As filed with the Securities and Exchange Commission on April 22, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) or 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
_________________________
SOVRAN ACQUISITION LIMITED PARTNERSHIP
(Exact Name of Registrant As Specified in its Charter)
_________________________
Delaware 16-1481551
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5166 Main Street
Williamsville, New York 14221
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 633-1850
_________________________
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which
to be so Registered Each Class is to be Registered
Not Applicable Not Applicable
Securities to be registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
<PAGE>
TABLE OF CONTENTS
Page No.
ITEM 1. BUSINESS
ITEM 2. FINANCIAL INFORMATION
ITEM 3. PROPERTIES
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
ITEM 6. EXECUTIVE COMPENSATION
ITEM 7. CERTAIN TRANSACTIONS
ITEM 8. LEGAL PROCEEDINGS
ITEM 9. MARKET PRICE AND DISTRIBUTIONS AND RELATED SECURITY
HOLDER MATTERS
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
<PAGE>
ITEM 1. BUSINESS
General
Sovran Acquisition Limited Partnership (the "Operating Partnership")
is the entity through which Sovran Self Storage, Inc. (the "Company"), a
self-administered and self-managed real estate investment trust ("REIT"),
conducts substantially all of the Company's business and owns substantially
all of the Company's assets. The Operating Partnership is one of the
largest owners and operators of self-storage properties in the Eastern
United States and Texas. In 1995, the Company was formed under Maryland
law and the Operating Partnership was organized as a Delaware limited
partnership to continue and to expand the self-storage operations of the
Company's privately owned predecessor organizations. The term "Company
Predecessors" as used herein refers to the Company's predecessor
organizations prior to the Company's initial public offering in June, 1995
(the "Initial Offering") and the concurrent completion of the various
transactions that occurred simultaneously therewith (the "Formation
Transactions"). The term "Company" as used herein means Sovran Self
Storage, Inc. and its subsidiaries on a consolidated basis (including the
Operating Partnership) or, where the context so requires, Sovran Self
Storage, Inc. only, and, as the context may require, the Company
Predecessors. The term "Operating Partnership" as used herein means Sovran
Acquisition Limited Partnership and, as the context may require, the
Company Predecessors.
The Company is currently an 96.53% economic owner of the Operating
Partnership and controls it through Sovran Holdings, Inc. ("Holdings"), a
wholly-owned subsidiary of the Company incorporated in Delaware and the
sole general partner of the Operating Partnership. This structure is
commonly referred to as an umbrella partnership REIT or "UPREIT". The
Board of Directors of Holdings, the members of which are the same as the
members of the Board of Directors of the Company, manages the affairs of
the Operating Partnership by directing the affairs of Holdings. The
Company's limited partner and indirect general partner interests in the
Operating Partnership entitle it to share in cash distributions from, and
in the profits and losses of, the Operating Partnership in proportion to
its ownership interest therein and entitle the Company to vote on all
matters requiring a vote of the limited partners.
The other limited partners of the Operating Partnership are persons
who contributed their direct or indirect interests in certain self-storage
properties to the Operating Partnership. The Operating Partnership is
obligated to redeem each unit of limited partnership ("Unit") at the
request of the holder thereof for cash equal to the fair market value of a
share of the Company's common stock, par value $.01 per share ("Common
Shares"), at the time of such redemption, provided that the Company at its
option may elect to acquire any such Unit presented for redemption for one
Common Share or cash. With each such redemption or acquisition by the
Company, the Company's percentage ownership interest in the Operating
Partnership will increase. In addition, whenever the Company issues Common
Shares, the Company is obligated to contribute any net proceeds therefrom
to the Operating Partnership and the Operating Partnership is obligated to
issue an equivalent number of Units to the Company.
The Operating Partnership may issue additional Units to acquire
additional self-storage properties in transactions that in certain
<PAGE>
circumstances defer some or all of the sellers' tax consequences. The
Operating Partnership believes that many potential sellers of self-storage
properties have a low tax basis in their properties and would be more
willing to sell the properties in transactions that defer Federal income
taxes. Offering Units instead of cash for properties may provide potential
sellers partial Federal income tax deferral.
As of April 20, 1998 the Operating Partnership owned and operated 177
self-storage properties (individually, a "Property" and collectively, the
"Properties") consisting of approximately 9.7 million net rentable square
feet, situated in 19 states, primarily the Eastern United States and Texas.
As of December 31, 1997, the Properties had a weighted average occupancy of
85.1% and a weighted average annual rent per occupied square foot of $7.67.
The Operating Partnership believes that it is one of the largest operators
of self-storage properties in the United States based on facilities owned.
The Operating Partnership seeks to increase cash flow and enhance
investor value through aggressive management of the Properties and
selective acquisitions of new self-storage properties. Aggressive property
management entails increasing rents, increasing occupancy levels, strictly
controlling costs, maximizing collections, strategically expanding and
improving the Properties and, should economic conditions warrant,
developing new properties. The Operating Partnership believes that there
continues to be significant opportunities for growth through acquisitions,
and constantly seeks to acquire self-storage properties located primarily
in the Eastern United States that are susceptible to realization of
increased economies of scale and enhanced performance through application
of the Operating Partnership's management expertise.
The Operating Partnership's principal executive offices are located at
5166 Main Street, Williamsville, New York 14221, and its telephone number
is (716) 633-1850. The Operating Partnership also maintains a regional
office in Atlanta, Georgia.
Industry Overview
Self storage facilities offer inexpensive storage space to residential
and commercial users. In addition to fully enclosed and secure storage
space, some operators, including the Operating Partnership, also offer
outside storage for automobiles, recreational vehicles and boats. The
storage sites are usually fenced and well lighted with gates that are
either manually operated or automated. Most facilities have a full time
manager who resides in an apartment located on the property. Customers
have access to their storage area during business hours and in certain
circumstances are provided with 24 hour access. Individual storage units
are secured by the customer's lock, which may be purchased from the
Operating Partnership, but the customer has control of access to the unit.
The Operating Partnership believes that the self-storage industry is
characterized by a trend toward consolidation, continuing increase in
demand, relatively slow growth in supply and a targeted market of primarily
residential customers.
According to published data, of the approximately 25,000 facilities
in the United States, only 12% are managed by the ten largest operators.
The remainder of the industry is characterized by numerous small, local
operators. The shortage of skilled operators, the scarcity of financing
<PAGE>
available to small operators for acquisitions and expansions and the
potential for savings through economies of scale are factors which are
leading to a consolidation in the industry. The Operating Partnership
believes that as a result of this trend, significant growth opportunities
exist for operators with proven management systems and sufficient capital
resources.
The self-storage industry has also experienced relatively slow growth
in supply in recent years due to the scarcity of financing available to
small operators, restrictive zoning and other regulations and the
substantial start up costs associated with the construction and lease-up of
new facilities. Demand for self-storage service has increased
significantly as indicated by an increase in industry-wide average rents
and in industry average occupancy. It is expected to remain strong because
it is slow to react to changing conditions and because of various other
factors, including, population growth, increased mobility, expansion of
condominium, townhouse and apartment living, and increasing consumer
awareness, particularly by commercial users. Commercial customers tend to
rent larger areas for longer terms, are more reliable payers and are less
sensitive to price increases. The Operating Partnership estimates that
commercial users account for approximately 30-35% of its total occupancy,
which is substantially higher than the reported industry average of 23%.
Property Management
The Operating Partnership believes that it has developed substantial
expertise in managing self-storage facilities. Key elements of the
Operating Partnership's management system include:
- Recruiting, training and retaining capable, aggressive on-site
Property Managers;
- Motivating Property Managers by providing incentive-based
compensation;
- Developing and maintaining an integrated marketing plan for each
Property;
- Minimizing maintenance costs; and
- Linking all facilities to a central customized management
information system.
Each Property is generally managed by a full-time Property Manager and
one or more assistant managers. The Property Manager typically resides on-
site in an apartment furnished by the Operating Partnership. Each Property
Manager is responsible for most operational decisions with respect to his
or her Property, including rent charges and maintenance, subject to certain
monetary limits. Assistant managers enable Property Managers to have
sufficient time to perform marketing functions. Each Property Manager
reports to an Area Manager who in turn reports to a Regional Vice
President. The Operating Partnership currently employs four Regional Vice
Presidents who primarily focus on marketing and overall supervision of the
Area Managers. The Area Managers are responsible for overseeing site
operations.
<PAGE>
Property Managers attend a thorough orientation program and undergo
continuous training which emphasizes telephone skills, closing techniques,
identification of selected marketing opportunities, networking with
possible referral sources, and familiarization with the Operating
Partnership's customized management information system. In addition to
frequent contact with Area Managers and other Operating Partnership
personnel, Property Managers receive periodic newsletters regarding a
variety of operational issues, and from time to time attend "roundtable"
seminars with other Property Managers.
The Operating Partnership annually develops a written marketing plan
for each of its Properties the content of which is highly dependent upon
local conditions. The focus of each marketing plan is, in part, determined
by occupancy rates. If all storage units of a same size at a Property are
at or near 90% occupancy, then the plan will generally include increases in
rental rates. If a Property has excess capacity, then the marketing plan
will target selected markets such as local military bases, colleges,
apartment and condominium complexes, industrial parks, medical centers,
retail shopping malls and office suites. The Operating Partnership
primarily uses telephone directories to advertise its services, including a
map and when possible, listing Properties in the same marketplace in a
single advertisement. The Operating Partnership also conducts quarterly
surveys of its competitors' practices, which include "shopping" competing
facilities.
The Operating Partnership's customized computer system performs
billing, collections and reservation functions for each Property, and also
tracks information used in developing marketing plans regarding occupancy
levels, and tenant demographics and histories. The system generates daily,
weekly and monthly financial reports for each Property that are immediately
transmitted to the Operating Partnership's principal office each night.
The system also requires a Property Manager to input a descriptive
explanation for all debit and credit transactions, paid-to-date changes,
and all other discretionary activities, which allows the accounting staff
at the Operating Partnership's principal office to promptly review all such
transactions. Late charges are automatically imposed. More sensitive
activities such as rental rate changes and unit size or number changes are
completed only by Area Managers. The Operating Partnership's customized
management information system permits it to add new facilities to its
portfolio with minimal additional overhead expense.
The Operating Partnership's Regional Vice Presidents, Area Managers
and Property Managers are compensated with a base salary and may, in
addition, earn incentive compensation. The Operating Partnership annually
establishes a target gross income and net operating income for each
Property. As incentive compensation, Property Managers earn a percentage of
all gross income in excess of the target level; and Regional Vice
Presidents earn a percentage of the combined net operating incomes in
excess of the targeted levels for all facilities reporting to them. The
Area Managers may receive bonuses from the Regional Vice President they
work under. This incentive compensation program is not subject to any caps
or increment requirements. It is not unusual for any manager to earn in
excess of 25% of the base salary as incentive compensation. The Operating
Partnership believes that the structure of these programs causes its
managers to exercise their operational autonomy in a manner to maximize
income through increased rental rates.
<PAGE>
Environmental and Other Regulations
The Operating Partnership is subject to federal, state, and local
environmental regulations that apply generally to the ownership of real
property and the operation of self-storage facilities. The Operating
Partnership has not received notice from any governmental authority or
private party of any material environmental noncompliance, claim, or
liability in connection with any of the Properties, and is not aware of any
environmental condition with respect to any of the Properties that could
have a material adverse effect on the Operating Partnership's financial
condition or results of operations.
The Properties are also generally subject to the same types of local
regulations governing other real property, including zoning ordinances.
The Operating Partnership believes that the Properties are in material
compliance with all such regulations.
Insurance
Each of the Properties is covered by fire, flood and property
insurance, including comprehensive liability, all-risk property insurance,
provided by reputable companies and with commercially reasonable terms. In
addition, the Operating Partnership maintains a policy insuring against
environmental liabilities resulting from tenant storage on terms customary
for the industry, and title insurance insuring fee title to the Properties
in an aggregate amount believed to be adequate.
Competition
The primary factors upon which competition in the self-storage
industry is based are location, rental rates, suitability of a property's
design to prospective tenants' needs, and the manner in which the property
is operated and marketed. The Operating Partnership believes it competes
successfully on these bases. The extent of competition depends in
significant part on local market conditions. The Operating Partnership
seeks to locate its facilities so as not to cause its own Properties to
compete with one another for customers, but the number of self-storage
facilities in a particular area could have a material adverse effect on the
performance of any of the Properties.
Several of the Operating Partnership's competitors, including Public
Storage Management, Inc., Shurgard Incorporated, U-Haul International,
Storage Trust Realty and Storage USA, Inc., are larger and have
substantially greater financial resources than the Operating Partnership.
These larger operators may, among other possible advantages, be capable of
greater leverage and the payment of higher prices for acquisitions.
Investment Policy
While the Operating Partnership emphasizes equity real estate
investments, it may, in its discretion, invest in mortgages and other real
estate interests related to self-storage properties consistent with the
Company's qualification as a REIT. The Operating Partnership may also
retain a purchase money mortgage for a portion of the sale price in
connection with the disposition of properties from time to time. Also,
while the Operating Partnership does not have any current intention of
acquiring any interests other than direct ownership in self-storage
<PAGE>
facilities, subject to the percentage of ownership limitations and gross
income tests necessary for the Company's REIT qualification, the Operating
Partnership also may invest in securities of entities engaged in real
estate activities or securities of other issuers, including for the purpose
of exercising control over such entities.
Disposition Policy
Management periodically reviews the assets comprising the Operating
Partnership's portfolio. The Operating Partnership has no current
intention to dispose of any of the Properties, although it reserves the
right to do so. Any disposition decision will be based on a variety of
factors, including, but not limited to, the (i) potential to continue to
increase cash flow and value, (ii) sale price, (iii) strategic fit with the
rest of the Operating Partnership's portfolio, (iv) potential for, or
existence of, environmental or regulatory issues, (v) alternative uses of
capital, and (vi) maintaining the Company's qualification as a REIT.
Employees
The Operating Partnership currently employs a total of 487 employees,
including 176 Property Managers, 8 Area Managers, 4 Regional Vice
Presidents and 259 part time employees. At the Operating Partnership's
headquarters, in addition to the Company's 3 senior executive officers, the
Operating Partnership employs 37 people engaged in various support
activities such as accounting and management information systems. None of
the Operating Partnership's employees is covered by a collective bargaining
agreement. The Operating Partnership considers its employee relations to
be excellent.
ITEM 2. FINANCIAL INFORMATION
Selected Financial and Operating Information
The following table sets forth selected financial and operating
information on a historical and pro forma basis for the Operating
Partnership and on a combined historical basis for the Company Predecessors
as applicable. The following information should be read in conjunction
with all of the financial statements and notes thereto included elsewhere
herein. The operating information of the Operating Partnership for the
years ended December 31, 1997, and 1996 and for the period from June 26,
1995 to December 31, 1995 have been derived from the financial statements
audited by Ernst & Young LLP, independent auditors, whose report with
respect thereto is included elsewhere herein. The combined operating
information for the period ended June 25, 1995 and the years ended
December 31, 1994 and 1993 has been derived from audited combined financial
statements of the Company Predecessors not included in such report.
The unaudited selected pro forma operating and other data is presented
as if (i) the acquisition of 44 Properties in 1997 and 22 Properties in
1998 had occurred as of the beginning of 1997, and (ii) the proceeds of the
Company's April 1997 common stock offering were received at the beginning
of 1997. The pro forma balance sheet data was prepared as if the 22
Properties acquired in 1998 had all been acquired at December 31, 1997.
The pro forma financial information is not necessarily indicative of what
the actual financial position and results of operations of the Operating
Partnership would have been as of the date or for the period indicated, nor
does it purport to represent the Operating Partnership's future financial
position and results of operations.
<PAGE>
<TABLE> SELECTED FINANCIAL DATA
<CAPTION>
Operating Partnership Predecessor
At or for At or for For Period For Period
Unaudited Year Year from from At or for Year Ended
Pro Forma Ended Ended 6/26/95 to 1/1/95 to December 31,
(Dollars in thousands, 12/31/97(c) 12/31/97 12/31/96 12/31/95 6/25/95 1994 1993
except per Unit data)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Operating revenues $ 62,999 $49,354 $33,597 $12,942 $ 9,532 $18,530 $13,660
Earnings (losses) 25,306 23,763 15,682 6,744 311 1,836 (825)
Net income per Unit-
basic 1.98 1.97 1.88 0.91 - - -
Net income per Unit-
diluted 1.97 1.96 1.87 0.91 - - -
Distributions declared
per Unit 2.12 2.12 2.05 1.04 - - -
Balance Sheet Data:
Storage facilities before
accumulated depreciation $402,896 $333,036 $220,711 $ 159,461 $114,008 $91,889 $83,727
Total Assets 396,996 327,073 235,415 160,437 84,527 82,733 78,918
Total Debt 105,717 39,559 - 5,000 69,102 66,340 61,550
Total Liabilities 116,906 50,319 8,131 10,697 71,311 69,014 64,096
Limited partners' capital
interest 14,454 14,454 4,435 - - - -
Partners' capital 265,636 262,300 222,849 149,740 13,216 13,719 14,822
Other Data:
Net cash provided by
operating activities $34,952 $31,159 $20,152 $7,188 $2,003 $5,428 $1,470
Net cash used in
investing activities (164,923) (98,765) (59,146) (157,965) (3,340) (6,609) (15,217)
Net cash provided by
financing activities 115,850 53,486 54,949 151,509 507 1,030 14,283
Funds from operations(b) 34,076 30,281 19,842 9,904 - - -
Number of facilities 177 155 111 82 74 60 54
Weighted average occupancy 85.1% 85.1% 86.0% 86.1% 86.6% 88.7% 86.7%
<PAGE>
(a) The Operating Partnership began operations on June 26, 1995, and had no historical results of operations before that date.
Results of operations prior to June 26, 1995 relate to Sovran Capital, Inc. and the Sovran Partnerships (Company Predecessors).
(b) Funds from operations ("FFO") means income (loss) (computed in accordance with GAAP) plus depreciation of real estate assets
and amortization of intangible assets exclusive of deferred financing costs. FFO is a supplemental performance measure for REITs
as defined by the National Association of Real Estate Investment Trusts, Inc. FFO is presented because analysts consider FFO to be
one measure of the performance of the Operating Partnership. FFO does not take into consideration scheduled principal payments on
debt, capital improvements and other obligations. Accordingly, FFO is not a substitute for the Operating Partnership's cash flow
or net income as a measure of the Operating Partnership liquidity or operating performance or ability to pay distributions.
(c) See pro forma financial information included elsewhere herein.
</TABLE>
<PAGE>
Management Discussion and Analysis for Financial Conditions
and Results of Operations
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with the financial
statements and notes thereto included elsewhere in this report.
The following discussion is based on the financial statements of the
Operating Partnership as of December 31, 1997, December 31, 1996, December
31, 1995, and for the period from June 26, 1995 (commencement of
operations) to December 31, 1995; and the combined statements of the
Company Predecessors for the period from January 1, 1995 to June 25, 1995.
The combined financial statements of the Company Predecessors are presented
for comparative purposes.
When used in this discussion and elsewhere in this document, the words
"intends," "believes," "anticipates," and similar expressions are intended
to identify "forward-looking statements" within the meaning of that term in
Section 27A of the Securities Exchange Act of 1933, as amended, and in
Section 21F of Securities Exchange Act of 1934, as amended. Such forward-
looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the actual results, performance or
achievements of the Operating Partnership to be materially different from
those expressed or implied by such forward-looking statements. Such
factors include the effect of competition from new self-storage facilities,
which would cause rents and occupancy rates to decline; the Operating
Partnership's ability to evaluate, finance and integrate acquired
businesses into the existing business and operations; the Operating
Partnership's ability to effectively compete in the industries in which it
does business; and tax law changes which may change the taxability of
future income.
Results of Operations
Year Ended December 31, 1997 compared to Year Ended December 31, 1996
Rental revenues improved from $32.9 million for the year ended
December 31, 1996 to $48.6 million for the year ended December 31, 1997, an
increase of $15.7 million, or 48%. Of this, $10.4 million resulted from
the acquisition of forty-four properties during 1997, $4.3 million resulted
from having the 1996 acquisitions included for a full year of operations,
and $1 million resulted from increased revenues at the eighty-two core
properties considered in same store sales. For this core group, revenues
increased 3.5%, primarily as the result of rental rate increases, as
average occupancy was unchanged from 1996's level of 87.8%. Interest and
other income increased just slightly to $0.8 million in 1997.
Property operating and real estate tax expense increased $4.5 million
or 49% during the period. Of this, $3.1 million was incurred by the
facilities acquired in 1997, $1.3 million resulted from the having the 1996
acquisitions included for a full year of operations, and $0.1 million
additional cost was incurred in the operation of the eighty-two core
properties.
General and administrative expenses increased $0.5 million, primarily
as a result of increased supervisory and accounting costs associated with
the operation of an increased number of properties.
<PAGE>
Interest expense of $2.2 million in 1997 resulted primarily from
borrowings on the Operating Partnership's line of credit facility (a
mortgage loan assumed in an acquisition transaction required interest
payments of $0.2 million). The Operating Partnership had borrowings
outstanding of $42 million before paying off the balance with the proceeds
of a Company common stock offering in April 1997. The credit facility was
then utilized throughout the balance of the year to fund further
acquisitions, so that by the end of the year, the amount outstanding on the
line was $36 million.
Depreciation and amortization expense increased to $7 million from
$4.6 million, primarily as a result of the additional depreciation taken on
the $112 million of real estate assets acquired in 1997 and a full year of
depreciation on 1996 acquisitions.
Earnings before interest, and depreciation and amortization increased
$10.7 million or 48%, in 1997 as a result of the aforementioned items.
Year Ended December 31, 1996 compared to Year Ended December 31, 1995
Rental revenues improved from $21.8 million for the year ended
December 31, 1995 to $32.9 million for the year ended December 31, 1996, an
increase of $11.1 million, or 51%. Of this, $5.1 million resulted from the
acquisition of twenty-nine properties during 1996, $ 4.9 million resulted
from having 1995 acquisitions included for a full year of operations, and
$1.1 million resulted from increased occupancy levels and rental rates.
Interest and other income remained unchanged at approximately $0.7 million.
Property operating and real estate tax expense increased $3 million or
48% during the period. Of this, $1.5 million was incurred by the facilities
acquired in 1996, $1.4 million resulted from having the 1995 acquisitions
included for a full year of operations, and $0.1 million of additional cost
was incurred in the operation of the sixty facilities owned by the
Operating Partnership since January 1, 1995.
General and administrative expenses decreased $0.3 million, primarily
as a result of non-recurring legal, accounting and other professional fees
associated with the winding up of partnership activities and the merger and
formation transactions.
Interest expenses of $1.9 million in 1996 resulted exclusively from
borrowings on the Operating Partnership's line of credit facility. The
Operating Partnership had borrowings outstanding of $59.3 million before
paying off the balance with the proceeds of a Company common stock offering
in October 1996. Interest expense in 1995 was $3.4 million, or $1.5
million higher than in 1996. This was primarily due to the fact that until
the Initial Offering in June 1995, the Predecessors had incurred
substantial mortgage debt as a means to finance its acquisitions, and paid
approximately $3.3 million to carry that debt through June 1995. Upon
completion of the Initial Offering, this mortgage debt was paid in full,
and there was only a line of credit borrowing of $5 million outstanding at
the end of 1995.
Depreciation and amortization expense increased to $4.6 million from
$3.3 million, primarily as a result of the additional depreciation taken on
the $60 million or real estate assets acquired in 1996.
Earnings before interest, and depreciation and amortization increased
$8.4 million or 61% in 1996 as a result of the aforementioned items.
<PAGE>
Pro Forma Year Ended December 31, 1997 compared to Pro Forma Year Ended
December 31, 1996
The following unaudited pro forma information shows the results of
operations as though the acquisitions of storage facilities in 1997 and
1996, and the common stock offerings in 1997 and 1996 had all occurred as
of the beginning of 1996.
Year Ended December 31,
(Dollars in thousands) 1997 1996
Revenues:
Rental income $ 53,264 $ 50,663
Interest and other income 821 792
Total revenues 54,085 51,455
Expenses:
Property operations and maintenance 10,728 9,918
Real estate taxes 4,352 3,688
General and administrative 2,800 2,660
Interest 3,167 3,167
Depreciation and amortization 7,742 7,742
Total expenses 28,789 27,175
Net income $ 25,296 $ 24,280
Rental revenue of $53.3 million in 1997 was increased by 5.1% over
1996's revenues of $50.7 million, primarily as a result of rate increases
at the 73 properties acquired in 1997 and 1996, and a 4% increase in
average occupancy of the new properties.
Operating expenses and real estate taxes in 1997 were $15.1 million,
as compared to $13.6 million in 1996, an increase of 11%. While cost
efficiencies were enjoyed regarding insurance and yellow-page advertising,
these savings were offset by the Operating Partnership's paying higher
wages to attract professional managers, and start-up costs relating to the
acquisition of the 73 properties. Despite the increase in expenses,
operating margins improved from 71.7% to 72.0% in 1997.
General and administrative costs were determined by the Operating
Partnership's historical costs incurred in the management of 155
properties, and operating as a publicly owned REIT.
Interest expense in both years was determined by applying the year-end
rate and the applicable non-usage fee associated with the Operating
Partnership's $75 million credit facility.
Such unaudited pro forma information is based upon the historical
statements of operations of the Operating Partnership. It should be read in
conjunction with the financial statements of the Operating Partnership and
<PAGE>
the predecessors and notes thereto. In management's opinion, all
adjustments necessary to reflect the effects of these transactions have
been made. This unaudited pro forma statement does not purport to represent
what the actual results of operations of the Operating Partnership would
have been assuming such transactions had been completed as set forth above,
nor does it purport to represent the results of operations for future
periods.
Liquidity and Capital Resources
Capital Resources and Establishment of Line of Credit
The Company the Operating Partnership have relied principally on
equity capital since inception and have raised net proceeds of $269 million
from the Initial Offering on June 25, 1995, and additional offerings of
Company Common Stock in 1996 and 1997. The Operating Partnership used the
proceeds of the offerings to repay indebtedness, to purchase additional
properties, and to acquire limited partners' interest in the Sovran
Partnerships.
The equity offerings have been supplemented with borrowings on the $75
million line of credit which was replaced on February 20, 1998, by a three-
year, $150 million unsecured line. The commitment fee on the new line was
$750,000, and interest is payable monthly at 137.5 basis points above
LIBOR, with a provision for reduction should the Operating Partnership
attain an investment-grade rating. This will reduce the borrowing costs
from what it would have been under the old agreement.
In addition to the equity and debt capital, the Operating Partnership
issued $3.6 million and $9.2 million of Units in 1996 and 1997,
respectively, in exchange for self storage facilities at the request of
sellers.
As a result of its limited use of debt and the replacement of the
secured credit facility with the unsecured line of credit, the Operating
Partnership believes it has achieved a level of market capitalization and
critical mass to enable it to access the senior debt markets to fund 1998
growth.
Acquisition of Properties
Since the Initial Offering, the Operating Partnership used the balance
of the proceeds from the underwriter's over-allotment option, the follow-on
public offerings, issuance of Units and borrowings pursuant to the line of
credit to acquire properties from unaffiliated storage operators in
Virginia, Florida, Georgia, New York, Pennsylvania, Texas, Alabama,
Maryland, Massachusetts, Michigan, Ohio and Louisiana. In 1995, following
the Initial Offering, the Operating Partnership added 8 facilities and
550,000 square feet of storage space to its portfolio. In 1996, twenty-
nine facilities comprising 1,490,000 square feet, and in 1997, forty-four
facilities totaling 2.5 million square feet were acquired. Through
April 20, 1998, an additional 22 Properties totaling 1.4 million square
feet were acquired bringing the total Properties owned to 177 with 9.7
million square feet of net rentable storage space.
Internal Property Acquisition Costs
As a result of a recent consensus reached by the Financial Accounting
Standards Board Emerging Issues Task Force, the Operating Partnership will
no longer capitalize internal costs related to the acquisition of operating
<PAGE>
properties. The amount of such costs capitalized in 1997 and 1996 were
$728,000 and $755,000, respectively.
Future Acquisition and Development Plans
The Operating Partnership's external growth strategy is to increase
the number of facilities it owns by acquiring suitable facilities in
markets in which it already has operations, or to expand in new markets by
acquiring several facilities at once in those new markets.
Since the Initial Offering, the Operating Partnership has increased
its presence in the Boston, Washington, Cleveland, Atlanta, Norfolk,
Charlotte, Greensboro, Orlando, Jacksonville, Pensacola, Orlando and
Ft. Lauderdale/Palm Beach markets. Properties acquired in these cities
were added to improve the Operating Partnership's presence and enhance
visibility of its operations. Economies of scale are enjoyed via this
strategy, as yellow-page costs, maintenance expenses and relief payroll
costs can be shared among numerous facilities.
The Operating Partnership has also entered new markets with great
impact. Sixteen Properties were acquired in Texas, giving the Operating
Partnership a strong presence in San Antonio, Dallas and Houston. Six
Properties were acquired in Tampa, five in Northern Michigan, four each in
Ft. Myers and St. Petersburg, three each in Birmingham and Montgomery, and
two each in Newport News, Pittsburgh, Baton Rouge, Syracuse and Jackson.
The Operating Partnership will continue to aggressively pursue the
acquisition of quality self-storage properties in markets where it already
operates, and in strategic new markets where a substantial property base
can be quickly established.
The Operating Partnership also intends to expand and enhance certain
of its existing facilities by building additional storage buildings on
presently vacant land and by installing climate control and enhanced
security systems at selected sites.
Distribution Requirements of the Company and Impact on the Operating
Partnership
As a REIT, the Company is not required to pay Federal income tax on
income that it distributes to its shareholders, provided that the amount
distributed is equal to at least 95% of taxable income. These
distributions must be made in the year to which they relate, or in the
following year if declared before the Company files its Federal income tax
return, and if it is paid before the first regular distribution of the
following year. The first distribution of 1998 may be applied toward the
Company's 1997 distribution requirement. The Company's source of funds for
such distributions are solely and directly from the Operating Partnership.
As a REIT, the Company must derive at least 95% of its total gross
income from income related to real property, and from dividends, interest
and gain from the sale or disposition of stock or securities. In 1997, the
Company's percentage of revenue from such sources exceeded 97%, thereby
passing the 95% test, and no special measures are expected to be required
to enable the Company to maintain its REIT designation.
<PAGE>
Inflation
The Operating Partnership does not believe that inflation has had or
will have a direct effect on its operations. Substantially all of the
leases at the facilities allow for monthly rent increases, which provide
the Operating Partnership with the opportunity to achieve increases in
rental income as each lease matures.
Seasonality
The Operating Partnership's revenues typically have been higher in the
third and fourth quarter, primarily because the Operating Partnership
increases its rental rates on most of its storage units at the beginning of
May and, to a lesser extent, because self-storage facilities tend to
experience greater occupancy during the late spring, summer and early fall
months due to the greater incidence of residential moves during these
periods. However, the Operating Partnership believes that its tenant mix,
diverse geographic locations, rental structure and expense structure
provide adequate protection against undue fluctuations in cash flows and
net revenues during off-peak seasons. Thus, the Operating Partnership does
not expect seasonality to affect materially distributions to unitholders.
Impact of Year 2000
Based on a preliminary assessment and limited testing, the Operating
Partnership believes it has made all changes to its software so that its
computer system will function properly with respect to dates in the year
2000 and thereafter. The Operating Partnership presently believes that
with these modifications, the Year 2000 issue will not pose significant
operational problems for its computer systems.
The Operating Partnership has initiated formal communications with
third parties to determine the extent to which the Operating Partnership's
interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 issues.
The Operating Partnership anticipates completing the Year 2000 project
in 1998, which is prior to any expected impact on its operating system.
The Operating Partnership's total Year 2000 project costs, which are
expected to be immaterial, and the anticipated time frame, are based on
presently available information. These estimates were derived utilizing
numerous assumptions of future events, including the availability of
certain resources, third-party modification plans and other factors.
However, there can be no guarantee that the estimated time of completion
will be achieved and actual results could differ materially from those
anticipated.
<PAGE>
ITEM 3. PROPERTIES
Overview
At April 20, 1998, the Operating Partnership owned 100% fee simple
interests in, and operated, a total of 177 Properties, consisting of
approximately 9.7 million net rentable square feet, situated in nineteen
states primarily in the Eastern United States and Texas. As of
December 31, 1997, the Properties had a weighted average occupancy of 85.1%
and a weighted average annual rent per square foot of $7.67. The Operating
Partnership believes that it is one of the largest operators of self-
storage properties in the United States based on facilities owned.
The Operating Partnership's self-storage facilities offer inexpensive,
easily-accessible, enclosed storage space to residential and commercial
users on a month-to-month basis. Most of the Operating Partnership's
Properties are fenced with computerized gates and are well lighted. All
but twenty-two of the Properties are single-story, thereby providing
customers with the convenience of direct vehicle access to their storage
units. All Properties have a Property Manager on-site during business
hours and, in most cases, the Property Manager resides in an apartment at
the facility. Customers have access to their storage areas during business
hours, and some commercial customers are provided 24-hour access.
Individual storage units are secured by a lock furnished by the customer to
provide the customer with control of access to the unit.
Currently, 141 of the Properties conduct business under the user-
friendly trade name "Uncle BoB's Self-Storage" and the remainder are
operated under various names acquired with the Properties. The Operating
Partnership intends to convert all of the Properties to the "Uncle BoB's"
trade name.
<PAGE>
<TABLE>
The table below provides certain information regarding the Properties:
<CAPTION>
Uncle
BoB's Occupancy
Year Trade at Mgr.
Location Built Sq. Ft. Name 12/31/97 Acres Units Bldgs. Floors Apt. Construction
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama
Birmingham I 1990 37,075 Y 80% 2.7 297 9 1 Y Masonry/Steel Roof
Birmingham II 1990 52,155 Y 92% 4.7 414 8 1 Y Masonry/Steel Roof
Montgomery I 1982 75,000 Y 81% 5.0 625 16 1 Y Masonry/Steel Roof
Birmingham III 1970 72,050 Y 80% 4.3 409 6 1 N Masonry/Steel Roof
Montgomery II 1984 42,100 Y 93% 2.7 300 10 1 N Masonry/Steel Roof
Montgomery III 1988 41,550 Y 92% 2.4 392 9 1 Y Steel Bldg./Steel Roof
Birmingham-Walt 1984 62,776 N N/A 3.3 397 6 1 Y Masonry Wall/Metal Roof
Connecticut
New Haven 1985 36,000 Y 96% 3.9 340 5 1 N Masonry Wall/Steel Roof
Hartford-Metro I 1988 47,650 Y 96% 10.0 339 10 1 N Steel Bldg./Steel Roof
Hartford-Metro II 1992 40,275 Y 95% 6.0 313 7 1 N Steel Bldg./Steel Roof
Florida
Lakeland I 1985 45,725 Y 94% 3.5 444 11 1 Y Masonry Wall/Steel Roof
Tallahassee I 1973 149,600 Y 82% 18.7 730 21 1 Y Masonry Wall/Tar & Gravel Roof
Tallahassee II 1975 43,600 Y 98% 4.0 236 7 1 Y Masonry Wall/Tar & Gravel Roof
Port St. Lucie 1985 60,000 Y 77% 4.0 599 12 1 N Steel Bldg./Steel Roof
Deltona 1984 60,000 Y 84% 5.0 452 5 1 Y Masonry Wall/Shingle Roof
Jacksonville I 1985 40,000 Y 93% 2.7 296 14 1 Y Masonry Wall/Tar & Gravel Roof
Orlando I 1988 53,875 Y 90% 2.8 603 3 2 Y Steel Bldg./Steel Roof
Ft. Lauderdale 1985 103,000 Y 91% 7.6 646 7 1 Y Steel Bldg./Steel Roof
West Palm l 1985 49,000 Y 84% 3.2 412 6 1 N Steel Bldg./Steel Roof
Melbourne I 1986 61,787 Y 95% 8.3 605 11 1 Y Masonry Wall/Shingled Roof
Pensacola I 1983 105,127 Y 80% 7.5 976 13 1 Y Steel Bldg./Steel Roof
Pensacola II 1986 57,355 Y 88% 3.4 509 9 1 Y Steel Bldg./Steel Roof
Melbourne II 1986 55,755 Y 93% 3.4 657 11 1 N Steel Bldg./Steel Roof
Jacksonville II 1987 53,225 Y 100% 4.4 465 11 1 Y Masonry/Steel Roof
Pensacola III 1986 63,250 Y 81% 6.1 510 12 1 N Steel Bldg./Steel Roof
Pensacola IV 1990 39,825 Y 91% 2.7 280 9 1 Y Masonry/Steel Roof
Pensacola V 1990 38,850 Y 66% 2.6 324 4 1 Y Masonry/Steel Roof
<PAGE>
Tampa I 1989 60,202 Y 93% 3.3 889 6 1 N Masonry/Steel Roof
Tampa II 1985 55,911 Y 86% 2.9 794 10 1 N Masonry/Steel Roof
Tampa III 1988 45,507 Y 91% 2.2 689 14 1 N Masonry/Steel Roof
Orlando II 1986 135,000 Y 74% 8.5 1,359 20 1 Y Masonry Wall/Steel Roof
Ft. Myers I 1988 28,068 Y 78% 1.1 272 6 2 Y Steel Bldg./Steel Roof
Ft. Myers II 1991/94 41,728 Y 81% 3.2 602 6 1 Y Masonry/Steel Roof
Tampa IV 1985 60,675 Y 77% 4.0 633 10 1 Y Masonry/Steel Roof
West Palm II 1986 33,120 Y 89% 2.3 395 9 1 Y Masonry/Steel Roof
Ft. Myers III 1986 35,435 Y 84% 2.4 261 9 1 Y Masonry/Steel Roof
Lakeland II 1988 41,860 Y 96% 4.0 446 9 1 N Masonry Wall/Steel Roof
Ft. Myers IV 1987 60,000 Y 94% 4.5 289 4 1 Y Masonry/Steel Roof
Jacksonville III 1987 102,500 Y 78% 5.9 786 13 1 Y Masonry Wall/Shingle Roof
Jacksonville IV 1985 43,865 Y 83% 2.7 527 7 1 Y Steel Bldg./Steel Roof
Jacksonville V 1987/92 55,400 Y 97% 2.9 514 13 2 Y Steel Bldg./Masonry Wall/Steel
Roof
Orlando III 1975 60,000 Y 89% 3.2 487 8 2 N Masonry Wall/Steel Roof
Orlando IV 1984 37,372 N 90% 2.8 341 6 1 Y Steel Bldg/Steel Roof
Delray I-Mini 1969 50,395 Y 99% 3.5 495 3 1 Y Masonry Wall/Concrete Roof
Delray II-Safeway 1980 71,218 Y 94% 4.3 774 17 1 Y Masonry Wall/Concrete Roof
Tampa-E. Hillsborough 1985 84,740 N N/A 5.3 733 16 1 Y Masonry Wall/Metal Roof
Titusville 1986/90 54,390 N N/A 6.0 417 9 1 Y Metal Wall/Shingle Roof
Georgia
Savannah 1981 58,781 Y 82% 5.4 527 11 1 Y Masonry Wall/Steel Roof
Atlanta-Metro I 1988 69,075 Y 81% 3.9 539 5 1 Y Steel Bldg./Steel Roof
Atlanta-Metro II 1988 45,100 Y 82% 3.9 375 6 1 Y Steel Bldg./Steel Roof
Atlanta-Metro III 1988 55,475 Y 84% 5.3 483 9 1 Y Steel Bldg./Steel Roof
Atlanta-Metro IV 1989 41,724 Y 92% 3.5 304 7 1 Y Steel Bldg./Steel Roof
Atlanta-Metro V 1988 38,082 Y 84% 4.2 372 3 1 Y Masonry Wall/Tar & Gravel Roof
Atlanta-Metro VI 1986 51,375 Y 79% 3.6 458 7 1 Y Steel Bldg./Steel Roof
Atlanta-Metro VII 1981 43,400 Y 77% 2.5 324 9 2 Y Masonry Wall/Tar & Gravel Roof
Atlanta-Metro VIII 1975 41,400 Y 85% 3.3 452 6 2 Y Masonry Wall/Tar & Gravel Roof
Augusta I 1988 52,300 Y 85% 4.0 407 13 1 Y Steel Bldg./Steel Roof
Macon I 1989 40,700 Y 92% 3.2 356 14 1 Y Steel Bldg./Steel Roof
Augusta II 1987 45,700 Y 87% 3.5 377 4 1 Y Masonry Wall/Steel Roof
Atlanta-Metro IX 1988 56,725 Y 81% 4.6 409 6 1 Y Steel Bldg./Steel Roof
Atlanta-Metro X 1988 45,425 Y 88% 6.8 391 9 1 N Steel Bldg./Steel Roof
Macon II 1989/94 58,750 Y 88% 14.0 535 11 1 Y Steel Bldg./Steel Roof
Savannah II 1988 50,975 N 75% 2.6 484 8 1 Y Masonry Wall/Steel Roof
Atlanta-Alpharetta 1994 80,265 N 76% 5.8 555 8 1&2 Y Steel Bldg./Steel Roof
Atlanta-Marietta 1996 59,450 N 95% 6.0 451 8 1&2 Y Steel Bldg./Steel Roof
Atlanta-Doraville 1995 67,275 N 90% 4.9 632 8 1&2 Y St&Masonry Bldg/Steel Roof
Ft. Oglethorpe 1989 45,290 N N/A 3.3 397 6 1 Y Masonry Wall/Metal Roof
<PAGE>
Louisiana
Baton Rouge-1 1982 72,100 N 97% 2.5 419 12 1 Y Masonry Wall/Metal Roof
Baton Rouge-2 1985 44,735 N 98% 2.8 443 9 1 N Masonry Wall/Steel Roof
Maryland
Salisbury 1979 34,350 Y 70% 3.0 418 10 1 N Masonry Wall/Tar & Gravel Roof
Baltimore I 1984 22,233 Y 85% 1.9 347 2 3 N Masonry Wall/Shingled Roof
Baltimore II 1988 63,915 Y 93% 2.2 526 2 4 Y Masonry Wall/Tar & Gravel Roof
Baltimore III 1990 53,171 Y 80% 3.1 686 8 1 Y Steel Bldg./Steel Roof
Massachusetts
New Bedford 1982 41,980 Y 90% 3.4 408 7 1 Y Steel Bldg./Steel Roof
Springfield 1986 41,339 Y 80% 4.7 337 5 1 N Masonry Wall/Shingle Roof
Boston-Metro I 1980 37,575 Y 92% 2.0 403 3 2 N Masonry Wall/Tar & Gravel Roof
Boston-Metro II 1986 36,900 Y 97% 3.6 428 8 2 N Masonry Wall/Tar & Gravel Roof
Northbridge 1988 39,175 N N/A 3.5 283 10 1 N Metal Wall/Metal Roof
Salem 1979 53,400 N N/A 2.0 496 2 2 Y Steel Wall/Metal Roof
Michigan
Grand Rapids 1976 57,900 N 85% 5.4 526 9 1 Y Masonry Wall/Steel Roof
Grand Rapids II 1983 32,300 N 83% 8.0 296 6 1 N Masonry & Steel Walls
Kalamazoo 1978 58,214 Y 78% 11.6 607 14 1 Y Steel Bldg/Steel & Shingle Roof
Lansing 1987 43,943 Y 87% 3.8 426 9 1 Y Steel Bldg/Steel Roof
Holland 1978 95,088 Y 76% 13.6 676 18 1 Y Masonry Wall/Steel Roof
Mississippi
Jackson I 1990 41,900 Y 92% 2.0 344 6 1 Y Masonry/Steel Roof
Jackson II 1990 38,775 Y 86% 2.1 308 9 1 Y Masonry/Steel Roof
North Carolina
Charlotte 1986 37,051 Y 86% 2.9 337 6 1 Y Steel Bldg./Steel Roof
Fayetteville 1980 92,800 Y 66% 6.2 1,601 2 1 Y Steel Bldg./Steel Roof
Greensboro 1986 42,900 Y 66% 3.4 415 5 1 Y Steel Bldg./Mas. Wall/Steel Roof
Raleigh I 1985 57,750 Y 84% 5.0 569 8 2 Y Steel Bldg./Steel Roof
Raleigh II 1985 33,150 Y 77% 2.5 329 8 1 Y Steel Bldg./Steel Roof
Charlotte II 1995 48,750 Y 58% 5.6 494 7 1 Y Masonry Wall/Steel Roof
Charlotte III 1995 31,200 Y 73% 2.9 346 6 1 Y Masonry Wall/Steel Roof
Greensboro I 1995 32,198 N 83% 1.0 312 7 1 N Metal Wall/Metal Roof
Greensboro II 1997 9,755 N 74% 2.5 92 2 1 N Metal Wall/Metal Roof
New Hampshire
Salem-Policy 1980 62,075 N N/A 8.7 546 9 1 Y Masonry Wall/Gravel/Metal Roof
Greensboro-High Point 1993 58,035 N N/A 2.5 538 9 1 N Steel Wall/Metal Roof
<PAGE>
Dorham-Cornwallis 1990/96 79,260 N N/A 4.7 666 9 1 Y Masonry Wall/Metal Roof
Dorham-Hillsborough 1988/91 67,941 N N/A 5.0 624 5 1 Y Metal Wall/Metal Roof
New York
Middletown 1988 30,000 Y 95% 2.8 281 4 1 N Steel Bldg./Steel Roof
Buffalo I 1981 61,200 Y 93% 5.1 507 10 1 Y Steel Bldg./Steel Roof
Rochester I 1981 43,000 Y 82% 2.9 407 5 1 Y Steel Bldg./Steel Roof
Rochester II 1980 39,000 Y 88% 3.5 250 9 1 N Masonry Wall/Shingle Roof
Buffalo II 1984 53,525 Y 96% 6.2 430 12 1 Y Steel Bldg./Steel Roof
Syracuse l 1987 70,200 Y 83% 7.5 767 16 1 N Steel Bldg./Steel Roof
Syracuse II 1983 54,590 Y 78% 3.6 422 10 1 Y Steel Bldg./Shingled Roof
Rochester III 1990 51,826 Y 92% 2.7 421 1 1 N Masonry Wall/Shingle Roof
Harriman 1989/95 66,230 N N/A 6.1 649 10 1 Y Metal Wall/Metal Roof
Ohio
Youngstown 1980 48,825 Y 94% 5.8 380 5 1 Y Steel Bldg./Steel Roof
Cleveland- I 1980 48,250 Y 73% 6.4 359 9 1 Y Steel Bldg./Steel Roof
Cleveland II 1987 60,500 Y 86% 4.8 453 4 1 Y Steel Bldg./Steel Roof
Cincinnati 1988 48,830 Y 94% 2.8 496 7 1 Y Masonry Wall/Steel Roof
Dayton 1988 61,875 Y 87% 3.6 615 8 1 Y Masonry Wall/Steel Roof
Youngstown II 1988 55,525 N 69% 3.9 497 7 1 N Masonry Wall/Steel Roof
Akron 1990 37,720 Y 90% 3.4 296 12 1 Y Masonry Wall/Steel Roof
Cleveland III 1986 68,110 Y 89% 3.4 570 12 1 Y Masonry Wall/Steel Roof
Cleveland IV 1978 65,125 Y 97% 3.5 554 5 1 Y Masonry Wall/Steel Roof
Cleveland V 1979 73,450 Y 89% 3.1 646 9 1&2 Y Masonry Wall/Rolled Roof
Cleveland VI 1979 46,625 Y 91% 2.6 361 8 1 Y Masonry Wall/Concrete Roof
Cleveland VII 1977 69,750 Y 92% 4.3 628 13 1 Y Masonry Wall/Steel Roof
Cleveland VIII 1970 45,275 Y 80% 5.7 395 6 1 Y Masonry Wall/Steel Roof
Cleveland IX 1982 53,748 Y 80% 4.4 291 5 1 Y Masonry Wall/Steel Roof
Cleveland X 1989 47,050 Y 84% 5.8 380 6 1 N Metal Wall/Metal Roof
Pennsylvania
Allentown 1983 30,000 Y 98% 6.3 277 7 1 Y Masonry Wall/Shingle Roof
Sharon 1975 37,200 Y 91% 3.0 314 5 1 Y Steel Bldg./Steel Roof
Harrisburg I 1983 48,746 Y 92% 4.1 475 9 1 Y Masonry Wall/Steel Roof
Harrisburg II 1985 58,800 Y 89% 9.2 299 10 1 Y Masonry Wall/Steel Roof
Pittsburgh 1990 57,375 Y 87% 3.4 551 6 1 Y Steel Bldg./Steel Roof
Pittsburgh II 1983 75,875 Y 84% 4.8 732 4 2 Y Masonry Wall/Shingled Roof
Harrisburg III 1984 63,740 N 95% 4.1 614 9 1 Y Masonry Wall/Metal Roof
Rhode Island
Providence 1984 37,825 Y 84% 3.7 397 7 1 Y Masonry Wall/Tar & Gravel Roof
East Greenwich 1984/88 71,190 N N/A 4.9 670 9 1 Metal Wall/Metal Roof
<PAGE>
South Carolina
Charleston I 1985 51,445 Y 87% 3.3 421 11 1 Y Steel Bldg./Mas. Wall/Steel Roof
Columbia I 1985 47,650 Y 69% 3.3 410 7 1 Y Steel Bldg./Steel Roof
Columbia II 1987 59,000 Y 81% 6.0 464 8 1 N Steel Bldg./Steel Roof
Columbia III 1989 41,200 Y 77% 3.5 354 5 2 Y Steel Bldg./Steel Roof
Columbia IV 1986 56,000 Y 83% 5.6 446 7 1 Y Steel Bldg./Steel Roof
Spartanburg 1989 49,500 Y 83% 3.6 350 6 1 Y Steel Bldg./Steel Roof
Charleston II 1985 41,038 Y 96% 2.2 335 10 1 Y Masonry Wall/Steel Roof
Tennessee
Hixon 1985 42,175 N N/A 2.7 345 3 1 Y Masonry Wall/Metal Roof
Chattonooga-Lee Hwy 1987 37,250 N N/A 3.3 390 6 1 Y Masonry Wall/Metal Roof
Chattanooga-Hwy 58 1985 35,405 N N/A 2.4 325 4 1 Y Masonry Wall/Metal Roof
Hendersonville 1986/97 93,665 N N/A 5.7 652 16 1 Y Masonry or Metal Wall/Metal Roof
Texas
Arlington I 1987 45,965 Y 92% 2.3 411 7 1 Y Masonry Wall/Steel Roof
Arlington II 1986 67,100 Y 75% 3.8 330 11 1 Y Masonry Wall/Steel Roof
Ft. Worth 1986 40,825 Y 86% 2.4 356 3 1 Y Masonry Wall/Asphalt Roof
San Antonio I 1986 48,280 Y 84% 3.9 486 12 1 Y Masonry Wall/Steel Roof
San Antonio II 1986 40,550 Y 81% 1.9 287 7 1 Y Masonry Wall/Steel Roof
San Antonio III 1981 48,782 Y 84% 2.6 495 5 1 Y Masonry Wall/Steel Roof
Universal 1985 35,100 Y 87% 2.4 427 8 1 Y Masonry Wall/Steel Roof
San Antonio IV 1995 44,600 Y 67% 5.4 372 11 1 Y Steel Bldg/Steel Roof
Houston I 1993/95 69,650 Y 70% 6.4 543 5 1 Y Metal Wall/Steel Roof
Houston II 1995 61,861 Y 86% 6.3 541 1 1 Y Metal Wall/Steel Roof
Houston III 1995 35,600 Y 69% 1.8 332 1 1 Y Metal Wall/Steel Roof
Dallas-Skillman 1975 121,707 Y 85% 5.9 1,111 8 1&2 Y Masonry Wall/Steel Roof
Dallas-Cent. 1977 104,303 Y 84% 6.7 1,125 8 1&2 Y Masonry Wall/Steel Roof
Dallas-Samuell 1975 79,056 Y 93% 3.8 796 6 1&2 Y Masonry Wall/Steel Roof
Dallas-Hargrove 1975 71,938 Y 88% 3.1 747 5 1&2 Y Masonry Wall/Steel Roof
Houston IV 1984 75,500 N 85% 4.1 670 9 1 Y Metal Wall/Metal Roof
Virginia
Newport News I 1988 52,944 Y 93% 3.2 451 7 1 Y Steel Bldg./Steel Roof
Alexandria 1984 77,310 Y 78% 3.2 1,105 4 2 Y Masonry Wall/Tar & Gravel Roof
Norfolk I 1984 49,950 Y 89% 2.7 357 7 1 Y Steel Bldg./Steel Roof
Norfolk II 1989 45,375 Y 91% 2.1 363 4 1 Y Masonry Wall/Steel Roof
Richmond 1987 52,035 Y 84% 2.7 524 5 1 Y Masonry Wall/Steel Roof
Newport News II 1988/93 63,125 Y 95% 4.7 384 8 1 Y Steel Bldg./Steel Roof
Lynchburg I 1982 47,200 Y 85% 5.3 429 10 1 Y Masonry Wall/Steel Roof
Lynchburg II 1985 41,250 Y 66% 2.3 380 4 1 Y Masonry Wall/Steel Roof
Lynchburg III 1987 22,000 Y 81% 1.5 182 3 1 N Masonry Wall/Metal Roof
<PAGE>
Christiansburg 1985/90 36,673 Y 84% 3.2 327 6 1 Y Masonry Wall/Metal Roof
Chesapeake 1988/95 35,901 Y 81% 12.0 271 7 1 Y Metal Wall/Steel Roof
Danville 1988 49,776 Y 81% 3.2 408 8 1 N Steel Wall/Metal Roof
Chesapeake-Military 1996 59,355 N N/A 3.0 600 3 1 N Masonry Wall/Metal Roof
Chesapeake-Volvo 1995 63,918 N N/A 4.0 544 4 1 N Masonry Wall/Metal Roof
Virginia Beach-Shell 1991 52,571 N N/A 2.5 587 5 1 N Masonry Wall/Metal Roof
Virginia Beach-Central 1993/95 97,522 N N/A 5.0 990 6 1 N Masonry Wall/Metal Roof
Norfolk-Naval Base 1975 126,691 N N/A 5.2 1,259 11 1 N Masonry Wall/Metal Roof
Lynchburg-Timberlake 1990/96 48,773 N N/A 5.2 450 7 1 N Masonry Wall/Metal Roof
Total for all Properties 9,716,410 760.5 1,405
86,507
Average for all Properties 85.33%
Weighted Average 85.11%
</TABLE>
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Through Holdings, a wholly-owned subsidiary of the Company and the
sole general partner of the Operating Partnership, the Company manages the
business of the Operating Partnership. The Operating Partnership has no
directors or officers. No director or officer of the Company or Holdings
beneficially owns any Units.
The Company beneficially owns 12,330,963 Units which constitute 96.53%
of all outstanding Units. No other person holds more than a 5% beneficial
ownership in the Operating Partnership.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Through Holdings, a wholly-owned subsidiary of the Company and the
sole general partner of the Operating Partnership, the Company controls the
Operating Partnership. The Board of Directors of Holdings, the members of
which are the same as the members of the Board of Directors of the Company,
manages the affairs of the Operating Partnership by directing the affairs
of the general partner of the Operating Partnership. The Operating
Partnership has no directors, or executive officers. Consequently, this
Item 5 reflects information with respect to the directors and executive
officers of the Company and Holdings.
Robert J. Attea (Age 56): Chairman of the Board and Chief Executive
Officer of the Company and Holdings. Director of the Company and Holdings
since the completion of the Initial Offering on June 25, 1995. From 1988
to 1995 Mr. Attea served as President and Chief Executive Officer of the
Company and was re-appointed Chief Executive Officer of the Company and
Holdings in March, 1997. From 1985 to 1988, he served as Director of
Acquisitions and Vice President of Property Management.
Kenneth F. Myszka (Age 49): President and Chief Operating Officer of
the Company and Holdings. Director of the Company and Holdings since the
completion of the Initial Offering on June 25, 1995. From completion of
the Initial Offering to the present, Mr. Myszka has served as President and
was the Chief Executive Officer of the Company and Holdings until March
1997 at which time he became the Chief Operating Officer. From 1982 to
1995, Mr. Myszka served as Senior Vice President of the Company's
predecessor.
Charles E. Lannon (Age 50): Director of the Company and Holdings
since the completion of the Initial Offering on June 25, 1995. Mr. Lannon
was the predecessor company's Senior Vice President--Marketing from 1982 to
1995. Mr. Lannon left the employ of the Company to become the Chief
Executive Officer of an unrelated business owned by Mr. Lannon and other
Company founders.
John E. Burns (Age 51): Director of the Company since the completion
of the Initial Offering on June 25, 1995. Director of Holdings since
April 1, 1998. Since 1980, John Burns has been President and founder of
Sterling Ltd. Co., an Ohio based tax and financial counseling firm of which
he also currently serves as Chairman. Mr. Burns also serves as Chairman
and founder of Sterling Asset Management, Co., managing client assets in
excess of $130 million and President of SLC Capital, Inc., a general
partner of several investment partnerships. In addition, Mr. Burns serves
as Chairman of Fitworks Holding, LLC and is Chairman of the Champion Boxed
Beef Co.
<PAGE>
Michael A. Elia (Age 46): Director of the Company since the
completion of the Initial Offering on June 25, 1995. Director of Holdings
since April 1, 1998. Since 1984 Michael Elia has been President, Chief
Executive Officer and a director of Sevenson Environmental Services, Inc.,
an environmental remediation contractor. He is also President and a
director of Sevenson International Services, Inc. and a director of
Sevenson Industrial Services, Inc., affiliates of Sevenson Environmental
Services, Inc.
Anthony P. Gammie (Age 63): Director of the Company since the
completion of the Initial Offering on June 25, 1995. Director of Holdings
since April 1, 1998. From 1985 through 1996, Mr. Gammie was Chairman of
the Board of Bowater Incorporated. During the past 5 years he has served
as a director of Alumax, Inc., The Bank of New York and The American Forest
& Paper Association. He is currently a director of Lipper/Leumi High
Income Bond Fund, Inc. located in Curacao, Netherlands Antilles.
David L. Rogers (Age 42): From June 25, 1995 to the present, David L.
Rogers has served as the Company's and Holding's Chief Financial Officer
and Secretary. From 1988 to 1995, Mr. Rogers served as the Company's Vice
President of Finance. From 1984 to 1988, Mr. Rogers served as Controller
and Due Diligence Officer.
ITEM 6. EXECUTIVE COMPENSATION
Through Holdings, a wholly-owned subsidiary of the Company and the
sole general partner of the Operating Partnership, the Company controls the
Operating Partnership. The Board of Directors of Holdings, the members of
which are the same as the members of the Board of Directors of the Company,
manages the affairs of the Operating Partnership by directing the affairs
of the general partner of the Operating Partnership. The Directors and
Officers of Holdings receive their compensation from the Company and are
not separately compensated by Holdings. Consequently, the information
provided in this Item 6 reflects compensation paid to the Directors and
executive officers of the Company.
Compensation of Directors
The Company pays its Directors who are not also officers of the
Company an annual fee of $12,500 in cash. Outside Directors are also paid
a meeting fee of $1,000 for each special meeting attended. In addition,
the Company will reimburse all Directors for expenses incurred in attending
meetings. Pursuant to the Directors' Option Plan, each Director who is not
an officer or employee of the Company is granted, effective as of the
Director's initial election or appointment, a ten year option to acquire
2,500 Common Shares at the fair market value on the date of grant, and
will, as of the close of each annual shareholders' meeting thereafter, be
granted a ten-year option to acquire an additional 2,500 Common Shares at
the fair market value of the Common Stock on the date of grant. The
initial options for 2,500 Common Shares were exercisable one year from the
date of grant, June 22, 1996; the Directors' options awarded thereafter
vest immediately. The exercise price is payable in cash.
Executive Officers
The following table sets forth the compensation awarded to each of the
Executive Officers of the Company during each of the fiscal years ended
December 31, 1997, 1996 and 1995.
<PAGE>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Securities
Restricted Underlying
Fiscal Base Stock Option/SARS
Name and Principal Position Year Salary($) Bonus($) Award(s) (#)
Robert J. Attea 1997 $131,250 $ 0 $ 0 0
Chairman of the Board and 1996 110,000 40,000 0 0
Chief Executive Officer 1995 98,425 12,500 0 45,000
Kenneth F. Myszka 1997 131,250 0 0 0
President and 1996 110,000 40,000 0 0
Chief Operating Officer 1995 98,425 12,500 0 45,000
David L. Rogers 1997 131,250 0 0 0
Chief Financial Officer 1996 110,000 40,000 0 0
and Secretary 1995 98,425 12,500 83,486 45,000
FISCAL YEAR END OPTION VALUES
Number of Unexercised Value of Options at
Options at Year End (#) Year-End($)(1)
Name Exercisable Unexercisable Exercisable Unexercisable
Robert J. Attea 22,500 22,500 $212,344 $212,344
Kenneth F. Myszka 22,500 22,500 $212,344 $212,344
David L. Rogers 22,500 22,500 $212,344 $212,344
______________
(1) Based upon the closing price of the Company's Stock on the New York
Stock Exchange on December 31, 1997 at $32.4375 per share and the
grant price of $23.00 per share.
<PAGE>
Employment Agreements
Concurrently with the Initial Offering, the Company entered into
employment agreements with Messrs. Attea, Myszka and Rogers that require
each of them to devote their full business time to the Company. Each
employment agreement has a three year term with an automatic extension each
year for an additional year. The employment agreements provide for certain
severance payments in the event of the executive's death or disability, his
termination without cause or his resignation with good reason. Each
employment agreement prohibits the executive, during employment and during
the two year period following termination of employment, from engaging in
the self storage business.
ITEM 7. CERTAIN TRANSACTIONS
The Company has a Facilities Services Agreement with several
businesses owned by the executive officers and Mr. Lannon, whereby such
businesses pay for the use of certain common facilities in the Company's
offices based upon an arm's-length charge. Charges under the Facilities
Services Agreement are periodically reviewed by the Audit Committee of the
Company's Board of Directors.
The law firm of Phillips, Lytle, Hitchcock, Blaine & Huber LLP has
represented and is currently representing the Company and the Operating
Partnership. Robert J. Attea is the brother of a partner of Phillips,
Lytle, Hitchcock, Blaine & Huber LLP.
ITEM 8. LEGAL PROCEEDINGS
Robert J. Amsdell, a former business associate of certain officers and
directors of the Company, including Robert J. Attea, Charles E. Lannon,
Kenneth F. Myszka and David L. Rogers, filed a lawsuit against the Company
on June 13, 1995 in the United States District Court for the Northern
District of Ohio in connection with the formation of the Company as a REIT
and related transactions, as well as the Initial Offering. On April 29,
1996, Mr. Amsdell filed a first amended complaint and on September 24,
1997, a second amended complaint was filed. The complaint alleges, among
other things, breach of fiduciary duty, breach of contract, breach of
general partnership/joint venture arrangement, fraud and deceit, breach of
duty of good faith and other causes of action including a declaratory
judgment as to Mr. Amsdell's continuing interest in the Company.
Mr. Amsdell is seeking money damages in excess of $25 million, as well as
punitive damages and declaratory and injunctive relief (including the
imposition of a constructive trust on assets of the Company in which Mr.
Amsdell claims to have a continuing interest) and an accounting. The first
amended complaint also added Messrs. Attea, Lannon, Myszka and Rogers as
additional defendants. The parties are currently involved in discovery.
The Company intends to vigorously defend the lawsuit. Messers. Attea,
Lannon, Myszka and Rogers have agreed to indemnify the Company for any loss
arising from the lawsuit. The Operating Partnership believes that the
actual amount of Mr. Amsdell's recovery in this matter, if any, would be
within the ability of these individuals to provide indemnification. The
Operating Partnership does not believe that the lawsuit will have a
material adverse effect upon the Operating Partnership.
<PAGE>
ITEM 9. MARKET PRICE AND DISTRIBUTIONS AND RELATED SECURITY
HOLDER MATTERS
There is no established public trading market for the Units. As of
April 20, 1998, there were 12 holders of record of Units.
The following table sets forth the quarterly distributions per Unit
paid by the Operating Partnership to holders of its Units with respect to
each such period.
Quarter Ended Distributions Per Unit
June 30, 1995 $.025
September 30, 1995 .505
December 31, 1995 .505
March 31, 1996 .505
June 30, 1996 .505
September 30, 1996 .520
December 31, 1996 .520
March 31, 1997 .520
June 30, 1997 .520
September 30, 1997 .540
December 31, 1997 .540
March 31, 1998 .540
The partnership agreement of the Operating Partnership (the
"Partnership Agreement") provides that the Operating Partnership will
distribute all available cash (as defined in the Partnership Agreement) on
at least a quarterly basis, in amounts determined by the general partner in
its sole discretion, to the partners in accordance with their respective
percentage interest in the Operating Partnership. Distributions are
declared at the discretion of the Board of Directors of Holdings, the
general partner of the Operating Partnership and a wholly-owned subsidiary
of the Company, and will depend on actual funds from operations of the
Operating Partnership, its financial condition, capital requirements, the
annual distribution requirements under the REIT provisions of the Internal
Revenue Code of 1986, as amended, and such other factors as the Board of
Directors may deem relevant. The Board of Directors of Holdings may modify
the Operating Partnership's distribution policy from time to time, subject
to the terms of the Partnership Agreement.
The Operating Partnership's line of credit contains customary
representations, covenants and events of default, including covenants which
restrict the ability of the Operating Partnership to make distributions in
excess of stated amounts. In general, during any four consecutive fiscal
quarters the Operating Partnership may only distribute up to 90% of the
Operating Partnership's funds from operations (as defined in the related
agreement). The line of credit contains exceptions to these limitations to
allow the Operating Partnership to make any distributions necessary to
allow the Company to maintain its status as a REIT. The Operating
Partnership does not anticipate that this provision will adversely effect
the ability of the Operating Partnership to make distributions, as
currently anticipated.
<PAGE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Operating Partnership has issued
Units in private placements in reliance on the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended, in the
amounts and for the consideration set forth below:
- On June 26 and July 25, 1995, the Company transferred
$148,244,000 to the Operating Partnership in exchange for
7,466,749.29 Units and Holdings transferred $1,496,000 to the
Operating Partnership in exchange for 75,421.71 general
partnership units.
- On January 20, 1996, in connection with the Sovran Self Storage,
Inc. 1995 Award and Option Plan, the Operating Partnership issued
1980 Units to the Company and 20 general partnership units to
Holdings.
- On July 25, 1996, Thomas Hinkel and Hinkel Investment Limited
Partnership transferred their interest in a self-storage facility
to the Operating Partnership in exchange for 6,327.8 and
12,459.37 Units, respectively.
- On October 1, 1996, the Company transferred $65,959,000 to the
Operating Partnership in exchange for 2,710,000 Units and
Holdings transferred $974,000 to the Operating Partnership in
exchange for 40,000 general partnership units.
- On October 8, 1996, the Company transferred $9,940,000 to the
Operating Partnership in exchange for 408,375 Units and Holdings
transferred $100,000 to the Operating Partnership in exchange for
4,125 general partnership units.
- On December 18, 1996, Harold Samloff and Laurence Glaser
transferred their interest in a self-storage facility to the
Operating Partnership in exchange for 60,571.425 Units for each
of them.
- On February 26, 1997, the Company transferred $34,500 to the
Operating Partnership in exchange for 1,500 Units in connection
with the Sovran Self Storage, Inc. 1995 Award and Option Plan.
- On March 31, 1977, Montague-Betts Company and D.W.B. Associates
transferred their interests in certain self-storage properties to
the Operating Partnership in exchange for 214,974.46 and
28,953.02 Units, respectively.
- On April 22, 1997, the Company transferred $39,148,000 to the
Operating Partnership in exchange for 1,400,000 Units and
Holdings transferred $2,796,000 to the Operating Partnership in
exchange for 100,000 general partnership units.
- On May 21, 1997, in connection with the Sovran Self Storage, Inc.
1995 Award and Option Plan, the Company transferred $51,750 to
the Operating Partnership in exchange for 2,250 units.
- On June 22, 1997, in connection with the Sovran Self Storage,
Inc. 1995 Award and Option Plan, the Company transferred $34,500
to the Operating Partnership in exchange for 1,500 Units.
<PAGE>
- On June 23, 1997, in connection with the Sovran Self Storage,
Inc. 1995 Award and Option Plan, the Company transferred $69,000
to the Operating Partnership in exchange for 3,000 Units.
- On June 24, 1997, in connection with the Sovran Self Storage,
Inc. 1995 Award and Option Plan, the Company transferred $69,000
to the Operating Partnership in exchange for 3,000 Units.
- On June 26, 1997, in connection with the Sovran Self Storage,
Inc. 1995 Award and Option Plan, the Company transferred $69,000
to the Operating Partnership in exchange for 3,000 Units.
- On November 12, 1997, in connection with the Sovran Self Storage,
Inc. 1995 Award and Option Plan, the Operating Partnership issued
200 Units to the Company.
- On December 2, 1997 Frank Bingman, Joseph & Beverly Snyder,
Morgan Whiteley and Marlene Whiteley transferred their interest
in a self-storage facility to the Operating Partnership in
exchange for 19,917.0124, 19,917.0124, 9,958.5062 and 9,958.5062
Units, respectively.
- On February 4, 1998, the Company transferred its interest in a
self-storage facility to the Operating Partnership in exchange
for 109,841.25 Units.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
General
The following description is only a summary of certain provisions of
the Partnership Agreement and is subject to, and qualified in its entirety
by, the Partnership Agreement, a copy of which has been filed with the
Securities and Exchange Commission.
Voting Rights
Under the Partnership Agreement, the Operating Partnership's limited
partners (the "Limited Partners") do not have voting rights relating to the
operation and management of the Operating Partnership except in connection
with certain amendments to the Partnership Agreement, dissolution of the
Operating Partnership and the sale or exchange of all or substantially all
of the Operating Partnership's assets, including mergers or other
combinations.
Vote Required to Dissolve the Operating Partnership
Under Delaware law and the terms of the Partnership Agreement, the
Operating Partnership may be dissolved upon the consent of the general
partner of the Operating Partnership (the "General Partner") and the vote
of Limited Partners (including the Company) holding at least 75% of the
percentage interests of the Limited Partners.
Vote Required to Sell Assets or Merge
Under the Partnership Agreement, except in certain circumstances, the
Operating Partnership may not sell, exchange, transfer or otherwise dispose
of all or substantially all of its assets, including by way of merger or
<PAGE>
consolidation or other combination of the Operating Partnership, without
the consent of the Limited Partners (including the Company) holding 75% or
more of the percentage interests of the Limited Partners. Currently, the
Company holds 94.81% of the percentage interests of the Limited Partners.
Meetings of the Partners
Meetings of the partners may be called by the General Partner and must
be called by the General Partner upon receipt of a written request by
Limited Partners holding 20% or more of the partnership interests. The
notice must state the nature of the business to be transacted, and must be
given to all partners not less than seven (7) days nor more than thirty
(30) days prior to the date of such meeting. Partners may vote in person
or by proxy at such meeting. Partners can act without a meeting with the
written consent of holders of 75% or more of the percentage interests of
the partners.
Transferability of Interests
Holdings may not transfer any of its general partner interest or
withdraw as the general partner of the Operating Partnership or transfer
any of its general partnership units, and the Company may not transfer any
of its Units, except in certain specifically identified types of
transactions, including under certain circumstances in the event of a
merger, consolidation or sale of all or substantially all of the assets of
the Company or the General Partner.
The Limited Partners (other than the Company) generally may transfer
their interests in the Operating Partnership, in whole or in part, without
the consent of the General Partner. No Limited Partner has the right to
substitute a transferee as a Limited Partner in its place without the
consent of the General Partner, which consent may be withheld in the sole
discretion of the General Partner. If the General Partner does not consent
to the admission of a permitted transferee, the transferee shall be
considered an assignee of an economic interest in the Operating Partnership
but will not be a holder of Units for any other purpose; as such the
assignee will not be permitted to vote on any affairs or issues on which a
Limited Partner may vote.
Issuance of Additional Units
The Operating Partnership is authorized to issue Units and other
partnership interests to its partners or to other persons for such
consideration and on such terms and conditions as the General Partner, in
its sole discretion, may deem appropriate. In addition, the Company may
cause the Operating Partnership to issue to the Company additional Units,
or other partnership interests in different series or classes which may be
senior to the Units, in conjunction with an offering of securities of the
Company having substantially similar rights and in which the proceeds
thereof are contributed to the Operating Partnership. No Limited Partner
has any preemptive, preferential or similar rights with respect to
additional capital contributions to the Operating Partnership or the
issuance or sale of any interests therein.
Redemption Rights
Pursuant to the Partnership Agreement, the Limited Partners (other
than the Company) have redemption rights which, subject to certain
<PAGE>
limitations, enable them to cause the Operating Partnership to redeem each
Unit for cash equal to the market value of a Common Share or, at the
Company's election, the Company may purchase each Unit offered for
redemption for cash or one Common Share (the "Redemption Rights").
Management Liability and Indemnification
The Partnership Agreement generally provides that the General Partner
will incur no liability to the Operating Partnership or any Limited Partner
for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission if the General Partner acted in good
faith. In addition, the General Partner is not responsible for any
misconduct or negligence on the part of its agents provided the General
Partner appointed such agents in good faith. The General Partner may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisors, and any
action it take or omits to take in reliance upon the opinion of such
persons, as to matters which the General Partner reasonably believes to be
within their professional or expert competence, shall be conclusively
presumed to have been done or omitted in good faith and in accordance with
such opinion. The Partnership Agreement also provides for indemnification
of the General Partner, the directors and officers of the General Partner,
and such other persons as the General Partner may from time to time
designate, against any and all losses, claims, damages, liabilities, joint
or several, expenses (including, without limitation, attorney's fees and
other legal fees and expenses), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate
to the operations of the Operating Partnership in which such person may be
involved.
Amendment
Amendments to the Partnership Agreement may be proposed by the General
Partner or by Limited Partners holding twenty percent (20%) or more of the
partnership interests and generally require approval of Limited Partners
(including the Company) holding a majority of the outstanding Limited
Partner interests. Certain amendments that would, among other things,
convert a Limited Partner's interest to a General Partner interest, modify
the limited liability of a Limited Partner in a manner adverse to such
Limited Partner, alter rights of a Limited Partner to receive distributions
or allocations, alter or modify the Redemption Rights in a manner adverse
to a Limited Partner, or cause the termination of the Operating Partnership
prior to the expiration of the term of the Partnership Agreement, require
the consent of each Limited Partner adversely affected by such amendment.
Management Fees and Expenses
Holdings may not be compensated for its services as General Partner.
However, Holdings and/or the Company may be reimbursed for all expenses
that they incur relating to the ownership and operation of, or for the
benefit of, the Operating Partnership.
Distributions and Allocations
The Partnership Agreement provides that the Operating Partnership will
distribute all available cash (as defined in the Partnership Agreement) on
at least a quarterly basis, in amounts determined by the General Partner in
<PAGE>
its sole discretion, to the partners in accordance with their respective
percentage interest in the Operating Partnership. Upon liquidation of the
Operating Partnership, after payment of, or adequate provision for, debts
and obligations of the Operating Partnership, including any partner loans,
any remaining assets of the Operating Partnership will be distributed to
all partners with positive capital accounts in accordance with their
respective positive capital account balances.
Profit and loss of the Operating Partnership for each fiscal year of
the Operating Partnership generally will be allocated among the partners in
accordance with their respective interest in the Operating Partnership.
Taxable income and loss will be allocated in the same manner, subject to
compliance with the provisions of Code sections 704(b) and 704(c) and
Treasury Regulations promulgated thereunder.
Term
The Operating Partnership will continue until December 31, 2094, or
until sooner dissolved upon (i) withdrawal of the General Partner (unless
the Limited Partners elect to continue the Operating Partnership),
(ii) through December 31, 2053, an election to dissolve the Operating
Partnership made by the General Partner with the consent of the Limited
Partners (including the Company) holding 75% or more of the limited partner
interests in the Operating Partnership, (iii) on or after January 1, 2054,
an election to dissolve the Operating Partnership made by the General
Partner in its sole and absolute discretion, (iv) entry of a decree of
judicial dissolution, (v) the sale of all or substantially all of the
assets of the Operating Partnership, or (vi) a final and non-appealable
judgment ruling the General Partner bankrupt or insolvent (unless the
Limited Partners elect to continue the Operating Partnership prior to the
entry of such order or judgment).
Tax Matters
Pursuant to the Partnership Agreement, the General Partner will be the
tax matters partner of the Operating Partnership and, as such, will have
authority to handle tax audits and to make tax elections under the Code on
behalf of the Operating Partnership.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Partnership Agreement generally provides that the General Partner
will incur no liability to the Operating Partnership or any Limited Partner
for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission if the General Partner acted in good
faith. In addition, the General Partner is not responsible for any
misconduct or negligence on the part of its agents provided the General
Partner appointed such agents in good faith. The General Partner may
consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisors, and any
action it take or omits to take in reliance upon the opinion of such
persons, as to matters which the General Partner reasonably believes to be
within their professional or expert competence, shall be conclusively
presumed to have been done or omitted in good faith and in accordance with
such opinion. The Partnership Agreement also provides for indemnification
of the General Partner, the directors and officers of the General Partner,
and such other persons as the General Partner may from time to time
<PAGE>
designate, against any and all losses, claims, damages, liabilities, joint
or several, expenses (including, without limitation, attorney's fees and
other legal fees and expenses), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate
to the operations of the Operating Partnership in which such person may be
involved.
The Operating Partnership is managed by Holdings, which serves as
general partner of the Operating Partnership. Holdings is a wholly-owned
subsidiary of the Company.
The Company is a Maryland corporation. Under Maryland law, a
corporation formed in Maryland is permitted to limit, by provision in its
Articles of Incorporation, the liability of directors and officers so that
no director or officer of the Company shall be liable to the Company or to
any shareholder for money damages except to the extent that (i) the
director or officer actually received an improper benefit in money,
property, or services, for the amount of the benefit or profit in money,
property, or services actually received, or (ii) a judgment or other final
adjudication adverse to the director or officer is entered in a proceeding
based on a finding in a proceeding that the director's or officer's action
was the result of active and deliberate dishonesty and was material to the
cause of action adjudicated in the proceeding. The Company's Articles of
Incorporation have incorporated the provisions of such law limited the
liability of directors and officers. Holding's Certificate of
Incorporation contains similar provisions that are consistent with Delaware
law.
The Company's Bylaws require it to indemnify, to the full extent of
Maryland law, any present or former director or officer (and such person's
spouse and children) (an "Indemnitee") who is or was a party or threatened
to be made a party to any proceeding by reason of his or her service in
that capacity, against all expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection
with the proceeding, provided that the Company shall have received a
written affirmation by the Indemnitee that he or she has met the standard
of conduct necessary for indemnification by the Company as authorized by
the Bylaws. The Company shall not be required to indemnify an Indemnitee
if (a) it is established that (i) the Indemnitee's act or omission was
committed in bad faith or was the result of active or deliberate
dishonesty, (ii) the Indemnitee actually received an improper personal
benefit in money, property or services or (iii) in the case of a criminal
proceeding, the Indemnitee had reasonable cause to believe that the
Indemnitee's act or omission was unlawful, (b) the proceeding was initiated
by the Indemnitee, (c) the Indemnitee received payment for such expenses
pursuant to insurance or otherwise or (d) the proceeding arises under
Section 16 of the Securities Exchange Act of 1934, as amended. Pursuant to
the Bylaws, the Indemnitee is required to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the
standard of conduct was not met. The Company's Bylaws also permit the
Company to provide such other and further indemnification or payment or
reimbursement of expenses as may be permitted by the MGCL or to which the
Indemnitee may be entitled. Holdings' bylaws contain similar provisions
that are consistent with Delaware law.
Each of the Company's officers and directors (the "Indemnitees") has
entered into an indemnification agreement with the Company (the
"Indemnitor"). The indemnification agreements require, among other things,
<PAGE>
that the Indemnitor indemnify the Indemnitees to the fullest extent
permitted by law and advance to the Indemnitees all related expenses,
subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Under these agreements, the Indemnitors
also must indemnify and advance all expenses incurred by the Indemnitees
seeking to enforce their rights under the indemnification agreements, and
cover such Indemnitees under the Company's director's and officers'
liability insurance. Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by provisions in the
Company's Articles of Incorporation and Bylaws, it provides greater
assurance to directors and officers that indemnification will be available
because, as a contract, it cannot be modified unilaterally in the future by
the Board of Directors or by the Company's shareholders to eliminate the
rights it provides.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Financial Statements Table of Contents" on page F-1 of this Form
10. See also the Company's Amended Current Report on Form 8-K/A dated
April 17, 1998 with respect to the historical summaries of combined gross
revenue and direct operating expenses of certain recently acquired
Properties.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Financial Statement Schedules
See "Financial Statements Table of Contents" on page F-1 of this Form
10.
(b) Exhibits
Exhibit No. Description
3.1 Agreement of Limited Partnership of
the Operating Partnership, as amended
3.2* Amended and Restated Articles of
Incorporation of the Company
3.3* By-laws of the Company
3.4 Articles Supplementary of the Articles of
Incorporation of the Company classifying and
designating the Company's Series A Junior
Participating Preferred Stock (Incorporated
by reference to Exhibit 3.1 to the Company's
Form 8A filed December 3, 1996)
10.1 Revolving Credit Agreement between the
Company, the Operating Partnership, Fleet
National Bank and other lenders named therein
<PAGE>
10.2* Form of Non-competition Agreement between the
Company and Charles E. Lannon
10.3* Form of Non-competition Agreement between the
Company and Robert J. Attea
10.4* Form of Non-competition Agreement between the
Company and Kenneth F. Myszka
10.5* Form of Non-competition Agreement between the
Company and David L. Rogers
10.6* Sovran Self Storage, Inc. 1995 Award and
Option Plan
10.7* 1995 Sovran Self Storage, Inc. Directors'
Option Plan
10.8* Sovran Self Storage Incentive Compensation
Plan for Executive Officer
10.9* Restricted Stock Agreement between the
Company and David L. Rogers
10.10* Form of Supplemental Representations,
Warranties and Indemnification Agreement
among the Company and Robert J. Attea,
Charles E. Lannon, Kenneth F. Myszka and
David L. Rogers
10.11* Form of Pledge Agreement among the Company
and Robert J. Attea, Charles E. Lannon,
Kenneth F. Myszka and David L. Rogers
10.12* Form of Indemnification Agreement between the
Company and certain Officers and Directors of
the Company
10.13* Form of Subscription Agreement (including
Registration Rights Statement) among the
Company and subscribers for 422,171 Common
Shares
10.14* Form of Registration Rights and Lock-Up
Agreement among the Company and Robert J.
Attea, Charles E. Lannon, Kenneth F. Myszka
and David L. Rogers
10.15* Form of Facilities Services Agreement between
the Company and Williamsville Properties,
Inc.
27.1 Financial Data Schedule
_________________
* Incorporated by reference to the exhibits as filed with the Company's
Registration Statement on Form S-11 (File No. 33-91422) filed June 19,
1995.
<PAGE>
Financial Statements
Table of Contents
Sovran Acquisition Limited Partnership
Page
I
Pro Forma
Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . .F-2
Unaudited Pro Forma Balance Sheet as of December 31, 1997 . . . . . . .F-3
Unaudited Pro Forma Statement of Operations for the
Year Ended December 31, 1997. . . . . . . . . . . . . . . . . . . . .F-4
Notes to Unaudited Pro Forma Financial Statements . . . . . . . . . . .F-5
II
Historical
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . .F-6
Balance Sheets at December 31, 1997 and 1996. . . . . . . . . . . . . .F-7
Statements of Operations of the Operating Partnership
for the Years ended December 31, 1997 and 1996 and the period
from June 26, 1995 to December 31, 1995 and the Company
Predecessors for the period January 1, 1995 to June 25, 1995 . . .F-8
Combined Statement of Owners' Equity for the Company
Predecessors for the Period January 1, 1995 to June 25, 1995 . . .F-9
Statement of Partners' Capital of the Operating Partnership
for the Years ended December 31, 1997 and 1996 and the period
ended December 31, 1995. . . . . . . . . . . . . . . . . . . . . .F-10
Statements of Cash Flows of the Operating Partnership
for the Years ended December 31, 1997 and 1996 and the period
from June 26, 1995 to December 31, 1995 and the Company
Predecessors for the period January 1, 1995 to June 25, 1995 . . .F-12
Notes to Financial Statements F-14
III
Historical
Financial Statement Schedule
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . .F-24
Schedule of Combined Real Estate and Accumulated Depreciation . . . . .F-25
<PAGE>
Sovran Acquisition Limited Partnership
Pro Forma Financial Information
The following unaudited Pro Forma Balance Sheet as of December 31, 1997 and
unaudited Pro Forma Statement of Operations for year then ended have been
prepared to reflect the (i) acquisition of 44 self storage facilities in
1997, (ii) acquisition of 22 self storage facilities in 1998, and
(iii) receipt of the proceeds of Sovran Self Storage, Inc.'s common stock
offering in April 1997 as if such proceeds were received at the beginning
of 1997. The pro forma financial information is based on the historical
financial statements of Sovran Acquisition Limited Partnership included
elsewhere in this Form-10 for the year ended December 31, 1997, and should
be read in conjunction with those financial statements and notes thereto.
The Pro Forma Balance Sheet was prepared as if the 22 acquisition
facilities that were purchased after December 31, 1997, were acquired at
that date. The Pro Forma Statement of Operations was prepared as if (i)
the 44 self storage facilities acquired in 1997 and the 22 self storage
facilities acquired in 1998, were purchased at the beginning of 1997 and
(ii) the April 1997 common stock offering had occurred at the beginning of
1997. The combined pro forma financial information is not necessarily
indicative of the financial position or results of operations which
actually would have occurred if such transactions had been consummated on
the dates described, nor does it purport to represent Sovran Acquisitions
Limited Partnership's future financial position or results of operations.
<PAGE>
Sovran Acquisition Limited Partnership
Pro Forma Balance Sheet
December 31, 1997
(in thousands)
(unaudited)
Sovran Pro Forma
Acquisition Facilities Sovran
Limited Acquired Acquisition
Partnership in 1998 Limited
(Note 1) (Note 2) Partnership
Assets
Investment in storage facilities, net $ 321,397 $69,860 $391,257
Cash and cash equivalents 2,567 - 2,567
Accounts receivable 834 27 861
Prepaid expenses and other assets 2,275 36 2,311
Total Assets $ 327,073 $69,923 $396,996
Liabilities
Line of credit $ 36,000 $66,158 $102,158
Accounts payable and accrued liabilities 1,950 138 2,088
Deferred revenue 1,994 291 2,285
Accrued distributions 6,816 - 6,816
Mortgage payable 3,559 - 3,559
Total liabilities 50,319 66,587 116,906
Limited partners' capital interest 14,454 - 14,454
Partners' Capital
General partner 5,257 - 5,257
Limited partner 257,043 3,336 260,379
Total partners' capital 262,300 3,336 265,636
Total liabilities and
partners' capital $ 327,073 $69,923 $396,996
=====================================
<PAGE>
<TABLE>
Sovran Acquisition Limited Partnership
Pro Forma Statement of Operations
Year Ended December 31, 1997
(in thousands, except per unit information)
(unaudited)
<CAPTION>
1997
Sovran Facilities Pro Forma
Acquisition Preacquisi- Facilities 1998 Sovran
Limited tion Pro Acquired Facilities Acquisition
Partnership Forma Combined in 1998 Pro Forma Limited
(Note 1) (Note 3) Pro Forma (Note 4) Adjustments Partnership
<S> <C> <C> <C> <C> <C> <C>
Revenues
Rental Income $ 48,584 $ 4,680 $ 53,264 $ 8,734 $ - $ 61,998
Interest and other income 770 51 821 180 - 1,001
Total revenue 49,354 4,731 54,085 8,914 - 62,999
Expenses
Property operations and
maintenance 9,708 1,020 10,728 1,815 - 12,543
Real estate taxes 3,955 397 4,352 598 - 4,950
General and administrative 2,757 43 2,800 - 143 (a) 2,943
Interest 2,166 1,001 3,167 - 4,833 (b) 8,000
Depreciation and amortization 7,005 737 7,742 - 1,515 (c) 9,257
Net income $ 23,763 $ 1,533 $ 25,296 $ 6,501 $(6,491) $ 25,306
===================================================================
Earnings per unit - basic $ 1.97 $ 1.98
Earnings per unit - diluted $ 1.96 $ 1.97
Distributions declared per unit $ 2.12 $ 2.12
Units used in basic
per unit calculation 12,090,000 12,774,000 (d)
</TABLE>
<PAGE>
Sovran Acquisition Limited Partnership
Notes to Pro Forma Financial Statements
(unaudited)
1. Sovran Acquisition Limited Partnership
The balance sheet and statement of operations as of and for the year ended
December 31, 1997, include the accounts of Sovran Acquisition Limited
Partnership included elsewhere in this Form-10.
2. Pro Forma Adjustments - Balance Sheet
These adjustments reflect the 22 acquisitions that occurred subsequent to
December 31, 1997 and were not included in the Sovran Acquisition Limited
Partnership December 31, 1997 balance sheet. The facilities were purchased
from unaffiliated parties for an aggregate purchase price of approximately
$70 million. The acquisitions were funded by cash generated from
operations, borrowings under the line of credit, and the issuance of
Operating Partnership Units.
3. Facilities Acquired in 1997 - Statement of Operations
The statements of operations for the 44 facilities acquired in 1997
reflects the results of operations for the 44 facilities up to the date
acquired in 1997 and additional general and administrative, depreciation,
and interest expense which would have resulted if the facilities were owned
since January 1, 1997.
4. Facilities Acquired in 1998 - Statement of Operations
The statements of operations for the 22 facilities acquired in 1998
reflects the gross revenue and direct operating expenses for these
facilities for the year ended December 31, 1997.
5. 1998 Facilities Pro Forma Adjustments - Statement of Operations
(a) To reflect an estimated increase in general and administrative
expenses based on results subsequent to acquisition.
(b) To reflect interest expense on the line of credit utilized to
fund the purchase of the 22 facilities in 1998.
(c) To record additional depreciation expense related to the
facilities purchased in 1998 based on a 39 year life and
approximately $59 million of the purchase price being allocated
to depreciable assets.
(d) Pro forma earnings per share calculated as if the operating
partnership units outstanding after the purchase of the 22
facilities in 1998 had been outstanding since the beginning of
1997.
<PAGE>
Report of Independent Auditors
The Board of Directors and Partners
Sovran Acquisition Limited Partnership:
We have audited the accompanying balance sheets of Sovran Acquisition
Limited Partnership as of December 31, 1997 and 1996 and the related
statements of operations, partners' capital and cash flows for the years
ended December 31, 1997 and 1996 and the period from June 26, 1995 to
December 31, 1995. We have also audited the combined statements of
operations, owners' equity and cash flows of Sovran Capital, Inc. and
Sovran Partnerships for the period from January 1, 1995 to June 25, 1995.
These financial statements are the responsibility of the management of
Sovran Acquisition Limited Partnership. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Sovran
Acquisition Limited Partnership as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended
December 31, 1997 and 1996 and the period from June 26, 1995 through
December 31, 1995, and the combined results of operations and cash flows of
Sovran Capital, Inc. and Sovran Partnerships from January 1, 1995 to
June 25, 1995 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Buffalo, New York
April 16, 1998
<PAGE>
Balance Sheets - Sovran Acquisition Limited Partnership
December 31,
(Dollars in thousands) 1997 1996
Assets
Investment in storage facilities:
Land $71,391 $49,591
Building and equipment 261,645 171,120
333,036 220,711
Less accumulated depreciation (11,639) (5,457)
Investments in storage facilities, net 321,397 215,254
Cash and cash equivalents 2,567 16,687
Accounts receivable 834 482
Prepaid expenses and other assets 2,275 2,992
Total Assets $327,073 $235,415
======== ========
Liabilities
Line of credit $36,000 $ -
Accounts payable and accrued
liabilities 1,950 1,124
Deferred revenue 1,994 1,367
Accrued distributions 6,816 5,640
Mortgage payable 3,559 -
Total Liabilities 50,319 8,131
Limited partners' capital interest (443,609
and 139,930 units, respectively), at
redemption value (Note 1) 14,454 4,435
Partners' Capital
General partner (219,567 and
119,567 units issued and outstanding,
respectively) 5,257 2,523
Limited partner (12,001,554 and
10,587,104 units issued and outstanding,
respectively) 257,043 220,326
Total partners' capital 262,300 222,849
Total liabilities and
partners' capital $327,073 $235,415
======== ========
(See notes to financial statements.)
<PAGE>
<TABLE>
Sovran Acquisition Limited Partnership (the Operating Partnership) and Sovran Capital, Inc. and
Sovran Partnerships (Company Predecessors)
Statements of Operations of the Operating Partnership and Combined Statements of Operations of
Company Predecessors
<CAPTION>
Operating Partnership Predecessors
Year Ended Year Ended For Period For Period
Dollars in thousands, December 31, December 31, 6/26/95 to 1/1/95 to
except per unit data) 1997 1996 12/31/95 6/25/95
_____________________________________________ ____________
<S> <C> <C> <C> <C>
Revenues:
Rental income $48,584 $ 32,946 $ 12,557 $ 9,260
Interest and other income 770 651 385 272
_________ _________ _________ ________
Total revenues 49,354 33,597 12,942 9,532
Expenses:
Property operations and
maintenance 9,708 6,662 2,533 2,061
Real estate taxes 3,955 2,464 861 708
General and administrative 2,757 2,282 974 1,574
Interest 2,166 1,924 131 3,268
Depreciation and
amortization 7,005 4,583 1,699 1,610
_________ _________ _________ ________
Total expenses 25,591 17,915 6,198 9,221
_________ _________ _________ ________
Net income $23,763 $ 15,682 $ 6,744 $ 311
========= ========= ========= ========
Earnings per unit-basic $ 1.97 $ 1.88 $ 0.91 $ -
Earnings per unit-diluted $ 1.96 $ 1.87 $ 0.91 $ -
Distributions declared
per unit $ 2.12 $ 2.05 $ 1.04 $ -
(See notes to financial statements.)
</TABLE>
<PAGE>
<TABLE>
Sovran Capital, Inc. and Sovran Partnerships (the Company Predecessors)
Combined Statement of Owners' Equity
<CAPTION>
Common Additional Accumulated Distribution
Stock Common Paid-in Owners' Treasury in Excess of Total
(Dollars in thousands) Shares Stock Capital Equity Stock Net Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995 400 $ - $ - $13,794 $ (75) $ - $ 13,719
Cash distributions - - - (1,779) - - (1,779)
Cash contributions - - - 965 - - 965
Net income - - - 311 - - 311
Balance June 25, 1995 400 $ - $ - $13,291 $ (75) $ - $ 13,216
</TABLE>
<PAGE>
<TABLE>
Sovran Acquisition Limited Partnership (the Operating Partnership)
Statements of Partners' Capital
<CAPTION>
Sovran Sovran Self Total
Holdings, Inc. Storage Inc. Partners' Limited Partners'
General Partner Limited Partner Capital Capital Interest
<S> <C> <C> <C> <C>
Balance June 26, 1995 $ - $ - $ - $ -
Proceeds from Initial
Public Offering 1,243 123,089 124,332 -
Proceeds from private placement 101 10,031 10,132 -
Proceeds from exercise of
over-allotment 160 15,882 16,042 -
Issuance of units to principal
shareholders in exchange for
their interest in Sovran
Capital, Inc. 3 293 296 -
Net income 67 6,677 6,744 -
Distributions (78) (7,728) (7,806) -
________ _________ _________ _________
Balance December 31, 1995 $1,496 $148,244 $149,740 $ -
Proceeds from issuance of
common stock 1,074 75,899 76,973 -
Issuance of redeemable units
for acquisition of storage
facilities - - - 3,659
Earned portion of restricted
stock - 12 12 -
Net income 162 15,497 15,659 23
Distributions (200) (18,555) (18,755) (27)
Adjustment to reflect limited
partners' redeemable capital
at balance sheet date (9) (771) (780) 780
________ _________ _________ _________
Balance December 31, 1996 $2,523 $220,326 $222,849 $4,435
Proceeds from issuance of
common stock 2,796 39,148 41,944 -
<PAGE>
Issuance of redeemable units
for acquisition of storage
facilities - - - 9,240
Exercise of stock options - 328 328 -
Earned portion of restricted
stock - 13 13 -
Net income 366 22,753 23,119 644
Distributions (413) (24,708) (25,121) (697)
Adjustment to reflect limited
partners' redeemable capital
at balance sheet date (15) (817) (832) 832
________ _________ _________ _________
Balance December 31, 1997 $5,257 $257,043 $262,300 $14,454
======== ========= ========= =========
(See notes to financial statements.)
</TABLE>
<PAGE>
<TABLE>
Sovran Acquisition Limited Partnership (the Operating Partnership) and Sovran Capital, Inc. and
Sovran Partnerships (Company Predecessors)
Statements of Cash Flows of the Operating Partnership and Combined Statements of Cash Flows of the
Predecessors
<CAPTION>
Operating Partnership Predecessors
Year Ended Year Ended For Period For Period
December 31, December 31, 6/26/95 to 1/1/95 to
(Dollars in thousands) 1997 1996 12/31/95 6/25/95
<S> <C> <C> <C> <C>
Operating Activities
Net income $ 23,763 $ 15,682 $ 6,744 $ 311
Adjustments to reconcile
net income to net cash
provided by operating
activities
Depreciation and amortization 7,005 4,583 1,699 1,610
Restricted stock earned 13 12 - -
Changes in assets and
liabilities
Accounts receivable (162) (145) (40) (46)
Prepaid expenses and other (283) (182) 37 (849)
Accounts payable and other
liabilities 894 157 (1,225) 891
Deferred revenue (71) 45 (27) 86
_______________________________________ _______
Net cash provided by
operating activities 31,159 20,152 7,188 2,003
Investing Activities
Additions to storage
facilities (98,970) (57,160) (156,780) (3,478)
<PAGE>
Other assets 205 (1,986) (1,185) -
Restricted cash - - - 138
_______________________________________ _______
Net cash used in investing
activities (98,765) (59,146) (157,965) (3,340)
Financing Activities
Net proceeds from sale of
common stock 42,273 76,973 150,506 -
Proceeds from (payments on)
line of credit 36,000 (5,000) 5,000 -
Distributions paid (24,787) (17,024) (3,997) (1,779)
Proceeds from issuance of
mortgages - - - 2,821
Mortgage principal payments - - - (1,500)
Capital contributions - - - 965
_______________________________________ ________
Net cash provided by
financing activities 53,486 54,949 151,509 507
_______________________________________ ________
Net (decrease) increase
in cash (14,120) 15,955 732 (830)
Cash beginning of period 16,687 732 - 1,045
_______________________________________ ________
Cash end of period $ 2,567 $ 16,687 $ 732 $ 215
======================================= ========
Supplemental cash flow
information
Cash paid for interest $ 2,238 $ 1,842 $ 234 $3,268
</TABLE>
<PAGE>
Sovran Acquisition Limited Partnership (the Operating Partnership) and
Sovran Capital, Inc. and Sovran Partnerships (Company Predecessors)
Statements of Cash Flows of the Operating Partnership and Combined
Statements of Cash Flows of the Predecessors
Supplemental cash-flow information for the years ended December 31, 1997,
and 1996.
(Dollars in thousands)
1997 1996
Storage facilities acquired through the
issuance of partnership units $ 9,240 $ 3,659
Storage facilities acquired through
assumption of mortgage 3,559 -
Fair value of net liabilities assumed on the
acquisition of storage facilities 4,144 434
Distributions declared but unpaid at December 31, 1997, 1996 and 1995 were
$6,816, $5,640 and $3,809, respectively.
Supplemental cash-flow information for the period June 26, 1995 to
December 31, 1995
(Dollars in thousands)
Cash paid for partnership interest $42,865
Cash paid for acquisition properties 45,121
Cash paid to retire partnership mortgages 67,602
Prepayment penalties and closing costs 860
Cash paid for building improvements 332
Cash paid for storage facilities per statement of cash flows $156,780
Fair value of net liabilities assumed of the partnerships
and Sovran Capital, Inc. 2,681
Investment in storage facilities per financial statements $159,461
(See notes to financial statements.)
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Sovran Acquisition Limited Partnership - December 31, 1997
1. ORGANIZATION
Sovran Acquisition Limited Partnership (the "Operating Partnership")
is the entity through which Sovran Self Storage, Inc. (the "Company"), a
self-administered and self-managed real estate investment trust ("REIT"),
conducts substantially all of its business and owns substantially all of
its assets. The Operating Partnership is one of the largest owners and
operators of self-storage properties in the Eastern United States and
Texas. In 1995, the Company was formed under Maryland law and the
Operating Partnership was organized as a Delaware limited partnership to
continue and to expand the self-storage operations of the Company's
privately owned predecessor organizations. On June 26, 1995, the Company
commenced operations, through the Operating Partnership, effective with the
completion of its initial public offering of 5,890,000 shares (the "Initial
Offering"). Contemporaneously with the closing of the Initial Offering,
the Operating Partnership acquired, in a transaction accounted for as a
purchase, sixty-two self-storage facilities (the "Original Properties")
which had been owned and managed by Sovran Capital, Inc. and the Sovran
Partnerships ("Company Predecessors"). Purchase accounting was applied to
the acquisition of the Original Properties to the extent cash was paid to
purchase 100% of the limited-partnership interests in the Sovran
Partnerships, prepay outstanding mortgages at the time of acquisition and
for related transaction costs. Additionally, the Operating Partnership
acquired on that date twelve self-storage properties from unaffiliated
third parties. The Operating Partnership has since purchased a total of
eighty-one (forty-four in 1997, twenty-nine in 1996 and eight in 1995) self
storage properties from unaffiliated third parties, increasing the total
number of self-storage properties owned at December 31, 1997 to 155
properties, most of which are in the eastern United States and Texas.
As of December 31, 1997, the Company was a 96.5% economic owner of the
Operating Partnership and controls it through Sovran Holdings, Inc.
("Holdings"), a wholly owned subsidiary of the Company incorporated in
Delaware and the sole general partner of the Operating Partnership (this
structure is commonly referred to as an umbrella partnership REIT or
"UPREIT"). The board of directors of Holdings, the members of which are
also members of the Board of Directors of the Company, manages the affairs
of the Operating Partnership by directing the affairs of Holdings. The
Company's limited partner and indirect general partner interests in the
Operating Partnership entitle it to share in cash distributions from, and
in the profits and losses of, the Operating Partnership in proportion to
its ownership interest therein and entitle the Company to vote on all
matters requiring a vote of the limited partners.
The other limited partners of the Operating Partnership are persons
who contributed their direct or indirect interests in certain self-storage
properties to the Operating Partnership. The Operating Partnership is
obligated to redeem each unit of limited partnership ("Unit") at the
request of the holder thereof for cash equal to the fair market value of a
share of the Company's common stock ("Common Shares") at the time of such
redemption, provided that the Company at its option may elect to acquire
any Unit presented for redemption for one Common Share or cash. The
Company presently anticipates that it will elect to issue Common Shares to
<PAGE>
acquire Units presented for redemption, rather than paying cash. With each
such redemption the Company's percentage ownership interest in the
Operating Partnership will increase. In addition, whenever the Company
issues Common Shares, the Company is obligated to contribute any net
proceeds therefrom to the Operating Partnership and the Operating
Partnership is obligated to issue an equivalent number of Units to the
Company. Such limited partners' redemption rights are reflected in
"limited partners' capital interest" in the accompanying balance sheets at
the cash redemption amount at the balance sheet date. Capital activity
with regard to such limited partners' redemption rights is reflected in the
accompanying statements of partners' capital.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Company and the Operating Partnership were
formed on April 19, 1995, and commenced operations effective with the
completion of the Offering on June 25, 1995. Accordingly, the Operating
Partnership results of operations are presented from June 26, 1995, the
date following the completion of the Offering and the establishment of REIT
status, through December 31, 1997.
The combined statements of operations for the period ended June 25,
1995 reflect the assets, liabilities and results of operations of the
Sovran Capital, Inc. and the Sovran Partnerships (Company Predecessors).
Such financial statement has been presented on a combined basis, because
the entities were the subject of the business combination described in
Note 1. All intercompany transactions and balances have been eliminated.
Cash and Cash Equivalents: The Operating Partnership considers all highly
liquid debt instruments purchased with maturity of three months or less to
be cash equivalents.
Revenue Recognition: Rental income is recorded when earned. Rental income
received prior to the start of the rental period is included in deferred
revenue.
Interest and Other Income: Other income consists primarily of interest
income, sales of storage-related merchandise (locks and packing supplies)
and commissions from truck rentals.
Investment in Storage Facilities: Storage facilities are recorded at cost.
Depreciation is computed using the straight line method over estimated
useful lives of forty years for buildings and improvements, and five to
twenty years for furniture, fixtures and equipment. Expenditures for
significant renovations or improvements which extend the useful life of
assets are capitalized. Repair and maintenance costs are expensed as
incurred.
Prepaid Expenses and Other Assets: Included in prepaid expenses and other
assets are prepaid expenses and intangible assets. The intangible assets
at December 31, 1997, consist primarily of loan acquisition costs of
approximately $1,155, net of accumulated amortization of approximately
$771; organizational costs of approximately $63, net of accumulated
amortization of approximately $29; and covenants not to compete of $785,
net of accumulated amortization of $350. Loan acquisition costs are
amortized over the terms of the related debt; organization costs are
amortized over five years; and the covenants are amortized over the
contract periods. Amortization expense was $794 and $620 for the periods
ended December 31, 1997 and 1996, respectively.
<PAGE>
Income Taxes: No provision has been made for income taxes in the
accompanying financial statements since the Operating Partnership qualifies
as a partnership for Federal and state income tax purposes and its partners
are required to include their respective shares of profits and losses in
their income tax returns.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. EARNINGS PER UNIT
In 1997, the Operating Partnership adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." All prior period per
unit data has been restated to conform with the provisions of this
statement. The following table sets forth the computation of basic and
diluted earnings per unit.
Year Ended Year Ended For Period
(Dollars in thousands, December 31, December 31, 6/26/95
except per unit data) 1997 1996 to 12/31/95
Numerator:
Net Income $ 23,763 $ 15,682 $ 6,744
Denominator:
Denominator for basic
earnings per unit -
weighted average units 12,090 8,344 7,430
Effect of Dilutive Securities:
Options for Company stock 62 35 10
Denominator for diluted
earnings per unit -
adjusted weighted -
average units and
assumed conversion 12,152 8,379 7,440
Basic Earnings per Unit $ 1.97 $ 1.88 $ .91
Diluted Earnings
per Unit $ 1.96 $ 1.87 $ .91
<PAGE>
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during the years
ended December 31, 1997 and December 31, 1996
(Dollars in Thousands)
1997 1996
Cost:
Beginning balance $ 220,711 $ 159,461
Property acquisitions 106,926 58,626
Improvements and equipment additions 5,527 2,640
Dispositions (128) (16)
Ending balance $ 333,036 $ 220,711
Accumulated Depreciation:
Beginning balance $ 5,457 $ 1,497
Additions during the year 6,211 3,964
Dispositions (29) (4)
Ending balance $ 11,639 $ 5,457
5. LINE OF CREDIT
At December 31, 1997, the Operating Partnership maintained a $75
million revolving-credit facility of which $36 million was outstanding and
secured by specific storage facilities. At December 31, 1997, the
Operating Partnership had identified and pledged properties sufficient to
provide $75 million of such borrowings. Interest on outstanding balances
is payable monthly at 190 basis points above LIBOR. The commitment fee was
$225,000 and there is a facility fee attached to the line at the following
rates: i) .25% if the unused commitment (UC) is less than $30 million, or
ii) .375% if UC is greater than $30 million. At December 31, 1997, the
Operating Partnership was at the .375% rate.
On February 20, 1998, the Operating Partnership entered into a new
$150 million unsecured credit facility which replaces in its entirety the
$75 million revolving credit facility. The new facility matures February
2001 and provides for funds at LIBOR plus 1.375%, a savings of 52.5 basis
points over the old facility. As a result of the new credit facility, in
1998 the Operating partnership will record an extraordinary loss on the
extinguishment of debt of $ 312,000, representing the unamortized financing
costs of the revolving credit facility.
<PAGE>
6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma information shows the results of
operations as though the acquisitions of storage facilities in 1997 and
1996, and the common stock offerings of the Company in 1997 and 1996 had
all occurred as of the beginning of 1996.
Year ended December 31,
(Dollars in thousands, except unit data) 1997 1996
Total revenues $ 54,085 $ 51,455
Total expenses (28,789) (27,175)
Net Income $ 25,296 $ 24,280
Earnings per unit - basic $ 2.00 $ 1.92
Units used in basic earnings
per unit calculation 12,666,730 12,666,730
Such unaudited pro forma information is based upon the historical
statements of operations of the Operating Partnership. It should be read
in conjunction with the financial statements of the Operating Partnership
and the predecessors and notes thereto. In management's opinion, all
adjustments necessary to reflect the effects of these transactions have
been made. This unaudited pro forma statement does not purport to
represent what the actual results of operations of the Operating
Partnership would have been assuming such transactions had been completed
as set forth above, nor does it purport to represent the results of
operations for future periods.
7. STOCK OPTIONS
The Operating Partnership continues to account for Company stock-based
compensation using the measurement prescribed by APB Opinion No. 25 which
does not recognize compensation expense because the exercise price of the
stock options equals the market price of the underlying stock on the date
of grant. SFAS 123 requires companies that choose not to adopt the new
fair value accounting rules to disclose pro forma net income and earnings
per unit under the new method. The Operating Partnership will issue a Unit
to the Company for each common share of the Company issued under the
following plans.
The Company has established the 1995 Award and Option Plan (the Plan)
for the purpose of attracting and retaining the Company's executive
officers and other employees. The options vest ratably over four years,
and must be exercised within ten years from the date of grant. The
exercise price for qualified incentive stock options must be at least equal
to the fair market value at the date of grant. As of December 31, 1997,
options for 306,000 shares had been granted under the Plan. The total
options available under the plan is 400,000.
<PAGE>
The Company also established the 1995 Outside Directors' Stock Option
Plan (the Non-employee Plan) for the purpose of attracting and retaining
the services of experienced and knowledgeable outside directors. The Non-
employee Plan provides for the annual granting of options to purchase 2,500
shares of common stock to each eligible director. Such options vest over a
one year period for initial awards and immediately upon subsequent grants.
The total shares reserved under the Non-employee Plan is 50,000. The
exercise price for options granted under the Non-employee Plan is equal to
fair market value at date of grant. As of December 31, 1997, options for
30,000 shares had been granted under the Non-employee Plan.
The Company has also issued 2,200 shares of restricted stock to
employees which vest over a four-year period. The fair value of the
restricted stock on the date of grant ranged from $25.38 to $29.19.
The fair value for these options was $2.30, which was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997: risk-free interest rate of 6%;
dividend yield of 7%, volatility factor of the expected market price of the
Company's common stock of .16.
The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Operating Partnership's pro forma information for the year ended
December 31, 1997 follows (in thousands, except for earnings per unit
information).
Pro forma net income $ 23,620
Pro forma earnings per unit: Basic $ 1.95
Diluted $ 1.94
The pro forma effect on earnings for the years ended December 31, 1996 and
1995 was immaterial.
<PAGE>
<TABLE>
A summary of the Company's stock option activity and related information for the years ended
December 31 follows:
<CAPTION>
1997 1996 1995
Weighted Weighted Weighted
Average average average
exercise exercise exercise
Options price Options price Options price
__________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 293,500 $23.97 268,000 $23.00 - $ -
Granted 34,000 29.93 28,000 25.92 274,000 23.00
Exercised (14,250) 23.00 - - - -
Forfeited (18,000) 24.53 (2,500) 23.00 (6,000) 23.00
__________________________________________________________________________________________
Outstanding at end
of year 295,250 $25.36 293,500 $23.97 268,000 $ 23.00
__________________________________________________________________________________________
Exercisable at end
of year 146,750 $25.12 82,000 $23.48 - -
Exercise prices for options outstanding as of December 31, 1997 ranged from $23.00 to $30.63. The
weighted average remaining contractual life of those options is 8.07 years.
</TABLE>
<PAGE>
8. RETIREMENT PLAN
Employees of the Operating Partnership qualifying under certain age
and service requirements are eligible to be a participant in a 401(K) Plan
which was effective September 1, 1997. The Operating Partnership
contributes to the Plan at the rate of 50% of the first 4% of gross wages.
Total expense to the Operating Partnership was approximately $15,000 for
the year ended December 31, 1997.
9. THE COMPANY'S SHAREHOLDER RIGHTS PLAN
In November 1996, the Company adopted a Shareholder Rights Plan and
declared a dividend distribution of one Right for each outstanding share of
common stock. Under certain conditions, each Right may be exercised to
purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock at a purchase price of $75, subject to adjustment. The
Rights will be exercisable only if a person or group has acquired 10% or
more of the outstanding shares of common stock, or following the
commencement of a tender or exchange offer for 10% or more of such
outstanding shares of common stock. If a person or group acquires more
than 10% of the then outstanding shares of common stock, each Right will
entitle its holder to receive, upon exercise, common stock having a value
equal to two times the exercise price of the Right. In addition, if the
Company is acquired in a merger or other business combination transaction,
each Right will entitle its holder to purchase that number of the acquiring
Company's common shares having a market value of twice the Right's exercise
price. The Company will be entitled to redeem the Rights at $.01 per Right
at any time prior to the earlier of the expiration of the Rights in
November 2006 or the time that a person has acquired a 10% position. The
Rights do not have voting or dividend rights, and until they become
exercisable, have no dilutive effect on the Operating Partnership's
earnings.
10. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations for the
fiscal quarters since the consummation of the offering on June 26, 1995
(dollars in thousands, except per unit data)
1997 Quarter Ended
March 31 June 30 Sept. 30 Dec. 31
Revenue $10,732 $11,938 $13,320 $13,364
Net Income $ 4,935 $ 6,189 $ 6,559 $ 6,080
Net Income Per Unit (Note 3):
Basic $ 0.46 $ 0.50 $ 0.52 $ 0.49
Diluted $ 0.46 $ 0.50 $ 0.52 $ 0.48
<PAGE>
1996 Quarter Ended
March 31 June 30 Sept. 30 Dec. 31
Revenues $ 6,944 $ 7,960 $ 9,034 $ 9,659
Net Income $ 3,152 $ 3,610 $ 3,651 $ 5,269
Net Income Per Unit (Note 3):
Basic $ 0.42 $ 0.48 $ 0.48 $ 0.50
Diluted $ 0.42 $ 0.48 $ 0.48 $ 0.49
1995 Quarter Ended
June 30* Sept. 30 Dec. 31
Revenues $ 352 $ 6,343 $ 6,247
Net Income $ 164 $ 3,213 $ 3,367
Net Income Per Unit(Note 3):
Basic and Diluted $ 0.02 $ 0.44 $ 0.45
(*) Includes results for the period June 26, 1995 (Formation) to June 30,
1995.
11. COMMITMENTS AND CONTINGENCIES
The Operating Partnership's current practice is to conduct
environmental investigations in connection with property acquisitions. At
this time, the Operating Partnership is not aware of any environmental
contamination of any of its facilities which individually or in the
aggregate would be material to the Operating Partnership's overall
business, financial condition, or results of operations.
As of December 31, 1997, the Operating Partnership had entered into
contracts for the purchase of ten facilities. These facilities were
acquired in January and February, 1998 for a total cost of $34,145,000.
12. LEGAL PROCEEDINGS
A former business associate (Plaintiff) of certain officers and
directors of the Company, including Robert J. Attea, Kenneth F. Myszka,
David L. Rogers and Charles E. Lannon, filed a lawsuit against the Company
on June 13, 1995 in the United States District Court for the Northern
District of Ohio. The Plaintiff has since amended the complaint in the
lawsuit alleging breach of fiduciary duty, breach of contract, breach of
general partnership/joint venture arrangement, breach of duty of good
faith, fraud and deceit, and other causes of action including declaratory
judgement as to the Plaintiff's continuing interest in the Company. The
Plaintiff is seeking money damages in excess of $25 million, as well as
punitive damages and declaratory and injunctive relief (including the
imposition of a constructive trust on assets of the Company in which the
Plaintiff claims to have a continuing interest) and an accounting. The
amended complaint also added Messrs. Attea, Myszka, Rogers and Lannon as
additional defendants. The parties are currently involved in discovery.
The Company intends to vigorously defend the lawsuit. Messrs. Attea,
<PAGE>
Myszka, Rogers and Lannon have agreed to indemnify the Company for cost and
any loss arising from the lawsuit. The Operating Partnership believes that
the actual amount of the Plaintiff's recovery in this matter if any, would
be within the ability of these individuals to provide indemnification. The
Operating Partnership does not believe that the lawsuit will have a
material, adverse effect upon the Operating Partnership.
13. INTERNAL PROPERTY ACQUISITION COSTS
On March 19, 1998 the Financial Accounting Standards Board Emerging
Issues Task Force reached a consensus as to the accounting for internal
acquisition costs incurred in connection with real property. The Task
Force consensus indicates that internal costs related to the acquisition of
operating properties should be expensed as incurred. The Operating
Partnership has previously capitalized such costs and will comply with the
consensus prospectively. The amount of such costs capitalized in 1997 and
1996 were $728,000 and $755,000, respectively.
<PAGE>
Report of Independent Auditors
The Board of Directors and Partners
Sovran Acquisition Limited Partnership:
We have audited the financial statements of Sovran Acquisition
Limited Partnership as of December 31, 1997 and 1996, and for the years
ended December 31, 1997 and 1996 and the period from June 26, 1995 to
December 31, 1995 and have issued our report thereon dated April 16, 1998
included elsewhere in this General Form of Registration of Securities. Our
audits also included the financial statements schedule listed in Item 15(b)
of this Registration Statement. This schedule is the responsibility of the
Operating Partnership's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Buffalo, New York
April 16, 1998
<PAGE>
<TABLE>
Sovran Acquisition Limited Partnership Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 1997
<CAPTION>
Cost
Initial Cost Capitalized
to Operating Subsequent to Gross Amount at Which
Partnership Acquisition Carried at Close of Period
Building, Building, Building
Equipment Equipment Equipment
and and Land and Accumulated
Description ST Land Improvements Improvements Land Improvements Total Depreciation Acquired
<S> <C> <C> <C> <C> <C> <C> <C> <C>
_________________________________________________________________________________________________________________________________
Charleston I SC 416 1,516 12 416 1,528 1,944 102 6/26/95
Lakeland I FL 397 1,424 33 397 1,457 1,854 96 6/26/95
Charlotte NC 308 1,102 42 308 1,144 1,452 71 6/26/95
Tallahassee I FL 770 2,734 222 770 2,956 3,726 180 6/26/95
Youngstown OH 239 1,110 69 239 1,179 1,418 73 6/26/95
Cleveland-Metro I OH 179 836 144 179 980 1,159 57 6/26/95
Cleveland-Metro II OH 701 1,659 8 701 1,667 2,368 107 6/26/95
Tallahassee II FL 204 734 31 204 765 969 48 6/26/95
Pt. St. Lucie FL 395 1,501 97 395 1,598 1,993 114 6/26/95
Deltona FL 483 1,752 157 483 1,909 2,392 119 6/26/95
Middletown NY 224 808 38 224 846 1,070 55 6/26/95
Buffalo I NY 423 1,531 435 497 1,892 2,389 104 6/26/95
Rochester I NY 395 1,404 17 395 1,421 1,816 89 6/26/95
Salisbury MD 164 760 63 164 823 987 52 6/26/95
New Bedford MA 367 1,325 31 367 1,356 1,723 86 6/26/95
Fayetteville NC 853 3,057 59 853 3,116 3,969 197 6/26/95
Allentown PA 199 921 65 203 982 1,185 63 6/26/95
Jacksonville I FL 152 728 64 152 792 944 53 6/26/95
Columbia I SC 268 1,248 5 268 1,253 1,521 83 6/26/95
Rochester II NY 230 847 87 234 930 1,164 60 6/26/95
Savannah I GA 463 1,684 58 463 1,742 2,205 112 6/26/95
Greensboro NC 444 1,613 30 444 1,643 2,087 107 6/26/95
Raleigh I NC 649 2,329 75 649 2,404 3,053 152 6/26/95
New Haven CT 387 1,402 14 387 1,416 1,803 92 6/26/95
Atlanta-Metro I GA 844 2,021 58 844 2,079 2,923 133 6/26/95
Atlanta-Metro II GA 302 1,103 9 303 1,111 1,414 74 6/26/95
<PAGE>
Buffalo II NY 315 745 110 315 855 1,170 50 6/26/95
Raleigh II NC 321 1,150 15 321 1,165 1,486 74 6/26/95
Columbia II SC 361 1,331 42 374 1,360 1,734 91 6/26/95
Columbia III SC 189 719 26 189 745 934 52 6/26/95
Columbia IV SC 488 1,188 12 488 1,200 1,688 79 6/26/95
Atlanta-Metro III GA 430 1,579 18 430 1,597 2,027 106 6/26/95
Orlando I FL 513 1,930 75 513 2,005 2,518 137 6/26/95
Spartanburg SC 331 1,209 25 331 1,234 1,565 82 6/26/95
Sharon PA 194 912 37 194 949 1,143 64 6/26/95
Ft. Lauderdale FL 1,503 3,619 105 1,503 3,724 5,227 248 6/26/95
West Palm I FL 398 1,035 40 398 1,075 1,473 80 6/26/95
Atlanta-Metro IV GA 423 1,015 10 423 1,025 1,448 68 6/26/95
Atlanta-Metro V GA 483 1,166 35 483 1,201 1,684 77 6/26/95
Atlanta-Metro VI GA 308 1,116 31 308 1,147 1,455 76 6/26/95
Atlanta-Metro VII GA 170 786 49 170 835 1,005 54 6/26/95
Atlanta-Metro VIII GA 413 999 22 413 1,021 1,434 68 6/26/95
Baltimore I MD 154 555 38 154 593 747 40 6/26/95
Baltimore II MD 479 1,742 85 479 1,827 2,306 119 6/26/95
Augusta I GA 357 1,296 77 357 1,373 1,730 87 6/26/95
Macon I GA 231 1,081 7 231 1,088 1,319 72 6/26/95
Melbourne I FL 883 2,104 33 883 2,137 3,020 144 6/26/95
Newport News VA 316 1,471 13 316 1,484 1,800 98 6/26/95
Pensacola I FL 632 2,962 96 632 3,058 3,690 199 6/26/95
Augusta II GA 315 1,139 71 315 1,210 1,525 73 6/26/95
Hartford-Metro I CT 715 1,695 25 715 1,720 2,435 113 6/26/95
Atlanta-Metro IX GA 304 1,118 49 304 1,167 1,471 77 6/26/95
Alexandria VA 1,375 3,220 46 1,375 3,266 4,641 205 6/26/95
Pensacola II FL 244 901 6 244 907 1,151 63 6/26/95
Melbourne II FL 834 2,066 26 834 2,092 2,926 148 6/26/95
Hartford-Metro II CT 234 861 7 234 868 1,102 59 6/26/95
Atlanta-Metro X GA 256 1,244 4 256 1,248 1,504 85 6/26/95
Norfolk I VA 313 1,462 27 313 1,489 1,802 97 6/26/95
Norfolk II VA 278 1,004 12 278 1,016 1,294 67 6/26/95
Birmingham I AL 307 1,415 33 307 1,448 1,755 92 6/26/95
Birmingham II AL 730 1,725 38 730 1,763 2,493 114 6/26/95
Montgomery I AL 863 2,041 78 863 2,119 2,982 137 6/26/95
Jacksonville II FL 326 1,515 49 326 1,564 1,890 103 6/26/95
Pensacola III FL 369 1,358 42 369 1,400 1,769 90 6/26/95
Pensacola IV FL 244 1,128 32 244 1,160 1,404 75 6/26/95
Pensacola V FL 226 1,046 32 226 1,078 1,304 70 6/26/95
Tampa I FL 1,088 2,597 42 1,088 2,639 3,727 175 6/26/95
Tampa II FL 526 1,958 58 526 2,016 2,542 140 6/26/95
Tampa III FL 672 2,439 32 672 2,471 3,143 164 6/26/95
<PAGE>
Jackson I MS 343 1,580 26 343 1,606 1,949 102 6/26/95
Jackson II MS 209 964 22 209 986 1,195 64 6/26/95
Richmond VA 443 1,602 51 443 1,653 2,096 101 8/25/95
Orlando II FL 1,161 2,755 64 1,162 2,818 3,980 162 9/29/95
Birmingham III AL 424 1,506 47 424 1,553 1,977 76 1/16/96
Macon II GA 431 1,567 19 431 1,586 2,017 87 12/1/95
Harrisburg I PA 360 1,641 62 360 1,703 2,063 87 12/29/95
Harrisburg II PA 627 2,224 25 627 2,249 2,876 115 12/29/95
Syracuse I NY 470 1,712 40 472 1,750 2,222 93 12/27/95
Ft. Myers FL 205 912 26 206 937 1,143 70 12/28/95
Ft. Myers II FL 412 1,703 36 413 1,738 2,151 113 12/28/95
Newport News II VA 442 1,592 27 442 1,619 2,061 84 1/5/96
Montgomery II AL 353 1,299 48 353 1,347 1,700 72 1/23/96
Charleston II SC 237 858 63 237 921 1,158 45 3/1/96
Tampa IV FL 766 1,800 50 766 1,850 2,616 83 3/28/96
Arlington I TX 442 1,767 21 442 1,788 2,230 80 3/29/96
Arlington II TX 408 1,662 27 408 1,689 2,097 77 3/29/96
Ft. Worth TX 328 1,324 35 328 1,359 1,687 61 3/29/96
San Antonio I TX 436 1,759 27 436 1,786 2,222 80 3/29/96
San Antonio II TX 289 1,161 24 289 1,185 1,474 53 3/29/96
Syracuse II NY 481 1,559 300 496 1,844 2,340 70 6/5/96
Montgomery III AL 279 1,014 21 279 1,035 1,314 44 5/21/96
West Palm II FL 345 1,262 47 345 1,309 1,654 57 5/29/96
Ft. Myers III FL 229 884 37 229 921 1,150 40 5/29/96
Pittsburgh PA 545 1,940 18 545 1,958 2,503 76 6/19/96
Lakeland II FL 359 1,287 57 359 1,344 1,703 52 6/26/96
Springfield MA 251 917 174 300 1,042 1,342 41 6/28/96
Ft. Myers IV FL 344 1,254 83 344 1,337 1,681 54 6/28/96
Cincinnati OH 557 1,988 17 557 2,005 2,562 73 7/23/96
Dayton OH 667 2,379 15 667 2,394 3,061 87 7/23/96
Baltimore III MD 777 2,770 36 777 2,806 3,583 102 7/26/96
Jacksonville III FL 568 2,028 229 568 2,257 2,825 76 8/23/96
Jacksonville IV FL 436 1,635 32 436 1,667 2,103 64 8/26/96
Pittsburgh II PA 627 2,257 79 632 2,331 2,963 79 8/28/96
Jacksonville V FL 535 2,033 19 538 2,049 2,587 78 8/30/96
Charlotte II NC 487 1,754 16 487 1,770 2,257 58 9/16/96
Charlotte III NC 315 1,131 12 315 1,143 1,458 38 9/16/96
Orlando III FL 314 1,113 88 314 1,201 1,515 35 10/30/96
Rochester III NY 704 2,496 18 708 2,510 3,218 63 12/20/96
Youngstown II OH 600 2,142 25 600 2,167 2,767 55 1/10/97
Akron OH 413 1,478 12 413 1,490 1,903 38 1/10/97
<PAGE>
Cleveland III OH 751 2,676 204 751 2,880 3,631 70 1/10/97
Cleveland IV OH 725 2,586 179 725 2,765 3,490 68 1/10/97
Cleveland V OH 637 2,918 324 637 3,242 3,879 78 1/10/97
Cleveland VI OH 495 1,781 227 495 2,008 2,503 48 1/10/97
Cleveland VII OH 761 2,714 171 761 2,885 3,646 71 1/10/97
Cleveland VIII OH 418 1,921 193 418 2,114 2,532 51 1/10/97
Cleveland IX OH 606 2,164 43 606 2,207 2,813 56 1/10/97
Grand Rapids I MI 455 1,631 14 455 1,645 2,100 38 1/17/97
Grand Rapids II MI 219 790 34 219 824 1,043 19 1/17/97
Kalamazoo MI 516 1,845 65 516 1,910 2,426 44 1/17/97
Lansing MI 327 1,332 5 327 1,337 1,664 31 1/17/97
Holland MI 451 1,830 99 451 1,929 2,380 45 1/17/97
San Antonio III TX 474 1,686 87 474 1,773 2,247 40 1/30/97
Universal TX 346 1,236 38 346 1,274 1,620 29 1/30/97
San Antonio IV TX 432 1,560 30 432 1,590 2,022 38 1/30/97
Houston-Eastex TX 634 2,565 4 634 2,569 3,203 50 3/26/97
Houston-Nederland TX 566 2,279 4 566 2,283 2,849 44 3/26/97
Houston-College TX 293 1,357 4 293 1,361 1,654 27 3/26/97
Lynchburg-Lakeside VA 335 1,342 30 335 1,372 1,707 26 3/31/97
Lynchburg -
Timberlake VA 328 1,315 10 328 1,325 1,653 25 3/31/97
Lynchburg-Amherst VA 155 710 16 155 726 881 14 3/31/97
Christiansburg VA 245 1,120 9 245 1,129 1,374 21 3/31/97
Chesapeake VA 260 1,043 33 260 1,076 1,336 20 3/31/97
Danville VA 326 1,488 14 326 1,502 1,828 28 3/31/97
Orlando-W 25th St FL 289 1,160 33 289 1,193 1,482 23 3/31/97
Delray I-Mini FL 491 1,756 53 491 1,809 2,300 35 4/11/97
Savannah II GA 296 1,196 84 296 1,280 1,576 22 5/8/97
Delray II-Safeway FL 921 3,282 70 921 3,352 4,273 49 5/21/97
Cleveland X-Avon OH 301 1,214 72 301 1,286 1,587 19 6/4/97
Dallas-Skillman TX 960 3,847 37 960 3,884 4,844 49 6/30/97
Dallas-Centennial TX 965 3,864 35 965 3,899 4,864 49 6/30/97
Dallas-Samuell TX 570 2,285 34 570 2,319 2,889 29 6/30/97
Dallas-Hargrove TX 370 1,486 2 370 1,488 1,858 19 6/30/97
Houston-Antoine TX 515 2,074 5 515 2,079 2,594 27 6/30/97
Atlanta-Alpharetta GA 1,033 3,753 22 1,033 3,775 4,808 41 7/24/97
Atlanta-Marietta GA 769 2,788 8 769 2,796 3,565 31 7/24/97
Atlanta-Doraville GA 735 3,429 17 735 3,446 4,181 30 8/21/97
GreensboroHilltop NC 268 1,097 5 268 1,102 1,370 7 9/25/97
GreensboroStgCch NC 89 376 3 89 379 468 3 9/25/97
Baton Rouge-
Airline LA 396 1,831 4 396 1,835 2,231 12 10/9/97
<PAGE>
Baton Rouge-
Airline2 LA 282 1,303 1 282 1,304 1,586 3 11/21/97
Harrisburg-
Peiffers PA 635 2,550 5 635 2,555 3,190 5 12/3/97
Corporate Office NY 0 68 282 0 350 350 12 01/1/95
Boston-Metro I MA 363 1,679 76 363 1,755 2,118 113 6/26/95
Boston-Metro II MA 680 1,616 28 680 1,644 2,324 108 6/26/95
E. Providence RI 345 1,268 90 345 1,358 1,703 88 6/26/95
0
____________________ _____ ____________________________________________ ______
71,214 253,311 8,511 71,391 261,645 333,036 11,639
==================== ===== ============================================ ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996 December 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $220,711 $159,461 $ -
Additions during period:
Acquisitions through
foreclosure $ - $ - $ -
Other acquisitions 106,926 58,626 158,698
Improvements, etc. 5,527 2,640 763
Other (describe) - 112,453 - 61,266 - 159,461
_ _ _
Deductions during period:
Cost of real estate sold - - - -
Other (describe) (128) (128) (16) (16) - -
____ ____ ___ ___ _ _
Balance at close of period $333,036 $220,711 $159,461
======== ======== ========
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Buffalo, State of New York on this 22nd day of April, 1998.
SOVRAN ACQUISITION LIMITED PARTNERSHIP
By: Sovran Holdings, Inc.
Its: General Partner
By: /S/ David L. Rogers
David L. Rogers, Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3.1 Agreement of Limited Partnership of
the Operating Partnership, as amended
3.2* Amended and Restated Articles of
Incorporation of the Company
3.3* By-laws of the Company
3.4 Articles Supplementary of the Articles of
Incorporation of the Company classifying and
designating the Company's Series A Junior
Participating Preferred Stock (Incorporated
by reference to Exhibit 3.1 to the Company's
Form 8A filed December 3, 1996)
10.1 Revolving Credit Agreement between the
Company, the Operating Partnership, Fleet
National Bank and other lenders named therein
10.2* Form of Non-competition Agreement between the
Company and Charles E. Lannon
10.3* Form of Non-competition Agreement between the
Company and Robert J. Attea
10.4* Form of Non-competition Agreement between the
Company and Kenneth F. Myszka
10.5* Form of Non-competition Agreement between the
Company and David L. Rogers
10.6* Sovran Self Storage, Inc. 1995 Award and
Option Plan
10.7* 1995 Sovran Self Storage, Inc. Directors'
Option Plan
10.8* Sovran Self Storage Incentive Compensation
Plan for Executive Officer
10.9* Restricted Stock Agreement between the
Company and David L. Rogers
10.10* Form of Supplemental Representations,
Warranties and Indemnification Agreement
among the Company and Robert J. Attea,
Charles E. Lannon, Kenneth F. Myszka and
David L. Rogers
10.11* Form of Pledge Agreement among the Company
and Robert J. Attea, Charles E. Lannon,
Kenneth F. Myszka and David L. Rogers
<PAGE>
10.12* Form of Indemnification Agreement between the
Company and certain Officers and Directors of
the Company
10.13* Form of Subscription Agreement (including
Registration Rights Statement) among the
Company and subscribers for 422,171 Common
Shares
10.14* Form of Registration Rights and Lock-Up
Agreement among the Company and Robert J.
Attea, Charles E. Lannon, Kenneth F. Myszka
and David L. Rogers
10.15* Form of Facilities Services Agreement between
the Company and Williamsville Properties,
Inc.
27.1 Financial Data Schedule
_________________
* Incorporated by reference to the exhibits as filed with the Company's
Registration Statement on Form S-11 (File No. 33-91422) filed June 19,
1995.
<PAGE>
Exhibit 3.1
AGREEMENT OF LIMITED PARTNERSHIP
OF
SOVRAN ACQUISITION LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP OF SOVRAN ACQUISITION LIMITED
PARTNERSHIP ("Agreement"), dated as of June 1, 1995, is entered into by and
among SOVRAN HOLDINGS, INC. (the "General Partner", it being understood
that references herein to Sovran Self Storage, Inc. include references to
any successor thereto as a result of a transaction in accordance with the
terms hereof), a Delaware corporation, as the General Partner, SOVRAN SELF
STORAGE, INC., a Maryland corporation ("Limited Partner", it being
understood that references herein to Sovran Self Storage, Inc. include
references to any successor thereto as a result of a transaction in
accordance with the terms hereof), as a Limited Partner, together with any
other Persons who become Partners in the Partnership as provided herein.
WHEREAS, the General Partner and the Limited Partner desire to form a
partnership, to enter into this Agreement and to provide for the admission
of Additional Limited Partners;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as
it may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 4.2 hereof and who is
shown as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership taxable year (i) increased
by any amounts which such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5) and (ii) decreased by the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital
Account is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as
of the end of the relevant Partnership taxable year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is
<PAGE>
deemed distributed by, and recontributed to, the Partnership for federal
income tax purposes upon a termination thereof pursuant to Section 708 of
the Code, such property shall thereafter constitute a Contributed Property
until the Carrying Value of such property is further adjusted pursuant to
Exhibit B hereof.
"Affiliate" means, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, (ii) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person, (iii) any Person of which
such Person owns or controls ten percent (10%) or more of the voting
interests, or (iv) any officer, director, general partner or trustee of
such Person or of any Person referred to in clauses (i), (ii), and (iii)
above. For purposes of this definition, "control" when used with respect
to any Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Agreed Value" means (i) in the case of any Contributed Property set
forth in Exhibit D and as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit D;
(ii) in the case of any Contributed Property not set forth in Exhibit D and
as of the time of its contribution to the Partnership, the 704(c) Value of
such property, reduced by any liabilities either assumed by the Partnership
upon such contribution or to which such property is subject when
contributed, and (iii) in the case of any property distributed to a Partner
by the Partnership, the Partnership's Carrying Value of such property at
the time such property is distributed, reduced by any indebtedness either
assumed by such Partner upon such distribution or to which such property is
subject at the time of distribution as determined under Section 752 of the
Code and the Regulations thereunder.
"Agreement" means this Agreement of Limited Partnership of Sovran
Acquisition Limited Partnership, as it may be amended, supplemented or
restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have
been transferred in a manner permitted under this Agreement, but who has
not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may
be) for such period (without regard to adjustments resulting from
allocations described in Sections 1.A through 1.E of Exhibit C);
(b) Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the
Partnership referred to in clause (ii) (f) below (including, without
limitation, reductions resulting because the General Partner
determines such amounts are no longer necessary);
<PAGE>
(d) the excess of proceeds from the sale, exchange, disposition,
or refinancing of Partnership property for such period over the gain
recognized from such sale, exchange, disposition, or refinancing
during such period (excluding Terminating Capital Transactions); and
(e) all other cash received by the Partnership for such period
that was not included in determining Net Income or Net Loss for such
period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership during
such period;
(b) capital expenditures made by the Partnership during such
period;
(c) investments made by the Partnership during such period in
any entity (including loans made thereto) to the extent that such
investments are not otherwise described in clause (ii)(a) or (ii)(b);
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss
for such period that was not received by the Partnership during such
period;
(f) the amount of any increase in reserves during such period
which the General Partner determines to be necessary or appropriate in
its sole and absolute discretion; and
(g) the amount of any working capital accounts and other cash or
similar balances which the General Partner determines to be necessary
or appropriate, in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any
disbursements made or reserves established, after commencement of the
dissolution and liquidation of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will
be reflected by the difference between such Partner's Capital Account
balance as maintained pursuant to Exhibit B and the hypothetical balance of
such Partner's Capital Account computed as if it had been maintained
strictly in accordance with federal income tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Buffalo, New York are authorized or required by
law to close.
<PAGE>
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Agreed Value of Contributed Property which such
Partner contributes or is deemed to contribute to the Partnership pursuant
to Section 4.1, 4.2, or 4.3 hereof.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not
below zero) by all Depreciation with respect to such Property charged to
the Partners' Capital Accounts following the contribution of or adjustment
with respect to such Property, and (ii) with respect to any other
Partnership property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying
Value of any property shall be adjusted from time to time in accordance
with Exhibit B hereof, and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash per Partnership Unit equal to
the Value on the Valuation Date of the REIT Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating to
the Partnership filed in the office of the Delaware Secretary of State, as
amended from time to time in accordance with the terms hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision
of future law.
"Consent" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset, in such
form as may be permitted by the Act, but excluding cash, contributed or
deemed contributed to the Partnership (including deemed contributions to
the Partnership on termination and reconstitution thereof pursuant to
Section 708 of the Code). Once the Carrying Value of a Contributed
Property is adjusted pursuant to Exhibit B hereof, such property shall no
longer constitute a Contributed Property for purposes of Exhibit B hereof,
but shall be deemed an Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that Sovran
Self Storage, Inc. (i) declares or pays a dividend on its outstanding REIT
Shares in REIT Shares or makes a distribution to all holders of its
outstanding REIT Shares in REIT Shares; (ii) subdivides its outstanding
REIT Shares; or (iii) combines its outstanding REIT Shares into a smaller
number of REIT Shares, the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, the numerator of which
shall be the number of REIT Shares issued and outstanding on the record
date for such dividend, distribution, subdivision or combination assuming
for such purpose that such dividend, distribution, subdivision or
combination has occurred as of such time, and the denominator of which
shall be the actual number of REIT Shares (determined without the above
<PAGE>
assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Conversion
Factor shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
"Depreciation" means, for each taxable year an amount equal to the
federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if
the Carrying Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such
beginning Carrying Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year bears to such
beginning adjusted tax basis; provided, however, that if the federal income
tax depreciation, amortization, or other cost recovery deduction for such
year is zero, Depreciation shall be determined with reference to such
beginning Carrying Value using any reasonable method selected by the
General Partner.
"Effective Date" means the date of closing of the initial public
offering of REIT Shares.
"General Partner" means Sovran Holdings, Inc., in its capacity as the
general partner of the Partnership, or its successors as general partner of
the Partnership.
"General Partner Interest" means a Partnership Interest held by the
General Partner that is a general partnership interest. A General Partner
Interest may be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such
natural Person's spouse and such natural Person's natural or adoptive
parents, descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his
estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner,
the dissolution and commencement of winding up of the partnership; (iv) as
to any estate which is a Partner, the distribution by the fiduciary of the
estate's entire interest in the Partnership; (v) as to any trustee of a
trust which is a Partner, the termination of the trust (but not the
substitution of a new trustee); or (vi) as to any Partner, the bankruptcy
of such Partner. For purposes of this definition, bankruptcy of a Partner
shall be deemed to have occurred when (a) the Partner commences a voluntary
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect, (b)
the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar
law now or hereafter in effect has been entered against the Partner, (c)
the Partner executes and delivers a general assignment for the benefit of
the Partner's creditors, (d) the Partner files an answer or other pleading
<PAGE>
admitting or failing to contest the material allegations of a petition
filed against the Partner in any proceeding of the nature described in
clause (b) above, (e) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all
or any substantial part of the Partner's properties, (f) any proceeding
seeking liquidation, reorganization or other relief of or against such
Partner under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120)
days after the commencement thereof, (g) the appointment without the
Partner's consent or acquiescence of a trustee, receiver or liquidator has
not been vacated or stayed within ninety (90) days of such appointment, or
(h) an appointment referred to in clause (g) which has been stayed is not
vacated within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of (A) his status as the General Partner, or a director or officer
of the Partnership or the General Partner, or (B) his or its liabilities,
pursuant to a loan guarantee or otherwise, for any indebtedness of the
Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken assets subject to), and (ii) such other
Persons (including Affiliates of the General Partner or the Partnership) as
the General Partner may designate from time to time (whether before or
after the event giving rise to potential liability), in its sole and
absolute discretion.
"Limited Partner" means Sovran Self Storage, Inc. and any other Person
named as a Limited Partner in Exhibit A attached hereto, as such Exhibit
may be amended from time to time, or any Substituted Limited Partner or
Additional Limited Partner, in such Person's capacity as a Limited Partner
in the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the
Partnership Interests of all Partners and includes any and all benefits to
which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply
with the terms and provisions of this Agreement. A Limited Partner Interest
may be expressed as a number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The
items included in the calculation of Net Income shall be determined in
accordance with federal income tax accounting principles, subject to the
specific adjustments provided for in Exhibit B.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance
with federal income tax accounting principles, subject to the specific
adjustments provided for in Exhibit B.
<PAGE>
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or
negative pledge securing a Nonrecourse Liability, the amount of any taxable
gain that would be allocated to the Partners pursuant to Section 2.B of
Exhibit C if such properties were disposed of in a taxable transaction in
full satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership taxable year shall be determined in accordance with the rules
of Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in
the form of Exhibit E to this Agreement.
"Ownership Interest" means the stock and securities (including any
evidence of indebtedness) of the General Partner at any time owned or held
by Sovran Self Storage, Inc.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result
if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership
Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the
General Partner and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well
as any net increase or decrease in Partnership Minimum Gain, for a
Partnership taxable year shall be determined in accordance with the rules
of Regulations Section 1.704-2(d).
<PAGE>
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section
5.1 hereof, which record date shall be the same as the record date
established by Sovran Self Storage, Inc. for a distribution to its
shareholders of some or all of its portion of such distribution.
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1, 4.2
and 4.3. The number of Partnership Units outstanding and the Percentage
Interest in the Partnership represented by such Units are set forth in
Exhibit A attached hereto, as such Exhibit may be amended from time to
time. The ownership of Partnership Units shall be evidenced by such form
of certificate for units as the General Partner adopts from time to time
unless the General Partner determines that the Partnership Units shall be
uncertificated securities.
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in Exhibit A attached hereto, as such Exhibit may be amended from
time to time.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Private Placement" means the private placement of REIT Shares by
Sovran Self Storage, Inc. which closes concurrently with the initial public
offering of REIT Shares.
"Recapture Income" means any gain recognized by the Partnership upon
the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
"Redemption Right" shall have the meaning set forth in Section 8.6
hereof.
"Regulations" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the
Code.
"REIT Share" shall mean a common share of the capital stock, par value
$.01, of Sovran Self Storage, Inc.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
product of the number of Partnership Units offered for redemption by a
Redeeming Partner, multiplied by the Conversion Factor (rounded down to the
nearest whole number in the event such product is not a whole number);
provided that in the event Sovran Self Storage, Inc. issues to all holders
<PAGE>
of REIT Shares rights, options, warrants or convertible or exchangeable
securities entitling the shareholders to subscribe for or purchase REIT
Shares, or any other securities or property (collectively, the "rights"),
then the REIT Shares Amount shall also include such rights that a holder of
that number of REIT Shares would be entitled to receive.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of
Contributed Property or Adjusted Property, to the extent such item of gain
or loss is not allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of
Exhibit C to eliminate Book-Tax Disparities.
"704(c) Value" of any Contributed Property means the value of such
property as set forth in Exhibit D or if no value is set forth in
Exhibit D, the fair market value of such property or other consideration at
the time of contribution as determined by the General Partner using such
reasonable method of valuation as it may adopt; provided, however, that the
704(c) Value of any property deemed contributed to the Partnership for
federal income tax purposes upon termination and reconstitution thereof
pursuant to Section 708 of the Code shall be determined in accordance with
Exhibit B hereof. Subject to Exhibit B hereof, the General Partner shall,
in its sole and absolute discretion, use such method as it deems reasonable
and appropriate to allocate the aggregate of the 704(c) Values of
Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.
"Specified Redemption Date" means the tenth (10th) Business Day after
receipt by the General Partner of a Notice of Redemption in accordance with
Section 8.6 hereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of
the voting equity securities or (ii) the outstanding equity interests is
owed, directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related
series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit B hereof) as of
such date, over (ii) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Exhibit B hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the
Carrying Value of such property (prior to any adjustment to be made
pursuant to Exhibit B hereof) as of such date, over (ii) the fair market
value of such property (as determined under Exhibit B hereof) as of such
date.
<PAGE>
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first
Business Day thereafter.
"Value" means, with respect to a REIT Share, the average of the daily
market price for the ten (10) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day
shall be: (i) if the REIT Shares are listed or admitted to trading on any
securities exchange or the NASDAQ-National Market System, the closing
price, regular way, on such day, or if no such sale takes place on such
day, the average of the closing bid and asked prices on such day; (ii) if
the REIT Shares are not listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System, the last reported sale price
on such day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable
quotation source designated by the General Partner; or (iii) if the REIT
Shares are not listed or admitted to trading on any securities exchange or
the NASDAQ-National Market System and no such last reported sale price or
closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable
quotation source designated by the General Partner, or if there shall be no
bid and asked prices on such day, the average of the high bid and low asked
prices, as so reported, on the most recent day (not more than ten (10) days
prior to the date in question) for which prices have been so reported;
provided that if there are no bid and asked prices reported during the ten
(10) days prior to the date in question, the Value of the REIT Shares shall
be determined by the General Partner acting in good faith on the basis of
such quotations and other information as it considers, in its reasonable
judgment, appropriate. In the event the REIT Shares Amount includes rights
that a holder of REIT Shares would be entitled to receive, then the Value
of such rights shall be determined by the General Partner acting in good
faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization and Continuation
The Partnership is a limited partnership organized by the General
Partner and the Limited Partner pursuant to the provisions of the Act and
upon the terms and conditions set forth in this Agreement. Except as
expressly provided herein to the contrary, the rights and obligations of
the Partners and the administration and termination of the Partnership
shall be governed by the Act. The Partnership Interest of each Partner
shall be personal property for all purposes.
Section 2.2 Name
The name of the Partnership shall be Sovran Acquisition Limited
Partnership. The Partnership's business may be conducted under any other
name or names deemed advisable by the General Partner, including the name
of the General Partner or any Affiliate thereof. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included
in the Partnership's name where necessary for the purposes of complying
with the laws of any jurisdiction that so requires. The General Partner in
<PAGE>
its sole and absolute discretion may change the name of the Partnership at
any time and from time to time and shall notify the Limited Partners of
such change in the next regular communication to the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the State
of Delaware and the name and address of the registered agent for service of
process on the Partnership in the State of Delaware is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. The principal office of the Partnership shall be 5166 Main
Street, Williamsville, New York 14221, or such other place as the General
Partner may from time to time designate by notice to the Limited Partners.
The Partnership may maintain offices at such other place or places within
or outside the State of Delaware as the General Partner deems advisable.
Section 2.4 Power of Attorney
A. Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case
with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and
stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates,
documents and other instruments (including, without
limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the General Partner
or the Liquidator deems appropriate or necessary to form,
qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in
which the limited Partners have limited liability) in the
State of Delaware and in all other jurisdictions in which
the Partnership may or plans to conduct business or own
property; (b) all instruments that the General Partner deems
appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance
with its terms; (c) all conveyances and other instruments or
documents that the General Partner or the Liquidator deems
appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of
cancellation; (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article 11, 12 or 13
hereof or the Capital Contribution of any Partner; and (e)
all certificates, documents and other instruments relating
to the determination of the rights, preferences and
privileges of Partnership Interests; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner or any
Liquidator, to make, evidence, give, confirm or ratify any
<PAGE>
vote, consent, approval, agreement or other action which is made or given
by the Partners hereunder or is consistent with the terms of this agreement
or appropriate or necessary, in the sole discretion of the General Partner
or any Liquidator, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14 hereof or as may be otherwise expressly provided for in this
Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the
fact that each of the Partners will be relying upon the power of the
General Partner and any Liquidator to act as contemplated by this agreement
in any filing or other action by it on behalf of the Partnership, and it
shall survive and not be affected by the subsequent Incapacity of any
Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Units and shall extend to such
Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such Limited Partner or Assignee hereby agrees to be
bound by any representation made by the General Partner or any Liquidator,
acting in good faith pursuant to such power of attorney, and each such
Limited Partner or Assignee hereby waives any and all defenses which may be
available to contest, negate or disaffirm the action of the General Partner
or any Liquidator, taken in good faith under such power of attorney. Each
Limited Partner or Assignee shall execute and deliver to the General
Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's request therefor, such further
designation, powers of attorney and other instruments as the General
Partner or the Liquidator, as the case may be, deems necessary to
effectuate this Agreement and the purposes of the Partnership.
Section 2.5 Term
The term of the Partnership commenced on June __, 1995, the date the
Certificate was filed in the office of the Secretary of State of Delaware
in accordance with the Act and shall continue until December 31, 2094,
unless, the Partnership is dissolved sooner pursuant to the provisions of
Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted
by a limited partnership organized pursuant to the Act, provided, however,
that such business shall be limited to and conducted in such a manner as to
permit Sovran Self Storage, Inc. at all times to be classified as a REIT,
unless Sovran Self Storage, Inc. ceases to qualify as a REIT for reasons
other than the conduct of the business of the Partnership, (ii) to enter
into any partnership, joint venture or other similar arrangement to engage
in any of the foregoing or to own interests in any entity engaged in any of
the foregoing, and (iii) to do anything necessary or incidental to the
foregoing. In connection with the foregoing, and without limiting Sovran
<PAGE>
Self Storage, Inc.'s right, in its sole discretion, to cease qualifying as
a REIT, the Partners acknowledge Sovran Self Storage, Inc.'s current status
as a REIT inures to the benefit of all of the Partners and not solely the
General Partner.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for
the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Partnership, including,
without limitation, full power and authority, directly or through its
ownership interest in other entities, to enter into, perform and carry out
contracts of any kind, borrow money and issue evidences of indebtedness,
whether or not secured by mortgage, deed of trust, pledge or other lien,
acquire and develop real property, and lease, sell, transfer and dispose of
real property, provided that the Partnership shall not take, or refrain
from taking, any action which, in the judgment of the General Partner, in
its sole and absolute discretion, (i) could adversely affect the ability of
Sovran Self Storage, Inc. to continue to qualify as a REIT, (ii) could
subject Sovran Self Storage, Inc. to any additional taxes under Section 857
or Section 4981 of the Code, or (iii) could violate any law or regulation
of any governmental body or agency having jurisdiction over Sovran Self
Storage, Inc. or its securities, unless such action (or inaction) shall
have been specifically consented to by the General Partner in writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
On the Effective Date, the Partners shall make Capital Contributions
set forth in Exhibit A to this Agreement. To the extent the Partnership
acquires any property by the merger of any other Person into the
Partnership, Persons who receive Partnership Interests in exchange for
their interests in the Person merging into the Partnership shall become
Partners and shall be deemed to have made Capital Contributions as provided
in the applicable merger agreement and as set forth in Exhibit A as amended
to reflect such deemed Capital Contributions. The Partners shall own
Partnership Units in the amounts set forth for such Partner in Exhibit A
and shall have a Percentage Interest in the Partnership as set forth in
Exhibit A, which Percentage Interest shall be adjusted in Exhibit A from
time to time by the General Partner to the extent necessary to reflect
accurately redemptions, Capital Contributions, the issuance of additional
Partnership Units (pursuant to any merger or otherwise), or similar events
having an effect on any Partner's Percentage Interest. The number of
Partnership Units held by the General Partner (equal to one percent (1%) of
all outstanding Partnership Units from time to time) shall be deemed to be
the General Partner Interest. Except as provided in Sections 4.2 and 10.5,
the Partners shall have no obligation to make any additional Capital
Contributions or loans to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests
A. The General Partner is hereby authorized to cause the Partnership
from time to time to issue to the Partners (including the General Partner)
<PAGE>
or other Persons additional Partnership Units or other Partnership
Interests in one or more classes, or one or more series of any of such
classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties, including rights,
powers and duties senior to Limited Partner Interests, all as shall be
determined by the General Partner in its sole and absolute discretion
subject to Delaware law, including, without limitation, (i) the allocations
of items of Partnership income, gain, loss, deduction and credit to each
such class or series of Partnership Interests; (ii) the right of each such
class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of
Partnership Interests upon dissolution and liquidation of the Partnership;
provided that no such additional Partnership Units or other Partnership
Interests shall be issued to Sovran Self Storage, Inc. or the General
Partner unless either (a)(1) the additional Partnership Interests are
issued in connection with an issuance of REIT Shares or other shares by
Sovran Self Storage, Inc. which shares have designations, preferences and
other rights such that the economic interests attributable to such shares
are substantially similar to the designations, preferences and other rights
of the additional Partnership Interests issued to Sovran Self Storage, Inc.
in accordance with this Section 4.2.A, and (2) either (x) Sovran Self
Storage, Inc. shall make a Capital Contribution to the Partnership in an
amount equal to the proceeds raised in connection with such issuance or (y)
Sovran Self Storage, Inc. shall transfer to the General Partner, by loan or
contribution, an amount equal to the proceeds raised in connection with the
issuance of such shares of Sovran Self Storage, Inc. and, in turn, the
General Partner shall make a Capital Contribution to the Partnership in an
amount equal to the amount transferred to it by Sovran Self Storage, Inc.
or (z) through a combination of (x) and (y) above a Capital Contribution
equal to the proceeds raised in connection with the issuance of such shares
is made to the Partnership, or (b) the additional Partnership Interests are
issued to all Partners in proportion to their respective Percentage
Interests.
B. After the Effective Date, Sovran Self Storage, Inc. shall not
issue any additional REIT Shares (other than REIT Shares issued pursuant to
Section 8.6), or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase REIT Shares
(collectively "New Securities") other than to all holders of REIT Shares
unless (i) the General Partner shall cause the Partnership to issue to
Sovran Self Storage, Inc. Partnership Interests or rights, options,
warrants or convertible or exchangeable securities of the Partnership
having designations, preferences and other rights, all such that the
economic interests are substantially similar to those of the New
Securities, and (ii) either (a) Sovran Self Storage, Inc. contributes to
the Partnership the proceeds from the issuance of such New Securities and
from the exercise of rights contained in such New Securities or (b) Sovran
Self Storage, Inc. transfers to the General Partner, by loan or
contribution, the proceeds from the issuance of such New Securities and
from the exercise of rights contained in such New Securities and the
General Partner, in turn, contributes the amount so transferred to it to
the Partnership or (c) through a combination of (a) and (b) above a Capital
Contribution equal to the proceeds raised in connection with the issuance
of such New Securities and from the exercise of rights contained in such
New Securities is made to the Partnership. Without limiting the foregoing,
Sovran Self Storage, Inc. is expressly authorized to issue New Securities
for less than fair market value, and the General Partner is expressly
<PAGE>
authorized to cause the Partnership to issue to Sovran Self Storage, Inc.
or the General Partner corresponding Partnership Interests, so long as (x)
the General Partner concludes in good faith that such issuance is in the
interests of the General Partner and the Partnership (for example, and not
by way of limitation, the issuance of REIT Shares and corresponding Units
pursuant to an employee or director stock purchase plan providing for
employee or director purchases of REIT Shares at a discount from fair
market value or employee or director stock options that have an exercise
price that is less than the fair market value of the REIT Shares, either at
the time of issuance or at the time of exercise), and (y) Sovran Self
Storage, Inc. contributes all proceeds from such issuance and exercise to
the Partnership or transfers all proceeds from such issuance and exercise
to the General Partner, whether by loan or contribution, and the General
Partner, in turn, contributes the amount so transferred to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares
In connection with the initial public offering and the Private
Placement of REIT Shares by Sovran Self Storage, Inc. and any other
issuance of REIT Shares or New Securities pursuant to Section 4.2, Sovran
Self Storage, Inc. shall contribute to the Partnership any proceeds (or a
portion thereof) raised in connection with such issuance or shall transfer
to the General Partner any proceeds (or a portion thereof) raised in
connection with such issuance, by loan or contribution, and the General
Partner shall contribute the amount so transferred to it to the
Partnership; provided that if the proceeds actually received by Sovran Self
Storage, Inc. or the General Partner are less than the gross proceeds of
such issuance as a result of any underwriter's discount or other expenses
paid or incurred in connection with such issuance, then Sovran Self
Storage, Inc. and the General Partner shall be deemed to have made a
Capital Contribution to the Partnership in the amount equal to the sum of
the net proceeds of such issuance plus the amount of such underwriter's
discount and other expenses paid by Sovran Self Storage, Inc. or the
General Partner.
Section 4.4 No Preemptive Rights
No Person shall have any preemptive, preferential or other similar
right with respect to (i) additional Capital Contributions or loans to the
Partnership; or (ii) issuance or sale of any Partnership Units or other
Partnership Interests.
Section 4.5 No Interest on Capital
No Partner shall be entitled to interest on its Capital Contribution
or its Capital Account.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
The General Partner shall distribute at least quarterly an amount
equal to 100% of Available Cash generated by the Partnership during such
quarter or shorter period to the Partners who are Partners on the
Partnership Record Date with respect to such quarter or shorter period in
<PAGE>
accordance with their respective Percentage Interests on such Partnership
Record Date; provided that in no event may a Partner receive a distribution
of Available Cash with respect to a Partnership Unit if such Partner is
entitled to receive a distribution out of such Available Cash with respect
to a REIT Share for which such Partnership Unit has been redeemed or
exchanged. The General Partner shall take such reasonable efforts, as
determined by it in its sole and absolute discretion and consistent with
Sovran Self Storage, Inc.'s qualification as a REIT, to distribute
Available Cash to the Limited Partners so as to preclude any such
distribution or portion thereof from being treated as part of a sale of
property to the Partnership by a Limited Partner under Section 707 of the
Code or the Regulations thereunder; provided that the General Partner and
the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of any distribution to a Limited Partner being so
treated.
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any
allocation, payment or distribution to the General Partner, the Limited
Partners or Assignees shall be treated as amounts distributed to the
General Partner, Limited Partners, or Assignees pursuant to Section 5.1 for
all purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the
liquidation of the Partnership shall be distributed to the Partners in
accordance with Section 13.2
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners among themselves, the Partnership's items of
income, gain, loss and deduction (computed in accordance with Exhibit B
hereof) shall be allocated among the Partners in each taxable year (or
portion thereof) as provided herein below.
A. Net Income shall be allocated (i) first, to the General Partner
to the extent that Net Losses previously allocated to the General Partner
pursuant to the last sentence of Section 6.1.B exceed Net Income previously
allocated to the General Partner pursuant to this clause (i) of Section
6.1.A, and (ii) thereafter, Net Income shall be allocated to the Partners
in accordance with their respective Percentage Interests.
B. After giving effect to the special allocations set forth in
Section 1 of Exhibit C attached hereto, Net Losses shall be allocated to
the Partners in accordance with their respective Percentage Interests;
provided that Net Losses shall not be allocated to any Limited Partner
pursuant to this Section 6.1.B to the extent that such allocation would
cause such Limited Partner to have an Adjusted Capital Account Deficit at
<PAGE>
the end of such taxable year (or increase any existing Adjusted Capital
Account Deficit). All Net Losses in excess of the limitations set forth in
this Section 6.1.B shall be allocated to the General Partner.
C. For purposes of Regulations Section 1.752-3(a), the Partners
agree that Nonrecourse Liabilities of the Partnership in excess of the sum
of (i) the amount of Partnership Minimum Gain and (ii) the total amount of
Nonrecourse Built-in Gain shall be allocated among the Partners in
accordance with their respective Percentage Interests.
D. Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall to the extent possible, after
taking into account other required allocations of gain pursuant to
Exhibit C, be characterized as Recapture Income in the same proportions and
to the same extent as such Partners have been allocated any deductions
directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
E. In the event that the Partnership issues additional Partnership
Interests to the General Partner or any Additional Limited Partner under
Section 4.2 hereof, the General Partner shall make such revisions to
Sections 6.1.A and B above as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are and
shall be exclusively vested in the General Partner, and no Limited Partner
shall have any right to participate in or exercise control or management
power over the business and affairs of the Partnership. The General
Partner may not be removed by the Limited Partners with or without cause.
In addition to the powers now or hereafter granted a general partner of a
limited partnership under applicable law or which are granted to the
General Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.3 hereof, shall have full power and authority
to do all things deemed necessary or desirable by it to conduct the
business of the Partnership, to exercise all powers set forth in Section
3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof,
including, without limitation:
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation,
making prepayments on loans and borrowing money to
permit the Partnership to make distributions to its
Partners in such amounts as will permit Sovran Self
Storage, Inc. (so long as Sovran Self Storage, Inc.
qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any
excise tax pursuant to Section 4981 of the Code) and to
make distributions to its Partners such that Sovran
Self Storage, Inc. can distribute to its shareholders
amounts sufficient to permit Sovran Self Storage, Inc.
<PAGE>
to maintain REIT status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of
evidence of indebtedness (including the securing of same by deed to secure
debt, mortgage, deed of trust or other lien or encumbrance on the
Partnership's assets) and the incurring of any obligations it deems
necessary for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental
or other agencies having jurisdiction over the business
or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of
the Partnership (including the exercise or grant of any
conversion, option, privilege, or subscription right or
other right available in connection with any assets at
any time held by the Partnership) or the merger or
other combination of the Partnership with or into
another entity (all of the foregoing subject to any
prior approval only to the extent required by Section
7.3 hereof);
(4) the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement and on any
terms it sees fit, including, without limitation, the
financing of the conduct of the operations of Sovran
Self Storage, Inc., the Partnership or any of the
Partnership's Subsidiaries, the lending of funds to
other Persons (including, without limitation, the
Subsidiaries of the Partnership, the General Partner
and/or Sovran Self Storage, Inc.) and the repayment of
obligations of the Partnership and its Subsidiaries and
any other Person in which it has an equity investment,
and the making of capital contributions to its
Subsidiaries;
(5) the management, operation, leasing, landscaping,
repair, alteration, demolition or improvement of any
real property or improvements owned by the Partnership
or any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the
General Partner considers useful or necessary to the
conduct of the Partnership's operations or the
implementation of the General Partner's powers under
this Agreement, including contracting with contractors,
developers, consultants, accountants, legal counsel,
other professional advisors and other agents and the
payment of their expenses and compensation out of the
Partnership's assets;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
<PAGE>
(8) holding, managing, investing and reinvesting cash and
other assets of the Partnership;
(9) the collection and receipt of revenues and income of
the Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees
of the Partnership, any division of the Partnership, or
the General Partner (including, without limitation,
employees having titles such as "president," "vice
president," "secretary" and "treasurer" of the
Partnership, any division of the Partnership, or the
General Partner), and agents, outside attorneys,
accountants, consultants and contractors of the General
Partner or the Partnership or any division of the
Partnership, and the determination of their
compensation and other terms of employment or hiring;
(11) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems necessary
or appropriate;
(12) the formation of, or acquisition of an interest in, and
the contribution of property to, any further limited or
general partnerships, joint ventures or other
relationships that it deems desirable (including,
without limitation, the acquisition of interests in,
and the contributions of property to, its Subsidiaries
and any other Person in which it has an equity
investment from time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the
settlement, compromise, submission to arbitration or
any other form of dispute resolution, or abandonment
of, any claim, cause of action, liability, debt or
damages, due or owing to or from the Partnership, the
commencement or defense of suits, legal proceedings,
administrative proceedings, arbitration or other forms
of dispute, resolution, and the representation of the
Partnership in all suits or legal proceedings,
administrative proceedings, arbitrations or other forms
of dispute resolution, the incurring of legal expense,
and the indemnification of any Person against
liabilities and contingencies to the extent permitted
by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons);
(15) the determination of the fair market value of any
Partnership property distributed in kind using such
<PAGE>
reasonable method of valuation as the General Partner
may adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited
power of attorney, of any right, including the right to
vote, appurtenant to any asset or investment held by
the Partnership;
(17) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or in
connection with any Subsidiary of the Partnership or
any other Person in which the Partnership has a direct
or indirect interest, or jointly with any such
Subsidiary or other Person;
(18) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any
Person in which the Partnership does not have an
interest pursuant to contractual or other arrangements
with such Person;
(19) the making, execution and delivery of any and all
deeds, leases, notes, deeds to secure debt, mortgages,
deeds of trust, security agreements, conveyances,
contracts, guarantees, warranties, indemnities,
waivers, releases or legal instruments or agreement in
writing necessary or appropriate in the judgment of the
General Partner for the accomplishment of any of the
powers of the General Partner enumerated in this
Agreement; and
(20) the distribution of cash to acquire Partnership Units
held by a Limited Partner in connection with a Limited
Partner's exercise of its Redemption Right under
Section 8.6.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements
and transactions on behalf of the Partnership without any further act,
approval or vote of the Partners, notwithstanding any other provision of
this Agreement (except as provided in Section 7.3), the Act or any
applicable law, rule or regulation, to the fullest extent permitted under
the Act or other applicable law. The execution, delivery or performance by
the General Partner or the Partnership of any agreement authorized or
permitted under this Agreement shall not constitute a breach by the General
Partner of any duty that the General Partner may owe the Partnership or the
Limited Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner
may cause the Partnership to obtain and maintain (i) casualty, liability
and other insurance on the properties of the Partnership and (ii) liability
insurance for the Indemnitees hereunder.
D. At all times from and after the date hereof, the General Partner
may cause the Partnership to establish and maintain at any and all times
<PAGE>
working capital accounts and other cash or similar balances in such amounts
as the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner of any action taken by it. The General Partner
and the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such
Limited Partner as a result of an action (or inaction) by the General
Partner pursuant to its authority under this Agreement.
Section 7.2 Certificate of Limited Partnership
The General Partner has previously filed the Certificate with the
Secretary of State of Delaware as required by the Act. The General Partner
shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be reasonable and necessary or appropriate
for the formation, continuation, qualification and operation of a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own
property. To the extent that such action is determined by the General
Partner to be reasonable and necessary or appropriate, the General Partner
shall file amendments to and restatements of the Certificate and do all the
things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the
laws of the State of Delaware and each other state, or the District of
Columbia, in which the Partnership may elect to do business or own
property. Subject to the terms of Section 8.5.A(4) hereof, the General
Partner shall not be required, before or after filing, to deliver or mail a
copy of the Certificate or any amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner's Authority
A. The General Partner may not take any action in contravention of
an express prohibition or limitation of this Agreement without the written
Consent of Limited Partners holding 75% or more of the Percentage Interests
of the Limited Partners (including Limited Partner Interests held, directly
or indirectly, by Sovran Self Storage, Inc. and the General Partner) (or
such other percentage of the Limited Partners as may be specifically
provided for under a provision of this Agreement).
B. Except as provided in Article 13 hereof, the General Partner may
not sell, exchange, transfer or otherwise dispose of all or substantially
all of the Partnership's assets in a single transaction or a series of
related transactions (including by way of merger, consolidation or other
combination with any other Person) without the Consent of Limited Partners
holding 75% or more of the Percentage Interests of the Limited Partners
(including Limited Partner Interests held, directly or indirectly, by
Sovran Self Storage, Inc. and the General Partner).
Section 7.4 Reimbursement of the General Partner
A. Except as provided in this Section 7.4 and elsewhere in this
Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
<PAGE>
General Partner shall not be compensated for its services as general
partner of the Partnership.
B. The General Partner shall be reimbursed on a monthly basis, or
such other basis as the General Partner may determine in its sole and
absolute discretion, for all expenses that it and/or Sovran Self Storage,
Inc. incurs relating to the ownership and operation of, or for the benefit
of, the Partnership; provided that the amount of any such reimbursement
shall be reduced by (i) any interest earned by the General Partner with
respect to bank accounts or other instruments or accounts held by it on
behalf of the Partnership as permitted in Section 7.5.A and (ii) any amount
derived by the General Partner from any Qualified REIT Subsidiary (as
defined in Section 7.5.A). The Limited Partners acknowledge that, for
purposes of this Section 7.4.B, all expenses of the General Partner and
Sovran Self Storage, Inc. are deemed incurred for the benefit of the
Partnership. Such reimbursements shall be in addition to any reimbursement
to the General Partner and/or Sovran Self Storage, Inc. as a result of
indemnification pursuant to Section 7.7 hereof.
C. As set forth in Section 4.3, Sovran Self Storage, Inc. and the
General Partner shall be treated as having made a Capital Contribution in
the amount of all expenses that Sovran Self Storage, Inc. and the General
Partner incur relating to the organization of the Partnership and the
General Partner, the initial public offering and Private Placement of REIT
Shares by Sovran Self Storage, Inc. and any other issuance of additional
Partnership Interests or REIT Shares pursuant to Section 4.2 hereof.
D. In the event that the General Partner or Sovran Self Storage,
Inc. shall elect to purchase from shareholders of Sovran Self Storage, Inc.
REIT Shares for the purpose of delivering such REIT Shares to satisfy an
obligation under any dividend reinvestment program adopted by Sovran Self
Storage, Inc., any employee stock purchase plan adopted by Sovran Self
Storage, Inc., or any similar obligation or arrangement undertaken by the
General Partner or Sovran Self Storage, Inc. in the future, the purchase
price paid by the General Partner or Sovran Self Storage, Inc. for such
REIT Shares and any other expenses incurred by the General Partner or
Sovran Self Storage, Inc. in connection with such purchase shall be
considered expenses of the Partnership and shall be reimbursed to the
General Partner or Sovran Self Storage, Inc., subject to the condition
that: (i) if such REIT Shares subsequently are to be sold by the General
Partner or Sovran Self Storage, Inc., the General Partner or Sovran Self
Storage, Inc. shall pay to the Partnership any proceeds received by the
General Partner or Sovran Self Storage, Inc. for such REIT Shares (provided
that a transfer of REIT Shares for Units pursuant to Section 8.6 would not
be considered a sale for such purposes); and (ii) if such REIT Shares are
not retransferred by the General Partner or Sovran Self Storage, Inc.
within 30 days after the purchase thereof, the General Partner shall cause
the Partnership to cancel a number of Partnership Units held by the General
Partner or Sovran Self Storage, Inc. equal to the product obtained by
multiplying the Conversion Factor by the number of such REIT Shares.
Section 7.5 Outside Activities of the General Partner and Sovran
Self Storage, Inc.
A. The General Partner shall not directly or indirectly enter into
or conduct any business other than in connection with the ownership,
acquisition and disposition of Partnership Interests as a General Partner
<PAGE>
or Limited Partner and the management of the business of the Partnership,
and such activities as are incidental thereto, and Sovran Self Storage,
Inc. shall not directly or indirectly enter into or conduct any business
other than in connection with the ownership of the stock of the General
Partner, the ownership, acquisition or disposition of Partnership Interests
as a Limited Partner, making loans to the General Partner, and such
activities as are incidental thereto. The assets of the General Partner
shall be limited to Partnership Interests and the assets of Sovran Self
Storage, Inc. shall be limited to the stock and debt obligations of the
General Partner and the Partnership Interests. The General Partner shall
not hold any assets other than Partnership Interests as a General Partner
or Limited Partner, and other than such bank accounts or similar
instruments or accounts as it deems necessary to carry out its
responsibilities contemplated under this Agreement and its organizational
documents. The General Partner and any Affiliates of the General Partner
may acquire Limited Partner Interests and shall be entitled to exercise all
rights of a Limited Partner relating to such Limited Partner Interests.
Notwithstanding the above, the General Partner may form and own an equity
interest in, and participate thereby in the business of, including, without
limitation, as a shareholder of one or more direct wholly owned special
purpose corporate subsidiaries the sole purpose of which is to serve as
general partner of a partnership at least 99 percent of the equity of which
partnership is owned directly or indirectly by the Partnership (a
"Qualified REIT Subsidiary").
B. Except as provided in Section 7.4.D, in the event Sovran Self
Storage, Inc. exercises its rights to purchase REIT Shares, then the
General Partner shall cause the Partnership to purchase from Sovran Self
Storage, Inc. that number of Partnership Units equal to the product
obtained by multiplying the number of REIT Shares to be purchased by Sovran
Self Storage, Inc. (and/or the General Partner) times the Conversion Factor
on the same terms and for the same aggregate price that Sovran Self
Storage, Inc. (and/or the General Partner) purchased such REIT Shares. The
General Partner shall then distribute such funds to Sovran Self Storage,
Inc.
C. In the event the Partnership or Sovran Self Storage, Inc.
acquires REIT Shares as a result of the forfeiture of such REIT Shares
under a restricted or similar stock plan, then the General Partner shall
cause the Partnership to cancel that number of Partnership Units equal to
the number of REIT Shares so acquired (and if the Partnership acquired such
REIT Shares, it shall transfer such REIT Shares to Sovran Self Storage,
Inc. for cancellation).
D. The General Partner shall not issue at any time capital stock
(whether voting or non-voting or common or preferred) or any evidence of
indebtedness except to Sovran Self Storage, Inc.
Section 7.6 Contracts with Affiliates
A. The Partnership may lend or contribute funds or other assets to
its Subsidiaries or other Persons in which it has an equity investment and
such Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner.
The foregoing authority shall not create any right or benefit in favor of
any Subsidiary or any other Person.
<PAGE>
B. Except as provided in Section 7.5.A, the Partnership may transfer
assets to joint ventures, other partnerships, corporations or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law as the General Partner, in its sole and absolute discretion,
believes are advisable.
C. Except as expressly permitted by this Agreement, neither the
General Partner nor any of its Affiliates shall sell, transfer or convey
any property to, or purchase any property from, the Partnership, directly
or indirectly, except pursuant to transactions that are determined by the
General Partner in good faith to be fair and reasonable and no less
favorable to the Partnership than would be obtained from an unaffiliated
third party.
D. The General Partner, in its sole and absolute discretion and
without the approval of the Limited Partners, may propose and adopt on
behalf of the Partnership employee benefit plans, stock option plans, and
similar plans funded by the Partnership for the benefit of employees of the
General Partner, the Partnership, Subsidiaries of the Partnership or any
Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the General Partner, or any
of the Partnership's Subsidiaries.
E. The General Partner is expressly authorized to enter into, in the
name and on behalf of the Partnership, a right of first opportunity
arrangement and other conflict avoidance agreements with various Affiliates
of the Partnership and the General Partner, on such terms as the General
Partner, in its sole and absolute discretion, believes are advisable.
Section 7.7 Indemnification
A. The Partnership shall indemnify each Indemnitee from and against
any and all losses, claims, damages, liabilities, joint or several,
expenses (including, without limitation, attorneys fees and other legal
fees and expenses), judgments, fines , settlements, and other amounts
arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the
operations of the Partnership, the General Partner or Sovran Self Storage,
Inc. as set forth in this Agreement in which such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless
it is established that: (i) the act or omission of the Indemnitee was
material to the matter giving rise to the proceeding and either was
committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal
benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a
loan guaranty or otherwise, for any indebtedness of the Partnership or any
Subsidiary of the Partnership (including without limitation, any
indebtedness which the Partnership or any Subsidiary of the Partnership has
assumed or taken subject to), and the General Partner is hereby authorized
and empowered, on behalf of the Partnership, to enter into one or more
indemnity agreements consistent with the provisions of this Section 7.7 in
favor of any Indemnitee having or potentially having liability for any such
indebtedness. The termination of any proceeding by judgment, order or
<PAGE>
settlement does not create a presumption that the Indemnitee did not meet
the requisite standard of conduct set forth in this Section 7.7.A with
respect to the subject matter of such proceeding. The termination of any
proceeding by conviction of an Indemnitee or upon a plea of nolo contendere
or its equivalent by an Indemnitee, or an entry of an order of probation
against an Indemnitee prior to judgment, creates a rebuttable presumption
that such Indemnitee acted in a manner contrary to that specified in this
Section 7.7.A with respect to the subject matter of such proceeding. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership or otherwise provide funds, to enable the Partnership to fund
its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding may be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding upon receipt by the Partnership of (i)
a written affirmation by the Indemnitee of the Indemnitee's good faith
belief that the standard of conduct necessary for indemnification by the
Partnership as authorized in this Section 7.7.A. has been met, and (ii) a
written undertaking by or on behalf of the Indemnitee to repay the amount
if it shall ultimately be determined that the standard of conduct has not
been met.
C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity unless otherwise provided in a written
agreement pursuant to which such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as
the General Partner shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the
Partnership also imposes duties on, or otherwise involves services by, it
to the plan or participants or beneficiaries of the plan; excise taxes
assessed on an Indemnitee with respect to an employee benefit plan pursuant
to applicable law shall constitute fines within the meaning of Section 7.7;
and actions taken or omitted by the Indemnitee with respect to an employee
benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participants and beneficiaries
of the plan shall be deemed to be for a purpose which is not opposed to the
best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to
personal liability by reason of the indemnification provisions set forth in
this Agreement.
<PAGE>
G. An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
Any amendment, modification or repeal of this Section 7.7 or any provision
hereof shall be prospective only and shall not in any way affect the
limitations on the Partnership's liability to any Indemnitee under this
Section 7.7 as in effect immediately prior to such amendment, modification,
or repeal with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment, modification or
repeal, regardless of when such claims may arise or be asserted.
Section 7.8 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement, neither the General Partner nor Sovran Self Storage, Inc. shall
be liable for monetary damages to the Partnership, any Partners or any
Assignees for losses sustained or liabilities incurred as a result of
errors in judgment or of any act or omission if the General Partner acted
in good faith.
B. The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership, Sovran Self Storage, Inc.
and the shareholders of Sovran Self Storage, Inc. collectively, that the
General Partner is under no obligation to consider the separate interests
of the Limited Partners (including, without limitation, the tax
consequences to Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions, and that neither
the General Partner nor Sovran Self Storage, Inc. shall be liable for
monetary damages for losses sustained, liabilities incurred, or benefits
not derived by Limited Partners in connection with such decisions, provided
that the General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set
forth in Section 7.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agents.
Neither the General Partner nor Sovran Self Storage, Inc. shall be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect
the limitations on the General Partner's liability to the Partnership and
the Limited Partners under this Section 7.8 as in effect immediately prior
to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise
or be asserted.
Section 7.9 Other Matters Concerning the General Partner
A. The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
<PAGE>
instrument, opinion, report, notice, request, consent, order, bond,
debenture, or other paper or document believed by it in good faith to be
genuine and to have been signed or presented by the proper party or
parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and advisers
selected by it, and any act taken or omitted to be taken in reliance upon
the opinion of such Persons as to matters which such General Partner
reasonably believes to be within such Person's professional or expert
competence shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact.
Each such attorney shall, to the extent provided by the General Partner in
the power of attorney, have full power and authority to do and perform all
and every act and duty which is permitted or required to be done by the
General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or
omission is necessary or advisable in order (i) to protect the ability of
Sovran Self Storage, Inc. to continue to qualify as a REIT or (ii) to avoid
Sovran Self Storage, Inc. incurring any taxes under Section 857 or Section
4981 of the Code, is expressly authorized under this Agreement and is
deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually or collectively,
shall have any ownership interest in such Partnership assets or any portion
thereof. Title to any or all of the Partnership assets may be held in the
name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General
Partner. The General Partner hereby declares and warrants that any
Partnership assets for which legal title is held in the name of the General
Partner or any nominee or Affiliate of the General Partner shall be held by
the General Partner for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however,that
the General Partner shall use its best efforts to cause beneficial and
record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the
property of the Partnership in its books and records, irrespective of the
name in which legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any
<PAGE>
other Partner or Person, to encumber, sell or otherwise use in any manner
any and all assets of the Partnership and to enter into any contracts on
behalf of the Partnership, and take any and all actions on behalf of the
Partnership and such Person shall be entitled to deal with the General
Partner as if the General Partner were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby
waives any and all defenses or other remedies which may be available
against such Person to contest, negate or disaffirm any action of the
General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated
to ascertain that the terms of this Agreement have been complied with or to
inquire into the necessity or expedience of any act or action of the
General Partner or its representatives. Each and every certificate,
document or other instrument executed on behalf of the Partnership by the
General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that
(i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and
(iii) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5
hereof, or under the Act.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or
trustee of the General Partner, the Partnership or any of their Affiliates,
in their capacity as such) shall take part in the operation, management or
control (within the meaning of the Act) of the Partnership's business,
transact any business in the Partnership's name or have the power to sign
documents for or otherwise bind the Partnership. The transaction of any
such business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such, shall
not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to Section 7.5 hereof, any agreements entered into pursuant to
Section 7.6.E hereof and any other agreements entered into by a Limited
Partner or its Affiliates with the Partnership or a Subsidiary, any Limited
Partner (other than the General Partner and Sovran Self Storage, Inc.) and
any officer, director, employee, agent, trustee, Affiliate or shareholder
of any Limited Partner (other than the General Partner and Sovran Self
<PAGE>
Storage, Inc.) shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the
Partnership, including business interests and activities that are in direct
competition with the Partnership or that are enhanced by the activities of
the Partnership. Neither the Partnership nor any Partners shall have any
rights by virtue of this Agreement or the Partnership relationship
established hereby in any business ventures of any Limited Partner or
Assignee. None of the Limited Partners (other than the General Partner and
Sovran Self Storage, Inc.) nor any other Person shall have any rights by
virtue of this Agreement or the Partnership relationship established hereby
in any business ventures of any other Person (other than the General
Partner to the extent expressly provided herein) and such Person shall have
no obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to
the Partnership, any Limited Partner or such other Person, could be taken
by such Person.
Section 8.4 Return of Capital
Except pursuant to the right of redemption set forth in Section 8.6,
no Limited Partner shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent of distributions made pursuant
to this Agreement or upon termination of the Partnership as provided
herein. Nothing in this Section 8.4 shall be interpreted as limiting the
Partnership's right to redeem all or a portion of the Partnership Units
held by a Limited Partner, with the consent of such Limited Partner, on
such terms and conditions as determined by the General Partner to be in the
interests of the Partnership. Except to the extent provided by Exhibit C
hereof or as permitted by Section 4.2.B, or otherwise expressly provided in
this Agreement, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
A. In addition to other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, upon written
demand with a statement of the purpose of such demand and at such Limited
Partner's own expense (including such copying and administrative charges as
the General Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by
Sovran Self Storage, Inc. pursuant to the Securities
Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and
all amendments thereto, together with executed copies of all
<PAGE>
powers of attorney pursuant to which this Agreement, the Certificate and
all amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of
cash and a description and statement of any other property
or services contributed by each Partner and which each
Partner has agreed to contribute in the future, and the date
on which each became a Partner.
B. The Partnership shall notify each Limited Partner upon request of
the then current Conversion Factor.
C. Notwithstanding any other provision of this Section 8.5, the
General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith
believes is not in the best interests of the Partnership or could damage
the Partnership or its business or (ii) the Partnership is required by law
or by agreements with an unaffiliated third party to keep confidential.
Section 8.6 Redemption Right
A. Subject to Sections 8.6.B and 8.6.C, on or after the date one (1)
year after the closing of a transaction pursuant to which a Limited Partner
obtains his Partnership Units, such Limited Partner, other than the General
Partner or Sovran Self Storage, Inc., shall have the right (the "Redemption
Right") to require the Partnership to redeem on a Specified Redemption Date
all or a portion of the Partnership Units held by such Limited Partner at a
redemption price equal to and in the form of the Cash Amount to be paid by
the Partnership. The Redemption Right shall be exercised pursuant to a
Notice of Redemption delivered to the Partnership (with copies to the
General Partner and Sovran Self Storage, Inc.) by the Limited Partner who
is exercising the redemption right (the "Redeeming Partner"); provided,
however, that the Partnership shall not be obligated to satisfy such
Redemption Right if Sovran Self Storage, Inc. and/or the General Partner
elects to purchase the Partnership Units subject to the Notice of
Redemption pursuant to Section 8.6.B. A Limited Partner may not exercise
the Redemption Right for less than one thousand (1,000) Partnership Units
or, if such Limited Partner holds less than one thousand (1,000)
Partnership Units, all of the Partnership Units held by such Partner. The
Redeeming Partner shall have no right, with respect to any Partnership
Units so redeemed, to receive any distributions paid on or after the
Specified Redemption Date. The Assignee of any Limited Partner may
exercise the rights of such Limited Partner pursuant to this Section 8.6,
and such Limited Partner shall be deemed to have assigned such rights to
such Assignee and shall be bound by the exercise of such rights by such
Assignee. In connection with any exercise of such rights by such Assignee
on behalf of such Limited Partner, the Cash Amount shall be paid by the
Partnership directly to such Assignee and not to such Limited Partner.
B. Notwithstanding the provisions of Section 8.6.A, a Limited
Partner that exercises the Redemption Right shall be deemed to have offered
to sell the Partnership Units described in the Notice of Redemption to the
General Partner and Sovran Self Storage, Inc., and either the General
Partner or Sovran Self Storage, Inc. (or both) may, in its sole and
<PAGE>
absolute discretion, elect to purchase directly and acquire such
Partnership Units by paying to the Redeeming Partner either the Cash Amount
or the REIT Shares Amount, as elected by the General Partner or Sovran Self
Storage, Inc. (in its sole and absolute discretion), on the Specified
Redemption Date, whereupon the General Partner or Sovran Self Storage, Inc.
shall acquire the Partnership Units offered for redemption by the Redeeming
Partner and shall be treated for all purposes of this Agreement as the
owner of such Partnership Units. If the General Partner and/or Sovran Self
Storage, Inc. shall elect to exercise its right to purchase Partnership
Units under this Section 8.6.B with respect to a Notice of Redemption, they
shall so notify the Redeeming Partner within five Business Days after the
receipt by the General Partner of such Notice of Redemption. Unless the
General Partner and/or Sovran Self Storage, Inc. (in their sole and
absolute discretion) shall exercise its right to purchase Partnership Units
from the Redeeming Partner pursuant to this Section 8.6.B, neither the
General Partner nor Sovran Self Storage, Inc. shall have any obligation to
the Redeeming Partner or the Partnership with respect to the Redeeming
Partner's exercise of the Redemption Right. In the event the General
Partner or Sovran Self Storage, Inc. shall exercise its right to purchase
Partnership Units with respect to the exercise of a Redemption Right in the
manner described in the first sentence of this Section 8.6.B, the
Partnership shall have no obligation to pay any amount to the Redeeming
Partner with respect to such Redeeming Partner's exercise of such
Redemption Right, and each of the Redeeming Partner, the Partnership and
the General Partner or Sovran Self Storage, Inc., as the case may be, shall
treat the transaction between the General Partner or Sovran Self Storage,
Inc., as the case may be, and the Redeeming Partner for federal income tax
purposes as a sale of the Redeeming Partner's Partnership Units to the
General Partner or Sovran Self Storage, Inc., as the case may be. Each
Redeeming Partner agrees to execute such documents as the General Partner
and Sovran Self Storage, Inc. may reasonably require in connection with the
issuance of REIT Shares upon exercise of the Redemption Right. If the
Redemption Right is satisfied by the delivery of REIT Shares, the Redeeming
Partner shall be deemed to become a holder of REIT Shares as of the close
of business on the Specified Redemption Date.
C. Notwithstanding the provisions of Section 8.6.A and Section
8.6.B, a Partner shall not be entitled to exercise the Redemption Right
pursuant to Section 8.6.A if the delivery of REIT Shares to such Partner on
the Specified Redemption Date by the General Partner or Sovran Self
Storage, Inc. pursuant to Section 8.6.B (regardless of whether or not the
General Partner or Sovran Self Storage, Inc. would in fact exercise its
rights under Section 8.6.B) would be prohibited under Sovran Self Storage,
Inc.'s Certificate of Incorporation or would violate any federal or state
securities laws.
D. Each Limited Partner covenants and agrees with the General
Partner and Sovran Self Storage, Inc. that all Partnership Units delivered
for redemption or sale shall be delivered to the Partnership, the General
Partner or Sovran Self Storage, Inc., as the case may be, free and clear of
all liens and, notwithstanding anything herein contained to the contrary,
none of the General Partner, Sovran Self Storage, Inc. or the Partnership
shall be under any obligation to acquire Partnership Units which are or may
be subject to any liens. Each Limited Partner further agrees that, in the
event any state or local property transfer tax is payable as a result of
the transfer of its Partnership Units to the Partnership, the General
<PAGE>
Partner or Sovran Self Storage, Inc., such Limited Partner shall assume and
pay such transfer tax.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the principal
office of the Partnership those records and documents required to be
maintained by the Act and other books and records deemed by the General
Partner to be appropriate with respect to the Partnership's business,
including, without limitation, all books and records necessary to provide
to the Limited Partners any information, lists and copies of documents
required to be provided pursuant to Section 9.3 hereof. Any records
maintained by or on behalf of the Partnership in the regular course of its
business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, micrographics or any other information storage device,
provided that the records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting
principles, or such other basis as the General Partner determines to be
necessary or appropriate.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. As soon as practicable, but in no event later than one hundred
five (105) days after the close of each Partnership Year, the General
Partner shall cause to be mailed to each Limited Partner as of the close of
the Partnership Year, an annual report containing financial statements of
the Partnership, or of the General Partner or Sovran Self Storage, Inc. if
such statements are prepared solely on a consolidated basis with the
General Partner or Sovran Self Storage, Inc., for such Partnership Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent
public accountants selected by the General Partner.
B. As soon as practicable, but in no event later than one hundred
five (105) days after the close of each calendar quarter (except the last
calendar quarter of each year), the General Partner shall cause to be
mailed to each Limited Partner as of the last day of the calendar quarter,
a report containing unaudited financial statements of the Partnership, or
of the General Partner or Sovran Self Storage, Inc., if such statements are
prepared solely on a consolidated basis with the General Partner or Sovran
Self Storage, Inc., and such other information as may be required by
applicable law or regulation, or as the General Partner determines to be
appropriate.
<PAGE>
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and
other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within ninety
(90) days of the close of each taxable year, the tax information reasonably
required by Limited Partners for federal and state income tax reporting
purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available
election pursuant to the Code. The General Partner shall have the right to
seek to revoke any such election (including, without limitation, the
election under Section 754 of the Code) upon the General Partner's
determination in its sole and absolute discretion that such revocation is
in the best interests of the Partners.
Section 10.3 Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer
identification number, and profit interest of each of the Limited Partners
and the Assignees; provided, however, that such information is provided to
the Partnership by the Limited Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement the tax
matters partner may expressly state that such agreement
shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files
a statement with the IRS providing that the tax matters
partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner or (ii) who
is a "notice partner" (as defined in Section 6231(a)(8) of
the Code) or a member of a "notice group" (as defined in
Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to
be taken into account by a Partner for tax purposes (a
<PAGE>
"final adjustment") is mailed to the tax matters partner, to seek judicial
review of such final adjustment, including the filing of a petition for
readjustment with the Tax Court or the filing of a complaint for refund
with the United States Claims Court or the District Court of the United
States for the district in which the Partnership's principal place of
business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
IRS and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition or complaint)
for judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period
for assessing any tax which is attributable to any item
required to be taken account by a Partner for tax purposes,
or an item affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable law
or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of
the tax matters partner and the provisions relating to indemnification of
the General Partner set forth in Section 7.7 of this Agreement shall be
fully applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its
services as such. All third party costs and expenses incurred by the tax
matters partner in performing its duties as such (including legal and
accounting fees and expenses) shall be borne by the Partnership. Nothing
herein shall be construed to restrict the Partnership from engaging an
accounting firm to assist the tax matters partner in discharging its duties
hereunder.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60) month period as
provided in Section 709 of the Code.
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to withhold
from or pay on behalf of or with respect to such Limited Partner any amount
of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect
to any amount distributable or allocable to such Limited Partner pursuant
to this Agreement, including, without limitation, any taxes required to be
withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445,
or 1446 of the Code. Any amount paid on behalf of or with respect to a
Limited Partner shall constitute a loan by the Partnership to such Limited
<PAGE>
Partner, which loan shall be repaid by such Limited Partner within fifteen
(15) days after notice from the General Partner that such payment must be
made unless (i) the Partnership withholds such payment from a distribution
which would otherwise be made to the Limited Partner or (ii) the General
Partner determines, in its sole and absolute discretion, that such payment
may be satisfied out of the available funds of the Partnership which would,
but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as
having been distributed to such Limited Partner. Each Limited Partner
hereby unconditionally and irrevocably grants to the Partnership a security
interest in such Limited Partner's Partnership Interest to secure such
Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited
Partner fails to pay any amounts owed to the Partnership pursuant to this
Section 10.5 when due, the General Partner may, in its sole and absolute
discretion, elect to make the payment to the Partnership on behalf of such
defaulting Limited Partner, and in such event shall be deemed to have
loaned such amount to such defaulting Limited Partner and shall succeed to
all rights and remedies of the Partnership as against such defaulting
Limited Partner. Without limitation, in such event the General Partner
shall have the right to receive distributions that would otherwise be
distributable to such defaulting Limited Partner until such time as such
loan, together with all interest thereon, has been paid in full, and any
such distributions so received by the General Partner shall be treated as
having been distributed to the defaulting Limited Partner and immediately
paid by the defaulting Limited Partner to the General Partner in repayment
of such loan. Any amounts payable by a Limited Partner hereunder shall
bear interest at the lesser of (A) the base rate on corporate loans at
large United States money center commercial banks, as published from time
to time in The Wall Street Journal, plus four (4) percentage points, or (B)
the maximum lawful rate of interest on such obligation, such interest to
accrue from the date such amount is due (i.e., fifteen (15) days after
demand) until such amount is paid in full. Each Limited Partner shall take
such actions as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer," when used in this Article 11 with respect to
a Partnership Unit, shall be deemed to refer to a transaction by which the
General Partner purports to assign all or any part of its General Partner
Interest to another Person or by which a Limited Partner purports to assign
all or any part of its Limited Partner Interest to another Person, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise. The term
"transfer" when used in this Article 11 does not include any redemption of
Partnership Interests by the Partnership from a Limited Partner or any
acquisition of Partnership Units from a Limited Partner by the General
Partner or Sovran Self Storage, Inc. pursuant to Section 8.6.
B. No Partnership Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article 11. Any transfer or purported transfer of a Partnership Interest
not made in accordance with this Article 11 shall be null and void.
<PAGE>
Section 11.2 Transfer of General Partner's Partnership Interest or
Sovran Self Storage, Inc.'s Interest in the General
Partner
A. The General Partner may not transfer any of its General Partner
Interest or Limited Partnership Interests or withdraw as General Partner
except as provided in Section 11.2.B or in connection with a transaction
described in Section 11.2.C. or 11.2.D. Sovran Self Storage, Inc. shall
not transfer any of its Limited Partner Interests or Ownership Interest
except in connection with a transaction described in Section 11.2.B,
11.2.C. or 11.2.D.
B. The General Partner and Sovran Self Storage, Inc. may transfer
Limited Partner Interests held by them either to the Partnership in
accordance with Section 7.5.B hereof or to a purported holder of REIT
Shares in accordance with Sovran Self Storage, Inc.'s certificate of
incorporation.
C. Except as otherwise provided in Section 11.2.D., neither the
General Partner nor Sovran Self Storage, Inc. shall engage in any merger,
consolidation or other combination with or into another Person or sale of
all or substantially all of its assets, or effect any reclassification, or
recapitalization or change of outstanding REIT Shares (other than a change
in par value, or from par value to no par value, or as a result of a
subdivision or combination as described in the definition of "Conversion
Factor") ("Transaction"), unless (i) the Transaction also includes a merger
of the Partnership or sale of substantially all of the assets of the
Partnership which has been approved by the requisite Consent of the
Partners pursuant to Section 7.3 and as a result of which all Limited
Partners will receive for each Partnership Unit an amount of cash,
securities, or other property equal to the product of the Conversion Factor
and the greatest amount of cash, securities or other property paid to a
holder of one REIT Share in consideration of one REIT Share at any time
during the period from and after the date on which the Transaction is
consummated, provided that if, in connection with the Transaction, a
purchase, tender or exchange offer shall have been made to and accepted by
the holders of more than fifty percent (50%) of the outstanding REIT
Shares, each holder of Partnership Units shall receive the greatest amount
of cash, securities, or other property which such holder would have
received had it exercised the Redemption Right and received REIT Shares in
exchange for its Partnership Units immediately prior to the expiration of
such purchase, tender or exchange offer and had thereupon accepted such
purchase, tender or exchange offer, and (ii) no more than forty-nine
percent (49%) of the equity securities of the acquiring Person in such
transaction shall be owned, after consummation of such Transaction, by the
General Partner or Persons who are Affiliates of the Partnership or the
General Partner immediately prior to the date on which the Transaction is
consummated.
D. Notwithstanding Section 11.2.C, either the General Partner or
Sovran Self Storage, Inc. may merge with another entity if immediately
after such merger substantially all of the assets of the surviving entity,
other than Partnership Units held by the General Partner (whether such
Partnership Units constitute the General Partnership Interest or a Limited
Partnership Interest) or by Sovran Self Storage, Inc., are contributed to
the Partnership as a Capital Contribution in exchange for Partnership Units
with a fair market value, as reasonably determined by the General Partner,
equal to the 704(c) Value of the assets so contributed.
<PAGE>
Section 11.3 Limited Partners' Rights to Transfer
A. Subject to the provisions of Sections 11.3.C, 11.3.D, 11.3.E, and
11.4, a Limited Partner may transfer, with or without the consent of the
General Partner, all or any portion of its Partnership Interest, or any of
such Limited Partner's economic rights as a Limited Partner.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of
such Limited Partner's estate shall have all the rights of a Limited
Partner, but not more rights than those enjoyed by other Limited Partners,
for the purpose of settling or managing the estate and such power as the
Incapacitated Limited Partner possessed to transfer all or any part of his
or its interest in the Partnership. The Incapacity of a Limited Partner,
in and of itself, shall not dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited
Partner of its Partnership Units if, in the opinion of legal counsel to the
Partnership, such transfer would require filing of a registration statement
under the Securities Act of 1933 or would otherwise violate any federal or
state securities laws or regulations applicable to the Partnership or the
Partnership Unit.
D. No transfer by a Limited Partner of its Partnership Units may be
made to any Person if (i) in the opinion of legal counsel for the
Partnership, it would result in the Partnership being treated as an
association taxable as a corporation for federal income tax purposes, or
would result in a termination of the Partnership for federal income tax
purposes, (ii) in the opinion of legal counsel for the Partnership, it
would adversely affect the ability of Sovran Self Storage, Inc. to continue
to qualify as a REIT or subject Sovran Self Storage, Inc. to any additional
taxes under Section 857 or Section 4981 of the Code, or (iii) such transfer
is effectuated through an "established securities market" or a "secondary
market (or the substantial equivalent thereof)" with the meaning of Section
7704 of the Code.
E. No transfer of any Partnership Units may be made to a lender to
the Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General
Partner, in its sole and absolute discretion, provided that as a condition
to such consent the lender will be required to enter into an arrangement
with the Partnership and the General Partner to exchange or redeem for the
Cash Amount any Partnership Units in which a security interest is held
simultaneously with the time at which such lender would be deemed to be a
partner in the Partnership for purposes of allocating liabilities to such
lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a
transferee as a Limited Partner in his place. The General Partner shall,
however, have the right to consent to the admission of a transferee of the
interest of a Limited Partner pursuant to this Section 11.4 as a
Substituted Limited Partner, which consent may be given or withheld by the
General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit a transferee of any such interests to become a
<PAGE>
Substituted Limited Partner shall not give rise to any cause of action
against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited
Partner in accordance with this Article 11 shall have all the rights and
powers and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement. The admission of any transferee as a
Substituted Limited Partner shall be subject to the transferee executing
and delivering to the Partnership an acceptance of all the terms and
conditions of this Agreement (including, without limitation, the provisions
of Section 2.4 and such other documents or instruments as may be required
to effect the admission).
C. Upon the admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited
Partner and to eliminate or adjust, if necessary, the name, address and
interest of the predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as
a Substituted Limited Partner, as described in Section 11.4, such
transferee shall be considered an Assignee for purposes of this Agreement.
An Assignee shall be deemed to have had assigned to it, and shall be
entitled to receive distributions from the Partnership and the share of Net
Income, Net Losses, Recapture Income, and any other items, gain, loss,
deduction and credit of the Partnership attributable to the Partnership
Units assigned to such transferee, but shall not be deemed to be a holder
of Partnership Units for any other purpose under this Agreement, and shall
not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to
have been voted on such matter in the same proportion as all other
Partnership Units held by Limited Partners are voted). In the event any
such transferee desires to make a further assignment of any such
Partnership Units, such transferee shall be subject to all the provisions
of this Article 11 to the same extent and in the same manner as any Limited
Partner desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions
A. No Limited Partner may withdraw from the Partnership other than
as a result of a permitted transfer of all of such Limited Partner's
Partnership Units in accordance with this Article 11 or pursuant to
redemption of all of its Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of its Partnership
Units in a transfer permitted pursuant to this Article 11 shall cease to be
a Limited Partner upon the admission of all Assignees of such Partnership
Units as Substitute Limited Partners. Similarly, any Limited Partner who
shall transfer all of its Partnership Units pursuant to a redemption of all
of its Partnership Units under Section 8.6 shall cease to be a Limited
Partner.
C. Transfers pursuant to this Article 11 may only be made on the
first day of a fiscal quarter of the Partnership, unless the General
Partner otherwise agrees.
<PAGE>
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or redeemed or transferred pursuant to
Section 8.6, or any day other than the first day of a Partnership Year,
then Net Income, Net Losses, each item thereof and all other items
attributable to such interest for such Partnership Year shall be divided
and allocated between the transferor Partner and the transferee Partner by
taking into account their varying interests during the Partnership Year in
accordance with Section 706(d) of the Code, using the interim closing of
the books method. Solely for purposes of making such allocations, each of
such items for the calendar month in which the transfer or assignment
occurs shall be allocated to the transferee Partner, and none of such items
for the calendar month in which a redemption occurs shall be allocated to
the Redeeming Partner. All distributions of Available Cash attributable to
such Partnership Unit with respect to which the Partnership Record Date is
before the date of such transfer, assignment, or redemption shall be made
to the transferor Partner or the Redeeming Partner, as the case may be, and
in the case of a transfer or assignment other than a redemption, all
distributions of Available Cash thereafter attributable to such Partnership
Unit shall be made to the transferee Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to Section
11.2 hereof who is proposed to be admitted as a successor General Partner
shall be admitted to the Partnership as the General Partner, effective upon
such transfer. Any such transferee shall carry on the business of the
Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to
effect the admission. In the case of such admission on any day other than
the first day of a Partnership Year, all items attributable to the General
Partner Interest for such Partnership year shall be allocated between the
transferring General Partner and such successor as provided in Section
11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
A. After the admission to the Partnership of the initial Limited
Partner on the date hereof, a Person who makes a Capital Contribution to
the Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the
General Partner (i) evidence of acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Section 2.4
hereof and (ii) such other documents or instruments as may be required in
the discretion of the General Partner in order to effect such Person's
admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in
<PAGE>
the General Partner's sole and absolute discretion. The admission of any
Person as an Additional Limited Partner shall become effective on the date
upon which the name of such Person is recorded on the books and records of
the Partnership, following the consent of the General Partner to such
admission.
C. If any Additional Limited Partner is admitted to the Partnership
on any day other than the first day of a Partnership Year, then Net Income,
Net Losses, each item thereof and all other items allocable among Partners
and Assignees for such Partnership Year shall be allocated among such
Additional Limited Partner and all other Partners and Assignees by taking
into account their varying interests during the Partnership Year in
accordance with Section 706(d) of the Code, using the interim closing of
the books method. Solely for purposes of making such allocations, each of
such item for the calendar month in which an admission of any Additional
Limited Partner occurs shall be allocated among all the Partners and
Assigns including such Additional Limited Partner. All distributions of
Available Cash with respect to which the Partnership Record Date is before
the date of such admission shall be made solely to Partners and Assignees
other than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and
Assignees including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to
amend the records of the Partnership and, if necessary, to prepare as soon
as practical an amendment of this Agreement (including an amendment of
Exhibit A) and, if required by law, shall prepare and file an amendment to
the Certificate and may for this purpose exercise the power of attorney
granted pursuant to Section 2.4 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
Except as set forth in this Article 13, no Partner shall have the
right to dissolve the Partnership. The Partnership shall not be dissolved
by the admission of Substituted Limited Partners or Additional Limited
Partners or by the admission of a successor General Partner in accordance
with the terms of this Agreement. Upon the withdrawal of the General
Partner, any successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and its affairs shall be
wound up, upon the first to occur of any of the following ("Liquidating
Events"):
A. the expiration of its terms as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless, within ninety (90) days
after such event of withdrawal a majority in interest of the remaining
Partners agree in writing to continue the business of the Partnership and
to the appointment, effective as of the date of withdrawal, of a successor
General Partner;
<PAGE>
C. from and after the date of this Agreement through December 31,
2053, an election to dissolve the Partnership made by the General Partner
with the Consent of Partners holding 75% or more of the Percentage
Interests of the Limited Partners (including Limited Partner Interests
held, directly or indirectly, by the General Partner and Sovran Self
Storage, Inc.);
D. on or after January 1, 2054, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute
discretion;
E. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
F. the sale of all or substantially all of the assets and properties
of the Partnership; or
G. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect, unless prior to the entry of such order or judgment
all of the remaining Partners agree in writing to continue the business of
the Partnership and to the appointment, effective as of a date prior to the
date of such order or judgment, of a substitute General Partner.
Section 13.2 Winding Up
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors
and Partners. No Partner shall take any action that is inconsistent with,
or not necessary to or appropriate for, the winding up of the Partnership's
business and affairs. The General Partner or, in the event there is no
remaining General Partner, any Person elected by a majority in interest of
the Limited Partners (the General Partner or such other Person being
referred to herein as the "Liquidator"), shall be responsible for
overseeing the winding up and dissolution of the Partnership and shall take
full account of the Partnership's liabilities and property and the
Partnership property shall be liquidated as promptly as is consistent with
obtaining the fair value thereof, and the proceeds therefrom (which may, to
the extent determined by the General Partner, include shares of stock in
the General Partner) shall be applied and distributed in the following
order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than
the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General Partner
and Sovran Self Storage, Inc.;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the other Partners;
and
<PAGE>
(4) The balance, if any, to the General Partner and Limited
Partners in accordance with their Capital Accounts, after
giving effect to all contributions, distributions, and
allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof which
require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of
the Partnership the Liquidator determines that an immediate sale of part or
all of the Partnership's assets would be impractical or would cause undue
loss to the Partners, the Liquidator may, in its sole and absolute
discretion, defer for a reasonable time the liquidation of any assets
except those necessary to satisfy liabilities of the Partnership (including
to those Partners as creditors) and/or distribute to the Partners, in lieu
of cash, as tenants in common and in accordance with the provisions of
Section 13.2.A hereof, undivided interests in such Partnership assets as
the Liquidator deems not suitable for liquidation. Any such distributions
in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator deems
reasonable and equitable and to any agreements governing the operation of
such properties at such time. The Liquidator shall determine the fair
market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and
Limited Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to
the Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or the General
Partner arising out of or in connection with the
Partnership. The assets of any such trust shall be
distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise
have been distributed to the General Partner and Limited
Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to
reflect the unrealized portion of any installment
obligations owed to the Partnership, provided that such
withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order
of priority set forth in Section 13.2.A as soon as
practicable.
<PAGE>
Section 13.3 Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the General Partner and Limited Partners who
have positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in his
Capital Account (after giving effect to all contributions, distributions
and allocations for all taxable years, including the year during which such
liquidation occurs), such Partner shall have no obligation to make any
contribution to the capital of the Partnership with respect to such
deficit, and such deficit shall not be considered a debt owed to the
Partnership or to any other Person for any purpose whatsoever.
Section 13.4 Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13, in the event
the Partnership is considered liquidated within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the
Partnership's property shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the Partnership's affairs
shall not be wound up. Instead, for federal income tax purposes and for
purposes of maintaining Capital Accounts pursuant to Exhibit B hereto, the
Partnership shall be deemed to have distributed the property in kind to the
General Partner and Limited Partners, who shall be deemed to have assumed
and taken such property subject to all Partnership liabilities, all in
accordance with their respective Capital Accounts. Immediately thereafter,
the General Partner and Limited Partners shall be deemed to have
recontributed the Partnership property in kind to the Partnership, which
shall be deemed to have assumed and taken such property subject to all such
liabilities.
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of its
Capital Contributions and shall have no right or power to demand or receive
property other than cash from the Partnership. Except as otherwise
provided in this Agreement, no Limited Partner shall have priority over any
other Partner as to the return of its Capital Contributions, distributions,
or allocations.
Section 13.6 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs that would,
but for the provisions of an election or objection by one or more Partners
pursuant to Section 13.1, result in a dissolution of the Partnership, the
General Partner shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Partners.
Section 13.7 Termination of Partnership and Cancellation of
Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 hereof, the Partnership shall be
terminated, a certificate of cancellation shall be filed, and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such
<PAGE>
other actions as may be necessary to terminate the Partnership shall be
taken.
Section 13.8 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.9 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership
property.
Section 13.10 Liability of the Liquidator
The Liquidator shall be indemnified and held harmless by the
Partnership from and against any and all claims, demands, liabilities,
costs, damages and causes of action of any nature whatsoever arising out of
or incidental to the Liquidator's taking of any action authorized under or
within the scope of this Agreement; provided, however, that the Liquidator
shall not be entitled to indemnification, and shall not be held harmless,
where the claim, demand, liability, cost, damage or cause of action at
issue arises out of:
(i) a matter entirely unrelated to the Liquidator's action or conduct
pursuant to the provisions of this Agreement; or
(ii) the proven willful misconduct or gross negligence of the
Liquidator.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. Amendments to this Agreement may be proposed by the General
Partner or by any Limited Partners holding twenty percent (20%) or more of
the Partnership Interests. Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners. The General
Partner shall seek the written vote of the Partners on the proposed
amendment or shall call a meeting to vote thereon and to transact any other
business that it may deem appropriate. For purposes of obtaining a written
vote, the General Partner may require a response within a reasonable
specified time, but not less than fifteen (15) days, and failure to respond
in such time period shall constitute a vote which is consistent with the
General Partner's recommendation with respect to the proposal. Except as
provided in Section 7.3.A, 7.3.B, 13.1.C, 14.1.B, 14.1.C or 14.1.D, a
proposed amendment shall be adopted and be effective as an amendment hereto
if it is approved by the General Partner and it receives the Consent of
Partners holding a majority of the Percentage Interests of the Limited
Partners (including Limited Partner Interests held, directly or indirectly,
by the General Partner and Sovran Self Storage, Inc.).
<PAGE>
B. Notwithstanding Section 14.1.A, the General Partner shall have
the power, without the consent of the Limited Partners, to amend this
Agreement as may be required to facilitate or implement any of the
following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner
or any Affiliate of the General Partner for the benefit of
the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.2.A hereof;
(4) to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not inconsistent
with law or with other provisions, or make other changes
with respect to matters arising under this Agreement that
will not be inconsistent with law or with the provisions of
this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in
federal or state law.
The General Partner shall provide notice to the Limited Partners when any
action under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement
shall not be amended without the Consent of each Partner adversely affected
if such amendment would (i) convert a Limited Partner's interest in the
Partnership into a general partner interest, (ii) modify the limited
liability of a Limited Partner in a manner adverse to such Limited Partner,
(iii) alter rights of the Partner to receive distributions pursuant to
Article 5 or Article 13, or the allocations specified in Article 6 (except
as permitted pursuant to Section 4.2 and Section 14.1.B(3) hereof), (iv)
alter or modify the Redemption Right and REIT Shares Amount as set forth in
Sections 8.6 and 11.2.B, and the related definitions, in a manner adverse
to such Partner, (v) cause the termination of the Partnership prior to the
time set forth in Sections 2.5 or 13.1, or (vi) amend this Section 14.1.C.
Further, no amendment may alter the restrictions on the General Partner's
authority set forth in Section 7.3 without the Consent specified in that
section.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the
General Partner shall not amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2
without the Consent of 75% of the Percentage Interests of the Limited
Partners excluding Limited Partners Interests held by the General Partner.
<PAGE>
Section 14.2 Meetings of the Partners
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written
request by Limited Partners holding twenty percent (20%) or more of the
Partnership Interests. The call shall state the nature of the business to
be transacted. Notice of any such meeting shall be given to all Partners
not less than seven (7) days nor more than thirty (30) days prior to the
date of such meeting. Partners may vote in person or by proxy at such
meeting. Whenever the vote or Consent of the Partners is permitted or
required under this Agreement, such vote or Consent may be given at a
meeting of the Partners or may be given in accordance with the procedure
prescribed in Section 14.1.A hereof. Except as otherwise expressly
provided in this Agreement, the Consent of holders of a majority of the
Percentage Interests held by Limited Partners (including Limited
Partnership Interests held, directly or indirectly, by the General Partner
or Sovran Self Storage, Inc.) shall control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth
the action so taken is signed by 75% of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this
Agreement). Such consent may be in one instrument or in several
instruments, and shall have the same force and effect as a vote of 75% of
the Percentage Interests of the Partners (or such other percentage as is
expressly required by this Agreement). Such consent shall be filed with
the General Partner. An action so taken shall be deemed to have been taken
at a meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act
for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited
Partner or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of
the Limited Partner executing it, such revocation to be effective upon the
Partnership's receipt of written notice of such revocation from the Limited
Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to
such rules for the conduct of the meeting as the General Partner or such
other Person deems appropriate. Without limitation, meetings of Partners
may be conducted in the same manner as meetings of the shareholders of
Sovran Self Storage, Inc. and may be held at the same time, and as part of,
meetings of the shareholders of Sovran Self Storage, Inc.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to be
given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when
<PAGE>
sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address set forth in
Exhibit A or such other address of which the Partner shall notify the
General Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in
no way define, limit, extend or describe the scope or intent of any
provisions hereof. Except as specifically provided otherwise, references
to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
Section 15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.
Section 15.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors,
legal representatives and permitted assigns.
Section 15.6 Creditors
Other than as expressly set forth herein with respect to the
Indemnitees, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original
or the same counterpart. Each party shall become bound by this Agreement
immediately upon affixing its signature hereto.
<PAGE>
Section 15.9 Applicable Law
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
Section 15.10 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected thereby.
Section 15.11 Entire Agreement
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes the
Prior Agreement and any other prior written or oral understandings or
agreements among them with respect thereto.
Section 15.12 No Rights as Shareholders
Nothing contained in this Agreement shall be construed as conferring
upon the holders of the Partnership Units any rights whatsoever as
shareholders of the General Partner or of Sovran Self Storage, Inc.,
including without limitation, any right to receive dividends or other
distributions made to shareholders of the General Partner or of Sovran Self
Storage, Inc., or to vote or to consent or to receive notice as
shareholders in respect of any meeting of shareholders for the election of
directors of the General Partner or of Sovran Self Storage, Inc., or any
other matter.
Section 15.13 Guaranty of Sovran Self Storage, Inc.
Sovran Self Storage, Inc. unconditionally and irrevocably guarantees
to the Limited Partners the performance by the General Partner of the
General Partner's obligations under this Agreement. This guarantee is
exclusively for the benefit of the Limited Partners and shall not extend to
the benefit of any creditor of the Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
General Partner:
SOVRAN HOLDINGS, INC.
By /S/ Kenneth F. Myszka
-----------------------------
Kenneth F. Myszka, President
Limited Partner:
SOVRAN SELF STORAGE, INC.
By /S/ Kenneth F. Myszka
-----------------------------
Kenneth F. Myszka, President
<PAGE>
EXHIBIT A
Number of Percentage
Partners' Names Capital Partnership Interest in
and Addresses Contribution(s) Units the Partnership
1. General Partner:
Sovran Holdings, Inc. __________ 67,921.71 1%
5166 Main Street
Williamsville, NY 14221
2. Limited Partner(s):
Sovran Self Storage, Inc. __________ 6,724,249.29 99%
5166 Main Street
Williamsville, NY 14221
3. Additional Limited Partners:
<PAGE>
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate
Capital Account in accordance with the rules of Regulations Section 1.704-
1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions and any other deemed contributions made by such
Partner to the Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax)
computed in accordance with Section 1.B hereof and allocated to such
Partner pursuant to Section 6.1.A of the Agreement and Exhibit C hereof,
and decreased by (x) the amount of cash or Agreed Value of all actual and
deemed distributions of cash or property made to such Partner pursuant to
this Agreement and (y) all items of Partnership deduction and loss computed
in accordance with Section 1.B hereof and allocated to such Partner
pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined
in accordance with Section 703(a) of the Code (for this purpose all items
of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable
income or loss), with the following adjustments:
(1) Except as otherwise provided in Regulations Section 1.704-
1(b)(2)(iv)(m), the computation of all items of income,
gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by
the Partnership, provided that the amounts of any
adjustments to the adjusted bases of the assets of the
Partnership made pursuant to Section 734 of the Code as a
result of the distribution of property by the Partnership to
a Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital Accounts)
shall be reflected in the Capital Accounts of the Partners
in the manner and subject to the limitations prescribed in
Regulations Section 1.704-1(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and deduction
shall be made without regard to the fact that items
described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the
Code are not includable in gross income or are neither
currently deductible nor capitalized for federal income tax
purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined
as if the adjusted basis of such property as of such date of
disposition were equal in amount to the Partnership's
Carrying Value with respect to such property as of such
date.
<PAGE>
(4) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any
such adjustment shall be taken into account as gain or loss
from the disposition of such asset.
(6) Any items specifically allocated under Section 2 of
Exhibit C hereof shall not be taken into account.
C. Generally, a transferee (including an Assignee) of a Partnership
Unit shall succeed to a pro rata portion of the Capital Account of the
transferor; provided, however, that, if the transfer causes a termination
of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties shall be deemed solely for federal income tax
purposes, to have been distributed in liquidation of the Partnership to the
holders of Partnership Units (including such transferee) and recontributed
by such Persons in reconstitution of the Partnership. In such event, the
Carrying Values of the Partnership properties shall be adjusted immediately
prior to such deemed distribution pursuant to Section 1.D(2) hereof. The
Capital Accounts of such reconstituted Partnership shall be maintained in
accordance with the principles of this Exhibit B.
D. (1) Consistent with the provisions of Regulations Section 1.704-
1(b)(2)(iv)(f), and as provided in Section 1.D(2), the
Carrying Value of all Partnership assets shall be adjusted
upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property,
as of the times of the adjustments provided in Section
1.D(2) hereof, as if such Unrealized Gain or Unrealized Loss
had been recognized on an actual sale of each such property
and allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times:
(a) immediately prior to the acquisition of an additional
interest in the Partnership by any new or existing Partner
in exchange for more than a de minimis Capital Contribution;
(b) immediately prior to the distribution by the Partnership
to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c)
immediately prior to the liquidation of the Partnership
within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g), provided, however, that adjustments pursuant
to clauses (a) and (b) above shall be made only if the
General Partner determines that such adjustments are
necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e),
the Carrying Value of Partnership assets distributed in kind
shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as of the time any such asset is
distributed.
<PAGE>
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount and
fair market value of all Partnership assets (including cash
or cash equivalents) shall be determined by the General
Partner using such reasonable method of valuation as it may
adopt, or in the case of a liquidating distribution pursuant
to Article 13 of the Agreement, shall be determined and
allocated by the Liquidator using such reasonable methods of
valuation as it may adopt. The General Partner, or the
Liquidator, as the case may be, shall allocate such
aggregate value among the assets of the Partnership (in such
manner as it determines in its sole and absolute discretion
to arrive at a fair market value for individual properties).
E. The provisions of this Agreement (including this Exhibit B and
other Exhibits to this Agreement) relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b), and
shall be interpreted and applied in a manner consistent with such
Regulations. In the event the General Partner shall determine that it is
prudent to modify (i) the manner in which the Capital Accounts, or any
debits or credits thereto (including, without limitation, debits or credits
relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Partnership, the General Partner, or
the Limited Partners) are computed or (ii) the manner in which items are
allocated among the Partners for federal income tax purposes in order to
comply with such Regulations or to comply with Section 704(c) of the Code,
the General Partner may make such modification without regard to Article 14
of the Agreement, provided that it is not likely to have a material effect
on the amounts distributable to any Person pursuant to Article 13 of the
Agreement upon the dissolution of the Partnership. The General Partner
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the partners and the
amount of Partnership capital reflected on the Partnership's balance sheet,
as computed for book purposes, in accordance with Regulations
Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications
in the event unanticipated events might otherwise cause this Agreement not
to comply with Regulations Section 1.704-1(b). In addition, the General
Partner may adopt and employ such methods and procedures for (i) the
maintenance of book and tax capital accounts, (ii) the determination and
allocation of adjustments under Sections 704(c), 734 and 743 of the Code,
(iii) the determination of Net Income, Net Loss, taxable income, taxable
loss and items thereof under this Agreement and pursuant to the Code,
(iv) the adoption of reasonable conventions and methods for the valuation
of assets and the determination of tax basis, (v) the allocation of asset
value and tax basis, and (vi) conventions for the determination of cost
recovery, depreciation and amortization deductions, as it determines in its
sole discretion are necessary or appropriate to execute the provisions of
this Agreement and to comply with federal and state tax laws.
2. No Interest
No interest shall be paid by the Partnership on Capital Contributions
or on balances in Partners' Capital Accounts.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
<PAGE>
Partnership, except as provided in Articles 4, 5, 7 and 13 of the
Agreement.
<PAGE>
EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules
Notwithstanding any other provision of the Agreement or this
Exhibit C, the following special allocations shall be made in the following
order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if
there is a net decrease in Partnership Minimum Gain during any Partnership
taxable year, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, as determined under Regulations Section 1.704-
2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined
in accordance with Regulations Section 1.704-2(f)(6). This Section 1.A is
intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.A, each Partner's
Adjusted Capital Account Deficit shall be determined prior to any other
allocations pursuant to Section 6.1 of Partner Minimum Gain during such
Partnership taxable year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
Partnership taxable year, each Partner who has a share of the Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of
the net decrease in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section 1.704-
2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined
in accordance with Regulations Section 1.704-2(i)(4). This Section 1.B is
intended to comply with the minimum gain chargeback requirement in such
Section of the Regulations and shall be interpreted consistently therewith.
Solely for purposes of the Section 1.B, each Partner's Adjusted Capital
Account Deficit shall be determined prior to any other allocations pursuant
to Section 6.1 of the Agreement or this Exhibit with respect to such
Partnership taxable year, other than allocations pursuant to Section 1.A
hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations
required under Sections 1.A and 1.B hereof, such Partner has an Adjusted
Capital Account Deficit, items of Partnership income and gain (consisting
<PAGE>
of a pro rata portion of each item of Partnership income, including gross
income and gain for the Partnership taxable year) shall be specifically
allocated to such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, its Adjusted Capital Account
Deficit created by such adjustments, allocations or distributions as
quickly as possible. This Section 1.C is intended to constitute a
"qualified income offset" under Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
D. Nonrecourse Deductions. Nonrecourse Deductions for any
Partnership taxable year shall be allocated to the Partners in accordance
with their respective Percentage Interests. If the General Partner
determines in its good faith discretion that the Partnership's Nonrecourse
Deductions must be allocated in a different ratio to satisfy the safe
harbor requirements of the Regulations promulgated under Section 704(b) of
the Code, the General Partner is authorized, upon notice to the Limited
Partners, to revise the prescribed ratio to the numerically closest ratio
for such Partnership taxable year which would satisfy such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Partnership taxable year shall be specially allocated to
the Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as
an item of gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases such basis), and such item of gain or
loss shall be specially allocated to the Partners in a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
pursuant to such Section of the Regulations.
G. Curative Allocations. The allocations set forth in Section 1.A
through F of this Exhibit C (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations under Section 704(b) of
the Code. The Regulatory Allocations may not be consistent with the manner
in which the Partners intend to divide Partnership distributions.
Accordingly, the General Partner is hereby authorized to divide other
allocations of income, gain, deduction and loss among the Partners so as to
prevent the Regulatory Allocations from distorting the manner in which
Partnership distributions will be divided among the Partners. In general,
the Partners anticipate that this will be accomplished by specially
allocating other items of income, gain, loss and deduction among the
Partners so that the net amount of the Regulatory Allocations and such
special allocations to each person is zero. However, the General Partner
will have discretion to accomplish this result in any reasonable manner;
provided, however, that no allocation pursuant to this Section 1.G shall
cause the Partnership to fail to comply with the requirements of
Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e) or -2(i).
<PAGE>
2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the
Partners as follows:
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the
Partners consistent with the principles of Section
704(c) of the Code and the Regulations thereunder to
take into account the variation between the 704(c)
Value of such property and its adjusted basis at the
time of contribution; and
(b) any item of Residual Gain or Residual Loss attributable
to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of
"book" gain or loss is allocated pursuant to Section
6.1 of the Agreement and Section 1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the
Code and the Regulations thereunder to take into
account the Unrealized Gain or Unrealized Loss
attributable to such property and the allocations
thereof pursuant to Exhibit B, and
(2) second, in the event such property was originally
a Contributed Property, be allocated among the Partners
in a manner consistent with Section 2.B(1) of this
Exhibit C; and
(b) any item of Residual Gain or Residual Loss attributable
to an Adjusted Property shall be allocated among the
Partners in the same manner its correlative item of
"book" gain or loss is allocated pursuant to Section
6.1 of the Agreement and Section 1 of this Exhibit C.
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners the same manner as their
correlative item of "book" gain or loss is allocated
pursuant to Section 6.1 of the Agreement and Section 1 of
this Exhibit C.
C. To the extent that the Treasury Regulations promulgated pursuant
to Section 704(c) of the Code permit the Partnership to utilize alternative
methods to eliminate the disparities between the Carrying Value of property
and its adjusted basis, the General Partner shall have the authority to
<PAGE>
elect the method to be used by the Partnership and such election shall be
binding on all Partners. It is anticipated that the General Partner will
elect the "traditional method" under Section 704(c) of the Code with
respect to property contributed as of the date hereof.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the
Agreement.
<PAGE>
EXHIBIT D
VALUE OF CONTRIBUTED PROPERTY
Underlying Property 704(c) Value Agreed Value
[Intentionally Left Blank]
<PAGE>
EXHIBIT E
NOTICE OF REDEMPTION
The undersigned Limited Partner hereby irrevocably (i) redeems
__________ Limited Partnership Units in Sovran Acquisition Limited
Partnership in accordance with the terms of the Agreement of Limited
Partnership of Sovran Acquisition Limited Partnership and the Redemption
Right referred to therein, (ii) surrenders such Limited Partnership Units
and all right, title and interest therein, and (iii) directs that the Cash
Amount or REIT Shares Amount (as determined by the General Partner)
deliverable upon exercise of the Redemption Right be delivered to the
address specified below, and if REIT Shares are to be delivered, such REIT
Shares be registered or placed in the name(s) and at the address(es)
specified below. The undersigned hereby, represents, warrants, and
certifies that the undersigned (a) has marketable and unencumbered title to
such Limited Partnership Units, free and clear of the rights or interests
of any other person or entity, (b) has the full right, power, and authority
to redeem and surrender such Limited Partnership Units as provided herein,
and (c) has obtained the consent or approval of all person or entities, if
any, having the right to consent or approve such redemption and surrender.
Dated:_________________________
Name of Limited Partner:____________________________________
Please Print
____________________________________
(Signature of Limited Partner)
____________________________________
(Street Address)
____________________________________
(City) (State)
(Zip Code)
Signature Guaranteed by:
____________________________________
If REIT Shares are to be issued, issue to:
Name:_________________________________
Please insert social security or identifying number:__________________
<PAGE>
Amendment to
AGREEMENT OF LIMITED PARTNERSHIP
OF
SOVRAN ACQUISITION OF LIMITED PARTNERSHIP
THIS AMENDMENT OF THE LIMITED PARTNERSHIP AGREEMENT OF
SOVRAN ACQUISITION LIMITED PARTNERSHIP ("Amendment"), dated as of
June 1, 1995, is entered into by and among SOVRAN HOLDINGS, INC.
(the "General Partner"), a Delaware corporation, as the General
Partner and SOVRAN SELF STORAGE, INC., a Maryland corporation, as
limited partner ("Limited Partner").
WHEREAS, the General Partner and the Limited Partner
desire to amend the Agreement of Limited Partnership of Sovran
Acquisition Limited Partnership to provide for the admission of
Additional Limited Partners;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, and other valuable consideration, the receipt
of which is hereby acknowledged, the parties hereto do hereby
agree as follows:
Exhibit A of the Partnership Agreement is amended to
read as set forth on the attachment hereto, effective February 4,
1998.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the 6th day of April, 1998.
General Partner:
SOVRAN HOLDINGS, INC.
By /S/ David L. Rogers
David L. Rogers, Chief Financial Officer
Limited Partner:
SOVRAN SELF STORAGE, INC.
By /S/ David L. Rogers
David L. Rogers, Chief Financial Officer
<PAGE>
EXHIBIT A
Number of
Partnership Percentage Interest
Partners' Names and Addresses Units in the Partnership
1. General Partner:
Sovran Holdings, Inc. 219,566.71 1.7188%
5166 Main Street
Williamsville, NY 14221
2. Limited Partner(s):
Sovran Self Storage, Inc. 12,111,395.25 94.8086
5166 Main Street
Williamsville, NY 14221
3. Thomas S. Hinkel 6327.8 0.0495
942 Creek Drive
Annapolis, MD 21403
4. Hinkel Investment Limited
Partnership 12,459.37 0.0975
942 Creek Drive
Annapolis, MD 21403
5. Harold Samloff 60,571.425 0.4742
400 University Avenue
Rochester, NY 14607
6. Laurence C. Glazer 60,571.425 0.4742
400 University Avenue
Rochester, NY 14607
7. Montague-Betts Company 214,974.5 1.6828
P.O. Box 11929
Lynchburg, VA 24506
8. D,W.B. Associates 28,953.02 0.2266
P.O. Box 11929
Lynchburg, VA 24506
9. D. Joseph Snyder & Beverly 19,917.01 0.1559
B. Snyder
as tenants in common
5700 Sloop Court
New Bern, NC 28560
10. Frank M. Bingman 19,917.01 0.1559
565 Brentwater Road
Camp Hill, PA 17011
11. Morgan S. Whiteley 9,958.50 0.0780
11714 Amkin Drive
Clifton, VA 22024
<PAGE>
12. Marlene Whiteley 9,958.50 0.0780
11714 Amkin Drive
Clifton, VA 22024
<PAGE>
Exhibit 10.1
REVOLVING CREDIT AGREEMENT
among
SOVRAN SELF STORAGE, INC. AND
SOVRAN ACQUISITION LIMITED PARTNERSHIP
and
FLEET NATIONAL BANK
and
OTHER LENDERS WHICH MAY BECOME
PARTIES TO THIS AGREEMENT
and
FLEET NATIONAL BANK,
AS ADMINISTRATIVE AGENT
with
FLEET NATIONAL BANK,
AS LOAN ARRANGER
FIRST UNION NATIONAL BANK,
AS SYNDICATION AGENT
CREDITANSTALT CORPORATE FINANCE, INC.,
AS DOCUMENTATION AGENT
Dated as of February 20, 1998
<PAGE>
TABLE OF CONTENTS
Section Page
1. DEFINITIONS AND RULES OF INTERPRETATION
1.1. Definitions
1.2. Rules of Interpretation
2. THE REVOLVING CREDIT FACILITY
2.1. Commitment to Lend
2.2. [Intentionally Omitted]
2.3. The Revolving Credit Notes
2.4. Interest on Revolving Credit Loans; Fees
2.5. Requests for Revolving Credit Loans
2.6. Conversion Options
2.7. Funds for Revolving Credit Loans
2.8. Repayment of the Revolving Credit Loans at
Maturity
2.9. Optional Repayments of Revolving Credit
Loans
2.10. Mandatory Repayments of Revolving
Credit Loans
3. INTENTIONALLY OMITTED
4. CERTAIN GENERAL PROVISIONS
4.1. Funds for Payments
4.2. Computations
4.3. Inability to Determine LIBOR Rate
4.4. Illegality
4.5. Additional Costs, Etc.
4.6. Capital Adequacy
4.7. Certificate
4.8. Indemnity
4.9. Interest on Overdue Amounts
4.10. Concerning Joint and Several Liability of the
Borrowers
4.11. Interest Limitation
4.12. Reasonable Efforts to Mitigate
4.13. Replacement of Lenders
5. GUARANTIES
6. REPRESENTATIONS AND WARRANTIES
6.1. Authority; Etc
6.2. Governmental Approvals
6.3. Title to Properties; Leases
6.4. Financial Statements
6.5. Fiscal Year
6.6. Franchises, Patents, Copyrights, Etc.
6.7. Litigation
6.8. No Materially Adverse Contracts, Etc.
<PAGE>
6.9. Compliance With Other Instruments, Laws, Etc.
6.10. Tax Status
6.11. No Event of Default
6.12. Investment Company Acts
6.13. Absence of UCC Financing Statements, Etc.
6.14. Absence of Liens
6.15. Certain Transactions
6.16. Employee Benefit Plans
6.17. Regulations U and X
6.18. Environmental Compliance
6.19. Subsidiaries
6.20. Loan Documents
6.21. REIT Status
6.22. Subsequent Guarantors
6.23. Trading Status
6.24. Title Policies
7. AFFIRMATIVE COVENANTS OF THE BORROWERS AND THE
GUARANTORS
7.1. Punctual Payment
7.2. Maintenance of Office
7.3. Records and Accounts
7.4. Financial Statements, Certificates and
Information
7.5. Notices
7.6. Existence of SALP, Holdings and Subsidiary
Guarantors; Maintenance of Properties
7.7. Existence of Sovran; Maintenance of REIT Status
of Sovran; Maintenance of Properties
7.8. Insurance
7.9. Taxes
7.10. Inspection of Properties and Book
7.11. Compliance with Laws, Contracts, Licenses,
and Permit
7.12. Use of Proceeds
7.13. Acquisition of Unencumbered Properties
7.14. Additional Guarantors; Solvency of Guarantors
7.15. Further Assurances
7.16. Form of Lease
7.17. Environmental Indemnification
7.18. Response Actions
7.19. Environmental Assessments
7.20. Employee Benefit Plans
7.21. No Amendments to Certain Documents
7.22. Exclusive Credit Facility
7.23. Management
8. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS
AND THE GUARANTORS
8.1. Restrictions on Indebtedness
8.2. Restrictions on Liens, Etc
8.3. Restrictions on Investments
8.4. Merger, Consolidation and Disposition of Assets
8.5. Sale and Leaseback
8.6. Compliance with Environmental Laws
<PAGE>
8.7. Distributions
8.8. Employee Benefit Plans
8.9. Fiscal Year
8.10. Amsdell Litigation
8.11. Negative Pledge
9. FINANCIAL COVENANTS OF THE BORROWERS
9.1. Leverage Ratio
9.2. Secured Indebtedness
9.3. Tangible Net Worth
9.4. Debt Service Coverage
9.5. Unimproved Land
9.6. Construction-in-Process
9.7. Mortgage Notes
9.8. Unimproved Land, Construction-in-Process
and Notes
9.9. Joint Venture Ownership Interest
9.10. Unhedged Variable Rate Debt
9.11. Unsecured Indebtedness
9.12. Unencumbered Property Debt Service Coverage
9.13. Covenant Calculations
10. CONDITIONS TO THE CLOSING DATE
10.1. Loan Documents
10.2. Certified Copies of Organization Documents
10.3. By-laws; Resolutions
10.4. Incumbency Certificate; Authorized Signers
10.5. Title Policies
10.6. Certificates of Insurance
10.7. Environmental Site Assessments
10.8. Opinion of Counsel Concerning Organization
and Loan Documents
10.9. Tax and Securities Law Compliance
10.10. Guaranties
10.11. Certifications from Government Officials;
UCC-11 Reports
10.12. Proceedings and Documents
10.13. Fees
10.14. Closing Certificate; Compliance Certificate
10.15. Existing Indebtedness
10.16. Subsequent Guarantors
11. CONDITIONS TO ALL BORROWINGS
11.1 Representations True; No Event of Default;
Compliance Certificate
11.2 No Legal Impediment
11.3 Governmental Regulation
12. EVENTS OF DEFAULT; ACCELERATION; ETC.
12.1. Events of Default and Acceleration
12.2. Termination of Commitments
12.3. Remedies
13. SETOFF
<PAGE>
14. THE AGENT
14.1. Authorization
14.2. Employees and Agents
14.3. No Liability
14.4. No Representations
14.5. Payments
14.6. Holders of Revolving Credit Notes
14.7. Indemnity
14.8. Agent as Lender
14.9. Notification of Defaults and Events of Default
14.10. Duties in the Case of Enforcement
14.11. Successor Agent
14.12. Notices
15. EXPENSES
16. INDEMNIFICATION
17. SURVIVAL OF COVENANTS, ETC.
18. ASSIGNMENT; PARTICIPATIONS; ETC.
18.1. Conditions to Assignments by Lenders
18.2. Certain Representations and Warranties;
Limitations; Covenants
18.3. Register
18.4. New Revolving Credit Notes
18.5. Participations
18.6. Pledge by Lender
18.7. No Assignment by Borrowers
18.8 Disclosure
18.9. Syndication
19. NOTICES, ETC.
20. GOVERNING LAW; CONSENT TO JURISDICTION
AND SERVICE
21. HEADINGS
22. COUNTERPARTS
23. ENTIRE AGREEMENT, ETC.
24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS
25. CONSENTS, AMENDMENTS, WAIVERS, ETC.
26. SEVERABILITY
<PAGE>
EXHIBITS
A Form of Revolving Credit Note
B Form of Subsidiary Guaranty
C Form of Revolving Credit Loan Request
D Form of Compliance Certificate
E [Intentionally Omitted]
F Form of Assignment and Assumption Agreement
G Form of Conversion Notice
<PAGE>
Schedules to Revolving Credit Agreement
SCHEDULE 1.2 Lenders' Commitments
SCHEDULE 6.1(b) Capitalization; Outstanding Securities, Etc.
SCHEDULE 6.3 Partially Owned Real Estate Holding Entities
SCHEDULE 6.7 Litigation
SCHEDULE 6.15 Certain Transactions
SCHEDULE 6.18 Environmental Matters
SCHEDULE 6.19 Subsidiaries
SCHEDULE 6.24 Changes to Title Policies
SCHEDULE 7.16 Form of Lease
SCHEDULE 8.3(d) Existing Investments
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of the 20th day
of February, 1998, by and among SOVRAN SELF STORAGE, INC., a
Maryland corporation ("Sovran") and SOVRAN ACQUISITION LIMITED
PARTNERSHIP, a Delaware limited partnership ("SALP", and together
with Sovran, collectively referred to herein as the "Borrowers"
and individually as a "Borrower"), each with a principal place of
business at 5166 Main Street, Williamsville, New York 14221,
FLEET NATIONAL BANK ("Fleet"), a national banking association
having its principal place of business at 111 Westminster Street,
Providence, Rhode Island 02903, and the other lending
institutions listed on Schedule 1.2 hereto or which may become
parties hereto pursuant to Section 18 (individually, a "Lender"
and collectively, the "Lenders") and FLEET NATIONAL BANK, as
agent for itself and each other Lender.
RECITALS
A. The Borrowers are primarily engaged in the business of
owning, purchasing, developing, constructing, renovating and
operating self storage facilities in the United States primarily
known as "Uncle BoB's Self Storage".
B. Sovran is a limited partner of SALP, holds in excess of
96% of the partnership interests in SALP, conducts all or
substantially all of its business through SALP, and is qualified
to elect REIT status for income tax purposes. Sovran Holdings
Inc., a Delaware corporation ("Holdings"), is a wholly-owned
Subsidiary of Sovran and the sole general partner of SALP and has
agreed to guaranty the obligations of the Borrowers hereunder.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
Section 1. DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1. Definitions. The following terms shall have
the meanings set forth in this Section 1 or elsewhere in the
provisions of this Agreement referred to below:
Accountants. In each case, nationally-recognized,
independent certified public accountants reasonably acceptable to
the Agent. The Agent hereby acknowledges that the Accountants
may include Ernst & Young, LLP.
Adjusted Unencumbered Property NOI. With respect to any
fiscal period for any Unencumbered Property, the net income of
such Unencumbered Property during such period, as determined in
accordance with GAAP, before deduction of (a) gains (or losses)
from debt restructurings or other extraordinary items relating to
such Unencumbered Property, and (b) income taxes; plus (x)
interest expense relating to such Unencumbered Property and (y)
depreciation and amortization relating to such Unencumbered
Property; minus a recurring capital expense reserve equal to ten
cents ($0.10) per net rentable square foot multiplied by the
total net rentable square feet of such Unencumbered Property.
<PAGE>
Administration Fee. See Section 2.4(f).
Affiliate. With reference to any Person, (i) any director
or executive officer of that Person, (ii) any other Person
controlling, controlled by or under direct or indirect common
control of that Person, (iii) any other Person directly or
indirectly holding 10% or more of any class of the capital stock
or other equity interests (including options, warrants,
convertible securities and similar rights) of that Person and
(iv) any other Person 10% or more of any class of whose capital
stock or other equity interests (including options, warrants,
convertible securities and similar rights) is held directly or
indirectly by that Person.
Agent. Fleet National Bank acting as agent for the Lenders,
or any successor agent, as permitted by Section 14.
Agent's Head Office. The Agent's head office located at 111
Westminster Street, Providence, Rhode Island 02903, or at such
other location as the Agent may designate from time to time
pursuant to Section 19 hereof, or the office of any successor
Agent permitted under Section 14 hereof.
Agreement. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto, as the same may be from time to
time amended and in effect.
Applicable Margin. The applicable margin (if any) over the
then Prime Rate or LIBOR Rate, as applicable to the Revolving
Credit Loan(s) in question, as set forth below, which is used in
calculating the interest rate applicable to Revolving Credit
Loans and which shall vary from time to time in accordance with
SALP's long-term unsecured, non-credit enhanced debt ratings, if
any. The Applicable Margin to be used in calculating the
interest rate applicable to Prime Rate Loans or LIBOR Rate Loans
shall vary from time to time in accordance with SALP's then
applicable (if any) (x) Moody's debt rating, (y) S&P's debt
rating and (z) any Third Debt Rating, as set forth below in this
definition, and the Applicable Margin shall be adjusted effective
on the next Business Day following any change in SALP's Moody's
debt rating or S&P's debt rating or Third Debt Rating, as the
case may be. SALP shall notify the Agent in writing promptly
after becoming aware of any change in any of its debt ratings.
In order to qualify for an Applicable Margin based upon a debt
rating, SALP shall obtain and maintain debt ratings from at least
two (2) nationally recognized rating agencies reasonably
acceptable to the Agent, one of which must be Moody's or S&P so
long as such Persons are in the business of providing debt
ratings for the REIT industry; provided that until such time as
SALP obtains two debt ratings or if SALP fails to maintain at
least two debt ratings, the Applicable Margin shall be based upon
an S&P rating of less than BBB- in the table below. In addition,
SALP may, at its option, obtain and maintain three debt ratings
(of which one must be from Moody's or S&P except as set forth in
the previous sentence). If at any time of determination of the
Applicable Margin, (a) SALP has then current debt ratings from
two (2) rating agencies, then the Applicable Margin shall be
<PAGE>
based on the lower of such ratings, or (b) SALP has then current
debt ratings from three (3) rating agencies, then the Applicable
Margin shall be based on the lower of the two highest ratings (of
which one must be from Moody's or S&P so long as such Persons are
in the business of providing debt ratings for the REIT industry).
The applicable debt ratings and the Applicable Margins are set
forth in the following table:
Applicable Applicable
Margin Margin
for LIBOR Rate for Prime Rate
S&P Rating Moody's Rating Third Rating Loans Loans
___________________________________________________________________________
No rating No rating or No rating or
or less than less than less than BBB-/
BBB- Baa3 Baa3 equivalent 1.375% 0%
BBB- Baa3 BBB-/Baa3
equivalent 1.25 % 0%
BBB Baa2 BBB/Baa2
equivalent 1.125% 0%
BBB+ Baa1 BBB+/Baa1
equivalent 1.00% 0%
A- or higher A3 or higher A-/A3 equiva-
lent or higher 0.90% 0%
Assignment and Assumption. See Section 18.1.
Borrower Representative. Sovran, acting on behalf of all of
the Borrowers. The Agent and the Lenders shall be entitled to
rely, and all of the Borrowers hereby agree that the Agent and
the Lenders may so rely, on any notice given or received or
action taken or not taken by Sovran as being authorized by each
of the Borrowers.
Borrowers. As defined in the preamble hereto.
Budgeted Project Costs. With respect to Construction-In-
Process, the total budgeted project cost of such Construction-In-
Process shown on schedules submitted to the Agent from time to
time; provided that for Construction-In-Process owned by any
Partially-Owned Entity, the Budgeted Project Cost of such
Construction-In-Process shall be the applicable Borrower's
pro-rata share of the total budgeted project cost of such
Construction-In-Process (based on the greater of (x) such
Borrower's percentage equity interest in such Partially-Owned
Entity or (y) the Borrower's obligation to provide or liability
for providing funds to such Partially-Owned Entity).
Building. Individually and collectively, the buildings,
structures and improvements now or hereafter located on the Real
Estate and intended for income production.
<PAGE>
Business Day. Any day on which banking institutions in
Boston, Massachusetts are open for the transaction of banking
business and, in the case of LIBOR Rate Loans, also a day which
is a LIBOR Business Day.
Capitalized Leases. Leases under which any Borrower or any
of its Subsidiaries or any Partially-Owned Entity is the lessee
or obligor, the discounted future rental payment obligations
under which are required to be capitalized on the balance sheet
of the lessee or obligor in accordance with GAAP.
Capitalized Unencumbered Property Value. As of any date of
determination with respect to an Unencumbered Property, an amount
equal to Adjusted Unencumbered Property NOI for such Unencumbered
Property for the most recent two (2) complete fiscal quarters
multiplied by two (2), with the product being divided by ten and
one-half percent (10.5%). The calculation of Capitalized
Unencumbered Property Value shall be adjusted as set forth in
Section 9.13 hereof.
CERCLA. See Section 6.18.
Closing Date. February 20, 1998, which is the date on which
all of the conditions set forth in Section 10 have been
satisfied.
Closing Fee. See Section 2.4(d).
Code. The Internal Revenue Code of 1986, as amended and in
effect from time to time.
Completed Revolving Credit Loan Request. A loan request
accompanied by all information required to be supplied under the
applicable provisions of Section 2.5.
Commitment. With respect to each Lender, the amount set
forth from time to time on Schedule 1.2 hereto as the amount of
such Lender's Commitment to make Revolving Credit Loans to the
Borrowers.
Commitment Fee. See Section 2.4(e).
Commitment Percentage. With respect to each Lender, the
percentage set forth on Schedule 1.2 hereto as such Lender's
percentage of the Total Commitment and any changes thereto from
time to time.
Consolidated or consolidated. With reference to any term
defined herein, shall mean that term as applied to the accounts
of Sovran and its subsidiaries (including the Guarantors) or SALP
and its subsidiaries, as the case may be, consolidated in
accordance with GAAP.
Consolidated Adjusted EBITDA. For any period, an amount
equal to the consolidated net income of the Borrowers and their
respective Subsidiaries for such period, as determined in
accordance with GAAP, before deduction of (a) gains (or losses)
<PAGE>
from the sale of real property or interests therein, debt
restructurings and other extraordinary items, (b) minority
interest attributable to a Borrower or a Guarantor and (c) income
taxes; plus (x) interest expense and (y) depreciation and
amortization, minus a recurring capital expense reserve in an
amount equal to ten cents ($0.10) per net rentable square foot
multiplied by the total net rentable square feet of all Real
Estate; all after adjustments for unconsolidated partnerships,
joint ventures and other entities. The calculation of
Consolidated Adjusted EBITDA shall be adjusted as set forth in
Section 9.13 hereof.
Consolidated Assumed Amortizing Debt Service Charges. As of
any date of determination, an amount equal to the assumed
interest and principal payments for an imputed six month period
on all Indebtedness of the Borrowers and their respective
Subsidiaries for borrowed money or in respect of reimbursement
obligations for letters of credit, guaranty obligations or
Capitalized Leases, whether direct or contingent, which is
outstanding on such date based upon a two hundred and forty (240)
month mortgage style amortization schedule and an annual interest
rate equal to the sum of two percent (2%) plus the imputed ten
(10) year United States Treasury bill yield as of such date based
upon published quotes for Treasury bills having ten (10) years to
maturity. For example, if the imputed ten (10) year United
States Treasury bill yield as of such date were 6% and the total
amount of Indebtedness of the Borrowers and their respective
Subsidiaries on such date were $100,000, Consolidated Assumed
Amortizing Debt Service Charges would be equal to $5,019.
Consolidated Assumed Amortizing Unsecured Debt Service
Charges. As of any date of determination, an amount equal to the
assumed interest and principal payments for an imputed six month
period on all Unsecured Indebtedness of the Borrowers and their
respective Subsidiaries for borrowed money or in respect of
reimbursement obligations for letters of credit, guaranty
obligations or Capitalized Leases, whether direct or contingent,
which is outstanding on such date based upon a two hundred and
forty (240) month mortgage style amortization schedule and an
annual interest rate equal to the sum of two percent (2%) plus
the imputed ten (10) year United States Treasury bill yield as of
such date based upon published quotes for Treasury bills having
ten (10) years to maturity. For example, if the imputed ten (10)
year United States Treasury bill yield as of such date were 6%
and the total amount of Unsecured Indebtedness of the Borrowers
and their respective Subsidiaries on such date were $100,000,
Consolidated Assumed Amortizing Unsecured Debt Service Charges
would be equal to $5,019.
Consolidated Capitalized Value. As of any date of
determination, an amount equal to Consolidated Adjusted EBITDA
for the most recent two (2) completed fiscal quarters multiplied
by two (2), with the product being divided by ten and one-half
percent (10.5%). The calculation of Consolidated Capitalized
Value shall be adjusted as set forth in Section 9.13 hereof.
<PAGE>
Consolidated Secured Indebtedness. As of any date of
determination, the aggregate principal amount of all Indebtedness
of the Borrowers and their respective Subsidiaries for borrowed
money or in respect of reimbursement obligations for letters of
credit, guaranty obligations or Capitalized Leases, whether
direct or contingent, which is outstanding at such date and which
is secured by a Lien on properties or other assets of such
Persons, without regard to Recourse.
Consolidated Tangible Net Worth. As of any date of
determination, the Consolidated Capitalized Value minus
Consolidated Total Liabilities.
Consolidated Total Liabilities. As of any date of
determination, all liabilities of the Borrowers and their
respective Subsidiaries determined on a consolidated basis in
accordance with GAAP and classified as such on the consolidated
balance sheet of the Borrowers and their respective Subsidiaries,
and all Indebtedness of the Borrowers and their respective
Subsidiaries, whether or not so classified. The calculation of
Consolidated Total Liabilities shall be adjusted as set forth in
Section 9.13 hereof.
Consolidated Unsecured Indebtedness. As of any date of
determination, the aggregate principal amount of all Unsecured
Indebtedness of the Borrowers and their respective Subsidiaries
for borrowed money or in respect of reimbursement obligations for
letters of credit, guaranty obligations or Capitalized Leases,
whether direct or contingent, which is outstanding at such date,
including without limitation the aggregate principal amount of
all the Obligations under this Agreement as of such date,
determined on a consolidated basis in accordance with GAAP,
without regard to Recourse.
Construction-In-Process. Any Real Estate for which any
Borrower, any Guarantor, any of the Borrowers' Subsidiaries or
any Partially-Owned Entity is actively pursuing construction,
renovation, or expansion of Buildings, all pursuant to such
Person's ordinary course of business.
Conversion Request. A notice given by the Borrower
Representative to the Agent of its election to convert or
continue a Revolving Credit Loan in accordance with Section 2.6.
Daily Unused Commitment. The daily difference between (a)
$150,000,000 and (b) the principal amount of Revolving Credit
Loans outstanding for each such day hereunder.
default. When used with reference to this Agreement or any
other Loan Document, any of the events or conditions specified in
Section 12.1, whether or not any requirement for the giving of
notice, the lapse of time or both, has been satisfied.
Default. As of the relevant time of determination, an event
or occurrence which:
(i) requires notice and time to cure to become an Event of
Default and as to which notice has been given to the
Borrowers by the Agent; or
<PAGE>
(ii) has occurred and will become an Event of Default
(without notice) if such event remains uncured after
any grace period specified in Section 12.1 or, in the
case of matters referred to in Section 12.1(k), in the
other applicable Loan Document(s).
Disqualifying Building Event. Any structural or repair and
maintenance matter (other than a Release) as to any Building or
any Real Estate that in the Agent's reasonable opinion will
require the expenditure of $250,000 or more to remedy or complete
such matter and the remediation or completion of which is
required by prudent real estate ownership or operation.
Disqualifying Environmental Event. Any Release or
threatened Release of Hazardous Substances, any violation of
Environmental Laws or any other similar environmental event with
respect to a Real Estate that causes (y) the occupancy or rent of
such Real Estate to be adversely affected, as compared to what
otherwise would have been the occupancy or rent of such Real
Estate in the absence of such environmental event or (z) such
Real Estate to no longer be financeable on a secured, long-term
debt basis under the then generally accepted underwriting
standards of national institutional lenders.
Disqualifying Legal Event. Any violation or non-compliance
with any applicable law, statute, rule or regulation (other than
an Environmental Law) with respect to any Real Estate, which
requires cure or compliance for prudent real estate ownership or
operation.
Distribution. With respect to:
(i) SALP, any distribution of cash or other cash
equivalent, directly or indirectly, to the partners or
other equity interest holders of SALP; or any other
distribution on or in respect of any partnership
interests of SALP; and
(ii) Sovran, the declaration or payment of any dividend on
or in respect of any shares of any class of capital
stock of Sovran, other than dividends payable solely in
shares of common stock by Sovran; the purchase,
redemption, or other retirement of any shares of any
class of capital stock of Sovran, directly or
indirectly through a Subsidiary of Sovran or otherwise;
the return of capital by Sovran to its shareholders as
such; or any other distribution on or in respect of any
shares of any class of capital stock of Sovran.
Dollars or $. Dollars in lawful currency of the United
States of America.
Drawdown Date. The date on which any Revolving Credit Loan
is made or is to be made, and the date on which any Revolving
Credit Loan is converted or continued in accordance with
Section 2.6.
Duff & Phelps. Duff & Phelps, and its successors.
<PAGE>
Eligible Assignee. Any of (a) a commercial bank organized
under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of
$1,000,000,000; (b) a commercial bank organized under the laws of
any other country (including the central bank of such country)
which is a member of the Organization for Economic Cooperation
and Development (the "OECD"), or a political subdivision of any
such country, and having total assets in excess of
$1,000,000,000, provided that such bank is acting with respect to
this Agreement through a branch or agency located in the United
States of America and complies with the requirements set forth in
Section 4.1(c) hereof, and (c) a financial institution acceptable
to the Agent which is regularly engaged in making, purchasing or
investing in loans and having total assets in excess of
$1,000,000,000 and complies with the requirements set forth in
Section 4.1(c) hereof, to the extent applicable.
Employee Benefit Plan. Any employee benefit plan within the
meaning of Section 3(3) of ERISA maintained or contributed to by
any Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
Environmental Laws. See Section 6.18(a).
ERISA. The Employee Retirement Income Security Act of 1974,
as amended and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single
employer with any Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to
a Guaranteed Pension Plan within the meaning of Section 4043 of
ERISA and the regulations promulgated thereunder as to which the
requirement of notice has not been waived.
Eurocurrency Reserve Rate. For any day with respect to a
LIBOR Rate Loan, the weighted average of the rates (expressed as
a decimal) at which all of the Lenders subject thereto would be
required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements)
against "Eurocurrency Liabilities" (as that term is used in
Regulation D), if such liabilities were outstanding. The
Eurocurrency Reserve Rate shall be adjusted automatically on and
as of the effective date of any change in the Eurocurrency
Reserve Rate.
Event of Default. See Section 12.1.
Fitch. Fitch IBCA Inc., and its successors.
Fleet. As defined in the preamble hereto.
Funds from Operations. With respect to any fiscal period of
the Borrowers, an amount, without double-counting, equal to the
consolidated net income of the Borrowers and their respective
Subsidiaries, as determined in accordance with GAAP, before
<PAGE>
deduction of real estate related depreciation and amortization,
and excluding gains (or losses) from the sale of real property or
interests therein, debt restructurings or other extraordinary
items, and after adjustments for unconsolidated partnerships,
joint ventures or other entities (such adjustments to be
calculated to reflect Funds from Operations on the same basis, to
the extent that such Funds from Operations attributable to
unconsolidated partnerships, joint ventures and other entities
are not subject to the claims of any other Person).
GAAP. Generally accepted accounting principles,
consistently applied.
Guaranteed Pension Plan. Any employee pension benefit plan
within the meaning of Section 3(2) of ERISA maintained or
contributed to by any Borrower or any Guarantor, as the case may
be, or any ERISA Affiliate of any of them the benefits of which
are guaranteed on termination in full or in part by the PBGC
pursuant to Title IV of ERISA, other than a Multiemployer Plan.
Guaranties. Collectively, the Holdings Guaranty and any
other guaranty of the Obligations made by an Affiliate of a
Borrower in favor of the Agent and the Lenders.
Guarantors. Collectively, Holdings and any other Affiliate
of a Borrower executing a Guaranty, provided, however, when the
context so requires, Guarantor shall refer to Holdings or such
Affiliate, as appropriate. Any Guarantor that is the owner of an
Unencumbered Property shall be a wholly-owned Subsidiary.
Provided further, however, from and after the release of the
Guaranty of any Subsidiary Guarantor pursuant to Section 5 below,
such Subsidiary Guarantor shall no longer be considered a
"Guarantor" for purposes of this Agreement.
Hazardous Substances. See Section 6.18(b).
Holdings. As defined in the preamble hereto.
Holdings Guaranty. The Guaranty dated as of the date hereof
made by Holdings in favor of the Agent and the Lenders pursuant
to which Holdings guarantees to the Agent and the Lenders the
unconditional payment and performance of the Obligations.
Indebtedness. With respect to any Person, all obligations,
contingent and otherwise, that in accordance with GAAP should be
classified upon such Person's balance sheet as liabilities,
including, without limitation, (a) all obligations for borrowed
money and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge,
negative pledge, security interest, lien, charge, or other
encumbrance existing on property owned or acquired subject
thereto, whether or not the liability secured thereby shall have
been assumed; (c) all obligations (i) under any Capitalized Lease
or (ii) under any lease (a "synthetic lease") which is treated as
an operating lease under GAAP and as a loan or financing for U.S.
income tax purposes or (iii) which are "off balance sheet"
<PAGE>
transactions having the same practical effect as to such Person's
financial position as a transaction that would be a liability of
such Person on the balance sheet; (d) all obligations to
purchase, redeem, retire, or otherwise acquire for value any
shares of capital stock of any class issued by such Person or any
rights to acquire such shares; (e) all obligations under any
forward contract, futures contract, swap, option or other
financing arrangement, the value of which is dependent upon
interest rates, currency exchange rates, commodities or other
indices; and (f) all guarantees for borrowed money, endorsements
and other contingent obligations, whether direct or indirect, in
respect of indebtedness or obligations of others, including any
obligation to supply funds (including partnership obligations and
capital requirements) to or in any manner to invest in, directly
or indirectly, the debtor, to purchase indebtedness, or to
assure the owner of indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the
purpose of enabling the debtor to make payment of the
indebtedness held by such owner or otherwise, and the
reimbursement obligations in respect of any letters of credit,
bankers' acceptances or similar facilities issued for the account
of such Person. The calculation of Indebtedness of any Person
shall be adjusted as set forth in Section 9.13.
Indemnified Lender's(s') Group. See Section 16.
Interest Payment Date. (i) As to any Prime Rate Loan, the
last day of the calendar month which includes the Drawdown Date
thereof; and (ii) as to any LIBOR Rate Loan in respect of which
the Interest Period is (A) 3 months or less, the last day of such
Interest Period and (B) more than 3 months, the date that is 3
months from the first day of such Interest Period, each date that
is 3 months thereafter, and, in addition, the last day of such
Interest Period.
Interest Period. With respect to each Loan, (a) initially,
the period commencing on the Drawdown Date of such Loan and
ending on the last day of one of the following periods (as
selected by the Borrowers in a Completed Revolving Credit Loan
Request or as otherwise in accordance with the terms of this
Agreement): (i) for any Prime Rate Loan, the last day of the
calendar month, and (ii) for any LIBOR Rate Loan, 1, 2, 3, or 6
months (provided that (x) the Interest Period for LIBOR Rate
Loans may be shorter than 1 month in order to consolidate 2 or
more LIBOR Rate Loans and (y) the Interest Period for all LIBOR
Rate Loans shall be 1 month until the earlier of 90 days after
the Closing Date or the date on which Fleet completes the
syndication of the Total Commitment); and (b) thereafter, each
period commencing at the end of the last day of the immediately
preceding Interest Period applicable to such Loan and ending on
the last day of the applicable period set forth in (a) above as
selected by the Borrowers in a Conversion Request or as otherwise
in accordance with this Agreement; provided that all of the
foregoing provisions relating to Interest Periods are subject to
the following:
(A) if any Interest Period with respect to a Prime
Rate Loan would end on a day that is not a Business Day,
<PAGE>
that Interest Period shall end on the next succeeding
Business Day;
(B) if any Interest Period with respect to a LIBOR
Rate Loan would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the
next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the immediately preceding Business Day;
(C) if the Borrowers shall fail to give notice of
conversion or continuation as provided in Section 2.6, the
Borrowers shall be deemed to have requested a conversion of
the affected LIBOR Rate Loan into a Prime Rate Loan on the
last day of the then current Interest Period with respect
thereto;
(D) any Interest Period relating to any LIBOR Rate
Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall, subject to subparagraph (E) below,
end on the last Business Day of a calendar month; and
(E) any Interest Period that would otherwise extend
beyond the Maturity Date shall end on the Maturity Date.
Investment Grade Credit Rating. A long-term unsecured,
non-credit enhanced debt rating (a) from Moody's of Baa3 or
higher, (b) from S&P of BBB- or higher, or (c) from a Third
Rating Agency of the Baa3/BBB- equivalent or higher.
Investments. All expenditures made and all liabilities
incurred (contingently or otherwise, but without
double-counting): (i) for the acquisition of stock, partnership
or other equity interests or Indebtedness of, or for loans,
advances, capital contributions or transfers of property to, any
Person; and (ii) for the acquisition of any other obligations of
any Person. In determining the aggregate amount of Investments
outstanding at any particular time: (a) there shall be included
as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such
interest is paid; (b) there shall be deducted in respect of each
such Investment any amount received as a return of capital (but
only by repurchase, redemption, retirement, repayment,
liquidating dividend or liquidating distribution); (c) there
shall not be deducted in respect of any Investment any amounts
received as earnings on such Investment, whether as dividends,
interest or otherwise, except that accrued interest included as
provided in the foregoing clause (a) may be deducted when paid;
and (d) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
Joint Venture Ownership Interest Value. As of any date of
determination, an amount equal to the pro rata share of
Consolidated EBITDA attributable to the Borrowers from
<PAGE>
Partially-Owned Entities for the most recent two (2) completed
fiscal quarters multiplied by two (2), with the product being
divided by ten and one-half percent (10.5%).
Leases. Leases, licenses and agreements, whether written or
oral, relating to the use or occupation of space in or on the
Buildings or on the Real Estate by persons other than the
Borrower, its Subsidiaries or any Partially-Owned Entity.
Lenders. Collectively, Fleet, any other lenders which may
provide additional commitments and become parties to this
Agreement, and any other Person who becomes an assignee of any
rights of a Lender pursuant to Section 18 or a Person who
acquires all or substantially all of the stock or assets of a
Lender.
LIBOR Breakage Costs. With respect to any LIBOR Rate Loan
to be prepaid or not drawn after elected, a prepayment "breakage"
fee in an amount determined by the Agent in the following manner:
(i) First, the Agent shall determine the amount by which
(a) the total amount of interest which would have
otherwise accrued hereunder on each installment of
principal prepaid or not so drawn, during the period
beginning on the date of such prepayment or failure to
draw and ending on the last day of the applicable LIBOR
Rate Loan Interest Period (the "Reemployment Period"),
exceeds (b) the total amount of interest which would
accrue, during the Reemployment Period, on any readily
marketable bond or other obligation of the United
States of America designated by the Agent in its sole
discretion at or about the time of such payment, such
bond or other obligation of the United States of
America to be in an amount equal (as nearly as may be)
to the amount of principal so paid or not drawn after
elected and to have maturity at the end of the
Reemployment Period, and the interest to accrue thereon
to take account of amortization of any discount from
par or accretion of premium above par at which the same
is selling at the time of designation. Each such
amount is hereinafter referred to as an "Installment
Amount".
(ii) Second, each Installment Amount shall be treated as
payable on the last day of the LIBOR Rate Loan Interest
Period which would have been applicable had such
principal installment not been prepaid or not borrowed.
(iii) Third, the amount to be paid on each such breakage date
shall be the present value of the Installment Amount
determined by discounting the amount thereof from the
date on which such Installment Amount is to be treated
as payable, at the same yield to maturity as that
payable upon the bond or other obligation of the United
States of America designated as aforesaid by the Agent.
<PAGE>
If by reason of an Event of Default the Agent elects to
declare a LIBOR Rate Loan to be immediately due and payable,
then any breakage fee with respect to such LIBOR Rate Loan
shall become due and payable in the same manner as though
the Borrowers had exercised such right of prepayment.
LIBOR Business Day. Any day on which commercial banks are
open for international business (including dealings in Dollar
deposits) in London or such other eurodollar interbank market as
may be selected by the Agent in its sole discretion acting in
good faith.
LIBOR Rate. For any Interest Period with respect to a LIBOR
Rate Loan, the rate of interest per annum (rounded upward, if
necessary, to the nearest 1/32 of one percent) as determined on
the basis of the offered rates for deposits in Dollars for a
period of time comparable to such Interest Period which appears
on the Telerate page 3750 (or such other page as may replace that
page on the Telerate service) as of 11:00 a.m. London time on the
date that is two (2) LIBOR Business Days prior to the beginning
of such Interest Period; provided, however, if the rate described
above does not appear on the Telerate System on any applicable
interest determination date, the LIBOR Rate shall be the rate
(rounded upwards as described above, if necessary) for deposits
in Dollars for a period of time substantially equal to the
Interest Period which appears on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the
purpose of displaying such rates), as of 11:00 a.m. London time
on the date that is two (2) LIBOR Business Days prior to the
beginning of such Interest Period.
If both the Telerate and Reuters systems are unavailable,
then the rate for that date will be determined on the basis of
the offered rates for deposits in Dollars for a period of time
comparable to the Interest Period which are offered by four major
banks in the London interbank market at approximately 11:00 a.m.
London time on the date that is two (2) LIBOR Business Days prior
to the beginning of such Interest Period as selected by the
Agent. The principal London office of each of the four major
London banks will be requested to provide a quotation of its
Dollar deposit offered rate. If at least two such quotations are
provided, the rate for that date will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as
requested, the rate for that date will be determined on the basis
of the rates quoted for loans in Dollars to leading European
banks for a period of time comparable to the Interest Period by
major banks in New York City at approximately 11:00 a.m. New York
City time on the date that is two (2) LIBOR Business Days prior
to the beginning of such Interest Period. In the event that the
Agent is unable to obtain any quotation as provided above, it
will be deemed that the LIBOR Rate cannot be determined.
In the event that the Board of Governors of the Federal
Reserve System shall impose a reserve requirement with respect to
LIBOR deposits of the Lenders, then for any period during which
such reserve requirement shall apply, the LIBOR Rate shall be
equal to the amount determined above divided by an amount equal
to one (1.00) minus the Eurocurrency Reserve Rate.
<PAGE>
LIBOR Rate Loan(s). Those Revolving Credit Loans bearing
interest calculated by reference to the LIBOR Rate.
Lien. See Section 8.2.
Loan Documents. Collectively, this Agreement, the Notes,
the Guaranties, the Fee Letter of even date and any and all other
agreements, instruments or documents now or hereafter evidencing
or otherwise relating to the Loans and executed or delivered by
or on behalf of any Borrower or its Subsidiaries or any Guarantor
or its Subsidiaries in connection with the Loans, or referred to
herein or therein and delivered to the Agent or the Lenders by or
on behalf of any Borrower, any Guarantor or any of their
respective Subsidiaries, and all schedules, exhibits and annexes
hereto or thereto, as the same may from time to time be amended
and in effect, and any other document identified thereon as a
"Loan Document" under this Agreement.
Loans. The Revolving Credit Loans.
Maturity Date. February 20, 2001, or such earlier date on
which the Loans shall become due and payable pursuant to the
terms thereof.
Moody's. Moody's Investors Service, Inc., and its
successors.
Multiemployer Plan. Any multiemployer plan within the
meaning of Section 3(37) of ERISA maintained or contributed to by
any Borrower or any Guarantor as the case may be or any ERISA
Affiliate.
Notes. The Revolving Credit Notes.
Obligations. All indebtedness, obligations and liabilities
of the Borrowers and their Subsidiaries to any of the Lenders and
the Agent, individually or collectively, under this Agreement or
any of the other Loan Documents or in respect of any of the Loans
or the Notes or other instruments at any time evidencing any
thereof, whether existing on the date of this Agreement or
arising or incurred hereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated
or unliquidated, secured or unsecured, arising by contract,
operation of law or otherwise.
Operating Subsidiaries. Any Subsidiaries of a Borrower
that, at any time of reference, provide management, construction,
design or other services (excluding any such Subsidiary which may
provide any such services which are only incidental to that
Subsidiary's ownership of one or more Real Estate).
Partially-Owned Entity(ies). Any of the partnerships, joint
ventures and other entities owning real estate assets in which
SALP and/or Sovran collectively, directly or indirectly through
its full or partial ownership of another entity, own less than
100% of the equity interests, whether or not such entity is
required in accordance with GAAP to be consolidated with Sovran
for financial reporting purposes.
<PAGE>
PBGC. The Pension Benefit Guaranty Corporation created by
Section 4002 of ERISA and any successor entity or entities having
similar responsibilities.
Permits. All governmental permits, licenses, and approvals
necessary or useful for the lawful operation and maintenance of
the Real Estate.
Permitted Liens. Liens, security interests and other
encumbrances permitted by Section 8.2.
Person. Any individual, corporation, partnership, trust,
unincorporated association, business, or other legal entity, and
any government (or any governmental agency or political
subdivision thereof).
Prime Rate. The higher of (a) the variable annual rate of
interest designated from time to time by Fleet at its head office
in Boston, Massachusetts as its "prime rate" (which is a
reference rate and does not necessarily represent the lowest or
best rate being charged to any customer) or (b) one half of one
percent (1/2%) above the overnight federal funds effective rate
as published by the Board of Governors of the Federal Reserve
System, as in effect from time to time. Any change in the Prime
Rate during an Interest Period shall result in a corresponding
change on the same day in the rate of interest accruing from and
after such day on the unpaid balance of principal of the Prime
Rate Loans, if any, applicable to such Interest Period, effective
on the day of such change in the Prime Rate.
Prime Rate Loans. Those Revolving Credit Loans bearing
interest calculated by reference to the Prime Rate.
RCRA. See Section 6.18.
Real Estate. The fixed and tangible properties consisting
of land, buildings and/or other improvements owned by any
Borrower, by any Guarantor or by any other entity in which a
Borrower is the holder of an equity interest at the relevant time
of reference thereto, including, without limitation, (i) the
Unencumbered Properties at such time of reference, and (ii) the
real estate assets owned by each of the Partially-Owned Entities
at such time of reference.
Record. The grid attached to any Note, or the continuation
of such grid, or any other similar record, including computer
records, maintained by any Lender with respect to any Loan.
Recourse. With reference to any obligation or liability,
any liability or obligation that is not Without Recourse to the
obligor thereunder, directly or indirectly. For purposes hereof,
a Person shall not be deemed to be "indirectly" liable for the
liabilities or obligations of an obligor solely by reason of the
fact that such Person has an ownership interest in such obligor,
provided that such Person is not otherwise legally liable,
directly or indirectly, for such obligor's liabilities or
obligations (e.g., by reason of a guaranty or contribution
obligation, by operation of law or by reason of such Person's
being a general partner of such obligor).
<PAGE>
REIT. A "real estate investment trust", as such term is
defined in Section 856 of the Code.
Release. See Section 6.18(c)(iii).
Required Lenders. As of any date, the Lenders whose
aggregate Commitments constitute at least sixty-six and
two-thirds percent (66 2/3%) of the Total Commitment.
Revolving Credit Loan(s). Each and every revolving credit
loan made or to be made by the Lenders to the Borrowers pursuant
to Section 2.
Revolving Credit Notes. Collectively, the separate
promissory notes of the Borrowers in favor of each Lender in
substantially the form of Exhibit A hereto, in the aggregate
principal amount of $150,000,000, dated as of the date hereof or
as of such later date as any Person becomes a Lender under this
Agreement, and completed with appropriate insertions, as each of
such notes may be amended and/or restated from time to time.
Revolving Credit Note Record. A Record with respect to the
Revolving Credit Notes.
S&P. Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
SALP. As defined in the preamble hereto.
SARA. See Section 6.18.
SEC. The United States Security and Exchange Commission.
SEC Filings. Collectively, (a) Sovran's Annual Report on
Form 10-K for the year ended December 31, 1996, filed with the
SEC pursuant to the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), (b) Sovran's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997 filed with the
SEC pursuant to the Exchange Act and (c) Sovran's Current Report
on Form 8-K, dated November 11, 1997, filed with the SEC pursuant
to the Exchange Act, including all amendments thereto.
Sovran. As defined in the preamble hereto.
subsidiary. Any entity required to be consolidated with its
direct or indirect parent in accordance with GAAP.
Subsidiary. Any corporation, association, partnership,
trust, or other business entity of which the designated parent
shall at any time own directly or indirectly through a Subsidiary
or Subsidiaries at least a majority (by number of votes or
controlling interests) of the outstanding voting interests or at
least a majority of the economic interests (including, in any
case, the Operating Subsidiaries and any entity required to be
consolidated with its designated parent in accordance with GAAP).
Subsidiary Guarantor. Any Guarantor other than Holdings.
<PAGE>
Subsidiary Guaranty. The form of Guaranty to be entered
into by any Subsidiary Guarantor substantially in the form of
Exhibit B hereto.
Third Debt Rating. SALP's long term unsecured debt rating
from a Third Rating Agency.
Third Rating Agency. Duff & Phelps, Fitch or another
nationally-recognized rating agency (other than S&P or Moody's)
reasonably satisfactory to the Agent.
Title Policies. For each Unencumbered Property, an ALTA
standard form title policy (or, if such form is not available, an
equivalent form of title insurance policy) issued by a
nationally-recognized title insurance company, insuring that a
Borrower or a Subsidiary Guarantor holds good and clear
marketable fee simple title to such Unencumbered Property,
subject only to Permitted Liens.
Total Commitment. As of any date, the sum of the
then-current Commitments of the Lenders, provided that the Total
Commitment shall not at any time exceed the lesser of: (i)
$150,000,000 or (ii) the amount that is the maximum amount that
permits compliance with the terms of Section 9.
Type. As to any Revolving Credit Loan, its nature as a
Prime Rate Loan or a LIBOR Rate Loan.
Unanimous Lender Approval. The written consent of each
Lender that is a party to this Agreement at the time of
reference.
Unencumbered Property. Any Real Estate located in the
contiguous United States that on any date of determination: (a)
is not subject to any Liens (including any such Lien imposed by
the organizational documents of the owner of such asset, but
excluding Permitted Liens), (b) is not the subject of any matter
that materially adversely affects the value of such Real Estate,
(c) is not the subject of a Disqualifying Environmental Event, a
Disqualifying Building Event or a Disqualifying Legal Event, (d)
has been improved with a Building or Buildings which (1) have
been issued a certificate of occupancy (where available) or is
otherwise lawfully occupied for its intended use, (2) are fully
operational and (3) have an average rent-paying occupancy rate
(by net rentable square feet) of at least 75% for the two most
recently ended consecutive fiscal quarters, (e) is wholly owned
by a Borrower or a Guarantor that is a wholly-owned Subsidiary
and (f) has not been designated by the Borrowers in writing to
the Agent as Real Estate that is not an Unencumbered Property
because of a Disqualifying Environmental Event, a Disqualifying
Building Event or a Disqualifying Legal Event or the Borrower's
intention to subject such Unencumbered Property to an
Indebtedness Lien or Sell such Unencumbered Property pursuant to
Section 8.4(b) hereof, which designation shall not be permitted
during the continuance of a Default (other than if such
designation during a Default is made in conjunction with such
Real Estate's being the subject of a Sale or Indebtedness Lien
<PAGE>
under Section 8.4(b)(ii) and in compliance therewith) or an Event
of Default and shall be accompanied by a compliance certificate
in the form of Exhibit D attached hereto.
Unhedged Variable Rate Debt. All Indebtedness of the
Borrowers and their respective Subsidiaries for borrowed money or
in respect of reimbursement obligations for letters of credit,
guaranty obligations or Capitalized Leases, whether direct or
contingent, including, to the extent applicable, the Obligations,
which bears interest at one or more variable rates and is not
subject to an interest rate hedging arrangement having a minimum
term of one (1) year and having other terms reasonably acceptable
to the Agent.
Unimproved Land. Any Real Estate consisting of raw land
which is unimproved by Buildings.
Unsecured Indebtedness. All Indebtedness of any Person that
is not secured by a Lien on any asset of such Person.
Wholly-owned Subsidiary. Any Subsidiary of which Sovran
and/or SALP shall at any time own directly or indirectly through
a Subsidiary or Subsidiaries at least a majority (by number of
votes or controlling interests) of the outstanding voting
interests and one hundred percent (100%) of the economic
interests, of which at least ninety-nine percent (99%) of the
economic interests shall be owned by SALP.
"Without Recourse" or "without recourse". With reference to
any obligation or liability, any obligation or liability for
which the obligor thereunder is not liable or obligated other
than as to its interest in a designated Real Estate or other
specifically identified asset only (which asset is not interests
in another Person), subject to such limited exceptions to the
non-recourse nature of such obligation or liability, such as
fraud, misappropriation, misapplication and environmental
indemnities, as are usual and customary in like transactions
involving institutional lenders at the time of the incurrence of
such obligation or liability.
Section 1.2. Rules of Interpretation.
(i) A reference to any document or agreement shall include
such document or agreement as amended, modified or
supplemented from time to time in accordance with its
terms or the terms of this Agreement.
(ii) The singular includes the plural and the plural
includes the singular.
(iii) A reference to any law includes any amendment or
modification to such law.
(iv) A reference to any Person includes its permitted
successors and permitted assigns.
<PAGE>
(v) Accounting terms not otherwise defined herein have the
meanings assigned to them by GAAP applied on a
consistent basis by the accounting entity to which they
refer.
(vi) The words "include", "includes" and "including" are not
limiting.
(vii) All terms not specifically defined herein or by GAAP,
which terms are defined in the Uniform Commercial Code
as in effect in New York, have the meanings assigned to
them therein.
(viii) Reference to a particular "Section" refers to that
section of this Agreement unless otherwise indicated.
(ix) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Agreement as a whole
and not to any particular section or subdivision of
this Agreement.
(x) Any provision granting any right to any Borrower or
Guarantor during the continuance of (a) an Event of
Default shall not modify, limit, waive or estop the
rights of the Lenders during the continuance of such
Event of Default, including the rights of the Lenders
to accelerate the Loans under Section 12.1 and the
rights of the Lenders under Section 12.2 or 12.3, or
(b) a Default, shall not extend the time for curing
same or modify any otherwise applicable notice
regarding same.
Section 2. THE REVOLVING CREDIT FACILITY.
Section 2.1. Commitment to Lend. Subject to the
provisions of Section 2.5 and the other terms and conditions set
forth in this Agreement, each of the Lenders severally agrees to
lend to the Borrowers and the Borrowers may borrow, repay, and
reborrow from each Lender from time to time from the Closing Date
up to but not including the Maturity Date upon notice by the
Borrower Representative to the Agent given in accordance with
Section 2.5 hereof, such sums as are requested by the Borrower
Representative up to a maximum aggregate principal amount
outstanding (after giving effect to all amounts requested) at any
one time equal to such Lender's Commitment; provided that the sum
of the outstanding amount of the Revolving Credit Loans (after
giving effect to all amounts requested) shall not at any time
exceed the Total Commitment in effect at such time.
The Revolving Credit Loans shall be made pro rata in
accordance with each Lender's Commitment Percentage. Each
request for a Revolving Credit Loan made pursuant to Section 2.5
hereof shall constitute a representation and warranty by the
Borrowers that the conditions set forth in Section 10 have been
satisfied as of the Closing Date and that the conditions set
forth in Section 11 have been satisfied on the date of such
request and will be satisfied on the proposed Drawdown Date of
<PAGE>
the requested Revolving Credit Loan, provided that the making of
such representation and warranty by the Borrowers shall not limit
the right of any Lender not to lend if such conditions have not
been met. No Revolving Credit Loan shall be required to be made
by any Lender unless all of the conditions contained in
Section 10 have been satisfied as of the Closing Date and all of
the conditions set forth in Section 11 have been met at the time
of any request for a Revolving Credit Loan.
Section 2.2. [Intentionally Omitted]
Section 2.3. The Revolving Credit Notes. The Revolving
Credit Loans shall be evidenced by the Revolving Credit Notes. A
Revolving Credit Note shall be payable to the order of each
Lender in an aggregate principal amount equal to such Lender's
Commitment. The Borrowers irrevocably authorize each Lender to
make or cause to be made, at or about the time of the Drawdown
Date of any Revolving Credit Loan or at the time of receipt of
any payment of principal on such Lender's Revolving Credit Notes,
an appropriate notation on such Lender's Revolving Credit Note
Record reflecting the making of such Revolving Credit Loan or (as
the case may be) the receipt of such payment. The outstanding
amount of the Revolving Credit Loans set forth on such Lender's
Revolving Credit Note Record shall be prima facie evidence of the
principal amount thereof owing and unpaid to such Lender, but the
failure to record, or any error in so recording, any such amount
on such Lender's Revolving Credit Note Record shall not limit or
otherwise affect the obligations of the Borrowers hereunder or
under any Revolving Credit Note to make payments of principal of
or interest on any Revolving Credit Note when due. Upon receipt
of an affidavit of an officer of any Lender as to the loss,
theft, destruction or mutilation of any Revolving Credit Note or
any other security document which is not of public record, and,
in the case of any such loss, theft, destruction or mutilation,
upon surrender and cancellation of such Revolving Credit Note or
other security document, the Borrowers will issue, in lieu
thereof, a replacement Revolving Credit Note or other security
document in the same principal amount thereof and otherwise of
like tenor.
Section 2.4. Interest on Revolving Credit Loans; Fees.
(a) Interest on Prime Rate Loans. Each Prime Rate Loan
shall bear interest for the period commencing with the Drawdown
Date thereof and ending on the last day of the Interest Period
with respect thereto (unless earlier paid in accordance with
Section 2.9) at a rate equal to the Prime Rate plus the
Applicable Margin for Prime Rate Loans.
(b) Interest on LIBOR Rate Loans. Each LIBOR Rate Loan
shall bear interest for the period commencing with the Drawdown
Date thereof and ending on the last day of the Interest Period
with respect thereto (unless earlier paid in accordance with
Section 2.9) at a rate equal to the LIBOR Rate determined for
such Interest Period plus the Applicable Margin for LIBOR Rate
Loans.
<PAGE>
(c) Interest Payments. The Borrowers jointly and severally
unconditionally promise to pay interest on each Revolving Credit
Loan in arrears on each Interest Payment Date with respect
thereto.
(d) Closing Fee. The Borrowers jointly and severally agree
to pay to the Agent a closing fee (the "Closing Fee") as set
forth in that certain letter agreement of even date herewith
between the Borrower Representative and the Agent.
(e) Commitment Fee. The Borrowers jointly and severally
agree to pay to the Agent, for the accounts of the Lenders in
accordance with their respective Commitment Percentages, a
commitment fee in an amount equal to either: (i) one-fifth of
one percent (0.20%) per annum on the Daily Unused Commitment, if
the Daily Unused Commitment exceeds 66 2/3% of the Total
Commitment (without regard to clause (ii) of the proviso in the
definition thereof), (ii) fifteen hundredths of one percent
(0.15%) per annum on the Daily Unused Commitment, if the Daily
Unused Commitment exceeds 33 1/3% of the Total Commitment
(without regard to clause (ii) of the proviso in the definition
thereof) but is less than or equal to 66 2/3% of the Total
Commitment (without regard to clause (ii) of the proviso in the
definition thereof), or (iii) one-eighth of one percent (0.125%)
per annum on the Daily Unused Commitment, if the Daily Unused
Commitment is less than or equal to 33 1/3% of the Total
Commitment (without regard to clause (ii) of the proviso in the
definition thereof), in each case calculated during each calendar
quarter or portion thereof for the first calendar quarter of the
term of this Agreement and the last calendar quarter of the term
of this Agreement, if either of same is not a full calendar
quarter from the date hereof to the Maturity Date (the
"Commitment Fee"). The Commitment Fee shall be payable quarterly
in arrears on the fifteenth (15th) day of each January, April,
July and October quarter for the immediately preceding calendar
quarter commencing on the first such date following the Closing
Date, with a final payment on the Maturity Date or any earlier
date on which the Commitments shall terminate.
(f) Administration Fee. The Borrowers shall pay to the
Agent an administration fee as set forth in that certain letter
agreement of even date herewith between the Borrower
Representative and the Agent.
Section 2.5. Requests for Revolving Credit Loans.
The following provisions shall apply to each request by the
Borrowers for a Revolving Credit Loan:
(i) The Borrower Representative shall submit a
Completed Revolving Credit Loan Request to the Agent as
provided in this Section 2.5. Except as otherwise provided
herein, each Completed Revolving Credit Loan Request shall
be in a minimum amount of $2,000,000 or an integral multiple
of $500,000 in excess thereof. Each Completed Revolving
Credit Loan Request shall be irrevocable and binding on the
<PAGE>
Borrowers and shall obligate the Borrowers to accept the
Revolving Credit Loans requested from the Lenders on the
proposed Drawdown Date, unless such Completed Revolving
Credit Loan Request is withdrawn (x) in the case of a
request for a LIBOR Rate Loan, at least four (4) Business
Days prior to the proposed Drawdown Date for such Revolving
Credit Loan, and (y) in the case of a request for a Prime
Rate Loan, at least two (2) Business Days prior to the
proposed Drawdown Date for such Revolving Credit Loan.
(ii) Each Completed Revolving Credit Loan Request may
be delivered by the Borrower Representative to the Agent by
10:00 a.m. (New York City time) on any Business Day, and at
least two (2) Business Days prior to the proposed Drawdown
Date of any Prime Rate Loan, and at least four (4) Business
Days prior to the proposed Drawdown Date of any LIBOR Rate
Loan.
(iii) Each Completed Revolving Credit Loan Request shall
include a completed writing in the form of Exhibit C hereto
specifying: (1) the principal amount of the Revolving Credit
Loan requested, (2) the proposed Drawdown Date of such
Revolving Credit Loan, (3) the Interest Period applicable to
such Revolving Credit Loan, and (4) the Type of such
Revolving Credit Loan being requested.
(iv) No Lender shall be obligated to fund any Revolving
Credit Loan unless:
(a) a Completed Revolving Credit Loan Request has
been timely received by the Agent as provided in
subsection (i) above; and
(b) both before and after giving effect to the
Revolving Credit Loan to be made pursuant to the
Completed Revolving Credit Loan Request, all of the
conditions contained in Section 10 shall have been
satisfied as of the Closing Date and all of the
conditions set forth in Section 11 shall have been met,
including, without limitation, the condition under
Section 11.1 that there be no Default or Event of
Default under this Agreement; and
(c) the Agent shall have received a certificate
in the form of Exhibit D hereto signed by the chief
financial officer or treasurer of the Borrower
Representative setting forth computations evidencing
compliance with the covenants contained in Section 9.1,
Section 9.2, Section 9.3 and Section 9.11 on a pro
forma basis after giving effect to such requested
Revolving Credit Loan, and, certifying that, both
before and after giving effect to such requested
Revolving Credit Loan, no Default or Event of Default
exists or will exist under this Agreement or any other
Loan Document, and that after taking into account such
requested Revolving Credit Loan, no default will exist
as of the Drawdown Date or thereafter.
<PAGE>
(v) The Agent will use good faith efforts to cause the
Completed Revolving Credit Loan Request to be delivered to
each Lender in accordance with Section 14.12 and in any
event on the same day or the Business Day following the day
a Completed Revolving Credit Loan Request is received by the
Agent.
Section 2.6. Conversion Options.
(a) The Borrowers may elect from time to time by written
notice in the form of Exhibit G to convert any outstanding
Revolving Credit Loan to a Revolving Credit Loan of another Type,
provided that (i) with respect to any such conversion of a LIBOR
Rate Loan to a Prime Rate Loan, the Borrower Representative shall
give the Agent at least three (3) Business Days prior written
notice of such election; (ii) with respect to any such conversion
of a Prime Rate Loan to a LIBOR Rate Loan, the Borrower
Representative shall give the Agent at least four (4) LIBOR
Business Days prior written notice of such election; (iii) with
respect to any such conversion of a LIBOR Rate Loan into a Prime
Rate Loan, such conversion shall only be made on the last day of
the Interest Period with respect thereto unless the Borrowers pay
the related LIBOR Breakage Costs at the time of such conversion
and (iv) no Revolving Credit Loan may be converted into a LIBOR
Rate Loan when any Default or Event of Default has occurred and
is continuing. All or any part of outstanding Revolving Credit
Loans of any Type may be converted into a Revolving Credit Loan
of another Type as provided herein, provided that any partial
conversion shall be in an aggregate principal amount of
$2,000,000 or a integral multiple of $500,000 in excess thereof.
Each Conversion Request relating to the conversion of a Prime
Rate Loan to a LIBOR Rate Loan shall be irrevocable by the
Borrowers.
(b) Any Revolving Credit Loan of any Type may be continued
as such upon the expiration of the Interest Period with respect
thereto (i) in the case of Prime Rate Loans, automatically and
(ii) in the case of LIBOR Rate Loans by compliance by the
Borrower Representative with the notice provisions contained in
Section 2.6(a); provided that no LIBOR Rate Loan may be continued
as such when any Default or Event of Default has occurred and is
continuing but shall be automatically converted to a Prime Rate
Loan on the last day of the first Interest Period relating
thereto ending during the continuance of any Default or Event of
Default. The Agent shall notify the Lenders promptly when any
such automatic conversion contemplated by this Section 2.6(b) is
scheduled to occur.
(c) In the event that the Borrower Representative does not
notify the Agent of its election hereunder with respect to the
continuation of any LIBOR Rate Loan as such, the affected LIBOR
Rate Loan shall automatically be converted to a Prime Rate Loan
at the end of the applicable Interest Period.
(d) The Borrowers may not request or elect a LIBOR Rate
Loan pursuant to Section 2.5, elect to convert a Prime Rate Loan
to a LIBOR Rate Loan pursuant to Section 2.6(a), or elect to
<PAGE>
continue a LIBOR Rate Loan pursuant to Section 2.6(b) if, after
giving effect thereto, there would be greater than seven (7)
LIBOR Rate Loans then outstanding. Any Loan Request for a LIBOR
Rate Loan that would create greater than seven (7) LIBOR Rate
Loans outstanding shall be deemed to be a Loan Request for a
Prime Rate Loan.
Section 2.7. Funds for Revolving Credit Loans.
(a) Subject to the other provisions of this Section 2, not
later than 12:00 p.m. (New York City time) on the proposed
Drawdown Date of any Revolving Credit Loan, each of the Lenders
will make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Lender's
Commitment Percentage of the amount of the requested Revolving
Credit Loan; provided that each Lender shall provide notice to
the Agent of its intent not to make available its Commitment
Percentage of any requested Revolving Credit Loan as soon as
possible after receipt of any Completed Revolving Credit Loan
Request, and in any event not later than 4:00 p.m. (New York City
time) on (x) the Business Day prior to the Drawdown Date of any
requested Prime Rate Loan and (y) the third Business Day prior to
the Drawdown Date of any requested LIBOR Rate Loan. Upon receipt
from each Lender of such amount, the Agent will make available to
the Borrowers in the Borrower Representative's account with the
Agent the aggregate amount of such Revolving Credit Loan made
available to the Agent by the Lenders; all such funds received by
the Agent by 12:00 p.m. (New York City time) on any Business Day
will be made available to the Borrowers not later than 2:00 p.m.
on the same Business Day. Funds received after such time will be
made available by not later than 12:00 p.m. on the next Business
Day. The failure or refusal of any Lender to make available to
the Agent at the aforesaid time and place on any Drawdown Date
the amount of its Commitment Percentage of the requested
Revolving Credit Loan shall not relieve any other Lender from its
several obligation hereunder to make available to the Agent the
amount of its Commitment Percentage of any requested Revolving
Credit Loan but in no event shall the Agent (in its capacity as
Agent) have any obligation to make any funding or shall any
Lender be obligated to fund more than its Commitment Percentage
of the requested Revolving Credit Loan or to increase its
Commitment Percentage on account of such failure or otherwise.
(b) The Agent may, unless notified to the contrary by any
Lender prior to a Drawdown Date, assume that such Lender has made
available to the Agent on such Drawdown Date the amount of such
Lender's Commitment Percentage of the Revolving Credit Loan to be
made on such Drawdown Date, and the Agent may (but it shall not
be required to), in reliance upon such assumption, make available
to the Borrowers a corresponding amount. If any Lender makes
available to the Agent such amount on a date after such Drawdown
Date, such Lender shall pay to the Agent on demand an amount
equal to the product of (i) the average, computed for the period
referred to in clause (iii) below, of the weighted average
interest rate paid by the Agent for federal funds acquired by the
Agent during each day included in such period, multiplied by (ii)
the amount of such Lender's Commitment Percentage of such
<PAGE>
Revolving Credit Loan, multiplied by (iii) a fraction, the
numerator of which is the number of days that elapsed from and
including such Drawdown Date to the date on which the amount of
such Lender's Commitment Percentage of such Revolving Credit Loan
shall become immediately available to the Agent, and the
denominator of which is 360. A statement of the Agent submitted
to such Lender with respect to any amounts owing under this
paragraph shall be prima facie evidence of the amount due and
owing to the Agent by such Lender. If the amount of such
Lender's Commitment Percentage of such Revolving Credit Loans is
not made available to the Agent by such Lender within three (3)
Business Days following such Drawdown Date, the Agent shall be
entitled to recover such amount from the Borrowers on demand,
with interest thereon at the rate per annum applicable to the
Revolving Credit Loans made on such Drawdown Date.
Section 2.8. Repayment of the Revolving Credit Loans at
Maturity. The Borrowers jointly and severally promise to pay on
the Maturity Date, and there shall become absolutely due and
payable on the Maturity Date, all unpaid principal of the
Revolving Credit Loans outstanding on such date, together with
any and all accrued and unpaid interest thereon, the unpaid
balance of the Commitment Fee accrued through such date, and any
and all other unpaid amounts due under this Agreement, the
Revolving Credit Notes or any other of the Loan Documents.
Section 2.9. Optional Repayments of Revolving Credit
Loans. The Borrowers shall have the right, at their election, to
prepay the outstanding amount of the Revolving Credit Loans, in
whole or in part, at any time without penalty or premium;
provided that the outstanding amount of any LIBOR Rate Loans may
not be prepaid unless the Borrowers pay any LIBOR Breakage Costs
for each LIBOR Rate Loan so prepaid at the time of such
prepayment. The Borrower Representative shall give the Agent, no
later than 10:00 a.m., New York City time, at least two (2)
Business Days' prior written notice of any prepayment pursuant to
this Section 2.9 of any Prime Rate Loans, and at least four (4)
LIBOR Business Days' notice of any proposed prepayment pursuant
to this Section 2.9 of LIBOR Rate Loans, specifying the proposed
date of prepayment of Revolving Credit Loans and the principal
amount to be prepaid. Each such partial prepayment of the
Revolving Credit Loans shall be in an amount of $2,000,000 or
integral multiple of $500,000 in excess thereof, or, if less, the
outstanding balance of the Revolving Credit Loans then being
repaid, shall be accompanied by the payment of all charges
outstanding on all Revolving Credit Loans so prepaid and of all
accrued interest on the principal prepaid to the date of payment,
and shall be applied, in the absence of instruction by the
Borrower Representative, first to the principal of Prime Rate
Loans and then to the principal of LIBOR Rate Loans, at the
Agent's option.
Section 2.10. Mandatory Repayments of Revolving Credit
Loans. If at any time the outstanding amount of the Revolving
Credit Loans exceeds the Total Commitment, the Borrowers shall
immediately pay the amount of such excess to the Agent for the
respective accounts of the Lenders for application to the
Revolving Credit Loans.
<PAGE>
Section 3. INTENTIONALLY OMITTED.
Section 4. CERTAIN GENERAL PROVISIONS.
Section 4.1. Funds for Payments.
(a) All payments of principal, interest, fees, and any
other amounts due hereunder or under any of the other Loan
Documents shall be made to the Agent, for the respective accounts
of the Lenders or (as the case may be) the Agent, at the Agent's
Head Office, in each case in Dollars and in immediately available
funds.
(b) All payments by the Borrowers hereunder and under any
of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory liens, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or
any political subdivision thereof or taxing or other authority
therein unless the Borrowers are compelled by law to make such
deduction or withholding. If any such obligation is imposed upon
the Borrowers with respect to any amount payable by them
hereunder or under any of the other Loan Documents, the Borrowers
shall pay to the Agent, for the account of the Lenders or (as the
case may be) the Agent, on the date on which such amount is due
and payable hereunder or under such other Loan Document, such
additional amount in Dollars as shall be necessary to enable the
Lenders to receive the same net amount which the Lenders would
have received on such due date had no such obligation been
imposed upon the Borrowers. The Borrower Representative will
deliver promptly to the Agent certificates or other valid
vouchers for all taxes or other charges deducted from or paid
with respect to payments made by the Borrowers hereunder or under
such other Loan Document.
(c) Each Lender that is not incorporated or organized under
the laws of the United States of America or a state thereof or
the District of Columbia (a "Non-U.S. Lender") agrees that, prior
to the first date on which any payment is due to it hereunder, it
will deliver to the Borrower Representative and the Agent two
duly completed copies of United States Internal Revenue Service
Form 1001 or 4224 or successor applicable form, as the case may
be, certifying in each case that such Non-U.S. Lender is entitled
to receive payments under this Agreement and the Notes payable to
it, without deduction or withholding of any United States federal
income taxes. Each Non-U.S. Lender that so delivers a Form 1001
or 4224 pursuant to the preceding sentence further undertakes to
deliver to each of the Borrower Representative and the Agent two
further copies of Form 1001 or 4224 or successor applicable form,
or other manner of certification, as the case may be, on or
before the date that any such letter or form expires or becomes
obsolete or after the occurrence of any event requiring a change
in the most recent form previously delivered by it to the
Borrower Representative, and such extensions or renewals thereof
as may reasonably be requested by the Borrower Representative,
certifying in the case of a Form 1001 or 4224 that such Non-U.S.
<PAGE>
Lender is entitled to receive payments under this Agreement and
the Notes without deduction or withholding of any United States
federal income taxes, unless in any such case an event
(including, without limitation, any change in treaty, law or
regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Non-U.S. Lender from
duly completing and delivering any such form with respect to it
and such Non-U.S. Lender advises the Borrower Representative that
it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
(d) The Borrowers shall not be required to pay any
additional amounts to any Non-U.S. Lender in respect of United
States Federal withholding tax pursuant to Section 4.1(b) to the
extent that (i) the obligation to withhold amounts with respect
to United States Federal withholding tax existed on the date such
Non-U.S. Lender became a party to this Agreement or, with respect
to payments to a different lending office designated by the
Non-U.S. Lender as its applicable lending office (a "New Lending
Office"), the date such Non-U.S. Lender designated such New
Lending Office with respect to the Loans; provided, however, that
this clause (i) shall not apply to any transferee or New Lending
Office as a result of an assignment, transfer or designation made
at the request of the Borrowers; and provided further, however,
that this clause (i) shall not apply to the extent the indemnity
payment or additional amounts any transferee, or Lender through a
New Lending Office, would be entitled to receive without regard
to this clause (i) do not exceed the indemnity payment or
additional amounts that the Person making the assignment or
transfer to such transferee, or Lender making the designation of
such New Lending Office, would have been entitled to receive in
the absence of such assignment, transfer or designation; or (ii)
the obligation to pay such additional amounts would not have
arisen but for a failure by such Non-U.S. Lender to comply with
the provisions of paragraph (c) above.
Section 4.2. Computations. All computations of interest on
the Loans and of other fees to the extent applicable shall be
made on the basis of a 360-day year and the actual number of days
elapsed. Except as otherwise provided in the definition of the
term "Interest Period" with respect to LIBOR Rate Loans, whenever
a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business
Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the Note Records
from time to time shall constitute prima facie evidence of the
principal amount thereof.
Section 4.3. Inability to Determine LIBOR Rate. In the
event, prior to the commencement of any Interest Period relating
to any LIBOR Rate Loan, the Agent shall reasonably determine that
adequate and reasonable methods do not exist for ascertaining the
LIBOR Rate that would otherwise determine the rate of interest to
be applicable to any LIBOR Rate Loan during any Interest Period,
the Agent shall forthwith give notice of such determination
<PAGE>
(which shall be conclusive and binding on the Borrowers) to the
Borrower Representative and the Lenders. In such event (a) any
Loan Request with respect to LIBOR Rate Loans shall be
automatically withdrawn and shall be deemed a request for Prime
Rate Loans, (b) each LIBOR Rate Loan will automatically, on the
last day of the then current Interest Period thereof, become a
Prime Rate Loan, and (c) the obligations of the Lenders to make
LIBOR Rate Loans shall be suspended until the Agent reasonably
determines that the circumstances giving rise to such suspension
no longer exist, whereupon the Agent shall so notify the Borrower
Representative and the Lenders.
Section 4.4. Illegality. Notwithstanding any other
provisions herein, if any present or future law, regulation,
treaty or directive or in the interpretation or application
thereof shall make it unlawful for any Lender to make or maintain
LIBOR Rate Loans, such Lender shall forthwith give notice of such
circumstances to the Borrower Representative and the other
Lenders and thereupon (a) the commitment of such Lender to make
LIBOR Rate Loans or convert Prime Rate Loans to LIBOR Rate Loans
shall forthwith be suspended and (b) such Lender's Commitment
Percentage of LIBOR Rate Loans then outstanding shall be
converted automatically to Prime Rate Loans on the last day of
each Interest Period applicable to such LIBOR Rate Loans or
within such earlier period as may be required by law, all until
such time as it is no longer unlawful for such Lender to make or
maintain LIBOR Rate Loans. The Borrowers hereby jointly and
severally agree to promptly pay the Agent for the account of such
Lender, upon demand, any additional amounts necessary to
compensate such Lender for any costs incurred by such Lender in
making any conversion required by this Section 4.4 prior to the
last day of an Interest Period with respect to a LIBOR Rate Loan,
including any interest or fees payable by such Lender to lenders
of funds obtained by it in order to make or maintain its LIBOR
Rate Loans hereunder.
Section 4.5. Additional Costs, Etc. If any present or
future applicable law, which expression, as used herein, includes
statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or
the interpretation thereof and requests, directives, instructions
and notices at any time or from time to time hereafter made upon
or otherwise issued to any Lender or the Agent by any central
bank or other fiscal, monetary or other authority (whether or not
having the force of law), shall:
(a) subject any Lender or the Agent to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature
with respect to this Agreement, the other Loan Documents, such
Lender's Commitment or the Loans (other than taxes based upon or
measured by the income or profits of such Lender or the Agent),
or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Lender
of the principal of or the interest on any Loans or any other
amounts payable to the Agent or any Lender under this Agreement
or the other Loan Documents, or
<PAGE>
(c) impose or increase or render applicable (other than to
the extent specifically provided for elsewhere in this Agreement)
any special deposit, reserve, assessment, liquidity, capital
adequacy or other similar requirements (whether or not having the
force of law) against assets held by, or deposits in or for the
account of, or loans by, or commitments of an office of any
Lender, or
(d) impose on any Lender or the Agent any other conditions
or requirements with respect to this Agreement, the other Loan
Documents, the Loans, such Lender's Commitment, or any class of
loans, or commitments of which any of the Loans or such Lender's
Commitment forms a part;
and the result of any of the foregoing is
(i) to increase the cost to any Lender of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Lender's Commitment, or
(ii) to reduce the amount of principal, interest or
other amount payable to such Lender or the Agent hereunder
on account of such Lender's Commitment or any of the Loans,
or
(iii) to require such Lender or the Agent to make any
payment or to forego any interest or other sum payable
hereunder, the amount of which payment or foregone interest
or other sum is calculated by reference to the gross amount
of any sum receivable or deemed received by such Lender or
the Agent from the Borrowers hereunder,
then, and in each such case, the Borrowers will, within thirty
(30) days of demand made by such Lender or (as the case may be)
the Agent at any time and from time to time and as often as the
occasion therefor may arise, pay to such Lender such additional
amounts as such Lender shall determine in good faith to be
sufficient to compensate such Lender for such additional cost,
reduction, payment or foregone interest or other sum, provided
that such Lender is generally imposing similar charges on its
other similarly situated borrowers.
Section 4.6. Capital Adequacy. If after the date hereof
any Lender or the Agent determines that (i) the adoption of or
change in any law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law)
regarding capital requirements for banks or bank holding
companies or any change in the interpretation or application
thereof by a court or governmental authority with appropriate
jurisdiction, or (ii) compliance by such Lender or the Agent or
any Person controlling such Lender or the Agent with any law,
governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) of any such Person
regarding capital adequacy, has the effect of reducing the return
on such Lender's or the Agent's Commitment with respect to any
Loans to a level below that which such Lender or the Agent could
have achieved but for such adoption, change or compliance (taking
<PAGE>
into consideration such Lender's or the Agent's then existing
policies with respect to capital adequacy and assuming full
utilization of such entity's capital) by any amount deemed by
such Lender or (as the case may be) the Agent to be material,
then such Lender or the Agent may notify the Borrower
Representative of such fact. To the extent that the amount of
such reduction in the return on capital is not reflected in the
Prime Rate or the LIBOR Rate, the Borrowers jointly and severally
agree to pay such Lender or (as the case may be) the Agent for
the amount of such reduction in the return on capital as and when
such reduction is determined within thirty (30) days of
presentation by such Lender or (as the case may be) the Agent of
a certificate in accordance with Section 4.7 hereof. Each Lender
shall allocate such cost increases among its customers in good
faith and on an equitable basis.
Section 4.7. Certificate. A certificate setting forth any
additional amounts payable pursuant to Section 4.5 or 4.6 and a
brief explanation of such amounts (including the calculation
thereof) which are due, submitted by any Lender or the Agent to
the Borrower Representative, shall be prima facie evidence that
such amounts are due and owing.
Section 4.8. Indemnity. In addition to the other
provisions of this Agreement regarding such matters, but without
duplication to the extent a Lender has been compensated pursuant
thereto, the Borrowers jointly and severally agree to indemnify
the Agent and each Lender and to hold the Agent and each Lender
harmless from and against any loss, cost or expense (including
loss of anticipated profits) that the Agent or such Lender may
sustain or incur as a consequence of (a) the failure by the
Borrowers to pay any principal amount of or any interest on any
LIBOR Rate Loans as and when due and payable, including any such
loss or expense arising from interest or fees payable by the
Agent or such Lender to lenders of funds obtained by it in order
to maintain its LIBOR Rate Loans, (b) the failure by the
Borrowers to make a borrowing or conversion after the Borrowers
have given a Completed Revolving Credit Loan Request for a LIBOR
Rate Loan or a Conversion Request for a LIBOR Rate Loan, and (c)
the making of any payment of a LIBOR Rate Loan or the making of
any conversion of any such Loan to a Prime Rate Loan on a day
that is not the last day of the applicable Interest Period with
respect thereto, including interest or fees payable by the Agent
or a Lender to lenders of funds obtained by it in order to
maintain any such LIBOR Rate Loans.
Section 4.9. Interest During Event of Default; Late
Charges. During the continuance of an Event of Default,
outstanding principal and (to the extent permitted by applicable
law) interest on the Loans and all other amounts payable
hereunder or under any of the other Loan Documents shall bear
interest at a rate per annum equal to four percent (4%) above the
interest rate that would otherwise be applicable until such
amount shall be paid in full (after as well as before judgment).
In addition, the Borrowers shall pay on demand a late charge
equal to five percent (5%) of any amount of principal and/or
interest charges on the Loans which is not paid within ten (10)
days of the date when due.
<PAGE>
Section 4.10. Concerning Joint and Several Liability of the
Borrowers.
(a) Each of the Borrowers is accepting joint and several
liability hereunder and under the other Loan Documents in
consideration of the financial accommodations to be provided by
the Lenders under this Agreement, for the mutual benefit,
directly and indirectly, of each of the Borrowers and in
consideration of the undertakings of each other Borrower to
accept joint and several liability for the Obligations.
(b) Each of the Borrowers, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety
but also as a co-debtor, joint and several liability with the
other Borrowers, with respect to the payment and performance of
all of the Obligations (including, without limitation, any
Obligations arising under this Section 4.10), it being the
intention of the parties hereto that all the Obligations shall be
the joint and several Obligations of each of the Borrowers
without preferences or distinction among them.
(c) If and to the extent that any of the Borrowers shall
fail to make any payment with respect to any of the Obligations
as and when due or to perform any of the Obligations in
accordance with the terms thereof, then in each such event the
other Borrowers will make such payment with respect to, or
perform, such Obligation.
(d) The Obligations of each of the Borrowers under the
provisions of this Section 4.10 constitute full recourse
Obligations of each of the Borrowers enforceable against each
such Person to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of
this Agreement or any other circumstance whatsoever.
(e) Except as otherwise expressly provided in this
Agreement, each of the Borrowers hereby waives notice of
acceptance of its joint and several liability, notice of any
Loans made under this Agreement, notice of any action at any time
taken or omitted by the Lenders under or in respect of any of the
Obligations, and, generally, to the extent permitted by
applicable law, all demands, notices and other formalities of
every kind in connection with this Agreement. Each of the
Borrowers hereby assents to, and waives notice of, any extension
or postponement of the time for the payment of any of the
Obligations, the acceptance of any payment of any of the
Obligations, the acceptance of any partial payment thereon, any
waiver, consent or other action or acquiescence by the Lenders at
any time or times in respect of any default by any of the
Borrowers in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all
other indulgences whatsoever by the Lenders in respect of any of
the Obligations, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any
security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any of the Borrowers.
<PAGE>
Without limiting the generality of the foregoing, each of the
Borrowers assents to any other action or delay in acting or
failure to act on the part of the Lenders with respect to the
failure by any of the Borrowers to comply with any of its
respective Obligations, including, without limitation, any
failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this
Section 4.10, afford grounds for terminating, discharging or
relieving any of the Borrowers, in whole or in part, from any of
its Obligations under this Section 4.10, it being the intention
of each of the Borrowers that, so long as any of the Obligations
hereunder remain unsatisfied, the Obligations of such Borrowers
under this Section 4.10 shall not be discharged except by
performance and then only to the extent of such performance. The
Obligations of each of the Borrowers under this Section 4.10
shall not be diminished or rendered unenforceable by any winding
up, reorganization, arrangement, liquidation, re- construction or
similar proceeding with respect to any of the Borrowers or the
Lenders. The joint and several liability of the Borrowers
hereunder shall continue in full force and effect notwithstanding
any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of
formation of any of the Borrowers or the Lenders.
(f) The provisions of this Section 4.10 are made for the
benefit of the Lenders and their successors and assigns, and may
be enforced against any or all of the Borrowers as often as
occasion therefor may arise and without requirement on the part
of the Lenders first to marshal any of their claims or to
exercise any of their rights against any other Borrower or to
exhaust any remedies available to them against any other Borrower
or to resort to any other source or means of obtaining payment of
any of the Obligations hereunder or to elect any other remedy.
The provisions of this Section 4.10 shall remain in effect until
all of the Obligations shall have been paid in full or otherwise
fully satisfied. If at any time, any payment, or any part
thereof, made in respect of any of the Obligations, is rescinded
or must otherwise be restored or returned by the Lenders upon the
insolvency, bankruptcy or reorganization of any of the Borrowers,
or otherwise, the provisions of this Section 4.10 will forthwith
be reinstated in effect, as though such payment had not been
made.
Section 4.11 Interest Limitation. All agreements between
the Borrowers and the Guarantors, on the one hand, and the
Lenders and the Agent, on the other hand, are hereby expressly
limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Loans or otherwise,
shall the amount paid or agreed to be paid to the Lenders for the
use or the forbearance of the Loans exceed the maximum
permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date
hereof; provided, however that in the event there is a change in
the law which results in a higher permissible rate of interest,
then this Agreement and other Loan Document shall be governed by
such new law as of its effective date. In this regard, it is
<PAGE>
expressly agreed that it is the intent of the Borrowers and the
Guarantors and the Lenders and the Agent in the execution,
delivery and acceptance of this Agreement and the other Loan
Documents to contract in strict compliance with the laws of the
State of New York from time to time in effect. If, under or from
any circumstances whatsoever, fulfillment of any provision hereof
or of any of the other Loan Documents at the time of performance
of such provision shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such
validity, and if under or from any circumstances whatsoever any
Lender should ever receive as interest any amount which would
exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the
principal balance of the Loans and not to the payment of
interest. This provision shall control every other provision of
all agreements between the Borrowers and the Guarantors and the
Lenders and the Agent.
Section 4.12. Reasonable Efforts to Mitigate.
Each Lender agrees that as promptly as practicable after it
becomes aware of the occurrence of an event or the existence of a
condition that would cause it to be affected under Section 4.4,
4.5 or 4.6, such Lender will give notice thereof to the Borrower
Representative, with a copy to the Agent and, to the extent so
requested by the Borrower Representative and not inconsistent
with regulatory policies applicable to such Lender, such Lender
shall use reasonable efforts and take such actions as are
reasonably appropriate (including the changing of its lending
office or branch) if as a result thereof the additional moneys
which would otherwise be required to be paid to such Lender
pursuant to such sections would be reduced other than for de
minimus amounts, or the illegality or other adverse circumstances
which would otherwise require a conversion of such Loans or
result in the inability to make such Loans pursuant to such
sections would cease to exist, and in each case if, as determined
by such Lender in its sole discretion, the taking such actions
would not adversely affect such Loans.
Section 4.13. Replacement of Lenders. If any Lender (an
"Affected Lender") (i) makes demand upon the Borrowers for (or if
the Borrowers are otherwise required to pay) amounts pursuant to
Section 4.4, 4.5 or 4.6, or (ii) is unable to make or maintain
LIBOR Rate Loans as a result of a condition described in
Section 4.4, the Borrower Representative may, within 90 days of
receipt of such demand, notice (or the occurrence of such other
event causing the Borrowers to be required to pay such
compensation or causing Section 4.4 to be applicable) as the case
may be, by notice (a "Replacement Notice") in writing to the
Agent and such Affected Lender (A) request the Affected Lender to
cooperate with the Borrowers in obtaining a replacement lender
satisfactory to the Agent and the Borrowers (the "Replacement
Lender"); (B) request the non-Affected Lenders to acquire and
assume all of the Affected Lender's Loans and Commitment as
provided herein, but none of such Lenders shall be under an
obligation to do so; or (C) designate a Replacement Lender which
<PAGE>
is an Eligible Assignee and is reasonably satisfactory to the
Agent other than when an Event of Default has occurred and is
continuing and absolutely satisfactory to the Agent when an Event
of Default has occurred and is continuing. If any satisfactory
Replacement Lender shall be obtained, and/or any of the
non-Affected Lenders shall agree to acquire and assume all of the
Affected Lender's Loans and Commitment, then such Affected Lender
shall assign, in accordance with Section 18, all of its
Commitment, Loans, Notes and other rights and obligations under
this Agreement and all other Loan Documents to such Replacement
Lender or non-Affected Lenders, as the case may be, in exchange
for payment of the principal amount so assigned and all interest
and fees accrued on the amount so assigned, plus all other
Obligations then due and payable to the Affected Lender;
provided, however, that (x) such assignment shall be in
accordance with the provisions of Section 18, shall be without
recourse, representation or warranty and shall be on terms and
conditions reasonably satisfactory to such Affected Lender and
such Replacement Lender and/or non-Affected Lenders, as the case
may be, and (y) prior to any such assignment, the Borrowers shall
have paid to such Affected Lender all amounts properly demanded
and unreimbursed under Section 4.4, 4.5 and 4.8.
Section 5. GUARANTIES. Each of the Guarantors will
jointly and severally guaranty all of the Obligations pursuant to
its Guaranty. The Obligations are full recourse obligations of
each Borrower and each Guarantor, and all of the respective
assets and properties of each Borrower and each Guarantor shall
be available for the payment in full in cash and performance of
the Obligations. Other than during the continuance of a Default
or an Event of Default, at the request of the Borrower
Representative, the Guaranty of any Subsidiary Guarantor shall be
released by the Agent if and when all of the Real Estate owned by
such Subsidiary Guarantor shall cease to be Unencumbered
Properties pursuant to the terms of this Agreement.
Section 6. REPRESENTATIONS AND WARRANTIES. Each of the
Borrowers for itself and for each of the other Borrowers and for
each Guarantor insofar as any such statements relate to such
Guarantor represents and warrants to the Agent and the Lenders
all of the statements contained in this Section 6.
Section 6.1. Authority; Etc.
(a) Organization; Good Standing.
(i) SALP is a limited partnership duly organized,
validly existing and in good standing under the laws of
the State of Delaware; Holdings is a corporation duly
organized, validly existing and in good standing under
the laws of the State of Delaware; each of SALP and
Holdings has all requisite partnership or corporate, as
the case may be, power to own its respective properties
and conduct its respective business as now conducted
and as presently contemplated; and each of SALP and
Holdings is in good standing as a foreign entity and is
duly authorized to do business in the jurisdictions
where the Real Estate owned by it is located
<PAGE>
and in each other jurisdiction where such qualification
is necessary except where a failure to be so qualified
in such other jurisdiction would not have a materially
adverse effect on any of their respective businesses,
assets or financial conditions.
(ii) Sovran is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Maryland; each Subsidiary of Sovran is
duly organized, validly existing and in good standing
as a corporation or partnership or other entity, as the
case may be, under the laws of the state of its
organization; Sovran and each of its Subsidiaries has
all requisite corporate or partnership or other entity,
as the case may be, power to own its respective
properties and conduct its respective business as now
conducted and as presently contemplated; and Sovran and
each of its Subsidiaries is in good standing as a
foreign entity and is duly authorized to do business in
the jurisdictions where such qualification is necessary
(including, as to Sovran, in the State of New York)
except where a failure to be so qualified in such other
jurisdiction would not have a materially adverse effect
on the business, assets or financial condition of
Sovran or such Subsidiary.
(iii) As to each subsequent Guarantor, a provision
similar, as applicable, to (a) (i) or (ii) above shall
be included in each such subsequent Guarantor's
Subsidiary Guaranty, and the Borrowers shall be deemed
to make for itself and on behalf of each such
subsequent Guarantor a representation and warranty as
to such provision regarding such subsequent Guarantor.
(b) Capitalization.
(i) The outstanding equity of SALP is comprised
of a general partner interest and limited partner
interests, all of which have been duly issued and are
outstanding and fully paid and non-assessable as set
forth in Schedule 6.1(b) hereto. All of the issued and
outstanding general partner interests of SALP are owned
and held of record by Holdings; all of the limited
partner interests of SALP are owned and held of record
as set forth in Schedule 6.1(b) hereto. Except as set
forth in the Agreement of Limited Partnership of SALP
or as disclosed in Schedule 6.1(b) hereto, as of the
Closing Date there are no outstanding securities or
agreements exchangeable for or convertible into or
carrying any rights to acquire any equity interests in
SALP. Except as disclosed in Schedule 6.1(b), there
are no outstanding commitments, options, warrants,
calls or other agreements (whether written or oral)
binding on SALP or Sovran which require or could
require SALP or Sovran to sell, grant, transfer,
assign, mortgage, pledge or otherwise dispose of any
<PAGE>
equity interests of SALP. No general partnership
interests of SALP are subject to any restrictions on
transfer or any partner agreements, voting agreements,
trust deeds, irrevocable proxies, or any other similar
agreements or interests (whether written or oral).
(ii) As of the Closing Date, the authorized
capital stock of, or any other equity interests in
Holdings are as set forth in Schedule 6.1(b), and the
issued and outstanding voting and non-voting shares of
the common stock of Holdings, and all of the other
equity interests in Holdings, all of which have been
duly issued and are outstanding and fully paid and
non-assessable, are owned and held of record by Sovran.
Except as disclosed in Schedule 6.1(b), as of the
Closing Date there are no outstanding securities or
agreements exchangeable for or convertible into or
carrying any rights to acquire any equity interests in
Holdings, and there are no outstanding options,
warrants, or other similar rights to acquire any shares
of any class in the capital of or any other equity
interests in Holdings. As of the Closing Date there
are no outstanding commitments, options, warrants,
calls or other agreements or obligations (whether
written or oral) binding on Holdings to issue, sell,
grant, transfer, assign, mortgage, pledge or otherwise
dispose of any shares of any class in the capital of or
other equity interests in Holdings. No shares of, or
equity interests in Holdings held by Sovran are subject
to any restrictions on transfer pursuant to any of
Holding's applicable charter, by-laws or any
shareholder agreements, voting agreements, voting
trusts, trust agreements, trust deeds, irrevocable
proxies or any other similar agreements or instruments
(whether written or oral).
(c) Due Authorization. The execution, delivery and
performance of this Agreement and the other Loan Documents to
which any of the Borrowers or any of the Guarantors is or is to
become a party and the transactions contemplated hereby and
thereby (i) are within the authority of such Borrower and such
Guarantor, (ii) have been duly authorized by all necessary
proceedings on the part of such Borrower or such Guarantor and
any general partner or other controlling Person thereof, (iii) do
not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which such
Borrower or such Guarantor is subject or any judgment, order,
writ, injunction, license or permit applicable to such Borrower
or such Guarantor, (iv) do not conflict with any provision of the
agreement of limited partnership, any certificate of limited
partnership, the charter documents or by-laws of such Borrower or
such Guarantor or any general partner or other controlling Person
thereof, and (v) do not contravene any provisions of, or
constitute a default, Default or Event of Default hereunder or a
failure to comply with any term, condition or provision of, any
other agreement, instrument, judgment, order, decree, permit,
license or undertaking binding upon or applicable to such
<PAGE>
Borrower or such Guarantor or any of such Borrower's or such
Guarantor's properties (except for any such failure to comply
under any such other agreement, instrument, judgment, order,
decree, permit, license, or undertaking as would not materially
and adversely affect the condition (financial or otherwise),
properties, business or results of operations of any Borrower,
the Operating Subsidiaries or any Guarantor) or result in the
creation of any mortgage, pledge, security interest, lien,
encumbrance or charge upon any of the properties or assets of any
Borrower, the Operating Subsidiaries or any Guarantor.
(d) Enforceability. Each of the Loan Documents to which
any of the Borrowers or any of the Guarantors is a party has been
duly executed and delivered and constitutes the legal, valid and
binding obligations of each such Borrower and each such
Guarantor, as the case may be, subject only to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors'
rights and to the fact that the availability of the remedy of
specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may
be brought.
Section 6.2. Governmental Approvals. The execution,
delivery and performance by each Borrower of this Agreement and
by each Borrower and each Guarantor of the other Loan Documents
to which such Borrower or such Guarantor is or is to become a
party and the transactions contemplated hereby and thereby do not
require (i) the approval or consent of any governmental agency or
authority other than those already obtained, or (ii) filing with
any governmental agency or authority, other than filings which
will be made with the SEC when and as required by law.
Section 6.3. Title to Properties; Leases.
The Borrowers, the Guarantors and their respective
Subsidiaries each has good title to all of its respective
properties, assets and rights of every name and nature purported
to be owned by it, including, without limitation, that:
(a) As of the Closing Date (with respect to Unencumbered
Properties designated as such on the Closing Date) or the date of
designation as an Unencumbered Property (with respect to
Unencumbered Properties acquired and/or designated as such after
the Closing Date), and in each case to the best of its knowledge
thereafter, a Borrower or (if after the Closing Date) a Guarantor
holds good and clear record and marketable fee simple title to
the Unencumbered Properties, subject to no rights of others,
including any mortgages, conditional sales agreements, title
retention agreements, liens or encumbrances, except for Permitted
Liens.
(b) Each of the Borrowers and each of the then Guarantors
will, as of the Closing Date, own all of the assets as reflected
in the financial statements of the Borrowers described in
Section 6.4 or acquired since the date of such financial
statements (except property and assets sold or otherwise disposed
of in the ordinary course of business since that date).
<PAGE>
(c) Each of the direct or indirect interests of the
Borrowers or Holdings in any Partially-Owned Entity is set forth
on Schedule 6.3 hereto, including the type of entity in which the
interest is held, the percentage interest owned by such Borrower
or Holdings in such entity, the capacity in which such Borrower
or Holdings holds the interest, and such Borrower's or Holdings'
ownership interest therein.
Section 6.4. Financial Statements. The following
financial statements have been furnished to each of the Lenders:
(a) The audited consolidated balance sheet of Sovran and
its Subsidiaries (including, without limitation, SALP) as of
December 31, 1996 and their related consolidated income
statements for the fiscal year ended December 31, 1996 and the
unaudited consolidated balance sheet of Sovran and its
Subsidiaries as of September 30, 1997 and their related
consolidated income statements for the fiscal quarter then ended,
certified by the chief financial officer of Sovran. Such balance
sheet and income statements have been prepared in accordance with
GAAP and fairly present the financial condition of Sovran and its
Subsidiaries as of the close of business on the dates thereof and
the results of operations for the fiscal periods then ended.
There are no contingent liabilities of Sovran as of such dates
involving material amounts, known to the officers of the
Borrowers, not disclosed in said financial statements and the
related notes thereto.
(b) The SEC Filings.
Section 6.5 Fiscal Year. The Borrowers and their
respective Subsidiaries each has a fiscal year which is the
twelve months ending on December 31 of each calendar year.
Section 6.6. Franchises, Patents, Copyrights, Etc. Each
Borrower, each Guarantor and each of their respective
Subsidiaries possesses all franchises, patents, copyrights,
trademarks, trade names, licenses and permits, and rights in
respect of the foregoing, adequate for the conduct of their
respective businesses substantially as now conducted without
known conflict with any rights of others, including all Permits.
Section 6.7. Litigation. Except as stated on Schedule 6.7
there are no actions, suits, proceedings or investigations of any
kind pending or threatened against any Borrower, any Guarantor or
any of their respective Subsidiaries before any court, tribunal
or administrative agency or board that, if adversely determined,
might, either individually or in the aggregate, materially
adversely affect the properties, assets, financial condition or
business of such Borrower, such Guarantor or their respective
Subsidiaries or materially impair the right of such Borrower,
such Guarantor or their respective Subsidiaries to carry on
their respective businesses substantially as now conducted by
them, or result in any substantial liability not adequately
covered by insurance, or for which adequate reserves are not
maintained, as reflected in the applicable financial statements
of the Borrowers, or which question the validity of this
Agreement or any of the other Loan Documents, or any action taken
or to be taken pursuant hereto or thereto.
<PAGE>
Section 6.8. No Materially Adverse Contracts, Etc. None
of any Borrower, any Guarantor or any of their respective
Subsidiaries is subject to any charter, corporate, partnership or
other legal restriction, or any judgment, decree, order, rule or
regulation that has or is expected in the future to have a
materially adverse effect on their respective businesses, assets
or financial conditions. None of any Borrower, any Guarantor or
any of their respective Subsidiaries is a party to any contract
or agreement that has or is expected, in the judgment of their
respective officers, to have any materially adverse effect on the
respective businesses of such Borrower, such Guarantor or any of
their respective Subsidiaries.
Section 6.9. Compliance With Other Instruments, Laws, Etc.
None of any Borrower, any Guarantor or any of their respective
Subsidiaries is in violation of any provision of its partnership
agreement, charter documents, bylaws or other organizational
documents, as the case may be, or any respective agreement or
instrument to which it may be subject or by which it or any of
its properties may be bound or any decree, order, judgment,
statute, license, rule or regulation, in any of the foregoing
cases in a manner that could result, individually or in the
aggregate, in the imposition of substantial penalties or
materially and adversely affect the financial condition,
properties or businesses of such Borrower, such Guarantor or any
of their respective Subsidiaries.
Section 6.10. Tax Status.
(a) (i) Each of the Borrowers, the Guarantors and their
respective Subsidiaries (A) has timely made or filed all federal,
state and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(B) has paid all taxes and other governmental assessments and
charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and
by appropriate proceedings, and (C) has set aside on its books
provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports
or declarations apply, and (ii) there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the respective officers of the Borrowers and
the Guarantors and their respective Subsidiaries know of no basis
for any such claim.
(b) To the best of the Borrowers' knowledge, each
Partially-Owned Entity (i) has timely made or filed all federal,
state and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and
charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and
by appropriate proceedings, and (iii) has set aside on its books
provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports
or declarations apply. To the best of the Borrowers' knowledge,
except as otherwise disclosed in writing to the Agent, there are
<PAGE>
no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction from any Partially-Owned
Entity, and the officers of the Borrowers know of no basis for
any such claim.
Section 6.11. No Event of Default; No Materially Adverse
Changes. No default, Default or Event of Default has occurred
and is continuing. Since September 30, 1997 there has occurred
no materially adverse change in the financial condition or
business of Sovran and its Subsidiaries or SALP and its
Subsidiaries as shown on or reflected in the consolidated balance
sheet of Sovran and its Subsidiaries as at September 30, 1997, or
the consolidated statement of income for the fiscal quarter then
ended, other than changes in the ordinary course of business that
have not had any materially adverse effect either individually or
in the aggregate on the business or financial condition or
properties of Sovran, SALP or any of their respective
Subsidiaries.
Section 6.12. Investment Company Acts. None of any
Borrower, any Guarantor or any of their respective Subsidiaries
is an "investment company", or an "affiliated company" or a
"principal underwriter" of an "investment company", as such terms
are defined in the Investment Company Act of 1940.
Section 6.13. Absence of UCC Financing Statements, Etc.
Except for Permitted Liens, as of the Closing Date there will be
no financing statement, security agreement, chattel mortgage,
real estate mortgage, equipment lease, financing lease, option,
encumbrance or other document filed or recorded with any filing
records, registry, or other public office, that purports to
cover, affect or give notice of any present or possible future
lien or encumbrance on, or security interest in, any Unencumbered
Property. Neither any Borrower nor any Guarantor has pledged or
granted any lien on or security interest in or otherwise
encumbered or transferred any of their respective interests in
any Subsidiary (including in the case of Sovran, its interests in
SALP, and in the case of any Borrower, its interests in the
Operating Subsidiaries) or in any Partially-Owned Entity.
Section 6.14. Absence of Liens. A Borrower or a Guarantor
is the owner of the Unencumbered Properties free from any lien,
security interest, encumbrance and any other claim or demand,
except for Permitted Liens.
Section 6.15. Certain Transactions. Except as set forth on
Schedule 6.15, none of the officers, partners, directors, or
employees of any Borrower or any Guarantor or any of their
respective Subsidiaries is presently a party to any transaction
with any Borrower, any Guarantor or any of their respective
Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, partner,
director or such employee or, to the knowledge of the Borrowers,
any corporation, partnership, trust or other entity in which any
<PAGE>
officer, partner, director, or any such employee or natural
Person related to such officer, partner, director or employee or
other Person in which such officer, partner, director or employee
has a direct or indirect beneficial interest has a substantial
interest or is an officer, director, trustee or partner.
Section 6.16. Employee Benefit Plans.
Section 6.16.1. In General.
Each Employee Benefit Plan and each Guaranteed Pension
Plan has been maintained and operated in compliance in all
material respects with the provisions of ERISA and, to the
extent applicable, the Code, including but not limited to
the provisions thereunder respecting prohibited transactions
and the bonding of fiduciaries and other persons handling
plan funds as required by Section 412 of ERISA. The
Borrowers have heretofore delivered to the Agent the most
recently completed annual report, Form 5500, with all
required attachments, and actuarial statement required to be
submitted under Section 103(d) of ERISA, with respect to
each Guaranteed Pension Plan.
Section 6.16.2. Terminability of Welfare Plans.
No Employee Benefit Plan, which is an employee welfare
benefit plan within the meaning of Section 3(1) or
Section 3(2)(B) of ERISA, provides benefit coverage
subsequent to termination of employment, except as required
by Title I, Part 6 of ERISA or the applicable state
insurance laws. The Borrowers may terminate each such Plan
at any time (or at any time subsequent to the expiration of
any applicable bargaining agreement) in the discretion of
the Borrowers without liability to any Person other than for
claims arising prior to termination.
Section 6.16.3. Guaranteed Pension Plans.
Each contribution required to be made to a Guaranteed
Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice
or lien provisions of Section 302(f) of ERISA, or otherwise,
has been timely made. No waiver of an accumulated funding
deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan, and
neither any Borrower or any Guarantor nor any ERISA
Affiliate is obligated to or has posted security in
connection with an amendment to a Guaranteed Pension Plan
pursuant to Section 307 of ERISA or Section 401(a)(29) of
the Code. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been
incurred by any Borrower or any Guarantor or any ERISA
Affiliate with respect to any Guaranteed Pension Plan and
there has not been any ERISA Reportable Event (other than an
ERISA Reportable Event as to which the requirement of 30
days notice has been waived), or any other event or
condition which presents a material risk of termination of
<PAGE>
any Guaranteed Pension Plan by the PBGC. Based on the latest
valuation of each Guaranteed Pension Plan (which in each
case occurred within twelve months of the date of this
representation), and on the actuarial methods and
assumptions employed for that valuation, the aggregate
benefit liabilities of all such Guaranteed Pension Plans
within the meaning of Section 4001 of ERISA did not exceed
the aggregate value of the assets of all such Guaranteed
Pension Plans, disregarding for this purpose the benefit
liabilities and assets of any Guaranteed Pension Plan with
assets in excess of benefit liabilities, by more than
$500,000.
Section 6.16.4. Multiemployer Plans.
Neither any Borrower or any Guarantor nor any ERISA
Affiliate has incurred any material liability (including
secondary liability) to any Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer
Plan under Section 4201 of ERISA or as a result of a sale of
assets described in Section 4204 of ERISA. Neither any
Borrower nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under
and within the meaning of Section 4241 or Section 4245 of
ERISA or is at risk of entering reorganization or becoming
insolvent, or that any Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of
ERISA.
Section 6.17. Regulations U and X. The proceeds of the
Loans shall be used for the purposes described in Section 7.12.
No portion of any Loan is to be used for the purpose of
purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and
224.
Section 6.18. Environmental Compliance. The Borrowers have
caused environmental assessments to be conducted and/or taken
other steps to investigate the past and present environmental
condition and usage of the Real Estate and the operations
conducted thereon. Based upon such assessments and/or
investigation, the Borrowers have determined that:
(a) None of any Borrower, any Guarantor, any of their
respective Subsidiaries or any operator of the Real Estate or any
portion thereof, or any operations thereon is in violation, or
alleged violation, of any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, or any state or local
statute, regulation, ordinance, order or decree relating to
health, safety or the environment (hereinafter "Environmental
<PAGE>
Laws"), which violation or alleged violation has, or its
remediation would have, by itself or when aggregated with all
such other violations or alleged violations, a material adverse
effect on the environment or the business, assets or financial
condition of any Borrower, any Guarantor or any of their
respective Subsidiaries, or constitutes a Disqualifying
Environmental Event with respect to any Unencumbered Property.
(b) None of any Borrower, any Guarantor or any of their
respective Subsidiaries has received notice from any third party,
including, without limitation, any federal, state or local
governmental authority, (i) that it has been identified by the
United States Environmental Protection Agency ("EPA) as a
potentially responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B (1986), (ii) that any hazardous waste, as defined by
42 U.S.C. Section 6903(5), any hazardous substances as defined by
42 U.S.C. Section 9601(14), any pollutant or contaminant as
defined by 42 U.S.C. Section 9601(33) or any toxic substances,
oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances")
which it has generated, transported or disposed of has been found
at any site at which a federal, state or local agency or other
third party has conducted or has ordered that any Borrower, any
Guarantor or any of their respective Subsidiaries conduct a
remedial investigation, removal or other response action pursuant
to any Environmental Law, or (iii) that it is or shall be a named
party to any claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case, contingent or
otherwise) arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection
with the release of Hazardous Substances; which event described
in any such notice would have a material adverse effect on the
business, assets or financial condition of any Borrower, any
Guarantor or any of their respective Subsidiaries, or constitutes
a Disqualifying Environmental Event with respect to any
Unencumbered Property.
(c) Except as set forth on Schedule 6.18, (i) no portion of
the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance
with applicable Environmental Laws; and no underground tank or
other underground storage receptacle for Hazardous Substances is
located on any portion of any Real Estate except in accordance
with applicable Environmental Laws, (ii) in the course of any
activities conducted by the Borrowers, the Guarantors, their
respective Subsidiaries or the operators of their respective
properties, or any ground or space tenants on any Real Estate, no
Hazardous Substances have been generated or are being used on
such Real Estate except in accordance with applicable
Environmental Laws, (iii) there has been no present or past
releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping
(a "Release") or threatened Release of Hazardous Substances on,
upon, into or from the Real Estate, (iv) there have been no
Releases on, upon, from or into any real property in the vicinity
of any of the Real Estate which, through soil or groundwater
<PAGE>
contamination, may have come to be located on such Real Estate,
and (v) any Hazardous Substances that have been generated on any
of the Real Estate during ownership thereof by a Borrower or a
Guarantor or any of their respective Subsidiaries have been
transported off-site only by carriers having an identification
number issued by the EPA, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as
required under applicable Environmental Laws, which transporters
and facilities have been and are, to the best of the Borrowers'
knowledge, operating in compliance with such permits and
applicable Environmental Laws; any of which events described in
clauses (i) through (v) above would have a material adverse
effect on the business, assets or financial condition of any
Borrower, any Guarantor or any of their respective Subsidiaries,
or constitutes a Disqualifying Environmental Event with respect
to any Unencumbered Property. Notwithstanding that the
representations contained herein are limited to the knowledge of
the Borrowers, any such limitation shall not affect the covenants
specified in Section 7.11 or elsewhere in this Agreement.
(d) None of any Borrower, any Guarantor or any of the Real
Estate is subject to any applicable Environmental Law requiring
the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of
notice to any governmental agency or the recording or delivery to
other Persons of an environmental disclosure document or
statement, by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the effectiveness of
any other transactions contemplated hereby.
Section 6.19. Subsidiaries. Schedule 6.19 sets forth all
of the respective Subsidiaries of Sovran or SALP, and Schedule
6.19 will be updated to reflect any subsequent Guarantor and its
Subsidiaries, if any.
Section 6.20. Loan Documents. All of the representations
and warranties of the Borrowers and the Guarantors made in this
Agreement and in the other Loan Documents or any document or
instrument delivered to the Agent or the Lenders pursuant to or
in connection with any of such Loan Documents are true and
correct in all material respects and do not include any untrue
statement of a material fact or omit to state a material fact
required to be stated or necessary to make such representations
and warranties not materially misleading.
Section 6.21. REIT Status. Sovran has not taken any action
that would prevent it from maintaining its qualification as a
REIT for its tax year ended December 31, 1997 or from maintaining
such qualification at all times during the term of the Loans.
Sovran is not a "pension held REIT" within the meaning of
Section 856(h)(3)(D) of the Code.
Section 6.22. Subsequent Guarantors. The foregoing
representations and warranties in Section 6.3 through
Section 6.20, as the same are true, correct and applicable to
Guarantors existing on the Closing Date, shall be true, correct
and applicable to each subsequent Guarantor.
<PAGE>
Section 6.23. Trading Status. No security of Sovran traded
on the New York Stock Exchange has been suspended from trading.
Section 6.24. Title Policies. To the best of the
Borrowers' knowledge, except as set forth on Schedule 6.24
hereto, each of the Title Policies delivered to the Agent
pursuant to Section 10.5 with respect to an Unencumbered Property
remains true and correct in all material respects as of the
Closing Date.
Section 7. AFFIRMATIVE COVENANTS OF THE BORROWERS AND
THE GUARANTORS. Each of the Borrowers for itself and on behalf
of each of the Guarantors (if and to the extent expressly
included in Subsections contained in this Section) covenants and
agrees that, so long as any Loan or Note is outstanding or the
Lenders have any obligation to make any Loans:
Section 7.1. Punctual Payment. The Borrowers will duly
and punctually pay or cause to be paid the principal and interest
on the Loans and all interest, fees, charges and other amounts
provided for in this Agreement and the other Loan Documents, all
in accordance with the terms of this Agreement and the Notes, and
the other Loan Documents.
Section 7.2. Maintenance of Office. Each of the Borrowers
and the Guarantors will maintain its chief executive office in
Williamsville, New York, or at such other place in the contiguous
United States of America as each of them shall designate upon
written notice to the Agent to be delivered within five (5) days
of such change, where notices, presentations and demands to or
upon the Borrowers and the Guarantors, as the case may be, in
respect of the Loan Documents may be given or made.
Section 7.3. Records and Accounts. Each of the Borrowers
and the Guarantors will (a) keep, and cause each of its
Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in
accordance with GAAP, (b) maintain adequate accounts and reserves
for all taxes (including income taxes), contingencies,
depreciation and amortization of its properties and the
properties of its Subsidiaries and (c) at all times engage Ernst
& Young LLP or other Accountants as the independent certified
public accountants of Sovran, SALP and their respective
Subsidiaries and will not permit more than thirty (30) days to
elapse between the cessation of such firm's (or any successor
firm's) engagement as the independent certified public
accountants of Sovran, SALP and their respective Subsidiaries and
the appointment in such capacity of a successor firm as
Accountants.
Section 7.4. Financial Statements, Certificates and
Information. The Borrowers will deliver to the Agent:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each of its fiscal years:
(i) in the case of SALP, if prepared, the audited
consolidated balance sheet of SALP and its subsidiaries
<PAGE>
at the end of such year, and the related audited
consolidated statements of income, funds available for
distribution and cash flows for the year then ended, in
each case (except for cash flow statements) with
supplemental consolidating schedules provided by SALP;
and
(ii) in the case of Sovran, the audited consolidated
and consolidating (for Subsidiaries which own Real
Estate, if any Subsidiary becomes the owner of Real
Estate pursuant to Section 7.6 or Section 7.7 hereof)
balance sheet of Sovran and its subsidiaries
(including, without limitation, SALP and its
subsidiaries) at the end of such year, and the related
audited consolidated and consolidating (for
Subsidiaries which own Real Estate, if any Subsidiary
becomes the owner of Real Estate pursuant to
Section 7.6 or Section 7.7 hereof) statements of
income, funds available for distribution, and cash
flows for the year then ended;
each setting forth in comparative form the figures for the
previous fiscal year and all such statements to be in reasonable
detail, prepared in accordance with GAAP, and, in each case,
accompanied by an auditor's report prepared without qualification
by the Accountants, together with a written statement from such
Accountants to the effect that they have read a copy of this
Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any default,
Default, Event of Default or of any facts or circumstances that
would cause Sovran not to continue to qualify as a REIT for
federal income tax purposes, or, if such accountants shall have
obtained knowledge of any then existing default, Default, Event
of Default or such facts or circumstances, they shall make
disclosure thereof in such statement;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of its fiscal
quarters:
(i) in the case of SALP, if prepared, copies of the
unaudited consolidated balance sheet of SALP and its
subsidiaries as at the end of such quarter, and the
related unaudited consolidated statements of income,
funds available for distribution and cash flows for the
portion of SALP's fiscal year then elapsed, with
supplemental consolidating schedules (except with
respect to cash flow statements) provided by SALP; and
(ii) in the case of Sovran, copies of the unaudited
consolidated and consolidating (for Subsidiaries which
own Real Estate, if any Subsidiary becomes the owner of
Real Estate pursuant to Section 7.6 or Section 7.7
hereof) balance sheet of Sovran and its subsidiaries
(including, without limitation, SALP and its
subsidiaries) as at the end of such quarter, and the
related unaudited consolidated and consolidating (for
<PAGE>
Subsidiaries which own Real Estate, if any Subsidiary
becomes the owner of Real Estate pursuant to
Section 7.6 or Section 7.7 hereof) statements of
income, funds available for distribution and cash flows
for the portion of Sovran's fiscal year then elapsed;
all in reasonable detail and prepared in accordance with GAAP,
together with a certification by the principal financial officer
of SALP or Sovran, as applicable, that the information contained
in such financial statements fairly presents the financial
position of SALP or Sovran (as the case may be) and its
subsidiaries on the date thereof (subject to year-end
adjustments);
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a
statement in the form of Exhibit D hereto signed by the chief
financial officer of SALP or Sovran, as applicable, and (if
applicable) reconciliations to reflect changes in GAAP since
September 30, 1997; and, in the case of Sovran, setting forth in
reasonable detail computations evidencing compliance with the
covenants contained in Section 9 hereof;
(d) promptly as they become available, a copy of each
report (including any so-called management letters) submitted to
any Borrower or any Guarantor or any of their respective
subsidiaries by the Accountants in connection with each annual
audit of the books of any Borrower or any Guarantor or such
subsidiary by such Accountants or in connection with any interim
audit thereof pertaining to any phase of the business of any
Borrower or any Guarantor or any such subsidiary;
(e) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature sent to the holders
of any Indebtedness of any Borrower or any Guarantor (other than
the Loans) for borrowed money, to the extent that the information
or disclosure contained in such material refers to or could
reasonably be expected to have a material adverse effect on the
business, assets, financial condition or prospects, or operations
of any Borrower or any Guarantor;
(f) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the SEC
or sent to the stockholders of Sovran;
(g) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of Sovran,
copies of the Form 10-K statement filed by Sovran with the SEC
for such fiscal year, and as soon as practicable, but in any
event not later than forty-five (45) days after the end of each
fiscal quarter of Sovran, copies of the Form 10-Q statement filed
by Sovran with the SEC for such fiscal quarter; and
(h) from time to time such other financial data and
information about the Borrowers, the Guarantors, their respective
Subsidiaries, the Real Estate and the Partially-Owned Entities
which is prepared by such Person in the normal course of its
<PAGE>
business or is required for securities and tax law compliance as
the Agent or any Lender may reasonably request, including without
limitation occupancy information, existing environmental reports,
and insurance certificates with respect to the Real Estate
(including the Unencumbered Properties) and tax returns.
Section 7.5. Notices.
(a) Defaults. Each Borrower will, and will cause each
Guarantor, as applicable, to, promptly notify the Agent in
writing of the occurrence of any default, Default or Event of
Default. If any Person shall give any notice or take any other
action in respect of (x) a claimed default (whether or not
constituting a Default or an Event of Default) under this
Agreement or (y) a claimed default by any Borrower, any Guarantor
or any of their respective Subsidiaries, as applicable, under any
note, evidence of Indebtedness, indenture or other obligation to
which or with respect to which any of them is a party or obligor,
whether as principal, guarantor or surety, and such default would
permit the holder of such note or obligation or other evidence of
Indebtedness to accelerate the maturity thereof or otherwise
cause the entire Indebtedness to become due, such Borrower or
such Guarantor, as the case may be, shall forthwith give written
notice thereof to the Agent, describing the notice or action and
the nature of the claimed failure to comply.
(b) Environmental Events. Each Borrower will, and will
cause each Guarantor to, promptly give notice in writing to the
Agent (i) upon such Borrower's or such Guarantor's obtaining
knowledge of any material violation of any Environmental Law
regarding any Real Estate or such Borrower's or such Guarantor's
operations or the operations of any of their Subsidiaries, (ii)
upon such Borrower's or such Guarantor's obtaining knowledge of
any known Release of any Hazardous Substance at, from, or into
any Real Estate which it reports in writing or is reportable by
it in writing to any governmental authority and which is material
in amount or nature or which could materially affect the value of
such Real Estate, (iii) upon such Borrower's or such Guarantor's
receipt of any notice of material violation of any Environmental
Laws or of any material Release of Hazardous Substances in
violation of any Environmental Laws or any matter that may be a
Disqualifying Environmental Event, including a notice or claim of
liability or potential responsibility from any third party
(including without limitation any federal, state or local
governmental officials) and including notice of any formal
inquiry, proceeding, demand, investigation or other action with
regard to (A) such Borrower's or such Guarantor's or any other
Person's operation of any Real Estate, (B) contamination on, from
or into any Real Estate, or (C) investigation or remediation of
off-site locations at which such Borrower or such Guarantor or
any of its predecessors are alleged to have directly or
indirectly disposed of Hazardous Substances, or (iv) upon such
Borrower's or such Guarantor's obtaining knowledge that any
expense or loss has been incurred by such governmental authority
in connection with the assessment, containment, removal or
remediation of any Hazardous Substances with respect to which
such Borrower or such Guarantor or any Partially-Owned Entity may
<PAGE>
be liable or for which a lien may be imposed on any Real Estate;
any of which events described in clauses (i) through (iv) above
would have a material adverse effect on the business, assets or
financial condition of any Borrower, any Guarantor or any of
their respective Subsidiaries, or constitutes a Disqualifying
Environmental Event with respect to any Unencumbered Property.
(c) Notification of Claims against Unencumbered Properties.
Each Borrower will, and will cause each Guarantor to, promptly
upon becoming aware thereof, notify the Agent in writing of any
setoff, claims, withholdings or other defenses to which any of
the Unencumbered Properties are subject, which (i) would have a
material adverse effect on (x) the business, assets or financial
condition of any Borrower, any Guarantor or any of their
respective Subsidiaries, or (y) the value of such Unencumbered
Property, or (ii) with respect to such Unencumbered Property,
constitute a Disqualifying Environmental Event, a Disqualifying
Legal Event, a Disqualifying Building Event or a Lien which is
not a Permitted Lien.
(d) Notice of Litigation and Judgments. Each Borrower
will, and will cause each Guarantor to, and the Borrowers will
cause each of their respective Subsidiaries to, give notice to
the Agent in writing within ten (10) days of becoming aware of
any litigation or proceedings threatened in writing or any
pending litigation and proceedings an adverse determination in
which could materially affect any Borrower, any Guarantor or any
of their respective Subsidiaries or any Unencumbered Property or
to which any Borrower, any Guarantor or any of their respective
Subsidiaries is or is to become a party involving an uninsured
claim against any Borrower, any Guarantor or any of their
respective Subsidiaries that could reasonably be expected to have
a materially adverse effect on such Borrower or such Guarantor or
their respective properties, business, assets, financial
condition or prospects or on the value or operation of the
Unencumbered Properties and stating the nature and status of such
litigation or proceedings. Each Borrower will, and will cause
each of the Guarantors and the Subsidiaries to, give notice to
the Agent, in writing, in form and detail reasonably satisfactory
to the Agent, within ten (10) days of any judgment not covered by
insurance, final or otherwise, against any Borrower, any
Guarantor or any of their Subsidiaries in an amount in excess of
$100,000.
(e) Acquisition of Real Estate. The Borrower
Representative shall notify the Agent in writing within seven (7)
days of the acquisition of any Real Estate by any Borrower, any
Guarantor, any of their respective Subsidiaries or any
Partially-Owned Entity (whether or not such acquisition was made
with proceeds of the Loans), which notice shall include, with
respect to such Real Estate, its owner (if other than SALP), its
address, a brief description, a summary of occupancy levels, a
proforma and historic (if available) income statement and a
summary of the key business terms of such acquisition (including
sources and uses of funds for such acquisition), a summary of the
principal terms of any financing for such Real Estate, and a
statement as to whether such Real Estate qualifies as an
Unencumbered Property.
<PAGE>
Section 7.6. Existence of SALP, Holdings and Subsidiary
Guarantors; Maintenance of Properties. SALP for itself and for
Holdings and each Subsidiary Guarantor (insofar as any such
statements relate to Holdings or such Subsidiary Guarantor) will
do or cause to be done all things necessary to, and shall,
preserve and keep in full force and effect its existence as a
limited partnership, corporation or another legally constituted
entity, and will do or cause to be done all things necessary to
preserve and keep in full force all of its rights and franchises
and those of its Subsidiaries, and will not, and will not cause
or permit any of its Subsidiaries to, convert to a limited
liability company or a limited liability partnership. SALP shall
be the owner of substantially all of the Real Estate owned by the
Borrowers and their respective Subsidiaries and shall not permit
any Subsidiary of any Borrower to own any Real Estate without the
prior written consent of the Required Lenders, and then only in
specific circumstances outside of the ordinary course of
business. In any such case, such Subsidiary shall be
wholly-owned by Sovran or SALP and shall become a Subsidiary
Guarantor. SALP (a) will cause all necessary repairs, renewals,
replacements, betterments and improvements to be made to all Real
Estate owned or controlled by it or by any of its Subsidiaries or
any Subsidiary Guarantor, all as in the judgment of SALP or such
Subsidiary or such Subsidiary Guarantor may be necessary so that
the business carried on in connection therewith may be properly
conducted at all times, subject to the terms of the applicable
Leases and partnership agreements or other entity charter
documents, (b) will cause all of its other properties and those
of its Subsidiaries and the Subsidiary Guarantors used or useful
in the conduct of its business or the business of its
Subsidiaries or such Subsidiary Guarantor to be maintained and
kept in good condition, repair and working order and supplied
with all necessary equipment, and (c) will, and will cause each
of its Subsidiaries and each Subsidiary Guarantor to, continue to
engage exclusively in the business of owning and operating self
storage facilities, which self storage facilities shall be known
primarily as "Uncle BoB's Self Storage"; provided that nothing in
this Section 7.6 shall prevent any Borrower from discontinuing
the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the
judgment of SALP, desirable in the conduct of its or their
business and such discontinuance does not cause a Default or an
Event of Default hereunder and does not in the aggregate
materially adversely affect the business of the Borrowers and
their respective Subsidiaries on a consolidated basis. Holdings
shall at all times be a wholly-owned Subsidiary of Sovran and the
sole general partner of SALP.
Section 7.7. Existence of Sovran; Maintenance of REIT
Status of Sovran; Maintenance of Properties. Sovran will do or
cause to be done all things necessary to preserve and keep in
full force and effect its existence as a Maryland corporation.
Sovran will at all times maintain its status as a REIT and not to
take any action which could lead to its disqualification as a
REIT. Sovran shall at all times maintain its listing on the New
York Stock Exchange. Sovran will continue to operate as a fully-
integrated, self-administered and self-managed real estate
<PAGE>
investment trust which, together with its Subsidiaries
(including, without limitation SALP) owns and operates an
improved property portfolio comprised exclusively of self-storage
facilities. Sovran will not engage in any business other than
the business of acting as a REIT and serving as a limited partner
of SALP and as a member, partner or stockholder of other Persons
as permitted by this Agreement. Sovran shall conduct all or
substantially all of its business operations through SALP, and
shall not own real estate assets outside of its interests in
SALP. Sovran shall cause SALP to own substantially all of the
Real Estate owned by the Borrowers and their respective
Subsidiaries and shall not permit any Subsidiary of any Borrower
to become the owner of any Real Estate without the prior written
consent of the Required Lenders, and then only in specific
circumstances outside of the ordinary course of business. In any
such case, such Subsidiary shall be wholly-owned by Sovran or
SALP and shall become a Subsidiary Guarantor. Sovran shall do or
cause to be done all things necessary to preserve and keep in
full force all of its rights and franchises and those of its
Subsidiaries. Sovran shall (a) cause all of its properties and
those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and
kept in good condition, repair and working order and supplied
with all necessary equipment, (b) cause to be made all necessary
repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of Sovran may be necessary so
that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (c) cause
SALP and each of its Subsidiaries to continue to engage
exclusively in the business of owning and operating self storage
facilities, which self-storage facilities shall be known
primarily as "Uncle BoB's Self Storage"; provided that nothing in
this Section 7.7 shall prevent Sovran from discontinuing the
operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the
judgment of Sovran, desirable in the conduct of its or their
business and such discontinuance does not cause a Default or an
Event of Default hereunder and does not in the aggregate
materially adversely affect the business of Sovran and its
Subsidiaries on a consolidated basis.
Section 7.8. Insurance. Each Borrower will, and will
cause each Guarantor to, maintain with respect to its properties,
and will cause each of its Subsidiaries to maintain with
financially sound and reputable insurers, insurance with respect
to such properties and its business against such casualties and
contingencies as shall be in accordance with the general
practices of businesses having similar operations and real estate
portfolios in similar geographic areas and in amounts, containing
such terms, in such forms and for such periods as may be
reasonable and prudent.
Section 7.9. Taxes. Each Borrower will, and will cause
each Guarantor to, pay or cause to be paid real estate taxes,
other taxes, assessments and other governmental charges against
the Real Estate before the same become delinquent and will duly
pay and discharge, or cause to be paid and discharged, before the
<PAGE>
same shall become overdue, all taxes, assessments and other
governmental charges imposed upon its sales and activities, or
any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if
unpaid might by law become a lien or charge upon any of the Real
Estate; provided that any such tax, assessment, charge, levy or
claim need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings
and if such Borrower or such Guarantor shall have set aside on
its books adequate reserves with respect thereto; and provided
further that such Borrower or such Guarantor will pay all such
taxes, assessments, charges, levies or claims forthwith upon the
commencement of proceedings to foreclose any lien that may have
attached as security therefor. If requested by the Agent, the
Borrowers will provide evidence of the payment of real estate
taxes, other taxes, assessments and other governmental charges
against the Real Estate in the form of receipted tax bills or
other form reasonably acceptable to the Agent.
Section 7.10. Inspection of Properties and Books. Each
Borrower will, and will cause each Guarantor to, permit the
Lenders, through the Agent or any of the Lenders' other
designated representatives, to visit and inspect any of the
properties of any Borrower, any Guarantor or any of their
respective Subsidiaries, to examine the books of account of the
Borrowers, the Guarantors and their respective Subsidiaries (and
to make copies thereof and extracts therefrom) and to discuss the
affairs, finances and accounts of the Borrowers, the Guarantors
and their respective Subsidiaries with, and to be advised as to
the same by, its officers, all at such reasonable times and
intervals as the Agent may reasonably request; provided that the
Borrowers shall only be responsible for the costs and expenses
incurred by the Agent in connection with such inspections after
the occurrence and during the continuance of an Event of Default.
The Agent and each Lender agrees to keep any non-public
information delivered or made available by the Borrowers to it
confidential from anyone other than persons employed or retained
by the Agent or such Lender (including, without limitation,
employees, officers, attorneys and other advisors) who, in the
reasonable determination of the Agent or such Lender, reasonably
need to know such information and who are or are expected to
become engaged in evaluating, approving, structuring or
administering the Loans or rendering legal advice in connection
with the Loans; provided such employees, officers, attorneys and
other advisors agree to keep such information confidential in
accordance with this Section 7.10; and provided further that
nothing herein shall prevent the Agent or any Lender or persons
employed or retained by the Agent or such Lender from disclosing
such information (i) to any other Lender, (ii) to any other
person if reasonably incidental to the administration of the
Loans, (iii) upon the order of any court or administrative
agency, (iv) upon the request or demand of any regulatory agency
or authority, (v) which has been publicly disclosed other than as
a result of a disclosure by the Agent or any Lender which is not
permitted by this Agreement, (vi) in connection with any
litigation to which the Agent, any Lender, or their respective
<PAGE>
Affiliates may be a party, (vii) to the extent reasonably
required in connection with the exercise of any remedy hereunder,
(viii) to the Agent's or such Lender's Affiliates, legal counsel
and independent auditors, (ix) to any actual or proposed
participant or Eligible Assignee of all or part of its rights
hereunder, and (x) as otherwise required by law.
Section 7.11. Compliance with Laws, Contracts, Licenses,
and Permits. Each Borrower will, and will cause each Guarantor
to, comply with, and will cause each of their respective
Subsidiaries to comply with (a) all applicable laws and
regulations now or hereafter in effect wherever its business is
conducted, including, without limitation, all Environmental Laws
and all applicable federal and state securities laws, (b) the
provisions of its partnership agreement and certificate or
corporate charter and other charter documents and by-laws, as
applicable, (c) all material agreements and instruments to which
it is a party or by which it or any of its properties may be
bound (including the Real Estate and the Leases) and (d) all
applicable decrees, orders, and judgments. If at any time while
any Loan or Note is outstanding or the Lenders have any
obligation to make Loans hereunder, any Permit shall become
necessary or required in order that any Borrower may fulfill any
of its obligations hereunder, the Borrowers and the Guarantors
will immediately take or cause to be taken all reasonable steps
within the power of the Borrowers or the Guarantors, as
applicable, to obtain such Permit and furnish the Agent with
evidence thereof.
Section 7.12. Use of Proceeds. Subject at all times to the
other provisions of this Agreement, the Borrowers will use the
proceeds of the Loans solely to finance (a) the acquisition,
renovation and construction of self storage facilities, (b) the
repayment of Indebtedness, and (c) general working capital needs.
Section 7.13. Acquisition of Unencumbered Properties. In
addition to the requirements of Section 7.5(e), the Borrowers
shall, within seven (7) Business Days of the acquisition of an
Unencumbered Property or the qualification of any Real Estate as
an Unencumbered Property, deliver to the Agent a copy of the
Title Policy and the final environmental site assessment for such
Unencumbered Property. Such Title Policies and environmental
site assessments, as well as insurance certificates, shall not be
forwarded to the Lenders by the Agent, but shall be available for
inspection by the Lenders at the Agent's Head Office.
Section 7.14. Additional Guarantors; Solvency of
Guarantors.
(a) If, after the Closing Date, a Subsidiary of any
Borrower acquires any Real Estate in accordance with Section 7.6
and Section 7.7 that otherwise qualifies as an Unencumbered
Property but is owned by a Person other than a then Borrower or
Guarantor, the Borrowers shall cause such Person (which Person
must be or become a wholly-owned Subsidiary of SALP or Sovran) to
execute and deliver a Guaranty to the Agent and the Lenders in
substantially the form of Exhibit B hereto prior to such Real
<PAGE>
Estate's becoming an Unencumbered Property hereunder. Such
Guaranty shall evidence consideration and equivalent value. The
Borrowers will not permit any Guarantor that owns any
Unencumbered Properties to have any Subsidiaries.
(b) The Borrowers shall cause each of the Subsidiary
Guarantors to remain solvent and shall provide each of the
Subsidiary Guarantors with such funds and assets as such
Subsidiary Guarantor shall require in the operation of its
business, all in consideration of such Guarantor's execution and
delivery of its Guaranty.
Section 7.15. Further Assurances. Each Borrower will, and
will cause each Guarantor to, cooperate with, and to cause each
of its Subsidiaries to cooperate with, the Agent and the Lenders
and execute such further instruments and documents as the Lenders
or the Agent shall reasonably request to carry out to their
satisfaction the transactions contemplated by this Agreement and
the other Loan Documents.
Section 7.16. Form of Lease. The Borrowers shall cause
every lease for self storage space at an Unencumbered Property to
be substantially in the form of Schedule 7.16 with such changes
as required by applicable law or competitive market conditions
generally applicable to self storage facilities in the market of
such Unencumbered Property.
Section 7.17. Environmental Indemnification. The Borrowers
jointly and severally covenant and agree that they will indemnify
and hold the Agent and each Lender, and each of their respective
Affiliates, harmless from and against any and all claims,
expense, damage, loss or liability incurred by the Agent or any
Lender (including all reasonable costs of legal representation
incurred by the Agent or any Lender, but excluding, as
applicable, for the Agent or a Lender any claim, expense, damage,
loss or liability as a result of the gross negligence or willful
misconduct of the Agent or such Lender or any of their respective
Affiliates) relating to (a) any Release or threatened Release of
Hazardous Substances on any Real Estate; (b) any violation of any
Environmental Laws with respect to conditions at any Real Estate
or the operations conducted thereon; (c) the investigation or
remediation of off-site locations at which any Borrower, any
Guarantor or any of their respective Subsidiaries or their
predecessors are alleged to have directly or indirectly disposed
of Hazardous Substances; or (d) any action, suit, proceeding or
investigation brought or threatened with respect to any Hazardous
Substances relating to Real Estate (including, but not limited
to, claims with respect to wrongful death, personal injury or
damage to property). It is expressly acknowledged by each
Borrower that this covenant of indemnification shall survive the
payment of the Loans and shall inure to the benefit of the Agent
and the Lenders and their respective Affiliates, their respective
successors, and their respective assigns under the Loan Documents
permitted under this Agreement.
<PAGE>
Section 7.18. Response Actions. Each Borrower covenants
and agrees that if any Release or disposal of Hazardous
Substances shall occur or shall have occurred on any Real Estate
owned by it or any of its Subsidiaries, such Borrower will cause
the prompt containment and removal of such Hazardous Substances
and remediation of such Real Estate as necessary to comply with
all Environmental Laws or to preserve the value of such Real
Estate.
Section 7.19. Environmental Assessments. If the Required
Lenders have reasonable grounds to believe that a Disqualifying
Environmental Event has occurred with respect to any Unencumbered
Property, after reasonable notice by the Agent, whether or not a
Default or an Event of Default shall have occurred, the Required
Lenders may determine that the affected Real Estate no longer
qualifies as an Unencumbered Property; provided that prior to
making such determination, the Agent shall give the Borrower
Representative reasonable notice and the opportunity to obtain
one or more environmental assessments or audits of such
Unencumbered Property prepared by a hydrogeologist, an
independent engineer or other qualified consultant or expert
approved by the Agent, which approval will not be unreasonably
withheld, to evaluate or confirm (i) whether any Release of
Hazardous Substances has occurred in the soil or water at such
Unencumbered Property and (ii) whether the use and operation of
such Unencumbered Property materially complies with all
Environmental Laws (including not being subject to a matter that
is a Disqualifying Environmental Event). Such assessment will
then be used by the Agent to determine whether a Disqualifying
Environmental Event has in fact occurred with respect to such
Unencumbered Property. All such environmental assessments shall
be at the sole cost and expense of the Borrowers.
Section 7.20. Employee Benefit Plans.
(a) In General. Each Employee Benefit Plan maintained by
any Borrower, any Guarantor or any of their respective ERISA
Affiliates will be operated in compliance in all material
respects with the provisions of ERISA and, to the extent
applicable, the Code, including but not limited to the provisions
thereunder respecting prohibited transactions.
(b) Terminability of Welfare Plans. With respect to each
Employee Benefit Plan maintained by any Borrower, any Guarantor
or any of their respective ERISA Affiliates which is an employee
welfare benefit plan within the meaning of Section 3(1) or
Section 3(2)(B) of ERISA, such Borrower, such Guarantor, or any
of their respective ERISA Affiliates, as the case may be, has the
right to terminate each such plan at any time (or at any time
subsequent to the expiration of any applicable bargaining
agreement) without liability other than liability to pay claims
incurred prior to the date of termination.
(c) Unfunded or Underfunded Liabilities. The Borrowers
will not, and will not permit any Guarantor to, at any time, have
accruing or accrued unfunded or underfunded liabilities with
respect to any Employee Benefit Plan, Guaranteed Pension Plan or
Multiemployer Plan, or permit any condition to exist under any
Multiemployer Plan that would create a withdrawal liability.
<PAGE>
Section 7.21. No Amendments to Certain Documents. The
Borrowers will not, and will not permit any Guarantor to, at any
time cause or permit its certificate of limited partnership,
agreement of limited partnership, articles of incorporation,
by-laws or other charter documents, as the case may be, to be
modified, amended or supplemented in any respect whatever,
without (in each case) the express prior written consent or
approval of the Required Lenders, if such changes would affect
Sovran's REIT status or otherwise materially adversely affect the
rights of the Agent and the Lenders hereunder or under any other
Loan Document.
Section 7.22. Exclusive Credit Facility. The Borrowers
will at all times use this Agreement as the Borrower's exclusive
revolving credit agreement and will not at any time during the
term of this Agreement permit any other revolving credit
agreement to be maintained by any Borrower or any Guarantor.
Section 7.23. Management. Except by reason of death or
incapacity, at least two (2) of the Key Management Individuals
(as hereinafter defined) shall remain active in the executive
and/or operational management, in their current positions and
with their current responsibilities (or more senior positions
with requisite greater responsibilities), of Sovran; provided,
however, if at least two (2) of the Key Management Individuals
are not so active in such positions and with such
responsibilities (except by reason of death or incapacity as
aforesaid), then within ninety (90) days of the occurrence of
such event, Sovran shall propose and appoint such individual(s)
of comparable experience, reputation and otherwise reasonably
acceptable to the Required Lenders to such position(s) such that,
after such appointment, such acceptable replacement individuals,
together with the Key Management Individuals remaining so active
with Sovran in such positions and with such responsibilities,
total at least two (2). For purposes hereof, "Key Management
Individuals" shall mean and include Robert J. Attea, Kenneth F.
Myszka and David L. Rogers.
Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS
AND THE GUARANTORS. Each Borrower for itself and on behalf of
the Guarantors covenants and agrees that, so long as any Loan or
Note is outstanding or any of the Lenders has any obligation to
make any Loans:
Section 8.1. Restrictions on Indebtedness.
The Borrowers and the Guarantors may, and may permit their
respective Subsidiaries to, create, incur, assume, guarantee or
be or remain liable for, contingently or otherwise, any
Indebtedness other than the specific Indebtedness which is
prohibited under this Section 8.1 and with respect to which each
of the Borrowers and the Guarantors will not, and will not permit
any Subsidiary to, create, incur, assume, guarantee or be or
remain liable for, contingently or otherwise, singularly or in
the aggregate as follows:
(a) Indebtedness (excluding the Obligations) which is
incurred under a revolving credit facility or line of credit with
another financial institution;
<PAGE>
(b) Indebtedness which would result in a Default or Event
of Default under Section 9 hereof or under any other provision of
this Agreement;
(c) An aggregate amount in excess of $1,000,000 at any one
time in respect of taxes, assessments, governmental charges or
levies and claims for labor, materials and supplies for which
payment therefor is required to be made in accordance with the
provisions of Section 7.9 and has not been timely made;
(d) An aggregate amount in excess of $1,000,000 at any one
time in respect of uninsured judgments or awards, with respect to
which the applicable periods for taking appeals have expired, or
with respect to which final and unappealable judgments or awards
have been rendered; and
(e) Current unsecured liabilities incurred in the ordinary
course of business, which (i) are overdue for more than sixty
(60) days, (ii) exceed $1,000,000 in the aggregate at any one
time, and (iii) are not being contested in good faith.
The terms and provisions of this Section 8.1 are in addition
to, and not in limitation of, the covenants set forth in
Section 9 of this Agreement.
Notwithstanding anything contained herein to the contrary,
the Borrowers and the Guarantors will not, and will not permit
any Subsidiary to, incur any Indebtedness for borrowed money
which, together with other Indebtedness for borrowed money
incurred by any Borrower, any Guarantor, and any Subsidiary since
the date of the most recent compliance certificate delivered to
the Agent in accordance with this Agreement, exceeds $5,000,000
in the aggregate unless the Borrowers shall have delivered a
compliance certificate in the form of Exhibit D hereto to the
Agent evidencing covenant compliance at the time of delivery of
the certificate and on a pro-forma basis after giving effect to
such proposed Indebtedness.
Section 8.2. Restrictions on Liens, Etc. None of any
Borrower, any Guarantor, any Operating Subsidiary and any
wholly-owned Subsidiary will: (a) create or incur or suffer to be
created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any
kind upon any of its property or assets of any character whether
now owned or hereafter acquired, or upon the income or profits
therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the
same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (c)
acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase
money security agreement, device or arrangement; (d) suffer to
exist for a period of more than thirty (30) days after the same
shall have been incurred any Indebtedness or claim or demand
against it that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over
its general creditors; or (e) sell, assign, pledge or otherwise
<PAGE>
transfer any accounts, contract rights, general intangibles,
chattel paper or instruments, with or without recourse (the
foregoing items (a) through (e) being sometimes referred to in
this Section 8.2 collectively as "Liens"), provided that the
Borrowers, the Guarantors and any Subsidiary may create or incur
or suffer to be created or incurred or to exist:
(i) Liens securing taxes, assessments, governmental
charges or levies or claims for labor, material and supplies, the
Indebtedness with respect to which is not prohibited by
Section 8.1(d);
(ii) deposits or pledges made in connection with, or to
secure payment of, worker's compensation, unemployment insurance,
old age pensions or other social security obligations; and
deposits with utility companies and other similar deposits made
in the ordinary course of business;
(iii) Liens (other than affecting the Unencumbered
Properties) in respect of judgments or awards, the Indebtedness
with respect to which is not prohibited by Section 8.1(e);
(iv) encumbrances on properties consisting of
easements, rights of way, covenants, restrictions on the use of
real property and defects and irregularities in the title
thereto; landlord's or lessor's Liens under Leases to which any
Borrower, any Guarantor, or any Subsidiary is a party or bound;
purchase options granted at a price not less than the market
value of such property; and other minor Liens or encumbrances on
properties, none of which interferes materially and adversely
with the use of the property affected in the ordinary conduct of
the business of the owner thereof, and which matters (x) do not
individually or in the aggregate have a material adverse effect
on the business of any Borrower, any Guarantor or any of their
respective Subsidiaries or (xx) do not make title to such
property unmarketable by the conveyancing standards in effect
where such property is located;
(v) any Leases (excluding "synthetic leases") entered
into good faith with Persons that are not Affiliates; provided
that Leases with Affiliates on market terms and with monthly
market rent payments required to be paid are Permitted Liens;
(vi) Liens and other encumbrances or rights of others
which exist on the date of this Agreement and which do not
otherwise constitute a breach of this Agreement; provided that
nothing in this clause (vi) shall be deemed or construed to
permit an Unencumbered Property to be subject to a Lien to secure
Indebtedness;
(vii) as to Real Estate which are acquired after the
date of this Agreement, Liens and other encumbrances or rights of
others which exist on the date of acquisition and which do not
otherwise constitute a breach of this Agreement; provided that
nothing in this clause (vii) shall be deemed or construed to
permit an Unencumbered Property to be subject to a Lien to secure
Indebtedness;
<PAGE>
(viii) Liens affecting the Unencumbered Properties in
respect of judgments or awards that have been in force for less
than the applicable period for taking an appeal, so long as
execution is not levied thereunder or in respect of which, at the
time, a good faith appeal or proceeding for review is being
prosecuted, and in respect of which a stay of execution shall
have been obtained pending such appeal or review; provided that
the Borrowers shall have obtained a bond or insurance with
respect thereto to the Agent's reasonable satisfaction, and,
provided further, such Lien does not constitute a Disqualifying
Environmental Event, a Disqualifying Building Event or a
Disqualifying Legal Event;
(ix) Liens securing Indebtedness for the purchase price
of capital assets (other than Real Estate but including
Indebtedness in respect of Capitalized Leases for equipment and
other equipment leases) to the extent not otherwise prohibited by
Section 8.1; and
(x) other Liens (other than affecting the Unencumbered
Properties) in connection with any Indebtedness permitted under
Section 8.1 which do not otherwise result in a Default or Event
of Default under this Agreement.
Notwithstanding the foregoing provisions of this
Section 8.2, the failure of any Unencumbered Property to comply
with the covenants set forth in this Section 8.2 shall result in
such Unencumbered Property's disqualification as Unencumbered
Property under this Agreement, but such disqualification shall
not by itself constitute a Default or Event of Default, unless
such disqualification causes a Default or an Event of Default
under another provision of this Agreement.
Section 8.3. Restrictions on Investments. None of any
Borrower, any Guarantor, or any Subsidiary will make or permit to
exist or to remain outstanding any Investment except Investments
in:
(a) marketable direct or guaranteed obligations of the
United States of America that mature within one (1) year from the
date of purchase;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total
assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued
by a corporation organized and existing under the laws of the
United States of America or any state thereof that at the time of
purchase have been rated and the ratings for which are not less
than "P 1" if rated by Moody's, and not less than "A 1" if rated
by S&P;
(d) Investments existing on the Closing Date and listed on
Schedule 8.3(d) hereto;
<PAGE>
(e) So long as no Default or Event of Default has occurred
and is continuing or would occur after giving effect thereto,
acquisitions of Real Estate consisting of self storage facilities
and the equity of Persons whose primary operations consist of the
ownership, development, operation and management of self storage
facilities; provided, however that (i) the Borrowers shall not,
and shall not permit any Guarantor or any of its Subsidiaries to,
acquire any such Real Estate without the prior written consent of
the Agent if the environmental investigation for such Real Estate
determines that the potential environmental remediation costs and
other environmental liabilities associated with such Real Estate
exceed $200,000; and (ii) the Borrowers shall not permit any of
their Subsidiaries which is not a Borrower or a Guarantor, or
which does not become a Borrower or a Guarantor, to acquire any
Unencumbered Property, and in all cases such Guarantor shall be a
wholly-owned Subsidiary of SALP or Sovran;
(f) any Investments now or hereafter made in any
Subsidiary;
(g) Investments in respect of (1) equipment, inventory and
other tangible personal property acquired in the ordinary course
of business, (2) current trade and customer accounts receivable
for services rendered in the ordinary course of business and
payable in accordance with customary trade terms, (3) advances to
employees for travel expenses, drawing accounts and similar
expenditures, and (4) prepaid expenses made in the ordinary
course of business;
(h) any other Investments made in the ordinary course of
business and consistent with past business practices;
(i) interest rate hedges in connection with Indebtedness;
and
(j) shares of so-called "money market funds" registered
with the SEC under the Investment Company Act of 1940 which
maintain a level per- share value, invest principally in
marketable direct or guaranteed obligations of the United States
of America and agencies and instrumentalities thereof, and have
total assets in excess of $50,000,000.
Section 8.4. Merger, Consolidation and Disposition of
Assets.
None of any Borrower, any Guarantor, any Operating
Subsidiary or any wholly-owned Subsidiary will:
(a) Become a party to any merger, consolidation or
reorganization without the prior written consent of the Lenders,
except that so long as no Default or Event of Default has
occurred and is continuing, or would occur after giving effect
thereto, the merger, consolidation or reorganization of one or
more Persons with and into any Borrower, any Guarantor, or any
wholly-owned Subsidiary, shall be permitted if such action is not
hostile, any Borrower, any Guarantor, or any wholly-owned
Subsidiary, as the case may be, is the surviving entity and such
<PAGE>
merger, consolidation or reorganization does not cause a breach
of Section 7.23; provided that for any such merger, consolidation
or reorganization (other than (w) the merger or consolidation of
one or more Subsidiaries of SALP with and into SALP, (x) the
merger or consolidation of two or more Subsidiaries of SALP, (y)
the merger or consolidation of one or more Subsidiaries of Sovran
with and into Sovran, or (z) the merger or consolidation of two
or more Subsidiaries of Sovran), the Borrowers shall provide to
the Agent a statement in the form of Exhibit D hereto signed by
the chief financial officer or treasurer of the Borrower
Representative and setting forth in reasonable detail
computations evidencing compliance with the covenants contained
in Section 9 hereof and certifying that no Default or Event of
Default has occurred and is continuing, or would occur and be
continuing after giving effect to such merger, consolidation or
reorganization and all liabilities, fixed or contingent, pursuant
thereto;
(b) Sell, transfer or otherwise dispose of (collectively
and individually, "Sell" or a "Sale") or grant a Lien to secure
Indebtedness (an "Indebtedness Lien") on any of its now owned or
hereafter acquired assets without obtaining the prior written
consent of the Required Lenders except for:
(i) the Sale of or granting of an Indebtedness Lien on
any Unencumbered Property so long as no Default or Event of
Default has then occurred and is continuing, or would occur
and be continuing after giving effect to such Sale or
Indebtedness Lien; provided, that prior to any Sale of any
Unencumbered Property or the granting of an Indebtedness
Lien on any Unencumbered Property under this clause (i), the
Borrowers shall provide to the Agent a statement in the form
of Exhibit D hereto signed by the chief financial officer or
treasurer of the Borrower Representative and setting forth
in reasonable detail computations evidencing compliance with
the covenants contained in Section 9 hereof and certifying
that no Default or Event of Default has occurred and is
continuing, or would occur and be continuing after giving
effect to such proposed Sale or Indebtedness Lien and all
liabilities, fixed or contingent, pursuant thereto; and
(ii) the Sale of or the granting of an Indebtedness
Lien on any of its now owned or hereafter acquired assets
(other than any Unencumbered Property) so long as no Event
of Default has then occurred and is continuing and no
Default or Event of Default would occur and be continuing
after giving effect to such Sale or Indebtedness Lien and
all other Sales (to be) made and Indebtedness Liens (to be)
granted under this clause (ii); provided, that (x) if such
Sale or Indebtedness Lien is made or granted under this
clause (ii) while a Default is continuing, such Sale or
Indebtedness Lien (together with other Sales and
Indebtedness Liens under this clause (ii)) cures (or would
cure) such Default before it becomes an Event of Default,
(y) if multiple Sales or grantings of Indebtedness Liens are
undertaken pursuant to the foregoing subclause (x) to cure a
Default, the Borrowers shall apply the net proceeds of each
<PAGE>
such Sale or Indebtedness Lien remaining after application
to such cure to the repayment of the Revolving Credit Loans
until such Default has been fully cured, and (z) prior to
the Sale of any asset or the granting of an Indebtedness
Lien on any asset under this clause (ii), the Borrowers
shall provide to the Agent a statement in the form of
Exhibit D hereto signed by the chief financial officer or
treasurer of the Borrower Representative and setting forth
in reasonable detail computations evidencing compliance with
the covenants contained in Section 9 hereof and certifying
that no Default or Event of Default would occur and be
continuing after giving effect to all such proposed Sales or
Indebtedness Liens and all liabilities, fixed or contingent,
pursuant thereto.
Section 8.5. Sale and Leaseback. The Borrowers will not,
and will not permit any Guarantor or any of their respective
Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby any Borrower, any Guarantor or any of their
respective Subsidiaries shall sell or transfer any property owned
by it in order then or thereafter to lease such property.
Section 8.6. Compliance with Environmental Laws. None of
any Borrower, any Guarantor, or any Subsidiary will do any of the
following: (a) use any of the Real Estate or any portion thereof
as a facility for the handling, processing, storage or disposal
of Hazardous Substances except for quantities of Hazardous
Substances used in the ordinary course of business and in
compliance with all applicable Environmental Laws, (b) cause or
permit to be located on any of the Real Estate any underground
tank or other underground storage receptacle for Hazardous
Substances except in full compliance with Environmental Laws, (c)
generate any Hazardous Substances on any of the Real Estate
except in full compliance with Environmental Laws, or (d) conduct
any activity at any Real Estate or use any Real Estate in any
manner so as to cause a Release or a violation of any
Environmental Law; provided that a breach of this covenant shall
result in the exclusion of the affected Real Estate from the
calculation of the covenants set forth in Section 9, but shall
only constitute an Event of Default under Section 12.1(c) hereof
if such breach has a material adverse effect on the Borrowers and
their Subsidiaries, taken as a whole, or materially impairs the
ability of the Borrowers to fulfill their obligations to the
Lenders under this Agreement.
Section 8.7. Distributions. (a) The Borrowers will not in
any period of four (4) consecutive completed fiscal quarters make
(i) Distributions in such period in excess of 90% of Funds From
Operations for such period or (ii) any Distributions during any
period when any Event of Default has occurred and is continuing;
provided, however, that the Borrowers may at all times make
Distributions to the extent (after taking into account all
available funds of Sovran from all other sources) required in
order to enable Sovran to continue to qualify as a REIT. In the
event that Sovran or SALP raises equity during the term of this
Agreement, the permitted percentage of Distributions will be
<PAGE>
adjusted based on the total declared distribution per share and
partnership units over the most recent four (4) quarters to Funds
From Operations per weighted average share and partnership unit
based on the most recent four (4) quarters.
(b) Sovran will not, during any period when any Event of
Default has occurred and is continuing, make any Distributions in
excess of the Distributions required to be made by Sovran in
order to maintain its status as a REIT.
Section 8.8. Employee Benefit Plans. None of any
Borrower, any Guarantor or any ERISA Affiliate will
(a) engage in any "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code which
could result in a material liability for any Borrower, any
Guarantor or any of their respective Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in
Section 302 of ERISA, whether or not such deficiency is or may be
waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a
manner which, could result in the imposition of a lien or
encumbrance on the assets of any Borrower, any Guarantor or any
of their respective Subsidiaries pursuant to Section 302(f) or
Section 4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances
requiring the posting of security pursuant to Section 307 of
ERISA or Section 401(a)(29) of the Code; or
(e) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section 4001
of ERISA) of all Guaranteed Pension Plans exceeding the value of
the aggregate assets of such Plans, disregarding for this purpose
the benefit liabilities and assets of any such Plan with assets
in excess of benefit liabilities.
Section 8.9. Fiscal Year. The Borrowers will not, and
will not permit the Guarantors or any of their respective
Subsidiaries to, change the date of the end of its fiscal year
from that set forth in Section 6.5.
Section 8.10. Amsdell Litigation. The Borrower will not,
and will not permit, release of the indemnifications relating to
the litigation of Robert Amsdell described on Schedule 6.7 or the
collateral for such indemnification as described on Schedule 6.7.
Section 8.11. Negative Pledge. From and after the date
hereof, neither any Borrower nor any Guarantor will, and will not
permit any Subsidiary to, enter into any agreement containing any
provision prohibiting the creation or assumption of any Lien upon
its properties (other than prohibitions on liens for particular
assets (other than an Unencumbered Property) set forth in a
<PAGE>
security instrument in connection with Indebtedness for such
assets and the granting or effect of such liens does not
otherwise constitute a Default or Event of Default), revenues or
assets, whether now owned or hereafter acquired, or restricting
the ability of the Borrowers or the Guarantors to amend or modify
this Agreement or any other Loan Document.
Section 9. FINANCIAL COVENANTS OF THE BORROWERS. Each
of the Borrowers covenants and agrees that, so long as any Loan
or Note is outstanding or any Lender has any obligation to make
any Loan:
Section 9.1. Leverage Ratio. As at the end of any fiscal
quarter or other date of measurement, the Borrowers shall not
permit Consolidated Total Liabilities to exceed 50% of
Consolidated Capitalized Value.
Section 9.2. Secured Indebtedness. As at the end of any
fiscal quarter or other date of measurement, the Borrowers shall
not permit Consolidated Secured Indebtedness to exceed 25% of
Consolidated Capitalized Value.
Section 9.3. Tangible Net Worth. As at the end of any
fiscal quarter or any other date of measurement, the Borrowers
shall not permit Consolidated Tangible Net Worth to be less than
the sum of (a) $200,000,000 plus (b) 80% of the sum of (i) the
aggregate proceeds received by Sovran (net of fees and expenses
customarily incurred in transactions of such type) in connection
with any offering of stock in Sovran and (ii) the aggregate value
of operating units issued by SALP in connection with asset or
stock acquisitions (valued at the time of issuance by reference
to the terms of the agreement pursuant to which such units are
issued), in each case after the Closing Date and on or prior to
the date such determination of Consolidated Tangible Net Worth is
made.
Section 9.4. Debt Service Coverage. As at the end of any
fiscal quarter or other date of measurement, the Borrowers shall
not permit Consolidated Adjusted EBITDA for the two (2) most
recent, complete, consecutive fiscal quarters to be less than two
(2) times Consolidated Assumed Amortizing Debt Service Charges.
Section 9.5. Unimproved Land. As at the end of any fiscal
quarter or other date of measurement, the Borrowers shall not
permit the book value of Unimproved Land to exceed 10% of
Consolidated Capitalized Value.
Section 9.6. Construction-in-Process. As at the end of any
fiscal quarter or other date of measurement, the Borrowers shall
not permit the aggregate Budgeted Project Costs of all
Construction-in-Process to exceed 10% of Consolidated Capitalized
Value.
Section 9.7. Promissory Notes. As at the end of any fiscal
quarter or other date of measurement, the Borrowers shall not
permit the book value of Indebtedness of third parties to the
Borrowers or their Subsidiaries for borrowed money or other
liquid or liquifiable obligations, whether secured or unsecured,
to exceed 10% of Consolidated Capitalized Value.
<PAGE>
Section 9.8. Unimproved Land, Construction-in-Process and
Notes. As at the end of any fiscal quarter or other date of
measurement, the Borrowers shall not permit (a) the sum of
(i) the book value of Unimproved Land plus (ii) the aggregate
Budgeted Project Costs of all Construction-in-Process plus
(iii) the book value of Indebtedness of third parties to the
Borrowers or their Subsidiaries for borrowed money or other
liquid or liquifiable obligations, whether secured or unsecured,
to exceed (b) 20% of Consolidated Capitalized Value.
Section 9.9. Joint Venture Ownership Interest. As at the
end of any fiscal quarter or other date of measurement, the
Borrowers shall not permit Joint Venture Ownership Interest Value
to exceed 10% of Consolidated Capitalized Value.
Section 9.10. Unhedged Variable Rate Debt. As at the end
of any fiscal quarter, the Borrowers shall not permit the value
of Unhedged Variable Rate Indebtedness to exceed 20% of
Consolidated Capitalized Value for any two (2) consecutive fiscal
quarters.
Section 9.11. Unsecured Indebtedness. As at the end of any
fiscal quarter or other date of measurement, the Borrowers shall
not permit Consolidated Unsecured Indebtedness to exceed 45% of
aggregate Capitalized Unencumbered Property Value for all
Unencumbered Properties .
Section 9.12. Unencumbered Property Debt Service Coverage.
As at the end of any fiscal quarter or other date of measurement,
the Borrowers shall not permit the aggregate Adjusted
Unencumbered Property NOI for all Unencumbered Properties for the
two (2) most recent, complete, consecutive fiscal quarters to be
less than two (2) times Consolidated Assumed Amortizing Unsecured
Debt Service Charges.
Section 9.13. Covenant Calculations.
(a) For purposes of the calculations to be made pursuant to
Section 9.1-9.12 (and the defined terms relevant thereto,
including, without limitation, those relating to "debt service"),
references to Indebtedness or liabilities of the Borrowers shall
mean Indebtedness or liabilities (including, without limitation,
Consolidated Total Liabilities) of the Borrowers, plus (but
without double-counting):
(i) all Indebtedness or liabilities of the Operating
Subsidiaries, the Guarantors and any other wholly-owned
Subsidiary (excluding any such Indebtedness or liabilities
owed to the Borrowers or any Guarantor),
(ii) all Indebtedness or liabilities of each
Partially-Owned Entity (including Capitalized Leases), but
only to the extent, if any, that said Indebtedness or
liability is Recourse to any of the Borrowers, the
Guarantors or their respective Subsidiaries or any of their
respective assets (other than their respective interests in
such Partially-Owned Entity), and
<PAGE>
(iii) Indebtedness or liabilities of each
Partially-Owned Entity to the extent of the pro-rata share
of such Indebtedness or liability allocable to any of the
Borrowers, the Guarantors or their respective Subsidiaries,
if the Indebtedness or liability of such Partially-Owned
Entity is Without Recourse to such Person or its assets
(other than its interest in such Partially-Owned Entity).
(b) For purpose of Section 9.1, 9.2, 9.3, 9.5, 9.6, 9.7,
9.8, 9.9, 9.10 and 9.11 hereof, Consolidated Adjusted EBITDA and
Adjusted Unencumbered Property NOI (and all defined terms and
calculations using such terms) shall be adjusted to (i) deduct
the actual results of any Real Estate disposed of by a Borrower,
a Guarantor or any of their respective Subsidiaries during the
relevant fiscal period, and (ii) include the pro forma results of
any Real Estate acquired by a Borrower, a Guarantor or any of
their respective Subsidiaries during the relevant fiscal period,
with such pro forma results being calculated by (x) using the
Borrowers' pro forma projections for such acquired property,
subject to the Agent's reasonable approval, if such property has
been owned by a Borrower, a Guarantor or any of their respective
Subsidiaries for less than one complete fiscal quarter or (y)
using the actual results for such acquired property and adjusting
such results for the appropriate period of time required by the
applicable financial covenant, if such property has been owned by
a Borrower, a Guarantor or any of their respective Subsidiaries
for at least one complete fiscal quarter.
(c) For purposes of Section 9.1-9.12 hereof, Consolidated
Adjusted EBITDA and Adjusted Unencumbered Property NOI (and the
defined terms and calculations using such terms) shall be
adjusted, to the extent applicable, to include the pro rata share
of results attributable to the Borrowers from unconsolidated
Subsidiaries of the Borrowers and their respective Subsidiaries
and from unconsolidated Partially-Owned Entities.
Section 10. CONDITIONS TO THE CLOSING DATE. The
obligations of the Lenders to make the initial Revolving Credit
Loans shall be subject to the satisfaction of the following
conditions precedent on or prior to February 27, 1998:
Section 10.1. Loan Documents. Each of the Loan Documents
shall have been duly executed and delivered by the respective
parties thereto and shall be in full force and effect.
Section 10.2. Certified Copies of Organization Documents.
The Agent shall have received from each Borrower and Holdings a
copy, certified as of the Closing Date by a duly authorized
officer of such Person (or its general partner, in the case of
SALP), to be true and complete, of each of its certificate of
limited partnership, agreement of limited partnership,
incorporation documents, by-laws, and/or other organizational
documents as in effect on the Closing Date, along with any other
organization documents of any Borrower (and its general partner,
in the case of SALP) or Holdings, as the case may be, and each as
in effect on the date of such certification.
<PAGE>
Section 10.3. By-laws; Resolutions. All action on the part
of the Borrowers and Holdings necessary for the valid execution,
delivery and performance by the Borrowers and Holdings of this
Agreement and the other Loan Documents to which either of them is
or is to become a party shall have been duly and effectively
taken, and evidence thereof satisfactory to the Lenders shall
have been provided to the Agent. Without limiting the foregoing,
the Agent shall have received from Holdings true copies of its
by-laws and the resolutions adopted by its board of directors
authorizing the transactions described herein and evidencing the
due authorization, execution and delivery of the Loan Documents
to which SALP and Holdings are a party, each certified by the
secretary as of a recent date to be true and complete.
Section 10.4. Incumbency Certificate; Authorized Signers.
The Agent shall have received from each of the Borrowers and
Holdings an incumbency certificate, dated as of the Closing Date,
signed by a duly authorized officer such Person and giving the
name of each individual who shall be authorized: (a) to sign, in
the name and on behalf of such Person, each of the Loan Documents
to which such Person is or is to become a party; (b) in the case
of the Borrower Representative, to make Loan Requests and
Conversion Requests on behalf of the Borrowers; and (c) in the
case of the Borrower Representative, to give notices and to take
other action on behalf of the Borrowers and the Guarantors under
the Loan Documents.
Section 10.5. Title Policies. The Agent (on behalf of the
Lenders) shall have received copies of the Title Policies for all
Real Estate which are Unencumbered Properties as of the Closing
Date.
Section 10.6. Certificates of Insurance. The Agent shall
have received (a) current certificates of insurance as to all of
the insurance maintained by each Borrower and their respective
Subsidiaries on the Real Estate (including flood insurance if
necessary) from the insurer or an independent insurance broker,
identifying insurers, types of insurance, insurance limits, and
policy terms; and (b) such further information and certificates
from the Borrowers, their insurers and insurance brokers as the
Agent may reasonably request.
Section 10.7. Environmental Site Assessments. The Agent
shall have received environmental site assessments from a
hydrogeologist, environmental engineer, qualified consultant or
other expert and in form and substance satisfactory to the Agent,
covering all Unencumbered Properties and all other real property
in respect of which any Borrower or any of its Subsidiaries may
have material liability, whether contingent or otherwise, for
dumping or disposal of Hazardous Substances or otherwise with
respect to Environmental Laws, such site assessments to be dated
as of a recent date.
Section 10.8. Opinion of Counsel Concerning Organization
and Loan Documents. Each of the Lenders and the Agent shall have
received favorable opinions addressed to the Lenders and the
Agent in form and substance satisfactory to the Lenders and the
Agent from Phillips, Lytle, Hitchcock, Blaine & Huber, as counsel
<PAGE>
to the Borrowers and their respective Subsidiaries with respect
to New York law and certain matters of Delaware corporate law and
Hogan & Hartson, L.L.P., as counsel to Sovran, with respect to
Maryland law.
Section 10.9. Tax and Securities Law Compliance. Each of
the Lenders and the Agent shall also have received from Phillips,
Lytle, Hitchcock, Blaine & Huber, as counsel to the Borrowers, a
favorable opinion addressed to the Lenders and the Agent, in form
and substance satisfactory to each of the Lenders and the Agent,
with respect to the qualification of Sovran as a REIT and certain
other tax and securities laws matters.
Section 10.10. Guaranties. Each of the Guaranties to be
executed and delivered on the Closing Date shall have been duly
executed and delivered by the Guarantor thereunder.
Section 10.11. Certifications from Government Officials;
UCC-11 Reports. The Agent shall have received (i) certifications
from government officials evidencing the legal existence, good
standing and foreign qualification of each Borrower and each
Guarantor, along with a certified copy of the certificate of
limited partnership or certificate of incorporation of each
Borrower and each Guarantor, all as of the most recent
practicable date; and (ii) UCC-11 search results from the
appropriate jurisdictions for each Borrower and each Guarantor
with respect to the Unencumbered Properties.
Section 10.12. Proceedings and Documents. All proceedings
in connection with the transactions contemplated by this
Agreement, the other Loan Documents and all other documents
incident thereto shall be satisfactory in form and substance to
each of the Lenders and to the Agent's counsel, and the Agent,
each of the Lenders and such counsel shall have received all
information and such counterpart originals or certified or other
copies of such documents as the Agent may reasonably request.
Section 10.13. Fees. The Borrowers shall have paid to the
Agent, for the accounts of the Lenders or for its own account, as
applicable, all of the fees and expenses that are due and payable
as of the Closing Date in accordance with this Agreement and that
certain letter agreement of even date herewith between the
Borrower Representative and the Agent.
Section 10.14. Compliance Certificate. The Borrowers shall
have delivered a compliance certificate in the form of Exhibit D
hereto evidencing compliance with the covenants set forth in
Section 9 hereof.
Section 10.15. Existing Indebtedness. The existing of
record indebtedness of the Borrowers to Paine Webber Real Estate
Securities, Inc. ("Paine Webber") under the $75,000,000 Revolving
Credit Agreement dated as of June 26, 1995, as amended, among
Sovran, SALP, Holdings and Paine Webber, shall have been
satisfied in full or will be satisfied in full with the proceeds
of the initial Revolving Credit Loan, and all Liens securing such
indebtedness shall have been discharged and terminated or such
<PAGE>
Liens will promptly after the Closing Date be discharged and
terminated of record pursuant to arrangements satisfactory to the
Agent, and satisfactory evidence of the foregoing shall have been
provided to the Agent.
Section 10.16. Subsequent Guarantors. As a condition to
the effectiveness of any subsequent Guaranty, each subsequent
Guarantor shall deliver such documents, agreements, instruments
and opinions as the Agent shall require as to such Guarantor and
the Unencumbered Property owned by such Guarantor that are
analogous to the deliveries made by the Guarantors as of the
Closing Date pursuant to Section 10.2 through Section 10.8,
Section 10.10 and Section 10.11.
Section 11. CONDITIONS TO ALL BORROWINGS. The
obligations of the Lenders to make any Loan whether on or after
the Closing Date, shall also be subject to the satisfaction of
the following conditions precedent:
Section 11.1. Representations True; No Event of Default;
Compliance Certificate. Each of the representations and
warranties of the Borrowers and the Guarantors contained in this
Agreement, the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with this
Agreement shall be true as of the date as of which they were made
and shall also be true at and as of the time of the making of
each Loan, with the same effect as if made at and as of that time
except to the extent that such representations and warranties
relate expressly to an earlier date); and no Default or Event of
Default under this Agreement shall have occurred and be
continuing on the date of any Loan Request or on the Drawdown
Date of any Loan. Each of the Lenders shall have received a
certificate of the Borrowers signed by an authorized officer of
the Borrower Representative as provided in Section 2.5(iv)(c).
Section 11.2. No Legal Impediment. No change shall have
occurred in any law or regulations thereunder or interpretations
thereof that in the reasonable opinion of the Agent or any Lender
would make it illegal for any Lender to make such Loan.
Section 11.3. Governmental Regulation. Each Lender shall
have received such statements in substance and form reasonably
satisfactory to such Lender as such Lender shall require for the
purpose of compliance with any applicable regulations of the
Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 12.1. Events of Default and Acceleration. If any
of the following events ("Events of Default") shall occur:
(a) the Borrowers shall fail to pay any principal of the
Loans when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at
any other date fixed for payment;
<PAGE>
(b) the Borrowers shall fail to pay any interest on the
Loans, the Commitment Fee or any other sums due hereunder or
under any of the other Loan Documents (including, without
limitation, amounts due under Section 7.17) when the same shall
become due and payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date fixed for
payment, and such failure continues for five (5) days;
(c) any Borrower or any Guarantor or any of their
respective Subsidiaries shall fail to comply with any of their
respective covenants contained in Section 7.1, Section 7.6,
Section 7.7, Section 7.8, Section 7.9, Section 7.12,
Section 7.21, Section 7.22, Section 7.23, Section 8 or Section 9;
(d) any Borrower or any Guarantor or any of their
respective Subsidiaries shall fail to perform any other term,
covenant or agreement contained herein or in any other Loan
Document (other than those specified elsewhere in this
Section 12) and such failure continues for thirty (30) days;
(e) any representation or warranty of any Borrower or any
Guarantor or any of their respective Subsidiaries in this
Agreement or any of the other Loan Documents or in any other
document or instrument delivered pursuant to or in connection
with this Agreement shall prove to have been false in any
material respect upon the date when made or deemed to have been
made or repeated;
(f) any Borrower or any Guarantor or any of their
respective Subsidiaries shall (i) fail to pay at maturity, or
within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any
Capitalized Leases (x) in respect of any Recourse obligations or
credit or (y) in respect of any Without Recourse obligations or
credit which total in an aggregate amount in excess of
$10,000,000, or (ii) fail to observe or perform any material
term, covenant or agreement contained in any agreement by which
it is bound, evidencing or securing borrowed money or credit
received or in respect of any Capitalized Leases (x) in respect
of any Recourse obligations or credit or (y) in respect of any
Without Recourse obligations or credit in an aggregate amount in
excess of $10,000,000, in either case for such period of time
(after the giving of appropriate notice if required) as would
permit the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof;
(g) any Borrower, any Guarantor or any of their respective
Subsidiaries shall make an assignment for the benefit of
creditors, or admit in writing its inability to pay or generally
fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other
custodian, liquidator or receiver of any Borrower, any Guarantor
or any of their respective Subsidiaries or of any substantial
part of the properties or assets of any Borrower, any Guarantor
or any of their respective Subsidiaries or shall commence any
case or other proceeding relating to any Borrower, any Guarantor
or any of their respective Subsidiaries under any bankruptcy,
<PAGE>
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction,
now or hereafter in effect, or shall take any action to authorize
or in furtherance of any of the foregoing, or if any such
petition or application shall be filed or any such case or other
proceeding shall be commenced against any Borrower, any Guarantor
or any of their respective Subsidiaries and (i) any Borrower, any
Guarantor or any of their respective Subsidiaries shall indicate
its approval thereof, consent thereto or acquiescence therein or
(ii) any such petition, application, case or other proceeding
shall continue undismissed, or unstayed and in effect, for a
period of sixty (60) days;
(h) a decree or order is entered appointing any trustee,
custodian, liquidator or receiver or adjudicating any Borrower,
any Guarantor or any of their respective Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect
of any Borrower, any Guarantor or any of their respective
Subsidiaries in an involuntary case under federal bankruptcy laws
as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied
and unstayed, for more than thirty (30) days, whether or not
consecutive, any uninsured final judgment against any Borrower,
any Guarantor or any of their respective Subsidiaries that, with
other outstanding uninsured final judgments, undischarged,
unsatisfied and unstayed, against any Borrower, any Guarantor or
any of their respective Subsidiaries exceeds in the aggregate
$1,000,000;
(j) any of the Loan Documents or any material provision of
any Loan Documents shall be cancelled, terminated, revoked or
rescinded otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of
the Agent, or any Guaranty shall be cancelled, terminated,
revoked or rescinded at any time or for any reason whatsoever, or
any action at law, suit or in equity or other legal proceeding to
make unenforceable, cancel, revoke or rescind any of the Loan
Documents shall be commenced by or on behalf of any Borrower or
any of its Subsidiaries or any Guarantor or any of its
Subsidiaries, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall
make a determination that, or issue a judgment, order, decree or
ruling to the effect that, any one or more of the Loan Documents
is illegal, invalid or unenforceable as to any material terms
thereof;
(k) any "Event of Default" or default (after notice and
expiration of any period of grace, to the extent provided, and if
none is specifically provided, then for a period of thirty (30)
days after notice), as defined or provided in any of the other
Loan Documents, shall occur and be continuing;
(l) any Borrower or any ERISA Affiliate incurs any
liability to the PBGC or a Guaranteed Pension Plan pursuant to
Title IV of ERISA in an aggregate amount exceeding $500,000, or
<PAGE>
any Borrower or any ERISA Affiliate is assessed withdrawal
liability pursuant to Title IV of ERISA by a Multiemployer Plan
requiring aggregate annual payments exceeding $500,000, or any of
the following occurs with respect to a Guaranteed Pension Plan:
(i) an ERISA Reportable Event, or a failure to make a required
installment or other payment (within the meaning of
Section 302(f)(1) of ERISA), provided that the Agent determines
in its reasonable discretion that such event (A) could be
expected to result in liability of any Borrower or any of their
respective Subsidiaries to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $500,000 and (B) could
constitute grounds for the termination of such Guaranteed Pension
Plan by the PBGC, for the appointment by the appropriate United
States District Court of a trustee to administer such Guaranteed
Pension Plan or for the imposition of a lien in favor of such
Guaranteed Pension Plan; or (ii) the appointment by a United
States District Court of a trustee to administer such Guaranteed
Pension Plan; or (iii) the institution by the PBGC of proceedings
to terminate such Guaranteed Pension Plan; or
(m) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under said Act) of 20% or more of the outstanding
shares of common stock of Sovran; or, during any period of twelve
consecutive calendar months, individuals who were directors of
Sovran on the first day of such period (together with directors
whose election by the Board of Directors or whose nomination for
election by Sovran's stockholders was approved by a vote of at
least two-thirds of the members of the Board of Directors then in
office who either were members of the Board of Directors on the
Closing Date or whose election or nomination for election was
previously so approved) shall cease to constitute a majority of
the board of directors of Sovran;
then, and in any such event, so long as the same may be
continuing, the Agent may, and upon the request of the Required
Lenders shall, by notice in writing to the Borrowers, declare all
amounts owing with respect to this Agreement, the Notes and the
other Loan Documents to be, and they shall thereupon forthwith
become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived by each Borrower and each Guarantor; provided
that in the event of any Event of Default specified in
Section 12.1(g) or Section 12.1(h), all such amounts shall become
immediately due and payable automatically and without any
requirement of notice from any of the Lenders or the any of Agent
or action by the Lenders or the Agent.
Section 12.2. Termination of Commitments. If any one or
more Events of Default specified in Section 12.1(g) or
Section 12.1(h) shall occur, any unused portion of the
Commitments hereunder shall forthwith terminate and the Lenders
shall be relieved of all obligations to make Loans to the
Borrowers. If any other Event of Default shall have occurred and
be continuing, whether or not the Lenders shall have accelerated
<PAGE>
the maturity of the Loans pursuant to Section 12.1, the Agent
may, and upon the request of the Required Lenders shall, by
notice to the Borrowers, terminate the unused portion of the
credit hereunder, and upon such notice being given such unused
portion of the credit hereunder shall terminate immediately and
each of the Lenders shall be relieved of all further obligations
to make Loans. No such termination of the credit hereunder shall
relieve any Borrower or any Guarantor of any of the Obligations
or any of its existing obligations to the Lenders arising under
other agreements or instruments.
Section 12.3. Remedies. In the event that one or more
Events of Default shall have occurred and be continuing, whether
or not the Lenders shall have accelerated the maturity of the
Loans pursuant to Section 12.1, the Required Lenders may direct
the Agent to proceed to protect and enforce the rights and
remedies of the Agent and the Lenders under this Agreement, the
Notes, any or all of the other Loan Documents or under applicable
law by suit in equity, action at law or other appropriate
proceeding (including for the specific performance of any
covenant or agreement contained in this Agreement or the other
Loan Documents or any instrument pursuant to which the
Obligations are evidenced and the obtaining of the appointment of
a receiver) and, if any amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof
or any other legal or equitable right or remedy of the Agent and
the Lenders under the Loan Documents or applicable law. No
remedy herein conferred upon the Lenders or the Agent or the
holder of any Note is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or under any of
the other Loan Documents or now or hereafter existing at law or
in equity or by statute or any other provision of law.
Section 13. SETOFF. Without demand or notice to the
extent permitted by applicable law, during the continuance of any
Event of Default, any deposits (general or specific, time or
demand, provisional or final, regardless of currency, maturity,
or the branch at which such deposits are held, but specifically
excluding tenant security deposits, other fiduciary accounts and
other segregated escrow accounts required to be maintained by any
of the Borrowers for the benefit of any third party) or other
sums credited by or due from any of the Lenders to any of the
Borrowers or any other property of any of the Borrowers in the
possession of the Agent or a Lender may be applied to or set off
against the payment of the Obligations. Each of the Lenders
agrees with each other Lender that (a) if pursuant to any
agreement between such Lender and any Borrower (other than this
Agreement or any other Loan Document), an amount to be set off is
to be applied to Indebtedness of any Borrower to such Lender,
other than with respect to the Obligations, such amount shall be
applied ratably to such other Indebtedness and to the
Obligations, and (b) if such Lender shall receive from any
Borrower, whether by voluntary payment, exercise of the right of
setoff, counterclaim, cross action, enforcement of the
Obligations by proceedings against such Borrower at law or in
equity or by proof thereof in bankruptcy, reorganization,
<PAGE>
liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Note or Notes
held by such Lender any amount in excess of its ratable portion
of the payments received by all of the Lenders with respect to
the Notes held by all of the Lenders, such Lender will make such
disposition and arrangements with the other Lenders with respect
to such excess, either by way of distribution, pro tanto
assignment of claims, subrogation or otherwise, as shall result
in each Lender receiving in respect of the Notes held by it, its
proportionate payment as contemplated by this Agreement; provided
that if all or any part of such excess payment is thereafter
recovered from such Lender, such disposition and arrangements
shall be rescinded and the amount restored to the extent of such
recovery, but without interest. Notwithstanding the foregoing,
no Lender shall exercise a right of setoff if such exercise would
limit or prevent the exercise of any other remedy or other
recourse against any Borrower.
Section 14. THE AGENT.
Section 14.1. Authorization. (a) The Agent is authorized
to take such action on behalf of each of the Lenders and to
exercise all such powers as are hereunder and under any of the
other Loan Documents and any related documents delegated to the
Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not
expressly assumed herein or therein shall be implied to have been
assumed by the Agent. The relationship between the Agent and the
Lenders is and shall be that of agent and principal only, and
nothing contained in this Agreement or any of the other Loan
Documents shall be construed to constitute the Agent as a trustee
or fiduciary for any Lender.
(b) Each Borrower, without further inquiry or
investigation, shall, and is hereby authorized by the Lenders to,
assume that all actions taken by the Agent hereunder and in
connection with or under the Loan Documents are duly authorized
by the Lenders. The Lenders shall notify the Borrowers of any
successor to Agent by a writing signed by Required Lenders, which
successor shall be reasonably acceptable to the Borrowers so long
as no Default or Event of Default has occurred and is continuing.
Section 14.2. Employees and Agents. The Agent may exercise
its powers and execute its duties by or through employees or
agents and shall be entitled to take, and to rely on, advice of
counsel concerning all matters pertaining to its rights and
duties under this Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in
its sole discretion may reasonably determine, and all reasonable
fees and expenses of any such Persons shall be paid by the
Borrowers if so provided in Section 15 hereof.
Section 14.3. No Liability. Neither the Agent, nor any of
its shareholders, directors, officers or employees nor any other
Person assisting them in their duties nor any agent or employee
thereof, shall be liable for any waiver, consent or approval
given or any action taken, or omitted to be taken, in good faith
<PAGE>
by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the
consequences of any oversight or error of judgment whatsoever,
except that the Agent may be liable for losses due to its willful
misconduct or gross negligence.
Section 14.4. No Representations. The Agent shall not be
responsible for the execution or validity or enforceability of
this Agreement, the Notes, or any of the other Loan Documents or
for the validity, enforceability or collectibility of any such
amounts owing with respect to the Notes, or for any recitals or
statements, warranties or representations made herein or in any
of the other Loan Documents or in any certificate or instrument
hereafter furnished to it by or on behalf of any Guarantor or any
Borrower or any of their respective Subsidiaries, or be bound to
ascertain or inquire as to the performance or observance of any
of the terms, conditions, covenants or agreements in this
Agreement or the other Loan Documents. The Agent shall not be
bound to ascertain whether any notice, consent, waiver or request
delivered to it by any Borrower or any Guarantor or any holder of
any of the Notes shall have been duly authorized or is true,
accurate and complete. The Agent has not made nor does it now
make any representations or warranties, express or implied, nor
does it assume any liability to the Lenders, with respect to the
credit worthiness or financial condition of any Borrower or any
of its Subsidiaries or any Guarantor or any of the Subsidiaries
or any tenant under a Lease or any other entity. Each Lender
acknowledges that it has, independently and without reliance upon
the Agent or any other Lender, and based upon such information
and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
Section 14.5. Payments.
(a) A payment by the Borrowers to the Agent hereunder or
any of the other Loan Documents for the account of any Lender
shall constitute a payment to such Lender. The Agent agrees to
distribute to each Lender such Lender's pro rata share of
payments received by the Agent for the account of the Lenders, as
provided herein or in any of the other Loan Documents. All such
payments shall be made on the date received, if before 1:00 p.m.,
and if after 1:00 p.m., on the next Business Day. If payment is
not made on the day received, interest thereon at the overnight
federal funds effective rate shall be paid pro rata to the
Lenders.
(b) If in the reasonable opinion of the Agent the
distribution of any amount received by it in such capacity
hereunder, under the Notes or under any of the other Loan
Documents might involve it in material liability, it may refrain
from making distribution until its right to make distribution
shall have been adjudicated by a court of competent jurisdiction,
provided that interest thereon at the overnight federal funds
effective rate shall be paid pro rata to the Lenders. If a court
of competent jurisdiction shall adjudge that any amount received
and distributed by the Agent is to be repaid, each Person to whom
any such distribution shall have been made shall either repay to
<PAGE>
the Agent its proportionate share of the amount so adjudged to be
repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in
this Agreement or any of the other Loan Documents, any Lender
that fails (i) to make available to the Agent its pro rata share
of any Loan or (ii) to comply with the provisions of Section 13
with respect to making dispositions and arrangements with the
other Lenders, where such Lender's share of any payment received,
whether by setoff or otherwise, is in excess of its pro rata
share of such payments due and payable to all of the Lenders, in
each case as, when and to the full extent required by the
provisions of this Agreement, or to adjust promptly such Lender's
outstanding principal and its pro rata Commitment Percentage as
provided in Section 2.1, shall be deemed delinquent (a
"Delinquent Lender") and shall be deemed a Delinquent Lender
until such time as such delinquency is satisfied. A Delinquent
Lender shall be deemed to have assigned any and all payments due
to it from the Borrowers, whether on account of outstanding
Loans, interest, fees or otherwise, to the remaining
nondelinquent Lenders for application to, and reduction of, their
respective pro rata shares of all outstanding Loans. The
Delinquent Lender hereby authorizes the Agent to distribute such
payments to the nondelinquent Lenders in proportion to their
respective pro rata shares of all outstanding Loans. If not
previously satisfied directly by the Delinquent Lender, a
Delinquent Lender shall be deemed to have satisfied in full a
delinquency when and if, as a result of application of the
assigned payments to all outstanding Loans of the nondelinquent
Lenders, the Lenders' respective pro rata shares of all
outstanding Loans have returned to those in effect immediately
prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
Section 14.6. Holders of Notes. The Agent may deem and
treat the payee of any Notes as the absolute owner thereof for
all purposes hereof until it shall have been furnished in writing
with a different name by such payee or by a subsequent holder,
assignee or transferee.
Section 14.7. Indemnity. The Lenders ratably and severally
agree hereby to indemnify and hold harmless the Agent and its
Affiliates from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent has not been
reimbursed by the Borrowers as required by Section 15), and
liabilities of every nature and character arising out of or
related to this Agreement, the Notes, or any of the other Loan
Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agent's actions taken hereunder or thereunder,
except to the extent that any of the same shall be directly
caused by the Agent's willful misconduct or gross negligence.
Section 14.8. Agent as Lender. In its individual capacity
as a Lender, Fleet shall have the same obligations and the same
rights, powers and privileges in respect to its Commitment and
the Loans made by it, and as the holder of any of the Notes, as
it would have were it not also the Agent.
<PAGE>
Section 14.9. Notification of Defaults and Events of
Default. Each Lender hereby agrees that, upon learning of the
existence of a default, Default or an Event of Default, it shall
(to the extent notice has not previously been provided) promptly
notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this Section 14.9 it shall promptly
notify the other Lenders of the existence of such default,
Default or Event of Default.
Section 14.10. Duties in the Case of Enforcement. In case
one or more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Obligations
shall have occurred, the Agent shall, if (a) so requested by the
Required Lenders and (b) the Lenders have provided to the Agent
such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to
enforce the provisions of this Agreement and exercise all or any
such other legal and equitable and other rights or remedies as it
may have in respect of enforcement of the Lenders' rights against
the Borrowers and the Guarantors under this Agreement and the
other Loan Documents. The Required Lenders may direct the Agent
in writing as to the method and the extent (other than when such
direction requires Unanimous Lender Approval under Section 25) of
any such enforcement, the Lenders (including any Lender which is
not one of the Required Lenders) hereby agreeing to ratably and
severally indemnify and hold the Agent harmless from all
liabilities incurred in respect of all actions taken or omitted
in accordance with such directions, provided that the Agent need
not comply with any such direction to the extent that the Agent
reasonably believes the Agent's compliance with such direction to
be unlawful or commercially unreasonable in any applicable
jurisdiction.
Section 14.11. Successor Agent. Fleet, or any successor
Agent, may resign as Agent at any time by giving written notice
thereof to the Lenders and to the Borrowers. In addition, the
Required Lenders may remove the Agent in the event of the Agent's
gross negligence or willful misconduct or in the event that the
Agent ceases to hold a Commitment of at least $20,000,000 or a
Commitment Percentage of at least ten percent (10%) under this
Agreement. Any such resignation or removal shall be effective
upon appointment and acceptance of a successor Agent, as
hereinafter provided. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor
Agent, which is a Lender under this Agreement, provided that so
long as no Default or Event of Default has occurred and is
continuing the Borrowers shall have the right to approve any
successor Agent, which approval shall not be unreasonably
withheld. If, in the case of a resignation by the Agent, no
successor Agent shall have been so appointed by the Required
Lenders and approved by the Borrowers, and shall have accepted
such appointment, within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint any one of the other
Lenders as a successor Agent. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with
<PAGE>
all the rights, powers, privileges and duties of the retiring or
removed Agent, and the retiring or removed Agent shall be
discharged from all further duties and obligations as Agent under
this Agreement. After any Agent's resignation or removal
hereunder as Agent, the provisions of this Section 14 shall inure
to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
Section 14.12. Notices. Any notices or other information
required hereunder to be provided to the Agent shall be forwarded
by the Agent to each of the Lenders on the same day (if
practicable) and, in any case, on the next Business Day
following the Agent's receipt thereof.
Section 15. EXPENSES. The Borrowers jointly and
severally agree to pay (a) the reasonable costs of producing and
reproducing this Agreement, the other Loan Documents and the
other agreements and instruments mentioned herein, (b) the
reasonable fees, expenses and disbursements of the Agent's
outside counsel or any local counsel to the Agent incurred in
connection with the preparation, administration or interpretation
of the Loan Documents and other instruments mentioned herein,
each closing hereunder, and amendments, modifications, approvals,
consents or waivers hereto or hereunder, (c) the fees, expenses
and disbursements of the Agent incurred by the Agent in
connection with the preparation, administration or interpretation
of the Loan Documents and other instruments mentioned herein, any
amendments, modifications, approvals, consents or waivers hereto
or hereunder, or the cancellation of any Loan Document upon
payment in full in cash of all of the Obligations or pursuant to
any terms of such Loan Document for providing for such
cancellation, including, without limitation, the fees and
disbursements of the Agent's counsel in preparing the
documentation, (d) the fees, costs, expenses and disbursements of
the Agent and its Affiliates incurred in connection with the
syndication and/or participations of the Loans, including,
without limitation, costs of preparing syndication materials and
photocopying costs, which syndication costs and expenses shall be
payable by the Borrowers regardless of whether the Loans are
ultimately syndicated, (e) all reasonable expenses (including
reasonable attorneys' fees and costs, which attorneys may be
employees of any Lender or the Agent, and the fees and costs of
appraisers, engineers, investment bankers, surveyors or other
experts retained by any Lender or the Agent in connection with
any such enforcement proceedings) incurred by any Lender or the
Agent in connection with (i) the enforcement of or preservation
of rights under any of the Loan Documents against any Borrower or
any of its Subsidiaries or any Guarantor or the administration
thereof after the occurrence and during the continuance of a
Default or Event of Default (including, without limitation,
expenses incurred in any restructuring and/or "workout" of the
Loans), and (ii) subject to the limitation set forth in
Section 16 hereof, any litigation, proceeding or dispute whether
arising hereunder or otherwise, in any way related to any
Lender's or the Agent's relationship with any Borrower or any of
its Subsidiaries or any Guarantor, (f) all reasonable fees,
expenses and disbursements of the Agent incurred in connection
<PAGE>
with UCC searches and (g) all costs incurred by the Agent in the
future in connection with its inspection of the Unencumbered
Properties after the occurrence and during the continuance of an
Event of Default. The covenants of this Section 15 shall survive
payment or satisfaction of payment of amounts owing with respect
to the Notes.
Section 16. INDEMNIFICATION. The Borrowers jointly and
severally agree to indemnify and hold harmless the Agent and each
of the Lenders and the shareholders, directors, agents, officers,
subsidiaries and affiliates of the Agent and each of the Lenders
(each group consisting of the Agent or a Lender and its
respective shareholders, directors, agents, officers,
subsidiaries and affiliates being an "Indemnified Lender's
Group") from and against any and all claims, actions and suits,
whether groundless or otherwise, and from and against any and all
liabilities, losses, settlement payments, obligations, damages
and expenses of every nature and character, arising out of this
Agreement or any of the other Loan Documents or the transactions
contemplated hereby or thereby or which otherwise arise in
connection with the financing, including, without limitation, (a)
any actual or proposed use by any Borrower or any of its
Subsidiaries of the proceeds of any of the Loans, (b) any
Borrower or any of its Subsidiaries or any Guarantor entering
into or performing this Agreement or any of the other Loan
Documents or the transactions contemplated by this Agreement or
any of the other Loan Documents, or (c) pursuant to Section 7.17
hereof, in each case including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs
of internal counsel incurred in connection with any such
investigation, litigation or other proceeding, provided, however,
that the Borrowers shall not be obligated under this Section 16
to indemnify any Person for liabilities arising from the gross
negligence or willful misconduct of such Person or of any other
Person in the Indemnified Lender's Group of which such Person is
a member (but such indemnification shall continue to apply to all
other Persons including all other Indemnified Lender's Groups).
Each Person to be indemnified under this Section 16 shall give
the Borrowers notice of any claim as to which it is seeking
indemnification under this Section 16 promptly after becoming
aware of the same (which shall constitute notice for all
Indemnified Lender's Groups), but such Person's failure to give
prompt notice shall not affect the obligations of the Borrowers
under this Section 16 unless such failure prejudices the legal
rights of the Borrowers regarding such indemnity. In litigation,
or the preparation therefor, the Borrowers shall be entitled to
select counsel reasonably acceptable to the Required Lenders, and
the Lenders (as approved by the Required Lenders) shall be
entitled to select their own supervisory counsel and, in addition
to the foregoing indemnity, the Borrowers agree to pay promptly
the reasonable fees and expenses of each such counsel if (i) in
the reasonable opinion of the Agent, use of counsel of the
Borrowers' choice could reasonably be expected to give rise to a
conflict of interest, (ii) the Borrowers shall not have employed
counsel reasonably satisfactory to the Agent and the Lenders
within a reasonable time after notice of the institution of any
such litigation or proceeding or (iii) the Borrower
<PAGE>
Representative authorizes the Agent and the Lenders to employ
separate counsel at the Borrowers' expense. If and to the extent
that the obligations of the Borrowers under this Section 16 are
unenforceable for any reason, the Borrowers hereby agree to make
the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The
provisions of this Section 16 shall survive the repayment of the
Loans and the termination of the obligations of the Lenders
hereunder and shall continue in full force and effect as long as
the possibility of any such claim, action, cause of action or
suit exists.
Section 17. SURVIVAL OF COVENANTS, ETC. All covenants,
agreements, representations and warranties made herein, in the
Notes, in any of the other Loan Documents or in any documents or
other papers delivered by or on behalf of any Borrower or any of
its Subsidiaries or any Guarantor pursuant hereto shall be deemed
to have been relied upon by the Lenders and the Agent,
notwithstanding any investigation heretofore or hereafter made by
any of them, and shall survive the making by the Lenders of any
of the Loans, as herein contemplated, and shall continue in full
force and effect so long as any amount due under this Agreement
or the Notes or any of the other Loan Documents remains
outstanding or any Lender has any obligation to make any Loans.
The indemnification obligations of the Borrowers provided herein
and in the other Loan Documents shall survive the full repayment
of amounts due and the termination of the obligations of the
Lenders hereunder and thereunder to the extent provided herein
and therein. All statements contained in any certificate or
other paper delivered to any Lender or the Agent at any time by
or on behalf of any Borrower or any of its Subsidiaries or any
Guarantor pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and
warranties by such Borrower or such Subsidiary or such Guarantor
hereunder.
Section 18. ASSIGNMENT; PARTICIPATIONS; ETC.
Section 18.1. Conditions to Assignment by Lenders. Except
as provided herein, each Lender may assign to one or more
Eligible Assignees all or a portion of its interests, rights and
obligations under this Agreement (including all or a portion of
its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, and the Notes held by it);
provided that (a) the Agent and, unless an Event of Default shall
have occurred and be continuing, the Borrower Representative each
shall have the right to approve any Eligible Assignee, which
approval by the Borrower Representative shall not be unreasonably
withheld or delayed, (b) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning
Lender's rights and obligations under this Agreement, (c) each
such assignment shall be in a minimum amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, (d) unless the
assigning Lender shall have assigned its entire Commitment, each
Lender shall have at all times an amount of its Commitment of not
less than $5,000,000 and (e) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register
<PAGE>
(as hereinafter defined), an assignment and assumption,
substantially in the form of Exhibit F hereto (an "Assignment and
Assumption"), together with any Notes subject to such assignment.
Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and
Assumption, which effective date shall be at least five (5)
Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in
such Assignment and Assumption, have the rights and obligations
of a Lender hereunder and thereunder, and (ii) the assigning
Lender shall, to the extent provided in such assignment and upon
payment to the Agent of the registration fee referred to in
Section 18.3, be released from its obligations under this
Agreement.
Section 18.2. Certain Representations and Warranties;
Limitations; Covenants. By executing and delivering an
Assignment and Assumption, the parties to the assignment
thereunder confirm to and agree with each other and the other
parties hereto as follows: (a) other than the representation and
warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse
claim, the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, the other
Loan Documents or any other instrument or document furnished
pursuant hereto; (b) the assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the
financial condition of any Borrower or any of its Subsidiaries or
any Guarantor or any other Person primarily or secondarily liable
in respect of any of the Obligations, or the performance or
observance by any Borrower or any of its Subsidiaries or any
Guarantor or any other Person primarily or secondarily liable in
respect of any of the Obligations of any of their obligations
under this Agreement or any of the other Loan Documents or any
other instrument or document furnished pursuant hereto or
thereto; (c) such assignee confirms that it has received a copy
of this Agreement, together with copies of the most recent
financial statements referred to in Section 6.4 and Section 7.4
and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter
into such Assignment and Assumption; (d) such assignee will,
independently and without reliance upon the assigning Lender, the
Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action
under this Agreement; (e) such assignee represents and warrants
that it is an Eligible Assignee; (f) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to the Agent by the terms hereof
or thereof, together with such powers as are reasonably
incidental thereto; (g) such assignee agrees that it will perform
in accordance with their terms all of the obligations that by the
terms of this Agreement are required to be performed by it as a
Lender; and (h) such assignee represents and warrants that it is
legally authorized to enter into such Assignment and Assumption.
<PAGE>
Section 18.3. Register. The Agent shall maintain a copy of
each Assignment and Assumption delivered to it and a register or
similar list (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment Percentages of,
and principal amount of the Loans owing to, the Lenders from time
to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrowers, the Agent and the
Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the
Borrowers and the Lenders at any reasonable time and from time to
time upon reasonable prior notice. Upon each such recordation,
the assigning Lender agrees to pay to the Agent a registration
fee in the sum of $2,500.
Section 18.4. New Revolving Credit Notes. Upon its receipt
of an Assignment and Assumption executed by the parties to such
assignment, together with each Note subject to such assignment,
the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrowers
and the Lenders (other than the assigning Lender). Within five
(5) Business Days after receipt of such notice, the Borrowers, at
its own expense, (i) shall execute and deliver to the Agent, in
exchange for each surrendered Note, a new Note to the order of
such Eligible Assignee in an amount equal to the amount assumed
by such Eligible Assignee pursuant to such Assignment and
Assumption and, if the assigning Lender has retained some portion
of its obligations hereunder, a new Note to the order of the
assigning Lender in an amount equal to the amount retained by it
hereunder and (ii) shall deliver an opinion from counsel to the
Borrowers in substantially the form delivered on the Closing Date
pursuant to Section 10.8 as to the enforceability of such new
Notes. Such new Notes shall provide that they are replacements
for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered
Notes, shall be dated the effective date of such Assignment and
Assumption and shall otherwise be in substantially the form of
the assigned Notes. The surrendered Notes shall be cancelled and
returned to the Borrowers.
Section 18.5. Participations. Each Lender may sell
participations to one or more banks or other entities in all or a
portion of such Lender's rights and obligations under this
Agreement and the other Loan Documents; provided that (a) each
such participation shall be in an amount of not less than
$10,000,000, (b) any such sale or participation shall not affect
the rights and duties of the selling Lender hereunder to the
Borrowers and the Agent and the Lender shall continue to exercise
all approvals, disapprovals and other functions of a Lender, (c)
the only rights granted to the participant pursuant to such
participation arrangements with respect to waivers, amendments or
modifications of, or approvals under, the Loan Documents shall be
the rights to approve waivers, amendments or modifications that
would reduce the principal of or the interest rate on any Loans,
extend the term or increase the amount of the Commitment of such
Lender as it relates to such participant, reduce the amount of
any fees to which such participant is entitled or extend any
<PAGE>
regularly scheduled payment date for principal or interest, and
(d) no participant shall have the right to grant further
participations or assign its rights, obligations or interests
under such participation to other Persons without the prior
written consent of the Agent.
Section 18.6. Pledge by Lender. Notwithstanding any other
provision of this Agreement, any Lender at no cost to the
Borrowers may at any time pledge all or any portion of its
interest and rights under this Agreement (including all or any
portion of its Notes) to any of the twelve Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12 U.S.C.
Section 341. No such pledge or the enforcement thereof shall
release the pledgor Lender from its obligations hereunder or
under any of the other Loan Documents.
Section 18.7. No Assignment by Borrowers. None of the
Borrowers shall assign or transfer any of its rights or
obligations under any of the Loan Documents without prior
Unanimous Lender Approval.
Section 18.8. Disclosure. The Borrowers agree that, in
addition to disclosures made in accordance with standard banking
practices, any Lender may disclose information obtained by such
Lender pursuant to this Agreement to assignees or participants
and potential assignees or participants hereunder; provided that
such assignees or potential assignees shall be Eligible
Assignees. Any such disclosed information shall be treated by
any assignee or participant with the same standard of
confidentiality set forth in Section 7.10 hereof.
Section 18.9. Syndication. The Borrowers acknowledge that
the Agent intends, and shall have the right, by itself or through
its Affiliates, to syndicate or enter into co-lending
arrangements with respect to the Loans and the Total Commitment
pursuant to this Section 18, and the Borrowers agree to cooperate
with the Agent's and its Affiliate's syndication and/or
co-lending efforts, such cooperation to include, without
limitation, the provision of information reasonably requested by
potential syndicate members.
Section 19. NOTICES, ETC. Except as otherwise expressly
provided in this Agreement, all notices and other communications
made or required to be given pursuant to this Agreement or the
Notes shall be in writing and shall be delivered in hand, mailed
by United States registered or certified first class mail,
postage prepaid, sent by overnight courier, or sent by facsimile
and confirmed by delivery via courier or postal service,
addressed as follows:
(a) if to any Borrower or any Guarantor, to the Borrower
Representative at Sovran Self Storage, Inc., 5166 Main Street,
Williamsville, New York 14221, Attention: Mr. David L. Rogers,
Chief Financial Officer, with a copy to Phillips, Lytle,
Hitchcock, Blaine & Huber LLP, One Marine Midland Center,
Buffalo, New York 14203, Attention: Mr. Frederick G. Attea, or
to such other address for notice as the Borrower Representative
or any Guarantor shall have last furnished in writing to the
Agent;
<PAGE>
(b) if to the Agent, at 111 Westminster Street, Mail Code
RI-MO-215, Providence, Rhode Island 02903, Attention: Mark E.
Dalton, Vice President, or such other address for notice as the
Agent shall have last furnished in writing to the Borrowers, with
a copy to Paul M. Vaughn, Esq., Bingham Dana LLP, 150 Federal
Street, Boston, Massachusetts 02110, or at such other address
for notice as the Agent shall last have furnished in writing to
the Person giving the notice; and additionally, for any Completed
Revolving Credit Loan Request, to Agency Services, Fleet
Corporate Administration, Mail Stop MA OF D05P, One Federal
Street, Boston, Massachusetts 02110, Attention: Timothy J.
Callahan, Senior Loan Administrator; and
(c) if to any Lender, at such Lender's address set forth on
Schedule 1.2 hereto, or such other address for notice as such
Lender shall have last furnished in writing to the Person giving
the notice.
Any such notice or demand shall be deemed to have been duly
given or made and to have become effective (i) if delivered by
hand, overnight courier or facsimile to the party to which it is
directed, at the time of the receipt thereof by such party or the
sending of such facsimile with electronic confirmation of receipt
and (ii) if sent by registered or certified first-class mail,
postage prepaid, on the fifth Business Day following the mailing
thereof.
Section 20. GOVERNING LAW; CONSENT TO JURISDICTION AND
SERVICE. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS,
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS
UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). EACH OF THE BORROWERS AND THE
GUARANTORS AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK, NEW YORK
OR ANY FEDERAL COURT SITTING IN NEW YORK, NEW YORK AND CONSENTS
TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS AND THE SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWERS OR THE
GUARANTORS BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 19. THE
BORROWERS AND EACH OF THE GUARANTORS HEREBY WAIVES ANY OBJECTION
THAT EITHER OF THEM MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
Section 21. HEADINGS. The captions in this Agreement are
for convenience of reference only and shall not define or limit
the provisions hereof.
Section 22. COUNTERPARTS. This Agreement and any
amendment hereof may be executed in several counterparts and by
each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this
Agreement it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom
enforcement is sought.
<PAGE>
Section 23. ENTIRE AGREEMENT, ETC. The Loan Documents
and any other documents executed in connection herewith or
therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this
Agreement nor any term hereof may be changed, waived, discharged
or terminated, except as provided in Section 25.
Section 24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE
CLAIMS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, EACH
OF THE BORROWERS, EACH OF THE GUARANTORS, THE AGENT AND EACH OF
THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE REVOLVING CREDIT NOTES OR ANY OF THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, EACH OF THE BORROWERS AND EACH OF THE
GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHT ANY OF THEM MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH OF THE BORROWERS
AND THE GUARANTORS (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGE THAT THE AGENT AND THE LENDERS HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH
THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS CONTAINED HEREIN.
Section 25. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except
as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given,
and any term of this Agreement or of any of the other Loan
Documents may be amended, and the performance or observance by
any Borrower or any Guarantor of any terms of this Agreement or
the other Loan Documents or the continuance of any default,
Default or Event of Default may be waived (either generally or in
a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Required Lenders.
Notwithstanding the foregoing, Unanimous Lender Approval
shall be required for any amendment, modification or waiver of
this Agreement that:
(i) reduces or forgives any principal of any
unpaid Loan or any interest thereon (including any
interest "breakage" costs) or any fees due any Lender
hereunder, or permits any prepayment not otherwise
permitted hereunder; or
(ii) changes the unpaid principal amount of, or
the rate of interest on, any Loan; or
<PAGE>
(iii) changes the date fixed for any payment of
principal of or interest on any Loan (including,
without limitation, any extension of the Maturity Date)
or any fees payable hereunder; or
(iv) changes the amount of any Lender's Commitment
(other than pursuant to an assignment permitted under
Section 18.1 hereof) or increases the amount of the
Total Commitment; or
(v) releases or reduces the liability of any
Guarantor pursuant to its Guaranty other than as
provided in Section 5; or
(vi) modifies this Section 25 or any other
provision herein or in any other Loan Document which by
the terms thereof expressly requires Unanimous Lender
Approval; or
(vii) amends any of the provisions governing
funding contained in Section 2 hereof; or
(viii) changes the rights, duties or obligations of
the Agent specified in Section 14 hereof (provided that
no amendment or modification to such Section 14 or to
the fee payable to the Agent under this Agreement may
be made without the prior written consent of the
Agent); or
(ix) changes the definitions of Required Lenders
or Unanimous Lender Approval.
No waiver shall extend to or affect any obligation not expressly
waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of the Agent or the
Lenders or any Lender in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial to such right or any
other rights of the Agent or the Lenders. No notice to or demand
upon any Borrower shall entitle any Borrower to other or further
notice or demand in similar or other circumstances.
Section 26. SEVERABILITY. The provisions of this
Agreement are severable, and if any one clause or provision
hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such
clause or provision in any other jurisdiction, or any other
clause or provision of this Agreement in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as a sealed instrument as of the date first set forth
above.
SOVRAN SELF STORAGE, INC.
By:
Name:
Title:
SOVRAN ACQUISITION LIMITED
PARTNERSHIP
By: Sovran Holdings Inc.,
its general partner
By:
Name:
Title:
FLEET NATIONAL BANK,
individually and as Agent
By:
Name:
Title:
FIRST UNION NATIONAL BANK
By:
Name:
Title:
<PAGE>
CREDITANSTALT CORPORATE FINANCE,
INC.
By:
Name:
Title:
By:
Name:
Title:
CRESTAR BANK
By:
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:
Name:
Title:
MARINE MIDLAND BANK
By:
Name:
Title:
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN
BRANCH
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
Schedule 1.2
Lender Commitment Amount Commitment Percentage
Fleet National Bank
One Federal Street
Boston, MA 02110 $ 26,250,000 17.5%
First Union National Bank
One First Union Center
Charlotte, NC 28288-0166 $ 26,250,000 17.5%
Creditanstalt Corporate Finance, Inc.
Two Greenwich Plaza
Greenwich, CT 06830-6353 $ 26,250,000 17.5%
Crestar Bank
8245 Boone Boulevard, Suite 820
Vienna, VA 22181-3872 $ 18,750,000 12.5%
PNC Bank, National Association
249 Fifth Avenue
Pittsburgh, PA 15222 $ 18,750,000 12.5%
Marine Midland Bank
One Marine Midland Center
Buffalo, NY 14203-2842 $ 18,750,000 12.5%
Dresdner Bank AG, New York Branch
and Grand Cayman Branch
75 Wall Street
New York, NY 10005-2886 $ 15,000,000 10.0%
TOTAL $150,000,000 100%
<PAGE>
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