-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WNwDLawV/uU38CxZMVNUW76y4qTSaiM1Wyp0ZB4lpE6CU4NPXBZZPEZOSFxuK5eH SNd4QWEx8vyFJbx1gzy/lw== /in/edgar/work/0000004457-00-000105/0000004457-00-000105.txt : 20001114 0000004457-00-000105.hdr.sgml : 20001114 ACCESSION NUMBER: 0000004457-00-000105 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERCO /NV/ CENTRAL INDEX KEY: 0000004457 STANDARD INDUSTRIAL CLASSIFICATION: [7510 ] IRS NUMBER: 880106815 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11255 FILM NUMBER: 761463 BUSINESS ADDRESS: STREET 1: 1325 AIRMOTIVE WY STE 100 CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: 7756886300 MAIL ADDRESS: STREET 1: 1325 AIRMOTIVE WAY STREET 2: SUITE 100 CITY: RENO STATE: NV ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: AMERCO DATE OF NAME CHANGE: 19770926 10-Q 1 0001.txt FORM 10-Q 09/30/00 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission Registrant, State of Incorporation I.R.S. Employer File Number Address and Telephone Number Identification No. ________________________________________________________________________________ 1-11255 AMERCO 88-0106815 (A Nevada Corporation) 1325 Airmotive Way, Ste. 100 Reno, Nevada 89502-3239 Telephone (775) 688-6300 2-38498 U-Haul International, Inc. 86-0663060 (A Nevada Corporation) 2727 N. Central Avenue Phoenix, Arizona 85004 Telephone (602) 263-6645 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. 22,075,737 shares of AMERCO Common Stock, $0.25 par value were outstanding at November 10, 2000. 5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were outstanding at November 10, 2000. U-Haul International, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. 2 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements a) Condensed Consolidated Balance Sheets as of September 30, 2000 (unaudited) and March 31, 2000............................... 4 b) Condensed Consolidated Statements of Earnings for the Six months ended September 30, 2000 and 1999 (unaudited)................. 6 c) Condensed Consolidated Statements of Comprehensive Income for the Six months ended September 30, 2000 and 1999 (unaudited).. 7 d) Condensed Consolidated Statements of Earnings for the Quarters ended September 30, 2000 and 1999 (unaudited).................. 8 e) Condensed Consolidated Statements of Cash Flows for the Six months ended September 30, 2000 and 1999 (unaudited)...... 9 f) Notes to Condensed Consolidated Financial Statements - September 30, 2000 (unaudited), March 31, 2000 and September 30, 1999 (unaudited)................................ 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 28 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................. 29 Item 4. Submission of Matters to a Vote of Security Holders............... 30 Item 6. Exhibits and Reports on Form 8-K.................................. 31 3 THIS PAGE LEFT INTENTIONALLY BLANK 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Balance Sheets September 30, March 31, Assets 2000 2000 ------------------------- (Unaudited) (in thousands) Cash and cash equivalents $ 26,408 48,435 Notes and mortgage, net 63,514 49,866 Inventories, net 83,671 84,614 Prepaid expenses 12,003 17,822 Investments, fixed maturities 874,122 884,824 Investments, other 489,359 320,695 Other assets 351,590 336,307 ------------------------ Property, plant and equipment, at cost: Buildings and improvements 817,666 853,403 Rental trucks 1,006,364 1,035,585 Other property, plant, and equipment 653,492 672,122 ------------------------ 2,477,522 2,561,110 Less accumulated depreciation 1,143,096 1,178,448 ------------------------ Total property, plant and equipment 1,334,426 1,382,662 ------------------------ Total Assets $ 3,235,093 3,125,225 ======================== The accompanying notes are an integral part of these consolidated financial statements. 5 September 30, March 31, Liabilities and Stockholders' Equity 2000 2000 ------------------------- (Unaudited) (in thousands) Liabilities: Notes and loans payable $ 1,096,240 1,137,840 Policy benefits and losses, claims and loss expenses payable 553,716 548,043 Liabilities from premium deposits 463,360 461,673 Deferred income taxes 169,441 109,413 Other liabilities 271,478 282,962 ------------------------ Total liabilities 2,554,235 2,539,931 Stockholders' equity: Serial preferred stock - Series A preferred stock - - Series B preferred stock - - Serial common stock - Series A common stock 1,441 1,441 Common stock 9,122 9,122 Additional paid-in capital 311,708 275,242 Accumulated other comprehensive income (50,125) (42,317) Retained earnings 827,536 755,172 Cost of common shares in treasury, net (402,661) (397,000) Unearned ESOP shares (16,163) (16,366) ------------------------ Total stockholders' equity 680,858 585,294 Contingent liabilities and commitments ------------------------ Total Liabilities and Stockholders' Equity $ 3,235,093 3,125,225 ======================== The accompanying notes are an integral part of these consolidated financial statements. 6 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Earnings Six months ended September 30, (Unaudited) 2000 1999 ------------------------- (in thousands, except share and per share data) Revenues Rental revenue $ 680,283 643,030 Net sales 113,961 110,121 Premiums 121,495 107,803 Net investment and interest income 46,604 41,485 ----------------------- Total revenues 962,343 902,439 Costs and expenses Operating expenses 486,828 467,378 Cost of sales 65,974 62,734 Benefits and losses 95,815 84,015 Amortization of deferred policy acquisition costs 16,569 14,981 Lease expense 86,536 64,212 Depreciation, net 44,485 38,551 ----------------------- Total costs and expenses 796,207 731,871 Earnings from operations 166,136 170,568 Interest expense 44,052 39,815 ----------------------- Pretax earnings 122,084 130,753 Income tax expense (43,239) (46,319) ----------------------- Net earnings $ 78,845 84,434 ======================= Earnings per common share: Basic $ 3.35 3.53 Diluted $ 3.35 3.46 ======================= Weighted average common shares outstanding: Basic 21,606,388 21,958,826 Diluted 21,606,388 22,542,159 ======================= The accompanying notes are an integral part of these consolidated financial statements. 7 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income Six months ended September 30, (Unaudited) 2000 1999 ------------------- (in thousands) Comprehensive income: Net earnings $ 78,845 84,434 Changes in other comprehensive income: Foreign currency translation (3,585) 2,605 Fair market value of cash flow hedge (182) 1,497 Unrealized gain on investments (4,041) (8,521) ------------------- Total comprehensive income $ 71,037 80,015 =================== The accompanying notes are an integral part of these consolidated financial statements. 8 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Earnings Quarters ended September 30, (Unaudited) 2000 1999 -------------------------- (in thousands, except share and per share data) Revenues Rental revenue $ 357,535 337,464 Net sales 53,815 52,481 Premiums 66,508 51,727 Net investment and interest income 25,048 21,254 ----------------------- Total revenues 502,906 462,926 Costs and expenses Operating expense 255,184 246,647 Cost of sales 32,777 31,360 Benefits and losses 53,580 40,306 Amortization of deferred policy acquisition costs 8,694 7,019 Lease expense 46,102 32,816 Depreciation, net 21,675 19,772 ----------------------- Total costs and expenses 418,012 377,920 Earnings from operations 84,894 85,006 Interest expense 21,242 19,617 ----------------------- Pretax earnings 63,652 65,389 Income tax expense (22,419) (23,262) ----------------------- Net earnings $ 41,233 42,127 ======================= Earnings per common share: Basic $ 1.77 1.77 Diluted $ 1.77 1.76 ======================= Weighted average common shares outstanding: Basic 21,489,970 21,964,452 Diluted 21,489,970 22,131,119 ======================== The accompanying notes are an integral part of these consolidated financial statements. 9 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Cash Flows Six months ended September 30, (Unaudited) 2000 1999 ------------------- (in thousands) Net cash provided by operating activities 118,092 160,493 ------------------- Cash flows from investing activities: Purchases of investments: Property, plant and equipment (260,914) (182,680) Fixed maturities (52,636) (62,530) Mortgage loans (13,591) (8,395) Proceeds from sale of investments: Property, plant and equipment 231,147 120,403 Fixed maturities 58,550 66,219 Changes in other investments (56,462) (23,960) ------------------- Net cash used by investing activities (93,906) (90,943) ------------------- Cash flows from financing activities: Net change in short-term borrowings (41,566) (147,335) Investment contract deposits 40,128 31,856 Investment contract withdrawals (37,750) (31,519) Changes in other financing activities (7,025) 82,578 ------------------- Net cash used by financing activities (46,213) (64,420) ------------------- Increase (decrease) in cash and cash equivalents (22,027) 5,130 Cash and cash equivalents at beginning of period 48,435 44,505 ------------------- Cash and cash equivalents at end of period $ 26,408 49,635 =================== The accompanying notes are an integral part of these consolidated financial statements. 10 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements September 30, 2000, March 31, 2000 and September 30, 1999 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AMERCO, a Nevada corporation (AMERCO), is the holding company for U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (Real Estate), Republic Western Insurance Company (RepWest) and Oxford Life Insurance Company (Oxford). PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements include the accounts of the parent corporation, AMERCO, and its wholly-owned subsidiaries. All material intercompany accounts and transactions of AMERCO and its subsidiaries have been eliminated. The financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in AMERCO's annual financial statements and notes. The condensed consolidated balance sheet as of September 30, 2000 and the related condensed consolidated statements of earnings for the three and six months ended September 30, 2000 and 1999 and the condensed consolidated statements of comprehensive income and the condensed consolidated cash flows for the six months ended September 30, 2000 and 1999 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such condensed financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The operating results and financial position of AMERCO's consolidated insurance operations are determined on a one quarter lag. There were no effects related to intervening events which would materially affect the consolidated financial position or results of operations for the financial statements presented herein. Certain reclassifications have been made to the financial statements for the three and six months ended September 30, 1999 to conform with the current year's presentation. NEW ACCOUNTING STANDARDS During the quarter ended June 30, 2000, AMERCO adopted Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements", which provides guidance on the recognition, presentation and disclosure of revenue in the financial statements filed with the Securities and Exchange Commission. The adoption of SAB 101 was not material to AMERCO's condensed consolidated financial statements. 11 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 2. INVESTMENTS A comparison of amortized cost to market for fixed maturities is as follows: June 31, 2000 ------------- Par Value Gross Gross Estimated Consolidated or number Amortized unrealized unrealized market Held-to-Maturity of shares cost gains losses value ------------------------------------------------------ (in thousands) U.S. treasury securities and government obligations $ 17,775 $ 17,105 112 (352) 16,865 U.S. government agency mortgage- backed securities $ 16,641 16,559 36 (378) 16,217 Corporate securities $ 66,500 67,252 389 (4,363) 63,278 Mortgage-backed securities $ 34,777 34,243 248 (485) 34,006 Redeemable preferred stocks 4,561 115,174 211 (17,136) 98,249 ---------------------------------------- 250,333 996 (22,714) 228,615 ---------------------------------------- June 30, 2000 ------------- Par Value Gross Gross Estimated Consolidated or number Amortized unrealized unrealized market Available-for-Sale of shares cost gains losses value ------------------------------------------------------ (in thousands) U.S. treasury securities and government obligations $ 41,270 $ 41,863 889 (1,137) 41,615 U.S. government agency mortgage- backed securities $ 35,172 34,899 223 (534) 34,588 Obligations of states and political subdivisions $ 16,135 16,346 407 (160) 16,593 Corporate securities $ 488,333 487,181 1,933 (21,992) 467,122 Mortgage-backed securities $ 35,712 35,464 375 (495) 35,344 Redeemable preferred stocks 1,311 32,675 63 (4,211) 28,527 ---------------------------------------- 648,428 3,890 (28,529) 623,789 ---------------------------------------- Total $ 898,761 4,886 (51,243) 852,404 ======================================== 12 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES A summarized condensed consolidated balance sheet for RepWest is presented below: June 30, ------------------- 2000 1999 ------------------- (in thousands) Investments, fixed maturities $ 392,243 408,273 Receivables 176,416 111,227 Deferred policy acquisition costs 21,450 11,710 Deferred federal income taxes 11,384 11,477 Other assets 63,644 79,752 ------------------- Total assets $ 665,137 622,439 =================== Policy liabilities and accruals $ 325,043 328,114 Unearned premiums 77,364 46,260 Other policyholders' funds and liabilities 52,867 34,515 ------------------- Total liabilities 455,274 408,889 Stockholder's equity 209,863 213,550 ------------------- Total liabilities and stockholder's equity $ 665,137 622,439 =================== A summarized condensed consolidated income statement for RepWest is presented below: Quarter ended Six months ended June 30, June 30, ------------------------------------------ 2000 1999 2000 1999 ------------------------------------------ (in thousands) Premiums $ 41,925 30,775 72,332 64,568 Net investment income 7,744 8,537 15,752 16,689 ----------------- ----------------- Total revenue 49,669 39,312 88,084 81,257 Benefits and losses 35,519 25,428 60,101 53,713 Amortization of deferred policy acquisition costs 3,191 3,437 6,371 6,832 Operating expenses 11,405 7,462 19,717 15,736 ----------------- ----------------- Total expenses 50,115 36,327 86,189 76,281 Income (loss) from operations (446) 2,985 1,895 4,976 Income tax benefit (expense) 273 (939) (590) (1,566) ----------------- ----------------- Net income (loss) $ (173) 2,046 1,305 3,410 ================= ================= 13 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES, continued A summarized condensed consolidated balance sheet for Oxford is presented below: June 30, ------------------- 2000 1999 ------------------- (in thousands) Investments, fixed maturities $ 481,879 473,121 Investments, other 148,115 152,577 Deferred policy acquisition costs 74,787 77,054 Other assets 22,674 45,051 ------------------- Total assets $ 727,455 747,803 =================== Policy liabilities and accruals $ 149,151 151,401 Premium deposits 463,360 457,612 Other policyholders' funds and liabilities 27,327 48,088 ------------------- Total liabilities 639,838 657,101 Stockholder's equity 87,617 90,702 ------------------- Total liabilities and stockholder's equity $ 727,455 747,803 =================== A summarized condensed consolidated income statement for Oxford is presented below: Quarter ended Six months ended June 30, June 30, ---------------------------------------- 2000 1999 2000 1999 ---------------------------------------- (in thousands) Premiums $ 26,020 22,095 51,524 47,207 Net investment income 6,659 4,624 12,363 10,241 ---------------- ---------------- Total revenue 32,679 26,719 63,887 57,448 Benefits and losses 18,061 14,878 35,714 30,302 Amortization of deferred policy acquisition costs 5,503 3,582 10,198 8,149 Operating expenses 7,626 5,653 13,231 12,531 ---------------- ---------------- Total expenses 31,190 24,113 59,143 50,982 Income from operations 1,489 2,606 4,744 6,466 Income tax expense (56) (911) (1,125) (2,172) ---------------- ---------------- Net income $ 1,433 1,695 3,619 4,294 ================ ================ 14 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 4. CONTINGENT LIABILITIES AND COMMITMENTS During the six months ended September 30, 2000, a subsidiary of U-Haul entered into thirty-one transactions and has subsequently entered into one transaction, whereby the subsidiary sold rental trucks, which were subsequently leased back. AMERCO has guaranteed $49,098,000 of residual values at September 30, 2000 for these assets at the end of the respective lease terms. U-Haul also entered into one transaction where it leased computer equipment and one transaction where it leased general rental items (GRI). Following are the lease commitments for the leases executed during the quarter ended September 30, 2000, and subsequently which have a term of more than one year (in thousands): Net activity Year ended Lease subsequent to March 31, Commitments period end Total -------------------------------------------------------- 2001 $ 24,986 1,697 26,683 2002 33,976 4,183 38,159 2003 33,924 4,183 38,107 2004 33,574 4,183 37,757 2005 33,558 4,183 37,741 Thereafter 66,576 10,854 77,430 ------------------------------------ $ 226,594 29,283 255,877 ==================================== In the normal course of business, AMERCO is a defendant in a number of suits and claims. AMERCO is also a party to several administrative proceedings arising from state and local provisions that regulate the removal and/or clean- up of underground fuel storage tanks. It is the opinion of management that none of such suits, claims or proceedings involving AMERCO, individually or in the aggregate are expected to result in a material loss. 5. SUPPLEMENTAL CASH FLOWS INFORMATION The (increase) decrease in receivables, inventories, investment, other and accounts payable and accrued liabilities net of other operating and investing activities follows: Six months ended September 30, 2000 1999 ---------------------- (in thousands) Receivables $ (20,937) (2,917) ====================== Investment, other (refer to Note 7) $ (98,351) - ====================== Inventories $ 943 3,831 ====================== Accounts payable and accrued expenses $ (7,709) (8,595) ====================== 15 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 6. EARNINGS PER SHARE The following table reflects the calculation of the earnings per share:
Weighted Average Common Shares Income Outstanding Per Share (Numerator) (Denominator) Amount _____________ _______________ _________ (in thousands, except share and per share data) Quarter ended September 30, 2000: Earnings from operations $ 41,233 Less: preferred stock dividends 3,241 ------ Basic and diluted earnings per common share 37,992 21,489,970 $ 1.77 ====== ========== ==== Quarter ended September 30, 1999: Earnings from operations $ 42,127 Less: preferred stock dividends 3,313 ------ Basic earnings per common share 38,814 21,964,452 $ 1.77 Effects of dilutive securities - preferred stock conversion 72 166,667 ------ ---------- Diluted earnings per common share 38,886 22,131,119 $ 1.76 ====== ========== ==== Six months ended September 30, 2000: Earnings from operations $ 78,845 Less: preferred stock dividends 6,481 ------ Basic and diluted earnings per common share 72,364 21,606,388 $ 3.35 ====== ========== ==== Six months ended September 30, 1999: Earnings from operations $ 84,434 Less: preferred stock dividends 7,018 ------ Basic earnings per common share 77,416 21,958,826 $ 3.53 Effect of dilutive securities - Series B preferred shares 537 583,333 ------ ---------- Diluted earnings per common share 77,953 22,542,159 $ 3.46 ====== ========== ====
16 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 7. RELATED PARTIES During the six months ended September 30, 2000, subsidiaries of AMERCO held various senior and junior notes with SAC Holding Corporation and its subsidiaries (SAC Holdings). The voting common stock of SAC Holdings is held by Mark V. Shoen, a major stockholder of AMERCO. AMERCO's subsidiaries received interest payments of $15,431,564 and principal payments of $71,591 from SAC Holdings during the six months ended September 30, 2000. The terms of the notes with SAC Holdings are consistent with the terms of notes held by U-Haul for other properties owned by unrelated parties and managed by U-Haul. These amounts are reflected in Investments, other of the condensed consolidated balance sheet. During the six months ended September 30, 2000, a subsidiary of AMERCO funded through a note the purchase of properties and construction costs for SAC Holdings of approximately $141,087,000. This amount is reflected in Investments, other of the condensed consolidated balance sheet. U-Haul currently manages the properties owned by SAC Holdings pursuant to a management agreement, under which U-Haul receives a management fee equal to 6% of the gross receipts from the properties. Management fees of $2,690,000 and $2,269,000 were received during the six months ended September 30, 2000 and 1999, respectively. The management fee percentage is consistent with the fees received by U-Haul for other properties owned by unrelated parties and managed by U-Haul. In June 2000, Real Estate completed the sale of twenty-four storage properties to Twelve SAC Self-Storage Corporation, Thirteen SAC Self-Storage Corporation and Fourteen SAC Self-Storage Corporation, subsidiaries of SAC Holding Corporation, for $98,351,000. Real Estate received cash and notes from the sale. The gain is reflected in the equity section of the condensed consolidated balance sheet. Management believes that the foregoing transactions were consummated on terms equivalent to those that prevail in arm's-length transactions. 17 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 8. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA Industry Segment Data - AMERCO has four industry segments represented by Moving and Storage Operations (U-Haul), Real Estate (AREC), Property and Casualty Insurance (RepWest) and Life Insurance (Oxford). Information concerning operations by industry segment follows:
Moving and Property/ Adjustments Storage Real Casualty Life and Operations Estate Insurance Insurance Eliminations Consolidated ---------------------------------------------------------------- (in thousands) Six months ended September 30, 2000 ------------------ Revenues: Outside $ 806,415 6,318 86,418 63,192 - 962,343 Intersegment - 34,845 1,666 695 (37,206) - --------- ------- ------- ------- --------- --------- Total revenues $ 806,415 41,163 88,084 63,887 (37,206) 962,343 Depreciation/ amortization $ 48,687 5,384 6,755 10,625 - 71,451 Interest expense $ 44,052 22,244 - - (22,244) 44,052 Pretax earnings $ 107,345 8,100 1,895 4,744 - 122,084 Income tax $ (38,689) (2,835) (590) (1,125) - (43,239) Identifiable assets $1,437,776 747,255 665,137 727,455 (342,530) 3,235,093 Six months ended September 30, 1999 ------------------ Revenues: Outside $ 761,710 5,996 77,907 56,826 - 902,439 Intersegment - 35,298 3,350 622 (39,270) - --------- ------- ------- ------- --------- --------- Total revenues $ 761,710 41,294 81,257 57,448 (39,270) 902,439 Depreciation/ amortization $ 40,416 5,041 6,985 11,357 - 63,799 Interest expense $ 39,815 20,273 - - (20,273) 39,815 Pretax earnings $ 105,395 13,916 4,976 6,466 - 130,753 Income tax $ (37,710) (4,871) (1,566) (2,172) - (46,319) Identifiable assets $1,400,884 708,010 622,439 747,803 (352,003) 3,127,133
18 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 8. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Moving Property/ Adjustments and Storage Real Casualty Life and Operations Estate Insurance Insurance Eliminations Consolidated ---------------------------------------------------------------------- (in thousands) Quarter ended September 30, 2000 ------------------ Revenues: Outside $ 418,193 3,802 48,590 32,321 - 502,906 Intersegment - 17,102 1,079 358 (18,539) - --------- ------- ------- ------- -------- --------- Total revenue $ 418,193 20,904 49,669 32,679 (18,539) 502,906 Depreciation/ amortization $ 24,381 2,632 3,298 5,556 - 35,867 Interest expense $ 21,242 10,911 - - (10,911) 21,242 Pretax earnings $ 58,419 4,190 (446) 1,489 - 63,652 Income tax $ (21,177) (1,459) 273 (56) - (22,419) Identifiable assets $1,437,776 747,255 665,137 727,455 (342,530) 3,235,093 Quarter ended September 30, 1999 ------------------ Revenues: Outside $ 394,999 3,039 38,485 26,403 - 462,926 Intersegment - 17,688 827 316 (18,831) - --------- ------- ------- ------- -------- --------- Total revenue $ 394,999 20,727 39,312 26,719 (18,831) 462,926 Depreciation/ amortization $ 21,272 2,566 3,626 6,788 - 34,252 Interest expense $ 19,617 10,035 - - (10,035) 19,617 Pretax earnings $ 53,660 6,138 2,985 2,606 - 65,389 Income tax $ (19,263) (2,149) (939) (911) - (23,262) Identifiable assets $1,400,884 708,010 622,439 747,803 (352,003) 3,127,133
Geographic Area Data - United United (All amounts are in States Canada Consolidated States Canada Consolidated --------------------------------------------------------------- U.S. $'s) Six months ended Quarter ended --------------------------------------------------------------- (in thousands) September 30, 2000 ------------------ Total revenues $ 939,062 23,281 962,343 490,212 12,694 502,906 Depreciation/ amortization $ 69,281 2,170 71,451 34,765 1,102 35,867 Interest expense $ 44,045 7 44,052 21,241 1 21,242 Pretax earnings $ 116,869 5,215 122,084 60,738 2,914 63,652 Income tax $ (43,233) (6) (43,239) (22,413) (6) (22,419) Identifiable assets $ 3,177,402 57,691 3,235,093 3,177,402 57,691 3,235,093 September 30, 1999 ------------------ Total revenues $ 881,585 20,854 902,439 451,357 11,569 462,926 Depreciation/ amortization $ 62,099 1,700 63,799 33,347 905 34,252 Interest expense $ 39,804 11 39,815 19,614 3 19,617 Pretax earnings $ 126,976 3,777 130,753 62,928 2,461 65,389 Income tax $ (46,319) - (46,319) (23,262) - (23,262) Identifiable assets $ 3,082,969 44,164 3,127,133 3,082,969 44,164 3,127,133
19 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 9. SUBSEQUENT EVENTS On November 7, 2000, AMERCO declared a cash dividend of $3,241,000 ($0.53125 per preferred share) to preferred stockholders of record as of November 17, 2000. 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This report contains forward-looking statements. Additional written or oral forward-looking statements may be made by AMERCO from time to time in filings with the Securities and Exchange Commission or otherwise. Management believes such forward-looking statements are within the meaning of the safe- harbor provisions. Such statements may include, but not be limited to, projections of revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services and financing needs or plans, as well as assumptions relating to the foregoing. The words "believe", "expect", "anticipate", "estimate", "project" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. The following disclosures, as well as other statements in this report and in the Notes to AMERCO's Consolidated Financial Statements, describe factors, among others, that could contribute to or cause such differences, or that could affect AMERCO's stock price. GENERAL Information on industry segments is incorporated by reference from "Item 1. Financial Statements - Notes 1, 3 and 8 of Notes to Consolidated Financial Statements". The notes discuss the principles of consolidation, summarized consolidated financial information and industry segment and geographical area data, respectively. In consolidation, all intersegment premiums are eliminated and the benefits, losses and expenses are retained by the insurance companies. RESULTS OF OPERATIONS SIX MONTHS ENDED SEPTEMBER 30, 2000 VERSUS SIX MONTHS ENDED SEPTEMBER 30, 1999 Moving and Storage Operations Revenues consist of rental revenues and net sales. Total rental revenue was $679.1 million and $641.8 million for the six months ended September 30, 2000 and 1999, respectively. Net revenues from the rental of moving related equipment increased by $31.1 million. This increase is primarily attributable to higher truck and trailer rental revenues and storage revenues. Net sales revenues were $114.0 million and $110.1 million for the six months ended September 30, 2000 and 1999, respectively. Revenue growth resulted from an increase in the sale of moving support items and an increase in the sale of hitches. Cost of sales was $66.0 million and $62.7 million for the six months ended September 30, 2000 and 1999, respectively. A higher sales volume contributed to the increase. Operating expenses before intercompany eliminations were $491.8 million and $476.5 million for the six months ended September 30, 2000 and 1999, respectively. Increased expenditure levels for personnel and rental equipment maintenance, due to an increase in truck rental transactions and in fleet size, were primarily responsible. Net depreciation expense was $39.2 million and $33.9 million for the six months ended September 30, 2000 and 1999, respectively. The increase reflects depreciation on the rental truck fleet. Operating profit before tax and intercompany elimination was $121.6 million and $117.9 million for the six months ended September 30, 2000 and 1999, respectively. 21 Real Estate Operations Rental revenue before intercompany eliminations was $36.1 million and $36.5 million for the six months ended September 30, 2000 and 1999, respectively. Intercompany revenue was $34.8 million and $35.3 million for the six months ended September 30, 2000 and 1999, respectively. Net investment and interest income was $5.1 million and $4.7 million for the six months ended September 30, 2000 and 1999, respectively. This increase correlates to an increase in average note and mortgage outstanding. Net depreciation expense was $5.3 million and $4.6 million for the six months ended September 30, 2000 and 1999, respectively. The increase is due to the build out of storage facilities. Operating profit before tax and intercompany elimination was $8.1 million and $13.9 million for the six months ended September 30, 2000 and 1999, respectively. The decrease reflects increases in lease expenses. Property and Casualty RepWest's premiums were $72.3 million and $64.6 million for the six months ended June 30, 2000 and 1999, respectively. General agency premiums were $20.3 million and $8.2 million for the six months ended June 30, 2000 and 1999, respectively. Assumed treaty reinsurance premium was $22.9 million and $20.9 million for the six months ended June 30, 2000 and 1999, respectively. Rental industry revenue was $17.0 million and $23.9 million for the six months ending June 30, 2000 and 1999, respectively. This change was caused by the restructuring of the rental industry Business Auto General Liability Policy. Net investment income was $15.8 million and $16.7 million for the six months ended June 30, 2000 and 1999, respectively. The reduction is attributable to decreased gains and decreased invested assets. Benefits and losses were $60.1 million and $53.7 million for the six months ended June 30, 2000 and 1999, respectively. This increase is due to new agency programs in Non-Standard Auto and Transportation, which were offset by a decrease in rental industry incurred. The amortization of deferred acquisition costs (DAC) were $6.4 million and $6.8 million for the six months ended June 30, 2000 and 1999, respectively. The decrease was related to the timing of inception of new business. Operating expenses were $19.7 million and $15.7 million for the six months ended June 30, 2000 and 1999, respectively. The difference was due to increased personnel, changes in claims handling procedures and commissions on new agency business premium writings. Operating profit before tax and intercompany elimination was $1.9 million and $5.0 million for the six months ended June 30, 2000 and 1999, respectively. The decrease is the result of additional incurred losses and operating expense, and decreased investment income, offset by an increase in earned premiums. 22 Life Insurance Net premiums were $51.5 million and $47.2 million for the six months ended June 30, 2000 and 1999, respectively. The difference was primarily due to a $2.2 million increase in the credit insurance lines and a $2.6 million increase in the Medicare supplement line. Net investment income before intercompany eliminations was $12.4 million and $10.2 million for the six months ended June 30, 2000 and 1999, respectively. The increase was due to improved interest rate spreads on the interest sensitive products and a larger invested asset base. Benefits were $35.7 million and $30.3 million for the six months ended June 30, 2000 and 1999, respectively. Medicare supplement benefits increased $3.7 million from 1999; credit insurance benefits increased $2.1 million from 1999. These increases are primarily due to higher loss ratios. Other health insurance benefits increased $0.8 million for the year primarily from one-time charges. The life insurance lines have had better mortality experience in 2000, resulting in a $1.2 million decrease in benefits from 1999. Amortization of DAC was $10.2 million and $8.1 million for the six months ended June 30, 2000 and 1999, respectively. The increase resulted from a $1.0 million increase in the annuity lines and $1.1 million increase in the credit insurance lines. Operating expenses were $13.2 million and $12.5 million for the six months ended June 30, 2000 and 1999, respectively. The increase is due to premium volume increases. Operating profit before tax and intercompany eliminations was $4.7 million and $6.5 million for the six months ended June 30, 2000 and 1999, respectively. The decrease is due to loss ratios on the Medicare supplement business and Credit insurance business. Interest Expense Interest expense was $44.1 million and $39.8 million for the six months ended September 30, 2000 and 1999, respectively. The increase can be attributed to increases in the average debt outstanding and in the average cost of debt. Consolidated Group As a result of the foregoing, pretax earnings totaled $122.1 million and $130.8 million for the six months ended September 30, 2000 and 1999, respectively. After providing for income taxes, net earnings were $78.8 million and $84.4 million for the six months ended September 30, 2000 and 1999, respectively. 23 QUARTER ENDED SEPTEMBER 30, 2000 VERSUS QUARTER ENDED SEPTEMBER 30, 1999 Moving and Storage Operations Revenues consist of rental revenues and net sales. Total rental revenue was $356.7 million and $336.8 million for the quarters ended September 30, 2000 and 1999, respectively. Net revenues from the rental of moving related equipment increased by $17.8 million. This increase is primarily attributable to higher truck and trailer rental revenues and storage revenues increased $2.1 million due to increases in rates and in the number of storage rooms rented. Net sales revenues were $53.8 million and $52.5 million for the quarters ended September 30, 2000 and 1999, respectively. Revenue growth resulted from the sale of moving support items (i.e. boxes, etc.) which led to the majority of the increase during the quarter. Cost of sales was $32.8 million and $31.4 million for the quarters ended September 30, 2000 and 1999, respectively. Rising material costs from the sale of propane accounted for almost half of the increase. Operating expenses before intercompany elimination were $255.2 million and $250.9 million for the quarters ended September 30, 2000 and 1999, respectively. The increase reflects higher personnel and rental equipment maintenance expenditures associated with an increase in truck rental transactions and inventory levels. Net depreciation expense was $19.0 million and $17.2 million for the quarters ended September 30, 2000 and 1999, respectively. The increase reflects an increase in depreciation recognized on the rental truck fleet. Operating profit before tax and intercompany elimination was $66.7 million and $59.7 million for the quarters ended September 30, 2000 and 1999, respectively. The increase reflects increases in revenues over increases in operating expenses. Real Estate Operations Rental revenue before intercompany eliminations was $17.9 million and $18.4 million for the quarters ended September 30, 2000 and 1999, respectively. Intercompany revenue was $17.1 million and $17.7 million for the quarters ended September 30, 2000 and 1999, respectively. Net investment and interest income was $3.0 million and $2.4 million for the quarters ended September 30, 2000 and 1999, respectively. This increase correlates to an increase in average note and mortgages outstanding. Net depreciation expense remained constant at $2.6 million for the quarters ended September 30, 2000 and 1999. Operating profit before tax and intercompany elimination was $4.2 million and $6.1 million for the quarters ended September 30, 2000 and 1999, respectively. The decrease reflects increases in lease expenses. 24 Property and Casualty RepWest's premiums were $41.9 million and $30.8 million for the quarters ended June 30, 2000 and 1999, respectively. The increase is directly related to general agency premiums, of $12.7 million and $4.2 million for the quarters ended June 30, 2000 and 1999, respectively. Assumed treaty reinsurance premium were $13.2 million and $11.0 million for the quarters ended June 30, 2000 and 1999, respectively. Net investment income was $7.7 million and $8.5 million for the quarters ended June 30, 2000 and 1999, respectively. This resulted from decreased gains and invested assets. Benefits and losses incurred were $35.5 million and $25.4 million for the quarters ended June 30, 2000 and 1999, respectively. The increase is a result of new general agency business writings in Non-Standard Auto and Transportation. The amortization of deferred acquisition costs (DAC) was $3.2 million and $3.4 million for the quarters ended June 30, 2000 and 1999, respectively. The decrease was related to the timing of inception of new business. Operating expenses were $11.4 million and $7.5 million for the quarters ended June 30, 2000 and 1999, respectively. The change is due to increased general and administrative expenses, due to an increase in personnel and overhead required to support new business expansion. Commission expense also increased due to new agency business premium writings on Non-standard Auto and Transportation coverages. Operating profit (loss) before tax and intercompany elimination was ($0.4) million and $3.0 million for the quarters ended June 30, 2000 and 1999, respectively. This decrease is the result of increased incurred losses and operating expense, decreased investment income, offset by an increase in earned premiums. 25 Life Insurance Net premiums were $26.0 million and $22.1 million for the quarters ended June 30, 2000 and 1999, respectively. The change is primarily due to a $1.4 million increase in the credit insurance line and a $1.6 million increase in the Medicare supplement line. Net investment income before intercompany eliminations was $6.7 million and $4.6 million for the quarters ended June 30, 2000 and 1999, respectively. This increase is due to improved spreads on the interest sensitive products timing difference and a larger invested asset base. Benefits were $18.1 million and $14.9 million for the quarters ended June 30, 2000 and 1999, respectively. Medicare supplement benefits increased $1.7 million from 1999 due to higher loss ratios. Credit insurance benefits increased $0.6 million due to volume of insurance. Other health insurance benefits increased $0.7 million due to one-time charges. Amortization of DAC was $5.5 million and $3.6 million for the quarters ended June 30, 2000 and 1999, respectively. Annuity lines and credit insurance lines increased $0.8 million and $1.1 million, respectively for the quarter ending June 30, 2000. Operating expenses were $7.6 million and $5.7 million for the quarters ended June 30, 2000 and 1999, respectively. This increase included $0.8 million in Medical Supplement commissions to agents, $0.4 million for outside fronting fees and administration costs, $0.3 million of personnel costs and $0.4 million of other expense. Operating profit before tax and intercompany eliminations was $1.5 million and $2.6 million for the quarters ended June 30, 2000 and 1999, respectively. The decrease is due to loss ratios on the Medicare supplement business. Interest Expense Interest expense was $21.2 million and $19.6 million for the quarters ended September 30, 2000 and 1999, respectively. The increase can be attributed to an increase in the average cost of debt partially offset by a decrease in average debt outstanding. Consolidated Group As a result of the foregoing, pretax earnings were $63.7 million and $65.4 million for the quarters ended September 30, 2000 and 1999, respectively. After providing for income taxes, net earnings were $41.2 million and $42.1 million for the quarters ended September 30, 2000 and 1999, respectively. 26 LIQUIDITY AND CAPITAL RESOURCES Moving and Storage Operations To meet the needs of its customers, U-Haul maintains a large inventory of rental items. In the six months ended September 30, 2000 and 1999, capital expenditures were $260.9 million and $182.7 million, respectively. These expenditures primarily reflect the expansion of the rental truck fleet. The capital required to fund these acquisitions was obtained through internally generated funds from operations and through lease financings. Cash provided by operating activities was $61.0 million and $96.1 million for the six months ended September 30, 2000 and 1999, respectively. The decrease resulted primarily from an increase in receivables and a decrease in accounts payable and accrued liabilities. At September 30, 2000, total outstanding notes and loans payable was $1,096.2 million as compared to $1,137.8 million at March 31, 2000. Real Estate Operations Cash provided by operating activities was $8.3 million and $2.5 million for the six months ended September 30, 2000 and 1999, respectively. The increase resulted from a decrease in receivables. Property and Casualty Cash used by operating activities was $(1.8) million and $(6.6) million for six months ended June 30, 2000 and 1999, respectively. This change resulted from increases in unearned premuium and reinsurance losses payable from December 1999 to June 2000. The increase was offset by a larger decrease in loss and loss adjusting expense reserves from December 1999 to June 2000, decreased net income and a larger increase in deferred policy acquisition costs. RepWest's cash and cash equivalents and short-term investment portfolio were $10.4 million and $10.5 million at June 30, 2000 and 1999, respectively. RepWest maintains a diversified securities investment portfolio, primarily in bonds, at varying maturity levels with 88.0% of the fixed-income securities consisting of investment grade securities. The maturity distribution is designed to provide sufficient liquidity to meet future cash needs. Current liquidity remains strong with current invested assets equal to 92.2% of total liabilities. The liability for reported and unreported losses isare based upon company historical and industry averages. Unpaid loss adjustment expenses are based on historical ratios of loss adjustment expenses paid to losses paid. Unpaid loss and loss expenses are not discounted. 27 Life Insurance Oxford's primary sources of cash are premiums, receipts from interest- sensitive products and investment income. The primary uses of cash are operating costs and benefit payments to policyholders. Matching the investment portfolio to the cash flow demands of the types of insurance being written is an important consideration. Cash provided (used) by operating activities was ($3.4) million and $2.4 million for the six months ended June 30, 2000 and 1999, respectively. The decrease is due to higher benefit payouts in relation to collected premium. Cash provided by financing activities were $2.4 million and $0.3 million for the six months ended June 30, 2000 and 1999, respectively. The increase is due to a better ratio of annuity deposits to withdrawals. In addition to cash flows from operating and financing activities, a substantial amount of liquid funds is available through Oxford's short-term portfolio. Short-term investments were $51.6 million and $75.6 million for the six months ending June 30, 2000 and 1999, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs. Consolidated Group During each of the fiscal years ended March 31, 2001, 2002 and 2003, AMERCO estimates gross capital expenditures will average approximately $380 million primarily reflecting rental fleet rotation. This level of capital expenditures, combined with an average of approximately $72 million in annual long-term debt maturities during this same period, are expected to create annual average funding needs of approximately $452 million. Credit Agreements AMERCO's operations are funded by various credit and financing arrangements, including unsecured long-term borrowings, unsecured medium-term notes and revolving lines of credit with domestic and foreign banks. Principally to finance its fleet of trucks and trailers, AMERCO routinely enters into sale and leaseback transactions. As of September 30, 2000, AMERCO had $1,096.2 million in total notes and loans payable outstanding and unutilized lines of credit of approximately $284.2 million. Certain of AMERCO's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, maintaining certain financial ratios and placing certain additional liens on its properties, assets and restricting the issuance of certain types of preferred stock. At September 30, 2000, AMERCO was in compliance with these covenants. Reference is made to Note 5 of Notes to Consolidated Financial Statements in AMERCO's Annual Report on Form 10-K for the fiscal year ended March 31, 2000 for additional information about AMERCO's credit agreements. 28 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosure About Market Risk, in AMERCO's Annual Report on Form 10-K for the fiscal year ended March 31, 2000. 29 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In the normal course of business, AMERCO is a defendant in a number of suits and claims. AMERCO is also a party to several administrative proceedings arising from state and local provisions that regulate the removal and/or cleanup of underground fuel storage tanks. It is the opinion of management that none of the suits, claims or proceedings involving AMERCO, individually or in the aggregate, are expected to result in a material loss. Reference is made to Part I, Item 1, Business, in AMERCO's Annual Report on Form 10-K for the fiscal year ended March 31, 2000 for a discussion of certain environmental proceedings and to Note 15 of Notes to Consolidated Financial Statements in AMERCO's Annual Report on Form 10-K for the fiscal year ended March 31, 2000 for a discussion of the California overtime litigation. 30 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 2000 Annual Meeting of Stockholders was held on September 8, 2000. At the 2000 Annual Meeting of Stockholders, Edward J. Shoen and Richard J. Herrera were elected to serve until the 2004 Annual Meeting of Stockholders. John M. Dodds and James P. Shoen continue to serve as directors with terms that expire at the 2001 Annual Meeting of Stockholders; William E. Carty and Charles J. Bayer continue as directors with terms that expire at the 2002 Annual Meeting of Stockholders; and John P. Brogan and James J. Grogan continue as directors with terms that expire at the 2003 Annual Meeting of Stockholders. The following table sets forth the votes cast for, against or withheld, as well as the number of abstentions and broker non-votes with respect to each matter voted on at the 2000 Annual Meeting of Stockholders:
Matters Votes Broker Submitted Votes Cast Cast Votes Non- To a Vote For Against Withheld Abstentions Votes Election of Directors Edward J. Shoen 19,678,903 3,557 711,814 - - Richard J. Herrera 19,433,633 6,806 886,455 - -
31 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 3.1 Restated Articles of Incorporation (1) 3.2 Restated By-Laws of AMERCO as of August 27, 1997 (2) 10.1 Management Agreement between Twelve SAC Self Storage Corporation and a subsidiary of AMERCO 10.2 Management Agreement between Thirteen SAC Self Storage Corporation and a subsidiary of AMERCO 10.3 Management Agreement between Fourteen SAC Self Storage Corporation and a subsidiary of AMERCO 27 Financial Data Schedule (b) Reports on Form 8-K. No report on Form 8-K was filed during the quarter ended September 30, 2000. _________________ (1) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 1992, file no. 1-11255. (2) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, file no. 1-11255. 32 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERCO ____________________________________ (Registrant) Dated: November 13, 2000 By: /S/ GARY B. HORTON ____________________________________ Gary B. Horton, Treasurer (Principal Financial Officer) EX-10.1 2 0002.txt MANAGEMENT AGREEMENT WITH TWELVE SAC PROPERTY MANAGEMENT AGREEMENT ----------------------------- THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is entered into as of June 30, 2000 among Twelve SAC Self-Storage Corporation, a Nevada corporation, with its principal place of business at 715 South Country Club Drive, Mesa, AZ 85210 ("Owner"), and the property managers identified on Exhibit A attached hereto and incorporated herein by reference (each such property manager is respectively referred to herein as "U-Haul"). RECITALS -------- A. Owner owns the leasehold estate in the real property and self- storage related improvements thereon located at the street addresses identified on Exhibit A hereto (hereinafter, collectively the "Property"). B. Owner intends that the Property be rented on a space-by-space retail basis to corporations, partnerships, individuals and/or other entities for use as self-storage facilities. C. Owner desires that U-Haul manage the Property and U-Haul desires to act as the property manager for the Property, all in accordance with the terms and conditions of this Agreement and as more specifically designated on Exhibit A hereto. NOW, THEREFORE, in consideration of the mutual covenants herein contained, Owner and U-Haul hereby agree as follows. 1. Employment. ---------- (a) Owner hereby retains U-Haul, and U-Haul agrees to act as manager of the Property upon the terms and conditions hereinafter set forth. (b) Owner acknowledges that U-Haul, and/or U-Haul affiliates, is in the business of managing self-storage facilities, both for its own account and for the account of others. It is hereby expressly agreed that notwithstanding this Agreement, U-Haul and such affiliates may continue to engage in such activities, may manage facilities other than those presently managed by U-Haul and its affiliates (whether or not such other facilities may be in direct or indirect competition with Owner) and may in the future engage in other business which may compete directly or indirectly with activities of Owner. (c) In the performance of their respective duties under this Agreement, each U-Haul property manager shall occupy the position of an independent contractor with respect to Owner. Nothing contained herein shall be construed as making the parties hereto (or any of them) partners or joint venturors, nor (except as expressly otherwise provided for herein) construed as making U-Haul an agent or employee of Owner or of any other U-Haul property manager hereunder. 2. Duties and Authority of U-Haul. ------------------------------ (a) GENERAL DUTIES AND AUTHORITY. Subject only to the restrictions and limitations provided in paragraphs (o) and (p) of this Section 2 and the right of Owner to terminate this Agreement as provided in Section 6 hereof, U-Haul shall have the sole and exclusive authority to fully manage the Property and supervise and direct the business and affairs associated or related to the daily operation thereof, and, to that end on behalf of Owner, to execute such documents and instruments as, in the sole judgment of U-Haul, are reasonably necessary or advisable under the circumstances in order to fulfill U-Haul's duties hereunder. Such duties and authority shall include, without limitation, those set forth below. (b) RENTING OF THE PROPERTY. U-Haul shall establish policies and procedures for the marketing activities for the Property, and may advertise the Property through such media as U-Haul deems advisable, including, without limitation, advertising with the Yellow Pages. U-Haul shall have the sole discretion, which discretion shall be exercised in good faith, to establish the terms and conditions of occupancy by the tenants of the Property, and U-Haul is hereby authorized to enter into rental agreements on behalf and for the account of Owner with such tenants and to collect rent from such tenants. U-Haul may jointly advertise the Property with other properties owned or managed by U-Haul, and in that event, U-Haul shall reasonably allocate the cost of such advertising among such properties. (c) REPAIR, MAINTENANCE AND IMPROVEMENTS. U-Haul shall make, execute, supervise and have control over the making and executing of all decisions concerning the acquisition of furniture, fixtures and supplies for the Property, and may purchase, lease or otherwise acquire the same on behalf of Owner. U-Haul shall make and execute, or supervise and have control over the making and executing of all decisions concerning the maintenance, repair, and landscaping of the Property. U-Haul shall, on behalf of Owner, negotiate and contract for and supervise the installation of all capital improvements related to the Property; provided, however, that U-Haul agrees to secure the prior written approval of Owner on all such expenditures in excess of $5,000.00 for any one item, except monthly or recurring operating charges and/or emergency repairs if in the opinion of U-Haul such emergency-related expenditures are necessary to protect the Property from damage or to maintain services to the tenants as called for in their respective leases. (d) PERSONNEL. U-Haul shall select all vendors, suppliers, contractors, subcontractors and employees with respect to the Property and shall hire, discharge and supervise all labor and employees required for the operation and maintenance of the Property. Any employees so hired shall be employees of U-Haul, and shall be carried on the payroll of U-Haul. Employees may include, but will not be limited to, on-site resident managers, on-site assistant managers, and relief managers located, rendering services, or performing activities on the Property in connection with its operation and management. The cost of employing such persons shall not exceed prevailing rates for comparable persons performing the same or similar services with respect to real estate similar to the Property. (e) AGREEMENTS. U-Haul shall negotiate and execute on behalf of Owner such agreements which U-Haul deems necessary or advisable for the furnishing of utilities, services, concessions and supplies, for the maintenance, repair and operation of the Property and such other agreements which may benefit the Property or be incidental to the matters for which U-Haul is responsible hereunder. (f) OTHER DECISIONS. U-Haul shall make all decisions in connection with the daily operation of the Property. (g) REGULATIONS AND PERMITS. U-Haul shall comply in all material respects with any statute, ordinance, law, rule, regulation or order of any governmental or regulatory body, having jurisdiction over the Property, respecting the use of the Property or the maintenance or operation thereof. U-Haul shall apply for and attempt to obtain and maintain, on behalf of Owner, all licenses and permits required or advisable (in the sole judgment of U-Haul) in connection with the management and operation of the Property. (h) RECORDS AND REPORTS OF DISBURSEMENTS AND COLLECTIONS. U-Haul shall establish, supervise, direct and maintain the operation of a system of record keeping and bookkeeping with respect to all receipts and disbursements in connection with the management and operation of the Property. The books, records and accounts shall be maintained at the U-Haul office or at such other location as U-Haul shall determine, and shall be available and open to examination and audit quarterly by Owner, its representatives, any mortgagee of the Property, and such mortgagee's representative. On or before thirty (30) days after the close of each quarter, U-Haul shall cause to be prepared and delivered to Owner, a monthly statement of receipts, expenses and charges, together with a statement of the disbursements made by U-Haul during such period on Owner's behalf. (i) [Reserved]. (j) COLLECTION. U-Haul shall be responsible for the billing and collection of all accounts receivable and for payment of all accounts payable with respect to the Property and shall be responsible for establishing policies and procedures to minimize the amount of bad debts. (k) LEGAL ACTIONS. U-Haul shall cause to be instituted, on behalf and in the name of Owner, any and all legal actions or proceedings U-Haul deems necessary or advisable to collect charges, rent or other income due to Owner with respect to the Property and to oust or dispossess tenants or other persons unlawfully in possession under any lease, license concession agreement or otherwise, and to collect damages for breach thereof or default thereunder by such tenant, licensee, concessionaire or occupant. (l) INSURANCE. U-Haul shall use its best efforts to assure that there is obtained and maintained in force, fire, comprehensive liability and other insurance policies in amounts generally carried with respect to similar facilities. U-Haul may in its discretion obtain employee theft or similar insurance in amounts and with such deductibles as U-Haul deems appropriate. U-Haul shall promptly provide Owner with such certificates of insurance as Owner may reasonably request in writing, evidencing such insurance coverage. (m) TAXES. During the term of this Agreement, U-Haul shall pay from Owner's funds, prior to delinquency, all real estate taxes, personal property taxes, and all other taxes assessed to, or levied upon, the Property. If required by the holder of any note secured by the Property, U-Haul will set aside, from Owner's funds, a reserve from each month's rent and other income collected, in an amount required by said holder for purposes of payment of real property taxes. (n) [Reserved] (o) LIMITATIONS ON U-HAUL AUTHORITY. Notwithstanding anything to the contrary set forth in this Section 2, U-Haul shall not, without obtaining the prior written consent of Owner, (i) rent storage space in the Property by written lease or agreement for a stated term in excess of one year, (ii) alter the building or other structures of the Property in any material manner; (iii) make any other agreements which exceed a term of one year and are not terminable on thirty day's notice at the will of Owner, without penalty, payment or surcharge; (iv) act in violation of any law; or (v) act in violation of any duty or responsibility of Owner under any mortgage loan secured by the Property. (p) SHARED EXPENSES. Owner acknowledges that certain economies may be achieved with respect to certain expenses to be incurred by U-Haul on behalf of Owner hereunder if materials, supplies, insurance or services are purchased by U-Haul in quantity for use not only in connection with the Property but in connection with other properties owned or managed by U-Haul or its affiliates. U-Haul shall have the right to purchase such materials, supplies, insurance and/or services in its own name and charge Owner a pro rata allocable share of the cost of the foregoing; provided, however, that the pro rata cost of such purchase to Owner shall not result in expenses greater than would otherwise be incurred at competitive prices and terms available in the area where the Property is located; and provided further, U-Haul shall give Owner access to records so Owner may review any such expenses incurred. (q) DEPOSIT OF GROSS REVENUES. All Gross Revenues (as hereinafter defined) shall be deposited into a "lock box account" maintained by U-Haul International, Inc., parent company of U-Haul, in accordance with the terms of a certain Cash Management Agreement dated as of the date hereof among Owner, Wells Fargo Bank, National Association (as lender and agent) and U-Haul (the "CMA"). Borrower and U-Haul each hereby covenant and agree that they shall comply with the terms and provisions of the CMA. 3. Duties of Owner. --------------- Owner hereby agrees to cooperate with U-Haul in the performance of U-Haul's duties under this Agreement and to that end, upon the request of U-Haul, to provide, at such rental charges, if any, as are deemed appropriate, reasonable office space for U-Haul employees on the premises of the Property and to give U-Haul access to all files, books and records of Owner relevant to the Property. Owner shall not unreasonably withhold or delay any consent or authorization to U-Haul required or appropriate under this Agreement. 4. Compensation of U-Haul. ---------------------- (a) MANAGEMENT FEE. Owner shall pay to U-Haul as the full amount due for the services herein provided a fee (the "Management Fee") equal to six percent (6%) of the "Gross Revenue" derived from or connected with the Property so managed by U-Haul hereunder. The term "Gross Revenue" shall mean all receipts (excluding security deposits unless and until Owner recognizes the same as income) of Owner (whether or not received by U-Haul on behalf or for the account of Owner) arising from the operation of the Property, including without limitation, rental payments of lessees of space in the Property, vending machine or concessionaire revenues, maintenance charges, if any, paid by the tenants of the Property in addition to basic rent, parking fees, if any, and all monies whether or not otherwise described herein paid for the use of the Property. "Gross Revenue" shall be determined on a cash basis. The Management Fee shall be paid promptly at the end of each calendar quarter and shall be calculated on the basis of the "Gross Revenue" of such preceding quarter. The Management Fee shall be paid to each U-Haul property manager herein identified based on the Gross Revenue of each respective Property for which such property manager is responsible as set forth on Exhibit A hereto. Each property manager --------- agrees that its monthly Management Fee shall be subordinate to that month's principal balance and interest payment on any first lien position mortgage loan on the Property. It is understood and agreed that the Management Fee will not be reduced by the cost to Owner of those employees and independent contractors engaged by or for Owner, including but not limited to the categories of personnel specifically referred to in Section 2(d). Except as provided in this Section 4, it is further understood and agreed that U-Haul shall not be entitled to additional compensation of any kind in connection with the performance by it of its duties under this Agreement. (b) REIMBURSEMENT OF CERTAIN EXPENSES. In addition to the Management Fee described above, U-Haul shall be entitled to reimbursement from Owner, on a quarterly basis, for all out-of-pocket expenses incurred by U-Haul hereunder in connection with the management and operation of the Property, including, without limitation, taxes, insurance, operational expenses, overhead, litigation and dispute resolution related expenses, capital improvement expenses, and costs of sales. 5. Use of Trademarks, Service Marks and Related Items. -------------------------------------------------- Owner acknowledges the significant value of the "U-Haul" name in the operations of Owner's property and it is therefore understood and agreed that the name, trademark and service mark, "U-Haul", and related marks, slogans, caricatures, designs and other trade or service items shall be utilized for the non-exclusive benefit of Owner in the rental and operation of the Property, and in comparable operations elsewhere. It is further understood and agreed that this name and all such marks, slogans, caricatures, designs and other trade or service items shall remain and be at all times the property of U-Haul and its affiliates, and that, except during the term hereof and as expressly provided herein, Owner shall have no right whatsoever therein. Owner agrees that during the term of this agreement the sign faces at the property will have the name "U-Haul." The U-Haul sign faces will be paid for by Owner. Upon termination of this agreement at any time for any reason, all such use by and for the benefit of Owner of any such name, mark, slogan, caricature, design or other trade or service item in connection with the Property shall, in any event, be terminated and any signs bearing any of the foregoing shall be removed from view and no longer used by Owner. In addition, upon termination of this Agreement at any time for any reason, Owner shall not enter into any new leases of Property using the U-Haul lease form or use other forms prepared by U-Haul. It is understood and agreed that U-Haul will use and shall be unrestricted in its use of such name, mark, slogan, caricature, design or other trade or service item in the management and operation of other storage facilities both during and after the expiration or termination of the term of this Agreement. 6. Termination. ----------- Owner or U-Haul may terminate this Agreement with or without cause by giving not less than sixty days' written notice to the other party pursuant to Section 11 hereof. In addition, if Owner fails to pay U-Haul any amounts owed under this Agreement when due, U-Haul may terminate this Agreement by giving Owner not less than ten days written notice pursuant to Section 11 hereof. Notwithstanding the foregoing, however, U-Haul shall not resign as property manager of the Property until a nationally recognized and reputable successor property manager is available and prepared to assume property management responsibilities with respect to the Property in question Upon termination of this Agreement, U-Haul shall promptly return to Owner all monies, books, records and other materials held by U-Haul for or on behalf of Owner. In addition, if U-Haul has contracted to advertise the Property in the Yellow Pages, Owner shall, at the option of U-Haul, continue to be responsible for the cost of such advertisement and shall either (i) pay U-Haul the remaining amount due under such contract in a lump sum; or (ii) pay U- Haul monthly for the amount due under such contract. 7. Indemnification. --------------- Owner hereby agrees to indemnify and hold each of U-Haul, all persons and companies affiliated with U-Haul, and all officers, shareholders, directors, employees and agents of U-Haul and of any affiliated companies or persons (collectively, the "Indemnified Persons") harmless from any and all costs, expenses, attorneys' fees, suits, liabilities, judgments, damages, and claims in connection with the management of the Property (including the loss of use thereof following any damage, injury or destruction), arising from any cause except for the willful misconduct or gross negligence on the part of the Indemnified Persons. In addition, no Indemnified Person shall be liable for any error of judgment or for any mistake of fact or law, or for anything which it may do or refrain from doing hereafter, except in cases of willful misconduct or gross negligence. U-Haul hereby agrees to indemnify and hold Owner harmless from any and all costs, expenses, attorneys' fees, suits, liabilities, judgments, damages and claims in connection with the management of the Property arising from the willful misconduct of, gross negligence of, or breach of this Agreement by the Indemnified Persons. In addition, U-Haul shall not be liable to Owner for the acts or omissions of U-Haul's officers, shareholders, directors, employees, and agents except for U-Haul's own gross negligence or willful misconduct. 8. Assignment. ---------- This Agreement may be assigned by Owner in connection with any mortgage loan on the Property, whether pursuant to a conditional or unconditional, absolute assignment. U-Haul shall have the right to assign this Agreement to an affiliate or a wholly or majority owned subsidiary; provided, however, any such assignee must assume all obligations of U- Haul hereunder, Owner's rights hereunder will be enforceable against any such assignee and U-Haul shall not be released from its liabilities hereunder unless Owner shall expressly agree thereto in writing. 9. Headings. -------- The headings contained herein are for convenience of reference only and are not intended to define, limit or describe the scope or intent of any provision of this Agreement. 10. Governing Law. ------------- The validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties shall be governed by the internal laws of the State of Arizona. 11. Notices. ------- Any notice required or permitted herein shall be in writing and shall be personally delivered or mailed first class postage prepaid or delivered by an overnight delivery service to the respective addresses of the parties set forth below their signatures on the signature page thereof, or to such other address as any party may give to the other in writing. Any notice required by this Agreement will be deemed to have been given when personally served or one day after delivery to an overnight delivery service or five days after deposit in the first class mail. 12. Severability. ------------ Should any term or provision hereof be deemed invalid, void or unenforceable either in its entirety or in a particular application, the remainder of this Agreement shall nonetheless remain in full force and effect and, if the subject term or provision is deemed to be invalid, void or unenforceable only with respect to a particular application, such term or provision shall remain in full force and effect with respect to all other applications. 13. Successors. ---------- This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their permitted assigns and successors in interest. 14. Attorneys' Fees. --------------- If it shall become necessary for any party hereto to engage attorneys to institute legal action for the purpose of enforcing their respective rights hereunder or for the purpose of defending legal action brought by the other party hereto, the party or parties prevailing in such litigation shall be entitled to receive all costs, expenses and fees (including reasonable attorneys' fees) incurred by it in such litigation (including appeals). 15. 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. 16. Scope of Property Manager Responsibility. ---------------------------------------- The duties, obligations and liability of each property manager identified herein shall extend only so far as to relate to the Property for which such property manager is managing located in the domicile state of such property manager, as more specifically described on Exhibit A hereto, and no individual property manager hereunder shall be liable for the acts or omissions of any other property manager hereunder. Each property manager shall use its best efforts to assist Owner in fulfilling Owner's obligations arising under any loan to Owner that is secured by the Property, including but not limited to preparing and providing financial and accounting reports, and maintaining the Property. Each property manager agrees that it will perform its obligations hereunder according to reasonable industry standards, in good faith, and in a commercially reasonable manner. U-Haul agrees that, in discharging its duties hereunder, it will not have any relationship with any of its affiliates that would be less favorable to Owner than would reasonably be available in a transaction with an unaffiliated party. [Rest of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first above written. "Owner" Twelve SAC Self-Storage Corporation, a Nevada corporation By: /S/ BRUCE BROCKHAGEN ___________________________ Bruce Brockhagen, Secretary U-Haul Co. of Arizona By: /S/ DON MURNEY ___________________________ U-Haul Co. of New York By: /S/ DON MURNEY ___________________________ U-Haul Co. of Louisiana By: /S/ DON MURNEY ___________________________ U-Haul Co. of California By: /S/ DON MURNEY ___________________________ U-Haul Co. of Texas By: /S/ DON MURNEY ___________________________ U-Haul Co. of Florida By: /S/ DON MURNEY ___________________________ U-Haul Co. of Massachusetts By: /S/ DON MURNEY ___________________________ (PAGE> EXHIBIT A - ---------------------------------------------------------------- Number Name City State Owner - ---------------------------------------------------------------- 710022 U-HAUL CENTER VACAVILLE VACAVILLE CA 12 SAC 713059 U-HAUL CTR COVINA COVINA CA 12 SAC 723031 U-HAUL CENTER HAYDEN SCOTTSDALE AZ 12 SAC 744023 U-HAUL CENTER GRISSOM ROAD SAN ANTONIO TX 12 SAC 745045 U-HAUL CENTER I-10 WEST HOUSTON NORTH TX 12 SAC 747055 U-HAUL CTR TULANE NEW ORLEANS LA 12 SAC 788052 U-HAUL CTR BROWARD FORT LAUDERDALE FL 12 SAC 806070 U-HAUL CENTER ROCKVILLE ROCKVILLE NY 12 SAC 837078 U-HAUL OF MEDFORD MEDFORD MA 12 SAC EX-10.2 3 0003.txt MANAGEMENT AGREEMENT WITH THIRTEEN SAC PROPERTY MANAGEMENT AGREEMENT ----------------------------- THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is entered into as of June 30, 2000 among Thirteen SAC Self-Storage Corporation, a Nevada corporation, with its principal place of business at 715 South Country Club Drive, Mesa, AZ 85210 ("Owner"), and the property managers identified on Exhibit A attached hereto and incorporated by --------- reference (each such property manager is respectively referred to herein as "U-Haul"). RECITALS -------- A. Owner owns the leasehold estate in the real property and self- storage related improvements thereon located at the street addresses identified on Exhibit A hereto (hereinafter, collectively the "Property"). B. Owner intends that the Property be rented on a space-by-space retail basis to corporations, partnerships, individuals and/or other entities for use as self-storage facilities. C. Owner desires that U-Haul manage the Property and U-Haul desires to act as the property manager for the Property, all in accordance with the terms and conditions of this Agreement and as more specifically designated on Exhibit A hereto. NOW, THEREFORE, in consideration of the mutual covenants herein contained, Owner and U-Haul hereby agree as follows. 1. Employment. ---------- (a) Owner hereby retains U-Haul, and U-Haul agrees to act as manager of the Property upon the terms and conditions hereinafter set forth. (b) Owner acknowledges that U-Haul, and/or U-Haul affiliates, is in the business of managing self-storage facilities, both for its own account and for the account of others. It is hereby expressly agreed that notwithstanding this Agreement, U-Haul and such affiliates may continue to engage in such activities, may manage facilities other than those presently managed by U-Haul and its affiliates (whether or not such other facilities may be in direct or indirect competition with Owner) and may in the future engage in other business which may compete directly or indirectly with activities of Owner. (c) In the performance of their respective duties under this Agreement, each U-Haul property manager shall occupy the position of an independent contractor with respect to Owner. Nothing contained herein shall be construed as making the parties hereto (or any of them) partners or joint venturors, nor (except as expressly otherwise provided for herein) construed as making U-Haul an agent or employee of Owner or of any other U-Haul property manager hereunder. 2. Duties and Authority of U-Haul. ------------------------------ (a) GENERAL DUTIES AND AUTHORITY. Subject only to the restrictions and limitations provided in paragraphs (o) and (p) of this Section 2 and the right of Owner to terminate this Agreement as provided in Section 6 hereof, U-Haul shall have the sole and exclusive authority to fully manage the Property and supervise and direct the business and affairs associated or related to the daily operation thereof, and, to that end on behalf of Owner, to execute such documents and instruments as, in the sole judgment of U-Haul, are reasonably necessary or advisable under the circumstances in order to fulfill U-Haul's duties hereunder. Such duties and authority shall include, without limitation, those set forth below. (b) RENTING OF THE PROPERTY. U-Haul shall establish policies and procedures for the marketing activities for the Property, and may advertise the Property through such media as U-Haul deems advisable, including, without limitation, advertising with the Yellow Pages. U-Haul shall have the sole discretion, which discretion shall be exercised in good faith, to establish the terms and conditions of occupancy by the tenants of the Property, and U-Haul is hereby authorized to enter into rental agreements on behalf and for the account of Owner with such tenants and to collect rent from such tenants. U-Haul may jointly advertise the Property with other properties owned or managed by U-Haul, and in that event, U-Haul shall reasonably allocate the cost of such advertising among such properties. (c) REPAIR, MAINTENANCE AND IMPROVEMENTS. U-Haul shall make, execute, supervise and have control over the making and executing of all decisions concerning the acquisition of furniture, fixtures and supplies for the Property, and may purchase, lease or otherwise acquire the same on behalf of Owner. U-Haul shall make and execute, or supervise and have control over the making and executing of all decisions concerning the maintenance, repair, and landscaping of the Property. U- Haul shall, on behalf of Owner, negotiate and contract for and supervise the installation of all capital improvements related to the Property; provided, however, that U-Haul agrees to secure the prior written approval of Owner on all such expenditures in excess of $5,000.00 for any one item, except monthly or recurring operating charges and/or emergency repairs if in the opinion of U-Haul such emergency-related expenditures are necessary to protect the Property from damage or to maintain services to the tenants as called for in their respective leases. (d) PERSONNEL. U-Haul shall select all vendors, suppliers, contractors, subcontractors and employees with respect to the Property and shall hire, discharge and supervise all labor and employees required for the operation and maintenance of the Property. Any employees so hired shall be employees of U-Haul, and shall be carried on the payroll of U-Haul. Employees may include, but will not be limited to, on-site resident managers, on-site assistant managers, and relief managers located, rendering services, or performing activities on the Property in connection with its operation and management. The cost of employing such persons shall not exceed prevailing rates for comparable persons performing the same or similar services with respect to real estate similar to the Property. (e) AGREEMENTS. U-Haul shall negotiate and execute on behalf of Owner such agreements which U-Haul deems necessary or advisable for the furnishing of utilities, services, concessions and supplies, for the maintenance, repair and operation of the Property and such other agreements which may benefit the Property or be incidental to the matters for which U-Haul is responsible hereunder. (f) OTHER DECISIONS. U-Haul shall make all decisions in connection with the daily operation of the Property. (g) REGULATIONS AND PERMITS. U-Haul shall comply in all material respects with any statute, ordinance, law, rule, regulation or order of any governmental or regulatory body, having jurisdiction over the Property, respecting the use of the Property or the maintenance or operation thereof. U-Haul shall apply for and attempt to obtain and maintain, on behalf of Owner, all licenses and permits required or advisable (in the sole judgment of U-Haul) in connection with the management and operation of the Property. (h) RECORDS AND REPORTS OF DISBURSEMENTS AND COLLECTIONS. U- Haul shall establish, supervise, direct and maintain the operation of a system of record keeping and bookkeeping with respect to all receipts and disbursements in connection with the management and operation of the Property. The books, records and accounts shall be maintained at the U- Haul office or at such other location as U-Haul shall determine, and shall be available and open to examination and audit quarterly by Owner, its representatives, any mortgagee of the Property, and such mortgagee's representative. On or before thirty (30) days after the close of each quarter, U-Haul shall cause to be prepared and delivered to Owner, a monthly statement of receipts, expenses and charges, together with a statement of the disbursements made by U-Haul during such period on Owner's behalf. (i) [Reserved]. (j) COLLECTION. U-Haul shall be responsible for the billing and collection of all accounts receivable and for payment of all accounts payable with respect to the Property and shall be responsible for establishing policies and procedures to minimize the amount of bad debts. (k) LEGAL ACTIONS. U-Haul shall cause to be instituted, on behalf and in the name of Owner, any and all legal actions or proceedings U-Haul deems necessary or advisable to collect charges, rent or other income due to Owner with respect to the Property and to oust or dispossess tenants or other persons unlawfully in possession under any lease, license concession agreement or otherwise, and to collect damages for breach thereof or default thereunder by such tenant, licensee, concessionaire or occupant. (l) INSURANCE. U-Haul shall use its best efforts to assure that there is obtained and maintained in force, fire, comprehensive liability and other insurance policies in amounts generally carried with respect to similar facilities. U-Haul may in its discretion obtain employee theft or similar insurance in amounts and with such deductibles as U-Haul deems appropriate. U-Haul shall promptly provide Owner with such certificates of insurance as Owner may reasonably request in writing, evidencing such insurance coverage. (m) TAXES. During the term of this Agreement, U-Haul shall pay from Owner's funds, prior to delinquency, all real estate taxes, personal property taxes, and all other taxes assessed to, or levied upon, the Property. If required by the holder of any note secured by the Property, U- Haul will set aside, from Owner's funds, a reserve from each month's rent and other income collected, in an amount required by said holder for purposes of payment of real property taxes. (n) [Reserved] (o) LIMITATIONS ON U-HAUL AUTHROITY. Notwithstanding anything to the contrary set forth in this Section 2, U-Haul shall not, without obtaining the prior written consent of Owner, (i) rent storage space in the Property by written lease or agreement for a stated term in excess of one year, (ii) alter the building or other structures of the Property in any material manner; (iii) make any other agreements which exceed a term of one year and are not terminable on thirty day's notice at the will of Owner, without penalty, payment or surcharge; (iv) act in violation of any law; or (v) act in violation of any duty or responsibility of Owner under any mortgage loan secured by the Property. (p) SHARED EXPENSES. Owner acknowledges that certain economies may be achieved with respect to certain expenses to be incurred by U-Haul on behalf of Owner hereunder if materials, supplies, insurance or services are purchased by U-Haul in quantity for use not only in connection with the Property but in connection with other properties owned or managed by U-Haul or its affiliates. U-Haul shall have the right to purchase such materials, supplies, insurance and/or services in its own name and charge Owner a pro rata allocable share of the cost of the foregoing; provided, however, that the pro rata cost of such purchase to Owner shall not result in expenses greater than would otherwise be incurred at competitive prices and terms available in the area where the Property is located; and provided further, U-Haul shall give Owner access to records so Owner may review any such expenses incurred. (q) DEPOSIT OF GROSS REVENUES. All Gross Revenues (as hereinafter defined) shall be deposited into a "lock box account" maintained by U-Haul International, Inc., parent company of U-Haul, in accordance with the terms of a certain Cash Management Agreement dated as of the date hereof among Owner, Wells Fargo Bank, National Association (as lender and agent) and U-Haul (the "CMA"). Borrower and U-Haul each hereby covenant and agree that they shall comply with the terms and provisions of the CMA. 3. Duties of Owner. --------------- Owner hereby agrees to cooperate with U-Haul in the performance of U-Haul's duties under this Agreement and to that end, upon the request of U-Haul, to provide, at such rental charges, if any, as are deemed appropriate, reasonable office space for U-Haul employees on the premises of the Property and to give U-Haul access to all files, books and records of Owner relevant to the Property. Owner shall not unreasonably withhold or delay any consent or authorization to U-Haul required or appropriate under this Agreement. 4. Compensation of U-Haul. ---------------------- (a) MANAGEMENT FEE. Owner shall pay to U-Haul as the full amount due for the services herein provided a fee (the "Management Fee") equal to six percent (6%) of the "Gross Revenue" derived from or connected with the Property so managed by U-Haul hereunder. The term "Gross Revenue" shall mean all receipts (excluding security deposits unless and until Owner recognizes the same as income) of Owner (whether or not received by U-Haul on behalf or for the account of Owner) arising from the operation of the Property, including without limitation, rental payments of lessees of space in the Property, vending machine or concessionaire revenues, maintenance charges, if any, paid by the tenants of the Property in addition to basic rent, parking fees, if any, and all monies whether or not otherwise described herein paid for the use of the Property. "Gross Revenue" shall be determined on a cash basis. The Management Fee shall be paid promptly at the end of each calendar quarter and shall be calculated on the basis of the "Gross Revenue" of such preceding quarter. The Management Fee shall be paid to each U-Haul property manager herein identified based on the Gross Revenue of each respective Property for which such property manager is responsible as set forth on Exhibit A hereto. Each property manager agrees --------- that its monthly Management Fee shall be subordinate to that month's principal balance and interest payment on any first lien position mortgage loan on the Property. It is understood and agreed that the Management Fee will not be reduced by the cost to Owner of those employees and independent contractors engaged by or for Owner, including but not limited to the categories of personnel specifically referred to in Section 2(d). Except as provided in this Section 4, it is further understood and agreed that U-Haul shall not be entitled to additional compensation of any kind in connection with the performance by it of its duties under this Agreement. (b) REIMBURSEMENT OF CERTAIN EXPENSES. In addition to the Management Fee described above, U-Haul shall be entitled to reimbursement from Owner, on a quarterly basis, for all out-of-pocket expenses incurred by U-Haul hereunder in connection with the management and operation of the Property, including, without limitation, taxes, insurance, operational expenses, overhead, litigation and dispute resolution related expenses, capital improvement expenses, and costs of sales. 5. Use of Trademarks, Service Marks and Related Items. -------------------------------------------------- Owner acknowledges the significant value of the "U-Haul" name in the operations of Owner's property and it is therefore understood and agreed that the name, trademark and service mark, "U-Haul", and related marks, slogans, caricatures, designs and other trade or service items shall be utilized for the non-exclusive benefit of Owner in the rental and operation of the Property, and in comparable operations elsewhere. It is further understood and agreed that this name and all such marks, slogans, caricatures, designs and other trade or service items shall remain and be at all times the property of U-Haul and its affiliates, and that, except during the term hereof and as expressly provided herein, Owner shall have no right whatsoever therein. Owner agrees that during the term of this agreement the sign faces at the property will have the name "U-Haul." The U-Haul sign faces will be paid for by Owner. Upon termination of this agreement at any time for any reason, all such use by and for the benefit of Owner of any such name, mark, slogan, caricature, design or other trade or service item in connection with the Property shall, in any event, be terminated and any signs bearing any of the foregoing shall be removed from view and no longer used by Owner. In addition, upon termination of this Agreement at any time for any reason, Owner shall not enter into any new leases of Property using the U-Haul lease form or use other forms prepared by U-Haul. It is understood and agreed that U-Haul will use and shall be unrestricted in its use of such name, mark, slogan, caricature, design or other trade or service item in the management and operation of other storage facilities both during and after the expiration or termination of the term of this Agreement. 6. Termination. ----------- Owner or U-Haul may terminate this Agreement with or without cause by giving not less than sixty days' written notice to the other party pursuant to Section 11 hereof. In addition, if Owner fails to pay U-Haul any amounts owed under this Agreement when due, U-Haul may terminate this Agreement by giving Owner not less than ten days written notice pursuant to Section 11 hereof. Notwithstanding the foregoing, however, U-Haul shall not resign as property manager of the Property until a nationally recognized and reputable successor property manager is available and prepared to assume property management responsibilities with respect to the Property in question Upon termination of this Agreement, U-Haul shall promptly return to Owner all monies, books, records and other materials held by U-Haul for or on behalf of Owner. In addition, if U-Haul has contracted to advertise the Property in the Yellow Pages, Owner shall, at the option of U-Haul, continue to be responsible for the cost of such advertisement and shall either (i) pay U-Haul the remaining amount due under such contract in a lump sum; or (ii) pay U- Haul monthly for the amount due under such contract. 7. Indemnification. --------------- Owner hereby agrees to indemnify and hold each of U-Haul, all persons and companies affiliated with U-Haul, and all officers, shareholders, directors, employees and agents of U-Haul and of any affiliated companies or persons (collectively, the "Indemnified Persons") harmless from any and all costs, expenses, attorneys' fees, suits, liabilities, judgments, damages, and claims in connection with the management of the Property (including the loss of use thereof following any damage, injury or destruction), arising from any cause except for the willful misconduct or gross negligence on the part of the Indemnified Persons. In addition, no Indemnified Person shall be liable for any error of judgment or for any mistake of fact or law, or for anything which it may do or refrain from doing hereafter, except in cases of willful misconduct or gross negligence. U-Haul hereby agrees to indemnify and hold Owner harmless from any and all costs, expenses, attorneys' fees, suits, liabilities, judgments, damages and claims in connection with the management of the Property arising from the willful misconduct of, gross negligence of, or breach of this Agreement by the Indemnified Persons. In addition, U-Haul shall not be liable to Owner for the acts or omissions of U-Haul's officers, shareholders, directors, employees, and agents except for U-Haul's own gross negligence or willful misconduct. 8. Assignment. ---------- This Agreement may be assigned by Owner in connection with any mortgage loan on the Property, whether pursuant to a conditional or unconditional, absolute assignment. U-Haul shall have the right to assign this Agreement to an affiliate or a wholly or majority owned subsidiary; provided, however, any such assignee must assume all obligations of U- Haul hereunder, Owner's rights hereunder will be enforceable against any such assignee and U-Haul shall not be released from its liabilities hereunder unless Owner shall expressly agree thereto in writing. 9. Headings. -------- The headings contained herein are for convenience of reference only and are not intended to define, limit or describe the scope or intent of any provision of this Agreement. 10. Governing Law. ------------- The validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties shall be governed by the internal laws of the State of Arizona. 11. Notices. ------- Any notice required or permitted herein shall be in writing and shall be personally delivered or mailed first class postage prepaid or delivered by an overnight delivery service to the respective addresses of the parties set forth below their signatures on the signature page thereof, or to such other address as any party may give to the other in writing. Any notice required by this Agreement will be deemed to have been given when personally served or one day after delivery to an overnight delivery service or five days after deposit in the first class mail. 12. Severability. ------------ Should any term or provision hereof be deemed invalid, void or unenforceable either in its entirety or in a particular application, the remainder of this Agreement shall nonetheless remain in full force and effect and, if the subject term or provision is deemed to be invalid, void or unenforceable only with respect to a particular application, such term or provision shall remain in full force and effect with respect to all other applications. 13. Successors. ---------- This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their permitted assigns and successors in interest. 14. Attorneys' Fees. --------------- If it shall become necessary for any party hereto to engage attorneys to institute legal action for the purpose of enforcing their respective rights hereunder or for the purpose of defending legal action brought by the other party hereto, the party or parties prevailing in such litigation shall be entitled to receive all costs, expenses and fees (including reasonable attorneys' fees) incurred by it in such litigation (including appeals). 15. 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. 16. Scope of Property Manager Responsibility. ---------------------------------------- The duties, obligations and liability of each property manager identified herein shall extend only so far as to relate to the Property for which such property manager is managing located in the domicile state of such property manager, as more specifically described on Exhibit A hereto, and no individual property manager hereunder shall be liable for the acts or omissions of any other property manager hereunder. Each property manager shall use its best efforts to assist Owner in fulfilling Owner's obligations arising under any loan to Owner that is secured by the Property, including but not limited to preparing and providing financial and accounting reports, and maintaining the Property. Each property manager agrees that it will perform its obligations hereunder according to reasonable industry standards, in good faith, and in a commercially reasonable manner. U-Haul agrees that, in discharging its duties hereunder, it will not have any relationship with any of its affiliates that would be less favorable to Owner than would reasonably be available in a transaction with an unaffiliated party. [Rest of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first above written. "Owner" Thirteen SAC Self-Storage Corporation, a Nevada corporation By: /S/ BRUCE BROCKHAGEN ___________________________ Bruce Brockhagen, Secretary U-Haul Co. of Georgia /S/ DON MURNEY ________________________ U-Haul Co. of California /S/ DON MURNEY ________________________ U-Haul Co. of Kansas /S/ DON MURNEY ________________________ U-Haul Co. of Louisiana /S/ DON MURNEY ________________________ U-Haul Co. of Texas /S/ DON MURNEY ________________________ U-Haul Co. of Florida /S/ DON MURNEY ________________________ U-Haul Co. of Massachusetts /S/ DON MURNEY ________________________ U-Haul Co. of Missouri /S/ DON MURNEY ________________________ U-Haul Co. of Oregon /S/ DON MURNEY ________________________ U-Haul Co. of Pennsylvania /S/ DON MURNEY ________________________ U-Haul Co. of Virginia /S/ DON MURNEY ________________________ EXHIBIT A - -------------------------------------------------------------- Number Name City State Owner - -------------------------------------------------------------- 704027 U-HAUL CT OF TIGARD TIGARD OR 13 SAC 715059 U-HAUL LAMBERT ROAD LA HABRA CA 13 SAC 734025 U-HAUL CENTER OF OLATHE OLATHE KS 13 SAC 736055 U-HAUL KINGSHIGHWAY SAINT LOUIS MO 13 SAC 737024 U-HAUL CENTER OF ROUND ROCK ROUND ROCK TX 13 SAC 746071 U-HAUL CTR BEAUMONT BEAUMONT TX 13 SAC 747073 U-HAUL GAUSE BLVD SLIDELL LA 13 SAC 779069 U-HAUL CTR SAVANNAH SAVANNAH GA 13 SAC 785053 U-HAUL CENTER GOLDENROD ORLANDO FL 13 SAC 791031 U-HAUL WORCESTER WORCESTER MA 13 SAC 796067 U-HAUL OF HYANNIS HYANNIS MA 13 SAC 811055 U-HAUL MECHANICSBRG MECHANICSBURG PA 13 SAC 825053 U-HAUL CTR DOWNTOWN NORFOLK VA 13 SAC EX-10.3 4 0004.txt MANAGEMENT AGREEMENT WITH FOURTEEN SAC PROPERTY MANAGEMENT AGREEMENT ----------------------------- THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is entered into as of June 30, 2000 among Fourteen SAC Self-Storage Corporation, a Nevada corporation, with its principal place of business at 715 South Country Club Drive, Mesa, AZ 85210 ("Owner"), and the property managers identified on Exhibit A attached hereto and incorportated herein --------- by reference (each such property manager is respectively referred to herein as "U-Haul"). RECITALS -------- A. Owner owns the leasehold estate in the real property and self- storage related improvements thereon located at the street addresses identified on Exhibit A hereto (hereinafter, collectively the "Property"). B. Owner intends that the Property be rented on a space-by-space retail basis to corporations, partnerships, individuals and/or other entities for use as self-storage facilities. C. Owner desires that U-Haul manage the Property and U-Haul desires to act as the property manager for the Property, all in accordance with the terms and conditions of this Agreement and as more specifically designated on Exhibit A hereto. NOW, THEREFORE, in consideration of the mutual covenants herein contained, Owner and U-Haul hereby agree as follows. 1. Employment. ---------- (a) Owner hereby retains U-Haul, and U-Haul agrees to act as manager of the Property upon the terms and conditions hereinafter set forth. (b) Owner acknowledges that U-Haul, and/or U-Haul affiliates, is in the business of managing self-storage facilities, both for its own account and for the account of others. It is hereby expressly agreed that notwithstanding this Agreement, U-Haul and such affiliates may continue to engage in such activities, may manage facilities other than those presently managed by U-Haul and its affiliates (whether or not such other facilities may be in direct or indirect competition with Owner) and may in the future engage in other business which may compete directly or indirectly with activities of Owner. (c) In the performance of their respective duties under this Agreement, each U-Haul property manager shall occupy the position of an independent contractor with respect to Owner. Nothing contained herein shall be construed as making the parties hereto (or any of them) partners or joint venturors, nor (except as expressly otherwise provided for herein) construed as making U-Haul an agent or employee of Owner or of any other U-Haul property manager hereunder. 2. Duties and Authority of U-Haul. ------------------------------ (a) GENERAL DUTIES AND AUTHORITY. Subject only to the restrictions and limitations provided in paragraphs (o) and (p) of this Section 2 and the right of Owner to terminate this Agreement as provided in Section 6 hereof, U-Haul shall have the sole and exclusive authority to fully manage the Property and supervise and direct the business and affairs associated or related to the daily operation thereof, and, to that end on behalf of Owner, to execute such documents and instruments as, in the sole judgment of U-Haul, are reasonably necessary or advisable under the circumstances in order to fulfill U-Haul's duties hereunder. Such duties and authority shall include, without limitation, those set forth below. (b) RENTING OF THE PROPERTY. U-Haul shall establish policies and procedures for the marketing activities for the Property, and may advertise the Property through such media as U-Haul deems advisable, including, without limitation, advertising with the Yellow Pages. U-Haul shall have the sole discretion, which discretion shall be exercised in good faith, to establish the terms and conditions of occupancy by the tenants of the Property, and U-Haul is hereby authorized to enter into rental agreements on behalf and for the account of Owner with such tenants and to collect rent from such tenants. U-Haul may jointly advertise the Property with other properties owned or managed by U-Haul, and in that event, U-Haul shall reasonably allocate the cost of such advertising among such properties. (c) REPAIR, MAINTENANCE AND IMPROVEMENTS. U-Haul shall make, execute, supervise and have control over the making and executing of all decisions concerning the acquisition of furniture, fixtures and supplies for the Property, and may purchase, lease or otherwise acquire the same on behalf of Owner. U-Haul shall make and execute, or supervise and have control over the making and executing of all decisions concerning the maintenance, repair, and landscaping of the Property. U-Haul shall, on behalf of Owner, negotiate and contract for and supervise the installation of all capital improvements related to the Property; provided, however, that U-Haul agrees to secure the prior written approval of Owner on all such expenditures in excess of $5,000.00 for any one item, except monthly or recurring operating charges and/or emergency repairs if in the opinion of U-Haul such emergency-related expenditures are necessary to protect the Property from damage or to maintain services to the tenants as called for in their respective leases. (d) PERSONNEL. U-Haul shall select all vendors, suppliers, contractors, subcontractors and employees with respect to the Property and shall hire, discharge and supervise all labor and employees required for the operation and maintenance of the Property. Any employees so hired shall be employees of U-Haul, and shall be carried on the payroll of U-Haul. Employees may include, but will not be limited to, on-site resident managers, on-site assistant managers, and relief managers located, rendering services, or performing activities on the Property in connection with its operation and management. The cost of employing such persons shall not exceed prevailing rates for comparable persons performing the same or similar services with respect to real estate similar to the Property. (e) AGREEMENTS. U-Haul shall negotiate and execute on behalf of Owner such agreements which U-Haul deems necessary or advisable for the furnishing of utilities, services, concessions and supplies, for the maintenance, repair and operation of the Property and such other agreements which may benefit the Property or be incidental to the matters for which U-Haul is responsible hereunder. (f) OTHER DECISIONS. U-Haul shall make all decisions in connection with the daily operation of the Property. (g) REGULATIONS AND PERMITS. U-Haul shall comply in all material respects with any statute, ordinance, law, rule, regulation or order of any governmental or regulatory body, having jurisdiction over the Property, respecting the use of the Property or the maintenance or operation thereof. U-Haul shall apply for and attempt to obtain and maintain, on behalf of Owner, all licenses and permits required or advisable (in the sole judgment of U-Haul) in connection with the management and operation of the Property. (h) RECORDS AND REPORTS OF DISBURSEMENTS AND COLLECTIONS. U-Haul shall establish, supervise, direct and maintain the operation of a system of record keeping and bookkeeping with respect to all receipts and disbursements in connection with the management and operation of the Property. The books, records and accounts shall be maintained at the U-Haul office or at such other location as U-Haul shall determine, and shall be available and open to examination and audit quarterly by Owner, its representatives, any mortgagee of the Property, and such mortgagee's representative. On or before thirty (30) days after the close of each quarter, U-Haul shall cause to be prepared and delivered to Owner, a monthly statement of receipts, expenses and charges, together with a statement of the disbursements made by U-Haul during such period on Owner's behalf. (i) [Reserved]. (j) COLLECTION. U-Haul shall be responsible for the billing and collection of all accounts receivable and for payment of all accounts payable with respect to the Property and shall be responsible for establishing policies and procedures to minimize the amount of bad debts. (k) LEGAL ACTIONS. U-Haul shall cause to be instituted, on behalf and in the name of Owner, any and all legal actions or proceedings U-Haul deems necessary or advisable to collect charges, rent or other income due to Owner with respect to the Property and to oust or dispossess tenants or other persons unlawfully in possession under any lease, license concession agreement or otherwise, and to collect damages for breach thereof or default thereunder by such tenant, licensee, concessionaire or occupant. (l) INSURANCE. U-Haul shall use its best efforts to assure that there is obtained and maintained in force, fire, comprehensive liability and other insurance policies in amounts generally carried with respect to similar facilities. U-Haul may in its discretion obtain employee theft or similar insurance in amounts and with such deductibles as U-Haul deems appropriate. U-Haul shall promptly provide Owner with such certificates of insurance as Owner may reasonably request in writing, evidencing such insurance coverage. (m) TAXES. During the term of this Agreement, U-Haul shall pay from Owner's funds, prior to delinquency, all real estate taxes, personal property taxes, and all other taxes assessed to, or levied upon, the Property. If required by the holder of any note secured by the Property, U- Haul will set aside, from Owner's funds, a reserve from each month's rent and other income collected, in an amount required by said holder for purposes of payment of real property taxes. (n) [Reserved] (o) LIMITATIONS ON U-HAUL AUTHORITY. Notwithstanding anything to the contrary set forth in this Section 2, U-Haul shall not, without obtaining the prior written consent of Owner, (i) rent storage space in the Property by written lease or agreement for a stated term in excess of one year, (ii) alter the building or other structures of the Property in any material manner; (iii) make any other agreements which exceed a term of one year and are not terminable on thirty day's notice at the will of Owner, without penalty, payment or surcharge; (iv) act in violation of any law; or (v) act in violation of any duty or responsibility of Owner under any mortgage loan secured by the Property. (p) SHARED EXPENSES. Owner acknowledges that certain economies may be achieved with respect to certain expenses to be incurred by U-Haul on behalf of Owner hereunder if materials, supplies, insurance or services are purchased by U-Haul in quantity for use not only in connection with the Property but in connection with other properties owned or managed by U-Haul or its affiliates. U-Haul shall have the right to purchase such materials, supplies, insurance and/or services in its own name and charge Owner a pro rata allocable share of the cost of the foregoing; provided, however, that the pro rata cost of such purchase to Owner shall not result in expenses greater than would otherwise be incurred at competitive prices and terms available in the area where the Property is located; and provided further, U-Haul shall give Owner access to records so Owner may review any such expenses incurred. (q) DEPOSIT OF GROSS REVENUES. All Gross Revenues (as hereinafter defined) shall be deposited into a "lock box account" maintained by U-Haul International, Inc., parent company of U-Haul, in accordance with the terms of a certain Cash Management Agreement dated as of the date hereof among Owner, Wells Fargo Bank, National Association (as lender and agent) and U-Haul (the "CMA"). Borrower and U-Haul each hereby covenant and agree that they shall comply with the terms and provisions of the CMA. 3. Duties of Owner. --------------- Owner hereby agrees to cooperate with U-Haul in the performance of U-Haul's duties under this Agreement and to that end, upon the request of U-Haul, to provide, at such rental charges, if any, as are deemed appropriate, reasonable office space for U-Haul employees on the premises of the Property and to give U-Haul access to all files, books and records of Owner relevant to the Property. Owner shall not unreasonably withhold or delay any consent or authorization to U-Haul required or appropriate under this Agreement. 4. Compensation of U-Haul. ---------------------- (a) MANAGEMENT FEE. Owner shall pay to U-Haul as the full amount due for the services herein provided a fee (the "Management Fee") equal to six percent (6%) of the "Gross Revenue" derived from or connected with the Property so managed by U-Haul hereunder. The term "Gross Revenue" shall mean all receipts (excluding security deposits unless and until Owner recognizes the same as income) of Owner (whether or not received by U-Haul on behalf or for the account of Owner) arising from the operation of the Property, including without limitation, rental payments of lessees of space in the Property, vending machine or concessionaire revenues, maintenance charges, if any, paid by the tenants of the Property in addition to basic rent, parking fees, if any, and all monies whether or not otherwise described herein paid for the use of the Property. "Gross Revenue" shall be determined on a cash basis. The Management Fee shall be paid promptly at the end of each calendar quarter and shall be calculated on the basis of the "Gross Revenue" of such preceding quarter. The Management Fee shall be paid to each U-Haul property manager herein identified based on the Gross Revenue of each respective Property for which such property manager is responsible as set forth on Exhibit A hereto. Each property manager --------- agrees that its monthly Management Fee shall be subordinate to that month's principal balance and interest payment on any first lien position mortgage loan on the Property. It is understood and agreed that the Management Fee will not be reduced by the cost to Owner of those employees and independent contractors engaged by or for Owner, including but not limited to the categories of personnel specifically referred to in Section 2(d). Except as provided in this Section 4, it is further understood and agreed that U-Haul shall not be entitled to additional compensation of any kind in connection with the performance by it of its duties under this Agreement. (b) REIMBURSEMENT OF CERTAIN EXPENSES. In addition to the Management Fee described above, U-Haul shall be entitled to reimbursement from Owner, on a quarterly basis, for all out-of-pocket expenses incurred by U-Haul hereunder in connection with the management and operation of the Property, including, without limitation, taxes, insurance, operational expenses, overhead, litigation and dispute resolution related expenses, capital improvement expenses, and costs of sales. 5. Use of Trademarks, Service Marks and Related Items. -------------------------------------------------- Owner acknowledges the significant value of the "U-Haul" name in the operations of Owner's property and it is therefore understood and agreed that the name, trademark and service mark, "U-Haul", and related marks, slogans, caricatures, designs and other trade or service items shall be utilized for the non-exclusive benefit of Owner in the rental and operation of the Property, and in comparable operations elsewhere. It is further understood and agreed that this name and all such marks, slogans, caricatures, designs and other trade or service items shall remain and be at all times the property of U-Haul and its affiliates, and that, except during the term hereof and as expressly provided herein, Owner shall have no right whatsoever therein. Owner agrees that during the term of this agreement the sign faces at the property will have the name "U-Haul." The U-Haul sign faces will be paid for by Owner. Upon termination of this agreement at any time for any reason, all such use by and for the benefit of Owner of any such name, mark, slogan, caricature, design or other trade or service item in connection with the Property shall, in any event, be terminated and any signs bearing any of the foregoing shall be removed from view and no longer used by Owner. In addition, upon termination of this Agreement at any time for any reason, Owner shall not enter into any new leases of Property using the U-Haul lease form or use other forms prepared by U-Haul. It is understood and agreed that U-Haul will use and shall be unrestricted in its use of such name, mark, slogan, caricature, design or other trade or service item in the management and operation of other storage facilities both during and after the expiration or termination of the term of this Agreement. 6. Termination. ----------- Owner or U-Haul may terminate this Agreement with or without cause by giving not less than sixty days' written notice to the other party pursuant to Section 11 hereof. In addition, if Owner fails to pay U-Haul any amounts owed under this Agreement when due, U-Haul may terminate this Agreement by giving Owner not less than ten days written notice pursuant to Section 11 hereof. Notwithstanding the foregoing, however, U-Haul shall not resign as property manager of the Property until a nationally recognized and reputable successor property manager is available and prepared to assume property management responsibilities with respect to the Property in question Upon termination of this Agreement, U-Haul shall promptly return to Owner all monies, books, records and other materials held by U-Haul for or on behalf of Owner. In addition, if U-Haul has contracted to advertise the Property in the Yellow Pages, Owner shall, at the option of U-Haul, continue to be responsible for the cost of such advertisement and shall either (i) pay U-Haul the remaining amount due under such contract in a lump sum; or (ii) pay U- Haul monthly for the amount due under such contract. 7. Indemnification. --------------- Owner hereby agrees to indemnify and hold each of U-Haul, all persons and companies affiliated with U-Haul, and all officers, shareholders, directors, employees and agents of U-Haul and of any affiliated companies or persons (collectively, the "Indemnified Persons") harmless from any and all costs, expenses, attorneys' fees, suits, liabilities, judgments, damages, and claims in connection with the management of the Property (including the loss of use thereof following any damage, injury or destruction), arising from any cause except for the willful misconduct or gross negligence on the part of the Indemnified Persons. In addition, no Indemnified Person shall be liable for any error of judgment or for any mistake of fact or law, or for anything which it may do or refrain from doing hereafter, except in cases of willful misconduct or gross negligence. U-Haul hereby agrees to indemnify and hold Owner harmless from any and all costs, expenses, attorneys' fees, suits, liabilities, judgments, damages and claims in connection with the management of the Property arising from the willful misconduct of, gross negligence of, or breach of this Agreement by the Indemnified Persons. In addition, U-Haul shall not be liable to Owner for the acts or omissions of U-Haul's officers, shareholders, directors, employees, and agents except for U-Haul's own gross negligence or willful misconduct. 8. Assignment. ---------- This Agreement may be assigned by Owner in connection with any mortgage loan on the Property, whether pursuant to a conditional or unconditional, absolute assignment. U-Haul shall have the right to assign this Agreement to an affiliate or a wholly or majority owned subsidiary; provided, however, any such assignee must assume all obligations of U- Haul hereunder, Owner's rights hereunder will be enforceable against any such assignee and U-Haul shall not be released from its liabilities hereunder unless Owner shall expressly agree thereto in writing. 9. Headings. -------- The headings contained herein are for convenience of reference only and are not intended to define, limit or describe the scope or intent of any provision of this Agreement. 10. Governing Law. ------------- The validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties shall be governed by the internal laws of the State of Arizona. 11. Notices. ------- Any notice required or permitted herein shall be in writing and shall be personally delivered or mailed first class postage prepaid or delivered by an overnight delivery service to the respective addresses of the parties set forth below their signatures on the signature page thereof, or to such other address as any party may give to the other in writing. Any notice required by this Agreement will be deemed to have been given when personally served or one day after delivery to an overnight delivery service or five days after deposit in the first class mail. 12. Severability. ------------ Should any term or provision hereof be deemed invalid, void or unenforceable either in its entirety or in a particular application, the remainder of this Agreement shall nonetheless remain in full force and effect and, if the subject term or provision is deemed to be invalid, void or unenforceable only with respect to a particular application, such term or provision shall remain in full force and effect with respect to all other applications. 13. Successors. ---------- This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their permitted assigns and successors in interest. 14. Attorneys' Fees. --------------- If it shall become necessary for any party hereto to engage attorneys to institute legal action for the purpose of enforcing their respective rights hereunder or for the purpose of defending legal action brought by the other party hereto, the party or parties prevailing in such litigation shall be entitled to receive all costs, expenses and fees (including reasonable attorneys' fees) incurred by it in such litigation (including appeals). 15. 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. 16. Scope of Property Manager Responsibility. ---------------------------------------- The duties, obligations and liability of each property manager identified herein shall extend only so far as to relate to the Property for which such property manager is managing located in the domicile state of such property manager, as more specifically described on Exhibit A hereto, and no individual property manager hereunder shall be liable for the acts or omissions of any other property manager hereunder. Each property manager shall use its best efforts to assist Owner in fulfilling Owner's obligations arising under any loan to Owner that is secured by the Property, including but not limited to preparing and providing financial and accounting reports, and maintaining the Property. Each property manager agrees that it will perform its obligations hereunder according to reasonable industry standards, in good faith, and in a commercially reasonable manner. U-Haul agrees that, in discharging its duties hereunder, it will not have any relationship with any of its affiliates that would be less favorable to Owner than would reasonably be available in a transaction with an unaffiliated party. [Rest of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first above written. "Owner" Fourteen SAC Self-Storage Corporation, a Nevada corporation By: /S/ BRUCE BROCKHAGEN ___________________________ Bruce Brockhagen, Secretary U-Haul Co. of New York /S/ DON MURNEY __________________________ U-Haul Co. of Texas /S/ DON MURNEY __________________________ U-Haul Co. of Nevada /S/ DON MURNEY __________________________ U-Haul Co. of Illinois /S/ DON MURNEY __________________________ EXHIBIT A - ------------------------------------------------------------ Number Name City State Owner ____________________________________________________________ 758059 U-HAUL CENTER NEW-TOWN CHICAGO NORTH IL 14 SAC 800057 U-HAUL CTR ALBANY ALBANY NY 14 SAC 803079 U-HAUL KINGS BRIDGE BRONX NY 14 SAC 806056 U-HAUL FIVE TOWNS INWOOD NY 14 SAC EX-27 5 0005.txt FDS 09/30/00
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS MAR-31-2001 SEP-30-2000 26,408 0 579,977 0 83,671 0 2,477,522 1,143,096 3,235,093 0 1,096,240 0 0 10,563 670,295 3,235,093 113,961 963,343 65,974 728,181 0 2,052 44,052 122,084 43,239 78,845 0 0 0 78,845 3.35 3.35 THE VALUE FOR RECEIVABLES REPRESENTS THEIR AMOUNT NET OF THEIR ALLOWANCES. AN UNCLASSIFIED BALANCE SHEET EXISTS IN THE REGISTRANT'S FINANCIAL STATEMENTS.
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