and all documents
evidencing and/or securing the Prepaid Loans.
(xi)
Copies of all Ground Lease agreements and amendments.
(xii)
Copies of the Kapolei Loan and all related documents.
The parties acknowledge that
Purchaser may require other documents in connection with its review
of the Properties and Sellers’ business thereon.
Purchaser will provide Sellers with a checklist requesting such
other documents, and Sellers will use commercially reasonable
efforts to make the documents identified thereon available within
ten (10) days of Purchaser’s request, to the extent that such
documents exist and are within the control of Sellers or their
affiliates, employees or agents.
B.
Excluded Documents . As used herein, “
Excluded Documents ” shall mean (i) any purchase and
escrow agreements and correspondence pertaining to Seller’s
acquisition of the Property, (ii) any agreements and/or letters of
intent pertaining to the potential acquisition of the Property by
any past or prospective purchasers, (iii) any third party purchase
inquiries and correspondence, appraisals or economic evaluations of
the Property, (iv) any personnel records and files maintained by or
on behalf of Seller with respect to individuals, if any, employed
at or in connection with a Property which Seller is obligated by
law to keep confidential, and (v) any documents or materials which
are subject to the attorney/client privilege or which are the
subject of a confidentiality obligation; provided, however, that
prior to the expiration of the Due Diligence Period, Seller shall
give Purchaser written notification if Seller is claiming that any
Document requested by Purchaser is an Excluded Documents pursuant
to the provisions of this Section 6.B(v).
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C.
Return of Documents . As to each Property, at such
time as this Agreement is terminated for any reason, Purchaser
shall return to Sellers the copies and/or originals of all of the
Documents delivered or made available to Purchaser by or on behalf
of any Seller with respect to such Property.
D.
No Representations . Purchaser acknowledges that with
the exception of the Documents described in Sections 6.A(iv),
6.A(v), 6.A(vii), 6.A(viii), 6.A(ix), 6.A(x), 6.A(xi), and
6.A(xii), many of the Documents were prepared by third parties
other than Sellers, and in some instances, may have been prepared
prior to Sellers’ ownership of the Properties.
Purchaser further acknowledges and agrees that, except as expressly
set forth in Section 17 below, (i) neither Sellers nor any of
Sellers’ respective agents, employees or contractors has made
any warranty or representation regarding the truth, accuracy or
completeness of the Documents or the source(s), and (ii) Seller has
not undertaken any independent investigation as to the truth,
accuracy or completeness of the Documents and Seller is providing
the Documents or making the Documents available to Purchaser solely
as an accommodation to Purchaser. To the extent such
Documents exist and are in the possession or reasonable control of
any of the Sellers or any of their respective affiliates, employees
or agents, Sellers agree to cause the Documents described in
Sections 6.A(iv), 6.A(v), 6.A(vii), 6.A(viii), 6.A(ix), 6.A(x),
6.A(xi), and 6.A(xii) to be true and accurate in all material
respects and, to the extent such documents do not exist or are not
within the reasonable control of any of the Sellers or any of their
respective affiliates, employees or agents, Sellers agree to
provide reasonable cooperation with Purchaser to provide Purchaser
with access to such Documents.
E.
Survival of Obligations . The obligations of Section
6.C shall survive any termination of this Agreement. In
addition to any other remedies available to Sellers, Sellers shall
have the right to seek equitable relief (including specific
performance and injunctive relief) against Purchaser and
Purchaser’s representatives to enforce the provisions of
Section 6.C.
7.
Rule 3-14 Audit . Sellers acknowledge that under Rule 3-14
of Regulation S-X, Purchaser is required to obtain certain
information in connection with reports Purchaser is required to
file with the Securities and Exchange Commission.
Accordingly, provided that Purchaser provides a certificate
executed by an executive officer of Purchaser that Purchaser is
obligated to complete a Rule 3-14 Audit (hereinbelow defined)
Sellers agree to (a) allow Purchaser and Purchaser’s
representatives, at Purchaser’s sole cost and expense, to
perform an audit of Sellers’ respective operations at the
Properties to the extent required under Rule 3-14 of Regulation S-X
(hereinafter a “ Rule 3-14 Audit ”), and (b)
make available to Purchaser and Purchaser’s representatives
for inspection and audit at Sellers’ respective offices all
of Sellers’ books and records reasonably requested by
Purchaser for the full calendar year 2005 and the full calendar
year 2006 and relating to the operations of each Seller on the
Properties, including, but not limited to, income, expense,
occupancy, and other financial and occupancy information relating
to the Properties. In connection with the foregoing,
Purchaser shall give Sellers no less than ten (10) business
days’ prior written notice of Purchaser’s plans to
inspect and audit such books and records. Sellers acknowledge
that Rule 3-14 may require Purchaser to perform a Rule 3-14 Audit
both after the expiration of the Due Diligence Period and after the
Closing and Sellers agree that Sellers’ respective
obligations under this Section 7 shall survive the Closing and
delivery of documents contemplated by this Agreement. Any
Rule 3-14 Audit shall be completed as soon as reasonably possible
and Purchaser and Purchaser’s representatives shall use
commercially reasonable best efforts not to interfere with
Sellers’ ability to conduct its business. Copies of all
Rule 3-14 Audits shall be promptly provided to each Seller at no
cost to Seller. Purchaser expressly acknowledges and agrees
that all Rule 3-14 Audits, together with the books and records made
available to Purchaser in connection therewith, shall be subject to
the terms and conditions of Section 24, below.
8.
Due Diligence Period
A.
Due Diligence Period . Purchaser shall have until the
earlier of either (1) sixty (60) days after the Effective Date, or
(2) the date on which Purchaser gives Sellers written notice of
Purchaser’s
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intent to proceed with the purchase
of the Properties (the “ Approval Notice ”)
pursuant to Section 8.H below (“ Due Diligence Period
”) to conduct, at Purchaser’s sole cost and expense,
its due diligence to determine, in Purchaser’s sole
discretion, that all of the Properties (including any related
Ground Leases and Third Party Loans) are suitable and satisfactory
for Purchaser’s intended use of such Property.
Purchaser’s inspection shall include the
following:
B.
Property Evaluation . Purchaser shall have the right
to inspect and examine the Properties, during regular business
hours, to the extent Purchaser deems necessary in its sole
discretion, to determine the condition of each Property; provided,
however, Purchaser shall not undertake any invasive or destructive
testing without the prior written consent of Seller, which consent
shall not be unreasonably withheld or delayed. In connection
with Purchaser’s inspection of the Properties, Sellers shall
make available to Purchaser and Purchaser’s representatives
for inspection and review at the address to which notices to Seller
are to be sent pursuant to Section 28 below or, at Sellers’
option, at Sellers’ respective offices, all of Sellers’
books and records (other than the Excluded Documents) relating to
the acquisition, construction, development, entitlement,
permitting, operation, maintenance or ownership, of each of the
Properties. Purchaser and Purchaser’s representatives
shall have the right, at Purchaser’s sole expense, to copy
any of such documents and records and, to the extent to copied,
such documents and records shall become Documents. Purchaser
and its agents shall schedule all on-site inspections with Sellers
in advance. Purchaser and Purchaser’s representatives,
consultants, agents and employees shall, during regular business
hours, (a) have the right to cause complete non-invasive
environmental reviews and site assessments and inspections of each
Property to be made, (b) have access to all buildings,
improvements, storage areas (not under the control of Tenants and,
subject to each Tenant’s rights), other spaces, equipment and
Personal Property, (c) conduct all other necessary feasibility
studies, title reports, surveys, engineering studies, examination
of zoning status, building and use permits, sign permits and all
other permits required for each Property. While conducting
such investigations, tests and studies, Purchaser and
Purchaser’s agents and representatives shall be obligated
to: (I) use commercially reasonable efforts not to unduly
disturb the Tenants or unreasonably interfere with the
Tenants’ right of quiet enjoyment or use of the Property
pursuant to their respective Leases; (II) use commercially
reasonable efforts to not unreasonably interfere with the
operation, use and maintenance of the Property; (III) use
commercially reasonable efforts not damage any part of the Property
or any personal property owned or held by any Tenant or any third
party; (IV) use commercially reasonable efforts not injure or
otherwise cause bodily harm to Seller, any Tenant or any of their
respective agents, contractors and employees, or any other third
party; (IV) maintain commercial general liability (occurrence)
insurance with minimum limits of $2,000,000 per occurrence and in
the aggregate, from an insurer reasonably satisfactory to Sellers
covering any accident arising in connection with the presence of
Purchaser and Purchaser’s agents and representatives on the
Properties and to deliver a certificate of insurance verifying such
coverage to Seller prior to any entry upon any of the Properties;
(V) promptly pay when due the costs of all tests, investigations,
studies and examinations done by Purchaser with regard to the
Properties; (VII) not to permit any liens to attach to the Property
by reason of the exercise of Purchaser’s rights hereunder;
(VIII) promptly remove or cause to be removed (by bonding or
otherwise) any such liens which attach to the Property; (IX) fully
restore the Properties and the Personal Property to the condition
in which the same was found before any such inspections, tests or
studies were undertaken, subject to reasonable wear and tear; (X)
comply with the confidentiality standards set forth in Section 24,
below; and (k) comply with the terms and provisions of Section 8.F,
below.
C.
Evaluation of Business . In addition to
Purchaser’s inspection of the Documents provided by or made
available by Sellers pursuant to Section 6, Purchaser, and its
agents and accountants, shall have the right, during regular
business hours and upon not less than three (3) business days prior
written notice, to inspect and examine all business and service
records, Tenant files, Leases, accounts receivable, accounts
payable, books and records of account, computer records, bank
deposit receipts, Ground Leases, and Third Party Loan Documents,
and all other such documents relating to the management, operation,
income and expense of each Property for all of 2004 and all
subsequent months to date. Purchaser shall have the
right
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to make photocopies of all records
and documents at Purchaser’s sole cost and expense.
Purchaser will use any such information made available by Sellers
solely to evaluate the business conducted from the Property and
acknowledges that all such information shall be subject to the
terms and conditions of Section 24, below. Purchaser shall
also have the right to seek commercially reasonable estoppel
certificates and commercially reasonable non-disturbance and
attornment agreements from each non-self storage tenant and from
the lessor of each Ground Lease; provided, however, that any
estoppel from the lessor under the Ground Lease shall be in the
form attached hereto as Exhibit “E” and any
estoppel from each non-self storage tenant shall be subject to the
prior approval of Sellers, which approval shall not be unreasonably
withheld, conditioned or delayed. In the event that this
transaction does not close for any reason, other than the default
of any Seller, Purchaser will return and/or deliver to Sellers, at
no cost to Sellers, all Documents and reports, studies, surveys or
other materials that Purchaser has obtained from Sellers or any
other source, including the items provided pursuant to Section
6.
D.
Assumption or Termination of Contracts . During the
Due Diligence Period, Purchaser shall review the Contracts.
On or before the expiration of the Due Diligence Period, Purchaser
shall designate, as to each Property, by written notice to Sellers
(the “ Purchaser’s Designated Contract Notice
”) all Contracts which Purchaser chooses to have assigned to
Purchaser (the “ Designated Contracts ”).
The failure of Purchaser to give Purchaser’s Designated
Contract Notice with respect to any Property shall be deemed to
constitute Purchaser’s election to assume all Contracts with
respect to such Property. Seller shall be responsible for
cancellation of Contracts which are not Designated Contracts and
shall be responsible for the payment of all cancellation fees
associated with the termination of those Contracts.
Notwithstanding anything to the contrary contained herein, Seller
shall cause the termination of all property management agreements
with respecting each Property. Seller’s cancellation of
Contracts which are not Designated Contracts shall be effective
upon the Closing.
E.
Extensions of Due Diligence Period . If during the Due
Diligence Period, any third party investigation obtained by
Purchaser recommends a Phase II environmental study (“Phase
II Study”) and, except as provided otherwise in this Section,
Purchaser otherwise approves the Properties prior to expiration of
the Due Diligence Period, Purchaser shall have the right to extend
the Due Diligence Period for the applicable Property or Properties
only for an additional twenty-one (21) days solely to complete the
Phase II Study and to otherwise continue Purchaser’s
investigation of the environmental condition of the Property for
which such Phase II Study is recommended. Purchaser may only
exercise this right to extend the Due Diligence Period by giving
Seller written notice at any time prior to the expiration of the
Due Diligence Period and by delivering the Approval Notice (subject
only to the provisions of this Section 8.E, Section 8.F below and
Section 15 below).
F.
Tenant, Ground Lessor and Governmental Authority Inquiries
. Purchaser shall have the right, as part of
Purchaser’s due diligence investigation, to contact
Sellers’ Tenants, on-site property managers, and, except as
provided below in this Section 8.F with respect to the City of
Berkeley, California, governmental authorities about various
aspects of the Properties; provided, however, that except as
provided below with respect to storage unit Tenants, Purchaser
shall not contact or make inquiries of any Tenants or any
Seller’s on-site property managers without Purchaser first
providing Sellers with written notice thereof, which notice shall
include the general subject matter of such inquiry, interview,
contact or meeting. Purchaser shall provide at least two (2)
business days prior written notice of each such inquiry, contact,
interview and meeting and Seller shall have the right to be present
and otherwise participate in all such inquiries, contacts,
interviews and meetings. Prior to the date on which Sellers
give the lessors under the Ground Leases written notice of
Sellers’ intent to assign the Ground Leases to Purchaser
(hereinafter the “ Ground Lease Notification Date
”), Purchaser shall not contact any of the lessors under the
Ground Leases without the prior written consent of Sellers which
consent may, prior to the Ground Lease Notification Date, be
withheld by Sellers in Sellers’ sole and absolute discretion;
provided, however, that if the Ground Lease Notification Date has
not occurred at least thirty-five (35) days prior to the expiration
of the Due Diligence Period and provided
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