<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended March 31, 2000
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission File Number: 001-12910
STORAGE USA, INC.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
62-1251239
(IRS Employer
Identification Number)
165 Madison Avenue, Suite 1300, Memphis, TN
(Address of principal executive offices)
38103
(Zip Codes)
Registrant's telephone number, including area code: (901) 252-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. (X) Yes ( ) NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.01 par value, 27,675,952 shares outstanding at May 1, 2000.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Storage USA, Inc.
Consolidated Statements of Operations
(unaudited)
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 2000 March 31, 1999
--------------- ---------------
<S> <C> <C>
Operating Revenues:
Rental income $ 58,445 $ 59,407
Service income 1,605 277
Other income 1,836 983
--------------- ---------------
Total operating revenues 61,886 60,667
--------------- ---------------
Operating Expenses:
Cost of property operations & maintenance 15,730 15,034
Taxes 5,187 4,996
Costs of providing services 1,285 325
General & administrative 2,265 3,698
Depreciation & amortization 9,193 8,356
--------------- ---------------
Total operating expenses 33,660 32,409
--------------- ---------------
Income from operations 28,226 28,258
Other income (expense):
Interest expense, net (11,047) (10,847)
--------------- ---------------
Income before minority interest
and gain(loss) on sale/exchange 17,179 17,411
Gain(loss) on sale/exchange of storage facilities 890 (578)
--------------- ---------------
Income before minority interest 18,069 16,833
Minority interest (3,391) (3,078)
--------------- ---------------
Net income $ 14,678 $ 13,755
=============== ===============
Basic net income per share $ 0.53 $ 0.49
=============== ===============
Diluted net income per share $ 0.53 $ 0.49
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Storage USA, Inc.
Consolidated Balance Sheets
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
as of as of
March 31, 2000 December 31, 1999
------------------ --------------------
(unaudited)
<S> <C> <C>
Assets
Investments in storage facilities, at cost:
Land $ 438,422 $ 441,080
Buildings and equipment 1,217,912 1,229,812
------------------ --------------------
1,656,334 1,670,892
Accumulated depreciation (103,272) (94,538)
------------------ --------------------
1,553,062 1,576,354
Cash & cash equivalents 1,557 1,699
Advances and investments in real estate 131,402 120,246
Other assets 62,371 56,620
------------------ --------------------
Total assets $1,748,392 $1,754,919
================== ====================
Liabilities & shareholders' equity
Notes payable $ 600,000 $ 600,000
Line of credit borrowings 108,682 105,500
Mortgage notes payable 69,588 70,163
Other borrowings 42,783 42,453
Accounts payable & accrued expenses 23,736 22,940
Dividends payable 19,213 18,831
Rents received in advance 11,369 10,869
Deferred gain from contribution of self-storage facilities 37,077 37,125
------------------ --------------------
Total liabilities 912,448 907,881
------------------ --------------------
Minority interest
Preferred units 65,000 65,000
Common units 85,882 91,143
------------------ --------------------
Total minority interest 150,882 156,143
------------------ --------------------
Commitments and contingencies
Shareholders' equity:
Common stock $.01 par value, 150,000,000 shares
authorized, 27,845,600 and 27,865,932
shares issued and outstanding 278 279
Paid-in capital 752,136 753,032
Notes receivable - officers (11,782) (11,368)
Deferred compensation (488) (517)
Accumulated deficit (15,831) (15,831)
Distributions in excess of net income (39,251) (34,700)
------------------ --------------------
Total shareholders' equity 685,062 690,895
------------------ --------------------
Total liabilities & shareholders' equity $1,748,392 $1,754,919
================== ====================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Storage USA, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 2000 March 31, 1999
===============================================
<S> <C> <C>
Operating activities:
Net income $ 14,678 $ 13,755
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,193 8,356
Minority interest 3,391 3,078
(Gain)/Loss on sale/exchange of self-storage facilities (890) 578
Changes in assets and liabilities:
Other assets (276) (3,968)
Other liabilities 1,404 6,093
-----------------------------------------------
Net cash provided by operating activities 27,500 27,892
===============================================
Investing activities:
Acquisition and improvements of storage facilities (4,263) (8,378)
Proceeds from sale/exchange of storage facilities and development 21,350 410
Development of storage facilities (10,414) (12,697)
Advances and investments in real estate (10,330) (7,448)
Proceeds from liquidation of advances and investments in real
estate 2,013 -
-----------------------------------------------
Net cash used in investing activities (1,644) (28,113)
===============================================
Financing activities:
Net borrowings under line of credit 3,182 19,789
Mortgage principal payments (313) (328)
Other borrowings principal payments/payoffs (100) (804)
Payment of debt issuance costs - (79)
Cash dividends (18,831) (17,745)
Preferred unit dividends (1,442) (1,010)
Proceeds from issuance of stock 107 (35)
Repurchase of common stock (6,153) -
Proceeds from issuance of preferred units - (18)
Payments on notes receivable 43 10
Distribution to minority interests (2,491) (2,382)
-----------------------------------------------
Net cash used in financing activities (25,998) (2,602)
===============================================
Net increase in cash and equivalents (142) (2,823)
Cash and equivalents, beginning of period 1,699 2,823
-----------------------------------------------
Cash and equivalents, end of period $ 1,557 $ -
===============================================
Supplemental schedule of non-cash activities:
Common stock issued in exchange for notes receivable 457 -
Equity share of joint venture received for disposition of assets 6,526 -
Note received in consideration for undepreciated land sold 2,200 875
Restricted stock issued - 246
Partnership Units exchanged for shares of common stock 5,604 250
-----------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(amounts in thousands, except share and per share data)
1. Unaudited Interim Financial Statements
--------------------------------------
References to the Company include Storage USA, Inc. ("the REIT") and SUSA
Partnership, L.P. (the "Partnership"), its principal operating subsidiary.
Interim consolidated financial statements of the Company are prepared
pursuant to the requirements for reporting on Form 10-Q. Accordingly,
certain disclosures accompanying annual financial statements prepared in
accordance with generally accepted accounting principles are omitted. In
the opinion of management, all adjustments, consisting solely of normal
recurring adjustments, necessary for the fair presentation of consolidated
financial statements for the interim periods have been included. The
current period's results of operations are not necessarily indicative of
results that ultimately may be achieved for the year. The interim
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1999 as filed with the
Securities and Exchange Commission.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could vary from these estimates.
2. Organization
------------
Storage USA, Inc. (the "Company") a Tennessee corporation, was formed in
1985 to acquire, develop, construct, franchise, own and operate self-
storage facilities throughout the United States. The Company is structured
as an umbrella partnership real estate investment trust ("UPREIT") in which
substantially all of the Company's business is conducted through the
Partnership. Under this structure, the Company is able to acquire self-
storage facilities in exchange for units of limited partnership interest in
the Partnership ("Units"), permitting the sellers to at least partially
defer taxation of capital gains. At March 31, 2000 and December 31, 1999,
respectively, the Company owned approximately 88.9% and 88.4% of the
partnership interest in the Partnership.
In 1996, the Company formed Storage USA Franchise Corp ("Franchise"), a
Tennessee corporation. The Partnership owns 100% of the non-voting common
stock of Franchise. The Partnership accounts for Franchise under the equity
method and includes its 97.5% share of the profit or loss of Franchise in
Other Income.
3. Summary of Significant Accounting Policies
------------------------------------------
Service Income
Service income consists of revenue derived from the providing of services
to third parties. These services include the management of self-storage
facilities, as well as general contractor, development and acquisition
services provided to the GE Capital Corp Development and Acquisition
Ventures ("GE Capital Ventures"). Below is a summary of first quarter
service income:
Three months Three months
ended ended
March 31, 2000 March 31, 1999
---------------------------------
Management fees $ 612 $277
General Contractor fees 448 -
Development fees 545 -
--------------------------------
Total service income $1,605 $277
================================
Other Income
Other income consists of revenue from property specific activities (rental
of floor and storage space for locks and packaging material, truck rentals
and ground rents for cellular telephone antenna towers and billboards)
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 2000
(amounts in thousands, except per share data)
and the proportionate share of net income of equity investments including
joint ventures and Franchise. A summary of these amounts is as follows:
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 2000 March 31, 1999
--------------------------------------
<S> <C> <C>
Facility specific revenue $1,120 $1,003
Share of net income of equity investments 716 (20)
--------------------------------------
Total other income $1,836 $ 983
======================================
</TABLE>
Interest Expense, net
Interest income and expense are netted together and the breakout of income
and expense is as follows:
Three months Three months
ended ended
March 31, 2000 March 31, 1999
------------------------------------
Interest income $ 3,339 $ 2,992
Interest expense (14,386) (13,839)
------------------------------------
Interest expense, net $(11,047) $(10,847)
====================================
Reclassifications
Certain previously reported amounts have been reclassified to conform to
the current financial statement presentation with no impact on previously
reported net income or shareholders' equity.
4. Investment in Storage Facilities
--------------------------------
The following table summarizes the activity in storage facilities during
the period:
Cost:
Balance on January 1, 2000 $1,670,892
Property Acquisitions -
Land Acquisition and Development 10,414
Disposition of Property (29,201)
Improvements and other 4,229
-----------------------
Balance on March 31, 2000 $1,656,334
=======================
Accumulated Depreciation:
Balance on January 1, 2000 $ 94,538
Additions during the period 8,782
Disposition of Property (48)
-----------------------
Balance on March 31, 2000 $ 103,272
=======================
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 2000
(amounts in thousands, except per share data)
The preceding cost balances include facilities acquired through capital
leases of $31,382 at March 31, 2000 and $31,334 at December 31, 1999 and
construction in progress of $60,989 at March 31, 2000 and $89,870 at
December 31, 1999. Also included above is $13,200 at March 31, 2000 and
$11,800 at December 31, 1999 of corporate office furniture and fixtures.
Accumulated depreciation associated with the facilities acquired through
capital leases was $932 at March 31, 2000 and $771 at December 31, 1999.
5. Advances and Investments in Real Estate
---------------------------------------
Advances
As of March 31, 2000 and December 31, 1999, $121.588 and $177,022
respectively of advances have been made by the Company to franchisees of
Franchise to fund the development and construction of franchised self-
storage facilities. The loans are collateralized by the property.
Joint Ventures
Fidelity Venture
On June 7, 1999, the Company formed a joint venture with Fidelity
Management Trust Company (the "Fidelity Venture"). The Company contributed
32 self-storage facilities with a fair value of $144,000 to the Fidelity
Venture in return for a 25% interest and cash proceeds of approximately
$131,000. During the first three months of 2000, the Company recognized
$272 in equity earnings from the Fidelity Venture and $323 in management
fees for managing the venture's properties. As of March 31, 2000, the
Company had a recorded negative investment balance in the Fidelity Venture
of $257. The table below summarizes certain financial information related
to the Fidelity Venture:
Three months
ended
March 31, 2000
------------------------------------------
Property revenues $ 5,349
Property expenses $ 1,859
Net Operating Income $ 3,490
Net income $ 1,087
Total assets $149,235
Total debt $ 92,655
GE Capital Ventures
On December 1, 1999, the Company formed two joint ventures with GE Capital
Corp ("GE Capital"), providing for a total investment capacity of $400,000
for acquisitions and development of self-storage facilities. The Company
has a 25% interest in the $160,000 Development Venture and a 16.7% interest
in the $240,000 Acquisition Venture. During the quarter, the Company
transferred nine projects that were in various stages of development into
the GE Capital Development Venture, representing projected aggregate total
costs of $53,000. The projects were transferred to the Development Venture
at the Company's cost of $26,030. The Company received $19,856 in cash,
and recorded an investment in the venture of $6,526, representing a 25%
interest.
In connection with the transaction, the Company also recognized $448 and
$545 in general contractor and development service fees, respectively, as
well as $286 and $176 in related expenses. As of March 31, 2000, the
Company has a recorded investment of $9,108 in the joint ventures.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 2000
(amounts in thousands, except per share data)
On February 14, 2000, the Development Venture closed on a credit facility
with a commercial bank. Under the facility, the Development Venture can
borrow up to 50% of the cost of each project. The borrowings are supported
by mortgages which are non- recourse to the joint venture partners, except
for an environmental indemnification and construction completion guaranty
that SUSA Partnership, L.P. will provide. The facility bears interest at
various spreads over the Eurodollar Rate. The Development Venture did not
draw against the facility until April of 2000. The Acquisition Venture has
not yet closed on a credit facility but expects to obtain a facility that
will allow it to borrow up to 50% of acquisition costs.
Other Ventures
The Company has equity interests in several single facility joint ventures.
As of March 31, 2000, the recorded investment in these joint ventures
was $963.
6. Other Assets
------------
As of As of
March 31, December 31,
2000 1999
--------------------------
Deposits $ 4,911 $ 4,147
Deferred costs of issuances of
Unsecured notes 9,497 10,006
Accounts receivable 3,863 4,855
Mortgages receivable 5,117 4,449
Notes receivable 9,738 7,445
Other receivables 2,527 4,988
Advancements and investments in Franchise 20,410 13,906
Other 6,308 6,824
--------------------------
Total Other Assets $ 62,371 $56,620
--------------------------
7. Lines of credit, Mortgages payable, and Other borrowings
--------------------------------------------------------
The Company can borrow under a $200,000 line of credit with a group of
commercial banks and under a $40,000 line of credit with a commercial bank.
The lines bear interest at various spreads of LIBOR. The following table
lists additional information about the lines of credit.
As of
Line of Credit Borrowings March 31, 2000
---------------------------------------------------------
Total lines of credit $240,000
Borrowings outstanding $108,682
Weighted average daily interest
rate year-to-date 7.23%
The Company from time to time assumes mortgages on facilities acquired.
Certain mortgages were assumed at above market interest rates. Premiums
were recorded upon assumption and amortized using the interest method over
the terms of the related debt. The following table provides information
about the mortgages:
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 2000
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Mortgage Notes Payable
as of March 31, 2000
- ---------------------------------------------------------------------------
Face Amount Maturity Range
- ---------------------------------------------------------------------------
<S> <C> <C>
Fixed rate $58,032 2000-2021
Variable rate 5,305 2006-2016
-------------------------------------
$63,337
Premiums 6,251
------------
Mortgage notes payable $69,588
------------
</TABLE>
The Company has other borrowings used in the financing of property acquisitions.
The following table provides information about the other borrowings.
<TABLE>
<CAPTION>
Other Borrowings
as of March 31, 2000
-------------------------------------------------------------------------------------------------
Face Amount Carry Value Imputed Rate
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-interest bearing notes $ 9,150 $ 8,516 7.50%
Deferred units 12,000 10,448 7.50%
Capital Leases - 23,819 7.50%
----------------------------------------------------------
$42,783
---------------
</TABLE>
During the three months ended March 31, 2000, total interest paid on all debt
was $11,848 and total interest capitalized for construction costs was $1,418.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 2000
(amounts in thousands, except per share data)
8. Income per Share
----------------
Basic and diluted income per share is calculated as presented in the
following table:
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 2000 March 31, 1999
------------------------------------------
<S> <C> <C>
Basic net income per share:
Net income $ 14,678 $ 13,755
Basic weighted average
Common shares outstanding 27,850 27,837
------------------------------------------
Basic net income per share $ 0.53 $ 0.49
Diluted net income per share:
Net income $ 14,678 $ 13,755
Minority interest relating to limited
Partners of the Partnership 1,906 1,795
------------------------------------------
Net income before minority interest relating
To limited partners of the Partnership $ 16,584 $ 15,550
Basic weighted average
Common shares outstanding 27,850 27,837
Weighted average Partnership Units
Outstanding 3,538 3,642
Basic weighted average common shares
And partnership units outstanding 31,388 31,479
Dilutive effect of stock options 53 70
------------------------------------------
Diluted weighted average common shares
And partnership units outstanding 31,441 31,549
------------------------------------------
Diluted net income per share $ 0.53 $ 0.49
</TABLE>
9. Commitments
-----------
As of March 31, 2000, the Company is committed to advance an additional
$20,407 to franchisees of Franchise for the construction of self-storage
facilities. These advances are collateralized by the facility. The
Company is a limited guarantor on $7,830 of loan commitments made by third
party lenders to franchisees of Franchise. This entire amount has been
funded as of March 31, 2000.
10. Subsequent Events
-----------------
Subsequent to the end of the first quarter, the Company's Acquisition
Venture with GE Capital acquired its first property, a facility in
Brooklyn, NY. Through equity contributions and debt advances, the Company
funded $3,500 of the $11,100 purchase price with GE Capital providing the
remainder.
The Company also continued with its Board-authorized plan to repurchase up
to 5% of its common shares outstanding through open market and private
purchases. Between April 1 and May 1, 2000, an additional 237 shares were
repurchased at an average price of approximately $31 per share. The total
of 692 shares as of May 1, 2000 represents approximately 49% of the
announced repurchase.
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
March 31, 2000
(amounts in thousands, except per share data)
11. Legal Proceedings
-----------------
On July 22, 1999, a purported statewide class action was filed against the
REIT and Partnership in the Circuit Court of Montgomery County, Maryland,
under the style: Ralph Grunewald v. Storage USA, Inc. and SUSA Partnership,
L.P., case no. 201546V, seeking recovery of certain late fees paid by our
tenants and an injunction against further assessment of similar fees. The
Company filed a responsive pleading on September 17, 1999, setting out its
answer and affirmative defenses, and believes that it has defenses to the
claims in the suit and intends to vigorously defend it. The case is
currently in discovery and no trial date has been set.
On November 15, 1999 a purported nationwide class action was filed against
the REIT and Partnership in the Supreme Court of the State of New York,
Ulster County, case no 99-3278 , also seeking the recovery of certain late
and administrative fees paid by our tenants and an injunction against
similar fees. The Company filed a responsive pleading on January 28, 2000
and the case has been transferred to New York County, case no. 410589/00.
The Company believes that it has defenses to the suit and intends to
vigorously defend it. The case is currently in discovery and no trial date
has been set.
While the ultimate resolution of these cases will not have a material
adverse effect on the Company's financial position, if during any period
the potential contingency should become probable, the results of operations
in such period could be materially affected.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the consolidated financial condition
and results of operations should be read together with the Consolidated
Financial Statements and Notes thereto. References to "we," "our" or "the
Company" include Storage USA, Inc. (the "REIT") and SUSA Partnership, L.P., the
principal operating subsidiary of the REIT (the "Partnership").
The following are definitions of terms used throughout this discussion that
will be helpful in understanding our business.
. Physical Occupancy means the total net rentable square feet rented as of
the date (or period if indicated) divided by the total net rentable square
feet available.
. Scheduled Rent Per Square Foot means the average market rate per square
foot of rentable space.
. Net Rental Income means income from self-storage rentals less discounts.
. Realized Rent Per Square Foot means the annualized result of dividing
rental income, less discounts by total square feet rented.
. Direct Property Operating Cost means the costs incurred in the operation of
a facility, such as utilities, real estate taxes, and on-site personnel.
Costs incurred in the management of all facilities, such as accounting
personnel and management level operations personnel are excluded.
. Net Operating Income ("NOI") means total property revenues less Direct
Property Operating Costs.
. Annual Capitalization Rate ("Cap Rate")/ Yield means NOI of a facility
divided by the total capitalized costs of the facility.
. Funds from Operations ("FFO") means net income, computed in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (losses)
from debt restructuring and sales of property, plus depreciation and
amortization of revenue-producing property, and after adjustments for
unconsolidated partnerships and joint ventures.
. Same-Store Facilities include all facilities that we owned for the entire
period of both comparison periods. Development properties and expansions
are removed from these groups to avoid skewing the results.
Overview
As of March 31, 2000, we owned, managed and franchised 510 facilities containing
34.7 million square feet in 31 states and the District of Columbia.
Internal Growth
The following table compares Same-Store Facilities (329 properties owned since
January 1, 1999) for the first quarter of 2000 and 1999. Newly developed and
expanded facilities are removed from the same-store pool to avoid skewing the
results.
12
<PAGE>
<TABLE>
<CAPTION>
Same-Store Results
(amounts in thousands except occupancy and per square foot figures)
--------------------------------------------------------------------
Quarter Ended Quarter Ended
March 31, 2000 March 31, 1999 Growth %
------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $48,667 $46,539 4.6%
Operating Expenses 9,429 9,127 3.3%
Property Tax & Other 5,621 5,770 (2.6%)
------------------------------------------------------------------
Total Expenses 15,050 14,897 1.0%
------------------------------------------------------------------
NOI excluding late fees $33,617 $31,642 6.2%
==================================================================
Late fee Income 1,443 3,017 (52.2%)
NOI including late fees $35,060 $34,659 1.2%
==================================================================
Physical Occupancy 83.80% 84.60%
Scheduled Rent per Square Foot $ 11.87 $ 11.24 5.6%
Realized Rent per Square Foot $ 10.48 $ 9.92 5.6%
</TABLE>
. Our Same-Store Facilities achieved 6.2% NOI growth excluding late fees in
the first quarter of 2000, and 1.2% growth including late fees, as compared
to the same quarter in 1999. The 6.2% NOI growth without late fees resulted
from revenue increases of 4.6%, offset by expense growth of 1.0%.
. The revenue increase of 4.6% for the quarter was driven by an increase in
scheduled rent per square foot of 5.6% and a slight drop in the discount
factor versus the same period last year, partially offset by a 0.8
percentage point decrease in physical occupancy.
. Our operating expenses grew 3.3% from the first quarter of 1999 due to
increases in repairs and maintenance expense, health insurance and payroll
taxes. Meanwhile, property tax and other expenses decreased 2.6% compared
to the first quarter of 1999 due primarily to significant reductions in
property and liability insurance costs.
The following table lists changes in the 10 largest same-store markets on a rent
per square foot basis and occupied square feet basis and the resulting change in
net rental income for the first quarter 2000 over the first quarter 1999. The
largest 10 markets in total represent 67.8% of the same-store NOI.
<TABLE>
<CAPTION>
Ten Largest Same-Store Markets
-----------------------------------------
Quarter Ended March 31, 2000 vs.
Quarter Ended March 31, 1999
-----------------------------------------
% % % %
Number of Total Change in Change in Change in
of Same-Store Net Rental Realized Occupied
Market Facilities NOI Income/(1)/ RPSF/(2)/ Sq. Ft.
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Los Angeles-Riverside-Orange County, CA 46 18.1% 8.3% 8.1% 0.2%
New York-Northern New Jersey-Long Island 25 14.7% 6.7% 6.1% 0.5%
Washington-Baltimore, DC-MD-VA-WV 20 9.6% 4.2% 7.3% (2.8%)
Miami-Fort Lauderdale, FL 15 6.4% 3.6% 5.8% (2.1%)
Philadelphia-Wilmington-Atlantic City, PA-NJ 14 4.0% 2.7% 5.0% (2.2%)
Phoenix-Mesa, AZ 14 3.1% 4.8% 6.5% (1.6%)
San Francisco-Oakland-San Jose, CA 8 3.2% 0.9% 6.2% (5.0%)
Dallas-Fort Worth, TX 10 3.1% 2.5% 2.9% (0.4%)
Detroit, Ann Arbor-Flint, MI 11 2.9% 8.9% 7.4% (1.5%)
Las Vegas, NV-AZ 11 2.7% 1.9% 3.7% (1.7%)
</TABLE>
(1) The percentage change in Realized Rent per Square Foot plus the percent
change in occupied square feet approximates the percentage change in net
rental income.
(2) Rent Per Square Foot.
13
<PAGE>
External Growth
There were no new property acquisitions during the first quarter of 2000.
Substantially all property acquisitions transacted throughout the remainder of
2000 will be through the General Electric Capital Corporation ("GE Capital")
Acquisition Venture.
We did not place any development facilities in service in the first quarter. We
did, however, complete four expansions at a cost of approximately $3.5 million,
which added a total of approximately 86 thousand square feet. In connection with
our joint ventures with GE Capital discussed in the Financing section below, we
transferred nine projects in various stages of development into the GE Capital
Development Venture during the first quarter of 2000. These projects have a
total projected cost of $53.0 million, and were transferred to the venture at
our cost of $26.0 million. We do plan to continue the development of ten new
facilities within the REIT. The following chart summarizes the details of these
10 projects as well as our expansion projects under construction or in
construction planning as of March 31, 2000:
<TABLE>
<CAPTION>
Square Expected Investment Remaining
# of Feet Investment to Date Investment
----------------------------------------------------------------------------------
(amounts in thousands except for number of facilities)
<S> <C> <C> <C> <C> <C>
Total development in process 10 795 $62,881 $40,248 $22,633
Total expansions in process 22 495 $29,685 $ 7,862 $21,823
----------------------------------------------------------------------------------
Total 32 1,290 $92,566 $48,110 $44,456
==================================================================================
</TABLE>
The following table presents the anticipated timing of completion and the
total expected dollar amounts invested in opening the facilities in the
process of being newly developed or expanded.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2nd Qtr 00 3rd Qtr 00 4th Qtr 00 2001-2002 Total
------------------------------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C>
Development $ 14,235 $ 15,023 $ 5,029 $ 28,594 $ 62,881
Expansions 3,702 2,350 6,135 17,498 29,685
------------------------------------------------------------------------------------
Total $ 17,937 $ 17,373 $ 11,164 $ 46,092 $ 92,566
====================================================================================
</TABLE>
Financing
During the fourth quarter of 1999, we formed two joint ventures with GE Capital,
providing a total investment capacity of $400 million for acquisitions and
development of self-storage properties. We plan to fund substantially all of
our new acquisition and development through 2001 through the GE Ventures. As
stated above, in the "External Growth" section, we transferred nine projects in
various stages of development into the GE Capital Development Venture during the
first quarter of 2000. These projects have a total projected cost of $53.0
million, $26.0 million of which represented the Company's total costs as of
March 31, 2000. We received $19.9 million in cash, and recorded an investment in
the venture of $6.5 million, representing a 25% interest.
In December of 1999, we announced a Board authorized plan to repurchase up to 5%
of our common shares outstanding through open market and private purchases. The
timing of the purchases, the length of time that the program will continue and
the exact number of shares to be purchased is dependent upon prevailing market
conditions. As of March 31, 2000, we had repurchased 455 thousand shares at an
average price of $29.45. Subsequent to the end of the first quarter of 2000,
we purchased an additional 237 thousand shares at an average price of $30.99.
The total of 692 thousand shares repurchased as of May 1, 2000 represents
approximately 49% of the announced repurchase.
Other Initiatives
On May 8, 2000, we announced the formation of a strategic alliance with Access
Storage, S.A. and Millers Storage, S.A., the leading self-storage operators in
Europe and Australia respectively, to provide management advisory services. As
part of the agreement, we received an option to purchase convertible debt and
also to acquire up to a 20% interest in these companies, which are indirect
affiliates of Security Capital Group Incorporated. We do not expect to
exercise such option in 2000.
14
<PAGE>
Commencing on May 1, 2000, we began offering our customers direct access to
tenant insurance, which insures their goods against described perils, in all
Storage USA facilities except those located in the states of Florida and North
Carolina. The net profits from the premiums written during 2000 will ultimately
accrue to the benefit of a charitable trust established by the Company. We are
anticipating that profits from premiums written subsequent to 2000 will
ultimately accrue to the benefit of a taxable REIT subsidiary that will be
formed and wholly owned by the Partnership pursuant to the Ticket to Work and
Work Incentives Improvement Act of 1999.
Results of Operations
The following table reflects the profit and loss statement for the three months
ended March 31, 2000 and March 31, 1999 based on a percentage of total revenues
and is used in the discussion that follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---------------------------------------------------------------
<S> <C> <C>
Revenue
Rental Income 94.4% 97.9%
Service Income 2.6% 0.5%
Other Income 3.0% 1.6%
---------------------------------------------------------------
Total Operating Revenues 100.0% 100.0%
Expenses
Cost of Property Operations and 25.4% 24.8%
Maintenance
Taxes 8.4% 8.2%
Cost of Providing Services 2.1% 0.5%
General And Administrative 3.7% 6.1%
</TABLE>
Rental income decreased $962 thousand, or 1.6% in the quarter ended March 31,
2000 compared to the same period in 1999. The primary contributors to the
decline in rental income are summarized in the table below.
<TABLE>
<CAPTION>
Rental Income Growth in 2000 over 1999 for comparable periods
ended March 31 (in thousands)
--------------------------------------------
Before
Late fees Late fees Total
--------------------------------------------
<S> <C> <C> <C>
1999 acquisitions $ 2,696 $ 64 $ 2,760
1999 developments 581 11 592
1999 dispositions (5,433) (341) (5,774)
Same-store facilities 2,055 (1,575) 480
Other lease-up, expansion and development facilities 1,083 (103) 980
--------------------------------------------
$ 982 $ (1,944) $ (962)
--------------------------------------------
</TABLE>
Much of the decrease is due to the one-time impact of our change in late fee
policy, as described in our form 10-K for the year ended 1999. This change
produced an unfavorable $1.9 million variance in the first quarter, or
approximately 53.4%. Rental income also declined due to 1999 property
dispositions, most notably the 32 properties contributed to the joint venture
with Fidelity Management Trust Company in the 2/nd/ quarter of 1999. This $5,433
reduction in rental income was partially offset by increased revenues from 1999
acquisitions of $2,696, developments and expansions of $1,664, held for the full
three months in year 2000. The remaining $2,055 growth occurred in Same-Store
Facilities, and was provided by an approximate 5.6% increase in realized rent
per square foot, from $9.92 in the first quarter of 1999 to $10.48 for the same
period in 2000. Physical occupancy during this period declined slightly, from
84.6% in 1999 to 83.8% in 2000.
As stated above, we reevaluated the amounts that we charge our customers for
late fees and implemented reduced late fees in the first quarter of 2000. The
impact of the change in late fee policy on our total revenues was and remains
difficult to determine due to a number of factors: differences in late fee
charges across the country; variances in late fee calculation in acquired
facilities; and the discretion of facility managers to waive late fees. As set
forth in our form 10-K for the year ended 1999, we established an estimate of as
much as $5.0 million in reduced revenue in the year 2000 due to the policy
change. After a review of our first quarter, we now estimate a reduction in
revenue for 2000 of approximately $6.8 million, but there can be no assurance
that the reduction will be limited to this amount due to the
15
<PAGE>
factors set out above. You should refer to the discussions under "Legal
Proceedings" and "Forward-Looking Statements and Risk Factors" for additional
information relevant to our late fee policy.
Service income increased by $1.3 million from the first quarter of 1999 to the
same period in 2000. It also grew as a percentage of revenue: from 0.5% in first
quarter 1999 to 2.6% in the same period in 2000. A portion of the increase, $335
thousand, is due to an increased number of managed and franchised facilities
paying fees to the Company. There were 66 such properties as of March 31, 1999,
versus 108 as of March 31, 2000. The remaining increase was due to the fees from
general contractor and development services provided to the GE Capital
Development venture for the first quarter of 2000. Below is a summary of first
quarter service income:
<TABLE>
<CAPTION>
Three months Three months
Ended ended
March 31, 2000 March 31, 1999
----------------------------------
<S> <C> <C>
Management fees $ 612 $ 277
General Contractor fees 448 -
Development fees 545 -
----------------------------------
Total service income $ 1,605 $ 277
==================================
</TABLE>
Other income grew $853 thousand in the first quarter of 2000 over the same
period in 1999. Other income consists of revenue from property specific
activities (rental of floor and storage space for locks and packaging material,
truck rentals and ground rents for cellular telephone antenna towers and
billboards) and the proportionate share of net income of equity investments
including joint ventures and Franchise. A summary of these amounts is as
follows:
<TABLE>
<CAPTION>
Three months Three months
Ended ended
March 31, 2000 March 31, 1999
----------------------------------
<S> <C> <C>
Facility specific revenue $1,120 $1,003
Share of net income of equity investments 716 (20)
----------------------------------
Total other income $1,836 $ 983
==================================
</TABLE>
As a percentage of revenues, cost of property operations and maintenance
increased from the first quarter of 1999 to 2000, 24.8% to 25.4%. The trend for
the cost of property operations as a percentage of revenues is to decrease over
time due to Same-Store Facility revenue growth outpacing expense growth. This
was generally the case here, except for a few notable exceptions. Salary expense
increased between the two periods, primarily due to two strategic initiatives
commencing in 1999: the national reservation center and the internal information
technology help desk. There were minimal salary costs in 1999 associated with
these initiatives, compared to a full three months in 2000. Health insurance
expense also showed a significant increase, following what we believe is a
national trend. Finally, 2000 utility expenses exceeded those of 1999 due to the
unusually mild winter in 1999.
Tax expense as a percentage of revenues was 8.4% for the first quarter of 2000
compared to 8.2% for the same period 1999. Tax expense as a percentage of
revenues tends to trend down as a result of Same-Store Facility revenue growth
outpacing tax expense growth. This trend was negated in the first quarter due
to the impact of property tax reassessments on a number of our larger
facilities.
Costs of providing services increased from $325 thousand in the first quarter of
1999 to $1.3 million in the same period in 2000, and increased as a percentage
of revenues from 0.5% to 2.1%. This was due primarily to the new services
provided, general contracting and development services, and their corresponding
costs. The costs of providing management services also increased, as more
managed properties were added to the Storage USA system between March 31 of 1999
and 2000.
General and administrative expenses ("G&A") as a percentage of revenues
decreased from 6.1% in the first quarter of 1999 to 3.7% for the same period of
2000. This was indicative of a G&A expense decrease from $3.7 to $2.3 million
between the two periods. Contributing substantially to this decrease in expense
was the classification in 2000 of
16
<PAGE>
development and construction department overhead as part of the cost of
providing services, continued benefits in 2000 from various cost containment
programs and lower management bonus accruals in 2000 compared to 1999.
Depreciation and amortization expense increased from $8.4 million in the first
quarter of 1999 to $9.2 million for the same period in 2000. This was due to a
$12.4 million increase in depreciable assets since March 31, 1999.
Interest expense grew from $15.0 million in the first quarter of 1999 to $15.8
million during the same period in 2000. The interest expense increase was
primarily from the sources listed in the table below and was offset by
capitalized interest of $1.4 million in the first quarter of 2000 and $1.1
million in the first quarter of 1999.
<TABLE>
<CAPTION>
As of March 31,
------------------------------------------------------------------
2000 1999
------------------------------------------------------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Debt Borrowing Interest Rate Borrowing Interest Rate
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes payable $ 600,000 7.37% $ 600,000 7.37%
Lines of credit 128,410 7.23% 92,067 6.23%
Mortgages payable 69,877 9.92% 67,517 9.75%
Leases & other borrowings 42,621 7.50% 37,898 7.5%
</TABLE>
Interest income grew $300 thousand, from $3.0 million in the first quarter of
1999 to $3.3 million in the same period in 2000. This increase was due to
additional advances from us to Franchisees since March 31, 1999, and the
resulting interest growth. The remainder of the increase is from interest
earned on amounts outstanding under the 1995 Employee Stock Purchase and Loan
Plan and earnings on overnight deposits.
We recorded an $890 thousand gain on the sale of storage facilities in the first
quarter of 2000. $414 thousand of that gain relates to the sale of two
Columbus, Indiana storage facilities; $295 thousand to the sale of a non-
operating development project in White Marsh, Maryland to a franchisee; and the
remaining $180 to adjustments from prior period dispositions.
Minority interest expense represents the portion of income allocable to holders
of limited partnership interest in the Partnership ("Units") and distributions
payable to holders of preferred units. The increase from $3.1 million in the
first quarter of 1999 to $3.4 in the same period in 2000 is mainly attributable
to the increase in net income before minority interest between the two periods
of $1.2 million.
Liquidity and Capital Resources
Cash provided by operating activities was $27.5 million during the three months
ended March 31, 2000 as compared to $27.9 million during the same period in
1999. The items affecting the operating cash flows are discussed more fully in
the "Results of Operations" section.
We invested $4.3 million in the first quarter ending March 31, 2000 in the
acquisition and improvement of self-storage facilities compared to $8.4 million
during the same period in 1999. For the first quarter of 2000, the entirety of
the investment represents improvements, as no self-storage facilities were
acquired. There was one facility acquired in the same period in 1999. In the
first quarter of 2000, we received $1.0 million in cash proceeds from the sale
of two self-storage facilities in Indiana, $19.9 from the transfer of nine
development projects to the GE Capital Development Venture, and $463 thousand
from the sale of another non-operating development project to a franchisee. For
the GE Capital transaction, we also received a $6.5 million interest in the
venture, representing 25%. In the transaction involving the single development
project, we accepted a $2.2 million note and received the balance of the sales
price in cash.
In addition to improvements, we invested $10.4 million in the first three months
of 2000 and $12.7 million in the first three months of 1999 for development and
construction of self-storage facilities. There were 10 newly developed
facilities and 22 expansions of existing facilities in process with $48.1
million cumulative invested at March 31, 2000. The total budget for these
facilities is $92.6 million, of which $44.5 million remains to be invested. We
also provided financing to franchisees of Franchise during the first quarter
2000 of $10.3 million, compared to $7.4 million one year
17
<PAGE>
ago. Proceeds were also received from certain franchisees, as two repaid their
loans during the period, generating $2.0 million in cash. We have $20.4 million
of loan commitments to franchisees to fund as of March 31, 2000. Additionally,
we expect to invest approximately $15.0 million as part of our required equity
contributions in the GE Capital joint ventures during the remainder of 2000.
Sometimes we acquire facilities in exchange for Units. The Units are redeemable
after one year for cash or, at our option, shares of our common stock. Sellers
taking Units instead of cash are able to defer recognizing a taxable gain on the
sale of their facilities until they sell or redeem their Units. At March 31,
2000 we had 3.5 million Units outstanding, of which the following Units were
redeemable:
. 82 thousand Units for an amount equal to the fair market value ($2.5 million,
based upon a price per Unit of $30.63 at March 31, 2000) payable in cash or,
at our option, by a promissory note payable in quarterly installments over
two years with interest at the prime rate.
. 3.4 million Units for amounts equal to the fair market value ($104.4 million,
based upon a price per Unit of $30.63 at March 31, 2000) payable by us in
cash or, at our option, in shares of our common stock at the initial exchange
ratio of one share for each Unit.
We anticipate that the source of funds for any cash redemption of Units will be
retained cash flow or proceeds from the future sale of our securities or other
indebtedness. We have agreed to register any shares of our common stock issued
upon redemption of Units under the Securities Act of 1933.
Between November 1996 and July 1998, the Partnership issued $600 million of
notes payable. The notes are unsecured obligations of the Partnership, and may
be redeemed at any time at the option of the Partnership, subject to a premium
payment and other terms and conditions. The combined notes carry a weighted
average interest rate of 7.37% and were issued at a price to yield a weighted
average of 7.42%. The terms of the notes are staggered between seven and thirty
years, maturing between 2003 and 2027.
During the 1/st/ quarter 2000, we repurchased, under our stock buy-back plan,
204 thousand shares of common stock at a total cost of $6.2 million. Subject to
prevailing market conditions and price levels, we expect to commit an additional
estimated $28 million during the remainder of 2000 to this plan to purchase up
to a total of 5% of our outstanding shares, inclusive of shares repurchased in
1999.
We initially fund our capital requirements primarily through the available lines
of credit with the intention of refinancing these with long-term capital in the
form of equity and debt securities when we determine that market conditions are
favorable. At March 31, 2000, we can issue under currently effective shelf
registration statements up to $650 million of common stock, preferred stock,
depository shares and warrants and can also issue $250 million of unsecured,
non-convertible senior debt securities of the Partnership. Our lines of credit
bear interest at various spreads over LIBOR. We had net borrowings in the three
months ended March 31, 2000 of $3.2 million. For the same period in 1999, net
borrowings totaled $19.8 million. We currently have a $200 million unsecured
revolving credit line with a group of commercial banks, bearing interest at a
spread of 120 basis points over LIBOR, based on our current debt rating and
maturing on March 31, 2002. We also have a $40 million line of credit with a
commercial bank. The line bears interest at spread over LIBOR, matures on July
1, 2000, and is renewable at that time.
We expect to incur approximately $4.5 million for scheduled maintenance and
repairs during 2000 and approximately $5.9 million to conform facilities
acquired from 1994 to 1999 to our standards of which $771 thousand for scheduled
maintenance and $433 thousand for conforming facilities acquired has been
incurred to date. Commencing during the 2/nd/ quarter of 2000, we will be
committed under several new leases relating to corporate office space in
Memphis. The leases have a term of fifteen years with estimated annual payments
of $2.7 million. We have rented a portion of this space to others under several
subleases at the same rent and substantially similar terms to our primary leases
and expect to receive approximately $0.9 million annually from such subleases.
We believe that borrowings under our current credit facilities combined with
cash from operations will provide us with necessary liquidity and capital
resources to meet the funding requirements of our remaining development and
expansion pipeline, commitments to provide financing to franchisees, equity
commitments of the GE Capital joint ventures and expected investments under our
stock-buy back plan. Additionally, no significant maturities are scheduled under
any of our borrowings until 2003.
18
<PAGE>
Qualitative and Quantitative Disclosure About Market Risk
We are exposed to certain financial market risks, the most predominant being
fluctuations in interest rates on existing variable rate debt and the repricing
of fixed rate debt upon maturity. We monitor interest rate fluctuations as an
integral part of our overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce the potentially
adverse effect on our results. The effect of interest rate fluctuations
historically has been small relative to other factors affecting operating
results, such as rental rates and occupancy.
Our operating results are affected by changes in interest rates primarily as a
result of borrowing under our lines of credit. If interest rates increased by
25 basis points, our interest expense for the three months ended March 31,2000
would have increased by approximately $80 thousand, based on average outstanding
balances during that period.
Funds from Operations ("FFO")
We believe FFO should be considered in conjunction with net income and cash
flows to facilitate a clear understanding of our operating results. FFO should
not be considered as an alternative to net income, as a measure of our financial
performance or as an alternative to cash flows from operating activities as a
measure of liquidity. FFO does not represent cash generated from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs. We follow the current National Association of Real
Estate Investment Trust's (NAREIT) definition of FFO which, effective January 1,
2000, now includes non-recurring results of operations, except those defined as
"extraordinary items" under GAAP. Since we have historically not added back
non-recurring items to our calculation, we were not required to restate prior
period FFO amounts. Our FFO may not be comparable to similarly titled measures
of other REITs that calculate FFO differently. In calculating FFO, we add back
only depreciation and amortization of revenue-producing property. As such, our
FFO and FFO per share may not be comparable to other REITs that may add back
total depreciation and amortization.
The following table illustrates the components of our FFO for the three months
ended March 31, 2000 and March 31, 1999:
<TABLE>
<CAPTION>
Three Months Three Months
Funds from Operations Attributable Ended Ended
to Company Shareholders: March 31, 2000 March 31, 1999
----------------------------------
<S> <C> <C>
Net Income $ 14,678 $13,755
Loss/(Gain) on Sale of Assets* (595) 578
Depreciation & Amortization 9,193 8,356
Depreciation from Unconsolidated Entities 153 -
Less Depreciation of Non-Revenue Producing
Property (914) (572)
----------------------------------
Consolidated FFO $ 22,515 $22,117
Minority Interest Share of (Loss)/Gain on Sale 67 (66)
Minority Interest Share of Depreciation &
Amortization from Unconsolidated Entities (17) -
Minority Interest Share of Depreciation &
Amortization (933) (900)
----------------------------------
FFO Available to Company Shareholders $ 21,632 $21,151
==================================
</TABLE>
*Excludes $295 gain on sale of undepreciated land.
During the first quarter of 2000, we declared a dividend per share of $0.69,
which is an increase of 3.0% over the first quarter 1999 dividend of $0.67. As
a qualified REIT, we are required to distribute a substantial portion of our net
taxable income as dividends to our shareholders. While our goal is to generate
and retain sufficient cash flow to meet
19
<PAGE>
our operating, capital and debt service needs, our dividend requirements may
require us to utilize our bank lines of credit and other sources of liquidity to
finance property acquisitions and development, and major capital improvements.
See "Liquidity and Capital Resources" section.
Legal Proceedings
On July 22, 1999, a purported statewide class action was filed against the REIT
and Partnership in the Circuit Court of Montgomery County, Maryland, under the
style: Ralph Grunewald v. Storage USA, Inc. and SUSA Partnership, L.P., case no.
201546V, seeking recovery of certain late fees paid by the our tenants and an
injunction against further assessment of similar fees. The Company filed a
responsive pleading on September 17, 1999, setting out its answer and
affirmative defenses, and believes that it has defenses to the claims in the
suit and intends to vigorously defend it. The case is currently in discovery
and no trial date has been set.
On November 15, 1999 a purported nationwide class action was filed against the
REIT and Partnership in the Supreme Court of the State of New York, Ulster
County, case no 99-3278 , also seeking the recovery of certain late and
administrative fees paid by our tenants and an injunction against similar fees.
The Company filed a responsive pleading on January 28, 2000 and the case has
been transferred to New York County, case no. 410589/00. The Company believes
that it has defenses to the suit and intends to vigorously defend it. The case
is currently in discovery and no trial date has been set.
While the ultimate resolution of these cases will not have a material adverse
effect on the Company's financial position, if during any period the potential
contingency should become probable, the results of operations in such period
could be materially affected.
Forward Looking Statements and Risk Factors
Certain information included in this Form 10-Q that is not historical fact is
based on our current expectations. This includes statements regarding: (a)
anticipated future development, acquisition and expansion activity, (b) the
impact of anticipated rental rate increases and our newly revised late fee
policy on our revenue growth, (c) our 2000 anticipated revenues, expenses and
returns, (d) future capital requirements, (e) sources of capital, and (f)
sources of funds for payment of our indebtedness. Words such as "believes",
"expects", "anticipate", "intends", "plans" and "estimates" and variations of
such words and similar words also identify forward looking statements. Such
statements are forward looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. The following factors,
among others, could cause actual results to differ materially from the forward-
looking statements:
. Changes in the economic conditions in the markets in which we operate could
negatively impact the financial resources of our customers, impairing our
ability to raise rents.
. Certain of our competitors with substantially greater financial resources
than us could reduce the number of suitable acquisition opportunities offered
to us and increase the price necessary to consummate the acquisition of
particular facilities.
. Competition for development sites could drive up costs, making it unfeasible
for us to develop properties in certain markets.
. Increased development of new facilities in our markets could result in over-
supply and lower rental rates.
. Amounts that we charge for late fees are under review, have been and are the
subject of litigation against us and are, in some states, the subject of
governmental regulation. Consequently, such amounts could change, materially
affecting the results of operations.
. The conditions affecting the bank, debt and equity markets could change.
. The availability of sufficient capital to finance our business plan on
satisfactory terms could decrease.
. Competition could increase, adversely effecting occupancy and rental rates,
thereby reducing our revenue.
. Costs related to compliance with laws, including environmental laws could
increase.
. General business and economic conditions could change, adversely effecting
occupancy and rental rates, thereby reducing our revenue.
. Other risk factors exist as described in our Annual Report on Form 10-K for
the year ended December 31, 1999 and other reports filed from time to time
with the Securities and Exchange Commission.
20
<PAGE>
We caution you not to place undue reliance on any such forward-looking
statements. We assume no obligation to update any forward-looking statements as
a result of new information, subsequent events or any other circumstances. Such
statements speak only as of the date that they are made.
21
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
See disclosure in the section entitled "Qualitative and Quantitative Disclosure
About Market Risk" in Management's Discussion and Analysis of Financial
Condition and Results of Operations.
22
<PAGE>
Part II- OTHER INFORMATION
Item 1. Legal Proceedings
See disclosure in the section entitled "Legal Proceedings" in Management's
Discussion and Analysis of Financial Condition and Results of Operations on page
20.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibit 10.1 Form of Employment Agreement between the Company and Dean
Jernigan, effective February 3, 2000.
Exhibit 10.2 Form of Employment Agreement between the Company and
Christopher P. Marr, effective February 3, 2000.
Exhibit 10.3 Form of Employment Agreement between the Company and John
W. McConomy, effective February 3, 2000.
Exhibit 10.4 Form of Employment Agreement between the Company and
Francis C. Brown III, effective February 3, 2000.
Exhibit 10.5 Form of Employment Agreement between the Company and Mark
E. Yale, effective February 3, 2000.
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
On May 2, 2000, we filed our current report on Form 8-K. The filing
included information relating to our April 26, 2000 press release
announcing our financial results for the first quarter of 2000.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 15, 2000
Storage USA, Inc.
By: /s/ Christopher P. Marr
-----------------------
Christopher P. Marr
Chief Financial Officer
(Principal Financial and Accounting Officer)
24
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Form of Employment Agreement between the Company and Dean
Jernigan, effective February 3, 2000.
10.2 Form of Employment Agreement between the Company and Christopher
P. Marr, effective February 3, 2000.
10.3 Form of Employment Agreement between the Company and John W.
McConomy, effective February 3, 2000.
10.4 Form of Employment Agreement between the Company and Francis C.
Brown III, effective February 3, 2000.
10.5 Form of Employment Agreement between the Company and Mark E.
Yale, effective February 3, 2000.
25
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT effective as of February 3, 2000, by and between Storage USA,
Inc., a Tennessee corporation (the "Company"), and O. Dean Jernigan (the
"Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the
Chairman, Chief Executive Officer and President of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and
desirable to execute a written document setting forth the terms and conditions
of said relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following definitions:
(a) "1993 Omnibus Stock Plan" means the Company's 1993 Omnibus
Stock Plan, as amended.
(b) "1995 Employee Stock Purchase and Loan Plan" means the
Company's 1995 Employee Stock Purchase and Loan Plan, as amended.
(c) "1996 Officers' Stock Option Loan Program" means the Company's
1996 Officers' Stock Option Loan Program, as amended.
(d) "Arbitrators" means the arbitrators selected to conduct any
arbitration proceeding in connection with any disputes arising out of or
relating to this Agreement.
(e) "Award Period" means any period in which the Company's
performance is measured in connection with its Shareholder Value Plan.
(f) "Award Plans" has the meaning set forth in Section 4(b) of
------------
this Agreement.
(g) "Base Salary" means the annual salary to be paid to Executive
as set forth in Section 4(a) of this Agreement.
------------
(h) "Benefit Plans" has the meaning set forth in Section 4(c) of
this Agreement.
<PAGE>
(i) "Company" means Storage USA, Inc., a Tennessee corporation,
and any successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(j) "Company Shares" means the shares of common stock of the
Company or any securities of a successor company which shall have replaced such
common stock.
(k) "Executive" means the person identified in the preamble
paragraph of this Agreement.
(l) "Fair Market Value" means, on any given date, the closing sale
price of the common stock of the Company on the New York Stock Exchange on such
date, or, if the New York Stock Exchange shall be closed on such date, the next
preceding date on which the New York Stock Exchange shall have been open.
(m) "Good Reason" means any of the following:
(i) a removal of the Executive from Executive's position as
Executive may hold from time to time pursuant to Section 2
hereof, except in connection with a Termination with Cause, as
a result of the Executive's death or Permanent Disability or
by Voluntary Termination;
(ii) a reduction in the Executive's Base Salary as in effect
on the date hereof; or as the same may be increased from time
to time, which reduction treats Executive differently than
other similarly situated executives or singles out or
discriminates against Executive; or modifying, suspending,
discontinuing, or terminating any Award Plan or Benefit Plan
in a manner which treats Executive differently than other
similarly situated employees or singles out or discriminates
against Executive;
(iii) the relocation of the Company's principal executive
offices to a location outside a thirty-mile radius of Memphis,
Tennessee or the Company's requiring the Executive to be based
at any place other than a location within a thirty-mile radius
of Memphis, Tennessee (unless such relocation of Executive is:
(i) for good business reasons, in connection with Executive's
promotion; (ii) otherwise approved by Executive; or (iii) in
connection with the relocation, for good business reason(s),
of the entire department or function for which Executive is
responsible), except for reasonably required travel on the
Company's business;
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<PAGE>
(iv) any material breach by the Company of any provision of
this Agreement;
(v) any purported termination of Executive's employment by the
Company which is not effected pursuant to the procedures set
forth in Section 3; or
---------
(vi) the failure of the Company to obtain an agreement
reasonably satisfactory to Executive from any successor or
assign of the Company to assume and agree to perform this
Agreement.
(n) "Option(s)" means any options issued pursuant to the Company's
1993 Omnibus Stock Plan, or any other stock option plan adopted by the Company,
any option granted with respect to Partnership Units, or any option granted
under the plan of any successor company that replaces or assumes the Company's
or the Partnership's options.
(o) "Partnership" means SUSA Partnership, L.P.
(p) "Partnership Unit(s)" means limited partnership interests of
the Partnership.
(q) "Permanent Disability" means a complete physical or mental
inability, confirmed by a licensed physician, to perform the services described
in Section 2 of the Agreement that continues for a period of six (6) consecutive
months.
(r) "Plan Loan(s)" means any loan extended by the Company to
Executive pursuant to the 1995 Employee Stock Purchase and Loan Plan, or any
other similar plan or program adopted by the Company during the Term of this
Agreement.
(s) "Restricted Stock" means any restricted stock issued pursuant
to the Company's 1993 Omnibus Stock Plan, or any other Award Plan adopted by the
Company, or any restricted stock issued under the plan of any successor company
that replaces or assumes the Company's grants of restricted stock.
(t) "Retirement Age" means the Executive's sixty-fifth (65)
birthday.
(u) "Salary Continuation" shall have the meaning set out in
Section 8.a.
(v) "Self-Storage Business" means the business of acquiring,
developing, constructing, franchising, owning or operating self-storage
facilities.
(w) "Self-Storage Property" means any real estate upon which the
Self-Storage Business is being conducted.
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<PAGE>
(x) "Shareholder Value Plan" means the Company's Shareholder Value
Plan, as amended.
(y) "SVU Grant" means the total number of shareholder value units
granted to the Executive pursuant to the Company's Shareholder Value Plan.
(z) "SVU Value" means the value of each shareholder value unit
based upon certain performance measures as set forth in the Company's
Shareholder Value Plan.
(aa) "Term" has the meaning assigned to it in Section 3 of this
---------
Agreement.
(bb) "Termination Date" means the date employment of Executive is
terminated, which date shall be: (i) in the case of Executive's Permanent
Disability, thirty (30) days after a Termination Notice is given and Executive
does not return to the full-time performance of his duties within such thirty
(30) day period; or (ii) in all other instances, the date specified as the
Termination Date in the Termination Notice, which date shall not be less than
thirty (30) nor more than sixty (60) days from the date the Termination Notice
is given.
(cc) "Termination Notice" means a written notice of termination of
employment by Executive or the Company.
(dd) "Termination With Cause" means the termination of the
Executive's employment by the Company for any of the following reasons:
(i) the Executive's conviction of a felony;
(ii) the Executive's theft, embezzlement, misappropriation of
or intentional infliction of material damage to the Company's
property or business opportunity;
(iii) the Executive's intentional breach of the noncompetition
or non-solicitation provisions contained in Section 9 of this
---------
Agreement; or
(iv) the Executive's ongoing willful neglect of or failure to
perform his duties hereunder or his ongoing willful failure or
refusal to follow any reasonable, unambiguous duly adopted
written direction of the Company that is not inconsistent with
the description of the Executive's duties set forth in Section
-------
2, if such willful neglect or failure is materially damaging
-
or materially detrimental to the business and operations of
the Company; provided that Executive shall have received
written notice of such
4
<PAGE>
failure and shall have continued to engage in such failure
after thirty (30) days following receipt of such notice from
the Company, which notice specifically identifies the manner
in which the Company believes that Executive has engaged in
such failure.
For purposes of this subsection, no act, or failure to act,
shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith, and without reasonable belief
that such action or omission was in the best interest of the
Company.
(ee) "Termination Without Cause" means the termination of the
Executive's employment by the Company for any reason other than: (i) Termination
With Cause; or (ii) termination by the Company due to Executive's death or
Permanent Disability.
(ff) "Uniform Arbitration Act" means the Uniform Arbitration Act,
Tennessee Code Annotatedss. 29-5-391 et seq., as amended.
-------
(gg) "Voluntary Termination" means the Executive's voluntary
termination of his employment hereunder for any reason other than Good Reason.
2. Employment; Services. The Company, SUSA-TN, LLC and Partnership
--------------------
shall employ the Executive, and the Executive agrees to be so employed, in the
capacity of Chairman, Chief Executive Officer and President of the Company, to
serve for the Term hereof, subject to earlier termination as hereinafter
provided. The Executive shall devote such amount of his time and attention to
the Company's affairs as are necessary to perform his duties to the Company in
his capacity as Chairman, Chief Executive Officer and President of the Company.
The Executive shall have authority and responsibility with respect to his
functional area of responsibility within the Company.
3. Term; Termination.
-----------------
(a) The term of the Executive's employment hereunder shall be one
(1) year and shall commence on February 3, 2000 and shall be extended
automatically, for so long as the Executive remains employed by the Company
hereunder, on the first day of each month beginning January 3, 2001 for an
additional one-month period (such period, as it may be extended from time to
time, being herein referred to as the "Term"), unless terminated earlier in
accordance with the terms of this Agreement, to the effect that on the first day
of each month, the remaining term of this Agreement and the Executive's
employment hereunder shall be one (1) year, but shall in no event extend beyond
the Retirement Age.
5
<PAGE>
(b) Any purported termination of employment by Executive or the
Company shall be communicated by a Termination Notice. The Termination Notice
shall indicate the specific termination provision in this Agreement relied upon
and set forth the facts and circumstances claimed to provide a basis for
termination. If the party receiving the Termination Notice notifies the other
party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. Compensation.
-------------
(a) Base Salary. During the Term, the Company shall pay the
Executive for his services a Base Salary of $390,000, to be paid consistent with
the general payroll practices of the Company, such Base Salary being subject to
any increases or reductions approved by the Chief Executive Officer of the
Company; provided however, that any such reductions may not treat Executive
differently than similarly situated executives or otherwise single out or
discriminate against Executive. Executive agrees that, consistent with Company
policy as of the date hereof, Executive does not accrue any vacation or sick
pay. In the event such policy is changed to provide for such an accrual, this
Agreement will be amended to provide for such change.
(b) Award Plans. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, Restricted Stock or Options, and shall
be eligible to participate in the Company's 1993 Omnibus Stock Plan, 1995
Employee Stock Purchase and Loan Plan, 1996 Officers' Stock Option Loan Program,
Shareholder Value Plan, and any other stock option, incentive compensation,
profit participation, bonus or extra compensation plan that is adopted by the
Company and in which the Company's executive officers generally participate
(collectively, "Award Plans"), but payments and/or awards are not "entitlements"
and shall be paid or made consistent with the terms of such Award Plans. For
example, if the Company's bonus plan provides that a bonus is only payable if
certain objectives are met, Executive shall only be paid such bonus if the
objectives are met.
(c) Benefit Plans. During the Term, Executive shall be entitled to
participate in, and to all rights and benefits provided by, each and every
health, life,
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<PAGE>
medical, dental, disability, insurance and welfare plan maintained by the
Company including, without limitation, the benefits that are maintained from
time to time by the Company for the benefit of Executive, the executives of the
Company generally or for the Company's employees generally, provided that
Executive is eligible to participate in such plan under the eligibility
provisions thereof that are generally applicable to the participants thereof
(collectively, "Benefit Plans").
(d) Overall Qualification. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as: (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan; and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. Expenses. The Company recognizes that the Executive will have to
--------
incur certain out-of-pocket expenses, including but not limited to travel
expenses, related to his services and the Company's business, and the Company
agrees to reimburse the Executive for all reasonable expenses necessarily
incurred by him in the performance of his duties upon presentation of a voucher
or documentation indicating the amount and business purposes of any such
expenses; provided that Executive complies with the Company's policies and
procedures regarding business expenses.
6. Voluntary Termination; Termination With Cause. If: (i) the
--------------------- ----------------------
Executive ceases to be an employee of the Company on account of a Voluntary
Termination; or (ii) there shall be a Termination With Cause, the Executive
shall not be entitled to any compensation after the Termination Date of such
Voluntary Termination or Termination With Cause (except Base Salary accrued but
unpaid on the Termination Date of such event).
7. Death or Disability. Executive's employment with the Company shall
-------------------
terminate upon the Executive's death or Permanent Disability. Upon such
termination, the Company shall continue to pay the Executive or his heirs,
devisees, executors, legatees or personal representatives, as appropriate, Base
Salary then in effect for one (1) year from the Termination Date. The Company
shall also pay any amounts due pursuant to the terms of any Benefit Plans (as
appropriate) and Award Plans in which Executive was a participant, including,
without limitation, the pro rata amount of any bonus to be paid to Executive for
the fiscal year in which Executive was terminated. In addition, in the event of
a termination due to Executive's Permanent Disability, Executive shall be
permitted to participate in, and have all rights and benefits provided by, all
Benefit Plans which Executive was eligible to participate in immediately prior
to the Termination Date (to the extent such participation is possible under the
laws then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
7
<PAGE>
8. Termination Without Cause; Resignation for Good Reason. Executive's
------------------------------------------------------
employment with the Company is at will, consequently, the Company may terminate
Executive for any reason, or no reason at all, at any time and Executive may
resign his employment with the Company at any time; provided that, upon
termination of Executive's employment by the Executive for Good Reason, or in
the event of a Termination Without Cause, and only in such event(s), the Company
shall provide the compensation and benefits set forth in this Section 8.
---------
Executive's continued employment shall not constitute consent to, or a waiver
of, rights with respect to any circumstances constituting Good Reason hereunder.
(a) Base Salary, Benefit and Award Plans. The Company shall continue
to pay the Executive his Base Salary then in effect until the earlier of: (x)
two years after the Termination Date; or (y) the date that Executive commences
employment with another employer (or if Executive becomes self-employed) at an
annual base salary equal to Executive's Base Salary on the Termination Date; all
on the regular payroll schedule with appropriate payroll tax and other
deductions ("Salary Continuation"); provided however, that in no event shall
Salary Continuation be paid to Executive past the Retirement Age. In the event
that Executive commences Employment with another employer (or becomes self-
employed) at an annual base salary less than Executive's Base Salary on the
Termination Date, the Salary Continuation shall be reduced by an amount equal to
the amount of annual base salary received by Executive from such other employer
or from such self-employment. The Company shall also pay on the Termination Date
any amounts due pursuant to the terms of any Benefit Plans and Award Plans in
which Executive was a participant, including, without limitation, the pro rata
amount of any bonus to be paid to Executive for the fiscal year in which
Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive was eligible to participate in immediately prior to the
Termination Date (to the extent such participation is possible under the laws
then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
(b) Restricted Stock and Stock Options. All restrictions upon any
Restricted Stock which may have been awarded to Executive shall expire and be
removed, such Restricted Stock shall vest according to the schedule for vesting
following the Termination Date and through the date of the final payment of
Salary Continuation (unless otherwise expired or removed and vested pursuant to
the terms of any Restricted Stock Award pursuant to the 1993 Omnibus Stock Plan
or any Award Plan), and such stock shall be delivered to Executive. All Options
granted to Executive prior to the Termination Date shall continue to vest,
according to their schedule following the Termination Date and through the date
of the final payment of Salary Continuation (unless otherwise previously vested
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan). No Stock
Options or Restricted Stock will be granted to Executive after the Termination
Date. In lieu of Company Shares issuable upon exercise of any vested,
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
Fair Market Value of Company Shares on the Termination Date over the per share
exercise price of
8
<PAGE>
each vested Option held by Executive, times (ii) the number of Company Shares
covered by each such Option. In the event Executive does not elect to receive a
cash payment for any vested, outstanding and unexercised Options granted to
Executive, Executive shall have the right to otherwise exercise such Options in
accordance with the terms and conditions provided in the 1993 Omnibus Stock Plan
or any other applicable Award Plans.
(c) Plan Loans. If Executive has any Plan Loans outstanding to the
Company immediately prior to the Termination Date, the Company shall discharge
and cancel the amount of principal and interest due with respect to such Plan
Loans which exceeds the Fair Market Value of Company Shares securing the Plan
Loans on the Termination Date, such discharge to be effective upon Executive's
payment of the Plan Loans in full (less the amount discharged) within ninety
(90) days following the Termination Date. Executive shall have the option of
repaying all amounts due with respect to the Plan Loans by the transfer of the
Company Shares securing the Plan Loans, or by the payment, in cash, of the
amounts due with respect to the Plan Loans. Except as otherwise set forth
herein, Executive shall remain subject to all terms and conditions set forth in
the Loan Agreements and Promissory Notes until the Plan Loans are paid in full.
(d) Shareholder Value Plan. With respect to Executive's
participation in the Company's Shareholder Value Plan, the Award Periods in
connection with all of Executive's outstanding SVU Grants shall be accelerated
such that each Award Period is deemed to have ended upon the Termination Date.
At such time, the Company shall pay Executive an amount equal to the SVU Value
multiplied by the number of Executive's outstanding SVU Grants. The SVU Value
shall be reduced by 66% for all SVU Grants which were granted less than twelve
months prior to the Termination Date and the SVU Value shall be reduced by 33%
for all SVU Grants which were granted less than twenty-four months but more than
twelve months prior to the Termination Date. No adjustments shall be made to the
SVU Value for SVU Grants which were granted more than twenty-four months prior
to the Termination Date. All payments made to Executive after the Termination
Date in connection with outstanding SVU Grants shall be made solely in cash.
(e) Legal Fees. The Company shall also pay to Executive all
reasonable legal fees and expenses incurred by Executive as a result of a
dispute concerning this Agreement in connection with a Termination Without Cause
or Executive's resignation for Good Reason (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement),
if Executive is the prevailing party in connection with such dispute.
9. Non Competition; Non Solicitation.
---------------------------------
(a) For a period of two (2) years following the Term, Executive
shall not: (i) solicit any employee of the Company to leave the service of the
Company; or (ii) own any interest in any Self-Storage Property (other than: (x)
any permissible interest acquired while Executive was employed by the Company;
or (y) any interest that is
9
<PAGE>
expressly permitted by the Company) as partner, shareholder or otherwise; or
directly or indirectly, for his own account or of the account of others, either
as an officer, director, promoter, employee, consultant, advisor, agent,
manager, or in any other capacity, engage in the Self-Storage Business.
(b) The non solicitation provision shall apply to any Company
employee during the period of such Employee's employment and for a period of
thirty (30) days after such Employee's termination of employment with the
Company.
(c) The Executive agrees that damages at law for violation of the
restrictive covenant contained herein would not be an adequate or proper remedy
to the Company, and that should the Executive violate or threaten to violate any
of the provisions of such covenant, the Company, its successors or assigns,
shall be entitled to obtain a temporary or permanent injunction, as appropriate,
against the Executive in any court having jurisdiction over the person and the
subject matter, prohibiting any further violation of any such covenants. The
injunctive relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
(d) The Executive acknowledges that this Agreement has been
negotiated at arm's length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by
these presents has attempted to limit the Executive's right to compete only to
the extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
10. Employment Status. The parties acknowledge and agree that Executive
-----------------
is an employee of the Company, not an independent contractor. Any payments made
to Executive by the Company pursuant to this Agreement shall be treated for
federal and state payroll tax purposes as payments made to a Company employee,
irrespective whether such payments are made subsequent to the Termination Date.
11. Notices. All notices or deliveries authorized or required pursuant
-------
to this Agreement shall be deemed to have been given when in writing and
personally delivered or when deposited in the U.S. mail, certified, return
receipt requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to the
other party:
10
<PAGE>
To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: 6366 Lendenwood
Memphis, TN 38120
12. Entire Agreement. This Agreement contains the entire understanding
----------------
between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto; provided however, that the parties to this
Agreement hereby acknowledge and agree that this Agreement is subject to the
Severance Agreement dated as of August 16, 1999, between the parties, to all
covenants and agreements set forth in the Severance Agreement, and to any
subsequent renewals, extensions or modifications to the Severance Agreement. Any
action by the Company or termination of Executive's employment with the Company
that constitutes or otherwise gives rise to a Change of Control Termination, as
defined in the Severance Agreement, shall be governed exclusively by the
Severance Agreement. The provisions of Section 2(b) of the Severance Agreement
governing disputes shall be effective with respect to any dispute as to whether
a Termination constitutes a Change of Control Termination. In the event that
Executive expressly agrees to waive any provision hereof, such waiver shall be
memorialized by an amendment to this Agreement, which Executive hereby agrees to
sign This Agreement shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto
13. Arbitration. Any controversy concerning or claim arising out of or
-----------
relating to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party seeking
such arbitration.
(a) The Arbitrators. Any arbitration proceeding shall be conducted
by three (3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit any
matter relating to this Agreement to arbitration shall do so by written notice
to the other party, which notice shall set forth the items to be arbitrated,
such party's choice of Arbitrator, and such party's substantive position in the
arbitration. The party receiving such notice shall, within fifteen (15) days
after receipt of such notice, appoint an Arbitrator and notify the other party
of its appointment and of its substantive position. The Arbitrators appointed by
the parties to the Arbitration shall select an additional Arbitrator meeting the
aforedescribed criteria. The Arbitrators shall be required to render a decision
in accordance with the procedures set forth in Subparagraph (b) below within
thirty (30) days after being notified of their selection. The fees of the
Arbitrators shall be equally divided amongst the parties to the arbitration.
11
<PAGE>
(b) Arbitration Procedures. Arbitration shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties agree
that jurisdiction and venue in Shelby County, Tennessee are appropriate and
approved by such parties.
14. Applicable Law. This Agreement shall be governed and construed in
--------------
accordance with the laws of the State of Tennessee.
15. Assignment. The Executive acknowledges that his services are
----------
unique and personal. Accordingly, the Executive may not assign his rights or
delegate his duties or obligations under this Agreement, except with respect to
certain rights to receive payments as described in Section 7.
---------
16. Headings. Headings in this Agreement are for convenience only
--------
and shall not be used to interpret or construe its provisions.
17. Successors; Binding Agreement. The Company will require any
-----------------------------
successor to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a beach of this Agreement and shall entitle Executive to compensation from
the Company in the same amount and on the same terms as Executive would be
entitled to hereunder if Executive terminates his employment for Good Reason.
The Company's rights and obligations under this Agreement shall inure to the
benefit of and shall be binding upon the Company's successors and assigns.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
STORAGE USA, INC.
By: /s/ John W. McConomy
--------------------
Name: John W. McConomy
Title: Exec. VP, General Counsel & Secretary
By: /s/ Harry J. Thie
-----------------
Name: Harry J. Thie
Title: Compensation Committee Chairman
Board of Directors
EXECUTIVE:
Name: /s/ O. Dean Jernigan
--------------------
O. Dean Jernigan
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<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT effective as of February 3, 2000, by and between Storage USA,
Inc., a Tennessee corporation (the "Company"), and Christopher P. Marr (the
"Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the
Chief Financial Officer of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and
desirable to execute a written document setting forth the terms and conditions
of said relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following definitions:
(a) "1993 Omnibus Stock Plan" means the Company's 1993 Omnibus
Stock Plan, as amended.
(b) "1995 Employee Stock Purchase and Loan Plan" means the
Company's 1995 Employee Stock Purchase and Loan Plan, as amended.
(c) "1996 Officers' Stock Option Loan Program" means the Company's
1996 Officers' Stock Option Loan Program, as amended.
(d) "Arbitrators" means the arbitrators selected to conduct any
arbitration proceeding in connection with any disputes arising out of or
relating to this Agreement.
(e) "Award Period" means any period in which the Company's
performance is measured in connection with its Shareholder Value Plan.
(f) "Award Plans" has the meaning set forth in Section 4(b) of
------------
this Agreement.
(g) "Base Salary" means the annual salary to be paid to Executive
as set forth in Section 4(a) of this Agreement.
------------
(h) "Benefit Plans" has the meaning set forth in Section 4(c) of
this Agreement.
<PAGE>
(i) "Company" means Storage USA, Inc., a Tennessee corporation, and
any successor to its business and/or assets which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(j) "Company Shares" means the shares of common stock of the
Company or any securities of a successor company which shall have replaced such
common stock.
(k) "Executive" means the person identified in the preamble
paragraph of this Agreement.
(l) "Fair Market Value" means, on any given date, the closing sale
price of the common stock of the Company on the New York Stock Exchange on such
date, or, if the New York Stock Exchange shall be closed on such date, the next
preceding date on which the New York Stock Exchange shall have been open.
(m) "Good Reason" means any of the following:
(i) a removal of the Executive from Executive's position as
Executive may hold from time to time pursuant to Section 2
hereof, except in connection with a Termination with Cause, as
a result of the Executive's death or Permanent Disability or by
Voluntary Termination;
(ii) a reduction in the Executive's Base Salary as in effect on
the date hereof; or as the same may be increased from time to
time, which reduction treats Executive differently than other
similarly situated executives or singles out or discriminates
against Executive; or modifying, suspending, discontinuing, or
terminating any Award Plan or Benefit Plan in a manner which
treats Executive differently than other similarly situated
employees or singles out or discriminates against Executive;
(iii) the relocation of the Company's principal executive
offices to a location outside a thirty-mile radius of Memphis,
Tennessee or the Company's requiring the Executive to be based
at any place other than a location within a thirty-mile radius
of Memphis, Tennessee (unless such relocation of Executive is:
(i) for good business reasons, in connection with Executive's
promotion; (ii) otherwise approved by Executive; or (iii) in
connection with the relocation, for good business reason(s), of
the entire department or function for which Executive is
responsible), except for reasonably required travel on the
Company's business;
2
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(iv) any material breach by the Company of any provision of
this Agreement;
(v) any purported termination of Executive's employment by the
Company which is not effected pursuant to the procedures set
forth in Section 3; or
(vi) the failure of the Company to obtain an agreement
reasonably satisfactory to Executive from any successor or
assign of the Company to assume and agree to perform this
Agreement.
(n) "Option(s)" means any options issued pursuant to the Company's
1993 Omnibus Stock Plan, or any other stock option plan adopted by the Company,
any option granted with respect to Partnership Units, or any option granted
under the plan of any successor company that replaces or assumes the Company's
or the Partnership's options.
(o) "Partnership" means SUSA Partnership, L.P.
(p) "Partnership Unit(s)" means limited partnership interests of
the Partnership.
(q) "Permanent Disability" means a complete physical or mental
inability, confirmed by a licensed physician, to perform the services described
in Section 2 of the Agreement that continues for a period of six (6) consecutive
---------
months.
(r) "Plan Loan(s)" means any loan extended by the Company to
Executive pursuant to the 1995 Employee Stock Purchase and Loan Plan, or any
other similar plan or program adopted by the Company during the Term of this
Agreement.
(s) "Restricted Stock" means any restricted stock issued pursuant
to the Company's 1993 Omnibus Stock Plan, or any other Award Plan adopted by the
Company, or any restricted stock issued under the plan of any successor company
that replaces or assumes the Company's grants of restricted stock.
(t) "Retirement Age" means the Executive's sixty-fifth (65)
birthday.
(u) "Salary Continuation" shall have the meaning set out in
Section 8.a.
(v) "Self-Storage Business" means the business of acquiring,
developing, constructing, franchising, owning or operating self-storage
facilities.
(w) "Self-Storage Property" means any real estate upon which the
Self-Storage Business is being conducted.
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(x) "Shareholder Value Plan" means the Company's Shareholder Value
Plan, as amended.
(y) "SVU Grant" means the total number of shareholder value units
granted to the Executive pursuant to the Company's Shareholder Value Plan.
(z) "SVU Value" means the value of each shareholder value unit
based upon certain performance measures as set forth in the Company's
Shareholder Value Plan.
(aa) "Term" has the meaning assigned to it in Section 3 of this
Agreement.
(bb) "Termination Date" means the date employment of Executive is
terminated, which date shall be: (i) in the case of Executive's Permanent
Disability, thirty (30) days after a Termination Notice is given and Executive
does not return to the full-time performance of his duties within such thirty
(30) day period; or (ii) in all other instances, the date specified as the
Termination Date in the Termination Notice, which date shall not be less than
thirty (30) nor more than sixty (60) days from the date the Termination Notice
is given.
(cc) "Termination Notice" means a written notice of termination of
employment by Executive or the Company.
(dd) "Termination With Cause" means the termination of the
Executive's employment by the Company for any of the following reasons:
(i) the Executive's conviction of a felony;
(ii) the Executive's theft, embezzlement, misappropriation of
or intentional infliction of material damage to the Company's
property or business opportunity;
(iii) the Executive's intentional breach of the noncompetition
or non-solicitation provisions contained in Section 9 of this
---------
Agreement; or
(iv) the Executive's ongoing willful neglect of or failure to
perform his duties hereunder or his ongoing willful failure or
refusal to follow any reasonable, unambiguous duly adopted
written direction of the Company that is not inconsistent with
the description of the Executive's duties set forth in Section
-------
2, if such willful neglect or failure is materially damaging
-
or materially detrimental to the business and operations of
the Company; provided that Executive shall have received
written notice of such failure and shall have continued to
engage in such
4
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failure after thirty (30) days following receipt of such
notice from the Company, which notice specifically identifies
the manner in which the Company believes that Executive has
engaged in such failure.
For purposes of this subsection, no act, or failure to act,
shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith, and without reasonable belief
that such action or omission was in the best interest of the
Company.
(ee) "Termination Without Cause" means the termination of the
Executive's employment by the Company for any reason other than: (i) Termination
With Cause; or (ii) termination by the Company due to Executive's death or
Permanent Disability.
(ff) "Uniform Arbitration Act" means the Uniform Arbitration Act,
Tennessee Code Annotatedss. 29-5-391 et seq., as amended.
-- ----
(gg) "Voluntary Termination" means the Executive's voluntary
termination of his employment hereunder for any reason other than Good Reason.
2. Employment; Services. The Company, SUSA-TN, LLC and Partnership
--------------------
shall employ the Executive, and the Executive agrees to be so employed, in the
capacity of Chief Financial Officer of the Company, or such other position which
offers at least a comparable level of responsibility and authority to which the
Chief Executive Officer may elect to assign Executive from time to time, to
serve for the Term hereof, subject to earlier termination as hereinafter
provided. The Executive shall devote such amount of his time and attention to
the Company's affairs as are necessary to perform his duties to the Company in
his capacity as Chief Financial Officer. The Executive shall have authority and
responsibility with respect to his functional area of responsibility within the
Company, consistent with direction from his immediate supervisor.
3. Term; Termination.
-----------------
(a) The term of the Executive's employment hereunder shall be one
(1) year and shall commence on February 3, 2000 and shall be extended
automatically, for so long as the Executive remains employed by the Company
hereunder, on the first day of each month beginning January 3, 2001 for an
additional one-month period (such period, as it may be extended from time to
time, being herein referred to as the "Term"), unless terminated earlier in
accordance with the terms of this Agreement, to the effect that on the first day
of each month, the remaining term of this Agreement and the Executive's
employment hereunder shall be one (1) year, but shall in no event extend beyond
the Retirement Age.
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<PAGE>
(b) Any purported termination of employment by Executive or the
Company shall be communicated by a Termination Notice. The Termination Notice
shall indicate the specific termination provision in this Agreement relied upon
and set forth the facts and circumstances claimed to provide a basis for
termination. If the party receiving the Termination Notice notifies the other
party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. Compensation.
-------------
(a) Base Salary. During the Term, the Company shall pay the
Executive for his services a Base Salary of $210,000, to be paid consistent with
the general payroll practices of the Company, such Base Salary being subject to
any increases or reductions approved by the Chief Executive Officer of the
Company; provided however, that any such reductions may not treat Executive
differently than similarly situated executives or otherwise single out or
discriminate against Executive. Executive agrees that, consistent with Company
policy as of the date hereof, Executive does not accrue any vacation or sick
pay. In the event such policy is changed to provide for such an accrual, this
Agreement will be amended to provide for such change.
(b) Award Plans. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, Restricted Stock or Options, and shall
be eligible to participate in the Company's 1993 Omnibus Stock Plan, 1995
Employee Stock Purchase and Loan Plan, 1996 Officers' Stock Option Loan Program,
Shareholder Value Plan, and any other stock option, incentive compensation,
profit participation, bonus or extra compensation plan that is adopted by the
Company and in which the Company's executive officers generally participate
(collectively, "Award Plans"), but payments and/or awards are not "entitlements"
and shall be paid or made consistent with the terms of such Award Plans. For
example, if the Company's bonus plan provides that a bonus is only payable if
certain objectives are met, Executive shall only be paid such bonus if the
objectives are met.
(c) Benefit Plans. During the Term, Executive shall be entitled to
participate in, and to all rights and benefits provided by, each and every
health, life,
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medical, dental, disability, insurance and welfare plan maintained by the
Company including, without limitation, the benefits that are maintained from
time to time by the Company for the benefit of Executive, the executives of the
Company generally or for the Company's employees generally, provided that
Executive is eligible to participate in such plan under the eligibility
provisions thereof that are generally applicable to the participants thereof
(collectively, "Benefit Plans").
(d) Overall Qualification. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as: (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan; and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. Expenses. The Company recognizes that the Executive will have to
--------
incur certain out-of-pocket expenses, including but not limited to travel
expenses, related to his services and the Company's business, and the Company
agrees to reimburse the Executive for all reasonable expenses necessarily
incurred by him in the performance of his duties upon presentation of a voucher
or documentation indicating the amount and business purposes of any such
expenses; provided that Executive complies with the Company's policies and
procedures regarding business expenses.
6. Voluntary Termination; Termination With Cause. If: (i) the Executive
---------------------------------------------
ceases to be an employee of the Company on account of a Voluntary Termination;
or (ii) there shall be a Termination With Cause, the Executive shall not be
entitled to any compensation after the Termination Date of such Voluntary
Termination or Termination With Cause (except Base Salary accrued but unpaid on
the Termination Date of such event).
7. Death or Disability. Executive's employment with the Company shall
-------------------
terminate upon the Executive's death or Permanent Disability. Upon such
termination, the Company shall continue to pay the Executive or his heirs,
devisees, executors, legatees or personal representatives, as appropriate, Base
Salary then in effect for one (1) year from the Termination Date. The Company
shall also pay any amounts due pursuant to the terms of any Benefit Plans (as
appropriate) and Award Plans in which Executive was a participant, including,
without limitation, the pro rata amount of any bonus to be paid to Executive for
the fiscal year in which Executive was terminated. In addition, in the event of
a termination due to Executive's Permanent Disability, Executive shall be
permitted to participate in, and have all rights and benefits provided by, all
Benefit Plans which Executive was eligible to participate in immediately prior
to the Termination Date (to the extent such participation is possible under the
laws then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
7
<PAGE>
8. Termination Without Cause; Resignation for Good Reason. Executive's
------------------------------------------------------
employment with the Company is at will, consequently, the Company may terminate
Executive for any reason, or no reason at all, at any time and Executive may
resign his employment with the Company any time; provided that, upon termination
of Executive's employment by the Executive for Good Reason, or in the event of a
Termination Without Cause, and only in such event(s), the Company shall provide
the compensation and benefits set forth in this Section 8. Executive's continued
---------
employment shall not constitute consent to, or a waiver of, rights with respect
to any circumstances constituting Good Reason hereunder.
(a) Base Salary, Benefit and Award Plans. The Company shall continue
to pay the Executive his Base Salary then in effect until the earlier of: (x)
two years after the Termination Date; or (y) the date that Executive commences
employment with another employer (or if Executive becomes self-employed) at an
annual base salary equal to Executive's Base Salary on the Termination Date; all
on the regular payroll schedule with appropriate payroll tax and other
deductions ("Salary Continuation"); provided however, that in no event shall
Salary Continuation be paid to Executive past the Retirement Age. In the event
that Executive commences Employment with another employer (or becomes self-
employed) at an annual base salary less than Executive's Base Salary on the
Termination Date, the Salary Continuation shall be reduced by an amount equal to
the amount of annual base salary received by Executive from such other employer
or from such self-employment. The Company shall also pay on the Termination Date
any amounts due pursuant to the terms of any Benefit Plans and Award Plans in
which Executive was a participant, including, without limitation, the pro rata
amount of any bonus to be paid to Executive for the fiscal year in which
Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive was eligible to participate in immediately prior to the
Termination Date (to the extent such participation is possible under the laws
then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
(b) Restricted Stock and Stock Options. All restrictions upon any
Restricted Stock which may have been awarded to Executive shall expire and be
removed, such Restricted Stock shall vest according to the schedule for vesting
following the Termination Date and through the date of the final payment of
Salary Continuation (unless otherwise expired or removed and vested pursuant to
the terms of any Restricted Stock Award pursuant to the 1993 Omnibus Stock Plan
or any Award Plan), and such stock shall be delivered to Executive. All Options
granted to Executive prior to the Termination Date shall continue to vest,
according to their schedule following the Termination Date and through the date
of the final payment of Salary Continuation (unless otherwise previously vested
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan). No Stock
Options or Restricted Stock will be granted to Executive after the Termination
Date. In lieu of Company Shares issuable upon exercise of any vested,
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
Fair Market Value of Company Shares on the Termination Date over the per share
exercise price of
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<PAGE>
each vested Option held by Executive, times (ii) the number of Company Shares
covered by each such Option. In the event Executive does not elect to receive a
cash payment for any vested, outstanding and unexercised Options granted to
Executive, Executive shall have the right to otherwise exercise such Options in
accordance with the terms and conditions provided in the 1993 Omnibus Stock Plan
or any other applicable Award Plans.
(c) Plan Loans. If Executive has any Plan Loans outstanding to the
Company immediately prior to the Termination Date, the Company shall discharge
and cancel the amount of principal and interest due with respect to such Plan
Loans which exceeds the Fair Market Value of Company Shares securing the Plan
Loans on the Termination Date, such discharge to be effective upon Executive's
payment of the Plan Loans in full (less the amount discharged) within ninety
(90) days following the Termination Date. Executive shall have the option of
repaying all amounts due with respect to the Plan Loans by the transfer of the
Company Shares securing the Plan Loans, or by the payment, in cash, of the
amounts due with respect to the Plan Loans. Except as otherwise set forth
herein, Executive shall remain subject to all terms and conditions set forth in
the Loan Agreements and Promissory Notes until the Plan Loans are paid in full.
(d) Shareholder Value Plan. With respect to Executive's
participation in the Company's Shareholder Value Plan, the Award Periods in
connection with all of Executive's outstanding SVU Grants shall be accelerated
such that each Award Period is deemed to have ended upon the Termination Date.
At such time, the Company shall pay Executive an amount equal to the SVU Value
multiplied by the number of Executive's outstanding SVU Grants. The SVU Value
shall be reduced by 66% for all SVU Grants which were granted less than twelve
months prior to the Termination Date and the SVU Value shall be reduced by 33%
for all SVU Grants which were granted less than twenty-four months but more than
twelve months prior to the Termination Date. No adjustments shall be made to the
SVU Value for SVU Grants which were granted more than twenty-four months prior
to the Termination Date. All payments made to Executive after the Termination
Date in connection with outstanding SVU Grants shall be made solely in cash.
(e) Legal Fees. The Company shall also pay to Executive all
reasonable legal fees and expenses incurred by Executive as a result of a
dispute concerning this Agreement in connection with a Termination Without Cause
or Executive's resignation for Good Reason (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement),
if Executive is the prevailing party in connection with such dispute.
9. Non Competition; Non Solicitation.
---------------------------------
(a) For a period of two (2) years following the Term, Executive
shall not: (i) solicit any employee of the Company to leave the service of the
Company; or (ii) own any interest in any Self-Storage Property (other than: (x)
any permissible interest
9
<PAGE>
acquired while the Executive was employed by the Company; or (y) any interest
that is expressly permitted by the Company) as partner, shareholder or
otherwise; or directly or indirectly, for his own account or for the account of
others, either as an officer, director, promoter, employee, consultant, advisor,
agent, manager, or in any other capacity, engage in the Self-Storage Business.
(b) The non solicitation provision shall apply to any Company
employee during the period of such Employee's employment and for a period of
thirty (30) days after such Employee's termination of employment with the
Company.
(c) The Executive agrees that damages at law for violation of the
restrictive covenant contained herein would not be an adequate or proper remedy
to the Company, and that should the Executive violate or threaten to violate any
of the provisions of such covenant, the Company, its successors or assigns,
shall be entitled to obtain a temporary or permanent injunction, as appropriate,
against the Executive in any court having jurisdiction over the person and the
subject matter, prohibiting any further violation of any such covenants. The
injunctive relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
(d) The Executive acknowledges that this Agreement has been
negotiated at arm's length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by
these presents has attempted to limit the Executive's right to compete only to
the extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
10. Employment Status. The parties acknowledge and agree that Executive
-----------------
is an employee of the Company, not an independent contractor. Any payments made
to Executive by the Company pursuant to this Agreement shall be treated for
federal and state payroll tax purposes as payments made to a Company employee,
irrespective whether such payments are made subsequent to the Termination Date.
11. Notices. All notices or deliveries authorized or required pursuant
-------
to this Agreement shall be deemed to have been given when in writing and
personally delivered or when deposited in the U.S. mail, certified, return
receipt requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to the
other party:
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To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: 2964 Mallard Lane
Germantown, TN 38138
12. Entire Agreement. This Agreement contains the entire understanding
----------------
between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto; provided however, that the parties to this
Agreement hereby acknowledge and agree that this Agreement is subject to the
Severance Agreement dated as of August 16, 1999 between the parties, to all
covenants and agreements set forth in the Severance Agreement, and to any
subsequent renewals, extensions or modifications to the Severance Agreement. Any
action by the Company or termination of Executive's employment with the Company
that constitutes or otherwise gives rise to a Change of Control Termination, as
defined in the Severance Agreement, shall be governed exclusively by the
Severance Agreement. The provisions of Section 2(b) of the Severance Agreement
governing disputes shall be effective with respect to any dispute as to whether
a Termination constitutes a Change of Control Termination. In the event that
Executive expressly agrees to waive any provision hereof, such waiver shall be
memorialized by an amendment to this Agreement, which Executive hereby agrees to
sign This Agreement shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto
13. Arbitration. Any controversy concerning or claim arising
-----------
out of or relating to this Agreement shall be settled by final and binding
arbitration in Memphis, Shelby County, Tennessee at a location specified by the
party seeking such arbitration.
(a) The Arbitrators. Any arbitration proceeding shall be conducted
by three (3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit any
matter relating to this Agreement to arbitration shall do so by written notice
to the other party, which notice shall set forth the items to be arbitrated,
such party's choice of Arbitrator, and such party's substantive position in the
arbitration. The party receiving such notice shall, within fifteen (15) days
after receipt of such notice, appoint an Arbitrator and notify the other party
of its appointment and of its substantive position. The Arbitrators appointed by
the parties to the Arbitration shall select an additional Arbitrator meeting the
aforedescribed criteria. The Arbitrators shall be required to render a decision
in accordance with the procedures set forth in Subparagraph (b) below within
thirty (30) days after being notified of their selection. The fees of the
Arbitrators shall be equally divided amongst the parties to the arbitration.
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(b) Arbitration Procedures. Arbitration shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties agree
that jurisdiction and venue in Shelby County, Tennessee are appropriate and
approved by such parties.
14. Applicable Law. This Agreement shall be governed and construed
--------------
in accordance with the laws of the State of Tennessee.
15. Assignment. The Executive acknowledges that his services are
----------
unique and personal. Accordingly, the Executive may not assign his rights or
delegate his duties or obligations under this Agreement, except with respect to
certain rights to receive payments as described in Section 7.
---------
16. Headings. Headings in this Agreement are for convenience only
--------
and shall not be used to interpret or construe its provisions.
17. Successors; Binding Agreement. The Company will require any
-----------------------------
successor to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a beach of this Agreement and shall entitle Executive to compensation from
the Company in the same amount and on the same terms as Executive would be
entitled to hereunder if Executive terminates his employment for Good Reason.
The Company's rights and obligations under this Agreement shall inure to the
benefit of and shall be binding upon the Company's successors and assigns.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
STORAGE USA, INC.
By:/s/ Dean Jernigan
-----------------
Name: Dean Jernigan
Title: Chairman, CEO and President
EXECUTIVE:
Name: /s/ Christopher P. Marr
-----------------------
Christopher P. Marr
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<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT effective as of February 3, 2000, by and between Storage USA,
Inc., a Tennessee corporation (the "Company"), and John W. McConomy (the
"Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the
Executive Vice President, General Counsel and Secretary of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and
desirable to execute a written document setting forth the terms and conditions
of said relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following definitions:
(a) "1993 Omnibus Stock Plan" means the Company's 1993 Omnibus
Stock Plan, as amended.
(b) "1995 Employee Stock Purchase and Loan Plan" means the
Company's 1995 Employee Stock Purchase and Loan Plan, as amended.
(c) "1996 Officers' Stock Option Loan Program" means the Company's
1996 Officers' Stock Option Loan Program, as amended.
(d) "Arbitrators" means the arbitrators selected to conduct any
arbitration proceeding in connection with any disputes arising out of or
relating to this Agreement.
(e) "Award Period" means any period in which the Company's
performance is measured in connection with its Shareholder Value Plan.
(f) "Award Plans" has the meaning set forth in Section 4(b) of
this Agreement. ------------
(g) "Base Salary" means the annual salary to be paid to Executive
as set forth in Section 4(a) of this Agreement.
------------
(h) "Benefit Plans" has the meaning set forth in Section 4(c) of
this Agreement. ------------
<PAGE>
(i) "Company" means Storage USA, Inc., a Tennessee corporation, and
any successor to its business and/or assets which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(j) "Company Shares" means the shares of common stock of the
Company or any securities of a successor company which shall have replaced such
common stock.
(k) "Executive" means the person identified in the preamble
paragraph of this Agreement.
(l) "Fair Market Value" means, on any given date, the closing
sale price of the common stock of the Company on the New York Stock Exchange on
such date, or, if the New York Stock Exchange shall be closed on such date, the
next preceding date on which the New York Stock Exchange shall have been open.
(m) "Good Reason" means any of the following:
(i) a removal of the Executive from Executive's position as
Executive may hold from time to time pursuant to Section 2
hereof, except in connection with a Termination with Cause, as
a result of the Executive's death or Permanent Disability or by
Voluntary Termination;
(ii) a reduction in the Executive's Base Salary as in effect on
the date hereof; or as the same may be increased from time to
time, which reduction treats Executive differently than other
similarly situated executives or singles out or discriminates
against Executive; or modifying, suspending, discontinuing, or
terminating any Award Plan or Benefit Plan in a manner which
treats Executive differently than other similarly situated
employees or singles out or discriminates against Executive;
(iii) the relocation of the Company's principal executive
offices to a location outside a thirty-mile radius of Memphis,
Tennessee or the Company's requiring the Executive to be based
at any place other than a location within a thirty-mile radius
of Memphis, Tennessee (unless such relocation of Executive is:
(i) for good business reasons, in connection with Executive's
promotion; (ii) otherwise approved by Executive; or (iii) in
connection with the relocation, for good business reason(s), of
the entire department or function for which Executive is
responsible), except for reasonably required travel on the
Company's business;
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(iv) any material breach by the Company of any provision of
this Agreement;
(v) any purported termination of Executive's employment by the
Company which is not effected pursuant to the procedures set
forth in Section 3; or
---------
(vi) the failure of the Company to obtain an agreement
reasonably satisfactory to Executive from any successor or
assign of the Company to assume and agree to perform this
Agreement.
(n) "Option(s)" means any options issued pursuant to the Company's
1993 Omnibus Stock Plan, or any other stock option plan adopted by the Company,
any option granted with respect to Partnership Units, or any option granted
under the plan of any successor company that replaces or assumes the Company's
or the Partnership's options.
(o) "Partnership" means SUSA Partnership, L.P.
(p) "Partnership Unit(s)" means limited partnership interests of
the Partnership.
(q) "Permanent Disability" means a complete physical or mental
inability, confirmed by a licensed physician, to perform the services described
in Section 2 of the Agreement that continues for a period of six (6) consecutive
---------
months.
(r) "Plan Loan(s)" means any loan extended by the Company to
Executive pursuant to the 1995 Employee Stock Purchase and Loan Plan, or any
other similar plan or program adopted by the Company during the Term of this
Agreement.
(s) "Restricted Stock" means any restricted stock issued pursuant
to the Company's 1993 Omnibus Stock Plan, or any other Award Plan adopted by the
Company, or any restricted stock issued under the plan of any successor company
that replaces or assumes the Company's grants of restricted stock.
(t) "Retirement Age" means the Executive's sixty-fifth (65)
birthday.
(u) "Salary Continuation" shall have the meaning set out in
Section 8.a.
(v) "Self-Storage Business" means the business of acquiring,
developing, constructing, franchising, owning or operating self-storage
facilities.
(w) "Self-Storage Property" means any real estate upon which the
Self-Storage Business is being conducted.
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(x) "Shareholder Value Plan" means the Company's Shareholder Value
Plan, as amended.
(y) "SVU Grant" means the total number of shareholder value units
granted to the Executive pursuant to the Company's Shareholder Value Plan.
(z) "SVU Value" means the value of each shareholder value unit
based upon certain performance measures as set forth in the Company's
Shareholder Value Plan.
(aa) "Term" has the meaning assigned to it in Section 3 of this
Agreement. ---------
(bb) "Termination Date" means the date employment of Executive is
terminated, which date shall be: (i) in the case of Executive's Permanent
Disability, thirty (30) days after a Termination Notice is given and Executive
does not return to the full-time performance of his duties within such thirty
(30) day period; or (ii) in all other instances, the date specified as the
Termination Date in the Termination Notice, which date shall not be less than
thirty (30) nor more than sixty (60) days from the date the Termination Notice
is given.
(cc) "Termination Notice" means a written notice of termination of
employment by Executive or the Company.
(dd) "Termination With Cause" means the termination of the
Executive's employment by the Company for any of the following reasons:
(i) the Executive's conviction of a felony;
(ii) the Executive's theft, embezzlement, misappropriation of
or intentional infliction of material damage to the Company's
property or business opportunity;
(iii) the Executive's intentional breach of the noncompetition
or non-solicitation provisions contained in Section 9 of this
---------
Agreement; or
(iv) the Executive's ongoing willful neglect of or failure to
perform his duties hereunder or his ongoing willful failure or
refusal to follow any reasonable, unambiguous duly adopted
written direction of the Company that is not inconsistent with
the description of the Executive's duties set forth in Section
-------
2, if such willful neglect or failure is materially damaging
-
or materially detrimental to the business and operations of
the Company; provided that Executive shall have received
written notice of such
4
<PAGE>
failure and shall have continued to engage in such failure
after thirty (30) days following receipt of such notice from
the Company, which notice specifically identifies the manner
in which the Company believes that Executive has engaged in
such failure.
For purposes of this subsection, no act, or failure to act,
shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith, and without reasonable belief
that such action or omission was in the best interest of the
Company.
(ee) "Termination Without Cause" means the termination of the
Executive's employment by the Company for any reason other than: (i) Termination
With Cause; or (ii) termination by the Company due to Executive's death or
Permanent Disability.
(ff) "Uniform Arbitration Act" means the Uniform Arbitration
Act, Tennessee Code Annotated(S) 29-5-391 et seq., as amended.
(gg) "Voluntary Termination" means the Executive's voluntary
termination of his employment hereunder for any reason other than Good Reason.
2. Employment; Services. The Company, SUSA-TN, LLC and Partnership
--------------------
shall employ the Executive, and the Executive agrees to be so employed, in the
capacity of Executive Vice President, General Counsel and Secretary of the
Company, or such other position which offers at least a comparable level of
responsibility and authority to which the Chief Executive Officer may elect to
assign Executive from time to time, to serve for the Term hereof, subject to
earlier termination as hereinafter provided. The Executive shall devote such
amount of his time and attention to the Company's affairs as are necessary to
perform his duties to the Company in his capacity as Executive Vice President,
General Counsel and Secretary. The Executive shall have authority and
responsibility with respect to his functional area of responsibility within the
Company, consistent with direction from his immediate supervisor.
3. Term; Termination.
-----------------
(a) The term of the Executive's employment hereunder shall be one
(1) year and shall commence on February 3, 2000 and shall be extended
automatically, for so long as the Executive remains employed by the Company
hereunder, on the first day of each month beginning January 3, 2001 for an
additional one-month period (such period, as it may be extended from time to
time, being herein referred to as the "Term"), unless terminated earlier in
accordance with the terms of this Agreement, to the effect that on the first day
of each month, the remaining term of this Agreement and the Executive's
employment hereunder shall be one (1) year, but shall in no event extend beyond
the Retirement Age.
5
<PAGE>
(b) Any purported termination of employment by Executive or the
Company shall be communicated by a Termination Notice. The Termination Notice
shall indicate the specific termination provision in this Agreement relied upon
and set forth the facts and circumstances claimed to provide a basis for
termination. If the party receiving the Termination Notice notifies the other
party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. Compensation.
-------------
(a) Base Salary. During the Term, the Company shall pay the
Executive for his services a Base Salary of $200,000, to be paid consistent with
the general payroll practices of the Company, such Base Salary being subject to
any increases or reductions approved by the Chief Executive Officer of the
Company; provided however, that any such reductions may not treat Executive
differently than similarly situated executives or otherwise single out or
discriminate against Executive. Executive agrees that, consistent with Company
policy as of the date hereof, Executive does not accrue any vacation or sick
pay. In the event such policy is changed to provide for such an accrual, this
Agreement will be amended to provide for such change.
(b) Award Plans. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, Restricted Stock or Options, and shall
be eligible to participate in the Company's 1993 Omnibus Stock Plan, 1995
Employee Stock Purchase and Loan Plan, 1996 Officers' Stock Option Loan Program,
Shareholder Value Plan, and any other stock option, incentive compensation,
profit participation, bonus or extra compensation plan that is adopted by the
Company and in which the Company's executive officers generally participate
(collectively, "Award Plans"), but payments and/or awards are not "entitlements"
and shall be paid or made consistent with the terms of such Award Plans. For
example, if the Company's bonus plan provides that a bonus is only payable if
certain objectives are met, Executive shall only be paid such bonus if the
objectives are met.
(c) Benefit Plans. During the Term, Executive shall be entitled to
participate in, and to all rights and benefits provided by, each and every
health, life,
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medical, dental, disability, insurance and welfare plan maintained by the
Company including, without limitation, the benefits that are maintained from
time to time by the Company for the benefit of Executive, the executives of the
Company generally or for the Company's employees generally, provided that
Executive is eligible to participate in such plan under the eligibility
provisions thereof that are generally applicable to the participants thereof
(collectively, "Benefit Plans").
(d) Overall Qualification. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as: (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan; and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. Expenses. The Company recognizes that the Executive will have to
--------
incur certain out-of-pocket expenses, including but not limited to travel
expenses, related to his services and the Company's business, and the Company
agrees to reimburse the Executive for all reasonable expenses necessarily
incurred by him in the performance of his duties upon presentation of a voucher
or documentation indicating the amount and business purposes of any such
expenses; provided that Executive complies with the Company's policies and
procedures regarding business expenses.
6. Voluntary Termination; Termination With Cause. If: (i) the
---------------------------------------------
Executive ceases to be an employee of the Company on account of a Voluntary
Termination; or (ii) there shall be a Termination With Cause, the Executive
shall not be entitled to any compensation after the Termination Date of such
Voluntary Termination or Termination With Cause (except Base Salary accrued but
unpaid on the Termination Date of such event).
7. Death or Disability. Executive's employment with the Company shall
-------------------
terminate upon the Executive's death or Permanent Disability. Upon such
termination, the Company shall continue to pay the Executive or his heirs,
devisees, executors, legatees or personal representatives, as appropriate, Base
Salary then in effect for one (1) year from the Termination Date. The Company
shall also pay any amounts due pursuant to the terms of any Benefit Plans (as
appropriate) and Award Plans in which Executive was a participant, including,
without limitation, the pro rata amount of any bonus to be paid to Executive for
the fiscal year in which Executive was terminated. In addition, in the event of
a termination due to Executive's Permanent Disability, Executive shall be
permitted to participate in, and have all rights and benefits provided by, all
Benefit Plans which Executive was eligible to participate in immediately prior
to the Termination Date (to the extent such participation is possible under the
laws then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
7
<PAGE>
8. Termination Without Cause; Resignation for Good Reason. Executive's
------------------------------------------------------
employment with the Company is at will, consequently, the Company may terminate
Executive for any reason, or no reason at all, at any time and Executive may
resign his employment with the Company at any time; provided that, upon
termination of Executive's employment by the Executive for Good Reason, or in
the event of a Termination Without Cause, and only in such event(s), the Company
shall provide the compensation and benefits set forth in this Section 8.
---------
Executive's continued employment shall not constitute consent to, or a waiver
of, rights with respect to any circumstances constituting Good Reason hereunder.
(a) Base Salary, Benefit and Award Plans. The Company shall continue
to pay the Executive his Base Salary then in effect until the earlier of: (x)
one and one-half years after the Termination Date; or (y) the date that
Executive commences employment with another employer (or if Executive becomes
self-employed) at an annual base salary equal to Executive's Base Salary on the
Termination Date; all on the regular payroll schedule with appropriate payroll
tax and other deductions ("Salary Continuation"); provided however, that in no
event shall Salary Continuation be paid to Executive past the Retirement Age. In
the event that Executive commences Employment with another employer (or becomes
self-employed) at an annual base salary less than Executive's Base Salary on the
Termination Date, the Salary Continuation shall be reduced by an amount equal to
the amount of annual base salary received by Executive from such other employer
or from such self-employment. The Company shall also pay on the Termination Date
any amounts due pursuant to the terms of any Benefit Plans and Award Plans in
which Executive was a participant, including, without limitation, the pro rata
amount of any bonus to be paid to Executive for the fiscal year in which
Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive was eligible to participate in immediately prior to the
Termination Date (to the extent such participation is possible under the laws
then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
(b) Restricted Stock and Stock Options. All restrictions upon any
Restricted Stock which may have been awarded to Executive shall expire and be
removed, such Restricted Stock shall vest according to the schedule for vesting
following the Termination Date and through the date of the final payment of
Salary Continuation (unless otherwise expired or removed and vested pursuant to
the terms of any Restricted Stock Award pursuant to the 1993 Omnibus Stock Plan
or any Award Plan), and such stock shall be delivered to Executive. All Options
granted to Executive prior to the Termination Date shall continue to vest,
according to their schedule following the Termination Date and through the date
of the final payment of Salary Continuation (unless otherwise previously vested
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan). No Stock
Options or Restricted Stock will be granted to Executive after the Termination
Date. In lieu of Company Shares issuable upon exercise of any vested,
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
Fair Market
8
<PAGE>
Value of Company Shares on the Termination Date over the per share exercise
price of each vested Option held by Executive, times (ii) the number of Company
Shares covered by each such Option. In the event Executive does not elect to
receive a cash payment for any vested, outstanding and unexercised Options
granted to Executive, Executive shall have the right to otherwise exercise such
Options in accordance with the terms and conditions provided in the 1993 Omnibus
Stock Plan or any other applicable Award Plans.
(c) Plan Loans. If Executive has any Plan Loans outstanding to the
Company immediately prior to the Termination Date, the Company shall discharge
and cancel the amount of principal and interest due with respect to such Plan
Loans which exceeds the Fair Market Value of Company Shares securing the Plan
Loans on the Termination Date, such discharge to be effective upon Executive's
payment of the Plan Loans in full (less the amount discharged) within ninety
(90) days following the Termination Date. Executive shall have the option of
repaying all amounts due with respect to the Plan Loans by the transfer of the
Company Shares securing the Plan Loans, or by the payment, in cash, of the
amounts due with respect to the Plan Loans. Except as otherwise set forth
herein, Executive shall remain subject to all terms and conditions set forth in
the Loan Agreements and Promissory Notes until the Plan Loans are paid in full.
(d) Shareholder Value Plan. With respect to Executive's
participation in the Company's Shareholder Value Plan, the Award Periods in
connection with all of Executive's outstanding SVU Grants shall be accelerated
such that each Award Period is deemed to have ended upon the Termination Date.
At such time, the Company shall pay Executive an amount equal to the SVU Value
multiplied by the number of Executive's outstanding SVU Grants. The SVU Value
shall be reduced by 66% for all SVU Grants which were granted less than twelve
months prior to the Termination Date and the SVU Value shall be reduced by 33%
for all SVU Grants which were granted less than twenty-four months but more than
twelve months prior to the Termination Date. No adjustments shall be made to the
SVU Value for SVU Grants which were granted more than twenty-four months prior
to the Termination Date. All payments made to Executive after the Termination
Date in connection with outstanding SVU Grants shall be made solely in cash.
(e) Legal Fees. The Company shall also pay to Executive all
reasonable legal fees and expenses incurred by Executive as a result of a
dispute concerning this Agreement in connection with a Termination Without Cause
or Executive's resignation for Good Reason (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement),
if Executive is the prevailing party in connection with such dispute.
9. Non Competition; Non Solicitation.
---------------------------------
(a) For a period of one and one-half (1 1/2) years following the
Term, Executive shall not: (i) solicit any employee of the Company to leave the
service of the Company; or (ii) own any interest in any Self-Storage Property
(other than: (x) any
9
<PAGE>
permissible interest acquired while Executive was employed by the Company; or
(y) any interest that is expressly permitted by the Company) as partner,
shareholder or otherwise; or directly or indirectly, for his own account or of
the account of others, either as an officer, director, promoter, employee,
consultant, advisor, agent, manager, or in any other capacity, engage in the
Self-Storage Business.
(b) The non solicitation provision shall apply to any Company
employee during the period of such Employee's employment and for a period of
thirty (30) days after such Employee's termination of employment with the
Company.
(c) The Executive agrees that damages at law for violation of the
restrictive covenant contained herein would not be an adequate or proper remedy
to the Company, and that should the Executive violate or threaten to violate any
of the provisions of such covenant, the Company, its successors or assigns,
shall be entitled to obtain a temporary or permanent injunction, as appropriate,
against the Executive in any court having jurisdiction over the person and the
subject matter, prohibiting any further violation of any such covenants. The
injunctive relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
(d) The Executive acknowledges that this Agreement has been
negotiated at arm's length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by
these presents has attempted to limit the Executive's right to compete only to
the extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
10. Employment Status. The parties acknowledge and agree that Executive
-----------------
is an employee of the Company, not an independent contractor. Any payments made
to Executive by the Company pursuant to this Agreement shall be treated for
federal and state payroll tax purposes as payments made to a Company employee,
irrespective whether such payments are made subsequent to the Termination Date.
11. Notices. All notices or deliveries authorized or required pursuant
-------
to this Agreement shall be deemed to have been given when in writing and
personally delivered or when deposited in the U.S. mail, certified, return
receipt requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to the
other party:
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<PAGE>
To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: 2900 Waterleaf Drive
Germantown, TN 38138
12. Entire Agreement. This Agreement contains the entire understanding
----------------
between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto; provided however, that the parties to this
Agreement hereby acknowledge and agree that this Agreement is subject to the
Severance Agreement dated as of August 16, 1999 between the parties, to all
covenants and agreements set forth in the Severance Agreement, and to any
subsequent renewals, extensions or modifications to the Severance Agreement. Any
action by the Company or termination of Executive's employment with the Company
that constitutes or otherwise gives rise to a Change of Control Termination, as
defined in the Severance Agreement, shall be governed exclusively by the
Severance Agreement. The provisions of Section 2(b) of the Severance Agreement
governing disputes shall be effective with respect to any dispute as to whether
a Termination constitutes a Change of Control Termination. In the event that
Executive expressly agrees to waive any provision hereof, such waiver shall be
memorialized by an amendment to this Agreement, which Executive hereby agrees to
sign This Agreement shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto
13. Arbitration. Any controversy concerning or claim arising out of or
-----------
relating to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party seeking
such arbitration.
(a) The Arbitrators. Any arbitration proceeding shall be conducted
by three (3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit any
matter relating to this Agreement to arbitration shall do so by written notice
to the other party, which notice shall set forth the items to be arbitrated,
such party's choice of Arbitrator, and such party's substantive position in the
arbitration. The party receiving such notice shall, within fifteen (15) days
after receipt of such notice, appoint an Arbitrator and notify the other party
of its appointment and of its substantive position. The Arbitrators appointed by
the parties to the Arbitration shall select an additional Arbitrator meeting the
aforedescribed criteria. The Arbitrators shall be required to render a decision
in accordance with the procedures set forth in Subparagraph (b) below within
thirty (30) days after being notified of their selection. The fees of the
Arbitrators shall be equally divided amongst the parties to the arbitration.
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<PAGE>
(b) Arbitration Procedures. Arbitration shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties agree
that jurisdiction and venue in Shelby County, Tennessee are appropriate and
approved by such parties.
14. Applicable Law. This Agreement shall be governed and construed in
--------------
accordance with the laws of the State of Tennessee.
15. Assignment. The Executive acknowledges that his services are unique
----------
and personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement, except with respect to certain
rights to receive payments as described in Section 7.
---------
16. Headings. Headings in this Agreement are for convenience only and
--------
shall not be used to interpret or construe its provisions.
17. Successors; Binding Agreement. The Company will require any
-----------------------------
successor to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a beach of this Agreement and shall entitle Executive to compensation from
the Company in the same amount and on the same terms as Executive would be
entitled to hereunder if Executive terminates his employment for Good Reason.
The Company's rights and obligations under this Agreement shall inure to the
benefit of and shall be binding upon the Company's successors and assigns.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
STORAGE USA, INC.
By: /s/ Dean Jernigan
----------------------------
Name: Dean Jernigan
Title: Chairman, CEO and President
EXECUTIVE:
Name: /s/ John W. McConomy
----------------------------
John W. McConomy
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<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
AGREEMENT effective as of February 3, 2000, by and between Storage USA,
Inc., a Tennessee corporation (the "Company"), and Francis C. "Buck" Brown III
(the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the Senior
Vice President, E-Commerce of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and desirable
to execute a written document setting forth the terms and conditions of said
relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
-----------
have the following definitions:
(a) "1993 Omnibus Stock Plan" means the Company's 1993 Omnibus Stock
Plan, as amended.
(b) "1995 Employee Stock Purchase and Loan Plan" means the Company's
1995 Employee Stock Purchase and Loan Plan, as amended.
(c) "1996 Officers' Stock Option Loan Program" means the Company's
1996 Officers' Stock Option Loan Program, as amended.
(d) "Arbitrators" means the arbitrators selected to conduct any
arbitration proceeding in connection with any disputes arising out of or
relating to this Agreement.
(e) "Award Period" means any period in which the Company's performance
is measured in connection with its Shareholder Value Plan.
(f) "Award Plans" has the meaning set forth in Section 4(b) of this
------------
Agreement.
(g) "Base Salary" means the annual salary to be paid to Executive as
set forth in Section 4(a) of this Agreement.
------------
(h) "Benefit Plans" has the meaning set forth in Section 4(c) of this
------------
Agreement.
<PAGE>
(i) "Company" means Storage USA, Inc., a Tennessee corporation, and
any successor to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(j) "Company Shares" means the shares of common stock of the Company
or any securities of a successor company which shall have replaced such
common stock.
(k) "Executive" means the person identified in the preamble paragraph
of this Agreement.
(l) "Fair Market Value" means, on any given date, the closing sale
price of the common stock of the Company on the New York Stock Exchange on
such date, or, if the New York Stock Exchange shall be closed on such date,
the next preceding date on which the New York Stock Exchange shall have
been open.
(m) "Good Reason" means any of the following:
(i) a removal of the Executive from Executive's position as
Executive may hold from time to time pursuant to Section 2 hereof,
except in connection with a Termination with Cause, as a result of
the Executive's death or Permanent Disability or by Voluntary
Termination;
(ii) a reduction in the Executive's Base Salary as in effect on
the date hereof; or as the same may be increased from time to
time, which reduction treats Executive differently than other
similarly situated executives or singles out or discriminates
against Executive; or modifying, suspending, discontinuing, or
terminating any Award Plan or Benefit Plan in a manner which
treats Executive differently than other similarly situated
employees or singles out or discriminates against Executive;
(iii) the relocation of the Company's principal executive offices
to a location outside a thirty-mile radius of Memphis, Tennessee
or the Company's requiring the Executive to be based at any place
other than a location within a thirty-mile radius of Memphis,
Tennessee (unless such relocation of Executive is: (i) for good
business reasons, in connection with Executive's promotion; (ii)
otherwise approved by Executive; or (iii) in connection with the
relocation, for good business reason(s), of the entire department
or function for which Executive is responsible), except for
reasonably required travel on the Company's business;
2
<PAGE>
(iv) any material breach by the Company of any provision of this
Agreement;
(v) any purported termination of Executive's employment by the
Company which is not effected pursuant to the procedures set forth
in Section 3; or
---------
(vi) the failure of the Company to obtain an agreement reasonably
satisfactory to Executive from any successor or assign of the
Company to assume and agree to perform this Agreement.
(n) "Option(s)" means any options issued pursuant to the Company's
1993 Omnibus Stock Plan, or any other stock option plan adopted by the
Company, any option granted with respect to Partnership Units, or any
option granted under the plan of any successor company that replaces or
assumes the Company's or the Partnership's options.
(o) "Partnership" means SUSA Partnership, L.P.
(p) "Partnership Unit(s)" means limited partnership interests of the
Partnership.
(q) "Permanent Disability" means a complete physical or mental
inability, confirmed by a licensed physician, to perform the services
described in Section 2 of the Agreement that continues for a period of six
---------
(6) consecutive months.
(r) "Plan Loan(s)" means any loan extended by the Company to Executive
pursuant to the 1995 Employee Stock Purchase and Loan Plan, or any other
similar plan or program adopted by the Company during the Term of this
Agreement.
(s) "Restricted Stock" means any restricted stock issued pursuant to
the Company's 1993 Omnibus Stock Plan, or any other Award Plan adopted by
the Company, or any restricted stock issued under the plan of any successor
company that replaces or assumes the Company's grants of restricted stock.
(t) "Retirement Age" means the Executive's sixty-fifth (65) birthday.
(u) "Salary Continuation" shall have the meaning set out in Section
8.a.
(v) "Self-Storage Business" means the business of acquiring,
developing, constructing, franchising, owning or operating self-storage
facilities.
(w) "Self-Storage Property" means any real estate upon which the
Self-Storage Business is being conducted.
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(x) "Shareholder Value Plan" means the Company's Shareholder Value
Plan, as amended.
(y) "SVU Grant" means the total number of shareholder value units
granted to the Executive pursuant to the Company's Shareholder Value Plan.
(z) "SVU Value" means the value of each shareholder value unit based
upon certain performance measures as set forth in the Company's Shareholder
Value Plan.
(aa) "Term" has the meaning assigned to it in Section 3 of this
---------
Agreement.
(bb) "Termination Date" means the date employment of Executive is
terminated, which date shall be: (i) in the case of Executive's Permanent
Disability, thirty (30) days after a Termination Notice is given and
Executive does not return to the full-time performance of his duties within
such thirty (30) day period; or (ii) in all other instances, the date
specified as the Termination Date in the Termination Notice, which date
shall not be less than thirty (30) nor more than sixty (60) days from the
date the Termination Notice is given.
(cc) "Termination Notice" means a written notice of termination of
employment by Executive or the Company.
(dd) "Termination With Cause" means the termination of the Executive's
employment by the Company for any of the following reasons:
(i) the Executive's conviction of a felony;
(ii) the Executive's theft, embezzlement, misappropriation
of or intentional infliction of material damage to the
Company's property or business opportunity;
(iii) the Executive's intentional breach of the
noncompetition or non-solicitation provisions contained in
Section 9 of this Agreement; or
---------
(iv) the Executive's ongoing willful neglect of or failure to
perform his duties hereunder or his ongoing willful failure or
refusal to follow any reasonable, unambiguous duly adopted
written direction of the Company that is not inconsistent with
the description of the Executive's duties set forth in Section 2,
---------
if such willful neglect or failure is materially damaging or
materially detrimental to the business and operations of the
Company; provided that Executive shall have received written
notice of such
4
<PAGE>
failure and shall have continued to engage in such failure after
thirty (30) days following receipt of such notice from the
Company, which notice specifically identifies the manner in which
the Company believes that Executive has engaged in such failure.
For purposes of this subsection, no act, or failure to act, shall
be deemed "willful" unless done, or omitted to be done, by
Executive not in good faith, and without reasonable belief that
such action or omission was in the best interest of the Company.
(ee) "Termination Without Cause" means the termination of the
Executive's employment by the Company for any reason other than: (i)
Termination With Cause; or (ii) termination by the Company due to
Executive's death or Permanent Disability.
(ff) "Uniform Arbitration Act" means the Uniform Arbitration Act,
Tennessee Code Annotated (S) 29-5-391 et seq., as amended.
-- ----
(gg) "Voluntary Termination" means the Executive's voluntary
termination of his employment hereunder for any reason other than Good
Reason.
2. Employment; Services. The Company, SUSA-TN, LLC and Partnership
--------------------
shall employ the Executive, and the Executive agrees to be so employed, in the
capacity of Senior Vice President, E-Commerce of the Company, or such other
position which offers at least a comparable level of responsibility and
authority to which the Chief Executive Officer may elect to assign Executive
from time to time, to serve for the Term hereof, subject to earlier termination
as hereinafter provided. The Executive shall devote such amount of his time and
attention to the Company's affairs as are necessary to perform his duties to the
Company in his capacity as Senior Vice President, E-Commerce. The Executive
shall have authority and responsibility with respect to his functional area of
responsibility within the Company, consistent with direction from his immediate
supervisor.
3. Term; Termination.
-----------------
(a) The term of the Executive's employment hereunder shall be
one (1) year and shall commence on February 3, 2000 and shall be extended
automatically, for so long as the Executive remains employed by the Company
hereunder, on the first day of each month beginning January 3, 2001 for an
additional one-month period (such period, as it may be extended from time to
time, being herein referred to as the "Term"), unless terminated earlier in
accordance with the terms of this Agreement, to the effect that on the first day
of each month, the remaining term of this Agreement and the Executive's
employment hereunder shall be one (1) year, but shall in no event extend beyond
the Retirement Age.
5
<PAGE>
(b) Any purported termination of employment by Executive or the
Company shall be communicated by a Termination Notice. The Termination Notice
shall indicate the specific termination provision in this Agreement relied upon
and set forth the facts and circumstances claimed to provide a basis for
termination. If the party receiving the Termination Notice notifies the other
party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. Compensation.
-------------
(a) Base Salary. During the Term, the Company shall pay the
Executive for his services a Base Salary of $160,455, to be paid consistent with
the general payroll practices of the Company, such Base Salary being subject to
any increases or reductions approved by the Chief Executive Officer of the
Company; provided however, that any such reductions may not treat Executive
differently than similarly situated executives or otherwise single out or
discriminate against Executive. Executive agrees that, consistent with Company
policy as of the date hereof, Executive does not accrue any vacation or sick
pay. In the event such policy is changed to provide for such an accrual, this
Agreement will be amended to provide for such change.
(b) Award Plans. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, Restricted Stock or Options, and shall
be eligible to participate in the Company's 1993 Omnibus Stock Plan, 1995
Employee Stock Purchase and Loan Plan, 1996 Officers' Stock Option Loan Program,
Shareholder Value Plan, and any other stock option, incentive compensation,
profit participation, bonus or extra compensation plan that is adopted by the
Company and in which the Company's executive officers generally participate
(collectively, "Award Plans"), but payments and/or awards are not "entitlements"
and shall be paid or made consistent with the terms of such Award Plans. For
example, if the Company's bonus plan provides that a bonus is only payable if
certain objectives are met, Executive shall only be paid such bonus if the
objectives are met.
(c) Benefit Plans. During the Term, Executive shall be entitled to
participate in, and to all rights and benefits provided by, each and every
health, life,
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medical, dental, disability, insurance and welfare plan maintained by the
Company including, without limitation, the benefits that are maintained from
time to time by the Company for the benefit of Executive, the executives of the
Company generally or for the Company's employees generally, provided that
Executive is eligible to participate in such plan under the eligibility
provisions thereof that are generally applicable to the participants thereof
(collectively, "Benefit Plans").
(d) Overall Qualification. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as: (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan; and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. Expenses. The Company recognizes that the Executive will have to
--------
incur certain out-of-pocket expenses, including but not limited to travel
expenses, related to his services and the Company's business, and the Company
agrees to reimburse the Executive for all reasonable expenses necessarily
incurred by him in the performance of his duties upon presentation of a voucher
or documentation indicating the amount and business purposes of any such
expenses; provided that Executive complies with the Company's policies and
procedures regarding business expenses.
6. Voluntary Termination; Termination With Cause. If: (i) the
----------------------------------------------
Executive ceases to be an employee of the Company on account of a Voluntary
Termination; or (ii) there shall be a Termination With Cause, the Executive
shall not be entitled to any compensation after the Termination Date of such
Voluntary Termination or Termination With Cause (except Base Salary accrued but
unpaid on the Termination Date of such event).
7. Death or Disability. Executive's employment with the Company shall
-------------------
terminate upon the Executive's death or Permanent Disability. Upon such
termination, the Company shall continue to pay the Executive or his heirs,
devisees, executors, legatees or personal representatives, as appropriate, Base
Salary then in effect for one (1) year from the Termination Date. The Company
shall also pay any amounts due pursuant to the terms of any Benefit Plans (as
appropriate) and Award Plans in which Executive was a participant, including,
without limitation, the pro rata amount of any bonus to be paid to Executive for
the fiscal year in which Executive was terminated. In addition, in the event of
a termination due to Executive's Permanent Disability, Executive shall be
permitted to participate in, and have all rights and benefits provided by, all
Benefit Plans which Executive was eligible to participate in immediately prior
to the Termination Date (to the extent such participation is possible under the
laws then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
7
<PAGE>
8. Termination Without Cause; Resignation for Good Reason. Executive's
------------------------------------------------------
employment with the Company is at will, consequently, the Company may terminate
Executive for any reason, or no reason at all, at any time and Executive may
resign his employment with the Company at any time; provided that, upon
termination of Executive's employment by the Executive for Good Reason, or in
the event of a Termination Without Cause, and only in such event(s), the Company
shall provide the compensation and benefits set forth in this Section 8.
---------
Executive's continued employment shall not constitute consent to, or a waiver
of, rights with respect to any circumstances constituting Good Reason hereunder.
(a) Base Salary, Benefit and Award Plans. The Company shall continue
to pay the Executive his Base Salary then in effect until the earlier of: (x)
one year after the Termination Date; or (y) the date that Executive commences
employment with another employer (or if Executive becomes self-employed) at an
annual base salary equal to Executive's Base Salary on the Termination Date; all
on the regular payroll schedule with appropriate payroll tax and other
deductions ("Salary Continuation"); provided however, that in no event shall
Salary Continuation be paid to Executive past the Retirement Age. In the event
that Executive commences Employment with another employer (or becomes self-
employed) at an annual base salary less than Executive's Base Salary on the
Termination Date, the Salary Continuation shall be reduced by an amount equal to
the amount of annual base salary received by Executive from such other employer
or from such self-employment. The Company shall also pay on the Termination Date
any amounts due pursuant to the terms of any Benefit Plans and Award Plans in
which Executive was a participant, including, without limitation, the pro rata
amount of any bonus to be paid to Executive for the fiscal year in which
Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive was eligible to participate in immediately prior to the
Termination Date (to the extent such participation is possible under the laws
then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
(b) Restricted Stock and Stock Options. All restrictions upon any
Restricted Stock which may have been awarded to Executive shall expire and be
removed, such Restricted Stock shall vest according to the schedule for vesting
following the Termination Date and through the date of the final payment of
Salary Continuation (unless otherwise expired or removed and vested pursuant to
the terms of any Restricted Stock Award pursuant to the 1993 Omnibus Stock Plan
or any Award Plan), and such stock shall be delivered to Executive. All Options
granted to Executive prior to the Termination Date shall continue to vest,
according to their schedule following the Termination Date and through the date
of the final payment of Salary Continuation (unless otherwise previously vested
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan). No Stock
Options or Restricted Stock will be granted to Executive after the Termination
Date. In lieu of Company Shares issuable upon exercise of any vested,
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
Fair Market Value of Company Shares on the Termination Date over the per share
exercise price of
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<PAGE>
each vested Option held by Executive, times (ii) the number of Company Shares
covered by each such Option. In the event Executive does not elect to receive a
cash payment for any vested, outstanding and unexercised Options granted to
Executive, Executive shall have the right to otherwise exercise such Options in
accordance with the terms and conditions provided in the 1993 Omnibus Stock Plan
or any other applicable Award Plans.
(c) Plan Loans. If Executive has any Plan Loans outstanding to the
Company immediately prior to the Termination Date, the Company shall discharge
and cancel the amount of principal and interest due with respect to such Plan
Loans which exceeds the Fair Market Value of Company Shares securing the Plan
Loans on the Termination Date, such discharge to be effective upon Executive's
payment of the Plan Loans in full (less the amount discharged) within ninety
(90) days following the Termination Date. Executive shall have the option of
repaying all amounts due with respect to the Plan Loans by the transfer of the
Company Shares securing the Plan Loans, or by the payment, in cash, of the
amounts due with respect to the Plan Loans. Except as otherwise set forth
herein, Executive shall remain subject to all terms and conditions set forth in
the Loan Agreements and Promissory Notes until the Plan Loans are paid in full.
(d) Shareholder Value Plan. With respect to Executive's participation
in the Company's Shareholder Value Plan, the Award Periods in connection with
all of Executive's outstanding SVU Grants shall be accelerated such that each
Award Period is deemed to have ended upon the Termination Date. At such time,
the Company shall pay Executive an amount equal to the SVU Value multiplied by
the number of Executive's outstanding SVU Grants. The SVU Value shall be reduced
by 66% for all SVU Grants which were granted less than twelve months prior to
the Termination Date and the SVU Value shall be reduced by 33% for all SVU
Grants which were granted less than twenty-four months but more than twelve
months prior to the Termination Date. No adjustments shall be made to the SVU
Value for SVU Grants which were granted more than twenty-four months prior to
the Termination Date. All payments made to Executive after the Termination Date
in connection with outstanding SVU Grants shall be made solely in cash.
(e) Legal Fees. The Company shall also pay to Executive all reasonable
legal fees and expenses incurred by Executive as a result of a dispute
concerning this Agreement in connection with a Termination Without Cause or
Executive's resignation for Good Reason (including all such fees and expenses,
if any, incurred in contesting or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this Agreement), if
Executive is the prevailing party in connection with such dispute.
9. Non Competition; Non Solicitation.
---------------------------------
(a) For a period of one (1) year following the Term, Executive shall
not: (i) solicit any employee of the Company to leave the service of the
Company; or (ii) own any interest in any Self-Storage Property (other than: (x)
any permissible interest acquired while Executive was employed by the Company;
or (y) any interest that is
9
<PAGE>
expressly permitted by the Company) as partner, shareholder or otherwise; or
directly or indirectly, for his own account or of the account of others, either
as an officer, director, promoter, employee, consultant, advisor, agent,
manager, or in any other capacity, engage in the Self-Storage Business.
(b) The non solicitation provision shall apply to any Company employee
during the period of such Employee's employment and for a period of thirty (30)
days after such Employee's termination of employment with the Company.
(c) The Executive agrees that damages at law for violation of the
restrictive covenant contained herein would not be an adequate or proper remedy
to the Company, and that should the Executive violate or threaten to violate any
of the provisions of such covenant, the Company, its successors or assigns,
shall be entitled to obtain a temporary or permanent injunction, as appropriate,
against the Executive in any court having jurisdiction over the person and the
subject matter, prohibiting any further violation of any such covenants. The
injunctive relief provided herein shall be in addition to any award of damages,
compensatory, exemplary or otherwise, payable by reason of such violation.
(d) The Executive acknowledges that this Agreement has been negotiated
at arm's length by the parties, neither being under any compulsion to enter into
this Agreement, and that the foregoing restrictive covenant does not in any
respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by
these presents has attempted to limit the Executive's right to compete only to
the extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
10. Employment Status. The parties acknowledge and agree that Executive
-----------------
is an employee of the Company, not an independent contractor. Any payments made
to Executive by the Company pursuant to this Agreement shall be treated for
federal and state payroll tax purposes as payments made to a Company employee,
irrespective whether such payments are made subsequent to the Termination Date.
11. Notices. All notices or deliveries authorized or required pursuant
-------
to this Agreement shall be deemed to have been given when in writing and
personally delivered or when deposited in the U.S. mail, certified, return
receipt requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to the
other party:
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<PAGE>
To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: 426 Grandview
Memphis, TN 38111
12. Entire Agreement. This Agreement contains the entire understanding
----------------
between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of, the parties hereto; provided however, that the parties to this
Agreement hereby acknowledge and agree that this Agreement is subject to the
Severance Agreement dated as of August 16, 1999 between the parties, to all
covenants and agreements set forth in the Severance Agreement, and to any
subsequent renewals, extensions or modifications to the Severance Agreement. Any
action by the Company or termination of Executive's employment with the Company
that constitutes or otherwise gives rise to a Change of Control Termination, as
defined in the Severance Agreement, shall be governed exclusively by the
Severance Agreement. The provisions of Section 2(b) of the Severance Agreement
governing disputes shall be effective with respect to any dispute as to whether
a Termination constitutes a Change of Control Termination. In the event that
Executive expressly agrees to waive any provision hereof, such waiver shall be
memorialized by an amendment to this Agreement, which Executive hereby agrees to
sign This Agreement shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto
13. Arbitration. Any controversy concerning or claim arising out of or
-----------
relating to this Agreement shall be settled by final and binding arbitration in
Memphis, Shelby County, Tennessee at a location specified by the party seeking
such arbitration.
(a) The Arbitrators. Any arbitration proceeding shall be conducted by
three (3) Arbitrators and the decision of the Arbitrators shall be binding on
all parties. Each Arbitrator shall have substantial experience and expert
competence in the matters being arbitrated. The party desiring to submit any
matter relating to this Agreement to arbitration shall do so by written notice
to the other party, which notice shall set forth the items to be arbitrated,
such party's choice of Arbitrator, and such party's substantive position in the
arbitration. The party receiving such notice shall, within fifteen (15) days
after receipt of such notice, appoint an Arbitrator and notify the other party
of its appointment and of its substantive position. The Arbitrators appointed by
the parties to the Arbitration shall select an additional Arbitrator meeting the
aforedescribed criteria. The Arbitrators shall be required to render a decision
in accordance with the procedures set forth in Subparagraph (b) below within
thirty (30) days after being notified of their selection. The fees of the
Arbitrators shall be equally divided amongst the parties to the arbitration.
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(b) Arbitration Procedures. Arbitration shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties agree
that jurisdiction and venue in Shelby County, Tennessee are appropriate and
approved by such parties.
14. Applicable Law. This Agreement shall be governed and construed in
--------------
accordance with the laws of the State of Tennessee.
15. Assignment. The Executive acknowledges that his services are unique
----------
and personal. Accordingly, the Executive may not assign his rights or delegate
his duties or obligations under this Agreement, except with respect to certain
rights to receive payments as described in Section 7.
---------
16. Headings. Headings in this Agreement are for convenience only and
--------
shall not be used to interpret or construe its provisions.
17. Successors; Binding Agreement. The Company will require any successor
-----------------------------
to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Executive to compensation from the Company in
the same amount and on the same terms as Executive would be entitled to
hereunder if Executive terminates his employment for Good Reason. The Company's
rights and obligations under this Agreement shall inure to the benefit of and
shall be binding upon the Company's successors and assigns.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
STORAGE USA, INC.
By: /s/ Dean Jernigan
-------------------------------
Name: Dean Jernigan
Title: Chairman, CEO and President
EXECUTIVE:
Name: /s/ Francis C. Brown III
---------------------------
Francis C. Brown III
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<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT effective as of February 3, 2000, by and between Storage
USA, Inc., a Tennessee corporation (the "Company"), and Mark E. Yale (the
"Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the
Senior Vice President, Financial Reporting of the Company; and
WHEREAS, the Company and the Executive each deem it necessary and
desirable to execute a written document setting forth the terms and conditions
of said relationship.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following
------------
terms shall have the following definitions:
(a) "1993 Omnibus Stock Plan" means the Company's 1993
Omnibus Stock Plan, as amended.
(b) "1995 Employee Stock Purchase and Loan Plan" means
the Company's 1995 Employee Stock Purchase and Loan Plan, as amended.
(c) "1996 Officers' Stock Option Loan Program" means the
Company's 1996 Officers' Stock Option Loan Program, as amended.
(d) "Arbitrators" means the arbitrators selected to
conduct any arbitration proceeding in connection with any disputes arising out
of or relating to this Agreement.
(e) "Award Period" means any period in which the
Company's performance is measured in connection with its Shareholder Value Plan.
(f) "Award Plans" has the meaning set forth in Section 4
---------
(b) of this Agreement.
- ---
(g) "Base Salary" means the annual salary to be paid
to Executive as set forth in Section 4(a) of this Agreement.
-------------
(h) "Benefit Plans" has the meaning set forth in Section
-------
4(c) of this Agreement.
- ----
<PAGE>
(i) "Company" means Storage USA, Inc., a Tennessee
corporation, and any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(j) "Company Shares" means the shares of common stock of
the Company or any securities of a successor company which shall have replaced
such common stock.
(k) "Executive" means the person identified in the
preamble paragraph of this Agreement.
(l) "Fair Market Value" means, on any given date, the
closing sale price of the common stock of the Company on the New York Stock
Exchange on such date, or, if the New York Stock Exchange shall be closed on
such date, the next preceding date on which the New York Stock Exchange shall
have been open.
(m) "Good Reason" means any of the following:
(i) a removal of the Executive from Executive's
position as Executive may hold from time to time
pursuant to Section 2 hereof, except in connection
with a Termination with Cause, as a result of the
Executive's death or Permanent Disability or by
Voluntary Termination;
(ii) a reduction in the Executive's Base Salary as in
effect on the date hereof; or as the same may be
increased from time to time, which reduction treats
Executive differently than other similarly situated
executives or singles out or discriminates against
Executive; or modifying, suspending, discontinuing,
or terminating any Award Plan or Benefit Plan in a
manner which treats Executive differently than other
similarly situated employees or singles out or
discriminates against Executive;
(iii) the relocation of the Company's principal
executive offices to a location outside a thirty-mile
radius of Memphis, Tennessee or the Company's
requiring the Executive to be based at any place
other than a location within a thirty-mile radius of
Memphis, Tennessee (unless such relocation of
Executive is: (i) for good business reasons, in
connection with Executive's promotion; (ii) otherwise
approved by Executive; or (iii) in connection with
the relocation, for good business reason(s), of the
entire department or function for which Executive is
responsible), except for reasonably required travel
on the Company's business;
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<PAGE>
(iv) any material breach by the Company of any
provision of this Agreement;
(v) any purported termination of Executive's
employment by the Company which is not effected
pursuant to the procedures set forth in Section 3; or
(vi) the failure of the Company to obtain an
agreement reasonably satisfactory to Executive from
any successor or assign of the Company to assume and
agree to perform this Agreement.
(n) "Option(s)" means any options issued pursuant to the
Company's 1993 Omnibus Stock Plan, or any other stock option plan adopted by the
Company, any option granted with respect to Partnership Units, or any option
granted under the plan of any successor company that replaces or assumes the
Company's or the Partnership's options.
(o) "Partnership" means SUSA Partnership, L.P.
(p) "Partnership Unit(s)" means limited partnership
interests of the Partnership.
(q) "Permanent Disability" means a complete physical or
mental inability, confirmed by a licensed physician, to perform the services
described in Section 2 of the Agreement that continues for a period of six (6)
consecutive months.
(r) "Plan Loan(s)" means any loan extended by the Company
to Executive pursuant to the 1995 Employee Stock Purchase and Loan Plan, or any
other similar plan or program adopted by the Company during the Term of this
Agreement.
(s) "Restricted Stock" means any restricted stock issued
pursuant to the Company's 1993 Omnibus Stock Plan, or any other Award Plan
adopted by the Company, or any restricted stock issued under the plan of any
successor company that replaces or assumes the Company's grants of restricted
stock.
(t) "Retirement Age" means the Executive's sixty-fifth
(65) birthday.
(u) "Salary Continuation" shall have the meaning set out
in Section 8.a.
(v) "Self-Storage Business" means the business of
acquiring, developing, constructing, franchising, owning or operating
self-storage facilities.
(w) "Self-Storage Property" means any real estate upon
which the Self-Storage Business is being conducted.
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<PAGE>
(x) "Shareholder Value Plan" means the Company's
Shareholder Value Plan, as amended.
(y) "SVU Grant" means the total number of shareholder
value units granted to the Executive pursuant to the Company's Shareholder Value
Plan.
(z) "SVU Value" means the value of each shareholder value
unit based upon certain performance measures as set forth in the Company's
Shareholder Value Plan.
(aa) "Term" has the meaning assigned to it in Section 3 of
this Agreement.
(bb) "Termination Date" means the date employment of
Executive is terminated, which date shall be: (i) in the case of Executive's
Permanent Disability, thirty (30) days after a Termination Notice is given and
Executive does not return to the full-time performance of his duties within such
thirty (30) day period; or (ii) in all other instances, the date specified as
the Termination Date in the Termination Notice, which date shall not be less
than thirty (30) nor more than sixty (60) days from the date the Termination
Notice is given.
(cc) "Termination Notice" means a written notice of
termination of employment by Executive or the Company.
(dd) "Termination With Cause" means the termination of
the Executive's employment by the Company for any of the following reasons:
(i) the Executive's conviction of a felony;
(ii) the Executive's theft, embezzlement,
misappropriation of or intentional infliction of
material damage to the Company's property or business
opportunity;
(iii) the Executive's intentional breach of the
noncompetition or non-solicitation provisions
contained in Section 9 of this Agreement; or
---------
(iv) the Executive's ongoing willful neglect of
or failure to perform his duties hereunder or his
ongoing willful failure or refusal to follow any
reasonable, unambiguous duly adopted written
direction of the Company that is not inconsistent
with the description of the Executive's duties set
forth in Section 2, if such willful neglect or
failure is materially damaging or materially
detrimental to the business and operations of the
Company; provided that Executive shall have received
written notice of such
4
<PAGE>
failure and shall have continued to engage in such
failure after thirty (30) days following receipt of
such notice from the Company, which notice
specifically identifies the manner in which the
Company believes that Executive has engaged in such
failure.
For purposes of this subsection, no act, or failure
to act, shall be deemed "willful" unless done, or
omitted to be done, by Executive not in good faith,
and without reasonable belief that such action or
omission was in the best interest of the Company.
(ee) "Termination Without Cause" means the termination
of the Executive's employment by the Company for any reason other than: (i)
Termination With Cause; or (ii) termination by the Company due to Executive's
death or Permanent Disability.
(ff) "Uniform Arbitration Act" means the Uniform
Arbitration Act, Tennessee Code Annotated. (S)29-5-391 et seq., as amended.
-- ----
(gg) "Voluntary Termination" means the Executive's voluntary
termination of his employment hereunder for any reason other than Good Reason.
2. Employment; Services. The Company, SUSA-TN, LLC and
--------------------
Partnership shall employ the Executive, and the Executive agrees to be so
employed, in the capacity of Senior Vice President, Financial Reporting of the
Company, or such other position which offers at least a comparable level of
responsibility and authority to which the Chief Executive Officer may elect to
assign Executive from time to time, to serve for the Term hereof, subject to
earlier termination as hereinafter provided. The Executive shall devote such
amount of his time and attention to the Company's affairs as are necessary to
perform his duties to the Company in his capacity as Senior Vice President,
Financial Reporting. The Executive shall have authority and responsibility with
respect to his functional area of responsibility within the Company, consistent
with direction from his immediate supervisor.
3. Term; Termination.
-----------------
(a) The term of the Executive's employment hereunder shall be
one (1) year and shall commence on February 3, 2000 and shall be extended
automatically, for so long as the Executive remains employed by the Company
hereunder, on the first day of each month beginning January 3, 2001 for an
additional one-month period (such period, as it may be extended from time to
time, being herein referred to as the "Term"), unless terminated earlier in
accordance with the terms of this Agreement, to the effect that on the first day
of each month, the remaining term of this Agreement and the Executive's
employment hereunder shall be one (1) year, but shall in no event extend beyond
the Retirement Age.
5
<PAGE>
(b) Any purported termination of employment by Executive or
the Company shall be communicated by a Termination Notice. The Termination
Notice shall indicate the specific termination provision in this Agreement
relied upon and set forth the facts and circumstances claimed to provide a basis
for termination. If the party receiving the Termination Notice notifies the
other party prior to the Termination Date that a dispute exists concerning the
termination, the Termination Date shall be extended until the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction. The Termination Date shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay Executive his full compensation in effect when the notice giving rise to the
dispute was given and Executive shall continue as a participant in all Award
Plans and Benefit Plans in which Executive participated when the Termination
Notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this subsection. Amounts paid under this subsection
are in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.
4. Compensation.
-------------
(a) Base Salary. During the Term, the Company shall pay the
Executive for his services a Base Salary of $138,000, to be paid consistent with
the general payroll practices of the Company, such Base Salary being subject to
any increases or reductions approved by the Chief Executive Officer of the
Company; provided however, that any such reductions may not treat Executive
differently than similarly situated executives or otherwise single out or
discriminate against Executive. Executive agrees that, consistent with Company
policy as of the date hereof, Executive does not accrue any vacation or sick
pay. In the event such policy is changed to provide for such an accrual, this
Agreement will be amended to provide for such change.
(b) Award Plans. During the Term, the Executive shall also be
eligible for additional compensation in the form of a cash bonus, shares of
stock in the Company, Partnership Units, Restricted Stock or Options, and shall
be eligible to participate in the Company's 1993 Omnibus Stock Plan, 1995
Employee Stock Purchase and Loan Plan, 1996 Officers' Stock Option Loan Program,
Shareholder Value Plan, and any other stock option, incentive compensation,
profit participation, bonus or extra compensation plan that is adopted by the
Company and in which the Company's executive officers generally participate
(collectively, "Award Plans"), but payments and/or awards are not "entitlements"
and shall be paid or made consistent with the terms of such Award Plans. For
example, if the Company's bonus plan provides that a bonus is only payable if
certain objectives are met, Executive shall only be paid such bonus if the
objectives are met.
(c) Benefit Plans. During the Term, Executive shall be
entitled to participate in, and to all rights and benefits provided by, each and
every health, life,
6
<PAGE>
medical, dental, disability, insurance and welfare plan maintained by the
Company including, without limitation, the benefits that are maintained from
time to time by the Company for the benefit of Executive, the executives of the
Company generally or for the Company's employees generally, provided that
Executive is eligible to participate in such plan under the eligibility
provisions thereof that are generally applicable to the participants thereof
(collectively, "Benefit Plans").
(d) Overall Qualification. Nothing in this Agreement shall be
construed as preventing the Company from modifying, suspending, discontinuing or
terminating any of the Company Benefit Plans or Award Plans without notice or
liability to Executive so long as: (i) the modification, suspension,
discontinuation or termination of any such plan is authorized by and performed
in accordance with the specific provisions of such plan; and (ii) such
modification, suspension, discontinuation or termination is taken generally with
respect to all similarly situated employees of the Company and does not single
out or discriminate against Executive.
5. Expenses. The Company recognizes that the Executive will have to
--------
incur certain out-of-pocket expenses, including but not limited to travel
expenses, related to his services and the Company's business, and the Company
agrees to reimburse the Executive for all reasonable expenses necessarily
incurred by him in the performance of his duties upon presentation of a voucher
or documentation indicating the amount and business purposes of any such
expenses; provided that Executive complies with the Company's policies and
procedures regarding business expenses.
6. Voluntary Termination; Termination With Cause. If: (i) the
------------------------------------------------
Executive ceases to be an employee of the Company on account of a Voluntary
Termination; or (ii) there shall be a Termination With Cause, the Executive
shall not be entitled to any compensation after the Termination Date of such
Voluntary Termination or Termination With Cause (except Base Salary accrued but
unpaid on the Termination Date of such event).
7. Death or Disability. Executive's employment with the Company shall
-------------------
terminate upon the Executive's death or Permanent Disability. Upon such
termination, the Company shall continue to pay the Executive or his heirs,
devisees, executors, legatees or personal representatives, as appropriate, Base
Salary then in effect for one (1) year from the Termination Date. The Company
shall also pay any amounts due pursuant to the terms of any Benefit Plans (as
appropriate) and Award Plans in which Executive was a participant, including,
without limitation, the pro rata amount of any bonus to be paid to Executive for
the fiscal year in which Executive was terminated. In addition, in the event of
a termination due to Executive's Permanent Disability, Executive shall be
permitted to participate in, and have all rights and benefits provided by, all
Benefit Plans which Executive was eligible to participate in immediately prior
to the Termination Date (to the extent such participation is possible under the
laws then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
7
<PAGE>
8. Termination Without Cause; Resignation for Good Reason. Executive's
------------------------------------------------------
employment with the Company is at will, consequently, the Company may terminate
Executive for any reason, or no reason at all, at any time and Executive may
resign his employment with the Company at any time; provided that, upon
termination of Executive's employment by the Executive for Good Reason, or in
the event of a Termination Without Cause, and only in such event(s), the Company
shall provide the compensation and benefits set forth in this Section 8.
---------
Executive's continued employment shall not constitute consent to, or a waiver
of, rights with respect to any circumstances constituting Good Reason hereunder.
(a) Base Salary, Benefit and Award Plans. The Company shall continue
to pay the Executive his Base Salary then in effect until the earlier of: (x)
one year after the Termination Date; or (y) the date that Executive commences
employment with another employer (or if Executive becomes self-employed) at an
annual base salary equal to Executive's Base Salary on the Termination Date; all
on the regular payroll schedule with appropriate payroll tax and other
deductions ("Salary Continuation"); provided however, that in no event shall
Salary Continuation be paid to Executive past the Retirement Age. In the event
that Executive commences Employment with another employer (or becomes self-
employed) at an annual base salary less than Executive's Base Salary on the
Termination Date, the Salary Continuation shall be reduced by an amount equal to
the amount of annual base salary received by Executive from such other employer
or from such self-employment. The Company shall also pay on the Termination Date
any amounts due pursuant to the terms of any Benefit Plans and Award Plans in
which Executive was a participant, including, without limitation, the pro rata
amount of any bonus to be paid to Executive for the fiscal year in which
Executive was terminated. In addition, Executive shall be permitted to
participate in, and have all rights and benefits provided by, all Benefit Plans
which Executive was eligible to participate in immediately prior to the
Termination Date (to the extent such participation is possible under the laws
then pertaining to such Benefit Plans), for one (1) year following the
Termination Date.
(b) Restricted Stock and Stock Options. All restrictions upon any
Restricted Stock which may have been awarded to Executive shall expire and be
removed, such Restricted Stock shall vest according to the schedule for vesting
following the Termination Date and through the date of the final payment of
Salary Continuation (unless otherwise expired or removed and vested pursuant to
the terms of any Restricted Stock Award pursuant to the 1993 Omnibus Stock Plan
or any Award Plan), and such stock shall be delivered to Executive. All Options
granted to Executive prior to the Termination Date shall continue to vest,
according to their schedule following the Termination Date and through the date
of the final payment of Salary Continuation (unless otherwise previously vested
pursuant to the 1993 Omnibus Stock Plan or any other Award Plan). No Stock
Options or Restricted Stock will be granted to Executive after the Termination
Date. In lieu of Company Shares issuable upon exercise of any vested,
outstanding and unexercised Options granted to Executive, Executive may, at
Executive's option, receive an amount in cash equal to the product of (i) the
Fair Market Value of Company Shares on the Termination Date over the per share
exercise price of
8
<PAGE>
each vested Option held by Executive, times (ii) the number of Company Shares
covered by each such Option. In the event Executive does not elect to receive a
cash payment for any vested, outstanding and unexercised Options granted to
Executive, Executive shall have the right to otherwise exercise such Options in
accordance with the terms and conditions provided in the 1993 Omnibus Stock Plan
or any other applicable Award Plans.
(c) Plan Loans. If Executive has any Plan Loans outstanding to
the Company immediately prior to the Termination Date, the Company shall
discharge and cancel the amount of principal and interest due with respect to
such Plan Loans which exceeds the Fair Market Value of Company Shares securing
the Plan Loans on the Termination Date, such discharge to be effective upon
Executive's payment of the Plan Loans in full (less the amount discharged)
within ninety (90) days following the Termination Date. Executive shall have the
option of repaying all amounts due with respect to the Plan Loans by the
transfer of the Company Shares securing the Plan Loans, or by the payment, in
cash, of the amounts due with respect to the Plan Loans. Except as otherwise set
forth herein, Executive shall remain subject to all terms and conditions set
forth in the Loan Agreements and Promissory Notes until the Plan Loans are paid
in full.
(d) Shareholder Value Plan. With respect to Executive's
participation in the Company's Shareholder Value Plan, the Award Periods in
connection with all of Executive's outstanding SVU Grants shall be accelerated
such that each Award Period is deemed to have ended upon the Termination Date.
At such time, the Company shall pay Executive an amount equal to the SVU Value
multiplied by the number of Executive's outstanding SVU Grants. The SVU Value
shall be reduced by 66% for all SVU Grants which were granted less than twelve
months prior to the Termination Date and the SVU Value shall be reduced by 33%
for all SVU Grants which were granted less than twenty-four months but more than
twelve months prior to the Termination Date. No adjustments shall be made to the
SVU Value for SVU Grants which were granted more than twenty-four months prior
to the Termination Date. All payments made to Executive after the Termination
Date in connection with outstanding SVU Grants shall be made solely in cash.
(e) Legal Fees. The Company shall also pay to Executive all
reasonable legal fees and expenses incurred by Executive as a result of a
dispute concerning this Agreement in connection with a Termination Without Cause
or Executive's resignation for Good Reason (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement),
if Executive is the prevailing party in connection with such dispute.
9. Non Competition; Non Solicitation.
---------------------------------
(a) For a period of one (1) year following the Term, Executive
shall not: (i) solicit any employee of the Company to leave the service of the
Company; or (ii) own any interest in any Self-Storage Property (other than: (x)
any permissible interest acquired while Executive was employed by the Company;
or (y) any interest that is
9
<PAGE>
expressly permitted by the Company) as partner, shareholder or otherwise; or
directly or indirectly, for his own account or of the account of others, either
as an officer, director, promoter, employee, consultant, advisor, agent,
manager, or in any other capacity, engage in the Self-Storage Business.
(b) The non solicitation provision shall apply to any Company
employee during the period of such Employee's employment and for a period of
thirty (30) days after such Employee's termination of employment with the
Company.
(c) The Executive agrees that damages at law for violation of
the restrictive covenant contained herein would not be an adequate or proper
remedy to the Company, and that should the Executive violate or threaten to
violate any of the provisions of such covenant, the Company, its successors or
assigns, shall be entitled to obtain a temporary or permanent injunction, as
appropriate, against the Executive in any court having jurisdiction over the
person and the subject matter, prohibiting any further violation of any such
covenants. The injunctive relief provided herein shall be in addition to any
award of damages, compensatory, exemplary or otherwise, payable by reason of
such violation.
(d) The Executive acknowledges that this Agreement has been
negotiated at arm's length by the parties, neither being under any compulsion to
enter into this Agreement, and that the foregoing restrictive covenant does not
in any respect inhibit his ability to earn a livelihood in his chosen profession
without violating the restrictive covenant contained herein. The Company by
these presents has attempted to limit the Executive's right to compete only to
the extent necessary to protect the Company from unfair competition. The Company
recognizes, however, that reasonable people may differ in making such a
determination. Consequently, the Company agrees that if the scope or
enforceability of the restricted covenant contained herein is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the circumstances
existing at the time.
10. Employment Status. The parties acknowledge and agree that Executive
-----------------
is an employee of the Company, not an independent contractor. Any payments made
to Executive by the Company pursuant to this Agreement shall be treated for
federal and state payroll tax purposes as payments made to a Company employee,
irrespective whether such payments are made subsequent to the Termination Date.
11. Notices. All notices or deliveries authorized or required pursuant
-------
to this Agreement shall be deemed to have been given when in writing and
personally delivered or when deposited in the U.S. mail, certified, return
receipt requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to the
other party:
10
<PAGE>
To the Company: 165 Madison
Suite 1300
Memphis, TN 38103
Attn: General Counsel
To the Executive: 8825 Somerset Lane
Germantown, TN 38138
12. Entire Agreement. This Agreement contains the entire
----------------
understanding between the parties hereto with respect to the subject matter
hereof and shall not be modified in any manner except by instrument in writing
signed, by or on behalf of, the parties hereto; provided however, that the
parties to this Agreement hereby acknowledge and agree that this Agreement is
subject to the Severance Agreement dated as of August 16, 1999 between the
parties, to all covenants and agreements set forth in the Severance Agreement,
and to any subsequent renewals, extensions or modifications to the Severance
Agreement. Any action by the Company or termination of Executive's employment
with the Company that constitutes or otherwise gives rise to a Change of Control
Termination, as defined in the Severance Agreement, shall be governed
exclusively by the Severance Agreement. The provisions of Section 2(b) of the
Severance Agreement governing disputes shall be effective with respect to any
dispute as to whether a Termination constitutes a Change of Control Termination.
In the event that Executive expressly agrees to waive any provision hereof, such
waiver shall be memorialized by an amendment to this Agreement, which Executive
hereby agrees to sign This Agreement shall be binding upon and inure to the
benefit of the heirs, successors and assigns of the parties hereto
13. Arbitration. Any controversy concerning or claim arising
-----------
out of or relating to this Agreement shall be settled by final and binding
arbitration in Memphis, Shelby County, Tennessee at a location specified by the
party seeking such arbitration.
(a) The Arbitrators. Any arbitration proceeding shall be
conducted by three (3) Arbitrators and the decision of the Arbitrators shall be
binding on all parties. Each Arbitrator shall have substantial experience and
expert competence in the matters being arbitrated. The party desiring to submit
any matter relating to this Agreement to arbitration shall do so by written
notice to the other party, which notice shall set forth the items to be
arbitrated, such party's choice of Arbitrator, and such party's substantive
position in the arbitration. The party receiving such notice shall, within
fifteen (15) days after receipt of such notice, appoint an Arbitrator and notify
the other party of its appointment and of its substantive position. The
Arbitrators appointed by the parties to the Arbitration shall select an
additional Arbitrator meeting the aforedescribed criteria. The Arbitrators shall
be required to render a decision in accordance with the procedures set forth in
Subparagraph (b) below within thirty (30) days after being notified of their
selection. The fees of the Arbitrators shall be equally divided amongst the
parties to the arbitration.
11
<PAGE>
(b) Arbitration Procedures. Arbitration shall be conducted in
accordance with the Uniform Arbitration Act, except to the extent the provisions
of such Act are modified by this Agreement or the subsequent mutual agreement of
the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. Any party hereto may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this provision applies in any court having
jurisdiction over such action in Shelby County, Tennessee, and the parties agree
that jurisdiction and venue in Shelby County, Tennessee are appropriate and
approved by such parties.
14. Applicable Law. This Agreement shall be governed and
---------------
construed in accordance with the laws of the State of Tennessee.
15. Assignment. The Executive acknowledges that his services
----------
are unique and personal. Accordingly, the Executive may not assign his rights or
delegate his duties or obligations under this Agreement, except with respect to
certain rights to receive payments as described in Section 7.
---------
16. Headings. Headings in this Agreement are for convenience only
--------
and shall not be used to interpret or construe its provisions.
17. Successors; Binding Agreement. The Company will require any
-----------------------------
successor to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a beach of this Agreement and shall entitle Executive to compensation from
the Company in the same amount and on the same terms as Executive would be
entitled to hereunder if Executive terminates his employment for Good Reason.
The Company's rights and obligations under this Agreement shall inure to the
benefit of and shall be binding upon the Company's successors and assigns.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
STORAGE USA, INC.
By: /s/ Dean Jernigan
---------------------------------
Name: Dean Jernigan
Title: Chairman, CEO & President
EXECUTIVE:
Name: /s/ Mark E. Yale
-------------------------------
Mark E. Yale
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2000,
AND THE THRED MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,557
<SECURITIES> 0
<RECEIVABLES> 193,773
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 195,330
<PP&E> 1,656,334
<DEPRECIATION> 103,272
<TOTAL-ASSETS> 1,748,392
<CURRENT-LIABILITIES> 177,277
<BONDS> 821,053
0
65,000
<COMMON> 278
<OTHER-SE> 684,784
<TOTAL-LIABILITY-AND-EQUITY> 1,748,392
<SALES> 58,445
<TOTAL-REVENUES> 61,886
<CGS> 0
<TOTAL-COSTS> 33,660
<OTHER-EXPENSES> 2,501<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,047
<INCOME-PRETAX> 14,678
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,678
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,678
<EPS-BASIC> 0.53
<EPS-DILUTED> 0.53<F1>
<FN>
<F1>Included in other expenses are minority interest expense and gain/(loss) on
exchange of self-storage facilities.
</FN>
</TABLE>
