Exhibit 10.30


 




 





 


LOAN AGREEMENT


 


 


between


 


 


ESP SEVEN SUBSIDIARY LLC

as Borrower


 


 


and


 


 


GENERAL ELECTRIC CAPITAL CORPORATION

as Lender


 


 


October 16, 2007




 


 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE
  1 CERTAIN DEFINITIONS

  	
   

  	
  1

  
	
  Section 1.1

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  2 LOAN TERMS

  	
   

  	
  9

  
	
  Section 2.1

  	
   

  	
  The Loan

  	
   

  	
  9

  
	
  Section 2.2

  	
   

  	
  Interest Rate; Late
  Charge

  	
   

  	
  9

  
	
  Section 2.3

  	
   

  	
  Terms of Payment

  	
   

  	
  11

  
	
  Section 2.4

  	
   

  	
  Security

  	
   

  	
  13

  
	
  Section 2.5

  	
   

  	
  Origination Fee

  	
   

  	
  13

  
	
  Section 2.6

  	
   

  	
  Unused Fee

  	
   

  	
  13

  
	
  Section 2.7

  	
   

  	
  Debt Service Coverage

  	
   

  	
  13

  
	
  Section 2.8

  	
   

  	
  Partial Release of
  Collateral

  	
   

  	
  14

  
	
  Section 2.9

  	
   

  	
  Additional Projects

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  3 INSURANCE, CONDEMNATION, AND IMPOUNDS

  	
   

  	
  18

  
	
  Section 3.1

  	
   

  	
  Insurance

  	
   

  	
  18

  
	
  Section 3.2

  	
   

  	
  Use and Application of Insurance
  Proceeds

  	
   

  	
  20

  
	
  Section 3.3

  	
   

  	
  Condemnation Awards

  	
   

  	
  21

  
	
  Section 3.4

  	
   

  	
  Impounds

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  4 REPRESENTATIONS AND WARRANTIES

  	
   

  	
  22

  
	
  Section 4.1

  	
   

  	
  Organization and Power

  	
   

  	
  22

  
	
  Section 4.2

  	
   

  	
  Validity of Loan
  Documents

  	
   

  	
  22

  
	
  Section 4.3

  	
   

  	
  Liabilities;
  Litigation; Other Secured Transactions

  	
   

  	
  23

  
	
  Section 4.4

  	
   

  	
  Taxes and Assessments

  	
   

  	
  23

  
	
  Section 4.5

  	
   

  	
  Other Agreements;
  Defaults

  	
   

  	
  23

  
	
  Section 4.6

  	
   

  	
  Compliance with Law

  	
   

  	
  23

  
	
  Section 4.7

  	
   

  	
  Location of Borrower

  	
   

  	
  24

  
	
  Section 4.8

  	
   

  	
  ERISA

  	
   

  	
  24

  
	
  Section 4.9

  	
   

  	
  Margin Stock

  	
   

  	
  24

  
	
  Section 4.10

  	
   

  	
  Tax Filings

  	
   

  	
  24

  
	
  Section 4.11

  	
   

  	
  Solvency

  	
   

  	
  24

  
	
  Section 4.12

  	
   

  	
  Full and Accurate
  Disclosure

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  5 ENVIRONMENTAL MATTERS

  	
   

  	
  26

  
	
  Section 5.1

  	
   

  	
  Representations and
  Warranties on Environmental Matters

  	
   

  	
  26

  
	
  Section 5.2

  	
   

  	
  Covenants on
  Environmental Matters

  	
   

  	
  26

  
	
  Section 5.3

  	
   

  	
  Allocation of Risks and
  Indemnity

  	
   

  	
  27

  
	
  Section 5.4

  	
   

  	
  Lender’s Right to
  Protect Collateral

  	
   

  	
  29

  
	
  Section 5.5

  	
   

  	
  No Waiver

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  6  LEASING MATTERS

  	
   

  	
  29

  
	
  Section 6.1

  	
   

  	
  Representations and
  Warranties on Leases

  	
   

  	
  29

  
						



 


i

















 


	
  Section 6.2

  	
   

  	
  Standard Lease Form;
  Approval Rights

  	
   

  	
  30

  
	
  Section 6.3

  	
   

  	
  Covenants

  	
   

  	
  30

  
	
  Section 6.4

  	
   

  	
  Tenant Estoppels

  	
   

  	
  31

  
	
  Section 6.5

  	
   

  	
  Project Information

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  7 FINANCIAL REPORTING

  	
   

  	
  31

  
	
  Section 7.1

  	
   

  	
  Financial Statements

  	
   

  	
  31

  
	
  Section 7.2

  	
   

  	
  Accounting Principles

  	
   

  	
  32

  
	
  Section 7.3

  	
   

  	
  Other Information

  	
   

  	
  32

  
	
  Section 7.4

  	
   

  	
  Annual Budget

  	
   

  	
  32

  
	
  Section 7.5

  	
   

  	
  Audits

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  8 COVENANTS

  	
   

  	
  33

  
	
  Section 8.1

  	
   

  	
  Due on Sale and
  Encumbrance; Transfers of Interests

  	
   

  	
  33

  
	
  Section 8.2

  	
   

  	
  Taxes; Charges

  	
   

  	
  34

  
	
  Section 8.3

  	
   

  	
  Control; Management

  	
   

  	
  35

  
	
  Section 8.4

  	
   

  	
  Operation; Maintenance;
  Inspection

  	
   

  	
  35

  
	
  Section 8.5

  	
   

  	
  Taxes on Security

  	
   

  	
  35

  
	
  Section 8.6

  	
   

  	
  Legal Existence; Name,
  Etc.

  	
   

  	
  36

  
	
  Section 8.7

  	
   

  	
  Affiliate Transactions

  	
   

  	
  36

  
	
  Section 8.8

  	
   

  	
  Limitation on Other
  Debt

  	
   

  	
  36

  
	
  Section 8.9

  	
   

  	
  Further Assurances

  	
   

  	
  37

  
	
  Section 8.10

  	
   

  	
  Estoppel Certificates

  	
   

  	
  37

  
	
  Section 8.11

  	
   

  	
  Notice of Certain
  Events

  	
   

  	
  37

  
	
  Section 8.12

  	
   

  	
  Indemnification

  	
   

  	
  37

  
	
  Section 8.13

  	
   

  	
  Application of
  Operating Revenues

  	
   

  	
  38

  
	
  Section 8.14

  	
   

  	
  Representations and Warranties

  	
   

  	
  38

  
	
  Section 8.15

  	
   

  	
  Immediate Repairs

  	
   

  	
  38

  
	
  Section 8.16

  	
   

  	
  1206 Waltham, MA Lease

  	
   

  	
  38

  
	
  Section 8.17

  	
   

  	
  Contribution Agreement

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  9 ANTI-MONEY LAUNDERING AND INTERNATIONAL TRADE  CONTROLS

  	
   

  	
  39

  
	
  Section 9.1

  	
   

  	
  Compliance with
  International Trade Control Laws and OFAC Regulations

  	
   

  	
  39

  
	
  Section 9.2

  	
   

  	
  Borrower’s Funds

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  10 EVENTS OF DEFAULT

  	
   

  	
  40

  
	
  Section 10.1

  	
   

  	
  Payments

  	
   

  	
  40

  
	
  Section 10.2

  	
   

  	
  Insurance

  	
   

  	
  40

  
	
  Section 10.3

  	
   

  	
  Transfer

  	
   

  	
  40

  
	
  Section 10.4

  	
   

  	
  Covenants

  	
   

  	
  40

  
	
  Section 10.5

  	
   

  	
  Representations and
  Warranties

  	
   

  	
  41

  
	
  Section 10.6

  	
   

  	
  Other Encumbrances

  	
   

  	
  41

  
	
  Section 10.7

  	
   

  	
  Involuntary Bankruptcy
  or Other Proceeding

  	
   

  	
  41

  
	
  Section 10.8

  	
   

  	
  Voluntary Petitions,
  Etc.

  	
   

  	
  41

  



 


ii

















 


	
  ARTICLE
  11 REMEDIES

  	
   

  	
  41

  
	
  Section 11.1

  	
   

  	
  Remedies - Insolvency
  Events

  	
   

  	
  41

  
	
  Section 11.2

  	
   

  	
  Remedies - Other Events

  	
   

  	
  42

  
	
  Section 11.3

  	
   

  	
  Lender’s Right to
  Perform the Obligations

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  12 MISCELLANEOUS

  	
   

  	
  43

  
	
  Section 12.1

  	
   

  	
  Notices

  	
   

  	
  43

  
	
  Section 12.2

  	
   

  	
  Amendments and Waivers;
  References

  	
   

  	
  44

  
	
  Section 12 3

  	
   

  	
  Limitation on Interest

  	
   

  	
  44

  
	
  Section 12.4

  	
   

  	
  Invalid Provisions

  	
   

  	
  44

  
	
  Section 12.5

  	
   

  	
  Reimbursement of
  Expenses

  	
   

  	
  45

  
	
  Section 12.6

  	
   

  	
  Approvals; Third
  Parties; Conditions

  	
   

  	
  45

  
	
  Section 12.7

  	
   

  	
  Lender Not in Control;
  No Partnership

  	
   

  	
  45

  
	
  Section 12.8

  	
   

  	
  Time of the Essence

  	
   

  	
  46

  
	
  Section 12.9

  	
   

  	
  Successors and Assigns

  	
   

  	
  46

  
	
  Section 12.10

  	
   

  	
  Renewal, Extension or
  Rearrangement

  	
   

  	
  46

  
	
  Section 12.11

  	
   

  	
  Sale of Loan,
  Participation

  	
   

  	
  46

  
	
  Section 12.12

  	
   

  	
  Waivers

  	
   

  	
  47

  
	
  Section 12.13

  	
   

  	
  Cumulative Rights

  	
   

  	
  47

  
	
  Section 12.14

  	
   

  	
  Singular and Plural

  	
   

  	
  47

  
	
  Section 12.15

  	
   

  	
  Phrases

  	
   

  	
  47

  
	
  Section 12.16

  	
   

  	
  Exhibits and Schedules

  	
   

  	
  47

  
	
  Section 12.17

  	
   

  	
  Titles of Articles,
  Sections and Subsections

  	
   

  	
  47

  
	
  Section 12.18

  	
   

  	
  Promotional Material

  	
   

  	
  47

  
	
  Section 12.19

  	
   

  	
  Survival

  	
   

  	
  47

  
	
  Section 12.20

  	
   

  	
  WAIVER OF JURY TRIAL

  	
   

  	
  48

  
	
  Section 12.21

  	
   

  	
  Punitive or
  Consequential Damages; Waiver

  	
   

  	
  48

  
	
  Section 12.22

  	
   

  	
  Governing Law

  	
   

  	
  48

  
	
  Section 12.23

  	
   

  	
  Entire Agreement

  	
   

  	
  48

  
	
  Section 12.24

  	
   

  	
  Counterparts

  	
   

  	
  49

  
	
  Section 12.25

  	
   

  	
  Agreements Regarding
  Borrower and Subsidiaries

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  13 LIMITATIONS ON LIABILITY

  	
   

  	
  50

  
	
  Section 13.1

  	
   

  	
  Limitation on Liability

  	
   

  	
  50

  
	
  Section 13.2

  	
   

  	
  Limitation on Liability
  of Lender’s Officers, Employees, Etc.

  	
   

  	
  52

  
						



 


	
  LIST OF EXHIBITS AND SCHEDULES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
   

  	
  —

  	
   

  	
  LEGAL DESCRIPTION OF PROJECT

  
	
  SCHEDULE 1.1(A)

  	
   

  	
  —

  	
   

  	
  VALUATION AMOUNTS

  
	
  SCHEDULE 1.1(B)

  	
   

  	
  —

  	
   

  	
  PROJECT INFORMATION

  
	
  SCHEDULE 1.1(C)

  	
   

  	
  —

  	
   

  	
  LIST OF SITE ASSESSMENTS

  
	
  SCHEDULE 2.1

  	
   

  	
  —

  	
   

  	
  ADVANCE CONDITIONS

  
	
  SCHEDULE 4.1

  	
   

  	
  —

  	
   

  	
  ORGANIZATIONAL MATTERS

  



 


iii

















 


	
  SCHEDULE 4.1(A)

  	
   

  	
  —

  	
   

  	
  BORROWER’S ORGANIZATIONAL STRUCTURE

  
	
  SCHEDULE 4.6

  	
   

  	
  —

  	
   

  	
  ZONING REPORTS AND PROPERTY CONDITION REPORTS

  
	
  SCHEDULE 8.15

  	
   

  	
  —

  	
   

  	
  IMMEDIATE REPAIRS

  



 


iv

















 


LIST OF DEFINED TERMS


 


	
  Affiliate

  	
   

  	
  1

  
	
  Agreement

  	
   

  	
  1

  
	
  Anti-Money Laundering Laws

  	
   

  	
  1

  
	
  Assignment of Rents and Leases

  	
   

  	
  1

  
	
  Bank Secrecy Act

  	
   

  	
  2

  
	
  Bankruptcy Party

  	
   

  	
  30

  
	
  Borrower

  	
   

  	
  1

  
	
  Borrower Party

  	
   

  	
  2

  
	
  Budget

  	
   

  	
  2

  
	
  Business Day

  	
   

  	
  2

  
	
  Cash on Cash Return

  	
   

  	
  2

  
	
  Closing Date

  	
   

  	
  2

  
	
  Collateral

  	
   

  	
  2

  
	
  Contract Rate

  	
   

  	
  2, 8

  
	
  Debt

  	
   

  	
  2

  
	
  Debt Service

  	
   

  	
  2

  
	
  Debt Service Coverage

  	
   

  	
  3

  
	
  Default Rate

  	
   

  	
  3

  
	
  Environmental Laws

  	
   

  	
  3

  
	
  ERISA

  	
   

  	
  16

  
	
  Eurodollar Business Day

  	
   

  	
  4

  
	
  Event of Default

  	
   

  	
  3

  
	
  Financial Institution

  	
   

  	
  3

  
	
  Guarantors

  	
   

  	
  3

  
	
  Guaranty

  	
   

  	
  3

  
	
  Hazardous Materials

  	
   

  	
  3

  
	
  IEEPA

  	
   

  	
  29

  
	
  Interest Holder

  	
   

  	
  3, 24

  
	
  Joinder Party

  	
   

  	
  3

  
	
  Lender

  	
   

  	
  1

  
	
  Libor Rate

  	
   

  	
  3

  
	
  Lien

  	
   

  	
  4

  
	
  Loan

  	
   

  	
  4

  
	
  Loan Documents

  	
   

  	
  4

  
	
  Loan Year

  	
   

  	
  4

  
	
  Lockout Period

  	
   

  	
  9

  
	
  Maturity Date

  	
   

  	
  4

  
	
  Mortgage

  	
   

  	
  4

  
	
  Net Cash Flow

  	
   

  	
  4

  
	
  Note

  	
   

  	
  5

  
	
  OFAC

  	
   

  	
  5

  
	
  Operating Expenses

  	
   

  	
  5

  
	
  Operating Revenues

  	
   

  	
  5

  



 


v

















 


	
  Patriot Act

  	
   

  	
  5

  
	
  Person

  	
   

  	
  5

  
	
  Potential Default

  	
   

  	
  5

  
	
  Prepayment Premium Period

  	
   

  	
  9

  
	
  Project

  	
   

  	
  5

  
	
  Restoration Threshold

  	
   

  	
  6

  
	
  Single Purpose Entity

  	
   

  	
  6

  
	
  Site Assessment

  	
   

  	
  6

  
	
  Specially Designated National and Blocked Persons

  	
   

  	
  6

  
	
  Standard Adjustments

  	
   

  	
  6

  
	
  Transfer

  	
   

  	
  6, 23

  
	
  TWEA

  	
   

  	
  29

  
	
  U.S. Person

  	
   

  	
  7

  
	
  UCC

  	
   

  	
  7

  
	
  Underwritten NOI

  	
   

  	
  7

  
	
  Underwritten Operating Expenses

  	
   

  	
  7

  
	
  Underwritten Operating Revenues

  	
   

  	
  7

  



 


vi














 


LOAN
AGREEMENT


 


This Loan Agreement (this
“Agreement”) is entered
into as of October 16, 2007 between GENERAL
ELECTRIC CAPITAL CORPORATION, a Delaware corporation (“Lender”), and ESP SEVEN SUBSIDIARY LLC, a Delaware
limited liability company (“Borrower”).


 


ARTICLE 1


 


CERTAIN DEFINITIONS


 


Section 1.1    Certain Definitions. As used
herein, the following terms have the meanings indicated:


 


“Additional Project” has the meaning
assigned in Section 2.9.


 


“Affiliate” means, as to any Person,
(a) any corporation in which such Person or any partner, shareholder,
director, officer, member, or manager of such Person, at any level, directly or
indirectly owns or controls more than ten percent (10%) of the beneficial
interest, (b) any partnership, joint venture or limited liability company
in which such Person or any partner, shareholder, director, officer, member, or
manager of such Person, at any level, is a partner, joint venturer or member,
(c) any trust in which such Person or any partner, shareholder, director,
officer, member or manager of such Person, at any level, or any individual
related by birth, adoption or marriage to such Person, is a trustee or
beneficiary, (d) any entity of any type which is directly or indirectly
owned or controlled by (or is under common control with) such Person or any
partner, shareholder, director, officer, member or manager of such Person, at
any level, (e) any partner, shareholder, director, officer, member,
manager or employee of such Person, or (f) any individual related by
birth, adoption or marriage to any partner, shareholder, director, officer,
member, manager, or employee of such Person. Each Borrower Party shall be
deemed to be an Affiliate of Borrower.


 


“Agreement” means this Loan Agreement.


 


“Anti-Money Laundering Laws” means those
laws, regulations and sanctions, state and federal, criminal and civil, that
(a) limit the use of and/or seek the forfeiture of proceeds from illegal
transactions; (b) limit commercial transactions with designated countries
or individuals believed to be terrorists, narcotics dealers or otherwise
engaged in activities contrary to the interests of the United States;
(c) require identification and documentation of the parties with whom a
Financial Institution conducts business; or (d) are designed to disrupt
the flow of funds to terrorist organizations. Such laws, regulations and
sanctions shall be deemed to include the Patriot Act, the Bank Secrecy Act, the
Trading with the Enemy Act, 50 U.S.C. App. Section 1 et  seq.,
the International Emergency Economic Powers Act, 50 U.S.C. Section 1701 et
seq., and the sanction regulations promulgated pursuant thereto by the
OFAC, as well as laws relating to prevention and detection of money laundering
in 18 U.S.C. Sections 1956 and 1957.


 


1

















 


“Applicable Margin” means, for each
calendar quarter, the applicable amount for such quarter, as determined in
accordance with Section 2.2(1).


 


“Assignment of Rents and Leases” means
each Assignment of Rents and Leases, executed by Borrower or a Subsidiary for
the benefit of Lender, and pertaining to leases of space in a Project.


 


“Average Daily Balance” means, for any
calendar quarter, the mean average daily closing balance of the Loan during
such calendar quarter.


 


“Bank Secrecy Act” means the Bank
Secrecy Act, 31 U.S.C. Sections 5311 et  seq.


 


“Borrower Party” means any Joinder
Party, each Subsidiary, Extra Space of Pennsylvania LLC, a Utah limited
liability company, Extra Space Management, Inc., a Utah corporation, ESP
7, and Extra Space of Pennsylvania Two LLC, a Utah limited liability company,
and any general partner or managing member in Borrower, at any level.


 


“Borrowing Base” means, as of any date
of determination, an amount equal to the least of (a) the Maximum
Commitment, (b) eighty-five percent (85%) of the sum of the Valuation
Amounts of all Projects then serving as Collateral and (c) the principal
amount that would result in a Debt Service Coverage of 1.15:1.00; provided,
however, the Valuation Amount and Underwritten NOI of the “1195 Lanham, MD”
Project shall be excluded from Borrowing Base calculations until such time as
Lender has received evidence reasonably acceptable to Lender that (i) the
Mortgage covering such Project has been recorded in the appropriate real property
records and (ii) all state and county taxes for such Mortgage have been
paid in full; provided further, that if the preceding clauses (i) and
(ii) have not been satisfied on or before the date which is ninety (90)
days after the Closing Date, the Valuation Amount and Underwritten NOI of the
“1195 Lanham, MD” Project shall be permanently excluded from Borrowing Base
calculations and the Mortgage executed by Extra Space of Lanham LLC shall be
retuned to Borrower.


 


“Business Day” means a day other than a
Saturday, a Sunday, or a legal holiday on which national banks located in the
State of New York are not open for general banking business.


 


“Closing Date” means the date of the
“gap” closing (i.e., upon the Title Company’s irrevocable written commitment to
issue to Lender the Title Insurance Policies and Lender’s acknowledgment of the
satisfaction of the other conditions set forth in Part A of Schedule
2.1).


 


“Collateral” means the Projects and all
other “Mortgaged Property” described in the Mortgages, and any other property
that at any time secures the Loan or any portion thereof.


 


“Contract Rate” has the meaning assigned
in Article 2.


 


2

















 


“Contribution Agreement” means that
certain Contribution and Indemnity Agreement of even date herewith executed by
Borrower and the Subsidiaries in favor of each other.


 


“Debt” means, for any Person, without
duplication: (a) all indebtedness of such Person for borrowed money, for
amounts drawn under a letter of credit, or for the deferred purchase price of
property for which such Person or any of its assets is liable, (b) all
unfunded amounts under a loan agreement, letter of credit, or other credit
facility for which such Person or any of its assets would be liable or subject,
if such amounts were advanced under the credit facility, (c) all amounts
required to be paid by such Person as a guaranteed payment to partners or a
preferred or special dividend, including any mandatory redemption of shares or
interests, but not including any REIT Distributions, (d) all indebtedness
guaranteed by such Person, directly or indirectly, (e) all obligations
under leases that constitute capital leases for which such Person or any of its
assets is liable or subject, and (f) all obligations of such Person under
interest rate swaps, caps, floors, collars and other interest hedge agreements,
in each case whether such Person or any of its assets is liable or subject,
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations such Person otherwise assures a creditor against loss.


 


“Debt Service” means the aggregate
interest, fixed principal, and other payments due under the Loan (and under any
other permitted Debt relating to the Projects expressly approved by Lender),
but not including Excess, for the period of time for which calculated (unless
otherwise noted). The foregoing calculation shall exclude payments applied to
escrows or reserves required by Lender.


 


“Debt Service Coverage” means, as of any
date, the ratio of annualized Underwritten NOI for the immediately preceding
twelve (12) calendar months to annualized Debt Service.


 


“Default Rate” means the lesser of
(a) the maximum per annum rate of interest allowed by applicable law, and
(b) the Contract Rate plus five percent (5%) per annum.


 


“Environmental Laws” means any federal,
state or local law (whether imposed by statute, ordinance, rule, regulation,
administrative or judicial order, or common law), now or hereafter enacted,
governing health, safety, industrial hygiene, the environment or natural
resources, or Hazardous Materials, including, without limitation, such laws
governing or regulating (a) the use, generation, storage, removal,
recovery, treatment, handling, transport, disposal, control, release, discharge
of, or exposure to, Hazardous Materials, (b) the transfer of property upon
a negative declaration or other approval of a governmental authority of the
environmental condition of such property, or (c) requiring notification or
disclosure of releases of Hazardous Materials or other environmental conditions
whether or not in connection with a transfer of title to or interest in
property.


 


“ESP 7” means Extra Space Properties
Seven LP, a Utah limited partnership.


 


“Event of Default” has the meaning assigned
in Article 10.


 


“Excess” has the meaning assigned in
Section 2.7.


 


3

















 


“Financial Institution” means a United
States Financial Institution as defined in 31 U.S.C. Section 5312, as
periodically amended.


 


Foster-Miller”
means Foster-Miller, Inc., a Massachusetts limited liability company.


 


“Foster-Miller Lease” means that certain
Lease dated April 14, 1990 as amended, by and between Extra Space of
Waltham LLC, as successor in interest to J. Gershon Bloch and Peter L. Godecke,
as Trustees of Waltham Storage Depot Trust, as landlord, and Foster-Miller, as
tenant, covering a portion of the Project known as “1206 Waltham, MA”.


 


“Guaranty” means that certain Guaranty
of even date herewith executed by Extra Space of Lanham LLC, a Maryland limited
liability company, for the benefit of Lender.


 


“Hazardous Materials” means
(a) petroleum or chemical products, whether in liquid, solid, or gaseous
form, or any fraction or by-product thereof, (b) asbestos or
asbestos-containing materials, (c) polychlorinated biphenyls (pcbs),
(d) radon gas, (e) underground storage tanks, (f) any explosive
or radioactive substances, (g) lead or lead-based paint, or (h) any
other substance, material, waste or mixture which is or shall be listed,
defined, or otherwise determined by any governmental authority to be hazardous,
toxic, dangerous or otherwise regulated, controlled or giving rise to liability
under any Environmental Laws.


 


“Interest Holder” has the meaning
assigned in Section 8.1.


 


“Joinder Party” means the Persons, if
any, executing the Joinder hereto, including Extra Space Storage LLC, a
Delaware limited liability company, and ESP 7.


 


“Libor Rate” shall mean the British
Bankers Association LIBOR Rate (rounded upward to the nearest one sixteenth of
one percent) listed on Reuters Screen LIBOR01 Page for U.S. Dollar
deposits with a designated maturity of one (1) month determined as of
11:00 a.m. London Time on the second (2nd) full Eurodollar Business Day
next preceding the first day of each month with respect to which interest is
payable under the Loan (unless such date is not a Business Day in which event
the next succeeding Eurodollar Business Day which is also a Business Day will
be used). If Reuters (i) publishes more than one (1) such Libor Rate,
the average of such rates shall apply, or (ii) ceases to publish the Libor
Rate, then the Libor Rate shall be determined from such substitute financial
reporting service as Lender in its discretion shall determine. The term “Eurodollar Business Day”, shall mean
any day on which banks in the City of London are generally open for interbank
or foreign exchange transactions.


 


“Lien” means, as to any Project, any
interest, or claim thereof, in the Collateral securing an obligation owed to,
or a claim by, any Person other than the owner of the Collateral, whether such
interest is based on common law, statute or contract, including the lien or
security interest arising from a deed of trust, mortgage, assignment,
encumbrance, pledge, security agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes. The term “Lien” shall
include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting the Collateral.


 


4

















 


“Loan” means the revolving line of
credit to be made by Lender to Borrower under this Agreement and all other
amounts secured by the Loan Documents.


 


“Loan Documents” means: (a) this
Agreement, (b) the Note, (c) the Mortgages, (d) the Assignments
of Rents and Leases, (e) UCC financing statements, (f) the Pledge
Agreement, (g) the Guaranty, (h) such assignments of management agreements,
contracts and other rights as may be required by Lender, (i) any letter of
credit provided to Lender in connection with the Loan, (j) all other
documents evidencing, securing, governing or otherwise pertaining to the Loan,
and (k) all amendments, modifications, renewals, substitutions and
replacements of any of the foregoing.


 


“Loan Year” means the period between the
Closing Date and October 31, 2008 for the first Loan Year and the period
between each succeeding November 1 and October 31 until the Maturity
Date.


 


“Lockout Period” has the meaning
assigned in Section 2.3(4).


 


“LTV Ratio” shall mean, as of the date
of determination, the ratio, expressed as a percentage, of (a) the Maximum
Commitment to (b) the aggregate value of the Projects as of such date, as
determined by Lender in accordance with its then-current underwriting policies
and procedures for properties similar to the Projects.


 


“Maturity Rate” means the earlier of
(a) October 31, 2010, as such date may possibly be extended as
provided in Section 2.3(3), or (b) any earlier date on which the
entire Loan is required to be paid in full, by acceleration or otherwise, under
this Agreement or any of the other Loan Documents.


 


“Maximum Commitment” means
$100,000,000.00, subject to reduction as provided in this Agreement.


 


“Mortgage” means each Mortgage, Security
Agreement and Fixture Filing and each Deed of Trust, Security Agreement and
Fixture Filing, executed by Borrower or a Subsidiary in favor of Lender,
covering a Project.


 


“Net Cash Flow” means, for any period,
the amount by which Operating Revenues exceed the sum of
(a) Operating Expenses, (b) Debt Service paid during such period,
(c) capital expenditures, tenant improvement costs and leasing
commissions, each approved by Lender and paid by Borrower during such period, and
(d) any actual payment into impounds, escrows, or reserves required by
Lender, except to the extent that any such payment is already included within
the definition of Operating Expenses. In addition, Net Cash Flow shall be
increased by any proceeds withdrawn from reserves and impounds funded out of
Operating Revenues to the extent such proceeds are not applied to Operating
Expenses.


 


“New Jersey Projects” means,
collectively, the “1054 Metuchen, NJ” Project and the “1331 Union, NJ Project”.


 


5

















 


“New Jersey Subsidiaries” means,
collectively, Extra Space of Metuchen LLC, a New Jersey limited liability
company, and Extra Space of Union LLC, a New Jersey limited liability company.


 


“Non-Borrower Subsidiaries” means,
collectively, the Subsidiaries in which Borrower does not have a direct or
indirect ownership interest.


 


“Non-New Jersey Projects” means,
collectively, the Projects other than the New Jersey Projects.


 


“Non-New Jersey Subsidiaries” means,
collectively, the Subsidiaries other than the New Jersey Subsidiaries.


 


“Note” means the Promissory Note of even
date, in the stated principal amount of $100,000,000.00, executed by Borrower,
and payable to the order of Lender in evidence of the Loan.


 


“OFAC” means the Office of Foreign
Assets Control, Department of the Treasury.


 


“Operating Expenses” means, for any
period, all reasonable and necessary expenses of operating the Projects in the
ordinary course of business which are paid in cash by Borrower or the Subsidiaries
during such period and which are directly associated with and fairly allocable
to the Projects for the applicable period, including ad valorem real estate
taxes and assessments, insurance premiums, regularly scheduled tax impounds
paid to Lender, maintenance costs, management fees and costs, wages, salaries,
personnel expenses, accounting, legal and other professional fees, fees and
other expenses incurred by Lender and reimbursed by Borrower under the Loan
Documents and deposits to any capital replacement, leasing or other reserves
required by Lender. Operating Expenses shall exclude Debt Service, capital
expenditures, tenant improvement costs, leasing commissions, any of the
foregoing operating expenses which are paid from deposits to cash reserves and
such deposits were previously included as Operating Expenses, any payment or
expense for which Borrower was or is to be reimbursed from proceeds of the Loan
or insurance or by any third party, and any non-cash charges such as
depreciation and amortization. Any management fee or other expense payable to
Borrower or to an Affiliate of Borrower shall be included as an Operating
Expense only with Lender’s prior approval. Operating Expenses shall not include
federal, state or local income taxes.


 


“Operating Revenues” means, for any
period, all cash receipts of the Subsidiaries or Borrower during such period
from operation of the Projects or otherwise arising in respect of the Projects
after the date hereof which are properly allocable to the Projects for the
applicable period, including receipts from leases and parking agreements,
concession fees and charges, other miscellaneous operating revenues and
proceeds from rental or business interruption insurance, but excluding security
deposits and earnest money deposits until they are forfeited by the depositor,
advance rentals until they are earned, and proceeds from a sale or other
disposition.


 


“Patriot Act” means the USA PATRIOT Act
of 2001, Pub. L. No. 107-56.


 


6

















 


“Person” means any individual,
corporation, partnership, joint venture, association, joint stock company,
trust, trustee, estate, limited liability company, unincorporated organization,
real estate investment trust, government or any agency or political subdivision
thereof, or any other form of entity.


 


“Pledge Agreement” means each Pledge and
Security Agreement executed by Borrower or ESP 7 in favor of the Lender.


 


“Potential Default” means the occurrence
of any event or condition which, with the giving of notice, the passage of
time, or both, would constitute an Event of Default.


 


“Projects” means, collectively,
(a) the properties described in Schedule 1.1(B) (as such
schedule may from time to time be supplemented or updated in accordance with
the terms hereof) and each Additional Project added to the Collateral in
accordance with Section 2.9, and (b) as to each property described in
clause (a) above, all other “Mortgaged Property” described in the Mortgage
encumbering such property.


 


“REIT Distributions” means distributions
made or reasonably required to be made by Borrower so that it contributes its
proportionate share of any distributions made or scheduled to be made by any
Joinder Party to its publicly traded parent companies for the purpose of funding
distributions to REIT shareholders and REIT OP unit holders which are
reasonably required to be made either (i) for the REIT to maintain its tax
status as a Real Estate Investment Trust, or (ii) to comply with
resolutions adopted by the Board of Directors of the publicly traded REIT.


 


“Restoration Threshold” means, as of any
date, the lesser of (a) two and one-half percent (2.5%) of the
replacement value of the improvements at the damaged Project as of such date,
and (b) $500,000.


 


“Single Purpose Entity” shall mean a
Person (other than an individual, a government, or any agency or political
subdivision thereof), which (a) exists solely for the purpose of
(i) as to each Subsidiary, owning its Project, and (ii) as to
Borrower, owning the Subsidiaries and its Projects, (b) conducts business
only in its own name, (c) does not engage in any business or have any
assets (i) as to each Subsidiary, unrelated to the Project owned thereby,
and (ii) as to Borrower, other than its ownership of the Subsidiaries and
assets related to its Projects, (d) does not have any indebtedness other
than as permitted by this Agreement, (e) has its own separate books,
records, and accounts (with no commingling of assets), (f) holds itself
out as being a Person separate and apart from any other Person,
(g) observes corporate and partnership formalities independent of any
other entity, and (h) otherwise constitutes a single purpose, bankruptcy
remote entity as determined by Lender.


 


“Site Assessment” means an environmental
engineering report for each Project prepared by an engineer engaged by Lender
at Borrower’s expense, and in a manner satisfactory to Lender, based upon an
investigation relating to and making appropriate inquiries concerning the
existence of Hazardous Materials on or about such Project, and the past or
present discharge, disposal, release or escape of any such substances, all
consistent with ASTM Standard E 1527-05 (or any successor thereto published by
ASTM) and other good customary and commercial


 


7

















 


practice; provided, however, the term Site Assessment shall include the
reports listed in Schedule 1.1(C). Borrower represents and warrants to
Lender that true, correct and complete copies of all items in Schedule 1.1
(C) were delivered to Lender prior to the Closing Date.


 


“Specially Designated National and Blocked Persons”
means those Persons that have been designated by executive order or by the
sanction regulations of OFAC as Persons with whom U.S. Persons may not transact
business or must limit their interactions to types approved by OFAC.


 


“Standard Adjustments” means the
following assumptions to be made with respect to each Project when calculating
Underwritten NOI: (a) an occupancy rate equal to the lesser of market
occupancy or the Project’s actual occupancy rate (but in no event more than a
ninety percent (90%) occupancy rate); (b) capital reserves of $0.15 per
gross square foot; and (c) a management fee equal to the greater of the
Project’s actual management fee or six percent (6%) of Operating Revenues. As
used above, “market occupancy” means, as to each Project, the average occupancy
rate of self-storage projects that are similar in size and quality to such
Project and that are located in such Project’s geographic market or sub-market
area, all as determined by Lender.


 


“Subsidiary” means each of the entities
identified as subsidiaries in Schedule 4.1.


 


“Title Insurance Policies” means,
collectively, the ALTA (or equivalent) mortgagee policies of title insurance in
the maximum amount of the Loan, with reinsurance and endorsements as Lender may
require, containing no exceptions to title (printed or otherwise) which are
unacceptable to Lender, and insuring that each Mortgage is a first-priority
Lien on the Project encumbered thereby and related collateral.


 


“Transfer” has the meaning assigned in
Section 8.1.


 


“UCC” means, as to each Project, the
Uniform Commercial Code as enacted and in effect in the state where such
Project is located (and as it may from time to time be amended), and, as to the
Pledge Agreement, the Uniform Commercial Code as enacted and in effect in the
State of Utah (and as it may from time to time be amended); provided that, to
the extent that the UCC is used to define any term in this Agreement or in any
other Loan Document and such term is defined differently in different Articles
or Divisions of the UCC, the definition of such term contained in
Article or Division 9 shall govern; provided further, however, that if, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of, or remedies with respect to, Lender’s Liens on any Collateral
is governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the state where a Project is located, the term “UCC”
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for the purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions related
to such provisions.


 


“Underwritten NOI” means the amount by
which Underwritten Operating Revenues on an aggregate basis for all Projects
exceed Underwritten Operating Expenses on an aggregate basis for all Projects
for the 12-month period immediately preceding the date of calculation.


 


8

















 


“Underwritten Operating Expenses” means
Operating Expenses as determined and adjusted by Lender to reflect the Standard
Adjustments and otherwise in accordance with its then current audit policies
and procedures for properties similar to the Project.


 


“Underwritten Operating Revenues” means
Operating Revenues as determined and adjusted by Lender to reflect the Standard
Adjustments and otherwise in accordance with its then current audit policies
and procedures for properties similar to the Project.


 


“U.S. Person” means any United States
citizen, any entity organized under the laws of the United States or its
constituent states or territories, or any entity, regardless of where
organized, having its principal place of business within the United States or
any of its territories.


 


“Valuation Amount” means, with respect
to each Project, the amount set forth opposite the reference to such Project in
Schedule 1.1 (A) under the caption “Valuation Amount”, as such
Valuation Amount for the “1206 Waltham, MA” Project may be decreased pursuant
to the terms of Section 8.16.


 


ARTICLE
2


 


LOAN
TERMS


 


Section 2.1           The Loan. The Loan in the maximum
amount outstanding at any time of up to ONE HUNDRED MILLION AND NO/100 DOLLARS
($100,000,000.00) shall be funded in one or more advances and repaid in
accordance with this Agreement. Subject to the foregoing limitation and the
other terms and conditions of this Agreement, Borrower may borrow, repay without
penalty or premium, and reborrow hereunder. All Loan advances shall be made
upon Borrower’s satisfaction of the conditions for advances described in Schedule
2.1.


 


Section 2.2           Interest Rate; Late Charge.


 


(1)       The outstanding principal
balance of the Loan (including any amounts added to principal under the Loan
Documents) shall bear interest at a variable rate of interest, adjusted
monthly, equal to the Libor Rate plus the Applicable Margin (the “Contract Rate”).


 


From the Closing Date
through the end of the calendar quarter in which the first advance is made, the
Applicable Margin is 1.0%.


 


The Applicable Margin
shall be adjusted by reference to the following grid:


 


	
  Test No.:

  	
   

  	
  If Debt
  Service Coverage is:

  
	
  1.

  	
   

  	
  3 2.00:1.00
  assuming an Applicable Margin of 1.00, the Applicable Margin shall be 1.00%.

  
	
  2.

  	
   

  	
  3 1.75:1.00
  assuming an Applicable Margin of 1.25, but Test No. 1 above is not met,
  the Applicable Margin shall be 1.25%.

  



 


9

















 


	
  Test No.:

  	
   

  	
  If Debt
  Service Coverage is:

  
	
  3.

  	
   

  	
  3 1.50:1.00
  assuming an Applicable Margin of 1.65, but neither Test No. 1 nor Test
  No. 2 above is met, the Applicable Margin shall be 1.65%.

  
	
  4.

  	
   

  	
  If none of Test No. 1, Test No. 2 or Test
  No. 3 is met, the Applicable Margin shall be 2.05%.

  



 


(2)       Lender shall test the Debt
Service Coverage at the end of the calendar quarter in which the first advance
is made, and at the end of each calendar quarter thereafter, based on
(i) an assumed Loan balance equal to the Average Daily Balance for such quarter
and (ii) the then-current Libor Rate. If, based on such test, Lender
determines that a different Applicable Margin applies to the Loan, Lender shall
notify Borrower of the new Applicable Margin (and, upon Borrower’s request,
provide supporting calculations of Debt Service Coverage, Underwritten NOI and
Standard Adjustments to Borrower, which shall be provided to Borrower
substantially in the form of Schedule 2.2(2) attached hereto),
which shall apply to the outstanding balance of the Loan effective as of the
first day of the next calendar quarter until again changed in accordance with
the results of a subsequent Debt Service Coverage test.


 


(3)       If, as a result of any
restatement of or other adjustment to the financial statements of Borrower or
for any other reason, the Lender determines that (a) the Debt Service
Coverage as calculated based on financial information provided by Borrower as
of any applicable date was inaccurate and (b) a proper calculation of the
Debt Service Coverage would have resulted in different pricing for any period,
then (i) if the proper calculation of the Debt Service Coverage would have
resulted in a higher Contract Rate for such period, Borrower shall
automatically and retroactively be obligated to pay to the Lender, promptly on
demand by the Lender, an amount equal to the excess of the amount of interest
that should have been paid for such period over the amount of interest actually
paid for such period; and (ii) if the proper calculation of the Debt
Service Coverage would have resulted in a lower Contract Rate for such period,
Lender shall have no obligation to repay any interest to Borrower; provided
that if, as a result of any restatement or other event a proper calculation of
the Debt Service Coverage would have resulted in a higher Contract Rate for one
or more periods and a lower Contract Rate for one or more other periods (due to
the shifting of income or expenses from one period to another period or any
similar reason), then the amount payable by Borrower pursuant to clause
(i) above shall be based upon the excess, if any, of the amount of
interest and fees that should have been paid for all applicable periods over
the amount of interest and fees paid for all such periods.


 


(4)       Interest owing for each
month shall be computed on the basis of a fraction, the denominator of which is
three hundred sixty (360) and the numerator of which is the actual number of
days elapsed from the first day of such month (or, for the initial advance,
from the date of such advance). Principal and other amortization payments shall
be applied to the Loan balance as and when actually received.


 


(5)       If Borrower fails to pay
any installment of interest within five (5) days after the date on which
the same is due, Borrower shall pay to Lender a late charge


 


10

















 


on such past-due amount, as liquidated damages and not as a penalty,
equal to five percent (5%) of such amount, but not in excess of the maximum
amount of interest allowed by applicable law. The foregoing late charge is
intended to compensate Lender for the expenses incident to handling any such
delinquent payment and for the losses incurred by Lender as a result of such
delinquent payment. Borrower agrees that, considering all of the circumstances existing
on the date this Agreement is executed, the late charge represents a reasonable
estimate of the costs and losses Lender will incur by reason of late payment.
Borrower and Lender further agree that proof of actual losses would be costly,
inconvenient, impracticable and extremely difficult to fix. Acceptance of the
late charge shall not constitute a waiver of the default arising from the
overdue installment, and shall not prevent Lender from exercising any other
rights or remedies available to Lender. While any Event of Default exists, the
Loan shall bear interest at the Default Rate.


 


Section 2.3    Terms of Payment. The Loan shall be payable as follows:


 


(1)       Interest. Commencing on
December 1, 2007, Borrower shall pay interest in arrears on the first day
of each month until all amounts due under the Loan Documents are paid in full.


 


(2)       Principal Amortization/Mandatory Prepayments.
 The Loan shall be an interest-only loan
and Borrower shall not be required to make any regularly scheduled principal
amortization payments; provided, however, if on any day the outstanding
principal amount of the Loan exceeds the lesser of (i) eighty-five percent
(85%) of the sum of the Valuation Amounts or (ii) the Maximum Commitment,
Borrower shall pay such excess to Lender, in immediately available funds,
within thirty (30) days of demand by Lender (or on such earlier date as is
required by any other applicable provision of this Agreement).


 


(3)       Maturity.  On the Maturity Date, Borrower shall pay to
Lender all outstanding principal, accrued and unpaid interest, and any other
amounts due under the Loan Documents. Subject to the provisions of this
Section 2.3(3), Borrower, at its option, may extend the term of the Loan
for two (2) additional 12-month periods. Borrower’s right to extend the
term of the Loan is subject to the satisfaction of each of the following
conditions as to each extension:


 


(a)        Borrower shall deliver to
Lender a written request to extend the term of the Loan (the “Extension Request”) at least ninety
(90) days before the then existing Maturity Date.


 


(b)       No Event of Default or
Potential Default has occurred and is continuing on the date on which Borrower
delivers the Extension Request to Lender, or on the date the extension period
commences.


 


(c)        Borrower shall have paid
to Lender, in immediately available funds, an extension fee equal to one
quarter percent (0.25%) of the Maximum Commitment.


 


11














 


(d)       During the extended term of the Loan, all
terms and conditions of the Loan Documents (other than the original Maturity
Date) shall continue to apply except that Borrower shall have no further right
to extend the term of the Loan after the second extension.


 


(e)        The Debt Service Coverage (based an
Applicable Margin of 2.05% and assuming the outstanding Loan balance equals the
Maximum Commitment) equals or exceeds 1.15 to 1 and the LTV Ratio does
not exceed eighty-five percent (85%).


 


(f)        If required by Lender, Borrower shall
cause to be delivered to Lender at Borrower’s expense an updated Site
Assessment for each Property reasonably satisfactory to Lender, which shall
show no adverse matters or items.


 


(g)       If required by Lender, Borrower shall
cause to be delivered to Lender at Borrower’s expense an updated engineering
and an updated seismic report for each Property, each report reasonably
satisfactory to Lender, which shall show no adverse matters or items.


 


(h)       Borrower shall execute and deliver such
other instruments, certificates, opinions of counsel and documentation as
Lender shall reasonably request in order to preserve, confirm or secure the
Liens and security granted to Lender by the Loan Documents, including any
amendments, modifications or supplements to any of the Loan Documents,
endorsements to the Title Insurance Policies and, if required by Lender,
estoppels and other certificates.


 


(i)         Borrower shall pay all costs and
expenses incurred by Lender in connection with such extension of the Loan,
including Lender’s attorneys’ fees and disbursements.


 


(4)       Lockout/Prepayment.
The Loan may not be canceled or otherwise terminated by Borrower through April 30,
2009 (the “Lockout Period”).
Thereafter, upon not less than thirty (30) days’ prior written notice to
Lender, Borrower may, upon repayment of the Loan and satisfaction of any other
obligations owing under the Loan Documents in full (including without
limitation the payment of the Unused Fee prorated from the first day of the
then current calendar quarter through the end of the Lockout Period), Borrower
may cancel the Loan, from and after which Borrower shall have no further right
to request or receive Loan advances and Lender shall have no further
obligations under the Loan Documents. If the Loan is accelerated during the
Lockout Period for any reason other than casualty or condemnation, Borrower
shall pay, in addition to all other amounts outstanding under the Loan
Documents (including without limitation the payment of the Unused Fee prorated
from the first day of the then current calendar quarter through the date of
cancellation), a prepayment premium equal to $250,000.00.


 


(5)       Application
of Payments. All payments received by Lender under the Loan
Documents shall be applied to the following, in such order as Lender may


 


12

















 


elect in its sole
discretion: (a) to any fees and expenses due to Lender under the Loan
Documents; (b) to any Default Rate interest or late charges; (c) to
accrued and unpaid interest; (d) to amounts owed under any reserves or
escrows required by Lender; and (e) to the principal sum and other amounts
due under the Loan Documents. Prepayments of principal shall be applied against
amounts owing in inverse order of maturity.


 


Section 2.4    Security. The Loan shall be secured by
the Mortgages creating a first lien on the Projects, the Assignments of Rents
and Leases and the other Loan Documents.


 


Section 2.5    Origination
Fee. As partial consideration for Lender’s agreement to make the
Loan, Borrower shall pay to Lender a loan origination fee of $500,000.00 (the “Origination Fee”). The Origination Fee
shall be payable in full on or before the Closing Date.


 


Section 2.6    Unused
Fee. In addition to the payment of the Origination Fee provided
for in Section 2.5 above, Borrower shall pay to Lender (commencing on January 1,
2008 and by the first day of each April, July, October and January thereafter),
an unused fee (the “Unused Fee”)  on the average daily amount of the
Maximum Commitment which was unused during the immediately preceding calendar
quarter calculated on the basis of actual days elapsed in a year consisting of
360 days, at the rate of one eighth percent (0.125%) per annum, calculated
through the last calendar day of each such calendar quarter, and payable in
arrears. For purposes of this Section 2.6: (a) the average daily
amount of the Maximum Commitment which was unused shall equal: (i) the
average daily Maximum Commitment during a calendar quarter; less (ii) the
average daily utilization of the Maximum Commitment during such calendar
quarter; (b) the average daily Maximum Commitment during a calendar
quarter shall equal the quotient of: (i) the aggregate of the Maximum
Commitment on each day during such calendar quarter; divided by (ii) the
number of days in such calendar quarter; and (c) the average daily
utilization of the Maximum Commitment during a calendar quarter shall equal the
mean average daily closing balance of the Loan during such calendar quarter;
provide, however, that the Unused Fee due January 1, 2008 shall be
calculated for the period commencing on the Closing Date and ending on December 31,
2007.


 


Section 2.7    Debt
Service Coverage. At the end of each Loan Year, Lender shall
test the Debt Service Coverage based on an Applicable Margin of 2.05% and
assuming the outstanding Loan balance equals the Maximum Commitment. If, as of
any such determination date, the Debt Service Coverage is less than 1.15:1, (i) Lender
shall have the right, in its sole and absolute discretion, to permanently
reduce the Maximum Commitment to an amount which would increase the Debt
Service Coverage to 1.15:1, and (ii) Borrower shall, within thirty (30)
days after Lender’s demand, which demand shall be accompanied by Lender’s
supporting calculations, pay to Lender, in immediately available funds, the
amount, if any, by which the outstanding principal amount of the Loan exceeds
the Borrowing Base (the “Excess”)
due to the reduction in the Maximum Commitment in accordance with clause (i).
Any reduction in the Maximum Commitment pursuant to this Section 2.7 shall
be effective as of the date of Lender’s notice of such reduction to Borrower,
and shall remain effective for the balance of the Loan term unless superseded
by a subsequent reduction notice by Lender in accordance with this Section 2.7.


 


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Section 2.8    Partial
Release of Collateral. Except as expressly set forth below in
this Section, Lender shall have no obligation to release any of the Collateral until
all of Borrower’s indebtedness and obligations under the Loan Documents have
been paid and performed in full, and all obligations of Lender under this
Agreement and the other Loan Documents have terminated. Borrower shall be
entitled to obtain releases of Projects from the Lien of the Loan Documents,
provided that all of the following conditions are satisfied as to each proposed
release of a Project (the “Release Project”):


 


(1)       Borrower
has provided Lender with at least thirty (30) (or five (5) days for the
release of the “ 1195 Lanham, MD” Project completed within ninety (90) days
after the Closing Date) but not more than ninety (90) days prior written notice
(the “Partial Release Notice”)
of the proposed release together with copies of any documents which Borrower
requests that Lender execute in connection with such proposed release.


 


(2)       Except for the release of the “1195
Lanham, MD” Project completed within ninety (90) days after the Closing Date,
for any proposed release occurring during the Lockout Period, the proposed
release shall be requested in connection with a bona fide sale of the Release
Project to a third party purchaser (not an Affiliate of Borrower or any
Borrower Party). During the Lockout Period, no partial release shall be permitted
if requested in connection with a refinance or other recapitalization of a
Project or any other transaction other than a bona fide sale to a third party
purchaser except for the release of the “1195 Lanham, MD” Project completed
within ninety (90) days after the Closing Date.


 


(3)       For any proposed release occurring after
the Lockout Period, concurrently with the requested release, fee title to the
Release Project, or the ownership interests in the current owners thereof,
shall be transferred to a Person other than Borrower, any Subsidiary or any
entity in which Borrower or any Subsidiary holds a direct or indirect ownership
interest.


 


(4)       No Event of Default or Potential Default
has occurred and is continuing on the date on which Borrower delivers the Partial
Release Notice to Lender, or on the date of the requested release.


 


(5) If,
after giving effect to the requested release (and the resulting decrease in the
Borrowing Base), the outstanding balance of the Loan exceeds the Borrowing
Base, Borrower shall have paid to Lender the Excess.


 


(6)       The remaining Projects shall be
acceptable to Lender in its sole and absolute discretion. Without limiting the
foregoing, the Valuation Amount for any remaining Project shall not exceed
twenty-five percent (25%) of the sum of the Valuation Amounts for all remaining
Projects, and the Valuation Amounts for all remaining Projects located in the
same “Metropolitan Statistical Area” (as defined by the United States Office of
Management and Budget) shall not exceed thirty-five percent (35%) of the sum of
the Valuation Amounts for all remaining Projects.


 


14

















 


(7)       Lender shall have prepared, and Borrower
shall have acknowledged, revised Schedules 1.1(A), l.(B) and
4.1, in each case revised to exclude the Release Project and, if
applicable, its Subsidiary owner. As of the date of the release of Release
Project from the Lien of the Loan Documents, such revised schedules shall be
deemed to supersede and replace the prior versions thereof.


 


(8)       Borrower shall have executed and
delivered to Lender such other instruments, certificates and documentation as
Lender shall reasonably request in order to preserve, confirm or secure the
validity and priority of the remaining Liens and security granted to Lender
under the Loan Documents, including any amendments, modifications or
supplements to any of the Loan Documents and endorsements to the Title
Insurance Policies insuring the Liens of the Mortgages encumbering the
remaining Projects.


 


(9)       Borrower shall have delivered to Lender a
copy of any purchase and sale agreement and all other related documentation
with respect to the sale of the Release Project.


 


(10)     Borrower shall have paid all costs and
expenses incurred by Lender in connection with the proposed release, including
attorneys’ fees and costs and all title insurance premiums for title
endorsements required by Lender in connection with the proposed release.


 


Section 2.9    Additional
Projects. During the term of the Loan, Borrower shall have the
option of adding additional self-storage projects (each an “Additional Project”) to the Collateral,
upon the satisfaction of all of the following conditions precedent with respect
to each such Additional Project (and delivery below shall be subject to Lender’s
receipt, review, approval and/or confirmation, at Borrower’s cost and expense,
each in form and substance satisfactory to Lender):


 


(1)       Borrower has provided Lender with at
least thirty (30) but not more than ninety (90) days prior written notice (the “Additional Project Notice”) of the
proposed addition of the Additional Project to the Collateral.


 


(2)       No Event of Default or Potential Default
has occurred and is continuing on the date on which Borrower delivers the
Additional Project Notice to Lender, or on the date of the requested addition.


 


(3)       The Additional Project shall be acquired
by Borrower.


 


(4)       The Additional Project shall be
acceptable to Lender in its sole and absolute discretion.


 


(5)       Concurrently with the addition of the
Additional Project, Borrower shall pay to Lender a fee (the “Additional Project Fee”) equal to one
quarter percent (0.25%) of eighty-five percent (85%) of the Valuation Amount
determined by Lender for such Additional Project; provided, however, the
Additional Project Fee shall be waived for each of the first two (2) Additional
Projects added to the Collateral in any Loan Year.


 


15

















 


(6)       Lender shall have received a Mortgage
(the “Additional Mortgage”)
covering the Additional Project and all personal property related thereto (and
such Additional Mortgage shall have been properly recorded in the official
records of the county or counties in which the Additional Project is located).


 


(7)       Lender shall have received an Assignment of
Rents and Leases (the “Additional
Assignment  of Rents and
Leases”) covering the Additional Project and all leases related
thereto (and such Additional Assignment of Rents and Leases shall have been
properly recorded in the official records of the county or counties in which
the Additional Project is located).


 


(8)       Lender shall have prepared, and Borrower
shall have acknowledged, revised Schedules 1.1(A) (which shall
reflect Lender’s determination of the Valuation Amount for the Additional
Project) and l.1(B), revised to include the applicable information for
the Additional Project. As of the date of the recordation of the Mortgage
encumbering the Additional Project, such revised schedules shall be deemed to
supersede and replace the prior versions thereof.


 


(9)       Lender shall have received an ALTA (or
equivalent) mortgagee policy of title insurance, with reinsurance and
endorsements as Lender may reasonably require, containing no exceptions to
title (printed or otherwise) which are unacceptable to Lender, and insuring
that the Additional Mortgage is a first-priority Lien on the Additional Project
and related collateral. Borrower shall also obtain, at its sole cost and
expense, any endorsements, continuations or modifications to any existing title
policies as Lender may reasonably request, including without limitation
aggregation or tie-in endorsements, but not including any overall increase in
the insured amount above the Maximum Commitment Amount.


 


(10)     Lender shall have received legal opinions
issued by counsel for the entity acquiring the Additional Project (and, where
required by Lender, by Lender’s local counsel), opining as to the due
organization, valid existence and good standing of such Person, and the due
authorization, execution, delivery, enforceability and validity of the
Additional Mortgage and the Additional Assignment of Rents and Leases with
respect to, such Person; that the Loan, as reflected in the Loan Documents, is
not usurious; to the extent that Lender is not otherwise satisfied, that the Additional
Project and its use is in full compliance with all legal requirements; and as
to such other matters as Lender and Lender’s counsel reasonably may specify.


 


(11)     Lender shall have received such information
regarding the Additional Project as Lender shall request, including without
limitation financial information, historic rent rolls and operating statements,
to enable Lender to establish a Valuation Amount for the Additional Project.


 


(12)     Lender shall have received UCC searches for
the seller of the Additional Project.


 


16

















 


(13)     Lender shall have received evidence of
insurance as required by this Agreement with respect to the Additional Project.


 


(14)     Lender shall have received a current
ALTA/ACSM land title survey of the Additional Project, dated or updated to a
date not earlier than thirty (30) days prior to the date hereof, certified to
Lender and the issuer of Lender’s title insurance, prepared by a licensed
surveyor acceptable to Lender and such title insurer, and conforming to Lender’s
current standard survey requirements.


 


(15)     Lender shall have a current engineering
report or architect’s certificate with respect to the Additional Project,
covering, among other matters, inspection of heating and cooling systems, roof
and structural details and showing no failure of compliance with building plans
and specifications, applicable legal requirements (including requirements of
the Americans with Disabilities Act) and fire, safety and health standards. As
requested by Lender, such report shall also include an assessment of the
Additional Project’s tolerance for earthquake and seismic activity.


 


(16)     Lender shall have received a current Site
Assessment for the Additional Project.


 


(17)     Lender shall have received a current rent
roll of the Additional Project, which Borrower shall represent and warrant is
true and correct. Such rent roll shall include the following information: (a) tenant
names; (b) unit/suite numbers; (c) area of each demised premises and total
area of the Additional Project (stated in net rentable square feet); (d) rental
rate (including escalations) (stated in gross amount and in amount per net
rentable square foot per year); and (e) security deposit, if any.


 


(18)     Lender shall have received evidence that
the Additional Project and the operation thereof comply with all legal
requirements, including that all requisite certificates of occupancy, building
permits, and other licenses, certificates, approvals or consents required of
any governmental authority have been issued without variance or condition and
that there is no litigation, action, citation, injunctive proceedings, or like
matter pending or threatened with respect to the validity of such matters. At
Lender’s request, Borrower shall furnish Lender with a zoning endorsement to
Lender’s title insurance policy (if available), zoning letters from applicable
municipal agencies, and utility letters from applicable service providers or
other reasonable proof that required utilities are available to the Additional
Project.


 


(19)     No condemnation or adverse zoning or usage
change proceeding shall have occurred or shall have been threatened against the
Additional Project; the Additional Project shall not have suffered any
significant damage by fire or other casualty which has not been repaired; no
law, regulation, ordinance, moratorium, injunctive proceeding, restriction,
litigation, action, citation or similar proceeding or matter shall have been
enacted, adopted, or threatened by any governmental authority, which would
have, in Lender’s judgment, a material adverse effect on the Additional Project
or the acquirer of the Additional Project.


 


17

















 


(20)     All fees and commissions payable to real
estate brokers, mortgage brokers, or any other brokers or agents in connection
with the Loan or the acquisition of the Additional Project shall have been
paid, such evidence to be accompanied by any waivers or indemnifications deemed
necessary by Lender.


 


(21)     Lender shall have received payment of
Lender’s costs and expenses in underwriting, documenting, and closing the
transaction, including fees and expenses of Lender’s inspecting engineers,
consultants, and outside counsel.


 


(22)     Lender shall have received such other
authorizations, documents, certificates, updates, reports, searches or items as
Lender reasonably may require with respect to the Additional Project.


 


ARTICLE 3


 


INSURANCE, CONDEMNATION, AND IMPOUNDS


 


Section 3.1    Insurance.
Borrower shall, and shall cause the Subsidiaries to, maintain insurance as
follows:


 


(1)       Casualty;
Business Interruption. Borrower shall, and shall cause the
Subsidiaries, to keep the Projects insured against damage by fire and the other
hazards covered by a standard extended coverage and all-risk insurance policy
for the full insurable value thereof on a replacement cost claim recovery basis
(without reduction for depreciation or co-insurance and without any exclusions
or reduction of policy limits for acts of domestic and foreign terrorism or any
similar acts no matter how labeled), and shall maintain boiler and machinery
insurance, acts of domestic and foreign terrorism endorsement coverage and such
other casualty insurance as reasonably required by Lender. Lender reserves the
right to require from time to time the following additional insurance: flood,
earthquake/sinkhole, windstorm and/or building law or ordinance. Borrower
shall, and shall cause each Subsidiary, to keep each of its Projects insured
against loss by flood if such Project is located currently or at any time in
the future in an area identified by the Federal Emergency Management Agency as
an area having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968, the Flood Disaster
Protection Act of 1973 or the National Flood Insurance Reform Act of 1994 (as
such acts may from time to time be amended) in an amount at least equal to the
lesser of (a) the maximum value of the Project (as determined by Lender)
or (b) the maximum limit of coverage available under said acts. Any such
flood insurance policy shall be issued in accordance with the requirements and
current guidelines of the Federal Insurance Administration. Borrower shall, and
shall cause each Subsidiary, to maintain business interruption insurance,
including rental income loss and extra expense, against all periods covered by
Borrower and such Subsidiary’s property insurance for a limit equal to
twelve(12) calendar months’ exposure, all without any exclusions or reduction
of policy limits for acts of domestic and foreign terrorism or any similar acts
no matter how labeled. Borrower shall not, and shall not permit the
Subsidiaries, to maintain any separate or additional insurance which is


 


18

















 


contributing in the event
of loss unless it is properly endorsed and otherwise satisfactory to Lender in
all respects. The proceeds of insurance paid on account of any damage or
destruction to any Project shall be paid to Lender to be applied as provided in
Section 3.2.


 


(2)       Liability.
Borrower shall, and shall cause the Subsidiaries, to maintain (a) commercial
general liability insurance with respect to each Project providing for limits
of liability of not less than $5,000,000 for both injury to or death of a
person and for property damage per occurrence with a deductible not greater
than $250,000.00, and (b) other liability insurance as reasonably required
by Lender.


 


(3)       Form and
Quality. All insurance policies shall be endorsed in form and
substance acceptable to Lender to name Lender as an additional insured, loss
payee or mortgagee thereunder, as its interest may appear, with loss payable to
Lender, without contribution, under a standard New York (or local equivalent)
mortgagee clause. All such insurance policies and endorsements shall be fully
paid for, shall be issued by appropriately licensed insurance companies
acceptable to Lender with a rating of “A-:IX” or better as established by A.M.
Best’s Rating Guide, and shall be in such form, and shall contain such
provisions, deductibles (with no increased deductible for acts of domestic and
foreign terrorism or any similar acts no matter how labeled) and expiration
dates, as are acceptable to Lender. Each policy shall provide that such policy
may not be canceled or materially changed except upon thirty (30) days’ prior
written notice of intention of non-renewal, cancellation or material change to
Lender and that no act or thing done by Borrower or any Subsidiary shall
invalidate any policy as against Lender. Blanket policies shall be permitted
only if Lender receives appropriate endorsements and/or duplicate policies
containing Lender’s right to continue coverage on a pro rata pass-through
basis. Without limiting the foregoing, Lender shall have the right to conduct
an annual review of Borrower’s insurance coverage, which is provided pursuant
to a blanket policy covering the Projects and other properties owned by
affiliates of Extra Space Storage LLC, a Delaware limited liability company.
Borrower agrees that Lender shall have the right to reasonably increase the
amount of coverage required to be maintained under such blanket policy based on
additional properties added to such blanket policy subsequent to the Closing Date
(or subsequent to the most recent annual review, as the case may be), as
determined by Lender’s insurance consultants as part of such annual review. If
Borrower or any Subsidiary fails to maintain insurance in compliance with this Section 3.1,
Lender may obtain such insurance and pay the premium therefor and Borrower
shall, on demand, reimburse Lender for all expenses incurred in connection
therewith.


 


(4)       Assignment.
Borrower shall, and shall cause the Subsidiaries, to assign the policies or
proofs of insurance to Lender, in such manner and form that Lender and its
successors and assigns shall at all times have and hold the same as security
for the payment of the Loan. If requested by Lender, Borrower shall deliver
copies of all original policies certified to Lender by the insurance company or
authorized agent as being true copies, together with the endorsements required
hereunder. If Borrower or any Subsidiary elects to obtain any insurance which
is not required under this Agreement (including earthquake insurance), all
related insurance policies shall be endorsed in compliance with Section 3.1(3),
and such additional insurance shall not be canceled


 


19

















 


without prior notice to
Lender. From time to time upon Lender’s request, Borrower shall identify to
Lender all insurance maintained by Borrower or the Subsidiaries with respect to
each Project. The proceeds of insurance policies coming into the possession of
Lender shall not be deemed trust funds, and Lender shall be entitled to apply
such proceeds as herein provided.


 


(5)       Adjustments.
Borrower shall give immediate written notice of any loss to the insurance
carrier, and shall give immediate notice to Lender of any loss which exceeds
$25,000. Borrower, on its own behalf and on behalf of the Subsidiaries, hereby
irrevocably authorizes and empowers Lender, as attorney-in-fact for Borrower
and the Subsidiaries coupled with an interest, to notify any insurance carriers
of Borrower and the Subsidiaries to add Lender as a loss payee, mortgagee
insured or additional insured, as the case may be, to any policy maintained by
Borrower or the Subsidiaries (regardless of whether such policy is required
under this Agreement), to make proof of loss, to adjust and compromise any
claim under insurance policies, to appear in and prosecute any action arising
from such insurance policies, to collect and receive insurance proceeds, and to
deduct therefrom Lender’s expenses incurred in the collection of such proceeds.
Nothing contained in this Section 3.1(5), however, shall require Lender to
incur any expense or take any action hereunder.


 


Section 3.2    Use and
Application of Insurance Proceeds. Lender shall apply insurance
proceeds to costs of restoring a damaged Project or the Loan as follows:


 


(1)       if the loss is less than or equal to the
Restoration Threshold, Lender shall apply the insurance proceeds to restoration
provided (a) no Event of Default or Potential Default exists, and (b) Borrower
or the applicable Subsidiary promptly commences and is diligently pursuing
restoration of the Project;


 


(2)       if the loss exceeds the Restoration
Threshold, but is not more than ten percent (10%) of the replacement value of
the improvements (for projects containing multiple phases or stand alone structures,
such calculation to be based on the damaged phase or structure, not the project
as a whole), Lender shall apply the insurance proceeds to restoration provided
that at all times during such restoration (a) no Event of Default or
Potential Default exists; (b) Lender determines that there are sufficient
funds available to restore and repair the Project to a condition approved by
Lender; (c) Lender determines that the Underwritten NOI during restoration
will be sufficient to pay Debt Service during restoration; (d) Lender
determines (based on leases which will remain in effect after restoration is
complete) that after restoration the Debt Service Coverage will be at least
equal to 1.15:1 based on an Applicable Margin of 2.05% and assuming the
outstanding Loan balance equals the Maximum Commitment; (e) Lender
determines that the LTV Ratio after restoration will not exceed eighty-five
percent (85%); (f) Lender determines that restoration and repair of the
Project to a condition approved by Lender will be completed within six months
after the date of loss or casualty and in any event ninety (90) days prior to
the Maturity Date; (g) Borrower or the applicable Subsidiary promptly
commences and is diligently pursuing restoration of the Project; and (h) the
Project after the restoration will be in compliance with and permitted under
all applicable zoning, building and land use laws, rules, regulations and
ordinances;


 


20

















 


(3)       if the conditions set forth above are not
satisfied or the loss exceeds the maximum amount specified in Section 3.2(2) above,
in Lender’s sole discretion, Lender may apply any insurance proceeds it may
receive to amounts owing under the Loan Documents in such order and manner as
Lender in its sole discretion determines, or allow all or a portion of such
proceeds to be used for the restoration of the Project; and


 


(4)       insurance proceeds applied to restoration
will be disbursed on receipt of satisfactory plans and specifications,
contracts and subcontracts, schedules, budgets, lien waivers and architects’
certificates, and otherwise in accordance with prudent commercial construction
lending practices for construction loan advances, including, as applicable, the
advance conditions under Schedule 2.1. Any insurance proceeds remaining
after payment of all restoration costs shall be applied by Lender to the Loan
balance or, at Lender’s sole option, remitted to Borrower or the applicable
Subsidiary.


 


Section 3.3    Condemnation
Awards. Borrower shall immediately notify Lender of the
institution of any proceeding for the condemnation or other taking of any
Project or any portion thereof. Lender may participate in any such proceeding
and Borrower will deliver to Lender all instruments necessary or required by Lender
to permit such participation. Without Lender’s prior consent, which shall not
be unreasonably withheld, Borrower shall not, and shall not permit any
Subsidiary to (1) agree to any compensation or award, and (2) take
any action or fail to take any action which would cause the compensation to be
determined. Borrower, on its own behalf and on behalf of the Subsidiaries,
hereby assigns to Lender all awards and compensation to which Borrower or any
Subsidiary is entitled for the taking or purchase in lieu of condemnation of
any Project or any part thereof, and agrees that all such awards and
compensation shall be paid to Lender. Borrower, on its own behalf and on behalf
of the Subsidiaries, authorizes Lender to collect and receive such awards and
compensation, to give proper receipts and acquittances therefor, and in Lender’s
sole discretion to apply the same toward the payment of the Loan,
notwithstanding that the Loan may not then be due and payable, or to the
restoration of the affected Project; however, if the award is less than or
equal to $50,000 and Borrower requests that such proceeds be used for
non-structural site improvements (such as landscape, driveway, walkway and
parking area repairs) required to be made as a result of such condemnation,
Lender will apply the award to such restoration in accordance with disbursement
procedures applicable to insurance proceeds provided there exists no Potential
Default or Event of Default. Borrower, upon request by Lender, shall execute or
cause the Subsidiaries to execute all instruments requested to confirm the
assignment of the awards and compensation to Lender, free and clear of all
liens, charges or encumbrances.


 


Section 3.4    Impounds.
Borrower shall deposit into a reserve with Lender, monthly on the first day of
each month, one-twelfth (l/12th) of the annual charges for ground or other
rent, if any (but only if such rent is due less often than monthly or,
regardless of payment frequency, if Borrower has failed to make one or more of
such payments), insurance premiums and real estate taxes, assessments and
similar charges relating to each Project. On or before Closing Date, Borrower
shall deposit with Lender a sum of money which together with the monthly
installments will be sufficient to make each of such payments thirty (30) days
prior to the date any delinquency or penalty becomes due with respect to such
payments. Deposits shall


 


21

















 


be made on the basis of
Lender’s estimate from time to time of the charges for the current year (after
giving effect to any reassessment or, at Lender’s election, on the basis of the
charges for the prior year, with adjustments when the charges are fixed for the
then current year). All funds so deposited shall be held by Lender, without
interest, and may be commingled with Lender’s general funds. Borrower hereby
grants to Lender a security interest in all funds so deposited with Lender for
the purpose of securing the Loan. While an Event of Default exists, the funds
deposited may be applied in payment of the charges for which such funds have
been deposited, or to the payment of the Loan or any other charges affecting
the security of Lender, as Lender may elect, but no such application shall be
deemed to have been made by operation of law or otherwise until actually made
by Lender. Borrower shall furnish Lender with bills for the charges for which
such deposits are required at least thirty (30) days prior to the date on which
the charges first become payable. If at any time the amount on deposit with
Lender, together with amounts to be deposited by Borrower before such charges
are payable, is insufficient to pay such charges, Borrower shall deposit any
deficiency with Lender immediately upon demand. Lender shall pay such charges
when the amount on deposit with Lender is sufficient to pay such charges and
Lender has received a bill for such charges.


 


ARTICLE 4


 


REPRESENTATIONS AND WARRANTIES


 


Borrower
represents and warrants to Lender that:


 


Section 4.1    Organization
and Power. Borrower and each Borrower Party is duly organized,
validly existing and in good standing under the laws of the state of its
formation or existence. Borrower is in compliance with all legal requirements
applicable to doing business in the state in which Borrower’s Projects are
located. Each Subsidiary is in compliance with all legal requirements
applicable to doing business in the state in which such Subsidiary’s Project is
located. Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of
the Internal Revenue Code. Borrower and each Borrower Party has only one state
of incorporation or organization, which is set forth in Schedule 4.1.
All other information regarding Borrower and each Borrower Party contained in Schedule
4.1, including the ownership structure of Borrower and its constituent
entities, is true and correct as of the Closing Date.


 


Section 4.2    Validity
of Loan Documents. The execution, delivery and performance by
Borrower and each Borrower Party of the Loan Documents: (1) are duly
authorized and do not require the consent or approval of any other party or
governmental authority which has not been obtained; and (2) will not
violate any law or result in the imposition of any lien, charge or encumbrance
upon the assets of any such party, except as contemplated by the Loan
Documents. The Loan Documents constitute the legal, valid and binding
obligations of Borrower and each Borrower Party, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, or similar
laws generally affecting the enforcement of creditors’ rights.


 


22














 


Section 4.3      Liabilities;
Litigation; Other Secured Transactions.


 


(1)         The financial statements delivered by
Borrower and each Borrower Party are true and correct with no significant
change since the date of preparation. Except as disclosed in such financial
statements, there are no liabilities (fixed or contingent) affecting any
Project, Borrower or any Borrower Party. Except as disclosed in such financial
statements, there is no litigation, administrative proceeding, investigation or
other legal action (including any proceeding under any state or federal
bankruptcy or insolvency law) pending or, to the knowledge of Borrower,
threatened, against any Project, Borrower or any Borrower Party which if
adversely determined could have a material adverse effect on such party, such
Project or the Loan.


 


(2)         Neither Borrower nor any Subsidiary is,
or has been, bound (whether as a result of a merger or otherwise) as a debtor
under a pledge or security agreement entered into by another Person, which has
not heretofore been terminated.


 


Section 4.4      Taxes
and Assessments. Each Project is comprised of one or more
parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot. Except as otherwise shown on the
Title Insurance Policies, there are no pending or, to Borrower’s best
knowledge, proposed, special or other assessments for public improvements or
otherwise affecting any Project, nor are there any contemplated improvements to
any Project that may result in such special or other assessments.


 


Section 4.5      Other
Agreements; Defaults. Neither Borrower nor any Borrower Party is
a party to any agreement or instrument or subject to any court order,
injunction, permit, or restriction which might adversely affect in any material
respect any Project or the business, operations, or condition (financial or
otherwise) of Borrower or any Borrower Party. Neither Borrower nor any Borrower
Party is in violation of any agreement which violation would have an adverse
effect in any material respect on any Project, Borrower, or any Borrower Party
or Borrower’s or any Borrower Party’s business, properties, or assets,
operations or condition, financial or otherwise.


 


Section 4.6      Compliance
with Law.


 


(1)         To the best of Borrower’s knowledge, Borrower
and each Borrower Party have all requisite licenses, permits, franchises,
qualifications, certificates of occupancy or other governmental authorizations
to own, lease and operate the Projects and carry on its business. Except as set
forth in the zoning reports and the property condition reports obtained by
Lender in connection with the Loan and listed in Schedule 4.6 attached
hereto, each Project is in compliance with all applicable zoning, subdivision,
building and other legal requirements and is free of structural defects. Except
as set forth in the property condition reports obtained by Lender in connection
with the Loan, each Project’s building systems are in good working order,
subject to ordinary wear and tear. Except as set forth in the zoning reports
obtained by Lender in connection with the Loan and listed in Schedule 4.6
attached hereto, no Project constitutes, in whole or in part, a legally
non-conforming use under applicable legal requirements.


 


23

















 


(2)         No condemnation has been commenced or,
to Borrower’s knowledge, is contemplated with respect to all or any portion of
any Project or for the relocation of roadways providing access to any Project.


 


(3)         Each Project has adequate rights of access
to public ways and is served by adequate water, sewer, sanitary sewer and storm
drain facilities. All public utilities necessary or convenient to the full use
and enjoyment of each Project are located in the public right-of-way abutting
such Project, and all such utilities are connected so as to serve such Project
without passing over other property, except to the extent such other property
is subject to a perpetual easement for such utility benefiting such Project.
All roads necessary for the full utilization of each Project for its current
purpose have been completed and dedicated to public use and accepted by all
governmental authorities.


 


Section 4.7      Location
of Borrower. Borrower’s and each Subsidiary’s principal place of
business and chief executive offices are located at the address stated in
Section 12.1 and, except as otherwise set forth in Schedule 4.1,
Borrower and each Subsidiary at all times has maintained its principal place of
business and chief executive office at such location or at other locations
within the same state.


 


Section 4.8      ERISA.


 


(1)          As
of the Closing Date and throughout the term of the Loan, (a) neither
Borrower nor any Subsidiary is nor will be an “employee benefit plan” as
defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”),
which is subject to Title I of ERISA, and (b) the assets of Borrower and
each Subsidiary do not and will not constitute “plan assets” of one or more
such plans for purposes of Title I of ERISA; and


 


(2)          As of
the Closing Date and throughout the term of the Loan (a) neither Borrower
nor any Subsidiary is nor will not be a “governmental plan” within the meaning
of Section 3(3) of ERISA and (b) transactions by or with
Borrower and each Subsidiary are not and will not be subject to state statutes
applicable to Borrower or any Subsidiary regulating investments of and
fiduciary obligations with respect to governmental plans.


 


(3)          Neither
Borrower nor any Subsidiary has any employees.


 


Section 4.9      Margin
Stock. No part of proceeds of the Loan will be used for
purchasing or acquiring any “margin stock” within the meaning of Regulations T,
U or X of the Board of Governors of the Federal Reserve System.


 


Section 4.10    Tax
Filings. Borrower and each Borrower Party have filed (or have
obtained effective extensions for filing) all federal, state and local tax
returns required to be filed and have paid or made adequate provision for the
payment of all federal, state and local taxes, charges and assessments payable
by Borrower and each Borrower Party, respectively.


 


Section 4.11    Solvency.
Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds
and will, immediately following the making of the Loan, exceed


 


24

















 


Borrower’s total
liabilities, including, without limitation, subordinated, unliquidated,
disputed and contingent liabilities. The fair saleable value of Borrower’s
assets is and will, immediately following the making of the Loan, be greater
than Borrower’s probable liabilities, including the maximum amount of its
contingent liabilities on its Debts as such Debts become absolute and matured.
Borrower’s assets do not and, immediately following the making of the Loan will
not, constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Borrower does not intend to, and does
not believe that it will, incur Debts and liabilities (including contingent
liabilities and other commitments) beyond its ability to pay such Debts as they
mature (taking into account the timing and amounts of cash to be received by
Borrower and the amounts to be payable on or in respect of obligations of
Borrower). Giving effect to the Contribution Agreement, the fair saleable value
of each Subsidiary’s assets exceeds and will, immediately following the making
of the Loan, exceed each Subsidiary’s total liabilities, including
subordinated, unliquidated, disputed and contingent liabilities. The fair
saleable value of each Subsidiary’s assets is and will, immediately following
the making of the Loan and the encumbrance of the Projects by the Mortgages, be
greater than each Subsidiary’s probable liabilities, including the maximum
amount of its contingent liabilities on its Debts as such Debts become absolute
and matured. No Subsidiary’s assets constitute and, immediately following the
making of the Loan and the encumbrance of the Projects by the Mortgages will
not constitute, unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. No Subsidiary intends to, nor does
any Subsidiary believe that it will, incur Debts and liabilities (including
contingent liabilities and other commitments) beyond its ability to pay such
Debts as they mature (taking into account the timing and amounts of cash to be
received by such Subsidiary and the amounts to be payable on or in respect of
obligations of such Subsidiary). Except as expressly disclosed to Lender in
writing, no petition in bankruptcy has been filed by or against Borrower or any
Borrower Party in the last seven (7) years, and neither Borrower nor any
Borrower Party in the last seven (7) years has ever made an assignment for
the benefit of creditors or taken advantage of any insolvency act for the
benefit of debtors. Neither Borrower nor any Borrower Party is contemplating
either the filing of a petition by it under state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or
property, and neither Borrower nor any Borrower Party has knowledge of any
Person contemplating the filing of any such petition against it.


 


Section 4.12    Full
and Accurate Disclosure. No statement of fact made by or on
behalf of Borrower or any Borrower Party in this Agreement or in any of the
other Loan Documents contains any untrue statement of a material fact or omits
to state any material fact necessary to make statements contained herein or
therein not misleading. There is no fact presently known to Borrower which has
not been disclosed to Lender which adversely affects in any material respect,
nor as far as Borrower can foresee, might adversely affect in any material
respect, any Project or the business, operations or condition (financial or
otherwise) of Borrower or any Borrower Party. All information supplied by
Borrower regarding any other Collateral is accurate and complete in all
material respects. All evidence of Borrower’s and each Borrower Party’s
identity provided to Lender is genuine, and all related information is
accurate.


 


25

















 


ARTICLE 5


 


ENVIRONMENTAL MATTERS


 


Section 5.1      Representations
and Warranties on Environmental Matters. To Borrower’s
knowledge, except as set forth in the Site Assessments, (1) no Hazardous
Material is now or was formerly used, stored, generated, manufactured,
installed, disposed of or otherwise present at or about any Project or any
property adjacent to any Project (except for cleaning and other products
currently used in connection with the routine maintenance or repair of the
Projects in full compliance with Environmental Laws), (2) all permits,
licenses, approvals and filings required by Environmental Laws have been
obtained, and the use, operation and condition of the Projects do not, and did
not previously, violate any Environmental Laws, and (3) no civil, criminal
or administrative action, suit, claim, hearing, investigation or proceeding has
been brought or been threatened, nor have any settlements been reached by or
with any parties or any liens imposed in connection with any Project concerning
Hazardous Materials or Environmental Laws.


 


Section 5.2      Covenants
on Environmental Matters.


 


(1)         Borrower shall, and shall cause each
Subsidiary to, (a) comply strictly and in all respects with applicable
Environmental Laws; (b) notify Lender immediately upon Borrower’s or any
Subsidiary’s discovery of any spill, discharge, release or presence of any
Hazardous Material (except for cleaning and other products used in connection
with routine maintenance or repair of the Projects in full compliance with
Environmental Laws) at, upon, under, within, contiguous to or otherwise
affecting any Project which may constitute a violation of Environmental Law;
(c) promptly remove such Hazardous Materials and remediate the affected
Project in full compliance with Environmental Laws and in accordance with the
reasonable recommendations and specifications of an independent environmental
consultant approved by Lender; and (d) promptly forward to Lender copies
of all orders, notices, permits, applications or other communications and
reports in connection with any spill, discharge, release or the presence of any
Hazardous Material or any other matters relating to the Environmental Laws or
any similar laws or regulations, as they may affect any Project, any Subsidiary
or Borrower.


 


(2)         Borrower shall not cause, shall
prohibit any other Person within the control of Borrower (including the
Subsidiaries) from causing, and shall use prudent, commercially reasonable
efforts to prohibit other Persons (including tenants) from causing (a) any
spill, discharge or release, or the use, storage, generation, manufacture,
installation, or disposal, of any Hazardous Materials (except for cleaning and
other products used in connection with routine maintenance or repair of the
Projects in full compliance with Environmental Laws) at, upon, under, within or
about any Project or the transportation of any Hazardous Materials to or from
any Project, (b) any underground storage tanks to be installed at any
Project, or (c) any activity that requires a permit or other authorization
under Environmental Laws to be conducted at any Project.


 


26

















 


(3)         Borrower shall provide to Lender, at
Borrower’s expense promptly upon the written request of Lender from time to
time, a Site Assessment for any Project or; if required by Lender, an update to
any existing Site Assessment for any Project, to assess the presence or absence
of any Hazardous Materials and the potential costs in connection with
abatement, cleanup or removal of any Hazardous Materials found on, under, at or
within such Project. Borrower shall pay the cost of no more than one such Site
Assessment or update for each Project in any twelve (12)-month period, unless
Lender’s request for a Site Assessment is based on either information provided
under Section 5.2(1), a reasonable suspicion of Hazardous Materials at or
near a Project, a breach of representations under Section 5.1, or an Event
of Default, in which case any such Site Assessment or update shall be at
Borrower’s expense.


 


(4)         Within 120 days after the Closing Date,
Borrower shall cause to be prepared by environmental engineers approved by
Lender, and shall deliver to Lender, Operations and Maintenance Programs
(collectively, the “O&M Programs”)
for the removal or encapsulation of, or other action for handling,
asbestos-containing materials at the Projects referenced on Schedule 1.1(B) known
as “1019 Norwood, MA,” “1206 Waltham, MA,” 1073 Arvada, CO,” “1075 Thornton,
CO”, “1076 Westminster, CO,” “1195 Lanham, MD,” “1197 Morrisville, PA” and
“1198 Philadelphia, PA” (collectively, the “O&M Projects”‘). Borrower shall immediately implement
the O&M Programs. Prior to the commencement of any construction,
rehabilitation, modification or renovation at any O&M Project, including
any such work which requires the removal of any materials or improvements of
any kind in connection with the ceiling, subflooring, floor tiles, baseboard,
wall texture, pipe insulation and other portions of such Project containing
asbestos-containing materials (the “ACM-Related
Work”), all ACM-Related Work shall be implemented in accordance
with the procedures and programs in the O&M Program for such Project and
all applicable governmental requirements. Each O&M Program and work
resulting therefrom shall be conducted by an accredited, licensed, abatement
contractor using state-of-the-art work practices and procedures and shall
include all monitoring and project management performed by an accredited asbestos
consultant. Borrower shall deliver to Lender promptly when available, copies of
all reports, notices, submittals, permits, licenses, and certificates relating
to any O&M Program. For each O&M Program, until all matters in such
O&M Program have been satisfied, Borrower shall deliver to Lender, on or
before the first day of each Loan Year, evidence of an annual inspection by the
environmental engineers for the O&M Project covered thereby, addressing the
status of affected space requiring ACM-Related Work or other action with
respect to Hazardous Materials. Borrower shall follow the procedures of the
O&M Programs with respect to any additional Hazardous Materials revealed by
any annual inspection. All fees and expenses incurred for all such inspections
and review and approval of any O&M Program shall be paid by Borrower.


 


Section 5.3   Allocation of Risks and Indemnity. As
between Borrower and Lender, and except as expressly set forth below in this
Section 5.3, all risk of loss associated with non-compliance with
Environmental Laws, or with the presence of any Hazardous Material at, upon,
within, contiguous to or otherwise affecting the Projects, shall lie solely
with Borrower. Accordingly, except as expressly set forth below in this
Section 5.3, Borrower shall bear all risks and costs associated with any
loss (including any loss in value attributable to Hazardous


 


27

















 


Materials), damage or
liability therefrom, including all costs of removal of Hazardous Materials or other
remediation required under this Agreement. Borrower shall at all times
indemnify, defend and hold Lender harmless from and against any and all claims,
suits, actions, debts, damages, losses, liabilities, litigations, judgments,
charges, costs and expenses (including reasonable costs of defense), of any
nature whatsoever proffered or incurred by Lender, whether as mortgagee or
beneficiary under the Mortgages, as mortgagee in possession, or as
successor-in-interest to Borrower or the Subsidiaries by foreclosure deed or
deed in lieu of foreclosure, and whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law,
including those arising from the joint, concurrent or comparative negligence of
Lender, under or on account of the Environmental Laws, including the assertion
of any lien thereunder, with respect to: (1) a breach of any
representation, warranty or covenant of Borrower contained in this
Article 5; (2) any acts performed by Lender pursuant to the
provisions of this Article 5; (3) any discharge of Hazardous
Materials, the threat of discharge of any Hazardous Materials or the storage or
presence of any Hazardous Materials affecting any Project whether or not the
same originates or emanates from a Project or any contiguous real estate,
including any loss of value of any Project as a result of the foregoing;
(4) any costs of removal or remedial action incurred by the United States
Government or any costs incurred by any other Person or damages from injury to,
destruction of, or loss of natural resources including reasonable costs of
assessing such injury, destruction or loss incurred pursuant to any
Environmental Laws; (5) liability for personal injury or property damage
arising under any statutory or common law tort theory, including without
limitation damages assessed for the maintenance of a public or private nuisance
or for the carrying on of an abnormally dangerous activity at, upon, under or
within any Project; and/or (6) any other environmental matter affecting
any Project within the jurisdiction of the Environmental Protection Agency, any
other federal agency or any state or local environmental agency. The foregoing
notwithstanding, Borrower shall not be liable under the foregoing indemnification
to the extent any such loss, liability, damage, claim, cost or expense results
solely from Lender’s gross negligence or willful misconduct. Borrower’s
obligations under this Article 5 shall arise upon the discovery of the
presence of any Hazardous Material, whether or not the Environmental Protection
Agency, any other federal agency or any state or local environmental agency has
taken or threatened any action in connection with the presence of any Hazardous
Materials and whether or not the existence of any such Hazardous Material or
potential liability on account thereof is disclosed in any Site Assessment, and
shall continue notwithstanding the repayment of the Loan or any transfer or
sale of any right, title and interest in the Projects (by foreclosure, deed in
lieu of foreclosure or otherwise). Notwithstanding the foregoing, subject to
the conditions specified below in this Section 5.3, Borrower shall not be
liable under this Section 5.3 for such indemnified matters directly
created or arising from events or conditions caused or created by Lender with
respect to any Project and first existing after Lender acquires title to such
Project by foreclosure or acceptance of a deed in lieu thereof, but only if
(a) Borrower delivers to Lender a current site assessment evidencing the
presence of no Hazardous Materials on such Project and no violation of any
Environmental Laws with respect to such Project not more than ninety (90) days
and not less than thirty (30) days prior thereto, and (b) such loss, liability,
damage, claim, cost or expense does not directly or indirectly arise from or
relate to any release of or exposure to any Hazardous Material (including
personal injury or damage to property), non-compliance with any Environmental
Laws, or remediation existing or occurring prior to the date Lender acquires
title to such Project.


 


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Section
5.4    Lender’s Right
to Protect Collateral.   If (1) any
discharge of Hazardous Materials or the threat of a discharge of Hazardous
Material affecting any Project occurs, whether originating or emanating from
such Project or any contiguous real estate, and/or (2) Borrower or any
Subsidiary fails to comply with any Environmental Laws or related regulations,
Lender may at its election, but without the obligation so to do, give such
notices and/or cause such work to be performed at the affected Project and/or
take any and all other actions as Lender shall deem necessary or advisable in
order to abate the discharge of any Hazardous Material, remove the Hazardous
Material or cure Borrower’s or such Subsidiary’s noncompliance.


 


Section 5.5    No Waiver. Notwithstanding any
provision in this Article 5 or elsewhere in the Loan Documents, or any
rights or remedies granted by the Loan Documents, Lender does not waive and
expressly reserves all rights and benefits now or hereafter accruing to Lender
under any “security interest” or “secured creditor” exception under applicable
Environmental Laws, as the same may be amended. No action taken by Lender
pursuant to the Loan Documents shall be deemed or construed to be a waiver or
relinquishment of any such rights or benefits under any “security interest
exception.”


 


ARTICLE 6


 


LEASING MATTERS


 


Section 6.1    Representations and Warranties on Leases.
Borrower represents and warrants to Lender with respect to leases of each
Project that: (1) the rent roll delivered to Lender is true and correct,
and the leases are valid and in full force and effect; (2) the leases
(including amendments) are in writing, and there are no oral agreements with
respect thereto; (3) the copies of the leases delivered to Lender are true
and complete; (4) neither the landlord nor more than (i) five percent
(5 %) of the self-storage tenants at any one Project and (ii) five percent
(5%) of all self-storage tenants at all Projects are in default under any of
the leases; (5) no retail or office tenant is in default under any of the
leases which would represent more than five percent (5%) of the Operating
Revenues of any one Project or the Projects in aggregate; (6) Borrower has
no knowledge of any notice of termination or default with respect to any retail
or office lease which would represent more than five percent (5%) of the
Operating Revenues of any one Project or the Projects in aggregate (except that
Foster-Miller has given notice that it is terminating the Foster-Miller Lease);
(7) Borrower has not assigned or pledged any of the leases, the rents or
any interests therein except to Lender; (8) no tenant or other party has
an option to purchase all or any portion of any Project; (9) no retail or
office tenant has the right to terminate its lease prior to expiration of the
stated term of such lease; (10) not more than five percent (5%) of the
self-storage tenants at any Project has prepaid more than one month’s rent in
advance (except for bona fide security deposits not in excess of an amount
equal to two month’s rent), and no self-storage tenants have prepaid more than
twelve month’s rent in advance; (11) no retail or office tenant has prepaid
more than one month’s rent in advance (except for bona fide security deposits
not in excess of an amount equal to two month’s rent); and (12) all existing
retail and office leases are subordinate to the applicable Mortgages either pursuant
to their terms or a recorded subordination agreement, or are month-to-month
leases.


 


29

















 


Section 6.2    Standard Lease Form; Approval Rights. Except as provided
below, all future leases and other rental arrangements shall in all respects be
approved by Lender and shall be on a standard lease form provided to Lender
with no material modifications (except as approved by Lender). Except as
provided below, all retail and office leases and other rental arrangements
shall in all respects be approved by Lender and shall be on a standard lease
form approved by Lender with no material modifications (except as approved by
Lender). Lender hereby approves of the Borrower’s current standard forms for
self-storage leases and office/retail leases which have been provided to
Lender. Retail and office lease forms shall provide that the tenant shall
attorn to Lender, and that any cancellation, surrender, or amendment of such
lease without the prior written consent of Lender shall be voidable by Lender.
Borrower shall, and shall cause each Subsidiary to, hold, in trust, all tenant
security deposits related to Borrower’s and such Subsidiary’s
Project(s) in the manner required by the applicable leases and applicable
law. Within ten (10) days after Lender’s request, Borrower shall furnish
to Lender a statement of all tenant security deposits, copies of all retail and
office leases not previously delivered to Lender and a current rent roll for
each Project, each certified by Borrower as being true and correct.
Notwithstanding anything contained in the Loan Documents, Lender’s approval
shall not be required for future self-storage leases or self-storage lease
extensions at a Project if there exists no Event of Default. Notwithstanding
anything contained in the Loan Documents, Lender’s approval shall not be
required for future retail or office leases or retail or office lease
extensions at a Project if the following conditions are satisfied:
(1) there exists no Potential Default or Event of Default; (2) the
lease is on the standard lease form approved by Lender with no material
modifications (except as approved by Lender, such approval not to be
unreasonably withheld or delayed); (3) the lease does not conflict with
any restrictive covenant affecting the Project or any other lease for space in
the Project; and (4) the leased premises, when combined with all other
space in the Project leased to the same tenant or any Affiliate thereof, are
not greater than 5,000 rentable square feet, and the lease term is at least 36
months (but not more than 60 months).


 


Section 6.3    Covenants. Borrower shall, and shall
cause each Subsidiary to, (1) perform the obligations which Borrower or
such Subsidiary is required to perform under the leases; (2) enforce the
obligations to be performed by the tenants under (i) self-storage leases
to the extent customary in the ordinary course of Borrower’s business
consistent with prudent property management practices and (ii) retail and
office leases; (3) promptly furnish to Lender any notice of default or
termination received by Borrower or any Subsidiary from, or given by Borrower
or any Subsidiary to, any retail or office tenant unless such lease is for less
than 1,000 rentable square feet; (4) not collect any rents from the
self-storage tenants at any Project for more than thirty (30) days in advance
of the time when the same shall become due, except for bona fide security
deposits not in excess of an amount equal to two months rent, and provided that
the aggregate prepaid rents collected for more than one month in advance for
any Project shall not exceed five percent (5%) of the annualized gross revenues
from such Project; (5) not collect any rents from retail or office tenants
for more than thirty (30) days in advance of the time when the same shall
become due, except for bona fide security deposits not in excess of an amount
equal to two months rent; (6) not enter into any ground lease or master
lease of any part of any Project; (7) not further assign or encumber any
lease; (8) not, except with Lender’s prior written consent, cancel or
accept surrender or termination of any retail or office lease of not less than
1,000 rentable square feet at any Project except in the ordinary course of
business, consistent with prudent property management practices; and
(9) not, except with Lender’s prior written consent,


 


30

















 


modify or amend any
retail or office lease (except for non-material modifications and amendments
entered into in the ordinary course of business, consistent with prudent
property management practices for the particular property type, not affecting
the economic terms of the lease) of not less than 1,000 rentable square feet at
any Project, and any action in violation of clauses (6), (7), (8), and
(9) of this Section 6.3 shall be void at the election of Lender.


 


Section 6.4      Tenant
Estoppels. At Lender’s request, Borrower shall use commercially
reasonable efforts to obtain and furnish to Lender, written estoppels in form
and substance reasonably satisfactory to Lender, executed by self-storage
tenants under any “corporate” or master leases of any part of any Project and
by retail and office tenants under any leases of any part of any Project
accounting for more than ten percent (10%) of the net rentable square footage
of such Project and by retail and office tenants under any leases of any part
of any Project in excess of 5,000 square feet, and confirming the term, rent,
and other provisions and matters relating to the leases.


 


Section 6.5      Project
Information. The information in Schedule 1.1(B) hereof
with respect to each Project is correct.


 


ARTICLE 7


 


FINANCIAL REPORTING


 


Section 7.1      Financial
Statements.


 


(1)         Monthly
Reports. Within thirty (30) days after the end of each calendar
month, Borrower shall furnish to Lender, on a Project-by-Project basis, a
current (as of the calendar month just ended) balance sheet, a detailed
operating statement (showing monthly activity and year-to-date) stating
Operating Revenues, Operating Expenses and Net Cash Flow for the calendar month
just ended, an updated rent roll for each Project, and, as requested by Lender,
a written statement setting forth any variance from the annual budget, a
general ledger, copies of bank statements and bank reconciliations and other
documentation supporting the information disclosed in the most recent financial
statements.


 


(2)         Annual
Reports. Within ninety (90) days after the end of Borrower’s
fiscal years, Borrower shall furnish to Lender, on a Project-by-Project basis,
a current (as of the end of such fiscal year) balance sheet, a detailed
operating statement stating Operating Revenues, Operating Expenses and Net Cash
Flow for each of Borrower and each Project, and, if required by Lender at any
time after an Event of Default has occurred (even if such Event of Default is
subsequently waived by Lender in its sole discretion), prepared on a review
basis and certified by an independent public accountant satisfactory to Lender,
provided that in such event Borrower shall have an additional sixty (60) days
to deliver such certified financial statements.


 


(3)         Certification:
Supporting Documentation. Each such financial statement shall be
in scope and detail satisfactory to Lender and certified by the chief financial
representative of Borrower.


 


31

















 


(4)         Tax
Returns. Borrower shall furnish to Lender copies of Borrower’s
and each Subsidiary’s filed federal, state and (if applicable) local income tax
returns for each taxable year (with all forms and supporting schedules
attached) within thirty (30) days after filing. Alternatively, if Borrower and
each Subsidiary are included in a consolidated tax return pursuant to
applicable tax law, delivery of such consolidated tax statements (with all
forms and supporting schedules attached) within thirty (30) days after filing
shall satisfy this requirement.


 


Section 7.2    Accounting Principles. All financial
statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied from year to year. If the financial statements
are prepared on an accrual basis, such statements shall be accompanied by a
reconciliation to cash basis accounting principles.


 


Section 7.3   Other Information. Borrower shall
deliver to Lender such additional information regarding Borrower, the
Subsidiaries, its business, any Borrower Party, and the Projects within thirty
(30) days after Lender’s request therefor.


 


Section 7.4    Annual Budget. Borrower shall provide
to Lender its proposed annual capital improvements budget for each Project for
each fiscal year for Lender’s review and approval, which approval shall not be
unreasonably withheld, and Borrower shall provide to Lender its proposed annual
operating budget for each Project for such fiscal year for Lender’s review.
Both such budgets shall be provided within ninety (90) days after the
commencement of each fiscal year.


 


Section 7.5    Audits. Lender’s employees and third
party consultants shall be entitled to perform such financial investigations
and audits of Borrower’s and each Subsidiary’s books and records as Lender
shall deem necessary. Borrower shall reimburse Lender for the costs of
(i) one financial audit of Borrower, the Subsidiaries and all Projects per
Loan Year, (ii) any financial audits required in connection with
determining the Debt Service Coverage in accordance with this Agreement, and
(iii) any additional financial audits performed while any Event of Default
exists. Borrower shall permit Lender and Lender’s agents and consultants to
examine such records, books and papers of Borrower and each Subsidiary which
reflect upon its financial condition, the income and expenses relative to the
Projects and the representations set forth in Article 9. Borrower authorizes
Lender to communicate directly with Borrower’s and each Subsidiary’s
independent certified public accountants; provided that Borrower shall have the
right to participate in all communications with such accountants, and Borrower
agrees to not impair, impede or delay such communications. Borrower authorizes
such accountants to disclose to Lender any and all financial statements and
other supporting financial documents and schedules, including copies of any
management letter, with respect to the business, financial condition and other
affairs of Borrower and each Subsidiary.


 


32














 


ARTICLE 8


 


COVENANTS


 


Borrower covenants
and agrees with Lender as follows:


 


Section 8.1      Due on Sale and Encumbrance; Transfers of Interests.
Without the prior written consent of Lender,


 


(1)         Except as
permitted under Section 2.8, no Transfer shall occur or be permitted, nor
shall Borrower enter into any easement or other agreement granting rights in or
restricting the use or development of any Project; and


 


(2)         no Transfer
shall occur or be permitted alone or in the aggregate which would (a) cause
Borrower to cease to own one hundred percent (100%) of the beneficial interests
in the Non-New Jersey Subsidiaries and the Non-New Jersey Projects, (b) cause
either Borrower or ESP 7 to cease to own one hundred percent (100%) of the
beneficial interests in the New Jersey Subsidiaries and the New Jersey
Projects, (c) cause either (i) ESP 7 to cease to own one hundred
percent of the ownership interests in Borrower, or (ii) Extra Space
Storage LLC, a Delaware limited liability company (“ESS”) to cease to own one hundred
percent of the ownership interests in Borrower, (d) cause ESS to own less
than (i) fifty-one percent (51%) of the ownership interests in ESP 7 or (ii) one
hundred percent (100%) of the ownership interests in the general partner of ESP
7 (unless (A) ESS directly owns 100% of the ownership interests in
Borrower under subsection (c)(ii) above and (B) ESP 7 no longer
directly owns any membership interest in any New Jersey Subsidiary that owns
any Project serving as Collateral), (e) cause ESS to cease to be wholly-owned
and controlled by a limited partnership (the “REIT OP”) functioning as the REIT’s (as defined below)
operating partnership, (f) cause either Extra Space Management, Inc.
(so long as Extra Space Management, Inc. remains a Qualified Manager), or
a Qualified Manager (defined below), to cease to be associated with and
directly involved with day to day operational and management responsibilities
for the business of the REIT OP, ESS and Borrower or (g) result in a new
general partner, member or limited partner having the ability to control the
affairs of Borrower or ESP 7 being admitted to or created in Borrower or ESP 7
(or result in any existing general partner or member or controlling limited
partner withdrawing from Borrower or ESP 7).


 


As used in this
Agreement, “Transfer” shall
mean any direct or indirect sale, transfer, conveyance, installment sale,
master lease, mortgage, pledge, encumbrance, grant of Lien or other interest,
license, lease, alienation or assignment, whether voluntary or involuntary, of
all or any portion of the direct or indirect legal or beneficial ownership of,
or any interest in (a) any Project or any part thereof or (b) Borrower
or ESP 7, including any agreement to transfer or cede to another Person any
voting, management or approval rights, or any other rights, appurtenant to any
such legal or beneficial ownership or other interest. “Transfer” is
specifically intended to include any pledge or assignment, directly or
indirectly, of a controlling interest in Borrower or ESP 7 or any of either’s
general partner, controlling limited partner or controlling member for purposes
of securing so-called “mezzanine” indebtedness. “Transfer” shall not


 


33

















 


include (i) the
leasing of individual units within any Project so long as Borrower complies
with the provisions of the Loan Documents relating to such leasing activity; or
(ii) the transfer of limited partner or non-managing member interests in
ESS so long as the transfer does not violate the provisions of Sections 8.1(2),
and does not violate the provisions of Article 9. As used in this Section 3.9,
“control”, and the
correlative terms “controlled by”
and “controlling”, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of the business and affairs of the
entity in question by reason of ownership of beneficial interests, by contract
or otherwise. As used herein, “Qualified
Manager” shall mean a reputable and experienced owner, operator
developer or manager of Class “A” or “B” self-storage facilities that (1) has
at least ten (10) years experience in the ownership, operation,
development or management of Class “A” or “B” self-storage facilities, (2) is
the owner, operator, developer or manager of self-storage facilities
containing, in the aggregate, not less than 2,000,000 rentable square feet, and
(3) is not, and within the last seven (7) years has not, been the
subject of a bankruptcy proceeding. As used herein, “REIT” shall mean Extra Space Storage
Inc., or any successor corporation which has one or more classes of shares or
other ownership interests that are registered with the Securities Exchange
Commission and are publicly traded on a national securities exchange or in the
over-the-counter securities market.


 


Without limiting
the foregoing, Borrower further agrees that it will require each Person that
proposes to become a partner, member or shareholder (each such Person, an “Interest Holder”) in Borrower after the
Closing Date to sign and deliver to Borrower, within thirty (30) days after
such transfer (and Borrower shall deliver to Lender promptly after receipt), a
certificate executed by a duly authorized officer of the new Interest Holder
containing representations, warranties and covenants substantially the same as
the representations, warranties and covenants provided by Borrower in Article 9
hereof.


 


Section 8.2      Taxes; Charges. Borrower shall pay (or
cause the Subsidiaries to pay) before any fine, penalty, interest or cost may
be added thereto, and shall not enter into (or permit any Subsidiary to enter
into) any agreement to defer, any real estate taxes and assessments, franchise
taxes and charges, and other governmental charges that may become a Lien upon any
Project or become payable during the term of the Loan, and will promptly
furnish Lender with evidence of such payment; however, Borrower’s compliance
with Section 3.4 of this Agreement relating to impounds for taxes and
assessments shall, with respect to payment of such taxes and assessments, be
deemed compliance with this Section 8.2. Borrower shall not, and shall not
permit any Subsidiary to, suffer or permit the joint assessment of any Project
with any other real property constituting a separate tax lot or with any other
real or personal property. Borrower shall, or shall cause each Subsidiary to,
pay when due all claims and demands of mechanics, materialmen, laborers and
others which, if unpaid, might result in a Lien on Borrower’s or such
Subsidiary’s Project; however, Borrower or any Subsidiary, as applicable, may
contest the validity of such claims and demands so long as (1) Borrower
notifies Lender that Borrower or such Subsidiary intends to contest such claim
or demand, (2) Borrower or such Subsidiary provides Lender with an
indemnity, bond or other security satisfactory to Lender (including an
endorsement to the Title Insurance Policies insuring against such claim or
demand) assuring the discharge of Borrower or such Subsidiary’s obligations for
such claims and demands, including interest and penalties, and (3) Borrower
or such Subsidiary is diligently contesting the same by appropriate legal
proceedings in good faith and at its own expense and


 


34

















 


concludes such contest
prior to the tenth (10th) day preceding the earlier to occur of the Maturity
Date or the date on which the applicable Project is scheduled to be sold for
non-payment.


 


Section 8.3      Control; Management. Without the prior
written consent of Lender, there shall be no change in the day-to-day control
and management of Borrower or Borrower’s general partner or managing member,
and no change in their respective organizational documents relating to control
over Borrower, Borrower’s general partner or managing member and/or any
Project. Borrower shall not, nor shall Borrower permit any Subsidiary to, enter
into, terminate, replace or appoint any property manager or terminate or amend
the property management agreement in any material respect for any Project
without Lender’s prior written approval. Any change in ownership or control of
a property manager shall be cause for Lender to re-approve such property
manager and its property management agreement. Each property manager shall hold
and maintain all necessary licenses, certifications and permits required by
law. Borrower shall fully perform all of its covenants, agreements and
obligations under any property management agreement to which it is a party.
Borrower shall cause each Subsidiary to fully perform all of its covenants,
agreements and obligations under any property management agreement to which
Subsidiary is a party. Notwithstanding anything to the contrary in this Section 8.3,
changes in the individual officers and directors and managers of the REIT and
its subsidiaries shall be permitted without the consent of Lender so long as
such entities maintain their status as Qualified Managers.


 


Section 8.4      Operation; Maintenance; Inspection.
Borrower shall, and shall cause each Subsidiary to, observe and comply with all
legal requirements applicable to its existence and to the ownership, use and
operation of the Projects. Borrower shall, and shall cause the Subsidiaries to,
maintain the Projects in good condition and promptly repair any damage or casualty.
Borrower shall not, and shall not permit any Subsidiary to, without the prior
written consent of Lender, undertake any material alteration of any Project or
permit any of the fixtures or personalty owned by Borrower or any Subsidiary to
be removed at any time from any Project, unless the removed item is removed
temporarily for maintenance and repair or, if removed permanently, is obsolete
and is replaced by an article of equal or better suitability and value, owned
by Borrower or such Subsidiary and free and clear of any Liens except those in
favor of Lender. Borrower shall, and shall cause the Subsidiaries to, permit
Lender and its agents, representatives and employees, upon reasonable prior
notice to Borrower, to inspect the Projects and conduct such environmental and
engineering studies as Lender may require, provided such inspections and
studies do not materially interfere with the use and operation of the Projects.
Notwithstanding the foregoing, Borrower and its Subsidiaries shall be permitted
to convert any or all of the existing office, retail or industrial space at the
“1073 Arvada, CO” Project or the “1206 Waltham, MA” Project to self storage
uses, or to otherwise build out such existing spaces for future tenants;
provided that such activities do not violate other provisions of this
Agreement, including without limitation prohibitions against Liens and other
Debt.


 


Section 8.5      Taxes on Security. Borrower shall pay
all taxes, charges, filing, registration and recording fees, excises and levies
payable with respect to the Note or the Liens created or secured by the Loan
Documents, other than income, franchise and doing business taxes imposed on
Lender. If there shall be enacted any law (1) deducting all or a portion
of the Loan from the value of any Project for the purpose of taxation, (2) affecting
any Lien on any Project, or (3) changing existing laws of taxation of
mortgages, deeds of trust, security deeds, or


 


35

















 


debts secured by real
property, or changing the manner of collecting any such taxes, Borrower shall
promptly pay to Lender, on demand, all taxes, costs and charges for which
Lender is or may be liable as a result thereof; however, if such payment would
be prohibited by law or would render the Loan usurious, then instead of
collecting such payment, Lender may declare all amounts owing under the Loan
Documents to be immediately due and payable.


 


Section 8.6      Legal Existence; Name, Etc. Borrower shall, and shall cause each
Subsidiary to, preserve and keep in full force and effect its existence as, and
at all times operate as, a Single Purpose Entity. Borrower and each general
partner or managing member in Borrower shall, and shall cause each Subsidiary
to, preserve and keep in full force and effect its entity status, franchises,
rights and privileges under the laws of the state of its formation, and all
qualifications, licenses and permits applicable to the ownership, use and
operation of the Projects. Neither Borrower, ESP 7 nor any general partner or
managing member of Borrower or ESP 7 shall wind up, liquidate, dissolve,
reorganize, merge, or consolidate with or into any Person, or permit any
Subsidiary or Affiliate of Borrower or ESP 7 to do so. Without limiting the
foregoing, neither Borrower nor ESP 7 shall, nor shall either permit any
Subsidiary to, reincorporate or reorganize itself under the laws of any
jurisdiction other than the jurisdiction in which it is incorporated or
organized as of the Closing Date. Borrower, ESP 7 and each general partner or
managing member in Borrower and ESP 7 shall, and shall cause each Subsidiary
to, conduct business only in its own name and shall not change its name,
identity, organizational structure, state of formation or the location of its
chief executive office or principal place of business unless Borrower (1) shall
have obtained the prior written consent of Lender to such change, and (2) shall
have taken all actions necessary or requested by Lender to file or amend any
financing statement or continuation statement to assure perfection and
continuation of perfection of security interests under the Loan Documents.
Borrower and ESP 7 (and each general partner or managing member in Borrower and
ESP 7, if any) shall, and shall cause each Subsidiary to, maintain its
separateness as an entity, including maintaining separate books, records, and
accounts and observing corporate and partnership formalities independent of any
other entity, shall pay its obligations with its own funds and shall not
commingle funds or assets with those of any other entity. If Borrower or any
Subsidiary does not have an organizational identification number and later
obtains one, Borrower shall promptly notify Lender of such organizational
identification number.


 


Section 8.7      Affiliate Transactions. Without the
prior written consent of Lender, Borrower, ESP 7 and the Subsidiaries shall not
engage in any transaction affecting any Project with an Affiliate of Borrower
or of any Borrower Party except for transactions for which (i) the terms are
commercially reasonable and competitive with amounts that would be paid to or
received from third parties on an “arm’s length” basis, (ii) the terms are
reduced to a writing covering all material aspects of such arrangement, and (iii) the
agreement is terminable without cause by Borrower, ESP 7, Subsidiary or, after
the occurrence of an Event of Default, Lender, without penalty or fee, upon no
more than thirty (30) days’ prior written notice.


 


Section 8.8      Limitation on Other Debt. Borrower (and
each general partner or managing member in Borrower, if any) shall not, without
the prior written consent of Lender, (1) incur any Debt other than the
Loan and (2) permit the Subsidiaries to incur any Debt other than their
obligations under the Mortgages and customary trade payables which are payable,
and shall be paid, within sixty (60) days of when incurred.


 


36

















 


Section 8.9            Further Assurances. Borrower shall
promptly (1) cure, or cause the appropriate Borrower Party to cure, any
defects in the execution and delivery of the Loan Documents, (2) provide,
and to cause each Borrower Party to provide, Lender such additional information
and documentation on Borrower’s and each Borrower Party’s legal or beneficial
ownership, policies, procedures and sources of funds as Lender deems necessary
or prudent to enable Lender to comply with Anti-Money Laundering Laws as now in
existence or hereafter amended, and (3) execute and deliver, or cause to
be executed and delivered, all such other documents, agreements and instruments
as Lender may reasonably request to further evidence and more fully describe
the collateral for the Loan, to correct any omissions in the Loan Documents, to
perfect, protect or preserve any Liens created under any of the Loan Documents,
or to make any recordings, file any notices, or obtain any consents, as may be
necessary or appropriate in connection therewith. From time to time upon the
written request of Lender, Borrower shall deliver to Lender a schedule of the
name, legal domicile address and jurisdiction of organization, if applicable,
for each Borrower Party and each holder of a direct legal interest in Borrower
or ESP 7.


 


Section 8.10          Estoppel Certificates. Borrower, within
ten (10) days after request, shall furnish to Lender a written statement,
duly acknowledged, setting forth the amount due on the Loan, the terms of
payment of the Loan, the date to which interest has been paid, whether any
offsets or defenses exist against the Loan and, if any are alleged to exist,
the nature thereof in detail, and such other matters as Lender reasonably may
request.


 


Section 8.11          Notice of Certain Events.
Borrower shall promptly notify Lender of (1) any Potential Default or
Event of Default, together with a detailed statement of the steps being taken
to cure such Potential Default or Event of Default; (2) any notice of
default received by Borrower or any Subsidiary under other obligations relating
to any Project or otherwise material to Borrower’s or any Subsidiary’s business;
and (3) any threatened or pending legal, judicial or regulatory
proceedings, including any dispute between Borrower or any Subsidiary and any
governmental authority, affecting Borrower, any Subsidiary or any Project in
any material respect.


 


Section 8.12          Indemnification. Except for matters
caused by Lender’s gross negligence or willful misconduct, Borrower shall
indemnify, defend and hold Lender harmless from and against any and all losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs and disbursements (including the reasonable fees and
actual expenses of Lender’s counsel) of any kind or nature whatsoever,
including those arising from the joint, concurrent, or comparative negligence
of Lender, in connection with (1) any inspection, review or testing of or
with respect to the Projects, (2) any investigative, administrative,
mediation, arbitration, or judicial proceeding, whether or not Lender is
designated a party thereto, commenced or threatened at any time (including
after the repayment of the Loan) in any way related to the execution, delivery
or performance of any Loan Document or to any Project, (3) any proceeding
instituted by any Person claiming a Lien, and (4) any brokerage
commissions or finder’s fees claimed by any broker or other party in connection
with the Loan, any Project, or any of the transactions contemplated in the Loan
Documents, except to the extent any of the foregoing is caused by Lender’s
gross negligence or willful misconduct.


 


37

















 


Section 8.13          Application of Operating Revenues. All
Operating Revenues shall be applied to the payment of Debt Service and other
payments due under the Loan Documents, taxes, assessments, water charges, sewer
rents and other governmental charges levied, assessed or imposed against the
Projects, insurance premiums, operations and maintenance charges relating to
the Projects, and other obligations of the lessor under leases of space at each
Project, before using Operating Revenues for any other purpose.


 


Section 8.14          Representations and Warranties.
Borrower will cause all representations and warranties to remain true and
correct all times while any portion of the Loan remains outstanding.


 


Section 8.15          Immediate Repairs. Within six (6) months
after the Closing Date, Borrower shall deliver to Lender evidence reasonably
satisfactory to Lender that Borrower has completed, Lien free and in accordance
with applicable Laws, the immediate repairs work described in the table set
forth in Schedule 8.15 for the designated Projects (as such work is more
particularly described in the engineering reports for such Projects prepared by
Lender’s consultant(s) in connection with the Loan closing, copies of
which have been delivered to Borrower).


 


Section 8.16          1206 Waltham, MA Lease. On or before July 31,
2008, Borrower shall either (i) deliver to Lender evidence reasonably
satisfactory to Lender that Foster-Miller or one or more other tenants
acceptable to Lender have leased the entirety of the space currently covered by
the Foster-Miller Lease through at least October 31, 2013 (with no early
termination rights or options) at an annual base rental rate of not less than
$22.00 per square foot plus percentage rent and other amounts equivalent to
those due under the Foster-Miller Lease (and such lease or leases otherwise
comply with the terms of this Agreement), and each such tenant has accepted
possession of its leased premises, has commenced paying rent, is not then
otherwise in default under its lease, and has executed and delivered to Lender
an estoppel certificate, in form and substance satisfactory to Lender,
confirming the foregoing matters and such other matters concerning such tenant
and its lease as Lender reasonably requires, or (ii) have (A) caused
the Project known as “1206 Waltham, MA” to be released from the Lien of the
Loan Documents in accordance with Section 2.8 above and (B) added one
or more Additional Project(s) in accordance with Section 2.9 above
which have an aggregate Valuation Amount that equals or exceeds the Valuation
Amount of the “1206 Waltham, MA” Project, and which would increase the Debt
Service Coverage to at least 1.15:1.00 based on an Applicable Margin of 2.05%
and assuming the outstanding Loan balance equals the Maximum Commitment. Should
Borrower fail to satisfy the requirements set forth in either of clause (i) or
(ii) above, Lender, in its sole and absolute discretion, may decrease the
Valuation Amount and the Underwritten NOI of the “1206 Waltham, MA” Project to
exclude any value or income attributable to retail or office uses.


 


Section 8.17          Contribution Agreement. Without the
prior written consent of Lender, Borrower and the Subsidiaries shall not amend,
modify or terminate the Contribution Agreement.


 


38

















 


ARTICLE 9


 


ANTI-MONEY LAUNDERING AND


INTERNATIONAL TRADE CONTROLS


 


Section 9.1       Compliance
with International Trade Control Laws and OFAC Regulations.
Borrower represents, warrants and covenants to Lender that:


 


(1)          It is not now nor
shall it be at any time until after the Loan is fully repaid a Person with whom
a U.S. Person, including a Financial Institution, is prohibited from
transacting business of the type contemplated by this Agreement, whether such
prohibition arises under U.S. law, regulation, executive orders and lists
published by the OFAC (including those executive orders and lists published by
OFAC with respect to Specially Designated Nationals and Blocked Persons) or
otherwise.


 


(2)          No Borrower Party and
no Person who owns a direct interest in Borrower is now nor shall be at any
time until after the Loan is fully repaid a Person with whom a U.S. Person,
including a Financial Institution, is prohibited from transacting business of
the type contemplated by this Agreement, whether such prohibition arises under
U.S. law, regulation, executive orders and lists published by the OFAC
(including those executive orders and lists published by OFAC with respect to
Specially Designated Nationals and Blocked Persons) or otherwise.


 


Section 9.2       Borrower’s
Funds. Borrower represents, warrants and covenants to Lender
that:


 


(1)          It has taken, and
shall continue to take until after the Loan is fully repaid, such measures as
are required by law to verify that the funds invested in the Borrower are
derived (a) from transactions that do not violate U.S. law nor, to the
extent such funds originate outside the United States, do not violate the laws
of the jurisdiction in which they originated; and (b) from permissible
sources under U.S. law and to the extent such funds originate outside the
United States, under the laws of the jurisdiction in which they originated.


 


(2)          To the best of its
knowledge, neither Borrower, nor any Borrower Party, nor any holder of a direct
interest in Borrower, nor any Person providing funds to Borrower (a) is
under investigation by any governmental authority for, or has been charged
with, or convicted of, money laundering, drug trafficking, terrorist-related
activities, any crimes which in the United States would be predicate crimes to
money laundering, or any violation of any Anti-Money Laundering Laws; (b) has
been assessed civil or criminal penalties under any Anti-Money Laundering Laws;
and (c) has had any of its/his/her funds seized or forfeited in any action
under any Anti-Money Laundering Laws.


 


(3)          Borrower shall make
payments on the Loan using funds invested in Borrower, Operating Revenues or
insurance proceeds unless otherwise agreed to by Lender.


 


39

















 


(4)      To the best of Borrower’s
knowledge, as of the Closing Date and at all times during the term of the Loan,
all Operating Revenues are and will be derived from lawful business activities
of Project tenants or other permissible sources under U.S. law. Notwithstanding
the foregoing, Borrower shall not be in violation of this Section 9.2(4) if
upon discovery that Operating Revenues are derived from the unlawful business
activity of a Project tenant, or from any impermissible source under U.S. law,
Borrower takes commercially reasonable steps to terminate or remove or prohibit
the same.


 


(5)      During the term of the Loan
and on the Maturity Date, Borrower will take reasonable steps to verify that
funds used to make payments on the Loan and to repay the Loan in full (whether
in connection with a refinancing, asset sale or otherwise) are from sources
permissible under U.S. law and to the extent such funds originate outside the
United States, permissible under the laws of the jurisdiction in which they
originated.


 


ARTICLE 10


 


EVENTS OF DEFAULT


 


Each of the
following shall constitute an Event of Default under the Loan:


 


Section 10.1         Payments. Borrower’s failure to pay any
regularly scheduled installment of principal, interest or other amount due under
the Loan Documents within five (5) days after the date when due, or
Borrower’s failure to pay the Loan at the Maturity Date, whether by
acceleration or otherwise.


 


Section 10.2         Insurance. Borrower’s failure to
maintain or cause any Subsidiary to maintain insurance as required under Section 3.1
of this Agreement.


 


Section 10.3         Transfer. Any Transfer occurs in
violation of Section 8.1 of this Agreement.


 


Section 10.4         Covenants. Borrower’s failure to
perform, observe or comply with any of the agreements, covenants or provisions
contained in this Agreement or in any of the other Loan Documents, or any
Borrower Party’s failure to perform observe or comply with any of the
agreements, covenants or provisions contained in any of the other Loan
Documents to which it is a party (in each case, other than those agreements,
covenants and provisions referred to elsewhere in this Article 10), and
the continuance of such failure for thirty (30) days after notice by Lender to
Borrower; however, subject to any shorter period for curing any failure by
Borrower or the applicable Borrower Party as specified in any of the other Loan
Documents, Borrower or the applicable Borrower Party shall have an additional
sixty (60) days to cure such failure if (1) such failure does not involve
the failure to make payments on a monetary obligation; (2) such failure
cannot reasonably be cured within thirty (30) days but, using reasonable
diligence, is curable within such 60-day period; (3) Borrower or the
applicable Borrower Party is diligently undertaking to cure such default, and (4) Borrower
or the applicable Borrower Party has provided Lender with security reasonably
satisfactory to Lender against any


 


40

















 


interruption of payment
or impairment of collateral as a result of such continuing failure. The notice
and cure provisions of this Section 10.4 do not apply to the other Events
of Default described in this Article 10 or to Borrower’s or any Borrower
Party’s failure to perform, observe or comply with any of the agreements,
covenants or provisions contained in Article 9 (for which no notice and
cure period shall apply).


 


Section 10.5         Representations and Warranties. Any
representation or warranty made in any Loan Document proves to be untrue in any
material respect when made or deemed made.


 


Section 10.6         Other Encumbrances. Any default under
any document or instrument, other than the Loan Documents, evidencing or
creating a Lien on any Project or any part thereof.


 


Section 10.7         Involuntary Bankruptcy or Other Proceeding.
Commencement of an involuntary case or other proceeding against Borrower, any
Borrower Party or any other Person having an ownership or security interest in
any Project (each, a “Bankruptcy Party”)
which seeks liquidation, reorganization or other relief with respect to it or
its Debts or other liabilities under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeks the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any of its
property, and such involuntary case or other proceeding shall remain
undismissed or unstayed for a period of sixty (60) days; or an order for relief
against a Bankruptcy Party shall be entered in any such case under the Federal
Bankruptcy Code.


 


Section 10.8         Voluntary Petitions, Etc. Commencement
by a Bankruptcy Party of a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its Debts
or other liabilities under any bankruptcy, insolvency or other similar law or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official for it or any of its property, or consent by a Bankruptcy
Party to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or the making by a Bankruptcy Party of a general assignment for the benefit of
creditors, or the failure by a Bankruptcy Party, or the admission by a
Bankruptcy Party in writing of its inability, to pay its debts generally as
they become due, or any action by a Bankruptcy Party to authorize or effect any
of the foregoing.


 


Section 10.9         Joinder. Any Joinder Party’s failure to
timely perform, observe or comply with any of the agreements, covenants or
provisions contained in the Joinder hereto.


 


ARTICLE 11


 


REMEDIES


 


Section 11.1         Remedies - Insolvency Events. Upon the
occurrence of any Event of Default described in Section 10.7 or 10.8, the
obligations of Lender to advance amounts hereunder shall immediately terminate,
and all amounts due under the Loan Documents immediately shall become due and
payable, all without written notice and without presentment, demand, protest,
notice of protest or dishonor, notice of intent to accelerate the maturity
thereof,


 


41

















 


notice of acceleration of
the maturity thereof, or any other notice of default of any kind, all of which
are hereby expressly waived by Borrower; however, if the Bankruptcy Party under
Section 10.7 or 10.8 is other than Borrower, then all amounts due under
the Loan Documents shall become immediately due and payable at Lender’s
election, in Lender’s sole discretion.


 


Section 11.2         Remedies - Other Events. Except as set
forth in Section 11.1 above, while any Event of Default exists, Lender may
(1) by written notice to Borrower, declare the entire Loan to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate the maturity thereof,
notice of acceleration of the maturity thereof, or other notice of default of
any kind, all of which are hereby expressly waived by Borrower, (2) terminate
the obligation, if any, of Lender to advance amounts hereunder, and (3) exercise
all rights and remedies therefor under the Loan Documents and at law or in
equity.


 


Section 11.3         Lender’s Right to Perform the Obligations.
If Borrower or any Subsidiary shall fail, refuse or neglect to make any payment
or perform any act required by the Loan Documents, then while any Event of
Default exists, and without notice to or demand upon Borrower or any Subsidiary
and without waiving or releasing any other right, remedy or recourse Lender may
have because of such Event of Default, Borrower (on its own behalf and of
behalf of the Subsidiaries) agrees that Lender may (but shall not be obligated
to) make such payment or perform such act for the account of Borrower or the
applicable Subsidiary and at the expense of Borrower, and shall have the right
to enter upon the Projects for such purpose and to take all such action thereon
and with respect to the Projects as it may deem necessary or appropriate. If
Lender shall elect to pay any sum due with reference to any Project, Lender may
do so in reliance on any bill, statement or assessment procured from the
appropriate governmental authority or other issuer thereof without inquiring
into the accuracy or validity thereof. Similarly, in making any payments to
protect the security intended to be created by the Loan Documents, Lender shall
not be bound to inquire into the validity of any apparent or threatened adverse
title, lien, encumbrance, claim or charge before making an advance for the
purpose of preventing or removing the same. Borrower shall indemnify, defend
and hold Lender harmless from and against any and all losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements of any kind or nature whatsoever, including reasonable
attorneys’ fees, incurred or accruing by reason of any acts performed by Lender
pursuant to the provisions of this Section 11.3, including those arising
from the joint, concurrent, or comparative negligence of Lender, except as a
result of Lender’s gross negligence or willful misconduct. All sums paid by
Lender pursuant to this Section 11.3 and all other sums expended by Lender
to which it shall be entitled to be indemnified, together with interest thereon
at the Default Rate from the date of such payment or expenditure until paid,
shall constitute additions to the Loan, shall be secured by the Loan Documents
and shall be paid by Borrower to Lender upon demand.


 


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ARTICLE 12


 


MISCELLANEOUS


 


Section 12.1    Notices.  Any notice required or
permitted to be given under this Agreement shall be in writing and either shall
be mailed by certified mail, postage prepaid, return receipt requested, or sent
by overnight air courier service, or personally delivered to a representative
of the receiving party, or sent by telecopy or electronic mail (provided that
for both telecopy and electronic mail delivery, an identical notice is also
sent simultaneously by mail, overnight courier or personal delivery as
otherwise provided in this Section 12.1). All such notices shall be
mailed, sent or delivered, addressed to the party for whom it is intended at
its address set forth below.


 


	
  If to Borrower:

  	
   

  	
  ESP Seven Subsidiary LLC

  	
   

  
	
   

  	
   

  	
  2795 East Cottonwood Parkway, Suite 400

  	
   

  
	
   

  	
   

  	
  Salt Lake City, Utah 84121

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  David L. Rasmussen, General Counsel

  
	
   

  	
   

  	
  Telecopy:

  	
  (801) 365-4947

  
	
   

  	
   

  	
  E-Mail: drasmussen@extraspace.com

  	
   

  
						



 


	
  If to Lender:

  	
   

  	
  General Electric Capital Corporation

  	
   

  
	
   

  	
   

  	
  c/o GE Real Estate

  	
   

  
	
   

  	
   

  	
  16479 Dallas Parkway, Suite 500

  	
   

  
	
   

  	
   

  	
  Addison, Texas 75001

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Asset Manager/Extra Space Credit Line

  
	
   

  	
   

  	
  Telecopy:

  	
  (972) 447-2520

  
	
   

  	
   

  	
  E-Mail: scot.florsheim@gecapital.com

  	
   

  
					



 


Any notice so
addressed and sent by United States mail or overnight courier shall be deemed
to be given on the earliest of (1) when actually delivered, (2) on
the first Business Day after deposit with an overnight air courier service, or (3) on
the third Business Day after deposit in the United States mail, postage
prepaid, in each case to the address of the intended addressee (except as
otherwise provided in the Mortgages). Any notice so delivered in person shall
be deemed to be given when receipted for by, or actually received by Lender or
Borrower, as the case may be. If given by telecopy, a notice shall be deemed
given and received when the telecopy is transmitted to the party’s telecopy
number specified above and confirmation of complete receipt is received by the
transmitting party during normal business hours or on the next Business Day if
not confirmed during normal business hours, and an identical notice is also
sent simultaneously by mail, overnight courier, or personal delivery as
otherwise provided in this Section 12.1. If given by electronic mail, a
notice shall be deemed given and received when the electronic mail is
transmitted to the recipient’s electronic mail address specified above and
electronic confirmation of receipt (either by reply from the recipient or by
automated response to a request for delivery receipt) is received by the
sending party during normal business hours or on the next Business Day if not
confirmed during normal business hours, and an identical notice is also sent
simultaneously by mail, overnight courier or personal delivery as otherwise provided
in this Section 12.1. Except for telecopy and electronic mail notices sent
as expressly described above, no notice hereunder shall be effective if sent or
delivered by electronic means. Either


 


43

















 


party may designate a
change of address by written notice to the other by giving at least ten (10) days
prior written notice of such change of address.


 


Section 12.2    Amendments and Waivers; References. No
amendment or waiver of any provision of the Loan Documents shall be effective
unless in writing and signed by the party against whom enforcement is sought.
This Agreement and the other Loan Documents shall not be executed, entered
into, altered, amended, or modified by electronic means. Without limiting the
generality of the foregoing, the Borrower and Lender hereby agree that the
transactions contemplated by this Agreement shall not be conducted by
electronic means, except as specifically set forth in Section 12.1
regarding notices. Any reference to a Loan Document, whether in this Agreement
or in any other Loan Document, shall be deemed to be a reference to such Loan
Document as it may hereafter from time to time be amended, modified,
supplemented and restated in accordance with the terms hereof.


 


Section 12.3    Limitation on Interest. It is the
intention of the parties hereto to conform strictly to applicable usury laws.
Accordingly, all agreements between Borrower and Lender with respect to the
Loan are hereby expressly limited so that in no event, whether by reason of
acceleration of maturity or otherwise, shall the amount paid or agreed to be
paid to Lender or charged by Lender for the use, forbearance or detention of
the money to be lent hereunder or otherwise, exceed the maximum amount allowed
by law. If the Loan would be usurious under applicable law, then,
notwithstanding anything to the contrary in the Loan Documents: (1) the
aggregate of all consideration which constitutes interest under applicable law
that is contracted for, taken, reserved, charged or received under the Loan
Documents shall under no circumstances exceed the maximum amount of interest
allowed by applicable law, and any excess shall be credited on the Note by the
holder thereof (or, if the Note has been paid in full, refunded to Borrower);
and (2) if maturity is accelerated by reason of an election by Lender, or
in the event of any prepayment, then any consideration which constitutes
interest may never include more than the maximum amount allowed by applicable
law. In such case, excess interest, if any, provided for in the Loan Documents
or otherwise, to the extent permitted by applicable law, shall be amortized,
prorated, allocated and spread from the date of advance until payment in full
so that the actual rate of interest is uniform through the term hereof. If such
amortization, proration, allocation and spreading is not permitted under
applicable law, then such excess interest shall be canceled automatically as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited on the Note (or, if the Note has been paid in full, refunded to
Borrower). The terms and provisions of this Section 12.3 shall control and
supersede every other provision of the Loan Documents. If at any time the laws
of the United States of America permit Lender to contract for, take, reserve,
charge or receive a higher rate of interest than is allowed by applicable state
law (whether such federal laws directly so provide or refer to the law of any
state), then such federal laws shall to such extent govern as to the rate of
interest which Lender may contract for, take, reserve, charge or receive under
the Loan Documents.


 


Section 12.4    Invalid Provisions. If any provision of
any Loan Document is held to be illegal, invalid or unenforceable, such
provision shall be fully severable; the Loan Documents shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part thereof; the remaining provisions thereof shall remain in full
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance


 


44

















 


therefrom; and in lieu of
such illegal, invalid or unenforceable provision there shall be added automatically
as a part of such Loan Document a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible to be legal,
valid and enforceable.


 


Section 12.5    Reimbursement of Expenses. Except as
expressly provided in Section 5.2(3) and Section 7.5, Borrower
shall pay all costs and expenses incurred by Lender in connection with the
negotiation, documentation, closing, disbursement and administration of the
Loan (excluding the costs of any sale of an interest in the Loan under Section 12.11),
including fees and expenses of Lender’s attorneys and Lender’s environmental,
engineering, accounting and other consultants; fees, charges and taxes for the
recording or filing of Loan Documents; financial investigation, audit and
inspection fees and costs; settlement of condemnation and casualty awards;
title search costs, premiums for title insurance and endorsements thereto; and
fees and costs for UCC and litigation searches and background checks. Borrower
shall, upon request, promptly reimburse Lender for all amounts expended,
advanced or incurred by Lender to collect the Note, or to enforce the rights of
Lender under this Agreement or any other Loan Document, or to defend or assert
the rights and claims of Lender under the Loan Documents or with respect to the
Projects (by litigation or other proceedings), which amounts will include all
court costs, attorneys’ fees and expenses, fees of auditors and accountants,
and investigation expenses as may be incurred by Lender in connection with any
such matters (whether or not litigation is instituted), together with interest
at the Default Rate on each such amount from the date of disbursement until the
date of reimbursement to Lender, all of which shall constitute part of the Loan
and shall be secured by the Loan Documents.


 


Section 12.6    Approvals; Third Parties; Conditions.
All rights retained or exercised by Lender to review or approve leases,
contracts, plans, studies and other matters, including Borrower’s and any other
Person’s compliance with the provisions of Article 9 and compliance with
laws applicable to Borrower, the Projects or any other Person, are solely to
facilitate Lender’s credit underwriting, and shall not be deemed or construed
as a determination that Lender has passed on the adequacy thereof for any other
purpose and may not be relied upon by Borrower or any other Person. This
Agreement is for the sole and exclusive use of Lender and Borrower and may not
be enforced, nor relied upon, by any Person other than Lender and Borrower. All
conditions of the obligations of Lender hereunder, including the obligation to
make advances, are imposed solely and exclusively for the benefit of Lender,
its successors and assigns, and no other Person shall have standing to require
satisfaction of such conditions or be entitled to assume that Lender will
refuse to make advances in the absence of strict compliance with any or all of
such conditions, and no other Person shall, under any circumstances, be deemed
to be a beneficiary of such conditions, any and all of which may be freely
waived in whole or in part by Lender at any time in Lender’s sole discretion.


 


Section 12.7    Lender Not in Control; No Partnership.
None of the covenants or other provisions contained in this Agreement shall, or
shall be deemed to, give Lender the right or power to exercise control over the
affairs or management of Borrower, the power of Lender being limited to the
rights to exercise the remedies referred to in the Loan Documents. The
relationship between Borrower and Lender is, and at all times shall remain,
solely that of debtor and creditor. No covenant or provision of the Loan
Documents is intended, nor shall it be deemed or construed, to create a
partnership, joint venture, agency or common interest in profits or income
between Lender and Borrower (or any Subsidiary) or to create an equity interest
in the


 


45

















 


Projects in Lender.
Lender neither undertakes nor assumes any responsibility or duty to Borrower,
to the Subsidiaries or to any other Person with respect to the Projects or the
Loan, except as expressly provided in the Loan Documents; and notwithstanding
any other provision of the Loan Documents: (1) Lender is not, and shall
not be construed as, a partner, joint venturer, alter ego, manager, controlling
person or other business associate or participant of any kind of Borrower or
its stockholders, members, partners or Subsidiaries and Lender does not intend
to ever assume such status; (2) Lender shall in no event be liable for any
Debts, expenses or losses incurred or sustained by Borrower or any Subsidiary;
and (3) Lender shall not be deemed responsible for or a participant in any
acts, omissions or decisions of Borrower or its stockholders, members, partners
or Subsidiaries. Lender and Borrower disclaim any intention to create any
partnership, joint venture, agency or common interest in profits or income
between Lender and Borrower or the Subsidiaries, or to create any equity in the
Projects in Lender, or any sharing of liabilities, losses, costs or expenses.


 


Section 12.8    Time of the Essence. Time is of the
essence with respect to this Agreement.


 


Section 12.9    Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of Lender and Borrower and the
respective successors and assigns of Lender and Borrower, provided that neither
Borrower nor any other Borrower Party shall, without the prior written consent
of Lender, assign any rights, duties or obligations hereunder.


 


Section 12.10
   Renewal, Extension or
Rearrangement. All provisions of the Loan Documents shall apply
with equal effect to each and all promissory notes and amendments thereof
hereinafter executed which in whole or in part represent a renewal, extension,
increase or rearrangement of the Loan. For portfolio management purposes, at
any time during the term of the Loan Lender may elect to divide the Loan into
two or more separate loans evidenced by separate promissory notes so long as
the payment and other obligations of Borrower are not effectively increased or
otherwise modified. Borrower agrees to cooperate, and to cause the Subsidiaries
to cooperate, with Lender and to execute such documents as Lender reasonably
may request to effect such division of the Loan.


 


Section 12.11
   Sale of Loan,
Participation. Lender, at any time and without the consent of
Borrower or any Borrower Party, may grant participations in or sell, transfer,
assign and convey all or any portion of its right, title and interest in and to
the Loan, this Agreement and the other Loan Documents and any collateral given
to secure the Loan. Lender shall have the right (but shall be under no
obligation) to make available to any party for the purpose of granting
participations in or selling, transferring, assigning or conveying all or any
part of the Loan (including any governmental agency or authority and any
prospective bidder at any foreclosure sale of any Project) any and all
information which Lender may have with respect to the Projects, Borrower and any
Borrower Party, whether provided by Borrower, any Borrower Party or any third
party, or obtained as a result of any environmental assessments. Borrower and
each Borrower Party agrees that Lender shall have no liability whatsoever as a
result of delivering any such information to any third party, and Borrower and
the other Borrower Parties, on behalf of themselves and their successors and
assigns, hereby release and discharge Leader from any and all liabilities,
claims, damages, or causes of action arising out of, connected with or
incidental to the delivery of any such information to any third party.


 


46

















 


Section 12.12
   Waivers.
No course of dealing on the part of Lender, its officers, employees,
consultants or agents, nor any failure or delay by Lender with respect to
exercising any right, power or privilege of Lender under any of the Loan
Documents, shall operate as a waiver thereof.


 


Section 12.13
   Cumulative Rights.
Rights and remedies of Lender under the Loan Documents shall be cumulative, and
the exercise or partial exercise of any such right or remedy shall not preclude
the exercise of any other right or remedy.


 


Section 12.14
   Singular and Plural.
Words used in this Agreement and the other Loan Documents in the singular,
where the context so permits, shall be deemed to include the  plural and vice versa. The definitions of
words in the singular in this Agreement and the other Loan Documents shall
apply to such words when used in the plural where the context so permits and
vice versa.


 


Section 12.15
   Phrases.
When used in this Agreement and the other Loan Documents, the phrase “including”
shall mean “including, but not limited to,” the phrase “satisfactory to Lender”
shall mean “in form and substance satisfactory to Lender in all respects,” the
phrase “with Lender’s consent” or “with Lender’s approval” shall mean such
consent or approval at Lender’s sole discretion, and the phrase “acceptable to
Lender” shall mean “acceptable to Lender at Lender’s sole discretion.”


 


Section 12.16
   Exhibits and Schedules.
The exhibits and schedules attached to this Agreement are incorporated herein
and shall be considered a part of this Agreement for the purposes stated
herein.


 


Section 12.17
   Titles of Articles, Sections
and Subsections. All titles or headings to articles, sections,
subsections or other divisions of this Agreement and the other Loan Documents
or the exhibits hereto and thereto are only for the convenience of the parties
and shall not be construed to have any effect or meaning with respect to the
other content of such articles, sections, subsections or other divisions, such
other content being controlling as to the agreement between the parties hereto.


 


Section 12.18
   Promotional Material.
Borrower authorizes Lender to issue press releases, advertisements and other
promotional materials in connection with Lender’s own promotional and marketing
activities, and describing the Loan in general terms or in detail and Lender’s
participation in the Loan, provided that all references to Borrower contained
in any such press releases, advertisements or promotional materials shall be
approved in writing by Borrower in advance of issuance. All references to
Lender contained in any press release, advertisement or promotional material
issued by Borrower shall be approved in writing by Lender in advance of
issuance; provided, however, Lender shall not have any approval rights over any
disclosures to, or filings with, the Securities and Exchange Commission or New
York Stock Exchange (or similar public notices) made by REIT.


 


Section 12.19
   Survival.
All of the representations, warranties, covenants, and indemnities hereunder,
and under the indemnification provisions of the other Loan Documents, shall
survive the repayment in full of the Loan and the release of the liens
evidencing or securing


 


47

















 


the Loan, and shall
survive the transfer (by sale, foreclosure, conveyance in lieu of foreclosure
or otherwise) of any or all right, title and interest in and to the Projects to
any party, whether or not an Affiliate of Borrower.


 


Section 12.20
   WAIVER OF JURY TRIAL.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY
EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN
ANY WAY RELATING TO THE LOAN OR THE PROJECTS (INCLUDING, WITHOUT LIMITATION,
ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING
THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).
THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER THIS AGREEMENT.


 


Section 12.21
   Punitive or
Consequential Damages; Waiver. Neither Lender nor Borrower shall
be responsible or liable to the other or to any other Person for any punitive,
exemplary or consequential damages which may be alleged as a result of the Loan
or the transaction contemplated hereby, including any breach or other default
by any party hereto. Borrower represents and warrants to Lender that as of the
Closing Date neither Borrower nor any Borrower Party has any claims against
Lender in connection with the Loan.


 


Section 12.22
   Governing Law.
Except as otherwise expressly provided in any of the other Loan Documents, in
all respects, including all matters of construction, validity and performance,
this Agreement, the other Loan Documents, and the obligations arising hereunder
and thereunder, are being executed and delivered, and are intended to be
performed, in the state of Utah and the laws of the state of Utah and of the
United States of America shall govern the rights and duties of the parties
hereto and the validity, construction, enforcement and interpretation of the
Loan Documents, without regard to the principals thereof regarding conflict of
laws. Lender and Borrower agree to submit to personal jurisdiction and to waive
any objection as to venue in the County of Salt Lake, State of Utah. Nothing
herein shall preclude Lender or Borrower from bringing suit or taking other
legal action in any other jurisdiction.


 


Section 12.23
   Entire Agreement.
This Agreement and the other Loan Documents embody the entire agreement and
understanding between Lender and Borrower and supersede all prior agreements
and understandings between such parties relating to the subject matter hereof
and thereof, including any commitment letter (if any) issued by Lender with
respect to the Loan. Accordingly, the Loan Documents may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the parties. If any
conflict or inconsistency exists between this Agreement and any of the other
Loan Documents, the terms of this Agreement shall control.


 


48

















 


Section 12.24
   Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall
constitute an original, but all of which shall constitute one document.


 


Section 12.25
   Agreements Regarding
Borrower and Subsidiaries.


 


(1)          Performance of Obligations. Borrower
and Lender acknowledge that (a) Borrower and ESP 7 have formed the
Subsidiaries for the purposes of owning and operating certain Projects, (b) the
Loan Documents contain many provisions relating to the Subsidiaries, the
ownership and operation of certain Projects and the determination of
Underwritten NOI, Net Cash Flow and net sales proceeds resulting from the
operation and/or sale of such Projects, and (c) Borrower and ESP 7
collectively hold directly all of the beneficial ownership interests in the
Subsidiaries and have total control of the Subsidiaries in all respects.
Therefore, for purposes of this Agreement and each of the other Loan Documents,
whether or not expressly stated herein or therein, whenever this Agreement or
any of the other Loan Documents imposes any obligation on Borrower with respect
to the Projects owned by the Subsidiaries (other than the Non-Borrower
Subsidiaries) that would typically be an obligation performed by the direct
owner of the Projects: (i) Borrower shall be obligated to perform such
obligation itself, or to cause the applicable Subsidiary to perform such
obligation on behalf of Borrower; and (ii) Borrower’s failure to perform
any such obligation itself, or to cause the applicable Subsidiary to perform
such obligation on behalf of Borrower, shall be deemed a default by Borrower
hereunder. In addition, for purposes of all representations and warranties of
Borrower under the Loan Documents, all knowledge of the Subsidiaries shall be
attributed to Borrower. Even though particular covenants, obligations or
representations and warranties set forth in this Agreement or any of the other
Loan Documents may refer to Borrower only, all such references shall deemed
subject to the foregoing rules of construction and any default in the
performance of any such covenant or obligation, and any breach of any such
representation and warranty, shall be deemed a default of Borrower hereunder.


 


(2)          Loan Advances and Payments By Lender.
All advances of Loan proceeds may be made by Lender (at Lender’s option) to
Borrower or directly to one or more Subsidiaries, and all such advances to (i) Subsidiaries
other than Non-Borrower Subsidiaries shall be deemed to have been made by
Lender to Borrower and thereupon contributed by Borrower to the capital of such
Subsidiaries and (ii) Non-Borrower Subsidiaries shall be deemed to have
been made by Lender to Borrower and thereupon distributed by Borrower to ESP 7,
and thereupon contributed by ESP 7 to the capital of such Subsidiaries.
Further, any reserve funds or other amounts that are disbursed by Lender to a
Subsidiary under this Agreement or any of the other Loan Documents shall be
deemed to have been disbursed to Borrower. Lender’s advance of any Loan funds
or disbursement of any reserve funds or other amounts to or for the benefit or
account of any Subsidiary shall constitute a complete discharge of Lender’s
obligations to Borrower under the Loan Documents with respect to such sums; and
the Subsidiaries and Borrower shall look solely to each other for the proper
distribution of any such sums among themselves. Lender shall have no
responsibility or liability whatsoever for the proper distribution of any such
sums between Borrower and the Subsidiaries.


 


49

















 


(3)          Communications. All notices,
instructions and other communications of any nature (a) that are given to
Lender by any Subsidiary shall be deemed to have been given by Borrower (and
Borrower hereby appoints each Subsidiary to act as its agent for such purpose),
and (b) that are given to a Subsidiary by Lender shall be deemed to have
been given to Borrower.


 


ARTICLE 13


 


LIMITATIONS ON LIABILITY


 


Section 13.1    Limitation on Liability.


 


(1)          Except
as provided below in this Section 13.1, Borrower shall not be personally
liable for amounts due under the Loan Documents.


 


(2)          Borrower
shall be personally liable to Lender for any deficiency, loss or damage
suffered by Lender because of: (a) Borrower’s commission of a criminal
act, (b) the failure by Borrower or any Borrower Party to apply any funds
derived from any Project, including Operating Revenues, security deposits,
insurance proceeds and condemnation awards, as required by the Loan Documents; (c) the
fraud or misrepresentation by Borrower or any Borrower Party made in or in
connection with the Loan Documents or the Loan; (d) Borrower’s, ESP 7’s or
any Subsidiary’s collection of rents more than one month in advance (except to
the extent permitted in Section 6.3) or entering into, modifying or
canceling leases, or receipt of monies by Borrower or any Borrower Party in
connection with the modification or cancellation of any leases, in violation of
this Agreement or any of the other Loan Documents; (e) Borrower’s, ESP 7’s
or any Subsidiary’s interference with Lender’s exercise of rights under the
Assignment of Rents and Leases; (f) Borrower’s, ESP 7’s or any Subsidiary’s
failure to turn over to Lender all tenant security deposits upon Lender’s
demand following an Event of Default; (g) Borrower’s failure to timely
renew any letter of credit issued in connection with the Loan; (h) Borrower’s,
ESP 7’s or any Subsidiary’s failure to maintain insurance as required by this
Agreement or to pay any taxes or assessments affecting any Project; (i) damage
or destruction to any Project caused by the negligent or intentional acts or
omissions of Borrower, ESP 7 any Subsidiary, its agents, employees, or
contractors; (j) Borrower’s, ESP 7’s or any Subsidiary’s failure to
perform its obligations with respect to environmental matters under Article 5;
(k) Borrower’s failure to pay for any loss, liability or expense incurred
by Lender arising out of any claim or allegation made by Borrower, ESP 7 or any
Subsidiary, their successors or assigns, or any creditor of Borrower, ESP 7 or
any Subsidiary, that this Agreement or the transactions contemplated by the
Loan Documents establish a joint venture, partnership or other similar
arrangement between Borrower, ESP 7 and/or any Subsidiary and Lender; (1) any
brokerage commission or finder’s fees claimed in connection with the
transactions contemplated by the Loan Documents; or (m) uninsured damage
to any Project resulting from acts of terrorism. Borrower also shall be
personally liable to Lender for any and all attorneys’ fees and expenses and
court costs incurred by Lender in enforcing this Section 13.1(2) or
otherwise incurred by Lender in connection with any of the foregoing


 


50

















 


matters, regardless of
whether such matters are legal or equitable in nature or arise under tort or
contract law.


 


(3)          Notwithstanding
anything to the contrary contained in the Loan Documents, the limitation on
Borrower’s liability contained in Section 13.1(1) SHALL BECOME NULL
AND VOID and shall be of no further force and effect:


 


(a)    if any Transfer in violation of the Loan
Documents occurs;


 


(b)    if Borrower, ESP 7, any Subsidiary or any of
their respective members, partners or shareholders files a petition under the
United States Bankruptcy Code or similar state insolvency laws;


 


(c)    if Borrower, ESP 7 or any Subsidiary becomes
the subject of an involuntary proceeding under the United States Bankruptcy
Code or similar state insolvency laws, and either (i) Borrower, ESP 7, any
Subsidiary or any Affiliate of Borrower, ESP 7 or any Subsidiary conspired or
cooperated with one or more creditors of Borrower, ESP 7 or the applicable
Subsidiary to commence such involuntary proceeding, or (ii) Borrower, ESP
7 or the applicable Subsidiary fails to use commercially reasonable efforts to
obtain a dismissal of such involuntary proceeding; or


 


(d)    without limiting paragraphs (b) and (c) above,
upon the avoidance or any attempted avoidance or claim of avoidability by any
Subsidiary or any Affiliate of any Subsidiary (whether directly by such
Subsidiary or such Affiliate, as a debtor or as a debtor in possession), or by
a trustee in bankruptcy, an assignee for the benefit of creditors or a receiver
for any of them, whether brought directly by or on behalf of any Subsidiary’s
creditors, equity holders or estate in a state or federal bankruptcy or
insolvency proceeding or brought by any debtor, debtor in possession or trustee
in bankruptcy, assignee for the benefit of creditors or receiver for any
Subsidiary or any Affiliate of any Subsidiary or brought on behalf of any
Subsidiary or any Affiliate of any Subsidiary as a creditor of any other
Affiliate of any Subsidiary, or by any other Person, of (i) any transfer
to (or for the benefit of) Lender of an interest of any Subsidiary in property
(including the payment of money to Lender by any Subsidiary and the creation in
favor of Lender of a lien or any other encumbrance on property of any
Subsidiary pursuant to its Mortgage) or (ii) any obligation incurred by
any Subsidiary under its Mortgage, which avoidance or attempted avoidance is
brought pursuant to any state or federal fraudulent transfer, fraudulent
conveyance, debtor-creditor, or partnership or corporate powers/authority
statutory or common law, including Sections 544, 547 or 548 of Title 11 of the
United States Code (or such successor statutory provision as may provide for a
similar remedy) and the Uniform Fraudulent Transfer Act and the Uniform Fraudulent
Conveyance Act (as adopted by any applicable state).


 


51

















 


(4)          The
limitation on Borrower’s personal liability in Section 13.1(1) shall
not modify, increase, diminish or discharge the personal liability of any
Joinder Party, except as otherwise expressly provided in the Joinder.


 


(5)          Nothing in
this Section 13.1 shall be deemed to be a waiver of any right which Lender
may have under Sections 506(a), 506(b), 1111(b) or any other provision of
the United States Bankruptcy Code, as such sections may be amended, or
corresponding or superseding sections of the Bankruptcy Amendments and Federal
Judgeship Act of 1984, to file a claim for the full amount due to Lender under
the Loan Documents or to require that all Collateral shall continue to secure
the amounts due under the Loan Documents.


 


Section 13.2    Limitation on Liability of Lender’s Officers, Employees, Etc. Any
obligation or liability whatsoever of Lender which may arise at any time under
this Agreement or any other Loan Document shall be satisfied, if at all, out of
the Lender’s assets only. No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of Lender’s shareholders, directors, officers, employees or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.


 


[Remainder of page intentionally
left blank.]


 


52

















 


EXECUTED as of the date
first written above.


 


	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION, a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ERIC VESSELE

  
	
   

  	
   

  	
  Name:

  	
  ERIC VESSELE

  
	
   

  	
   

  	
  Title:

  	
  RISK MANAGER

  



 


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  ESP
  SEVEN SUBSIDIARY LLC, a Delaware

  limited liability company

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kent W Christensen

  
	
   

  	
   

  	
  Name: 

  	
  Kent W Christensen

  
	
   

  	
   

  	
  Title:

  	
  Manager

  



 


S-1














 


SCHEDULE 1.1(A)


VALUATION AMOUNTS


 


	
  Project

  	
   

  	
  Valuation Amount

  	
   

  
	
  0725 Deland, FL

  	
   

  	
  $

  	
  4,175,825

  	
   

  
	
  1337 Greenacres, FL

  	
   

  	
  $

  	
  3,552,993

  	
   

  
	
  1019 Norwood, MA

  	
   

  	
  $

  	
  8,577,674

  	
   

  
	
  1084 Kingston, MA

  	
   

  	
  $

  	
  7,497,947

  	
   

  
	
  1204 Quincy, MA

  	
   

  	
  $

  	
  6,635,996

  	
   

  
	
  1206 Waltham, MA

  	
   

  	
  $

  	
  16,216,515

  	
   

  
	
  1054 Metuchen, NJ

  	
   

  	
  $

  	
  7,196,098

  	
   

  
	
  1331 Union, NJ

  	
   

  	
  $

  	
  8,089,408

  	
   

  
	
  1073 Arvada, CO

  	
   

  	
  $

  	
  2,458,002

  	
   

  
	
  1074 Denver, CO

  	
   

  	
  $

  	
  4,088,704

  	
   

  
	
  1075 Thornton, CO

  	
   

  	
  $

  	
  4,415,469

  	
   

  
	
  1076 Westminster, CO

  	
   

  	
  $

  	
  2,870,629

  	
   

  
	
  1174 Tracy, CA

  	
   

  	
  $

  	
  4,927,084

  	
   

  
	
  1195 Lanham, MD

  	
   

  	
  $

  	
  14,126,412

  	
   

  
	
  1197 Morrisville, PA

  	
   

  	
  $

  	
  11,788,720

  	
   

  
	
  1198 Philadelphia, PA

  	
   

  	
  $

  	
  6,833,216

  	
   

  
	
  1365 Plano, TX

  	
   

  	
  $

  	
  4,707,972

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  118,158,664

  	
   

  



 

















 


Schedule 1.1(B)


PROJECT INFORMATION


 


	
  Project

  	
   

  	
  Address

  	
   

  	
  City

  	
   

  	
  State

  	
   

  	
  Total

  Storage

  Units

  	
   

  	
  NRSF

  	
   

  	
  Project Type

  	
   

  
	
  0725 Deland, FL

  	
   

  	
  2745
  S. Woodland Boulevard

  	
   

  	
  Deland

  	
   

  	
  FL

  	
   

  	
  659

  	
   

  	
  92,000

  	
   

  	
  Self-Storage

  	
   

  
	
  1337 Greenacres, FL

  	
   

  	
  6035
  Lake Worth Road

  	
   

  	
  Greenacres

  	
   

  	
  FL

  	
   

  	
  388

  	
   

  	
  37,900

  	
   

  	
  Self-Storage

  	
   

  
	
  1019 Norwood, MA

  	
   

  	
  934
  Washington Street

  	
   

  	
  Norwood

  	
   

  	
  MA

  	
   

  	
  662

  	
   

  	
  68,500

  	
   

  	
  Self-Storage

  	
   

  
	
  1084 Kingston, MA

  	
   

  	
  5
  Independence Road

  	
   

  	
  Kingston

  	
   

  	
  MA

  	
   

  	
  443

  	
   

  	
  60,750

  	
   

  	
  Self-Storage

  	
   

  
	
  1204 Quincy, MA

  	
   

  	
  21
  Weston Avenue

  	
   

  	
  Quincy
  Park

  	
   

  	
  MA

  	
   

  	
  724

  	
   

  	
  56,300

  	
   

  	
  Self-Storage

  	
   

  
	
  1206 Waltham, MA

  	
   

  	
  195
  Bear Hill Road

  	
   

  	
  Waltham

  	
   

  	
  MA

  	
   

  	
  500

  	
   

  	
  77,500

  	
   

  	
  Self-Storage

  	
   

  
	
  1054 Metuchen, NJ

  	
   

  	
  60
  Bridge Street

  	
   

  	
  Metuchen

  	
   

  	
  NJ

  	
   

  	
  757

  	
   

  	
  73,800

  	
   

  	
  Self-Storage

  	
   

  
	
  1331 Union, NJ

  	
   

  	
  700
  Green Lane

  	
   

  	
  Union

  	
   

  	
  NJ

  	
   

  	
  744

  	
   

  	
  74,000

  	
   

  	
  Self-Storage

  	
   

  
	
  1073 Arvada, CO

  	
   

  	
  7117
  W. 56th Avenue

  	
   

  	
  Arvada

  	
   

  	
  CO

  	
   

  	
  263

  	
   

  	
  46,400

  	
   

  	
  Self-Storage

  	
   

  
	
  1074 Denver, CO

  	
   

  	
  11855
  E. 40th Avenue

  	
   

  	
  Denver

  	
   

  	
  CO

  	
   

  	
  562

  	
   

  	
  68,300

  	
   

  	
  Self-Storage

  	
   

  
	
  1075 Thornton, CO

  	
   

  	
  664
  W. Thornton Parkway

  	
   

  	
  Thornton

  	
   

  	
  CO

  	
   

  	
  539

  	
   

  	
  59,900

  	
   

  	
  Self-Storage

  	
   

  
	
  1076 Westminster, CO

  	
   

  	
  7140
  Irving Street

  	
   

  	
  Westminster

  	
   

  	
  CO

  	
   

  	
  435

  	
   

  	
  58,775

  	
   

  	
  Self-Storage

  	
   

  
	
  1174 Tracy, CA

  	
   

  	
  780
  E. 11th Street

  	
   

  	
  Tracy

  	
   

  	
  CA

  	
   

  	
  452

  	
   

  	
  62,400

  	
   

  	
  Self-Storage

  	
   

  
	
  1195 Lanham, MD

  	
   

  	
  10101
  Martin Luther King Jr. Highway

  	
   

  	
  Lanham

  	
   

  	
  MD

  	
   

  	
  973

  	
   

  	
  156,200

  	
   

  	
  Self-Storage

  	
   

  
	
  1197 Morrisville, PA

  	
   

  	
  915
  Lincoln Highway

  	
   

  	
  Morrisville

  	
   

  	
  PA

  	
   

  	
  829

  	
   

  	
  104,500

  	
   

  	
  Self-Storage

  	
   

  
	
  1198 Philadelphia, PA

  	
   

  	
  11771
  Roosevelt Boulevard

  	
   

  	
  Philadelphia

  	
   

  	
  PA

  	
   

  	
  875

  	
   

  	
  104,000

  	
   

  	
  Self-Storage

  	
   

  
	
  1365 Plano, TX

  	
   

  	
  3101
  W. Spring Creek Parkway

  	
   

  	
  Plano

  	
   

  	
  TX

  	
   

  	
  515

  	
   

  	
  69,000

  	
   

  	
  Self-Storage

  	
   

  



 

















 


SCHEDULE 1.1(C) 


LIST OF SITE ASSESSMENTS


 


	
  Project

  	
   

  	
  Report Date

  	
   

  	
  Preparer

  	
   

  
	
  Tracy

  	
   

  	
  8/22/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Arvada

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Denver

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Thornton

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Westminster

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Green Acres

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Deland

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Norwood

  	
   

  	
  8/27/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Kingston

  	
   

  	
  8/22/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Quincy

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Waltham

  	
   

  	
  8/22/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Lanham

  	
   

  	
  8/22/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Metuchen

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Union

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Morrisville

  	
   

  	
  8/22/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Philadelphia

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  
	
  Plano

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc

  	
   

  



 

















 


SCHEDULE 2.1


 


CLOSING AND ADVANCE CONDITIONS


 


Part A
— Conditions To Closing


Part B
— General Conditions


 


PART A. CONDITIONS TO CLOSING


 


Lenders
obligations under this Agreement and the other Loan Documents to which the
party shall be subject to the terms of any commitment letter (if any) issued by
Lender with respect to the Loan, and Lender’s receipt, review, approval and/or
confirmation of the following, at Borrower’s cost and expense, each in form and
content satisfactory to Lender in its sole discretion:


 


1.             The Underwritten NOI of the
Projects equals or exceeds $7,850,000.


 


2.             The Maximum Commitment does not
exceed 85% of Lender’s determination of the aggregate value of the Projects.


 


3.             The Loan Documents, executed by
Borrower and, as applicable, each Borrower Party and each other party thereto.


 


4.             The Loan Origination fee of
$500,000 in cash.


 


5.             The Title Insurance Policies.


 


6.             All documents evidencing the
formation, organization, valid existence, good standing, and due authorization
of and for Borrower and each Borrower Party and the authorization for the
execution, delivery, and performance of the Loan Documents by Borrower and each
Borrower Party.


 


7.             Legal opinions issued by counsel
for Borrower and each Borrower Party (and, where required by Lender, by Lender’s
local counsel), opining as to the due organization, valid existence and good
standing of Borrower and each Borrower Party, and the due authorization,
execution, delivery, enforceability and validity of the Loan Documents with
respect to, Borrower and each Borrower Party; that the Loan, as reflected in
the Loan Documents, is not usurious; to the extent that Lender is not otherwise
satisfied, that each Project and its use is in full compliance with all legal
requirements; and as to such other matters as Lender and Lender’s counsel
reasonably may specify.


 

















 


8.             Current UCC searches for Borrower,
Borrower’s partners and members, the Subsidiaries and the immediately preceding
owners of the Projects.


 


9.             Evidence of insurance as required
by this Agreement, and conforming in all respects to the requirements of
Lender.


 


10.           A current ALTA/ACSM land title survey
of each Project, dated or updated to a date not earlier than thirty (30) days
prior to the date hereof, certified to Lender and the issuer of the Title
Insurance Policies, prepared by a licensed surveyor acceptable to Lender and
such title insurer, and conforming to Lender’s current standard survey requirements.


 


11.           A current engineering report or
architect’s certificate with respect to each Project, covering, among other
matters, inspection of heating and cooling systems, roof and structural details
and showing no failure of compliance with building plans and specifications,
applicable legal requirements (including requirements of the Americans with
Disabilities Act) and fire, safety and health standards.  As requested by Lender, such report shall
also include an assessment of such Project’s tolerance for earthquake and
seismic activity.


 


12.           A current Site Assessment for each
Project.


 


13.           A current rent roll of each Project,
which Borrower shall represent and warrant is true and correct.  Such rent roll shall include the following
information:  (a) tenant names; (b) unit/suite
numbers; (c) area of each demised premises and total area of the Project
(stated in net rentable square feet); (d) rental rate (including
escalations) (stated in gross amount and in amount per net rentable square foot
per year); (e) for any office or retail space leases, lease term
(commencement, expiration and renewal options); (f) for any office or
retail space leases, expense pass-throughs; (g) for any office or retail
space leases, cancellation/termination provisions; (h) security deposit if
any; and (i) for any office or retail space leases, material operating
covenants and co-tenancy clauses.  In
addition, Borrower shall provide Lender with a copy of the standard lease form
to be used by Borrower in leasing space in the Projects, and, at Lender’s
request, true and correct copies of all leases of the Projects.


 


14.           A copy of the management agreement
for each Project, if any, certified by Borrower as being true, correct and
complete.


 


15.           Borrower’s deposit with Lender of the
amount required by Lender to impound for taxes and assessments and insurance
under Article 3 and to fund any other required escrows or reserves.


 

















 


16.           Evidence that each Project and the
operation thereof comply with all legal requirements, including that all
requisite certificates of occupancy, building permits, and other licenses,
certificates, approvals or consents required of any governmental authority have
been issued without variance or condition and that there is no litigation,
action, citation, injunctive proceedings, or like matter pending or threatened
with respect to the validity of such matters. 
At Lender’s request, Borrower shall furnish Lender with a zoning
endorsement to the Title Insurance Policies, zoning letter from applicable
municipal agencies, and utility letter from applicable service providers.


 


17.           No change shall have occurred in the
financial condition of Borrower or any Borrower Party or in the Underwritten
NOI of any Project, or in the financial condition of any major or anchor tenant,
which would have, in Lender’s sole judgment, a material adverse effect on any
Project or on Borrower’s or any Borrower Party’s ability to repay the Loan or
otherwise perform its obligations under the Loan Documents.


 


18.           No condemnation or adverse zoning or
usage change proceeding shall have occurred or shall have been threatened
against any Project; no Project shall have suffered any significant damage by
fire or other casualty which has not been repaired; no law, regulation,
ordinance, moratorium, injunctive proceeding, restriction, litigation, action,
citation or similar proceeding or matter shall have been enacted, adopted, or
threatened by any governmental authority, which would have, in Lender’s
judgment, a material adverse effect on Borrower, any Borrower Party or any
Project.


 


19.           All fees and commissions payable to
real estate brokers, mortgage brokers, or any other brokers or agents in
connection with the Loan or the acquisition of the Projects have been paid,
such evidence to be accompanied by any waivers or indemnifications deemed
necessary by Lender.


 


20.           The Contribution Agreement.


 


21.           Payment of Lender’s costs and
expenses in underwriting, documenting, and closing the transaction, including
fees and expenses of Lender’s inspecting engineers, consultants, and outside
counsel.


 


22.           Such credit checks, background
investigations and other information required by Lender regarding Borrower,
each Borrower Party and any other Person holding a direct or indirect interest
in Borrower, including such additional information as Lender may request
regarding compliance by Borrower, and by direct and indirect interest holders
in Borrower, with the provisions of Article 9.


 














 


23.           Such other documents or items as
Lender or its counsel may reasonably require.


 


24.           The representations and warranties
contained in this Loan Agreement and in all other Loan Documents are true and
correct.


 


25.           No Potential Default or Event of
Default shall have occurred or exist.


 


PART B. GENERAL CONDITIONS


 


Each
advance of the Loan shall be subject to Lender’s receipt, review, approval
and/or confirmation of the following, each in form and content satisfactory to
Lender in its sole discretion:


 


1.             There shall exist no Potential
Default or Event of Default (currently and after giving effect to the requested
advance).


 


2.             The representations and warranties
contained in this Loan Agreement and in all other Loan Documents are true and
correct as of the date of the requested advance.


 


3.             Such advance shall be secured by
the Loan Documents. Subject only to those exceptions to title approved by
Lender at the time of the Loan closing, as evidenced by title insurance
endorsements satisfactory to Lender.


 


4.             Borrower shall have paid Lender’s
costs and expenses in connection with such advance (including title charges,
and costs and expenses of Lender’s inspecting engineer and attorneys).


 


5.             No change shall have occurred in
the financial condition of Borrower or any Borrower Party, or in the
Underwritten NOI of the Projects, or in the financial condition of any major or
anchor tenant, which would have, in Lender’s sole judgment, a material adverse
effect on the Loan, any Project, or Borrower’s or any Borrower Party’s ability
to perform its obligations under the Loan Documents.


 


6.             Borrower shall have delivered to
Lender all information requested by Lender pursuant to Article 9 and all
Interest Holder certifications then required under Section 8.1.


 


7.             No condemnation or adverse, as
determined by Lender, zoning or usage change proceeding shall have occurred or
shall have been threatened against any Project; no Project shall have suffered
any damage by fire or other casualty which has not been repaired or is not being


 

















 


restored
in accordance with this Agreement; no law, regulation, ordinance, moratorium,
injunctive proceeding, restriction, litigation, action, citation or similar
proceeding or matter shall have been enacted, adopted, or threatened by any
governmental authority, which would have, in Lender’s judgment, a material
adverse effect on any Project or Borrower’s or any Borrower Party’s ability to
perform its obligations under the Loan Documents.


 


8.             Lender shall have no obligation to
make any advance for less than $100,000, or to make advances more often than
eighteen times in any Loan Year.


 


9.             At the option of Lender (i) each
advance request shall be submitted to Lender at least five (5) Business
Days prior to the date of the requested advance, and (ii) all advances
shall be funded by wire transfer of immediately available funds to an account
directed by Borrower.


 


10.           After giving effect to the requested
advance, the Debt Service Coverage is not less than 1.15:1.


 


11.           After giving effect to the requested
advance, the aggregate outstanding principal balance of the Loan will not
exceed the Borrowing Base.


 


Each
request for and acceptance of a Loan advance shall be deemed to constitute, as
of the date of such request or acceptance, a representation and warranty by
Borrower that the statements contained in paragraphs 1 and 2 above are true and
correct.


 

















 


SCHEDULE
4.1


ORGANIZATIONAL
MATTERS


 


A.       Borrower’s Organizational
Structure.


See Exhibit 4.1 (A) attached hereto


 


B.       Organizational Information:  (Borrower and each Borrower
Party).


 


	
  Legal Name *

  	
   

  	
  State of

  Incorporation or

  Organization

  	
   

  	
  Type of Entity

  	
   

  	
  State Organizational

  ID No. **

  	
   

  	
  Federal Tax

  ID No.

  	
   

  	
  Subsidiary?

  
	
  ESP
  Seven Subsidiary LLC

  	
   

  	
  Delaware

  	
   

  	
  Ltd. Liability Co.

  	
   

  	
  4414748

  	
   

  	
  26-0842867

  	
   

  	
  No

  
	
  Extra
  Space Properties Seven LP

  	
   

  	
  Utah

  	
   

  	
  Ltd. Partnership

  	
   

  	
  5555845-0180

  	
   

  	
  20-0567600

  	
   

  	
  No

  
	
  Extra Space of Pennsylvania Two LLC

  	
   

  	
  Utah

  	
   

  	
  Ltd. Liability Co.

  	
   

  	
  5555844-0160

  	
   

  	
  20-0567563

  	
   

  	
  No

  
	
  Extra
  Space Storage LLC

  	
   

  	
  Utah

  	
   

  	
  Ltd. Liability Co.

  	
   

  	
  2944255

  	
   

  	
  87-0618405

  	
   

  	
  No

  
	
  Extra
  Space Management, Inc.

  	
   

  	
  Utah

  	
   

  	
  Corporation

  	
   

  	
  846238-0142

  	
   

  	
  87-0405300

  	
   

  	
  No

  
	
  Extra
  Space of Pennsylvania LLC

  	
   

  	
  Utah

  	
   

  	
  Ltd. Liability Co.

  	
   

  	
  5555843-0160

  	
   

  	
  20-0567502

  	
   

  	
  No

  
	
  Extra
  Space of Lanham LLC

  	
   

  	
  Maryland

  	
   

  	
  Ltd. Liability Co.

  	
   

  	
  W07720048

  	
   

  	
  20-0567191

  	
   

  	
  Yes

  
	
  Extra
  Space of Morrisville LP

  	
   

  	
  Pennsylvania

  	
   

  	
  Ltd. Partnership

  	
   

  	
  3193293

  	
   

  	
  20-0600133

  	
   

  	
  Yes

  
	
  Extra
  Space of Philadelphia LP

  	
   

  	
  Pennsylvania

  	
   

  	
  Ltd. Partnership

  	
   

  	
  3193292

  	
   

  	
  20-0600081

  	
   

  	
  Yes

  
	
  Extra
  Space of Metuchen LLC

  	
   

  	
  New Jersey

  	
   

  	
  Ltd. Liability Co.

  	
   

  	
  0600091594

  	
   

  	
  91-2052761

  	
   

  	
  Yes

  
	
  Extra
  Space of Union LLC

  	
   

  	
  New Jersey

  	
   

  	
  Ltd. Liability Co.

  	
   

  	
  0600220719

  	
   

  	
  20-1965549

  	
   

  	
  Yes

  



 






*  As it appears in official
filings in the state of its incorporation or organization.


**If none issued by applicable state or organization/incorporation,
insert “none issued.”


 


	
  C. Location Information.

  	
   

  	
   

  
	
   1.
  Borrower:

  	
   

  	
   

  
	
  a.  Chief
  Executive Office:

  	
   

  	
  ESP
  Seven Subsidiary LLC

  
	
   

  	
   

  	
  2795
  East Cottonwood Parkway, Suite 400

  
	
   

  	
   

  	
  Salt
  Lake City, UT 84121

  
	
   

  	
   

  	
  Attention:
  David L. Rasmussen, General Counsel

  
	
   

  	
   

  	
  Telephone
  No.: (801) 365-4473

  
	
   

  	
   

  	
   

  
	
  b.  Location
  of any prior

  	
   

  	
  None

  	
   

  
	
    Chief
  Executive Office (during

  	
   

  	
   

  	
   

  
	
    last 5
  years):

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  c.  Other
  Office Location:

  	
   

  	
  None

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  d.  Location
  of Collateral:

  	
   

  	
  At the Projects

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   2. Borrower
  Parties (Chief

  	
   

  	
  Same as Borrower

  	
   

  
	
   Executive
  Office):

  	
   

  	
   

  	
   

  



 

















 


SCHEDULE 4.6


ZONING REPORTS AND PROPERTY CONDITION REPORTS


 


	
   

  	
   

  	
  Report Date

  	
   

  	
  Preparer

  
	
  Zoning
  Reports

  	
   

  	
   

  	
   

  	
   

  
	
  Tracy

  	
   

  	
  9/26/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Arvada

  	
   

  	
  9/27/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Denver

  	
   

  	
  9/21/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Thornton

  	
   

  	
  9/25/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Westminster

  	
   

  	
  9/26/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Green Acres

  	
   

  	
  9/25/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Deland

  	
   

  	
  9/24/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Norwood

  	
   

  	
  10/4/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Kingston

  	
   

  	
  9/26/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Quincy

  	
   

  	
  9/25/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Waltham

  	
   

  	
  9/26/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Lanham

  	
   

  	
  9/24/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Metuchen

  	
   

  	
  9/26/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Union

  	
   

  	
  9/24/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Morrisville

  	
   

  	
  9/27/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Philadelphia

  	
   

  	
  9/27/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
  Plano

  	
   

  	
  9/26/2007

  	
   

  	
  The
  Planning & Zoning Resource Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Property
  Conditions Reports

  	
   

  	
   

  	
   

  	
   

  
	
  Tracy

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Arvada

  	
   

  	
  8/20/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Denver

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Thornton

  	
   

  	
  8/20/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Westminster

  	
   

  	
  8/20/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Green Acres

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Deland

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Norwood

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Kingston

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Quincy

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Waltham

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Lanham

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Metuchen

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Union

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Morrisville

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Philadelphia

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  
	
  Plano

  	
   

  	
  8/21/2007

  	
   

  	
  IVI
  Due Diligence Service, Inc.

  



 

















 


SCHEDULE 8.15


IMMEDIATE REPAIRS


 


	
  PROJECT

  	
   

  	
  REPAIRS

  	
   

  	
   

  	
   

  	
  ESTIMATED

  COST

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1019 Norwood, MA

  	
   

  	
  Repairs
  - Metal fence

  	
   

  	
   

  	
   

  	
  $

  	
  1,050

  	
   

  
	
   

  	
   

  	
  Repairs
  - Roof Door

  	
   

  	
   

  	
   

  	
  $

  	
  700

  	
   

  
	
   

  	
   

  	
  Repairs
  - Miscellaneous storage units

  	
   

  	
   

  	
   

  	
  $

  	
  3,500

  	
   

  
	
   

  	
   

  	
  Repairs
  - Fire pump and piping

  	
   

  	
   

  	
   

  	
  $

  	
  2,800

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  8,050

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1206 Waltham, MA

  	
   

  	
  Repairs
  - Roof

  	
   

  	
   

  	
   

  	
  $

  	
  700

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  700

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1073 Arvada, CO

  	
   

  	
  Repairs
  - Asphalt pavement

  	
   

  	
   

  	
   

  	
  $

  	
  18,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  18,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1074 Denver, CO

  	
   

  	
  Roofing
  - Replace/repair roof

  	
   

  	
   

  	
   

  	
  $

  	
  60,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  60,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1195 Lanham, MD

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  9,600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  9,600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1197 Morrisville, PA

  	
   

  	
  Repairs
  - Asphalt

  	
   

  	
   

  	
   

  	
  $

  	
  10,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  10,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1198 Philadelphia, PA

  	
   

  	
  Repairs
  - Asphalt

  	
   

  	
   

  	
   

  	
  $

  	
  27,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  27,500