Document:

Exhibit
10.27

PURCHASE AND SALE AGREEMENT

(AAAAA Rent-A-Space)

THIS PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into the 8th
day of December, 2006 (hereinafter the “Effective Date”),
by, between, and among those entities identified as sellers on the signature
pages of this Agreement, (each a “Seller”, and
collectively “Sellers”) and EXTRA SPACE STORAGE LLC, a Delaware limited
liability company (“Purchaser”).

R E C I T A L S:

A.            Each of the Sellers operates and owns either fee title
to, or a leasehold estate pursuant to the Ground Leases (hereinbelow defined)
in, one or more of the following self storage facilities listed on Exhibit “A” (each a “Property” and
collectively the “Properties”).  Each of the Properties are more fully
described on Exhibit “A-1” through “A-14”,  inclusive”.

B.            Purchaser desires to purchase all of Sellers’ right,
title, and interest in and to the Properties from Sellers in their as-is,
where-is condition and subject to the terms and conditions of this Agreement,
Sellers are willing to sell to Purchaser all of Sellers’ right, title, and
interest in and to the Properties.

NOW, THEREFORE, for and in consideration of the mutual
covenants set forth in this Agreement, the receipt and sufficiency of which are
hereby acknowledged by the parties to this Agreement, the parties to this
Agreement do hereby agree as follows:

1.             Agreement of Sale. 
Subject to, and on the terms and conditions herein set forth, Sellers
hereby agree to sell to Purchaser all of Sellers’ right, title, and interest in
and to the Properties and Purchaser agrees to purchase from Sellers all of
Sellers’ right, title, and interest in and to the Properties.  Subject to any provision contained herein
that expressly permits the termination of this Agreement as to a particular
Property, Purchaser expressly acknowledges and agrees that Purchaser has no
right to purchase and Sellers have no obligation to sell, less than all of the
Properties, it being the express agreement and understanding of Purchaser and
Sellers that, as a material inducement to Purchaser and Sellers to enter into
this Agreement, Purchaser has agreed to purchase, and Sellers have agreed to
sell, all of the Properties in accordance with the terms and conditions hereof.

2.             Property Description.

A.            Subject
to the provisions of this Section 2, each Property includes all of the right,
title and interest of the applicable Seller in and to (i) all buildings,
structures, fixtures, easements, rights of way and improvements located thereon
or appurtenant thereto (collectively, the “Improvements”),
(ii) the Personal Property (hereinafter defined), (ii) the Intangible Personal
(hereinafter defined), (iii) the Leases (hereinafter defined), (iv) the
Designated Contracts (hereinafter defined), (v) the Security Deposits
(hereinafter defined) and the Ground Leases (hereinafter defined).  In addition, the Kapolei Property (as defined
on Exhibit “A” also includes all of the
right, title, and interest of AAAAA Maui in and to that certain loan described
more fully in the Kapolei Ground Lease (as defined on Exhibit “A”)
and the letter agreement attached hereto as Exhibit “B”
(hereinafter the “Kapolei Loan”).  Notwithstanding anything to the contrary in
the preceding sentence, the term “Property” shall not include any of the
Excluded Property (hereinafter defined) with respect to any of the Properties.

B.            For
purposes of this Agreement “Personal  Property “ means, as to each Property, all fixtures,
furniture, carpeting, draperies, appliances, building supplies, equipment, machinery,
inventory and other tangible items of personal property which are owned by the
Seller of such Property and presently 

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affixed, attached to, placed or situated upon such Property and/or used
exclusively in connection with the ownership, operation and occupancy of such
Property.

C.            For
purposes of this Agreement, “Intangible Property”
means, as to each Property, all assignable intangible personal property, if
any, now or through the date of Closing owned by the Seller of such Property
and arising out of or in connection with such Seller’s ownership of such
Property and the Personal Property, including (to the extent any such items
exist): (i) such Seller’s rights to use all plans, specifications and drawings
relating to the Improvements located on such Property (subject to the rights of
the parties who prepared the same), (ii) transferable licenses, permits and
certificates of occupancy issued by governmental authorities relating to the
use, maintenance, occupancy and/or operation of such Property and the Personal
Property, and (iii) any presently effective and assignable warranties and
guaranties with respect to such Property.

D.            For
purposes of this Agreement, “Leases” means,
as to each Property, all leases and rental agreements (other than the Ground
Leases) now or hereafter entered into for occupancy of space within the
improvements or other portions of such Property.

E.             For
purposes of this Agreement, “Designated Contracts”
means, as to each Property, all Contracts (hereinafter defined) which Purchaser
chooses to have assigned to Purchaser pursuant to Section 8.D, below.  Designated Contracts also includes any such
contracts hereafter approved by Purchaser pursuant to the provisions of Section
12.C below.

F.             For
purposes of this Agreement, “Security Deposits”
means, as to each Property, all security deposits of tenants under Leases (“Tenants”), if any, which as of the Closing Date have not
been applied by Seller in accordance with the terms of the applicable Leases.

G.            For
purposes of this Agreement, “Ground Leases”
means: the Berkeley II Ground Lease, the Castro Valley Ground Lease, the
Kapolei Ground Lease, and the San Pablo Ground Lease, each as defined on Exhibit “A”.

H.            For
purposes of this Agreement, “Excluded Property”
means: (i) any bank accounts of any Seller, (ii) any motor vehicles or aircraft
owned by any Seller, (iii) any business forms, employee training manuals,
proprietary Seller software and other intellectual property owned and used by
any of the Sellers in the operation of a self storage business at any of the
Properties, (iv) except as provided in Section 22 below, the right to use the
name “AAAAA Rent-A-Space”, (v) any operating accounts, replacement or reserve
accounts or other accounts maintained by or on behalf of Seller or Seller’s
affiliates with respect to the Properties, excepting however, reserve accounts
under the Third Party Loans that are assumed by Purchaser, which reserve
accounts shall be assigned by Seller to Purchaser at closing of the applicable
Property; (vi) any refundable cash or other security deposits or any bonds
posted by or on behalf of Seller with any governmental authorities, utilities
or other parties, other than those for which an adjustment is made pursuant to
Section 11, below; (vii) subject to any obligation of Seller to remit such
refunds to Tenants, any refunds of real estate taxes and assessments, personal
property taxes and similar payments attributable to the period prior to the
applicable Closing (provided, however, any refunds for the fiscal tax year in
which the Closing occurs shall be prorated in accordance with Section 11,
below); (viii) subject to Section 13, below, any claims under Seller’s
insurance policies; and (ix) Seller’s agreements with any of Seller’s on-site
property managers.

3.             Purchase Price.  The “Purchase Price” to be paid by Purchaser to
Sellers for the Properties shall be a sum equal to the aggregate of ONE HUNDRED FIFTY MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($150,200,000.00).  The portion of the
Purchase Price allocated to each Property, which shall be paid at Closing to
the Seller of such Property pursuant to Section 11.A, below, 

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is set forth on Exhibit “C” attached
hereto (with respect to each Property, such portion of the Purchase Price so
allocated to such Property as aforesaid, shall hereinafter be referred to as
the “Allocated Purchase Price”).  The Purchase Price shall be paid by Purchaser
at Closing (defined below) as follows: (i) Assumption of the aggregate
outstanding balance of unpaid principal on the Third Party Loans (defined
below) owing as of the Closing Date (which amount shall be credited to the
Purchase Price at Closing), the current balances owing with respect to the
Third Party Loans are estimated to be approximately $16,580,243.00; plus (ii)
Payment of the aggregate outstanding balance of the Prepaid Loans (defined
below) (including unpaid principal and interest and any related charges and
other fees and expenses, but specifically not including any prepayment fees or
penalties payable with respect to the any Prepaid Loan) owing as of the Closing
(which aggregate amount shall be credited to the Purchase Price at Closing;
provided, however, that any prepayment fees or penalties payable with respect
to the prepayment of an Prepaid Loan shall not be a credit towards the Purchase
Price), the current balances owing with respect to the Third Party Loans are
estimated to be approximately $2,785,030; plus (iii) cash or other immediately
available funds for the balance of the Purchase Price, which amount is estimated
to be approximately $130,834,727.  At the
Closing, Purchaser shall, subject to the requirements of Section 4 below,
assume the Third Party Loans.  As used
herein, the terms “Third Party Loans”
and “Prepaid Loans” shall mean the loans
identified as such on the attached Exhibit “D”.  Each Property that is security for a Third
Party Loan is hereinafter referred to as a “Third Party
Loan Property” and all of the Properties that are security for a
Third Party Loan are hereinafter collectively referred to as the “Third Party Loan Properties”.

4.             Assumption of Third Party Loans.

A.            The
obligations of Sellers and Purchaser under this Agreement shall be subject to
the following:

(i)            Purchaser’s
approval of each of the Third Party Loans, including, but not limited to,
Purchaser’s approval of the amount, interest rate, payment schedule, repayment
term and other terms of each Third Party Loan and the form of the documents
evidencing and or securing each Third Party Loan, including, but not limited
to, any guarantees of each Third Party Loan (hereinafter collectively the “Third Party Loan Documents”), which approvals shall be in
Purchaser’s sole and absolute discretion. 
If Purchaser delivers the Approval Notice (hereinbelow defined),
Purchaser will be deemed to have irrevocably approved each Third Party Loan and
the Third Party Loan Documents.

(ii)           Each
Third Party Lender  and each loan
servicer of a Third Party Loan (if any) consenting to the transaction which is
the subject of this Agreement and Purchaser’s assumption of each Third Party
Loan, all on terms that are reasonably acceptable to Purchaser (the “Lender Conditions”). 
Seller has informed Purchaser that KN Productions, Inc. (hereinafter the
“Seller Guarantor”) has executed an
Indemnity and Guaranty Agreement with respect to each of the Third Party Loans
and that each such Third Party Lender may require Purchaser to provide a
financially responsible person to provide a similar guaranty and indemnity with
respect to such Third Party Lender’s Third Party Loan (hereinafter a “Replacement Guarantor”). 
Purchaser agrees to offer a Replacement Guarantor who shall, in
Purchaser’s reasonable determination, satisfy the financial conditions required
to be maintained by the applicable Seller Guarantor pursuant to the Third Party
Loan Documents; provided, however, that the parties acknowledge that Purchaser
may, at Purchaser’s option, require that the assumption and/or guaranties of
the Third Party Loans be provided by, one or more affiliates of Purchaser who
satisfy the foregoing criteria.  In the
event that the Third Party Loan Documents do not specify financial conditions
required to be maintained by the applicable Seller Guarantor, then, in the
event so required by the applicable Third Party Lender, Purchaser agrees to offer
a Replacement Guarantor who shall have a minimum net worth of at least
$100,000,000.00.  Notwithstanding the
foregoing, in no event shall Purchaser be required to approve any Lender
Conditions which require Purchaser or any affiliate of Purchaser to execute any
guaranties or to incur any obligations with respect to a Third Party Loan which
are materially more onerous or burdensome than the guaranties and/or
obligations 

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undertaken by the applicable Seller or such Seller’s affiliates
(including, but not limited to, the Seller Guarantor) under the applicable
Third Party Loan.

B.            Promptly
after the Effective Date, Purchaser and Sellers shall apply to each Third Party
Lender and servicer of a Third Party Loan for such Third Party Lender and
servicer’s consent to the transaction which is the subject of this Agreement
and Purchaser’s assumption of such Third Party Loan in accordance with Lender
Conditions that area reasonably acceptable to Purchaser.  Sellers and Purchaser each agree to use
commercially reasonable efforts to cooperate with each other and with each
Third Party Lender and servicer in seeking such approval and consent and in
responding to the reasonable requests of such Third Party Lender and/or
servicer.  Notwithstanding anything to
the contrary contained herein, provided that Sellers and Purchaser shall have
satisfied their respective obligations under this Section, the failure of a
Third Party Lender to approve the assignment and assumption of a Third Party
Loan by the expiration of the Due Diligence Period shall not constitute a
default by either Seller or Purchaser.

C.            Notwithstanding
anything to the contrary in this Agreement, if at the expiration of the Due
Diligence Period (1) any Third Party Lender and/or the servicer of such Third
Party Lender’s Third Party Loan has not consented to the transaction which is
the subject of this Agreement and to Purchaser’s assumption of such Third Party
Loan in accordance with Lender Conditions that are reasonably acceptable to
Purchaser and (2) Purchaser gives Sellers an Approval Notice in accordance with
the provisions of Section 8.H below, the following provisions of this Section
4.C shall apply:

(i)            Purchaser
may, by written notice to Sellers given either concurrently with the giving of
the Approval Notice or at any time after the giving of a notice pursuant to
Section 4.C(ii) below with respect to such Third Party Loan, elect to waive the
condition that such Third Party Lender and servicer consent to the transaction
which is the subject of this Agreement and to Purchaser’s assumption of the
such Third Party Loan and proceed to Closing, in which event, the provisions of
Section 16.C below shall apply to such Third Party Loan, or

(ii)           Purchaser
may, by written notice to Sellers given concurrently with the giving of the
Approval Notice, elect to proceed to the Closing with respect to all of the
Properties other than one or more of the Third Party Loan Properties with
respect to which Purchaser has not received such consent, in which event,
Purchaser and Seller shall continue to seek the consent of such Third Party
Lender and/or the servicer of such Third Party Lender’s Third Party Loan to the
transaction which is the subject of this Agreement and Purchaser’s assumption
of such Third Party Loan in accordance with the provisions of Section 4.B above
and the provisions of Sections 4.D and 11.H below shall apply to the Third
Party Loan Property which secures such Third Party Loan.

If at the expiration of the Due Diligence Period more than one Third
Party Lender and/or the servicer of such Third Party Lender’s Third Party Loan
have not consented to the transaction which is the subject of this Agreement
and Purchaser’s assumption of such Third Party Loan, Purchaser may, in
Purchaser’s sole discretion, make a different election with respect to each
such Third Party Loan.

D.            As
to each Third Party Loan with respect to which Purchaser has made an election
pursuant to Section 4.C(ii) above, upon Third Party Lender’s approval of
Purchaser’s assumption of the Third Party Loan in accordance with Lender
Conditions which are reasonably acceptable to Purchaser, Seller and Purchaser
agree to execute such documentation as may be reasonably required by Third
Party Lender pursuant to and in accordance with the terms of the Third Party
Loan Documents and such Lender Conditions and to take all other steps
reasonably necessary to promptly Close the loan assumption and Purchaser’s
acquisition of the Third Party Loan Property which secures such Third Party
Loan as soon as reasonably possible, but in no event later than the tenth
(10th) business day after the Lender shall have approved such 

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loan assumption, the completion of which shall include such Third Party
Lender’s release of Seller and each Seller Guarantor from future liability with
respect to the Third Party Loan.

E.             If
Purchaser initially makes an election pursuant to Section 4.C(ii) above with
respect to a Third Party Loan and thereafter makes an election pursuant to
Section 4.C(i) above with respect to such Third Party Loan, the Closing with
respect to Purchaser’s acquisition of the Third Party Loan Property that
secures such Third Party Loan shall occur as soon as reasonably possible after
the date on which Purchaser gives Sellers written notice of Purchaser’s
election pursuant to Section 4.C(i) above with respect to such Third Party
Loan, but in no event later than ten (10) business days after the giving of
such written notice.

F.             Concurrently
with the Closing of the assumption of the Third Party Loan and provided the
applicable Third Party Lender shall agree, all reserve accounts maintained by
such Third Party Lender on behalf of Seller in connection with the Third Party
Loan, if any, shall be assigned by the applicable Seller to Purchaser at the
Closing of the applicable Third Party Loan Property and such Seller shall
receive a credit at Closing equal the amounts so assigned.  If the applicable Third Party Lender shall
not agree to the assignment and assumption of existing reserves at Closing as
aforesaid, such Seller shall not receive a credit therefor at Closing, and, if
required by such Third Party Lender, Purchaser shall establish replacement
reserves in the amounts required by the Third Party Lender, and Purchaser shall
upon such Seller’s request, reasonably cooperate with such Seller’s efforts to
recover such Seller reserves from Lender.

G.            Purchaser
shall be responsible for and pay all fees, costs, expenses, and other charges
charged by any Third Party Lender with respect to its consenting to the
transaction which is the subject of this Agreement and the assumption of any
Third Party Loan in accordance with the provisions of this Section 4 including,
without limitation, any loan assumption fees.

5.             Earnest Money Deposit.

A.            Within
three (3) business days after the Effective Date, Purchaser shall deposit with
Chicago Title Insurance Company, National Office, at 171 N. Clark Street, 3rd Floor, Chicago, IL 60601,
Attention: Ronald K. Szopa, as the “Escrow
Agent” and “Title Company,”
an earnest money deposit in cash in the amount of FOURTEEN MILLION NINE HUNDRED
THOUSAND AND NO/100 DOLLARS ($14,900,000.00) (“Earnest Money Deposit”). The Earnest Money Deposit shall be
refundable during the Due Diligence Period (as defined in Section 8) and as
otherwise set forth in this Agreement and shall be credited to the Purchase
Price upon the Closing as set forth herein.

B.            Purchaser
acknowledges time is of the essence with respect to the delivery of the Earnest
Money Deposit and the balance of that portion of the Purchase Price due and
owing at the Closing.  If Purchaser fails
to timely deliver the Earnest Money Deposit and/or the balance of the Purchase
Price when due, such failure shall constitute a material default by Purchaser
hereunder and in addition to Sellers’ other remedies hereunder, Sellers may
terminate this Agreement by delivering written notice to Purchaser and Escrow
Agent.

C.            Upon
receipt, Escrow Agent shall deposit the Earnest Money Deposit into an interest
bearing money market account maintained at a bank customarily used by Escrow
Agent for such purposes.  All interest
earned on the Earnest Money Deposit while held by Escrow Agent shall be added
to and increase the amount of Earnest Money Deposit and shall be reported to
the Internal Revenue Service as income of Purchaser.  Purchaser and Sellers agree to provide Escrow
Agent with their respective tax identification numbers upon execution of this
Agreement and Purchaser and Sellers shall promptly execute all forms reasonably
requested by Escrow Agent in connection with depositing the Earnest Money
Deposit in an interest-bearing account as provided above.

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D.            A
portion of the Earnest Money Deposit shall be applied to the satisfaction of
the Allocated Purchase Price for each Property, with such portion of the
Earnest Money Deposit being determined in accordance with the following
provisions of this Section 5.D:

(i)            With
respect to the Closing for each of the Properties other than the last three (3)
Properties to Close, the portion of the Earnest Money Deposit to be applied to
the Allocated Purchase Price for each such Property shall be equal to the
product of $7,400,000.00 multiplied by a fraction the numerator of which is the
Allocated Purchase Price for such Property and the denominator of which is the
aggregate Allocated Purchase Prices for all of the Properties other than the
last three (3) Properties to Close.

(ii)           $2,500,000.00
of the Earnest Money Deposit shall be allocated to each of the last three (3)
Properties to Close; provided, however, that at the Closing of the last Property,
the entire remaining balance of the Earnest Money Deposit (including interest)
shall be applied to the Allocated Purchase Price for such Property

Except for a disbursement to Sellers as part of the Allocated Purchase
Price upon the Closing of a Property as provided above, if either Purchaser or
any Seller makes a written demand upon Escrow Agent for payment of the Earnest
Money Deposit (or a portion thereof), Escrow Agent shall give written notice to
the other party of such demand.  If
Escrow Agent does not receive a written objection from the other party to the
proposed payment of the Earnest Money Deposit (or a portion thereof) within
three (3) business days after that party’s receipt of such notice, Escrow Agent
shall make the payment of the Earnest Money Deposit (or a portion thereof)
pursuant to the demand.  If Escrow Agent
does receive such written objection within such three (3) business day period,
Escrow Agent shall continue to hold the Earnest Money Deposit (or a portion
thereof) as provided in Section 5.C until otherwise directed by joint written
instructions from Purchaser and Sellers or a final, non-appealable judgment of
a court of competent jurisdiction. 
However, Escrow Agent shall have the right to deposit the Earnest Money
Deposit with the clerk of the Superior Court of Alameda County,
California.  If Escrow Agent so deposits
the Earnest Money Deposit with the clerk of the court, Escrow Agent shall give
written notice thereof to Sellers and Purchaser and, upon such deposit and
notice, Escrow Agent shall be relieved and discharged of all further
obligations hereunder.

6.             Items from Sellers.

A.            Documents.  To the extent not already provided to
Purchaser, within three (3) business days after the Effective Date, each Seller
shall, with respect to each Property owned by such Seller, make available to
Purchaser at such Seller’s principal place of business during normal business
hours, all of the following (collectively, the “Documents”), to the extent that they exist and are
within the control of any of the Sellers or any of their respective affiliates,
employees or agents and to the extent the same do not constitute Excluded
Documents, as defined below:

(i)            All
inspections, studies, assessments, reports, audits, and surveys affecting or
relating to such Property, including, but not limited to, all title reports,
title policies, land surveys, environmental, mechanical, electrical,
structural, soils, and similar reports, assessments, and/or audits, traffic
studies, and appraisals. (Purchaser acknowledges that a substantial number of
such title reports, surveys, engineering reports and environmental reports have
already been received).

(ii)           All
site plans, as-built plans, drawings, environmental, mechanical, electrical,
structural, soils, and similar plans and specifications relating to such
Property.

(iii)          All
certificates, inspections, permits, compliance letters, and certificates of
occupancy relating to such Property or Seller’s business on such Property.

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(iv)          A
rent roll for such Property (each hereinafter a “Rent Roll
) together with a copy of the standard form of lease agreement, amendments, and
side agreements and tenant insurance sales materials used in connection with
the operation of such Property, and a true and correct copy of each non-self
storage lease affecting such Property,

(v)           A
list of all real estate contracts, including service contracts, license
agreements, warranties, management, maintenance, leasing commission or other
agreements affecting such Property, if any, together with copies of the
same.  The contracts which are included
on the lists delivered to Purchaser pursuant to this Section 6.A(v) are
hereinafter collectively referred to as the “Contracts”.

(vi)          Copies
of all real and personal property tax statements relating to such Property, or
any part thereof, for each of the two years prior to the current year and, if
available, for the current year.

(vii)         A
schedule of all litigation affecting such Property or such Seller during the
past twelve (12) months, together with a “loss run” of all claims submitted to
the Seller’s insurance carriers for the past five (5) years.

(viii)        Copies
of financial statements for such Property for 2004, 2005, and year to date
2006, together with copies of monthly delinquency reports, unit mix/occupancy
statistics report, monthly management reports, non-rented unit reports (
collectively the “Financial Reports”).  Prior to the Closing, each Seller shall
provide Purchaser with monthly updates to Seller’s Financial Reports within
five (5) business days after the end of each month.

(ix)           Copies
of the organizational documents for such Seller.

(x)            Copies
of all Third Party Loan Documents and all documents evidencing and/or securing
the Prepaid Loans.

(xi)           Copies
of all Ground Lease agreements and amendments.

(xii)          Copies
of the Kapolei Loan and all related documents.

The parties acknowledge that Purchaser may require
other documents in connection with its review of the Properties and Sellers’
business thereon.  Purchaser will provide
Sellers with a checklist requesting such other documents, and Sellers will use
commercially reasonable efforts to make the documents identified thereon
available within ten (10) days of Purchaser’s request, to the extent that such
documents exist and are within the control of Sellers or their affiliates,
employees or agents.

B.            Excluded
Documents.  As used herein, “Excluded Documents” shall mean (i) any purchase and escrow
agreements and correspondence pertaining to Seller’s acquisition of the
Property, (ii) any agreements and/or letters of intent pertaining to the
potential acquisition of the Property by any past or prospective purchasers,
(iii) any third party purchase inquiries and correspondence, appraisals or
economic evaluations of the Property, (iv) any personnel records and files
maintained by or on behalf of Seller with respect to individuals, if any,
employed at or in connection with a Property which Seller is obligated by law
to keep confidential, and (v) any documents or materials which are subject to
the attorney/client privilege or which are the subject of a confidentiality
obligation; provided, however, that prior to the expiration of the Due
Diligence Period, Seller shall give Purchaser written notification if Seller is
claiming that any Document requested by Purchaser is an Excluded Documents
pursuant to the provisions of this Section 6.B(v).

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C.            Return
of Documents.  As to each Property,
at such time as this Agreement is terminated for any reason, Purchaser shall
return to Sellers the copies and/or originals of all of the Documents delivered
or made available to Purchaser by or on behalf of any Seller with respect to
such Property.

D.            No
Representations.  Purchaser
acknowledges that with the exception of the Documents described in Sections
6.A(iv), 6.A(v), 6.A(vii), 6.A(viii), 6.A(ix), 6.A(x), 6.A(xi), and 6.A(xii),
many of the Documents were prepared by third parties other than Sellers, and in
some instances, may have been prepared prior to Sellers’ ownership of the
Properties.  Purchaser further
acknowledges and agrees that, except as expressly set forth in Section 17
below, (i) neither Sellers nor any of Sellers’ respective agents, employees or
contractors has made any warranty or representation regarding the truth,
accuracy or completeness of the Documents or the source(s), and (ii) Seller has
not undertaken any independent investigation as to the truth, accuracy or
completeness of the Documents and Seller is providing the Documents or making
the Documents available to Purchaser solely as an accommodation to
Purchaser.  To the extent such Documents
exist and are in the possession or reasonable control of any of the Sellers or
any of their respective affiliates, employees or agents, Sellers agree to cause
the Documents described in Sections 6.A(iv), 6.A(v), 6.A(vii), 6.A(viii),
6.A(ix), 6.A(x), 6.A(xi), and 6.A(xii) to be true and accurate in all material
respects and, to the extent such documents do not exist or are not within the
reasonable control of any of the Sellers or any of their respective affiliates,
employees or agents, Sellers agree to provide reasonable cooperation with
Purchaser to provide Purchaser with access to such Documents.

E.             Survival
of Obligations.  The obligations of
Section 6.C shall survive any termination of this Agreement.  In addition to any other remedies available
to Sellers, Sellers shall have the right to seek equitable relief (including
specific performance and injunctive relief) against Purchaser and Purchaser’s
representatives to enforce the provisions of Section 6.C.

7.             Rule 3-14 Audit. 
Sellers acknowledge that under Rule 3-14 of Regulation S-X,
Purchaser  is required to obtain certain
information in connection with reports Purchaser is required to file with the
Securities and Exchange Commission. 
Accordingly, provided that Purchaser provides a certificate executed by
an executive officer of Purchaser that Purchaser is obligated to complete a
Rule 3-14 Audit (hereinbelow defined) Sellers agree to (a) allow Purchaser and
Purchaser’s representatives, at Purchaser’s sole cost and expense, to perform
an audit of Sellers’ respective operations at the Properties to the extent
required under Rule 3-14 of Regulation S-X (hereinafter a “Rule 3-14
Audit”), and (b) make available to Purchaser and Purchaser’s
representatives for inspection and audit at Sellers’ respective offices all of
Sellers’ books and records reasonably requested by Purchaser for the full
calendar year 2005 and the full calendar year 2006 and relating to the
operations of each Seller on the Properties, including, but not limited to,
income, expense, occupancy, and other financial and occupancy information
relating to the Properties.  In
connection with the foregoing, Purchaser shall give Sellers no less than ten
(10) business days’ prior written notice of Purchaser’s plans to inspect and
audit such books and records.  Sellers
acknowledge that Rule 3-14 may require Purchaser to perform a Rule 3-14 Audit
both after the expiration of the Due Diligence Period and after the Closing and
Sellers agree that Sellers’ respective obligations under this Section 7 shall
survive the Closing and delivery of documents contemplated by this
Agreement.  Any Rule 3-14 Audit shall be
completed as soon as reasonably possible and Purchaser and Purchaser’s
representatives shall use commercially reasonable best efforts not to interfere
with Sellers’ ability to conduct its business. 
Copies of all Rule 3-14 Audits shall be promptly provided to each Seller
at no cost to Seller.  Purchaser
expressly acknowledges and agrees that all Rule 3-14 Audits, together with the
books and records made available to Purchaser in connection therewith, shall be
subject to the terms and conditions of Section 24, below.

8.             Due Diligence Period

A.            Due
Diligence Period.  Purchaser shall
have until the earlier of either (1) sixty (60) days after the Effective Date,
or (2) the date on which Purchaser gives Sellers written notice of Purchaser’s 

 8
 

 

intent to proceed with the purchase of the Properties (the “Approval Notice”) pursuant to Section 8.H below (“Due Diligence Period”) to conduct, at
Purchaser’s sole cost and expense, its due diligence to determine, in Purchaser’s
sole discretion, that all of the Properties (including any related Ground
Leases and Third Party Loans) are suitable and satisfactory for Purchaser’s
intended use of such Property.  Purchaser’s
inspection shall include the following:

B.            Property
Evaluation.  Purchaser shall have the
right to inspect and examine the Properties, during regular business hours, to
the extent Purchaser deems necessary in its sole discretion, to determine the
condition of each Property; provided, however, Purchaser shall not undertake
any invasive or destructive testing without the prior written consent of
Seller, which consent shall not be unreasonably withheld or delayed.  In connection with Purchaser’s inspection of
the Properties, Sellers shall make available to Purchaser and Purchaser’s
representatives for inspection and review at the address to which notices to
Seller are to be sent pursuant to Section 28 below or, at Sellers’ option, at
Sellers’ respective offices, all of Sellers’ books and records (other than the
Excluded Documents) relating to the acquisition, construction, development,
entitlement, permitting, operation, maintenance or ownership, of each of the
Properties.  Purchaser and Purchaser’s
representatives shall have the right, at Purchaser’s sole expense, to copy any
of such documents and records and, to the extent to copied, such documents and
records shall become Documents. 
Purchaser and its agents shall schedule all on-site inspections with
Sellers in advance.  Purchaser and
Purchaser’s representatives, consultants, agents and employees shall, during
regular business hours, (a) have the right to cause complete non-invasive
environmental reviews and site assessments and inspections of each Property to
be made, (b) have access to all buildings,
improvements, storage areas (not under the control of Tenants and, subject to
each Tenant’s rights), other spaces, equipment and Personal Property, (c)
conduct all other necessary feasibility studies, title reports, surveys,
engineering studies, examination of zoning status, building and use permits,
sign permits and all other permits required for each Property.  While conducting such investigations, tests
and studies, Purchaser and Purchaser’s agents and representatives shall be
obligated to:  (I) use commercially
reasonable efforts not to unduly disturb the Tenants or unreasonably interfere
with the Tenants’ right of quiet enjoyment or use of the Property pursuant to
their respective Leases; (II) use commercially reasonable efforts to not
unreasonably interfere with the operation, use and maintenance of the Property;
(III) use commercially reasonable efforts not damage any part of the Property
or any personal property owned or held by any Tenant or any third party; (IV)
use commercially reasonable efforts not injure or otherwise cause bodily harm
to Seller, any Tenant or any of their respective agents, contractors and
employees, or any other third party; (IV) maintain commercial general liability
(occurrence) insurance with minimum limits of $2,000,000 per occurrence and in
the aggregate, from an insurer reasonably satisfactory to Sellers covering any
accident arising in connection with the presence of Purchaser and Purchaser’s agents
and representatives on the Properties and to deliver a certificate of insurance
verifying such coverage to Seller prior to any entry upon any of the
Properties; (V) promptly pay when due the costs of all tests, investigations,
studies and examinations done by Purchaser with regard to the Properties; (VII)
not to permit any liens to attach to the Property by reason of the exercise of
Purchaser’s rights hereunder; (VIII) promptly remove or cause to be removed (by
bonding or otherwise) any such liens which attach to the Property; (IX) fully
restore the Properties and the Personal Property to the condition in which the
same was found before any such inspections, tests or studies were undertaken,
subject to reasonable wear and tear; (X) comply with the confidentiality
standards set forth in Section 24, below; and (k) comply with the terms and
provisions of Section 8.F, below.

C.            Evaluation
of Business.  In addition to
Purchaser’s inspection of the Documents provided by or made available by
Sellers pursuant to Section 6, Purchaser, and its agents and accountants, shall
have the right, during regular business hours and upon not less than three (3)
business days prior written notice, to inspect and examine all business and
service records, Tenant files, Leases, accounts receivable, accounts payable,
books and records of account, computer records, bank deposit receipts, Ground
Leases, and Third Party Loan Documents, and all other such documents relating
to the management, operation, income and expense of each Property for all of
2004 and all subsequent months to date. 
Purchaser shall have the right 

 9
 

 

to make photocopies of all records and documents at Purchaser’s sole
cost and expense.  Purchaser will use any
such information made available by Sellers solely to evaluate the business
conducted from the Property and acknowledges that all such information shall be
subject to the terms and conditions of Section 24, below.  Purchaser shall also have the right to seek
commercially reasonable estoppel certificates and commercially reasonable
non-disturbance and attornment agreements from each non-self storage tenant and
from the lessor of each Ground Lease; provided, however, that any estoppel from
the lessor under the Ground Lease shall be in the form attached hereto as Exhibit “E” and any estoppel from each non-self storage
tenant shall be subject to the prior approval of Sellers, which approval shall
not be unreasonably withheld, conditioned or delayed.  In the event that this transaction does not
close for any reason, other than the default of any Seller, Purchaser will
return and/or deliver to Sellers, at no cost to Sellers, all Documents and
reports, studies, surveys or other materials that Purchaser has obtained from
Sellers or any other source, including the items provided pursuant to Section
6.

D.            Assumption
or Termination of Contracts.  During
the Due Diligence Period, Purchaser shall review the Contracts.  On or before the expiration of the Due
Diligence Period, Purchaser shall designate, as to each Property, by written
notice to Sellers (the “Purchaser’s Designated
Contract Notice”) all Contracts which Purchaser chooses to have
assigned to Purchaser (the “Designated Contracts”).  The failure of Purchaser to give Purchaser’s
Designated Contract Notice with respect to any Property shall be deemed to
constitute Purchaser’s election to assume all Contracts with respect to such
Property.  Seller shall be responsible
for cancellation of Contracts which are not Designated Contracts and shall be
responsible for the payment of all cancellation fees associated with the
termination of those Contracts. 
Notwithstanding anything to the contrary contained herein, Seller shall
cause the termination of all property management agreements with respecting
each Property.  Seller’s cancellation of
Contracts which are not Designated Contracts shall be effective upon the
Closing.

E.             Extensions
of Due Diligence Period.  If during
the Due Diligence Period, any third party investigation obtained by Purchaser
recommends a Phase II environmental study (“Phase II Study”) and, except as
provided otherwise in this Section, Purchaser otherwise approves the Properties
prior to expiration of the Due Diligence Period, Purchaser shall have the right
to extend the Due Diligence Period for the applicable Property or Properties
only for an additional twenty-one (21) days solely to complete the Phase II
Study and to otherwise continue Purchaser’s investigation of the environmental
condition of the Property for which such Phase II Study is recommended.  Purchaser may only exercise this right to
extend the Due Diligence Period by giving Seller written notice at any time
prior to the expiration of the Due Diligence Period and by delivering the
Approval Notice (subject only to the provisions of this Section 8.E, Section
8.F below and Section 15 below).

F.             Tenant,
Ground Lessor and Governmental Authority Inquiries.  Purchaser shall have the right, as part of
Purchaser’s due diligence investigation, to contact Sellers’ Tenants, on-site
property managers, and, except as provided below in this Section 8.F with
respect to the City of Berkeley, California, governmental authorities about
various aspects of the Properties; provided, however, that except as provided
below with respect to storage unit Tenants, Purchaser shall not contact or make
inquiries of any Tenants or any Seller’s on-site property managers without
Purchaser first providing Sellers with written notice thereof, which notice
shall include the general subject matter of such inquiry, interview, contact or
meeting.  Purchaser shall provide at
least two (2) business days prior written notice of each such inquiry, contact,
interview and meeting and Seller shall have the right to be present and
otherwise participate in all such inquiries, contacts, interviews and
meetings.  Prior to the date on which
Sellers give the lessors under the Ground Leases written notice of Sellers’
intent to assign the Ground Leases to Purchaser (hereinafter the “Ground Lease Notification Date”), Purchaser shall not
contact any of the lessors under the Ground Leases without the prior written
consent of Sellers which consent may, prior to the Ground Lease Notification
Date, be withheld by Sellers in Sellers’ sole and absolute discretion;
provided, however, that if the Ground Lease Notification Date has not occurred
at least thirty-five (35) days prior to the expiration of the Due Diligence
Period and provided

 

 10

 

that Purchaser gives Sellers an Approval Notice (subject only to the
provisions of Section 8.E above, this Section 8.F and Section 15 below), the
Due Diligence Period shall, for the sole purpose of Purchaser approving the
Ground Leases, be extended until the date which is thirty-five (35) days after
the Ground Lease Notification Date. 
After the Ground Lease Notification Date, Purchaser shall not contact or
make inquiries of any lessors under the Ground Leases without Purchaser first
providing Sellers with written notice thereof, which notice shall include the
general subject matter of such inquiry, interview, contact or meeting.  Purchaser shall provide at least two (2)
business days prior written notice of each such inquiry, contact, interview and
meeting and Seller shall have the right to be present and otherwise participate
in all such inquiries, contacts, interviews and meetings.  Notwithstanding anything to the contrary in
this Agreement, Purchaser expressly acknowledges and agrees that prior to the
Closing, Purchaser shall have no right to discuss the modification or any
potential change or amendment of any Ground Leases with any lessor under a
Ground Lease.  Notwithstanding anything
to the contrary in this Section 8.F, Purchaser shall not contact in any manner
the City of Berkeley, California, or any employee or agent thereof without the
prior written consent of Sellers, which consent shall not be unreasonably
withheld or delayed; provided, however, that if Seller has not given such
consent at least thirty (30) days prior to the expiration of the Due Diligence
Period and provided that Purchaser gives Sellers an Approval Notice (subject
only to the provisions of Section 8.E above, this Section 8.F and Section 15
below), the Due Diligence Period shall, for the sole purpose of allowing
Purchaser to approve the zoning and entitlements for the Berkeley Property, be
extended until the date which is thirty (30) days after the date on which
Sellers give such consent.  Furthermore,
notwithstanding anything to the contrary in this Section 8.F, upon Purchaser’s
review of the Rent Roll for each Property, Purchaser will have the right to
identify, by written notice to Sellers, a sample of not more than ten percent
(10%) of the storage unit Tenants at each Property that will be audited in
connection with Purchaser’s inspection of such Property.  That sample will include a brief survey, the
script of which is attached to this Agreement as Exhibit “F”
and by this reference made a part hereof. 
Within two (2) business days of Sellers’ receipt of Purchaser’s written
notice identifying the storage unit Tenants to be included in the sample,
Seller shall provide to Purchaser copies of the leases and contact information
for each of the storage unit tenants in the sample.  Notwithstanding anything to the contrary in
this Agreement, any extensions of the Due Diligence Period pursuant to either
Section 8.E above or this Section 8.F shall run concurrently and not
consecutively.

G.             Purchaser’s Indemnification. 
Purchaser shall indemnify, defend, protect and hold Sellers and the
Properties harmless from and against any and all liens, costs, expenses,
losses, attorneys’ fees and liabilities resulting directly from the activities
of Purchaser and Purchaser’s agents upon any of the Properties under this
Agreement or Purchaser and/or Purchaser’s agents breach of this Section 8.  The provisions of this Section 8.G shall
survive the Closing or earlier termination of the Agreement.

H.            Purchaser’s Approval.  If
Purchaser is satisfied with Purchaser’s inspection of the Properties, Purchaser
will deliver the Approval Notice to Seller and Escrow Agent on or before the
last day of the Due Diligence Period, that Purchaser intends to proceed with
the purchase of all of the Properties. 
Purchaser’s failure to deliver the Approval Notice in a timely manner
shall be deemed to be disapproval of the Properties, in which case, this
Agreement shall automatically terminate, the Earnest Money Deposit shall be
promptly returned to Purchaser and the parties shall have no further rights or
obligations to one another hereunder except as expressly stated otherwise
herein.

9.             Engineering Report.  On
or before the last day of the Due Diligence Period, Purchaser may, at Purchaser’s
election, obtain at Purchaser’s sole cost and expense an engineering report
(each an “Engineering Report” and, collectively,
the “Engineering Reports”) on each Property
and all structures thereon, as applicable, issued either internally or by a
licensed company reasonably acceptable to Purchaser and Sellers and issued for
the benefit of Purchaser, at Purchaser’s sole cost and expense.  Purchaser shall promptly provide a copy of
each Engineering Report to Sellers at no cost to Sellers.

10.          Survey and Title Matters.

 11
 

 

A.            Title
Insurance.   Purchaser, at its sole
cost and expense, will order from the Title Company with respect to each
Property a current title insurance commitment for a policy (CLTA for those
Properties located in California and ALTA for the Properties in Hawaii) of
owner’s extended coverage title insurance (“Title
Commitment”) accompanied by true, complete, and legible copies of
all documents referred to in the Title Commitment (“Title
Documents”).  The Title
Commitment for each Property shall irrevocably obligate the Title Company to
issue an extended coverage title insurance policy (on the CLTA or ALTA form, as
applicable) in the full amount of the Allocated Purchase Price with respect to
such Property (each individually a “Title
Policy” and all collectively the “Title
Policies”), which Title Policy shall insure either Purchaser’s fee
simple title to or leasehold estate in such Property.  Purchaser shall cause Title Company to
deliver copies of each Title Commitment and related Title Documents to Sellers’
counsel concurrent with its delivery of the same to Purchaser.  Notwithstanding anything to the contrary
contained herein, Purchaser, at its sole cost, may obtain title insurance
coverage in addition to the Title Policy (including, without limitation, any
endorsements Purchaser may desire to obtain), provided that obtaining such
additional coverage shall not be a condition to or otherwise delay the Closing
hereunder.  Sellers agree to provide such
affidavits as the Title Company may reasonable require as a condition to the
issuance of the Title Policies.

B.            Survey.  Purchaser may order, at its sole option and
expense, an ALTA survey of each Property in a form sufficient to enable Title
Company to delete the survey exceptions from the Title Policies (each
individually a “Survey” and all
collectively the “Surveys”).  Purchaser shall promptly deliver copies of
any Surveys Purchaser obtains to Sellers.

C.            Zoning.  Subject to the limitations stated in Section
8.F above with respect to the City of Berkeley, California, Purchaser may
order, at its sole option and expense, a zoning report for one or more of the
Properties (each hereinafter a “Zoning Report”
and collectively the “Zoning Reports”).  Seller agrees to reasonably cooperate with
Purchaser and its agents in efforts to obtain information, including execution
of written requests and releases to third-parties and municipal authorities for
such information.

D.            Title,
Survey, and Zoning Objection.  No
later than fifteen (15) days prior to the expiration of the Due Diligence
Period, Purchaser shall provide Sellers with written notice of any matters set
forth in the Title Commitments, Surveys or Zoning Reports to which Purchaser
objects (“Objections”).  Any matters (i) set forth in the Title
Commitments or Surveys, other than “Monetary Encumbrances” as defined below, to
which Purchaser does not object to within the time period set forth above or
which have been waived or cured, (ii) any tenants in possession as tenants only
under the Leases without any option to purchase the Property, (iii) any matters
created by or with the written consent of Purchaser; and (iv) all governmental
laws, codes, ordinances and restrictions now or hereafter in effect as they may
affect the Property shall be referred to collectively herein as the “Permitted Exceptions.”  Sellers shall have ten (10) days from the
date of receiving such notice of Purchaser’s Objections from Purchaser within
which Sellers may elect to have such Objections removed from the Title
Commitments and/or Zoning Reports or cured to the reasonable satisfaction of
the Title Company.  In the event Sellers,
at Sellers’ sole discretion, fail or determine not to cure any of Purchaser’s
Objections within such ten (10) day period, then Purchaser shall have until the
expiration of the Due Diligence Period five to elect either to (y) waive
Purchaser’s Objections  and consider them
to be Permitted Exceptions or (z) terminate this Agreement, in which event the
Earnest Money Deposit shall be immediately refunded by Escrow Agent to
Purchaser.  Purchaser’s delivery of the
Approval Notice shall be deemed to constitute Purchaser’s election to proceed
under (y), above.  Sellers and Purchaser
agree that with the exception of the Third Party Mortgages (as defined in Exhibit “D”), “Monetary Encumbrances” (hereinafter defined)
shall not constitute Permitted Exceptions and Sellers shall have the
obligation, at or prior to the Closing, to remove all Monetary Encumbrances
other than the Third Party Mortgages being assumed or being taken subject to by
Purchaser at Closing.  As used herein,
the term “Monetary Encumbrances” shall mean mortgages, deeds of
trust, and other encumbrances securing an obligation to pay money that were
voluntarily created by Sellers; provided, however, that Monetary 

 12
 

 

Encumbrances shall not include property taxes or assessments for the
year in which the Closing occurs and common area maintenance charges, if any,
which are not yet due and payable. 
Sellers and Purchaser agree that property taxes and assessments for the
year in which the Closing occurs and common area maintenance charges, if any,
which are not yet due and payable shall be prorated in accordance with the
provisions of 11.E below.  Sellers shall
use good faith efforts to provide Purchaser with a “pay-off” letter from each
lender holding a debt secured by a lien or other security interest in a
Property within ten (10) days of the Effective Date.

E.             So
long as such failure is not a result of a default by any Seller under this
Agreement, Sellers’ inability to deliver title to any of the Properties in the
condition necessary for the Title Company to issue the Title Policies for any
reason shall constitute a failure of a condition and shall not constitute a
breach of Sellers’ obligations under this Agreement.

11.          Proration Date, Closing Date and Closing Procedures
and Requirements.

A.            Closing
Date.  Subject to the provisions of
Section 4.C(ii) above and Section 11.I below below, the “Closing Date” or “Closing” of this Agreement and the
completion of the purchase of the Properties by Purchaser shall be on or before
ten (10) business days from the end of the Due Diligence Period (hereinafter
the “Initial Scheduled Closing Date”).  Closing shall be coordinated and conducted
through the Title Company’s office and neither party shall be required to
personally attend the Closing.  The “Closing Date” with respect to any Property
shall be the date on which the “Closing”
with respect to such Property occurs. 
The “Closing” with respect
to any Property shall be deemed to have occurred when all of the conditions to
Closing with respect to such Property (as set forth in this Agreement) have
either been satisfied or waived, the Escrow Agent holds a separate settlement
statement signed by the Seller of such Property with respect to such Property,
separate settlement statements signed by Purchaser with respect to Property,
and all of the funds and all of the other documents required by this Agreement,
and Sellers and Purchaser have authorized Escrow Agent to disburse the Purchase
Price and deliver such documents in accordance with the provisions of this
Agreement.  The Closing of a Property
shall not occur unless each condition to Purchaser’s obligations, and Sellers’
obligations more specifically set out and otherwise enumerated in Section 15
below, have been satisfied or waived with respect to such Property.

B.            Transitional
Walk-Through.  Within approximately
ten (10) days prior to Closing, Purchaser’s operational staff shall have the
right to conduct a general walk-through of all buildings, improvements, storage
areas (not under the control of Tenants) and, subject to each Tenant’s rights,
other spaces, equipment and Personal Property with representatives of Sellers
in order to prepare for and assist in the transition of management at Closing.

C.            Conveyance
of Properties and Delivery of Closing Documents.  Each Seller shall convey such Seller’s
Property to Purchaser pursuant to a “Deed” or “Assignment”, as applicable, and the other documents which
are more particularly described on Exhibit “G”
attached hereto and by this reference made a part hereof.  At the Closing with respect to the Alameda
Property, the Seller of the Alameda Property and each of such Seller’s
affiliates will provide Purchaser with an additional separate assignment of all
of such Seller’s rights, claims, and causes of action arising from or relating
to the environmental condition of the Alameda Property against all prior owners
and other potentially responsible parties (other than such Seller and any of
such Seller’s affiliates); provided, however, that such Seller shall retain the
right to assert any and all defenses that are now or hereafter available to
such Seller with respect to any claims that might hereafter be asserted against
such Seller and relating to the environmental condition of the Alameda
Property.  The Seller of the Alameda
Property agrees to cooperate with Purchaser (at Purchaser’s expense) in the
assertion of such claims by Purchaser. 
By the Closing Date, each Seller shall deliver to the Title Company each
of the documents identified on Exhibit “G” as a document to be delivered by
such Seller (with each such document having been duly executed, in recordable
form where applicable).  By the Closing
Date, Purchaser shall 

 13
 

 

deliver to the Title Company each of the documents identified on
Exhibit “G” as a document to be delivered by Purchaser (with each such document
having been duly executed, in recordable form where applicable).  Promptly after the Closing Date, the Title
Company shall record and/or deliver the Deeds, Assignments and other documents
identified on Exhibit “G” in the manner specified on Exhibit “G”.

D.            Payment
of Purchase Price at Closing.  On the
Closing Date, the Earnest Money Deposit, including any additional deposits made
pursuant to this Agreement, shall be credited towards payment of the Purchase
Price in accordance with Section 5.D, above. 
Purchaser shall pay the portion of the Allocated Purchase Price to be
paid in cash at Closing to Escrow Agent by certified funds or by wire transfer.

E.             Prorations.

(i)            All
real property ad valorem taxes and general and special assessments applicable
to each Property for the year in which the Closing occurs shall be prorated
between Sellers and Purchaser as of 12:01 a.m. on the third day prior to the
Closing Date for such Property (the “Proration Date”),
said proration to be based upon the most recently available tax or assessment
rate and valuation with respect to such Property.  Notwithstanding the foregoing, any taxes or
assessments levied against any Property with respect to any period of time
prior to the Proration Date shall remain and be the obligation of Sellers, if
not provided for in the prorations, and Sellers shall promptly pay, or
reimburse Purchaser, as applicable, all such taxes or assessments prior to
their delinquency.  At or prior to the
Closing, Sellers shall pay all real property ad valorem taxes and all general
and special assessments applicable to the Properties which are due and payable
for any period prior to the year in which the Closing occurs.  Purchaser shall be responsible for the
payment of any taxes or assessments levied against any Property with respect to
any period of time after the Closing Date. 
Any refund for real estate taxes or assessments applicable to the period
preceding the Closing, whether paid before or after the Closing, shall be paid
to Seller, and Purchaser shall have no claim or right whatsoever thereto,
provided, however, any refund applicable to the pro-rated tax year for which
Purchaser paid a portion shall be prorated. 
The remaining principal amount (after the application of the prorated
portion of any installment applicable to the period prior to the Closing Date)
of any and all assessments and/or bonds which encumber the Properties or any
part thereof shall not be prorated or apportioned but shall be assumed in full
by Purchaser at Close of Escrow (and Purchaser shall not be entitled to a
credit from Seller against the Purchase Price in the amount of such assessments
and/or bonds).  The obligations under
this subsection shall survive Closing.

(ii)           Subject
to the Proration Review (as defined in Exhibit “H”),
all income and operating expense items, including, but not limited to,
utilities, yellow page advertisements, prepaid insurance premiums (but only to
the extent that Sellers’ insurance policies are assigned to Purchaser at
Closing pursuant to Section 17.A(xiv) below), Ground Lease rents, and all
amounts due under any Designated Contracts, shall be prorated as of the
Proration Date.  For any deposit with a
utility company for which the utility company accepts the Purchaser as assignee
and permits the retention of the deposit, Purchaser shall give Sellers a credit
at Closing for each such retained deposit with a utility company serving a
Property in which case Sellers shall assign their rights to each such deposit
to Purchaser at the Closing; or, at Sellers’ option, Sellers shall be entitled
to receive a refund of each such deposit from the utility company, and
Purchaser shall post its own deposits.

(iii)          For
purposes of this Agreement, “Rentals” means,
collectively, all amounts paid or payable by Tenants under their respective
Leases in connection with their occupancy of the Property, including prepaid
rents.  “Rentals” shall not include the
Security Deposits.  At the Closing with
respect to each Property, Rentals for such Property shall be allocated in
accordance with the following provisions of this Section 11.E(iii):

 14
 

 

(a)           As
to each Property, at the Closing, the Seller of such Property shall retain the
amount of any Rentals which have been prepaid for any period after the month in
which the Proration Date with respect to such Property occurs and Purchaser
shall receive a credit toward the Allocated Purchase Price for such Property
for such prepaid Rentals.

(b)           If
the Proration Date occurs on a date that is after the tenth (10th) day of any
calendar month, the Seller of such Property shall provide Purchaser and Escrow
Agent with a list of those Rentals that have actually been collected with
respect to such Property as of the Proration Date, and Escrow Holder shall make
appropriate debits and credits to the accounts of Purchaser and Seller to
reflect such prorations.

(c)           If
the Proration Date occurs on a date that is on or between the first (1st) and
tenth (10th) day of any calendar month, Rentals for such Property for such
calendar month shall be deemed received based on the average historical
collection rate for such Property during the first ten (10) days of each of the
three (3) calendar months immediately preceding the calendar month in which the
Proration Date with respect to such Property shall occur.  For purposes of proration of Rentals at
Closing, (I) the Seller of such Property shall provide Purchaser and Escrow
Agent with the amount of those Rentals that have been deemed received by such
Seller as of the Proration Date pursuant to the first sentence of this Section,
(II) the Seller of such Property shall provide Purchaser and Escrow Agent with
a list of the Rentals actually received by such Seller for such month, and
(III) Escrow Holder shall make appropriate debits and credits to the accounts
of Purchaser and such Seller to reflect such prorations.  By way of example only, assume that as of the
Proration Date, Seller has actually received $20,000 in Rentals for the month
in which the Proration Date occurs and that scheduled monthly Rentals for the
Property are in the aggregate $50,000. 
If the Proration Date occurs on the fifth (5th) day of a 30-day calendar
month and historically, 85% of the Rentals are collected by the tenth (10th)
day of a month, then for purposes of prorating Rentals, Escrow Agent shall (x)
assume that $42,500 of the Rentals will be collected during the first ten (10)
days of the calendar month in which the Closing shall occur, (y) then allocate
five/thirtieths (5/30) of the amount of the Rentals deemed collected (i.e.
$7,083.33) to Seller and the remainder to Purchaser, and (z) credit Purchaser
at Closing with an amount equal to the difference in Rentals actually collected
by Seller and the amount allocated to Seller at Closing pursuant to clause (y)
above (i.e. $12,916.67).

(d)           If
the Proration Date shall occur on a date that is (i) after the tenth (10th) day
of any calendar month, those Rentals which have not been collected as of the
Proration Date shall be deemed “Delinquent Rentals”
and (ii) on a date that is on or between the first (1st) and tenth (10th) day
of any calendar month, those Rentals not deemed collected pursuant Section
11.E(iii)(c) above, shall be deemed “Delinquent Rentals.”  At the Closing with respect to each Property,
the unpaid Delinquent Rentals for such Property shall be treated as though
received by Purchaser and prorated as follows: (x) Delinquent Rentals that are
unpaid for no more than 30 days shall be allocated 75% to the Seller of such
Property and 25% to Purchaser; (y) Delinquent Rentals that are unpaid in excess
of 30 days but no more than 60 days shall be allocated to 50% to the Seller of
such Property and 50% to Purchaser; and (z) Delinquent Rentals that are unpaid
for more than 60 days shall be allocated 100% to Purchaser.  If a Tenant has any Rentals that are
delinquent, all Rentals for that tenant (regardless of whether delinquent or
not) shall be included in the longest delinquency category for which that
tenant is delinquent as of the Proration Date. 
As an example, if a Tenant has Rentals that are 61-days delinquent, all
of the Rentals of that Tenant shall be entirely in the over 60-day
category.  Upon the Closing, Escrow Agent
shall credit to the account of the Seller of each Property the aggregate amount
of the Delinquent Rentals allocated to such Seller for such Property pursuant
to clauses (x) and (y) above.  After
Closing, Purchaser shall be entitled to retain all Delinquent Rentals actually
received as to such Property and Sellers shall have no interest therein, as
Sellers shall have received at Closing a credit for and payment of its
agreed-upon share of such Delinquent Rentals. 
Accordingly, there shall be no post-Closing reconciliation or adjustment
with respect to Delinquent Rentals, other than as may be necessary to determine
the actual amounts of Delinquent Rentals as of the Proration Date.

 15
 

 

(iv)          As
to each Property, at the Closing, the Seller of such Property shall retain the
amount of any Security Deposits and Purchaser shall receive a credit toward the
Allocated Purchase Price for such Security Deposits.

(v)           Other
customary adjustments, if any, made in connection with the sale of similar type
of storage properties shall be prorated between Purchaser and Seller at the
Closing.

(vi)          Subject
to the terms and conditions hereof, within sixty (60) days after the Closing,
Purchaser and Sellers shall review the prorations in accordance with the
provisions of Exhibit “H” attached
hereto and by this reference made a part hereof.

F.             Closing
Costs.  Sellers shall pay all filing and recording fees
relating to documents required to clear title to the Properties, specifically
including the payment and release of the liens of the Prepaid Loans.  Purchaser shall pay any taxes (including, but
not limited to, transfer taxes, transfer fees, documentary and intangible
taxes) relating to the transfer of title to the Properties and sales tax and
surtax to state or local entities with reference to the sale of the Properties,
and the cost of the Title Policies. 
Purchaser shall pay the closing fees charged by the Escrow Agent and
Title Company.  Purchaser shall pay any
intangible taxes, fees or other costs charged by the lenders on the assumption
of the Third Party Loans which Purchaser assumes per Section 4 above.  Any closing and/or escrow fees or costs not
specifically enumerated above shall be paid by Purchaser.  Purchaser and Seller shall each pay their own
attorneys’ fees in connection with the preparation and negotiation of this
Agreement.

G.            Transfer
of Possession and Risk of Loss. 
Operational control of the Properties shall be transferred to Purchaser
at the start of business on the Closing Date, subject to the supervision of the
Sellers.  Legal possession and all risks
of loss with respect to the Properties shall be borne by Sellers until the
delivery of the applicable Deed at Closing.

H.            Third
Party Loan Outside Closing Date. 
Notwithstanding anything to the contrary contained in this Agreement, if
(1) the Income Tax Condition (hereinafter defined) has been satisfied, (2)
Purchaser made an election pursuant to Section 4.C(ii) above with respect to
one or more of the Third Party Loan Properties, and (3) the Closing with
respect to each such Property has not occurred by April 15, 2007, the following
provisions of this Section 11.H shall apply:

(i)            Provided
that none of the Sellers is in default in the performance of the obligations of
any Seller under this Agreement and provided that no event has occurred which,
with the giving of notice or lapse of time, or both, would constitute such a
default by any of the Sellers, Seller shall have the right to thereafter
terminate this Agreement with respect to any of the Properties for which a
Closing has not occurred by written notice to Purchaser.

(ii)           Provided
that Purchaser is not in default in the performance of Purchaser’s obligations
under this Agreement and provided that no event has occurred which, with the
giving of notice or lapse of time, or both, would constitute such a default
Purchaser shall have the right to thereafter terminate this Agreement with
respect to any of the Properties for which a Closing has not occurred by
written notice to Sellers.

(iii)          Upon
a termination of this Agreement pursuant to either Section 11.H(i) or Section
11.H(ii) above, Escrow Agent shall return the applicable portion of the Earnest
Money Deposit to Purchaser and the parties shall have no further liability to
one another hereunder with respect to the Properties for which a Closing has
not occurred except to the extent expressly stated otherwise herein.

 16
 

 

I.              Income
Tax Condition.  Pursuant Section 16.E
below, Sellers’ obligations under this Agreement are conditioned upon Sellers
receiving a favorable determination regarding certain income tax matters
affecting Sellers and Sellers’ principals in the manner specified in Section
16.E below (referred to herein as the “Income Tax Condition”).  Sellers agree to use commercially reasonable
efforts to cause the Income Tax Condition to be satisfied as quickly as is
reasonably possible.  If the Income Tax
Condition has not been satisfied by the date which is ten (10) business days
prior to the Initial Scheduled Closing Date, the Closing shall be extended
until the date which is no later than the date which is thirty (30) days after
the date on which the Income Tax Condition is satisfied; provided, however,
that if the Income Tax Condition has not been satisfied by April 30, 2007, the
following provisions of this Section 11.I shall apply:

(i)            Provided
that none of the Sellers is in default in the performance of the obligations of
any Seller under this Agreement and provided that no event has occurred which,
with the giving of notice or lapse of time, or both, would constitute such a
default by any of the Sellers, Sellers shall have the right to terminate this
Agreement at any time after (but not prior to) the date which is six months
from the Initial Scheduled Closing Date by written notice to Purchaser.

(ii)           Provided
that Purchaser is not in default in the performance of Purchaser’s obligations
under this Agreement and provided that no event has occurred which, with the
giving of notice or lapse of time, or both, would constitute such a default
Purchaser shall have the right to terminate this Agreement at any time after
(but not prior to) April 30, 2007, by written notice to Sellers.

(iii)          Upon
a termination of this Agreement pursuant to either Section 11.I(i) or Section
11.I(ii) above, Escrow Agent shall return the entire Earnest Money Deposit to
Purchaser and the parties shall have no further liability to one another
hereunder except to the extent expressly stated otherwise herein.

12.          Covenants of Sellers. 
Sellers agree and covenant as follows:

A.            Conduct
of Business.  Up to the earlier of
the Closing with respect to the Properties of such Seller or the earlier
termination of this Agreement, each Seller shall (i) operate the business
conducted at each of such Seller’s Properties in the manner in which such
Seller has operated and maintained such Properties during the twelve (12) month
period prior to the Effective Date, (ii) use commercially reasonable efforts to
preserve intact each of such Seller’s Properties and the good will and
advantageous relationships of such Seller with customers, suppliers,
independent contractors, employees and other persons or entities material to
the operation of the businesses conducted on such Properties, (iii) perform
such Sellers’ material obligations under all Leases, Ground Leases, and other
agreements affecting any of such Seller’s Properties, and (iv) not knowingly
take any action or omit to take any action which would cause any of the
representations or warranties of any Seller contained herein to become
inaccurate or any of the covenants of any Seller to be breached.  No Seller will engage in any practice, take
any action, or enter into any transaction outside of the ordinary and usual
course of business.  Notwithstanding
anything to the contrary in this Section, no Seller shall, without Purchaser’s written consent (which
consent shall not be unreasonably withheld, conditioned or delayed prior to the
expiration of the Due Diligence Period and which consent may be withheld in
Purchaser’s sole and absolute discretion after the delivery of the Approval
Notice), enter into any lease agreements with tenants or modify or extend
existing Leases other than Leases for storage space in the ordinary course of
business and in no event: (1) for a term greater than one (1) year; (2) at
rental rates less than the rate in effect for like units; or (3) which allow
rent concessions unless such rent concessions are made in such Seller’s
ordinary and usual course of business and are consistent with the terms
disclosed to Purchaser.  Sellers hereby
disclose to Purchaser that Sellers are currently offering rental concessions
which are more particularly described on Exhibit “I”
attached hereto and by this reference made a part hereof.

 17
 

 

B.            Existing Notes, Mortgages, and Ground Leases.  Until
the earlier of the Closing with respect to such Properties or termination of
this Agreement, no Seller shall modify, alter or amend any existing note or
mortgage encumbering any of such Seller’s Properties or further encumber any of
such Seller’s Properties without the prior written consent of Purchaser, or
allow any existing note or mortgage encumbering any of such Seller’s Properties
to be in default in any material respect. 
Until the earlier of the Closing with respect to such Ground Lease or
termination of this Agreement, Sellers will not modify, alter or amend any of
the Ground Leases, or allow any of the Ground Leases to be in default in any
material respect.

C.            Further
Contracts.  Up to the earlier of the
Closing with respect to such Property or the termination of this Agreement, no
Seller shall, without Purchaser’s prior written approval (which approval may be
withheld in Purchaser’s sole and absolute discretion) and except as provided in
Section 12.A above with respect to Leases for storage space, enter into any
further Contracts or leases relating to such Seller’s Properties, which cannot
be terminated upon thirty (30) days notice without cost to Purchaser.  Any Contracts which are approved by Purchaser
pursuant to the provisions of this Section 12.C shall be deemed a Designated
Contract hereunder and Purchaser shall assume at Closing the obligations of
Seller arising thereunder to the extent that such obligations arise from and
after the Closing Date.

D.            Warranties
and Guaranties.  No Seller shall,
before or after the Closing Date with respect to such Seller’s Properties or
earlier termination of this Agreement, release or materially and adversely
modify any warranties or guarantees, if any, of manufacturers, suppliers and
installers related to such Seller’s Properties or any part thereof, except with
the prior written consent of Purchaser, which consent may be withheld in
Purchaser’s sole and absolute discretion after the delivery of the Approval
Notice.

E.             Change
in Facts or Circumstances.  If, prior
to the Closing has occurred with respect to all of the Properties, any Seller
becomes actually aware of any fact or circumstance which would make either any
representation or warranty contained in this Agreement or any of the documents
or other materials provided to Purchaser pursuant to this Agreement inaccurate,
such Seller shall promptly notify Purchaser in writing of such fact or
circumstance; provided, however, that in no event shall any Seller have any
liability, obligation or responsibility with respect to any representation or
warranty which was true and accurate when made by such Seller upon the
execution and delivery of this Agreement, but which subsequently becomes untrue
or inaccurate merely by the passage of time or by an action which such Seller
is authorized or permitted to take under this Agreement (e.g. any new Leases,
Contracts) or for any reason which is not a breach or default by such Seller of
the covenants made by such Seller in this Section 12.

F.             Telephone
Listing.  After delivery of the
Approval Notice but prior to Closing, Sellers will provide Purchaser with the
addresses and telephone numbers of each telephone company business office that
serves a Property and will execute and deliver to Purchaser all documents
required by the telephone company, including supersedure papers, to transfer
the telephone number, telephone listing, and yellow page advertisements of
Sellers to Purchaser.

G.            Termination
of Employees, Management and Service Contracts, and Rights to Occupy Apartment.  Purchaser shall have no obligation to hire
the employees of any of the Sellers (if any) and no duty or other obligation
with respect to the termination of any such employees.  Except to the extent directed otherwise by
Purchaser in writing prior to the expiration of the Due Diligence Period, Sellers
shall terminate the rights of any person to occupy any residential apartment on
any of the Properties effective as of the Closing and without cost or liability
to Purchaser.  None of the Sellers
nor any of their respective managing agents will, between the date hereof and
the date of Closing, enter into any new employment contracts or agreements or
hire any new employees except in the ordinary course of such Seller’s
business.  Purchaser shall not have any
liability under any pension or profit sharing plan that any Seller or its
managing agent may have established with respect to the Property or its
employees.

 18
 

 

H.            Completion
of Construction at Colma Property. 
The parties acknowledge that the Seller of the Colma Property is
currently in the process of constructing certain on-site and off-site improvements
to the Colma Property which improvements are more particularly described on Exhibit “J” attached hereto and by this reference made a
part hereof.  To the extent that such
improvements are not completed prior to the Closing with respect to the Colma
Property, the Seller of the Colma Property shall, in good faith, use reasonably
diligent efforts to cause such construction to be completed as soon as possible
after the Closing Date for the Colma Property at such Seller’s expense, on a
lien free basis and in accordance with applicable governmental
requirements.  The Seller of the Colma
Property shall indemnify, defend and hold Purchaser harmless of and from any
and all liens or expenses arising from such Seller’s construction of such
improvements.  The obligations of such
Seller pursuant to the provisions of this Section 12.H shall survive the
Closing with respect to the Colma Property.

13.          Damage to Properties.  If
before the Closing with respect to all of the Properties any of the
Properties with respect to which a Closing has not yet occurred is materially
or adversely affected in any way as a result of any fire, flood, earthquake,
similar acts of nature or other acts of destruction which involves damage requiring repair and restoration costs of less
than or equal to Two Million Dollars ($2,000,000), Sellers and Purchaser shall
be obligated to proceed with the Closing with respect to such Property and each
of the other Properties.  In that event,
the Allocated Purchase Price for such Property shall be reduced by the cost of
repairing and restoring each such Property. 
If such material or adverse change involves damage requiring repair and
restoration costs in excess of Two Million Dollars ($2,000,000) for any one
Property, or in excess of Ten Million Dollars ($10,000,000) in the aggregate
for all Properties, Purchaser shall have the option to (a) proceed with
the Closing with respect to all of the Properties, taking each such Property in
its un-restored condition together with any insurance proceeds or the right to
receive such insurance proceeds, and the rights to any other claims arising as
a result of such material or adverse , in which event, the Allocated Purchase
Price for each such Property shall be reduced by the difference between (1) the
cost of repairing and restoring each such Property and (2) the total amount of
insurance proceeds payable with respect to such material adverse change, or
(b) terminate this Agreement with respect to each of the Properties for
which a Closing has not occurred.  Upon a
termination of this Agreement pursuant to this Section 13, Escrow Agent shall
return the applicable portion of the Earnest Money Deposit to Purchaser and the
parties shall have no further liability to one another hereunder with respect
to the Properties for which a Closing has not occurred except to the extent
expressly stated otherwise herein.

14.          Eminent Domain.  If
before Closing with respect to all of the Properties, proceedings are commenced
or threatened for the taking by exercise of the power of eminent domain of all
or a material part of any of the Properties which, as reasonably determined by
Purchaser, would render such Property unacceptable to Purchaser as a
self-storage facility, Purchaser shall have the right, by giving written notice
to Sellers within five (5) days after Sellers give written notice to Purchaser
of the commencement of such proceedings to terminate this Agreement with
respect to any of the Properties for which a Closing has not occurred.  If before the Closing with respect to all of
the Properties, proceedings are commenced or threatened for the taking by
exercise of the power of eminent domain of less than such a material part of
any of the Properties, or if Purchaser has the right to terminate this
Agreement pursuant to the preceding sentence but Purchaser does not exercise
such right, then this Agreement shall remain in full force and effect and, on
the Closing with respect to such Properties, the condemnation award (or, if not
therefore received, the right to receive such portion of the award) payable on
account of each such taking shall be transferred by Seller to Purchaser as part
of the Intangible Property and Purchaser and Seller shall proceed to Closing in
accordance with the terms of this Agreement without a reduction in the Purchase
Price.  Sellers shall give notice to
Purchaser within ten (10) days after Sellers receive notice of the commencement
of any proceedings for the taking by exercise of the power of eminent domain of
all or any part of any of the Properties. 
Upon a termination of this
Agreement pursuant to this Section 13, Escrow Agent shall return the applicable
portion of the Earnest Money Deposit to Purchaser and the parties shall have no
further liability to one another 

 19
 

 

hereunder with respect to the Properties for which a Closing has not
occurred except to the extent expressly stated otherwise herein.

15.          Conditions to Purchaser’s Obligations. 
Purchaser’s obligation to purchase the Properties or otherwise perform
any obligations provided for in this Agreement is conditioned upon the
occurrence of the following conditions on or before the Closing Date:

A.            The
representations, warranties and covenants of Sellers contained in this
Agreement shall be materially true and correct as of the Closing Date.

B.            Each
of the Sellers shall have performed and complied with all material covenants
and agreements contained herein which are to be performed and materially
complied with by such Seller at or prior to the Closing Date.

C.            The
Title Company shall be irrevocably committed to issuing the Title Policies upon
Closing insuring ownership of the Properties in the name of Purchaser or its
nominee or assignee in the amount of the Allocated Purchase Price, subject only
to the Permitted Exceptions; provided, however, that this condition shall be
deemed to be satisfied with respect to any Property if prior to the expiration
of the Due Diligence Period Purchaser has not provided the Title Company with a
Survey for such Property (in a form which is acceptable to the Title Company)
and the Title Company is never the less willing to issue a standard coverage
policy of title insurance with respect to such Property (subject only to the
Permitted Exceptions for such Property).

D.            None
of the Properties shall have been materially affected by any legislative or
regulatory change occurring after the expiration of the Due Diligence Period
that would prohibit Purchaser from using each of the Properties as a
self-storage facility in a manner which is consistent with Sellers’ historical
use of that Property.

E.             Except
as disclosed in writing by Sellers to Purchaser and approved by Purchaser prior
to the end of the Due Diligence Period, there shall be no pending actions,
suits or proceedings of any kind or nature whatsoever, legal or equitable,
affecting any of the Properties in any material way, or relating to or arising
out of the ownership or operation of any of the Properties, and continuing
after the date of this Agreement in any court or before or by a federal, state,
county, municipal department, commission, board, bureau, or agency or other
governmental instrumentality.

F.             Except
as provided otherwise in Section 4.C above, each Third Party Lender and each
servicer of a Third Party Loan (if any) shall have approved the transaction
which is the subject of this Agreement and the Lender Conditions are acceptable
to Purchaser in accordance with the terms and conditions hereof.

G.            The
lessor of each Ground Lease shall have received any required notice of
assignment to the Purchaser, and consented to such assignment (when required by
the Ground Lease).  The lessor of each
Ground Lease shall have also executed an estoppel certificate which
acknowledges, to the best of the ground lessor’s knowledge, that rents are
current, that there are no material defaults by lessee beyond all applicable
cure and notice provisions, and confirming the completeness of Purchaser’s copy
of the Ground Lease.

H.            No
material default by any lessee under a Ground Lease shall have occurred and be
then continuing and no event shall have occurred and be then continuing which,
with the giving of notice or lapse of time, or both, shall constitute such a
default.

 

 20

 

I.              No
material default shall have occurred and be then continuing under any of the
Third Party Loan Documents and no event shall have occurred and be then
continuing which, with the giving of notice or lapse of time, or both, shall
constitute such a default.

J.             In
the event any of the foregoing conditions or other conditions to this Agreement
are not fulfilled, and are not waived by Purchaser on or before the Closing
with respect to a Property, Purchaser may terminate this Agreement with respect
to all, but not less than all, of the Properties for which a Closing has not
yet occurred.  Upon a termination of this
Agreement pursuant to this Section 15.J, Escrow Agent shall return the
applicable portion of the Earnest Money Deposit to Purchaser and the parties
shall have no further liability to one another hereunder with respect to the
Properties for which a Closing has not occurred except to the extent expressly
stated otherwise herein.

K.            Neither
Purchaser nor Seller shall willfully or in bad faith act or fail to act for the
purpose of permitting any of Purchaser’s Conditions in this Section 15 to fail.

L.             Purchaser
shall have the right to waive, in its sole and absolute discretion, any of the
conditions precedent set forth in this Section 15, and the election by
Purchaser to proceed with the Closing as to a particular Property with the
actual knowledge that a condition precedent has not been satisfied, shall be
deemed Purchaser’s waiver of such condition precedent for such Property to the
extent any such Purchaser condition precedent has not been previously satisfied
or waived.

16.          Conditions to Sellers’ Obligations. 
Sellers’ obligation to sell the Properties or otherwise perform any
obligations provided for in this Agreement is conditioned upon the occurrence
of the following conditions on or before the Closing Date:

A.            The
representations, warranties and covenants of Purchaser contained in this
Agreement shall be materially true and correct as of the Closing Date.

B.            Purchaser
shall have performed and complied with all material covenants and agreements
contained herein which are to be performed and materially complied with by
Purchaser at or prior to the Closing Date.

C.            As
to each Third Party Loan , the Third Party Lender shall have agreed to release
the applicable Seller and each Seller Guarantor from future liability with
respect to such Third Party Loan; provided, however, that Sellers shall be
deemed to have waived the condition specified in this Section 16.C with respect
to such Third Party Loan if:

(i)            Purchaser
has made an election pursuant to Section 4.C(i) above with respect to such
Third Party Loan; and

(ii)           At
the Closing with respect to the Third Party Loan Property which secures such
Third Party Loan, Purchaser agrees to indemnify, defend, and hold the Seller of
such Third Party Loan Property and the Seller Guarantor harmless of and from
any and all claims arising from or relating to such Third Party Loan from and
after such Closing.  Such indemnification
shall be in a form which is reasonably acceptable to such Seller and such
Seller’s counsel.

D.            The
lessor of each Ground Lease shall have consented to the assignment of the
Ground Lease to Purchaser when required by the Ground Lease.

E.             Sellers
shall have determined in good faith that the US tax effects of the Hastings
Bass ruling by the Jersey Court (with respect to the invalidity of a prior sale
by RAS I to Butterfield 

 21
 

 

Investments Ltd. in 1996) have been accepted by the IRS; provided,
however, that notwithstanding anything contained herein to the contrary, the
Seller shall not be obligated to consummate this sale prior to the date on
which James Knuppe is satisfied, in his sole and absolute discretion, that his
positions regarding the US tax effects of the Hastings Bass ruling by the
Jersey Court (with respect to the invalidity of a prior sale by RAS I to
Butterfield Investments Ltd. in 1996) have been accepted by the applicable IRS
officials with whom James Knuppe’s tax attorneys are dealing, so that there is
no material question remaining as to James Knuppe’s right to report any such
sale at his individual level (rather than as a sales transaction by Butterfield
Investments Ltd, and the US income tax costs of the IRS agreeing to the
acceptance of said position are at levels that James Knuppe deems reasonable,
in his sole and absolute discretion, in light of the overall benefits of the
IRS accepting said Hastings Bass ruling as constituting a retroactive voiding
of the original 1996 sale by RAS I to Butterfield Investments Ltd.; provided
further, however, that the terms of this Section 16.E shall be deemed met if
James Knuppe, in fact, determines to disclose his identity to the IRS via his
tax attorneys and pursues the previously agreed terms of a closing agreement on
said issues.  Promptly after such
determination is made, Sellers agree to give Purchaser written notice of such
determination.

F.             In
the event any of the foregoing conditions or other conditions to this Agreement
are not fulfilled, and are not waived by Sellers on or before the Closing with
respect to a Property, Sellers may terminate this Agreement with respect to all
of the Properties for which a Closing has not occurred.  Upon a termination of this Agreement pursuant
to this Section 16.F, Escrow Agent shall return the applicable portion of the
Earnest Money Deposit to Purchaser and the parties shall have no further
liability to one another hereunder with respect to the Properties for which a
Closing has not occurred except to the extent expressly stated otherwise
herein.

G.            Neither
Purchaser nor Seller shall willfully or in bad faith act or fail to act for the
purpose of permitting any of Purchaser’s Conditions in this Section 16 to fail.

H.            Seller
shall have the right to waive, in its sole and absolute discretion, any of the
conditions precedent set forth in this Section 16, and the election by Seller
to proceed with the Closing as to a particular Property with the actual
knowledge that a condition precedent has not been satisfied, shall be deemed
Seller’s waiver of such condition precedent for such Property to the extent any
such Seller condition precedent has not been previously satisfied or waived.

17.          Sellers’ Representations and Warranties.

A.            For
purposes of this Section 17, as to each Property, “Seller” shall mean and refer
only to the entity that owns such Property. 
The representations and warranties set forth herein shall be separate
for each Seller and shall be made solely as to itself and the Property it owns.  There shall be no joint liability to
Purchaser among or between the several Seller entities. Purchaser understands
and agrees that Purchaser shall look solely to the separate and specific Seller
entity and the separate and specific Property it owns with respect to each
representation and warranty set forth in this Agreement.  Subject to the foregoing, as to each
Property, respectively, Seller represents and warrants to Purchaser that the
following matters are true and correct as of the Effective Date and, subject to
this Section, will also be true and correct as of the Closing.

(i)            Seller is a limited partnership duly formed, validly
existing and in good standing in the state of its organization and, on or
before the Closing, Seller will be qualified to do business in each state in
which Seller operates a self storage business.

(ii)           Seller has the full power and authority necessary to enter
into, deliver and perform this Agreement, the other agreements contemplated
hereby and any other documents or instruments to be executed and delivered by
Seller at Closing.  The execution and
delivery of this Agreement by Seller 

 22
 

 

and the consummation by Seller of the transactions
contemplated by this Agreement have been duly authorized by all necessary
action on the part of Seller and will not, with or without the giving of
notice, lapse of time or both, violate, conflict with, result in a breach of,
or constitute a default under or give to others any right of termination or
cancellation of, (1) the organizational documents, including the bylaws and
charter, if any, of Seller, (2) any agreement, document, instrument or other
undertaking to which Seller is a party or by which Seller, its interests or any
of its assets or properties are bound, or (3) to the Actual Knowledge of Seller
, any applicable law, or any judgment, writ, injunction, decree, statute,
order, rule or regulation applicable to Seller or by which its interests or any
of its assets or properties are bound, or (4) result in the creation of any
lien upon any Property owned by Seller. 
This Agreement has been duly executed and delivered by Seller and
constitutes a valid and legally binding obligation of Seller, enforceable
against Seller in accordance with and subject to its respective terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors’ rights and general principles of equity.  The signatures on this Agreement for and on
behalf of Seller are genuine, and the signatory for Seller has been duly
authorized to execute the same on behalf of such Seller.

(iii)          With the exception of the Berkeley II Property, the Castro
Valley Property, the Kapolei Property, and the San Pablo II Property
(hereinafter collectively the “Ground Lease Properties”),
to the Actual Knowledge of Seller, either Seller or Seller’s predecessor in
interest owns fee simple title to each Property for which Seller is designated
as the “owner” on Exhibit “A”; provided, however, that the provisions of this
Section 17.A(iii) as applied to each Property shall, at the Closing for such
Property, be merged into the Deed for such Property and shall not survive the
Closing for such Property.  Seller’s
predecessor in interest, if any, is owned and controlled, directly or
indirectly through one or more intermediate entities, by the same individuals
who own and control Seller.

(iv)          To the Actual Knowledge of Seller, either Seller or Seller’s
predecessor in interest owns all of the interest of the lessee under each
Ground Lease for which Seller is designated as the “owner” on Exhibit “A”;
provided, however, that the provisions of this sentence as applied to each
Property shall not survive the Closing for such Property.  Seller’s predecessor in interest, if any, is
owned and controlled, directly or indirectly through one or more intermediate
entities, by the same individuals who own and control Seller.  Seller has provided Purchaser with a true,
correct and complete copy of each Ground Lease and all amendments to each
Ground Lease.  The copy of each Ground
Lease (including any amendments thereto) delivered to Purchaser by Sellers constitutes
the entire agreement between the lessor under such Ground Lease and the Seller
of the leasehold estate which is the subject of such Ground Lease with respect
to the property which is the subject of such Ground Lease.  Except as set forth in the copy of each
Ground Lease delivered by Sellers to Purchaser, no such Ground Lease has been
modified, changed, altered, assigned, supplemented, or amended.  To the Actual Knowledge of Sellers, none of
the Ground Leases is in default beyond all applicable cure and notice periods
and no event has occurred which, with the giving of notice or lapse of time, or
both, would constitute such a default. 
To the Actual Knowledge of Sellers, each Ground Lease is in full force
and effect according to its terms and is valid and binding upon each lessor
thereunder.

(v)           To the Actual Knowledge of Seller, Seller has not received
any written notice that Seller is in default under any of the Leases or under
any of the Contracts or that any event has occurred which, with the giving of
notice or lapse of time, or both, would constitute such a default.

(vi)          AAAAA Maui owns the Kapolei Loan and owns all of the right,
title, and interest thereunder free and clear of any and all liens, claims,
interests or encumbrances.  Sellers have provided
Purchaser with a true, correct and complete copy of all documents in its
possession or control regarding the Kapolei Loan.  Except as set forth in the copy of the
documents delivered by Sellers to Purchaser, the Kapolei Loan has not been
modified, changed, altered, assigned, supplemented, or amended.

 23
 

 

(vii)         To the Actual Knowledge of Seller, and except as disclosed
to Purchaser in writing, Seller has not received written notice of any
municipal violation which have not been corrected.

(viii)        To the Actual Knowledge of Seller, the
Financial Reports will fairly represent in all material respects the financial
condition and operating results of the Property for the periods indicated,
subject to normal year end adjustments. 
To the Actual Knowledge of Seller, since the date of the last financial
statement included in the information provided to Purchaser pursuant to this
Agreement, there has been no material adverse change in the financial condition
or in the operations of any Property.

(ix)           No lease commission or similar fee is due or unpaid by
Seller with respect to any Lease, and there are no written or oral agreements
that will obligate Purchaser, as Seller’s assignee, to pay any such commission
or fee under any Lease or extension, expansion or renewal thereof.  Except as set forth on the Rent Roll, the
Leases and any guarantees thereof are in full force and effect, and, to Seller’s
Actual Knowledge, are subject to no defenses, setoffs or counterclaims for the
benefit of the Tenants.  Except as noted in
the Rent Roll, neither the landlord under the Leases nor, to Seller’s Actual
Knowledge, any Tenant is in default under its Lease beyond all applicable
notice and cure periods.  Except as
disclosed on the Rent Roll, no rents or security deposits or other payments
have been collected in advance for more than one (1) month.  Except as disclosed on the Rent Roll, each
rental concession, rental abatement or other benefit granted to Tenants under
the Leases will have been fully utilized prior to the Closing.

(x)            The right of any person to occupy the manager’s apartment
on each Property (if any) is a month to month tenancy that can be terminated on
not more than thirty (30) days notice to such person

(xi)           To the Actual Knowledge of Seller, Seller has not received
any written notice of (A) a pending or overtly threatened in writing
condemnation or eminent domain proceeding relating to the Property, or (B)
pending or overtly threatened in writing actions, suits, legal or other
proceedings with reference to the Property.

(xii)          To Seller’s Actual Knowledge, Seller has not received
written notice of any present default or breach under any mortgage or other
encumbrance encumbering the Property or any covenants, conditions,
restrictions, rights-of-way or easements which may affect the Property or any
portion or portions thereof.

(xiii)         Except as set forth on the Schedule
17.A(xiii) attached hereto and incorporated herein, to the Actual Knowledge
of Seller, Seller has not received written notice of any existing, pending, or
threatened investigation, inquiry or proceeding by any governmental authority
or any other entity or person or to any remedial obligations under any
Environmental Law, as defined herein.

(xiv)        To the Actual Knowledge of Sellers all of Sellers’ insurance policies
are in full force and effect, all premiums for such policies were paid when due
and all future premiums for such policies (and any replacements thereof) shall
be paid by Sellers on or before the due date therefore.  Until the Closing, Seller shall pay the
premiums on, and shall not cancel or voluntarily allow to expire, any of Seller’s
insurance policies unless such policy is replaced, without any lapse of
coverage, by another policy or policies providing coverage at least as
extensive as the policy or policies being replaced.  To the extent permitted under such policy,
Seller agrees to assign on a non-exclusive basis to Purchaser at Closing such
of Seller’s current policies as Purchaser may request in writing and will use
commercially reasonable efforts to cause Purchaser to be named as an additional
insured under each of such policies on or before the expiration of the Due
Diligence Period.  At Closing, Seller
shall, provided that Purchaser has been named as an additional insured on such
policies, provide Purchaser with a Certificate of Insurance on Acord Form 25 or
Form 27, as applicable, as evidence that Purchaser has been named as an
additional insured under each such policy and 

 24
 

 

with evidence reasonably satisfactory to Purchaser
that each such policy has been assigned to Purchaser.  In the event of such an assignment, the
premiums on any of such policies that Purchaser elects to have assigned to it
shall be prorated between Seller and Purchaser as of the Proration Date.

(xv)         To the Actual Knowledge of Seller and except as
disclosed in the Documents, there are no labor disputes pending or overtly
threatened in writing concerning the operation or maintenance of any of the
Properties.  Sellers are not a party to
any union or other collective bargaining agreement with employees employed in
connection with the ownership, operation or maintenance of any of the
Properties.

(xvi)        No act of bankruptcy, voluntary or involuntary has occurred
with respect to Seller or any of its affiliates.

(xvii)       Neither Seller, nor to Seller’s Actual
Knowledge, any member, partner or shareholder of Seller, nor, to Seller’s
actual knowledge, any person or entity with actual authority to direct the
actions of any member, partner or shareholder of Seller, nor, to Seller’s actual
knowledge, any other person or entity holding any legal or beneficial interest
whatsoever in Seller, (a) are named on any list of persons, entities and
governments issued by the Office of Foreign Assets Control of the United States
Department of the Treasury (“OFAC”) pursuant
to Executive Order 13224 — Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism (“Executive Order 13224”), as in effect on the Effective Date,
or any similar list known to Seller or publicly issued by OFAC or any other
department or agency of the United States of America (collectively, the “OFAC Lists”), (b) are included in, owned by, controlled by,
knowingly acting for or on behalf of, knowingly providing assistance, support,
sponsorship, or services of any kind to, or otherwise knowingly associated with
any of the persons, entities or governments referred to or described in the
OFAC Lists, or (c) has knowingly conducted business with or knowingly engaged
in any transaction with any of the persons, entities or governments named on
any of the OFAC Lists or any of the persons, entities or governments  included in, owned by, controlled by, acting
for or on behalf of, providing assistance, support, sponsorship, or services of
any kind to, or, to Seller’s knowledge, otherwise associated with any of the
persons, entities or governments 
referred to or described in the OFAC Lists.

B.            As
used in this Section 17, the term “Actual
Knowledge” (or words of similar import) shall, when used with
respect to any Seller, mean the present, current, actual, conscious (and not
constructive, imputed or implied) knowledge of H. James Knuppe, Barbara Knuppe or Michael J. Knuppe, without
having made independent inquiry.  No such
person shall have any personal liability or obligation whatsoever with respect
to any of the matters set forth in this Agreement and any other documents,
agreements or instruments related thereto or any of the representations made by
Seller being or becoming untrue, inaccurate or incomplete in any respect and
Purchaser shall look solely to the assets of the Seller entity with respect to
a breach of a representation and warranty hereunder as to any Seller or
Property.  Under no circumstances
whatsoever shall information possessed by or known to any person or entity
(including any of Sellers’ consultants, agents or advisors or their respective
employees or representatives, or another Seller), other than H. James Knuppe,
Barbara Knuppe, or Michael J. Knuppe, be imputed or attributed to any Seller.

C.            All representations, warranties and
covenants of each Seller contained in this Agreement shall survive the Closing
and shall inure to the benefit of Purchaser and its legal representatives,
heirs, successors or assigns for a period of six (6) months after the Closing
of the applicable Property and shall automatically expire unless Purchaser
prior thereto has given such Seller written notice of any alleged breach and
Purchaser commences and serves an action against Seller within ninety (90) days
after Purchaser gives such notice to Seller (and, in the event any such suit is
timely commenced by Purchaser and served against Seller, shall survive
thereafter only insofar as the subject matter of the alleged breach specified
in such 

 25
 

 

suit is concerned).  If notice is not timely given and suit is not
timely commenced and served by Purchaser, Seller’s representations and
warranties shall thereafter be void and no force or effect as to such Property.

D.            Notwithstanding anything to the
contrary contained in this Agreement, no Seller shall have any liability,
obligation or responsibility of any kind to Purchaser or any party claiming by,
under or through Purchaser with respect to any of the representations and
warranties contained in Section 17 above if, prior to the Closing with respect
to a Property, Purchaser obtains knowledge from any source (including the
Documents) that any of the foregoing representations and warranties are untrue
or incorrect with respect to such Property, and Purchaser nevertheless Closes
Purchaser’s acquisition of such Property pursuant to this Agreement.  Purchaser further agrees to provide Sellers
with written notice (a “Representation Notice”)
promptly upon Purchaser’s learning that any representation or warranty of any
Seller in this Agreement is untrue or incorrect or has been breached by such
Seller.  In the event Purchaser gives one
or more Representation Notices with respect to the warranties and
representations of a Seller and such Seller fails to correct each inaccuracy or
cure all such breaches of any representation or warranty, then Purchaser’s sole
remedy in respect to a change in facts or circumstances which do not otherwise
constitute a default of such Seller of such Property pursuant to this
Agreement, shall be to elect, in Purchaser’s sole discretion, to (a) if such
breach(es) relate(s) to one or more of the Properties, remove such Properties
from the Properties being conveyed pursuant to this Agreement and receive a
reduction in the Purchase Price in the amount of the Allocated Purchase Price
of such Property or Properties, in which event no party hereto shall have any
further obligation or liability to any other party hereto with respect to such
Property or Properties except for those provisions of this Agreement which
expressly survive the termination of this Agreement or (b) if such breach(es)
relate to a Property or to Properties having, in the aggregate, an Allocated
Purchase Price equal to or greater than $50,000,000.00, terminate this
Agreement, in which event the undisbursed portion of the Earnest Money Deposit
shall be returned to Purchaser within five (5) days of such termination and,
following the return of such Earnest Money Deposit, no party hereto shall have
any further obligation or liability to any other party hereto with respect to
any Properties for which a Closing has not occurred except with respect to
those provisions of this Agreement which expressly survive the termination of
this Agreement.

18.          Purchaser’s Representations and Warranties.  Purchaser
makes the following representations and warranties, each of which is material
and is being relied upon by Sellers:

A.            Purchaser
is a limited liability company, duly formed, validly existing and in good
standing in the state of Delaware and, on or before the Closing, Purchaser, or
Purchaser’s affiliated company taking title at Closing, will be qualified to do
business in the state in which the Property is located.

B.            Purchaser
has the full power and authority necessary to enter into, deliver and perform
this Agreement, the other agreements contemplated hereby and any other
documents or instruments to be executed and delivered by Purchaser at
Closing.  The execution and delivery of
this Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
action on the part of Purchaser and will not, with or without the giving of
notice, lapse of time or both, violate, conflict with, result in a breach of,
or constitute a default under or give to others any right of termination or
cancellation of, (1) the organizational documents, including the bylaws and
charter, if any, of Purchaser, (2) any agreement, document, instrument or other
undertaking to which Purchaser is a party or by which Purchaser, its interests
or any of its assets or properties are bound, or (3) to Purchaser’s Actual
Knowledge, any applicable law, or any judgment, writ, injunction, decree,
statute, order, rule or regulation applicable to Purchaser or by which its
interests or any of its assets or properties are bound..  This Agreement has been duly executed and
delivered by Purchaser and constitutes a valid and legally binding obligation
of Purchaser, enforceable against Purchaser in accordance with and subject to
its respective terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors’ rights and general principles of
equity.  The signatures on this Agreement
for and on behalf of Purchaser are 

 26
 

 

genuine, and the signatory for Purchaser has been duly authorized to
execute the same on behalf of such Seller.

C.            Neither
Purchaser, nor any member or manager of Purchaser, nor, to Purchaser’s Actual
Knowledge, any person or entity with actual authority to direct the actions of
any member or manager of Purchaser without the vote, consent, or approval of
any other person, (i) are named on any list of persons, entities and
governments issued by OFAC pursuant to Executive Order 13224, as in effect on
the date hereof, or any OFAC Lists, (ii) are included in, owned by, controlled
by, knowingly acting for or on behalf of, knowingly providing assistance,
support, sponsorship, or services of any kind to, or otherwise knowingly
associated with any of the persons, entities or governments referred to or
described in the OFAC Lists, or (iii) has knowingly conducted business with or
knowingly engaged in any transaction with any of the persons, entities or
governments named on any of the OFAC Lists or any of the persons, entities or governments  included in, owned by, controlled by, acting
for or on behalf of, providing assistance, support, sponsorship, or services of
any kind to, or, to Purchaser’s knowledge, otherwise associated with any of the
persons, entities or governments  referred
to or described in the OFAC Lists.

D.            Each
and every one of the foregoing representations and warranties is true and
correct as of the Effective Date and will be true and correct as of the Closing
Date.

E.             As
used in this Agreement, the term “Actual
Knowledge” (or words of similar import) shall, when used with
respect to Purchaser, mean the present, current, actual, conscious (and not
constructive, imputed or implied) knowledge of Kenneth M. Woolley, Kent W. Christensen, Charles L. Allen, or David L.
Rasmussen, without having made independent inquiry.  No such person shall have any personal
liability or obligation whatsoever with respect to any of the matters set forth
in this Agreement and any other documents, agreements or instruments related
thereto or any of the representations made by Purchaser being or becoming
untrue, inaccurate or incomplete in any respect and Sellers shall look solely
to the assets of the Purchaser with respect to a breach of a representation and
warranty hereunder as to Purchaser. 
Under no circumstances whatsoever shall information possessed by or
known to any person or entity (including any of Purchaser’s consultants, agents
or advisors or their respective employees or representatives), other than Kenneth M. Woolley, Kent W. Christensen,
Charles L. Allen, or David L. Rasmussen, be imputed or attributed to
Purchaser.

F.             All
representations, warranties and covenants of Purchaser contained in this
Agreement shall survive the Closing and shall inure to the benefit of Sellers
and their respective legal representatives, heirs, successors or assigns for a
period of six (6) months after the last Closing of Purchaser’s acquisition of a
Property under this Agreement and shall automatically expire unless Sellers
prior thereto have given such Purchaser written notice of any alleged breach
and Purchaser commence and serve an action against Purchaser within ninety (90)
days after Sellers give such notice to Purchaser (and, in the event any such
suit is timely commenced by Sellers and served against Purchaser, shall survive
thereafter only insofar as the subject matter of the alleged breach specified
in such suit is concerned).  If notice is
not timely given and suit is not timely commenced and served by Sellers,
Purchaser’s representations and warranties shall thereafter be void and no
force or effect as to such Property.

19.          Indemnification.

A.            Subject
to the limitations contained in Sections 17, 20 and 23, each Seller agrees to
indemnify, defend and hold harmless Purchaser and its nominees, successors,
assigns, officers, directors, members, managers, partners, agents, and
employees from and against any and all liabilities, claims, causes of action,
penalties, costs and expenses, of any kind or nature whatsoever, to the extent
arising out of, resulting from, relating to, or incident to a breach of the
express representations and warranties of such Seller.

 27
 

 

B.            Each
Seller agrees to indemnify, defend and hold Purchaser harmless from and against
any and all claims, costs, penalties, damages, losses, liabilities and
expenses, including attorneys’ fees, related to or arising from any claim
related to the transactions contemplated herein by any person holding a direct
or indirect interest in Seller, including but not limited to any claim for the
breach of any fiduciary duty or the terms, conditions, representations and
warranties of this Agreement generally.

C.            Subject
to the provisions of Section 17 above, Purchaser agrees to indemnify, defend
and hold harmless Sellers and Sellers’ respective nominees, successors,
assigns, officers, directors, members, managers, partners, agents, and
employees from and against any and all liabilities, claims, causes of action,
penalties, costs and expenses, of any kind or nature whatsoever, arising out
of, resulting from, relating to, or incident to (i) Purchaser’s ownership or
use of the Properties after the Closing Date, (ii) the Designated Contracts,
(iii) the Leases, or (iv) the Ground Leases.

D.            The
provisions of this Section 19 shall survive the Closing.

20.          Purchase “As-Is”.

A.            NOTWITHSTANDING
ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, EXCEPT FOR THOSE
REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY A SELLER IN SECTION 17 ABOVE
OR OTHERWISE EXPRESSLY MADE BY A SELLER IN THIS AGREEMENT OR BY A SELLER IN THE
DOCUMENTS OR INSTRUMENTS DELIVERED BY SUCH SELLER AT THE CLOSING, IF ANY, IT IS
UNDERSTOOD AND AGREED THAT NEITHER SUCH SELLER NOR ANY OF ITS AGENTS, EMPLOYEES
OR CONTRACTORS HAS MADE, AND IS NOT NOW MAKING, AND PURCHASER HAS NOT RELIED
UPON AND WILL NOT RELY UPON (DIRECTLY OR INDIRECTLY), ANY WARRANTIES OR
REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, ORAL OR WRITTEN
WITH RESPECT TO THE PROPERTIES, INCLUDING WARRANTIES OR REPRESENTATIONS AS TO
(I) MATTERS OF TITLE, (II) ENVIRONMENTAL MATTERS RELATING TO ANY OF THE
PROPERTIES OR ANY PORTION THEREOF, (III) GEOLOGICAL CONDITIONS, (IV) FLOODING
OR DRAINAGE, (V) SOIL CONDITIONS, (VI) THE AVAILABILITY OF ANY UTILITIES TO ANY
OF THE PROPERTIES, (VII) USAGES OF ADJOINING PROPERTY, (VIII) ACCESS TO ANY OF
THE PROPERTIES OR ANY PORTION THEREOF, (IX) THE VALUE, COMPLIANCE WITH THE
PLANS AND SPECIFICATIONS, SIZE, LOCATION, AGE, USE, DESIGN, QUALITY,
DESCRIPTIONS, SUITABILITY, SEISMIC OR OTHER STRUCTURAL INTEGRITY, OPERATION,
TITLE TO, OR PHYSICAL OR FINANCIAL CONDITION OF THE IMPROVEMENTS OR ANY OTHER
PORTION OF ANY OF THE PROPERTIES, (X) ANY INCOME, EXPENSES, CHARGES, LIENS,
ENCUMBRANCES, RIGHTS OR CLAIMS ON OR AFFECTING OR PERTAINING TO ANY OF THE
PROPERTIES OR ANY PART THEREOF, (XI) THE PRESENCE OF HAZARDOUS SUBSTANCES
(HEREINBELOW DEFINED) IN OR ON, UNDER OR IN THE VICINITY OF ANY OF THE
PROPERTIES, (XII) THE CONDITION OR USE OF ANY OF THE PROPERTIES OR COMPLIANCE
OF ANY OF THE PROPERTIES WITH ANY OR ALL PAST, PRESENT OR FUTURE FEDERAL, STATE
OR LOCAL ORDINANCES, RULES, REGULATIONS OR LAWS, BUILDING, FIRE OR ZONING
ORDINANCES, CODES OR OTHER SIMILAR LAWS, (XIII) THE EXISTENCE OR NON-EXISTENCE
OF UNDERGROUND STORAGE TANKS, (XIV) THE POTENTIAL FOR FURTHER DEVELOPMENT OF
ANY OF THE PROPERTIES, (XV) ZONING, OR THE EXISTENCE OF VESTED LAND USE, ZONING
OR BUILDING ENTITLEMENTS AFFECTING ANY OF THE PROPERTIES, (XVI) THE
MERCHANTABILITY OF ANY OF THE PROPERTIES OR FITNESS OF ANY OF THE PROPERTIES
FOR ANY PARTICULAR PURPOSE, (XVII) TAX CONSEQUENCES (INCLUDING THE AMOUNT, USE
OR PROVISIONS RELATING TO ANY TAX CREDITS), (XVIII) MARKETPLACE CONDITIONS SUCH
AS SELF STORAGE SATURATION, (XIX) OCCUPANCY LEVELS, OR (XX) CURRENT INCOME
STREAMS.  PURCHASER
FURTHER ACKNOWLEDGES THAT, EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES 

 28
 

 

EXPRESSLY MADE BY A SELLER IN SECTION 17 ABOVE OR OTHERWISE EXPRESSLY
MADE BY A SELLER IN THIS AGREEMENT OR BY A SELLER IN THE DOCUMENTS OR
INSTRUMENTS DELIVERED BY SUCH SELLER AT THE CLOSING, ANY INFORMATION OF ANY
TYPE WHICH PURCHASER HAS RECEIVED OR MAY RECEIVE FROM SELLER OR ITS AGENTS,
EMPLOYEES OR CONTRACTORS, INCLUDING ANY ENVIRONMENTAL REPORTS AND SURVEYS, IS
FURNISHED ON THE EXPRESS CONDITION THAT PURCHASER SHALL NOT RELY THEREON, ALL
SUCH INFORMATION BEING FURNISHED WITHOUT ANY REPRESENTATION OR WARRANTY
WHATSOEVER.

B.            PURCHASER
REPRESENTS AND WARRANTS THAT PURCHASER IS A KNOWLEDGEABLE, EXPERIENCED AND
SOPHISTICATED PURCHASER OF REAL ESTATE AND THAT PURCHASER HAS RELIED AND SHALL
RELY SOLELY ON (I) PURCHASER’S OWN EXPERTISE AND THAT OF PURCHASER’S
CONSULTANTS IN PURCHASING THE PROPERTIES, (II) PURCHASER’S OWN KNOWLEDGE OF THE
PROPERTIES BASED ON PURCHASER’S INVESTIGATIONS AND INSPECTIONS OF THE
PROPERTIES AND (III) THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY A
SELLER IN SECTION 17 ABOVE OR OTHERWISE EXPRESSLY MADE BY A SELLER IN THIS
AGREEMENT OR BY A SELLER IN THE DOCUMENTS OR INSTRUMENTS DELIVERED BY SUCH
SELLER AT THE CLOSING.  EXCEPT FOR THOSE
REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY A SELLER IN SECTION 17 ABOVE
OR OTHERWISE EXPRESSLY MADE BY A SELLER IN THIS AGREEMENT OR BY A SELLER IN THE
DOCUMENTS OR INSTRUMENTS DELIVERED BY SUCH SELLER AT THE CLOSING: (W) PURCHASER
HAS CONDUCTED SUCH INSPECTIONS AND INVESTIGATIONS OF THE PROPERTIES AS
PURCHASER DEEMS NECESSARY, INCLUDING THE PHYSICAL AND ENVIRONMENTAL CONDITIONS
THEREOF, AND SHALL RELY UPON THE SAME, (X) UPON CLOSING, PURCHASER SHALL ASSUME
THE RISK THAT ADVERSE MATTERS, INCLUDING ADVERSE PHYSICAL AND ENVIRONMENTAL
CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER’S INSPECTIONS AND
INVESTIGATIONS, (Y) PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING, EACH
SELLER SHALL SELL AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT SUCH
SELLER’S PROPERTY “AS IS, WHERE IS,” WITH ALL FAULTS AND DEFECTS (LATENT AND
APPARENT), AND (Z).  PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS WITH RESPECT TO THE PROPERTY MADE BY SELLER, OR ANY AGENT,
EMPLOYEE OR CONTRACTOR OF SELLER.

C.            PURCHASER
ACKNOWLEDGES AND AGREES SELLER WOULD NOT HAVE AGREED TO SELL THE PROPERTY TO
PURCHASER WITHOUT THE DISCLAIMERS AND OTHER AGREEMENTS SET FORTH HEREIN.
PURCHASER ACKNOWLEDGES THAT THE PURCHASE PRICE REFLECTS THE NATURE OF THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT, AS LIMITED BY THE WAIVERS AND
DISCLAIMERS CONTAINED IN THIS AGREEMENT. 
PURCHASER HAS FULLY REVIEWED THE DISCLAIMERS AND WAIVERS SET FORTH IN
THIS AGREEMENT WITH PURCHASER’S COUNSEL AND UNDERSTANDS THE SIGNIFICANCE AND
EFFECT THEREOF.

D.            THE
TERMS AND CONDITIONS OF SECTIONS 20.A, 20.B, AND 20.C SHALL EXPRESSLY SURVIVE
THE CLOSING, NOT MERGE WITH THE PROVISIONS OF THE DEED OR ANY OTHER CLOSING
DOCUMENTS.

	
  

  	
  KMW

  	
   

  
	
   

  	
  PURCHASER’S INITIALS

  	
   

  

 

 29
 

 

E.             Except
with respect to any representations, warranties and indemnities expressly set
forth in this Agreement and except with respect to any representations,
warranties, indemnities, covenants or agreements set forth in any document or
instrument delivered by a Seller at Closing, and except as otherwise expressly
provided in this Section, as to each Seller and the Property owned by such
Seller, subject only to Section 23.D, below and those obligations of such
Seller hereunder which this Agreement specifically provides shall survive the
Closing, Purchaser and anyone claiming by, through or under Purchaser hereby
waives its right to recover from and fully and irrevocably releases each Seller
and such Seller’s partners, members, employees, officers, directors, parent,
subsidiaries, successors and assigns (the “Released Parties”)
from any and all claims, responsibility and/or liability that Purchaser may now
have or hereafter acquire against any of the Released Parties for any costs,
loss, liability, damage, expenses, demand, action or cause of action arising
from or related to (a) the condition (including any construction defects,
errors, omissions or other conditions, latent or otherwise), valuation,
salability or utility of any of the Properties, or its suitability for any
purpose whatsoever, (b) any other claims under Environmental Laws, and (c) any
information furnished by the Released Parties under or in connection with this
Agreement.  This release includes claims
of which Purchaser is presently unaware or which Purchaser does not presently
suspect to exist which, if known by Purchaser, would materially affect
Purchaser’s release of the Released Parties. 
Purchaser specifically waives the provision of any statute or principle
of law, which provides otherwise including, with respect to those Properties in
California, California Civil Code 1542 which provides in pertinent part:

“A
general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release,
which if known by him or her must have materially affected his or her
settlement with the debtor.”

	
  Purchaser:

  	
  KMW

  	
   

  

 

In this connection and to the extent permitted by law, Purchaser
agrees, represents and warrants that Purchaser realizes and acknowledges that
factual matters now unknown to Purchaser may have given or may hereafter give
rise to causes of action, claims, demands, debts, controversies, damages,
costs, losses and expenses which are presently unknown, unanticipated and
unsuspected, and Purchaser further agrees, represents and warrants that the
waivers and releases herein have been negotiated and agreed upon in light of
that realization and that Purchaser nevertheless hereby intends to release,
discharge and acquit Seller from any such unknown causes of action, claims,
demands, debts, controversies, damages, costs, losses and expenses.

F.             As
used herein, (a) “Environmental Laws”
means the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (42 U.S.C. Section 9601 et seq.), as amended, or the Resource
Conservation and Recovery Act (42 U.S.C. Section 6902 et seq.), as amended, or
any other federal, state or local law, ordinance, rule or regulation relating
to Hazardous Substances and applicable to the Property (but specifically
excluding any principles of common law or common law theories); and (b) “Hazardous Substances” means any hazardous, toxic or
dangerous waste, substance or material, any pollutant or contaminant, or any
substance or organism which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous, or any
substance which contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCBs), radon gas, urea formaldehyde or asbestos.

G.            As
to each Property, the foregoing provisions of this Section 20, including the
waivers and releases by Purchaser, shall survive the Closing and the
recordation of the Deed, and shall not be deemed merged into the Deed or other
documents and instruments delivered at Closing.

 

 30

 

21.          Rights of First Refusal. 
Affiliates of Sellers own and operate two additional self storage
facilities commonly referred to as the “Moraga Rent-A-Space” facility and the “Lahaina
Rent-A-Space” facility (hereinafter collectively the “ROR
Facilities”).  Sellers agree
that concurrently with the Closing, Sellers’ shall cause the owners of the ROR
Facilities to grant Purchaser, for a period of two (2) years from the first
Closing, a right of first refusal to purchase each of the ROR Facilities by a
Grant of Right of First Refusal, which shall be in a form of Exhibit “K” and executed and recorded at Closing.  The Grant of Right of First Refusal shall
provide, among other things, that if the owner of an ROR Facility (the “ROR Owner”) receives a bona fide third party offer to
purchase the ROR Facility (the “ROR Offer”)
that the ROR Owner is prepared to accept, then Purchaser shall have a period of
time not to exceed ten (10) business days in which to agree, in writing, to the
terms and conditions of the ROR Offer. 
Purchaser’s failure to exercise its right of first refusal within such
ten (10) business day period shall constitute Purchaser’s election not to
acquire the applicable ROR Facility in accordance with the terms of such ROR
Offer and, thereafter, the right of first refusal shall terminate with respect
to such ROR Offer and the ROR Owner shall be entitled to sell the ROR Offer in
accordance with the provisions of such ROR Offer free and clear of any such
right of first refusal.  Purchaser agrees
to promptly execute any and all commercially reasonable instruments and/or
documents to confirm the expiration or earlier termination of the right of
first refusal.  Notwithstanding anything
to the contrary contained herein, the parties agree that the right of first
refusal shall not apply to the transfer of any interest in any ROR Facility by
an affiliate of Sellers or the immediate family of H. James Knuppe to any
lineal descendant of H. James Knuppe; provided that the right of first refusal
shall survive such transfer.  The right
of first refusal granted to Purchaser shall be personal to Purchaser and shall
not be assignable (except to an Affiliate of Purchaser) without the express
prior written consent of Seller and the ROR Owners, which consent may be
withheld in their sole and absolute discretion.

22.          Grant of License to Use Name “Rent-A-Space”. 
Concurrently with the Closing, Sellers shall cause the holder of the
rights to the names and/or marks “AAAAA” and “Rent-A-Space”, and combinations
thereof, to license, on a non-exclusive basis, such names and/or marks to
Purchaser for a period of time commencing on the Closing Date and expiring with
respect to each Property on the second anniversary of the Closing Date for such
Property.  Purchaser shall not be
required to pay any additional consideration with respect to the grant of such
license and such grant of license shall be in the form of Exhibit “L”
attached hereto.

23.          Defaults.

A.            If
any Seller hereunder fails to perform its obligations as Seller and such Seller
fails to cure such default within five (5) business days after such Seller’s
receipt of a written notice from Purchaser specifying such default, then
Purchase shall elect, as Purchaser’s sole remedy, either: (a) specifically
enforce this Agreement or seek injunctive relief, (b) if such breach or default
relates to one or more Properties, remove such Property or Properties from the
Properties being conveyed pursuant to this Agreement, receive a reduction in
the Purchase Price in the amount of the Allocated Purchase Price of such
Property and the payment to Purchaser of Purchaser’s Reimbursable Due Diligence
Expenses (as hereinafter defined) allocable to such Properties,  (c) if such breach or default relates to Properties having,
in the aggregate, an Allocated Purchase Price equal to or greater than
$50,000,000.00, terminate this Agreement and receive an immediate refund of the
Earnest Money Deposit from Escrow Agent. 
The foregoing remedies are Purchaser’s sole and exclusive remedies with
respect to Seller’s default, and Purchaser waives any and all other remedies as
may be available at law or in equity in connection with Seller’s default.

B.            IN
THE EVENT THE CLOSING AND THE CONSUMMATION OF THE TRANSACTION CONTEMPLATED
HEREIN DO NOT OCCUR AS PROVIDED HEREIN BY REASON OF ANY BREACH OF PURCHASER
WHICH IS NOT CURED WITHIN FIVE (5) DAYS AFTER WRITTEN NOTICE OF SUCH BREACH IS
GIVEN TO PURCHASER BY SELLERS, PURCHASER AND SELLER AGREE THAT IT WOULD BE
IMPRACTICAL AND EXTREMELY DIFFICULT TO 

 31
 

 

ESTIMATE THE DAMAGES WHICH SELLER MAY SUFFER AS A RESULT THEREOF.  THEREFORE, PURCHASER AND SELLER DO HEREBY
AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT SELLER WOULD
SUFFER IN THE EVENT THAT PURCHASER BREACHES THIS AGREEMENT AND FAILS TO
COMPLETE THE PURCHASE OF EACH SITE IS AND SHALL BE, AS SELLER’S SOLE AND
EXCLUSIVE REMEDY THE RIGHT TO TERMINATE THIS AGREEMENT AND TO RETAIN THE
UNDISBURSED PORTION OF THE EARNEST MONEY DEPOSIT AS LIQUIDATED DAMAGES, AND
FOLLOWING SUCH TERMINATION NO PARTY HERETO SHALL HAVE ANY FURTHER OBLIGATION OR
LIABILITY TO ANY OTHER PARTY HERETO EXCEPT WITH RESPECT TO THOSE PROVISIONS OF
THIS AGREEMENT WHICH EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT.  UPON ANY SUCH BREACH BY PURCHASER, UNLESS
OTHERWISE SPECIFIED, THIS AGREEMENT SHALL BE TERMINATED WITH RESPECT TO EACH
PROPERTY FOR WHICH A CLOSING HAS NOT OCCURRED AND NEITHER PARTY SHALL HAVE ANY
FURTHER RIGHTS OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER, EXCEPT FOR THE
RIGHT OF SELLER TO RECEIVE THE UNDISBURSED PORTION OF THE EARNEST MONEY DEPOSIT
FROM ESCROW AGENT AS AFORESAID AND RETAIN THE UNDISBURSED PORTION OF THE
EARNEST MONEY DEPOSIT AS LIQUIDATED DAMAGES FROM PURCHASER AND THE OBLIGATION
OF PURCHASER TO DELIVER TO SELLER THE DOCUMENTS PURSUANT TO SECTION 6.C, ABOVE;
PROVIDED, HOWEVER, THAT THIS LIQUIDATED DAMAGES PROVISION SHALL NOT LIMIT
SELLER’S RIGHT TO (A) RECEIVE REIMBURSEMENT FOR OR RECOVER DAMAGES IN
CONNECTION WITH PURCHASER’S INDEMNITY OF SELLER AND/OR BREACH OF PURCHASER’S
OBLIGATIONS PURSUANT TO SECTION 8.C, ABOVE, OR (B) INJUNCTIVE RELIEF DUE TO
PURCHASER’S BREACH OF PURCHASER’S OBLIGATIONS UNDER SECTION 24 ABOVE.  THE PARTIES ACKNOWLEDGE THAT SUCH PAYMENT OF
THE EARNEST MONEY DEPOSIT IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS
INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER.

INTIALS:  

	
  MJK

  	
   

  	
  KMW

  
	
  AAAAA
  RENT-A-SPACE, ALAMEDA, LTD., LIMITED PARTNERSHIP, a California limited
  Partnership

  	
   

  	
  EXTRA SPACE STORAGE LLC

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE, ALAMEDA II, LTD., LIMITED PARTNERSHIP, a California limited
  Partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE, BERKELEY I, LTD., LIMITED PARTNERSHIP, a California limited
  Partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE, BERKELEY II, LTD., LIMITED PARTNERSHIP, a California limited
  Partnership

  	
   

  	
   

  

 

 32
 

 

	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE-CASTRO VALLEY, LTD. LIMITED PARTNERSHIP, a California limited
  partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE — COLMA, LTD., LIMITED PARTNERSHIP, a California limited
  Partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE, HAYWARD, LTD., LIMITED PARTNERSHIP, a California limited
  Partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE — MAUI, A LIMITED PARTNERSHIP, a Hawaii limited Partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE, SAN LEADRO, LTD.,LIMITED PARTNERSHIP, a California limited partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE, SAN PABLO, LTD., LIMITED PARTNERSHIP, a California limited
  Partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MJK

  	
   

  	
   

  
	
  AAAAA
  RENT-A-SPACE — VALLEJO, LTD., LIMITED PARTNERSHIP, a California limited
  Partnership

  	
   

  	
   

  

 

C.            Notwithstanding
anything to the contrary contained in this Agreement, if the Closing is
consummated, as to Purchaser and each Seller hereunder, as to each Property, no
party shall have any liability to another party following the Closing of such
Property with respect to any breaches of representations, warranties or
covenants under this Agreement (other than the covenants and obligations
contained in Section 11.E and Section 11.F unless and until the aggregate
amount of the actual general and compensatory damages suffered by the non-defaulting
party by reason of any such breach of representations, warranties or covenants
exceeds the sum of Ten Thousand Dollars ($10,000.00) for such Property (in
which event the defaulting party shall be responsible from the first dollar).
Unless and until the amount of the actual damages suffered or incurred by the
non-defaulting party by reason of any such breach of representations,
warranties or covenants exceeds in the aggregate, the sum of Ten Thousand
Dollars ($10,000.00) for such Property, the non-defaulting party shall not be
entitled to file an action or lawsuit or undertake any other legal proceeding
against the defaulting party by reason of such breach of representations,
warranties or covenants.  The covenants
and the obligations of the parties contained in Section 11.F and Section 11.F
shall be excluded from the application of this Section.  The provisions of this Section shall survive
the Closing and the recordation of the Deed, and shall not be deemed merged
into the Deed or other documents or instruments delivered at Closing.

 33
 

 

D.            The
obligations and liabilities of each Seller under this Agreement are and shall
be separate from the obligations and liabilities of each other Seller.  Furthermore, as to each Property and the
Seller of such Property, such Seller’s total liability with respect to a breach
of any representations, warranties or other obligations of such Seller
contained in this Agreement or in any document or instrument executed and
delivered at Closing (including any indemnity obligations in this Agreement or
in any such document or instrument) shall be limited to an amount equal to two
and one-half percent (2 1⁄2%) of the Allocated Purchase Price for such
Property.  It is expressly understood and
agreed that in no event shall any of the direct or indirect partners,
shareholders, owners, affiliates, officers, directors, employees or agents of
each Seller or any affiliate or controlling person thereof, have any liability
for any claim, cause of action or other liability arising out of or relating to
this Agreement whether based on contract, common law, statute, equity or
otherwise.  In no event shall a Seller be
liable to Purchaser for consequential, indirect or punitive damages.  The foregoing limitations on liability shall
survive the Closing or any earlier termination of this Agreement and shall not
diminish or otherwise affect Purchaser’s waivers and releases in Section 20 of
this Agreement.

24.          Confidentiality.

A.            Purchaser
agrees that, prior to the Closing, all documents and information obtained from
Sellers or Sellers’ representatives pursuant to this Agreement including,
without limitation, the Documents, shall be kept confidential as provided in
this Section 24.A.  Prior to the Closing,
the property information received from Sellers shall not be disclosed by
Purchaser or its representatives, in any manner whatsoever, in whole or in
part, except (1) with the prior written consent of Sellers (which consent may
be withheld in Sellers’ sole and absolute discretion), (2) to the extent that
such document or information is publicly available, (3) to Purchaser’s
representatives who need to know the property information for the purpose of
evaluating the Properties and who are informed by the Purchaser of the
confidential nature of the property information; (4) as may be necessary for
Purchaser or Purchaser’s representatives to comply with applicable laws,
including, without limitation, governmental regulatory, disclosure, tax and
reporting requirements, to comply with other requirements of regulatory and
supervisory authorities and self-regulatory organizations having jurisdiction
over Purchaser or Purchaser’s representatives; or to comply with regulatory or
judicial processes; or (5) as may be necessary in order to assume the Third
Party Loans.  In permitting Purchaser and
its representatives to review the Documents to assist Purchaser, Seller has not
waived any privilege or claim of confidentiality with respect thereto, and no
third party benefits or relationships of any kind, either expressed or implied,
have been offered, intended or created by Seller and any such claims are
expressly rejected by Seller and waived by Purchaser.  The provisions of this Section 24.A shall
survive the Closing but shall, notwithstanding any other provision of this
Agreement, survive any termination of this Agreement.

B.            Sellers
and Purchaser agree that the existence and terms of this Agreement shall be
kept confidential as provided in this Agreement.  The identity of Purchaser and Seller, the
existence of this Agreement and the terms of this Agreement shall be kept
confidential and shall not be disclosed by Sellers, Purchasers or their
respective representatives, in any manner whatsoever, in whole or in part,
except (1) with the prior written consent of the non-disclosing party (which
consent may be withheld in the non-disclosing party’s or parties’ sole and
absolute discretion), (2) to the extent that such document or information is
publicly available, or (3) as may be necessary for Sellers, Purchaser’s or any
of their respective representatives to comply with applicable laws, including,
without limitation, governmental regulatory, disclosure, tax and reporting
requirements, to comply with other requirements of regulatory and supervisory
authorities and self-regulatory organizations having jurisdiction over any
Seller or such Seller’s representatives; or to comply with regulatory or
judicial processes.  Furthermore, except
as expressly permitted pursuant to the provisions of subparts (2) or (3) of
this Section 24.B, under no circumstances shall Purchaser use the name “Knuppe”
or disclose the name “Knuppe” without the express prior written consent of
Sellers (which consent may be withheld in Sellers’ sole and absolute
discretion).  Purchaser shall give
Sellers advance written notice of Purchaser’s use of the name “Knuppe” in
accordance with the provision of this Section 24.B, which notice 

 34
 

 

shall include a reference to the applicable laws which require such
disclosure.  Sellers hereby disclose to
Purchaser that Seller may have inadvertently disclosed the nature of this
Agreement to the property manager(s) of the Hayward Property.  Purchaser expressly acknowledges and agrees
that the foregoing limited inadvertent disclosure shall not be deemed a default
hereof.

25.          Payment of Commissions.   
Each party hereto represents and warrants that it has employed no
brokers or real estate agencies in the creation of or the negotiations relating
to this Agreement, and each party shall indemnify, defend and hold harmless the
other party by reason of any breach of such party of its warranty and
representation under this section.  The
provisions of this section shall survive Closing.

26.          Agreement Not to Compete. 
Intentionally Deleted.

27.          Successors and Assigns.  
Subject to the restrictions on assignment set forth below, this
Agreement shall be binding upon and inure to the benefit of Sellers and
Purchaser and their respective estates, personal representatives, heirs,
devisees, legatees, successors and permitted assigns.  Purchaser may not assign any of its rights
and/or delegate any of its obligations under this Agreement without first
obtaining the prior written consent of the Sellers, which consent may be
withheld by Sellers in their sole and absolute discretion, provided that Sellers’
consent shall not be required for an assignment to an “affiliated” company (as
defined hereafter).  Any assignee as may
be consented to by Sellers or which is permitted under this Section shall
expressly assume in writing all obligations of Purchaser under this Agreement
and shall further acknowledge and agree in writing to be bound by all of the
provisions of this Agreement as if the assignee had originally executed this
Agreement as purchaser.  Notwithstanding
any assignment as may be consented to by Sellers or which is permitted under
this Section, the named purchaser hereunder shall not be released, and shall
remain liable for, all obligations of the party which is the Purchaser under
this Agreement.  An “affiliated” company
shall mean an entity that controls, is controlled by, or is under common
control with the Purchaser.

28.          Notices.  Any notice, approval, waiver,
objection or other communication required or permitted to be given hereunder or
given in regard to this Agreement by one party to the other shall be in writing
and the same shall be deemed to have been served and received (a) if hand
delivered, when delivered in person to the address set forth hereinafter for
the party to whom notice is given; (b) if by overnight delivery when received
by the other party; or (c) if by facsimile, when received by the other party at
the number hereinafter specified as evidenced by the confirmation receipt of
the Sender; provided, however, that if such facsimile is received after 5:00
p.m. Pacific Time, such notice shall be deemed received on the next
business  day.  Any party may change its address for notices
by notice theretofore given in accordance with this section:

	
  If to Sellers:

  	
  AAAAA Rent-A-Space 

  Attn: Dr. H. James Knuppe 

  4545 Crow Canyon Place 

  Castro Valley, CA 94552 

  Tel. (510) 727-1800 x 311 

  Fax. (510) 727-0185 

  Email. Knuppe@aol.com

  

 

 35
 

 

	
  With a Copy to:

  	
  Miller, Starr & Regalia A

  ttn: Eugene Miller & Hans Lapping 

  1331 N. California Blvd., 5th Flr. 

  Walnut Creek, CA 94596 

  Tel. (925) 935-9400 

  Fax. (925) 933-4126 

  Email. ehm@msandr.com & hl@msandr.com

  
	
   

  	
   

  
	
  If to Purchaser:

  	
  Extra Space Storage LLC 

  Attn: David L. Rasmussen 

  2795 E. Cottonwood Parkway, #400 

  Salt Lake City, UT 84121 

  Tel. 801-365-4473 

  Fax 801-365-4947 

  Email: drasmussen@extraspace.com

  
	
   

  	
   

  
	
  With a Copy to:

  	
  Steven E. Tyler 

  Holland & Hart LLP 

  60 East South Temple, Suite 2000 

  Salt Lake City, Utah 84111 

  Tel. 801-595-7800 

  Fax 801-364-9124 

  Email: setyler@hollandhart.com

  

 

29.          Timing.  If any date herein (except the
Proration Date) shall fall on a Saturday, Sunday, Monday or national or state
holiday (“Non-business Day”), the date shall
automatically be advanced to the first Tuesday thereafter; but if that day is a
Non-business Day, then the date shall be the next business day.

30.          Further Assurances.  From
time to time, at either party’s reasonable request, whether on or after
Closing, and without further consideration, the other party shall execute and
deliver any further commercially reasonable instruments of conveyance and take
such other commercially reasonable actions as the requesting party may
reasonably require to complete the transfer of the Properties to Purchaser.

31.          Counterparts.  This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.  Delivery of the executed Agreement may be
accomplished by facsimile transmission, and if so, the facsimile copy shall be
deemed an executed original counterpart of the Agreement.  All executed counterparts together shall
constitute one and the same document, and any signature pages, including
facsimile copies thereof, may be assembled to form a single original document.

32.          Attorney’s Fees.  Each party shall bear its own
attorneys’ fees in connection with the preparation and negotiation of this
Agreement and any controversy, claim or dispute between or among the parties.

33.          Time of Essence.  Time is of the essence of this Agreement.

34.          Survival. 
All provisions that expressly survive the Closing or
termination of this Agreement shall survive.

35.          Governing Law.  This Agreement and all
transactions contemplated hereby shall be governed by, construed and enforced
in accordance with the laws of the State of California with the exception 

 36
 

 

of issues of title to each Property which will be construed in
accordance with the laws of the State in which a particular Property is
located.  The parties agree that this Agreement
has been made in Castro Valley, California and that exclusive jurisdiction for
matters arising under this Agreement shall be in the State courts in Alameda
County, California.  Each party, by
signing this Agreement, irrevocably consents to and shall submit to such
jurisdiction.

36.          Entire Agreement and Amendments.  This
Agreement, together with all exhibits attached hereto or referred to herein,
contain all representations and the entire understanding between the parties
hereto with respect to the subject matter hereof.  Any prior correspondence, memoranda or
agreements are replaced in total by this Agreement and exhibits hereto.  This Agreement may only be modified or amended
upon the written consent of both parties.

37.          No Recordation. 
There shall be no recordation of either this Agreement or any memorandum
hereof or any affidavit pertaining hereto, and any such recordation of this
Agreement or memorandum hereof or affidavit pertaining hereto by any party
hereunder shall constitute a material default hereunder by such party, and
non-defaulting shall have all rights and remedies expressly available to such
party hereunder.

38.          Severability.  If
any provision of this Agreement or application to any party or circumstance
shall be determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances, other than those as to which
it is so determined invalid or unenforceable, shall not be affected thereby,
and each provision hereof shall be valid and shall be enforced to the fullest
extent permitted by law.

39.          Participation in Drafting.  The
language of this Agreement shall be in all cases construed simply according to
its fair meaning and not strictly for or against any of the parties
hereto.  Sellers and Purchaser each
acknowledge that they participated equally in the drafting of this Agreement
and, accordingly, no court construing this Agreement shall construe it more
stringently against one party than any other.

40.          Exhibits and Schedules. 
Exhibit “A” through Exhibit “L”, inclusive, and Schedule 17.A(xiii) are
hereby incorporated herein.

41.          Seller’s Access to Records.  For
a period of four (4) years subsequent to the Closing Date, Purchaser agrees to
reasonably cooperate with Sellers and Sellers’ agents, employees and
representatives in the event of Sellers’ need to respond to any legal
requirement, including any tax audit, by allowing Sellers and Sellers’ agents,
employees and representatives access, upon reasonable advance written notice
(which notice shall identify the nature of the information sought by Sellers),
at all reasonable times during business hours to examine and make copies of any
and all files and records delivered by Sellers to Purchaser.  The provisions of this Section shall survive
the Closing and the recordation of the Deed for a period of four (4) years and
shall not merge into the Deed and the other documents and instruments delivered
at Closing.

42.          1031 Exchange. 
Purchaser and/or Sellers may desire to effectuate a like-kind exchange
pursuant to Section 1031 of the Internal Revenue Code (the “Code”) in connection with this purchase or sale of the
Properties.  Purchaser and Sellers (as
applicable, the “Cooperating Party”) agree to use
reasonable efforts to accommodate the other (as applicable, the “Electing Party”) in effectuating a like-kind exchange
pursuant to Section 1031 of the Code in connection with the sale of any
Property; provided however, that (a) such exchange does not directly or
indirectly reduce the Purchase Price, (b) such exchange will not delay or
otherwise adversely affect any Closing, (c) there is no additional unreimbursed
loss, cost, damage, tax, expense or adverse consequence incurred by the
Cooperating Party resulting from, or in connection with, such exchange, (d) the
Electing Party indemnifies, defends, and hold harmless the Cooperating Party
of, from and against any such loss, cost, damage, tax, expense or adverse
consequence (including reasonable attorneys’ 

 37
 

 

fees), (e) all documents to be executed by the Cooperating Party in
connection with such exchange shall be subject to the approval of the
Cooperating Party, which approval shall not be unreasonably withheld provided
that the Electing Party has otherwise fully complied with the terms and
provisions of this Section, and shall expressly state, without qualification,
that the Cooperating Party (x) is acting solely as an accommodating party to
such exchange, (y) shall have no liability with respect thereto, and (z) is
making no representation or warranty that the transactions qualify as a
tax-free exchange under Section 1031 of the Code or any applicable state or
local laws, (f) in no event shall the Cooperating Party be obligated to acquire
any property or otherwise be obligated to take title, or appear in the records
of title, to any property in connection with such exchange, and (g) the
Electing Party shall pay all of the costs and expenses (including, without
limitation, reasonable legal fees and expenses) reasonably incurred by the
Cooperating Party from and after the date of this Agreement in connection with
the consideration and/or consummation of any such exchange.  The provisions of this Section shall survive
the Closing or any termination of this Agreement.

[Signatures on Following Pages]

 38
 

 

IN WITNESS WHEREOF, the parties have executed
this Purchase and Sale Agreement.

	
  

  	
  SELLERS: 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AAAAA RENT-A-SPACE, ALAMEDA, LTD.,
  LIMITED PARTNERSHIP, a California limited partnership  

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS - ALAMEDA, INC., a
  Nevada corporation, its general partner  

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AAAAA RENT-A-SPACE, ALAMEDA II, LTD. LIMITED
  PARTNERSHIP, a
  California limited partnership 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS CO., INC., a
  California corporation, its general partner 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AAAAA RENT-A-SPACE, BERKELEY I, LTD., LIMITED
  PARTNERSHIP, a California limited partnership By:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS CO., INC., a
  California corporation, its general partner 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AAAAA RENT-A-SPACE BERKELEY II, LTD., LIMITED
  PARTNERSHIP, a California limited partnership 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS CO., INC., a
  California corporation, its general partner 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 39
 

 

	
  

  	
  AAAAA RENT-A-SPACE — CASTRO VALLEY, LTD. LIMITED
  PARTNERSHIP, a California limited partnership 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS CO., INC., a
  California corporation, its general partner 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AAAAA RENT-A-SPACE — COLMA, LTD. LIMITED
  PARTNERSHIP, a California limited partnership 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS - COLMA, INC.,
  a Nevada corporation, its general partner 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 40
 

 

	
  

  	
  AAAAA RENT-A-SPACE, HAYWARD, LTD., LIMITED
  PARTNERSHIP, a California limited partnership 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS - HAYWARD, INC.,
  a Nevada corporation, its general partner 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AAAAA RENT-A-SPACE — MAUI, A LIMITED
  PARTNERSHIP, a
  Hawaiian limited partnership 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS CO., INC., a
  California corporation, its general partner 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AAAAA RENT-A-SPACE, SAN LEANDRO, LTD., LIMITED
  PARTNERSHIP, a
  California limited partnership 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS — SAN LEANDRO, INC.,
  a Nevada corporation, its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 41
 

 

	
  

  	
  AAAAA RENT-A-SPACE, SAN PABLO, LTD. LIMITED
  PARTNERSHIP, a
  California limited partnership 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS CO., INC., a
  California corporation, its general partner 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AAAAA RENT-A-SPACE — VALLEJO, LTD. LIMITED
  PARTNERSHIP, a
  California limited partnership 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  KN PRODUCTIONS CO., INC., a
  California corporation, its general partner 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Michael Knuppe

  
	
   

  	
   

  	
  Name:

  	
  Michael Knuppe

  
	
   

  	
   

  	
  Title:

  	
  President 

  
	
   

  	
   

  	
  Date:

  	
  12-08-06

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EXTRA SPACE STORAGE LLC 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth M. Wolley

  
	
   

  	
  Printed Name: Kenneth M. Wolley

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  
					

 

The foregoing Agreement is approved this      day
of December, 2006, by the following:

	
  

  	
  /s/ H. James Knuppe

  
	
   

  	
  H. James Knuppe

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Barbara Knuppe

  
	
   

  	
  Barbara Knuppe

  

 

 42Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT WITH RESERVE OF
OWNERSHIP (HEREINAFTER REFERED TO AS “AGREEMENT”) ENTERED INTO BY AND
BETWEEN CHEROKEE ELECTRÓNICA, S.A. DE C.V., REPRESENTED IN THIS ACT BY MESSRS.
JEFFREY FRANK AND ADOLFO ARTECHE, (HEREINAFTER REFERED TO AS “SELLER”);
AND INMOBILIARIA HONDARRIBIA, S.A. DE C.V., REPRESENTED IN THIS ACT BY MR. JUAN
MANUEL GÓMEZ ARREOLA (HEREINAFTER REFERED TO AS “BUYER”), IN ACCORDANCE
WITH THE FOLLOWING REPRESENTATIONS AND CLAUSES:

REPRESENTATIONS

I. The Seller  hereby
represents through its representative that as of the date hereof:

A.           It
is a variable capital limited liability company (sociedad de
responsabilidad limitada de capital variable), duly organized and
validly existing, under the laws of the United Mexican States (hereinafter, “México”),
as it is evidenced under the public deed number 20,612 dated June 8, 1988,
granted before the testimony of Mr. Álvaro Villalba Valdés, Notary Public
number 12 of the Judicial District of Texcoco, which first testimony was duly
registered in the Public Registry of Commerce. A copy of such public deed is
attached hereto as Exhibit A.

B.             As
it is evidenced by public deed number 4,379 dated February 14, 2007, granted
before the testimony of Mr. Jaime Maytorena Martínez-Negrete, Notary Public
number 86 of the city of Guadalajara, State of Jalisco, which first testimony
is pending to be registered in the Public Registry of Commerce, the execution
of this Agreement was approved by means of a board of director’s meeting of the
Seller. A copy of such public deed is attached hereto as Exhibit B.

C.             Its
legal representative has the sufficient and necessary authority for the
execution of this Agreement, authorities that as to the date hereof have not
been modified, limited or revoked in any manner, as it is evidenced in the
public deeds abovementioned.

D.            By
means of the public deeds attached hereto as Exhibit “C”, the Seller evidences
the acquisition of the real state property with a total surface area of
6,900.06 m2 (Six thousand nine hundred square meters 06/100), with a
construction with a total surface area of 3,614.20 m2 (three thousand six
hundred and fourteen square meters 20/100) (hereinafter, the “Property”),
A copy of such public deed is attached hereto as Exhibit
C.

E.              It
is the owner of the assets and equipment referred to in Exhibit “D”
hereof (the “Equipment”), which is currently located in the Property.
The property to such Equipment is dully evidenced in the invoices which form
part of such Exhibit “D” hereof.

 1
 

 

F.              As
for the date of this Agreement, the Property and Equipment are free form liens
and encumbrances, nor subject to any legal procedure of any nature which may
become in an obstruction for the transfer of such under this Agreement by the
Buyer. The Seller evidences such condition in respect to the Property, by means
of the No-Liens Certificates, which are attached hereto as Exhibit “E”.

G.             As
of the date of his Agreement, the Property nor the Equipment have not been
sailed, offered nor in any other way compromised in respect to its property nor
use to any third party; and consequently, as of this date no legal impediment
exists in order for Seller to transfer the Property and the Equipment in favor
of  Buyer.

H.            As
of the date of this Agreement, the Property is in compliance with all the tax
payments, rights and other contributions related to the same, including without
limitation, such payments in respect of property tax, electric and water
services, as such are dully evidenced hereto in Exhibit “F”.

I.                 Wishes
to execute this Agreement in order to transfer the title of the Property and
Equipment, in favor of the Buyer, pursuant to the terms and conditions hereto.

II. The Buyer  hereby
represents through its representative that as of the date hereof:

A.           It
is a variable capital limited liability company (sociedad de
responsabilidad limitada de capital variable), duly organized and
validly existing, under the laws of México, as it is evidenced according to
public deed number 1,018 dated January 29, 2007, granted before the testimony
of Mr. Jorge Gerardo Ortiz Monasterio, Public Broker number 43 of the state of
Jalisco, which first testimony is currently pending to be registered before the
Public Registry of Commerce. A copy of such public deed is attached hereto as Exhibit G.

B.             Its
legal representative has the sufficient and necessary authority for the
execution of this Agreement, as it is evidenced by public deed abovementioned,
authorities that as to the date hereof have not been modified, limited or
revoked in any manner.

C.             Wishes
to execute this Agreement in order to purchase the Property and Equipment.

By means of the representations above, the parties
hereby agree to enter into this Agreement, in accordance with the following:

C L A U S E S

FIRST. Purpose.

 2
 

 

Seller hereby sells to the Buyer, and the Buyer
acquires for itself, the Property and Equipment, with reserve of ownership (reserva de dominio), in its present conditions (ad corpus).

SECOND.
Price

The
parties hereby agree that the Buyer will pay in favor of the Seller as a
purchase price for the acquisition of the Property and Equipment in the total
amount of $13,500,000.00 (thirteen million and five hundred thousand pesos
00/100 M.N.) (the “Price”), which will be paid as provided in clause
three below, by means of a confirmed wire transfer in immediately available
funds in favor of the Seller in the following account:

	
  Client:

  	
   

  	
  Cherokee Electrónica, S.A. de C.V.

  
	
  Bank:

  	
   

  	
  Banco Santander-Serfin, S. A.

  
	
  Account Number:

  	
   

  	
  655-00742092

  
	
  Account “CLABE”:

  	
   

  	
  014320655007420924

  
	
  Branches:

  	
   

  	
  Plaza del Sol, número 4662.

  
	
  City:

  	
   

  	
  Guadalajara, Jalisco, México.

  

The parties hereby agree
that the Price does not include the payment of any tax, including without
limitation, the payment of the Value Added Tax (the “VAT”) as set forth
by the Value Added Tax Regulation (Ley del Impuesto al Valor
Agregado) in force. In consequence, Buyer hereby agrees to pay in
favor of Seller at the formalization date of this Agreement before Notary
Public, the amount of VAT which corresponds to the current appraisal value of
the constructions over the Property (the “Construction Value”) and to
the current value of the Equipment; such amounts will be withheld by Seller for
its payment to the corresponding tax authorities.

In order to determine payment of the VAT over the
Construction Value, the Buyer is obligated to perform all necessary acts in
order to deliver to Seller, in anticipation to the formalization of this
Agreement before Notary Public, of an appraisal of the construction over the
Property, which shall be previously approved by the corresponding tax
authorities. Additionally, the Buyer hereby agrees to pay the Seller any
difference that could exist in the future regarding such payment of the VAT, in
case of any change in the current applicable tax regulations or for any other
reason.

THIRD. Price Payment Form

The
parties hereto agree that the Price will be paid to the Seller as follows:

(i)             15%
(fifteen per cent) of the Price, that is, the amount of $2,025,000.00 M.N. (Two
Million Twenty five Thousand pesos 00/100 M.N.), is paid at the execution date
of this Agreement to the Seller; in accordance to that, this agreement will be
the receipt of payment.

 

 3
 

 

(ii) 85% (eighty five per cent) remainder of the Price, that is, the
amount of $11,475,000.00 M.N. (Eleven Million four hundred seventy five
thousand pesos 00/100 M.N.), plus the total amount which corresponds to the VAT
of the Construction Value and Equipment, will be paid to the Seller on April 30,
2007, date on which the parties will formalize this Agreement in a public
instrument and will perform the delivery of the invoices which evidence the
property of the Equipment.

FOURTH. Clearance of Property’s title.

Seller hereby agrees that it shall reimburse and be
responsible in terms of the applicable regulation for any existing encumbrance
in respect to the Property. Additionally, Seller will transfer the Property and
Equipment, free form liens and encumbrances, nor subject to any legal procedure
of any nature which may become in an obstruction for the transfer, in
compliance with all the tax payments, rights and other contributions related to
the same, including without limitation, such payments in respect of property
tax, electric and water services, as it will evidence such conditions by
delivering to Buyer of the corresponding documents upon formalization of this
Agreement.

FIFTH. Agreement Formalization

The
parties hereby agree to formalize this agreement before a Mexican Notary
Public, on April 30, 2007, date in witch the Buyer will pay the Seller the
remainder 85% (eighty five per cent) of the Price and the total amount which
corresponds to the payment of the VAT.

The
parties hereby agree that such formalization of this agreement in favor of
Buyer, may be granted in favor of such third party appointed by Buyer with at
least 5 days in anticipation to the formalization date of this agreement,
before one of the following Mexican Notary Public, as appointed by Seller: i)
Mr. Juan Carlos Vázquez Martín, Notary Public number 87 in the district of
Guadalajara, Jalisco, or ii) Mr. Pablo González Vázquez, Notary Public number
35 in the district of Zapopan, Jalisco, or iii) Mr. Ernesto Macías Ávila,
Notary Public number 5 in the district of Chapala, Jalisco.

The
Seller hereby grants in favor of such Notary Public to be appointed, all the
necessary faculties in order to perform the necessary actions for the execution
of the corresponding public deed, and to obtain any authorizations which may be
required under the applicable regulation.

SIXTH. 
Reservation of ownership and possession

In
accordance with to article 2312 of the Civil Federal Code (Codigo Civil Federal) in force, the Seller
reserves for itself the ownership and possession of the property until the Buyer
pays in full the Price and VAT in pursuit to the terms of this agreement.

The
Parties may not sell, transfer, encumber or trespass the possession, domain, or
any rights pertaining to neither the Property nor the Equipment until the
Price, VAT and all 

 4
 

 

other
obligations arising from this Agreement are fulfilled. The Parties acknowledge
knowing all the civil and criminal responsibilities and penalties which may
arise from the breach of this provision. Notwithstanding the above, such
prohibition shall not limit the right of Buyer to formalize this Agreement in
favor of such third party appointed by it, once it has complied with all of the
obligations set forth in this Agreement.

Moreover, the parties agree that the Seller reserves
for itself the possession of the Property and Equipment, which shall be
delivered by Seller to Buyer upon payment in full of the Price and VAT, and
until this Agreement is formalized and invoices evidencing the property of the
Equipment have been delivered.

SEVENTH.  Penalty.

Any of the Parties may, at its election, may
anticipately terminate this Agreement, being such party entitled and able to
demand the fulfillment of the obligations by the other party, or to terminate
this Agreement, in any of the following events:

a)              If
the Buyer tries to assign or encumber, in any form, the rights which may arise
from this Agreement, without the written consent from the Seller before the
formalization of this Agreement;

b)             If
the Buyer defaults with any of its obligations under this Agreement;

c)              Upon
the occurrence of an event by virtue of which the payment obligations set forth
in this Agreement may be accelerated in terms of the applicable regulation;

d)             If
the Seller defaults with any of its obligations under this Agreement,
including, without limitation, the existence of any lien or encumbrance of the
Property and Equipment.

In case that the Agreement is terminated due to any of
the aforementioned causes, Seller shall be obligated to reimburse in full the
Price and VAT received from Buyer, except if such termination results from
Buyers’ default of any of its obligations and in which Seller decides to demand
the fulfillment of Buyer’s obligations in accordance with article 1784 of the
Civil Code of Jalisco and its correlative article in the Mexican state’s
regulation. In such case, such reimbursement shall be performed in the
following 30 days after the termination of this Agreement. If applicable, if
Seller does not perform such reimbursement in such period, Seller will be
obligated to pay monthly interests on a 3% rate over such amounts, for each
month of delay in such reimbursements.

EIGHTH.  Taxes and expenses.

The parties hereby agree that any and all expenses and
fees arising from the formalization of this Agreement before notary public, its
registry before the Public Registry of Property (Registro Público de la Propiedad) and all taxes arising from
the acquisition of the Property and Equipment under this Agreement, will be
beard exclusively by the Buyer. More over, the Seller will be responsible for
the payment of the income taxes arising from 

 5
 

 

the sale of the Property and the payment of the VAT to the
corresponding tax authorities once such VAT is paid in full pursuant to the
provisions of this Agreement by Buyer.

NINTH. Current status of the Property and
Equipment.

The Buyer hereby agrees and confirms that he has
performed all necessary diligence and examinations over the Property and the
Equipment. Consequently, it agrees to purchase the Property in its current
conditions, “as is” and “where is”. For these purposes, the parties hereby
agree that Seller will deliver a document to Buyer evidencing the existence of
the Equipment and its location in the Property before the formalization of this
Agreement. Accordingly, Buyer hereby waives any present or future right that it
may be entitled with, to file any claim, complaint or action of any nature
against Seller in respect to any hidden defects attributable to the Property
and Equipment. Therefore, Buyer hereby releases, discharges and disclaims
Seller in respect to any present or future right that it may be entitled with
thereof.

TENTH. Notices.

All notices or other communications which are required
or permitted hereunder shall be in writing and shall be deemed sufficiently
given if performed to the addresses set forth below or such other address as
the addressee may have specified in a notice duly given to sender:

If to the Seller

Avenida Patria No. 179

Municipality of “El Manantial”

Guadalajara, Jalisco

México. C.P. 44970.

If to the Buyer

Calzada Independencia Sur no. 574

Municipality: Centro

Guadalajara, Jalisco.

México.

ELEVENTH. Applicable
law and jurisdiction.

This Agreement will be governed by and construed in
accordance with the Mexican applicable laws. For the interpretation and compliance
with the terms of this agreement, the Parties expressly agree to submit
themselves to the jurisdiction of the competent courts of the city of
Guadalajara, State of Jalisco, waiving to any other preferential jurisdiction
by means of their present or future domiciles or otherwise.

TWELVETH. Amendments.

Neither party hereto shall be bound by any
termination, amendment, supplement, waiver or modification of any term hereof
unless such party shall have consented thereto in writing. This Agreement may
not be amended, modified or supplemented without the consent of both of the
parties hereto.

 6
 

 

THIRTEENTH.  Headings. 

The headings used in this Agreement are for ease of
reference only and shall not be used to interpret or to construe any of the
provisions of this Agreement.

FOURTEENTH. Severability.

In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.

FIFTEENTH. Entire
Agreement.

This Agreement (including the Exhibits attached
hereto) contains the entire agreement between the Parties with respect to the
subject matter hereof and supersedes all prior agreements, negotiations and
understandings.

This Agreement is
executed in Spanish language. Any translation into English of this Agreement
shall be used by the parties for information purposes only.

IN WITNESS WHEREOF, each
of the parties hereto, intending to be legally bound, have caused this
Agreement (including its exhibits) to be duly executed on its behalf on
February 22, 2007.

 

	
  Seller

  Cherokee Electrónica, SA. de C.V.

  	
   

  	
  Buyer

  Inmobiliaria Hondarribia, S.A. de C.V.

  
	
   

  	
   

  	
   

  
	
  /s/ Jeffrey
  Frank 

  	
   

  	
   

  
	
  By: Jeffrey Frank

  	
   

  	
   

  
	
  Position: legal representative

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Adolfo
  Arteche

  	
   

  	
   

  
	
  By: Adolfo Arteche

  	
   

  	
   

  
	
  Position: legal representative

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Juan Manuel Gómez Arreola

  
	
   

  	
   

  	
  By: Juan Manuel
  Gómez Arreola

  
	
   

  	
   

  	
  Position: legal
  representative

  

 

 7

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