1
EXHIBIT 10.7
COST SHARING AGREEMENT
THIS COST SHARING AGREEMENT ("Agreement") is made and entered into as
of this 28th day of December, 1999, by and between LIBERTY SELF-STOR, LTD., an
Ohio limited liability company (the "Company") and LIBERTY SELF-STOR II, LTD.,
an Ohio limited liability company ("Liberty II").
WHEREAS, the Company owns and operates self-storage properties (the
"Facilities") that provide self-storage space for rent to the general public;
WHEREAS, Liberty II is the owner of certain assets that comprise a
truck rental business, which makes trucks available for short-term rental to the
general public, including tenants of the Facilities, and owns certain assets
that will be used in connection with the retail sale of locks, boxes, packing
materials, propane gas and related merchandise at the Facilities, as provided in
this Agreement (collectively referred to as the "Business");
WHEREAS, the Facilities are generally in visible locations and provide
easy access to the general public and the parties acknowledge that it would be
beneficial to Liberty II's Business and the Company's self-storage business to
operate Liberty II's Business at one or more of the Facilities; and
WHEREAS, the parties desire to agree on the terms and conditions of
sharing costs and expenses in connection with Liberty II's operation of the
Business at one or more of the Facilities and related matters as set forth in
this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. LOCATION OF THE BUSINESS. The Business will be located and operated
at one or more of the Facilities, under the terms and conditions of this
Agreement.
2. BUSINESS ASSETS. The right, title and interest of all assets used in
connection with the Business, other than the "Trade Name" as set forth under
Section 3(e) below, will remain at all times the property of Liberty II (the
"Business Assets").
3. COST SHARING
(a) Authority of Liberty II. Notwithstanding anything provided
to the contrary in this Section 3, Liberty II will have ultimate decision making
authority over the Business and the Business Assets. Liberty II's
responsibilities will include, but not be limited to, evaluating markets and
self-storage sites for operations of the Business, negotiating lease and agency
contracts with truck providers, establishing truck rental policy and procedures,
overseeing training of any of the personnel and workers employed by the Company
to perform Business activities, and monitoring and reporting for financial, tax
and other purposes on the Business.
2
(b) Reimbursement of Costs. Under Liberty II's direction and
control, the Company's employees will engage in the following activities on
behalf of Liberty II in connection with the Business and the Business Assets:
(a) sales, promotional, administrative, and bookkeeping activities, (b) the
payment of expenses and the collection of revenues, and (c) other activities as
the parties may agree to facilitate Liberty II's operation of the Business.
However, Company will not have any authority to incur any obligations or
liabilities on behalf of or for Liberty II's account without the prior consent
of Liberty II designated in writing for such purpose. Liberty II will reimburse
the Company on a monthly basis for the actual costs the Company incurs in
connection with the activities required under this Section 3(b); provided that
the Company provides Liberty II with an accounting of such costs, within 30 days
of the close of each month. The parties agree that the Company's receipt of
reimbursement payments to which it is entitled under this Section 3(b) will not
be treated as income to the Company, but will reduce the amount of its
deductible expenses, for federal income tax purposes.
(c) Rental of Facilities. The Company will rent to Liberty II
space at the Facilities to permit Liberty II to park and use rental trucks at
the Facilities and office space at the Facilities to permit Liberty II to
operate the Business. Liberty II will pay to the Company a monthly rental
payment based on the fair rental value of the space used and occupied by Liberty
II at the Facilities under this Section 3(c) (the "Fair Rental"). The Fair
Rental will be an amount that is equivalent to the rentals paid in comparable
rental agreements between unrelated parties. In the event the parties cannot
agree on the amount of the Fair Rental within 30 days of the effective date of
this Agreement, the Fair Rental will be determined by a qualified independent
appraiser who is agreed upon by the parties. The determination of the Fair
Rental by the qualified appraiser will be binding on the parties.
(d) Facilities. Liberty II and Company will mutually agree,
from time to time, on one or more of the Facilities at which the Business will
be operated. Either party will have the option to terminate the operation of the
Business at any Facility upon 30 days written notice to the other party.
(e) Advertising of the Company's Trade Name. Liberty II will
advertise the Company's trade name "Liberty Self-Storage" (the "Trade Name") by
displaying the Trade Name in a prominent manner and design, as agreed by the
parties, on its rental trucks (whether owned by Liberty II or leased from a
third party) that are used in connection with the Business (the "Advertising").
In consideration for the Advertising, the Company will pay to Liberty II, on a
monthly basis, the fair market value of the Advertising (the "FMV of the
Advertising"). The FMV of the Advertising will be an amount that is equivalent
to the cost charged in comparable advertising agreements between unrelated
parties. In the event the parties cannot agree on the amount of the FMV of the
Advertising within 30 days of the effective date of this Agreement, the FMV of
the Advertising will be determined by a qualified independent appraiser who is
agreed upon by the parties. The determination of the FMV of the Advertising by
the qualified appraiser will be binding on the parties.
(f) Grant of Licence to Use Trade Name. The Company grants
Liberty II a non-exclusive license to use the Trade Name to identify the
Business to the general public (the
2
3
"License"). Liberty II's License have the right to use the Trade Name to
advertise and promote the Business and for any other purpose intended to enhance
the goodwill of the Business. In consideration for the grant of the License,
Liberty II will pay to the Company, on a monthly basis, the fair market value of
the License (the "FMV of the License"). The FMV of the License will be an amount
that is equivalent to the cost charged in comparable trade name licensing
agreements between unrelated parties. In the event the parties cannot agree on
the amount of the FMV of the License within 30 days of the effective date of
this Agreement, the FMV of the License will be determined by a qualified
independent appraiser who is agreed upon by the parties. The determination of
the FMV of the License by the qualified appraiser will be binding on the
parties.
(g) Cost Sharing Payment Due Dates. The parties will be
obligated to pay the other party all amounts due under Section 3 on a monthly
basis, within 30 days of the end of each month. To carry-out the foregoing, the
parties may agree that one of the parties will make a net payment for any
particular month of the net amount due under Section 3.
4. PERIODIC REVIEW. Within 30 days of each annual anniversary of the
effective date of this Agreement, the parties will review the terms and
conditions of Section 3, including but not limited to, the payments made and
benefits derived during the preceding 12 months under the provisions of Section
3, to determine whether any of the terms or conditions of Section 3 should be
adjusted, modified, amended or canceled in order to fairly compensate either
party for its obligations thereunder or to fairly charge either party for the
benefits derived thereunder.
5. NON-EXCLUSIVITY. Nothing in this Agreement shall be construed as
granting the Company any rights in the Business, or in any of Liberty II's
undertakings, activities, businesses or assets, including any right to
participate as a service provider, independent contractor, partner, member,
shareholder, beneficiary, or in any other capacity, in connection with Liberty
II's conduct of its truck rental business or the retail sale of locks, boxes and
packaging materials, or any other related or unrelated activity, at any
locations other than the Facilities. Nothing in this Agreement shall be
construed as granting Liberty II any rights in the Company's undertakings,
activities, businesses or assets, including any right to participate as a
service provider, independent contractor, partner, member, shareholder,
beneficiary, or in any other capacity, in connection with the Company's
self-storage business, or any other related or unrelated activity, at any
locations other than the Facilities.
6. NOT A PARTNERSHIP OR SEPARATE ENTITY. The rights, duties and
obligations of and between the parties created by this Agreement will not
constitute a partnership or an entity separate from the parties for federal
income tax purposes within the meaning of Treas. Xxx.xx. 301.7701-1.
7. INSURANCE. Liberty II shall, during the term of this Agreement, at
its own cost and expense, obtain and keep in force liability insurance with
limits of at least $300,000/$500,000 per occurrence with $1,000,000 umbrella
coverage for injuries to or death of persons involved with the Business. Such
policy or policies shall name the Company as an additional insured party.
3
4
8. EFFECTIVE DATE. This Agreement will be effective as of the date
first set forth above.
9. NO OTHER AGREEMENTS. This Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties and representations be and
between the parties hereto, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, express or
implied, by and between them other than as set forth herein. Any and all prior
agreements by and between the parties hereto are hereby revoked. This Agreement
is, and is intended by the parties to be, an integration of any and all prior
agreements or understandings, oral or written.
10. TERMINATION. This Agreement may be terminated at any time by either
party upon 30 days written notice to the other party.
11. MISCELLANEOUS. This Agreement is for the exclusive benefit of
Liberty II and the Company, and it is not intended to confer any rights on any
other persons or entities. This Agreement will be construed and enforced in
accordance with the domestic substantive laws of the State of Ohio without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other state. This
Agreement cannot be changed orally, and can be changed only by an instrument in
writing signed by the party against whom enforcement of such change is sought.
All agreements, covenants, representations and warranties made in this Agreement
will survive the execution and the Closing Date. This Agreement may not be
assigned by either party without the consent of the other party. Whenever in
this Agreement any of the parties hereto is referred to, such reference will be
deemed to include their successors and assigns, and all covenants, promises and
agreements in this Agreement will bind and inure to the benefit of their
successors and assigns. This Agreement may be executed by any one or more of the
parties in any number of counterparts, each of which will be deemed to be an
original, but all such counterparts will together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
LIBERTY SELF-STOR, LTD.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Its: Executive Operating Manager
LIBERTY SELF-STOR II, LTD.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Its: Managing Member Designee
4
