Exhibit 10.1


 


THIRD
AMENDMENT TO CONTRIBUTION AGREEMENT


(Pool 2)


 


THIS THIRD AMENDMENT TO
CONTRIBUTION AGREEMENT (the “Third Amendment”)
is made and entered into effective as of September 24, 2009 (the “Effective Date”) by and between EXTRA SPACE
STORAGE LLC, a Delaware limited liability company (“Extra Space”), and HSRE-ESP IA, LLC, a
Delaware limited liability company  (“HSRE”).


 


RECITALS:


 


WHEREAS, Extra Space
and HSRE entered into that certain Contribution Agreement dated June 23,
2009 (the “Original Agreement”) relating to (i) the
formation of HSRE-ESP I, LLC, a Delaware limited liability company (“HSRE-ESP”); (ii) the contribution by Extra Space to
HSRE-ESP of Extra Space’s ninety nine percent (99%) ownership interest in Extra
Space Properties Fifty One LLC, a Delaware limited liability company (“ESP Fifty One”), and one hundred percent (100%) of the
ownership interest in Extra Space Properties Fifty Seven LLC, a Delaware
limited liability company, which owns the remaining one percent (1%) interest
in ESP Fifty One; and (iii) HSRE’s contribution of cash to HSRE-ESP; all
of which are more particularly described in the Contribution Agreement; and


 


WHEREAS, pursuant to
that certain First Amendment to Contribution Agreement (Pool 2) dated effective
as of August 7, 2009 (hereinafter the “First
Amendment”) and that certain Second Amendment to Contribution
Agreement (Pool 2) dated effective as of September 10, 2009 (hereinafter
the “Second Amendment”), Extra Space and
HSRE made certain amendments to the Original Agreement; and


 


WHEREAS, Extra Space
and HSRE desire to enter into this Third Amendment and further amend the
Original Agreement as provided herein.


 


AGREEMENT:


 


In consideration of the
covenants and conditions set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Extra Space and HSRE agree as follows:


 


1.             Recitals and Definitions.  The parties acknowledge that the Recitals set
forth above are true and correct and are hereby incorporated into the body of
this Third Amendment.  Unless otherwise
set forth herein, all capitalized terms used in this Third Amendment shall have
the same meaning in this Third Amendment as set forth in either the Original
Agreement, as amended or supplemented by the First Amendment, the Second
Amendment and this Third Amendment (collectively the “Contribution
Agreement”).


 


2.             Expiration of Due Diligence Period.  The parties acknowledge that the Due
Diligence Period has expired and that HSRE has waived and does hereby waive any
rights it might have to terminate Contribution Agreement pursuant to Section 8.3
of the Contribution Agreement.


 


3.             Approval of Third Party Loan Documents.  Pursuant to Section 3.2.1.1 of the
Contribution Agreement, HSRE hereby approves the amount, interest rate, payment
schedule, repayment term and other terms of the Existing Indebtedness and
approves the Third Party Loan Documents. 
The parties acknowledge, however, that as part of the application to the
Lender to consent to the transaction which is the subject of this Agreement
Extra Space, at HSRE’s request, included a request that the Lender 


 

















 


agree
to certain modifications of the Third Party Loan Documents in the form attached
hereto as Exhibit No. 1 and by this reference made a part hereof
(hereinafter the “Requested Loan Document
Modifications”).  The parties
agree that HSRE may, in good faith, continue to pursue the Lender’s consent to
the Requested Loan Document Modifications to the Third Party Loan Documents and
Extra Space agrees to cooperate in good faith with HSRE in such requests.  Notwithstanding anything to the contrary in Section 11.1.5
of the Contribution Agreement, HSRE’s obligations under the Contribution
Agreement shall not be contingent or otherwise conditioned upon either the
Lender or any servicer of the Existing Indebtedness consenting to the Requested
Loan Document Modifications.  HSRE agrees
that within five (5) business days of the date of this Third Amendment,
HSRE shall, in good faith, submit to the Lender all of the information and
documentation heretofore requested in writing from HSRE by the Lender and shall
hereafter submit to the Lender in a reasonably timely manner all information
and documentation hereafter requested from the Lender.


 


4.             Exercise of Option to Extend Closing for Lender
Approval Extension Period. 
Pursuant to Section 3.2.3 of the Contribution Agreement, HSRE
hereby exercises HSRE’s option to extend the Closing for the Lender Approval
Extension Period.


 


5.             Agreement Regarding Capital Expenditure Fund and
Waiver of Repair Notice. 
Prior to the Closing, Extra Space shall advance to ESP 51 the sum of
$116,750.00 (hereinafter the “Capital Expenditure Fund”).  The Capital Expenditure Fund shall be used by
HSRE-ESP to fund the cost of performing such of the capital repairs indentified
in Schedule No. 1 attached hereto and by this reference made a part hereof
(hereinafter the “Capital Repair Schedule”)
as HSRE may, from time to time, direct. 
Extra Space’s advance to ESP 51 of the Capital Expenditure Fund (A) shall
be in full and complete satisfaction of Extra Space’s obligation to repair any
of the items listed HSRE’s September 9, 2009 Repair Notice and (B) shall
not be treated as a capital contribution or a loan by Extra Space to HSRE-ESP
or to ESP 51 and shall not cause an increase in the Contribution Value.  Pursuant to Section 8.1 of the
Contribution Agreement, HSRE hereby waives any and all requirements that Extra
Space repair any of the Repair Items or any of the other repair and/or
maintenance items identified by HSRE in HSRE’s September 9, 2009 Repair
Notice.


 


6.             Agreement Regarding Designation of Insurance
Program.  The parties
acknowledge that property and casualty insurance for the Facilities is
currently provided pursuant to a “REIT Program” pursuant to which ESP 57 and
ESP Texas have elected to carry high deductibles for certain potential
risks.  The parties also acknowledge that
Extra Space has proposed that casualty insurance for the Facilities can be provided
either pursuant to Extra Space’s existing REIT Program, or, at a higher cost,
through Extra Space’s “JV Program” pursuant to which ESP 57 and ESP Texas can
elect to reduce or eliminate the deductible risks, or by using HSRE’s property
and casualty insurance program.  The
parties agree that provided such insurance satisfies the requirements of the
Lender with respect to the Facilities, HSRE may, at the time of Closing, elect
that property and casualty insurance for the Facilities be provided pursuant to
any of the three preceding described programs. 
Any further changes in the casualty insurance coverage for the
Facilities will be approved as part of the process of approving the Annual
Business Plan and/or Annual Operating Budget.


 


7.             Annual Business Plan and Annual Operating Budget.  The parties acknowledge that Extra Space
delivered to HSRE the Annual Business Plan and the Annual Operating Budget in
accordance with Section 8.4 of the Contribution Agreement and that Extra
Space is in the process of preparing the Annual Business Plan and Annual
Operating Budget for fiscal year 2010. 
HSRE hereby approves the Annual Business Plan and the Annual Operating
Agreement as previously submitted to HSRE by Extra Space and acknowledges that
such approval constitutes HSRE’s approval of the Annual Business Plan and
Annual Budget within the meaning of Section 11.1.4 of the Contribution
Agreement.  Upon completion of the fiscal
year 2010 Annual Business Plan and Annual Operating Budget, the fiscal year
2010 Annual Business Plan and Annual Operating Budget shall be reviewed and
approved by the 


 

















 


parties
in accordance with the provisions of the form of HSRE-ESP Operating Agreement
and the form of Property Management Agreement. 
Notwithstanding anything to the contrary in Section 11.1.4 of the
Contribution Agreement, HSRE’s obligations under the Contribution Agreement
shall not be contingent or otherwise conditioned upon HSRE’s approval of the
fiscal year 2010 Annual Business Plan and/or Annual Operating Budget.


 


8.             Waiver of Title Objections, Environmental Objections,
Insurance Objections and Budget Objections.  HSRE hereby waives all of its Title
Objections, Environmental Objections, Insurance Objections and Budget
Objections, subject, however, to Extra Space’s undertakings expressly set forth
in Extra Space’s Objection Response.


 


9.             Amendment of Sections 2.2.2, 2.2.3 and 2.2.4 of
the Contribution Agreement. 
Sections 2.2.2, 2.2.3 and 2.2.4 of the Contribution Agreement are hereby
amended by deleting said Sections 2.2.2, 2.2.3 and 2.2.4 in their entirety and
replacing them with the following Sections 2.2.2, 2.2.3 and 2.2.4:


 


2.2.2        Distribution Amount. 
Immediately after the Closing Extra Space and HSRE shall cause HSRE-ESP
to distribute to Extra Space cash in an amount (the “Extra Space
Distribution Amount”) equal to the sum of: (i) the “Initial
HSRE Contribution Amount” (hereinafter defined) minus (ii) any closing
costs and prorations described in Section 4.3.4 below (including the costs
described in Section 4.3.4 below) (collectively, the “Prorations”)
and credited, as of the Proration Date (as defined below), to HSRE-ESP, plus (iii) any
Prorations credited, as of the Proration Date, to Extra Space.  As used herein, the term “Initial HSRE Contribution Amount” shall mean fifty percent
(50%) of the difference between (A) the Contribution Value, minus (B) the
sum of the aggregate unpaid principal balance of the Existing Indebtedness plus
all accrued and unpaid interest with respect to the Existing Indebtedness as of
the Proration Date.  Extra Space and HSRE
agree that for purposes of determining the balance of Extra Space’s “Capital
Account” (as defined in the HSRE-ESP Operating Agreement) and Extra Space’s “Adjusted
Capital Account” (as defined in the HSRE-ESP Operating Agreement), the gross
amount of Extra Space’s initial “Capital Contribution” to HSRE-ESP shall be
reduced by the Initial HSRE Contribution Amount notwithstanding the fact that
the amount actually distributed to Extra Space by HSRE-ESP is adjusted (either
increased or decreased) pursuant to the provisions of this Section 2.2.2.  The parties hereby agree that the
provisions of this Section 2.2.2 are intended to cause the
Adjusted Capital Accounts of HSRE and Extra Space to be in an
50.00%/50.00% ratio, respectively, following the contribution of the ESP Interests
by Extra Space and the Initial HSRE Contribution Amount by HSRE and the
distribution of the Extra Space Distribution Amount to Extra Space and the
pro-rations and credits provided for herein.


 


2.2.3        Cash to be Contributed by HSRE.  At Closing, HSRE shall contribute to HSRE-ESP
cash in an amount (the “Total HSRE Contribution
Amount”) equal to the sum of (i) the Initial HSRE Contribution
Amount, plus (ii) Fifty Percent (50.00%) of the total Prorations charged
to HSRE-ESP.


 


2.2.4        Cash to be Contributed by Extra Space.  At Closing, Extra Space shall contribute to
HSRE-ESP cash in an amount (the “Total Extra Space
Contribution Amount”) equal to the sum of Fifty Percent (50.00%) of
the Prorations charged to HSRE-ESP.


 

















 


10.           Amendment
of Section 3.2.3 of Contribution Agreement.  Section 3.2.3 of the Contribution
Agreement is hereby amended by deleting said Section 3.2.3 in its entirety
and replacing it with the following Section 3.2.3:


 


3.2.3        Notwithstanding anything to the contrary in this Agreement,
if at the Closing Date, Lender and/or any servicer of Existing Indebtedness has
not consented to the transaction which is the subject of this Agreement and
provided that HSRE has not terminated this Agreement pursuant to Section 8.3
below, HSRE shall have the option to either (A) extend the Closing for an
additional ninety (90) days (hereinafter the “Lender
Approval Extension Period”) to permit Extra Space to continue to
pursue with reasonable diligence Lender’s consent to the transaction which is
the subject of this Agreement or (B) terminate this Agreement.  Such option shall be exercised by HSRE giving
Extra Space written notice of HSRE’s election to either extend the Closing or
terminate this Agreement pursuant to this Section 3.2.3 at any time on or
before the date on which the Closing Date would be scheduled to occur but for
such extension.  If HSRE fails to give
such written notice to Extra Space, such failure shall be deemed to be an
election to terminate this Agreement.  If
HSRE elects to extend the Closing for the Lender Approval Extension Period, the
Closing shall be on the earlier of the date on which the Lender Approval
Extension Period expires or fifteen (15) days after the Lender consents to the
transaction which is the subject of this Agreement.


 


11.           Amendment
of Section 4.3.4 of Contribution Agreement.  Section 4.3.4 of the Contribution
Agreement is hereby amended by deleting said Section 4.3.4 in its entirety
and replacing it with the following Section 4.3.4:


 


4.3.4        Closing Costs.  At the Closing, HSRE-ESP shall pay all
recording costs and all escrow costs. 
Furthermore, at Closing, the following costs shall be paid by HSRE-ESP
and/or reimbursed to Extra Space or HSRE by HSRE-ESP, as applicable: (i) all
actual out of pocket costs incurred or paid to unaffiliated third parties by
HSRE in connection with its due diligence investigation of the Property, the
ESP Interests, the Texas Interests and Extra Space, including, but not limited
to, the costs of the Surveys; (ii) all fees, costs, expenses, and other
charges charged by Lender and/or any servicer of the Existing Indebtedness or
incurred in the satisfaction of any condition or requirement imposed by Lender
or such servicer with respect to Lender’s consenting to the transaction which
is the subject of this Agreement; (iii) all attorney’s fees and costs
incurred by either Extra Space or HSRE in connection with the negotiation and
documentation of the transaction which is the subject of this Agreement and the
performance of due diligence for the benefit of HSRE pursuant to this Agreement
(hereinafter collectively the “Reimbursable Costs”);
provided, however, that in no event shall the aggregate amount of Reimbursable
Costs paid to or for the benefit of HSRE pursuant to this Section 4.3.4
exceed the aggregate amount of Reimbursable Costs paid to or for the benefit of
Extra Space pursuant to this Section 4.3.4 regardless of whether the
aggregate amount of Reimbursable Costs paid or incurred by HSRE exceeds the
aggregate amount of Reimbursable Costs paid or incurred by Extra Space.  At Closing, the following costs shall be paid
by Extra Space and/or HSRE-ESP in accordance with local practice and custom in
the area applicable to each Property:  (A) the
cost of the base title policy, endorsements, reinsurance or coinsurance, (B) transfer,
documentary and similar taxes related to the purchase of the ESP Interests, if
any; provided, however, that in the absence of local practice and custom
relating to the payment of such costs, such costs shall be paid by HSRE-ESP.  Notwithstanding anything to the contrary in
this Section 4.3.4, if the Closing does not occur, no party to this
Agreement shall be responsible for reimbursing


 

















 


any other party to this Agreement for fees,
expenses costs incurred by or for the benefit of such party except as expressly
provided otherwise in Section 13.1.2 below.


 


12.           Amendment
of Section 11.1 of Contribution Agreement.  The first paragraph of Section 11.1 of
the Contribution Agreement is hereby amended by deleting said paragraph in its
entirety and replacing it with the following:


 


11.1         HSRE’s Conditions
Precedent.  The
obligations of HSRE under this Agreement are contingent upon the satisfaction
of each of the following conditions as of the Closing Date.  If as of the Closing Date any of the
following conditions is not satisfied, HSRE may, on the Closing Date, either
waive such condition and proceed to Closing or terminate this Agreement by
written notice to Extra Space.  Upon such
termination, neither party shall have any further rights or liabilities
hereunder except for those provisions which expressly survive the termination
of this Agreement.


 


13.           Amendment
of Section 11.2 of Contribution Agreement.  The first paragraph of Section 11.2 of
the Contribution Agreement is hereby amended by deleting said paragraph in its
entirety and replacing it with the following:


 


11.2         Extra Space’s Conditions
Precedent.  The
obligations of Extra Space under this Agreement are contingent upon the
satisfaction of each of the following conditions as of the Closing Date.  If as of the Closing Date any of the
following conditions is not satisfied, Extra Space may, on the Closing Date,
either waive such condition and proceed to Closing or terminate this Agreement
by written notice to HSRE.  Upon such
termination, neither party shall have any further rights or liabilities
hereunder except for those provisions which expressly survive the termination
of this Agreement.


 


14.           Amendment
of Exhibit A to Contribution Agreement.  The Contribution Agreement is hereby amended
by deleting the form of Operating Agreement set forth on Exhibit A to the
Contribution Agreement in its entirety and replacing it with the form of
Operating Agreement set forth on “Exhibit A” attached hereto as Exhibit No. 2
and by this reference made a part hereof.


 


15.           Amendment
of Exhibit C to Contribution Agreement.  Exhibit C to the Contribution Agreement
(the Non-Competition and Right of First Opportunity Agreement) is hereby
amended by deleting Article V(a) of said Non-Competition and Right of
First Opportunity Agreement in its entirety from said Exhibit C and
replacing it with the following Article V(a):


 


(a)           with respect to the provisions of ARTICLE II hereof, on
the date (the “ROFO Termination Date”) that is  the earlier of (i) date on which a Rejection has
occurred or been deemed to occurred with respect to three consecutive Proposed
Project Notices given by ESP to HSRE; or (ii) the Exclusivity Termination
Date (as defined below).  For purposes
hereof, the “Exclusivity Termination Date”
shall mean the two (2) year anniversary following the execution of the
Company Operating Agreement.


 


16.           Full
Force and Effect.  Time is
of the essence with respect to each provision of the Contribution
Agreement.  In the event of a conflict
between the terms and conditions of the Contribution Agreement and this
Amendment, the terms of this Amendment shall prevail.


 


17.           No
Further Modification. 
Except as expressly set forth in this Amendment, all terms and
provisions of the Contribution Agreement are hereby confirmed and remain
unmodified and in full force and effect, such terms and provisions being hereby
incorporated herein for all purposes.


 

















 


18.           Counterparts
and Facsimile Transmission. 
This Amendment may be executed in any number of counterparts, each of which
so executed and delivered shall be deemed to be an original and all of which
shall constitute one and the same instrument. 
Each counterpart may be delivered by facsimile transmission.  The signature page of any counterpart
may be detached therefrom without impairing the legal effect of the signature(s) thereon
provided such signature page is attached to any other counterpart
identical thereto.


 


IN
WITNESS WHEREOF, the parties by and through their undersigned, duly
authorized representative, have executed this Amendment as of the day and year
first above written for the purposes herein expressed.


 


	
   

  	
  EXTRA
  SPACE:  

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EXTRA
  SPACE STORAGE LLC, a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Charles L. Allen  

  
	
   

  	
  Name:

  	
  Charles L. Allen  

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HSRE:

  
	
   

  	
   

  	
   

  
	
   

  	
  HSRE-ESP
  IA, LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  HSREP II Holding, LLC,
  a Delaware limited liability company, its sole member 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  HSRE REIT II, a
  Maryland real estate investment trust, a member 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By: 

  	
  /s/ Stephen M. Gordon 

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Stephen
  M. Gordon 

  
	
   

  	
   

  	
   

  	
  Its:

  	
  Trustee