Document:

EXHIBIT 10.1

 

FIRST AMENDMENT TO CONTRIBUTION AGREEMENT AND TO

AGREEMENT REGARDING TRANSFER OF SERIES A UNITS

(AAAAA Rent-A-Space)

THIS
FIRST AMENDMENT TO CONTRIBUTION AGREEMENT AND TO AGREEMENT REGARDING TRANSFER
OF SERIES A UNITS (hereinafter the “First Amendment”) is executed on
the 28th day of September, 2007, but made and entered into effective as of the
25th day of June, 2007, by, between, and among AAAAA RENT-A-SPACE, ALAMEDA, LTD., LIMITED PARTNERSHIP, a
California limited partnership, AAAAA RENT-A-SPACE,
ALAMEDA II, LTD. LIMITED PARTNERSHIP, a California limited partnership, AAAAA
RENT-A-SPACE, BERKELEY I, LTD., LIMITED PARTNERSHIP, a California
limited partnership, AAAAA RENT-A-SPACE,
BERKELEY II, LTD., LIMITED PARTNERSHIP, a California limited partnership,
AAAAA RENT-A-SPACE — CASTRO VALLEY, LTD.
LIMITED PARTNERSHIP, a California limited partnership, AAAAA RENT-A-SPACE — COLMA, LTD.  LIMITED PARTNERSHIP, a California
limited partnership, AAAAA RENT-A-SPACE,
HAYWARD, LTD., LIMITED PARTNERSHIP, a California limited
partnership, AAAAA RENT-A-SPACE — MAUI,  A LIMITED PARTNERSHIP, a Hawaiian
limited partnership, AAAAA RENT-A-SPACE, SAN
LEANDRO, LTD., LIMITED PARTNERSHIP, a California limited
partnership, AAAAA RENT-A-SPACE, SAN PABLO,
LTD. LIMITED PARTNERSHIP, a California limited partnership, and AAAAA RENT-A-SPACE — VALLEJO, LTD. LIMITED
PARTNERSHIP, a California limited partnership (each hereinafter
individually referred to as a “Contributor” and collectively the “Contributors”),
H. JAMES KNUPPE (hereinafter “James
Knuppe”), BARBARA KNUPPE, and EXTRA SPACE STORAGE LP, a Delaware limited
partnership (hereinafter “Extra Space”).

R E C I T A L S:

A.                                   Pursuant to that certain
Contribution Agreement dated effective as of June 15, 2007, between
Contributors and Extra Space (hereinafter the “Contribution Agreement”), each
of the Contributors conveyed to Extra Space certain real and personal property
owned by such Contributor in exchange for certain “Series A Preferred Units”
(hereinafter collectively the “Series A Units”), as defined in the Second
Amended and Restated Agreement of Limited Partnership for Extra Space (the “Partnership
Agreement”), all as more particularly described in the Contribution Agreement.

B.                                     Pursuant to
that certain Agreement Regarding Transfer of Series A Units dated June 25,
2007, between Contributors, James Knuppe, Barbara Knuppe, Extra Space, and
others (hereinafter the “Transfer Agreement”), the parties to the Transfer
Agreement agreed that all of the Series A Units to be issued by Extra Space
pursuant to the Contribution Agreement would be issued directly to James Knuppe
and Barbara Knuppe and James Knuppe and Barbara Knuppe assumed certain
obligations of the Contributors under the Contribution Agreement with respect
to the Series A Units.

 

 

C.                                     Pursuant to the
Partnership Agreement and the Contribution Agreement, James Knuppe and Barbara
Knuppe have certain rights to require Extra Space to redeem the Series A
Units.  The parties to this Agreement
desire to make certain amendments to the provision of the Contribution
Agreement relating to the redemption of the Series A Units.

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

1.                                       Amendment
of Section 3(f) of Contribution Agreement.  Section 3(f) of the Contribution Agreement is
hereby amended by deleting said Section 3(f) in its entirety and replacing it
with the following Section 3(f):

(f)                                    Issuance of
Series A Preferred Units.  The
Series A Preferred Units shall be issued and delivered to Contributors at
Closing.  Subject to the terms and
conditions set forth in this Agreement (including this Section 3(f)) and that
certain Promissory Note dated June 25, 2007, in the original principal amount
of $100,000,000.00 and in which H. James Knuppe and Barbara Knuppe appear as
Borrowers and Acquiror appears as Lender (hereinafter the “Note”), the Series A
Preferred Units shall be redeemable for cash or exchangeable for shares (“Conversion Shares”) of the Stock in accordance with the
provisions of the Amended and Restated Partnership Agreement (hereinafter
defined).  Pursuant to Section 16.4B of the
Amended and Restated Partnership Agreement, at such time as a “Tendering Series
A Preferred Unit Holder” (as defined in the Amended and Restated Partnership Agreement)
elects (or is deemed to have elected) to require Acquiror to redeem all or any
portion of such Tendering Series A Preferred Unit Holder’s “Tendered Series A
Preferred Units” (as defined in the Amended and Restated Partnership Agreement),
“Parent” (as defined in the Amended and Restated Partnership Agreement) may
elect to acquire some or all of the Tendered Series A Preferred Units of such
Tendering Series A Preferred Unit Holder in exchange for Stock.  Notwithstanding anything to the contrary in
the Amended and Restated Partnership Agreement, if Parent elects to acquire any
Tendered Series A Preferred Units of a Tendering Series A Preferred Unit
Holder, the following provisions shall apply:

(1)                                  Parent shall
not have any obligation to issue in the aggregate to all Tendering Series A
Preferred Unit Holders more than 116,000,000 shares of the Stock (hereinafter
the “Maximum Shares of Stock”) with respect to Parent’s acquisition of any or
all of the Series A Preferred Units issued pursuant to this Agreement;

(2)                                  Parent’s
obligation to issue shares of the Stock with respect to any Tendered Series A
Preferred Unit shall be deemed to have been satisfied in full upon the issuance
by Parent of the Maximum Shares of Stock with respect to the acquisition of
Tendered Series A Preferred Units regardless of whether the Maximum Shares of
Stock were issued with respect to (A) the acquisition of such Tendered Series A
Preferred Unit, 

 

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(B) the acquisition of such Tendered Series A
Preferred Unit in combination with the acquisition of other Tendered Series A
Preferred Units, or (C) the acquisition of other Tendered Series A Preferred
Units.

(3)                                  Effective upon
the issuance of the Maximum Shares of Stock with respect to the acquisition of one
or more Tendered Series A Preferred Units issued pursuant to this Agreement,
all Series A Preferred Units issued pursuant to this Agreement shall, to the
extent not previously redeemed by Acquiror or acquired by Parent, be deemed to
have been redeemed in full and shall no longer be issued or outstanding and neither
Acquiror nor Parent shall have any obligation to pay any additional amounts
with respect to any of the Series A Preferred Units issued pursuant to this
Agreement.

Anything
in the Amended and Restated Partnership Agreement to the contrary
notwithstanding, Acquiror agrees that so long as the Series A Preferred Units
remain issued and outstanding, Acquiror shall not (i) authorize or issue any
securities in Acquiror having any preference as to or on a parity with the
dividend or redemption rights, liquidation preferences, conversion rights,
voting rights or any other rights or privileges of the Series A Preferred
Units, (ii) reclassify any partnership interests into interests having any
preference as to or on a parity with the dividend or redemption rights,
liquidation preferences, conversion rights, voting rights or any other rights
or privileges of the Series A Preferred Units, (iii) authorize or issue any
debt which is convertible into or exchangeable for, partnership interests in
Acquiror having any preference as to or on parity with the dividend or
redemption rights, liquidation preferences, conversion rights, voting rights or
any other rights or privileges of the Series A Preferred Units, or (iv) amend
or repeal any provision of, or add any provision to the Amended and Restated
Partnership Agreement if such actions would alter or change the preferences,
rights, privileges or restrictions provided for the benefit of the Series A
Preferred Units.

2.                                       Amendment
of Section 1 of Promissory Note.  The penultimate sentence of Section 1 of that
certain Promissory Note dated June 25, 2007 from James Knuppe and Barbara
Knuppe to Extra Space (hereinafter the “Promissory Note”) shall be replaced
with the following:

Borrowers and Lender agree that Lender shall
have the right, immediately and without prior demand or notice, to offset any
distributions payable to Borrowers, or either of them or any of their
respective assignees, with respect to any Series A Units (whether now owned or
hereafter acquired by Borrowers, either Borrower or any of their respective
assignees) against any amounts due and payable hereunder.  Borrowers and Lender agree that for purposes
of applying the preceding sentence:  (a)
the term “distribution” shall include payments by Lender in redemption of
Series A Units pursuant to the Partnership Agreement (hereinafter defined) and
the issuance of any “REIT Shares” (as defined in the Partnership Agreement) by “Parent”
(as defined in the Partnership Agreement) as consideration for Parent’s
acquisition of Series A Units pursuant to Section 16.4B 

 

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of the Partnership Agreement, and (b) if any Series A Units are
assigned by Borrowers, for purposes of Lender’s exercise of Lender’s right of
offset (and solely for such purpose), each assignee shall be deemed to have
assumed a proportionate share of the liability under this Note based on the
number of Series A Units that are issued and outstanding as of the date of such
determination.  Furthermore, to the
extent of any amounts then due and owing, but unpaid, by Lender with respect to
the Series A Units, Borrowers may, at Borrowers’ option and notwithstanding any
assignment by Lender of Lender’s rights under this Note to any controlled
affiliate of Lender, immediately and without prior demand or notice, offset
such amounts against amounts then due and owing under this Note; provided,
however, that Borrowers shall at all times be jointly and severally liable for
any amounts remaining owing under this Note after any exercise of such right of
offset.  Borrowers and Lender further
agree that except as provided otherwise in Section 3 below with respect to a
redemption of up to 114,500 Series A Units, an election by any “Tendering
Series A Preferred Unit Holder” (as defined in the Partnership Agreement) to
require Lender to redeem all or any portion of such Tendering Series A
Preferred Unit Holder’s “Tendered Series A Preferred Units” (as defined in the
Partnership Agreement) shall be deemed to be an election by each Borrower and
each assignee of a Borrower to require Lender to redeem all of the Series A
Units held by Borrowers and their respective assignees in the same manner and
to the same extent as if each Borrower and each such assignee had made such an election
in accordance with the provisions of the Partnership Agreement.

3.                                       Amendment
of Subsection 3(iii) of Promissory Note.  Subsection 3(iii) of the Promissory Note is
hereby amended by deleting said Section 3(iii) in its entirety and replacing it
with the following Subsection 3(iii):

                                                (iii)                               Except as
provided below in this Section 3, either of the Borrowers or any of their
respective assignees exercises such Borrower or assignee’s right under the
Second Amended and Restated Agreement of Limited Partnership of Lender dated
June 25, 2007 (the “Partnership Agreement”)
to redeem any or all of the Series A Units

4.                                       Amendment
of Section 3 of Promissory Note.  Section 3 of the Promissory Note is further
amended by adding the following at the end and as part of Section 3 of the
Promissory Note:

Notwithstanding anything to the contrary in
subsection 3(iii) above but subject to that certain Contribution Agreement
(AAAAA Rent-A-Space) dated as of June 15, 2007, between AAAAA Rent-A-Space, Alameda, Ltd., Limited Partnership, a
California limited partnership, Lender, Borrowers, and others, as amended (the “Contribution Agreement”), if (a) no default Borrowers has
occurred under this Note and no event has occurred which with the giving of
notice or lapse of time or both would constitute such a default and (b) neither
borrower has assigned or otherwise transferred any of such Borrower’s Series A
Units or any right, title, or interest therein, Borrowers shall have the right,
on a one time basis in a single 

 

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redemption, to elect to require Lender to redeem, in the aggregate, up
to, but not to exceed, 114,500 Series A Units and such redemption shall not
cause the principal amount of this Note or the accrued but unpaid interest
thereon to be due and payable.  Upon any
redemption by Borrowers pursuant to the immediately preceding sentence, Lender
shall release from the Pledge the Series A Units which are to be redeemed as a
part of such redemption.

5.                                       Examples.  For the avoidance of confusion, attached hereto
as Attachment A, and by this reference made a part hereof, are examples
illustrating the manner in which the parties intend that Section 3(f) of the
Contribution Agreement and Section 1 of the Promissory Note (both as amended by
this First Amendment) are to be applied. 
To the extent that there is a conflict between the provisions of this
Agreement and the examples attached hereto, the examples shall control.

6.                                       Ratification
by James Knuppe and Barbara Knuppe.  Each of James Knuppe and Barbara Knuppe, with
respect to the Series A Units now or hereafter held by them, hereby assumes and
agrees to be bound by the provisions of Sections 3(f), 3(g)(1), and 3(i) of the
Contribution Agreement and agrees to hold such Series A Units subject to the
provisions of Sections 3(f), 3(g)(1) and 3(i) of the Contribution Agreement in
addition to any other provisions of the Contribution Agreement to which they
have agreed to be bound.  James Knuppe
and Barbara Knuppe do each hereby ratify and confirm the Contribution Agreement,
the Transfer Agreement and the Promissory Note, as those Agreements have been
amended and modified by this First Amendment.

7.                                       Ratification
by Other Parties to Contribution Agreement.  Each of the parties to this First Amendment
other than James Knuppe and Barbara Knuppe hereby ratifies and confirms the
Contribution Agreement and the Transfer Agreement as those Agreements have been
amended and modified by this First Amendment.

[Signatures
on Following Pages]

5

 

DATED
effective as of the effective date set forth above.

	
   

  	
  CONTRIBUTORS:

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  

 

6

 

	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  

 

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  

 

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  
	
   

  
	
   

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

  
	
   

  
	
   

  	
  By:

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

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael Knuppe

  
	
   

  	
   

  	
  Name:
  Michael Knuppe

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
  Date:
  9/28/07

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  H. James Knuppe

  	
  9/28/07

  
	
   

  	
   

  	
  H. JAMES
  KNUPPE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Barbara Knuppe

  	
  9/28/07

  
	
   

  	
   

  	
  BARBARA
  KNUPPE

  
						

 

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  EXTRA
  SPACE:

  
	
   

  
	
   

  	
  EXTRA SPACE STORAGE LP, a Delaware
  limited partnership

  
	
   

  
	
   

  	
  BY:

  	
  ESS HOLDINGS BUSINESS TRUST I, a
  Massachusetts business trust, its sole general partner

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Charles L. Allen

  
	
   

  	
   

  	
  Name: Charles L. Allen

  
	
   

  	
   

  	
  Title: Trustee

  

 

10

 

ATTACHMENT A

 

Except to the
extent expressly indicated otherwise in this Attachment, capitalized terms used
in this Attachment shall have the same meaning as set forth in the First
Amendment.

 

Assumptions for
Examples:

 

	
  Face
  amount of Promissory Note:

  	
   

  	
  $100,000,000.00

  
	
  Accrued but unpaid interest owing on the
  Promissory Note:

  	
   

  	
  $0.00

  
	
  Total Number of Series A Units owned by H. James
  Knuppe and Barbara Knuppe:

  	
   

  	
  989,980

  
	
  Series A Preferred Capital

  	
   

  	
  $116.16
 (rounded from $116.1639629083)

  
	
  Maximum Shares of Stock

  	
   

  	
  116,000,000

  
	
  Adjustment Factor (as defined in the Partnership
  Agreement)

  	
   

  	
  1.0

  

 

Example No. 1:

The “Value” (as defined in the Partnership
Agreement) of the Stock (as defined in the Contribution Agreement) at the time
that H. James Knuppe and Barbara Knuppe (collectively, “Knuppe”) tender the
Series A Units for redemption is $20.00 per share of Stock, and Parent elects
to acquire all of the Tendered Series A Units in exchange for Stock.

The
“Series A Preferred Redemption Amount” (as defined in the Partnership
Agreement) payable with respect to each Series A Unit would be equal to the sum
of the Series A Preferred Capital ($116.1639629083)
plus the Value of a share of Stock ($20.00), or $136.1639629083.  The total cash amount that would be payable
with respect to such redemption (but for Parent’s election to issue Stock in
exchange for the Series A Units) would be equal to the product of the total
number of Series A Units (989,980) multiplied by the Series A Preferred
Redemption Amount ($136.1639629083), or $134,799,600.00.  Parent would have the obligation to issue
6,739,980 shares of Stock with respect to the redemption.  5,000,000 of the shares of Stock (representing
the $100,000,000.00 balance owing under the Promissory Note) would be applied
to the satisfaction of the Promissory Note and 1,739,980 of the shares of Stock
would be issued to Knuppe.  Because
the total number of shares being issued is 6,739,980, the Maximum Shares of
Stock limitation would not apply.  Knuppe
would receive consideration in exchange for the Series A Units of $100,000,000
(through the satisfaction of the Promissory Note) plus shares of Stock having a
total Value of $34,799,600.00, for total consideration of $134,799,600.00.

Example No. 2:

The Value of the Stock at the time that
Knuppe tenders the Series A Units for redemption is $5.00 per share of Stock,
and Parent elects to acquire all of the Tendered Series A Preferred Units in
exchange for Stock.

 

11

 

The
Series A Preferred Redemption Amount payable with respect to each Series A Unit
would be equal to the sum of the Series A Preferred Capital ($116.1639629083) plus the Value of a share of
Stock ($5.00), or $121.1639629083.  The
total cash amount that would be payable with respect to such redemption (but
for Parent’s election to issue Stock in exchange for the Series A Units) would
be equal to the product of the total number of Series A Units (989,980)
multiplied by the Series A Preferred Redemption Amount ($121.1639629083), or $119,949,900.00.  Parent would have the obligation to issue 23,989,980
shares of Stock with respect to the redemption. 
20,000,000 of the shares of Stock (representing the $100,000,000.00
balance owing under the Promissory Note) would be applied to the satisfaction
of the Promissory Note and 3,989,980 of the shares of Stock would be issued to Knuppe.  Because the total number of shares being
issued is 23,989,980, the Maximum Shares of Stock limitation would not
apply.  Knuppe would receive
consideration in exchange for the Series A Units of $100,000,000 (through the
satisfaction of the Promissory Note) plus shares of Stock having a total Value
of $19,949,900.00, for total consideration of $119,949,900.00.

Example
No. 3:

The
Value of the Stock at the time that Knuppe tenders the Series A Units for
redemption is $1.00 per share of Stock, and Parent elects to acquire all of the
Tendered Series A Preferred Units in exchange for Stock.

The
Series A Preferred Redemption Amount payable with respect to each Series A Unit
would be equal to the sum of the Series A Preferred Capital ($116.1639629083) plus the Value of a share of
Stock ($1.00), or $117.1639629083.  The
total cash amount that would be payable with respect to such redemption (but
for Parent’s election to issue Stock in exchange for the Series A Units) would
be equal to the product of the total number of Series A Units (989,980)
multiplied by the Series A Preferred Redemption Amount ($117.1639629083), or
$115,989,980.00.  Parent would have the
obligation to issue 115,989,980 shares of Stock with respect to the
redemption.  100,000,000 of the shares of
Stock (representing the $100,000,000.00 balance owing under the Promissory
Note) would be applied to the satisfaction of the Promissory Note and
15,898,980 of the shares of Stock would be issued to Knuppe.  Because the total number of shares being
issued is 115,989,980, the Maximum Shares of Stock limitation would not
apply.  Knuppe would receive
consideration in exchange for the Series A Units of $100,000,000 (through the
satisfaction of the Promissory Note) plus shares of Stock having a total Value
of $15,989,980.00, for total consideration of $115,989,980.00.

Example
No. 4:

The
Value of the Stock at the time that Knuppe tenders the Series A Units for
redemption is $0.10 per share of Stock, and Parent elects to acquire all of the
Tendered Series A Preferred Units in exchange for Stock.

The Series A Preferred Redemption Amount
payable with respect to each Series A Unit would be equal to the sum of the
Series A Preferred Capital ($116.1639629083)
plus the Value of a share of Stock ($0.10), or $116.2639629083.  The total cash amount that would be payable
with respect to such redemption (but for Parent’s election to issue Stock in exchange
for the Series A Units) would be equal to the product of the total number of
Series A Units (989,980) multiplied 

 

12

 

by the Series A Preferred Redemption Amount
($116.2639629083), or $115,098,998.00.  But
for the Maximum Shares of Stock limitation, Parent would have the obligation to
issue 1,150,989,980 shares of Stock with respect to the redemption.  Because of the Maximum Shares of Stock
limitation, Parent would only be obligated to issue 116,000,000 shares of Stock
having a Value of $11,600,000.00.  All of
the Shares of Stock would be applied the satisfaction of the Promissory Note
leaving a balance owing under the Note of $88,400,000.00.  Knuppe remains obligated for the payment of
the $88,400,000.00 on the Promissory Note.

Example
No. 5:  The facts
are the same as in Example 4, except that Parent does not elect to redeem the
Series A Units in exchange for Stock. 
After the $100,000,000.00 outstanding balance on the Promissory Note is
subtracted, Knuppe would be entitled to a cash payment in exchange for the
Series A Units of $15,098,998.00.

Example No. 6:  The Parent and Extra Space file for
bankruptcy, and the Series A Units are worthless.  Knuppe elects to tender the Series A Units
for redemption.  Because the Series A
Units are worthless, they cannot be offset against the outstanding balance on
the Promissory Note.  Knuppe remains
obligated for $100,000,000 on the Promissory Note.

 

13Exhibit
10.1

PURCHASE AND SALE AGREEMENT

THIS
PURCHASE AND SALE AGREEMENT (the “Agreement”)
is entered into as of September    , 2007 by and between
Pure Cycle Corporation, a Delaware corporation (“Pure Cycle”), and                        ,
a                        
(“CAA Holder”).

RECITALS

A.            Pursuant to the Comprehensive Amendment Agreement No. 1,
dated as of April 11, 1996 (the “CAA”),
between Pure Cycle and certain investors (including CAA Holder), Pure Cycle is
obligated to pay such investors certain proceeds it receives from the sale of “Export Water” (as defined in the CAA).

B.            CAA Holder is referenced in Section 2.1(    ),
(    ), and (    ) of the CAA and is
entitled to receive “Gross Proceeds” (as defined in the CAA) totaling
$             ,
$             ,
and $             ,
respectively, under these subsections of the CAA (collectively, the “CAA Holder Gross Proceeds”).

C.            Pure Cycle has offered to purchase from the CAA Holder
all of its rights to receive payments under the CAA at a discount to the face
amount of the CAA Holder Gross Proceeds in consideration of the issuance of
certain shares of the capital stock of Pure Cycle, and CAA Holder has accepted
the offer, on and subject to the terms set forth herein.

AGREEMENT

In
consideration of the mutual promises herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:

1.             Purchase and Sale of CAA Interest.  CAA Seller hereby unconditionally and
irrevocably sells, transfers, assigns and conveys to Pure Cycle, and Pure Cycle
hereby purchases and accepts from CAA Holder, all of its right, title and
interest in and to CAA, including without limitation:  (i) the right of CAA Holder to receive
monies and other property or assets due and to become due to the CAA Holder
pursuant to the CAA (including, without limitation, the CAA Holder Gross
Proceeds) and (ii) all rights of the CAA Holder to compel performance and
otherwise exercise all remedies thereunder (collectively, the “Transferred Interest”).  Pure Cycle hereby assumes all of the
obligations, liabilities, responsibilities and commitments of the CAA Holder
under the CAA.

2.             Purchase Price. 
In consideration of the sale of the Transferred Interests, Pure Cycle
hereby agrees to issue and deliver                       
shares of common stock of Pure Cycle (the “PC Shares”) to CAA Holder.  The PC Shares shall bear the legend
restricting transfer set forth in Section 8 hereof.

3.             Effect of Purchase.  Upon issuance to the CAA Holder of the PC
Shares, all rights of the CAA Holder relating in any way to the CAA will be
owned by Pure Cycle.  Pure Cycle 

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and CAA Holder agree that this Agreement constitutes
an assignment to Pure Cycle of all of the CAA Holder’s rights, title and
interest in and to the CAA as of the date hereof, and that as of the date
hereof the CAA Holder shall cease to possess any rights with respect to the
CAA.

4.             Representations and Warranties
of the CAA Holders.

(a)           Authority.  The CAA Holder represents that it has all
requisite right, power, and authority to execute, deliver and perform its
obligations under this Agreement; this Agreement has been duly and validly
authorized, executed and delivered by the CAA Holder; and this Agreement is the
valid and binding obligation of the CAA Holder, enforceable against it in
accordance with its terms, except as enforceability may be limited by
(i) applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance, redemption, reinstatement, and other laws
affecting the rights or remedies of creditors generally or (ii) general
principles of equity.

(b)           Ownership.  The Transferred Interest represents the
entire interest of the CAA Holder under the CAA.  The CAA Holder owns the Transferred Interest
and passes to Pure Cycle good and marketable title to the Transferred Interest,
free and clear of any lien, encumbrance, pledge, option, adverse interest,
charge or assessment of any kind (a “Lien”).  The CAA holder represents that it has not
taken any action to sell or otherwise transfer the Transferred Interest, to
mortgage, hypothecate or otherwise encumber the Transferred Interest, or to
grant any Lien on the incidents of ownership of the Transferred Interest,
including any right of first offer or other contractual obligation.

(c)           No Conflicts.  The CAA Holder represents that the execution,
delivery and performance by it of this Agreement does not and will not
(i) conflict with, violate, result in a breach of or constitute a default
under any agreement, instrument or obligation to which such CAA Holder is a
party or by which it is bound; (ii) conflict with or violate any order,
judgment, decree, statute, rule or regulation applicable to the CAA Holder;
(iii) result in the creation or imposition of any Lien against or upon the
Transferred Interest; or (iv) require any consent, approval or
authorization of, or filing with, any governmental authority or any other third
party.

(d)           Investment Representations.  The CAA Holder understands that the valuation
of interests in the CAA and the common stock of Pure Cycle is uncertain and
that such value derives significantly from future transactions and developments
that are largely unknown and unknowable. 
The CAA Holder acknowledges that the consideration being paid hereunder
represents the result of an arms’ length negotiation between Pure Cycle and the
CAA Holder and represents the fair market value of the Transferred
Interest.  The CAA Holder has read and
understands the public filings made by Pure Cycle with the U.S. Securities and
Exchange Commission (the “SEC”).  In addition, the CAA Holder has been given
the opportunity to solicit from Pure Cycle all information relevant to
valuation of rights under the CAA and regarding Pure Cycle’s business and
operations and has received all the information requested.  The CAA Holder has made an investigation of
the pertinent facts related to Pure Cycle, the PC Shares, and the likelihood of
payment under the CAA and has reviewed all information regarding Pure Cycle to
the extent it deems necessary in order to be fully informed with respect
thereto.  The CAA Holder is an “accredited
investor” within the meaning of Rule 501 under the Securities Act of 1933,
as amended (the “Securities Act”),
and is knowledgeable and experienced in securities, 

 2
 

financial and business matters and in transactions of
this nature, and has made its own assessment of the value of the PC Shares and
of its rights under the CAA.  The CAA
Holder is capable of evaluating the merits and risks of this transaction and is
able to bear a complete loss of the investment in the PC Shares.  The CAA Holder understands that subsequent
events may prove that values of interests in the CAA were higher or lower than
the valuation indicated by the PC Shares paid hereunder.

(e)           Restricted Stock.  The CAA Holder represents that it has been
advised and understands that the PC Shares have not been registered under the
Securities Act or any state securities laws and that the PC Shares are being
issued in reliance upon exemptions from such registration requirements.  The CAA Holder acknowledges that the PC
Shares are “restricted securities” as that term is defined in Rule 144
promulgated by the SEC under the Securities Act and may not be sold or
transferred by the CAA Holder unless such PC Shares are subsequently registered
under that act and applicable state securities laws or are transferred pursuant
to an exemption from such registration requirements.

5.             Representations and Warranties
of Pure Cycle.

(a)           Authority.  Pure Cycle has all corporate right, power,
and authority to execute, deliver and perform its obligations under this
Agreement.  This Agreement has been duly
and validly authorized, executed and delivered by Pure Cycle.  This Agreement is the valid and binding obligation
of Pure Cycle, enforceable against Pure Cycle in accordance with its terms,
except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent conveyance,
redemption, reinstatement, and other laws affecting the rights or remedies of
creditors generally or (ii) general principles of equity.

(b)           No Conflicts.  The execution, delivery and performance by
Pure Cycle of this Agreement does not and will not (i) conflict with,
violate, result in a breach of or constitute a default under any agreement,
instrument or obligation to which Pure Cycle is a party or by which Pure Cycle
is bound; (ii) conflict with or violate any order, judgment, decree,
statute, rule or regulation applicable to Pure Cycle; or (iii) except as
required by Form 8-K under the Securities and Exchange Act of 1934,
require any consent, approval or authorization of, or filing with, any
governmental agency.

(c)           PC Shares.  The PC Shares are duly authorized validly
issued, fully paid and non-assessable.

6.             Release.

(a)           CAA Holder Release.  The CAA Holder, on behalf of itself and its
partners, officers, employees, affiliates, and agents, hereby fully and forever
releases and discharges Pure Cycle and its officers, directors, agents,
employees, affiliates, successors and predecessors from any and all claims,
demands, proceedings, causes of actions, orders, obligations, contracts,
agreements, debts, guarantees, damages, expenses, costs, attorneys’ fees and
liabilities whatsoever, whether known or unknown, suspected or unsuspected,
both at law and in equity, which the CAA Holder now has, has ever had or may
hereafter have against Pure 

 3
 

Cycle in connection with, related to or arising out of
(i) the CAA Holder’s interest in the CAA, (ii) the financing
transactions pursuant to which the CAA Holder acquired its interest in the CAA
and (iii) the business, operations, management, financing, or other
matters relating to Pure Cycle, provided that this release shall not apply with
respect to any claims arising out of this Agreement.

(b)           Pure Cycle Release.  Pure Cycle, on behalf of itself and its
officers, directors, employees and agents, hereby fully and forever releases
and discharges the CAA Holder and its partners, officers, agents, employees,
affiliates, successors and predecessors from any and all claims, demands,
proceedings, causes of actions, orders, obligations, contracts, agreements,
debts, guarantees, damages, expenses, costs, attorneys’ fees and liabilities
whatsoever, whether known or unknown, suspected or unsuspected, both at law and
in equity, which Pure Cycle now has, has ever had or may hereafter have against
the CAA Holder in connection with, related to or arising out of (i) the
CAA Holder’s interest in the CAA and (ii) the financing transactions
pursuant to which Pure Cycle entered into the CAA.

7.             Survival. 
Each of the covenants, representations and warranties of the CAA Holder
and Pure Cycle made herein shall survive the delivery of the PC Shares.

8.             Restrictive Legend.  The PC Shares issued hereunder shall bear the
following (or substantially equivalent) legend on the face or reverse side
thereof:

“These
shares have not been registered under the Securities Act of 1933, as amended,
or applicable state securities laws, and may not be sold, transferred or
otherwise disposed of unless the same are registered or unless an exemption
from such registration is available and Pure Cycle Corporation has received
evidence of such exemption satisfactory to it (which may include, among other
things, an option of counsel satisfactory to the corporation).

9.             Entire Agreement; Amendments; Waivers.  This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, with
respect thereto.  This Agreement may not
be modified orally, but only by an agreement in writing signed by the party
against whom any waiver or amendment may be sought to be enforced.  No action taken pursuant to this Agreement
and no investigation by or on behalf of any party hereto shall be deemed to
constitute a waiver by such party of compliance with any representation,
warranty, covenant or agreement herein. 
The waiver by any party hereto of any condition or of a breach of
another provision of this Agreement shall not be construed as a waiver of any
other condition or subsequent breach. 
The waiver by any party of any part of any condition precedent to its
obligations under this Agreement shall not preclude it from seeking redress for
breach of this Agreement other than with respect to the condition waived.

10.           Binding Effect.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.

 4
 

11.           Headings and Exhibits.  The section, exhibit and other headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.

12.           Counterparts.  For the convenience of the parties hereto,
this Agreement may be executed in any number of original or facsimile
counterparts, each of which, when executed, shall be deemed to be an original
and all of such counterparts together shall be deemed to be one and the same
Agreement.

13.           Governing Law.  This Agreement shall be construed and
enforced in accordance with the laws of the State of Colorado, without giving
effect to the principles of conflicts of law of such state.

*              *              *

[Signature page
follows]

 

 5
 

IN
WITNESS WHEREOF, the parties hereto have executed this Purchase and Sale
Agreement as of the date set forth above.

	
  PURE CYCLE CORPORATION,

  a Delaware corporation

  	
   

  	
  CAA HOLDER

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Mark Harding, President

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

 6

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