PRIVILEGED AND CONFIDENTIAL

 

Unit Purchase Agreement

among

Shurgard Storage Centers, Inc.,

Morningstar Storage Centers, LLC

and

the Morningstar Members listed on Exhibit A hereto

 

 

Dated June __, 2002

 

 

 

CONTENTS

1. General Definitions *

2. Purchase and Sale of Units *

2.1 Restated Operating Agreement *

2.2 Issuance of Units to Shurgard; Capital Contribution *

2.3 Estimated Closing Distribution and Final Closing Distribution *

2.4 Tax Treatment of Purchase *

3. Closing and Closing Date *

4. Representations and Warranties of Morningstar and Morningstar Members *

4.1 Organization; Qualification; Good Standing *

4.2 Subsidiaries *

4.3 Capitalization *

4.3.1 Authorized Capital *

4.3.2 Other Rights *

4.3.3 Authorization of Purchased Units *

4.4 Authorization and Enforceability *

4.5 Noncontravention *

4.6 Consents *

4.7 Financial Statements; Obligations *

4.8 Absence of Certain Changes or Events *

4.9 Books and Records *

4.10 Contracts *

4.10.1 Identification of Contracts *

4.10.2 General Contract Matters *

4.11 Real Property *

4.11.1 Properties *

4.11.2 Condition of Properties *

4.11.3 Improvements *

4.11.4 Governmental Approvals; Compliance with Laws *

4.11.5 Development Properties *

4.11.6 Third Party Rights to Properties *

4.12 Intellectual Property *

4.13 Taxes *

4.14 Labor Matters; Employees *

4.15 Employee Benefit Plans *

4.15.1 Employee Benefit Plan Listing *

4.15.2 Documents Provided *

4.15.3 Compliance *

4.15.4 Qualification *

4.15.5 Contributions, Premiums and Other Payments *

4.15.6 Multiemployer, Defined Benefit and Money Purchase Pension Plans and
Multiple Employer Welfare Arrangements *

4.15.7 Post-Employment Benefits *

4.15.8 Suits, Claims and Investigations *

4.15.9 Effect of Transaction *

4.15.10 ERISA Plan Asset Compliance *

4.15.11 Definitions *

4.16 Insurance *

4.17 Compliance with Laws *

4.18 Licenses and Authorizations *

4.19 Legal Proceedings; Orders *

4.20 Environmental Matters *

4.21 Certain Payments *

4.22 Brokers or Finders *

4.23 Relationships with Related Persons *

4.24 Disclosure *

4A. Representations and Warranties of Morningstar Members *

4A.1 Operating Agreement *

4A.2 Ownership of Units *

4A.3 Authority and Enforceability *

4A.5 Noncontravention *

4A.6 Contracts *

4A.7 Consents *

4A.8 Certain Payments *

5. Representations and Warranties of Shurgard *

5.1 Organization; Authorization *

5.2 Authorization and Enforceability *

5.3 Noncontravention *

5.4 Consents *

5.5 Investment Intent *

5.6 Legal Proceedings *

5.7 Brokers or Finders *

6. Certain Covenants *

6.1 Access *

6.2 Conduct of Business of Morningstar Prior to Closing *

6.3 Covenants Prior to Closing *

6.4 Consents and Approvals *

6.5 Tax Covenants *

6.6 Further Assurances *

7. Conditions Precedent to Shurgard's Obligations *

7.1 No Injunction or Litigation *

7.2 Representations, Warranties and Covenants *

7.3 No Adverse Change *

7.4 Corporate Existence of Morningstar and its Subsidiaries *

7.5 Manager's Certificate *

7.6 Opinion of Counsel to Morningstar *

7.7 Redemption of Convertible Debt *

7.8 Execution of Agreements *

7.9 Consents and Approvals *

7.10 Title Insurance *

7.11 Environmental Reports *

7.12 Tax Forms *

8. Conditions Precedent to Morningstar's Obligations *

8.1 No Injunction or Litigation *

8.2 Representations, Warranties and Covenants *

8.3 Secretary's Certificate *

8.4 Opinion of Counsel to Shurgard *

8.5 Execution of Agreements *

8.6 Consents and Approvals *

9. Further Assurances *

10. Costs *

11. Survival and Indemnification *

11.1 Survival *

11.2 Indemnification by the Morningstar Members *

11.3 Indemnification Threshold *

11.4 Procedure for Third Party Claims *

11.5 Offset Right *

12. Termination *

12.1 Termination *

12.2 Effect of Termination *

13. Miscellaneous *

13.1 Public Announcements *

13.2 Severability *

13.3 Modification and Waiver *

13.4 Notices *

13.5 Assignment *

13.6 Captions *

13.7 Entire Agreement *

13.8 No Third-Party Rights *

13.9 Counterparts *

13.10 Governing Law *

EXHIBITS

Exhibit B - Operating Agreement

Exhibit C - Form of Restated Operating Agreement

Exhibit D - Form of Management Services Agreement

Exhibit E - Schedule of Exceptions

Exhibit F - Opinion of Morningstar's Counsel

Exhibit G - Opinion of Shurgard's Counsel

Unit Purchase Agreement

This Unit Purchase Agreement (including all exhibits and schedules hereto, this
"Agreement") is made as of the ___ day of June, 2002, by and among Shurgard
Storage Centers, Inc., a Washington corporation ("Shurgard"), Morningstar
Storage Centers, LLC, a Delaware limited liability company ("Morningstar"), and
the members of Morningstar set forth on Exhibit A hereto (individually, a
"Morningstar Member" and collectively, the "Morningstar Members").

AGREEMENT

NOW, THEREFORE, in consideration of the covenants and agreements set forth in
this Agreement, the parties agree as follows:

1. General Definitions

Certain terms are defined in the text of this Agreement. In addition,
capitalized terms that appear in this Agreement shall have the meanings set
forth below unless the context expressly requires otherwise:

"Affiliate" of any Person shall mean any other Person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with such Person. "Control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.

"Affiliation and Development Agreement" refers to that Affiliation and
Development Agreement between Shurgard and Morningstar Properties initialed by
Shurgard and Morningstar Properties for identification purposes.

"Authorization" shall mean any consent, license, permit, grant, authorization,
certificate, endorsement, qualification or approval of any Governmental Entity
that is used in or necessary to (a) the ownership, operation or conduct of the
business of Morningstar or any of its Subsidiaries, or (b) permit Morningstar or
any of its Subsidiaries to own or lease its Properties.

"Claims" shall mean any civil, criminal or administrative claim, demand, cause
of action, suit, proceeding, arbitration, hearing or investigation.

"Closing" shall mean the consummation of the purchase and sale of the Shurgard
Units under this Agreement and "Closing Date" shall mean the date referred to in
Section 3.

"Closing Development Properties" shall mean the Morningstar properties known as
Ashley River, Capital Boulevard, Clayton, Cone Boulevard, Country Club, Dave
Lyle, English Road, Silas Creek and Sunset.

"Code" shall mean the Internal Revenue Code of 1986, as amended, and/or the
treasury regulations promulgated thereunder.

"Contract" shall mean all contracts, agreements, licenses, obligations,
promises, instruments and other undertakings and arrangements, including
purchase orders, sales orders, sale and distribution agreements, supply and
processing agreements and all other agreements relating primarily or exclusively
to the operation of the business of Morningstar or any of its Subsidiaries.

"Credit Agreement" shall mean that certain Credit Agreement dated December 31,
1998 between Morningstar and Five Arrows.

"Development Properties" shall have the meaning set forth in Section 4.11.5.

"Encumbrance" shall mean any lien, mortgage, deed of trust, pledge, security
interest, charge, condition, equitable interest, right of first refusal,
community property interest, covenant, option, title defect, Claim, restriction,
exception, or other adverse claim or interest or encumbrance of any kind or
nature whatsoever, whether or not perfected, including, without limitation, any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership.

"Escheatment Liability" shall mean any and all liability of Morningstar to the
any state of the United States or other governmental subdivision thereof arising
under applicable law as a result of Morningstar's taking possession of personal
or other property abandoned by its customers.

"Financial Statements" shall have the meaning set forth in Section 4.7.

"Five Arrows" shall mean Five Arrows Realty Securities LLC, a Delaware limited
liability company.

"Governmental Entity" shall mean a federal, state, provincial, local, county or
municipal government, governmental, regulatory or administrative agency,
department, commission, board, bureau, or other authority or instrumentality,
domestic or foreign, including, without limitation, any body exercising or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power of any nature.

"Intellectual Property" shall have the meaning set forth in Section 4.12.

"Interim Balance Sheet" shall have the meaning set forth in Section 4.7.

"Knowledge of Morningstar" shall mean, with respect to a particular fact or
other matter, that any member of the Morningstar Executive Group is, or ought to
be, in the prudent exercise of that individual's duties, after due inquiry,
aware of such fact or other matter.

"Law" shall mean any domestic or foreign constitutional provision, statute,
ordinance or other law, rule, regulation or interpretation of any Governmental
Entity and any decision, decree, injunction, judgment, order, ruling or
assessment of any Governmental Entity or any arbitrator.

"Loss" shall mean any loss, damage, judgement, debt, liability, diminution of
value, obligation, fine, penalty, cost or expense (including, but not limited
to, any legal or accounting fee or expense), whether or not relating to personal
injury, property damage, public or worker health, welfare or safety or the
environment and whether or not relating to violations of or liability under
Environmental Law.

"Management Services Agreement" shall mean the form of Management Services
Agreement between Morningstar Property Management, LLC, Morningstar and Shurgard
attached hereto as Exhibit D.

"Material Adverse Effect" shall mean an effect that could reasonably be expected
to be materially adverse to the assets, properties (including the Properties),
business, operations, results of operations, condition (financial or otherwise)
or prospects of Morningstar and its Subsidiaries, taken as a whole.

"Morningstar" shall mean Morningstar Storage Centers, LLC, a Delaware limited
liability company.

"Morningstar Executive Group" refers to Stephen Benson, Phyllis McArthur, David
Benson and Neville Christie.

"Operating Agreement" shall mean that certain Operating Agreement of Morningstar
Storage Centers, LLC dated as of December 31, 2001, which is attached hereto as
Exhibit B.

"Order" shall mean any award, decision, injunction, restraining order,
judgement, decree, writ, order, regulation, rule, subpoena or verdict entered,
issued, made or rendered by any court, administrative agency or other
Governmental Entity or by any arbitrator.

"Person" shall mean any individual, partnership, joint venture, corporation,
trust, limited liability company, unincorporated organization, Governmental
Entity and any other entity.

"Proceeding" shall mean any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving any Governmental Entity or arbitrator.

"Property" or "Properties" shall have the meaning set forth in Section 4.11.

"REIT" shall mean a real estate investment trust, within the meaning of
Section 856 of the Code.

"Restated Operating Agreement" shall mean the form of Amended and Restated
Operating Agreement of Morningstar Storage Centers, LLC attached hereto as
Exhibit B.

"Schedule of Exceptions" shall mean the Schedule of Exceptions attached hereto
as Exhibit E.

"Shurgard Units" shall have the meaning set forth in Section 2.2.

"Subsidiary" shall mean any corporation, limited liability company or other
legal entity in which Morningstar, directly or indirectly (including, without
limitation, through another Subsidiary), owns any of the outstanding stock,
membership or other equity interests.

"Tax" (and, in the plural, "Taxes") shall mean (a) domestic or foreign federal,
state or local taxes, charges, fees, levies, imposts, duties and governmental
fees or other like assessments or charges of any kind whatsoever (including,
without limitation, any income, net income, gross income, receipts, windfall
profit, severance, property, production, sales, use, business and occupation,
license, excise, registration, franchise, employment, payroll, withholding,
alternative or add-on minimum, intangibles, ad valorem, transfer, gains, stamp,
estimated, transaction, title, capital, paid-up capital, profits, occupation,
premium, value-added, recording, real property, personal property, inventory and
merchandise, business privilege, federal highway use, commercial rent or
environmental tax), (b) interest, penalties, fines, additions to tax or
additional amounts imposed by any taxing authority in connection with (i) any
item described in clause (a) or (ii) the failure to comply with any requirement
imposed with respect to any Tax Return, and (c) liability in respect of any
items described in clause (a) and/or (b) payable by reason of Contract,
assumption, transferee liability, operation of Law, Section 1.1502-6(a) of the
treasury regulations promulgated under the Code (or any predecessor or successor
thereof or any similar provision under Law) or otherwise.

"Tax Returns" shall mean any return, report or statement required to be filed
with respect to any Tax (including any attachments thereto and any amendment
thereof), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax, and including, where
permitted or required, consolidated, combined or unitary returns for any group
of entities that includes Morningstar.

"Unit" shall mean a unit of ownership interest in Morningstar as defined and
contemplated in the Restated Operating Agreement.

2. Purchase and Sale of Units

2.1 Restated Operating Agreement

At or immediately prior to the Closing, the Morningstar Members and Shurgard
shall enter into and execute the Restated Operating Agreement.

2.2 Issuance of Units to Shurgard; Capital Contribution

(a) Subject to the terms and conditions of this Agreement, Shurgard shall
contribute $62 million to the capital of Morningstar, and Morningstar shall
issue to Shurgard in exchange therefor 62,000,000 Units (the "Shurgard Units").

(b) Morningstar shall use all or a portion of the capital contribution received
from Shurgard to redeem or repay in full, simultaneous with the Closing, the
convertible debt owed by Morningstar pursuant to the Credit Agreement.

2.3 Estimated Closing Distribution and Final Distribution

(a) On or before the Closing Date, Morningstar shall prepare and deliver to
Shurgard, in a form acceptable to Shurgard, a pro forma balance sheet of
Morningstar estimated as of the Closing Date, prepared in a manner consistent
with that used to prepare the Financial Statements, and reflecting (i) the
capital contribution of Shurgard described above, (ii) the repayment of all
indebtedness, including principal and accrued and unpaid interest, outstanding
under the Credit Agreement, (iii) the distribution of assets as described in the
structure memorandum referred to in Section 4.3 of the Schedule of Exceptions,
and (iv) any amounts paid by Morningstar in connection with cancellation of
options (the "Estimated Closing Balance Sheet"). The Estimated Closing Balance
Sheet shall reflect appropriate accruals for all known liabilities as of the
Closing Date.

(b) At Closing, Morningstar shall distribute to the Morningstar Members an
amount equal to 80% of the Estimated Closing Distribution as calculated based on
the Estimated Closing Balance Sheet. "Estimated Closing Distribution" shall mean
the amount computed as follows:

(i) Morningstar's current assets (consisting of cash and cash equivalents,
receivables from tenants, net of allowances for doubtful accounts, accounts
receivable-other, due from affiliate, escrow deposits and other assets), less
Morningstar's current liabilities (consisting of accounts payable and accrued
liabilities, accrued interest payable, rents received in advance and tenant
security deposits); less

(ii) Morningstar's notes payable in excess $57,787,261; plus

(iii) Morningstar's fixed assets attributable to the Closing Development
Properties in excess of $25,150,365; plus

(iv) any amount expended by Swansong I, LLC in connection with construction at
the Property known as Ebenezer Road since March 31, 2002, which amounts were not
financed by additional borrowings on the line of credit secured by Ebenezer
Road, multiplied by Morningstar's percentage ownership interest in Ebenezer
Road; plus

(v) any amount expended by Morningstar for deferred maintenance to the
Properties as required by Shurgard; and less

(vi) all unpaid costs and fees incurred by Morningstar in connection with the
transactions contemplated by this Agreement to the extent not included in
Morningstar's current liabilities.

Morningstar's current assets and liabilities, notes payable and fixed assets
attributable to the Closing Development Properties shall be determined in
conformity with GAAP and in a manner consistent with that used to prepare the
Financial Statements.

(c) On or before July 8, 2002, Morningstar shall prepare and deliver a balance
sheet (and including a consolidated income statement) of Morningstar as of June
30, 2002, in conformity with GAAP and in a manner consistent with that used to
prepare the Financial Statements (the "June Balance Sheet") and will further
provide supporting general ledger schedules on or before July 12, 2002. The
computation set forth in Section 2.3(b) shall be repeated using the amounts
reflected in the June Balance Sheet (which shall include as a current liability
all unpaid costs and fees incurred by Morningstar in connection with the
transactions contemplated by this Agreement and which shall proportionately
adjusted to take into account a Closing Date earlier than June 30, 2002) in
place of the Estimated Closing Balance Sheet. The result shall be the "Final
Distribution."

(d) Shurgard and its advisors and accountants shall have until the later of (i)
fifteen (15) days after receipt by Shurgard of the June 30 Balance Sheet and
supporting schedules or (ii) July 31, 2002, to review the June Balance Sheet.
The June Balance Sheet will become final and binding on the parties on the
expiration of the time period specified in the preceeding sentence, unless
Shurgard delivers a written notice (the "Post-Closing Notice") to Morningstar
prior to such date that specifies in reasonable detail the amount by which, and
the reasons why, it thinks particular line items in the June Balance Sheet
either contain mathematical errors or were not prepared in accordance with this
Section 2.3. The Post-Closing Notice may not specify any other basis for
disagreement with the June Balance Sheet other than as set forth in the
preceding sentence.

(e) If the Final Distribution is greater than the Estimated Closing
Distribution, Morningstar shall pay the amount of such excess to the Morningstar
Members as a distribution without change in ownership interest or units within
five (5) days after determination of the June 30 Balance Sheet. If the Final
Distribution less than the Estimated Closing Distribution, the Morningstar
Members shall pay the amount of such deficiency to Morningstar as a capital
contribution without change in ownership interest or units within five (5) days
after determination of the June 30 Balance Sheet.

(f) If Shurgard delivers a Post-Closing Notice in accordance with this
Section 2.3, then the parties shall, during the 15-day period beginning on the
receipt by Morningstar of the Post-Closing Notice, seek in good faith to resolve
in writing any differences that they may have with respect to the matters
specified in the Post-Closing Notice. If Shurgard and Morningstar are unable to
resolve all of the objections of Shurgard within such 15-day period, then
Shurgard and Morningstar shall submit such unresolved objections to the a
regional accounting firm located in Charlotte, North Carolina that has not
previously provided services to either party and is mutually acceptable to the
parties (the "Third Party Accountants"). Shurgard and Morningstar shall use
reasonable efforts to cause the Third Party Accountants to render a final,
binding decision resolving the matters in dispute within 60 days following the
submission of such matters to the Third Party Accountants. The determination of
the Third Party Accountants will be final and binding on Shurgard and
Morningstar, and judgment may be entered on the determination of the Third Party
Accountants in any court having jurisdiction over the party against which such
determination is to be enforced. The fees, costs and expenses of the Third Party
Accountants shall be shared equally by Shurgard and Morningstar (Morningstar's
portion to be treated as a current liability for purposes of the June Balance
Sheet). In its report resolving disputed items, the Third Party Accountants may
not resolve any disputed item by choosing an amount that is greater than the
greater of the amount claimed by Shurgard or set forth in the June Balance Sheet
or less than the lesser of the amount claimed by Shurgard or set forth in the
June Balance Sheet.

2.4 Tax Treatment of Purchase

Unless otherwise required by Law, the parties shall treat the transaction
contemplated by Section 2.2 of this Agreement for all income Tax purposes (i) as
one or more contributions to the capital of Morningstar under Section 721(a) of
the Code (ii) one or more distributions to the Morningstar Members under
Section 731 of the Code and (iii) the extinguishment of a valid debt instrument
of Morningstar (the Credit Agreement), and no party hereto shall take (nor
permit any Affiliate to take) any position or file any Tax Return inconsistent
with such treatment.

3. Closing and Closing Date

(a) The Closing shall take place at the offices of Perkins Coie LLP, 1201 Third
Avenue, Seattle, WA 98101 on June ___, 2002, or on such other date or such other
place on which the parties may agree (the "Closing Date").

(b) At the Closing, Shurgard shall make the capital contribution described in
Section 2.2(a) by bank wire transfer of funds to Morningstar and Morningstar
shall credit the capital account of Shurgard on the books of Morningstar with
$62 million.

4. Representations and Warranties of Morningstar and Morningstar Members

Morningstar and the Morningstar Executive Group, jointly and severally,
represent and warrant to Shurgard that, except as set forth in the corresponding
section of the Schedule of Exceptions:

4.1 Organization; Qualification; Good Standing

(a) Morningstar is a limited liability company duly formed, validly existing and
in good standing under the laws of the State of Delaware. Morningstar has all
requisite power and authority to carry on its business as presently conducted
and as presently proposed to be conducted, to carry out the transactions
contemplated in this Agreement, the Restated Operating Agreement and the
Management Services Agreement and to issue and sell the Shurgard Units to
Shurgard. Morningstar is duly registered and qualified to conduct its business
and is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify would not have
a Material Adverse Effect.

(b) The copy of the Operating Agreement attached hereto as Exhibit B is an
accurate and complete copy of the Operating Agreement.

4.2 Subsidiaries

(a) All of Morningstar's Subsidiaries, together with Morningstar's ownership
interest in each such Subsidiary, are set forth in Section 4.2 of the Schedule
of Exceptions.

(b) Each Subsidiary is the form of entity identified in Section 4.2 of the
Schedule of Exceptions, duly formed, validly existing and, where applicable, in
good standing in the jurisdiction of its formation, with full corporate or other
power and authority to own, lease and operate its properties and to conduct its
business, and is duly registered and qualified to conduct its business and is in
good standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or qualification,
except where the failure so to register or qualify would not have a Material
Adverse Effect.

(c) Except as set forth in Section 4.2 of the Schedule of Exceptions, all of the
outstanding equity interests owned or held by Morningstar, directly or
indirectly, and to the Knowledge of Morningstar, all of the other outstanding
interests, in each of the Subsidiaries have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in Section 4.2
of the Schedule of Exceptions, all of the interests owned or held by
Morningstar, directly or indirectly, in each of the Subsidiaries are free and
clear of any Encumbrance, except for such as would not have a Material Adverse
Effect.

(d) Morningstar has made available to Shurgard a true and complete copy of the
articles or certificate of incorporation or organization, operating agreement,
limited partnership agreement or other fundamental instrument pursuant to which
each Subsidiary has been formed or organized. Each incorporation or organization
document, operating agreement, limited partnership agreement or other agreement
pursuant to which a Subsidiary has been created has been duly authorized by all
necessary action of any entity that is a party owned or controlled by
Morningstar, has been executed and delivered by each such party thereto and is
the valid and binding obligation of each such party, enforceable in accordance
with its terms.

4.3 Capitalization

4.3.1 Authorized Capital

(a) As of the date of this Agreement, the Operating Agreement provides for
authorized, issued and outstanding units of ownership interest of Morningstar as
follows: (i) 1,938,914 Regular Units, (ii) 1,333,595 Series A Units, (iii) 100
Series B Units and (iv) 100 Series C Units. The rights, privileges and
preferences of the Regular Units, Series A Units, Series B Units and the
Series C Units are as stated in the Operating Agreement. The Operating Agreement
also contemplates Series D Units, but no Series D Units have been issued or are
outstanding. Exhibit A contains a list of all Morningstar Members as of the date
of this Agreement and the number of units owned of record by each of the
Morningstar Members.

(b) As of the Closing, the Restated Operating Agreement will provide for
authorized, issued and outstanding units of ownership interest of Morningstar as
follows: 83,783,784 Units, of which 21,783,784 Regular Units shall be held by
the Morningstar Members as set forth in Exhibit A and 62,000,000 Shurgard Units
shall be issued to Shurgard at the Closing.

4.3.2 Other Rights

Except as set forth in this Agreement or in Section 4.3 of the Schedule of
Exceptions, there is not any (i) agreement or Encumbrance to which Morningstar
is a party relating to the sale or voting of any units of ownership interest of
Morningstar, including but not limited to rights of first refusal, preemptive
rights, rights of first offer, proxies or voting agreements, (ii) subscription,
warrant, option, convertible security, or other right (contingent or other) to
purchase or otherwise acquire from Morningstar (or, to the Knowledge of
Morningstar, from any other person or entity) any units of ownership interest of
Morningstar, (iii) commitment by Morningstar to issue any units of ownership
interest, subscriptions, warrants, options, convertible securities, or other
such rights or to distribute to holders of any of its units of ownership
interest any evidence of indebtedness or asset, or (iv) obligation (contingent
or other) by Morningstar to purchase, redeem or otherwise acquire any of its
units of ownership interest or any interest therein or to pay any dividend or
make any other distribution in respect thereof.

4.3.3 Authorization of Purchased Units

At the Closing, the sale, issuance and delivery of the Shurgard Units hereunder
and under the Restated Operating Agreement will be duly authorized by all
requisite action of Morningstar, its manager and the Morningstar Members. When
issued and delivered, the Shurgard Units will (i) be validly issued and
outstanding under the Restated Operating Agreement, (ii) assuming the substance
of the Shurgard representations set forth in Section 5.6 hereof, be issued in
compliance with all applicable federal and state securities laws, (iii) have no
personal liability attaching to the ownership thereof and (v) be free and clear
of all Encumbrances other than those deriving from Shurgard. The outstanding
Regular Units, Series A Units, Series B Units and Series C Units are validly
issued under the Operating Agreement and were issued in compliance with all
applicable federal and state securities laws. At the Closing, the Units to be
held by the Morningstar Members will be duly and validly issued under the
Restated Operating Agreement and will have been issued in compliance with all
applicable federal and state securities laws.

4.4 Authorization and Enforceability

(a) All actions on the part of Morningstar, its manager and the Morningstar
Members under the Operating Agreement and the Restated Operating Agreement
necessary for the due authorization, execution, delivery and performance of this
Agreement, the Restated Operating Agreement and the Management Services
Agreement, the consummation of the transactions contemplated hereby and thereby,
and the performance of all Morningstar's and the Morningstar Members'
obligations under this Agreement, the Restated Operating Agreement and the
Management Services Agreement have been taken or will be taken prior to the
Closing.

(b) This Agreement has been duly executed and delivered by Morningstar, as
contemplated by this Agreement.

(c) This Agreement constitutes the legal, valid and binding obligation of
Morningstar, enforceable against Morningstar in accordance with its terms. On
execution and delivery by Morningstar of the Management Services Agreement, such
agreement will constitute the legal, valid and binding obligations of
Morningstar, enforceable against Morningstar in accordance with its terms.

4.5 Noncontravention

Except as set forth in this Agreement, or in Section 4.5 of the Schedule of
Exceptions, neither the execution or the delivery of this Agreement, the
Restated Operating Agreement or the Management Services Agreement by
Morningstar, nor the consummation or performance of any of the transactions
contemplated hereby or thereby by Morningstar will, directly or indirectly (with
or without notice or lapse of time):

(a) contravene, conflict with, or result in a violation of any provision of the
Operating Agreement, the Restated Operating Agreement, or any resolution adopted
by Morningstar, its manager or the Morningstar Members;

(b) contravene or conflict with, or result in a violation of, or give any
Governmental Entity or other Person the right to challenge any of the
transactions contemplated by the this Agreement, the Operating Agreement, the
Restated Operating Agreement or the Management Services Agreement or to exercise
any remedy or obtain any relief under, any Law or any Order to which Morningstar
or any of its Subsidiaries, may be subject;

(c) contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Entity the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Authorization;

(d) contravene, conflict with, or result in a violation or breach of, any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any Contract or other restriction, Encumbrance or liability
to which Morningstar or any of its Subsidiaries is a party or by which
Morningstar or any of its Subsidiaries is bound or to which any assets of
Morningstar or any of its Subsidiaries are subject; or

(e) result in the imposition or creation of any Encumbrance on or with respect
to any of the assets of Morningstar or any of its Subsidiaries.

4.6 Consents

Except as set forth in Section 4.6 of the Schedule of Exceptions, no notices,
reports or other filings are required to be made by Morningstar or any of its
Subsidiaries with, nor are any Authorizations required to be obtained by
Morningstar or any of its Subsidiaries from, any Governmental Entity or any
other Person in connection with the execution, delivery and performance by
Morningstar of this Agreement, the Restated Operating Agreement or the
Management Services Agreement, or the consummation by Morningstar of the
transactions contemplated hereby or thereby.

4.7 Financial Statements; Obligations

(a) Set forth in Section 4.7 of the Schedule of Exceptions are: (i) the audited
consolidated balance sheets of Morningstar and its subsidiaries at December 31,
1999, 2000 and 2001 and the consolidated statements of earnings, members' equity
and cash flow of Morningstar and its subsidiaries for the each of the fiscal
years then ended, including the notes thereto and (ii) the unaudited
consolidated balance sheet of Morningstar and its subsidiaries at March 31, 2002
(the "Interim Balance Sheet") and the consolidated statements of earnings,
members' equity and cash flow of Morningstar and its subsidiaries for the
three-month period ended March 31, 2002 (collectively, the "Financial
Statements"). The Financial Statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered and present fairly the consolidated financial
condition and the results of operations, changes in members' equity and cash
flow of Morningstar and its subsidiaries at the respective dates of and for the
periods referred to in such Financial Statements, subject in the case of interim
financial statements to the absence of footnotes and to normal recurring
period-end adjustments (which will not, individually or in the aggregate, be
material in amount or effect).

(b) Except as set forth in Section 4.7 of the Schedule of Exceptions,
Morningstar has no indebtedness, obligation or liability of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due)
other than indebtedness, obligations and liabilities (i) reflected or reserved
against in the Financial Statements, (ii) incurred in the ordinary course
consistent with past practices since the date of the Interim Balance Sheet,
(iii) under executory Contracts, excluding indebtedness, obligations and
liabilities resulting from any breach of any executory Contract or
(iv) otherwise identified in the Schedule of Exceptions.

4.8 Absence of Certain Changes or Events

Except as otherwise set forth in this Agreement, or Section 4.8 of the Schedule
of Exceptions attached hereto, since the date of the Interim Balance Sheet:

(a) (i) neither Morningstar nor any of its Subsidiaries has suffered any changes
in its business, operations, properties, prospects, assets, results of
operations or condition (financial or otherwise) which changes, in the
aggregate, have had a Material Adverse Effect, and (ii) Morningstar and each of
its Subsidiaries has conducted its business in the ordinary course consistent
with past practices.

(b) neither Morningstar nor any of its Subsidiaries has (i) declared, set aside,
made or paid any dividend or other distribution in respect of the units or
capital stock of, or other equity interests in, or repurchased, redeemed or
otherwise acquired any outstanding units or capital stock of, or other equity
interests in, Morningstar or any of its Subsidiaries, (ii) transferred, issued,
sold or disposed of any units or capital stock of, or other equity interests in,
Morningstar or any of its Subsidiaries or granted options, warrants, calls or
other rights to purchase or otherwise acquired any units or capital stock of, or
other equity interests in, Morningstar or any of its Subsidiaries or,
(iii) effected any recapitalization, reclassification or like change in the
capitalization of Morningstar or any of its Subsidiaries or, (iv) amended its
articles or certificate of incorporation, operating agreement, limited
partnership agreement or other certificate or agreement of formation, or
(v) effected any material change in the accounting policies, practices or
principles with respect to the business of Morningstar or any of its
Subsidiaries, including with respect to the preparation of financial statements.

(c) Morningstar and its Subsidiaries (taken together) have not, except in
connection with ongoing construction at the sites as identified on Section 4.8
of the Schedule of Exceptions, (i) committed to make any capital expenditures
except for those with an aggregate cost not in excess of $25,000, (ii) waived or
committed to waive any rights that would have a Material Adverse Effect,
(iii) purchased, leased, sold, exchanged or otherwise disposed of or acquired
any assets (other than in the ordinary course consistent with past practices)
for which the aggregate consideration paid or payable in excess of $25,000, or
(iv) suffered any Damage, destruction or casualty loss, whether or not covered
by insurance, in excess of $25,000 in the case of any individual loss, or
$50,000 with respect to the aggregate of all such losses.

(d) neither Morningstar nor any of its Subsidiaries has (i) made or agreed to
make any increase in the compensation payable or to become payable to any
employee, except for regularly scheduled increases in compensation payable or
increases according to the terms of an employment agreement or otherwise
occurring in the ordinary course consistent with past practices, or (ii) except
as otherwise disclosed herein, made or agreed to make any material change in any
Employee Benefit Plan.

(e) each of Morningstar and its Subsidiaries, to the extent consistent with past
practice, has used all commercially reasonable efforts to preserve substantially
intact the organization of Morningstar and its Subsidiaries.

(f) neither Morningstar nor any of its Subsidiaries has had any material change
in its relations with its employees or any Person having a business relationship
with Morningstar or its Subsidiaries, the discontinuance of which would have a
Material Adverse Effect.

(g) other than in the ordinary course of business consistent with the past
practice, neither Morningstar nor any of its Subsidiaries has (i) made any
upward adjustments to, written up or otherwise increased the book value of any
of its assets (ii) reduced, written off or otherwise decreased the amount of any
of its obligations or liabilities, or (iii) permitted any Encumbrance to take
effect with respect to any of its assets.

(h) neither Morningstar nor any of its Subsidiaries has terminated or received
any notice of termination of any Contract involving a total remaining commitment
by or to Morningstar or such Subsidiary of at least $10,000.

(i) neither Morningstar nor any of its Subsidiaries has sold (other than sales
of inventory in the ordinary course of business), leased or otherwise disposed
of any of its assets or mortgaged, pledged or taken any action that may result
in the imposition of any Encumbrance on any of its assets, including a sale,
lease or other disposition of any of the Properties.

(j) neither Morningstar nor any of its Subsidiaries has entered into any
Contract to do any of the foregoing.

4.9 Books and Records

Except as set forth in Section 4.9 of the Schedule of Exceptions, Morningstar
has made available to Shurgard all books and records (including all discs, tapes
and other media-storage data and information) and other information relating
primarily or exclusively to the operation of the business of Morningstar and its
Subsidiaries. Such books and records are accurate and complete in all material
respects and have been maintained in accordance with sound business practices,
including the maintenance of an adequate system of internal controls.
Specifically and not in limitation of the foregoing, the minute books of
Morningstar and each of its Subsidiaries, all of which have been made available
to Shurgard, contain accurate and complete records in all material respects of
all meetings held and formal action taken (for which a meeting or formal vote is
required) by the Morningstar Members and/or the manager of Morningstar and the
members, stockholders, partners or other holders of ownership interests and/or
managers, boards of directors or other governing bodies of the Subsidiaries. The
unit transfer books of Morningstar and similar transfer books relating to the
ownership interests of each of the Subsidiaries accurately and completely
reflect all issuances and transfers of membership interests of Morningstar and
ownership interest of each of its Subsidiaries since its organization.

4.10 Contracts

4.10.1 Identification of Contracts

Section 4.10.1 of the Schedule of Exceptions sets forth the following Contracts
that are currently in force, accurate and complete copies of which Morningstar
has delivered to Shurgard:

(a) each Contract (or group of related Contracts) that involves aggregate
expenditures or receipts by Morningstar and its Subsidiaries in excess of
$25,000;

(b) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and other Contract to which Morningstar or any of
its Subsidiaries is a party that involves any real or personal property (except
leases and installment and conditional sales agreements involving aggregate
payments to or from Morningstar and its Subsidiaries of less than $25,000 and
with a term of less than one year;

(c) each Contract (or group of related contracts) under which Morningstar or any
of its Subsidiaries has created, incurred, assumed or guaranteed (or may create,
incur, assume or guarantee) indebtedness involving more than $100,000 or under
which Morningstar or any of its Subsidiaries has imposed an Encumbrance on any
of its assets;

(d) each Contract of Morningstar or any of its Subsidiaries concerning
confidentiality, noncompetition or Intellectual Property;

(e) each Contract with any of the directors, officers or employees of
Morningstar or any of its Subsidiaries in the nature of a collective bargaining
agreement, employment agreement, bonus agreement, profit sharing agreement,
option agreement, deferred compensation agreement or severance agreement that
will remain in effect following the Closing;

(f) each joint venture, partnership and other Contract (however named) involving
a sharing of profits, losses, costs or liabilities by Morningstar or any of its
Subsidiaries with any other Person;

(g) each Contract containing covenants that in any way purport to restrict the
business activity of Morningstar or any of its Subsidiaries, or limit the
freedom of Morningstar or any of its Subsidiaries to engage in any line of
business or to compete with any Person;

(h) any other Contract that is material to the business or assets of Morningstar
and its Subsidiaries, taken as a whole, or under which the consequences of a
default or termination would have a Material Adverse Effect.

4.10.2 General Contract Matters

With respect to each Contract so listed, except as disclosed in Section 4.10.2
of the Schedule of Exceptions, (i) such Contract is legal, valid, binding,
enforceable against Morningstar or its Subsidiary (as applicable), and in full
force and effect; (ii) such Contract will continue to be legal, valid, binding,
and enforceable against Morningstar or its Subsidiary (as applicable), and in
full force and effect on identical terms following the Closing; (iii) neither
Morningstar or any of its Subsidiaries, nor to the Knowledge of Morningstar, any
other party is in breach or default and, to the Knowledge of Morningstar, no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under such
Contract; and (iv) neither Morningstar or any of its Subsidiaries, nor to the
Knowledge of Morningstar, any other party has repudiated any provision of such
Agreement. Except as described in Section 4.10.2 of the Schedule of Exceptions,
neither Morningstar nor any of its Subsidiaries is a party to any verbal
contract, agreement, or other arrangement which, if reduced to written form,
would be required to be listed in Schedule 4.10.2 of the Schedule of Exceptions
under the terms of Section 4.10.2.

4.11 Real Property

4.11.1 Properties

Section 4.11.1 of the Schedule of Exceptions sets forth an accurate and complete
list of (i) all real property owned by Morningstar or any of its Subsidiaries,
(ii) all real property used in the business of Morningstar or any of its
Subsidiaries but not owned or leased by Morningstar or any of its Subsidiaries,
(iii) all leases of real property under which Morningstar or any of its
Subsidiaries is the lessor and (iv) all leases of real property under which
Morningstar or any of its Subsidiaries is the lessee (each, a "Property," and
collectively, the "Properties"). Morningstar and/or its Subsidiaries uses the
Properties for the conduct of the business of Morningstar and/or its
Subsidiaries and does not occupy or use any other space or facilities.
Morningstar has made available to Shurgard accurate and complete copies of the
deeds and other instruments by which Morningstar and/or its Subsidiaries
acquired the Properties, and accurate and complete copies of all title insurance
policies and surveys in the possession of Morningstar or its Subsidiaries
relating to the Properties.

4.11.2 Condition of Properties

(a) Access to and egress from each Property is available and provided by public
streets or appurtenant easements, and, to the Knowledge of Morningstar, there is
no governmental or quasi-governmental agency's plan to change the highway or
road system in the vicinity of any Property which would restrict or otherwise
adversely affect public access to such Property.

(b) All water, sewer, gas, electric, telephone, drainage and other utility
facilities required by law for the present use and operation of each Property
are operational and connected pursuant to valid permits to public utility lines
or, in the case of private wells and septic systems, the same are on land owned
or leased by Morningstar or any of its Subsidiaries. To the Knowledge of
Morningstar, such utility services are adequate for the full operation and
beneficial ownership, use, occupancy and maintenance of each Property, and
neither Morningstar nor any of its Subsidiaries is in default of any obligation
to any utility service provider. No other utility facilities are necessary to
meet the reasonable needs of any Property for its contemplated use. No fees,
connection charges or assessments are due or pending for the installation,
operation or use of any sewer, drainage, water run off or dry well facilities
and Morningstar has complied with all obligations owed to any governmental
authority or private party with respect to the installation, operation or use of
any sewer, drainage, water run off or dry well facilities.

(c) Except as set forth in Section 4.11.2 of the Schedule of Exceptions,
Morningstar knows of no fact, condition or potential condition affecting any
Property that would prevent or materially inhibit the continued operation of
such Property or any improvement or facility located thereon in the manner of
and for its present use.

(d) Morningstar has received no written notice of any condemnation action with
respect to any of the Properties, and, to the Knowledge of Morningstar, there is
no proposed or threatened eminent domain or similar proceeding, or private
purchase in lieu of such proceeding, which would affect any of the Properties in
any way whatsoever.

(e) The as-built condition of each Property is such that surface and storm water
does not accumulate in other than insubstantial quantities on such Property,
except to the extent allowed by law.

4.11.3 Improvements

(a) Subject to those items identified by Shurgard personnel on its Summary
Report in connection with their on-site inspection of each property, a true and
correct copy of which is attached hereto as Section 4.11.3 of the Schedule of
Exceptions, all of the improvements on each Property are in good condition and
repair, free of material infestation and free of material physical, mechanical,
structural, design and construction defects. All water, electric, sewer,
plumbing, heating, ventilating, gas and air conditioning servicing such
improvements are in good condition and proper working order and are free of
material defects. Neither Morningstar nor any of its Subsidiaries has deferred
any maintenance required to be performed in order to keep the foregoing in good
condition and proper working order. Morningstar has not failed to disclose to
Shurgard any material adverse conditions of disrepair or other material adverse
conditions or defects with respect to the physical condition of the Properties.

(b) Except for minor matters which, in the aggregate among all of the Properties
total less than $100,000, or as otherwise disclosed in Section 4.11.3 of the
Schedule of Exceptions, the improvements to each Property were designed and
constructed to satisfy the requirements of the local building code and any
local, state or federal requirements, including any seismic standards contained
therein, in effect at the time of such design and construction.

4.11.4 Governmental Approvals; Compliance with Laws

(a) Morningstar and/or its Subsidiaries have received all approvals of
governmental authorities (including certificates of occupancy, permits and
licenses) required in connection with the ownership and operation of each
Property, and except as otherwise disclosed in Section 4.11.4 of the Schedule of
Exceptions, each Property has been and is being operated and maintained in
compliance with all applicable legal requirements as well as all private
covenants and conditions affecting such Property. Morningstar has provided
Shurgard with true and correct copies of all certificates of occupancy and other
discretionary permits or approvals affecting any Property (i.e., approvals which
are not considered ministerial under applicable legal requirements, for example,
zoning or use variances, or conditional use permits) in the possession of or
reasonably available to Morningstar or its Subsidiaries. Except for conditional
use permit requirements and except as otherwise disclosed in Section 4.11.4 of
the Schedule of Exceptions, to the Knowledge of Morningstar, in the event that
all or any part of the improvements on a Property are destroyed or damaged,
zoning laws in effect at the time this representation is made do not prohibit
the improvements from being legally reconstructed to their condition prior to
such damage or destruction, and thereafter exist for the same use without
violating any zoning or other ordinances applicable thereto and without the
necessity of obtaining any variances or special permits. Neither the zoning nor
any other right to construct, use or operate any Property is in any way
dependent on or related to any real estate other than such Property.

(b) Except at set forth in Section 4.11.4 of the Schedule of Exceptions, neither
Morningstar nor any of its Subsidiaries has received any notice of a claim that
any of the Properties does not comply with, and Morningstar and each of its
Subsidiaries has complied with, all laws, ordinances, rules and regulations,
including, but not limited to, those relating to environmental, zoning, land use
and division, building, fire, health and safety matters, of any government or
any agency, body or subdivision thereof bearing on the construction of the
improvements on each Property and on the operation, ownership or use of the
Properties. Morningstar and each of its Subsidiaries has, or by the Closing Date
shall have, complied with and completed all requirements and obligations set
forth in any agreement with any government or agency, body or subdivision
thereof, or with any private party, relating to the construction of the
Improvements and off-site improvements and to the operation, ownership or use of
the Properties, and such government or private party shall have accepted the
completion of all such requirements and obligations. Each of the Properties has
been subdivided from contiguous properties and constitutes a separate and
distinct tax parcel on the roles of the applicable taxing authorities.

4.11.5 Development Properties

With respect to those Properties currently under construction or for which no
certificate of occupancy has yet been issued (each, a "Development Property"),
and without limiting any representations and warranties set forth above:

(a) Section 4.11.5 of the Schedule of Exceptions sets forth all Properties that
are Development Properties.

(b) Morningstar has provided to Shurgard a copy of the budget and schedule for
the construction of each Development Property. To the Knowledge of Morningstar,
(i) each such budget is complete and accurately sets forth all costs that have
been and will be incurred in completing the Development Property and obtaining a
permanent, unconditional certificate of occupancy and (ii) each such schedule
accurately sets forth the date by which the Development Property will be
completed and ready for occupancy. Section 4.11.5 of the Schedule of Exceptions
sets forth Morningstar's best, good faith estimate of the percentage of
completion of each Development Property. All costs of construction of the
Development Properties now or previously due and owing have been paid in full,
and there currently exist no liens in favor of anyone who has supplied labor,
services or materials for the construction of a Development Property nor any
basis for asserting a claim of lien.

(c) Except as otherwise disclosed in Section 4.11.5 of the Schedule of
Exceptions, Morningstar or the Subsidiary that owns each Development Property
has received all permits and governmental authorizations required in order to
commence and continue to completion the construction of the Development
Property. To the Knowledge of Morningstar, all permits and governmental
authorizations not yet received by Morningstar or a Subsidiary as identified in
Section 4.11.5 of the Schedule of Exceptions will be issued in a timely fashion
and without conditions or requirements that will materially increase the cost of
construction or delay the completion or occupancy date of the Development
Property.

(d) Morningstar has provided Shurgard with a true, correct and complete copy of
the contract with the general contractor for the construction of each
Development Property. Each such contract is in full force and effect and, to the
Knowledge of Morningstar, there exists no default thereunder by the general
contractor.

4.11.6 Third Party Rights to Properties

(a) There are no easements, licenses, agreements, leases, rights-of-way, Claims,
assessments, Encumbrances, rights of others or any other agreements to which
Morningstar or any of its Subsidiaries is a party or to which any Property is
subject that in any material way adversely affect the title to or the use or
operation of any Property. Morningstar or one or more of its Subsidiaries holds
good and marketable fee simple title to each Property.

(b) Except at set forth in Section 4.11.6 of the Schedule of Exceptions, neither
Morningstar nor any of its Subsidiaries has granted to any person any option or
other right to purchase all or any portion of any Property.

(c) Except for leases entered into in the ordinary course of business and that
involve annual rental payments of less than $50,000, there are no leases,
licenses or subleases covering any portion of any Property, whether for present
or future rights of occupancy, that cannot be terminated on 30 days notice.
Except as disclosed in the Schedule of Exceptions hereto, neither Morningstar
nor any of its Subsidiaries has assigned, pledged or granted any security
interest with respect to any of the leases, the rents payable thereunder or any
security deposit given in connection with any lease. Except as disclosed in the
Schedule of Exceptions hereto, no lease, rents payable thereunder or security
deposit given in connection with any lease is subject to any lien, security
interest or adverse claim by any non-lessee third party.

4.12 Intellectual Property

(a) Morningstar Group, Inc. ("MGI") has title to and ownership of and
Morningstar and each of its Subsidiaries has, pursuant to a license agreement
all rights to use all trade names, trademarks, trademark applications, trade
dress, service marks, copyright, trade secrets, information, and other
proprietary rights and processes ("Intellectual Property") necessary for
Morningstar and each Subsidiary's business as now conducted, or as proposed to
be conducted, without any conflict with or infringement of the rights of others.
Except for the license issued to Morningstar and its Subsidiaries, there are no
outstanding options or licenses relating to the Intellectual Property; neither
MGI nor Morningstar nor any of its Subsidiaries is a party to or bound by any
options, licenses or agreements with respect to the Intellectual Property nor
has MGI or Morningstar or any of its Subsidiaries entered into any agreements of
any kind relating to the Intellectual Property of any other person or entity,
except for those described in Section 4.12 of the Schedule of Exceptions.
Section 4.12 of the Schedule of Exceptions contains a complete list of
registered copyrights, registered trademarks and pending applications therefor
of MGI. Since inception, neither MGI nor Morningstar nor any of its Subsidiaries
has received any written communication alleging that MGI, Morningstar or any of
its Subsidiaries is violating or, by conducting its business as it is currently
conducted or currently proposed to be conducted, would materially violate any of
the Intellectual Property of any other person or entity.

(b) To the Knowledge of Morningstar, none of the employees of Morningstar or any
of its Subsidiaries is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's best efforts to promote the interests
of Morningstar and its Subsidiaries or that would conflict with Morningstar's or
any of its Subsidiaries' business as currently proposed to be conducted. To the
Knowledge of Morningstar, neither the execution nor delivery of this Agreement,
nor the carrying on of Morningstar's or any of its Subsidiaries' business by the
employees of and consultants to Morningstar or any of its Subsidiaries, nor the
conduct of Morningstar's or any of its Subsidiaries' business as currently
proposed to be conducted, will, to the Knowledge of Morningstar, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees or consultants is now obligated.

(c) Since its organization, Morningstar and MGI have taken reasonable measures
to protect the value (and, to the extent applicable, the confidentiality and
security) of all Intellectual Property used or then proposed to be used in its
or any of its Subsidiaries' business.

4.13 Taxes

(a) Except as set forth in Section 4.13 of the Schedule of Exceptions,
Morningstar and each of its Subsidiaries has filed on a timely basis all Tax
Returns that Morningstar and each of its Subsidiaries were required to file. To
the Knowledge of Morningstar, all such Tax Returns were correct and complete in
all respects and have been prepared and completed in accordance with applicable
Law. No such Tax Returns are currently the subject of audit or examination nor
has Morningstar or any of its Subsidiaries been notified, in writing or
otherwise, of any request for an audit or examination. All Taxes owed by
Morningstar and each of its Subsidiaries (whether or not shown on any Tax
Return) were paid in full when due or are being contested in good faith and are
supported by adequate reserves on the Financial Statements. Neither Morningstar
nor any Subsidiary has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to any Tax assessment or
deficiency. Morningstar and each of its Subsidiaries have duly and timely
withheld from employee salaries, wages or other compensation, gross income
allocated to partners or members (in each case, whether or not paid in cash) and
amounts paid to creditors, independent contractors and other third parties to
the extent required by law, complied with all information reporting and backup
withholding requirements and paid over to the appropriate governmental authority
all amounts required to be so withheld and paid over for all periods under all
applicable Laws.

(b) No dispute, claim or proposed adjustment concerning any Tax liability of
Morningstar or any of its Subsidiaries has been raised by any authority in
writing or otherwise. Except as set forth on Schedule 4.13, neither Morningstar
nor any of its Subsidiaries is a party to nor has it been notified in writing
or, otherwise, that it is the subject of any pending, proposed or threatened
action, investigation, proceeding, audit, claim or assessment by or before the
IRS or any other governmental authority. There are no Tax liens of any kind on
any property or assets of Morningstar or any of its Subsidiaries, except for
inchoate liens for Taxes not yet due and payable. Morningstar and each of its
Subsidiaries have made available to Shurgard correct and complete copies of all
income Tax Returns filed, examination reports and statements of deficiencies
assessed against or agreed to by Morningstar and each of its Subsidiaries on or
after January 1, 1998.

(c) Neither Morningstar nor any Subsidiary has made any payment or payments, is
obligated to make any payment or payments, nor is a party to (or participating
employer in) any agreement or Employee Benefit Plan that could obligate it or
Shurgard to make any payment or payments that would constitute an "excess
parachute payment," as defined in Section 280G of the Code (or any comparable
provisions of Law). No Subsidiary is or has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Morningstar and each of the Morningstar Members is a "United States person," as
defined in Section 7701(a)(30) of the Code. Neither Morningstar nor any
Subsidiary has neither requested, agreed nor is required to make any adjustments
pursuant to Section 481(a) (or any other Section) of the Code or any similar
provision of state, local or foreign law. Neither Morningstar nor any of its
Subsidiaries is a party to any Tax allocation, Tax sharing or similar agreement.
No Subsidiary (A) has been a member of any affiliated group within the meaning
of Code Section 1504 of the Code or any similar group defined under a similar
provision of state, local, or foreign law filing a consolidated income Tax
Return (other than a group the common parent of which was a Subsidiary) and
(B) has no liability for the Taxes of any Person (other than any Subsidiary)
under Treasury Regulation Section 1.1502-6 (or any comparable provision of
foreign, state or local law), as a transferee or successor, by contract, or
otherwise.

(d) The unpaid Taxes of Morningstar and its Subsidiaries (A) did not, as of
March 31, 2002, materially exceed the reserve for Tax liability (other than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Interim Balance Sheet (rather
than in any notes thereto) and (B) will not materially exceed that reserve as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of Morningstar and its Subsidiaries in filing
their Tax Returns. There is no Tax or taxable income of Morningstar or any of
its Subsidiaries that will be payable or reportable on or after the Closing Date
that is attributable to any restructuring or actual or constructive transfers of
any assets, liabilities or business activities of Morningstar or any of its
Subsidiaries in connection with Shurgard's purchase of Units in Morningstar
pursuant to this Agreement.

(e) Neither Morningstar nor any of its Subsidiaries has nor has had a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States and such foreign country, and neither
Morningstar nor any of its Subsidiaries has engaged in a trade or business
within, or derived any income from, any state, local or foreign jurisdiction
other than those for which Tax Returns have been duly filed, to the extent
required, by Morningstar.

(f) No election has been made with respect to Taxes of Morningstar or any of its
Subsidiaries (or the classification thereof for Tax purposes) which has not been
disclosed to Shurgard, including, but not limited to, any election pursuant to
Sections 704, 754 or 856(l) of the Code or Treasury Regulations
Section 301.7701-3.

(g) Neither Morningstar nor any of its Subsidiaries (i) constitute a "publicly
traded partnership" as defined in Section 7704(b) of the Code nor (ii) except
for any Subsidiary which is a corporation under state law, has ever failed to
qualify as a partnership or disregarded entity for federal income Tax purposes.

(h) As of the Closing Date, (i) no lease, loan or contract, whether formal or
informal, between Morningstar (or any noncorporate Subsidiary) and any corporate
Subsidiary requires such corporate Subsidiary to pay any amount in excess of an
amount that is commercially reasonable, (ii) neither Morningstar nor any
noncorporate Subsidiary provides any services of a material nature to tenants of
Morningstar or any of its Subsidiaries, (iii) to the Knowledge of Morningstar,
with respect to each Property, the fair market value of any personal property
leased to tenants does not exceed 15 percent of the total fair market value of
the real and personal property leased to tenants and (iv) except as set forth in
Section 4.13 of the Schedule of Exceptions, neither Swansong, LLC nor
Interchange X, LLC receives any rents from any entity in which a member of
Swansong, LLC or Interchange X, LLC, respectively, owns or Constructively Owns
(as such term is defined for purposes of the Restated Operating Agreement) any
interest.

(i) Neither Morningstar nor any noncorporate Subsidiary has ever held any real
property as stock in trade, inventory or primarily for sale to one or more
customers in the ordinary course of business. All information provided to
Shurgard regarding the business and operations of Morningstar and its
Subsidiaries accurately reflects, in all material respects, the business and
operations conducted by Morningstar and its Subsidiaries as of the Closing Date.

4.14 Labor Matters; Employees

(a) None of Morningstar's or any of its Subsidiaries' employees is represented
in his or her capacity as an employee of Morningstar or any of its Subsidiaries
by any labor organization. There are no labor disputes, employee grievances or
disciplinary actions, strikes, picketing, lockouts or similar job actions
pending or, to the Knowledge of Morningstar, threatened against Morningstar or
any of its Subsidiaries. To the Knowledge of Morningstar, no event has occurred
or circumstance exists that could provide the basis for any work stoppage or
other labor dispute. Morningstar and each of its Subsidiaries has complied in
all material respects with all provisions of Law relating to employment and
employment practices, terms and conditions of employment, wages and hours,
including, without limitation, equal opportunity, workplace safety, workers'
compensation, Workers Adjustment and Retraining Notification Act, 29 U.S.C.
S 2101 et seq., and any similar state or local "mass layoff" or "plant closing"
Law, discrimination, civil rights, the collection and payment of withholding
and/or social security Taxes or other similar Laws. Neither Morningstar nor any
of its Subsidiaries has received any notice or claim that it is liable for the
payment of any compensation, Damages, Taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Laws. To the
Knowledge of Morningstar, there are no organizational efforts presently being
made or threatened by or on behalf of any labor union with respect to
Morningstar's or any of its Subsidiaries employees and neither Morningstar nor
any of its Subsidiaries has been requested by any group of employees or other
Persons to enter into any collective bargaining agreement or other agreement
with any labor union or other employee organization. Except for the Workers
Compensation Claims disclosed in Section 4.14 of the Schedule of Exceptions,
there are no complaints, charges or Claims against Morningstar or any of its
Subsidiaries pending or, to the Knowledge of Morningstar, threatened that could
be brought or filed, with any public or Governmental Entity, arbitrator or court
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment or failure to employ any individual by
Morningstar or any of its Subsidiaries.

(b) Morningstar has provided to Shurgard an accurate and complete list of the
following information for each employee of Morningstar and each of its
Subsidiaries, including each employee on leave of absence or layoff status:
(i) name, (ii) job title, (iii) current compensation paid or payable and any
change in compensation made during Morningstar's [three] most recent fiscal
years, (iv) accrued vacation and sick leave, and (v) service credited for
purposes of vesting and eligibility to participate under any pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare,
vacation plan or other Employee Benefit Plan.

(c) To the Knowledge of Morningstar, no employee of Morningstar or any of its
Subsidiaries is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee and any other Person that affects
(i) the performance of his or her duties as an employee of Morningstar or any of
its Subsidiaries, or (ii) the ability of Morningstar or any of its Subsidiaries
to conduct its business, including any similar agreement with Morningstar or any
of its Subsidiaries by any such employee. To the Knowledge of Morningstar, no
key employee of Morningstar or any of its Subsidiaries intends to terminate his
or her employment.

(d) Morningstar has provided to Shurgard an accurate and complete list of the
following information for each retired employee of Morningstar or any of its
Subsidiaries, or their dependents, receiving benefits or scheduled to receive
benefits in the future: (i) name, (ii) pension benefit, (iii) pension option
election, (iv) retiree medical insurance coverage, (v) retiree life insurance
coverage, and (vi) other benefits.

4.15 Employee Benefit Plans

4.15.1 Employee Benefit Plan Listing

Morningstar has provided to Shurgard an accurate and complete list of all
Employee Benefit Plans. Neither Morningstar nor any ERISA Affiliate has any
agreement, arrangement, commitment or obligation, whether formal or informal,
whether written or unwritten and whether legally binding or not, to create,
enter into or contribute to any additional Employee Benefit Plan, or, except for
any obligation imposed by operation of law, to modify or amend any existing
Employee Benefit Plan. There has been no amendment, interpretation or other
announcement (written or oral) by Morningstar, any ERISA Affiliate or other
Person relating to, or change in participation or coverage under, any Employee
Benefit Plan that, either alone or together with other such items or events,
could materially increase the expense of maintaining such Employee Benefit Plan
(or the Employee Benefit Plans taken as a whole) above the level of expense
incurred with respect thereto for the most recent fiscal year included in the
Financial Statements. The terms of each Employee Benefit Plan permit Morningstar
or any ERISA Affiliate, as applicable, to amend or terminate such Employee
Benefit Plan at any time and for any reason without penalty and without material
liability or expense. None of the rights of Morningstar nor any ERISA Affiliate
under any Employee Benefit Plan will be impaired in any way by this Agreement or
the Restated Operating Agreement, or the consummation of the transactions
contemplated hereby and thereby.

4.15.2 Documents Provided

Morningstar has delivered to Shurgard accurate and complete copies (or, in the
case of unwritten Employee Benefit Plans, descriptions) of all Employee Benefit
Plans (and all amendments thereto), along with, to the extent applicable to the
particular Employee Benefit Plan, copies of the following: (i) the last three
annual reports (Form 5500 series) filed with respect to such Employee Benefit
Plan, (ii) all summary plan descriptions, summaries of material modifications
and all employee manuals or communications filed or distributed with respect to
such Employee Benefit Plan during the last three years, (iii) all contracts and
agreements (and any amendments thereto) relating to such Employee Benefit Plan,
including, without limitation, trust agreements, investment management
agreements, annuity contracts, insurance contracts, bonds, indemnification
agreements and service provider agreements, (iv) the most recent determination
letter issued by the United States Internal Revenue Service ("IRS") with respect
to such Employee Benefit Plan, (v) all written communications relating to the
amendment, creation or termination of such Employee Benefit Plan, or an increase
or decrease in benefits, acceleration of payments or vesting or other events
that could result in liability to Morningstar since the date of the most
recently completed and filed annual report, (vi) all correspondence to or from
any Governmental Entity relating to such Employee Benefit Plan, (vii) samples of
all administrative forms currently in use, including, without limitation, all
forms and notices under the health care continuation provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
under the Health Insurance Portability and Accountability Act of 1997, as
amended, ("HIPAA"), (viii) all coverage, nondiscrimination, top heavy and Code
Section 415 tests performed with respect to such Employee Benefit Plan for the
last three years; and (ix) the most recent registration statement, annual report
(Form 11-K) and prospectus prepared in connection with such Employee Benefit
Plan.

4.15.3 Compliance

With respect to each Employee Benefit Plan: (i) such Employee Benefit Plan is,
and at all times since inception has been, maintained, administered, operated
and funded in all material respects in accordance with its terms and in
compliance with all applicable requirements of all applicable Laws, including,
without limitation, ERISA, COBRA, HIPAA and the Code, (ii) Morningstar, the
ERISA Affiliates and all other Persons (including, without limitation, all
fiduciaries) have at all times and in all material respects properly performed
all of their duties and obligations (whether arising by operation of law or by
contract) under or with respect to such Employee Benefit Plan, including,
without limitation, all reporting, disclosure and notification obligations,
(iii) all returns, reports and other information (including, without limitation,
all Form 5500 series annual returns/reports, together with all schedules and
audit reports required with respect thereto) relating to such Employee Benefit
Plan required to be filed with any Governmental Entity have been accurately
completed in all material respects and timely and properly filed, (iv) all
notices, statements, reports and other disclosure (including, without
limitation, all summary plan descriptions, summaries of material modifications
and COBRA and HIPAA notices and certificates) required to be given or made to
participants in such Employee Benefit Plan or their beneficiaries have, in all
material respects, been accurately completed and timely and properly disclosed
or provided, (v) no fiduciary of such Employee Benefit Plan has engaged in any
transaction or acted in a manner that violates, or otherwise failed to act in
compliance with, the fiduciary requirements of ERISA or any other applicable
Law, (vi) no transaction or event has occurred or is threatened or about to
occur (including any of the transactions contemplated in or by this Agreement or
the Restated Operating Agreement) that constitutes or could constitute a
prohibited transaction under Section 406 or 407 of ERISA or under Section 4975
of the Code for which an exemption is not available, and (vii) neither
Morningstar nor any ERISA Affiliate has incurred, and there exists no condition
or set of circumstances in connection with which Morningstar, any ERISA
Affiliate or Shurgard could incur, directly or indirectly, any material
liability or expense (except for routine contributions and benefit payments)
under ERISA, the Code or any other applicable Law, or pursuant to any
indemnification or similar agreement, with respect to such Employee Benefit
Plan.

4.15.4 Qualification

Each Employee Benefit Plan that is intended to be qualified under Section 401(a)
of the Code is, and at all times since inception has been, so qualified and its
related trust is, and at all times since inception has been, exempt from
taxation under Section 501(a) of the Code. Each such Employee Benefit Plan
(i) is the subject of an unrevoked favorable determination letter from the IRS
with respect to such Employee Benefit Plan's qualified status under the Code, as
amended by the Tax Reform Act of 1986 and all subsequent legislation, (ii) has
remaining a period of time under the Code or applicable treasury regulations
promulgated thereunder or IRS pronouncements in which to apply to the IRS for
such a letter and to make any amendments necessary to obtain such a letter from
the IRS, or (iii) if reliance is permitted under IRS Announcement 2001-77,
relies on the favorable opinion letter or advisory letter of the master and
prototype or volume submitter plan sponsor of the Employee Benefit Plan. No fact
exists or, to the Knowledge of Morningstar, is reasonably expected to arise,
that could adversely affect the qualification or exemption of any such Employee
Benefit Plan or its related trust. No such Employee Benefit Plan is a "top-heavy
plan," as defined in Section 416 of the Code.

4.15.5 Contributions, Premiums and Other Payments

All contributions, premiums and other payments due or required to be paid to (or
with respect to) each Employee Benefit Plan have been timely paid, or, if not
yet due, have been accrued as a liability on the Interim Balance Sheet. All
income Taxes and wage Taxes that are required by Law to be withheld from
benefits derived under the Employee Benefit Plans have been properly withheld
and remitted to the proper depository.

4.15.6 Multiemployer, Defined Benefit and Money Purchase Pension Plans and
Multiple Employer Welfare Arrangements

Neither Morningstar nor any ERISA Affiliate maintains or contributes to, or has
ever maintained or contributed to (or been obligated to maintain or contribute
to), (i) a multi-employer plan as defined in Section 3(37) or Section 4001(a)(3)
of ERISA or 414(f) of the Code, (ii) a multiple employer plan within the meaning
of Section 4063 or 4064 of ERISA or Section 413(c) of the Code, (iii) an
employee benefit plan, fund, program, contract or arrangement that is subject to
Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, or (iv) a
multiple employer welfare arrangement as defined in Section 3(40) of ERISA.

4.15.7 Post-Employment Benefits

None of Morningstar, any ERISA Affiliate or any Employee Benefit Plan provides
or has any obligation to provide (or contribute toward the cost of)
post-employment or post-termination benefits of any kind, including, without
limitation, death and medical benefits, with respect to any current or former
officer, employee, agent, director or independent contractor of Morningstar or
any ERISA Affiliate, other than (i) continuation coverage mandated by
Sections 601 through 608 of ERISA and Section 4980B(f) of the Code,
(ii) retirement benefits under any Employee Benefit Plan that is qualified under
Section 401(a) of the Code, and (iii) deferred compensation that is accrued as a
current liability on the Interim Balance Sheet.

4.15.8 Suits, Claims and Investigations

There are no Claims (other than routine Claims for benefits) pending or, to the
Knowledge of Morningstar, threatened with respect to (or against the assets of)
any Employee Benefit Plan, nor, to the Knowledge of Morningstar, is there a
basis for any such Claim. No Employee Benefit Plan is currently under
investigation, audit or review, directly or indirectly, by the IRS, the United
States Department of Labor or any other Governmental Entity, and, to the
Knowledge of Morningstar, no such action is contemplated or under consideration
by the IRS, the United States Department of Labor or any other Governmental
Entity.

4.15.9 Effect of Transaction

Except as set forth in Section 4.15.9 of the Schedule of Exceptions, neither the
execution and delivery of this Agreement or the Restated Operating Agreement,
nor the consummation of the transactions contemplated hereby or thereby, will
(i) entitle any individual to severance pay, unemployment compensation or any
other payment from Morningstar, Shurgard or any ERISA Affiliate or Employee
Benefit Plan, (ii) otherwise increase the amount of compensation due to any
individual or forgive indebtedness owed by any individual, (iii) result in any
benefit or right becoming established or increased, or accelerate the time of
payment or vesting of any benefit, under any Employee Benefit Plan, or
(iv) require Morningstar, any ERISA Affiliate or Shurgard to transfer or set
aside any assets to fund or otherwise provide for any benefits for any
individual.

4.15.10 ERISA Plan Asset Compliance

Morningstar has not engaged in any transaction with Five Arrows, any investor in
Five Arrows or any ERISA Affiliate which could reasonably be expected to result
in any material liability under ERISA to Morningstar or any ERISA Affiliate. In
addition, no ERISA Affiliate has engaged in any transaction with Five Arrows,
any investor in Five Arrows, Morningstar or any other ERISA Affiliate which
could reasonably be expected to result in any material liability under ERISA to
Morningstar or any ERISA Affiliate. Neither the execution of this Agreement or
the Restated Operating Agreement nor the consummation of the transactions
contemplated herein and therein will give rise to any material liability under
ERISA to Morningstar or any ERISA Affiliate with respect to any employee benefit
plan that on the date this Agreement is executed or on the Closing Date is
directly or indirectly invested in Five Arrows.

 

4.15.11 Definitions

The following definitions shall apply to this Section 4.15:

"Employee Benefit Plan" shall mean any retirement, pension, profit sharing,
deferred compensation, stock bonus, savings, bonus, incentive, cafeteria,
medical, dental, vision, hospitalization, life insurance, accidental death and
dismemberment, medical expense reimbursement, dependent care assistance, tuition
reimbursement, disability, sick pay, holiday, vacation, severance, change of
control, stock purchase, stock option, restricted stock, phantom stock, stock
appreciation rights, fringe benefit or other employee benefit plan, fund,
policy, program, contract, arrangement or payroll practice of any kind
(including any "employee benefit plan", as defined in Section 3(3) of ERISA) or
any employment, consulting or personal services contract, whether written or
oral, qualified or nonqualified, funded or unfunded, domestic or foreign
(a) sponsored, maintained or contributed to by Morningstar or any ERISA
Affiliate or to which Morningstar or any ERISA Affiliate is a party,
(b) covering or benefiting any current or former officer, employee, agent,
director or independent contractor of Morningstar or any ERISA Affiliate (or any
dependent or beneficiary of any such individual), or (c) with respect to which
Morningstar or any ERISA Affiliate has (or could have) any obligation or
liability.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any regulations promulgated thereunder.

"ERISA Affiliate" shall mean any corporation, partnership, limited liability
company, sole proprietorship, joint venture, trade, business or other entity or
organization that, together with Morningstar, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code.

4.16 Insurance

(a) Morningstar has made available to Shurgard (i) accurate and complete copies
of all current insurance policies to which Morningstar or any of its
Subsidiaries is a party or under which Morningstar or any of its Subsidiaries,
or any director of Morningstar or any of its Subsidiaries, is covered,
(ii) accurate and complete copies of all pending applications for insurance
policies, and (iii) any statement by Morningstar's accountants with regard to
the adequacy of such entity's coverage or of the reserves for Claims under such
policies.

(b) Section 4.16 of the Schedule of Exceptions describes (i) any self-insurance
arrangement by or affecting Morningstar or any of its Subsidiaries, including
any reserves established thereunder, (ii) any Contract, other than an insurance
policy, for the transfer or sharing of any risk by Morningstar or any of its
Subsidiaries, and (iii) all obligations of Morningstar or any of its
Subsidiaries to third parties with respect to insurance (including such
obligations under leases and service agreements), and identifies the policy
under which such coverage is provided.

Section 4.16 of the Schedule of Exceptions sets forth, by year, for the current
policy year and each of the three preceding policy years (i) a summary of the
loss experience under each policy and (ii) a statement describing each Claim
under an insurance policy for an amount in excess of $10,000, that sets forth
(A) the name of the claimant, (B) a description of the policy by insurer, type
of insurance, and period of coverage, and (C) the amount and a brief description
of the Claim.

(c) All insurance policies to which Morningstar or any of its Subsidiaries is a
party or that provide coverage to Morningstar or any of its Subsidiaries (i) are
valid, outstanding, and enforceable, (ii) are issued by an insurer that is to
the Knowledge of Morningstar financially sound and reputable, (iii) taken
together, provide adequate insurance coverage for the assets of Morningstar and
its Subsidiaries and the operation of the business of Morningstar and its
Subsidiaries for all risks customarily insured against by a Person carrying on a
business similar to the business of Morningstar and its Subsidiaries, and
(iv) are sufficient for compliance with all Laws and Contracts to which
Morningstar or any of its Subsidiaries is a party or by which Morningstar or any
of its Subsidiaries is bound.

(d) Neither Morningstar nor any of its Subsidiaries has received (i) any refusal
of coverage or any notice that a defense will be afforded with reservation of
rights, or (ii) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations
thereunder.

(e) Morningstar or its Subsidiaries has paid through the date of this Agreement,
and will continue to pay through the Closing Date, all premiums due, and has
otherwise performed all of its obligations, under each insurance policy issued
to Morningstar or any of its Subsidiaries or that provides coverage to
Morningstar or any of its Subsidiaries or an officer or director of Morningstar
or any of its Subsidiaries.

(f) Morningstar or its Subsidiaries has given notice to the insurer of all
Claims pending under the insurance policies issued to Morningstar or any of its
Subsidiaries.

4.17 Compliance with Laws

(a) Except as set forth in Section 4.17 of the Schedule of Exceptions,
Morningstar and its Subsidiaries are, and at all times have been, in compliance
in all material respects with all Laws that are or were applicable to
Morningstar or any of its Subsidiaries or to the conduct or operation of the
business of Morningstar or any of its Subsidiaries or the ownership, operation
or use of any of the assets of Morningstar or any of its Subsidiaries, except,
in either such case, as would not result in a Material Adverse Effect.

(b) No event has occurred or circumstance exists that (with or without notice or
lapse of time) (a) may constitute or result in a violation by Morningstar or any
of its Subsidiaries of, or a failure on the part of Morningstar or any of its
Subsidiaries to comply with, any Law, or (b) may give rise to any obligation on
the part of Morningstar or any of its Subsidiaries to undertake, or to bear all
or any portion of the cost of, any Remedial Action of any nature, except, in
either such case, as would not result in a Material Adverse Effect.

(c) Except as set forth in Section 4.17 of the Schedule of Exceptions, neither
Morningstar nor any of its Subsidiaries has received any notice or other
communication (whether oral or written) from any Governmental Entity or any
other Person regarding (A) any actual, alleged, possible, or potential violation
of, or failure to comply with, any Law, or (B) any actual, alleged possible, or
potential obligation on the part of Morningstar or any of its Subsidiaries to
undertake, or to bear all or any portion of the cost of, any Remedial Action of
any nature, which condition has not been previously remedied or rectified by
Morningstar.

4.18 Licenses and Authorizations

Section 4.18 of the Schedule of Exceptions sets forth an accurate and complete
list of each Authorization that is held by Morningstar or any of its
Subsidiaries or that otherwise relates to the business of Morningstar or any of
its Subsidiaries, or to any assets owned or used by Morningstar or any of its
Subsidiaries. Each such Authorization listed or required to be listed thereon is
valid and in full force and effect. Except as set forth in Section 4.18 of the
Schedule of Exceptions:

(a) Morningstar and its Subsidiaries are, and at all times, have been in
compliance in all material respects with all the terms and requirements of each
Authorization identified or required to be identified in Section 4.18 of the
Schedule of Exceptions;

(b) No event has occurred or circumstance exists that may (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in a
material violation of or a failure to comply in all material respects with any
term or requirement of any Authorization listed or required to be listed in
Section 4.18 of the Schedule of Exceptions, or (B) result directly or indirectly
in the revocation, withdrawal, suspension, cancellation, or termination of, or
any modification to, any Authorization listed or required to be listed in
Section 4.18 of the Schedule of Exceptions;

(c) Neither Morningstar nor any of its Subsidiaries has received any notice or
other communication (whether oral or written) from any Governmental Entity or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Authorization;

(d) All applications required to have been filed for the renewal of the
Authorizations listed or required to be listed in Section 4.18 of the Schedule
of Exceptions have been duly filed on a timely basis with the appropriate
Governmental Entities, and all other filings required to have been made with
respect to such Authorizations have been duly made on a timely basis with the
appropriate Governmental Entities; and

(e) The Authorizations set forth in Section 4.18 of the Schedule of Exceptions
collectively constitute all of the Authorizations necessary to permit
Morningstar and its Subsidiaries to lawfully conduct and operate the business of
Morningstar and its Subsidiaries in the manner currently conducted by
Morningstar and its Subsidiaries and to permit Morningstar and its Subsidiaries
to own and use its assets in the manner in which they currently own and use such
assets.

4.19 Legal Proceedings; Orders

(a) Except as set forth in Section 4.19 of the Schedule of Exceptions, there is
no pending Proceeding (i) that has been commenced by or against Morningstar or
any of its Subsidiaries or that otherwise relates to or may affect the business
of Morningstar or any of its Subsidiaries, or any of the assets owned or used by
Morningstar or any of its Subsidiaries, or (ii) that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the transactions contemplated by this Agreement. To the Knowledge of
Morningstar, (A) no such Proceeding has been threatened, and (B) no event has
occurred or circumstance exists that may give rise to or serve as a basis for
the commencement of any such Proceeding.

(b) Neither Morningstar nor any of its Subsidiaries is subject to any Order that
relates to the business of Morningstar or any of its Subsidiaries, or any of the
assets owned or used by, Morningstar or any of its Subsidiaries, and to the
Knowledge of Morningstar, no officer, director, agent, or employee of
Morningstar or any of its Subsidiaries is subject to any Order that prohibits
such officer, director, agent, or employee from engaging in or continuing any
conduct, activity or practice relating to the business of Morningstar or any of
its Subsidiaries.

(c) Morningstar and each of its Subsidiaries is, and at all times has been, in
compliance with all material terms and requirements of each Order to which
Morningstar or any of its Subsidiaries, the business of Morningstar or any of
its Subsidiaries or any of the assets owned or used by Morningstar or any of its
Subsidiaries, is or has been subject; no event has occurred or circumstance
exists that may constitute or result in (with or with out notice or lapse of
time) a violation of or failure to comply with any material term or requirement
of any Order to which Morningstar or any of its Subsidiaries, the business of
Morningstar or any of its Subsidiaries or any of the assets owned or used by
Morningstar or any of its Subsidiaries, is subject; and neither Morningstar nor
any of its Subsidiaries has received any notice or other communication (whether
oral or written) from any Governmental Entity or any other Person regarding any
actual, alleged, possible, or potential violation of, or failure to comply with,
any material term or requirement of any Order to which Morningstar or any of its
Subsidiaries, the business of Morningstar or any of its Subsidiaries or any of
the assets owned or used by Morningstar or any of its Subsidiaries, is or has
been subject.

(d) There is no pending, or, to the Knowledge of Morningstar, contemplated
governmental action or activity, including without limitation, any planning or
zoning designations, street widening, special assessment districts, condemnation
action or private purchase in lieu thereof, parking or traffic regulation,
building code, or health or safety regulation that would in any way materially
adversely affect the value of any Property or the current use and operation of
such Property, or result in a special assessment (other than pending or
contemplated governmental action or activity caused by or relating to the
actions of Shurgard). Neither Morningstar nor any of its Subsidiaries has
received any notice from any Governmental Entity or from any other Person with
respect to any actual or threatened taking of any Property or any portion
thereof, for any public or quasi-public purpose by the exercise of the right of
condemnation or eminent domain or of any moratorium which may affect the use, or
operation of such Property.

4.20 Environmental Matters

Except as disclosed in the various reports listed in Section 4.20 of the
Schedule of Exceptions:

(a) Morningstar and each of its Subsidiaries are, and at all times have been, in
material compliance with, and have not been and are not in material violation of
any Environmental Law.

(b) Neither Morningstar nor any of its Subsidiaries has received any citation,
directive, inquiry, summons, warning, Order, notice, or other written
communication from any Governmental Entity, private citizen, or other individual
or entity of any actual, alleged or potential violation or failure to comply
with any Environmental Law, or of any actual, alleged or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities.

(c) There are no pending or, to the Knowledge of Morningstar, threatened Claims,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any
Property, any property in which Morningstar or any of its Subsidiaries has, or
has had, an interest or any business conducted by Morningstar or any of its
Subsidiaries.

(d) Neither Morningstar nor any of its Subsidiaries, has incurred any
Environmental, Health, and Safety Liabilities, including without limitation,
liabilities with respect to any Property, any property that Morningstar or any
of its Subsidiaries previously owned, occupied or operated or any business
conducted by Morningstar or any of its Subsidiaries.

(e) Except for such Hazardous Materials as may be stored in units by tenants
without any Knowledge of Morningstar and except for Hazardous Materials stored
or managed in compliance with Environmental Laws, no Hazardous Materials are
present at any Property or to the Knowledge of Morningstar were present on any
property that Morningstar or any of its Subsidiaries previously owned, occupied
or operated. Neither Morningstar nor any of its Subsidiaries has conducted, or
is aware of, any Hazardous Activity conducted at any Property, or to the
Knowledge of Morningstar at any property that Morningstar or any of its
Subsidiaries previously owned, occupied or operated or in any business operated
by Morningstar or any of its Subsidiaries, except in compliance with
Environmental Laws.

(f) There has been no Release of any Hazardous Materials upon, below, into or on
any Property, or to the Knowledge of Morningstar any property that Morningstar
or any of its Subsidiaries previously owned, occupied or operated or to the
Knowledge of Morningstar at any other locations where any Hazardous Materials
generated, manufactured, refined, imported or used by Morningstar or its
Subsidiaries or any of their predecessors, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received. To the Knowledge
of Morningstar, there has been no Release of any Hazardous Materials at any site
resulting from any business conducted by Morningstar or any of its Subsidiaries.

(g) Morningstar has delivered to Shurgard copies of any reports, studies,
analyses, tests or monitoring results possessed by Morningstar or any of its
Subsidiaries pertaining to (i) the presence or Release of Hazardous Materials or
the conduct of Hazardous Activities at any Property, at any property that
Morningstar or any of its Subsidiaries previously owned, occupied or operated or
in any business operated by Morningstar, it Subsidiaries or any of their
predecessors or (ii) compliance by Morningstar or any of its Subsidiaries or any
other Person for whose conduct it is or may be held responsible, with
Environmental Laws.

(h) The following definitions shall apply to this Section 4.20:

"Knowledge of Morningstar" shall mean only that information and data contained
in the reports, analyses, tests, monitoring, or correspondence provided by
Morningstar or any of its Subsidiaries to Shurgard pertaining to environmental,
occupational safety, and health matters, including without limitation the
Environment; Environmental, Health, and Safety Liabilities, Environmental Law,
Hazardous Activity; Hazardous Materials, and Occupational Safety and Health Law.

"CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. S 9601 et seq., as amended.

"Damages" shall mean any and all losses, Claims, damages, liabilities,
obligations, Taxes, judgments, equitable relief granted, settlements, awards
(including back-pay awards), demands, offsets, diminution of value involving a
third party Claim, defenses, counterclaims, actions or proceedings, costs,
expenses and attorneys' fees (including any such reasonable costs, expenses and
attorneys' fees incurred in enforcing any right of indemnification against any
Indemnitor or with respect to any appeal), interest and penalties, if any.

"Environment" shall mean soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins and
wetlands), subsurface waters, groundwaters, drinking water supply, sediments,
air (including outdoor and indoor air), plant and animal life, and any other
environmental medium or natural resource.

"Environmental, Health, and Safety Liabilities" shall mean any Damages or other
responsibility arising from or under Environmental Law or Occupational Safety
and Health Law and consisting of or relating to (a) any environmental, health,
or safety matters or conditions (including on-site or off-site contamination,
occupational safety and health, and regulation of chemical substances or
products), (b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, Damages, and response, investigative, removal,
remedial, or inspection costs and expenses, (c) financial responsibility for
cleanup costs or corrective action, including any investigation, cleanup,
removal, remedial, containment, or other remediation or response actions
("Cleanup") and for any natural resource damages, or (d) any other compliance
corrective, investigative, removal, remedial, response measures.

"Environmental Law" shall mean all federal, state and local laws (whether under
common law, statute, ordinance, rule, regulation or otherwise), permits, orders,
decrees, judgments, guidelines, standards, policies and other requirements of
governmental authorities, whether existing as of Closing or any time prior,
relating to the protection of human health, safety, natural resources or the
Environment.

"Hazardous Activity" shall mean the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials and any other
act, business, operation or thing that increases the danger, or risk of danger,
or poses an unreasonable risk of harm to Persons or property on or off the
Properties.

"Hazardous Materials" shall mean all chemicals, materials, substances, or wastes
that are regulated, listed, defined, designated or classified as, or otherwise
determined to be, dangerous, hazardous, radioactive, toxic or a pollutant or a
contaminant, whether or not under or pursuant to any Environmental Law,
including any admixture or solution thereof, and specifically including, without
limitation, petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing material and polychlorinated
biphenyls.

"Occupational Safety and Health Law" shall mean any Law designed to provide safe
and healthful working conditions and to reduce occupational safety and health
hazards, and any program, whether governmental or private (including those
promulgated or sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.

"Release" shall mean any releasing, spilling, emitting, leaking, pumping,
escaping, dumping, injecting, depositing, disposing, discharging, dispersing or
leaching into the Environment, whether intentional or unintentional.

"Remedial Action" shall mean any action required by any Governmental Entity or
necessary to obtain compliance with any Environmental Law to (a) investigate,
cleanup, remove, treat or in any other way address any Hazardous Material,
(b) prevent the Release of any Hazardous Materials, or (c) perform pre-remedial
studies and investigations or post-remedial monitoring and care.

4.21 Certain Payments

Neither Morningstar nor any of its Subsidiaries nor any member of the
Morningstar Executive Group, nor to the Knowledge of Morningstar, any other
director, officer, agent, or employee of Morningstar or any of its Subsidiaries,
or any other Person associated with or acting for or on behalf of Morningstar or
any of its Subsidiaries, has directly or indirectly made any contribution, gift,
bribe, rebate, payoff, influence payment, kick-back, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of Morningstar or
any of its Subsidiaries.

4.22 Brokers or Finders

Neither Morningstar nor any of its Subsidiaries nor any Person acting on behalf
of Morningstar or any of its Subsidiaries has directly or indirectly incurred,
nor will incur as a result of any action taken by or on behalf of Morningstar or
any of its Subsidiaries, any liability for brokerage or finders' fees or agents'
commissions or any similar fees, charges or payments in connection with this
Agreement, or any transaction contemplated hereby.

4.23 Relationships with Related Persons

Neither Morningstar nor any of its Subsidiaries nor any Related Person of
Morningstar owns (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in a Person that has (a) had business
dealings or a material financial interest in any transaction with Morningstar or
any of its Subsidiaries, or (b) engaged in competition with Morningstar or any
of its Subsidiaries with respect to any line of business of Morningstar or any
of its Subsidiaries in any market presently served by Morningstar or any of its
Subsidiaries.

"Related Person" shall mean:

(a) with respect to a particular individual (i)  each other member of such
individual's Family (as defined below), (ii)  any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family, (iii)  any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest (as defined below), and (iv) any Person with respect to which such
individual, or one or more members of such individual's Family, serves as a
director, officer, partner, executor or trustee (or in similar capacity); and

(b) with respect to a specified Person other than an individual, (i)  any Person
that directly or indirectly controls, is directly or indirectly controlled by,
or is directly or indirectly under the common control with such specified
Person, (ii)  any Person that holds a Material Interest in such specified
Person, (iii)  any Person that serves as a director, officer, partner, member,
executor, or trustee of such specified Person (or in a similar capacity),
(iv) any Person in which such specified Person holds a Material Interest,
(v) any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity), and (vi) any Related Person of
any individual described in clauses (b)(ii) or (b)(iii); provided, that none of
Morningstar or its Subsidiaries shall be deemed to be a Related Person of any
Morningstar Member or of Morningstar or any of its Subsidiaries.

For purposes of this definition,  the "Family" of an individual includes (A) the
individual, (B) the individual's spouse or former spouse, (C) any other natural
person who is related to the individual or the individual's spouse within the
second degree, and (D) any other natural person who resides with such
individual. For purposes of this definition, "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least ten percent (10%) of the outstanding voting power of a
Person or equity securities or other equity interests representing at least ten
percent (10%) of the outstanding equity securities or equity interests in a
Person.

4.24 Disclosure

(a) No representation or warranty made by Morningstar or the Morningstar Members
in this Agreement, the Restated Operating Agreement or the Management Services
Agreement contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.

(b) To the Knowledge of Morningstar, there is no fact that has specific
application to Morningstar or its Subsidiaries (other than general economic or
industry conditions) , that has not been set forth in this Agreement, and that
has resulted in or would result in a Material Adverse Effect.

4A. Representations and Warranties of Morningstar Members

Each Morningstar Member, with respect to itself and not jointly with respect to
any of the other Morningstar Members, represents and warrants to Shurgard that,
except as set forth in the corresponding section of the Schedule of Exceptions:

4A.1 Operating Agreement

The Operating Agreement has been duly authorized by all necessary action of such
Morningstar Member (if it is an entity), has been executed and delivered by such
Morningstar Member and is the valid and binding obligation of such Morningstar
Member, enforceable in accordance with its terms.

4A.2 Ownership of Units

For such Morningstar Member, Exhibit A sets forth (i) the number of Regular
Units, Series A Units, Series B Units, Series C Units and Series D Units under
the Operating Agreement owned, of record and beneficially, by such Morningstar
Member as of the date of this Agreement and (ii) the number of Units under the
Restated Operating Agreement to be held by such Morningstar Member as of the
Closing Date. Except as set forth in Section 4A.2 of the Schedule of Exceptions,
such Morningstar Member holds such units of ownership interest free and clear of
any Encumbrance.

4A.3 Authority and Enforceability

(a) All actions on the part of such Morningstar Member under the Operating
Agreement and the Restated Operating Agreement necessary for the due
authorization, execution, delivery and performance of this Agreement and the
Restated Operating Agreement, the consummation of the transactions contemplated
hereby and thereby, and the performance of such Morningstar Member's obligations
under this Agreement and the Restated Operating Agreement have been taken or
will be taken on or prior to the Closing.

(b) This Agreement has been, and the Restated Operating Agreement will be on or
before the Closing, duly executed and delivered by such Morningstar Member, as
the case may be, as contemplated by this Agreement.

(c) This Agreement constitutes the legal, valid and binding obligation of such
Morningstar Member, enforceable against such Morningstar Member in accordance
with its terms. On execution and delivery by the Morningstar Members of the
Restated Operating Agreement, such agreement will constitute the legal, valid
and binding obligations of such Morningstar Member, enforceable against such
Morningstar Member in accordance with its terms.

4A.5 Noncontravention

Neither the execution or the delivery of this Agreement or the Restated
Operating Agreement by such Morningstar Member, nor the consummation or
performance of any of the transactions contemplated hereby or thereby by such
Morningstar Member will, directly or indirectly (with or without notice or lapse
of time):

(a) contravene, conflict with, or result in a violation of any provisions of
such Morningstar Member's formation or organizational documents (if such
Morningstar Member is an entity);

(b) contravene or conflict with, or result in a violation of, or give any
Governmental Entity or other Person the right to challenge any of the
transactions contemplated by this Agreement, the Operating Agreement or the
Restated Operating Agreement or the exercise any remedy or obtain any relief
under, any Law or any Order to which such Morningstar Member may be subject;

(c) contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Entity the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Authorization;

(d) contravene, conflict with, or result in a violation or breach of, any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any Contract or other restriction, Encumbrance or liability
to which such Morningstar Member is a party or by which such Morningstar Member
is bound or to which any assets of such Morningstar Member is subject;

(e) result in the imposition or creation of any Encumbrance on or with respect
to any of the assets of such Morningstar Member.

4A.6 Contracts

Section 4.10.1 of the Schedule of Exceptions sets forth all Contracts that are
currently in force and that contain covenants that in any way purport to
restrict the business activity of any Morningstar Member, or limit the freedom
of any Morningstar Member to engage in any line of business or to compete with
any Person.

4A.7 Consents

No notices, reports or other filings are required to be made by such Morningstar
Member with, nor are any Authorizations required to be obtained by such
Morningstar Member from, any Governmental Entity or any other Person in
connection with the execution, delivery and performance by such Morningstar
Member of this Agreement or the Restated Operating Agreement, or the
consummation by such Morningstar Member of the transactions contemplated hereby
and thereby.

4A.8 Certain Payments

Such Morningstar Member has not directly or indirectly made any contribution,
gift, bribe, rebate, payoff, influence payment, kick-back, or other payment to
any Person, private or public, regardless of form, whether in money, property or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of Morningstar or
any of its Subsidiaries.

5. Representations and Warranties of Shurgard

Shurgard represents and warrants to Morningstar and the Morningstar Members that
the following statements are accurate and complete.

5.1 Organization; Authorization

Shurgard is a corporation duly organized, validly existing and in good standing
under the laws of the State of Washington. Shurgard has all requisite corporate
power and authority to carry on its business as presently conducted, to carry
out the transactions contemplated in this Agreement, the Restated Operating
Agreement and the Management Services Agreement.

5.2 Authorization and Enforceability

(a) All actions on the part of Shurgard and its officers, directors and
shareholders necessary for the due authorization, execution, delivery and
performance of this Agreement, the Restated Operating Agreement and the
Management Services Agreement, the consummation of the transactions contemplated
hereby and thereby, and the performance of all Shurgard's obligations under this
Agreement, the Restated Operating Agreement and the Management Services
Agreement have been taken or will be taken prior to the Closing.

(b) This Agreement has been, and the Restated Operating Agreement and the
Management Services Agreement will be on or before the Closing, duly executed
and delivered by Shurgard, as contemplated by this Agreement.

(c) This Agreement constitutes the legal, valid and binding obligation of
Shurgard, enforceable against Shurgard in accordance with its terms. On
execution and delivery by Shurgard of the Restated Operating Agreement, such
agreement will constitute the legal, valid and binding obligation of Shurgard,
enforceable against Shurgard in accordance with its terms. On execution and
delivery by Shurgard of the Management Services Agreement, such agreement will
constitute the legal, valid and binding obligation of Shurgard, enforceable
against Shurgard in accordance with its terms.

5.3 Noncontravention

Neither the execution and delivery of this Agreement, the Restated Operating
Agreement or the Management Services Agreement by Shurgard, nor the consummation
or performance of any of the transactions contemplated hereby and thereby by
Shurgard, will directly or indirectly (with or without notice or lapse of time):

(a) contravene, conflict with, or result in a violation of any provisions of the
articles of incorporation or the bylaws of Shurgard, or any resolution adopted
by the board of directors or the shareholders of Shurgard,

(b) contravene or conflict with, or result in a violation of, or give any
Governmental Entity or other Person the right to challenge any of the
transactions contemplated by this Agreement, the Restated Operating Agreement or
the Management Services Agreement or to exercise any remedy or obtain any relief
under, any Law or any Order to which Shurgard may be subject; or

(c) contravene, conflict with, or result in a violation of or breach of, any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any contract, agreement, lease, note, obligation or other
undertaking or arrangement or other restriction, Encumbrance or liability to
which Shurgard is a party or by which Shurgard is bound or to which any assets
of Shurgard are subject.

5.4 Consents

No notices, reports or other filings are required to be made by Shurgard with,
nor are any consents, licenses, permits, authorizations or approvals required to
be obtained by Shurgard from, any Governmental Entity or any other Person in
connection with the execution, delivery and performance by Shurgard of this
Agreement or the Restated Operating Agreement or the Management Services
Agreement, or the consummation by Shurgard of the transactions contemplated
hereby or thereby.

5.5 Investment Intent

(a) The Shurgard Units to be acquired pursuant to the provisions of this
Agreement will be, when delivered, acquired by Shurgard for investment for the
account of Shurgard and not with a view to the subsequent resale or other
distribution thereof, except within the limitations prescribed under the rules
and regulations under the Securities Act, or in some other manner that will not
violate the registration requirements of the Securities Act or any applicable
"Blue Sky" laws.

(b) Shurgard, through its agents, employees, contractors, attorneys, accountants
and representatives has been given (i) access to all such books and records and
other information as Shurgard has requested and access to an opportunity to
present questions to the Morningstar Executive Group and other employees of
Morningstar and its Subsidiaries, as Shurgard has requested and (ii) have been
given the opportunity to go upon each of the Properties of Morningstar and its
Subsidiaries prior to Closing to conduct such tests, investigations and analyses
of the Properties as Shurgard deems desirable and to review and to make
photocopies of all Contracts, title insurance policies, environmental reports,
surveys, Authorizations, permits, rent rolls, and other studies, agreements,
reports and information relating directly or indirectly to any one or more of
the Properties.

5.6 Legal Proceedings

There is no pending Proceeding that has been commenced against Shurgard that
challenges, or may have the effect of preventing, delaying, making illegal or
otherwise interfering with, any of the transactions contemplated by this
Agreement, the Restated Operating Agreement or the Management Services
Agreement. To the knowledge of Shurgard, (A) no such Proceeding has been
threatened, and (B) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding.

5.7 Brokers or Finders

Neither Shurgard nor any Person acting on behalf of Shurgard has directly or
indirectly incurred, nor will incur as a result of any action taken by or on
behalf of Shurgard, any liability for brokerage or finders' fees or agents'
commissions or any similar fees, charges or payments in connection with this
Agreement, or any transaction contemplated hereby.

6. Certain Covenants

6.1 Access

(a) Prior to the Closing Date, Morningstar has given Shurgard and shall continue
to give, and shall cause each of its Subsidiaries to (i) give Shurgard full
access, during normal business hours, to all facilities and properties of
Morningstar, (ii) furnish Shurgard with all documents and information as may be
reasonably requested by Shurgard, (iii) permit Shurgard to review all of the
books and records and Contracts as may be reasonably requested by Shurgard and
to make copies thereof, and (iv) fully cooperate with Shurgard in their
investigation and examination of Morningstar and its Subsidiaries and the
business of Morningstar and its Subsidiaries. The parties hereto expressly agree
that no investigation, or receipt of information provided by or on behalf of
Morningstar and its Subsidiaries or review thereof, by Shurgard shall diminish
or obviate, relieve Morningstar or the Morningstar Members from, or affect
Shurgard's ability or right to rely on, any of the representations, warranties,
covenants and agreements of Morningstar or the Morningstar Members contained in
this Agreement, the Restated Operating Agreement or the Management Services
Agreement.

(b) In the event that the Closing under this Agreement shall not occur, Shurgard
shall keep confidential and not use or disclose to any Person any information
acquired by Shurgard from Morningstar pursuant to this Section 7.1 or otherwise
disclosed in connection with the negotiation of this Agreement, unless
Morningstar shall give its written consent to the contrary; provided, however,
that the foregoing obligations of confidentiality and non-use shall not apply to
any information that (i) at the time of disclosure is, or thereafter becomes,
available to the public through no breach of this Agreement by Shurgard;
(ii) was known to, or otherwise in the possession of, Shurgard or its Affiliates
prior to the receipt of such information from Morningstar; (iii) is obtained by
Shurgard from a source other than Morningstar and other than one who would be
breaching a commitment of confidentiality to Morningstar by disclosing the
information to Shurgard; (iv) is developed by Shurgard or its Affiliates
independently of Morningstar's information; or (v) is required to be disclosed
by Shurgard in connection with a pending Claim.

6.2 Conduct of Business of Morningstar Prior to Closing

Except for actions taken with the prior written consent of Shurgard or otherwise
contemplated hereby or disclosed in the Schedule of Exceptions, from the date of
this Agreement until the Closing Date, Morningstar shall conduct, and shall
cause each of its Subsidiaries to conduct, the business of Morningstar and its
Subsidiaries only in the ordinary course consistent with past practices, and
Morningstar shall, and shall cause each of its Subsidiaries in all material
respects, to:

(a) maintain its business intact, preserve the goodwill of its business and
present relationships with the customers and suppliers of its business and
others with whom its business has business relations;

(b) maintain the Properties in good operating condition and repair;

(c) meet the contractual obligations of its business and perform and pay its
obligations as they mature in the ordinary course of business;

(d) comply with all Judgments, all laws, statutes, rules, ordinances and
regulations promulgated by any Governmental Entity and all Authorizations
applicable to the conduct of its business or the ownership or operation of the
Properties, and maintain, and prosecute applications for, such Authorizations
and pay all Taxes, assessments and other charges applicable thereto;

(e) promptly advise Shurgard in writing of any adverse change in the Properties,
business, results of operations, financial condition or prospects of Morningstar
and its Subsidiaries, taken as a whole;

(f) not take any action, or omit to take any action, that would result in any of
Morningstar's or the Morningstar Members' representations and warranties made
herein being inaccurate or misleading at the time of such action or omission as
if made at and as of such time;

(g) give written notice to Shurgard promptly on becoming aware of any inaccuracy
of any of Morningstar's or the Morningstar Members' representations or
warranties made herein or in the Schedule or Exceptions or of any event or state
of facts that would result in any such representation or warranty being
inaccurate or misleading at the time of such event or state of facts as if made
at and as of such time (any such notice to describe such inaccuracy, event or
state of facts in reasonable detail);

(h) not solicit, approach or furnish information to any prospective buyer, or
negotiate with any third party concerning the sale or transfer of the business
of Morningstar or any part thereof, whether any of such actions are taken
directly or indirectly, through a representative or otherwise;

(k) not make or change any election concerning Taxes or Tax Returns (unless
required by law or necessary or prudent to preserve Shurgard's status as a
REIT), file any amended Tax Return, settle any Tax claim or assessment or take
any other action with respect to Taxes of Morningstar or any of its Subsidiaries
other than in the ordinary course of business or as contemplated hereby.

(l) not knowingly take any action that reasonably could have a negative impact
on Shurgard's status as a REIT or cause Shurgard to incur any prohibited
transaction Tax under Section 857 of the Code.

6.3 Covenants Prior to Closing

(a) Morningstar shall repurchase or otherwise cancel all Series D Units of
Morningstar and all rights to acquire Series D Units.

(b) Morningstar and the Morningstar Members shall at or prior to Closing execute
and deliver the Restated Operating Agreement.

(c) Morningstar shall at or prior to Closing execute and deliver the Management
Services Agreement.

6.4 Consents and Approvals

Morningstar and the Morningstar Members shall apply for or otherwise use
reasonable efforts to obtain the waiver, consent and approval of all Persons
whose waiver, consent or approval is required in order to consummate the
transactions contemplated by this Agreement, or is required by any Contract.

6.5 Tax Covenants

Since December 31, 2001, the Morningstar Members have not and, after the Closing
Date, will not cause or permit any Subsidiary that is controlled by one or more
of the Morningstar Members to (i) take any action that reasonably could have a
negative impact on Shurgard's status as a REIT or (ii) cause Shurgard to incur
any Tax under Section 857 of the Code.

6.6 Further Assurances

From time to time following the Closing, Shurgard, Morningstar and the
Morningstar Members shall execute and deliver, or cause to be executed and
delivered, to each other additional instruments and documents as the requesting
party may reasonably request or as may be otherwise necessary or desirable to
carry out the purposes and intent of this Agreement.

7. Conditions Precedent to Shurgard's Obligations

Shurgard's obligation to purchase the Shurgard Units at the Closing shall be
subject to the satisfaction at or prior to the Closing of all of the following
conditions, each of which is for the sole benefit of Shurgard and may be waived
only in writing Shurgard:

7.1 No Injunction or Litigation

As of the Closing Date, there shall not be any Claim or Judgment of any nature
or type threatened, pending or made by or before any Entity, that questions or
challenges the lawfulness of the transactions contemplated by this Agreement or
the Restated Operating Agreement under any law or regulation or seeks to delay,
restrain or prevent such transactions. Any applicable waiting period specified
in the HSR Act, including any extensions thereof, shall have expired or been
terminated.

7.2 Representations, Warranties and Covenants

(a) The representations and warranties made by Morningstar, the Morningstar
Executive Group and the Morningstar Members in this Agreement, the Restated
Operating Agreement, the Management Agreement and any certificate furnished
pursuant hereto or thereto shall be accurate and correct on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date;

(b) Morningstar and the Morningstar Members shall have performed and complied
with the covenants and agreements required by this Agreement to be performed and
complied with by them on or prior to the Closing Date; and

(c) Morningstar, the Morningstar Executive Group and the Morningstar Members
shall have delivered to Shurgard a certificate dated the Closing Date to the
foregoing effect, signed by a duly authorized officer of the Manger of
Morningstar and by the Morningstar Members.

7.3 No Adverse Change

From the date of this Agreement to the Closing Date, there shall not have been
any change in the assets, including the Properties, business, results of
operations, financial condition or prospects of Morningstar and its
Subsidiaries, taken as a whole, that would constitute a Material Adverse Effect
and Morningstar and the Morningstar Executive Group shall have delivered to
Shurgard a certificate dated the Closing Date to the foregoing effect, signed by
a duly authorized officer of Morningstar and the Morningstar Executive Group.

7.4 Corporate Existence of Morningstar and its Subsidiaries

Morningstar shall have delivered to Shurgard a certificate issued by the
Secretary of State of each of the State of Delaware and the state of formation
of each of Morningstar's Subsidiaries, and of each state in which Morningstar or
any of its Subsidiaries is qualified as a foreign entity, as of a date
reasonably acceptable to Shurgard, as to the good standing (or existence, as
applicable) of Morningstar, or its Subsidiaries, as applicable, in such state;

7.5 Manager's Certificate

Morningstar shall have delivered to Shurgard a certificate of an officer of the
Manager of Morningstar, certifying as to (1) the Operating Agreement, (2) the
incumbency and signatures of the officers of the Manager of Morningstar
executing this Agreement, the Restated Operating Agreement and/or the Management
Services Agreement, and (3) the resolutions adopted by the manager of
Morningstar in connection with the transactions contemplated hereby, by the
Restated Operating Agreement and/or by the Management Services Agreement (copies
of which shall be attached to such certificate);

7.6 Opinion of Counsel to Morningstar

Morningstar shall have delivered to Shurgard an opinion of counsel to
Morningstar, addressed to Shurgard, in substantially the form attached as
Exhibit F;

7.7 Redemption of Convertible Debt

Concurrent with the Closing, Morningstar shall redeem or repay in full all
convertible debt owed by Morningstar pursuant to the Credit Agreement

7.8 Execution of Agreements

(a) The Morningstar Members shall have executed and delivered the Restated
Operating Agreement, and Morningstar shall have executed and delivered the
Management Services Agreement.

(b) Those Morningstar Members and Affiliates who are identified as parties to
the Affiliation and Development Agreement, shall have executed and delivered
such agreement and all related documents to be executed simultaneously.

7.9 Consents and Approvals

All consents, approvals or authorizations of, or declarations, filings or
registrations with, all Governmental Entities and other Persons required for the
consummation of the transactions contemplated by this Agreement, the Restated
Operating Agreement and the Management Services Agreement shall have been
obtained or made on terms satisfactory to Shurgard and shall be in full force
and effect.

7.10 Title Insurance

To the extent requested by Shurgard, Morningstar shall have obtained updates of
the existing policies of title insurance on all Properties within ninety
(90) days of the Closing Date, subject to standard printed exceptions and
exceptions set forth in Section 4.11 of the Schedule of Exceptions. Morningstar
shall have furnished copies to Shurgard.

7.11 Environmental Reports

Morningstar shall have obtained at or prior to Closing Phase I environmental
reports with respect to 19 Properties set forth in Section 4.20 of the Schedule
of Exceptions and such reports shall have been delivered to Shurgard and
satisfactory to Shurgard in all respects.

7.12 Tax Forms

Shurgard shall have received properly executed (1) nonforeign affidavits or
certificates necessary to comply with Section 1445 of the Code in a form
acceptable to Shurgard and (2) "taxable REIT subsidiary" elections on IRS Form
8875 by each Subsidiary that is taxable as a corporation, which elections shall
be effective as of the Closing Date.

8. Conditions Precedent to Morningstar's Obligations

Morningstar's obligation to sell the Shurgard Units to Shurgard at the Closing
shall be subject to the satisfaction at or prior to the Closing of all of the
following conditions, each of which is for the sole benefit of Morningstar and
may be waived only in writing by Morningstar:

8.1 No Injunction or Litigation

As of the Closing Date, there shall not be any Claim or Judgment of any nature
or type threatened, pending or made by or before any Governmental Entity that
questions or challenges the lawfulness of the transactions contemplated by this
Agreement, the Restated Operating Agreement or the Management Services Agreement
under any law or regulation or seeks to delay, restrain or prevent such
transactions.

8.2 Representations, Warranties and Covenants

(a) The representations and warranties made by Shurgard in this Agreement, the
Restated Operating Agreement or the Management Services Agreement or any
certificate furnished pursuant hereto or thereto shall be accurate and complete
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date;

(b) Shurgard shall have performed and complied with the covenants and agreements
required by this Agreement to be performed and complied with by it on or prior
to the Closing Date.

(c) Shurgard shall have delivered to Morningstar a certificate dated the Closing
Date to the foregoing effect, signed by a duly authorized officer of Shurgard.

8.3 Secretary's Certificate

Shurgard shall have delivered to Morningstar a certificate of the Secretary or
an Assistant Secretary of Shurgard, certifying as to (1) the bylaws of Shurgard
as amended to date, (2) the incumbency and signatures of the officers of
Shurgard executing this Agreement, the Restated Operating Agreement and/or the
Management Services Agreement, and (3) the resolutions adopted by the board of
directors of Shurgard in connection with the transactions contemplated hereby,
by the Restated Operating Agreement and/or by the Management Services Agreement
(copies of which shall be attached to such certificate);

8.4 Opinion of Counsel to Shurgard

Shurgard shall have delivered to Morningstar an opinion of counsel to Shurgard,
addressed to Morningstar, in substantially the form attached as Exhibit G;

8.5 Execution of Agreements

(a) Shurgard shall have executed and delivered the Restated Operating Agreement,
the Management Services Agreement, the Affiliation and Development Agreement and
all related documents contemplated thereby.

(b) Shurgard or one of its Affiliates shall have executed and delivered an
Affiliation and Development Agreement in the form initialed by Morningstar and
Shurgard and all related documents to be executed simultaneously.

8.6 Consents and Approvals

All consents, approvals or authorizations of, or declarations, filings or
registrations with, all Governmental Entities and other Persons required for the
consummation of the transactions contemplated by this Agreement, the Restated
Operating Agreement and the Management Services Agreement shall have been
obtained or made on terms satisfactory to Shurgard and shall be in full force
and effect. All consents, approvals or authorizations of any other third parties
required for the consummation of the transactions contemplated by this
Agreement, the Restated Operating Agreement and the Management Services
Agreement.

9. Further Assurances

After the Closing Date, Morningstar and the Morningstar Members shall from time
to time at Shurgard's request execute and deliver, or cause to be executed and
delivered, such further instruments of conveyance, assignment and transfer or
other documents, and perform such further acts and obtain such further consents,
approvals and authorizations, as Shurgard may reasonably require in order to
fully effect the conveyance and transfer to Shurgard of, or perfect Shurgard's
right, title and interest in, the Shurgard Units or to otherwise comply with the
provisions of this Agreement and consummate the transactions contemplated by
this Agreement, the Restated Operating Agreement and the Management Services
Agreement.

10. Costs

Each of Shurgard and Morningstar shall be responsible for its own costs and
expenses incurred in connection with the preparation, negotiation and delivery
of this Agreement, the Restated Operating Agreement and the Management Services
Agreement, including but not limited to attorneys' and accountants' fees and
expenses.

11. Survival and Indemnification

11.1 Survival

The representations and warranties made by Morningstar and the Morningstar
Executive Group in Sections 4.3 of this Agreement and the indemnification
provided in Sections 11.2(a)(iii) and (iv) shall survive the Closing
indefinitely. The representations and warranties made by Morningstar and the
Morningstar Executive Group in Section 4.13 and the indemnification provided by
Section 11.2(v) shall survive for the applicable statute of limitation periods.
The representations and warranties made by Morningstar and the Morningstar
Executive Group in Section 4.20 shall survive the Closing for a period of the
lesser of (i) ten years after the Closing Date or (ii) five years after the last
of the Morningstar Executive Group ceases to hold a membership interest in
Morningstar. All representations and warranties made by Morningstar and the
Morningstar Members (other than those set forth in the two previous sentences)
and Shurgard contained in this Agreement or in any certificate delivered
pursuant hereto shall survive the Closing for a period of two years after the
Closing Date, and shall not be deemed waived or otherwise affected by any
investigation made or any knowledge acquired with respect thereto. The covenants
and agreements of Morningstar and Shurgard contained in this Agreement shall
survive the Closing and shall continue until all obligations with respect
thereto shall have been performed or satisfied or shall have been terminated in
accordance with their terms.

11.2 Indemnification by the Morningstar Executive Group

(a) From and after the Closing Date, each of the Morningstar Executive Group,
jointly and severally, shall indemnify and hold Morningstar and Shurgard and its
Affiliates (the "Indemnified Parties") harmless from and against, and shall
reimburse Morningstar, Shurgard and its Affiliates for, any and all Losses
directly or indirectly arising out of, based on or in connection with:

(i) any inaccuracy in any representation or breach of any warranty made by
Morningstar and the Morningstar Executive Group in this Agreement, the Restated
Operating Agreement or in any certificate delivered pursuant hereto or thereto;

(ii) any failure by Morningstar or any member of the Morningstar Executive Group
to perform or comply with any covenant or agreement in this Agreement or the
Restated Operating Agreement;

(iii) any exceptions to the title of Properties covered by title insurance
updates provided in accordance with Section 7.10, which exceptions arise after
the date of such title insurance updates and prior to or at the Closing Date;

(iv) any Escheatment Liability except to the extent reflected in the Final
Closing Balance Sheet; and

(v) any liability for Taxes of Morningstar, Shurgard (to the extent such Taxes
are attributable to or arise out of its ownership of Units) or any Subsidiary
assessed during, attributable to or arising out of a taxable period of
Morningstar or any such Subsidiary ending on or prior to the Closing Date (or
the portion of any such taxable period that includes, but does not end on, the
Closing Date) to the extent such Taxes exceed the reserve for Tax liability set
forth on the face of the Final Closing Balance Sheet.

(b) From and after the Closing Date, each of the Morningstar Members, severally
and not jointly, shall indemnify and hold the Indemnified Parties harmless from
and against and shall reimburse the Indemnified Parties for any and all Losses
directly or indirectly arising out of, based on or in connection with any
inaccuracy in any representation or breach of any warranty made by a Morningstar
Member in this Agreement or the Restated Operating Agreement.

(c) Following the Closing, the Shurgard shall be entitled to act on behalf of
Morningstar in all matters relating to indemnification under this Section 11. If
the indemnifiable Losses are incurred by Morningstar, the Morningstar Executive
Group, or the Morningstar Members as applicable shall pay any indemnification
amount arising under this Section 11.2 by making an additional cash capital
contribution to Morningstar under the Restated Operating Agreement without
issuance of additional Units. If the indemnifiable Losses are incurred directly
by the Shurgard or any of its Affiliates, the Morningstar Executive Group or the
Morningstar Members as applicable shall pay any indemnification amount directly
to the person entitled to such indemnification.

11.3 Indemnification Threshold

The Morningstar Executive Group and the Morningstar Members shall not have
liability for indemnification of Morningstar with respect to matters described
in Section 11.2 unless and until, and only to the extent that, the aggregate
amount of all Losses incurred by Morningstar with respect to such matters, taken
together, exceed $100,000.

11.4 Procedure for Third Party Claims

(a) The Indemnified Parties agree to give prompt notice to the Morningstar
Members of the assertion of any claim by third party or the commencement of any
suit, action or proceeding by a third party (a "Third Party Claim") in respect
of which indemnity may be sought under this Article 11; provided, that the
failure to give such notice shall not affect the rights of the Indemnified
Parties except to the extent the Morningstar Executive Group or the Morningstar
Members, as applicable, are materially prejudiced by such failure. The notice
shall state the information then available regarding the amount and nature of
such claim, liability or expense and shall specify the provision or provisions
of this Agreement under which the liability or obligation is asserted.

(b) If the Morningstar Executive Group or the Morningstar Members, as
applicable, admit that the Indemnified Parties are entitled to indemnification
with respect to such claim, then the Morningstar Executive Group or the
Morningstar Members, as applicable, shall have the right, on written notice
given to Indemnified Parties within 30 days after receipt of the notice from the
Indemnified Parties of any Third Party Claim, to assume the defense or handling
of such Third Party Claim, at the Morningstar Executive Group or the Morningstar
Members, as applicable, sole expense, with counsel reasonably acceptable to the
Indemnified Parties in connection with conducting the defense or handling of
such Third Party Claim, and the Morningstar Executive Group or the Morningstar
Members, as applicable, shall defend or handle the same in consultation with the
Indemnified Parties, shall keep Indemnified Parties timely apprised of the
status of such Third Party Claim and shall not, without the prior written
consent of the Indemnified Parties, directly or indirectly assume any position
or take any action that would impose any obligation of any kind on or restrict
the actions of the Indemnified Parties. The Morningstar Executive Group or the
Morningstar Members, as applicable, shall not, without the prior written consent
of the Indemnified Parties, agree to a settlement of any Third Party Claim that
could directly or indirectly lead to liability or create any financial or other
obligation on the part of the Indemnified Parties for which Indemnified Parties
are not entitled to indemnification hereunder. The Indemnified Parties shall
cooperate with the Morningstar Executive Group or the Morningstar Members, as
applicable, and shall be entitled to participate in the defense or handling of
such Third Party Claim with its own counsel and at its own expense.
Notwithstanding the foregoing, in the event the Morningstar Executive Group or
the Morningstar Members, as applicable, fail to conduct the defense or handling
of any Third Party Claim in good faith after having assumed such defense or
handling, then the provisions of Section 11.4.3 shall govern.

(c) If the Morningstar Executive Group or the Morningstar Members, as
applicable, do not give written notice to the Indemnified Parties, within
30 days after receipt of the notice from the Indemnified Parties of any Third
Party Claim, of their election to assume the defense or handling of such Third
Party Claim, then the Indemnified Parties may, at the Morningstar Executive
Group or the Morningstar Members', as applicable, expense, select counsel in
connection with conducting the defense or handling of such Third Party Claim and
defend or handle such Third Party Claim in such manner as it may deem
appropriate, provided, however, that the Indemnified Parties shall keep the
indemnifying party timely apprised of the status of such Third Party Claim and
shall not settle such Third Party Claim without the prior written consent of the
Morningstar Executive Group or the Morningstar Members, as applicable, which
consent shall not be unreasonably withheld. If the Indemnified Parties defend or
handle such Third Party Claim, the Morningstar Executive Group or the
Morningstar Members, as applicable, shall cooperate with the Indemnified Parties
and shall be entitled to participate in the defense or handling of such Third
Party Claim with its own counsel and at its own expense.

11.5 Offset Right

In addition to any other rights or remedies the Indemnified Parties may have,
the Indemnified Parties shall be entitled to withhold and offset against any
amounts payable by such Indemnified Party under this Agreement or the Restated
Operating Agreement the amount of Losses such Indemnified Party has sustained or
that it reasonably believes it may sustain.

12. Termination

12.1 Termination

This Agreement may be terminated before the Closing:

(a) by Morningstar and the Morningstar Members, by giving written notice to
Shurgard on or after __________, ____, if any of the conditions set forth in
Section 8 is not satisfied or waived by such date, unless such satisfaction has
been frustrated or made impossible by any act or failure to act by Morningstar
or the Morningstar Members;

(b) by Shurgard, by giving written notice to Morningstar and the Morningstar
Members on or after __________, ____, if any of the conditions set forth in
Section 7 is not satisfied or waived by such date, unless such satisfaction has
been frustrated or made impossible by any act or failure to act by Shurgard;

(c) by Morningstar and the Morningstar Members, by giving written notice to
Shurgard at any time, if Shurgard has breached any representation, warranty,
covenant or agreement contained in this Agreement;

(d) by Shurgard, by giving written notice to Morningstar and the Morningstar
Members at any time, if Morningstar and/or any of Morningstar Member has
breached any representation, warranty, covenant or agreement contained in this
Agreement; or

(e) by mutual written agreement of Morningstar, the Morningstar Members and
Shurgard.

12.2 Effect of Termination

In the event of the termination of this Agreement pursuant to Section 12.1
above, this Agreement shall terminated and there shall be no other liability on
the part of Shurgard or Morningstar and the Morningstar Members to the other
parties except liability arising out of a material breach of this Agreement or
the failure by a party to fulfill its conditions hereunder, in which event the
non-breaching party reserves the right to seek all remedies available at law or
in equity. In addition in the event of termination of this Agreement (a) each
party shall return or destroy all documents containing confidential information
of the other party (and, on request, certify as to the destruction thereof), and
(b)  obligations of confidentiality and non-use with respect to the other
party's confidential information shall survive the termination of this
Agreement.

13. Miscellaneous

13.1 Public Announcements

No party shall make any public announcement in regard to the transactions
contemplated by this Agreement without the other party's prior consent, except
as may be required by law, in which case the parties shall use reasonable
efforts to coordinate with each other with respect to the timing, form and
content of such required disclosures.

13.2 Severability

If any court determines that any part or provision of this Agreement is invalid
or unenforceable, the remainder of this Agreement shall not be affected thereby
and shall be given full force and effect and remain binding on the parties.
Furthermore the court shall have the power to replace the invalid or
unenforceable part or provision with a provision that accomplishes, to the
extent possible, the original business purpose of such part or provision in a
valid and enforceable manner. Such replacement shall apply only with respect to
the particular jurisdiction in which the adjudication is made.

13.3 Modification and Waiver

This Agreement may not be amended or modified in any manner, except by an
instrument in writing signed by all of the parties. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, or in any way affect the right
of such party thereafter to enforce each and every such provision. No waiver of
any breach of this Agreement shall be deemed to be a waiver of any other or
subsequent breach.

13.4 Notices

All notices and other communications required or permitted to be given under
this Agreement shall be in writing and shall be sent by facsimile transmission,
or mailed postage prepaid by first-class certified mail, or mailed by a
nationally recognized express courier service, or hand-delivered, addressed as
follows:

if to Shurgard:

Shurgard Storage Centers, Inc.

1155 Valley Street, Suite 400

Seattle, WA 98109

Attention: ______________________

   

with a copy to:

Perkins Coie LLP

1201 Third Avenue, Suite 4800

Seattle, WA 98101-3099

Attention: Michael E. Stansbury

   

if to Morningstar or the Morningstar Members:

10833 Monroe Road

Matthews, NC 28105

Attention: Phyllis McArthur

   

with a copy to:

Kennedy Covington Lobdell & Hickman, L.L.P.

100 North Tryon Street, 42nd Floor

Charlotte, NC 28205

Attention: Glen B. Hardymon

   

Either party may change the persons or addresses to which any notices or other
communications to it should be addressed by notifying the other parties as
provided above. Any notice or other communication, if addressed and sent, mailed
or delivered as provided above, shall be deemed given or received three days
after the date of mailing as indicated on the certified mail receipt, or on the
next business day if mailed by express courier service, or on the date of
delivery or transmission if hand-delivered or sent by facsimile transmission.

13.5 Assignment

Neither Morningstar nor Shurgard may assign any of its rights or obligations
hereunder without the prior written consent of the other party. Notwithstanding
the foregoing, Shurgard may assign its rights and obligations under this
Agreement to any Affiliate of Shurgard, and furthermore Shurgard may assign its
rights and obligations hereunder to any successor of Shurgard in the conduct of
the business of Morningstar after the Closing; provided, however, that any such
assignment by Shurgard shall not relieve Shurgard from its obligations
hereunder. This Agreement shall be binding on and inure to the benefit of the
parties and their respective successors and assigns.

13.6 Captions

The captions and headings used in this Agreement have been inserted for
convenience of reference only and shall not be considered part of this Agreement
or be used in the interpretation thereof.

13.7 Entire Agreement

This Agreement constitutes the entire agreement and understanding among the
parties with respect to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations, representations and statements,
whether oral, written, implied or expressed, relating to such subject matter.

13.8 No Third-Party Rights

Nothing in this Agreement is intended, nor shall be construed, to confer on any
person or entity other than Shurgard, Morningstar and the Morningstar Members
(and only to the extent expressly provided herein, their respective Affiliates)
any right or remedy under or by reason of this Agreement.

13.9 Counterparts

This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which shall constitute one agreement.

13.10 Governing Law

This Agreement shall be governed by, and construed in accordance with, the laws
of the State of Washington as though made and to be fully performed in that
State.

[Remainder of page intentionally left blank.]

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective representatives hereunto authorized as of the day and year
first above written.

MORNINGSTAR:

MORNINGSTAR STORAGE CENTERS, LLC

By: MORNINGSTAR MANAGEMENT CO.

Its: Manager

/s/ David M. Benson

By:  David M. Benson

 Its:  President

MORNINGSTAR MEMBERS:

 

 

MORNINGSTAR MEMBERS:

 

/s/ David Benson

By: David Benson

Its: Member

 

/s/ Matthew Benson

By: Matthew Benson

Its: Member

 

/s/ Stephen E. Benson

By: Stephen E. Benson

Its: Member

 

/s/ Neville B. Christie

By: Neville B. Christie

Its: Member

 

/s/ Patricia A. Christie

By: Patricia A. Christie

Its: Member

 

/s/ Brain Livingston

By: Brian Livingston

Its: Member

 

/s/ Phyllis McArthur

By: Phyllis McArthur

Its: Member

 

MORNINGSTAR COMPANY OF CHARLOTTE, INC.

/s/ Neville R. Christie    

By: Neville R. Christie

Its: Vice President

THIRST FAMILY LIMITED PARTNERSHIP

 

/s/ Brian N. Livingston

By: Brian N. Livingston

Its: Managing Member

 

/s/ Kris Fetter

By: Kris Fetter

 

 

 

/s/ David Helms

By: David Helms

 

 

/s/ Lauren S. Benson by David Benson Attorney in Fact

By: David Benson, Attorney in Fact for Lauren S. Benson

 

 

/s/ David Benson as custodian for Ryan E. Benson

By: David Benson, Custodian for Ryan E. Benson

 

/s/ John J. McLeod

By: John J. McLeod

 

/s/ David Benson, Custodian for S.G. Benson 

By: David Benson, Custodian for Stephen G. Benson

 

 

/s/Ann B. C. Benson

By: Ann B. C. Benson

SHURGARD:

SHURGARD STORAGE CENTERS, INC.

 

 

/a/ Harrel Beck

By: Harrell L. Beck

Its: Senior Vice President

Chief Financial Officer

SCHEDULE OF EXCEPTIONS

[TO COME]