UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended September 30, 1999
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission File Number: 001-12403
SUSA PARTNERSHIP L.P.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
62-1554135
(IRS Employer
Identification Number)
165 Madison Avenue, Suite 1300, Memphis, TN
(Address of principal executive offices)
38103
(Zip Codes)
Registrant's telephone number, including area code: (901) 252-2000
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. ( X) Yes ( ) NO
<PAGE>
EXPLANATORY NOTE
This amendment is filed solely to correct a filing agent's typographical errors
in the Consolidated Condensed Statements of Cash Flows, the Notes to the
Consolidated Financial Statements, and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Registrant's
Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission
on November 15, 1999 (the "Original Form 10-Q"). The Consolidated Condensed
Statements of Cash Flows in the Original Form 10-Q indicated (Amounts in
Thousands) that the Registrant had Proceeds from sale/exchange of storage
facilities at the end of the period ending September 30, 1999, of ($40,799),
which amount should have been $140,799. Note four to the Consolidated Financial
Statements in the Original Form 10-Q indicated (Amounts in Thousands) Pro Forma
results for the Registrant of $42,792 in Net Income, $1.36 in Basic net income
per unit and $1.36 in Diluted net income per unit. These amounts should have
been $52,930, $1.68 and $1.67, respectively. There were also some changes made
to the discussion of Year 2000 Compliance in Management's Discussion and
Analysis of Financial Condition and Results of Operations from the Registrant's
Original Form 10-Q.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
SUSA PARTNERSHIP, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(amounts in thousands, except per unit data)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------- ------------------- ------------------- -------------------
<S> <C>
PROPERTY REVENUES:
Rental income $ 61,824 $ 57,038 $ 182,671 $ 156,898
Other income 2,660 702 6,275 3,025
---------- ---------- --------- ---------
Total property revenues 64,484 57,740 188,946 159,923
---------- ---------- --------- ---------
PROPERTY EXPENSES:
Cost of property
operations & maintenance 15,318 14,647 46,424 39,834
Taxes 5,408 4,753 15,684 13,330
General & administrative 3,500 2,916 11,022 7,513
Depreciation & amortization 8,674 7,345 26,046 21,037
----------- ----------- --------- ---------
Total property expenses 32,900 29,661 99,176 81,714
----------- ----------- --------- ---------
INCOME FROM PROPERTY OPERATIONS 31,584 28,079 89,770 78,209
OTHER INCOME (EXPENSE):
Interest expense, net (10,532) (9,808) (31,795) (26,605)
----------- ----------- --------- ---------
INCOME BEFORE GAIN (LOSS)
ON SALE OF ASSETS, MINORITY
INTEREST AND DISTRIBUTIONS
TO PREFERRED UNITHOLDERS 21,052 18,271 57,975 51,604
Gain/(Loss) on sale of assets 481 - 344 (284)
----------- ----------- --------- ---------
INCOME BEFORE MINORITY INTEREST
AND DISTRIBUTIONS TO
PREFERRED UNITHOLDERS 21,533 18,271 58,319 51,320
Minority interest (208) (166) (300) (31)
----------- ----------- --------- ---------
INCOME BEFORE DISTRIBUTIONS
TO PREFERRED UNITHOLDERS $ 21,325 $ 18,105 $ 58,019 $ 51,289
----------- ----------- --------- ---------
Distributions to preferred
unitholders ($1,609) - ($4,160) -
NET INCOME ATTRIBUTABLE TO
COMMON UNITHOLDERS $ 19,716 $ 18,105 $ 53,859 $ 51,289
=========== ========== ========= =========
BASIC NET INCOME PER UNIT $ 0.62 $ 0.58 $ 1.71 $ 1.65
=========== ========== ========= =========
DILUTED NET INCOME PER UNIT $ 0.62 $ 0.58 $ 1.70 $ 1.65
=========== ========== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
SUSA PARTNERSHIP, LP
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except unit data)
<TABLE>
<CAPTION>
as of as of
September 30, 1999 December 31, 1998
----------------------- ----------------------
(unaudited)
<S> <C>
ASSETS
Investments in storage facilities, at cost:
Land $ 426,999 $ 429,723
Buildings and equipment 1,199,604 1,186,492
----------------------- ----------------------
1,626,603 1,616,215
Accumulated depreciation (86,222) (73,496)
----------------------- ----------------------
1,540,381 1,542,719
Cash & cash equivalents 1,672 2,358
Advances and investments in real estate 125,185 112,163
Other assets 94,143 48,413
----------------------- ----------------------
TOTAL ASSETS $1,761,381 $1,705,653
======================= ======================
LIABILITIES & PARTNERS' CAPITAL
Notes payable $ 600,000 $ 600,000
Line of credit borrowings 87,316 70,762
Mortgage notes payable 70,731 78,737
Other borrowings 42,009 47,625
Accounts payable & accrued expenses 30,776 21,849
Dividends payable 18,787 17,758
Rents received in advance 11,723 10,332
Other liabilities 43,650 -
Minority interest 766 822
----------------------- ----------------------
TOTAL LIABILITIES 905,758 847,885
----------------------- ----------------------
Limited common partnership units
3,690,563 and 3,742,359 outstanding
at redemption value 101,490 120,925
Commitments and contingencies
Partners' Capital:
Preferred Partnership units 650,000 outstanding 65,000 65,000
Deferred compensation (201) -
General Common Partnership units
28,040,440 and 27,727,560 outstanding 679,758 678,522
Limited Common Partnership units 21,019 4,710
Notes receivable - officers (11,443) (11,389)
----------------------- ----------------------
TOTAL PARTNERS' CAPITAL 855,623 857,768
----------------------- ----------------------
TOTAL LIABILITIES & PARTNERS' CAPITAL $1,761,381 $1,705,653
======================= ======================
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
SUSA PARTNERSHIP, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1999 September 30, 1998
-------------------- --------------------
<S> <C>
OPERATING ACTIVITIES:
Net income $ 53,859 $ 51,289
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,046 21,037
Minority interest 300 31
Loss on exchange of self-storage facilities (344) 284
Changes in assets and liabilities:
Other assets (15,150) (20,688)
Other liabilities 15,539 19,596
-------------------- --------------------
Net cash provided by operating activities 80,250 71,549
==================== ====================
INVESTING ACTIVITIES:
Acquisition and improvements of storage facilities (83,317) (182,545)
Proceeds from sale/exchange of storage facilities 140,799 3,121
Development of storage facilities (48,169) (43,926)
Change in restricted escrow funds (26,109) -
Advances and investments in real estate (26,980) (69,177)
Proceeds from liquidation of advances and investments in
real estate 20,769 7,747
-------------------- --------------------
Net cash used in investing activities (23,007) (284,780)
==================== ====================
FINANCING ACTIVITIES:
Net borrowings under line of credit 16,554 55,169
Mortgage principal payments/payoffs (3,713) (3,121)
Mortgage principal borrowings - 145
Other borrowings principal payments/payoffs (6,131) -
Cash dividends (55,175) (35,437)
Preferred unit dividends (3,894) -
Proceeds from issuance of notes payable - 198,311
Payments on notes receivable 91 3,062
Limited partner distributions (7,310) (4,315)
Other financing transactions, net 1,649 1,122
-------------------- --------------------
Net cash (used in)/provided by financing activities (57,929) 214,936
==================== ====================
Net (decrease)/increase in cash and equivalents (686) 1,705
Cash and equivalents, beginning of period 2,358 909
-------------------- --------------------
Cash and equivalents, end of period $ 1,672 $ 2,614
==================== ====================
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Equity share of joint venture received for disposition of
assets $ 5,900 $ -
Common Stock issued in exchange for notes receivable and
contributed to Partnership in exchange for Partnership
units - 1,997
Common stock issued to Directors and contributed to
Partnership in exchange for Partnership units 160 132
Mortgages assumed on storage facilities acquired - 28,135
Note received in consideration for facility sold 875 -
Storage facilities acquired in exchange for Partnership Units 4,238 33,962
Storage facilities acquired in exchange for deferred
Partnership Unit agreement 1,000 10,785
Storage facilities acquired in exchange for unsecured notes - 12,769
Storage facilities acquired through capital lease - 23,889
Restricted stock issued 246 -
Partnership Units exchanged for shares of GP common stock 7,276 211
Exchange of storage facilities (net) (344) 284
Minority interest in acquired facility - 45
==================== ====================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
--------------------------------------
References to the "Company" and the "Partnership" refer to SUSA
Partnership, L.P. References to the "GP" refer to Storage USA, Inc.,
general partner and holder of approximately 88% of the interest
therein. Interim consolidated financial statements of the Company are
prepared pursuant to the requirements for reporting on Form 10-Q.
Accordingly, certain disclosures accompanying annual financial
statements prepared in accordance with generally accepted accounting
principles are omitted. In the opinion of management, all adjustments,
consisting solely of normal recurring adjustments, necessary for the
fair presentation of consolidated financial statements for the interim
periods have been included. The current period's results of operations
are not necessarily indicative of results that ultimately may be
achieved for the year. The interim consolidated financial statements
and notes thereto should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for
the year ended December 31, 1998 as filed with the Securities and
Exchange Commission.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amount reported in the financial
statements and accompanying notes. Actual results could vary from these
estimates.
2. ORGANIZATION
------------
The Company was formed by the GP in 1985 to acquire, develop,
construct, franchise, own and operate self-storage facilities
throughout the United States. On March 23, 1994, the GP completed an
initial public offering (the "IPO") of 6,325,000 shares of common stock
at $21.75 per share. The GP is structured as an umbrella partnership
real estate investment trust ("UPREIT") in which substantially all of
the GP's business is conducted through the Partnership. Under this
structure, the Company is able to acquire self-storage facilities in
exchange for units of limited partnership interest in the Partnership
("Units"), permitting the sellers to at least partially defer taxation
of capital gains. At June 30, 1999 and December 31, 1998, respectively,
the GP owed approximately 88.5% and 88.7% of the partnership interest
in the Partnership.
In 1996, the Company formed Storage USA Franchise Corp ("Franchise"), a
Tennessee corporation. The Partnership owns 100% of the non-voting
common stock of Franchise. The Partnership accounts for Franchise under
the equity method and includes its 97.5% share of the profit or loss of
Franchise in Other Income.
3. RECLASSIFICATIONS
-----------------
Certain previously reported amounts have been reclassified to conform
to the current financial statement presentation with no impact on
previously reported net income.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
4. INVESTMENT IN STORAGE FACILITIES
--------------------------------
The following table summarizes the activity in storage facilities
during the period:
Cost:
Balance on January 1, 1999 $ 1,616,215
Property acquisitions 65,555
Investment in development 48,145
Disposition of property (113,203)
Improvements and other 9,891
----------------
Balance on September 30, 1999 $ 1,626,603
================
Accumulated Depreciation:
Balance on January 1, 1999 $ 73,496
Additions during the period 24,962
Disposition of property (12,236)
---------------
Balance on September 30, 1999 $ 86,222
===============
Construction in process of $70,530 at September 30, 1999 and $65,716 at
December 31, 1998 is included in investment in storage facilities.
During the nine months ended September 30, 1999, the Company acquired
13 properties for $65.6 million and disposed of 37 properties,
including the 32 properties associated with the joint venture
transaction described in note 5.
The following pro forma combined results of operations of the Company
for the nine months ended September 30, 1999 has been prepared assuming
that the acquisition of the thirteen properties and the dispositions of
the 37 properties transacted during the same nine month period had been
completed as of January 1, 1999. . The unaudited combined financial
information is not necessarily indicative of what actual results of
operations of the Company would have been assuming such transactions
had been completed at the beginning of the period, nor does it purport
to represent the results of operations of future periods.
PRO FORMA FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, 1999
------------------
Revenues $ 184,857
Net income $ 52,930
Basic net income per unit $ 1.68
Diluted net income per unit $ 1.67
5. INVESTMENT IN JOINT VENTURES
----------------------------
On June 7, 1999, the Company formed a joint venture (the "Joint
Venture") with a major institutional investor, Fidelity Management
Trust Company ("Fidelity"). In accordance with the agreement, the
Company contributed 32 self-storage facilities for total consideration
of $144,000, which included $131,000 in cash proceeds and a 25%
interest in the joint venture. Fidelity owns the remaining 75%
interest.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
The self-storage facilities had a book value of $91,216. The Company
manages the Joint Venture and continues to operate all of the Joint
Venture's assets under the Storage USA brand for a fee. In order to
facilitate tax-free exchanges of facilities, $90,290 of the proceeds
was placed in escrow. As of September 30, 1999, $26,124 of these
proceeds remained in escrow and is included in other assets. A $43,670
gain on the transaction was deferred and is included in other
liabilities, until such time the Company disposes of its interest in
the Joint Venture. The Company's $5,900 investment in the Joint Venture
is included in advances and investments in real estate and its
proportionate share of the earnings of the Joint Venture are recognized
in other income.
6. OTHER ASSETS
------------
As of As of
September 30, December 31,
1999 1998
------------------------------
Restricted cash - escrow accounts $ 26,878 $ -
Deposits 5,453 5,046
Deferred costs of issuances of
unsecured notes 6,165 7,533
Accounts receivable 5,006 4,754
Mortgages receivable 7,194 3,624
Notes and other receivables 16,017 13,779
Other intangible 4,332 3,159
Other 23,098 10,518
------------------------------
Total Other Assets $ 94,143 $ 48,413
------------------------------
7. LINES OF CREDIT, MORTGAGES PAYABLE, AND OTHER BORROWINGS
--------------------------------------------------------
The Company can borrow under a $200,000 line of credit with a group of
commercial banks and under a $40,000 line of credit with a commercial
bank. The lines bear interest at various spreads of LIBOR. The
following table lists additional information about the lines of credit.
AS OF
LINE OF CREDIT BORROWINGS SEPTEMBER 30, 1999
------------------------------------------------------------
Total lines of credit $ 240,000
Borrowings outstanding $ 87,316
Weighted average daily interest
rate year-to-date 6.63%
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
The Company from time to time assumes mortgages on facilities acquired.
The following table provides information about the mortgages:
MORTGAGE NOTES PAYABLE
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Average
Interest Rate Interest Rate
Face Amount Maturity Range Range Year-to-Date
--------------------------------------------------------------------
<S> <C>
Fixed rate $ 58,609 2004-2016 6.5%-11.5% 9.97%
Variable rate 5,359 2007-2016 7.4%-9.0% 8.20%
---------- --------
9.76%
63,968
Premiums 6,763
----------
Mortgage notes payable $ 70,731
</TABLE>
The Company has other borrowings used in the financing of property
acquisitions. The following table provides information about the other
borrowings.
<TABLE>
<CAPTION>
OTHER BORROWINGS
AS OF SEPTEMBER 30, 1999
----------------------------------------------------------------------------------------
Face Amount Carry Value Imputed Rate
----------------------------------------------------------------------------------------
<S> <C>
Non-interest bearing notes $ 9,150 $ 8,213 7.50%
Deferred units 12,000 10,065 7.50%
Capital Leases - 23,731 7.50%
--------------------------------------------------------
$ 42,009
</TABLE>
During the nine months ended September 30, 1999, total interest paid on
all debt was $40,593 and total interest capitalized for construction
costs was $3,086.
8. OTHER INCOME
------------
Other income for the three months and nine months ended September 30,
1999 and 1998 consisted primarily of revenue from property specific
activities (rental of floor and storage space for locks and packaging
material, truck rentals and ground rents for cellular telephone antenna
towers and billboards), revenue for the management of facilities owned
by third parties, and the proportionate share of net income of equity
investments including joint ventures and Franchise. A summary of these
amounts is as follows:
<TABLE>
<CAPTION>
Three months ended Three months ended Nine months ended Nine months ended
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
----------------------------------------------------------------------------------
<S> <C>
Facility specific revenue $ 997 $ 841 $ 2,953 $ 2,225
Management fees 637 286 1,355 788
Share of net income of equity investments 1,026 (425) 1,967 12
----------------------------------------------------------------------------------
Total other income $ 2,660 $ 702 $ 6,275 $ 3,025
==================================================================================
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
9. INCOME PER UNIT
---------------
Basic and diluted income per unit is calculated as presented in the
following table:
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
-------------------------------------------------------------------------
<S> <C>
Basic net income per Unit:
Net income attributable to common unitholders $ 19,716 $ 18,105 $ 53,859 $ 51,289
Basic weighted average Units outstanding 31,694 31,357 31,578 31,036
--------------------------------------------------------------------------------------------------------------------------
Basic net income per Unit $ 0.62 $ 0.58 $ 1.71 $ 1.65
Diluted net income per Unit:
Net income attributable to common unitholders $ 19,716 $ 18,105 $ 53,859 $ 51,289
Basic weighted average Units outstanding 31,694 31,357 31,578 31,036
Dilutive effect of stock options 47 94 68 125
-------------------------------------------------------------------------
Diluted weighted average Units outstanding 31,741 31,451 31,646 31,161
-------------------------------------------------------------------------
Diluted net income per Unit $ 0.62 $ 0.58 $ 1.70 $ 1.65
</TABLE>
10. INTEREST EXPENSE, NET
---------------------
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
----------------------------------------------------------------------------
<S> <C>
Interest expense $ 14,017 $ 12,363 $ 41,582 $ 32,105
Interest income (3,485) (2,555) (9,787) (5,500)
----------------------------------------------------------------------------
Interest expense, net $ 10,532 $ 9,808 $ 31,795 $ 26,605
============================================================================
</TABLE>
11. COMMITMENTS
-----------
As of September 30, 1999, the Company is committed to advance an
additional $51,580 to franchisees of Franchise for the construction of
self-storage facilities. These advances are collateralized by the
facility. The Company is a limited guarantor on $7,830 of loan
commitments made by third party lenders to franchisees of Franchise, of
which $7,714 has been funded at September 30, 1999.
12. SUBSEQUENT EVENTS
-----------------
From September 30, 1999 to November 5, 1999, the Company completed the
acquisition of three self-storage facilities for approximately $26.4
million. All three were Storage USA franchised facilities. Two of the
facilities were open and operating, while the third was under
construction. These acquisitions were financed primarily through the
escrow proceeds from the joint venture transaction described in Note 5.
The Company has also entered into various property acquisition
contracts with an aggregate cost of approximately $10.9 million. These
acquisitions are subject to customary conditions to closing, including
satisfactory due diligence, and should close during the fourth quarter.
Should these contracts be terminated, the costs incurred by the Company
would not be material. The sale of another facility also occurred
subsequent to the end of the quarter, for approximately $2.6 million.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
13. LEGAL PROCEEDINGS
-----------------
On July 22, 1999, a purported class action was filed against the
Company in the Circuit Court of Montgomery County, Maryland, under the
style: Ralph Grunewald v. Storage USA, Inc. and SUSA Partnership, L.P.,
Case No. 201546V, seeking recovery of certain late fees paid by Company
tenants and an injunction against further assessment of similar fees.
The Company filed a responsive pleading on September 17, 1999, setting
out its answer and affirmative defenses, and believes that it has
defenses to the claims in this suit and intends to vigorously defend
it. The case is currently in discovery and no trial date has been set.
While the ultimate resolution of this suit cannot currently be
determined, management believes that the loss or liability, if any,
resulting from this suit will not have a material adverse effect on its
financial position. However, if during any period the potential
contingency should become probable, the results of operations in such
period could be materially affected.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated financial
condition and results of operations should be read together with the
Consolidated Financial Statements and Notes thereto. References to "we," "our"
or "the Company" or "the Partnership" refer to SUSA Partnership, L.P. References
to "the GP" refer to Storage USA, Inc., general partner and holder of
approximately 88% of the interest in the Partnership.
The following are definitions of terms used throughout this discussion that
will be helpful in understanding our business.
o PHYSICAL OCCUPANCY means the total net rentable square feet rented as of
the date (or period if indicated) divided by the total net rentable square
feet available.
o SCHEDULED RENT PER SQUARE FOOT means the average market rate per square
foot of rentable space.
o NET RENTAL INCOME means income from self-storage rentals less discounts.
o REALIZED RENT PER SQUARE FOOT means the annualized result of dividing
rental income, less discounts by total square feet rented.
o DIRECT PROPERTY OPERATING COST means the costs incurred in the operation of
a facility, such as utilities, real estate taxes, and on-site personnel.
Costs incurred in the management of all facilities, such as accounting
personnel and management level operations personnel are excluded.
o NET OPERATING INCOME ("NOI") means total property revenues less Direct
Property Operating Costs.
o ANNUAL CAPITALIZATION RATE ("CAP RATE")/ YIELD means NOI of a facility
divided by the total capitalized costs of the facility.
o FUNDS FROM OPERATIONS ("FFO") means net income, computed in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (losses)
from debt restructuring and sales of property, plus depreciation and
amortization of revenue-producing property, and after adjustments for
unconsolidated partnerships and joint ventures.
o SAME-STORE FACILITIES include all facilities that we owned for the entire
period of both comparison periods.
INTERNAL GROWTH
The following table compares Same-Store Facilities for the quarter (312
properties owned since July 1, 1998) and for the first nine months of 1999 (274
properties owned since January 31, 1998). Newly developed and expanded
facilities are removed from the same-store pool to avoid skewing the results.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------------------------------------------------------------------------
Same-Store Results 1999 1998 Growth % 1999 1998 Growth %
- ---------------------------------------------------------------------------------------------------------------------------------
(amounts in thousands except occupancy and per square foot figures)
<S> <C>
Revenues $ 49,036 $ 46,480 5.50% $122,600 $116,135 5.60%
Operating Expenses 8,160 8,181 (0.30%) 20,879 20,469 2.00%
Property Tax & Other 4,883 5,321 (8.20%) 12,801 13,598 (5.90%)
--------------------------------------------------------------------------------------------
Total Expenses 13,043 13,502 (3.40%) 33,680 34,067 (1.10%)
--------------------------------------------------------------------------------------------
NOI $ 35,993 $ 32,978 9.10% $ 88,920 $ 82,068 8.30%
============================================================================================
Physical Occupancy 88.2% 88.7% (0.60%) 86.7% 87.1% (0.50%)
Scheduled Rent per Square Foot $ 11.06 $ 10.41 6.20% $ 10.83 $ 10.18 6.40%
Realized Rent per Square Foot $ 10.08 $ 9.53 5.80% $ 9.74 $ 9.20 5.90%
</TABLE>
11
<PAGE>
o Our Same-Store Facilities achieved 9.1% NOI growth in the third quarter of
1999 as compared to the same quarter in 1998. The growth resulted from
revenue increases of 5.5% combined with a reduction in expenses of 3.4%.
For the nine months ended September 30, 1999, same-store NOI grew 8.3%, due
to a combination of revenue increases, 5.6%, and an expense reduction 1.1%.
o The revenue increase of 5.5% for the quarter and 5.6% for the first nine
months was driven by an increase in scheduled rent per square foot of 6.2%
for the quarter and 6.4% for the first nine months, each partially offset
by a decrease in physical occupancy and higher discounting activity than
prior periods.
o Our operating expenses shrank 0.3% from the third quarter of 1998, but
showed an increase of 2.0% over the first nine months of 1998. Meanwhile,
property tax and other expenses decreased 8.2% over the third quarter of
1998 and 5.9% over the first nine months of 1998, due primarily to
significant reductions in insurance costs.
The following table lists changes in the 10 largest same-store markets on a rent
per square foot basis and occupied square feet basis and the resulting change in
net rental income for the third quarter of 1999 and the nine months ended
September 30, 1999 over the corresponding periods in 1998.
<TABLE>
<CAPTION>
% of Change in Net Rental % Change in % Change in
# of YTD same- Income (1) Realized RPSF (2) Occupied sq. ft.
Market Facilities store NOI YTD QTD YTD QTD YTD QTD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Los Angeles-Riverside-Orange County, CA 44 20.4% 11.7% 12.0% 8.8% 8.9% 2.6% 2.8%
Washington-Baltimore, DC-MD-VA-WV 16 10.0% 5.2% 6.4% 5.9% 6.6% -0.6% -0.1%
New York-N. New Jersey-Long Island, NY 13 8.4% 2.8% 4.0% 3.5% 4.8% -0.7% -0.8%
Miami-Fort Lauderdale, FL 14 7.6% 3.8% 3.5% 5.6% 5.8% -1.7% -2.2%
San Francisco-Oakland-San Jose, CA 8 4.1% 2.6% 1.1% 8.1% 6.9% -5.2% -5.4%
Philadelphia-WILM-Atlantic City, PA-NJ 11 3.8% 8.1% 7.3% 5.4% 5.4% 2.6% 1.8%
Phoenix,-Mesa, AZ 13 3.7% 5.4% 6.0% 5.6% 7.0% -0.2% -0.9%
San Diego, CA 6 3.2% 12.0% 9.6% 11.3% 10.3% 0.6% -0.6%
Nashville, TN 8 2.9% -1.5% -0.8% 2.2% 2.0% -3.6% -1.0%
Dallas-Forth Worth, TX 6 2.6% 4.2% -1.2% 6.8% 1.6% -2.5% -2.8%
</TABLE>
(1) The percentage change in Realized Rent per Square Foot plus the percent
change in occupied square feet approximates the percentage change in net
rental income.
(2) Rent per square foot.
During the nine months ended September 30, 1999, we also continued to
make progress on a number of strategic initiatives aimed at reaching
new self-storage customers:
1. The implementation of our national reservation center was completed in the
third quarter of 1999. We now have full national coverage of all of our
facilities. Rollover calls nationwide are now forwarded to the Memphis
reservation center, where knowledgeable Storage USA employees can supply
potential customers with facility information and reserve storage units.
2. On September 27, 1999, we announced that we closed on our strategic
alliance with Budget Group Inc. This strategic alliance includes:
o A multi-year joint venture between affiliates of Budget Group, Inc.
("Budget") and Storage USA Franchise Corp., owned 50/50, for the
purpose of franchising and converting existing self-storage facilities
and franchising new facilities under the combined "Budget" and "Storage
USA" brands, which may be terminated by either party for any reason
after three years by exercising a buy-sell option, or earlier for other
reasons, such as an event of a default by either party.
o Our access, during the term of the joint venture, to pre-qualified
self-storage customer leads from the Budget and Ryder national
reservation centers, which will transfer calls to Storage USA's
national reservation center. Budget will have access to pre-qualified
leads for truck rental by transfer to its national reservation center.
o We are a primary truck rental partner with Budget Truck Rental and
Ryder TRS and will limit our truck rental relationships to Budget Truck
Rental and Ryder TRS.
o We will change our signs to reflect the new relationship with Budget on
approximately 140 company-owned facilities in California, Texas, and
Indiana on an agreed schedule over the next 12 to 18 months. These
markets were chosen as they reflect areas where both Storage USA and
Budget have prominence.
In early May, reservation agents at Budget's national reservation center in
Carrollton, Texas began referring truck rental customers with a stated
interest in self-storage to our national reservation center.
During the third quarter, we started receiving such referrals from Ryder,
also. A program for placing Budget/Ryder truck dealerships at our
facilities is in process and, by the end of the year 2000, we expect to
have about 75% of our facilities equipped with full Budget dealerships.
12
<PAGE>
EXTERNAL GROWTH
ACQUISITIONS
During the second quarter of 1999, we formed a joint venture with Fidelity
Management Trust Company (the "Venture"), to raise capital. We contributed 32
self-storage facilities with a total value of $144 million to the Venture in
return for $131 million in cash and a 25% interest in the joint venture.
Fidelity holds the remaining 75% interest. We manage the Venture and operate all
of the Venture's assets under the Storage USA brand for a fee. We planned to use
approximately $90 million of these proceeds to acquire in tax-free exchanges new
self-storage facilities that have greater potential for growth than the
facilities that were disposed. As of September 30, 1999, $64 million of the $90
million had been used for this purpose, with additional property acquisitions
identified for the remaining $26 million. The following table shows the
facilities acquired during the first three quarters of 1999:
Number of Total Net Rentable
Quarter ended Facilities Investment Square Feet
- -------------------------------------------------------------------------------
(amounts in thousands except number of facilities)
March 31, 1999 1 $ 2,673 70
June 30, 1999 7 43,896 506
September 30, 1999 5 18,986 376
---------------------------------------------------
Total year-to-date 13 $65,555 952
===================================================
Three of the five properties acquired in the third quarter of 1999 were former
Storage USA franchised facilities, located in Massachusetts, Alabama and
Florida. These properties accounted for 186 thousand square feet and a total
investment of $8.5 million . The remaining two acquisitions were in Tennessee
and Southern California, and made up the remaining square footage, 190 thousand,
and total investment, $10.5 million.
Four of the seven properties acquired in the second quarter were purchased from
unaffiliated parties, and were located in the metro New York area; the other
three were former franchise facilities, located in the Dallas area. We also
acquired the minority interest in one joint venture facility for approximately
$2 million in the second quarter. The lone first quarter acquisition was a
formerly franchised Tennessee facility.
From September 30, 1999 to November 5, 1999, the Company completed the
acquisition of three self-storage facilities for approximately $26.4 million.
All three were Storage USA franchised facilities. Two of the facilities were
open and operating, while the third was under construction. These acquisitions
were financed primarily through the escrow proceeds from the joint venture
transaction described in Note 5. The Company has also entered into various
property acquisition contracts with an aggregate cost of approximately $10.9
million. These acquisitions are subject to customary conditions to closing,
including satisfactory due diligence, and should close during the fourth
quarter. Should these contracts be terminated, the costs incurred by the Company
would not be material.
Based upon current conditions, we do not anticipate acquiring a significant
number of facilities in the remainder of 1999 beyond those to be acquired with
proceeds from the Venture. For more details on the Venture see the "Liquidity
and Capital Resources" section.
13
<PAGE>
NEW DEVELOPMENT AND EXPANSION
The following newly developed and expanded facilities were opened in the first
three quarters of 1999:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Developments Expansions
------------------------------------------------------------------------------------------------
Number of Net Rentable Number of Net Rentable
Quarter ended Facilities Investment Square Feet Facilities Investment Square Feet
- ----------------------------------------------------------------------------------------------------------------------------
(amounts in thousands except number of facilities)
<S> <C>
March 31, 1999 - - - 5 $ 5,466 129
June 30, 1999 5 $20,890 379 3 2,791 65
September 30, 1999 2 9,225 146 4 4,885 85
------------------------------------------------------------------------------------------------
Total year-to-date 7 $30,115 525 12 $13,142 279
================================================================================================
</TABLE>
The following chart details our development and expansion projects under
construction or in construction planning as of September 30, 1999:
<TABLE>
<CAPTION>
Expected Investment Remaining
# of Prop. Square feet Investment to Date Investment
------------------------------------------------------------------------------
(amounts in thousands except numbers of facilities)
<S> <C>
Total development in process 26 2,026 $ 137,129 $ 48,988 $ 88,141
Total expansions in process 31 614 $ 31,701 $ 11,859 $ 19,842
------------------------------------------------------------------------------
Total 57 2,640 $ 168,830 $ 60,847 $ 107,983
==============================================================================
</TABLE>
The following table presents the anticipated timing of completion and the total
expected dollar amounts invested in opening the facilities in the process of
being newly developed or expanded.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
4th Qtr 99 1st Qtr 00 2nd Qtr 00 3rd Qtr 00 4th Qtr 00 Thereafter Total
------------------------------------------------------------------------------------------------------
(amounts in thousands)
<S> <C>
Development $ 12,830 $ 26,879 $ 25,517 $ 13,975 $ 16,569 $ 41,359 $ 137,129
Expansions 4,907 9,110 2,225 3,123 3,409 8,927 31,701
------------------------------------------------------------------------------------------------------
Total $ 17,737 $ 35,989 $ 27,742 $ 17,098 $ 19,978 $ 50,286 $ 168,830
======================================================================================================
</TABLE>
FRANCHISING
During the third quarter of 1999, Storage USA Franchise Corp. opened three new
facilities, increasing the year to date total of newly opened facilities to
sixteen. During the first nine months of 1999, eleven franchised facilities were
sold by franchisees, seven to us and four to third parties, and three contracts
were terminated, bringing the total number of franchised facilities, open and
operating, to 42 as of September 30, 1999.
We have an equity interest in some of the franchised facilities, typically
ranging from 40% to 45%. We receive these equity interests in partial payment
for our extension of credit in the form of a construction loan to the
franchisee. The following table presents the status of our franchising program
as of September 30, 1999 and notes both those projects in which we have and
those in which we do not have an equity interest.
14
<PAGE>
With Without
Equity Equity
Participation Participation Total
- --------------------------------------------------------------------------------
Open and Operating 31 11 42
In Construction 10 11 21
In Design 8 6 14
- --------------------------------------------------------------------------------
Total 49 28 77
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The following table reflects the profit and loss statement for the quarter and
the nine months ended September 30, 1999 and September 30, 1998 based on a
percentage of total revenues and is used in the discussion that follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
REVENUE
Rental Income 91.0% 94.6% 91.9% 94.8%
Other Income 3.9% 1.2% 3.2% 1.8%
Interest Income 5.1% 4.2% 4.9% 3.3%
- -------------------------------------------------------------------------------------------------------------------------
Total Income 100.0% 100.0% 100.0% 100.0%
EXPENSES
Property Operations 22.5% 24.3% 23.4% 24.1%
Taxes 8.0% 7.9% 7.9% 8.1%
General and Administrative 5.1% 4.8% 5.5% 4.5%
</TABLE>
Rental income increased $4.8 million, or 8.4% in the quarter ended September 30,
1999 and $25.8 million, or 16.4% for the nine months ended September 30, 1999
compared to the same periods in 1998. This increase is primarily a result of
recognizing a full year of rental income on the 1998 acquisitions and our
internal growth, as outlined in the section entitled, "Internal Growth." The
primary contributors to rental income growth are summarized in the table below.
<TABLE>
<CAPTION>
Rental Income Growth in 1999 over 1998 for comparable periods ended September 30 Quarter Year-to-Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
1998 acquisitions $5,643 $22,363
Same-store facilities 2,344 6,356
1999 acquisitions 3,005 3,475
</TABLE>
The remainder of the rental income growth, quarterly and year to date, is
attributed to newly developed and expanded facilities offset by the sale of
facilities to the Venture discussed in the section entitled "External
Growth-Acquisitions". The majority of the Same-Store Facilities' revenue growth
for the quarter was provided by an approximate 5.8% increase in realized rent
per square foot, from $9.53 per square foot in the third quarter of 1998 to
$10.08 for the same period in 1999. Physical occupancy during this period
declined slightly, from 88.7% in 1998 to 88.2% in 1999. For the nine months
ended September 30, a Realized Rent per Square Foot increase of 5.9%, from $9.20
to $9.74, contributed to the bulk of the same-store rental income growth, with
occupancy again experiencing a small decrease, from 87.1% in 1998 to 86.7% this
year.
15
<PAGE>
We have reevaluated the amounts that we charge our customers for late fees and
expect to reduce them. We cannot currently determine the amount by which any
reductions will reduce our revenue in future periods for a number of reasons,
including the fact that our late fee charges vary across the country, they
varied at facilities we acquired and facility managers have the discretion to
waive late fees. However, the fee change could reduce revenues in 2000 by as
much as $5 million. We expect that any revenue reduction may be offset, in
part by increased rents, increased late fee collection efforts, and continued
efficiencies in our operating margins, but are not yet able to estimate the net
effect of these items. The change in fees is expected to become effective in
the first quarter of 2000. You should refer to the discussions under "Legal
Proceedings" and "Forward-Looking Statements and Risk Factors" for additional
information relevant to our late fee charges.
Other income grew $1.9 million in the third quarter of 1999 over the same period
in 1998, and $3.3 million for the nine months ended September 30, 1999 versus
the same nine months in 1998. Other income consisted primarily of revenue from
facility-specific activities (rental of floor and storage space for locks and
packaging materials, truck rentals and ground rents for cellular telephone
antenna towers and billboards), revenue for the management of facilities owned
by third parties, and the proportionate share of net income of equity
investments including joint ventures and Franchise. A summary of these amounts
is as follows:
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
September 30, 1999 September 30,1998 September 30, 1999 September 30, 1998
-----------------------------------------------------------------------------------
<S> <C>
Facility specific revenue $ 997 $ 841 $ 2,953 $ 2,225
Management fees 637 286 1,355 788
Share of net income of equity investments 1,026 (425) 1,967 12
-----------------------------------------------------------------------------------
Total other income $ 2,660 $ 702 $ 6,275 $ 3,025
===================================================================================
</TABLE>
As a percentage of revenues, cost of property operations and maintenance
decreased from the third quarter of 1998 to 1999, 24.3% to 22.5%, and for the
nine months ended September 30, 1998 to 1999, 24.1% to 23.4%. The trend for the
cost of property operations as a percentage of revenues is to decrease over time
due to Same-Store Facility revenue growth outpacing expense growth, as evidenced
here.
Tax expense as a percentage of revenues was 8.0% for the third quarter of 1999
and 7.9% for the nine months ended September 30, 1999 compared to 7.9% and 8.1%
for the same periods in 1998. Tax expense as a percentage of revenues trends
down as a result of Same-Store Facility revenue growth outpacing tax expense
growth. This trend was offset in the third quarter of 1999 by a reserve of $270
thousand being recorded for the expense associated with a recently-enacted
Tennessee law that subjects limited partnerships and limited liability
corporations to the Tennessee Excise and Franchise taxes.
General and administrative expenses ("G&A") as a percentage of revenues
increased from 4.8% in the third quarter of 1998 to 5.1% for the same period of
1999. This was indicative of a G&A expense increase from $2.9 to $3.5 million
between the two periods. For the nine months ended September 30, 1999 G&A
expenses as a percentage of revenues increased from 4.5% to 5.5% from 1998 to
1999, reflecting a dollar increase from $7.5 million to $11.0 million. This
growth in G&A is a result of the expansion throughout 1998 of our
administrative, marketing, acquisition and development, management information
systems, human resources, and legal departments.
Depreciation and amortization expense increased from $7.3 million in the third
quarter of 1998 to $8.7 million for the same period in 1999, and from $21.0
million to $26.0 million for the nine months ended September 30, 1998 to the
like period in 1999. This was due to our acquisition and development of
approximately $151 million in depreciable assets since September 30, 1998
partially offset by the sale of $115 million of depreciable assets in 1999,
mostly to form the Venture discussed in the section entitled "External
Growth-Acquisitions."
Interest expense increased from $12.3 million in the third quarter 1998 to $14.0
million during the same period 1999. For the nine months ended June 30, 1999 the
expense rose from 1998 to 1999, from $32.1 million to $41.6 million. The
interest expense increase was primarily from the sources listed in the table
below and was offset by capitalized interest.
16
<PAGE>
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
---------------------------------------------------------------------------------------------
W/A W/A W/A W/A
W/A INTEREST W/A Interest W/A INTEREST W/A Interest
Debt BORROWING RATE Borrowing Rate BORROWING RATE Borrowing Rate
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Notes payable $600,000 7.37% $600,000 7.37% $600,000 7.37% $466,667 7.42%
Lines of credit 85,508 6.51% 48,200 6.85% 92,963 6.24% 78,300 6.81%
Mortgages payable 64,114 9.76% 54,900 9.75% 65,885 9.76% 50,100 9.72%
Leases & other borrowings 47,126 7.50% 9,600 7.50% 47,486 7.50% 3,200 7.50%
</TABLE>
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
--------------------------------------------------------------------
<S> <C>
Capitalized interest 925 978 3,086 2,420
</TABLE>
Interest expense will continue to rise in 1999 as the $200 million of notes
payable issued in mid-1998 will be outstanding for the entire year and
additional borrowings on our lines of credit may occur in the remainder of the
year.
Interest income grew to $3.5 million in the third quarter of 1999 from $2.6
million during the same period in 1998. Likewise, interest income increased to
$9.8 million for the nine months ended September 30, 1999 from $5.5 million in
the corresponding period in 1998. Approximately $749 thousand of the third
quarter increase, and $3.2 million of the year to date increase, is due to the
interest earned on advances from us to Franchisees of Storage USA Franchise
Corp. We expect that this income will continue to grow as we make further
advances under this program. The remainder of the increase is from interest
earned on amounts outstanding under the 1995 Employee Stock Purchase and Loan
Plan and earnings on overnight deposits and escrowed funds.
The facilities that were sold to the joint venture discussed in the section
entitled "External Growth Acquisitions" for $144 million produced a $43 million
deferred gain, which is recorded in the other liabilities section of our balance
sheet. No gain can be recognized for so long as we retain a 25% interest in the
Venture. Only a sale to an unrelated third party would allow us to recognize the
gain. In addition to the properties sold to the Venture, we sold five facilities
during the nine months ended September 30, 1999, resulting in a $616 thousand
gain. Other asset dispositions during the year reduced the total gain to $344
thousand as of September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $80.2 million during the nine months
ended September 30, 1999 as compared to $71.5 million during the same period in
1998. These increases are primarily a result of the significant expansion of our
property portfolio. The items affecting the operating cash flows are discussed
more fully in the "Results of Operations" section.
In the nine months ended September 30, 1999, we received $140.8 million in
proceeds from the sale of self-storage facilities, including those 32 facilities
involved in the joint venture transaction described in the section entitled
"External Growth - Acquisitions." In order to redeploy these proceeds in a tax
efficient manner, $95.3 million of the total proceeds were placed in escrow
accounts. These proceeds were to be used to acquire additional properties and
development land parcels in tax-free exchanges. As of September 30, 1999, $69.1
million of these funds had been used for that purpose.
We invested a total of $87.4 million in the first nine months of 1999 in the
acquisition and improvement of self-storage facilities compared to $182.5
million during the same period 1998. These acquisitions and improvements were
financed through $83.3 million cash, $60.9 million cash from the escrow account
described above and $4.2 million in Units.
17
<PAGE>
In addition to acquisitions, we invested $48.2 million in the first nine months
of 1999 and $43.9 million in the first nine months of 1998 for land held for
development and construction of self-storage facilities. Of the $48.2 million
invested in 1999, $40.0 was in cash, and the remaining $8.2 million reflected
purchase of development land parcels through the escrowed funds described above.
There were 26 newly developed facilities and 31 expansions of existing
facilities in process with $60.8 million invested at September 30, 1999. The
total budget for these facilities is $168.8 million, of which $108.0 million
remains to be invested. We also provided $27.0 million in financing to
franchisees of Storage USA Franchise Corp. during the nine months ended
September 30, 1999. Proceeds were also received from certain franchisees, as six
repaid their loans during the period, generating $20.8 million in cash. We have
$51.6 million of loan commitments to other franchisees to fund as of September
30, 1999.
Between November 1996 and July 1998, we issued $600 million of notes payable.
The notes are our obligations, and may be redeemed at any time at our option,
subject to a premium payment and other terms and conditions. The combined notes
carry a weighted average interest rate of 7.37% and were issued at a price to
yield a weighted average of 7.42%. The terms of the notes are staggered between
seven and thirty years, maturing between 2003 and 2027.
Sometimes we acquire facilities in exchange for Units. The Units are redeemable
after one year for cash or, at our option, shares of the GP's common stock.
Sellers taking Units instead of cash are able to defer recognizing a taxable
gain on the sale of their facilities until they sell or redeem their Units. At
September 30, 1999 we had 3.7 million Units outstanding, of which the following
Units were redeemable:
o 82 thousand Units for an amount equal to the fair market value ($2.2
million, based upon a price per Unit of $27.50 at September 30, 1999)
payable in cash or, at our option, by a promissory note payable in quarterly
installments over two years with interest at the prime rate.
o 3.6 million Units for amounts equal to the fair market value ($99.2 million,
based upon a price per Unit of $27.50 at September 30, 1999) payable by us
in cash or, at our option, in shares of the GP's common stock at the initial
exchange ratio of one share for each Unit.
We anticipate that the source of funds for any cash redemption of Units will be
retained cash flow or proceeds from the future sale of the GP's securities or
other indebtedness. We have agreed to register any shares of the GP's common
stock issued upon redemption of Units under the Securities Act of 1933.
We initially fund our capital requirements primarily through the available lines
of credit with the intention of refinancing these with long-term capital in the
form of equity and debt securities when we determine that market conditions are
favorable. At September 30, 1999, the GP can issue under currently effective
shelf registration statements up to $650 million of common stock, preferred
stock, depositary shares and warrants and can also issue $250 million of
unsecured, non-convertible senior debt securities of the Partnership. The lines
of credit bear interest at various spreads over LIBOR. We had net borrowings in
the nine months ended September 30, 1999 of $16.6 million. For the same period
in 1998, net borrowings totaled $55.2 million. Borrowings would have been
greater in 1999 if we had not used $39.4 million of the proceeds received from
the joint venture described in the section entitled "External Growth -
Acquisitions" to reduce those lines of credit in the second quarter. Also, on
May 26, 1999, we closed on a $200 million unsecured revolving credit line with a
group of commercial banks, representing a $50 million increase from the previous
line of credit. The line bears interest at a spread of 120 basis points over
LIBOR based on our current debt rating. The maturity was extended to March 31,
2002, and existing covenants were modified.
We have committed to fund approximately $58.9 million of the remaining $108.0
million to be invested in the development and expansion pipeline and committed
to provide financing to franchisees for approximately $51.6 million. We believe
that borrowings under our current credit facilities combined with cash from
operations will provide us with necessary liquidity and capital resources to
meet the funding requirements of our firm commitments.
We expect to incur approximately $3.9 million for scheduled maintenance and
repairs during 1999 and approximately $2.3 million to conform facilities
acquired from 1994 to 1998 to our standards of which $2.2 million for scheduled
maintenance and $1.0 million for conforming facilities acquired has been
incurred to date.
FUNDS FROM OPERATIONS ("FFO")
We believe FFO should be considered in conjunction with net income and cash
flows to facilitate a clear understanding of our operating results. FFO should
not be considered as an alternative to net income, as a measure of our financial
18
<PAGE>
performance or as an alternative to cash flows from operating activities as a
measure of liquidity. FFO does not represent cash generated from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. We follow the current National Association of Real
Estate Investment Trust's definition of FFO. Our FFO may not be comparable to
similarly titled measures of other REITs that calculate FFO differently. In
calculating FFO, we add back only depreciation and amortization of
revenue-producing property. As such, Our FFO and FFO per unit may not be
comparable to other REITs that may add back total depreciation and amortization,
which may include, for example depreciation and amortization of office
equipment.
The following table illustrates the components of our FFO for the three months
and nine months ended September 30, 1999 and September 30, 1998:
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---------------------------------------------------------------------
<S> <C>
Net income attributable to common unitholders $19,716 $18,105 $53,859 $51,289
Loss/(Gain) on sale of assets (481) - (344) 284
Total depreciation and amortization 8,674 7,345 26,046 21,037
Depreciation from unconsolidated entities 142 - 191 -
Less depreciation of non-revenue producing property (768) (402) (1,932) (1,185)
---------------------------------------------------------------------
FFO attributable to common unitholders $27,283 $25,048 $77,820 $71,425
</TABLE>
During the third quarter of 1999, the GP declared a dividend per share of $0.67,
which is an increase of 4.7% over the third quarter 1998 dividend of $0.64. To
date, $2.01 per share in dividends have been declared, compared to $1.92 in
1998, again a 4.7% increase. As a qualified REIT, the GP is required to
distribute a substantial portion of its net income as dividends to its
shareholders. While our goal is to generate and retain sufficient cash flow to
meet our operating, capital and debt service needs, the GP's dividend
requirements may require us to utilize our bank lines of credit and other
sources of liquidity to finance property acquisitions and development, and major
capital improvements. See "Liquidity and Capital Resources" section.
YEAR 2000 COMPLIANCE
We are carrying out our plan to ensure that all of the material aspects of our
operations are Year 2000 ("Y2K") compliant. As part of our Y2K planning and
readiness program, we have retained an outside consultant to assist us in our
assessment of potential Y2K issues and to assist in the development of a
strategy for testing such systems. There are three phases to our Y2K plan. Phase
one included determining the scope of the issue, assigning responsible parties
and proposing solutions to the issue. This phase was completed in July 1998.
Phase two includes researching and testing all of our systems and documenting
their Y2K compliance. We have substantially completed this phase at this time.
The third phase, which will be completed during the fourth quarter of 1999,
involves implementing any necessary changes. We have grouped all of our systems
into three categories based on their importance in operating our facilities:
critical, moderate and minimal. All critical, moderate and minimal systems have
been documented as Y2K compliant with the following exceptions:
o The job costing system that we used in 1997 was not Y2K compliant. However,
this system was phased out in the first quarter of 1999 for other reasons.
New construction projects are being accounted for on a product that is Y2K
compliant.
o The phone system in our Columbia, MD regional office was not Y2K compliant
but was replaced in March of 1999 primarily for reasons unrelated to the
Y2K issue.
19
<PAGE>
o The gate and security systems at some of our self-storage facilities have
not yet been documented as being Y2K compliant. We have tested 60% of our
gate systems and have noted no problems that would affect our usage. The
remaining gate systems will be tested by the middle of November 1999. Any
non-compliant gate and security systems that have Y2K issues that will have
a material adverse affect on the operations of our facilities will be
scheduled for upgrade or replacement by December. The cost of replacement
varies by facility and has not yet been determined.
We have solicited our key vendors, including financial institutions, to
determine their state of readiness with respect to Y2K issues and are currently
following up with vendors who did not reply. Those vendors who are not prepared
for the Y2K issues will be replaced.
In the worst case scenario, we expect that we would be required to operate our
facilities manually for a limited period of time. This would include operating
the gate systems manually and manually tracking customer information. We believe
we can operate in this manner for a limited period of time without suffering any
material adverse effect on operations. Because there are a limited number of
systems that we believe may have Y2K issues, we have restricted our contingency
plan to these systems.
Because we have invested in new technology over the past few years, most systems
were Y2K compliant at the onset of this plan. The costs that we have incurred to
date include $43 thousand for an outside consultant discussed above,
management's time spent time investigating the Y2K matter and minor expenses for
off-the-shelf software to aid in the testing. The systems we have found not to
be compliant are in the process of being replaced for operational reasons not
related to the Y2K issue. With the possible exception of the gate and security
systems, we do not anticipate incurring any additional costs outside of
personnel time directly related to the Y2K issue but will not know for certain
until all systems are documented. As such, with the information currently
available, we anticipate that conforming our systems to be Y2K compliant will
not have a material impact on our financial position or results of operation.
The preceding outline of our Y2K readiness is based on our best estimates of
matters such as our vendors' readiness, our ability to operate our facilities
manually and other such matters, which were derived utilizing assumptions of
future events including the availability of certain resources, dependence upon
third party modifications of our software and other factors. However, there can
be no assurances that these estimates will be achieved and actual results could
differ materially from those expected.
See the Qualitative and Quantitative Disclosure about Market Risk section
regarding steps taken to safeguard against interest rate volatility stemming
from Y2k issues.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to certain financial market risks, the most predominant being
fluctuations in interest rates. We monitor interest rate fluctuations as an
integral part of our overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on our results. The effect of interest rate fluctuations
historically has been small relative to other factors affecting operating
results, such as rental rates and occupancy.
Our operating results are affected by changes in interest rates primarily as a
result of borrowing under our lines of credit. If interest rates increased by 25
basis points, our interest expense for the nine months ended September 30, 1999
would have increased by approximately $174 thousand, based on average
outstanding balances during that period.
In July of 1999, we purchased an interest rate cap from a bank to protect us
from interest rate volatility, particularly as it pertains to Y2K issues. In
return for a $45 thousand upfront premium, we have protection if the 3-month
LIBOR rate moves above 6.0% during the period from November 5, 1999 through
February 5, 2000.
LEGAL PROCEEDINGS
On July 22, 1999, a purported class action was filed against the Company in the
Circuit Court of Montgomery County, Maryland, under the style: Ralph Grunewald
v. Storage USA, Inc. and SUSA Partnership, L.P., Case No. 201546V, seeking
recovery of certain late fees paid by Company tenants and an injunction against
further assessment of similar fees. The Company filed a responsive pleading on
September 17, 1999, setting out its answer and affirmative
20
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defenses, and believes that it has defenses to the claims in this suit and
intends to vigorously defend it. The case is currently in discovery and no trial
date has been set. While the ultimate resolution of this suit cannot currently
be determined, management believes that the loss or liability, if any, resulting
from this suit will not have a material adverse effect on its financial
position. However, if during any period the potential contingency should become
probable, the results of operations in such period could be materially affected.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
Certain information included in this Form 10-Q that is not historical fact is
based on our current expectations. This includes statements regarding: (a)
anticipated future development, acquisition and expansion activity, (b) the
impact of anticipated rental rate increases on our revenue growth, (c) our 1999
anticipated revenues, expenses and returns, (d) future capital requirements, (e)
sources of capital, and (f) sources of funds for payment of our indebtedness.
Words such as "believes", "expects", "anticipate", "intends", "plans" and
"estimates" and variations of such words and similar words also identify forward
looking statements. Such statements are forward looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially. The
following factors, among others, could cause actual results to differ materially
from the forward-looking statements:
o Changes in the economic conditions in the markets in which we operate could
negatively impact the financial resources of our customers, impairing our
ability to raise rents.
o Certain of our competitors with substantially greater financial resources
than us could reduce the number of suitable acquisition opportunities
offered to us and increase the price necessary to consummate the acquisition
of particular facilities.
o Increased development of new facilities in our markets could result in
over-supply and lower rental rates,
o Amounts that we charge for late fees are under review, have been and are the
subject of litigation against us and are, in some states, the subject of
governmental regulation. Consequently, such amounts could change, materially
affecting the results of operations.
o The conditions affecting the bank, debt and equity markets could adversely
change, making it difficult to obtain capital on satisfactory terms.
o Competition could increase, reducing occupancy.
o Costs related to compliance with laws, including environmental laws could
increase.
o General business and economic conditions could negatively change.
o Other risk factors exist as described in our Annual Report on Form 10-K for
the year ended December 31, 1998 and other reports filed from time to time
with the Securities and Exchange Commission.
We caution you not to place undue reliance on any such forward looking
statements. We assume no obligation to update any forward-looking statements as
a result of new information, subsequent events or any other circumstances. Such
statements speak only as of the date that they are made.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See disclosure in the section entitled "Qualitative and Quantitative Disclosure
About Market Risk" in Management's Discussion and Analysis of Financial
Condition and Results of Operations on page 20.
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PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See disclosure in the section entitled "Legal Proceedings" in Management's
Discussion and Analysis of Financial Condition and Results of Operations on page
21.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the nine months ended September 30, 1999, we issued units of limited
partnership interest ("Units") in exchange for interest in self-storage
facilities. The date, amount and value of the issuances are summarized in the
following table:
Date of Units Approximate
Issuance Issued Value
-------------------------------------------------------
June 11, 1999 22,797 $ 763,000
June 15, 1999 43,908 1,475,000
June 15, 1999 59,544 2,000,000
September 25, 1999 37,071 999,998
-------------------------------------------------------
Total 163,320 $ 5,237,998
The Units were issued in private placements exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933 to various owners of self-storage
facilities. Beginning one year after their issuance, each Unit is redeemable for
cash equal to the market value of one share of Common Stock in the GP at the
time of redemption or, at our option, one share of Common Stock in the GP.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibit 10.1.1 - Form of Severance Agreement between the GP and Dean
Jernigan, Chairman, President and Chief Executive Officer, effective
August 16, 1999.
Exhibit 10.1.2 - Form of Severance Agreement between the GP and
Christopher P. Marr, Chief Financial Officer effective August 16, 1999.
Exhibit 10.1.3 - Form of Severance Agreement between the GP and each
of: (I) John W. McConomy, Executive Vice President, General Counsel and
Secretary; (II) Karl T. Haas, Executive Vice President Operations;
(III) Morris J. Kriger, Executive Vice President Acquisitions; (IV)
Francis C. ("Buck") Brown, III, Senior Vice President Human Resources;
(V) Richard B. Stern, Senior Vice President Development; (VI) Russell
W. Williams, Senior Vice President Sales and Marketing; and (VII) Mark
E. Yale, Senior Vice President Financial Reporting effective August 16,
1999.
Exhibit 10.1.4 - Form of Severance Agreement between the GP and each
of: (I) Teresa K. Corona, Vice President, Investor Relations, (II)
Michael P. Kenney, Vice President Operations - Western Division, (III)
Stephen R. Nichols, Vice President Operations - Eastern Division, (IV)
Richard J. Yonis, Vice President Operations - Central Division
effective August 16, 1999.
Exhibit 10.2 - Amendment No. 3 to the GP's 1995 Employee Stock Purchase
and Loan Plan dated as of August 5, 1999
Exhibit 10.3 - Amended and Restated Amendment No. 4 to the GP's 1993
Omnibus Stock Plan dated as of November 4, 1998.
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Exhibit 10.4 - Employment Agreement between the GP and Christopher P.
Marr, Chief Financial Officer, dated as of August 4, 1999
Exhibit 10.5 - Employment Agreement between the GP and Bruce F. Taub,
Senior Vice President, Capital Markets, dated as of June 12, 1998
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Amendment to this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: November 17, 1999
SUSA Partnership, L.P.
By Storage USA, Inc.,
General Partner
By: /s/ Christopher P. Marr
-----------------------
Christopher P. Marr
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
10.1.1 FORM OF SEVERANCE AGREEMENT BETWEEN STORAGE USA, INC. AND
DEAN JERNIGAN, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
EFFECTIVE AS OF AUGUST 16, 1999
<PAGE>
SEVERANCE AGREEMENT
AGREEMENT effective as of August 16, 1999, by and between Storage USA,
Inc., a Tennessee corporation (the "Company"), and O. Dean Jernigan (the
"Executive").
WITNESSETH:
WHEREAS, the Company considers it essential to the best interest of its
stockholders to foster the continuous employment of key management personnel;
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change of Control may exist and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of the Company's and its
affiliates' management personnel to the detriment of the Company and its
stockholders; and
WHEREAS, the Board has determined that it is in the best interest of
the Company and its stockholders to enter into this Agreement in order to
reinforce and encourage the continued attention and dedication of Executive to
his assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change of Control.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1) DEFINITIONS. For purposes of this Agreement, the following terms shall have
the following definitions:
A) "1993 OMNIBUS STOCK PLAN" means the Company's 1993 Omnibus Stock Plan, as
amended.
B) "1995 EMPLOYEE STOCK PURCHASE AND LOAN PLAN" means the Company's 1995
Employee Stock Purchase and Loan Plan, as amended.
C) "1996 OFFICERS' STOCK OPTION LOAN PROGRAM" means the Company's 1996
Officers' Stock Option Loan Program, as amended.
D) "ADDITIONAL AMOUNT" means the amount the Company shall pay to the
Executive in order to indemnify the Executive against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes (including
additional taxes on such Additional Amount) incurred by Executive as a
result of Executive receiving Change of Control Benefits as further
described in Section 6 of this Agreement.
E) "ARBITRATORS" means the arbitrators selected to conduct any arbitration
proceeding in connection with any disputes arising out of or relating to
this Agreement.
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<PAGE>
F) "AWARD PERIOD" means any period in which the Company's performance is
measured in connection with its Shareholder Value Plan.
G) "AWARD PLANS" mean each and every plan or program in which Executive
receives compensation in the form of a cash bonus, shares of stock in the
Company, Partnership Units, or Options, including, without limitation,
compensation received pursuant to the Company's 1993 Omnibus Stock Plan,
1995 Employee Stock Purchase and Loan Plan, 1996 Officers' Stock Option
Loan Program, Shareholder Value Plan, and any other stock option,
incentive compensation, profit participation, bonus or extra compensation
plan that is adopted by the Company and in which the Company's executive
officers generally participate.
H) "BASE SALARY" means the annual salary paid to Executive by the Company.
I) "BENEFIT PLANS" mean each and every health, life, medical, dental,
disability, insurance and welfare plan maintained by the Company that are
maintained from time to time by the Company for the benefit of Executive,
the executives of the Company generally or for the Company's employees
generally, provided that Executive is eligible to participate in such plan
under the eligibility provisions thereof that are generally applicable to
the participants thereof.
J) "BOARD" means the Board of Directors of the Company.
K) "CHANGE OF CONTROL" means any of the following events which occur during
the Term of this Agreement:
i) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors, without the approval of the Board
of the acquisition of such securities by the acquiring person;
ii) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors, regardless of whether or not the
Board shall have approved the acquisition of
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such securities by the acquiring person; if, at any time within three (3)
years after the acquisition of such securities, those individuals who
constituted the Board at the time of the acquisition of such securities
cease for any reason to constitute at least a majority of the Board of
Directors of the Company;
iii) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 49.9% or more of the combined
voting power of the Company's then outstanding securities entitled to vote
generally in the election of directors, regardless of whether or not the
Board shall have approved the acquisition of such securities by the
acquiring person;
iv) individuals who, as of the effective date of this Agreement,
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
unless any such change is approved by the vote of at least 80% of the
members of the Board of Directors of the Company in office immediately
prior to such cessation;
v) the Company is merged, consolidated or reorganized into or with another
corporation or other legal person, or securities of the Company are
exchanged for securities of another corporation or other legal person, and
immediately after such merger, consolidation, reorganization or exchange
less than 75% of the combined voting power of the then-outstanding
securities of such corporation or person immediately after such
transaction are held, directly or indirectly, in the aggregate by the
holders of securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction;
vi) the Company in any transaction or series of related transactions,
sells all or substantially all of its assets to any other corporation or
other legal person and less than 75% of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale or sales are held, directly or indirectly, in the
aggregate by the holders of securities entitled to vote generally in the
election of directors of the Company immediately prior to such sale;
vii) the Company and its affiliates shall sell or transfer (in a single
transaction or series of related transactions) to a non-affiliate business
operations or assets that generated at least two-thirds of the
consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been filed under
the Exchange Act) of the Company and its subsidiaries immediately prior
thereto;
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<PAGE>
viii) the Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K (or any successor, form or report or item therein)
that a change in control of the Company has occurred;
ix) the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company;
x) the Company ceases to be the general partner of the Partnership or in
any transaction or a series of transactions sells or transfers Partnership
Units owned by the Company to a third party constituting at least 49.9% of
the limited partnership interests in the Partnership; or
xi) any other transaction or series of related transactions occur that
have substantially the effect of the transactions specified in any of the
preceding clauses in this sentence.
L) "CHANGE OF CONTROL BENEFITS" means the Executive's receipt of the
Termination Payment or any other payment, benefit or compensation (except
for the Additional Amount) which the Executive receives or has the right
to receive from the Company or any of its affiliates as a result of a
Change of Control Termination.
M) "CHANGE OF CONTROL TERMINATION" means (i) a Termination Without Cause of
the Executive's employment by the Company, within (a) three (3) months
prior to a Change of Control and in anticipation of such Change of
Control; (b) on the date of the Change of Control; or (c) within two (2)
years after a Change of Control or (ii) the Executive's resignation for
Good Reason on or within two (2) years after a Change of Control.
N) "CODE" means the Internal Revenue Code of 1986, as amended.
O) "COMPANY" means Storage USA, Inc., a Tennessee corporation, and any
successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
P) "COMPANY SHARES" means the shares of common stock of the Company or any
securities of a successor company which shall have replaced such common
stock.
Q) "EXCESS PARACHUTE PAYMENTS" has the meaning set forth in section 280G of
the Code.
R) "EXCISE TAX" means a tax on Excess Parachute Payments imposed pursuant to
Code section 4999.
S) "EXECUTIVE" means the person identified in the preamble paragraph of this
Agreement.
5
<PAGE>
T) "FAIR MARKET VALUE" means, on any give date, the closing sale price of the
common stock of the Company on the New York Stock Exchange on such date,
or, if the New York Stock Exchange shall be closed on such date, the next
preceding date on which the New York Stock Exchange shall have been open.
U) "GOOD REASON" means any of the following:
i) a change in the Executive's status, position or responsibilities
(including reporting relationships and responsibilities) which, in the
Executive's reasonable judgment and without Executive's consent,
represents a reduction in or demotion of the Executive's status, position
or responsibilities as in effect immediately prior to a Change of Control;
the assignment to the Executive of any duties or responsibilities which,
in the Executive's reasonable judgment, are inconsistent with such status,
position or responsibilities; or any removal of the Executive from or
failure to reappoint or reelect the Executive to any of such positions;
ii) the relocation of the Company's principal executive offices to a
location outside a thirty-mile radius of Memphis, Tennessee or the
Company's requiring the Executive to be based at any place other than a
location within a thirty-mile radius of Memphis, Tennessee, except for
reasonably required travel on the Company's business;
iii) the failure by the Company to continue to provide the Executive with
compensation and benefits provided to Executive prior to the Change of
Control or benefits substantially similar to those provided to the
Executive under any of the employee benefit plans in which the Executive
is or becomes a participant, or the taking of any action by the Company
which would directly or indirectly materially reduce any of such benefits
or deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change of Control;
iv) any material breach by the Company of any provision of this Agreement;
or
v) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the Company
to assume and agree to perform this Agreement.
V) "OPTION(S)" means any options issued pursuant to the Company's 1993
Omnibus Stock Plan, or any other stock option plan adopted by the Company,
any option granted with respect to Partnership Units, or any option
granted under the plan of any successor company that replaces or assumes
the Company's or the Partnership's options.
W) "PARTNERSHIP" means SUSA Partnership, L.P.
X) "PARTNERSHIP UNIT(S)" means limited partnership interests of the
Partnership. The holder has the option of requiring the Company to redeem
such interests. The Company may
6
<PAGE>
elect to effectuate such redemption by either paying cash or exchanging
Company Shares for such interests.
Y) "PERMANENT DISABILITY" means a complete physical or mental inability,
confirmed by a licensed physician, to perform the Executive's duties that
continues for a period of six (6) consecutive months.
Z) "PLAN LOAN(S)" means any loan extended by the Company to Executive
pursuant to the 1995 Employee Stock Purchase and Loan Plan, the 1996
Officers' Stock Option Loan Program, or any other similar plan or program
adopted by the Company during the Term of this Agreement.
AA) "RESTRICTED STOCK" means any restricted stock issued pursuant to the
Company's 1993 Omnibus Stock Plan, or any other Award Plan adopted by the
Company, or any restricted stock issued under the plan of any successor
company that replaces or assumes the Company's grants of restricted stock.
bb) "SELF STORAGE BUSINESS" means the business of acquiring, developing,
constructing, franchising, owning or operating self-storage facilities.
CC) "SELF STORAGE PROPERTY" means any real estate upon which the Self-Storage
Business is being conducted.
DD) "SHAREHOLDER VALUE PLAN" means the Company's Shareholder Value Plan, as
amended.
EE) "SVU GRANT" means the total number of shareholder value units granted to
the Executive pursuant to the Company's Shareholder Value Plan.
FF) "SVU VALUE" means the value of each shareholder value unit based upon
certain performance measures as set forth in the Company's Shareholder
Value Plan.
GG) "TERM" has the meaning assigned to it in Section 2 of this Agreement.
HH) "TERMINATION DATE" means the date employment of Executive is terminated,
which date shall be the date specified as the Termination Date in the
Termination Notice, which date shall not be less than thirty nor more than
sixty days from the date the Termination Notice is given.
II) "TERMINATION NOTICE" means a written notice of termination of employment
by Executive or the Company.
JJ) "TERMINATION PAYMENT" has the meaning set forth in Section 3(b) of this
Agreement.
KK) "TERMINATION WITH CAUSE" means the termination of the Executive's
employment by the Company for any of the following reasons:
7
<PAGE>
i) the Executive's conviction for a felony;
ii) the Executive's theft, embezzlement, misappropriation of or
intentional infliction of material damage to the Company's property or
business opportunity; or
iii) the Executive's ongoing willful neglect of or failure to perform his
duties hereunder or his ongoing willful failure or refusal to follow any
reasonable, unambiguous duly adopted written direction of the Company that
is not inconsistent with the Executive's duties, if such willful neglect,
failure or refusal is materially damaging or materially detrimental to the
business and operations of the Company; provided that Executive shall have
received written notice of such failure and shall have continued to engage
in such failure after 30 days following receipt of such notice from the
Company, which notice specifically identifies the manner in which the
Company believes that Executive has engaged in such failure.
For purposes of this subsection, no act, or failure to act, shall be deemed
"willful" unless done, or omitted to be done, by Executive not in good faith,
and without reasonable belief that such action or omission was in the best
interest of the Company.
LL) "TERMINATION WITHOUT CAUSE" means the termination of the Executive's
employment by the Company for any reason other than Termination With
Cause, or termination by the Company due to Executive's death or Permanent
Disability.
MM) "UNIFORM ARBITRATION ACT" means the Uniform Arbitration Act, Tennessee
Code Annotated ss. 29-5-391 et seq., as amended.
2) TERM; TERMINATION.
a) The term of this Agreement hereunder shall commence on August 16, 1999 and
shall be extended automatically, for so long as the Executive remains
employed by the Company hereunder, on January 1 of each year beginning
January 1, 2000 for an additional one year period (such period, as it may
be extended from time to time, being herein referred to as the "Term"),
unless, not later than September 30 of the preceding year, the Company
shall have given notice that it does not wish to extend this Agreement;
provided, further, if a Change of Control of the Company shall have
occurred during the original or extended term of this Agreement, this
Agreement shall automatically continue in effect for a period of
twenty-four months beyond the month in which such Change of Control
occurred. This Agreement shall automatically terminate upon the
termination of Executive's employment other than by reason of a Change in
Control Termination.
b) Any purported termination of employment by Executive or the Company , (i)
within three (3) months prior to a Change of Control; (ii) on the date of
a Change of Control; or (iii)
within two (2) years after a Change of Control shall be communicated by a
Termination Notice. The Termination Notice shall indicate the specific
termination provision in this Agreement relied upon and set forth the
facts and circumstances claimed to provide a
8
<PAGE>
basis for termination. If the party receiving the Termination Notice
notifies the other party prior to the Termination Date that a dispute
exists concerning the termination, the Termination Date shall be extended
until the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction. The
Termination Date shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Company will continue to pay Executive
his full compensation in effect when the notice giving rise to the dispute
was given and Executive shall continue as a participant in all Award Plans
and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this
subsection are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
3) SEVERANCE BENEFIT IN CONNECTION WITH A CHANGE OF CONTROL TERMINATION.
----------------------------------------------------------------------
a) In the event of a Change of Control Termination, the Company shall, on the
Termination Date, pay the Executive in addition to any Base Salary earned
but not paid through the Termination Date and any amounts due pursuant to
Award Plans and Benefit Plans including, without limitation, the pro rata
amount of Executive's anticipated bonus for the fiscal year in which
Executive is terminated, the compensation and benefits set forth in this
Section 3.
b) The Company shall pay Executive a Termination Payment which is equal to
the sum of three (3) times the Executive's annual Base Salary in effect on
the Termination Date plus three (3) times the amount of the highest annual
cash bonus paid to the Executive for the previous five fiscal years (but
not including compensation under the Company's Shareholder Value Plan)
("Termination Payment"). The Termination Payment shall be calculated and
paid immediately prior to the closing of the transactions constituting a
Change of Control if the Executive receives notice prior to the Change of
Control that his employment will be terminated on or after the Change of
Control.
c) Executive shall be permitted to participate in, and have all rights and
benefits provided by, all Benefit Plans which Executive was eligible to
participate in immediately prior to the Termination Date (to the extent
such participation is possible under the laws then pertaining to such
Benefit Plans), for two years following the Termination Date. If Executive
is no longer eligible to participate in one or more of the Benefit Plans
because of such termination, Executive shall be entitled to, and the
Company shall provide to Executive at the Company's sole expense, benefits
substantially equivalent to those
Benefit Plans to which Executive was entitled immediately prior to such
termination for two (2) years after the Termination Date.
d) All restrictions upon any Restricted Stock which may have been awarded to
Executive shall expire and be removed and such Restricted Stock shall be
fully vested at the
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Termination Date (unless otherwise previously expired and removed and
vested pursuant to the terms of any Restricted Stock award pursuant to the
1993 Omnibus Stock Plan or any other Award Plan), and such Stock shall be
delivered to Executive. All Options granted to Executive shall become
fully vested at the Termination Date (unless otherwise previously vested
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan). In lieu
of Company Shares issuable upon exercise of any outstanding and
unexercised Options granted to Executive, Executive may, at Executive's
option, receive an amount in cash equal to the product of (i) the excess
of the higher of the Fair Market Value of Company Shares on the
Termination Date, or the highest per share price for Company Shares
actually paid in connection with any Change of Control of the Company,
over the per share exercise price of each Option held by Executive, times
(ii) the number of Company Shares covered by each such Option. In the
event Executive does not elect to receive a cash payment for any
outstanding and unexercised Options granted to Executive, Executive shall
have the right to otherwise exercise such Options in accordance with the
terms and conditions of the 1993 Omnibus Stock Plan or any other
applicable Award Plan. This Agreement shall not prevent Restricted Stock
or Options from vesting pursuant to the terms of the 1993 Omnibus Stock
Plan or any other Award Plan or otherwise, at a time prior to that
provided for herein.
e) If Executive has any Plan Loans outstanding to the Company immediately
prior to the effective date of a Change of Control Termination, the
Company shall, prior to the effective date of such Change of Control
Termination discharge and cancel the amount of principal and interest due
with respect to such Plan Loans which exceeds the Fair Market Value of
Company Shares securing the Plan Loans. The Executive shall pay the Plan
Loans in full (less the amount discharged) within ninety (90) days
following the Termination Date, and shall have the option of repaying all
amounts due with respect to the Plan Loans by the transfer of the Company
Shares securing the Plan Loans, or by the payment, in cash, of the amounts
due with respect to the Plan Loans. Except as otherwise set forth herein,
Executive shall remain subject to all terms and conditions set forth in
the Loan Agreements and Promissory Notes until the Plan Loans are paid in
full.
f) With respect to Executive's participation in the Company's Shareholder
Value Plan, the Award Periods in connection with all of Executive's
outstanding SVU Grants shall be accelerated such that each Award Period is
deemed to have ended upon the effective date of a Change of Control
Termination. At such time, the Company shall pay Executive an amount equal
to the SVU Value multiplied by the number of Executive's outstanding SVU
Grants. The SVU Value shall be reduced by 66% for all SVU Grants which
were granted less than twelve months prior to the effective date of a
Change of Control Termination and the SVU Value shall be reduced by 33%
for all SVU Grants which were
granted less than twenty-four months but more than twelve months prior to
the effective date of a Change of Control Termination. No adjustments
shall be made to the SVU Value for SVU Grants which were granted more than
twenty-four months prior to the effective date of the Change of Control
Termination. All payments made to Executive after a Change in Control
Termination in connection with outstanding SVU Grants shall be made solely
in cash.
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g) The Company shall also pay to Executive all legal fees and expenses
incurred by Executive as a result of a Change of Control Termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided hereunder).
4) CERTAIN TRANSACTIONS. Notwithstanding the provisions of Sections 1(k)(i),
(ii), (iii) or (viii), unless otherwise determined in a specific case by
majority vote of the Board, a Change of Control shall not be deemed to have
occurred for purposes of this Agreement solely because (i) an entity in which
the Company directly or indirectly beneficially owns 50% or more of the
voting securities or (ii) any Company-sponsored employee stock ownership
plan, or any other employee benefit plan of the Company, either files or
becomes obligated to file a report or a proxy statement under or in response
to Schedule 13D, Schedule 14D-l, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item thereon) under the Exchange Act, disclosing
beneficial ownership by it of shares of stock of the Company, or because the
Company reports that a Change of Control of the Company has or may have
occurred or will or may occur in the future by reason of such beneficial
ownership.
5) ESCROW ARRANGEMENT. If within thirty (30) days after the effective date of a
Change of Control, Executive's employment has not been terminated, the
Company shall, at the request of Executive, deposit with an escrow agent,
pursuant to an escrow agreement between the Company and such escrow agent, a
sum of money, or other property permitted by such escrow agreement, which is
substantially sufficient in the opinion of the Company's management to fund
the amounts due to Executive set forth in Section 3 of this Agreement. The
escrow agreement shall provide that such agreement may not be terminated
until the earlier of (i) Executive's employment has terminated and all
amounts due to Executive as set forth in this Agreement have been paid to
Executive or (ii) two (2) years after the effective date of the Change of
Control.
6) TAX MATTERS. If the Excise Tax on Excess Parachute Payments will be imposed
on the Executive under Code section 4999 as a result of the Executive's
receipt of the Change of Control Benefits, the Company shall indemnify the
Executive and hold him harmless against all claims, losses, damages,
penalties, expenses, interest, and Excise Taxes. To effect this
indemnification, the Company shall pay to the Executive the Additional Amount
which is sufficient to indemnify and hold the Executive harmless from the
application of Code sections 280G and 4999, including the amount of (i) the
Excise Tax that will be imposed on
the Executive under section 4999 of the Code with respect to the Change of
Control Benefits; (ii) the additional (A) Excise Tax under section 4999 of
the Code, (B) hospital insurance tax under section 3111(b) of the Code and
(C) federal, state and local income taxes for which the Executive is or will
be liable on account of the payment of the amount described in subitem (i);
and (iii) the further excise, hospital insurance and income taxes for which
the Executive is or will be liable on account of the payment of the amount
described in subitem (ii) and this subitem (iii) and any other
indemnification payment under this Section 6. The Additional
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Amount shall be calculated and paid to the Executive at the time that the
Termination Payment is paid to the Executive. In calculating the
Additional Amount, the highest marginal rates of federal and applicable
state and local income taxes applicable to individuals and in effect for
the year in which the Change of Control occurs shall be used. Nothing in
this paragraph shall give the Executive the right to receive
indemnification from the Company for federal, state or local income taxes
or hospital insurance taxes payable solely as a result of the Executive's
receipt of (a) the Change in Control Benefits, or (b) any additional
payment, benefit or compensation other than the Additional Amount. As
specified in items (ii) and (iii), above, all income, hospital insurance
and additional Excise Taxes resulting from additional compensation in the
form of the Excise Tax payment specified in item (i), above, shall be paid
to the Executive.
The provisions of this Section 6 are illustrated by the following example:
Assume that the Termination Payment and all other Change of Control
Benefits result in a total federal, state and local income tax and hospital
insurance tax liability of $180,000; and an Excise Tax liability under Code
section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Company must pay to the Executive $70,000, plus an amount necessary to
indemnify the Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000 payment to
the Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
7) EMPLOYMENT STATUS. The parties acknowledge and agree that Executive is an
employee of the Company or of one of its affiliates, not an independent
contractor. Any payments made to Executive by the Company pursuant to this
Agreement shall be treated for federal and state payroll tax purposes as
payments made to a Company employee, irrespective whether such payments are
made subsequent to the Termination Date.
8) NONCOMPETITION; NONSOLICITATION. For a period of two (2) years after
Executive receives Change of Control Benefits pursuant to the terms of this
Agreement, Executive shall not solicit any employee of the Company to leave
the service of the Company or own any interest in any Self-Storage Property
(other than any permissible interest acquired while Executive was employed by
the Company) as partner, shareholder or otherwise; or directly or indirectly,
for his own account or for the account of others, either as an officer,
director, promoter, employee, consultant, advisor, agent, manager, or in any
other capacity, engage in the Self-Storage Business.
The nonsolicitation provision shall apply to any Company employee
during the period of such Company employee's employment with the Company and for
a period of 30 days after such employee's termination of employment with the
Company. The Executive agrees that damages at law for violation of the
restrictive covenant contained herein would not be an adequate or proper remedy
to the Company, and that should the Executive violate or threaten to violate any
of the provisions of such covenant, the Company, its successors or assigns,
shall be entitled to obtain a temporary or permanent injunction, as appropriate,
against the Executive in any court having jurisdiction over the person and the
subject matter, prohibiting any further violation of
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any such covenants. The injunctive relief provided herein shall be in addition
to any award of damages, compensatory, exemplary or otherwise, payable by reason
of such violation.
Furthermore, the Executive acknowledges that this Agreement has been
negotiated at arms' length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by this
Agreement has attempted to limit the Executive's right to compete only to the
extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
9) NOTICES. All notices or deliveries authorized or required pursuant to this
Agreement shall be deemed to have been given when in writing and personally
delivered or when deposited in the U.S. mail, certified, return receipt
requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to
the other party:
To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: O. Dean Jernigan
6366 Lendenwood
Memphis, TN 38120
10) ENTIRE AGREEMENT. This Agreement contains the entire understanding between
the parties hereto with respect to the subject matter hereof and shall not be
modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto. This Agreement shall be binding upon and inure
to the benefit of the heirs, successors and assigns of the parties hereto.
11) ARBITRATION. Any controversy concerning or claim arising out of or relating
to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party
seeking such arbitration.
A) THE ARBITRATORS. Any arbitration proceeding shall be conducted by three
(3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit
any matter relating to this Agreement to arbitration shall do so by
written notice to the other party, which notice shall set forth the items
to be arbitrated, such party's choice of Arbitrator, and such party's
substantive position in the arbitration.
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The party receiving such notice shall, within fifteen (15) days after
receipt of such notice, appoint an Arbitrator and notify the other party
of its appointment and of its substantive position. The Arbitrators
appointed by the parties to the Arbitration shall select an additional
Arbitrator meeting the aforedescribed criteria. The Arbitrators shall be
required to render a decision in accordance with the procedures set forth
in Subparagraph (b) below within thirty (30) days after being notified of
their selection. The fees of the Arbitrators shall be equally divided
amongst the parties to the arbitration.
B) ARBITRATION PROCEDURES. Arbitration shall be conducted in accordance with
the Uniform Arbitration Act, except to the extent the provisions of such
Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may
bring an action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim to which this provision applies in
any court having jurisdiction over such action in Shelby County,
Tennessee, and the parties agree that jurisdiction and venue in Shelby
County, Tennessee are appropriate and approved by such parties.
12) APPLICABLE LAW. This Agreement shall be governed and construed in accordance
with the laws of the State of Tennessee.
13) ASSIGNMENT. The Executive acknowledges that his services are unique and
personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement.
14) HEADINGS. Headings in this Agreement are for convenience only and shall not
be used to interpret or construe its provisions.
15) SUCCESSORS; BINDING AGREEMENT. The Company will require any successor to all
or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a beach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
Executive would be entitled
to hereunder if Executive terminates his employment for Good Reason on or
within three (3) years after a Change of Control. The Company's rights and
obligations under this Agreement shall inure to the benefit of and shall be
binding upon the Company's successors and assigns.
16) CLAIMS. If Executive believes that he is being denied a benefit to which he
is entitled under this Agreement, he may file a written request for such
benefit with the Company at the address specified in Section 9 above setting
forth his claim. The Company shall have the sole discretion and authority to
construe and interpret the provisions of this Agreement and determine the
disposition of the Executive's claim. The Company shall advise the
Executive, in writing, of its decision and if the claim is denied, the
specific reason therefor, with
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reference to the terms of this Agreement, describing any additional
information that may be necessary, and explaining the claim review
procedure set forth herein. The Executive may then appeal such denial to a
committee appointed by the Chairperson of the Compensation Committee of
the Board of Directors of the Company within sixty (60) days, may review
any pertinent documents, and submit issues and comments in writing. The
committee shall then render a decision on review within ninety (90) days
of the Executive's appeal, unless special circumstances require an
extension, in which case such decision shall be rendered within one
hundred twenty (120) days. The decision on review shall be in writing,
final, and conclusive.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
STORAGE USA, INC.
By:
--------------------------------
Name: Harry Thie
Title: Director and
Chairman, Compensation Committee
of the Board of Directors
By:
---------------------------------
Name: John W. McConomy
Title: Executive Vice President
and General Counsel
EXECUTIVE:
-----------------------------------
Name: O. Dean Jernigan
15
10.1.2 FORM OF SEVERANCE AGREEMENT BETWEEN STORAGE USA, INC. AND
CHRISTOPHER P. MARR, CHIEF FINANCIAL OFFICER,
EFFECTIVE AS OF AUGUST 16, 1999
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SEVERANCE AGREEMENT
AGREEMENT effective as of August 16, 1999, by and between Storage
USA, Inc., a Tennessee corporation (the "Company"), and _________________ (the
"Executive").
WITNESSETH:
WHEREAS, the Company considers it essential to the best interest of its
stockholders to foster the continuous employment of key management personnel;
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change of Control may exist and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of the Company's and its
affiliates' management personnel to the detriment of the Company and its
stockholders; and
WHEREAS, the Board has determined that it is in the best interest of
the Company and its stockholders to enter into this Agreement in order to
reinforce and encourage the continued attention and dedication of Executive to
his assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change of Control.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1) DEFINITIONS. For purposes of this Agreement, the following terms shall have
the following definitions:
A) "1993 OMNIBUS STOCK PLAN" means the Company's 1993 Omnibus Stock Plan, as
amended.
B) "1995 EMPLOYEE STOCK PURCHASE AND LOAN PLAN" means the Company's 1995
Employee Stock Purchase and Loan Plan, as amended.
C) "1996 OFFICERS' STOCK OPTION LOAN PROGRAM" means the Company's 1996
Officers' Stock Option Loan Program, as amended.
D) "ADDITIONAL AMOUNT" means the amount the Company shall pay to the
Executive in order to indemnify the Executive against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes (including
additional taxes on such Additional Amount) incurred by Executive as a
result of Executive receiving Change of Control Benefits as further
described in Section 6 of this Agreement.
E) "ARBITRATORS" means the arbitrators selected to conduct any arbitration
proceeding in connection with any disputes arising out of or relating to
this Agreement.
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F) "AWARD PERIOD" means any period in which the Company's performance is
measured in connection with its Shareholder Value Plan.
G) "AWARD PLANS" mean each and every plan or program in which Executive
receives compensation in the form of a cash bonus, shares of stock in
the Company, Partnership Units, or Options, including, without
limitation, compensation received pursuant to the Company's 1993
Omnibus Stock Plan, 1995 Employee Stock Purchase and Loan Plan, 1996
Officers' Stock Option Loan Program, Shareholder Value Plan, and any
other stock option, incentive compensation, profit participation, bonus
or extra compensation plan that is adopted by the Company and in which
the Company's executive officers generally participate.
H) "BASE SALARY" means the annual salary paid to Executive by the Company.
I) "BENEFIT PLANS" mean each and every health, life, medical, dental,
disability, insurance and welfare plan maintained by the Company that
are maintained from time to time by the Company for the benefit of
Executive, the executives of the Company generally or for the Company's
employees generally, provided that Executive is eligible to participate
in such plan under the eligibility provisions thereof that are
generally applicable to the participants thereof.
J) "BOARD" means the Board of Directors of the Company.
K) "CHANGE OF CONTROL" means any of the following events which occur
during the Term of this Agreement:
i) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), becomes, is discovered to be, or files a report on
Schedule 13D or 14D-1 (or any successor schedule, form or report)
disclosing that such person is a beneficial owner (as defined in Rule
13d-3 under the Exchange Act or any successor rule or regulation),
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors,
without the approval of the Board of the acquisition of such
securities by the acquiring person;
ii) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), becomes, is discovered to be, or files a report on
Schedule 13D or 14D-1 (or any successor schedule, form or report)
disclosing that such person is a beneficial owner (as defined in Rule
13d-3 under the Exchange Act or any successor rule or regulation),
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors,
regardless of whether or not the Board shall have approved the
acquisition of
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such securities by the acquiring person; if, at any time within three
(3) years after the acquisition of such securities, those individuals
who constituted the Board at the time of the acquisition of such
securities cease for any reason to constitute at least a majority of
the Board of Directors of the Company;
iii) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), becomes, is discovered to be, or files a report on
Schedule 13D or 14D-1 (or any successor schedule, form or report)
disclosing that such person is a beneficial owner (as defined in Rule
13d-3 under the Exchange Act or any successor rule or regulation),
directly or indirectly, of securities of the Company representing 49.9%
or more of the combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors,
regardless of whether or not the Board shall have approved the
acquisition of such securities by the acquiring person;
iv) individuals who, as of the effective date of this Agreement,
constitute the Board of Directors of the Company cease for any reason
to constitute at least a majority of the Board of Directors of the
Company, unless any such change is approved by the vote of at least 80%
of the members of the Board of Directors of the Company in office
immediately prior to such cessation;
v) the Company is merged, consolidated or reorganized into or with
another corporation or other legal person, or securities of the Company
are exchanged for securities of another corporation or other legal
person, and immediately after such merger, consolidation,
reorganization or exchange less than 75% of the combined voting power
of the then-outstanding securities of such corporation or person
immediately after such transaction are held, directly or indirectly, in
the aggregate by the holders of securities entitled to vote generally
in the election of directors of the Company immediately prior to such
transaction;
vi) the Company in any transaction or series of related transactions,
sells all or substantially all of its assets to any other corporation
or other legal person and less than 75% of the combined voting power of
the then-outstanding securities of such corporation or person
immediately after such sale or sales are held, directly or indirectly,
in the aggregate by the holders of securities entitled to vote
generally in the election of directors of the Company immediately prior
to such sale;
vii) the Company and its affiliates shall sell or transfer (in a single
transaction or series of related transactions) to a non-affiliate
business operations or assets that generated at least two-thirds of the
consolidated revenues (determined on the basis of the Company's four
most recently completed fiscal quarters for which reports have been
filed under the Exchange Act) of the Company and its subsidiaries
immediately prior thereto;
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viii) the Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K (or any successor, form or report or item therein)
that a change in control of the Company has occurred;
ix) the shareholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company;
x) the Company ceases to be the general partner of the Partnership or
in any transaction or a series of transactions sells or transfers
Partnership Units owned by the Company to a third party constituting at
least 25% of the limited partnership interests in the Partnership; or
xi) any other transaction or series of related transactions occur that
have substantially the effect of the transactions specified in any of
the preceding clauses in this sentence.
l) "CHANGE OF CONTROL BENEFITS" means the Executive's receipt of the
Termination Payment or any other payment, benefit or compensation
(except for the Additional Amount) which the Executive receives or has
the right to receive from the Company or any of its affiliates as a
result of a Change of Control Termination.
M) "CHANGE OF CONTROL TERMINATION" means (i) a Termination Without Cause
of the Executive's employment by the Company, (a) within three (3)
months prior to a Change of Control and in anticipation of such Change
of Control; (b) on the date of the Change of Control; or (c) within two
(2) years after a Change of Control or (ii) the Executive's resignation
for Good Reason on or within two (2) years after a Change of Control.
N) "CODE" means the Internal Revenue Code of 1986, as amended.
O) "COMPANY" means Storage USA, Inc., a Tennessee corporation, and any
successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
P) "COMPANY SHARES" means the shares of common stock of the Company or any
securities of a successor company which shall have replaced such common
stock.
Q) "EXCESS PARACHUTE PAYMENTS" has the meaning set forth in section 280G
of the Code.
R) "EXCISE TAX" means a tax on Excess Parachute Payments imposed pursuant
to Code section 4999.
S) "EXECUTIVE" means the person identified in the preamble paragraph of
this Agreement.
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<PAGE>
T) "FAIR MARKET VALUE" means, on any give date, the closing sale price of
the common stock of the Company on the New York Stock Exchange on such
date, or, if the New York Stock Exchange shall be closed on such date,
the next preceding date on which the New York Stock Exchange shall have
been open.
U) "GOOD REASON" means any of the following:
i) a change in the Executive's status, position or responsibilities
(including reporting relationships and responsibilities) which, in
the Executive's reasonable judgment and without Executive's
consent, represents a reduction in or demotion of the Executive's
status, position or responsibilities as in effect immediately prior
to a Change of Control; the assignment to the Executive of any
duties or responsibilities which, in the Executive's reasonable
judgment, are inconsistent with such status, position or
responsibilities; or any removal of the Executive from or failure
to reappoint or reelect the Executive to any of such positions;
ii) the relocation of the Company's principal executive offices to
a location outside a thirty-mile radius of Memphis, Tennessee or
the Company's requiring the Executive to be based at any place
other than a location within a thirty-mile radius of Memphis,
Tennessee, except for reasonably required travel on the Company's
business;
iii) the failure by the Company to continue to provide the
Executive with compensation and benefits provided to Executive
prior to the Change of Control or benefits substantially similar to
those provided to the Executive under any of the employee benefit
plans in which the Executive is or becomes a participant, or the
taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed by the Executive
at the time of the Change of Control;
iv) any material breach by the Company of any provision of this
Agreement; or
v) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the
Company to assume and agree to perform this Agreement.
V) "OPTION(S)" means any options issued pursuant to the Company's 1993
Omnibus Stock Plan, or any other stock option plan adopted by the
Company, any option granted with respect to Partnership Units, or
any option granted under the plan of any successor company that
replaces or assumes the Company's or the Partnership's options.
W) "PARTNERSHIP" means SUSA Partnership, L.P.
X) "PARTNERSHIP UNIT(S)" means limited partnership interests of the
Partnership. The holder has the option of requiring the Company to
redeem such interests. The Company may elect to effectuate such
redemption by either paying cash or exchanging Company Shares for
such interests.
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<PAGE>
Y) "PERMANENT DISABILITY" means a complete physical or mental
inability, confirmed by a licensed physician, to perform the
Executive's duties that continues for a period of six (6)
consecutive months.
Z) "PLAN LOAN(S)" means any loan extended by the Company to Executive
pursuant to the 1995 Employee Stock Purchase and Loan Plan, the
1996 Officers' Stock Option Loan Program, or any other similar plan
or program adopted by the Company during the Term of this
Agreement.
AA) "RESTRICTED STOCK" means any restricted stock issued pursuant to
the Company's 1993 Omnibus Stock Plan, or any other Award Plan
adopted by the Company, or any restricted stock issued under the
plan of any successor company that replaces or assumes the
Company's grants of restricted stock.
BB) "SELF STORAGE BUSINESS" means the business of acquiring,
developing, constructing, franchising, owning or operating
self-storage facilities.
CC) "SELF STORAGE PROPERTY" means any real estate upon which the
Self-Storage Business is being conducted.
DD) "SHAREHOLDER VALUE PLAN" means the Company's Shareholder Value
Plan, as amended.
EE) "SVU GRANT" means the total number of shareholder value units
granted to the Executive pursuant to the Company's Shareholder
Value Plan.
FF) "SVU VALUE" means the value of each shareholder value unit based
upon certain performance measures as set forth in the Company's
Shareholder Value Plan.
GG) "TERM" has the meaning assigned to it in Section 2 of this
Agreement.
HH) "TERMINATION DATE" means the date employment of Executive is
terminated, which date shall be the date specified as the
Termination Date in the Termination Notice, which date shall not be
less than thirty nor more than sixty days from the date the
Termination Notice is given.
II) "TERMINATION NOTICE" means a written notice of termination of
employment by Executive or the Company.
JJ) "TERMINATION PAYMENT" has the meaning set forth in Section 3(b) of
this Agreement.
KK) "TERMINATION WITH CAUSE" means the termination of the Executive's
employment by the Company for any of the following reasons:
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<PAGE>
i) the Executive's conviction for a felony;
ii) the Executive's theft, embezzlement, misappropriation of or
intentional infliction of material damage to the Company's
property or business opportunity; or
iii) the Executive's ongoing willful neglect of or failure to
perform his duties hereunder or his ongoing willful failure or
refusal to follow any reasonable, unambiguous duly adopted
written direction of the Company that is not inconsistent with
the Executive's duties, if such willful neglect, failure or
refusal is materially damaging or materially detrimental to the
business and operations of the Company; provided that Executive
shall have received written notice of such failure and shall
have continued to engage in such failure after 30 days following
receipt of such notice from the Company, which notice
specifically identifies the manner in which the Company believes
that Executive has engaged in such failure.
For purposes of this subsection, no act, or failure to act, shall be deemed
"willful" unless done, or omitted to be done, by Executive not in good faith,
and without reasonable belief that such action or omission was in the best
interest of the Company.
LL) "TERMINATION WITHOUT CAUSE" means the termination of the
Executive's employment by the Company for any reason other than
Termination With Cause, or termination by the Company due to
Executive's death or Permanent Disability.
MM) "UNIFORM ARBITRATION ACT" means the Uniform Arbitration Act,
Tennessee Code Annotated ss. 29-5-391 et seq., as amended.
2) TERM; TERMINATION.
------------------
a) The term of this Agreement hereunder shall commence on ________1, 1999 and
shall be extended automatically, for so long as the Executive remains
employed by the Company hereunder, on January 1 of each year beginning
January 1, 2000 for an additional one year period (such period, as it may
be extended from time to time, being herein referred to as the "Term"),
unless, not later than September 30 of the preceding year, the Company
shall have given notice that it does not wish to extend this Agreement;
provided, further, if a Change of Control of the Company shall have
occurred during the original or extended term of this Agreement, this
Agreement shall automatically continue in effect for a period of
twenty-four months beyond the month in which such Change of Control
occurred. This Agreement shall automatically terminate upon the
termination of Executive's employment other than by reason of a Change in
Control Termination.
b) Any purported termination of employment by Executive or the Company (i)
within three (3) months prior to a Change of Control; (ii) on the date of
a Change of Control; or (iii) within two (2) years after a Change of
Control shall be communicated by a Termination Notice. The Termination
Notice shall indicate the specific termination provision in this Agreement
relied upon and set forth the facts and circumstances claimed to provide a
<PAGE>
basis for termination. If the party receiving the Termination
Notice notifies the other party prior to the Termination Date that a
dispute exists concerning the termination, the Termination Date shall
be extended until the dispute is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award, or by
a final judgment, order or decree of a court of competent jurisdiction.
The Termination Date shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will
continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given and Executive shall
continue as a participant in all Award Plans and Benefit Plans in which
Executive participated when the Termination Notice giving rise to the
dispute was given, until the dispute is finally resolved in accordance
with this subsection. Amounts paid under this subsection are in
addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
3) SEVERANCE BENEFIT IN CONNECTION WITH A CHANGE OF CONTROL TERMINATION.
---------------------------------------------------------------------
a) In the event of a Change of Control Termination, the Company shall, on the
Termination Date, pay the Executive in addition to any Base Salary earned
but not paid through the Termination Date and any amounts due pursuant to
Award Plans and Benefit Plans including, without limitation, the pro rata
amount of Executive's anticipated bonus for the fiscal year in which
Executive is terminated, the compensation and benefits set forth in this
Section 3.
b) The Company shall pay Executive a Termination Payment which is equal to
the sum of three (3) times the Executive's annual Base Salary in effect on
the Termination Date plus three (3) times the amount of the highest annual
cash bonus paid to the Executive for the previous five fiscal years (but
not including compensation under the Company's Shareholder Value Plan)
("Termination Payment"). The Termination Payment shall be calculated and
paid immediately prior to the closing of the transactions constituting a
Change of Control if the Executive receives notice prior to the Change of
Control that his employment will be terminated on or after the Change of
Control.
c) Executive shall be permitted to participate in, and have all rights and
benefits provided by, all Benefit Plans which Executive was eligible to
participate in immediately prior to the Termination Date (to the extent
such participation is possible under the laws then pertaining to such
Benefit Plans), for two years following the Termination Date. If Executive
is no longer eligible to participate in one or more of the Benefit Plans
because of such termination, Executive shall be entitled to, and the
Company shall provide to Executive at the Company's sole expense, benefits
substantially equivalent to those Benefit Plans to which Executive was
entitled immediately prior to such termination for two (2) years after the
Termination Date.
<PAGE>
d) All restrictions upon any Restricted Stock which may have been awarded to
Executive shall expire and be removed and such Restricted Stock shall be
fully vested at the Termination Date (unless otherwise previously expired
and removed and vested pursuant to the terms of any Restricted Stock award
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan), and such
Stock shall be delivered to Executive. All Options granted to Executive
shall become fully vested at the Termination Date (unless otherwise
previously vested pursuant to the 1993 Omnibus Stock Plan or any other
Award Plan). In lieu of Company Shares issuable upon exercise of any
outstanding and unexercised Options granted to Executive, Executive may,
at Executive's option, receive an amount in cash equal to the product of
(i) the excess of the higher of the Fair Market Value of Company Shares on
the Termination Date, or the highest per share price for Company Shares
actually paid in connection with any Change of Control of the Company,
over the per share exercise price of each Option held by Executive, times
(ii) the number of Company Shares covered by each such Option. In the
event Executive does not elect to receive a cash payment for any
outstanding and unexercised Options granted to Executive, Executive shall
have the right to otherwise exercise such Options in accordance with the
terms and conditions of the 1993 Omnibus Stock Plan or any other
applicable Award Plan. This Agreement shall not prevent Restricted Stock
or Options from vesting pursuant to the terms of the 1993 Omnibus Stock
Plan or any other Award Plan or otherwise, at a time prior to that
provided for herein.
e) If Executive has any Plan Loans outstanding to the Company immediately
prior to the effective date of a Change of Control Termination, the
Company shall, prior to the effective date of such Change of Control
Termination discharge and cancel the amount of principal and interest due
with respect to such Plan Loans which exceeds the Fair Market Value of
Company Shares securing the Plan Loans. The Executive shall pay the Plan
Loans in full (less the amount discharged) within ninety (90) days
following the Termination Date, and shall have the option of repaying all
amounts due with respect to the Plan Loans by the transfer of the Company
Shares securing the Plan Loans, or by the payment, in cash, of the amounts
due with respect to the Plan Loans. Except as otherwise set forth herein,
Executive shall remain subject to all terms and conditions set forth in
the Loan Agreements and Promissory Notes until the Plan Loans are paid in
full.
f) With respect to Executive's participation in the Company's Shareholder
Value Plan, the Award Periods in connection with all of Executive's
outstanding SVU Grants shall be accelerated such that each Award Period is
deemed to have ended upon the effective date of a Change of Control
Termination. At such time, the Company shall pay Executive an amount equal
to the SVU Value multiplied by the number of Executive's outstanding SVU
Grants. The SVU Value shall be reduced by 66% for all SVU Grants which
were granted less than twelve months prior to the effective date of a
Change of Control Termination and the SVU Value shall be reduced by 33%
for all SVU Grants which were granted less than twenty-four months but
more than twelve months prior to the effective date of a Change of Control
Termination. No adjustments shall be made to the SVU Value for SVU Grants
which were granted more than twenty-four months prior to the
<PAGE>
effective date of the Change of Control Termination. All payments made to
Executive after a Change in Control Termination in connection with
outstanding SVU Grants shall be made solely in cash.
g) The Company shall also pay to Executive all legal fees and expenses
incurred by Executive as a result of a Change of Control Termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided hereunder).
4) CERTAIN TRANSACTIONS. Notwithstanding the provisions of Sections 1(k)(i),
(ii), (iii), or (viii), unless otherwise determined in a specific case by
majority vote of the Board, a Change of Control shall not be deemed to have
occurred for purposes of this Agreement solely because (i) an entity in which
the Company directly or indirectly beneficially owns 50% or more of the
voting securities or (ii) any Company-sponsored employee stock ownership
plan, or any other employee benefit plan of the Company, either files or
becomes obligated to file a report or a proxy statement under or in response
to Schedule 13D, Schedule 14D-l, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item thereon) under the Exchange Act, disclosing
beneficial ownership by it of shares of stock of the Company, or because the
Company reports that a Change of Control of the Company has or may have
occurred or will or may occur in the future by reason of such beneficial
ownership.
5) ESCROW ARRANGEMENT. If within thirty (30) days after the effective date of a
Change of Control, Executive's employment has not been terminated, the
Company shall, at the request of Executive, deposit with an escrow agent,
pursuant to an escrow agreement between the Company and such escrow agent, a
sum of money, or other property permitted by such escrow agreement, which is
substantially sufficient in the opinion of the Company's management to fund
the amounts due to Executive set forth in Section 3 of this Agreement. The
escrow agreement shall provide that such agreement may not be terminated
until the earlier of (i) Executive's employment has terminated and all
amounts due to Executive as set forth in this Agreement have been paid to
Executive or (ii) two (2) years after the effective date of the Change of
Control.
6) TAX MATTERS. If the Excise Tax on Excess Parachute Payments will be imposed
on the Executive under Code section 4999 as a result of the Executive's
receipt of the Change of Control Benefits, the Company shall indemnify the
Executive and hold him harmless against all claims, losses, damages,
penalties, expenses, interest, and Excise Taxes. To effect this
indemnification, the Company shall pay to the Executive the Additional Amount
which is sufficient to indemnify and hold the Executive harmless from the
application of Code sections 280G and 4999, including the amount of (i) the
Excise Tax that will be imposed on the Executive under section 4999 of the
Code with respect to the Change of Control Benefits; (ii) the additional (A)
Excise Tax under section 4999 of the Code, (B) hospital insurance tax under
section 3111(b) of the Code and (C) federal, state and local income taxes for
which the
<PAGE>
Executive is or will be liable on account of the payment of the amount
described in subitem (i); and (iii) the further excise, hospital insurance
and income taxes for which the Executive is or will be liable on account
of the payment of the amount described in subitem (ii) and this subitem
(iii) and any other indemnification payment under this Section 6. The
Additional Amount shall be calculated and paid to the Executive at the
time that the Termination Payment is paid to the Executive. In calculating
the Additional Amount, the highest marginal rates of federal and
applicable state and local income taxes applicable to individuals and in
effect for the year in which the Change of Control occurs shall be used.
Nothing in this paragraph shall give the Executive the right to receive
indemnification from the Company for federal, state or local income taxes
or hospital insurance taxes payable solely as a result of the Executive's
receipt of (a) the Change in Control Benefits, or (b) any additional
payment, benefit or compensation other than the Additional Amount. As
specified in items (ii) and (iii), above, all income, hospital insurance
and additional Excise Taxes resulting from additional compensation in the
form of the Excise Tax payment specified in item (i), above, shall be paid
to the Executive.
The provisions of this Section 6 are illustrated by the following example:
Assume that the Termination Payment and all other Change of
Control Benefits result in a total federal, state and local income tax and
hospital insurance tax liability of $180,000; and an Excise Tax liability under
Code section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Company must pay to the Executive $70,000, plus an amount necessary to
indemnify the Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000 payment to
the Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
7) EMPLOYMENT STATUS. The parties acknowledge and agree that Executive is an
employee of the Company or of one of its affiliates, not an independent
contractor. Any payments made to Executive by the Company pursuant to this
Agreement shall be treated for federal and state payroll tax purposes as
payments made to a Company employee, irrespective whether such payments are
made subsequent to the Termination Date.
8) NONCOMPETITION; NONSOLICITATION. For a period of two (2) years after
Executive receives Change of Control Benefits pursuant to the terms of this
Agreement, Executive shall not solicit any employee of the Company to leave
the service of the Company or own any interest in any Self-Storage Property
(other than any permissible interest acquired while Executive was employed by
the Company) as partner, shareholder or otherwise; or directly or indirectly,
for his own account or for the account of others, either as an officer,
director, promoter, employee, consultant, advisor, agent, manager, or in any
other capacity, engage in the Self-Storage Business.
The nonsolicitation provision shall apply to any Company employee
during the period of such Company employee's employment with the Company and for
a period of 30 days after such employee's termination of employment with the
Company. The Executive agrees that damages
<PAGE>
at law for violation of the restrictive covenant contained herein would not be
an adequate or proper remedy to the Company, and that should the Executive
violate or threaten to violate any of the provisions of such covenant, the
Company, its successors or assigns, shall be entitled to obtain a temporary or
permanent injunction, as appropriate, against the Executive in any court having
jurisdiction over the person and the subject matter, prohibiting any further
violation of any such covenants. The injunctive relief provided herein shall be
in addition to any award of damages, compensatory, exemplary or otherwise,
payable by reason of such violation.
Furthermore, the Executive acknowledges that this Agreement has been
negotiated at arms' length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by this
Agreement has attempted to limit the Executive's right to compete only to the
extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
9) NOTICES. All notices or deliveries authorized or required pursuant to this
Agreement shall be deemed to have been given when in writing and personally
delivered or when deposited in the U.S. mail, certified, return receipt
requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to
the other party:
To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: ________________________
________________________
________________________
10)ENTIRE AGREEMENT. This Agreement contains the entire understanding between
the parties hereto with respect to the subject matter hereof and shall not be
modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto. This Agreement shall be binding upon and inure
to the benefit of the heirs, successors and assigns of the parties hereto.
11)ARBITRATION. Any controversy concerning or claim arising out of or relating
to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party
seeking such arbitration.
<PAGE>
A) THE ARBITRATORS. Any arbitration proceeding shall be conducted by three (3)
Arbitrators and the decision of the Arbitrators shall be binding on all
parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit any
matter relating to this Agreement to arbitration shall do so by written
notice to the other party, which notice shall set forth the items to be
arbitrated, such party's choice of Arbitrator, and such party's substantive
position in the arbitration. The party receiving such notice shall, within
fifteen (15) days after receipt of such notice, appoint an Arbitrator and
notify the other party of its appointment and of its substantive position.
The Arbitrators appointed by the parties to the Arbitration shall select an
additional Arbitrator meeting the aforedescribed criteria. The Arbitrators
shall be required to render a decision in accordance with the procedures set
forth in Subparagraph (b) below within thirty (30) days after being notified
of their selection. The fees of the Arbitrators shall be equally divided
amongst the parties to the arbitration.
B) ARBITRATION PROCEDURES. Arbitration shall be conducted in accordance with the
Uniform Arbitration Act, except to the extent the provisions of such Act are
modified by this Agreement or the subsequent mutual agreement of the parties.
Judgment upon the award rendered by the Arbitrator(s) may be entered in any
court having jurisdiction thereof. Any party hereto may bring an action,
including a summary or expedited proceeding, to compel arbitration of any
controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties
agree that jurisdiction and venue in Shelby County, Tennessee are appropriate
and approved by such parties.
12) APPLICABLE LAW. This Agreement shall be governed and construed in accordance
with the laws of the State of Tennessee.
13) ASSIGNMENT. The Executive acknowledges that his services are unique and
personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement.
14) HEADINGS. Headings in this Agreement are for convenience only and shall not
be used to interpret or construe its provisions.
15) SUCCESSORS; BINDING AGREEMENT. The Company will require any successor to all
or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a beach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
Executive would be entitled
to hereunder if Executive terminates his employment for Good Reason on or
within three (3) years after a Change of Control. The Company's rights and
obligations under this Agreement shall inure to the benefit of and shall be
binding upon the Company's successors and assigns.
<PAGE>
16) CLAIMS. If Executive believes that he is being denied a benefit to which he
is entitled under this Agreement, he may file a written request for such
benefit with the Company at the address specified in Section 9 above setting
forth his claim. The Company shall have the sole discretion and authority to
construe and interpret the provisions of this Agreement and determine the
disposition of the Executive's claim. The Company shall advise the
Executive, in writing, of its decision and if the claim is denied, the
specific reason therefor, with reference to the terms of this Agreement,
describing any additional information that may be necessary, and explaining
the claim review procedure set forth herein. The Executive may then appeal
such denial to a committee appointed by the Chief Executive Officer of the
Company within sixty (60) days, may review any pertinent documents, and
submit issues and comments in writing. The committee shall then render a
decision on review within ninety (90) days of the Executive's appeal, unless
special circumstances require an extension, in which case such decision
shall be rendered within one hundred twenty (120) days. The decision on
review shall be in writing, final, and conclusive.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
STORAGE USA, INC.
By: _________________________
Name: Dean Jernigan
Title: Chairman of the Board
and Chief Executive Officer
EXECUTIVE:
____________________________
Name:_______________________
10.1.3 FORM OF SEVERANCE AGREEMENT BETWEEN STORAGE USA, INC. AND EACH OF: (I)
JOHN W. MCCONOMY, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY; (II) KARL T. HAAS, EXECUTIVE VICE PRESIDENT OPERATIONS; (III)
MORRIS J. KRIGER, EXECUTIVE VICE PRESIDENT ACQUISITIONS; (IV) FRANCIS C.
("BUCK") BROWN, III, SENIOR VICE PRESIDENT HUMAN RESOURCES; (V) RICHARD
B. STERN, SENIOR VICE PRESIDENT DEVELOPMENT; (VI) BRUCE F. TAUB, SENIOR
VICE PRESIDENT, CAPITAL MARKETS; (VII) RUSSELL W. WILLIAMS, SENIOR VICE
PRESIDENT SALES AND MARKETING; AND (VIII) MARK E. YALE, SENIOR VICE
PRESIDENT FINANCIAL REPORTING; EFFECTIVE AS OF AUGUST 16, 1999
<PAGE>
SEVERANCE AGREEMENT
AGREEMENT effective as of August 16, 1999, by and between Storage
USA, Inc., a Tennessee corporation (the "Company"), and _________________ (the
"Executive").
WITNESSETH:
WHEREAS, the Company considers it essential to the best interest of its
stockholders to foster the continuous employment of key management personnel;
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change of Control may exist and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of the Company's and its
affiliates' management personnel to the detriment of the Company and its
stockholders; and
WHEREAS, the Board has determined that it is in the best interest of
the Company and its stockholders to enter into this Agreement in order to
reinforce and encourage the continued attention and dedication of Executive to
his assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change of Control.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1) DEFINITIONS. For purposes of this Agreement, the following terms shall have
the following definitions:
A) "1993 OMNIBUS STOCK PLAN" means the Company's 1993 Omnibus Stock Plan, as
amended.
B) "1995 EMPLOYEE STOCK PURCHASE AND LOAN PLAN" means the Company's 1995
Employee Stock Purchase and Loan Plan, as amended.
C) "1996 OFFICERS' STOCK OPTION LOAN PROGRAM" means the Company's 1996
Officers' Stock Option Loan Program, as amended.
D) "ADDITIONAL AMOUNT" means the amount the Company shall pay to the
Executive in order to indemnify the Executive against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes (including
additional taxes on such Additional Amount) incurred by Executive as a
result of Executive receiving Change of Control Benefits as further
described in Section 6 of this Agreement.
E) "ARBITRATORS" means the arbitrators selected to conduct any arbitration
proceeding in connection with any disputes arising out of or relating to
this Agreement.
<PAGE>
F) "AWARD PERIOD" means any period in which the Company's performance is
measured in connection with its Shareholder Value Plan.
G) "AWARD PLANS" mean each and every plan or program in which Executive
receives compensation in the form of a cash bonus, shares of stock in the
Company, Partnership Units, or Options, including, without limitation,
compensation received pursuant to the Company's 1993 Omnibus Stock Plan,
1995 Employee Stock Purchase and Loan Plan, 1996 Officers' Stock Option
Loan Program, Shareholder Value Plan, and any other stock option,
incentive compensation, profit participation, bonus or extra compensation
plan that is adopted by the Company and in which the Company's executive
officers generally participate.
H) "BASE SALARY" means the annual salary paid to Executive by the Company.
I) "BENEFIT PLANS" mean each and every health, life, medical, dental,
disability, insurance and welfare plan maintained by the Company that are
maintained from time to time by the Company for the benefit of Executive,
the executives of the Company generally or for the Company's employees
generally, provided that Executive is eligible to participate in such plan
under the eligibility provisions thereof that are generally applicable to
the participants thereof.
J) "BOARD" means the Board of Directors of the Company.
K) "CHANGE OF CONTROL" means any of the following events which occur during
the Term of this Agreement:
i) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors, without the approval of the Board
of the acquisition of such securities by the acquiring person;
ii) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors, regardless of whether or not the
Board shall have approved the acquisition of
<PAGE>
such securities by the acquiring person; if, at any time within three (3)
years after the acquisition of such securities, those individuals who
constituted the Board at the time of the acquisition of such securities
cease for any reason to constitute at least a majority of the Board of
Directors of the Company;
iii) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 49.9% or more of the combined
voting power of the Company's then outstanding securities entitled to vote
generally in the election of directors, regardless of whether or not the
Board shall have approved the acquisition of such securities by the
acquiring person;
iv) individuals who, as of the effective date of this Agreement,
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
unless any such change is approved by the vote of at least 80% of the
members of the Board of Directors of the Company in office immediately
prior to such cessation;
v) the Company is merged, consolidated or reorganized into or with another
corporation or other legal person, or securities of the Company are
exchanged for securities of another corporation or other legal person, and
immediately after such merger, consolidation, reorganization or exchange
less than 75% of the combined voting power of the then-outstanding
securities of such corporation or person immediately after such
transaction are held, directly or indirectly, in the aggregate by the
holders of securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction;
vi) the Company in any transaction or series of related transactions,
sells all or substantially all of its assets to any other corporation or
other legal person and less than 75% of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale or sales are held, directly or indirectly, in the
aggregate by the holders of securities entitled to vote generally in the
election of directors of the Company immediately prior to such sale;
vii) the Company and its affiliates shall sell or transfer (in a single
transaction or series of related transactions) to a non-affiliate business
operations or assets that generated at least two-thirds of the
consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been filed under
the Exchange Act) of the Company and its subsidiaries immediately prior
thereto;
<PAGE>
viii) the Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K (or any successor, form or report or item therein)
that a change in control of the Company has occurred;
ix) the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company;
x) the Company ceases to be the general partner of the Partnership or in
any transaction or a series of transactions sells or transfers Partnership
Units owned by the Company to a third party constituting at least 49.9% of
the limited partnership interests in the Partnership; or
xi) any other transaction or series of related transactions occur that
have substantially the effect of the transactions specified in any of the
preceding clauses in this sentence.
L) "CHANGE OF CONTROL BENEFITS" means the Executive's receipt of the
Termination Payment or any other payment, benefit or compensation
(except for the Additional Amount) which the Executive receives or has
the right to receive from the Company or any of its affiliates as a
result of a Change of Control Termination.
M) "CHANGE OF CONTROL TERMINATION" means (i) a Termination Without Cause
of the Executive's employment by the Company, (a) within three (3)
months prior to a Change of Control and in anticipation of such Change
of Control; (b) on the date of the Change of Control; or (c) within two
(2) years after a Change of Control or (ii) the Executive's resignation
for Good Reason on or within two (2) years after a Change of Control.
N) "CODE" means the Internal Revenue Code of 1986, as amended.
O) "COMPANY" means Storage USA, Inc., a Tennessee corporation, and any
successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
P) "COMPANY SHARES" means the shares of common stock of the Company or
any securities of a successor company which shall have replaced such
common stock.
Q) "EXCESS PARACHUTE PAYMENTS" has the meaning set forth in section 280G
of the Code.
R) "EXCISE TAX" means a tax on Excess Parachute Payments imposed pursuant
to Code section 4999.
S) "EXECUTIVE" means the person identified in the preamble paragraph of
this Agreement.
<PAGE>
T) "FAIR MARKET VALUE" means, on any give date, the closing sale price of
the common stock of the Company on the New York Stock Exchange on such
date, or, if the New York Stock Exchange shall be closed on such date,
the next preceding date on which the New York Stock Exchange shall have
been open.
U) "GOOD REASON" means any of the following:
i) a change in the Executive's status, position or responsibilities
(including reporting relationships and responsibilities) which, in the
Executive's reasonable judgment and without Executive's consent,
represents a reduction in or demotion of the Executive's status,
position or responsibilities as in effect immediately prior to a Change
of Control; the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are
inconsistent with such status, position or responsibilities; or any
removal of the Executive from or failure to reappoint or reelect the
Executive to any of such positions;
ii) the relocation of the Company's principal executive offices to a
location outside a thirty-mile radius of Memphis, Tennessee or the
Company's requiring the Executive to be based at any place other than a
location within a thirty-mile radius of Memphis, Tennessee, except for
reasonably required travel on the Company's business;
iii) the failure by the Company to continue to provide the Executive
with compensation and benefits provided to Executive prior to the
Change of Control or benefits substantially similar to those provided
to the Executive under any of the employee benefit plans in which the
Executive is or becomes a participant, or the taking of any action by
the Company which would directly or indirectly materially reduce any of
such benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change of Control;
iv) any material breach by the Company of any provision of this
Agreement; or
v) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the Company
to assume and agree to perform this Agreement.
V) "OPTION(S)" means any options issued pursuant to the Company's 1993
Omnibus Stock Plan, or any other stock option plan adopted by the
Company, any option granted with respect to Partnership Units, or any
option granted under the plan of any successor company that replaces or
assumes the Company's or the Partnership's options.
W) "PARTNERSHIP" means SUSA Partnership, L.P.
X) "PARTNERSHIP UNIT(S)" means limited partnership interests of the
Partnership. The holder has the option of requiring the Company to
redeem such interests. The Company may
<PAGE>
elect to effectuate such redemption by either paying cash or exchanging
Company Shares for such interests.
Y) "PERMANENT DISABILITY" means a complete physical or mental inability,
confirmed by a licensed physician, to perform the Executive's duties
that continues for a period of six (6) consecutive months.
Z) "PLAN LOAN(S)" means any loan extended by the Company to Executive
pursuant to the 1995 Employee Stock Purchase and Loan Plan, the 1996
Officers' Stock Option Loan Program, or any other similar plan or
program adopted by the Company during the Term of this Agreement.
AA) "RESTRICTED STOCK" means any restricted stock issued pursuant to the
Company's 1993 Omnibus Stock Plan, or any other Award Plan adopted by
the Company, or any restricted stock issued under the plan of any
successor company that replaces or assumes the Company's grants of
restricted stock.
BB) "SELF STORAGE BUSINESS" means the business of acquiring, developing,
constructing, franchising, owning or operating self-storage facilities.
CC) "SELF STORAGE PROPERTY" means any real estate upon which the
Self-Storage Business is being conducted.
DD) "SHAREHOLDER VALUE PLAN" means the Company's Shareholder Value Plan, as
amended.
EE) "SVU GRANT" means the total number of shareholder value units granted to
the Executive pursuant to the Company's Shareholder Value Plan.
FF) "SVU VALUE" means the value of each shareholder value unit based upon
certain performance measures as set forth in the Company's Shareholder
Value Plan.
GG) "TERM" has the meaning assigned to it in Section 2 of this Agreement.
HH) "TERMINATION DATE" means the date employment of Executive is terminated,
which date shall be the date specified as the Termination Date in the
Termination Notice, which date shall not be less than thirty nor more
than sixty days from the date the Termination Notice is given.
II) "TERMINATION NOTICE" means a written notice of termination of employment
by Executive or the Company.
JJ) "TERMINATION PAYMENT" has the meaning set forth in Section 3(b) of this
Agreement.
<PAGE>
KK) "TERMINATION WITH CAUSE" means the termination of the Executive's
employment by the Company for any of the following reasons:
i) the Executive's conviction for a felony;
ii) the Executive's theft, embezzlement, misappropriation of or
intentional infliction of material damage to the Company's property
or business opportunity; or
iii) the Executive's ongoing willful neglect of or failure to perform
his duties hereunder or his ongoing willful failure or refusal to
follow any reasonable, unambiguous duly adopted written direction
of the Company that is not inconsistent with the Executive's
duties, if such willful neglect, failure or refusal is materially
damaging or materially detrimental to the business and operations
of the Company; provided that Executive shall have received written
notice of such failure and shall have continued to engage in such
failure after 30 days following receipt of such notice from the
Company, which notice specifically identifies the manner in which
the Company believes that Executive has engaged in such failure.
For purposes of this subsection, no act, or failure to act, shall be deemed
"willful" unless done, or omitted to be done, by Executive not in good faith,
and without reasonable belief that such action or omission was in the best
interest of the Company.
LL) "TERMINATION WITHOUT CAUSE" means the termination of the Executive's
employment by the Company for any reason other than Termination With
Cause, or termination by the Company due to Executive's death or
Permanent Disability.
MM) "UNIFORM ARBITRATION ACT" means the Uniform Arbitration Act, Tennessee
Code Annotated ss. 29-5-391 et seq., as amended.
2) TERM; TERMINATION.
------------------
a) The term of this Agreement hereunder shall commence on ________1, 1999 and
shall be extended automatically, for so long as the Executive remains
employed by the Company hereunder, on January 1 of each year beginning
January 1, 2000 for an additional one year period (such period, as it may
be extended from time to time, being herein referred to as the "Term"),
unless, not later than September 30 of the preceding year, the Company
shall have given notice that it does not wish to extend this Agreement;
provided, further, if a Change of Control of the Company shall have
occurred during the original or extended term of this Agreement, this
Agreement shall automatically continue in effect for a period of
twenty-four months beyond the month in which such Change of Control
occurred. This Agreement shall automatically terminate upon the
termination of Executive's employment other than by reason of a Change in
Control Termination.
<PAGE>
b) Any purported termination of employment by Executive or the Company (i)
within three (3) months prior to a Change of Control; , (ii) on the date
of the Change of Control; or (iii) within two (2) years after a Change of
Control shall be communicated by a Termination Notice. The Termination
Notice shall indicate the specific termination provision in this Agreement
relied upon and set forth the facts and circumstances claimed to provide a
basis for termination. If the party receiving the Termination Notice
notifies the other party prior to the Termination Date that a dispute
exists concerning the termination, the Termination Date shall be extended
until the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction. The
Termination Date shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Company will continue to pay Executive
his full compensation in effect when the notice giving rise to the dispute
was given and Executive shall continue as a participant in all Award Plans
and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this
subsection are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
3) SEVERANCE BENEFIT IN CONNECTION WITH A CHANGE OF CONTROL TERMINATION.
----------------------------------------------------------------------
a) In the event of a Change of Control Termination, the Company shall, on the
Termination Date, pay the Executive in addition to any Base Salary earned
but not paid through the Termination Date and any amounts due pursuant to
Award Plans and Benefit Plans including, without limitation, the pro rata
amount of Executive's anticipated bonus for the fiscal year in which
Executive is terminated, the compensation and benefits set forth in this
Section 3.
b) The Company shall pay Executive a Termination Payment which is equal to
the sum of two (2) times the Executive's annual Base Salary in effect on
the Termination Date plus two (2) times the amount of the highest annual
cash bonus paid to the Executive for the previous five fiscal years (but
not including compensation under the Company's Shareholder Value Plan)
("Termination Payment"). The Termination Payment shall be calculated and
paid immediately prior to the closing of the transactions constituting a
Change of Control if the Executive receives notice prior to the Change of
Control that his employment will be terminated on or after the Change of
Control.
c) Executive shall be permitted to participate in, and have all rights and
benefits provided by, all Benefit Plans which Executive was eligible to
participate in immediately prior to the Termination Date (to the extent
such participation is possible under the laws then pertaining to such
Benefit Plans), for two years following the Termination Date. If Executive
is no longer eligible to participate in one or more of the Benefit Plans
because
<PAGE>
of such termination, Executive shall be entitled to, and the Company shall
provide to Executive at the Company's sole expense, benefits substantially
equivalent to those Benefit Plans to which Executive was entitled
immediately prior to such termination for two (2) years after the
Termination Date.
d) All restrictions upon any Restricted Stock which may have been awarded to
Executive shall expire and be removed and such Restricted Stock shall be
fully vested at the Termination Date (unless otherwise previously expired
and removed and vested pursuant to the terms of any Restricted Stock award
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan), and such
Stock shall be delivered to Executive. All Options granted to Executive
shall become fully vested at the Termination Date (unless otherwise
previously vested pursuant to the 1993 Omnibus Stock Plan or any other
Award Plan). In lieu of Company Shares issuable upon exercise of any
outstanding and unexercised Options granted to Executive, Executive may,
at Executive's option, receive an amount in cash equal to the product of
(i) the excess of the higher of the Fair Market Value of Company Shares on
the Termination Date, or the highest per share price for Company Shares
actually paid in connection with any Change of Control of the Company,
over the per share exercise price of each Option held by Executive, times
(ii) the number of Company Shares covered by each such Option. In the
event Executive does not elect to receive a cash payment for any
outstanding and unexercised Options granted to Executive, Executive shall
have the right to otherwise exercise such Options in accordance with the
terms and conditions of the 1993 Omnibus Stock Plan or any other
applicable Award Plan. This Agreement shall not prevent Restricted Stock
or Options from vesting pursuant to the terms of the 1993
e) Omnibus Stock Plan or any other Award Plan or otherwise, at a time prior
to that provided for herein.
f) If Executive has any Plan Loans outstanding to the Company immediately
prior to the effective date of a Change of Control Termination, the
Company shall, prior to the effective date of such Change of Control
Termination discharge and cancel the amount of principal and interest due
with respect to such Plan Loans which exceeds the Fair Market Value of
Company Shares securing the Plan Loans. The Executive shall pay the Plan
Loans in full (less the amount discharged) within ninety (90) days
following the Termination Date, and shall have the option of repaying all
amounts due with respect to the Plan Loans by the transfer of the Company
Shares securing the Plan Loans, or by the payment, in cash, of the amounts
due with respect to the Plan Loans. Except as otherwise set forth herein,
Executive shall remain subject to all terms and conditions set forth in
the Loan Agreements and Promissory Notes until the Plan Loans are paid in
full.
g) With respect to Executive's participation in the Company's Shareholder
Value Plan, the Award Periods in connection with all of Executive's
outstanding SVU Grants shall be accelerated such that each Award Period is
deemed to have ended upon the effective date of a Change of Control
Termination. At such time, the Company shall pay Executive an
<PAGE>
amount equal to the SVU Value multiplied by the number of Executive's
outstanding SVU Grants. The SVU Value shall be reduced by 66% for all SVU
Grants which were granted less than twelve months prior to the effective
date of a Change of Control Termination and the SVU Value shall be reduced
by 33% for all SVU Grants which were granted less than twenty-four months
but more than twelve months prior to the effective date of a Change of
Control Termination. No adjustments shall be made to the SVU Value for SVU
Grants which were granted more than twenty-four months prior to the
effective date of the Change of Control Termination. All payments made to
Executive after a Change in Control Termination in connection with
outstanding SVU Grants shall be made solely in cash.
h) The Company shall also pay to Executive all legal fees and expenses
incurred by Executive as a result of a Change of Control Termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided hereunder).
4) CERTAIN TRANSACTIONS. Notwithstanding the provisions of Sections 1(k)(i),
(ii), (iii) or (viii), unless otherwise determined in a specific case by
majority vote of the Board, a Change of Control shall not be deemed to have
occurred for purposes of this Agreement solely because (i) an entity in
which the Company directly or indirectly
beneficially owns 50% or more of the voting securities or (ii) any
Company-sponsored employee stock ownership plan, or any other employee
benefit plan of the Company, either files or becomes obligated to file a
report or a proxy statement under or in response to Schedule 13D, Schedule
14D-l, Form 8-K or Schedule 14A (or any successor schedule, form or report
or item thereon) under the Exchange Act, disclosing beneficial ownership by
it of shares of stock of the Company, or because the Company reports that a
Change of Control of the Company has or may have occurred or will or may
occur in the future by reason of such beneficial ownership.
5) ESCROW ARRANGEMENT. If within thirty (30) days after the effective date of a
Change of Control, Executive's employment has not been terminated, the
Company shall, at the request of Executive, deposit with an escrow agent,
pursuant to an escrow agreement between the Company and such escrow agent, a
sum of money, or other property permitted by such escrow agreement, which is
substantially sufficient in the opinion of the Company's management to fund
the amounts due to Executive set forth in Section 3 of this Agreement. The
escrow agreement shall provide that such agreement may not be terminated
until the earlier of (i) Executive's employment has terminated and all
amounts due to Executive as set forth in this Agreement have been paid to
Executive or (ii) two (2) years after the effective date of the Change of
Control.
6) TAX MATTERS. If the Excise Tax on Excess Parachute Payments will be imposed
on the Executive under Code section 4999 as a result of the Executive's
receipt of the Change of Control Benefits, the Company shall indemnify the
Executive and hold him harmless against
<PAGE>
all claims, losses, damages, penalties, expenses, interest, and Excise
Taxes. To effect this indemnification, the Company shall pay to the
Executive the Additional Amount which is sufficient to indemnify and hold
the Executive harmless from the application of Code sections 280G and
4999, including the amount of (i) the Excise Tax that will be imposed on
the Executive under section 4999 of the Code with respect to the Change of
Control Benefits; (ii) the additional (A) Excise Tax under section 4999 of
the Code, (B) hospital insurance tax under section 3111(b) of the Code and
(C) federal, state and local income taxes for which the Executive is or
will be liable on account of the payment of the amount described in
subitem (i); and (iii) the further excise, hospital insurance and income
taxes for which the Executive is or will be liable on account of the
payment of the amount described in subitem (ii) and this subitem (iii) and
any other indemnification payment under this Section 6. The Additional
Amount shall be calculated and paid to the Executive at the time that the
Termination Payment is paid to the Executive. In calculating the
Additional Amount, the highest marginal rates of federal and applicable
state and local income taxes applicable to individuals and in effect for
the year in which the Change of Control occurs shall be used. Nothing in
this paragraph shall give the Executive the right to receive
indemnification from the Company for federal, state or local income taxes
or hospital insurance taxes payable solely as a result of the Executive's
receipt of (a) the Change in Control Benefits, or (b) any additional
payment, benefit or compensation other than the Additional Amount. As
specified in items (ii) and (iii), above, all income, hospital insurance
and additional Excise Taxes resulting from additional compensation in the
form of the Excise Tax payment specified in item (i), above, shall be paid
to the Executive.
The provisions of this Section 6 are illustrated by the following example:
Assume that the Termination Payment and all other Change of Control
Benefits result in a total federal, state and local income tax and hospital
insurance tax liability of $180,000; and an Excise Tax liability under Code
section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Company must pay to the Executive $70,000, plus an amount necessary to
indemnify the Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000 payment to
the Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
7) EMPLOYMENT STATUS. The parties acknowledge and agree that Executive is an
employee of the Company or of one of its affiliates, not an independent
contractor. Any payments made to Executive by the Company pursuant to this
Agreement shall be treated for federal and state payroll tax purposes as
payments made to a Company employee, irrespective whether such payments are
made subsequent to the Termination Date.
8) NONCOMPETITION; NONSOLICITATION. For a period of two (2) years after
Executive receives Change of Control Benefits pursuant to the terms of this
Agreement, Executive shall not
solicit any employee of the Company to leave the service of the Company or
own any interest in any Self-Storage Property (other than any permissible
interest acquired while Executive was employed by the Company) as partner,
shareholder or otherwise; or directly or
<PAGE>
indirectly, for his own account or for the account of others, either as an
officer, director, promoter, employee, consultant, advisor, agent,
manager, or in any other capacity, engage in the Self-Storage Business.
The nonsolicitation provision shall apply to any Company employee
during the period of such Company employee's employment with the Company and for
a period of 30 days after such employee's termination of employment with the
Company. The Executive agrees that damages at law for violation of the
restrictive covenant contained herein would not be an adequate or proper remedy
to the Company, and that should the Executive violate or threaten to violate any
of the provisions of such covenant, the Company, its successors or assigns,
shall be entitled to obtain a temporary or permanent injunction, as appropriate,
against the Executive in any court having jurisdiction over the person and the
subject matter, prohibiting any further violation of any such covenants. The
injunctive relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
Furthermore, the Executive acknowledges that this Agreement has been
negotiated at arms' length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by this
Agreement has attempted to limit the Executive's right to compete only to the
extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
9) NOTICES. All notices or deliveries authorized or required pursuant to this
Agreement shall be deemed to have been given when in writing and personally
delivered or when deposited in the U.S. mail, certified, return receipt
requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to
the other party:
To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: ________________________
________________________
________________________
10) ENTIRE AGREEMENT. This Agreement contains the entire understanding between
the parties hereto with respect to the subject matter hereof and shall not
be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto. This Agreement
<PAGE>
shall be binding upon and inure to the benefit of the heirs, successors
and assigns of the parties hereto.
11) ARBITRATION. Any controversy concerning or claim arising out of or relating
to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party
seeking such arbitration.
A) THE ARBITRATORS. Any arbitration proceeding shall be conducted by three
(3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit
any matter relating to this
Agreement to arbitration shall do so by written notice to the other party,
which notice shall set forth the items to be arbitrated, such party's choice
of Arbitrator, and such party's substantive position in the arbitration. The
party receiving such notice shall, within fifteen (15) days after receipt of
such notice, appoint an Arbitrator and notify the other party of its
appointment and of its substantive position. The Arbitrators appointed by
the parties to the Arbitration shall select an additional Arbitrator meeting
the aforedescribed criteria. The Arbitrators shall be required to render a
decision in accordance with the procedures set forth in Subparagraph (b)
below within thirty (30) days after being notified of their selection. The
fees of the Arbitrators shall be equally divided amongst the parties to the
arbitration.
B) ARBITRATION PROCEDURES. Arbitration shall be conducted in accordance with
the Uniform Arbitration Act, except to the extent the provisions of such
Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may
bring an action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim to which this provision applies
in any court having jurisdiction over such action in Shelby County,
Tennessee, and the parties agree that jurisdiction and venue in Shelby
County, Tennessee are appropriate and approved by such parties.
12) APPLICABLE LAW. This Agreement shall be governed and construed in accordance
with the laws of the State of Tennessee.
13) ASSIGNMENT. The Executive acknowledges that his services are unique and
personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement.
14) HEADINGS. Headings in this Agreement are for convenience only and shall not
be used to interpret or construe its provisions.
15) SUCCESSORS; BINDING AGREEMENT. The Company will require any successor to all
or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company
<PAGE>
would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a beach of this
Agreement and shall entitle Executive to compensation from the Company in
the same amount and on the same terms as Executive would be entitled to
hereunder if Executive terminates his employment for Good Reason on or
within three (3) years after a Change of Control. The Company's rights and
obligations under this Agreement shall inure to the benefit of and shall
be binding upon the Company's successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
STORAGE USA, INC.
By:_______________________________
Name: Dean Jernigan
Title: Chairman of the Board
And Chief Executive Officer
EXECUTIVE:
____________________________
Name:_______________________
10.1.4 FORM OF SEVERANCE AGREEMENT BETWEEN STORAGE USA, INC. AND EACH OF: (I)
TERESA K. CORONA, VICE PRESIDENT, INVESTOR RELATIONS (II) MICHAEL P.
KENNEY, VICE PRESIDENT OPERATIONS-WESTERN DIVISION; (III) STEPHEN R.
NICHOLS, VICE PRESIDENT OPERATIONS-EASTERN DIVISION; (IV) RICHARD J.
YONIS, VICE PRESIDENT OPERATIONS-CENTRAL DIVISION;
EFFECTIVE AUGUST 16, 1999
<PAGE>
SEVERANCE AGREEMENT
AGREEMENT effective as of August 16, 1999, by and between Storage
USA, Inc., a Tennessee corporation (the "Company"), and ______________ (the
"Executive").
WITNESSETH:
WHEREAS, the Company considers it essential to the best interest of its
stockholders to foster the continuous employment of key management personnel;
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change of Control may exist and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of the Company's and its
affiliates' management personnel to the detriment of the Company and its
stockholders; and
WHEREAS, the Board has determined that it is in the best interest of
the Company and its stockholders to enter into this Agreement in order to
reinforce and encourage the continued attention and dedication of Executive to
his assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change of Control.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1) DEFINITIONS. For purposes of this Agreement, the following terms shall have
the following definitions:
A) "1993 OMNIBUS STOCK PLAN" means the Company's 1993 Omnibus Stock Plan, as
amended.
B) "1995 EMPLOYEE STOCK PURCHASE AND LOAN PLAN" means the Company's 1995
Employee Stock Purchase and Loan Plan, as amended.
C) "1996 OFFICERS' STOCK OPTION LOAN PROGRAM" means the Company's 1996
Officers' Stock Option Loan Program, as amended.
D) "ADDITIONAL AMOUNT" means the amount the Company shall pay to the
Executive in order to indemnify the Executive against all claims, losses,
damages, penalties, expenses, interest, and Excise Taxes (including
additional taxes on such Additional Amount) incurred by Executive as a
result of Executive receiving Change of Control Benefits as further
described in Section 6 of this Agreement.
E) "ARBITRATORS" means the arbitrators selected to conduct any arbitration
proceeding in connection with any disputes arising out of or relating to
this Agreement.
<PAGE>
F) "AWARD PERIOD" means any period in which the Company's performance is
measured in connection with its Shareholder Value Plan.
G) "AWARD PLANS" mean each and every plan or program in which Executive
receives compensation in the form of a cash bonus, shares of stock in the
Company, Partnership Units, or Options, including, without limitation,
compensation received pursuant to the Company's 1993 Omnibus Stock Plan,
1995 Employee Stock Purchase and Loan Plan, 1996 Officers' Stock Option
Loan Program, Shareholder Value Plan, and any other stock option,
incentive compensation, profit participation, bonus or extra compensation
plan that is adopted by the Company and in which the Company's executive
officers generally participate.
H) "BASE SALARY" means the annual salary paid to Executive by the Company.
I) "BENEFIT PLANS" mean each and every health, life, medical, dental,
disability, insurance and welfare plan maintained by the Company that are
maintained from time to time by the Company for the benefit of Executive,
the executives of the Company generally or for the Company's employees
generally, provided that Executive is eligible to participate in such plan
under the eligibility provisions thereof that are generally applicable to
the participants thereof.
J) "BOARD" means the Board of Directors of the Company.
K) "CHANGE OF CONTROL" means any of the following events which occur during
the Term of this Agreement:
i) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of directors, without the approval of the Board
of the acquisition of such securities by the acquiring person;
ii) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting
power of the Company's then outstanding securities entitled to vote
generally in the election of
<PAGE>
directors, regardless of whether or not the Board shall have approved the
acquisition of such securities by the acquiring person; if, at any time
within three (3) years after the acquisition of such securities, those
individuals who constituted the Board at the time of the acquisition of
such securities cease for any reason to constitute at least a majority of
the Board of Directors of the Company;
iii) any "person", as that term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes, is discovered to be, or files a report on Schedule 13D or
14D-1 (or any successor schedule, form or report) disclosing that such
person is a beneficial owner (as defined in Rule 13d-3 under the Exchange
Act or any successor rule or regulation), directly or indirectly, of
securities of the Company representing 49.9% or more of the combined
voting power of the Company's then outstanding securities entitled to vote
generally in the election of directors, regardless of whether or not the
Board shall have approved the acquisition of such securities by the
acquiring person;
iv) individuals who, as of the effective date of this Agreement,
constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
unless any such change is approved by the vote of at least 80% of the
members of the Board of Directors of the Company in office immediately
prior to such cessation;
v) the Company is merged, consolidated or reorganized into or with another
corporation or other legal person, or securities of the Company are
exchanged for securities of another corporation or other legal person, and
immediately after such merger, consolidation, reorganization or exchange
less than 75% of the combined voting power of the then-outstanding
securities of such corporation or person immediately after such
transaction are held, directly or indirectly, in the aggregate by the
holders of securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction;
vi) the Company in any transaction or series of related transactions,
sells all or substantially all of its assets to any other corporation or
other legal person and less than 75% of the combined voting power of the
then-outstanding securities of such corporation or person immediately
after such sale or sales are held, directly or indirectly, in the
aggregate by the holders of securities entitled to vote generally in the
election of directors of the Company immediately prior to such sale;
vii) the Company and its affiliates shall sell or transfer (in a single
transaction or series of related transactions) to a non-affiliate business
operations or assets that generated at least two-thirds of the
consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been filed under
the Exchange Act) of the Company and its subsidiaries immediately prior
thereto;
viii) the Company files a report or proxy statement with the Securities
and Exchange
<PAGE>
Commission pursuant to the Exchange Act disclosing in response to Form 8-K
(or any successor, form or report or item therein) that a change in
control of the Company has occurred;
ix) the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company;
x) the Company ceases to be the general partner of the Partnership or in
any transaction or a series of transactions sells or transfers Partnership
Units owned by the Company to a third party constituting at least 49.9% of
the limited partnership interests in the Partnership; or
xi) any other transaction or series of related transactions occur that
have substantially the effect of the transactions specified in any of the
preceding clauses in this sentence.
L) "CHANGE OF CONTROL BENEFITS" means the Executive's receipt of the
Termination Payment or any other payment, benefit or compensation
(except for the Additional Amount) which the Executive receives or has
the right to receive from the Company or any of its affiliates as a
result of a Change of Control Termination.
M) "CHANGE OF CONTROL TERMINATION" means (i) a Termination Without Cause
of the Executive's employment by the Company, (a) within three (3)
months prior to a Change of Control and in anticipation of such Change
of Control; (b) on the date of the Change of Control; or (c) within two
(2) years after a Change of Control or (ii) the Executive's resignation
for Good Reason on or within two (2) years after a Change of Control.
N) "CODE" means the Internal Revenue Code of 1986, as amended.
O) "COMPANY" means Storage USA, Inc., a Tennessee corporation, and any
successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
P) "COMPANY SHARES" means the shares of common stock of the Company or any
securities of a successor company which shall have replaced such common
stock.
Q) "EXCESS PARACHUTE PAYMENTS" has the meaning set forth in section 280G of
the Code.
R) "EXCISE TAX" means a tax on Excess Parachute Payments imposed pursuant
to Code section 4999.
S) "EXECUTIVE" means the person identified in the preamble paragraph of
this Agreement.
T) "FAIR MARKET VALUE" means, on any give date, the closing sale price of
the common stock of the Company on the New York Stock Exchange on such
date, or, if the New
<PAGE>
York Stock Exchange shall be closed on such date, the next preceding
date on which the New York Stock Exchange shall have been open.
U) "GOOD REASON" means any of the following:
i) a change in the Executive's status, position or responsibilities
(including reporting relationships and responsibilities) which, in the
Executive's reasonable judgment and without Executive's consent,
represents a reduction in or demotion of the Executive's status,
position or responsibilities as in effect immediately prior to a
Change of Control; the assignment to the Executive of any duties or
responsibilities which, in the Executive's
reasonable judgment, are inconsistent with such status, position or
responsibilities; or any removal of the Executive from or failure to
reappoint or reelect the Executive to any of such positions;
ii) the relocation of the Company's principal executive offices to a
location outside a thirty-mile radius of Memphis, Tennessee or the
Company's requiring the Executive to be based at any place other than
a location within a thirty-mile radius of Memphis, Tennessee, except
for reasonably required travel on the Company's business;
iii) the failure by the Company to continue to provide the Executive
with compensation and benefits provided to Executive prior to the
Change of Control or benefits substantially similar to those provided
to the Executive under any of the employee benefit plans in which the
Executive is or becomes a participant, or the taking of any action by
the Company which would directly or indirectly materially reduce any
of such benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the Change of Control;
iv) any material breach by the Company of any provision of this
Agreement; or
v) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the Company
to assume and agree to perform this Agreement.
V) "OPTION(S)" means any options issued pursuant to the Company's 1993
Omnibus Stock Plan, or any other stock option plan adopted by the
Company, any option granted with respect to Partnership Units, or any
option granted under the plan of any successor company that replaces or
assumes the Company's or the Partnership's options.
W) "PARTNERSHIP" means SUSA Partnership, L.P.
X) "PARTNERSHIP UNIT(S)" means limited partnership interests of the
Partnership. The holder has the option of requiring the Company to
redeem such interests. The Company may
<PAGE>
elect to effectuate such redemption by either paying cash or exchanging
Company Shares for such interests.
Y) "PERMANENT DISABILITY" means a complete physical or mental inability,
confirmed by a licensed physician, to perform the Executive's duties
that continues for a period of six (6) consecutive months.
Z) "PLAN LOAN(S)" means any loan extended by the Company to Executive
pursuant to the 1995 Employee Stock Purchase and Loan Plan, the 1996
Officers' Stock Option Loan Program, or any other similar plan or
program adopted by the Company during the Term of this Agreement.
AA) "RESTRICTED STOCK" means any restricted stock issued pursuant to the
Company's 1993 Omnibus Stock Plan, or any other Award Plan adopted by
the Company, or any restricted stock issued under the plan of any
successor company that replaces or assumes the Company's grants of
restricted stock.
BB) "SELF STORAGE BUSINESS" means the business of acquiring, developing,
constructing, franchising, owning or operating self-storage facilities.
CC) "SELF STORAGE PROPERTY" means any real estate upon which the
Self-Storage Business is being conducted.
DD) "SHAREHOLDER VALUE PLAN" means the Company's Shareholder Value Plan, as
amended.
EE) "SVU GRANT" means the total number of shareholder value units granted to
the Executive pursuant to the Company's Shareholder Value Plan.
FF) "SVU VALUE" means the value of each shareholder value unit based upon
certain performance measures as set forth in the Company's Shareholder
Value Plan.
GG) "TERM" has the meaning assigned to it in Section 2 of this Agreement.
HH) "TERMINATION DATE" means the date employment of Executive is terminated,
which date shall be the date specified as the Termination Date in the
Termination Notice, which date shall not be less than thirty nor more
than sixty days from the date the Termination Notice is given.
II) "TERMINATION NOTICE" means a written notice of termination of employment
by Executive or the Company.
JJ) "TERMINATION PAYMENT" has the meaning set forth in Section 3(b) of this
Agreement.
KK) "TERMINATION WITH CAUSE" means the termination of the Executive's
employment by the Company for any of the following reasons:
<PAGE>
i) the Executive's conviction for a felony;
ii) the Executive's theft, embezzlement, misappropriation of or
intentional infliction of material damage to the Company's
property or business opportunity; or
iii) the Executive's ongoing willful neglect of or failure to perform
his duties hereunder or his ongoing willful failure or refusal to
follow any reasonable, unambiguous duly adopted written direction
of the Company that is not inconsistent with the Executive's
duties, if such willful neglect, failure or refusal is materially
damaging or materially detrimental to the business and operations
of the Company; provided that Executive shall have received
written notice of such failure and shall have continued to engage
in such failure after 30 days following receipt of such notice
from the Company, which notice specifically identifies the manner
in which the Company believes that Executive has engaged in such
failure.
For purposes of this subsection, no act, or failure to act, shall be deemed
"willful" unless done, or omitted to be done, by Executive not in good faith,
and without reasonable belief that such action or omission was in the best
interest of the Company.
LL) "TERMINATION WITHOUT CAUSE" means the termination of the Executive's
employment by the Company for any reason other than Termination With
Cause, or termination by the Company due to Executive's death or
Permanent Disability.
MM) "UNIFORM ARBITRATION ACT" means the Uniform Arbitration Act, Tennessee
Code Annotated ss. 29-5-391 et seq., as amended.
2) TERM; TERMINATION.
------------------
a) The term of this Agreement hereunder shall commence on _______________,
1999 and shall be extended automatically, for so long as the Executive
remains employed by the Company hereunder, on January 1 of each year
beginning January 1, 2000 for an additional one year period (such period,
as it may be extended from time to time, being herein referred to as the
"Term"), unless, not later than September 30 of the preceding year, the
Company shall have given notice that it does not wish to extend this
Agreement; provided, further, if a Change of Control of the Company shall
have occurred during the original or extended term of this Agreement, this
Agreement shall automatically continue in effect for a period of
twenty-four months beyond the month in which such Change of Control
occurred. This Agreement shall automatically terminate upon the
termination of Executive's employment other than by reason of a Change in
Control Termination.
b) Any purported termination of employment by Executive or the Company (i)
within three (3) months prior to a Change of Control; (ii) on the date of
the Change of Control; or (iii) within two (2) years after a Change of
Control shall be communicated by a Termination Notice. The Termination
Notice shall indicate the specific termination provision in this Agreement
relied upon and set forth the facts and circumstances claimed to
<PAGE>
provide a basis for termination. If the party receiving the Termination
Notice notifies the other party prior to the Termination Date that a
dispute exists concerning the termination, the Termination Date shall be
extended until the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction. The
Termination Date shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Company will continue to pay Executive
his full compensation in effect when the notice giving rise to the dispute
was given and Executive shall continue as a participant in all Award Plans
and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this
subsection are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
3) SEVERANCE BENEFIT IN CONNECTION WITH A CHANGE OF CONTROL TERMINATION.
---------------------------------------------------------------------
a) In the event of a Change of Control Termination, the Company shall, on the
Termination Date, pay the Executive in addition to any Base Salary earned
but not paid through the Termination Date and any amounts due pursuant to
Award Plans and Benefit Plans including, without limitation, the pro rata
amount of Executive's anticipated bonus for the fiscal year in which
Executive is terminated, the compensation and benefits set forth in this
Section 3.
b) The Company shall pay Executive a Termination Payment which is equal to
the sum of one and one-half (1.5) times the Executive's annual Base Salary
in effect on the Termination Date plus one and one-half (1.5) times the
amount of the highest annual cash bonus paid to the Executive for the
previous five fiscal years (but not including compensation under the
Company's Shareholder Value Plan) ("Termination Payment"). The Termination
Payment shall be calculated and paid immediately prior to the closing of
the transactions constituting a Change of Control if the Executive
receives notice prior to the Change of Control that his employment will be
terminated on or after the Change of Control.
c) Executive shall be permitted to participate in, and have all rights and
benefits provided by, all Benefit Plans which Executive was eligible to
participate in immediately prior to the Termination Date (to the extent
such participation is possible under the laws then pertaining to such
Benefit Plans), for two years following the Termination Date. If Executive
is no longer eligible to participate in one or more of the Benefit Plans
because of such termination, Executive shall be entitled to, and the
Company shall provide to Executive at the Company's sole expense, benefits
substantially equivalent to those Benefit Plans to which Executive was
entitled immediately prior to such termination for two (2) years after the
Termination Date.
<PAGE>
d) All restrictions upon any Restricted Stock which may have been awarded to
Executive shall expire and be removed and such Restricted Stock shall be
fully vested at the Termination Date (unless otherwise previously expired
and removed and vested pursuant to the terms of any Restricted Stock award
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan), and such
Stock shall be delivered to Executive. All Options granted to Executive
shall become fully vested at the Termination Date (unless otherwise
previously vested pursuant to the 1993 Omnibus Stock Plan or any other
Award Plan). In lieu of Company Shares issuable upon exercise of any
outstanding and unexercised Options granted to Executive, Executive may,
at Executive's option, receive an amount in cash equal to the product of
(i) the excess of the higher of the Fair Market Value of Company Shares on
the Termination Date, or the highest per share price for Company Shares
actually paid in connection with any Change of Control of the Company,
over the per share exercise price of each Option held by Executive, times
(ii) the number of Company Shares covered by each such Option. In the
event Executive does not elect to receive a cash payment for any
outstanding and unexercised Options granted to Executive, Executive shall
have the right to otherwise exercise such Options in accordance with the
terms and conditions of the 1993 Omnibus Stock Plan or any other
applicable Award Plan. This Agreement shall not prevent Restricted Stock
or Options from vesting pursuant to the terms of the 1993 Omnibus Stock
Plan or any other Award Plan or otherwise, at a time prior to that
provided for herein.
e) If Executive has any Plan Loans outstanding to the Company immediately
prior to the effective date of a Change of Control Termination, the
Company shall, prior to the effective date of such Change of Control
Termination discharge and cancel the amount of principal and interest due
with respect to such Plan Loans which exceeds the Fair Market Value of
Company Shares securing the Plan Loans. The Executive shall pay the Plan
Loans in full (less the amount discharged) within ninety (90) days
following the Termination Date, and shall have the option of repaying all
amounts due with respect to the Plan Loans by the transfer of the Company
Shares securing the Plan Loans, or by the payment, in cash, of the amounts
due with respect to the Plan Loans. Except as otherwise set forth herein,
Executive shall remain subject to all terms and conditions set forth in
the Loan Agreements and Promissory Notes until the Plan Loans are paid in
full.
f) With respect to Executive's participation in the Company's Shareholder
Value Plan, the Award Periods in connection with all of Executive's
outstanding SVU Grants shall be accelerated such that each Award Period is
deemed to have ended upon the effective date of a Change of Control
Termination. At such time, the Company shall pay Executive an amount equal
to the SVU Value multiplied by the number of Executive's outstanding SVU
Grants. The SVU Value shall be reduced by 66% for all SVU Grants which
were granted less than twelve months prior to the effective date of a
Change of Control Termination and the SVU Value shall be reduced by 33%
for all SVU Grants which were granted less than twenty-four months but
more than twelve months prior to the effective date of a Change of Control
Termination. No adjustments shall be made to the SVU Value for SVU Grants
which were granted more than twenty-four months prior to the
<PAGE>
effective date of the Change of Control Termination. All payments made to
Executive after a Change in Control Termination in connection with
outstanding SVU Grants shall be made solely in cash.
g) The Company shall also pay to Executive all legal fees and expenses
incurred by Executive as a result of a Change of Control Termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the application of
Section 4999 of the Code to any payment or benefit provided hereunder).
4) CERTAIN TRANSACTIONS. Notwithstanding the provisions of Sections 1(k)(i),
(ii), (iii) or (viii), unless otherwise determined in a specific case by
majority vote of the Board, a Change of Control shall not be deemed to have
occurred for purposes of this Agreement solely because (i) an entity in
which the Company directly or indirectly beneficially owns 50% or more of
the voting securities or (ii) any Company-sponsored employee stock ownership
plan, or any other employee benefit plan of the Company, either files or
becomes obligated to file a report or a proxy statement under or in response
to Schedule 13D, Schedule 14D-l, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item thereon) under the Exchange Act, disclosing
beneficial ownership by it of shares of stock of the Company, or because the
Company reports that a Change of Control of the Company has or may have
occurred or will or may occur in the future by reason of such beneficial
ownership.
5) ESCROW ARRANGEMENT. If within thirty (30) days after the effective date of a
Change of Control, Executive's employment has not been terminated, the
Company shall, at the request of Executive, deposit with an escrow agent,
pursuant to an escrow agreement between the Company and such escrow agent, a
sum of money, or other property permitted by such escrow agreement, which is
substantially sufficient in the opinion of the Company's management to fund
the amounts due to Executive set forth in Section 3 of this Agreement. The
escrow agreement shall provide that such agreement may not be terminated
until the earlier of (i) Executive's employment has terminated and all
amounts due to Executive as set forth in this Agreement have been paid to
Executive or (ii) two (2) years after the effective date of the Change of
Control.
6) TAX MATTERS. If the Excise Tax on Excess Parachute Payments will be imposed
on the Executive under Code section 4999 as a result of the Executive's
receipt of the Change of Control Benefits, the Company shall indemnify the
Executive and hold him harmless against all claims, losses, damages,
penalties, expenses, interest, and Excise Taxes. To effect this
indemnification, the Company shall pay to the Executive the Additional
Amount which is sufficient to indemnify and hold the Executive harmless from
the application of Code sections 280G and 4999, including the amount of (i)
the Excise Tax that will be imposed on the Executive under section 4999 of
the Code with respect to the Change of Control Benefits; (ii) the additional
(A) Excise Tax under section 4999 of the Code, (B) hospital insurance tax
under section 3111(b) of the Code and (C) federal, state and local income
taxes for which the Executive is or will be liable on account of the payment
of the amount described in subitem
<PAGE>
(i); and (iii) the further excise, hospital insurance and income taxes for
which the Executive is or will be liable on account of the payment of the
amount described in subitem (ii) and this sub item (iii) and any other
indemnification payment under this Section 6. The Additional Amount shall be
calculated and paid to the Executive at the time that the Termination
Payment is paid to the Executive. In calculating the Additional Amount, the
highest marginal rates of federal and applicable state and local income
taxes applicable to individuals and in effect for the year in which the
Change of Control occurs shall be used. Nothing in this paragraph shall give
the Executive the right to receive indemnification from the Company for
federal, state or local income taxes or hospital insurance taxes payable
solely as a result of the Executive's receipt of (a) the Change in Control
Benefits, or (b) any additional payment, benefit or compensation other than
the Additional Amount. As specified in items (ii) and (iii), above, all
income, hospital insurance and additional Excise Taxes resulting from
additional compensation in the form of the Excise Tax payment specified in
item (i), above, shall be paid to the Executive.
The provisions of this Section 6 are illustrated by the following example:
Assume that the Termination Payment and all other Change of Control
Benefits result in a total federal, state and local income tax and hospital
insurance tax liability of $180,000; and an Excise Tax liability under Code
section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
the Company must pay to the Executive $70,000, plus an amount necessary to
indemnify the Executive for all federal, state and local income taxes, hospital
insurance taxes, and Excise Taxes that will result from the $70,000 payment to
the Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
7) EMPLOYMENT STATUS. The parties acknowledge and agree that Executive is an
employee of the Company or of one of its affiliates, not an independent
contractor. Any payments made to Executive by the Company pursuant to this
Agreement shall be treated for federal and state payroll tax purposes as
payments made to a Company employee, irrespective whether such payments are
made subsequent to the Termination Date.
8) NONCOMPETITION; NONSOLICITATION. For a period of two (2) years after
Executive receives Change of Control Benefits pursuant to the terms of this
Agreement, Executive shall not solicit any employee of the Company to leave
the service of the Company or own any interest in any Self-Storage Property
(other than any permissible interest acquired while Executive was employed
by the Company) as partner, shareholder or otherwise; or directly or
indirectly, for his own account or for the account of others, either as an
officer, director, promoter, employee, consultant, advisor, agent, manager,
or in any other capacity, engage in the Self-Storage Business.
The nonsolicitation provision shall apply to any Company employee
during the period of such Company employee's employment with the Company and for
a period of 30 days after such employee's termination of employment with the
Company. The Executive agrees that damages at law for violation of the
restrictive covenant contained herein would not be an adequate or proper remedy
to the Company, and that should the Executive violate or threaten to violate any
<PAGE>
of the provisions of such covenant, the Company, its successors or assigns,
shall be entitled to obtain a temporary or permanent injunction, as appropriate,
against the Executive in any court having jurisdiction over the person and the
subject matter, prohibiting any further violation of any such covenants. The
injunctive relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
Furthermore, the Executive acknowledges that this Agreement has been
negotiated at arms' length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by this
Agreement has attempted to limit the Executive's right to compete only to the
extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
9) NOTICES. All notices or deliveries authorized or required pursuant to this
Agreement shall be deemed to have been given when in writing and personally
delivered or when deposited in the U.S. mail, certified, return receipt
requested, postage prepaid,
addressed to the parties at the following addresses or to such other
addresses as either may designate in writing to the other party:
To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: ________________________
________________________
________________________
10) ENTIRE AGREEMENT. This Agreement contains the entire understanding between
the parties hereto with respect to the subject matter hereof and shall not
be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto. This Agreement shall be binding upon and
inure to the benefit of the heirs, successors and assigns of the parties
hereto.
11) ARBITRATION. Any controversy concerning or claim arising out of or relating
to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party
seeking such arbitration.
<PAGE>
A) THE ARBITRATORS. Any arbitration proceeding shall be conducted by three
(3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and
expert competence in the matters being arbitrated. The party desiring to
submit any matter relating to this Agreement to arbitration shall do so
by written notice to the other party, which notice shall set forth the
items to be arbitrated, such party's choice of Arbitrator, and such
party's substantive position in the arbitration. The party receiving
such notice shall, within fifteen (15) days after receipt of such
notice, appoint an Arbitrator and notify the other party of its
appointment and of its substantive position. The Arbitrators appointed
by the parties to the Arbitration shall select an additional Arbitrator
meeting the aforedescribed criteria. The Arbitrators shall be required
to render a decision in accordance with the procedures set forth in
Subparagraph (b) below within thirty (30) days after being notified of
their selection. The fees of the Arbitrators shall be equally divided
amongst the parties to the arbitration.
B) ARBITRATION PROCEDURES. Arbitration shall be conducted in accordance
with the Uniform Arbitration Act, except to the extent the provisions of
such Act are modified by this Agreement or the subsequent mutual
agreement of the parties. Judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
Any party hereto may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which
this provision applies in any court having jurisdiction over such action
in Shelby County, Tennessee, and the parties agree that jurisdiction and
venue in Shelby County, Tennessee are appropriate and approved by such
parties.
12) APPLICABLE LAW. This Agreement shall be governed and construed in accordance
with the laws of the State of Tennessee.
13) ASSIGNMENT. The Executive acknowledges that his services are unique and
personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement.
14) HEADINGS. Headings in this Agreement are for convenience only and shall not
be used to interpret or construe its provisions.
15) SUCCESSORS; BINDING AGREEMENT. The Company will require any successor to all
or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a beach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
Executive would be entitled to hereunder if Executive terminates his
employment for Good Reason on or within three (3) years after a Change of
Control. The Company's rights and obligations under this Agreement shall
inure to the benefit of and shall be binding upon the Company's successors
and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
STORAGE USA, INC.
By: __________________________
Name: Dean Jernigan
Title: Chairman of the Board
And Chief Executive Officer
EXECUTIVE:
_______________________________
Name: _________________________
STORAGE USA, INC.
AMENDMENT NO. 3 TO
1995 EMPLOYEE STOCK PURCHASE AND LOAN PLAN
This Amendment No. 3, dated as of August 5, 1999 to the Storage USA,
Inc. 1995 Employee Stock Purchase and Loan Plan recites and provides as follows:
WHERAS, at a meeting held on August 4, 1999, the Board of
Directors (the "Board") of Storage USA, Inc. (the "Company") and the
Compensation Committee of the Board determined, pursuant to Article III and
Article XI of the Plan, to amend the Company's 1995 Employee Stock Purchase and
Loan Plan (the "Plan") to eliminate the requirement contained in Section 7.02 of
the Plan that a Participant's spouse execute Notes under the Plan.
NOW, THEREFORE, Article 7.02 of the Plan is amended by deleting
therefrom references to the Participant's spouse and the requirement
that a Participant's spouse execute Notes delivered under the Plan.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 3 to be
executed as of the date first above written.
STORAGE USA, INC.
By: /s/ John W. McConomy
--------------------
Name: John W. McConomy
Its: Executive Vice President, General Counsel
and Secretary
Dated: August 5, 1999
STORAGE USA, INC.
AMENDED AND RESTATED
AMENDMENT NO. 4 TO
1993 OMNIBUS STOCK PLAN
This amended and restated Amendment No. 4, dated as of November 4, 1998
to the Storage USA, Inc. 1993 Omnibus Stock Plan, as amended, recites and
provides as follows:
WHEREAS, at a meeting held on November 4, 1998 the Board of Directors
of Storage USA, Inc. (the "Company") amended the Company's 1993 Omnibus Stock
Plan (the "Plan"), pursuant to paragraph 19 of the Plan, to: (i) increase the
number of options to purchase shares of the Company's Common Stock granted to
non-employee directors from 1000 to 2000; and (ii) to change the date of such
option grant from the last day of the year to the day of the Company's third
quarter earnings release, provided such release is made following the close of
the principal exchange upon which the Company's shares are listed.
NOW, THEREFORE, the following amendment to the Plan is hereby adopted:
Paragraph 6(h)(ii) is deleted in its entirety and the following
substituted therefor:
Each non-employee director will receive an annual automatic grant of
options to purchase 2000 shares of the Company's Common Stock, to be
awarded on the date of the Company's third quarter earnings release
(provided such release is made after the close of the principal stock
exchange upon which the Company's stock is listed), at the closing
stock price on such date, which options shall vest on such date.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 4 to be
executed as of the date first above written.
STORAGE USA, INC.
By: /s/ John W. McConomy
--------------------
Name: John W. McConomy
Its: Executive Vice President, General Counsel
and Secretary
STORAGE USA, INC.
165 Madison Avenue
Suite 1300
Memphis, Tennessee 38103
(901) 252-2000
August 4, 1999
Christopher P. Marr
Storage USA
165 Madison Ave. - Suite 1300
Memphis, TN 38103
Dear Chris,
Since August 1, 1998, you have served the Company in the capacity of Chief
Financial Officer. You report to the Chief Executive Officer. Your salary is
$210,000 subject to merit increases consistent with the Company's Compensation
Committee policy. In addition, you are eligible to receive an annual bonus and
other benefits made available from time to time by the Company to its senior
executive officers. Such benefits currently include, but are not limited to
participation in the Company's stock option plan, Shareholder Value Plan and
Employee Stock Purchase and Loan Plan. These benefits are subject to revision by
the Compensation Committee of the Board of Directors.
In consideration of your service to the Company, and as part of your
compensation/benefits package as a senior executive, the Company agrees, that,
for so long as you are employed by the Company, in the event that your
employment is terminated without Cause, if your job duties are significantly
diminished, or if you are required to report to any executive other than the
Chief Executive Officer you will be paid an amount equal to two years of your
then-current base salary (a "Termination Payment"). "Cause" means, without
limitation, failure to satisfactorily perform the duties and responsibilities of
the position in all material respects, willful failure to carry out the
reasonable and material instructions of the CEO, embezzlement of the Company's
assets, fraud, misrepresentation, theft or violations of law or Company policies
(other than minor traffic violations or similar offenses). In the event of a
termination of your employment for Cause, you will only be entitled to those
severance benefits that may be awarded you by the Company's Compensation
Committee of the Board of Directors at its sole discretion.
You agree that, for two years following the receipt of a Termination Payment,
you will not, directly or indirectly work for or hold any equity interest or
other interest in any entity that, as of the date of your termination, is in any
line of business directly competitive to that of the Company.
Your employment with the Company is at will and may be terminated at any time
for any reason, subject to payment of the Termination Payment in the event of a
termination without cause, as set out above.
You also agree that this letter agreement will be superseded by any subsequent
employment agreement between the Company and you, provided that such
agreement(s) contains a termination payment equivalent to the Termination
Payment.
Please sign, date and return the duplicate original of this letter indicating
your acceptance of its terms and conditions.
Sincerely,
/s/ Dean Jernigan /s/ Christopher P. Marr
- ----------------- -----------------------
Accepted and Agreed
Exhibit 10.5
[STORAGE USA LETTERHEAD]
June 12, 1998
Bruce F. Taub, Esq.
10320 Little Patuxent Parkway
Suite 608
Columbia, MD 21044
RE: EMPLOYMENT OFFER/TERMS AND CONDITIONS
Dear Bruce:
It is with pleasure that I, on behalf of Storage USA Franchise Corp.,
offer you the position of Senior Vice President and General Counsel. In this
position you will report directly to the Chief Financial Officer of Storage USA
Franchise Corp. or until such time as that position is created, the Senior Vice
President of Finance and Accounting of Storage USA, Inc. In the event the
position of Chief Financial Officer is vacant at the time of your relocation,
you will report directly to the Chief Executive Officer of Storage USA Franchise
Corp. Accordingly, the balance of this letter will set forth the terms and
conditions related to your employment with Storage USA Franchise Corp.:
1. Salary: Your starting salary is One Hundred Fifty Thousand Dollars
($150,000.00) per year with annual reviews beginning in the Spring of 1999. Your
first potential salary increase would be effective July 1, 1999.
2. Bonus Plan: Participation in the employee bonus plan (the "Bonus
Plan") is provided based upon eligibility for a bonus equal to twenty-two
percent (22%) to forty-four percent (44%) of your earned based salary. Sixty
percent (60%) of the bonus is based on the achievement of corporate goals and
forty percent (40%) is based on achievement of individual goals. The Bonus Plan
is presently geared to performance of Storage USA, Inc. and is tied to its funds
from operations per share. The goals for calendar year 1998 are funds from
operations per share of growth of eight percent (8%) at the lower threshold, ten
percent (10%) at the middle threshold and twelve percent (12%) at the upper
threshold. Individual goals would be established between you and the officer
within the Company to whom you report within a reasonable period established by
you and the officer to whom you report.
3. Employee Stock Option Plan: We will grant you fifteen thousand
options of Storage USA, Inc. stock, priced at the closing price on the NYSE on
your hire date. For purposes hereof, your hire date shall be September 1, 1998.
The options will have a five-year (5) vesting period
<PAGE>
equally divided. In addition each year there may be grants of stock options to
senior level employees, a class of which you are a part, at the Board of
Directors' discretion. In addition to the Employee Stock Option Plan, we will
also provide at your election, one hundred percent (100%) financing to purchase
up to ten thousand shares (10,000) of Storage USA, Inc. stock. It is a seven-
(7) year note and dividends are applied to pay interest and excess dividends pay
principal. The interest is calculated by dividing the annual dividend per share
by the per share stock price on the date you sign the note. A copy of the
employee stock purchase plan and stock option plan has been provided to you
under separate cover.
4. Lost 401-K Contribution: As a result of the matching contribution
from your present employer being lost, we will pay you Five Thousand Dollars
($5,000.00) on February 1, 1999 to compensate you for such loss.
5. Storage USA Franchise Corp. Incentives: As Senior Vice President
and General Counsel, you will be eligible to participate in additional long term
incentives tied to the success of Storage USA Franchise Corp. These incentives
are being determined and will be discussed with you as soon as practical but, in
any event, are expected to include a program whereby senior executives will
participate in stock ownership of Storage USA Franchise Corp. prior to Storage
USA Franchise Corp.'s election to pursue an initial public offering or private
sale, transfer or other issuance of its stock. Exact allocation of such shares
of stock shall be at the discretion of the Board of Directors.
6. Other Benefits: You will be eligible for all benefits available to
our corporate employees in accordance with our policy and procedures manual, a
copy of which has been provided to you under separate cover. These benefits
include, but shall not be limited to, paid vacation, 401-K, profit sharing,
health insurance, paid prescription plans, etc. Disability insurance will be
provided in accordance with the terms of the standard Company plan, a copy of
which has been provided to you under separate cover.
7. Severance: In addition to all the benefits referenced above, if
during your first twenty-four (24) months of employment, your position is
terminated for any reason other than for Cause (as hereinafter defined) or your
job description changes materially without your consent, you will be paid a
severance of one year's base compensation plus a prorated bonus and the Company
will continue to pay all health insurance premiums on your behalf for one (1)
year. All unvested stock options would immediately vest. (All of the
above-referenced payments upon severance shall be hereinafter referred to as the
"Severance Payments").
The Company agrees that there will be no obligation on your part to
mitigate the amount of any of the Severance Payments by seeking other employment
or otherwise. Nor, shall the amount of any Severance Payment be reduced by any
compensation earned by you from any source after termination or other
disposition of your employment.
<PAGE>
8. Staff: Insofar as we expect you to widely continue the use of
outside counsel, initially, it is contemplated that you will require a
secretary/administrative assistant, a paralegal or potentially two (2),
depending on the volume of transactions overseen or coordinated by your
department, and possibly another staff attorney depending upon the goals and
objectives of your department.
9. Relocation: As part of your offer, you are required to relocate to
the Memphis, Tennessee office no later than the conclusion of the month of
October, 1999. As part of your relocation, the Company agrees to all of the
provisions of policy A-4 of the Storage USA, Inc. Policies and Procedures
manual, a copy of which was provided to you under separate cover.
10. Bar Associations: As a member of the Maryland Bar Association, it
is our understanding that various dues are required to be paid for a member to
remain in good standing. Accordingly, the Company agrees to pay all dues and
expenses associated with your membership in the Maryland Bar and agrees to pay
all costs associated with your becoming and remaining a member in good standing
of the Tennessee Bar Association.
The management team of Storage USA Franchise Corp. and Storage USA,
Inc. are excited about you joining us. We all sincerely hope that you will
accept this offer and become part of the Storage USA team. To evidence your
acceptance of this offer, please execute this letter in the space provided
below.
Sincerely yours,
/s/ Christopher P. Marr
-----------------------
Christopher P. Marr
Senior Vice President,
Finance and Accounting
Storage USA, Inc.
CPM/kmh
AGREED TO AND ACCEPTED THIS 30TH DAY OF JUNE, 1998.
----
/s/ BRUCE F. TAUB
- -----------------
BRUCE F. TAUB
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's unaudited consolidated financial statements of September 30, 1999,
and the nine months then ended, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 1,672
<SECURITIES> 0
<RECEIVABLES> 219,328
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 221,000
<PP&E> 1,626,603
<DEPRECIATION> 86,222
<TOTAL-ASSETS> 1,761,381
<CURRENT-LIABILITIES> 105,702
<BONDS> 800,056
0
0
<COMMON> 0
<OTHER-SE> 855,623
<TOTAL-LIABILITY-AND-EQUITY> 1,761,381
<SALES> 182,671
<TOTAL-REVENUES> 188,946
<CGS> 0
<TOTAL-COSTS> 99,176
<OTHER-EXPENSES> 4,116
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,795
<INCOME-PRETAX> 53,859
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,859
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,859
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
Included in other expenses are minority interest expense and gain/(loss)
on exchange of self-storage facilities
</FN>
</TABLE>
