-----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, Q3irJbQWiolR3pc7uAvtNKKxClEcUzscV3Tm2cVgGQ3q06CpXc6BfQuTRinhdHi4 hs2jDSfnZmWjMEsctOR6ag== 0000004457-02-000033.txt : 20020414 0000004457-02-000033.hdr.sgml : 20020414 ACCESSION NUMBER: 0000004457-02-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERCO /NV/ CENTRAL INDEX KEY: 0000004457 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510] IRS NUMBER: 880106815 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11255 FILM NUMBER: 02552366 BUSINESS ADDRESS: STREET 1: 1325 AIRMOTIVE WAY 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 amqdec01.txt FORM 10-Q DEC 2001 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 December 31, 2001 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 [ ]. 21,417,837 shares of AMERCO Common Stock, $0.25 par value were outstanding at February 12, 2002. 5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were outstanding at February 12, 2002. 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 December 31, 2001 (unaudited) and March 31, 2001.............................. 4 b) Condensed Consolidated Statements of Earnings for the Nine months ended December 31, 2001 and 2000 (unaudited).......... 6 c) Condensed Consolidated Statements of Comprehensive Income for the Nine months ended December 31, 2001 and 2000 (unaudited).................................................. 7 d) Condensed Consolidated Statements of Earnings for the Quarters ended December 31, 2001 and 2000 (unaudited).................. 8 e) Condensed Consolidated Statements of Comprehensive Income for the Quarters ended December 31, 2001 and 2000 (unaudited).... 9 f) Condensed Consolidated Statements of Cash Flows for the Nine months ended December 31, 2001 and 2000 (unaudited).......... 10 g) Notes to Condensed Consolidated Financial Statements - December 31, 2001 (unaudited), March 31, 2001 and December 31, 2000 (unaudited)................................ 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................ 22 Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 30 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................ 31 Item 6. Exhibits and Reports on Form 8-K................................. 32 3 PART I. FINANCIAL INFORMATION A review of the Condensed Consolidated Financial Statements herein was not completed by the Company's independent public accountant prior to the deadline for filing this Form 10-Q, as required by Rule 10-01(d) of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. 4 ITEM 1. FINANCIAL STATEMENTS AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Balance Sheets December 31, March 31, Assets 2001 2001 ------------------------ (Unaudited) (in thousands) Cash and cash equivalents $ 35,716 52,778 Inventories, net 79,941 84,005 Prepaid expenses 18,324 14,416 Investments, fixed maturities 986,698 952,482 Investments, other 545,919 464,958 Other assets 485,785 452,781 ------------------------ Property, plant and equipment, at cost: Buildings and improvements 826,126 832,372 Rental trucks 1,069,769 1,037,653 Other property, plant, and equipment 661,294 660,802 ------------------------ 2,557,189 2,530,827 Less accumulated depreciation 1,218,226 1,168,183 ------------------------ Total property, plant and equipment 1,338,963 1,362,644 ------------------------ Total Assets $ 3,491,346 3,384,064 ======================== The accompanying notes are an integral part of these consolidated financial statements. 5 December 31, March 31, Liabilities and Stockholders' Equity 2001 2001 ------------------------ (Unaudited) (in thousands) Liabilities: Notes and loans payable $ 1,132,612 1,156,848 Policy benefits and losses, claims and loss expenses payable 705,745 668,830 Liabilities from premium deposits 548,948 522,207 Deferred income 15,424 24,546 Deferred income taxes 187,413 139,419 Other liabilities 238,437 256,848 ------------------------ Total liabilities 2,828,579 2,768,698 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 321,031 312,128 Accumulated other comprehensive income (30,681) (40,709) Retained earnings 791,930 755,174 Cost of common shares in treasury, net (415,924) (406,617) Unearned ESOP shares (14,152) (15,173) ------------------------ Total stockholders' equity 662,767 615,366 Contingent liabilities and commitments ------------------------ Total Liabilities and Stockholders' Equity $ 3,491,346 3,384,064 ======================== The accompanying notes are an integral part of these consolidated financial statements. 6 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Earnings Nine months ended December 31, (Unaudited) 2001 2000 ----------------------- (in thousands, except share and per share data) Revenues Rental revenue $ 980,095 951,058 Net sales 158,556 155,078 Premiums 308,261 210,102 Net investment and interest income 68,101 72,082 ----------------------- Total revenues 1,515,013 1,388,320 Costs and expenses Operating expenses 783,219 745,039 Cost of sales 89,116 87,600 Benefits and losses 276,260 170,678 Amortization of deferred policy acquisition costs 32,346 25,112 Lease expense 133,130 132,395 Depreciation, net 68,754 69,552 ----------------------- Total costs and expenses 1,382,825 1,230,376 Earnings from operations 132,188 157,944 Interest expense 58,842 65,287 ----------------------- Pretax earnings 73,346 92,657 Income tax expense (26,869) (32,983) ----------------------- Earnings from operations before extraordinary loss on early extinguishment of debt 46,477 59,674 Extraordinary loss on early extinguishment of debt, net of tax of $1,160 - (2,121) ----------------------- Net earnings $ 46,477 57,553 ======================= Basic and diluted earnings per common share: Earnings from operations before extraordinary loss on early extinguishment of debt 1.74 2.32 Extraordinary loss on early extinguishment of debt, net - (0.10) ----------------------- Net earnings $ 1.74 2.22 ======================= Basic and diluted average common shares outstanding: 21,092,225 21,539,821 ======================= The accompanying notes are an integral part of these consolidated financial statements. 7 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income Nine months ended December 31, (Unaudited) 2001 2000 ------------------- (in thousands) Comprehensive income: Net earnings $ 46,477 57,553 Changes in other comprehensive income: Foreign currency translation (3,647) (4,683) Fair market value of cash flow hedge 153 (861) Unrealized gain on investments 13,522 3,033 ------------------- Total comprehensive income $ 56,505 55,042 =================== The accompanying notes are an integral part of these consolidated financial statements. 8 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Earnings Quarters ended December 31, (Unaudited) 2001 2000 --------------------------- (in thousands, except share and per share data) Revenues Rental revenue $ 279,114 270,775 Net sales 40,284 41,117 Premiums 105,381 88,607 Net investment and interest income 21,142 25,478 ----------------------- Total revenues 445,921 425,977 Costs and expenses Operating expense 256,496 258,200 Cost of sales 23,950 21,626 Benefits and losses 95,487 74,863 Amortization of deferred policy acquisition costs 11,413 8,554 Lease expense 42,905 45,859 Depreciation, net 27,923 25,067 ----------------------- Total costs and expenses 458,174 434,169 Loss from operations (12,253) (8,192) Interest expense 17,986 21,235 ----------------------- Pretax loss (30,239) (29,427) Income tax benefit 10,027 10,256 ----------------------- Loss from operations before extraordinary loss on early extinguishment of debt (20,212) (19,171) Extraordinary loss on early extinguishment of debt, net of tax of $1,160 - (2,121) ----------------------- Net loss $ (20,212) (21,292) ======================= Basic and diluted loss per common share: Loss from operations before extraordinary loss on early extinguishment of debt $ (1.12) (1.05) Extraordinary loss on early extinguishment of debt, net - (0.10) ----------------------- Net loss $ (1.12) (1.15) ======================= Basic and diluted average common shares outstanding: 20,892,342 21,406,688 ======================= The accompanying notes are an integral part of these consolidated financial statements. 9 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income Quarters ended December 31, (Unaudited) 2001 2000 ------------------- (in thousands) Comprehensive income: Net loss $ (20,212) (21,292) Changes in other comprehensive income: Foreign currency translation (527) (1,098) Fair market value of cash flow hedge 443 (679) Unrealized gain on investments 9,107 7,074 ------------------- Total comprehensive loss $ (11,189) (15,995) =================== The accompanying notes are an integral part of these consolidated financial statements. 10 AMERCO AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Cash Flows Nine months ended December 31, (Unaudited) 2001 2000 ------------------- (in thousands) Net cash provided by operating activities 131,125 100,900 ------------------- Cash flows from investing activities: Purchases of investments: Property, plant and equipment (144,103) (280,271) Fixed maturities (140,695) (84,808) Real estate (65,436) - Mortgage loans (561) (21,654) Proceeds from sale of investments: Property, plant and equipment 101,049 240,140 Fixed maturities 117,356 89,583 Mortgage loans 10,039 19,187 Changes in other investments (18,359) (120,313) ------------------- Net cash used by investing activities (140,710) (158,136) ------------------- Cash flows from financing activities: Net change in short-term borrowings 81,743 169,281 Principal payments on notes (102,530) (125,048) Investment contract deposits 107,855 62,947 Investment contract withdrawals (83,224) (55,763) Changes in other financing activities (11,321) (17,569) ------------------- Net cash provided (used) by financing activities (7,477) 33,848 ------------------- Decrease in cash and cash equivalents (17,062) (23,388) Cash and cash equivalents at beginning of period 52,778 48,435 ------------------- Cash and cash equivalents at end of period $ 35,716 25,047 =================== Summary of non-cash investing and financing activity: A note and other receivables were reduced in exchange for the purchase of storage properties from a related party. $ 35,196 - An investment was received in exchange for the sale of storage properties to a related party. $ 44,312 98,351 The accompanying notes are an integral part of these consolidated financial statements. 11 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements December 31, 2001, March 31, 2001 and December 31, 2000 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AMERCO, a Nevada corporation (AMERCO), is the parent company for U-Haul International, Inc. (U-Haul), which conducts moving and storage operations, Amerco Real Estate Company (Real Estate), which conducts real estate operations, Republic Western Insurance Company (RepWest), which conducts property and casualty insurance operations, and Oxford Life Insurance Company (Oxford), which conducts life insurance operations. PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements include the accounts of 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 December 31, 2001 and the related condensed consolidated statements of earnings and the condensed consolidated statements of comprehensive income for the three and nine months ended December 31, 2001 and 2000 and the condensed consolidated cash flows for the nine months ended December 31, 2001 and 2000 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, except for as described in Note 9. Certain reclassifications have been made to the financial statements for the three and nine months ended December 31, 2000 to conform with the current year's presentation. 12 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: September 30, 2001 ------------------ 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 $ 4,100 $ 3,626 252 - 3,878 U.S. government agency mortgage- backed securities $ 10,048 10,005 432 - 10,437 Corporate securities $ 44,522 42,758 1,791 (164) 44,385 Mortgage-backed securities $ 30,334 29,831 1,379 (35) 31,175 Redeemable preferred stocks 114,784 114,674 373 (2,988) 112,059 ---------------------------------------- 200,894 4,227 (3,187) 201,934 ---------------------------------------- September 30, 2001 ------------------ 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 $ 42,260 $ 42,737 2,610 - 45,347 U.S. government agency mortgage- backed securities $ 27,531 27,324 1,209 (2) 28,531 Obligations of states and political subdivisions $ 15,910 16,039 698 (26) 16,711 Corporate securities $ 630,723 622,584 19,629 (17,162) 625,051 Mortgage-backed securities $ 31,300 31,238 1,205 (364) 32,079 Redeemable preferred stocks 1,228 31,022 304 (565) 30,761 Redeemable common stocks 657 8,625 - (1,301) 7,324 ---------------------------------------- 779,569 25,655 (19,420) 785,804 ---------------------------------------- Total $ 980,463 29,882 (22,607) 987,738 ======================================== 13 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: September 30, -------------------- 2001 2000 -------------------- (in thousands) Investments, fixed maturities $ 391,507 413,149 Investments, other 84,379 27,823 Receivables 223,740 147,143 Due from affiliate 53,042 28,905 Other assets 54,277 48,528 ------------------- Total assets $ 806,945 665,548 =================== Policy liabilities and accruals $ 406,072 309,887 Unearned premiums 105,120 81,679 Other policyholders' funds and liabilities 57,713 61,908 ------------------- Total liabilities 568,905 453,474 Stockholder's equity 238,040 212,074 ------------------- Total liabilities and stockholder's equity $ 806,945 665,548 =================== A summarized condensed consolidated income statement for RepWest is presented below: Quarter ended Nine months ended September 30, September 30, ----------------------------------------- 2001 2000 2001 2000 ----------------------------------------- (in thousands) Premiums $ 64,717 63,386 192,982 135,718 Net investment income 8,102 7,966 23,967 23,718 ---------------- ----------------- Total revenue 72,819 71,352 216,949 159,436 Benefits and losses 65,618 56,331 188,256 116,432 Amortization of deferred policy acquisition costs 6,207 3,770 17,837 10,130 Operating expenses 13,782 18,055 42,556 37,783 ---------------- ----------------- Total expenses 85,607 78,156 248,649 164,345 Loss from operations (12,788) (6,804) (31,700) (4,909) Income tax benefit 4,522 2,379 11,209 1,789 ---------------- ----------------- Net loss $ (8,266) (4,425) (20,491) (3,120) ================ ================= 14 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: September 30, ------------------- 2001 2000 ------------------- (in thousands) Investments, fixed maturities $ 595,191 470,772 Investments, other 198,668 167,208 Receivables 31,123 19,564 Other assets 89,865 84,626 ------------------- Total assets $ 914,847 742,170 =================== Policy liabilities and accruals $ 191,104 152,358 Premium deposits 548,948 469,393 Other policyholders' funds and liabilities 50,739 30,501 ------------------- Total liabilities 790,791 652,252 Stockholder's equity 124,056 89,918 ------------------- Total liabilities and stockholder's equity $ 914,847 742,170 =================== A summarized condensed consolidated income statement for Oxford is presented below: Quarter ended Nine months ended September 30, September 30, ---------------------------------------- 2001 2000 2001 2000 ---------------------------------------- (in thousands) Premiums $ 42,198 26,750 119,736 78,274 Net investment income 5,791 5,807 18,975 18,170 ---------------- ----------------- Total revenue 47,989 32,557 138,711 96,444 Benefits and losses 29,869 18,532 88,004 54,246 Amortization of deferred policy acquisition costs 5,217 4,784 14,509 14,982 Operating expenses 10,771 6,626 30,207 19,857 ---------------- ----------------- Total expenses 45,857 29,942 132,720 89,085 Income from operations 2,132 2,615 5,991 7,359 Income tax expense (555) (753) (1,787) (1,878) ---------------- ----------------- Net income $ 1,577 1,862 4,204 5,481 ================ ================= 15 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 4. CONTINGENT LIABILITIES AND COMMITMENTS During the nine months ended December 31, 2001, a subsidiary of U-Haul entered into five transactions whereby the subsidiary sold rental trucks, which were subsequently leased back. AMERCO has guaranteed $13,571,000 of residual values at December 31, 2001 for these assets at the end of the respective lease terms. Following are the lease commitments for the leases executed during the nine months ended December 31, 2001, 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 -------------------------------------------------------- 2002 $ 657 - 657 2003 2,625 - 2,625 2004 2,625 - 2,625 2005 2,300 - 2,300 2006 2,192 - 2,192 Thereafter 7,305 - 7,305 ------------------------------------ $ 17,704 - 17,704 ==================================== 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: Nine months ended December 31, 2001 2000 ---------------------- (in thousands) Receivables $ (14,911) 9,686 ====================== Inventories $ 4,064 3,221 ====================== Accounts payable and accrued expenses $ (20,730) (30,618) ====================== 16 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 December 31, 2001: Loss from operations $ (20,212) Less: preferred stock dividends 3,241 ------ Basic and diluted loss per common share (23,453) 20,892,342 $ (1.12) ====== ========== ==== Quarter ended December 31, 2000: Loss from operations before extraordinary loss on early extinguishment of debt $ (19,171) Less: preferred stock dividends 3,241 ------ Loss from operations before extraordinary loss on early extinguishment of debt available to common stockholders (22,412) 21,406,688 $ (1.05) Extraordinary loss on early extinguishment of debt, net (2,121) (0.10) ------ ---- Basic and diluted loss per common share (24,533) 21,406,688 $ (1.15) ====== ========== ==== Nine months ended December 31, 2001: Earnings from operations $ 46,477 Less: preferred stock dividends 9,722 ------ Basic and diluted earnings per common share 36,755 21,092,225 $ 1.74 ====== ========== ==== Nine months ended December 31, 2000: Earnings from operations before extraordinary loss on early extinguishment of debt $ 59,674 Less: preferred stock dividends 9,722 ----- Earnings from operations before extraordinary loss on early extinguishment of debt available to common stockholders 49,952 21,539,821 $ 2.32 Extraordinary loss on early extinguishment of debt, net (2,121) (0.10) ------ ---- Basic and diluted earnings per common share 47,831 21,539,821 $ 2.22 ====== ========== ====
17 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 7. RELATED PARTIES During the nine months ended December 31, 2001, 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 $20,899,000 and principal payments of $33,952,000 from SAC Holdings during the nine months ended December 31, 2001. The terms of the notes with SAC Holdings are similar to 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 nine months ended December 31, 2001, a subsidiary of AMERCO funded through a note the purchase of properties and construction costs for SAC Holdings of approximately $33,279,000. This amount is reflected in Investments, other of the condensed consolidated balance sheet. U-Haul currently manages the self-storage 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 $5,495,000 and $4,523,000 were received during the nine months ended December 31, 2001 and 2000, 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 December 2001, Real Estate completed the sale of fourteen storage properties to Eighteen SAC Self-Storage Corporation, subsidiary of SAC Holding Corporation, for $43,782,000. Real Estate received cash and notes from the sale. The gain is reflected in the equity section of the condensed consolidated balance sheet. In August 2001, Real Estate completed the sale of one storage property to SAC Holdings, for $530,000. Real Estate received notes from the sale. 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. In September 2001, the Company purchased nine storage properties from Five SAC Self-Storage Corporation, a subsidiary of SAC Holdings at a purchase price of $35.2 million for fair value. These properties were not previously owned by the consolidated company. Management believes that the foregoing transactions were consummated on terms equivalent to those that prevail in arm's-length transactions. During September 2001 the Company consummated a legal transfer of cash in the amount of $7.5 million and real estate properties in the amount of $65.5 million from Real Estate and other subsidiaries to Oxford and RepWest. The transferred assets were recorded by RepWest and Oxford at their original book value and no gain or loss was recorded. See Note 9 for additional discussion. 18 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 8. NEW ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 (SFAS 141), "Business Combinations", and No. 142 (SFAS 142), "Goodwill and Other Intangible Assets". SFAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB 16), "Business Combinations". The most significant changes made by SFAS 141 are: (1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, (2) establishing specific criteria for the recognition of intangible assets separately from goodwill, and (3) requiring unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized). SFAS 142 supercedes APB 17, "Intangible Assets". SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of SFAS 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS 142 are: (1) goodwill and indefinite lived intangible assets will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting unit level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to forty years. SFAS No. 141 and 142 are not expected to affect the consolidated financial position or results of operations. SFAS No. 143, Accounting for Asset Retirement Obligations, requires recognition of the fair value of liabilities associated with the retirement of long-lived assets when a legal obligation to incur such costs arises as a result of the acquisition, construction, development and/or the normal operation of a long-lived asset. Upon recognition of the liability, a corresponding asset is recorded and depreciated over the remaining life of the long-lived asset. The Statement defines a legal obligation as one that a party is required to settle as a result of an existing or enacted law, statute, ordinance, or written or oral contract or by legal construction of a contract under the doctrine of promissory estoppel. SFAS 143 is effective for fiscal years beginning after December 15, 2002. Management has not yet determined the total likely effects of adopting this Statement on the financial position or results of operations. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses issues relating to the implementation of FASB Statement No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and develops a single accounting model, based on the framework established in FAS 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. The Company is in the process of determining the extent to which this statement will impact its results of operations or financial position. 19 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 9. 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) Quarter ended December 31, 2001 ----------------- Revenues: Outside $ 319,027 7,619 71,692 47,583 - 445,921 Intersegment - 11,947 1,127 406 (13,480) - --------- ------- ------- ------- -------- --------- Total revenues $ 319,027 19,566 72,819 47,989 (13,480) 445,921 Depreciation/ amortization $ 26,404 2,985 6,322 5,241 - 40,952 Interest expense $ 17,986 8,229 - - (8,229) 17,986 Pretax earnings (loss) $ (28,010) 8,427 (12,788) 2,132 - (30,239) Income tax benefit (expense) $ 9,009 (2,949) 4,522 (555) - 10,027 Identifiable assets $1,493,042 714,819 806,945 904,547 (428,007) 3,491,346 Quarter ended December 31, 2000 ----------------- Revenues: Outside $ 320,572 3,025 70,191 32,189 - 425,977 Intersegment - 17,754 1,161 368 (19,283) - --------- ------- ------- ------- -------- --------- Total revenues $ 320,572 20,779 71,352 32,557 (19,283) 425,977 Depreciation/ amortization $ 29,034 2,760 3,453 4,824 - 40,071 Interest expense $ 21,235 10,626 - - (10,626) 21,235 Pretax earnings (loss) $ (27,593) 2,355 (6,804) 2,615 - (29,427) Income tax benefit (expense) $ 9,454 (824) 2,379 (753) - 10,256 Extraordinary loss on early extinguishment of debt, net $ (2,121) - - - - (2,121) Identifiable assets $1,451,906 761,149 665,548 731,627 (338,700) 3,271,530
20 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 9. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Moving Property/ Adjustments and Storage Real Casualty Life and Operations Estate Insurance Insurance Eliminations Consolidated ----------------------------------------------------------------------- (in thousands) Nine months ended December 31, 2001 ----------------- Revenues: Outside $1,152,824 10,986 213,677 137,526 - 1,515,013 Intersegment - 48,264 3,272 1,185 (52,721) - ---------- ------- ------- ------- -------- --------- Total revenues $1,152,824 59,250 216,949 138,711 (52,721) 1,515,013 Depreciation/ amortization $ 78,824 8,535 18,584 14,652 - 120,595 Interest expense $ 58,842 27,953 - - (27,953) 58,842 Pretax earnings (loss) $ 67,935 31,120 (31,700) 5,991 - 73,346 Income tax benefit (expense) $ (25,399) (10,892) 11,209 (1,787) - (26,869) Identifiable assets $1,493,042 714,819 806,945 904,547 (428,007) 3,491,346 Nine months ended December 31, 2000 ----------------- Revenues: Outside $1,126,987 9,343 156,609 95,381 - 1,388,320 Intersegment - 52,599 2,827 1,063 (56,489) - ---------- ------- ------- ------- -------- --------- Total revenues $1,126,987 61,942 159,436 96,444 (56,489) 1,388,320 Depreciation/ amortization $ 77,721 8,144 10,208 15,449 - 111,522 Interest expense $ 65,287 32,870 - - (32,870) 65,287 Pretax earnings (loss) $ 79,752 10,455 (4,909) 7,359 - 92,657 Income tax benefit (expense) $ (29,235) (3,659) 1,789 (1,878) - (32,983) Extraordinary loss on early extinguishment of debt, net $ (2,121) - - - - (2,121) Identifiable assets $1,451,906 761,149 665,548 731,627 (338,700) 3,271,530
21 AMERCO AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 9. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Geographic Area Data - United United (All amounts are in States Canada Consolidated States Canada Consolidated U.S. $'s) ------------------------------------------------------------------ Quarter ended Nine months ended ------------------------------------------------------------------ (in thousands) December 31, 2001 ----------------- Total revenues $ 437,993 7,928 445,921 1,483,503 31,510 1,515,013 Depreciation/ amortization $ 40,010 942 40,952 117,904 2,691 120,595 Interest expense $ 18,066 (80) 17,986 58,883 (41) 58,842 Pretax earnings (loss) $ (29,603) (636) (30,239) 68,164 5,182 73,346 Income tax benefit (expense) $ 10,027 - 10,027 (26,869) - (26,869) Identifiable assets $3,432,399 58,947 3,491,346 3,432,399 58,947 3,491,346 December 31, 2000 ----------------- Total revenues $ 418,421 7,556 425,977 1,357,483 30,837 1,388,320 Depreciation/ amortization $ 38,963 1,108 40,071 108,244 3,278 111,522 Interest expense $ 21,229 6 21,235 65,274 13 65,287 Pretax earnings (loss) $ (28,439) (988) (29,427) 88,430 4,227 92,657 Income tax benefit (expense) $ 10,256 - 10,256 (32,977) (6) (32,983) Extraordinary loss, net $ (2,121) - (2,121) (2,121) - (2,121) Identifiable assets $3,220,947 50,583 3,271,530 3,220,947 50,583 3,271,530
During September 2001 the Company consummated a legal transfer of cash in the amount of $7.5 million and real estate properties in the amount of $65.5 million from its subsidiaries and Real Estate to Oxford and RepWest. The transferred assets were recorded by the RepWest and Oxford at their original book value; however, because the operating results and financial position of Oxford and RepWest are reflected on a one-quarter lag, the amounts have not been reflected within the identifiable assets line of the Property/Casualty or Life Insurance segments above. Since the Moving and Storage and Real Estate operations are not reported on a one-quarter lag, the assets have been removed from the Real Estate industry segment identifiable assets and are reflected as an adjustment and elimination within the above table. 10. SUBSEQUENT EVENTS In January 2002, Real Estate completed the sale of thirty-seven storage properties to Twenty SAC Self-Storage Corporation, Twenty-One SAC Self-Storage Corporation, Twenty-Two SAC Self-Storage Corporation and Twenty-Three SAC Self- Storage Corporation, subsidiaries of SAC Holding Corporation, for $93,679,000. Real Estate received cash and notes from the sale. On February 6, 2002, AMERCO declared a cash dividend of $3,241,000 ($0.53125 per preferred share) to preferred stockholders of record as of February 18, 2002. 22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Quarterly report on Form 10-Q 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, the anticipated results of legal proceedings against the Company, 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. Some of the important factors that could cause our actual results, performance or financial condition to differ materially from our expectations are: fluctuations in our costs to maintain and update our fleet and facilities; changes in government regulations, particularly environmental regulations; our credit ratings; changes in demand for our products; changes in the general domestic economy; degree and nature of our competition; and other factors described in this Quarterly Report on Form 10-Q or the other documents we file with the Securities and Exchange Commission. As a result of these factors AMERCO's stock price may fluctuate dramatically. GENERAL Information on industry segments is incorporated by reference from "Item 1. Financial Statements - Notes 1, 3 and 9 of Notes to Condensed 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. For a discussion of new accounting standards please refer to Note 8 of the Consolidated Financial Statements. RESULTS OF OPERATIONS NINE MONTHS ENDED DECEMBER 31, 2001 VERSUS NINE MONTHS ENDED DECEMBER 31, 2000 Moving and Storage Operations Revenues consist of rental revenues and net sales. Total rental revenue was $976.1 million and $949.6 million for the nine months ended December 31, 2001 and 2000, respectively. Net revenues from the rental of moving equipment increased by $18.9 million. The increase was primarily attributable to higher truck and trailer rental revenues and storage revenues, caused by increases in prices and improvements in fleet utilization and storage occupancy. Net sales revenues were $158.5 million and $155.0 million for the nine months ended December 31, 2001 and 2000, respectively. Revenue growth resulted from an increase in the sale of moving support items and an increase in the sale of propane. Cost of sales was $89.1 million and $87.6 million for the nine months ended December 31, 2001 and 2000, respectively. Operating expenses before intercompany eliminations were $768.0 million and $743.8 million for the nine months ended December 31, 2001 and 2000, respectively. Increased expenditure levels for personnel and rental equipment maintenance, due to an increase in truck rental transactions, were primarily responsible. Net depreciation expense was $73.1 million and $59.8 million for the nine months ended December 31, 2001 and 2000, respectively. The increase reflects depreciation on the rental truck fleet. Operating profit before tax and intercompany elimination was $94.2 million and $102.5 million for the nine months ended December 31, 2001 and 2000, respectively. 23 Real Estate Operations Rental revenue before intercompany eliminations was $52.3 million and $54.1 million for the nine months ended December 31, 2001 and 2000, respectively. Intercompany revenue was $48.3 million and $52.6 million for the nine months ended December 31, 2001 and 2000, respectively. Net investment and interest income was $6.9 million and $7.8 million for the nine months ended December 31, 2001 and 2000, respectively. Net depreciation expense (income) was $(4.3) million and $9.7 million for the nine months ended December 31, 2001 and 2000, respectively. The decrease is due to an increase in the gain from the sale of property plant and equipment. Operating profit before tax and intercompany elimination was $31.1 million and $10.5 million for the nine months ended December 31, 2001 and 2000, respectively. The increase mainly reflects a gain of $12.5 million on sales of property plant and equipment and a decrease in net lease cost. Property and Casualty RepWest's premiums were $193.0 million and $135.7 million for the nine months ended September 30, 2001 and 2000, respectively. General agency premiums were $86.5 million and $37.5 million for the nine months ended September 30, 2001 and 2000, respectively. The change from 2000 to 2001 was the result of two agency programs, Non-Standard Auto and Transportation, which are responsible for $35.7 million of the increase. In addition, commercial agency business increased by $11.7 million for the same period. Assumed treaty reinsurance premium was $52.0 million and $50.5 million for the nine months ended September 30, 2001 and 2000, respectively. Of this increase, $8.1 million is associated with two Non-Standard Auto treaties, offset by a $5.1 million decrease in Crop Hail Premiums along with an additional $1.4 million decrease resulting from the non-renewal of numerous treaties in 2001. Direct Multiple Peril premiums were $26.0 million and $19.5 million for the nine months ended September 30, 2001 and 2000, respectively. The change from 2000 is a result of rate increases across the entire book of business. Rental industry revenue was $28.5 million and $28.2 million for the nine months ended September 30, 2001 and 2000, respectively. Net investment income was $24.0 million and $23.7 million for the nine months ended September 30, 2001 and 2000, respectively. Benefits and losses were $188.3 million and $116.4 million for the nine months ended September 30, 2001 and 2000, respectively. This increase is due to the Non-Standard Auto, Transportation and commercial agency programs, as well as to the assumed treaty reinsurance and Direct Multiple Peril business. The amortization of deferred acquisition costs (DAC) was $17.8 million and $10.1 million for the nine months ended September 30, 2001 and 2000, respectively. The increase is mainly due to the premium growth and resultant deferral of acquisition expenses in 2000 for the assumed treaty and general agency programs. Operating expenses were $42.6 million and $37.8 million for the nine months ended September 30, 2001 and 2000, respectively. The increase is a result of commissions on new agency business premium and premium taxes resulting from increased premium writings. Operating loss before tax and intercompany elimination was $31.7 million and $4.9 million for the nine months ended September 30, 2001 and 2000, respectively. The decrease is mainly attributable to a significant increase in incurred losses associated with Direct Multiple Peril, assumed treaty business and increased operating expense, offset by an increase in earned premiums. 24 Life Insurance Net premiums were $119.7 million and $78.3 million for the nine months ended September 30, 2001 and 2000, respectively. Medicare Supplement premiums increased by $41.3 million; driven by new business, rate increases, and the acquisition of Christian Fidelity Life Insurance Company (CFLIC). Net investment income before intercompany eliminations was $19.0 million and $18.2 million for the nine months ended September 30, 2001 and 2000, respectively. The increase was primarily due to realized gains, offset by decreasing market interest rates. Benefits incurred were $88.0 million and $54.2 million for the nine months ended September 30, 2001 and 2000, respectively. This increase is primarily due to a greater volume of Medicare supplement business in force from the acquisition of CFLIC and new business, which accounts for $27.2 million and $6.2 million, respectively. Amortization of DAC and the value of business acquired (VOBA) was $14.5 million and $15.0 million for the nine months ended September 30, 2001 and 2000, respectively. The decrease is primarily due to a smaller volume of credit insurance written. Operating expenses were $30.2 million and $19.9 million for the nine months ended September 30, 2001 and 2000, respectively. Commissions and premium taxes have increased $7.0 million and personnel and other operating expenses, net of fees collected, increased by $2.8 million primarily due to the increase in Medicare supplement business, of which the acquisition of CFLIC accounts for the majority of the increase. Operating profit before tax and intercompany eliminations was $6.0 million and $7.4 million for the nine months ended September 30, 2001 and 2000, respectively. The decrease is primarily due to smaller spreads from the deferred annuity business and higher loss ratios for the credit insurance business; offset by loss ratio improvements in Medicare supplement. Interest Expense Interest expense was $58.8 million and $65.3 million for the nine months ended December 31, 2001 and 2000, respectively. The decrease can be attributed to lower cost of funds on borrowed money. Consolidated Group As a result of the foregoing, pretax earnings totaled $73.3 million and $92.7 million for the nine months ended December 31, 2001 and 2000, respectively. After providing for income taxes, net earnings were $46.5 million and $59.7 million for the nine months ended December 31, 2001 and 2000, respectively. Following deductions for an extraordinary loss from the early extinguishment of debt, net earnings were $46.5 million and $57.6 million for the nine months ended December 31, 2001 and 2000, respectively. 25 QUARTER ENDED DECEMBER 31, 2001 VERSUS QUARTER ENDED DECEMBER 31, 2000 Moving and Storage Operations Revenues consist of rental revenues and net sales. Total rental revenue was $273.7 million and $270.5 million for the quarters ended December 31, 2001 and 2000, respectively. Net revenues from the rental of moving related equipment increased by $2.8 million. This increase is primarily attributable to higher truck and trailer rental revenues and storage revenues, caused by increases in prices and improvements in fleet utilization and storage occupancy. Net sales revenues were $40.3 million and $41.0 million for the quarters ended December 31, 2001 and 2000, respectively. Cost of sales was $23.9 million and $21.6 million for the quarters ended December 31, 2001 and 2000, respectively. Operating expenses before intercompany elimination were $247.0 million and $252.0 million for the quarters ended December 31, 2001 and 2000, respectively. The decrease reflects lower rental equipment and building maintenance expenditures. Net depreciation expense was $26.2 million and $20.7 million for the quarters ended December 31, 2001 and 2000, respectively. The increase reflects an increase in depreciation recognized on the rental truck fleet. Operating loss before tax and intercompany elimination was $18.0 million and $19.1 million for the quarters ended December 31, 2001 and 2000, respectively. The increase reflects increases in revenues over increases in operating expenses. Real Estate Operations Rental revenue before intercompany eliminations was $17.4 million and $18.0 million for the quarters ended December 31, 2001 and 2000, respectively. Intercompany revenue was $12.0 million and $17.8 million for the quarters ended December 31, 2001 and 2000, respectively. Net investment and interest income was $2.1 million and $2.7 million for the quarters ended December 31, 2001 and 2000, respectively. Net depreciation expense was $1.7 million and $4.4 million for the quarters ended December 31, 2001 and 2000, respectively. The decrease reflects the gain realized from the sale of property plant and equipment. Operating profit before tax and intercompany elimination was $8.4 million and $2.4 million for the quarters ended December 31, 2001 and 2000, respectively. The increase reflects increases in the sale of property plant and equipment and a decrease in net lease cost. 26 Property and Casualty RepWest's premiums were $64.7 million and $63.4 million for the quarters ended September 30, 2001 and 2000, respectively. General agency premiums were $23.7 million and $17.3 million for the quarters ended September 30, 2001 and 2000, respectively. The change from 2000 to 2001 was the result of Non-Standard Auto, Transportation and commercial agency programs, which are responsible for $6.0 million of the increase. Assumed treaty reinsurance premium were $20.3 million and $27.5 million for the quarters ended September 30, 2001 and 2000, respectively. This decrease is mainly attributable to a $4.4 million decrease in Crop Hail premiums from 2000 to 2001. Direct Multiple Peril Premiums were $10.0 million and $7.4 million for the quarters ended September 30, 2001 and 2000, respectively. This increase is a result of rate increases that took effect in the third quarter of 2001. Net investment income was $8.1 million and $8.0 million for the quarters ended September 30, 2001 and 2000, respectively. Benefits and losses incurred were $65.6 million and $56.3 million for the quarters ended September 30, 2001 and 2000, respectively. The increase is a result of Non-Standard Auto and Transportation general agency and Direct Multiple Peril programs, offset by a decrease in Crop Hail business. The amortization of DAC was $6.2 million and $3.8 million for the quarters ended September 30, 2001 and 2000, respectively. The increase is due to the increase in premium writings. Operating expenses were $13.8 million and $18.0 million for the quarters ended September 30, 2001 and 2000, respectively. The change is due to decreased commission expense resulting from a commission cap that was reached on Non- Standard Auto business, the non-renewal of numerous assumed reinsurance treaties and a decrease in DAC, offset by an increase in general and administrative expenses resulting from taxes associated with increased premium writings. Operating loss before tax and intercompany elimination was $12.8 million and $6.8 million for the quarters ended September 30, 2001 and 2000, respectively. The decrease is mainly attributable to an increase in incurred losses associated with Direct Multiple Peril business, along with a decrease in the capitalization of DAC, offset by an increase in earned premiums and a decrease in operating expenses. 27 Life Insurance Net premiums were $42.2 million and $26.8 million for the quarters ended September 30, 2001 and 2000, respectively. Medicare Supplement premiums increased by $15.0 million from new business, rate increases and the acquisition of CFLIC. Net investment income before intercompany eliminations was $5.8 million for the quarters ended September 30, 2001 and 2000. Benefits were $29.9 million and $18.5 million for the quarters ended September 30, 2001 and 2000, respectively. $11.7 million of the increase is due to a greater volume of Medicare supplement business in force, of which the acquisition of CFLIC accounts for the majority. Amortization of DAC and VOBA was $5.2 million and $4.8 million for the quarters ended September 30, 2001 and 2000, respectively. The increase is due primarily to annuity DAC amortization. Operating expenses were $10.8 million and $6.6 million for the quarters ended September 30, 2001 and 2000, respectively. Commissions and premium taxes have increased by $2.4 million primarily due to the increase in Medicare supplement premiums. Personnel and other operating expenses, net of fees collected, increased by $1.2 million primarily from the acquisition of CFLIC. Operating profit before tax and intercompany eliminations was $2.1 million and $2.6 million for the quarters ended September 30, 2001 and 2000, respectively. The decrease is primarily due to smaller spreads on the deferred annuity business and higher loss ratios on the credit disability business offset by improved loss ratios for the Medicare supplement business. Interest Expense Interest expense was $18.0 million and $21.2 million for the quarters ended December 31, 2001 and 2000, respectively. The decrease can be attributed to lower cost of funds on borrowed money. Consolidated Group As a result of the foregoing, pretax loss was $30.2 million and $29.4 million for the quarters ended December 31, 2001 and 2000, respectively. After providing for income taxes, net loss was $20.2 million and $19.2 million for the quarters ended December 31, 2001 and 2000, respectively. Following deductions for an extraordinary loss from the early extinguishment of debt, net loss was $20.2 million and $21.3 million for the quarters ended December 31, 2001 and 2000, respectively. 28 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 nine months ended December 31, 2001 and 2000, capital expenditures were $144.1 million and $280.3 million, respectively (See note 7 for additional discussion). These expenditures primarily reflect the renewal 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 $82.3 million and $27.5 million for the nine months ended December 31, 2001 and 2000, respectively. The increase resulted primarily from a decrease in accounts receivable and an increase in accrued liabilities. At December 31, 2001, total outstanding notes and loans payable was $1,132.6 million as compared to $1,156.8 million at March 31, 2001. Real Estate Operations Cash provided (used) by operating activities was $(36.4) million and $77.6 million for the nine months ended December 31, 2001 and 2000, respectively. The decrease resulted from a decrease in accrued liabilities. Property and Casualty Cash provided (used) by operating activities was $(32.0) million and $20.3 million for nine months ended September 30, 2001 and 2000, respectively. This change resulted from increased accounts receivable, other assets, unearned premium reserve and decreased net income from December 2000 to September 2001, offset by an increase in loss and loss adjusting expense reserves and reinsurance payables from December 2000 to September 2001. RepWest's cash and cash equivalents and short-term investment portfolio were $6.3 million and $12.0 million at September 30, 2001 and 2000, respectively. The decrease is a result of an increase in claim payments. RepWest maintains a diversified securities investment portfolio, primarily in bonds, at varying maturity levels with 87.0% 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 83.7% of total liabilities. The liability for reported and unreported losses is 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. 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. Benefit and claim statistics are continually monitored to provide projections of future cash requirements. Cash provided (used) by operating activities was $4.8 million and $(0.3) million for the nine months ended September 30, 2001 and 2000, respectively. The increase in cash flows from operating activities relates to increased premium writings and the timing of a settlement offset by higher claim payments. Cash provided by financing activities was $32.1 million and $7.2 million for the nine months ended September 30, 2001 and 2000, respectively. Cash flows from deferred annuity sales increase investment contract deposits, which are a component of financing activities. The increase in investment contract deposits over 2000 is due to growth in new deposits offset by withdrawals and terminations of existing deposits. 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 $74.0 million and $59.7 million for the nine months ended September 30, 2001 and 2000, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs. 29 Consolidated Group During each of the fiscal years ended March 31, 2002, 2003 and 2004, AMERCO estimates gross capital expenditures will average approximately $200 million primarily reflecting rental fleet rotation. This level of capital expenditures, combined with a potential range of $150 - $300 million in annual long-term debt maturities during this same period, are expected to create annual average funding needs of approximately $350 - $500 million. The Company plans to meet these needs through the cash flows, asset sales and various current and future sources of credit (See Credit Agreements discussion below). AMERCO has historically enjoyed a substantial and predictable level of cashflow (EBITDAR) from its non-insurance subsidiaries. These cashflows are dependent on revenues and expenses that can be impacted by economic trends. In the past, the Company has not been as affected by these economic trends as other businesses. Cashflow (defined as EBITDAR) is anticipated to range approximately from $400 million to $425 million annually. The sale of assets is less predictable and substantially lower than the cashflows. The sale of assets is dependant upon economic conditions, the amount and nature of sale and leaseback transactions and AMERCO's fleet rotation program. In many cases, a decline in asset sales is accompanied by a decrease in capital expenditures. The Company intends to meet these needs through cash flows, existing lines of credit, additional borrowings and sale of assets. We may be unable to secure such additional borrowings on satisfactory terms or in a timely manner. Depending on the results of our operations, and general and economic competitive conditions, many of which we cannot control, we may take certain actions, including delaying or reducing capital expenditures. From time to time, Real Estate sells storage properties to SAC Holdings. These sales have in the past provided significant cash flows to the Company. The ability of the Company to engage in similar transactions in the future is dependent to a large degree on the ability of SAC Holdings to obtain third party financing for its acquisition of the properties from Real Estate and in general, its willingness to engage in such transactions. Credit Agreements AMERCO's operations are funded by various credit and financing arrangements, including unsecured long-term borrowings, unsecured medium-term notes, revolving lines of credit with banks and operating leases. The operating leases are primarily used to finance Company's fleet of trucks and trailers. As of December 31, 2001, AMERCO had $1,132.6 million in total notes and loans payable outstanding and total unutilized lines of credit of approximately $95.0 million. The Company is in the process of refinancing its' $400 million revolving credit facility. The Company is also in the process of completing a private unsecured debt placement. In addition to the economic pressures, there has been a reduction in leasing companies and banks, which has had a negative impact on the financial markets. This has led to less availability and higher prices. Management of AMERCO believes there are enough leasing companies and banks to meet Company's financing needs. Certain of AMERCO's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, making third party guarantees, entering into contingent obligations, maintaining certain financial ratios and placing certain additional liens on its properties, assets and restricting the issuance of certain types of preferred stock. At December 31, 2001, AMERCO was in compliance with these covenants. AMERCO's various credit and financing arrangements are affected by its credit ratings such that were AMERCO to experience a credit downgrade, the interest rates that it is charged might be increased, which would result in an increase in the Company's interest expense and its ability to obtain addtional financing. 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, 2001 for additional information about AMERCO's credit agreements. 30 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, 2001. 31 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. 32 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 3.1 Restated Articles of Incorporation 3.2 Restated By-Laws of AMERCO as of August 27, 1997 (1) 10.1 Management Agreement between Eighteen SAC Self Storage Corporation and subsidiaries of AMERCO 10.2 Management Agreement between Twenty SAC Self Storage Corporation and subsidiaries of AMERCO 10.3 Management Agreement between Twenty-One SAC Self Storage Corporation and subsidiaries of AMERCO 10.4 Management Agreement between Twenty-Two SAC Self Storage Corporation and subsidiaries of AMERCO 10.5 Management Agreement between Twenty-Three SAC Self Storage Corporation and subsidiaries of AMERCO (b) Reports on Form 8-K. No report on Form 8-K was filed during the quarter ended December 31, 2001. _________________ (1) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, file no. 1-11255. 33 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: February 15, 2002 By: /S/ GARY B. HORTON ____________________________________ Gary B. Horton, Treasurer (Principal Financial Officer) EX-3.1 3 article.txt RESTATED ARTICLES OF INCORPORATION RESTATED ARTICLES OF INCORPORATION OF AMERCO The undersigned President and Secretary of AMERCO, in accordance with Section 78.403 of the General Corporation Law of Nevada, restate the Articles of Incorporation and to that end set forth that: 1. The name of the Corporation is AMERCO. 2. The name and address of the resident agent is The Corporation Trust Company of Nevada, One First Street, Reno, Nevada 89501. 3. The nature of the business and the objects and purposes to be transacted, promoted, or carried on by the Corporation are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Nevada including but not in any way limited to acting as holding company, and acquiring by purchase, merger, or otherwise, wholly or partially owned subsidiary corporations. 4. The Corporation shall have all the general and specific powers authorized for corporations in the General Corporation Law of Nevada as now or hereafter in effect. 5. The total number of shares of common stock which this corporation is authorized to issue is (i) One Hundred and Fifty Million (150,000,000) shares of common stock with a par value of Twenty-five Cents ($0.25) per share ("Common Stock"), and (ii) One Hundred and Fifty Million (150,000,000) shares of common stock ("Serial Common Stock"), with the Board of Directors having authority to issue shares of Serial Common Stock in one or more series (the number of shares of each series being determined by the Board of Directors), with or without par value, and with such voting powers, designations, preferences, limitations, restrictions, and relative rights as shall be stated or expressed in the resolution regarding such Serial Common Stock adopted by the Board of Directors pursuant to the authority expressly vested in it by this provision of the Articles of Incorporation, or any amendment thereto. For purposes of these Articles of Incorporation, the term "common stock" includes Common Stock and Serial Common Stock. The voting powers, designations, preferences, limitations, restrictions, and relative rights of the Series A Common Stock are described on Exhibit A attached --------- hereto. The voting powers, designations, preferences, limitations, restrictions, and relative rights of the Series B Common Stock are described on Exhibit B attached hereto. --------- In addition to the common stock authorized to be issued by the foregoing paragraph, this corporation is authorized to issue Fifty Million (50,000,000) shares of Preferred Stock with the Board of Directors having authority to issue such shares in one or more series (the number of shares of each series being determined by the Board of Directors), with or without par value, and with such voting powers, designations, preferences limitations, restrictions, and relative right as shall be stated or expressed in the resolution regarding such preferred stock adopted by the Board of Directors pursuant to the authority expressly vested in it by this provision of the Articles of Incorporation, or any amendment thereto. The voting powers, designations, preferences, limitations, restrictions, and relative rights of the Series A Preferred Stock are described on Exhibit C attached hereto. The voting powers, designations, - --------- preferences, limitations, restrictions, and relative rights of the Series B Preferred Stock are described on Exhibit D attached --------- hereto. 6. For the management of the business, and for the conduct of the affairs of the Corporation, and for the further definition, limitation, and regulation of the powers of the Corporation and its directors and stockholders, it is further provided: A. BOARD OF DIRECTORS. The Board of Directors shall consist of not less than 4 nor more than 8 directors, the exact number of directors to be determined from time to time solely by a resolution adopted by an affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into four classes, designated Class I, Class II, Class III and Class IV. Subject to applicable law, each class shall consist, as nearly as may be possible, of one-fourth of the total number of directors constituting the entire Board of Directors. At the 1990 Annual Meeting of Stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term, Class III directors for a three-year term, and Class IV directors for a four-year term. At each succeeding annual meeting of stockholders, commencing in 1991, successors to the class of directors whose term expires at the annual meeting shall be elected or reelected for a four-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes of directors so as to maintain the number of directors in each class as nearly equal as possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. When the number of directors is increased by the Board of Directors and any newly created directorships are filled by the Board of Directors, there shall be no classification of the additional directors until the next annual meeting of stockholders. A director shall hold office until the meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Directors need not be stockholders. The names and addresses of the current members of the board of Directors are: NAME ADDRESS ---- ------- Edward J. Shoen 2727 N. Central Ave. Phoenix, AZ 85004 Mark V. Shoen 2727 N. Central Ave. Phoenix, AZ 85004 James P. Shoen 2727 N. Central Ave. Phoenix, AZ 85004 Richard J. Herrera 2727 N. Central Ave. Phoenix, AZ 85004 John M. Dodds 2727 N. Central Ave. Phoenix, AZ 85004 Charles J. Bayer 2727 N. Central Ave. Phoenix, AZ 85004 W.E. Carty 2727 N. Central Ave. Phoenix, AZ 85004 Aubrey K. Johnson 2727 N. Central Ave. Phoenix, AZ 85004 B. POWERS OF BOARD. In furtherance and not in limitation of the powers conferred by the laws of the State of Nevada, the Board of Directors is expressly authorized and empowered: (i) To make, alter, amend, and repeal the By-Laws, subject to the power of the Stockholders to amend the By-laws, which power may be exercised only by the affirmative vote of two-thirds of all of the outstanding shares of common stock of the Corporation entitled to vote, which vote must be by ballot at a duly constituted meeting of the Stockholders, the notice of which meeting must include the proposed amendment. This Article 6.B(i) may be amended only by the affirmative vote of two-thirds of all of the outstanding shares of common stock of the Corporation entitled to vote, which vote must be by ballot at a duly constituted meeting of the stockholders, the notice of which meeting must include the proposed amendment. (ii) Subject to the applicable provisions of the By-Laws then in effect, to determine, from time to time, whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to stockholder inspection. No stockholder shall have any right to inspect any of the accounts, books or documents of the Corporation, except as permitted by law, unless and until authorized to do so by resolution of the Board of Directors or of the Stockholders of the Corporation; (iii) To authorize and issue, without stockholder consent, obligations of the Corporation, secured and unsecured, under such terms and conditions as the Board, in its sole discretion, may determine, and to pledge or mortgage, as security therefor, any real or personal property of the Corporation, including after- acquired property; (iv) To determine whether any and, if so, what part, of the earned surplus of the Corporation shall be paid in dividends to the stockholders, and to direct and determine other use and disposition of any such earned surplus; (v) To fix, from time to time, the amount of the profits of the Corporation to be reserved as working capital or for any other lawful purpose; (vi) To establish bonus, profit-sharing, stock option, or other types of incentive compensation plans for the employees, including officers and directors, of the Corporation, and to fix the amount of profits to be shared or distributed, and to determine the persons to participate in any such plans and the amount of their respective participations; (vii) To designate, by resolution or resolutions passed by a majority of the whole Board, one or more committees, each consisting or two or more directors, which, to the extend permitted by law and authorized by the resolution or the By-Laws, shall have and may exercise the powers of the Board; (viii) To provide for the reasonable compensation of its own members by By-Laws, and to fix the terms and conditions upon which such compensation will be paid; (ix) In addition to the powers and authority hereinbefore, or by statute, expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Nevada, of these Articles of Incorporation, and of the By-Laws of the Corporation. C. A directors or officer of the corporation shall not be personally liable to this corporation or its stockholders for damages for beach of fiduciary duty as a director or officer, but this article shall not eliminate or limit the liability of a director or officer for (i) acts of omissions which involve intentional misconduct, fraud or a knowing violation of law or (ii) the unlawful payment of dividends. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the corporation for acts or omissions prior to such repeal or modification. 7. [Intentionally Omitted as provided for in N.R.S. 78.403(3)]. 8. Except as otherwise provided by the Board of Directors, no holder of any shares of the stock of the Corporation shall have any preemptive right to purchase, subscribe for, or otherwise acquire any shares of stock of the Corporation of any class now or hereafter authorized, or any securities exchangeable for or convertible into such shares, or any warrants or other instruments evidencing rights or options to subscribe for, purchase or otherwise acquire such shares. 9. No contract or other transaction between this Corporation and any other Corporation shall be void or voidable because of the fact that any of the directors of this Corporation are interested in, or are directors of, such other Corporation, provided that the fact that he or such other Corporation is so interested shall be disclosed or shall have been known to the Board of Directors of this Corporation; and any director of the Corporation who is also a director or officer of such other Corporation, or is so interested, may be counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize such contract or transaction, and may vote thereat to authorize any such contract or transaction, with like force and effect as if he were not such director or officer of such other corporation or not so interested. 10. The duration of this Corporation shall be perpetual. 11. The affirmative vote of the holders of two-thirds (2/3) of the outstanding shares of common stock of this corporation entitled to vote shall be required to approve, adopt or authorize: (A) Any agreement for the merger, consolidation, amalgamation or combination of this corporation with or into any other corporation which is an Interested Stockholder (as hereafter defined); (B) Any sale, lease, exchange or other disposition to or with this corporation of any assets of any Interested Stockholder; (C) Any sale, lease, exchange or other disposition by this corporation of all or substantially all of the assets of this corporation to or with an Interested Stockholder; (D) Any plan or proposal for liquidation or dissolution of this corporation if any Shareholder of this corporation is an Interested Stockholder; or (E) Any reclassification of securities (including any reverse stock split) or recapitalization of this corporation which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of stock or convertible securities of this corporation, directly or indirectly owned by an Interested Stockholder. As used herein, Interested Stockholder shall mean any person, firm, corporation or other entity which, as of the record date for the determination of Shareholders entitled to notice of and to vote on any of the above transactions, is the beneficial owner, directly or indirectly, of more than five percent (5%) of any class of voting stock of this corporation. For the purposes hereof, any person, firms, corporation or other entity shall be deemed to be the beneficial owner of any shares of voting stock of this corporation which (i) it has the right to acquire pursuant to any agreement or upon exercise of conversion rights, warrants or options, or otherwise, or (ii) are owned, directly or indirectly (including shares deemed owned through the application of clause (i) above), by any other person, firm, corporation or other entity with which it has any agreement, arrangement or understanding with respect to the acquisition, holding, voting or disposition of stock of this corporation, or which is its "affiliate" or "associate" as those terms are defined in the Rules and Regulations under the Securities Exchange Act of 1934, as amended. The Board of Directors of this corporation shall have the power and duty, by resolution adopted by the affirmative vote of a majority of the whole Board of Directors, to determine (and such determination shall be conclusive) for the purposes of this Article 11, on the basis of information known to it, whether (i) any person, firm, corporation or other entity is the beneficial owner, directly or indirectly, of more than five percent (5%) of any class of voting stock of this corporation, (ii) any proposed sale, lease, exchange or other disposition involves all or substantially all of the assets of this corporation, or (iii) any person, firm, corporation or other entity has any agreement, arrangement or understanding with respect to the acquisition, holding, voting or disposition of stock of this corporation with any other person, firm, corporation or other entity. Notwithstanding any other provision of these Articles of Incorporation, the affirmative vote of the holders of two-thirds (2/3) of the outstanding shares of common stock of this corporation entitled to vote shall be required to amend, alter, change or repeal, or to adopt any provision inconsistent with, this Article 11. The respective two-thirds voting requirements specified above for any of the transactions referred to in any one or more of paragraphs A through E above, or to amend, alter, change or repeal, or to adopt any provision inconsistent with, this Article 11, shall not be applicable to a proposed action which has been approved or recommended by majority of the Disinterested Directors. As used herein, a "Disinterested Director" means (i) any Director of the corporation who was a Director as of July 24, 1988, or (ii) was thereafter elected by the Shareholders or appointed by the Board of Directors of this corporation and was not at the time of such election or appointment associated with or an affiliate of an Interested Stockholder directly or indirectly involved in the transaction or proposal before the Board of Directors, or (iii) a person designated, before his election or appointment as a Director, as a Disinterested Director by a majority of Disinterested Directors then on the Board. 12. Stockholder action by written consent is prohibited. This Article 12 may be amended only by the affirmative vote of two- thirds of all of the outstanding shares of common stock of the Corporation entitled to vote, which vote must be by ballot at a duly constituted meeting of the Stockholders, the notice of which meeting must include the proposed amendment. In Witness Whereof, we have executed the foregoing Restated Articles of Incorporation of AMERCO this 23rd day of January, 1997. /s/ Edward J. Shoen ------------------------------------- Edward J. Shoen, President /s/ Gary V. Klinefelter ------------------------------------- Gary V. Klinefelter, Secretary STATE OF ARIZONA ) ) ss. County of Maricopa ) The foregoing instrument was acknowledged before me this 23rd day of January, 1997, by Edward J. Shoen, President of AMERCO, a Nevada corporation, on behalf of the corporation. /s/ Nancy Jo Beiley ------------------------------------- Notary Public My commission expires: 5-22-99 - ----------------------------- STATE OF ARIZONA ) ) ss. County of Maricopa ) The foregoing instrument was acknowledged before me this 23rd day of January, 1997, by Gary V. Klinefelter, Secretary of AMERCO, a Nevada corporation, on behalf of the corporation. /s/ Nancy Jo Beiley ------------------------------------- Notary Public My commission expires: 5-22-99 - ----------------------------- EXHIBIT A AMERCO SERIES A COMMON STOCK (a) DESIGNATION. A series of Serial Common Stock (as defined in ------------ the Articles of Incorporation) is hereby designated "Series A Common Stock." The number of shares constituting the Series A Common Stock is 10,000,000. Shares of the Series A Common Stock shall have a par value of $0.25. (b) DIVIDENDS AND DISTRIBUTIONS. Shares of the Series A Common ---------------------------- Stock shall be entitled to receive such dividends and distributions as may be declared by the Board of Directors from time to time and shall be payable, when and as declared by the Board of Directors. (c) CONVERSION. The holders of shares of the Series A Common ----------- Stock shall not have any rights to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of stock of the Corporation. (d) VOTING. The shares of the Series A Common Stock shall be ------- entitled to one vote per share. (e) LIQUIDATION RIGHTS. Upon the dissolution, liquidation, or ------------------- winding up of the affairs of the Corporation, whether voluntary or involuntary, the Series A Common Stock shall be entitled to distribution of the assets of the Company on a pari passu basis with the Company's common stock, $0.25 par value. EXHIBIT B AMERCO SERIES B COMMON STOCK (a) DESIGNATION. A series of Serial Common Stock (as defined in ------------ the Articles of Incorporation) is hereby designated "Series B Common Stock." The number of shares constituting the Series B Common Stock is 10,000,000. Shares of the Series B Common Stock shall have a par value of $0.25. (b) DIVIDENDS AND DISTRIBUTIONS. Shares of the Series B Common ---------------------------- Stock shall be entitled to receive such dividends and distributions as may be declared by the Board of Directors from time to time on a pari passu basis with the Corporation's Common Stock and Series A Common Stock and shall be payable, when and as declared by the Board of Directors. (c) CONVERSION. The holders of shares of the Series B Common ----------- Stock shall not have any rights to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of stock of the Corporation. (d) VOTING. The shares of the Series B Common Stock shall be ------- entitled to one-tenth (1/10) of one vote per share. (e) Liquidation Rights. Upon the dissolution, liquidation, or -------------------- winding up of the affairs of the Corporation, whether voluntary or involuntary, the Series B Common Stock shall be entitled to distribution of the assets of the Corporation on a pari passu basis with the Corporation's Common Stock and Series A Common Stock. EXHIBIT C AMERCO SERIES A PREFERRED STOCK (a) Designation. A series of preferred stock is hereby ------------ designated "Series A 8 1/2% Preferred Stock." The number of shares constituting the Series A Preferred Stock is 6,100,000. Shares of the Series A Preferred Stock shall have a liquidation preference of $25.00 per share and shall have no par value. (b) Dividend Rate. -------------- (i) Shares of the Series A Preferred Stock shall be entitled to receive dividends at a fixed annual rate of $2.125 per share. Such dividends shall be cumulative from the date of original issue of such shares and shall be payable, when and as declared by the Board of Directors, quarterly for each of the quarters ending February, May, August, and November of each year, payable in arrears on the first business day that is not a legal holiday of each succeeding March, June, September, and December, commencing December 1, 1993. Each such dividend shall be paid to the holders of record of shares of the Series A Preferred Stock as they appear on the stock records of the Corporation on the applicable record date, not exceeding 15 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends on account of arrears for any past dividend periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date as may be fixed by the Board of Directors, which shall not exceed 15 days preceding such dividend payment date thereof. (ii) No dividends shall be declared or paid or set apart for payment on any shares of any class or classes of stock of the Corporation or any series thereof ranking, as to dividends, on a parity with or junior to the Series A Preferred Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set apart for such payment, on the Series A Preferred Stock for all dividend payment periods terminating on or prior to the date of payment of such dividend. When dividends are not paid in full, as aforesaid, upon the shares of the Series A Preferred Stock and any others shares of any class or classes of stock or series thereof ranking on a parity as to dividends with the Series A Preferred Stock, all dividends declared upon shares of the Series A Preferred Stock and any other shares of such class or classes of series thereof ranking on a parity as to dividends with the Series A Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of the Series A Preferred Stock and such other shares shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series A Preferred Stock and such other shares bear to each other. Holders of shares of the Series A Preferred Stock shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series A Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Stock that may be in arrears. (iii) So long as any shares of the Series A Preferred Stock are outstanding, no dividend (other than a dividend in common stock or in any other shares ranking junior to the Series A Preferred Stock as to dividends and upon Liquidation (as defined in subsection (f)(i) and other than as provided in paragraph (ii) of this subsection (b)) shall be declared or paid or set aside for payment or other distribution declared or made upon the shares of any class or classes of stock of the Corporation or any series thereof ranking junior to or on a parity with the Series A Preferred Stock as to dividends or upon Liquidation nor shall any of the shares of any class or classes of stock of the Corporation or any series thereof ranking junior to or on a parity with the Series A Preferred Stock as to dividends or upon Liquidation be redeemed, purchased, or otherwise acquired or any consideration paid (or any moneys be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation, or any subsidiary thereof (except by conversion into or exchange for shares of the Corporation ranking junior to the Series A Preferred Stock as to dividends and upon liquidation), unless, in each case, the full cumulative dividends on all outstanding shares of the Series A Preferred Stock shall have been or contemporaneously are declared and paid, or declared and a sum sufficient for payment thereof is set apart for payment, for all past dividend payment periods. (iv) Dividends payable on the Series A Preferred Stock for any period less than a full quarterly dividend period, and for the dividend period beginning on the date of issuance of the shares of the Series A Preferred Stock, shall be computed on the basis of a 360-day year consisting of 12 30-day months. The amount of dividends payable on shares of the Series A Preferred Stock for each full quarterly dividend period shall be computed by dividing by 4 the annual rate per share set forth above in subsection (b)(i). (c) Redemption. ----------- (i) The shares of the Series A Preferred Stock shall not be redeemable prior to December 1, 2000. On and after December 1, 2000, the Corporation, at its option, may redeem shares of the Series A Preferred Stock, as a whole or in part, for cash, at any time or from time to time, at a redemption price of $25.00 per share plus, in each case, accrued and unpaid dividends thereon to the date fixed for redemption. (ii) In the event that fewer than all the outstanding shares of the Series A Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of Directors or by any other method as may be determined by the Board of Directors in its sole discretion to be equitable. (iii) In the event the corporation shall redeem shares of the Series A Preferred Stock, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock records of the Corporation, or by publishing notice thereof in The Wall Street Journal or The ----------------------- --- New York Times, or, if neither such newspaper is then being -------------- published, any other daily newspaper of national circulation (each, an "Authorized Newspaper"). If the Corporation elects to provide such notice by publication, it shall also promptly mail notice of such redemption to each holder of the shares of the Series A Preferred Stock to be redeemed. Each such mailed or published notice shall state: (v) the redemption date; (w) the number of shares of the Series A Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (x) the redemption price; (y) the place or places where certificates for such shares are to be surrendered by payment of the redemption price; and (z) that dividends on the shares to be redeemed will cease to accrue on such redemption date. No defect in the notice of redemption or in the mailing thereof shall affect the validity of the redemption proceedings, and the failure to give notice to any holder of shares of the Series A Preferred Stock to be so redeemed shall not affect the validity of the notice given to the other holders of shares of the Series A Preferred Stock to be so redeemed. (iv) Notice having been mailed as aforesaid, then, notwithstanding that the certificates evidencing the shares of the Series A Preferred Stock shall not have been surrendered, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price) dividends on the shares of the Series A Preferred Stock so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders (including dividend and voting rights) of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (v) Any shares of the Series A Preferred Stock that shall at any time have been redeemed shall, after such redemption, in the discretion of the Board of Directors of the Corporation, be (x) held in treasury or (y) resume the status of authorized but unissued shares of preferred stock, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors. (vi) Notwithstanding the foregoing provisions of this subsection (c), if any dividends on the Series A Preferred Stock are in arrears, no shares of the Series A Preferred Stock shall be redeemed unless all outstanding shares of the Series A Preferred Stock are simultaneously redeemed, and the Corporation shall not, and shall not permit any subsidiary thereof to, purchase or otherwise acquire any shares of the Series A Preferred Stock; provided, however, -------- ------- that the foregoing shall not prevent the purchase or acquisition of shares of the Series A Preferred Stock pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of the Series A Preferred Stock. (d) Conversion. The holders of shares of the Series A ----------- Preferred Stock shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of stock of the Corporation. (e) Voting. The shares of the Series A Preferred Stock ------- shall not have any voting powers either general or special, except as required by law and except that: (i) So long as any of the shares of the Series A Preferred Stock are outstanding, the consent of the holders of at least two-thirds of all the shares of the Series A Preferred Stock at the time outstanding, given in person or by proxy, either in writing or by a vote at a meeting called for the purpose at which the holders of shares of the Series A Preferred Stock shall vote together as a separate class, shall be necessary for authorizing, affecting or validating the amendment, alteration, or repeal of any of the provisions of the Articles of Incorporation of the Corporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of amendment or any similar document relating to any series of preferred stock) that would adversely affect the powers, preferences, or special rights of the Series A Preferred Stock, including the creation or authorization of any class of stock that ranks senior to the Series A Preferred Stock with respect to dividends or upon Liquidation. Any amendment or any resolution or action of the Board of Directors that would create or issue any series of preferred stock out of the authorized shares of preferred stock, or that would authorize, create, or issue any shares or class of stock (whether or not already authorized), ranking junior to or on a parity with the Series A Preferred Stock with respect to the payment of dividends and distribution and distributions upon any Liquidation, shall not be considered to affect adversely the powers, preferences, or special rights of the outstanding shares of the Series A Preferred Stock; (ii) In the event that the Corporation shall have failed to declare and pay or set apart for payment in full the dividends accumulated on the outstanding shares of the Series A Preferred Stock for any six quarterly dividend payment periods, whether or not consecutive, and all such preferred dividends remain unpaid (a "Preferred Dividend Default"), the holders of outstanding shares of the Series A Preferred Stock, voting together as a class with the holders of all other series of preferred stock then entitled to vote on the election of such directors, shall be entitled to elect two directors to the Board of Directors of the Corporation until the full dividends accumulated on all outstanding shares of the Series A Preferred Stock have been declared and paid in full. Upon the occurrence of a Preferred Dividend Default, the Board of Directors shall within 10 business days (any day other than a day that is a Saturday, Sunday, or legal holiday on which banks are authorized to close in New York, New York) of such default call a special meeting of the holders of shares of the Series A Preferred Stock and all other holders of a series of preferred stock who are then entitled to participate in the election of such two directors for the purpose of electing the two directors provided by the foregoing provisions; provided that, in lieu of holding such meeting, -------- the holders of record of a majority of the outstanding shares of the Series A Preferred Stock and all other series of preferred stock who are then entitled to participate in the election of such two directors may, by action taken by written consents permitted by law and the Articles of Incorporation and the Bylaws of the Corporation, elect such two directors. If and when all accumulated dividends on the shares of the Series A Preferred Stock have been declared and paid or set aside for payment in full, the holders of shares of the Series A Preferred Stock shall be divested of the special voting rights provided by this paragraph, subject to revesting in the event of each and every subsequent Preferred Dividend Default. Upon termination of such special voting rights attributable to all holders of shares of the Series A Preferred Stock and any other series of preferred stock, each director elected by the holders of shares of the Series A Preferred Stock and the holders of any other series of preferred stock (hereinafter referred to as a "Preferred Stock Director") pursuant to such special voting rights shall, without further action, be deemed to have resigned, subject always to the election of directors pursuant to the foregoing provisions in case of a future Preferred Dividend Default. Any Preferred Stock Director may be removed at any time with or without cause by, and shall not be removed otherwise than by, the vote of the holders of record of two-thirds of the outstanding shares of the Series A Preferred Stock and all other series of preferred stock who were entitled to participate in such Preferred Stock Director's election, voting as a separate class, at a meeting called for such purpose or by written consent as, and to the extent, permitted by law and the Articles of Incorporation and the Bylaws of the Corporation. So long as a Preferred Dividend Default shall continue, any vacancy in the office of a Preferred Stock Director shall be filled by written consent of the Preferred Stock Director remaining in office or, if none remains in office, by vote of the holders of record of a majority of the outstanding shares of the Series A Preferred Stock and all other series of preferred stock who are then entitled to participate in the election of such Preferred Stock Directors as provided above. As long as a Preferred Dividend Default shall continue, holders of shares of the Series A Preferred Stock shall not, as such stockholders, be entitled to vote on the election or removal of directors other than Preferred Stock Directors, but shall not be divested of any other voting rights provided to such stockholders by law with respect to any other matter to be acted upon by the stockholders of the Corporation. The Preferred Stock Directors shall each be entitled to one vote per director on any matter. (f) Liquidation Rights. ------------------- (i) Upon the dissolution, liquidation, or winding up of the affairs of the Corporation, whether voluntary or involuntary (collectively, a "Liquidation"), after payment or provision for payment has been made of the debts and other liabilities of the corporation and payment or provision for payment has been made on all amounts required to be paid in respect of all outstanding shares of any class or classes of stock of the Corporation or series thereof ranking senior to the shares of the Series A Preferred Stock, the holders of the shares of the Series A Preferred Stock shall be entitled, subject to paragraph (iv) of this subsection (f), to receive out of the assets of the Corporation, before any payment or distribution shall be made on common stock or on any other class of stock ranking junior to preferred stock upon Liquidation, the amount of $25.00 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (ii) Neither the sale, transfer, or lease of all or any part of the property or business of the Corporation, nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation, shall be deemed to be a Liquidation for the purposes of this subsection (f). (iii) After the payment to the holders of the shares of the Series A Preferred Stock of the full preferential amounts provided for in this subsection (f) the holders of the Series A Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation and the shares of the Series A Preferred Stock shall no longer be deemed to be outstanding or be entitled to any other powers, preferences, rights, or privileges, including voting rights, and such shares shall be surrendered for cancellation to the Corporation. (iv) In the event the assets of the Corporation available for distribution to the holders of shares of the Series A Preferred Stock upon any Liquidation shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to paragraph (i) of this subsection (f), no such distribution shall be made on account of any shares of any series of preferred stock ranking on a parity with the shares of the Series A Preferred Stock upon such Liquidation unless proportionate distributive amounts shall be paid on account of the shares of the Series A Preferred Stock, ratably, in proportion to the full distributable amounts to which holders of all such parity shares are respectively entitled upon such Liquidation. (g) Priority. Any shares of any class or classes of the --------- Corporation or series thereof shall be deemed to rank: (i) Prior to the shares of the Series A Preferred Stock, either as to dividends or upon Liquidation, if the holders of such class or classes shall be entitled to the receipt of dividends or of amounts distributable upon Liquidation of the Corporation, in preference or priority to the holders of shares of the Series A Preferred Stock; (ii) On a parity with shares of the Series A Preferred Stock, either as to dividends or upon Liquidation, whether or not the dividend rates, dividend payment dates, or redemption or Liquidation prices per share or sinking fund provisions, if any, be different from those of the Series A Preferred Stock, if the holders of such shares shall be entitled to the receipt of dividends or of amounts distributable upon Liquidation of the Corporation, in proportion to their respective dividend rates or Liquidation prices, without preference or priority, one over the other, as between the holders of such shares and the holders of shares of the Series A Preferred Stock; and (iii) Junior to shares of the Series A Preferred Stock, either as to dividends or upon Liquidation, if such class is common stock or if the holders of shares of the Series A Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon Liquidation of the Corporation, in preference or priority to the holders of shares of such class or classes. (h) Sinking or Retirement Fund. The shares of the Series A --------------------------- Preferred Stock shall not be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares. (i) Miscellaneous. -------------- (i) Subject to paragraph (iii) of subsection (c) above, all notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof if sent by first class mail with postage prepaid, addressed: if to the Corporation, to its offices at 1325 Airmotive Way, Suite 100, Reno, Nevada 89502- 3239 (Attention: Secretary); if to a holder, to the address thereof shown on the security register maintained by the registrar for the Series A Preferred Stock; or to such other address as the Corporation or holder, as the case may be, shall have designated by notice similarly given. (ii) In the event a holder of shares of the Series A Preferred Stock shall not by written notice designate the name to whom payment upon redemption of any shares of the Series A Preferred Stock should be made or the address to which the certificate or certificates representing such shares, or such payment, should be sent, the Corporation shall be entitled to register such shares, and make such payment, in the name of the holder of such shares as shown on the records of the Corporation and to send the certificate or certificates representing such shares, or such payment, to the address of such holder shown on the records of the Corporation. EXHIBIT D AMERCO SERIES B PREFERRED STOCK The Series Designated as Series B Preferred Stock (the "Series B Preferred"), will consist of 100,000 shares and will have the designations, preferences, voting powers, relative, participating, optional or other special rights and privileges, and the qualifications, limitations and restrictions described below. Shares of the Series B Preferred shall have liquidation rights as provided in Section 2 and shall have no par value. Certain capitalized terms used below have the meanings given in Section 11. 1. DIVIDENDS AND DISTRIBUTIONS. A. REGULAR DIVIDENDS. Subject to the prior rights of the holders of Senior Shares, if any, the Holder, in preference to the holders of Junior Shares, shall be entitled, in conjunction with any provision then being made for the holders of Parity Shares, to receive, when, as and if declared by the Board of Directors, out of any funds of the Corporation lawfully available for the payment of dividends, payable on the last day of each Payment Period, cumulative cash dividends at, but not exceeding, (i) the product of the Conversion Value times the Floating Rate, plus (ii) any Additional Amounts, payable on the last day of each Payment Period following the date of this Certificate. If the stated dividends are not paid in full, the Series B Preferred and all Parity Shares shall share ratably in the payment of dividends, including accumulations thereof, if any, on such shares in accordance with the sums that would be payable on such shares if all dividends were paid in full. B. NOTICE. The Holder will notify the Corporation of any event occurring after the date of this Certificate which will entitle the Holder to receive any Additional Amounts as promptly as practicable after it obtains knowledge thereof but in any event within thirty (30) days after it obtains knowledge thereof and determines to request such compensation. Determinations and allocations by the Holder for purposes hereof of the effect of any Regulatory Change on its costs of purchasing or holding the Series B Preferred or on amounts receivable by it in respect of the Series B Preferred and of the additional amounts required to compensate the Holder in respect of any Additional Amounts, shall be prima facie valid provided that such determinations and allocations are made on a reasonable basis. C. PRIORITY. Any and all dividends payable on the Series B Preferred shall be paid in preference and in priority to the payment of dividends or distributions on any Junior Shares. So long as any Series B Preferred shares are outstanding, no dividends whatever shall be paid or declared, nor shall any distribution be made, on any Junior Shares, other than a dividend or distribution payable in Junior Shares, nor shall the Corporation or any subsidiary of the Corporation purchase, redeem or otherwise acquire for a consideration any Junior Shares, unless full cumulative dividends have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set apart for such payment, on the Series B Preferred for all Payment Periods terminating on or prior to the date of payment of such purchase, redemption or acquisition. 2. LIQUIDATION RIGHTS. A. GENERALLY. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any amount shall be paid to the holders of any Junior Shares, the Holder of the Series B Preferred shall be paid first out of the assets of the Corporation available for distribution to holders of its capital stock an amount per share equal, to but not exceeding, (i) the Conversion Value, as appropriately adjusted to reflect any stock split stock dividend, combination, recapitalization and the like of the Series B Preferred, plus (ii) all accrued but unpaid dividends (including any interest accrued thereon calculated through the date of liquidation (the "Liquidation Date")). If, upon the occurrence of a liquidation, dissolution or winding up, the assets and funds thus distributed to the Holder shall be insufficient to permit the payment to the Holder of its full liquidation preferences, then the entire assets and funds of the Corporation legally available for distribution to the holders of capital stock (other than Senior Shares) shall be distributed ratably to the Holder and the holders of any Parity Shares. B. EVENTS DEEMED LIQUIDATION. For purposes of this Section 2, the Holder may elect to have treated as a liquidation, dissolution or winding up of the Corporation the consolidation or merger of the Corporation with or into any other corporation or the sale or other transfer in a single transaction or a series of related transactions of all or substantially all of the assets of the Corporation or any other reorganization of the Corporation, unless the stockholders of the Corporation immediately prior to any such transaction are holders of a majority of the voting securities of the surviving or acquiring corporation immediately thereafter (and for purposes of this calculation equity securities which any stockholder or the Corporation owned immediately prior to such merger or consolidation as a stockholder of another party to the transaction shall be disregarded). C. PRIORITY. Any amounts payable on the Series B Preferred in the event of any liquidation, dissolution or winding up of the Corporation shall be paid in preference and in priority to the payment of any amounts payable on Junior Shares. 3. CONVERSION. The Holder has conversion rights as follows (the "Conversion Rights"): A. RIGHT TO CONVERT. Upon each of the following to occur from time to time: (i) August 31, 1997, and for 10 Business Days thereafter; (ii) the first day of each fiscal quarter of the Corporation occurring after August 31, 1997, and for 10 Business Days after the first day of each fiscal quarter; (iii) the expiration of ten days after the occurrence of an Event of Noncompliance under the Stock Purchase Agreement that is not then cured, and at any time thereafter; (iv) any dividends on the Series B Preferred becoming in arrears, and at any time thereafter; (v) the Corporation no longer holding more than 50% of the outstanding stock and assets of any of Ponderosa Holdings, Inc., Oxford Life Insurance Company or Republic Western Insurance Company, and at any time thereafter; or (vi) the Corporation or any of its subsidiaries completing any Excess Equity Offering, and at any time thereafter, then each share of Series B Preferred shall be convertible, at the option of the Holder, into either: i. the number of fully paid and nonassessable shares of Series B Common Stock that results from dividing the Conversion Price per share in effect at the time of conversion into the per share Conversion Value but no more than the maximum amount authorized and available for issuance; or ii. all of the shares of capital stock of Picacho then outstanding. Upon conversion, all accrued but unpaid dividends (including interest accrued thereon calculated as of the Conversion Date) on the Series B Preferred shall be paid in cash, to the extent permitted by applicable law. B. CONVERSION PRICE AND CONVERSION VALUE. The initial Conversion Price of the Series B Preferred shall be $25.00 per share, and the initial Conversion Value of the Series B Preferred shall be $1,000.00 per share. The initial Conversion Price of the Series B Preferred shall be subject to adjustment from time to time as provided in Section 3(d). C. MECHANICS OF CONVERSION. To convert any shares of Series B Preferred, the Holder shall surrender the certificate or certificates therefor, duly endorsed, at the principal office of the Corporation, or notify the Corporation in writing that such certificates have been lost, stolen or destroyed and agree to indemnify the Corporation from any loss incurred by it in connection with such certificates, and shall give written notice (the "Conversion Notice") to the Corporation at such office that the Holder elects to convert the same, specifying whether the Series B Preferred shares are to be converted into Series B Common Stock or shares of Picacho. As soon as practicable (but not more than one Business Day) after such delivery, or after such notification, the Corporation shall issue and deliver at such office to the Holder, unless the Corporation shall elect instead to redeem the Series B Preferred as provided in Section 5: i. A certificate or certificates for the number of shares of Series B Common Stock to which the Holder shall be entitled if the Holder has elected to convert the Series B Preferred into Series B Common Stock; or ii. A certificate or certificates for all of the outstanding shares of Picacho, if the Holder has elected to convert the Series B Preferred into Picacho stock; and, in either case, a check payable to the Holder in the amount of any accrued or declared but unpaid dividends payable pursuant to Section 1, if any. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred to be converted or of the notification of lost certificates and the persons entitled to shares of Series B Common Stock or Picacho stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares on such date (the "Conversion Date"). In the event of a notice of redemption of any shares of Series B Preferred pursuant to Section 5, the Conversion Rights shall terminate at the close of business on the Redemption Date, unless default is made in payment of the redemption price, in which case the Conversion Rights for such shares shall continue until such payment. D. ADJUSTMENTS TO CONVERSION PRICE. i. Adjustment of Conversion Price. The Conversion Price of the Series B Preferred shall be adjusted if the Corporation issues or is deemed to issue Additional Shares of Common Stock for a consideration per share that is less than the Conversion Price for the Series B Preferred in effect on the date of, and immediately prior to, such issue or deemed issue. ii. Deemed Issue of Additional Shares of Common Stock. If the Corporation at any time or from time to time after the date of this Certificate issues any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of ------- shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the exercise of such Options and conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 3(d)(iv)) of such Additional Shares of Common Stock would be less than the Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any such case in which Additional Shares of Common Stock are deemed to be issued: (1) except as provided in Section 3(d)(ii)(2), no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Corporation, or change in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (other than under or by reason of provisions designed to protect against dilution), the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; and (3) no readjustment pursuant to clause (2) above shall have the effect of increasing the Conversion Price. iii. Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. Except as provided by Section 3(d)(ii)(2), in the event the Corporation shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 3(d)(ii)) without consideration or for a consideration per share less than the Conversion Price of the Series B Preferred in effect on the date of and immediately prior to such issue, then and in each such event the Conversion Price of the Series B Preferred shall be reduced to the price (calculated to the nearest cent) at which the Additional Shares of Common Stock are issued. iv. Determination of Consideration. For purposes of this Section 3(d), the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be determined after payment of all commissions paid or discounts given in connection with the issuance or deemed issuance of the shares and shall be computed as follows: (1) Cash and Property: Such consideration shall: ----------------- (a) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation; (b) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined by the Board of Directors in the good faith exercise of its reasonable business judgment; and (c) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration that covers both, be the proportion of such consideration so received for the Additional Shares of Common Stock, computed as provided in clauses (a) and (b) above, as determined by the Board of Directors in the good faith exercise of its reasonable business judgment. (2) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 3(d)(ii), relating to Options and Convertible Securities, shall be determined by dividing: (a) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible securities and the conversion or exchange of such Convertible Securities, by (b) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. v. Other Adjustments. (a) Subdivisions, Combinations, or Consolidations of Series B Common Stock. In the event the outstanding shares of Series B Common Stock shall be subdivided, combined or consolidated, by stock split, stock dividend, combination or like event, into a greater or lesser number of shares of Series B Common Stock, the Conversion Price of the Series B preferred in effect immediately prior to such subdivision, combination, consolidation or stock dividend shall, concurrently with the effectiveness of such subdivision, combination or consolidation, be proportionately adjusted to achieve the result that, upon conversion of the Series B Preferred into Series B Common Stock, the Holder shall receive, as nearly as possible, the same percentage of the outstanding shares of Series B Common Stock that it would have had the Series B Preferred been converted immediately prior to such subdivision, combination or consolidation. (b) Reclassifications. In the case, at any time after the date of this Certificate, of any capital reorganization or any reclassification of the stock of the Corporation (other than as a result of a subdivision, combination or consolidation of shares), or the consolidation or merger of the Corporation with or into another person (other than a consolidation or merger (A) in which the Corporation is the continuing entity and that does not result in any change in the common Stock or (B) that is treated as a liquidation pursuant to Section 2(b)), the Conversion Price shall be adjusted so that the shares of the Series B Preferred shall, after such reorganization, reclassification, consolidation or merger, be convertible into the kind and number of shares of stock or other securities or property of the Corporation or otherwise to which the Holder would have been entitled if immediately prior to such reorganization, reclassification, consolidation or merger if the Holder had converted the shares of the Series B Preferred into Series B Common Stock. The provisions of this clause 3(d)(v)(b) shall similarly apply to successive reorganizations, reclassifications, consolidations or mergers. E. NO ADJUSTMENTS TO CONVERSION VALUE. The Corporation shall not effect any stock split, stock dividend, combination or recapitalization of the Series B Preferred and, therefore, the Conversion Value of the Series B Preferred will not be adjusted. F. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or readjustment of the Conversion Price of the Series B Preferred pursuant to this Section 3, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms of this Certificate and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of the Holder, furnish or cause to be furnished to the Holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price of the Series B Preferred at the time in effect, and (iii) the number of shares of Series B Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series B Preferred. G. STATUS OF CONVERTED STOCK. In case any shares of Series B Preferred shall be converted pursuant to Section 3, the shares so converted shall be canceled, shall not be reissuable and shall cease to be a part of the outstanding capital stock of the Corporation. H. FRACTIONAL SHARES. In lieu of any fractional shares of Series B Common Stock to which the Holder would otherwise be entitled upon conversion, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of one share of Series B Common Stock as determined by the Board of Directors in the good faith exercise of its reasonable business judgment. I. MISCELLANEOUS. i. All calculations under this Section 3 shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be. ii. The Holder shall have the right to challenge any determination by the Board of Directors of fair market value pursuant to this Section 3, in which case such determination of fair market value shall be made by an independent appraiser selected jointly by the Board of Directors and the Holder, the cost of such appraisal to be borne equally by the Corporation and the Holder. iii. No adjustment in the Conversion Price of the Series B Preferred need be made if such adjustment would result in a change in such Conversion Price of less than $0.01. Any adjustment of less than $0.01 that is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment that, on a cumulative basis, amounts to an adjustment of $0.01 or more in such Conversion Price. J. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Series B Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Preferred, such number of its shares of Series B Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B Preferred. If at any time the number of authorized but unissued shares of Series B Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series B Preferred, the Corporation will take such corporate action as may, in the option of its counsel, be necessary to increase its authorized but unissued shares of Series B Common Stock to such number of shares as shall be sufficient for such purpose. 4. VOTING RIGHTS. a. Except as otherwise required by law and Subsection 4(b), the Holder shall have no voting rights with respect to the Series B Preferred. b. So long as any of the shares of Series B preferred are outstanding, the written consent of the holder shall be necessary for authorizing, affecting or validating the amendment, alteration, or repeal of any of the provisions of the Articles of Incorporation of the Corporation or of any certificate amendatory thereof or supplemental thereto (including any certificate of amendment or any similar document relating to any series of preferred stock) that would adversely affect the powers, preferences, or special rights of the Series B Preferred, including the creation or authorization of any class of Senior Shares or Parity Shares. Any amendment or any resolution or action of the Board of Directors that would create or issue any series of Junior Shares out of the authorized shares of preferred stock, or that would authorize, create, or issue any other Junior Shares (whether or not already authorized), shall not be considered to affect adversely the powers, preferences, or special rights of the outstanding shares of the Series B Preferred. 5. REDEMPTION. A. OPTIONAL REDEMPTION. If the Holder exercises its Conversion Rights pursuant to Section 3, then instead of effecting the conversion, the Corporation may, by giving written notice to the Holder (a "Notice of Redemption") not later than one Business Day after receiving the Conversion Notice, elect to redeem all (but not less than all) of the Series B Preferred outstanding on the Redemption Date. B. REDEMPTION VALUE. Upon any redemption of the Series B Preferred, the Corporation shall pay out of funds legally available therefor in cash a sum per share equal to the Conversion Value, together with (i) all accrued but unpaid dividends (including any interest accrued thereon) calculated as of the Redemption Date, (ii) if the redemption Date is a date other than the last day of a Payment Period, the Interim Payment; and (iii) all other costs, fees, expenses, or amounts the Corporation is required to pay Holder pursuant to the Stock Purchase Agreement, regardless of the reason for such redemption or such costs, fees, expenses, or amounts (collectively the "Redemption Value"). C. NOTICE OF REDEMPTION. Any Notice of Redemption given by the Corporation shall be delivered to the Holder, notifying the Holder of the redemption to be effected. The Notice of Redemption shall: i. State that the Series B Preferred is to be redeemed; ii. Specify the date (the "Redemption Date") on which the Series B Preferred is to be redeemed, which shall be not more than ten Business Days following the date the Corporation receives the Conversion Notice from the Holder; iii. Request wire transfer or other instructions for the payment of the Redemption Value. D. TRANSFER INSTRUCTIONS. Not less than one Business Day after delivery of the Notice of Redemption, the Holder shall provide the Corporation with instructions for wire or other transfer of the Redemption Value to the Holder. E. COMPLETING THE REDEMPTION. On the Redemption Date: i. The Holder shall surrender to the Corporation at the principal offices of the Corporation the Holder's certificate or certificates representing the shares to be redeemed or provide a notice to the Corporation in writing that such certificates have been lost, stolen or destroyed and that the Holder agrees to indemnify the Corporation from any loss incurred by it in connection with such certificates; and ii. The Corporation shall pay the Redemption Value to the Holder by wire or other transfer acceptable to the Holder, and thereupon each surrendered or lost certificate shall be canceled. F. LACK OF LEGALLY AVAILABLE FUNDS. If the funds of the Corporation legally available for redemption of the Series B Preferred are insufficient to redeem the total number of shares of Series B Preferred required to be redeemed on the Redemption Date, then, at the Holder's election in its sole discretion, the Corporation either shall redeem that number of shares of Series B Preferred for which the Corporation has funds legally available or shall not redeem any of the Series B Preferred. G. EFFECT OF REDEMPTION. From and after the payment of the Redemption Value, all rights of the Holder shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. 6. NOTICES OF RECORD DATE. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall notify the Holder, at least 10 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. 7. NOTICES. All notices and other communications provided for in this Certificate shall be given or made in writing and telecopied, mailed by certified mail return receipt requested or delivered to the intended recipient at such address as shall be designated by such person in a notice to each other relevant person given in accordance with this Section, in addition to any other notices that may be required by law. All such communications shall be deemed to have been duly given when transmitted by telecopy, subject to telephone confirmation of receipt, or when personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as provided herein. 8. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE CORPORATION HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THE SERIES B PREFERRED SHARES, THE STOCK PURCHASE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE HOLDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF. 9. INTEREST. Any amounts required to be paid under this Certificate that are not paid on the first day such payment may be made and any dividends in arrears shall bear interest from that date at the lesser of (a) the Maximum Rate or (b) the sum of four percent plus the rate per annum publicly announced from time to time by NationsBank, N.A. as its prime rate in effect at its principal office in Charlotte, North Carolina. 10. MAXIMUM RATE. Notwithstanding anything to the contrary contained herein, in the event the Series B Preferred shall be deemed to be debt instead of equity, no provisions of this Certificate shall require the payment or permit the collection of interest in excess of the Maximum Rate. If any excess of interest in such respect shall be adjudicated to be so provided in this Certificate or otherwise in connection with the Series B Preferred, the provisions of this paragraph shall govern and prevail, and neither the Corporation nor the successors or assigns of the Corporation shall be obligated to pay the excess amount of such interest, or any other excess sum paid with respect to the Series B Preferred. If, for any reason, interest in excess of the Maximum Rate shall be deemed charged, required or permitted by any court of competent jurisdiction, any such excess shall be applied as a payment and reduction of the principal of indebtedness deemed to be evidenced by the Series B Preferred; and, if such principal has been paid in full, any remaining excess shall forthwith be paid to the Corporation. In determining whether or not the interest paid or payable exceed the Maximum Rate, the Corporation and the Holder shall, to the extent permitted by applicable law, (i) characterize any nonprincipal payment as an expense, fee, or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the entire term of the indebtedness deemed to be evidenced by the Series B Preferred so that the interest for the entire period does not exceed the Maximum Rate. 11. DEFINITIONS. a. Capitalized terms used in this Certificate and not otherwise defined have the meanings given to those terms in the Series B Stock Purchase Agreement between the Corporation and Blue Ridge Investments, LLC, dated August 30, 1996. b. "Additional Amounts" means such amounts, if any, as are necessary to compensate the Holder for any costs incurred by Holder which the Holder determines are attributable, directly or indirectly, to its purchase or holding of the Series B Preferred or any reduction in any amount receivable by the Holder as a holder of the Series B Preferred to the extent such costs and reductions in amount are not reflected in any dividends, fees, reimbursements or other amounts received by the Holder hereunder or under the Stock Purchase Agreement, resulting from (i) an increase (over the dividend rate paid hereunder) in the cost of funding the purchase of the Series B Preferred, or (ii) any Regulatory Change which: (A) changes the basis of taxation of any amounts payable generally to NationsBank under Eurodollar loans (other than taxes imposed on the overall net income of NationsBank or its applicable lending office (for of such loans by the jurisdiction in which NationsBank has its principal office or such applicable lending office); (B) imposes or modifies any reserve, special deposit, minimum capital, capital ratio, or similar requirement relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, NationsBank (including any of such loans or any deposits referred to in the definition of "Floating Rate" herein); or (C) imposes any other condition generally effecting loans by NationsBank or any of such extensions of credit or liabilities or commitments. c. "Additional Shares of Common Stock" means all shares of Common Stock issued (or, pursuant to Section 3(d)(ii), decreed to be issued) by the Corporation after the date of this Certificate, other than shares of Common Stock issued or issuable: i. upon conversion of shares of Series B Preferred; ii. as a dividend or distribution on Series B Preferred; iii. in a transaction described in Section 3(d)(v); iv. by way of dividend or other distribution on shares of Common Stock excluded from the definition of Additional Shares of Common Stock. d. "Affiliate" has the meaning given that term in Rule 405 promulgated by the Securities and Exchange Commission under the Securities Act. e. "Business Day" means (a) any day on which commercial banks are not authorized or required to close in Charlotte, North Carolina and (b) with respect to all payments, Conversions, Payment Periods, and notices, any day which is a Business Day described in clause (a) above and which is also a day on which dealings in dollar deposits are carried out in the London interbank market. f. "Common Stock" means shares of the Corporation's common stock, par value $0.25 per share, serial common stock, or other securities entitled generally to vote in the election of directors of the Corporation. g. "Conversion Date" has the meaning given in Section 3(c). h. "Conversion Notice" has the meaning given in Section 3(c). i. "Conversion Price" has the meaning given in Section 3(b). j. "Conversion Value" has the meaning given in Section 3(b). k. "Convertible Securities" means any evidences of indebtedness, shares or other securities convertible into or exchangeable for Common Stock, except the Series B Preferred. 1. "Corporation" means AMERCO, a Nevada corporation. m. "Excess Equity Offering" means any offer or sale of equity securities of the Corporation or any of its subsidiaries, whether public or private, after the date of this Certificate, other than (i) the offer and sale of Series B Preferred issued to Holder, (ii) the offer and sale by the Corporation of up to $125,000,000 of equity securities in a single transaction occurring on or before March 1, 1997, and (iii) issuances of equity securities to employees of the Corporation or its subsidiaries pursuant to written employee benefit plans existing on the date of this Certificate in the maximum amount permitted under such plans or arrangements on the date of this Certificate. n. "Floating Rate" means, for any Payment Period, the rate per annum that is the lesser of (x) the sum of (i) two and one- quarter percent (2.25%), and (ii) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Payment Period for a term comparable to such Payment Period, or if for any reason such rate is not available, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Payment Period for a term comparable to such Payment Period; provided, however, if more than one rate is -------- ------- specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates, or (y) the Maximum Rate. Dividends shall be computed on the basis of a year of 360 days and the actual number of days elapsed (including the first day but excluding the last day) during the Payment Period unless such calculation would result in the dividends exceeding the Maximum Rate, in which case dividends shall be calculated on the basis of a year of 365 or 366 days, as the case may be. Notwithstanding the first sentence of this paragraph, if at any time the dividend is limited by the terms of this Certificate to the Maximum Rate, then any subsequent reduction in the Floating Rate shall not reduce the dividend below the Maximum Rate until the aggregate amount of dividends accrued equals the aggregate amount of dividends which would have accrued on the Series B Preferred if the dividend specified in the first sentence of this paragraph had at all times been in effect. o. "Holder" means the holder or holders of record of the Series B Preferred. p. "Interim Payment" means such amount or amounts as shall be sufficient to compensate the Holder for any loss, cost, or expense incurred by the Holder as a result of any payment or prepayment for any reason on a date other than the last day of a Payment Period. Without limiting the effect of the preceding sentence, such compensation shall include an amount equal to the excess, if any, of (i) the amount of dividends which otherwise would have accrued on the Conversion Value of the Series B Preferred redeemed from the period from the date of such redemption to the last day of the Payment Period as the applicable rate of dividends for such Series B Preferred provided for herein, over (ii) the interest component of the amount the Holder would have bid in the London interbank market for dollar deposits of leading banks in amounts comparable to the Conversion Value of the Series B Preferred redeemed and with the maturities comparable to the applicable Payment Period. q. "Junior Shares" means all classes and series of shares that, by the terms of the Corporation's Articles of Incorporation, or by law, shall be subordinate to the Series B Preferred with respect to the right of the holders thereof to receive dividends and to participate in the assets of the Corporation distributable to shareholders upon any liquidation, dissolution or winding-up of the Corporation. r. "Liquidation Date" has the meaning given in Section 2(a). s. "Maximum Rate" means the maximum rate of nonusurious interest permitted from day to day by applicable law, and calculated after taking into account any and all relevant fees, payments, and other charges contracted for, charged or received which are deemed to be interest under applicable law. t. "NationsBank" means NationsBank Corporation, a Delaware corporation. u. "Options" means rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities, other than the Series B Preferred. v. "Parity Shares" means all classes and series of shares that, by the terms of the Corporation's Articles of Incorporation, or by law, shall be on parity with the Series B Preferred with respect to the right of the holders thereof to receive dividends and to participate in the assets of the Corporation distributable to shareholders upon any liquidation, dissolution or winding-up of the Corporation. w. "Payment Period" means each period commencing on the date any shares of Series B Preferred are first issued or, in the case of each subsequent, successive Payment Period, the last day of the next preceding Payment Period, and ending on the numerically corresponding day in the first, second or third calendar month thereafter, as the Holder may select by written notice to the Corporation at least three days before the commencement of the applicable Payment Period, except that each such Payment Period which commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (a) each Payment Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (b) any Payment Period which would otherwise extend beyond a Conversion Date, Redemption Date or Liquidation Date shall end on the Conversion Date, Redemption Date or Liquidation Date, as appropriate and (c) no Payment Period shall have a duration of less than one (1) month. If Holder shall fail to give the Corporation a notice of the length of a Payment Period prior to the end of the then current Payment Period, such Payment Period shall automatically be continued on the last day thereof as Payment Period having a term of one month. x. "Picacho" means Picacho Peak Investment Co., a Nevada corporation. y. "Redemption Date" has the meaning given in Section 5(c). z. "Regulatory Change" means any change after the date of this Certificate in United States federal, state or foreign laws or regulations (including Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time) or the adoption or making after such date of any interpretations, directives or requests applying to a class of institutions including NationsBank of or under any United States federal, state or foreign laws or regulations (whether or nor having the force of law) by any court or governmental or monetary authority charged with the interpretation or Administration thereof. aa. "Senior Shares" means all classes and series of shares, including the Corporation's Series A 8 1/2% Preferred Stock, that, by the terms of the Corporation's Articles of Incorporation, or by law, shall be senior to the Series B Preferred with respect to the right of the holders thereof to receive dividends and to participate in the assets of the Corporation distributable to shareholders upon any liquidation, dissolution or winding-up of the Corporation. bb. "Series B Common Stock" means the Series B common stock, $0.25 par value per share, of the Corporation. cc. "Stock Purchase Agreement" means the Series B Stock Purchase Agreement between the Corporation and Blue Ridge Investments, LLC, dated August 30, 1996. CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES C JUNIOR PARTICIPATING PREFERRED STOCK OF AMERCO Pursuant to Section 78.1955 of the General Corporation Law of the State of Nevada, AMERCO (the "Company"), a corporation organized and existing under the General Corporation Law of the State of Nevada, in accordance with the provisions of Section 78.035 and 78.195 thereof, DOES HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Restated Articles of Incorporation of the Company, the said Board of Directors on July 13, 1998, adopted the following resolution amending and restating that certain Certificate of Designation of Series C Preferred Stock, and creating a series of Three Million (3,000,000) shares of Preferred Stock designated as Series C Junior Participating Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of directors in accordance with the provisions of its Restated Articles of Incorporation that certain Certificate of Designation of Series C Preferred Stock be and it hereby is amended and restated and that the designation and amount thereof and the powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Designation and Amount. ----------------------- There shall be a series of the Preferred Stock which shall be designated as the "Series C Junior Participating Preferred Stock," no par value, and the number of shares constituting such series shall be 3,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors, provided, that no decrease shall reduce the number of shares of Series C Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company. Section 2. Dividends and Distributions. ---------------------------- (A) Subject to the rights of the holders of any shares of any series of preferred stock of the Company ranking prior and superior to the Series C Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series C Junior Participating Preferred Stock, in preference to the holders of shares of Common Stock, par value $0.25 per share, and shares of Serial Common Stock, par value $0.25, of the Company (the "Common Stock"), and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on any regular quarterly dividend payment date as shall be established by the Board of Directors (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series C Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series C Junior Participating Preferred Stock. In the event the Company shall at any time after July 13, 1998 (the "Rights Declaration Date") declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series C Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series C Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend $1.00 per share on the Series C Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series C Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series C Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series C Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may, in accordance with applicable law, fix a record date for the determination of holders of shares of Series C Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such number of days prior to the date fixed for the payment thereof as may be allowed by applicable law. Section 3. Voting Rights. --------------- The holders of shares of Series C Junior Participating Preferred Stock shall have the following voting rights: (A) Each share of Series C Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes to which holders of shares of Series C Junior Participating Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in the Company's Restated Articles of Incorporation or by law, the holders of shares of Series C Junior Participating Preferred Stock, the holders of shares of Common Stock, and the holders of shares of any other capital stock of the Company having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Company. (C) Except as otherwise set forth herein or in the Company's Restated Articles of Incorporation, and except as otherwise provided by law, holders of Series C Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. ---------------------- (A) Whenever dividends or distributions payable on the Series C Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series C Junior Participating Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Junior Participating Preferred Stock, except dividends paid ratably on the Series C Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) except as permitted in Section 4(A)(iv) below, redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Junior Participating Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series C Junior Participating Preferred Stock; and (iv) purchase or otherwise acquire for consideration any shares of Series C Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series C Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph(A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. ------------------ Any shares of Series C Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. The Company shall cause all such shares upon their cancellation to be authorized but unissued shares of Preferred Stock which may be reissued as part of a new series of Preferred Stock, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. --------------------------------------- (A) Subject to the rights of holders of any shares of any series of Preferred Stock of the Company ranking prior and superior to the Series C Junior Participating Preferred Stock with respect to liquidation, upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series C Junior Participating Preferred Stock shall have received $100.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series C Liquidation Preference"). Following the payment of the full amount of the Series C Liquidation Preference, no additional distributions shall be made to the holders of shares of Series C Junior Participating Preferred Stock, unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series C Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock dividends, and subdivisions, combinations and consolidations with respect to the Common Stock) (such number in clause (ii) being referred to as the "Adjustment Number"). Following the payment of the full amount of the Series C Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series C Junior Participating Preferred Stock and Common Stock, respectively, holders of Series C Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series C Junior Participating Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event there are not sufficient assets available to permit payment in full of the Series C Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series C Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. --------------------------- In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series C Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment herein set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time after the Rights Declaration Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series C Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event. Section 8. Redemption. ----------- The shares of Series C Junior Participating Preferred Stock shall not be redeemable. Section 9. Ranking. -------- The Series C Junior Participating Preferred Stock shall rank junior to all other series of the Company's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Fractional Shares. ------------------ Series C Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series C Junior Participating Preferred Stock." Pursuant to Section 78.1955(4) of the General Corporation Law of the State of Nevada, (a) attached is the original designation, (b) no shares of Series C Junior Participating Preferred Stock have been issued, and (c) set forth above is the amended and restated designation of the series, the number of the series, and the voting powers, designations, preferences, limitations, restrictions and relative rights of the series. IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 4th day of August, 1998. By: /s/ Edward J. Shoen ------------------------------ Name: Edward J. Shoen Title: President Attest By: /s/ Gary V. Klinefelter --------------------------- Name: Gary V. Klinefelter Title: Secretary State of Arizona ) ) SS County of Maricopa ) This instrument was acknowledged before me on 8-4-98 (date) by Edward J. Shoen and Gary V. Klinefelter as President and Secretary of AMERCO. /s/ Nancy Jo Beiley -------------------------------- Notary EX-10.1 4 sac18pma.txt PROPERTY MANAGEMENT AGREEMENT 18SAC PROPERTY MANAGEMENT AGREEMENT ----------------------------- THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is entered into as of December 20, 2001 among Eighteen 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 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 remitted by U-Haul (or its parent company) on a daily basis to a bank account and U-Haul shall maintain such records and systems as are necessary or appropriate to enable U-Haul to clearly identify the amount of Gross Revenue generated by each Property on a daily basis. 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 thirty 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": ---- Eighteen SAC Self-Storage Corporation, a Nevada corporation By: /S/ Mark V. Shoen ------------------------- Mark V. Shoen, President "U-Haul": ------ U-Haul Co. of Nevada, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of California, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Utah, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Arizona, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Texas, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Rhode Island, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of New York, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Pennsylvania, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of New Jersey, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Colorado, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Massachusetts, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary Exhibit A
Centers Name Address City State 706086 U-HAUL CTR DBL DIAMOND RANCH 10400 S VIRGINA STREET RENO NV 717082 U-HAUL CENTER MIRAMAR 9650 CAMINO RUIZ SAN DIEGO CA 720059 U-HAUL CTR SALT LK 55 EAST 3900 SOUTH SALT LAKE CITY UT 723030 U-HAUL CENTER KYRENE ROAD 6190 W CHANDLER BLVD CHANDLER AZ 741032 U-HAUL CENTER DENTON 164 NORTH I-35 E DENTON TX 741034 U-HAUL CENTER LOS RIOS 1100 LOS RIOS PLANO TX 746072 U-HAUL CTR ALIEF 11334 BELLAIRE BLVD HOUSTON SOUTH TX 796051 U-HAUL N BROADWAY 738 N BROADWAY EAST PROVIDENCE RI 803080 U-HAUL BRONX PARK 2800 WHITE PLAINS RD BRONX NY 810051 U-HAUL MACARTHUR ROAD 3001 MACARTHUR ROAD WHITEHALL PA 813047 U-HAUL CINNAMINSON 2101 ROUTE 130 CINNAMINSON NJ 816075 U-HAUL PALM SPRINGS 68075 RAMON ROAD CATHEDRAL CITY CA 834044 U-HAUL CENTER S HAVANA 615 S HAVANA AURORA SOUTH CO 837051 U-HAUL CENTRAL SQ 844 MAIN ST CAMBRIDGE MA
EX-10.2 5 sac20pma.txt PROPERTY MANAGEMENT AGREEMENT 20SAC PROPERTY MANAGEMENT AGREEMENT ----------------------------- THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is entered into as of December 31, 2001 among Twenty 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 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. Throughout the Term of this Agreement, U-Haul shall operate the Property under the "U-Haul" REGISTERED name. (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 remitted by U-Haul (or its parent company) on a daily basis to a bank account maintained by UBS Warburg Real Estate Investments Inc. ("Lender") (or an affiliate thereof) and the funds therein shall be applied in the manner specified in that Cash Management Agreement dated the date hereof among Owner, U-Haul and Lender. U-Haul shall maintain such records and systems as are necessary or appropriate to enable U-Haul to clearly identify the amount of Gross Revenue generated by each Property on a daily basis. 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. Throughout the term hereof, Owner shall not permit the Property to be operated under any name other than "U-Haul" REGISTERED. 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. U-Haul shall not offset or reduce the amount of the Management Fee payable to it at any time hereunder in exchange for a reduction in the amount rent due from U-Haul to Owner pursuant to any lease agreement between U-Haul and Owner. 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 thirty 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": ----- Twenty SAC Self-Storage Corporation, a Nevada corporation By: /S/ Mark V. Shoen ------------------------------- Its: President ------------------------------- "U-Haul": ------ U-Haul Co. of Arizona, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of California, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Georgia, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of New Jersey, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Oregon, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Rhode Island, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Texas, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Virginia, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary Exhibit A --------- 700026 U-HAUL CTR OF BEND BEND OR 97701 717068 U-HAUL LEMON GROVE LEMON GROVE CA 91945 723082 U-HAUL MAIN&LINDSAY MESA AZ 85203 744080 U-HAUL SAN PEDRO SAN ANTONIO TX 78212 776053 U-HAUL CT PETERS ST ATLANTA EAST GA 30313 796058 U-HAUL CTR WARWICK WARWICK RI 02886 813020 U-HAUL CENTER ROUTE 37 TOMS RIVER NJ 08753 825067 U-HAUL AIRLINE CTR PORTSMOUTH VA 23701 836044 U-HAUL CENTER ARLINGTON ARLINGTON TX 76012 EX-10.3 6 sac21pma.txt PROPERTY MANAGEMENT AGREEMENT 21SAC PROPERTY MANAGEMENT AGREEMENT ----------------------------- THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is entered into as of December 31, 2001 among Twenty-One 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 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. Throughout the Term of this Agreement, U-Haul shall operate the Property under the "U-Haul" REGISTERED name. (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 remitted by U-Haul (or its parent company) on a daily basis to a bank account maintained by UBS Warburg Real Estate Investments Inc. ("Lender") (or an affiliate thereof) and the funds therein shall be applied in the manner specified in that Cash Management Agreement dated the date hereof among Owner, U-Haul and Lender. U-Haul shall maintain such records and systems as are necessary or appropriate to enable U-Haul to clearly identify the amount of Gross Revenue generated by each Property on a daily basis. 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. Throughout the term hereof, Owner shall not permit the Property to be operated under any name other than "U-Haul" REGISTERED. 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. U-Haul shall not offset or reduce the amount of the Management Fee payable to it at any time hereunder in exchange for a reduction in the amount rent due from U-Haul to Owner pursuant to any lease agreement between U-Haul and Owner. 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 thirty 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": ----- Twenty-One SAC Self-Storage Corporation, a Nevada corporation By: /S/ Mark V. Shoen ------------------------------- Its: President ------------------------------- "U-Haul" ------ U-Haul Co. of Arizona, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of California, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Michigan, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Ohio, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Tennessee, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Texas, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary Exhibit A 707075 U-HAUL CTR THORNTON FREMONT CA 94536 708078 U-HAUL CTR BELMONT BELMONT CA 94002 712032 U-HAUL CENTER DOWNTOWN LOS ANGELES CA 90006 721058 U-HAUL 51ST & GLENDALE GLENDALE AZ 85301 744068 U-HAUL AUSTIN HWY SAN ANTONIO TX 78218 752069 U-HAUL CAROUSEL MALL INKSTER MI 48141 770054 U-HAUL CTR METRO DAYTON OH 45403 772061 U-HAUL HENDERSONVIL HENDERSONVILLE TN 37075 835081 U-HAUL NORTHWEST DALLAS TX 75220 EX-10.4 7 sac22pma.txt PROPERTY MANAGEMENT AGREEMENT 22SAC PROPERTY MANAGEMENT AGREEMENT ----------------------------- THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is entered into as of December 31, 2001 among Twenty-Two 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 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. Throughout the Term of this Agreement, U-Haul shall operate the Property under the "U-Haul" REGISTERED name. (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 remitted by U-Haul (or its parent company) on a daily basis to a bank account maintained by UBS Warburg Real Estate Investments Inc. ("Lender") (or an affiliate thereof) and the funds therein shall be applied in the manner specified in that Cash Management Agreement dated the date hereof among Owner, U-Haul and Lender. U-Haul shall maintain such records and systems as are necessary or appropriate to enable U-Haul to clearly identify the amount of Gross Revenue generated by each Property on a daily basis. 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. Throughout the term hereof, Owner shall not permit the Property to be operated under any name other than "U-Haul" REGISTERED. 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. U-Haul shall not offset or reduce the amount of the Management Fee payable to it at any time hereunder in exchange for a reduction in the amount rent due from U-Haul to Owner pursuant to any lease agreement between U-Haul and Owner. 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 thirty 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": ----- Twenty-Two SAC Self-Storage Corporation, a Nevada corporation By: /S/ Mark V. Shoen ------------------------------- Its: President ------------------------------- "U-Haul" ------ U-Haul Co. of Arizona, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Kansas, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Louisiana, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Massachusetts, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Maine, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Michigan, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Texas, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Virginia, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary Exhibit A 734024 U-HAUL STATE AVE KANSAS CITY KS 66102 747069 U-HAUL CAUSEWAY BLV METAIRIE LA 70002 751022 U-HAUL JOLLY CEDAR LANSING MI 48910 790066 U-HAUL CTR RT 295 PORTLAND ME 04101 791023 U-HAUL SPRINGFIELD SPRINGFIELD MA 01101 795028 U-HAUL CENTER OF MANASSAS PARK MANASSAS PARK VA 20111 828059 U-HAUL CTR ORACLE TUCSON AZ 85705 828068 U-HAUL W INA RD TUCSON AZ 85741 836033 WESTCREEK VILLAGE U-HAUL CTR FORT WORTH TX 76133 EX-10.5 8 sac23pma.txt PROPERTY MANAGEMENT AGREEMENT 23SAC PROPERTY MANAGEMENT AGREEMENT ----------------------------- THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is entered into as of December 31, 2001 among Twenty-Three 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 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. Throughout the Term of this Agreement, U-Haul shall operate the Property under the "U-Haul" REGISTERED name. (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 remitted by U-Haul (or its parent company) on a daily basis to a bank account maintained by UBS Warburg Real Estate Investments Inc. ("Lender") (or an affiliate thereof) and the funds therein shall be applied in the manner specified in that Cash Management Agreement dated the date hereof among Owner, U-Haul and Lender. U-Haul shall maintain such records and systems as are necessary or appropriate to enable U-Haul to clearly identify the amount of Gross Revenue generated by each Property on a daily basis. 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. Throughout the term hereof, Owner shall not permit the Property to be operated under any name other than "U-Haul" REGISTERED. 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. U-Haul shall not offset or reduce the amount of the Management Fee payable to it at any time hereunder in exchange for a reduction in the amount rent due from U-Haul to Owner pursuant to any lease agreement between U-Haul and Owner. 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 --------- 6. Termination. ----------- Owner or U-Haul may terminate this Agreement with or without cause by giving not less than thirty 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": ----- Twenty-Three SAC Self-Storage Corporation, a Nevada corporation By: /S/ Mark V. Shoen ------------------------------- Its: President ------------------------------- "U-Haul" ------ U-Haul Co. of Arizona, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Arkansas, Inc. By: /S/ Gary V. Klinefelter ------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of California, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Louisiana, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Maryland, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Missouri, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of New York, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Oklahoma, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary U-Haul Co. of Texas, Inc. By: /S/ Gary V. Klinefelter -------------------------------- Gary V. Klinefelter, Secretary Exhibit A --------- 710077 U-HAUL OF FLORIN RD SACRAMENTO WEST CA 95822 721021 U-HAUL CENTER 19TH & BELL PHOENIX WEST AZ 85023 736071 U-HAUL CT HAZELWOOD HAZELWOOD MO 63042 738057 U-HAUL DOWNTOWN OKLAHOMA CITY OK 73129 741035 U-HAUL CENTER ADDISON CARROLLTON TX 75006 742054 U-HAUL KANIS ROAD LITTLE ROCK AR 72204 744070 U-HAUL NACO-PERRIN SAN ANTONIO TX 78217 747074 U-HAUL CT GENTILLY NEW ORLEANS LA 70126 806024 U-HAUL CENTER CORAM CORAM NY 11727 820022 U-HAUL CT PULASKI HY BALTIMORE MD 21224 -----END PRIVACY-ENHANCED MESSAGE-----