SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File Number: 1-13820
Sovran Self Storage, Inc.
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(Exact name of Registrant as specified in its charter)
Maryland 16-1194043
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5166 Main Street
Williamsville, NY 14221
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(Address of principal executive offices)
(Zip code)
(716) 633-1850
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(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Securities Exchanges on which Registered
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Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None
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.
Yes [ X ] No [ ]
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 25, 1999, 12,379,135 shares of Common Stock,
$.01 par value per share were outstanding, and the aggregate
market value of the Common Stock held by non-affiliates was
approximately $286,603,202 (based on the closing price of the
Common Stock on the New York Stock Exchange on March 25, 1999).
Exhibit Index is on Pages 20 and 21
DOCUMENTS INCORPORATED BY REFERENCE
1998 Annual Report to Shareholders of the Company
(Part II).
Notice of Annual Meeting of Shareholders and Proxy Statement
for Annual Meeting of Shareholders of the Company to be held on
May 25, 1999 (Part III).
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Part I
Item 1. Business
Sovran Self Storage, Inc.(the "Company") is a self-
administered and self managed real estate investment trust
("REIT") which acquires, owns and manages self-storage
properties. (The Company's self-storage properties are
hereinafter referred to collectively as the "Properties" and
individually as a "Property"). The Company was formed on June
26, 1995. As of March 25, 1999 the Company owned and operated
211 self-storage properties consisting of approximately 11.8
million net rentable square feet, situated in 19 states,
primarily the Eastern United States and Texas. As of
December 31, 1998, the Properties have a weighted average
occupancy of 86.4% and a weighted average annual rent per
occupied square foot of $7.69. The Company believes that it is
the 5th largest operator of self-storage properties in the United
States based on facilities owned.
The Company seeks to increase cash flow and enhance
shareholder value through aggressive management of the Properties
and selective acquisitions of new self-storage properties.
Aggressive property management entails increasing rents,
increasing occupancy levels, strictly controlling costs,
maximizing collections, strategically expanding and improving the
Properties and, should economic conditions warrant, developing
new properties. The Company believes that there continues to be
significant opportunities for growth through acquisitions, and
constantly seeks to acquire self-storage properties located
primarily in the Eastern United States that are susceptible to
realization of increased economies of scale and enhanced
performance through application of the Company's management
expertise.
The Company was formed to continue the business of its
predecessor company, which had engaged in the self-storage
business since 1985. The Company owns an indirect interest in
each of the Properties through a limited partnership (the
"Partnership") of which the Company holds in total a 93.45%
economic interest and unaffiliated third parties own collectively
a 6.55% limited partnership interest. The Partnership owns a
100% fee simple interest in each of the Properties. The Company
believes that this structure, commonly known as an umbrella
partnership real estate investment trust ("UPREIT"), facilitates
the Company's ability to acquire properties by using units of the
Partnership as currency.
The Company was incorporated on April 19, 1995 under
Maryland law. The Company's principal executive offices are
located at 5166 Main Street, Williamsville, New York 14221, and
its telephone number is (716) 633-1850.
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Industry Overview
The Company believes that self-storage facilities offer
inexpensive storage space to residential and commercial users.
In addition to fully enclosed and secure storage space, some
operators, including the Company, also offer outside storage for
automobiles, recreational vehicles and boats. The storage sites
are usually fenced and well lighted with gates that are either
manually operated or automated. All facilities have a full time
manager/leasing. Customers have access to their storage area
during business hours and in certain circumstances are provided
with 24 hour access. Individual storage units are secured by the
customer's lock, which may be purchased from the Company, and the
customer has control of access to the unit.
The Company believes that the self-storage industry is
characterized by a trend toward consolidation, continuing
increase in demand, relatively slow growth in supply and a
targeted market of primarily residential customers.
According to published data, of the approximately 26,000
facilities in the United States, less than 18% are managed by the
ten largest operators. The remainder of the industry is
characterized by numerous small, local operators. The shortage
of skilled operators, the scarcity of financing available to
small operators for acquisitions and expansions and the potential
for savings through economies of scale are factors which are
leading to a consolidation in the industry. The Company believes
that as a result of this trend, significant growth opportunities
exist for operators with proven management systems and sufficient
capital resources.
Demand for self-storage service has increased as indicated
by an increase in industry-wide average rents and in industry
average occupancy. It is expected to remain strong because it is
slow to react to changing conditions and because of various other
factors, including population growth, increased mobility,
expansion of condominium, townhouse and apartment living, and
increasing consumer awareness, particularly by commercial users.
Commercial customers tend to rent larger areas for longer terms,
are more reliable payers and are less sensitive to price
increases. The Company estimates that commercial users account
for approximately 30-35% of its total occupancy, which is
substantially higher than the reported industry average of 23%.
Property Management
The Company believes that it has developed substantial
expertise in managing self-storage facilities. Key elements of
the Company's management system include:
- Recruiting, training and retaining capable, aggressive
on-site Property Managers;
- Motivating Property Managers by providing incentive-
based compensation;
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- Developing and maintaining an integrated marketing plan
for each Property;
- Minimizing maintenance costs;
- Linking all facilities to a central customized
management information system; and
- Utilization of a national marketing program that
attracts commercial tenants who have multi-market self-
storage needs.
Each Property is managed by a full-time Property Manager and
one or more assistant managers. Each Property Manager is
responsible for most operational decisions with respect to his or
her Property, including rent charges and maintenance, subject to
certain monetary limits. Assistant managers enable Property
Managers to have sufficient time to perform marketing functions.
Each Property Manager reports to an Area Manager who in turn
reports to a Regional Vice President. The Company currently
employs four Regional Vice Presidents who primarily focus on
marketing and overall supervision of the Area Managers. The Area
Managers are responsible for overseeing site operations.
Property Managers attend a thorough orientation program and
undergo continuous training, which emphasizes telephone skills,
closing techniques, identification of selected marketing
opportunities, networking with possible referral sources, and
familiarization with the Company's customized management
information system. In addition to frequent contact with Area
Managers and other Company personnel, Property Managers receive
periodic newsletters regarding a variety of operational issues,
and from time to time attend "roundtable" seminars with other
Property Managers.
The Company annually develops a written marketing plan for
each of its Properties which is highly dependent upon local
conditions. The focus of each marketing plan is, in part,
determined by occupancy rates. If all storage units of a same
size at a Property are at or near 90% occupancy, then the plan
will generally include increases in rental rates. If a Property
has excess capacity, then the marketing plan will target selected
markets such as local military bases, colleges, apartment and
condominium complexes, industrial parks, medical centers, retail
shopping malls and office suites. The Company primarily uses
telephone directories to advertise its services, including a map
and when possible, listing Properties in the same marketplace in
a single advertisement. The Company also conducts quarterly
surveys of its competitors' practices, which include "shopping"
competing facilities.
The Company's customized computer system performs billing,
collections and reservation functions for each Property, and also
tracks information used in developing marketing plans based on
occupancy levels, and tenant demographics and histories. The
system generates daily, weekly and monthly financial reports for
each Property that are immediately transmitted to the Company's
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principal office each night. The system also requires a Property
Manager to input a descriptive explanation for all debit and
credit transactions, paid-to-date changes, and all other
discretionary activities, which allows the accounting staff at
the Company's principal office to promptly review all such
transactions. Late charges are automatically imposed. More
sensitive activities such as rental rate changes and unit size or
number changes are completed only by Area Managers. The
Company's customized management information system permits it to
add new facilities to its portfolio with minimal additional
overhead expense.
The Company's Regional Vice Presidents, Area Managers and
Property Managers are compensated with a base salary and may, in
addition, earn incentive compensation. The Company annually
establishes a target gross income and net operating income for
each Property. As incentive compensation, Property Managers earn
a percentage of all gross income in excess of the target level;
and Regional Vice Presidents earn a percentage of the combined
net operating incomes in excess of the targeted levels for all
facilities reporting to them. The Area Managers receive bonuses
from the Regional Vice President they work under. This incentive
compensation program is not subject to any caps or increment
requirements. It is not unusual for any manager to earn in
excess of 10% of the base salary as incentive compensation. The
Company believes that the structure of these programs causes its
managers to exercise their operational autonomy in a manner to
maximize income through increased rental rates.
Environmental and Other Regulations
The Company is subject to federal, state, and local
environmental regulations that apply generally to the ownership
of real property and the operation of self-storage facilities.
The Company has not received notice from any governmental
authority or private party of any material environmental
noncompliance, claim, or liability in connection with any of the
Properties, and is not aware of any environmental condition with
respect to any of the Properties that could have a material
adverse effect on the Company's financial condition or results of
operations.
The Properties are also generally subject to the same types
of local regulations governing other real property, including
zoning ordinances. The Company believes that the Properties are
in substantial compliance with all such regulations.
Insurance
Each of the Properties is covered by fire, flood and
property insurance, including comprehensive liability, all-risk
property insurance, provided by reputable companies and with
commercially reasonable terms. In addition, the Company
maintains a policy insuring against environmental liabilities
resulting from tenant storage on terms customary for the
industry, and title insurance insuring fee title to the
Properties in an aggregate amount believed to be adequate.
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Federal Income Tax
The Company has operated, and intends to continue to
operate, in such a manner as to continue to qualify as a REIT
under the Internal Revenue Code of 1986 (the Code), but no
assurance can be given that it will at all times so qualify. To
the extent that the Company continues to qualify as a REIT, it
will not be taxed, with certain limited exceptions, on the
taxable income that is distributed to its shareholders. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources - REIT
Qualification and Distribution Requirements" appearing on page 28
of the Company's 1998 Annual Report to Shareholders, submitted
herewith as an exhibit and incorporated by reference.
Competition
The primary factors upon which competition in the self-
storage industry is based are location, rental rates, suitability
of the property's design to prospective tenants' needs, and the
manner in which the property is operated and marketed. The
Company believes it competes successfully on these bases. The
extent of competition depends in significant part on local market
conditions. The Company seeks to locate its facilities so as not
to cause its own Properties to compete with one another for
customers, but the number of self-storage facilities in a
particular area could have a material adverse effect on the
performance of any of the Properties.
Several of the Company's competitors, including Public
Storage Management, Inc., Shurgard Incorporated, U-Haul
International, and Storage USA, Inc., are larger and have
substantially greater financial resources than the Company.
These larger operators may, among other possible advantages, be
capable of greater leverage and the payment of higher prices for
acquisitions.
Investment Policy
While the Company emphasizes equity real estate investments,
it may, in its discretion, invest in mortgage and other real
estate interest related to self-storage properties consistent
with its qualification as a REIT. The Company may also retain a
purchase money mortgage for a portion of the sale price in
connection with the disposition of Properties from time to time.
Current market conditions preclude the Company from issuing
common or preferred equity. Should investment opportunities
become available, the Company may look to acquire self-storage
properties via a joint-venture partnership or similar entity.
The Company may or may not have a significant investment in such
a venture, but would use such an opportunity to expand its
portfolio of branded and managed properties.
Subject to the percentage of ownership limitations and gross
income tests necessary for REIT qualification, the Company also
may invest in securities of entities engaged in real estate
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activities or securities of other issuers, including for the
purpose of exercising control over such entities.
Disposition Policy
Management periodically reviews the assets comprising the
Company's portfolio. Any disposition decision will be based on a
variety of factors, including, but not limited to, the
(i) potential to continue to increase cash flow and value,
(ii) sale price, (iii) strategic fit with the rest of the
Company's portfolio, (iv) potential for, or existence of,
environmental or regulatory issues, (v) alternative uses of
capital, and (vi) maintaining qualification as a REIT.
Distribution Policy
The Company intends to pay regular quarterly distributions
to its shareholders. However, future distributions by the
Company will be at the discretion of the Board of Directors and
will depend on the actual cash available for distribution, the
Company's financial condition and capital requirements, the
annual distribution requirements under the REIT provisions of the
Code and other such factors as the Board of Directors deems
relevant. In order to maintain its qualification as a REIT, the
Company must make annual distributions to shareholders of at
least 95% of its REIT taxable income (which does not include
capital gains). Under certain circumstances, the Company may be
required to make distributions in excess of cash available for
distribution in order to meet this requirement.
The Board of Directors declared a dividend distribution of
one preferred share purchase right for each outstanding common
share to shareholders of record at the close of business on
December 16, 1996. These rights will become exercisable if a
person becomes an "acquiring person" by acquiring 10% or more of
the common shares of Sovran Self Storage, Inc. or if a person
commences a tender offer that would result in that person owning
10% or more of the common shares.
Borrowing Policy
The Board of Directors of the Company currently limits the
amount of debt that may be incurred by the Company to less than
50% of the sum of market value of the issued and outstanding
Common Stock plus the Company's debt (Market Capitalization).
The Company, however, may from time to time re-evaluate and
modify its borrowing policy in light of then current economic
conditions, relative costs of debt and equity capital, market
values of properties, growth and acquisition opportunities and
other factors.
The Company obtained an increase in the amount available
under the Credit Facility to $150 million from $75 million in
1998. In connection with the increase, the interest rate was
reduced from LIBOR plus 1.9 % to LIBOR plus 1.25% and the
maturity date was extended from August 1998 to February 2001.
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The Credit Line is to be used for development, acquisitions and
general corporate purposes. As a result of the new credit
facility, in 1998 the Company recorded an extraordinary loss on
the extinguishment of debt of $357,000, representing the
unamortized financing costs of the revolving credit facility.
On December 22, 1998, the Company borrowed $75 million
pursuant to a term note agreement. The note is for a period of
two years, maturing on December 22, 2000, and requires interest
at LIBOR plus 1.50%. The note is unsecured, and was used to
repay short-term borrowings.
To the extent that the Company desires to obtain additional
capital to pay distributions, to provide working capital, to pay
existing indebtedness or to finance acquisitions, expansions or
development of new properties, the Company may utilize public and
private equity offerings, floating or fixed rate debt financing,
retention of cash flow (subject to satisfying the Company's
distribution requirements under the REIT rules) or a combination
of these methods. Additional debt financing may also be obtained
through mortgages on its Properties, which may be recourse, non-
recourse, or cross-collateralized and may contain cross-default
provisions. The Company has not established any limit on the
number or amount of mortgages that may be placed on any single
Property or on its portfolio as a whole. For additional
information regarding borrowings, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" and Note 5 to the Consolidated
Financial Statements appearing in the Company's 1998 Annual
Report to Shareholders, submitted herewith as an exhibit and
incorporated by reference.
Employees
The Company currently employs a total of 579 employees,
including 229 Property Managers, 13 Area Managers, 4 Regional
Vice Presidents and 292 part time employees. At the Company's
headquarters, in addition to the 3 senior executive officers, the
Company employs 38 people engaged in various support activities
such as accounting and management information systems. None of
the Company's employees is covered by a collective bargaining
agreement. The Company considers its employee relations to be
excellent.
Item 2. Properties
Overview
At December 31, 1998, the Company, owned 100% fee simple
interests in, and operated, a total of 205 Properties, consisting
of approximately 11.6 million net rentable square feet, situated
in nineteen states in the Eastern and Midwestern United States
and Texas. As of December 31, 1998, the Properties had a
weighted average occupancy of 86.4% and a weighted average annual
rent per square foot of $7.69. The Company believes that it is
the 5th largest operator of self-storage properties in the United
States based on facilities owned.
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The Company's self-storage facilities offer inexpensive,
easily accessible, enclosed storage space to residential and
commercial users on a month-to-month basis. Most of the
Company's Properties are fenced with computerized gates and are
well lighted. All but twenty-two of the Properties are single-
story, thereby providing customers with the convenience of direct
vehicle access to their storage units. All Properties have a
Property Manager on-site during business hours. Customers have
access to their storage areas during business hours, and some
commercial customers are provided 24-hour access. Individual
storage units are secured by a lock furnished by the customer to
provide the customer with control of access to the unit.
Currently, 189 of the Properties conduct business under the
user-friendly trade name "Uncle BoB's Self-Storage" and the
remainder are operated under various names acquired with the
Properties. The Company intends to convert all of the Properties
to the "Uncle BoB's" trade name.
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The table below provides certain information regarding the properties:
Uncle
BoB's Occupancy
Year Trade at Mgr.
Location Built Sq. Ft. Name 12/31/98 Acres Units Bldgs. Floors Apt. Construction
______________________________________________________________________________________________________________________________
Alabama
Birmingham I 1990 36,975 Y 76% 2.7 297 9 1 Y Masonry/Steel Roof
Birmingham II 1990 52,400 Y 89% 4.7 397 8 1 Y Masonry/Steel Roof
Montgomery I 1982 74,830 Y 76% 5.0 620 16 1 Y Masonry/Steel Roof
Birmingham III 1970 72,560 Y 70% 4.3 411 6 1 N Masonry/Steel Roof
Montgomery II 1984 42,245 Y 94% 2.7 287 10 1 N Masonry/Steel Roof
Montgomery III 1988 41,550 Y 85% 2.4 392 9 1 Y Steel Bldg./Steel Roof
Birmingham-Walt 1984 63,380 N 85% 3.3 390 6 1 Y Masonry Wall/Metal Roof
Connecticut
New Haven 1985 35,260 Y 96% 3.9 305 5 1 N Masonry Wall/Steel Roof
Hartford-Metro I 1988 49,000 Y 97% 10.0 337 10 1 N Steel Bldg./Steel Roof
Hartford-Metro II 1992 37,825 Y 98% 6.0 309 7 1 N Steel Bldg./Steel Roof
Florida
Lakeland l 1985 48,055 Y 72% 3.5 443 11 1 Y Masonry Wall/Steel Roof
Tallahassee I 1973 147,059 Y 80% 18.7 723 21 1 Y Masonry Wall/Tar & Gravel Roof
Tallahassee II 1975 43,740 Y 96% 4.0 241 7 1 Y Masonry Wall/Tar & Gravel Roof
Port St. Lucie 1985 54,400 Y 85% 4.0 604 12 1 N Steel Bldg./Steel Roof
Deltona 1984 63,992 Y 87% 5.0 453 5 1 Y Masonry Wall/Shingle Roof
Jacksonville I 1985 39,912 Y 99% 2.7 296 14 1 Y Masonry Wall/Tar & Gravel Roof
Orlando I 1988 50,445 Y 90% 2.8 595 3 2 Y Steel Bldg./Steel Roof
Ft. Lauderdale 1985 98,440 Y 94% 7.6 636 7 1 Y Steel Bldg./Steel Roof
West Palm l 1985 45,465 Y 83% 3.2 412 6 1 N Steel Bldg./Steel Roof
Melbourne I 1986 61,034 Y 99% 8.3 656 11 1 Y Masonry Wall/Shingled Roof
Pensacola I 1983 108,333 Y 86% 7.5 966 13 1 Y Steel Bldg./Steel Roof
Pensacola II 1986 57,370 Y 93% 3.4 509 9 1 Y Steel Bldg./Steel Roof
Melbourne II 1986 55,755 Y 88% 3.4 630 11 1 N Steel Bldg./Steel Roof
Jacksonville II 1987 53,225 Y 92% 4.4 489 11 1 Y Masonry/Steel Roof
Pensacola III 1986 63,250 Y 92% 6.1 500 12 1 N Steel Bldg./Steel Roof
Pensacola IV 1990 39,825 Y 83% 2.7 281 9 1 Y Masonry/Steel Roof
Pensacola V 1990 38,850 Y 76% 2.6 324 4 1 Y Masonry/Steel Roof
Tampa I 1989 60,202 Y 93% 3.3 878 6 1 N Masonry/Steel Roof
Tampa II 1985 55,911 Y 85% 2.9 783 10 1 N Masonry/Steel Roof
Tampa III 1988 45,507 Y 89% 2.2 669 14 1 N Masonry/Steel Roof
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Orlando II 1986 134,834 Y 76% 8.5 1,360 20 1 Y Masonry Wall/Steel Roof
Ft. Myers I 1988 28,024 Y 84% 1.1 272 6 2 Y Steel Bldg./Steel Roof
Ft. Myers II 1991/94 23,053 Y 94% 1.9 303 2 1 Y Masonry/Steel Roof
Tampa IV 1985 47,410 Y 95% 4.0 557 10 1 Y Masonry/Steel Roof
West Palm II 1986 33,005 Y 93% 2.3 394 9 1 Y Masonry/Steel Roof
Ft. Myers III 1986 36,040 Y 91% 2.4 261 9 1 Y Masonry/Steel Roof
Lakeland II 1988 42,310 Y 93% 4.0 579 9 1 N Masonry Wall/Steel Roof
Ft. Myers IV 1987 59,686 Y 97% 4.5 277 4 1 Y Masonry/Steel Roof
Jacksonville III 1987 102,500 Y 75% 5.9 783 13 1 Y Masonry Wall/Shingle Roof
Jacksonville IV 1985 43,925 Y 81% 2.7 514 7 1 Y Steel Bldg./Steel Roof
Jacksonville V 1987/92 53,855 Y 96% 2.9 511 13 2 Y Steel Bldg./Masonry Wall/Steel
Roof
Orlando III 1975 52,704 Y 80% 3.2 504 8 2 N Masonry Wall/Steel Roof
Orlando lV 1984 38,580 Y 95% 2.8 337 6 1 Y Steel Bldg/Steel Roof
Delray I-Mini 1969 50,455 Y 94% 3.5 489 3 1 Y Masonry Wall/Concrete Roof
Delray II-Safeway 1980 70,050 Y 88% 4.3 727 17 1 Y Masonry Wall/Concrete Roof
Tampa-E. Hillborough 1985 84,690 N 96% 5.3 737 16 1 Y Masonry Wall/Metal Roof
Titusville 1986/90 54,720 Y 99% 6.0 416 9 1 Y Metal Wall/Shingle Roof
Ft.Myers-Mall 1991/94 18,501 Y 72% 1.3 252 4 1 Y Masonry/Steel Roof
Indian Harbor-Beach 1985 64,990 Y 90% 4.0 729 15 1 N Masonry Wall/Metal Roof
Hollywood-Sheridan 1988 129,178 N 89% 7.0 1,168 21 1 Y Masonry Wall/Concrete Roof
Pompano Beach-Atlantic 1985 74,644 N 83% 4.0 976 17 1 N Masonry Wall/Concrete Roof
Pompano Beach-Sample 1988 63,548 N 88% 3.6 837 14 1 N Masonry Wall/Metal Roof
Boca Raton-18th St 1991 90,395 N 83% 6.2 1,094 8 1 N Masonry Wall/Metal Roof
Vero Beach 1997 34,450 Y 97% 1.9 309 2 1 N Masonry Wall/Metal Roof
Hollywood-N.21st 1987 58,612 N 90% 3.1 742 11 1 Y Masonry Wall/Metal Roof
Georgia
Savannah 1981 59,530 Y 89% 5.4 500 11 1 Y Masonry Wall/Steel Roof
Atlanta-Metro I 1988 69,585 Y 81% 3.9 532 5 1 Y Steel Bldg./Steel Roof
Atlanta-Metro II 1988 45,300 Y 79% 3.9 375 6 1 Y Steel Bldg./Steel Roof
Atlanta-Metro III 1988 57,625 Y 82% 5.3 478 9 1 Y Steel Bldg./Steel Roof
Atlanta-Metro IV 1989 42,105 Y 95% 3.5 299 7 1 Y Steel Bldg./Steel Roof
Atlanta-Metro V 1988 44,945 Y 91% 4.2 318 3 1 Y Masonry Wall/Tar & Gravel Roof
Atlanta-Metro VI 1986 50,900 Y 77% 3.6 455 7 1 Y Steel Bldg./Steel Roof
Atlanta-Metro VII 1981 38,950 Y 85% 2.5 326 9 2 Y Masonry Wall/Tar & Gravel Roof
Atlanta-Metro VIII 1975 47,321 Y 83% 3.3 459 6 2 Y Masonry Wall/Tar & Gravel Roof
Augusta I 1988 52,360 Y 81% 4.0 409 13 1 Y Steel Bldg./Steel Roof
Macon I 1989 40,700 Y 86% 3.2 353 14 1 Y Steel Bldg./Steel Roof
Augusta II 1987 46,280 Y 86% 3.5 372 4 1 Y Masonry Wall/Steel Roof
Atlanta-Metro IX 1988 56,346 Y 81% 4.6 412 6 1 Y Steel Bldg./Steel Roof
Atlanta-Metro X 1988 47,505 Y 91% 6.8 399 9 1 N Steel Bldg./Steel Roof
Macon II 1989/94 58,915 Y 92% 14.0 540 11 1 Y Steel Bldg./Steel Roof
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Savannah II 1988 49,365 Y 90% 2.6 463 8 1 Y Masonry Wall/Steel Roof
Atlanta-Alpharetta 1994 81,405 Y 79% 5.8 573 8 1&2 Y Steel Bldg./Steel Roof
Atlanta-Marietta 1996 59,450 Y 93% 6.0 451 8 1&2 Y Steel Bldg./Steel Roof
Atlanta-Doraville 1995 68,465 Y 93% 4.9 636 8 1&2 Y St&Masonry Bldg/Steel Roof
Ft. Oglethorpe 1989 45,185 Y 84% 3.3 447 6 1 Y Masonry Wall/Metal Roof
Louisiana
Baton Rouge-1 1982 72,370 Y 88% 2.5 414 12 1 Y Masonry Wall/Metal Roof
Baton Rouge-2 1985 45,185 Y 86% 2.8 444 9 1 N Masonry Wall/Steel Roof
Maryland
Salisbury 1979 33,700 Y 81% 3.0 416 10 1 N Masonry Wall/Tar & Gravel Roof
Baltimore I 1984 21,233 Y 80% 1.9 347 2 3 N Masonry Wall/Shingled Roof
Baltimore II 1988 55,694 Y 97% 2.2 498 2 4 Y Masonry Wall/Tar & Gravel Roof
Baltimore III 1990 51,838 Y 91% 3.1 674 8 1 Y Steel Bldg./Steel Roof
Massachusetts
New Bedford 1982 42,068 Y 98% 3.4 374 7 1 Y Steel Bldg./Steel Roof
Springfield 1986 42,127 Y 88% 4.7 321 5 1 N Masonry Wall/Shingle Roof
Northbridge 1988 50,350 N 93% 3.5 358 10 1 N Metal Wall/Metal Roof
Salem 1979 53,405 N 88% 2.0 499 2 2 Y Steel Wall/Metal Roof
Boston-Metro I 1980 37,825 Y 97% 2.0 402 3 2 N Masonry Wall/Tar & Gravel Roof
Boston-Metro II 1986 38,175 Y 98% 3.6 428 8 2 N Masonry Wall/Tar & Gravel Roof
Michigan
Grand Rapids 1976 57,900 Y 89% 5.4 526 9 1 Y Masonry Wall/Steel Roof
Grand Rapids II 1983 32,300 Y 89% 8.0 296 6 1 N Masonry & Steel Walls
Kalamazoo 1978 60,218 Y 82% 11.6 674 14 1 Y Steel Bldg/Steel & Shingle Roof
Lansing 1987 44,945 Y 88% 3.8 411 9 1 Y Steel Bldg/Steel Roof
Holland 1978 96,208 Y 86% 13.6 722 18 1 Y Masonry Wall/Steel Roof
Waterford-Highland 1978 137,320 N 83% 16.6 1,719 16 1 Y Masonry Wall/Metal Roof
Mississippi
Jackson I 1990 42,010 Y 91% 2.0 344 6 1 Y Masonry/Steel Roof
Jackson II 1990 38,815 Y 96% 2.1 310 9 1 Y Masonry/Steel Roof
Jackson III-I55 1995 62,048 N 98% 1.3 426 2 1 N Metal Wall/Metal Roof
Jackson-N.West 1984 57,275 N 90% 5.2 473 13 1 Y Masonry Wall/Metal Roof
New Hampshire
Salem-Policy 1980 62,825 N 99% 8.7 547 9 1 Y Masonry Wall/Metal Roof
New York
Middletown 1988 26,000 Y 97% 2.8 283 4 1 N Steel Bldg./Steel Roof
Buffalo I 1981 76,320 Y 85% 5.1 545 10 1 Y Steel Bldg./Steel Roof
Rochester I 1981 41,834 Y 69% 2.9 407 5 1 Y Steel Bldg./Steel Roof
Rochester II 1980 29,820 Y 93% 3.5 249 9 1 N Masonry Wall/Shingle Roof
Buffalo II 1984 54,545 Y 86% 6.2 435 12 1 Y Steel Bldg./Steel Roof
Syracuse l 1987 73,320 Y 84% 7.5 767 16 1 N Steel Bldg./Steel Roof
Syracuse II 1983 54,590 Y 88% 3.6 422 10 1 Y Steel Bldg./Shingled Roof
- 13 -
Rochester III 1990 67,865 Y 93% 2.7 462 1 1 N Masonry Wall/Shingle Roof
Harriman 1989/95 66,210 N 88% 6.1 643 10 1 Y Metal Wall/Metal Roof
North Carolina
Charlotte 1986 37,815 Y 81% 2.9 333 6 1 Y Steel Bldg./Steel Roof
Fayetteville 1980 91,950 Y 66% 6.2 1,060 12 1 Y Steel Bldg./Steel Roof
Greensboro 1986 45,230 Y 76% 3.4 422 5 1 Y Steel Bldg./Mas. Wall/Steel Roof
Raleigh I 1985 58,490 Y 86% 5.0 544 8 2 Y Steel Bldg./Steel Roof
Raleigh II 1985 33,215 Y 75% 2.5 328 8 1 Y Steel Bldg./Steel Roof
Charlotte II 1995 48,950 Y 54% 5.6 486 7 1 Y Masonry Wall/Steel Roof
Charlotte III 1995 31,320 Y 84% 2.9 333 6 1 Y Masonry Wall/Steel Roof
Greensboro1 1995 32,198 Y 86% 1.0 313 7 1 N Metal Wall/Metal Roof
Greensboro2 1997 9,625 Y 89% 2.5 91 2 1 N Metal Wall/Metal Roof
Greensboro-High Point 1993 58,585 Y 68% 2.5 537 9 1 N Steel wall/Metal Roof
Durham-Hillborough 1988/91 67,231 Y 78% 5.0 619 5 1 Y Metal Wall/Metal Roof
Durham-Cornwallis 1990/96 78,980 N 78% 4.7 668 9 1 Y Masonry Wall/Metal Roof
Jacksonville-Center 1995 50,635 N 78% 5.0 484 11 1 Y Metal Wall/Metal Roof
Jacksonville-Gum Branch 1989 63,300 N 78% 5.0 505 14 1 T Metal Wall/Metal Roof
Jacksonville-N. Marine 1985 43,220 N 78% 8.4 476 6 1 Y Masonry Wall/Shingle Roof
Ohio
Youngstown 1980 54,510 Y 86% 5.8 371 5 1 Y Steel Bldg./Steel Roof
Cleveland- I 1980 48,840 Y 86% 6.4 347 9 1 Y Steel Bldg./Steel Roof
Cleveland II 1987 60,890 Y 93% 4.8 453 4 1 Y Steel Bldg./Steel Roof
Cincinnati 1988 48,615 Y 96% 2.8 496 7 1 Y Masonry Wall/Steel Roof
Dayton 1988 62,602 Y 87% 3.6 615 8 1 Y Masonry Wall/Steel Roof
Youngstown II 1988 55,700 Y 82% 3.9 499 7 1 N Masonry Wall/Steel Roof
Akron 1990 38,320 Y 93% 3.4 296 12 1 Y Masonry Wall/Steel Roof
Cleveland III 1986 68,100 Y 87% 3.4 599 12 1 Y Masonry Wall/Steel Roof
Cleveland IV 1978 66,520 Y 89% 3.5 622 5 1 Y Masonry Wall/Steel Roof
Cleveland V 1979 75,132 Y 89% 3.1 664 9 1&2 Y Masonry Wall/Rolled Roof
Cleveland VI 1979 47,165 Y 95% 2.6 377 8 1 Y Masonry Wall/Concrete Roof
Cleveland VII 1977 70,140 Y 94% 4.3 610 13 1 Y Masonry Wall/Steel Roof
Cleveland VIII 1970 48,025 Y 83% 5.7 477 6 1 Y Masonry Wall/Steel Roof
Cleveland IX 1982 54,690 Y 83% 4.4 296 5 1 Y Masonry Wall/Steel Roof
Cleveland X 1989 47,400 Y 80% 5.8 382 6 1 N Metal Wall/Metal Roof
Warren-Elm 1986 60,230 N 90% 7.3 498 8 1 Y Masonry Wall/Metal Roof
Warren-Youngstown 1986 59,031 N 86% 5.0 545 11 1 N Masonry Wall/Metal Roof
Batavia 1988 62,340 N 82% 5.5 548 9 1 N Metal Wall/Steel Roof
Pennsylvania
Allentown 1983 30,600 Y 98% 6.3 277 7 1 Y Masonry Wall/Shingle Roof
Sharon 1975 38,270 Y 95% 3.0 313 5 1 Y Steel Bldg./Steel Roof
Harrisburg I 1983 48,850 Y 97% 4.1 452 9 1 Y Masonry Wall/Steel Roof
Harrisburg II 1985 58,865 Y 88% 9.2 296 10 1 Y Masonry Wall/Steel Roof
- 14 -
Pittsburgh 1990 57,825 Y 93% 3.4 510 6 1 Y Steel Bldg./Steel Roof
Pittsburgh II 1983 100,860 Y 85% 4.8 706 4 2 Y Masonry Wall/Shingled Roof
Harrisburg 111 1984 63,770 Y 92% 4.1 615 9 1 Y Masonry Wall/Metal Roof
Rhode Island
East Greenwich 1984/88 72,945 Y 88% 4.9 675 9 1 Y Metal Wall/Metal Roof
Providence 1984 38,700 Y 96% 3.7 389 7 1 Y Masonry Wall/Tar & Gravel Roof
South Carolina
Charleston I 1985 49,719 Y 97% 3.3 408 11 1 Y Steel Bldg./Mas. Wall/Steel Roof
Columbia I 1985 47,650 Y 83% 3.3 394 7 1 Y Steel Bldg./Steel Roof
Columbia II 1987 58,830 Y 89% 6.0 464 8 1 N Steel Bldg./Steel Roof
Columbia III 1989 41,540 Y 77% 3.5 334 5 2 Y Steel Bldg./Steel Roof
Columbia IV 1986 57,680 Y 83% 5.6 446 7 1 Y Steel Bldg./Steel Roof
Spartanburg 1989 40,420 Y 76% 3.6 349 6 1 Y Steel Bldg./Steel Roof
Charleston II 1985 40,318 Y 99% 2.2 329 10 1 Y Masonry Wall/Steel Roof
Tennessee
Hixson 1985 42,250 N 83% 2.7 346 3 1 Y Masonry Wall/Metal Roof
Chattanooga-Lee Hwy 1987 37,260 Y 79% 3.3 390 6 1 Y Masonry Wall/Metal Roof
Chattanooga-Hwy 58 1985 35,565 N 80% 2.4 325 4 1 Y Masonry Wall/Metal Roof
Hendersonville 1986/97 94,065 N 76% 5.7 653 16 1 Y Masonry Wall/Metal Roof
Texas
Arlington I 1987 45,965 Y 87% 2.3 384 7 1 Y Masonry Wall/Steel Roof
Arlington II 1986 67,130 Y 76% 3.8 317 11 1 Y Masonry Wall/Steel Roof
Ft. Worth 1986 40,875 Y 98% 2.4 341 3 1 Y Masonry Wall/Asphalt Roof
San Antonio I 1986 49,920 Y 88% 3.9 486 12 1 Y Masonry Wall/Steel Roof
San Antonio II 1986 40,050 Y 95% 1.9 284 7 1 Y Masonry Wall/Steel Roof
San Antonio lll 1981 48,782 Y 91% 2.6 495 5 1 Y Masonry Wall/Steel Roof
Universal 1985 35,120 Y 96% 2.4 402 8 1 Y Masonry Wall/Steel Roof
San Antonio IV 1995 44,560 Y 98% 5.4 415 11 1 Y Steel Bldg/Steel Roof
Houston1 1993/95 70,060 Y 87% 6.4 564 5 1 Y Metal Wall/Steel Roof
Houston-2 1995 61,571 Y 98% 6.3 534 1 1 Y Metal Wall/Steel Roof
Houston 3 1995 35,600 Y 99% 1.8 316 1 1 Y Metal Wall/Steel Roof
Dallas-Skillman 1975 121,647 Y 78% 5.9 1,111 8 1&2 Y Masonry Wall/Steel Roof
Dallas-Cent. 1977 103,933 Y 88% 6.7 1,107 8 1&2 Y Masonry Wall/Steel Roof
Dallas-Samuell 1975 79,046 Y 93% 3.8 794 6 1&2 Y Masonry Wall/Steel Roof
Dallas-Hargrove 1975 71,914 Y 88% 3.1 747 5 1&2 Y Masonry Wall/Steel Roof
Houston-4 1984 75,470 Y 92% 4.1 671 9 1 Y Metal Wall/Metal Roof
Katy 1994 44,120 Y 90% 8.6 441 10 1 Y Metal Wall/Metal Roof
Humble 1986 63,854 Y 92% 2.3 614 6 1 Y Masonry Wall/Metal Roof
Houston-Old Katy 1996 52,800 Y 96% 3.0 491 19 1 Y Masonry Wall/Shingle Roof
Webster-Hwy 3 1997 54,850 N 82% 3.3 536 6 1 Y Masonry Wall/Metal Roof
Carrollton 1997 51,760 N 85% 3.2 499 5 1 Y Masonry Wall/Metal Roof
San Marcos 1994 61,135 N 86% 5.0 425 18 1 N Metal Wall/Metal Roof
- 15 -
Austin-McNeil 1994 72,490 N 76% 7.0 556 19 1 Y Metal Wall/Metal Roof
Austin-FM 1996 60,210 N 89% 4.9 404 9 1 Y Metal Wall/Metal Roof
Euless 1996 93,120 N 53% 7.5 499 9 1 Y Metal Wall/Metal Roof
N. Richland Hills 1996 76,545 N 73% 7.4 549 11 1 Y Metal Wall/Metal Roof
Katy-Franz 1993 67,285 Y 87% 7.2 535 10 1 Y Metal Wall/Metal Roof
Virginia
Newport News I 1988 50,100 Y 92% 3.2 451 7 1 Y Steel Bldg./Steel Roof
Alexandria 1984 76,334 Y 85% 3.2 1,129 4 2 Y Masonry Wall/Tar & Gravel Roof
Norfolk I 1984 50,950 Y 87% 2.7 338 7 1 Y Steel Bldg./Steel Roof
Norfolk II 1989 45,375 Y 92% 2.1 362 4 1 Y Masonry Wall/Steel Roof
Richmond 1987 52,070 Y 85% 2.7 526 5 1 Y Masonry Wall/Steel Roof
Newport News II 1988/93 63,675 Y 91% 4.7 400 8 1 Y Steel Bldg./Steel Roof
Lynchburg1 1982 47,321 Y 86% 5.3 430 10 1 Y Masonry Wall/Steel Roof
Lynchburg-2 1985 45,450 Y 64% 2.3 380 4 1 Y Masonry Wall/Steel Roof
Lynchburg 3 1987 24,000 Y 89% 1.5 183 3 1 N Masonry Wall/Metal Roof
Christiansburg 1985/90 37,823 Y 83% 3.2 331 6 1 Y Masonry Wall/Metal Roof
Chesapeake 1988/95 36,000 Y 80% 12.0 321 7 1 Y Metal Wall/Steel Roof
Danville 1988 49,672 Y 80% 3.2 408 8 1 N Steel Wall/Metal Roof
Chesapeake-Military 1996 58,435 Y 58% 3.0 592 3 1 N Masonry Wall/Metal Roof
Chesapeake-Volvo 1995 63,250 N 76% 4.0 535 4 1 N Masonry Wall/Metal Roof
Virginia Beach-Shell 1991 52,571 N 79% 2.5 586 5 1 N Masonry Wall/Metal Roof
Virginia Beach-Central 1993/95 96,702 N 64% 5.0 981 6 1 N Masonry Wall/Metal Roof
NorfolK-Naval Base 1975 125,640 N 60% 5.2 1,254 11 1 N Masonry Wall/Metal Roof
Lynchburg-Timberlake 1990/96 49,447 Y 81% 5.2 461 7 1 N Masonry Wall/Metal Roof
Total for all Properties 11,568,035 909 103,344 1,705
Weighted Average 86%
- 16 -
Item 3. Legal Proceedings
A former business associate (Plaintiff) of certain officers
and directors of the Company, including Robert J. Attea,
Kenneth F. Myszka, David L. Rogers and Charles E. Lannon, filed a
lawsuit against the Company on June 13, 1995 in the United States
District Court for the Northern District of Ohio. The Plaintiff
has since amended the complaint in the lawsuit alleging breach of
fiduciary duty, breach of contract, breach of general
partnership/joint venture arrangement, breach of duty of good
faith, fraud and deceit, and other causes of action including
declaratory judgment as to the Plaintiff's continuing interest in
the Company. The Plaintiff is seeking money damages in excess of
$15 million, as well as punitive damages and declaratory and
injunctive relief (including the imposition of a constructive
trust on assets of the Company in which the Plaintiff claims to
have a continuing interest) and an accounting. The amended
complaint also added Messrs. Attea, Myszka, Rogers and Lannon as
additional defendants. The parties are currently involved in
discovery. The Company intends to vigorously defend the lawsuit.
Messrs. Attea, Myszka, Rogers and Lannon have agreed to indemnify
the Company for costs and any loss arising from the lawsuit. The
Company believes that the actual amount of the Plaintiff's
recovery in this matter if any, would be within the ability of
these individuals to provide indemnification. The Company does
not believe that the lawsuit will have a material, adverse effect
upon the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders,
through the solicitation of proxies or otherwise.
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock is traded on the New York Stock
Exchange under the symbol "SSS". Set forth below are the high
and low sales prices for the Company's Common Stock for each full
quarterly period within the two most recent fiscal years.
Quarter High Low
1997
1st 32 29.375
2nd 30.875 28
3rd 31.75 28.625
4th 32.4375 28.6875
1998
1st 32.625 28.75
2nd 29.75 26.188
3rd 29.125 21.25
4th 26.625 23.563
- 17 -
As of March 25, 1999, there were approximately 450 holders
of record of the Company's Common Stock.
The Company has paid quarterly dividends to its shareholders
since the Initial Offering. Reflected in the table below are the
dividends paid in the last three years.
For Federal Income Tax purposes distributions to
shareholders are treated as ordinary income, capital gain, return
of capital or a combination thereof. Distributions to
shareholders for 1998 represent 96% ordinary income and 4% return
of capital.
History of Dividends Declared on Common Stock
1st Quarter, 1996 $0.505 per share
2nd Quarter, 1996 $0.505 per share
3rd Quarter, 1996 $0.520 per share
4th Quarter, 1996 $0.520 per share
_________________________________________
1st Quarter, 1997 $0.520 per share
2nd Quarter, 1997 $0.520 per share
3rd Quarter, 1997 $0.540 per share
4th Quarter, 1997 $0.540 per share
_________________________________________
1st Quarter, 1998 $0.540 per share
2nd Quarter, 1998 $0.540 per share
3rd Quarter, 1998 $0.560 per share
4th Quarter, 1998 $0.560 per share
Item 6. Selected Financial Data
The information required is incorporated by reference to the
Company's 1998 Annual Report to Shareholders on page 9.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation
The information required is incorporated by reference to the
Company's 1998 Annual Report to Shareholders on pages 24 to 31.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
The information required is incorporated by reference to the
Company's 1998 Annual Report to Shareholders on page 29.
Item 8. Financial Statements and Supplementary Data
The information required is incorporated by reference to the
Company's 1998 Annual Report on pages 10 to 23.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
None.
- 18 -
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required is incorporated by reference to
"Election of Directors", including and "Executive Officers of the
Company" and "Section 16(a) Beneficial Ownership Reporting
Compliance", in the Company's Proxy Statement for the Annual
Meeting of Shareholders of the Company to be held on May 25,
1999.
Item 11. Executive Compensation
The information required is incorporated by reference to
"Executive Compensation" and "Compensation of Directors" in the
Company's Proxy Statement for Annual Meeting of Shareholders of
the Company to be held May 25, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required herein is incorporated by reference
to "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement for Annual Meeting of
Shareholders of the Company to be held on May 25, 1999.
Item 13. Certain Relationships and Related Transactions
The information required herein is incorporated by reference
to "Certain Transactions" in the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on May 25, 1999.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Documents filed as part of this Annual Report on Form
10-K:
1. Financial Statements filed as part of this Annual Report on
Form 10-K are included in the 1998 Annual Report to
Shareholders and incorporated by reference.
(i) Consolidated Balance Sheets for Years Ended
December 31, 1998 and 1997.
(ii) Consolidated Statements of Operations for Years Ended
December 31, 1998, 1997, and 1996.
(iii) Consolidated Statements of Shareholders' Equity of the
for Years Ended December 31, 1998, 1997, and 1996.
(iv) Consolidated Statements of Cash Flows for Years Ended
December 31, 1998, 1997, and 1996.
(v) Selected Financial Data.
2. The following financial statement Schedule as of the period
ended December 31, 1998 is included in this Annual Report on
From 10-K.
Schedule III Real Estate and Accumulated Depreciation.
- 19 -
All other Consolidated financial schedules are omitted
because they are inapplicable, not required, or the information
is included elsewhere in the consolidated financial Statements or
the notes thereto.
3. Exhibits
The exhibits required to be filed as part of this Annual
Report on Form 10-K have been included as follows:
3.1(a)* Amended and Restated Articles of Incorporation of the
Registrant.
3.1(b) Articles Supplementary to the Articles of Incorporation
of the Registrant classifying and designating the
series A Junior Participating Cumulative Preferred
Stock. Incorporated by reference to Exhibit 3.1 to the
Registrant's Form 8A filed December 3, 1996.
3.2* Bylaws of the registrant.
4.1 Shareholder Rights Plan; incorporated by reference to
Exhibit 4.1 to the Registrant's Form 8A filed
December 3, 1996.
10.1* Form of Agreement of Limited Partnership of Sovran
Acquisition Limited Partnership.
10.2* Form of Non-competition Agreement between the
Registrant and Charles E. Lannon.
10.3* Form of Non-competition Agreement between the
Registrant and Robert J. Attea.
10.4* Form of Non-competition Agreement between the
Registrant and Kenneth F. Myszka.
10.5* Form of Non-competition Agreement between the
Registrant and David L. Rogers
10.6* Sovran Self Storage, Inc. 1995 Award and Option Plan.
10.7* 1995 Sovran Self Storage, Inc. Directors' Option Plan.
10.8* Sovran Self Storage Incentive Compensation Plan for
Executive Officer.
10.9* Restricted Stock Agreement between the Registrant and
David L. Rogers.
10.10* Form of Supplemental Representations, Warranties and
Indemnification Agreement among the Registrant and
Robert J. Attea, Charles E. Lannon, Kenneth F. Myszka
and David L. Rogers.
10.11* Form of Pledge Agreement among the Registrant and
Robert J. Attea, Charles E. Lannon, Kenneth F. Myszka
and David L. Rogers.
- 20 -
10.12* Form of Indemnification Agreement between the
Registrant and certain Officers and Directors of the
Registrant.
10.13* Form of Subscription Agreement (including Registration
Rights Statement) among the Registrant and subscribers
for 422,171 Common Shares.
10.14* Form of Registration Rights and Lock-Up Agreement among
the Registrant and Robert J. Attea, Charles E. Lannon,
Kenneth F. Myszka and David L. Rogers.
10.15* Form of Facilities Services Agreement between the
Registrant and Williamsville Properties, Inc.
10.16 Term Loan Agreement
13 1998 Annual Report to Shareholders. (Except for those
portions which are expressly incorporated by reference
to the Annual Report on Form 10-K, this exhibit is
furnished for the information of the Securities and
Exchange Commission and is not deemed to be filed as
part of this Annual Report on Form 10-K).
21 Subsidiary of the Company. The Company's only
subsidiary is Sovran Holdings, Inc.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
(b) Report on Form 8-K:
None.
* Incorporated by reference to the same numbered exhibits as
filed in the Company's Registration Statement on Form S-11
(File No. 33-91422) filed June 19, 1995.
- 21 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SOVRAN SELF STORAGE, INC.
March 31, 1999 By: /s/ David L. Rogers
____________________________
David L. Rogers,
Chief Financial Officer,
Secretary, Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/Robert J. Attea Chairman of the March 31, 1999
_____________________ Board of Directors
Robert J. Attea Chief Executive
Officer and Director
(Principal Executive
Officer)
/s/Kenneth F. Myszka President, Chief March 31, 1999
_____________________ Operating Officer
Kenneth F. Myszka and Director
/s/David L. Rogers Chief Financial March 31, 1999
_____________________ Officer (Principal
David L. Rogers Financial and
Accounting Officer)
/s/John Burns Director March 31, 1999
_____________________
John Burns
/s/Michael A. Elia Director March 31, 1999
_____________________
Michael A. Elia
/s/Anthony P. Gammie Director March 31, 1999
_____________________
Anthony P. Gammie
/s/Charles E. Lannon Director March 31, 1999
_____________________
Charles E. Lannon
- 22 -
Sovran Self Storage, Inc.
Schedule III
Combined Real Estate and Accumulated Depreciation
(in thousands)
December 31, 1998
Cost
Capitalized
Initial Subsequent to Gross Amount at Which
Cost to Company Acquisition Carried at Close of Period
___________________________ _____________ __________________________
Building, Building, Building
Equipment Equipment Equipment
and and Land and Accumulated
Description ST Land Improvements Improvements Land Improvements Total Depreciation Acquired
_______________________________________________________________________________________________________________________________
Boston-Metro I MA 363 1,679 105 363 1,784 2,147 160 6/26/95
Boston-Metro II MA 680 1,616 87 680 1,703 2,383 151 6/26/95
E. Providence RI 345 1,268 92 345 1,360 1,705 124 6/26/95
Charleston I SC 416 1,516 110 416 1,626 2,042 146 6/26/95
Lakeland I FL 397 1,424 38 397 1,462 1,859 136 6/26/95
Charlotte NC 308 1,102 55 308 1,157 1,465 101 6/26/95
Tallahassee I FL 770 2,734 378 770 3,112 3,882 260 6/26/95
Youngstown OH 239 1,110 142 239 1,252 1,491 111 6/26/95
Cleveland-Metro I OH 179 836 184 179 1,020 1,199 83 6/26/95
Cleveland-Metro II OH 701 1,659 77 701 1,736 2,437 155 6/26/95
Tallahassee II FL 204 734 133 204 867 1,071 73 6/26/95
Pt. St. Lucie FL 395 1,501 169 395 1,670 2,065 163 6/26/95
Deltona FL 483 1,752 268 483 2,020 2,503 172 6/26/95
Middletown NY 224 808 72 224 880 1,104 77 6/26/95
Buffalo I NY 423 1,531 647 497 2,104 2,601 157 6/26/95
Rochester I NY 395 1,404 27 395 1,431 1,826 126 6/26/95
Salisbury MD 164 760 135 164 895 1,059 75 6/26/95
New Bedford MA 367 1,325 94 367 1,419 1,786 123 6/26/95
Fayetteville NC 853 3,057 70 853 3,127 3,980 277 6/26/95
Allentown PA 199 921 207 203 1,124 1,327 91 6/26/95
Jacksonville I FL 152 728 171 152 899 1,051 84 6/26/95
Columbia I SC 268 1,248 23 268 1,271 1,539 116 6/26/95
Rochester II NY 230 847 109 234 952 1,186 86 6/26/95
Savannah I GA 463 1,684 60 463 1,744 2,207 161 6/26/95
Greensboro NC 444 1,613 91 444 1,704 2,148 152 6/26/95
- 23 -
Raleigh I NC 649 2,329 95 649 2,424 3,073 214 6/26/95
New Haven CT 387 1,402 79 387 1,481 1,868 130 6/26/95
Atlanta-Metro I GA 844 2,021 222 844 2,243 3,087 193 6/26/95
Atlanta-Metro II GA 302 1,103 85 303 1,187 1,490 109 6/26/95
Buffalo II NY 315 745 117 315 862 1,177 77 6/26/95
Raleigh II NC 321 1,150 160 321 1,310 1,631 108 6/26/95
Columbia II SC 361 1,331 89 374 1,407 1,781 126 6/26/95
Columbia III SC 189 719 101 189 820 1,009 74 6/26/95
Columbia IV SC 488 1,188 109 488 1,297 1,785 117 6/26/95
Atlanta-Metro III GA 430 1,579 98 430 1,677 2,107 153 6/26/95
Orlando I FL 513 1,930 147 513 2,077 2,590 195 6/26/95
Spartanburg SC 331 1,209 28 331 1,237 1,568 114 6/26/95
Sharon PA 194 912 191 194 1,103 1,297 95 6/26/95
Ft. Lauderdale FL 1,503 3,619 123 1,503 3,742 5,245 350 6/26/95
West Palm I FL 398 1,035 45 398 1,080 1,478 114 6/26/95
Atlanta-Metro IV GA 423 1,015 53 423 1,068 1,491 98 6/26/95
Atlanta-Metro V GA 483 1,166 92 483 1,258 1,741 112 6/26/95
Atlanta-Metro VI GA 308 1,116 168 308 1,284 1,592 115 6/26/95
Atlanta-Metro VII GA 170 786 97 174 879 1,053 83 6/26/95
Atlanta-Metro VIII GA 413 999 120 413 1,119 1,532 102 6/26/95
Baltimore I MD 154 555 78 154 633 787 59 6/26/95
Baltimore II MD 479 1,742 190 479 1,932 2,411 170 6/26/95
Augusta I GA 357 1,296 86 357 1,382 1,739 122 6/26/95
Macon I GA 231 1,081 42 231 1,123 1,354 103 6/26/95
Melbourne I FL 883 2,104 994 883 3,098 3,981 212 6/26/95
Newport News VA 316 1,471 113 316 1,584 1,900 139 6/26/95
Pensacola I FL 632 2,962 112 632 3,074 3,706 284 6/26/95
Augusta II GA 315 1,139 140 315 1,279 1,594 108 6/26/95
Hartford-Metro I CT 715 1,695 39 715 1,734 2,449 160 6/26/95
Atlanta-Metro IX GA 304 1,118 116 304 1,234 1,538 113 6/26/95
Alexandria VA 1,375 3,220 65 1,375 3,285 4,660 288 6/26/95
Pensacola II FL 244 901 112 244 1,013 1,257 99 6/26/95
Melbourne II FL 834 2,066 99 834 2,165 2,999 219 6/26/95
Hartford-Metro II CT 234 861 8 234 869 1,103 83 6/26/95
Atlanta-Metro X GA 256 1,244 55 256 1,299 1,555 123 6/26/95
Norfolk I VA 313 1,462 33 313 1,495 1,808 135 6/26/95
Norfolk II VA 278 1,004 140 278 1,144 1,422 104 6/26/95
Birmingham I AL 307 1,415 48 307 1,463 1,770 130 6/26/95
Birmingham II AL 730 1,725 56 730 1,781 2,511 160 6/26/95
Montgomery I AL 863 2,041 116 863 2,157 3,020 193 6/26/95
Jacksonville II FL 326 1,515 114 326 1,629 1,955 147 6/26/95
Pensacola III FL 369 1,358 187 369 1,545 1,914 142 6/26/95
- 24 -
Pensacola IV FL 244 1,128 98 244 1,226 1,470 115 6/26/95
Pensacola V FL 226 1,046 115 226 1,161 1,387 111 6/26/95
Tampa I FL 1,088 2,597 177 1,088 2,774 3,862 253 6/26/95
Tampa II FL 526 1,958 182 526 2,140 2,666 210 6/26/95
Tampa III FL 672 2,439 192 672 2,631 3,303 238 6/26/95
Jackson I MS 343 1,580 154 343 1,734 2,077 153 6/26/95
Jackson II MS 209 964 156 209 1,120 1,329 93 6/26/95
Richmond VA 443 1,602 146 443 1,748 2,191 153 8/25/95
Orlando II FL 1,161 2,755 153 1,162 2,907 4,069 247 9/29/95
Birmingham III AL 424 1,506 73 424 1,579 2,003 117 1/16/96
Macon II GA 431 1,567 55 431 1,622 2,053 129 12/1/95
Harrisburg I PA 360 1,641 143 360 1,784 2,144 141 12/29/95
Harrisburg II PA 627 2,224 173 636 2,388 3,024 181 12/29/95
Syracuse I NY 470 1,712 116 472 1,826 2,298 141 12/27/95
Ft. Myers FL 205 912 42 206 953 1,159 106 12/28/95
Ft. Myers II FL 412 1,703 172 413 1,874 2,287 184 12/28/95
Newport News II VA 442 1,592 49 442 1,641 2,083 127 1/5/96
Montgomery II AL 353 1,299 55 353 1,354 1,707 111 1/23/96
Charleston II SC 237 858 129 237 987 1,224 72 3/1/96
Tampa IV FL 766 1,800 123 766 1,923 2,689 131 3/28/96
Arlington I TX 442 1,767 64 442 1,831 2,273 127 3/29/96
Arlington II TX 408 1,662 144 408 1,806 2,214 138 3/29/96
Ft. Worth TX 328 1,324 64 328 1,388 1,716 98 3/29/96
San Antonio I TX 436 1,759 57 436 1,816 2,252 127 3/29/96
San Antonio II TX 289 1,161 48 289 1,209 1,498 84 3/29/96
Syracuse II NY 481 1,559 304 495 1,849 2,344 118 6/5/96
Montgomery III AL 279 1,014 29 279 1,043 1,322 72 5/21/96
West Palm II FL 345 1,262 65 345 1,327 1,672 94 5/29/96
Ft. Myers III FL 229 884 57 229 941 1,170 67 5/29/96
Pittsburgh PA 545 1,940 71 545 2,011 2,556 129 6/19/96
Lakeland II FL 359 1,287 612 359 1,899 2,258 91 6/26/96
Springfield MA 251 917 371 297 1,242 1,539 79 6/28/96
Ft. Myers IV FL 344 1,254 122 344 1,376 1,720 92 6/28/96
Cincinnati OH 557 1,988 51 557 2,039 2,596 126 7/23/96
Dayton OH 667 2,379 47 667 2,426 3,093 149 7/23/96
Baltimore III MD 777 2,770 43 777 2,813 3,590 174 7/26/96
Jacksonville III FL 568 2,028 457 568 2,485 3,053 138 8/23/96
Jacksonville IV FL 436 1,635 89 436 1,724 2,160 117 8/26/96
Pittsburgh II PA 627 2,257 260 631 2,513 3,144 145 8/28/96
Jacksonville V FL 535 2,033 66 538 2,096 2,634 144 8/30/96
Charlotte II NC 487 1,754 23 487 1,777 2,264 104 9/16/96
Charlotte III NC 315 1,131 23 315 1,154 1,469 68 9/16/96
- 25 -
Orlando III FL 314 1,113 278 314 1,391 1,705 74 10/30/96
Rochester III NY 704 2,496 47 708 2,539 3,247 127 12/20/96
Youngstown II OH 600 2,142 45 600 2,187 2,787 111 1/10/97
Akron OH 413 1,478 27 413 1,505 1,918 76 1/10/97
Cleveland III OH 751 2,676 256 751 2,932 3,683 145 1/10/97
Cleveland IV OH 725 2,586 273 725 2,859 3,584 145 1/10/97
Cleveland V OH 637 2,918 372 637 3,290 3,927 163 1/10/97
Cleveland VI OH 495 1,781 248 495 2,029 2,524 101 1/10/97
Cleveland VII OH 761 2,714 323 761 3,037 3,798 158 1/10/97
Cleveland VIII OH 418 1,921 458 418 2,379 2,797 118 1/10/97
Cleveland IX OH 606 2,164 81 606 2,245 2,851 114 1/10/97
Grand Rapids I MI 455 1,631 29 455 1,660 2,115 82 1/17/97
Grand Rapids II MI 219 790 96 219 886 1,105 47 1/17/97
Kalamazoo MI 516 1,845 100 516 1,945 2,461 94 1/17/97
Lansing MI 327 1,332 8 327 1,340 1,667 66 1/17/97
Holland MI 451 1,830 313 451 2,143 2,594 106 1/17/97
San Antonio III TX 474 1,686 111 474 1,797 2,271 87 1/30/97
Universal TX 346 1,236 54 346 1,290 1,636 63 1/30/97
San Antonio IV TX 432 1,560 46 432 1,606 2,038 82 1/30/97
Houston-Eastex TX 634 2,565 35 634 2,600 3,234 117 3/26/97
Houston-Nederland TX 566 2,279 60 566 2,339 2,905 103 3/26/97
Houston-College TX 293 1,357 66 293 1,423 1,716 64 3/26/97
Lynchburg-Lakeside VA 335 1,342 93 335 1,435 1,770 72 3/31/97
Lynchburg-Timberlake VA 328 1,315 93 328 1,408 1,736 68 3/31/97
Lynchburg-Amherst VA 155 710 84 155 794 949 39 3/31/97
Christiansburg VA 245 1,120 67 245 1,187 1,432 51 3/31/97
Chesapeake VA 260 1,043 70 260 1,113 1,373 50 3/31/97
Danville VA 326 1,488 27 326 1,515 1,841 67 3/31/97
Orlando-W 25th St FL 289 1,160 50 289 1,210 1,499 55 3/31/97
Delray I-Mini FL 491 1,756 243 491 1,999 2,490 87 4/11/97
Savannah II GA 296 1,196 94 296 1,290 1,586 57 5/8/97
Delray II-Safeway FL 921 3,282 96 921 3,378 4,299 136 5/21/97
Cleveland X-Avon OH 301 1,214 138 303 1,350 1,653 55 6/4/97
Dallas-Skillman TX 960 3,847 333 960 4,180 5,140 179 6/30/97
Dallas-Centennial TX 965 3,864 287 943 4,173 5,116 175 6/30/97
Dallas-Samuell TX 570 2,285 284 570 2,569 3,139 108 6/30/97
Dallas-Hargrove TX 370 1,486 182 370 1,668 2,038 77 6/30/97
Houston-Antoine TX 515 2,074 211 515 2,285 2,800 95 6/30/97
Atlanta-Alpharetta GA 1,033 3,753 100 1,033 3,853 4,886 147 7/24/97
Atlanta-Marietta GA 769 2,788 19 769 2,807 3,576 105 7/24/97
- 26 -
Atlanta-Doraville GA 735 3,429 32 735 3,461 4,196 122 8/21/97
GreensboroHilltop NC 268 1,097 47 268 1,144 1,412 39 9/25/97
GreensboroStgCch NC 89 376 20 89 396 485 14 9/25/97
Baton Rouge-Airline LA 396 1,831 150 396 1,981 2,377 70 10/9/97
Baton Rouge
Airline2 LA 282 1,303 85 282 1,388 1,670 46 11/21/97
Harrisburg-
Peiffers PA 635 2,550 34 637 2,582 3,219 71 12/3/97
Chesapeake-Military VA 542 2,210 29 542 2,239 2,781 53 2/5/98
Chesapeake-Volvo VA 620 2,532 13 620 2,545 3,165 61 2/5/98
Virginia Beach
Shell VA 540 2,211 32 540 2,243 2,783 54 2/5/98
Virginia Beach
Central VA 864 3,994 44 864 4,038 4,902 96 2/5/98
Norfolk-Naval Base VA 1,243 5,019 34 1,243 5,053 6,296 118 2/5/98
Tampa FL 709 3,235 188 709 3,423 4,132 98 2/4/98
Northbridge MA 441 1,788 6 441 1,794 2,235 42 2/9/98
Harriman NY 843 3,394 8 843 3,402 4,245 79 2/4/98
Greensboro NC 397 1,834 38 397 1,872 2,269 45 2/10/98
Lynchburg VA 488 1,746 12 488 1,758 2,246 38 2/18/98
Titusville FL 492 1,990 11 492 2,001 2,493 43 2/25/98
Salem MA 733 2,941 25 733 2,966 3,699 62 3/3/98
Hixson TN 332 1,193 50 332 1,243 1,575 24 3/27/98
Chattanooga-Lee Hwy TN 384 1,371 35 384 1,406 1,790 27 3/27/98
Chattanooga-Hwy 58 TN 296 1,198 54 296 1,252 1,548 24 3/27/98
Ft. Oglethorpe GA 349 1,250 38 349 1,288 1,637 25 3/27/98
Birmingham-Walt AL 544 1,942 9 544 1,951 2,495 38 3/27/98
East Greenwich RI 702 2,821 14 702 2,835 3,537 54 3/26/98
Durham-Hillborough NC 775 3,103 56 775 3,159 3,934 61 4/9/98
Durham-Cornwallis NC 940 3,763 28 940 3,791 4,731 72 4/9/98
Hendersonville TN 1,050 4,203 18 1,050 4,221 5,271 79 4/9/98
Salem-Policy NH 742 2,977 5 742 2,982 3,724 57 4/7/98
Warrem-Elm OH 522 1,864 11 522 1,875 2,397 32 4/22/98
Warren-Youngstown OH 512 1,829 1 512 1,830 2,342 31 4/22/98
Waterford MI 1,487 5,306 168 1,487 5,474 6,961 91 4/28/98
Indian Harbor FL 662 2,654 65 662 2,719 3,381 40 6/2/98
Jackson MS 744 3,021 25 744 3,046 3,790 53 5/13/98
Katy TX 419 1,524 33 419 1,557 1,976 24 5/20/98
Hollywood FL 1,208 4,854 7 1,208 4,861 6,069 62 7/1/98
Pompano Beach
Atlantic FL 944 3,803 15 944 3,818 4,762 49 7/1/98
- 27 -
Pompano Beach
Sample FL 903 3,643 4 903 3,647 4,550 47 7/1/98
Boca Raton FL 1,503 6,059 27 1,510 6,079 7,589 88 7/1/98
Vero Beach FL 489 1,813 11 489 1,824 2,313 30 6/12/98
Humble TX 447 1,790 16 447 1,806 2,253 23 6/16/98
Houston TX 659 2,680 11 659 2,691 3,350 35 6/19/98
Webster TX 635 2,302 5 635 2,307 2,942 30 6/19/98
Carrollton TX 548 1,988 7 548 1,995 2,543 26 6/19/98
Hollywood-N.21st FL 840 3,373 6 840 3,379 4,219 36 8/3/98
San Marcos TX 324 1,493 11 324 1,504 1,828 20 6/30/98
Austin-McNeil TX 492 1,995 35 492 2,030 2,522 26 6/30/98
Austin-FM TX 484 1,951 52 484 2,003 2,487 26 6/30/98
Jacksonville-Center NC 327 1,329 3 327 1,332 1,659 14 8/6/98
Jacksonville
Gum Branch NC 508 1,815 28 508 1,843 2,351 16 8/17/98
Jacksonville
N. Marine NC 216 782 52 216 834 1,050 5 9/24/98
Euless TX 550 1,998 4 550 2,002 2,552 13 9/29/98
N. Richland Hills TX 670 2,407 4 670 2,411 3,081 16 10/9/98
Batavia OH 390 1,570 3 390 1,573 1,963 3 11/19/98
Jackson MS 460 1,642 0 460 1,642 2,102 3 12/1/98
Katy-Franz TX 507 2,058 6 507 2,064 2,571 4 12/15/98
Corporate Office NY 0 68 445 0 513 513 192 01/1/95
_______ _______ ______ _______ _______ _______ ______
102,690 377,569 22,243 102,864 399,638 502,502 21,339
======= ======= ====== ======= ======= ======= ======
- 28 -
December 31, 1998 December 31, 1997 December 31, 1996
Cost:
Balance at beginning
of period $333,036 $220,711 $159,461
Additions during period:
Acquisitions through
Foreclosure $ - $ - $ -
Other acquisitions 157,080 106,926 58,626
Improvements, etc. 12,940 5,527 2,640
Other (describe) - 170,020 - 112,453 - 61,266
_______ _______ _______
Deductions during period:
Cost of real
estate sold (554) (128) (16)
Other (describe) - (554) - (128) - (16)
_______ ________ ______ _________ _______ ________
Balance at close of period $502,502 $333,036 $220,711
======== ======== ========
Accumulated Depreciation:
Balance at beginning
of period $ 11,639 $ 5,457 $ 1,497
Additions during period:
Depreciation expense $ 9,762 9,762 $ 6,211 6,211 $ 3,964 3,964
________ ________ ________
Deductions during period:
Accumulated depreciation of
Real estate sold (62) (62) (29) (29) (4) (4)
_________ _______ ________ ________ ________ ________
Balance at close of period $ 21,339 $ 11,639 $ 5,457
======== ======== ========
- 29 -
Exhibit 10.16
TABLE OF CONTENTS
Section Page
Section 1. DEFINITIONS AND RULES OF INTERPRETATION. 1
Section 1.1. Definitions. 1
Section 1.2. Rules of Interpretation. 21
Section 2. THE TERM LOAN FACILITY. 22
Section 2.1. Commitment to Lend. 22
Section 2.2. Increase of Total Commitment. 23
Section 2.3. The Term Notes. 23
Section 2.4. Interest on Term Loan; Fees. 24
Section 2.5. Intentionally Omitted. 25
Section 2.6. Conversion Options. 25
Section 2.7. [intentionally omitted] 26
Section 2.8. Repayment of the Term Loan at Maturity. 26
Section 2.9. Optional Repayments of Term Loan. 26
Section 3. INTENTIONALLY OMITTED. 26
Section 4. CERTAIN GENERAL PROVISIONS. 26
Section 4.1. Funds for Payments. 26
Section 4.2. Computations. 28
Section 4.3. Inability to Determine LIBOR Rate. 29
Section 4.4. Illegality. 29
Section 4.5. Additional Costs, Etc. 30
Section 4.6. Capital Adequacy. 31
Section 4.7. Certificate. 32
Section 4.8. Indemnity. 32
Section 4.9. Interest During Event of Default; Late
Charges. 32
Section 4.10. Concerning Joint and Several Liability of
the Borrowers. 33
Section 4.11. Interest Limitation. 35
Section 4.12. Reasonable Efforts to Mitigate. 35
Section 4.13. Replacement of Lenders. 36
Section 5. GUARANTIES. 37
Section 6. REPRESENTATIONS AND WARRANTIES. 37
Section 6.1. Authority; Etc. 37
Section 6.2. Governmental Approvals. 40
Section 6.3. Title to Properties; Leases. 41
Section 6.4. Financial Statements. 41
Section 6.5. Fiscal Year. 42
Section 6.6. Franchises, Patents, Copyrights, Etc. 42
Section 6.7. Litigation. 42
Section 6.8. No Materially Adverse Contracts, Etc. 43
Section 6.9. Compliance With Other Instruments, Laws, Etc. 43
Section 6.10. Tax Status. 43
Section 6.11. No Event of Default; No Materially Adverse
Changes. 44
Section 6.12. Investment Company Acts. 44
Section 6.13. Absence of UCC Financing Statements, Etc. 44
Section 6.14. Absence of Liens. 45
Section 6.15. Certain Transactions. 45
Section 6.16. Employee Benefit Plans. 45
Section 6.16.1. In General. 45
Section 6.16.2. Terminability of Welfare
Plans. 46
Section 6.16.3. Guaranteed Pension Plans. 46
Section 6.16.4. Multiemployer Plans. 46
Section 6.17. Regulations U and X. 47
Section 6.18. Environmental Compliance. 47
Section 6.19. Subsidiaries. 49
Section 6.20. Loan Documents. 49
Section 6.21. REIT Status. 50
Section 6.22. Subsequent Guarantors. 50
Section 6.23. Trading Status. 50
Section 6.24. Title Policies. 50
Section 6.25 Year 2000 Compliance. 50
Section 7. AFFIRMATIVE COVENANTS OF THE BORROWERS AND
THE GUARANTORS. 50
Section 7.1. Punctual Payment. 51
Section 7.2. Maintenance of Office. 51
Section 7.3. Records and Accounts. 51
Section 7.4. Financial Statements, Certificates and
Information. 51
Section 7.5. Notices. 55
Section 7.6. Existence of SALP, Holdings and Subsidiary
Guarantors; Maintenance of Properties. 57
Section 7.7. Existence of Sovran; Maintenance of REIT
Status of Sovran; Maintenance of Properties. 58
Section 7.8. Insurance. 59
Section 7.9. Taxes. 59
Section 7.10. Inspection of Properties and Books. 60
Section 7.11. Compliance with Laws, Contracts, Licenses,
and Permits. 61
Section 7.12. Use of Proceeds. 61
Section 7.13. Acquisition of Unencumbered Properties. 61
Section 7.14. Additional Guarantors; Solvency of Guarantors. 62
Section 7.15. Further Assurances. 62
Section 7.16. Form of Lease. 62
Section 7.17. Environmental Indemnification. 63
Section 7.18. Response Actions. 63
Section 7.19. Environmental Assessments. 63
Section 7.20. Employee Benefit Plans. 64
Section 7.21. No Amendments to Certain Documents. 65
Section 7.22. Intentionally Omitted. 65
Section 7.23. Management. 65
Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS
AND THE GUARANTORS. 65
Section 8.1. Restrictions on Indebtedness. 65
Section 8.2. Restrictions on Liens, Etc. 66
Section 8.3. Restrictions on Investments. 69
Section 8.4. Merger, Consolidation and Disposition of
Assets. 71
Section 8.5. Sale and Leaseback. 73
Section 8.6. Compliance with Environmental Laws. 73
Section 8.7. Distributions. 73
Section 8.8. Employee Benefit Plans. 74
Section 8.9. Fiscal Year. 74
Section 8.10 Amsdell Litigation. 75
Section 8.11. Negative Pledge. 75
Section 9. FINANCIAL COVENANTS OF THE BORROWERS. 75
Section 9.1. Leverage Ratio. 75
Section 9.2. Secured Indebtedness. 75
Section 9.3. Tangible Net Worth. 75
Section 9.4. Debt Service and Fixed Charge Coverages. 76
Section 9.5. Unimproved Land. 76
Section 9.6. Construction-in-Process. 76
Section 9.7. Promissory Notes. 76
Section 9.8. Unimproved Land, Construction-in-Process
and Notes. 76
Section 9.9. Joint Venture Ownership Interest. 77
Section 9.10. Unhedged Variable Rate Debt. 77
Section 9.11. Unsecured Indebtedness. 77
Section 9.12. Unencumbered Property Debt Service Coverage. 77
Section 9.13. Covenant Calculations. 77
Section 10. CONDITIONS TO THE CLOSING DATE. 78
Section 10.1. Loan Documents. 79
Section 10.2. Certified Copies of Organization Documents. 79
Section 10.3. By-laws; Resolutions. 79
Section 10.4. Incumbency Certificate; Authorized Signers. 79
Section 10.5. Title Policies. 79
Section 10.6. Certificates of Insurance. 80
Section 10.7. Environmental Site Assessments. 80
Section 10.8. Opinion of Counsel Concerning Organization
and Loan Documents. 80
Section 10.9. Tax and Securities Law Compliance. 80
Section 10.10. Guaranties. 80
Section 10.11. Certifications from Government Officials;
UCC-11 Reports. 80
Section 10.12. Proceedings and Documents. 81
Section 10.13. Fees. 81
Section 10.14. Compliance Certificate. 81
Section 10.15. Existing Indebtedness. 81
Section 10.16. Subsequent Guarantors. 81
Section 10.17 Representations True; No Event of Default;
Compliance Certificate. 81
Section 10.18. No Legal Impediment. 82
Section 10.19. Governmental Regulation. 82
Section 11. CERTAIN ADDITIONAL CONDITIONS TO THE SECOND
CLOSING DATE. 82
Section 11.1. Representations True; No Event of Default;
Compliance Certificate. 82
Section 11.2. No Legal Impediment. 82
Section 11.3. Governmental Regulation. 82
Section 11.4. Compliance Certificate. 83
Section 11.5. No Adverse Change. 83
Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC. 83
Section 12.1. Events of Default and Acceleration. 83
Section 12.2. Intentionally Omitted. 87
Section 12.3. Remedies. 87
Section 13. SETOFF. 87
Section 14. THE AGENT. 89
Section 14.1. Authorization. 89
Section 14.2. Employees and Agents. 89
Section 14.3. No Liability. 89
Section 14.4. No Representations. 90
Section 14.5. Payments. 90
Section 14.6. Holders of Notes. 91
Section 14.7. Indemnity. 92
Section 14.8. Agent as Lender. 92
Section 14.9. Notification of Defaults and Events of
Default. 92
Section 14.10. Duties in the Case of Enforcement. 92
Section 14.11. Successor Agent. 93
Section 14.12. Notices. 93
Section 15. EXPENSES. 93
Section 16. INDEMNIFICATION. 94
Section 17. SURVIVAL OF COVENANTS, ETC. 96
Section 18. ASSIGNMENT; PARTICIPATIONS; ETC. 96
Section 18.1. Conditions to Assignment by Lenders. 96
Section 18.2. Certain Representations and Warranties;
Limitations; Covenants. 97
Section 18.3. Register. 98
Section 18.4. New Term Notes. 98
Section 18.5. Participations. 99
Section 18.6. Pledge by Lender. 99
Section 18.7. No Assignment by Borrowers. 99
Section 18.8. Disclosure. 100
Section 18.9. Syndication. 100
Section 19. NOTICES, ETC. 100
Section 20. GOVERNING LAW; CONSENT TO JURISDICTION
AND SERVICE. 101
Section 21. HEADINGS. 101
Section 22. COUNTERPARTS. 101
Section 23. ENTIRE AGREEMENT, ETC. 102
Section 24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE
CLAIMS. 102
Section 25. CONSENTS, AMENDMENTS, WAIVERS, ETC. 102
Section 26. SEVERABILITY. 104
EXHIBITS
A Form of Term Note
B Form of Subsidiary Guaranty
C Form of Conversion Notice
D Form of Compliance Certificate
E Form of Second Closing Compliance Certificate
F Form of Assignment and Assumption Agreement
G Form of Term Loan Request
SCHEDULES
1 Lenders' Commitments
6.1(b) Capitalization; Outstanding Securities, Etc.
6.3 Partially Owned Real Estate Holding Entities
6.7 Litigation
6.15 Certain Transactions
6.18 Environmental Matters
6.19 Subsidiaries
6.24 Changes to Title Policies
7.16 Form of Lease
8.3(d) Existing Investments
TERM LOAN AGREEMENT
This TERM LOAN AGREEMENT is made as of the 22th day of
December, 1998, by and among SOVRAN SELF STORAGE, INC., a
Maryland corporation ("Sovran") and SOVRAN ACQUISITION LIMITED
PARTNERSHIP, a Delaware limited partnership ("SALP", and together
with Sovran, collectively referred to herein as the "Borrowers"
and individually as a "Borrower"), each with a principal place of
business at 5166 Main Street, Williamsville, New York 14221,
FLEET NATIONAL BANK ("Fleet"), a national banking association
having its principal place of business at 111 Westminster Street,
Providence, Rhode Island 02903, and the other lending
institutions listed on Schedule 1 hereto or which may become
parties hereto pursuant to Section 18 (individually, a "Lender"
and collectively, the "Lenders") and FLEET NATIONAL BANK, as
agent for itself and each other Lender.
RECITALS
A. The Borrowers are primarily engaged in the business of
owning, purchasing, developing, constructing, renovating and
operating self storage facilities in the United States primarily
known as "Uncle BoB's Self Storage".
B. Sovran is a limited partner of SALP, holds in excess of
93% of the partnership interests in SALP, conducts all or
substantially all of its business through SALP, and is qualified
to elect REIT status for income tax purposes. Sovran Holdings,
Inc., a Delaware corporation ("Holdings"), is a wholly-owned
Subsidiary of Sovran and the sole general partner of SALP and has
agreed to guaranty the obligations of the Borrowers hereunder.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
Section 1. DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1. Definitions. The following terms shall have
the meanings set forth in this Section 1 or elsewhere in the
provisions of this Agreement referred to below:
Accountants. In each case, nationally-recognized,
independent certified public accountants reasonably acceptable to
the Agent. The Agent hereby acknowledges that the Accountants
may include Ernst & Young, LLP.
Adjusted Unencumbered Property NOI. With respect to any
fiscal period for any Unencumbered Property, the net income of
such Unencumbered Property during such period, as determined in
accordance with GAAP, before deduction of (a) gains (or losses)
from debt restructurings or other extraordinary items (provided
such deduction shall not include extraordinary items that include
liquidated damages, compensatory damages or other obligations
arising out of a Borrower's default under an agreement to
purchase or lease Real Estate) relating to such Unencumbered
Property, and (b) income taxes; plus (x) interest expense
relating to such Unencumbered Property and (y) depreciation and
amortization relating to such Unencumbered Property; minus a
recurring capital expense reserve equal to ten cents ($0.10) per
net rentable square foot multiplied by the total net rentable
square feet of such Unencumbered Property.
Administrative Agent Fee. See Section 2.4(d).
Affiliate. With reference to any Person, (i) any director
or executive officer of that Person, (ii) any other Person
controlling, controlled by or under direct or indirect common
control of that Person, (iii) any other Person directly or
indirectly holding 10% or more of any class of the capital stock
or other equity interests (including options, warrants,
convertible securities and similar rights) of that Person and
(iv) any other Person 10% or more of any class of whose capital
stock or other equity interests (including options, warrants,
convertible securities and similar rights) is held directly or
indirectly by that Person.
Agent. Fleet National Bank acting as agent for the Lenders,
or any successor agent, as permitted by Section 14.
Agent's Head Office. The Agent's head office located at 111
Westminster Street, Providence, Rhode Island 02903, or at such
other location as the Agent may designate from time to time
pursuant to Section 19 hereof, or the office of any successor
Agent permitted under Section 14 hereof.
Agreement. This Term Loan Agreement, including the
Schedules and Exhibits hereto, as the same may be from time to
time amended and in effect.
Applicable Margin. The applicable margin (if any) over the
then Prime Rate or LIBOR Rate, as applicable to the Loan(s) in
question, which is used in calculating the interest rate
applicable to Prime Rate Loans or LIBOR Rate Loans, is set forth
in the following table:
Applicable Margin for Applicable Margin for
LIBOR Rate Loans Prime Rate Loans
1.50% 0%
Assignment and Assumption. See Section 18.1.
Arrangement Fee. See Section 2.4(d).
Borrower Representative. Sovran, acting on behalf of all of
the Borrowers. The Agent and the Lenders shall be entitled to
rely, and all of the Borrowers hereby agree that the Agent and
the Lenders may so rely, on any notice given or received or
action taken or not taken by Sovran as being authorized by each
of the Borrowers.
Borrowers. As defined in the preamble hereto.
Budgeted Project Costs. With respect to Construction-In-
Process, the total budgeted project cost of such Construction-In-
Process shown on schedules submitted to the Agent from time to
time; provided that for Construction-In-Process owned by any
Partially-Owned Entity, the Budgeted Project Cost of such
Construction-In-Process shall be the applicable Borrower's pro-
rata share of the total budgeted project cost of such
Construction-In-Process (based on the greater of (x) such
Borrower's percentage equity interest in such Partially-Owned
Entity or (y) the Borrower's obligation to provide or liability
for providing funds to such Partially-Owned Entity).
Building. Individually and collectively, the buildings,
structures and improvements now or hereafter located on the Real
Estate and intended for income production.
Business Day. Any day on which banking institutions in
Boston, Massachusetts are open for the transaction of banking
business and, in the case of LIBOR Rate Loans, also a day which
is a LIBOR Business Day.
Capitalized Leases. Leases under which any Borrower or any
of its Subsidiaries or any Partially-Owned Entity is the lessee
or obligor, the discounted future rental payment obligations
under which are required to be capitalized on the balance sheet
of the lessee or obligor in accordance with GAAP.
Capitalized Unencumbered Property Value. As of any date of
determination with respect to an Unencumbered Property, an amount
equal to Adjusted Unencumbered Property NOI for such Unencumbered
Property for the most recent two (2) complete fiscal quarters
multiplied by two (2), with the product being divided by ten and
one-half percent (10.5%). The calculation of Capitalized
Unencumbered Property Value shall be adjusted as set forth in
Section 9.13 hereof.
CERCLA. See Section 6.18.
Closing Date. December 22, 1998, which is the date by which
all of the conditions set forth in Section 10 are to be
satisfied.
Code. The Internal Revenue Code of 1986, as amended and in
effect from time to time.
Completed Term Loan Request. A loan request accompanied by
all information required to be supplied under the applicable
provisions of Section 2.2.
Commitment. With respect to each Lender, the amount set
forth from time to time on Schedule 1 hereto as the amount of
such Lender's Commitments to make Loans to the Borrowers pursuant
to Section 2.
Commitment Percentage. With respect to each Lender, the
percentage set forth on Schedule 1 hereto as such Lender's
percentage of the Total Commitment and any changes thereto from
time to time.
Consolidated or consolidated. With reference to any term
defined herein, shall mean that term as applied to the accounts
of Sovran and its subsidiaries (including the Guarantors) or SALP
and its subsidiaries, as the case may be, consolidated in
accordance with GAAP.
Consolidated Adjusted EBITDA. For any period, an amount
equal to the consolidated net income of the Borrowers and their
respective Subsidiaries for such period, as determined in
accordance with GAAP, before deduction of (a) gains (or losses)
from the sale of real property or interests therein, debt
restructurings and other extraordinary items, (provided such
deduction shall not include extraordinary items that include
liquidated damages, compensatory damages or other obligations
arising out of a Borrower's default under an agreement to
purchase or lease Real Estate) (b) minority interest attributable
to a Borrower or a Guarantor and (c) income taxes; plus (x)
interest expense and (y) depreciation and amortization, minus a
recurring capital expense reserve in an amount equal to ten cents
($0.10) per net rentable square foot multiplied by the total net
rentable square feet of all Real Estate; all after adjustments
for unconsolidated partnerships, joint ventures and other
entities. The calculation of Consolidated Adjusted EBITDA shall
be adjusted as set forth in Section 9.13 hereof.
Consolidated Assumed Amortizing Debt Service Charges. As of
any date of determination, an amount equal to the assumed
interest and principal payments for an imputed six month period
on all Indebtedness of the Borrowers and their respective
Subsidiaries for borrowed money or in respect of reimbursement
obligations for letters of credit, guaranty obligations or
Capitalized Leases, whether direct or contingent, which is
outstanding on such date based upon a two hundred and forty (240)
month mortgage style amortization schedule and an annual interest
rate equal to the greater of (x) the sum of two percent (2%) plus
the imputed ten (10) year United States Treasury bill yield as of
such date based upon published quotes for Treasury bills having
ten (10) years to maturity and (y) 7.5%. For example, if the
imputed ten (10) year United States Treasury bill yield as of
such date were 6% and the total amount of Indebtedness of the
Borrowers and their respective Subsidiaries on such date were
$100,000, Consolidated Assumed Amortizing Debt Service Charges
would be equal to $5,019.
Consolidated Assumed Amortizing Unsecured Debt Service
Charges. As of any date of determination, an amount equal to the
assumed interest and principal payments for an imputed six month
period on all Unsecured Indebtedness of the Borrowers and their
respective Subsidiaries for borrowed money or in respect of
reimbursement obligations for letters of credit, guaranty
obligations or Capitalized Leases, whether direct or contingent,
which is outstanding on such date based upon a two hundred and
forty (240) month mortgage style amortization schedule and an
annual interest rate equal to the greater of (x) the sum of two
percent (2%) plus the imputed ten (10) year United States
Treasury bill yield as of such date based upon published quotes
for Treasury bills having ten (10) years to maturity and (y)
7.5%. For example, if the imputed ten (10) year United States
Treasury bill yield as of such date were 6% and the total amount
of Unsecured Indebtedness of the Borrowers and their respective
Subsidiaries on such date were $100,000, Consolidated Assumed
Amortizing Unsecured Debt Service Charges would be equal to
$5,019.
Consolidated Capitalized Value. As of any date of
determination, an amount equal to Consolidated Adjusted EBITDA
for the most recent two (2) completed fiscal quarters multiplied
by two (2), with the product being divided by ten and one-half
percent (10.5%). The calculation of Consolidated Capitalized
Value shall be adjusted as set forth in Section 9.13 hereof.
Consolidated Secured Indebtedness. As of any date of
determination, the aggregate principal amount of all Indebtedness
of the Borrowers and their respective Subsidiaries for borrowed
money or in respect of reimbursement obligations for letters of
credit, guaranty obligations or Capitalized Leases, whether
direct or contingent, which is outstanding at such date and which
is secured by a Lien on properties or other assets of such
Persons, without regard to Recourse.
Consolidated Tangible Net Worth. As of any date of
determination, the Consolidated Capitalized Value minus
Consolidated Total Liabilities.
Consolidated Total Liabilities. As of any date of
determination, all liabilities of the Borrowers and their
respective Subsidiaries determined on a consolidated basis in
accordance with GAAP and classified as such on the consolidated
balance sheet of the Borrowers and their respective Subsidiaries,
and all Indebtedness of the Borrowers and their respective
Subsidiaries, whether or not so classified. The calculation of
Consolidated Total Liabilities shall be adjusted as set forth in
Section 9.13 hereof.
Consolidated Unsecured Indebtedness. As of any date of
determination, the aggregate principal amount of all Unsecured
Indebtedness of the Borrowers and their respective Subsidiaries
for borrowed money or in respect of reimbursement obligations for
letters of credit, guaranty obligations or Capitalized Leases,
whether direct or contingent, which is outstanding at such date,
including without limitation the aggregate principal amount of
all the Obligations under this Agreement as of such date,
determined on a consolidated basis in accordance with GAAP,
without regard to Recourse.
Construction-In-Process. Any Real Estate for which any
Borrower, any Guarantor, any of the Borrowers' Subsidiaries or
any Partially-Owned Entity is actively pursuing construction,
renovation, or expansion of Buildings, all pursuant to such
Person's ordinary course of business.
Conversion Request. A notice given by the Borrower
Representative to the Agent of its election to convert or
continue a Term Loan in accordance with Section 2.6.
default. When used with reference to this Agreement or any
other Loan Document, any of the events or conditions specified in
Section 12.1, whether or not any requirement for the giving of
notice, the lapse of time or both, has been satisfied.
Default. As of the relevant time of determination, an event
or occurrence which:
(i) requires notice and time to cure to become an
Event of Default and as to which notice has been given
to the Borrowers by the Agent; or
(ii) has occurred and will become an Event of
Default (without notice) if such event remains uncured
after any grace period specified in Section 12.1 or, in
the case of matters referred to in Section 12.1(k), in
the other applicable Loan Document(s).
Disqualifying Building Event. Any structural or repair and
maintenance matter (other than a Release) as to any Building or
any Real Estate that in the Agent's reasonable opinion will
require the expenditure of $250,000 or more to remedy or complete
such matter and the remediation or completion of which is
required by prudent real estate ownership or operation.
Disqualifying Environmental Event. Any Release or
threatened Release of Hazardous Substances, any violation of
Environmental Laws or any other similar environmental event with
respect to a Real Estate that causes (y) the occupancy or rent of
such Real Estate to be adversely affected, as compared to what
otherwise would have been the occupancy or rent of such Real
Estate in the absence of such environmental event or (z) such
Real Estate to no longer be financeable on a secured, long-term
debt basis under the then generally accepted underwriting
standards of national institutional lenders.
Disqualifying Legal Event. Any violation or non-compliance
with any applicable law, statute, rule or regulation (other than
an Environmental Law) with respect to any Real Estate, which
requires cure or compliance for prudent real estate ownership or
operation.
Distribution. With respect to:
(i) SALP, any distribution of cash or other cash
equivalent, directly or indirectly, to the partners or
other equity interest holders of SALP; or any other
distribution on or in respect of any partnership
interests of SALP; and
(ii) Sovran, the declaration or payment of any
dividend on or in respect of any shares of any class of
capital stock of Sovran, other than dividends payable
solely in shares of common stock by Sovran; the
purchase, redemption, or other retirement of any shares
of any class of capital stock of Sovran, directly or
indirectly through a Subsidiary of Sovran or otherwise;
the return of capital by Sovran to its shareholders as
such; or any other distribution on or in respect of any
shares of any class of capital stock of Sovran.
Dollars or $. Dollars in lawful currency of the United
States of America.
Drawdown Date. The Closing Date and the Second Closing
Date.
Eligible Assignee. Any of (a) a commercial bank organized
under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of
$1,000,000,000; (b) a commercial bank organized under the laws of
any other country (including the central bank of such country)
which is a member of the Organization for Economic Cooperation
and Development (the "OECD"), or a political subdivision of any
such country, and having total assets in excess of
$1,000,000,000, provided that such bank is acting with respect to
this Agreement through a branch or agency located in the United
States of America and complies with the requirements set forth in
Section 4.1(c) hereof, and (c) a financial institution acceptable
to the Agent which is regularly engaged in making, purchasing or
investing in loans and having total assets in excess of
$1,000,000,000 and complies with the requirements set forth in
Section 4.1(c) hereof, to the extent applicable.
Employee Benefit Plan. Any employee benefit plan within the
meaning of Section 3(3) of ERISA maintained or contributed to by
any Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
Environmental Laws. See Section 6.18(a).
ERISA. The Employee Retirement Income Security Act of 1974,
as amended and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single
employer with any Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to
a Guaranteed Pension Plan within the meaning of Section 4043 of
ERISA and the regulations promulgated thereunder as to which the
requirement of notice has not been waived.
Eurocurrency Reserve Rate. For any day with respect to a
LIBOR Rate Loan, the weighted average of the rates (expressed as
a decimal) at which all of the Lenders subject thereto would be
required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements)
against "Eurocurrency Liabilities" (as that term is used in
Regulation D), if such liabilities were outstanding. The
Eurocurrency Reserve Rate shall be adjusted automatically on and
as of the effective date of any change in the Eurocurrency
Reserve Rate.
Event of Default. See Section 12.1.
Fee Letter. See Section 2.4(d).
Fleet. As defined in the preamble hereto.
Funds from Operations. With respect to any fiscal period of
the Borrowers, an amount, without double-counting, equal to the
consolidated net income of the Borrowers and their respective
Subsidiaries, as determined in accordance with GAAP, before
deduction of real estate related depreciation and amortization,
and excluding gains (or losses) from the sale of real property or
interests therein (provided such deduction shall not include
extraordinary items that include liquidated damages, compensatory
damages or other obligations arising out of a Borrower's default
under an agreement to purchase or lease Real Estate), debt
restructurings or other extraordinary items, and after
adjustments for unconsolidated partnerships, joint ventures or
other entities (such adjustments to be calculated to reflect
Funds from Operations on the same basis, to the extent that such
Funds from Operations attributable to unconsolidated
partnerships, joint ventures and other entities are not subject
to the claims of any other Person).
GAAP. Generally accepted accounting principles,
consistently applied.
Guaranteed Pension Plan. Any employee pension benefit plan
within the meaning of Section 3(2) of ERISA maintained or
contributed to by any Borrower or any Guarantor, as the case may
be, or any ERISA Affiliate of any of them the benefits of which
are guaranteed on termination in full or in part by the PBGC
pursuant to Title IV of ERISA, other than a Multiemployer Plan.
Guaranties. Collectively, the Holdings Guaranty and any
other guaranty of the Obligations made by an Affiliate of a
Borrower in favor of the Agent and the Lenders.
Guarantors. Collectively, Holdings and any other Affiliate
of a Borrower executing a Guaranty, provided, however, when the
context so requires, Guarantor shall refer to Holdings or such
Affiliate, as appropriate. Any Guarantor that is the owner of an
Unencumbered Property shall be a wholly-owned Subsidiary.
Provided further, however, from and after the release of the
Guaranty of any Subsidiary Guarantor pursuant to Section 5 below,
such Subsidiary Guarantor shall no longer be considered a
"Guarantor" for purposes of this Agreement.
Hazardous Substances. See Section 6.18(b).
Holdings. As defined in the preamble hereto.
Holdings Guaranty. The Guaranty dated as of the date hereof
made by Holdings in favor of the Agent and the Lenders pursuant
to which Holdings guarantees to the Agent and the Lenders the
unconditional payment and performance of the Obligations.
Indebtedness. With respect to any Person, all obligations,
contingent and otherwise, that in accordance with GAAP should be
classified upon such Person's balance sheet as liabilities,
including, without limitation, (a) all obligations for borrowed
money and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge,
negative pledge, security interest, lien, charge, or other
encumbrance existing on property owned or acquired subject
thereto, whether or not the liability secured thereby shall have
been assumed; (c) all obligations (i) under any Capitalized Lease
or (ii) under any lease (a "synthetic lease") which is treated as
an operating lease under GAAP and as a loan or financing for U.S.
income tax purposes or (iii) which are "off balance sheet"
transactions having the same practical effect as to such Person's
financial position as a transaction that would be a liability of
such Person on the balance sheet; (d) all obligations to
purchase, redeem, retire, or otherwise acquire for value any
shares of capital stock of any class issued by such Person or any
rights to acquire such shares; (e) all obligations under any
forward contract, futures contract, swap, option or other
financing arrangement, the value of which is dependent upon
interest rates, currency exchange rates, commodities, any
Borrower's or Guarantor's present or future beneficial interest,
shares or security trading value, or other indices; (f) the
amount of payments received by such person in any forward equity
transaction by which such payments are received by such Person in
consideration for the sale of stock or partnership units in such
Person when the delivery and/or the determination of the amount
of the stock or units so sold occurs later than one (1) month
after such Person receives such payment, but only to the extent
that the obligation to deliver such stock or units is not payable
solely in the stock or units of such Person; and (g) all
guarantees for borrowed money, endorsements and other contingent
obligations, whether direct or indirect, in respect of
indebtedness or obligations of others, including any obligation
to supply funds (including partnership obligations and capital
requirements) to or in any manner to invest in, directly or
indirectly, the debtor, to purchase indebtedness, or to assure
the owner of indebtedness against loss, through an agreement to
purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the indebtedness held by such owner
or otherwise, and the reimbursement obligations in respect of any
letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person. The calculation of
Indebtedness of any Person shall be adjusted as set forth in
Section 9.13.
Indemnified Lender's(s') Group. See Section 16.
Interest Payment Date. The last day of each calendar month.
Interest Period. With respect to each Loan, (a) initially,
the period commencing on the Drawdown Date of such Loan and
ending on the last day of one of the following periods (as
selected by the Borrowers in a Completed Term Loan Request or as
otherwise in accordance with the terms of this Agreement): (i)
for any Prime Rate Loan, the last day of the calendar month, and
(ii) for any LIBOR Rate Loan, 1, 2, 3, or 6 months (provided that
(x) the Interest Period for LIBOR Rate Loans may be shorter than
1 month in order to consolidate 2 LIBOR Rate Loans and (y) the
Interest Period for all LIBOR Rate Loans shall be 1 month until
the earlier of January 15, 1999 or the Second Closing Date if the
Total Commitment is less than $75,000,000.00 on the Closing
Date); and (b) thereafter, each period commencing at the end of
the last day of the immediately preceding Interest Period
applicable to such Loan and ending on the last day of the
applicable period set forth in (a) above as selected by the
Borrowers in a Conversion Request or as otherwise in accordance
with this Agreement; provided that all of the foregoing
provisions relating to Interest Periods are subject to the
following:
(A) if any Interest Period with respect to a Prime
Rate Loan would end on a day that is not a Business Day,
that Interest Period shall end on the next succeeding
Business Day;
(B) if any Interest Period with respect to a LIBOR
Rate Loan would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the
next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the immediately preceding Business Day;
(C) if the Borrowers shall fail to give notice of
conversion or continuation as provided in Section 2.6, the
Borrowers shall be deemed to have requested a conversion of
the affected LIBOR Rate Loan into a Prime Rate Loan on the
last day of the then current Interest Period with respect
thereto;
(D) any Interest Period relating to any LIBOR Rate
Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall, subject to subparagraph (E) below,
end on the last Business Day of a calendar month; and
(E) any Interest Period that would otherwise extend
beyond the Maturity Date shall end on the Maturity Date.
Investments. All expenditures made and all liabilities
incurred (contingently or otherwise, but without double-
counting): (i) for the acquisition of stock, partnership or other
equity interests or Indebtedness of, or for loans, advances,
capital contributions or transfers of property to, any Person;
and (ii) for the acquisition of any other obligations of any
Person. In determining the aggregate amount of Investments
outstanding at any particular time: (a) there shall be included
as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such
interest is paid; (b) there shall be deducted in respect of each
such Investment any amount received as a return of capital (but
only by repurchase, redemption, retirement, repayment,
liquidating dividend or liquidating distribution); (c) there
shall not be deducted in respect of any Investment any amounts
received as earnings on such Investment, whether as dividends,
interest or otherwise, except that accrued interest included as
provided in the foregoing clause (a) may be deducted when paid;
and (d) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
Joint Venture Ownership Interest Value. As of any date of
determination, an amount equal to the pro rata share of
Consolidated EBITDA attributable to the Borrowers from Partially-
Owned Entities for the most recent two (2) completed fiscal
quarters multiplied by two (2), with the product being divided by
ten and one-half percent (10.5%).
Leases. Leases, licenses and agreements, whether written or
oral, relating to the use or occupation of space in or on the
Buildings or on the Real Estate by persons other than the
Borrower, its Subsidiaries or any Partially-Owned Entity.
Lenders. Collectively, Fleet, any other lenders which may
provide additional commitments and become parties to this
Agreement, and any other Person who becomes an assignee of any
rights of a Lender pursuant to Section 18 or a Person who
acquires all or substantially all of the stock or assets of a
Lender.
LIBOR Breakage Costs. With respect to any LIBOR Rate Loan
to be prepaid or not drawn after elected, a prepayment "breakage"
fee in an amount determined by the Agent in the following manner:
(i) First, the Agent shall determine the amount
by which (a) the total amount of interest which would
have otherwise accrued hereunder on each installment of
principal prepaid or not so drawn, during the period
beginning on the date of such prepayment or failure to
draw and ending on the last day of the applicable LIBOR
Rate Loan Interest Period (the "Reemployment Period"),
exceeds (b) the total amount of interest which would
accrue, during the Reemployment Period, on any readily
marketable bond or other obligation of the United
States of America designated by the Agent in its sole
discretion at or about the time of such payment, such
bond or other obligation of the United States of
America to be in an amount equal (as nearly as may be)
to the amount of principal so paid or not drawn after
elected and to have maturity at the end of the
Reemployment Period, and the interest to accrue thereon
to take account of amortization of any discount from
par or accretion of premium above par at which the same
is selling at the time of designation. Each such
amount is hereinafter referred to as an "Installment
Amount".
(ii) Second, each Installment Amount shall be
treated as payable on the last day of the LIBOR Rate
Loan Interest Period which would have been applicable
had such principal installment not been prepaid or not
borrowed.
(iii) Third, the amount to be paid on each such
breakage date shall be the present value of the
Installment Amount determined by discounting the amount
thereof from the date on which such Installment Amount
is to be treated as payable, at the same yield to
maturity as that payable upon the bond or other
obligation of the United States of America designated
as aforesaid by the Agent.
If by reason of an Event of Default the Agent
elects to declare a LIBOR Rate Loan to be immediately
due and payable, then any breakage fee with respect to
such LIBOR Rate Loan shall become due and payable in
the same manner as though the Borrowers had exercised
such right of prepayment.
LIBOR Business Day. Any day on which commercial banks are
open for international business (including dealings in Dollar
deposits) in London or such other eurodollar interbank market as
may be selected by the Agent in its sole discretion acting in
good faith.
LIBOR Rate. For any Interest Period with respect to a LIBOR
Rate Loan, the rate of interest per annum (rounded upward, if
necessary, to the nearest 1/32 of one percent) as determined on
the basis of the offered rates for deposits in Dollars for a
period of time comparable to such Interest Period which appears
on the Telerate page 3750 (or such other page as may replace that
page on the Telerate service) as of 11:00 a.m. London time on the
date that is two (2) LIBOR Business Days prior to the beginning
of such Interest Period; provided, however, if the rate described
above does not appear on the Telerate System on any applicable
interest determination date, the LIBOR Rate shall be the rate
(rounded upwards as described above, if necessary) for deposits
in Dollars for a period of time substantially equal to the
Interest Period which appears on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the
purpose of displaying such rates), as of 11:00 a.m. London time
on the date that is two (2) LIBOR Business Days prior to the
beginning of such Interest Period.
If both the Telerate and Reuters systems are unavailable,
then the rate for that date will be determined on the basis of
the offered rates for deposits in Dollars for a period of time
comparable to the Interest Period which are offered by four major
banks in the London interbank market at approximately 11:00 a.m.
London time on the date that is two (2) LIBOR Business Days prior
to the beginning of such Interest Period as selected by the
Agent. The principal London office of each of the four major
London banks will be requested to provide a quotation of its
Dollar deposit offered rate. If at least two such quotations are
provided, the rate for that date will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as
requested, the rate for that date will be determined on the basis
of the rates quoted for loans in Dollars to leading European
banks for a period of time comparable to the Interest Period by
major banks in New York City at approximately 11:00 a.m. New York
City time on the date that is two (2) LIBOR Business Days prior
to the beginning of such Interest Period. In the event that the
Agent is unable to obtain any quotation as provided above, it
will be deemed that the LIBOR Rate cannot be determined.
In the event that the Board of Governors of the Federal
Reserve System shall impose a reserve requirement with respect to
LIBOR deposits of the Lenders, then for any period during which
such reserve requirement shall apply, the LIBOR Rate shall be
equal to the amount determined above divided by an amount equal
to one (1.00) minus the Eurocurrency Reserve Rate.
LIBOR Rate Loan(s). Those Loans bearing interest calculated
by reference to the LIBOR Rate.
Lien. See Section 8.2.
Loan Documents. Collectively, this Agreement, the Notes,
the Guaranties, the Fee Letter and any and all other agreements,
instruments or documents now or hereafter evidencing or otherwise
relating to the Loans and executed or delivered by or on behalf
of any Borrower or its Subsidiaries or any Guarantor or its
Subsidiaries in connection with the Term Loan, or referred to
herein or therein and delivered to the Agent or the Lenders by or
on behalf of any Borrower, any Guarantor or any of their
respective Subsidiaries, and all schedules, exhibits and annexes
hereto or thereto, as the same may from time to time be amended
and in effect, and any other document identified thereon as a
"Loan Document" under this Agreement.
Loan(s). The Term Loan or any portion thereof.
Maturity Date. December 22, 2000, or such earlier date on
which the Term Loan shall become due and payable pursuant to the
terms thereof.
Multiemployer Plan. Any multiemployer plan within the
meaning of Section 3(37) of ERISA maintained or contributed to by
any Borrower or any Guarantor as the case may be or any ERISA
Affiliate.
Notes. The Term Notes.
Obligations. All indebtedness, obligations and liabilities
of the Borrowers and their Subsidiaries to any of the Lenders and
the Agent, individually or collectively, under this Agreement or
any of the other Loan Documents or in respect of any of the Loans
or the Notes or other instruments at any time evidencing any
thereof, whether existing on the date of this Agreement or
arising or incurred hereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated
or unliquidated, secured or unsecured, arising by contract,
operation of law or otherwise.
Operating Subsidiaries. Any Subsidiaries of a Borrower
that, at any time of reference, provide management, construction,
design or other services (excluding any such Subsidiary which may
provide any such services which are only incidental to that
Subsidiary's ownership of one or more Real Estate).
Partially-Owned Entity(ies). Any of the partnerships, joint
ventures and other entities owning real estate assets in which
SALP and/or Sovran collectively, directly or indirectly through
its full or partial ownership of another entity, own less than
100% of the equity interests, whether or not such entity is
required in accordance with GAAP to be consolidated with Sovran
for financial reporting purposes.
PBGC. The Pension Benefit Guaranty Corporation created by
Section 4002 of ERISA and any successor entity or entities having
similar responsibilities.
Permits. All governmental permits, licenses, and approvals
necessary or useful for the lawful operation and maintenance of
the Real Estate.
Permitted Liens. Liens, security interests and other
encumbrances permitted by Section 8.2.
Person. Any individual, corporation, partnership, trust,
unincorporated association, business, or other legal entity, and
any government (or any governmental agency or political
subdivision thereof).
Preferred Dividends. Any dividend, distribution,
redemption, or payment upon liquidation paid to one class of
stockholders of the capital stock of any Person in priority to
that to be paid to any other class of stockholders of the capital
stock of such Person.
Prime Rate. The higher of (a) the variable annual rate of
interest designated from time to time by Fleet at its head office
in Boston, Massachusetts as its "prime rate" (which is a
reference rate and does not necessarily represent the lowest or
best rate being charged to any customer) or (b) one half of one
percent (1/2%) above the overnight Federal Funds effective rate
as published by the Board of Governors of the Federal Reserve
System, as in effect from time to time. Any change in the Prime
Rate during an Interest Period shall result in a corresponding
change on the same day in the rate of interest accruing from and
after such day on the unpaid balance of principal of the Prime
Rate Loan, if any, applicable to such Interest Period, effective
on the day of such change in the Prime Rate.
Prime Rate Loan. A Loan bearing interest calculated by
reference to the Prime Rate.
RCRA. See Section 6.18.
Real Estate. The fixed and tangible properties consisting
of land, buildings and/or other improvements owned by any
Borrower, by any Guarantor or by any other entity in which a
Borrower is the holder of an equity interest at the relevant time
of reference thereto, including, without limitation, (i) the
Unencumbered Properties at such time of reference, and (ii) the
real estate assets owned by each of the Partially-Owned Entities
at such time of reference.
Record. The grid attached to any Note, or the continuation
of such grid, or any other similar record, including computer
records, maintained by any Lender with respect to any Loan.
Recourse. With reference to any obligation or liability,
any liability or obligation that is not Without Recourse to the
obligor thereunder, directly or indirectly. For purposes hereof,
a Person shall not be deemed to be "indirectly" liable for the
liabilities or obligations of an obligor solely by reason of the
fact that such Person has an ownership interest in such obligor,
provided that such Person is not otherwise legally liable,
directly or indirectly, for such obligor's liabilities or
obligations (e.g., by reason of a guaranty or contribution
obligation, by operation of law or by reason of such Person's
being a general partner of such obligor).
REIT. A "real estate investment trust", as such term is
defined in Section 856 of the Code.
Release. See Section 6.18(c)(iii).
Required Lenders. As of any date, the Lenders whose
aggregate Commitments constitute at least sixty-six and two-
thirds percent (66 2/3%) of the Total Commitment.
Revolving Credit Agreement: The Revolving Credit Agreement
dated as of February 20, 1998, by and among the Borrowers, Fleet
and the other banks party thereto, and Fleet, as Administrative
Agent, without giving effect to any amendment, modification or
waiver on or after the date hereof.
SALP. As defined in the preamble hereto.
SARA. See Section 6.18.
SEC. The United States Securities and Exchange Commission.
SEC Filings. Collectively, (a) Sovran's Annual Report on
Form 10-K for the year ended December 31, 1997, filed with the
SEC pursuant to the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), (b) Sovran's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998, filed with
the SEC pursuant to the Exchange Act and (c) Sovran's Current
Report on Form 8-K, dated August 12, 1998, filed with the SEC
pursuant to the Exchange Act, including all amendments thereto.
Second Closing Date. See Section 2.2.
Sovran. As defined in the preamble hereto.
subsidiary. Any entity required to be consolidated with its
direct or indirect parent in accordance with GAAP.
Subsidiary. Any corporation, association, partnership,
trust, or other business entity of which the designated parent
shall at any time own directly or indirectly through a Subsidiary
or Subsidiaries at least a majority (by number of votes or
controlling interests) of the outstanding voting interests or at
least a majority of the economic interests (including, in any
case, the Operating Subsidiaries and any entity required to be
consolidated with its designated parent in accordance with GAAP).
Subsidiary Guarantor. Any Guarantor other than Holdings.
Subsidiary Guaranty. The form of Guaranty to be entered
into by any Subsidiary Guarantor substantially in the form of
Exhibit B hereto.
Term Loan. The Term Loan made or to be made by the Lenders
to the Borrowers pursuant to Section 2.
Term Note Record. A Record with respect to a Term Note.
Term Notes. Collectively, the separate promissory notes of
the Borrowers in favor of each Lender in substantially the form
of Exhibit A hereto, in the aggregate principal amount of up to
$75,000,000, dated as of the date hereof and/or as of the Second
Closing Date or as of such later date as any Person becomes a
Lender under this Agreement, and completed with appropriate
insertions, as each of such notes may be amended and/or restated
from time to time.
Title Policies. For each Unencumbered Property, an ALTA
standard form title policy (or, if such form is not available, an
equivalent form of title insurance policy) issued by a
nationally-recognized title insurance company, insuring that a
Borrower or a Subsidiary Guarantor holds good and clear
marketable fee simple title to such Unencumbered Property,
subject only to Permitted Liens.
Total Commitment. As of any date, the sum of the then-
current Commitments of the Lenders, provided that the Total
Commitment shall not exceed $75,000,000 or, in the event that the
Second Closing Date occurs on or before January 15, 1999,
$75,000,000 or such lesser amount as shall be the sum of the
Commitments of the Lenders as of the Second Closing Date.
Tower Lease. A Lease with a communication carrier or a
tower development firm pursuant to which such carrier or firm
will occupy a portion of a self-storage property for the purpose
of using and/or constructing a monopole or tower thereon to which
will be attached communications equipment and antennae, provided
that any such Lease shall contain a relocation clause permitting
relocation of the demised premises on the Real Estate site where
the demised premises are located to allow re-use or
re-development of such Real Estate site, and further provided
that such relocation clause shall not be required (i) in any
Tower Lease in existence as of the date hereof, or (ii) in any
pre-existing Tower Lease on Real Estate hereinafter acquired.
Type. As to any Loan, its nature as a Prime Rate Loan or a
LIBOR Rate Loan.
Unanimous Lender Approval. The written consent of each
Lender that is a party to this Agreement at the time of
reference.
Unencumbered Property. Any Real Estate located in the
contiguous United States that on any date of determination: (a)
is not subject to any Liens (including any such Lien imposed by
the organizational documents of the owner of such asset, but
excluding Permitted Liens), (b) is not the subject of any matter
that materially adversely affects the value of such Real Estate,
(c) is not the subject of a Disqualifying Environmental Event, a
Disqualifying Building Event or a Disqualifying Legal Event, (d)
has been improved with a Building or Buildings which (1) have
been issued a certificate of occupancy (where available) or is
otherwise lawfully occupied for its intended use, (2) are fully
operational and (3) have an average rent-paying occupancy rate
(by net rentable square feet) of at least 75% for the two most
recently ended consecutive fiscal quarters, (e) is wholly owned
by a Borrower or a Guarantor that is a wholly-owned Subsidiary
and (f) has not been designated by the Borrowers in writing to
the Agent as Real Estate that is not an Unencumbered Property
because of a Disqualifying Environmental Event, a Disqualifying
Building Event or a Disqualifying Legal Event or the Borrower's
intention to subject such Unencumbered Property to an
Indebtedness Lien or Sell such Unencumbered Property pursuant to
Section 8.4(b) hereof, which designation shall not be permitted
during the continuance of a Default (other than if such
designation during a Default is made in conjunction with such
Real Estate's being the subject of a Sale or Indebtedness Lien
under Section 8.4(b)(ii) and in compliance therewith) or an Event
of Default and shall be accompanied by a compliance certificate
in the form of Exhibit D attached hereto.
Unhedged Variable Rate Debt. All Indebtedness of the
Borrowers and their respective Subsidiaries for borrowed money or
in respect of reimbursement obligations for letters of credit,
guaranty obligations or Capitalized Leases, whether direct or
contingent, including, to the extent applicable, the Obligations,
which bears interest at one or more variable rates and is not
subject to an interest rate hedging arrangement having a minimum
term of one (1) year and having other terms reasonably acceptable
to the Agent.
Unimproved Land. Any Real Estate consisting of raw land
which is unimproved by Buildings.
Unsecured Indebtedness. All Indebtedness of any Person that
is not secured by a Lien on any asset of such Person.
Up-Front Fee. See Section 2.4(d).
wholly-owned Subsidiary. Any Subsidiary of which Sovran
and/or SALP shall at any time own directly or indirectly through
a Subsidiary or Subsidiaries at least a majority (by number of
votes or controlling interests) of the outstanding voting
interests and one hundred percent (100%) of the economic
interests, of which at least ninety-nine percent (99%) of the
economic interests shall be owned by SALP.
Without Recourse or without recourse. With reference to any
obligation or liability, any obligation or liability for which
the obligor thereunder is not liable or obligated other than as
to its interest in a designated Real Estate or other specifically
identified asset only (which asset is not interests in another
Person), subject to such limited exceptions to the non-recourse
nature of such obligation or liability, such as fraud,
misappropriation, misapplication and environmental indemnities,
as are usual and customary in like transactions involving
institutional lenders at the time of the incurrence of such
obligation or liability.
Section 1.2. Rules of Interpretation.
(i) A reference to any document or agreement
shall include such document or agreement as amended,
modified or supplemented from time to time in
accordance with its terms or the terms of this
Agreement.
(ii) The singular includes the plural and the
plural includes the singular.
(iii) A reference to any law includes any amendment
or modification to such law.
(iv) A reference to any Person includes its
permitted successors and permitted assigns.
(v) Accounting terms not otherwise defined herein
have the meanings assigned to them by GAAP applied on a
consistent basis by the accounting entity to which they
refer.
(vi) The words "include", "includes" and
"including" are not limiting.
(vii) All terms not specifically defined herein or
by GAAP, which terms are defined in the Uniform
Commercial Code as in effect in New York, have the
meanings assigned to them therein.
(viii) Reference to a particular "Section " refers
to that section of this Agreement unless otherwise
indicated.
(ix) The words "herein", "hereof", "hereunder" and
words of like import shall refer to this Agreement as a
whole and not to any particular section or subdivision
of this Agreement.
(x) Any provision granting any right to any
Borrower or Guarantor during the continuance of (a) an
Event of Default shall not modify, limit, waive or
estop the rights of the Lenders during the continuance
of such Event of Default, including the rights of the
Lenders to accelerate the Loans under Section 12.1 and
the rights of the Lenders under Section 12.3, or (b) a
Default, shall not extend the time for curing same or
modify any otherwise applicable notice regarding same.
Section 2. THE TERM LOAN FACILITY.
Section 2.1. Commitment to Lend. Subject to the terms and
conditions set forth in this Agreement, each of the Lenders
severally agrees to lend to the Borrowers on the Closing Date an
amount equal to such Lender's Commitment Percentage of the Term
Loan. All of the Term Loan shall be borrowed on the Closing Date
except as provided in Section 2.2.
Section 2.2. Increase of Total Commitment. In the event
that the Total Commitment is less than $75,000,000 on the Closing
Date and provided no Default or Event of Default has occurred and
is continuing, the Agent shall use commercially reasonable
efforts between the Closing Date and January 15, 1999, to locate
additional lenders willing to hold Commitments to increase the
Total Commitment up to $75,000,000. In the event that the Agent
shall give notice by January 15, 1999 to the Borrowers as to its
location of such lenders (including any existing Lender that
might increase its Commitment), the Borrower Representative shall
submit within one (1) business day a Completed Term Loan Request
in the form of Exhibit G (a "Completed Term Loan Request") to the
Agent, which shall set a date for a second closing (the "Second
Closing Date") to occur within five (5) Business Days of the
receipt by the Agent of the Completed Term Loan Request. Upon
the Second Closing Date, the Agent shall be authorized (i) to
increase the Total Commitment to the amount specified in the
Agent's notice (not to exceed $75,000,000), (ii) to add any new
lender(s) to Schedule 1, (iii) to adjust the existing Lenders'
Commitment Percentages accordingly, (iv) to cause the Borrowers
to issue new Notes to the new or increased Commitment Lender(s),
and (v) to make such other changes to the Loan Documents as may
be necessary to reflect the change in Total Commitment and the
occurrence of the Second Closing Date. The Borrowers shall pay
to the Agent any additional fees due under the Fee Letter, any
LIBOR Brokerage Costs and all other Agent and Lender costs and
expenses of the increased Commitments and the occurrence of the
Second Closing Date, including the reasonable fees and expenses
of Agent's counsel.
The occurrence of the Second Closing Date pursuant to this
Section 2.2 hereof shall constitute a representation and warranty
by the Borrowers that the conditions set forth in Section 10 have
been satisfied as of the Closing Date and that the conditions set
forth in Section 11 have been satisfied as of the Second Closing
Date, provided that the making of such representation and
warranty by the Borrowers shall not limit the right of any Lender
not to lend if such conditions have not been met.
Section 2.3. The Term Notes. The Term Loan shall be
evidenced by the Term Notes. A Term Note shall be payable to the
order of each Lender in an aggregate principal amount equal to
such Lender's Commitment Percentage of the Term Loan. The
Borrowers irrevocably authorize each Lender to make or cause to
be made at or about the time of such Lender's receipt of any
payment of principal on such Lender's Term Note an appropriate
notation on such Lender's Term Note of the receipt of such
payment. The outstanding amount of the Term Loan set forth on
such Lender's Term Note Record shall be prima facie evidence of
the principal amount thereof owing and unpaid to such Lender, but
the failure to record, or any error in so recording, any such
amount on such Lender's Term Note Record shall not limit or
otherwise affect the obligations of the Borrowers hereunder or
under any Term Note to make payments of principal of or interest
on any Term Note when due. Upon receipt of an affidavit of an
officer of any Lender as to the loss, theft, destruction or
mutilation of any Term Note or any other security document which
is not of public record, and, in the case of any such loss,
theft, destruction or mutilation, upon surrender and cancellation
of such Term Note or other security document, the Borrowers will
issue, in lieu thereof, a replacement Term Note or other security
document in the same principal amount thereof and otherwise of
like tenor.
Section 2.4. Interest on Term Loan; Fees.
(a) Interest on Prime Rate Loans. Each Prime Rate
Loan shall bear interest for the period commencing with the
date of such Loan or conversion and ending on the last day
of the Interest Period with respect thereto (unless earlier
paid in accordance with Section 2.9) at a rate equal to the
Prime Rate plus the Applicable Margin for Prime Rate Loans.
(b) Interest on LIBOR Rate Loans. Each LIBOR Rate
Loan shall bear interest for the period commencing with the
date of such Loan or conversion and ending on the last day
of the Interest Period with respect thereto (unless earlier
paid in accordance with Section 2.9) at a rate equal to the
LIBOR Rate determined for such Interest Period plus the
Applicable Margin for LIBOR Rate Loans.
(c) Interest Payments. The Borrowers jointly and
severally unconditionally promise to pay interest on the
Term Loan in arrears on each Interest Payment Date with
respect thereto.
(d) Fees. The Borrowers jointly and severally agree
to pay to the Agent an administrative agent fee (the
"Administrative Agent Fee"), an arrangement fee (the
"Arrangement Fee") and an up-front fee (the "Up-Front Fee"),
as set forth in that certain letter agreement dated as of
November 10, 1998, between the Borrower Representative and
the Agent (the "Fee Letter").
Section 2.5. Intentionally Omitted.
Section 2.6. Conversion Options.
(a) The Borrowers may elect from time to time by
written notice in the form of Exhibit C (a "Conversion
Request") to convert the outstanding Term Loan to a Loan of
another Type, provided that (i) with respect to any such
conversion of a LIBOR Rate Loan to a Prime Rate Loan, the
Borrower Representative shall give the Agent at least three
(3) Business Days prior written notice of such election;
(ii) with respect to any such conversion of a Prime Rate
Loan to a LIBOR Rate Loan, the Borrower Representative shall
give the Agent at least four (4) LIBOR Business Days prior
written notice of such election; (iii) with respect to any
such conversion of a LIBOR Rate Loan into a Prime Rate Loan,
such conversion shall only be made on the last day of the
Interest Period with respect thereto unless the Borrowers
pay the related LIBOR Breakage Costs at the time of such
conversion and (iv) no Loan may be converted into a LIBOR
Rate Loan when any Default or Event of Default has occurred
and is continuing. Each Conversion Request relating to the
conversion of a Prime Rate Loan to a LIBOR Rate Loan shall
be irrevocable by the Borrowers.
(b) Any Term Loan of any Type may be continued as such
upon the expiration of the Interest Period with respect
thereto (i) in the case of a Prime Rate Loan, automatically
and (ii) in the case of LIBOR Rate Loans by compliance by
the Borrower Representative with the notice provisions
contained in Section 2.6(a); provided that no LIBOR Rate
Loan may be continued as such when any Default or Event of
Default has occurred and is continuing but shall be
automatically converted to a Prime Rate Loan on the last day
of the first Interest Period relating thereto ending during
the continuance of any Default or Event of Default. The
Agent shall notify the Lenders promptly when any such
automatic conversion contemplated by this Section 2.6(b) is
scheduled to occur.
(c) In the event that the Borrower Representative does
not notify the Agent of its election hereunder with respect
to the continuation of any LIBOR Rate Loan as such, the
affected LIBOR Rate Loan shall automatically be converted to
a Prime Rate Loan at the end of the applicable Interest
Period.
Section 2.7. [intentionally omitted]
Section 2.8. Repayment of the Term Loan at Maturity. The
Borrowers jointly and severally promise to pay on the Maturity
Date, and there shall become absolutely due and payable on the
Maturity Date, all unpaid principal of the Term Loan outstanding
on such date, together with any and all accrued and unpaid
interest thereon, the unpaid balance of the Administrative Agent
Fee accrued through such date, and any and all other unpaid
amounts due under this Agreement, the Term Notes or any other of
the Loan Documents.
Section 2.9. Optional Repayments of Term Loan. The
Borrowers shall have the right, at their election, to prepay the
outstanding amount of the Term Loan, in whole or in part, at any
time without penalty or premium; provided that the outstanding
amount of any LIBOR Rate Loans may not be prepaid unless the
Borrowers pay any LIBOR Breakage Costs for each LIBOR Rate Loan
so prepaid at the time of such prepayment. The Borrower
Representative shall give the Agent, no later than 10:00 a.m.,
New York City time, at least two (2) Business Days' prior written
notice of any prepayment pursuant to this Section 2.9 of any
Prime Rate Loans, and at least four (4) LIBOR Business Days'
notice of any proposed prepayment pursuant to this Section 2.9 of
LIBOR Rate Loans, specifying the proposed date of prepayment of
Term Loan and the principal amount to be prepaid. Each such
partial prepayment of the Term Loans shall be in an amount of
$10,000,000 or integral multiple of $500,000 in excess thereof,
or, if less, shall be accompanied by the payment of all charges
outstanding on the Term Loan and of all accrued interest on the
principal prepaid to the date of payment, and shall be applied,
in the absence of instruction by the Borrower Representative,
first to the principal of Prime Rate Loans and then to the
principal of LIBOR Rate Loans, at the Agent's option. No amount
of the Term Loan that is prepaid may be re-borrowed.
Section 3. INTENTIONALLY OMITTED.
Section 4. CERTAIN GENERAL PROVISIONS.
Section 4.1. Funds for Payments.
(a) All payments of principal, interest, fees, and any
other amounts due hereunder or under any of the other Loan
Documents shall be made to the Agent, for the respective
accounts of the Lenders or (as the case may be) the Agent,
at the Agent's Head Office, in each case in Dollars and in
immediately available funds.
(b) All payments by the Borrowers hereunder and under
any of the other Loan Documents shall be made without setoff
or counterclaim and free and clear of and without deduction
for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory liens, restrictions or
conditions of any nature now or hereafter imposed or levied
by any jurisdiction or any political subdivision thereof or
taxing or other authority therein unless the Borrowers are
compelled by law to make such deduction or withholding. If
any such obligation is imposed upon the Borrowers with
respect to any amount payable by them hereunder or under any
of the other Loan Documents, the Borrowers shall pay to the
Agent, for the account of the Lenders or (as the case may
be) the Agent, on the date on which such amount is due and
payable hereunder or under such other Loan Document, such
additional amount in Dollars as shall be necessary to enable
the Lenders to receive the same net amount which the Lenders
would have received on such due date had no such obligation
been imposed upon the Borrowers. The Borrower
Representative will deliver promptly to the Agent
certificates or other valid vouchers for all taxes or other
charges deducted from or paid with respect to payments made
by the Borrowers hereunder or under such other Loan
Document.
(c) Each Lender that is not incorporated or organized
under the laws of the United States of America or a state
thereof or the District of Columbia (a "Non-U.S. Lender")
agrees that, prior to the first date on which any payment is
due to it hereunder, it will deliver to the Borrower
Representative and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in
each case that such Non-U.S. Lender is entitled to receive
payments under this Agreement and the Notes payable to it,
without deduction or withholding of any United States
federal income taxes. Each Non-U.S. Lender that so delivers
a Form 1001 or 4224 pursuant to the preceding sentence
further undertakes to deliver to each of the Borrower
Representative and the Agent two further copies of Form 1001
or 4224 or successor applicable form, or other manner of
certification, as the case may be, on or before the date
that any such letter or form expires or becomes obsolete or
after the occurrence of any event requiring a change in the
most recent form previously delivered by it to the Borrower
Representative, and such extensions or renewals thereof as
may reasonably be requested by the Borrower Representative,
certifying in the case of a Form 1001 or 4224 that such Non-
U.S. Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of
any United States federal income taxes, unless in any such
case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent
such Non-U.S. Lender from duly completing and delivering any
such form with respect to it and such Non-U.S. Lender
advises the Borrower Representative that it is not capable
of receiving payments without any deduction or withholding
of United States federal income tax.
(d) The Borrowers shall not be required to pay any
additional amounts to any Non-U.S. Lender in respect of
United States Federal withholding tax pursuant to Section
4.1(b) to the extent that (i) the obligation to withhold
amounts with respect to United States Federal withholding
tax existed on the date such Non-U.S. Lender became a party
to this Agreement or, with respect to payments to a
different lending office designated by the Non-U.S. Lender
as its applicable lending office (a "New Lending Office"),
the date such Non-U.S. Lender designated such New Lending
Office with respect to the Loans; provided, however, that
this clause (i) shall not apply to any transferee or New
Lending Office as a result of an assignment, transfer or
designation made at the request of the Borrowers; and
provided further, however, that this clause (i) shall not
apply to the extent the indemnity payment or additional
amounts any transferee, or Lender through a New Lending
Office, would be entitled to receive without regard to this
clause (i) do not exceed the indemnity payment or additional
amounts that the Person making the assignment or transfer to
such transferee, or Lender making the designation of such
New Lending Office, would have been entitled to receive in
the absence of such assignment, transfer or designation; or
(ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to
comply with the provisions of paragraph (c) above.
Section 4.2. Computations. All computations of interest on
the Loans and of other fees to the extent applicable shall be
made on the basis of a 360-day year and the actual number of days
elapsed. Except as otherwise provided in the definition of the
term "Interest Period" with respect to LIBOR Rate Loans, whenever
a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business
Day, and interest shall accrue during such extension. The
outstanding amount of the Loans as reflected on the Term Note
Records from time to time shall constitute prima facie evidence
of the principal amount thereof.
Section 4.3. Inability to Determine LIBOR Rate. In the
event, prior to the commencement of any Interest Period relating
to any LIBOR Rate Loan, the Agent shall reasonably determine that
adequate and reasonable methods do not exist for ascertaining the
LIBOR Rate that would otherwise determine the rate of interest to
be applicable to any LIBOR Rate Loan during any Interest Period,
the Agent shall forthwith give notice of such determination
(which shall be conclusive and binding on the Borrowers) to the
Borrower Representative and the Lenders. In such event (a) any
Conversion Request with respect to a LIBOR Rate Loan shall be
automatically withdrawn and shall be deemed a request for a Prime
Rate Loan, (b) each LIBOR Rate Loan will automatically, on the
last day of the then current Interest Period thereof, become a
Prime Rate Loan, and (c) the obligations of the Lenders to make
LIBOR Rate Loans on the Closing Date or the Second Closing Date
shall be suspended until the Agent reasonably determines that the
circumstances giving rise to such suspension no longer exist,
whereupon the Agent shall so notify the Borrower Representative
and the Lenders.
Section 4.4. Illegality. Notwithstanding any other
provisions herein, if any present or future law, regulation,
treaty or directive or in the interpretation or application
thereof shall make it unlawful for any Lender to make on the
Closing Date or the Second Closing Date or maintain LIBOR Rate
Loans, such Lender shall forthwith give notice of such
circumstances to the Borrower Representative and the other
Lenders and thereupon (a) the commitment of such Lender to make
on the Closing Date or the Second Closing Date LIBOR Rate Loans
or convert Prime Rate Loans to LIBOR Rate Loans shall forthwith
be suspended and (b) such Lender's Commitment Percentage of the
LIBOR Rate Loan then outstanding shall be converted automatically
to a Prime Rate Loan on the last day of each Interest Period
applicable to such LIBOR Rate Loan or within such earlier period
as may be required by law, all until such time as it is no longer
unlawful for such Lender to make or maintain LIBOR Rate Loans.
The Borrowers hereby jointly and severally agree to promptly pay
the Agent for the account of such Lender, upon demand, any
additional amounts necessary to compensate such Lender for any
costs incurred by such Lender in making any conversion required
by this Section 4.4 prior to the last day of an Interest Period
with respect to a LIBOR Rate Loan, including any interest or fees
payable by such Lender to lenders of funds obtained by it in
order to make on the Closing Date or the Second Closing Date or
maintain its LIBOR Rate Loans hereunder.
Section 4.5. Additional Costs, Etc. If any present or
future applicable law, which expression, as used herein, includes
statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or
the interpretation thereof and requests, directives, instructions
and notices at any time or from time to time hereafter made upon
or otherwise issued to any Lender or the Agent by any central
bank or other fiscal, monetary or other authority (whether or not
having the force of law), shall:
(a) subject any Lender or the Agent to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any
nature with respect to this Agreement, the other Loan
Documents, such Lender's Commitment or the Loans (other than
taxes based upon or measured by the income or profits of
such Lender or the Agent), or
(b) materially change the basis of taxation (except
for changes in taxes on income or profits) of payments to
any Lender of the principal of or the interest on any Loans
or any other amounts payable to the Agent or any Lender
under this Agreement or the other Loan Documents, or
(c) impose or increase or render applicable (other
than to the extent specifically provided for elsewhere in
this Agreement) any special deposit, reserve, assessment,
liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or
commitments of an office of any Lender, or
(d) impose on any Lender or the Agent any other
conditions or requirements with respect to this Agreement,
the other Loan Documents, the Loans, such Lender's
Commitment, or any class of loans, or commitments of which
any of the Loans or such Lender's Commitment forms a part;
and the result of any of the foregoing is
(i) to increase the cost to any Lender of making,
funding, or issuing on the Closing Date or Second
Closing Date, or renewing, extending or maintaining any
of the Loans or such Lender's Commitment, or
(ii) to reduce the amount of principal, interest
or other amount payable to such Lender or the Agent
hereunder on account of such Lender's Commitment or any
of the Loans, or
(iii) to require such Lender or the Agent to make
any payment or to forego any interest or other sum
payable hereunder, the amount of which payment or
foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or
deemed received by such Lender or the Agent from the
Borrowers hereunder,
then, and in each such case, the Borrowers will, within thirty
(30) days of demand made by such Lender or (as the case may be)
the Agent at any time and from time to time and as often as the
occasion therefor may arise, pay to such Lender such additional
amounts as such Lender shall determine in good faith to be
sufficient to compensate such Lender for such additional cost,
reduction, payment or foregone interest or other sum, provided
that such Lender is generally imposing similar charges on its
other similarly situated borrowers.
Section 4.6. Capital Adequacy. If after the date hereof
any Lender or the Agent determines that (i) the adoption of or
change in any law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law)
regarding capital requirements for banks or bank holding
companies or any change in the interpretation or application
thereof by a court or governmental authority with appropriate
jurisdiction, or (ii) compliance by such Lender or the Agent or
any Person controlling such Lender or the Agent with any law,
governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) of any such Person
regarding capital adequacy, has the effect of reducing the return
on such Lender's or the Agent's Commitment with respect to any
Loans to a level below that which such Lender or the Agent could
have achieved but for such adoption, change or compliance (taking
into consideration such Lender's or the Agent's then existing
policies with respect to capital adequacy and assuming full
utilization of such entity's capital) by any amount deemed by
such Lender or (as the case may be) the Agent to be material,
then such Lender or the Agent may notify the Borrower
Representative of such fact. To the extent that the amount of
such reduction in the return on capital is not reflected in the
Prime Rate or the LIBOR Rate, the Borrowers jointly and severally
agree to pay such Lender or (as the case may be) the Agent for
the amount of such reduction in the return on capital as and when
such reduction is determined within thirty (30) days of
presentation by such Lender or (as the case may be) the Agent of
a certificate in accordance with Section 4.7 hereof. Each Lender
shall allocate such cost increases among its customers in good
faith and on an equitable basis.
Section 4.7. Certificate. A certificate setting forth any
additional amounts payable pursuant to Section 4.5 or 4.6 and a
brief explanation of such amounts (including the calculation
thereof) which are due, submitted by any Lender or the Agent to
the Borrower Representative, shall be prima facie evidence that
such amounts are due and owing.
Section 4.8. Indemnity. In addition to the other
provisions of this Agreement regarding such matters, but without
duplication to the extent a Lender has been compensated pursuant
thereto, the Borrowers jointly and severally agree to indemnify
the Agent and each Lender and to hold the Agent and each Lender
harmless from and against any loss, cost or expense (including
loss of anticipated profits) that the Agent or such Lender may
sustain or incur as a consequence of (a) the failure by the
Borrowers to pay any principal amount of or any interest on any
LIBOR Rate Loans as and when due and payable, including any such
loss or expense arising from interest or fees payable by the
Agent or such Lender to lenders of funds obtained by it in order
to maintain its LIBOR Rate Loans, (b) the failure by the
Borrowers to make a borrowing on the Closing Date or the Second
Closing Date or conversion after the Borrowers have given a
Completed Term Loan Request for a LIBOR Rate Loan or a Conversion
Request for a LIBOR Rate Loan, and (c) the making of any payment
of a LIBOR Rate Loan or the making of any conversion of any such
Loan to a Prime Rate Loan on a day that is not the last day of
the applicable Interest Period with respect thereto, including
interest or fees payable by the Agent or a Lender to lenders of
funds obtained by it in order to maintain any such LIBOR Rate
Loans.
Section 4.9. Interest During Event of Default; Late
Charges. During the continuance of an Event of Default,
outstanding principal and (to the extent permitted by applicable
law) interest on the Loans and all other amounts payable
hereunder or under any of the other Loan Documents shall bear
interest at a rate per annum equal to four percent (4%) above the
interest rate that would otherwise be applicable until such
amount shall be paid in full (after as well as before judgment).
In addition, the Borrowers shall pay on demand a late charge
equal to five percent (5%) of any amount of principal and/or
interest charges on the Loans which is not paid within ten (10)
days of the date when due.
Section 4.10. Concerning Joint and Several Liability of the
Borrowers.
(a) Each of the Borrowers is accepting joint and
several liability hereunder and under the other Loan
Documents in consideration of the financial accommodations
to be provided by the Lenders under this Agreement, for the
mutual benefit, directly and indirectly, of each of the
Borrowers and in consideration of the undertakings of each
other Borrower to accept joint and several liability for the
Obligations.
(b) Each of the Borrowers, jointly and severally,
hereby irrevocably and unconditionally accepts, not merely
as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the
payment and performance of all of the Obligations
(including, without limitation, any Obligations arising
under this Section 4.10), it being the intention of the
parties hereto that all the Obligations shall be the joint
and several Obligations of each of the Borrowers without
preferences or distinction among them.
(c) If and to the extent that any of the Borrowers
shall fail to make any payment with respect to any of the
Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in
each such event the other Borrowers will make such payment
with respect to, or perform, such Obligation.
(d) The Obligations of each of the Borrowers under the
provisions of this Section 4.10 constitute full recourse
Obligations of each of the Borrowers enforceable against
each such Person to the full extent of its properties and
assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstance
whatsoever.
(e) Except as otherwise expressly provided in this
Agreement, each of the Borrowers hereby waives notice of
acceptance of its joint and several liability, notice of any
Loans made under this Agreement, notice of any action at any
time taken or omitted by the Lenders under or in respect of
any of the Obligations, and, generally, to the extent
permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement.
Each of the Borrowers hereby assents to, and waives notice
of, any extension or postponement of the time for the
payment of any of the Obligations, the acceptance of any
payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action
or acquiescence by the Lenders at any time or times in
respect of any default by any of the Borrowers in the
performance or satisfaction of any term, covenant, condition
or provision of this Agreement, any and all other
indulgences whatsoever by the Lenders in respect of any of
the Obligations, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any
security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any of the
Borrowers. Without limiting the generality of the
foregoing, each of the Borrowers assents to any other action
or delay in acting or failure to act on the part of the
Lenders with respect to the failure by any of the Borrowers
to comply with any of its respective Obligations, including,
without limitation, any failure strictly or diligently to
assert any right or to pursue any remedy or to comply fully
with applicable laws or regulations thereunder, which might,
but for the provisions of this Section 4.10, afford grounds
for terminating, discharging or relieving any of the
Borrowers, in whole or in part, from any of its Obligations
under this Section 4.10, it being the intention of each of
the Borrowers that, so long as any of the Obligations
hereunder remain unsatisfied, the Obligations of such
Borrowers under this Section 4.10 shall not be discharged
except by performance and then only to the extent of such
performance. The Obligations of each of the Borrowers under
this Section 4.10 shall not be diminished or rendered
unenforceable by any winding up, reorganization,
arrangement, liquidation, re-construction or similar
proceeding with respect to any of the Borrowers or the
Lenders. The joint and several liability of the Borrowers
hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any
other change whatsoever in the name, membership,
constitution or place of formation of any of the Borrowers
or the Lenders.
(f) The provisions of this Section 4.10 are made for
the benefit of the Lenders and their successors and assigns,
and may be enforced against any or all of the Borrowers as
often as occasion therefor may arise and without requirement
on the part of the Lenders first to marshal any of their
claims or to exercise any of their rights against any other
Borrower or to exhaust any remedies available to them
against any other Borrower or to resort to any other source
or means of obtaining payment of any of the Obligations
hereunder or to elect any other remedy. The provisions of
this Section 4.10 shall remain in effect until all of the
Obligations shall have been paid in full or otherwise fully
satisfied. If at any time, any payment, or any part
thereof, made in respect of any of the Obligations, is
rescinded or must otherwise be restored or returned by the
Lenders upon the insolvency, bankruptcy or reorganization of
any of the Borrowers, or otherwise, the provisions of this
Section 4.10 will forthwith be reinstated in effect, as
though such payment had not been made.
Section 4.11. Interest Limitation. All agreements between
the Borrowers and the Guarantors, on the one hand, and the
Lenders and the Agent, on the other hand, are hereby expressly
limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Loans or otherwise,
shall the amount paid or agreed to be paid to the Lenders for the
use or the forbearance of the Loans exceed the maximum
permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date
hereof; provided, however that in the event there is a change in
the law which results in a higher permissible rate of interest,
then this Agreement and other Loan Document shall be governed by
such new law as of its effective date. In this regard, it is
expressly agreed that it is the intent of the Borrowers and the
Guarantors and the Lenders and the Agent in the execution,
delivery and acceptance of this Agreement and the other Loan
Documents to contract in strict compliance with the laws of the
State of New York from time to time in effect. If, under or from
any circumstances whatsoever, fulfillment of any provision hereof
or of any of the other Loan Documents at the time of performance
of such provision shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such
validity, and if under or from any circumstances whatsoever any
Lender should ever receive as interest any amount which would
exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the
principal balance of the Loans and not to the payment of
interest. This provision shall control every other provision of
all agreements between the Borrowers and the Guarantors and the
Lenders and the Agent.
Section 4.12. Reasonable Efforts to Mitigate. Each Lender
agrees that as promptly as practicable after it becomes aware of
the occurrence of an event or the existence of a condition that
would cause it to be affected under Section 4.4, 4.5 or 4.6, such
Lender will give notice thereof to the Borrower Representative,
with a copy to the Agent and, to the extent so requested by the
Borrower Representative and not inconsistent with regulatory
policies applicable to such Lender, such Lender shall use
reasonable efforts and take such actions as are reasonably
appropriate (including the changing of its lending office or
branch) if as a result thereof the additional moneys which would
otherwise be required to be paid to such Lender pursuant to such
sections would be reduced other than for de minimus amounts, or
the illegality or other adverse circumstances which would
otherwise require a conversion of such Loans or result in the
inability to make such Loans pursuant to such sections would
cease to exist, and in each case if, as determined by such Lender
in its sole discretion, the taking such actions would not
adversely affect such Loans.
Section 4.13. Replacement of Lenders. If any Lender (an
"Affected Lender") (i) makes demand upon the Borrowers for (or if
the Borrowers are otherwise required to pay) amounts pursuant to
Section 4.4, 4.5 or 4.6, or (ii) is unable to make or maintain
LIBOR Rate Loans as a result of a condition described in Section
4.4, the Borrower Representative may, within 90 days of receipt
of such demand, notice (or the occurrence of such other event
causing the Borrowers to be required to pay such compensation or
causing Section 4.4 to be applicable) as the case may be, by
notice (a "Replacement Notice") in writing to the Agent and such
Affected Lender (A) request the Affected Lender to cooperate with
the Borrowers in obtaining a replacement lender satisfactory to
the Agent and the Borrowers (the "Replacement Lender"); (B)
request the non-Affected Lenders to acquire and assume all of the
Affected Lender's Loans and Commitment as provided herein, but
none of such Lenders shall be under an obligation to do so; or
(C) designate a Replacement Lender which is an Eligible Assignee
and is reasonably satisfactory to the Agent other than when an
Event of Default has occurred and is continuing and absolutely
satisfactory to the Agent when an Event of Default has occurred
and is continuing. If any satisfactory Replacement Lender shall
be obtained, and/or any of the non-Affected Lenders shall agree
to acquire and assume all of the Affected Lender's Loans and
Commitment, then such Affected Lender shall assign, in accordance
with Section 18, all of its Commitment, Loans, Notes and other
rights and obligations under this Agreement and all other Loan
Documents to such Replacement Lender or non-Affected Lenders, as
the case may be, in exchange for payment of the principal amount
so assigned and all interest and fees accrued on the amount so
assigned, plus all other Obligations then due and payable to the
Affected Lender; provided, however, that (x) such assignment
shall be in accordance with the provisions of Section 18, shall
be without recourse, representation or warranty and shall be on
terms and conditions reasonably satisfactory to such Affected
Lender and such Replacement Lender and/or non-Affected Lenders,
as the case may be, and (y) prior to any such assignment, the
Borrowers shall have paid to such Affected Lender all amounts
properly demanded and unreimbursed under Sections 4.4, 4.5 and
4.8.
Section 5. GUARANTIES. Each of the Guarantors will jointly
and severally guaranty all of the Obligations pursuant to its
Guaranty. The Obligations are full recourse obligations of each
Borrower and each Guarantor, and all of the respective assets and
properties of each Borrower and each Guarantor shall be available
for the payment in full in cash and performance of the
Obligations. Other than during the continuance of a Default or
an Event of Default, at the request of the Borrower
Representative, the Guaranty of any Subsidiary Guarantor shall be
released by the Agent if and when all of the Real Estate owned by
such Subsidiary Guarantor shall cease to be Unencumbered
Properties pursuant to the terms of this Agreement.
Section 6. REPRESENTATIONS AND WARRANTIES. Each of the
Borrowers for itself and for each of the other Borrowers and for
each Guarantor insofar as any such statements relate to such
Guarantor represents and warrants to the Agent and the Lenders at
all times all of the statements contained in this Section 6.
Section 6.1. Authority; Etc.
(a) Organization; Good Standing.
(i) SALP is a limited partnership duly organized,
validly existing and in good standing under the laws of
the State of Delaware; Holdings is a corporation duly
organized, validly existing and in good standing under
the laws of the State of Delaware; each of SALP and
Holdings has all requisite partnership or corporate, as
the case may be, power to own its respective properties
and conduct its respective business as now conducted
and as presently contemplated; and each of SALP and
Holdings is in good standing as a foreign entity and is
duly authorized to do business in the jurisdictions
where the Real Estate owned by it is located and in
each other jurisdiction where such qualification is
necessary except where a failure to be so qualified in
such other jurisdiction would not have a materially
adverse effect on any of their respective businesses,
assets or financial conditions.
(ii) Sovran is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Maryland; each Subsidiary of Sovran is
duly organized, validly existing and in good standing
as a corporation or partnership or other entity, as the
case may be, under the laws of the state of its
organization; Sovran and each of its Subsidiaries has
all requisite corporate or partnership or other entity,
as the case may be, power to own its respective
properties and conduct its respective business as now
conducted and as presently contemplated; and Sovran and
each of its Subsidiaries is in good standing as a
foreign entity and is duly authorized to do business in
the jurisdictions where such qualification is necessary
(including, as to Sovran, in the State of New York)
except where a failure to be so qualified in such other
jurisdiction would not have a materially adverse effect
on the business, assets or financial condition of
Sovran or such Subsidiary.
(iii) As to each subsequent Guarantor, a provision
similar, as applicable, to (a) (i) or (ii) above shall
be included in each such subsequent Guarantor's
Subsidiary Guaranty, and the Borrowers shall be deemed
to make for itself and on behalf of each such
subsequent Guarantor a representation and warranty as
to such provision regarding such subsequent Guarantor.
(b) Capitalization.
(i) The outstanding equity of SALP is comprised
of a general partner interest and limited partner
interests, all of which have been duly issued and are
outstanding and fully paid and non-assessable as set
forth in Schedule 6.1(b) hereto. All of the issued and
outstanding general partner interests of SALP are owned
and held of record by Holdings; all of the limited
partner interests of SALP are owned and held of record
as set forth in Schedule 6.1(b) hereto. Except as set
forth in the Agreement of Limited Partnership of SALP
or as disclosed in Schedule 6.1(b) hereto, as of the
Closing Date there are no outstanding securities or
agreements exchangeable for or convertible into or
carrying any rights to acquire any equity interests in
SALP. Except as disclosed in Schedule 6.1(b), there
are no outstanding commitments, options, warrants,
calls or other agreements (whether written or oral)
binding on SALP or Sovran which require or could
require SALP or Sovran to sell, grant, transfer,
assign, mortgage, pledge or otherwise dispose of any
equity interests of SALP. No general partnership
interests of SALP are subject to any restrictions on
transfer or any partner agreements, voting agreements,
trust deeds, irrevocable proxies, or any other similar
agreements or interests (whether written or oral).
(ii) As of the Closing Date, the authorized
capital stock of, or any other equity interests in
Holdings are as set forth in Schedule 6.1(b), and the
issued and outstanding voting and non-voting shares of
the common stock of Holdings, and all of the other
equity interests in Holdings, all of which have been
duly issued and are outstanding and fully paid and non-
assessable, are owned and held of record by Sovran.
Except as disclosed in Schedule 6.1(b), as of the
Closing Date there are no outstanding securities or
agreements exchangeable for or convertible into or
carrying any rights to acquire any equity interests in
Holdings, and there are no outstanding options,
warrants, or other similar rights to acquire any shares
of any class in the capital of or any other equity
interests in Holdings. As of the Closing Date there
are no outstanding commitments, options, warrants,
calls or other agreements or obligations (whether
written or oral) binding on Holdings to issue, sell,
grant, transfer, assign, mortgage, pledge or otherwise
dispose of any shares of any class in the capital of or
other equity interests in Holdings. No shares of, or
equity interests in Holdings held by Sovran are subject
to any restrictions on transfer pursuant to any of
Holding's applicable charter, by-laws or any
shareholder agreements, voting agreements, voting
trusts, trust agreements, trust deeds, irrevocable
proxies or any other similar agreements or instruments
(whether written or oral).
(c) Due Authorization. The execution, delivery and
performance of this Agreement and the other Loan Documents
to which any of the Borrowers or any of the Guarantors is or
is to become a party and the transactions contemplated
hereby and thereby (i) are within the authority of such
Borrower and such Guarantor, (ii) have been duly authorized
by all necessary proceedings on the part of such Borrower or
such Guarantor and any general partner or other controlling
Person thereof, (iii) do not conflict with or result in any
breach or contravention of any provision of law, statute,
rule or regulation to which such Borrower or such Guarantor
is subject or any judgment, order, writ, injunction, license
or permit applicable to such Borrower or such Guarantor,
(iv) do not conflict with any provision of the agreement of
limited partnership, any certificate of limited partnership,
the charter documents or by-laws of such Borrower or such
Guarantor or any general partner or other controlling Person
thereof, and (v) do not contravene any provisions of, or
constitute a default, Default or Event of Default hereunder
or a failure to comply with any term, condition or provision
of, any other agreement, instrument, judgment, order,
decree, permit, license or undertaking binding upon or
applicable to such Borrower or such Guarantor or any of such
Borrower's or such Guarantor's properties (except for any
such failure to comply under any such other agreement,
instrument, judgment, order, decree, permit, license, or
undertaking as would not materially and adversely affect the
condition (financial or otherwise), properties, business or
results of operations of any Borrower, the Operating
Subsidiaries or any Guarantor) or result in the creation of
any mortgage, pledge, security interest, lien, encumbrance
or charge upon any of the properties or assets of any
Borrower, the Operating Subsidiaries or any Guarantor.
(d) Enforceability. Each of the Loan Documents to
which any of the Borrowers or any of the Guarantors is a
party has been duly executed and delivered and constitutes
the legal, valid and binding obligations of each such
Borrower and each such Guarantor, as the case may be,
subject only to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and
to the fact that the availability of the remedy of specific
performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor
may be brought.
Section 6.2. Governmental Approvals. The execution,
delivery and performance by each Borrower of this Agreement and
by each Borrower and each Guarantor of the other Loan Documents
to which such Borrower or such Guarantor is or is to become a
party and the transactions contemplated hereby and thereby do not
require (i) the approval or consent of any governmental agency or
authority other than those already obtained, or (ii) filing with
any governmental agency or authority, other than filings which
will be made with the SEC when and as required by law.
Section 6.3. Title to Properties; Leases.
The Borrowers, the Guarantors and their respective
Subsidiaries each has good title to all of its respective
properties, assets and rights of every name and nature purported
to be owned by it, including, without limitation, that:
(a) As of the Closing Date (with respect to
Unencumbered Properties designated as such on the Closing
Date) or the date of designation as an Unencumbered Property
(with respect to Unencumbered Properties acquired and/or
designated as such after the Closing Date), and in each case
to the best of its knowledge thereafter, a Borrower or (if
after the Closing Date) a Guarantor holds good and clear
record and marketable fee simple title to the Unencumbered
Properties, subject to no rights of others, including any
mortgages, conditional sales agreements, title retention
agreements, liens or encumbrances, except for Permitted
Liens.
(b) Each of the Borrowers and each of the then
Guarantors will, as of the Closing Date, own all of the
assets as reflected in the financial statements of the
Borrowers described in Section 6.4 or acquired since the
date of such financial statements (except property and
assets sold or otherwise disposed of in the ordinary course
of business since that date).
(c) Each of the direct or indirect interests of the
Borrowers or Holdings in any Partially-Owned Entity is set
forth on Schedule 6.3 hereto, including the type of entity
in which the interest is held, the percentage interest owned
by such Borrower or Holdings in such entity, the capacity in
which such Borrower or Holdings holds the interest, and such
Borrower's or Holdings' ownership interest therein.
Section 6.4. Financial Statements. The following financial
statements have been furnished to each of the Lenders:
(a) The audited consolidated balance sheet of Sovran
and its Subsidiaries (including, without limitation, SALP)
as of December 31, 1997 and their related consolidated
income statements for the fiscal year ended December 31,
1997 and the unaudited consolidated balance sheet of Sovran
and its Subsidiaries as of September 30, 1998 and their
related consolidated income statements for the fiscal
quarter then ended, certified by the chief financial officer
of Sovran. Such balance sheet and income statements have
been prepared in accordance with GAAP and fairly present the
financial condition of Sovran and its Subsidiaries as of the
close of business on the dates thereof and the results of
operations for the fiscal periods then ended. There are no
contingent liabilities of Sovran as of such dates involving
material amounts, known to the officers of the Borrowers,
not disclosed in said financial statements and the related
notes thereto.
(b) The SEC Filings.
Section 6.5. Fiscal Year. The Borrowers and their
respective Subsidiaries each has a fiscal year which is the
twelve months ending on December 31 of each calendar year.
Section 6.6. Franchises, Patents, Copyrights, Etc. Each
Borrower, each Guarantor and each of their respective
Subsidiaries possesses all franchises, patents, copyrights,
trademarks, trade names, licenses and permits, and rights in
respect of the foregoing, adequate for the conduct of their
respective businesses substantially as now conducted without
known conflict with any rights of others, including all Permits.
Section 6.7. Litigation. Except as stated on Schedule 6.7,
there are no actions, suits, proceedings or investigations of any
kind pending or threatened against any Borrower, any Guarantor or
any of their respective Subsidiaries before any court, tribunal
or administrative agency or board that, if adversely determined,
might, either individually or in the aggregate, materially
adversely affect the properties, assets, financial condition or
business of such Borrower, such Guarantor or their respective
Subsidiaries or materially impair the right of such Borrower,
such Guarantor or their respective Subsidiaries to carry on
their respective businesses substantially as now conducted by
them, or result in any substantial liability not adequately
covered by insurance, or for which adequate reserves are not
maintained, as reflected in the applicable financial statements
of the Borrowers, or which question the validity of this
Agreement or any of the other Loan Documents, or any action taken
or to be taken pursuant hereto or thereto.
Section 6.8. No Materially Adverse Contracts, Etc. None of
any Borrower, any Guarantor or any of their respective
Subsidiaries is subject to any charter, corporate, partnership or
other legal restriction, or any judgment, decree, order, rule or
regulation that has or is expected in the future to have a
materially adverse effect on their respective businesses, assets
or financial conditions. None of any Borrower, any Guarantor or
any of their respective Subsidiaries is a party to any contract
or agreement that has or is expected, in the judgment of their
respective officers, to have any materially adverse effect on the
respective businesses of such Borrower, such Guarantor or any of
their respective Subsidiaries.
Section 6.9. Compliance With Other Instruments, Laws,
Etc. None of any Borrower, any Guarantor or any of their
respective Subsidiaries is in violation of any provision of its
partnership agreement, charter documents, bylaws or other
organizational documents, as the case may be, or any respective
agreement or instrument to which it may be subject or by which it
or any of its properties may be bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that could result, individually or in
the aggregate, in the imposition of substantial penalties or
materially and adversely affect the financial condition,
properties or businesses of such Borrower, such Guarantor or any
of their respective Subsidiaries.
Section 6.10. Tax Status.
(a) (i) Each of the Borrowers, the Guarantors and
their respective Subsidiaries (A) has timely made or filed
all federal, state and local income and all other tax
returns, reports and declarations required by any
jurisdiction to which it is subject, (B) has paid all taxes
and other governmental assessments and charges shown or
determined to be due on such returns, reports and
declarations, except those being contested in good faith and
by appropriate proceedings, and (C) has set aside on its
books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such
returns, reports or declarations apply, and (ii) there are
no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the respective
officers of the Borrowers and the Guarantors and their
respective Subsidiaries know of no basis for any such claim.
(b) To the best of the Borrowers' knowledge, each
Partially-Owned Entity (i) has timely made or filed all
federal, state and local income and all other tax returns,
reports and declarations required by any jurisdiction to
which it is subject, (ii) has paid all taxes and other
governmental assessments and charges shown or determined to
be due on such returns, reports and declarations, except
those being contested in good faith and by appropriate
proceedings, and (iii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. To the best of the Borrowers'
knowledge, except as otherwise disclosed in writing to the
Agent, there are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any
jurisdiction from any Partially-Owned Entity, and the
officers of the Borrowers know of no basis for any such
claim.
Section 6.11. No Event of Default; No Materially Adverse
Changes. No default, Default or Event of Default has occurred
and is continuing. Since September 30, 1998, there has occurred
no materially adverse change in the financial condition or
business of Sovran and its Subsidiaries or SALP and its
Subsidiaries as shown on or reflected in the consolidated balance
sheet of Sovran and its Subsidiaries as at September 30, 1998, or
the consolidated statement of income for the fiscal quarter then
ended, other than changes in the ordinary course of business that
have not had any materially adverse effect either individually or
in the aggregate on the business or financial condition or
properties of Sovran, SALP or any of their respective
Subsidiaries.
Section 6.12. Investment Company Acts. None of any
Borrower, any Guarantor or any of their respective Subsidiaries
is an "investment company", or an "affiliated company" or a
"principal underwriter" of an "investment company", as such terms
are defined in the Investment Company Act of 1940.
Section 6.13. Absence of UCC Financing Statements,
Etc. Except for Permitted Liens, as of the Closing Date there
will be no financing statement, security agreement, chattel
mortgage, real estate mortgage, equipment lease, financing lease,
option, encumbrance or other document filed or recorded with any
filing records, registry, or other public office, that purports
to cover, affect or give notice of any present or possible future
lien or encumbrance on, or security interest in, any Unencumbered
Property. Neither any Borrower nor any Guarantor has pledged or
granted any lien on or security interest in or otherwise
encumbered or transferred any of their respective interests in
any Subsidiary (including in the case of Sovran, its interests in
SALP, and in the case of any Borrower, its interests in the
Operating Subsidiaries) or in any Partially-Owned Entity.
Section 6.14. Absence of Liens. A Borrower or a Guarantor
is the owner of the Unencumbered Properties free from any lien,
security interest, encumbrance and any other claim or demand,
except for Permitted Liens.
Section 6.15. Certain Transactions. Except as set forth on
Schedule 6.15, none of the officers, partners, directors, or
employees of any Borrower or any Guarantor or any of their
respective Subsidiaries is presently a party to any transaction
with any Borrower, any Guarantor or any of their respective
Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, partner,
director or such employee or, to the knowledge of the Borrowers,
any corporation, partnership, trust or other entity in which any
officer, partner, director, or any such employee or natural
Person related to such officer, partner, director or employee or
other Person in which such officer, partner, director or employee
has a direct or indirect beneficial interest has a substantial
interest or is an officer, director, trustee or partner.
Section 6.16. Employee Benefit Plans.
Section 6.16.1. In General. Each Employee Benefit
Plan and each Guaranteed Pension Plan has been maintained
and operated in compliance in all material respects with the
provisions of ERISA and, to the extent applicable, the Code,
including but not limited to the provisions thereunder
respecting prohibited transactions and the bonding of
fiduciaries and other persons handling plan funds as
required by Section 412 of ERISA. The Borrowers have
heretofore delivered to the Agent the most recently
completed annual report, Form 5500, with all required
attachments, and actuarial statement required to be
submitted under Section 103(d) of ERISA, with respect to
each Guaranteed Pension Plan.
Section 6.16.2. Terminability of Welfare Plans. No
Employee Benefit Plan, which is an employee welfare benefit
plan within the meaning of Section 3(1) or Section 3(2)(B)
of ERISA, provides benefit coverage subsequent to
termination of employment, except as required by Title I,
Part 6 of ERISA or the applicable state insurance laws. The
Borrowers may terminate each such Plan at any time (or at
any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of the Borrowers
without liability to any Person other than for claims
arising prior to termination.
Section 6.16.3. Guaranteed Pension Plans. Each
contribution required to be made to a Guaranteed Pension
Plan, whether required to be made to avoid the incurrence of
an accumulated funding deficiency, the notice or lien
provisions of Section 302(f) of ERISA, or otherwise, has
been timely made. No waiver of an accumulated funding
deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan, and
neither any Borrower or any Guarantor nor any ERISA
Affiliate is obligated to or has posted security in
connection with an amendment to a Guaranteed Pension Plan
pursuant to Section 307 of ERISA or Section 401(a)(29) of
the Code. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been
incurred by any Borrower or any Guarantor or any ERISA
Affiliate with respect to any Guaranteed Pension Plan and
there has not been any ERISA Reportable Event (other than an
ERISA Reportable Event as to which the requirement of 30
days notice has been waived), or any other event or
condition which presents a material risk of termination of
any Guaranteed Pension Plan by the PBGC. Based on the
latest valuation of each Guaranteed Pension Plan (which in
each case occurred within twelve months of the date of this
representation), and on the actuarial methods and
assumptions employed for that valuation, the aggregate
benefit liabilities of all such Guaranteed Pension Plans
within the meaning of Section 4001 of ERISA did not exceed
the aggregate value of the assets of all such Guaranteed
Pension Plans, disregarding for this purpose the benefit
liabilities and assets of any Guaranteed Pension Plan with
assets in excess of benefit liabilities, by more than
$500,000.
Section 6.16.4. Multiemployer Plans. Neither any
Borrower or any Guarantor nor any ERISA Affiliate has
incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan
under Section 4201 of ERISA or as a result of a sale of
assets described in Section 4204 of ERISA. Neither any
Borrower nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under
and within the meaning of Section 4241 or Section 4245 of
ERISA or is at risk of entering reorganization or becoming
insolvent, or that any Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of
ERISA.
Section 6.17. Regulations U and X. The proceeds of the
Loans shall be used for the purposes described in Section 7.12.
No portion of any Loan is to be used for the purpose of
purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and
224.
Section 6.18. Environmental Compliance. The Borrowers have
caused environmental assessments to be conducted and/or taken
other steps to investigate the past and present environmental
condition and usage of the Real Estate and the operations
conducted thereon. Based upon such assessments and/or
investigation, the Borrowers have determined that:
(a) None of any Borrower, any Guarantor, any of their
respective Subsidiaries or any operator of the Real Estate
or any portion thereof, or any operations thereon is in
violation, or alleged violation, of any judgment, decree,
order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those
arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, or any
state or local statute, regulation, ordinance, order or
decree relating to health, safety or the environment
(hereinafter "Environmental Laws"), which violation or
alleged violation has, or its remediation would have, by
itself or when aggregated with all such other violations or
alleged violations, a material adverse effect on the
environment or the business, assets or financial condition
of any Borrower, any Guarantor or any of their respective
Subsidiaries, or constitutes a Disqualifying Environmental
Event with respect to any Unencumbered Property.
(b) None of any Borrower, any Guarantor or any of
their respective Subsidiaries has received notice from any
third party, including, without limitation, any federal,
state or local governmental authority, (i) that it has been
identified by the United States Environmental Protection
Agency ("EPA) as a potentially responsible party under
CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B (1986), (ii)
that any hazardous waste, as defined by 42 U.S.C. Section
6903(5), any hazardous substances as defined by 42 U.S.C.
Section 9601(14), any pollutant or contaminant as defined
by 42 U.S.C. Section 9601(33) or any toxic substances, oil
or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances")
which it has generated, transported or disposed of has been
found at any site at which a federal, state or local agency
or other third party has conducted or has ordered that any
Borrower, any Guarantor or any of their respective
Subsidiaries conduct a remedial investigation, removal or
other response action pursuant to any Environmental Law, or
(iii) that it is or shall be a named party to any claim,
action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or
otherwise) arising out of any third party's incurrence of
costs, expenses, losses or damages of any kind whatsoever in
connection with the release of Hazardous Substances; which
event described in any such notice would have a material
adverse effect on the business, assets or financial
condition of any Borrower, any Guarantor or any of their
respective Subsidiaries, or constitutes a Disqualifying
Environmental Event with respect to any Unencumbered
Property.
(c) Except as set forth on Schedule 6.18, (i) no
portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances
except in accordance with applicable Environmental Laws; and
no underground tank or other underground storage receptacle
for Hazardous Substances is located on any portion of any
Real Estate except in accordance with applicable
Environmental Laws, (ii) in the course of any activities
conducted by the Borrowers, the Guarantors, their respective
Subsidiaries or the operators of their respective
properties, or any ground or space tenants on any Real
Estate, no Hazardous Substances have been generated or are
being used on such Real Estate except in accordance with
applicable Environmental Laws, (iii) there has been no
present or past releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping (a "Release") or threatened
Release of Hazardous Substances on, upon, into or from the
Real Estate, (iv) there have been no Releases on, upon, from
or into any real property in the vicinity of any of the Real
Estate which, through soil or groundwater contamination, may
have come to be located on such Real Estate, and (v) any
Hazardous Substances that have been generated on any of the
Real Estate during ownership thereof by a Borrower or a
Guarantor or any of their respective Subsidiaries have been
transported off-site only by carriers having an
identification number issued by the EPA, treated or disposed
of only by treatment or disposal facilities maintaining
valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are,
to the best of the Borrowers' knowledge, operating in
compliance with such permits and applicable Environmental
Laws; any of which events described in clauses (i) through
(v) above would have a material adverse effect on the
business, assets or financial condition of any Borrower, any
Guarantor or any of their respective Subsidiaries, or
constitutes a Disqualifying Environmental Event with respect
to any Unencumbered Property. Notwithstanding that the
representations contained herein are limited to the
knowledge of the Borrowers, any such limitation shall not
affect the covenants specified in Section 7.11 or elsewhere
in this Agreement.
(d) None of any Borrower, any Guarantor or any of the
Real Estate is subject to any applicable Environmental Law
requiring the performance of Hazardous Substances site
assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any governmental
agency or the recording or delivery to other Persons of an
environmental disclosure document or statement, by virtue of
the transactions set forth herein and contemplated hereby,
or as a condition to the effectiveness of any other
transactions contemplated hereby.
Section 6.19. Subsidiaries. Schedule 6.19 sets forth all of
the respective Subsidiaries of Sovran or SALP, and Schedule 6.19
will be updated to reflect any subsequent Guarantor and its
Subsidiaries, if any.
Section 6.20. Loan Documents. All of the representations
and warranties of the Borrowers and the Guarantors made in this
Agreement and in the other Loan Documents or any document or
instrument delivered to the Agent or the Lenders pursuant to or
in connection with any of such Loan Documents are true and
correct in all material respects and do not include any untrue
statement of a material fact or omit to state a material fact
required to be stated or necessary to make such representations
and warranties not materially misleading.
Section 6.21.REIT Status. Sovran has not taken any action that
would prevent it from maintaining its qualification as a REIT for
its tax year ended December 31, 1997 or from maintaining such
qualification at all times during the term of the Loans. Sovran
is not a "pension held REIT" within the meaning of Section
856(h)(3)(D) of the Code.
Section 6.22. Subsequent Guarantors. The foregoing
representations and warranties in Section 6.3 through Section
6.20, as the same are true, correct and applicable to Guarantors
existing on the Closing Date, shall be true, correct and
applicable to each subsequent Guarantor.
Section 6.23.Trading Status. No security of Sovran traded on the
New York Stock Exchange has been suspended from trading.
Section 6.24. Title Policies. To the best of the
Borrowers' knowledge, except as set forth on Schedule 6.24
hereto, each of the Title Policies delivered to the Agent
pursuant to Section 10.5 with respect to an Unencumbered Property
remains true and correct in all material respects as of the
Closing Date.
Section 6.25. Year 2000 Compliance. The Borrower and the
Guarantors have taken and are taking all necessary and
appropriate steps (a) to ascertain the extent of and successfully
address business and financial risks facing the Borrowers and the
Guarantors as a result of the Year 2000 Risk (that is the risk
that computer applications used by Borrowers and the Guarantors
and/or by their suppliers, vendors and customers may be unable to
recognize and perform without error date-sensitive functions
involving certain dates prior to and any date after December 31,
1999) and (b) to ensure that the Borrowers' and the Guarantors'
material computer applications and those of their key vendors and
suppliers will, on a timely basis, adequately address the Year
2000 Risk in all material respects. Based upon such review, the
Borrowers reasonably believe that the Year 2000 Risk will not
have any materially adverse effect on the business or financial
condition of the Borrowers, the Guarantors or their Subsidiaries.
Section 7. AFFIRMATIVE COVENANTS OF THE BORROWERS AND THE
GUARANTORS. Each of the Borrowers for itself and on behalf of
each of the Guarantors (if and to the extent expressly included
in Subsections contained in this Section) covenants and agrees
that, so long as any portion of the Term Loan remains
outstanding:
Section 7.1. Punctual Payment. The Borrowers will duly and
punctually pay or cause to be paid the principal and interest on
the Loans and all interest, fees, charges and other amounts
provided for in this Agreement and the other Loan Documents, all
in accordance with the terms of this Agreement and the Notes, and
the other Loan Documents.
Section 7.2. Maintenance of Office. Each of the Borrowers
and the Guarantors will maintain its chief executive office in
Williamsville, New York, or at such other place in the contiguous
United States of America as each of them shall designate upon
written notice to the Agent to be delivered within five (5) days
of such change, where notices, presentations and demands to or
upon the Borrowers and the Guarantors, as the case may be, in
respect of the Loan Documents may be given or made.
Section 7.3. Records and Accounts.
Each of the Borrowers and the Guarantors will (a) keep, and cause
each of its Subsidiaries to keep, true and accurate records and
books of account in which full, true and correct entries will be
made in accordance with GAAP, (b) maintain adequate accounts and
reserves for all taxes (including income taxes), contingencies,
depreciation and amortization of its properties and the
properties of its Subsidiaries and (c) at all times engage Ernst
& Young LLP or other Accountants as the independent certified
public accountants of Sovran, SALP and their respective
Subsidiaries and will not permit more than thirty (30) days to
elapse between the cessation of such firm's (or any successor
firm's) engagement as the independent certified public
accountants of Sovran, SALP and their respective Subsidiaries and
the appointment in such capacity of a successor firm as
Accountants.
Section 7.4. Financial Statements, Certificates and
Information. The Borrowers will deliver to the Agent:
(a) as soon as practicable, but in any event not later
than ninety (90) days after the end of each of its fiscal
years:
(i) in the case of SALP, if prepared, the audited
consolidated balance sheet of SALP and its subsidiaries
at the end of such year, and the related audited
consolidated statements of income, funds available for
distribution and cash flows for the year then ended, in
each case (except for cash flow statements) with
supplemental consolidating schedules provided by SALP;
and
(ii) in the case of Sovran, the audited
consolidated and consolidating (for Subsidiaries which
own Real Estate, if any Subsidiary becomes the owner of
Real Estate pursuant to Section 7.6 or Section 7.7
hereof) balance sheet of Sovran and its subsidiaries
(including, without limitation, SALP and its
subsidiaries) at the end of such year, and the related
audited consolidated and consolidating (for
Subsidiaries which own Real Estate, if any Subsidiary
becomes the owner of Real Estate pursuant to Section
7.6 or Section 7.7 hereof) statements of income, funds
available for distribution, and cash flows for the year
then ended;
each setting forth in comparative form the figures for the
previous fiscal year and all such statements to be in
reasonable detail, prepared in accordance with GAAP, and, in
each case, accompanied by an auditor's report prepared
without qualification by the Accountants, together with a
written statement from such Accountants to the effect that
they have read a copy of this Agreement, and that, in making
the examination necessary to said certification, they have
obtained no knowledge of any default, Default, Event of
Default or of any facts or circumstances that would cause
Sovran not to continue to qualify as a REIT for federal
income tax purposes, or, if such accountants shall have
obtained knowledge of any then existing default, Default,
Event of Default or such facts or circumstances, they shall
make disclosure thereof in such statement;
(b) as soon as practicable, but in any event not later
than forty-five (45) days after the end of each of its
fiscal quarters:
(i) in the case of SALP, if prepared, copies of
the unaudited consolidated balance sheet of SALP and
its subsidiaries as at the end of such quarter, and the
related unaudited consolidated statements of income,
funds available for distribution and cash flows for the
portion of SALP's fiscal year then elapsed, with
supplemental consolidating schedules (except with
respect to cash flow statements) provided by SALP; and
(ii) in the case of Sovran, copies of the
unaudited consolidated and consolidating (for
Subsidiaries which own Real Estate, if any Subsidiary
becomes the owner of Real Estate pursuant to Section
7.6 or Section 7.7 hereof) balance sheet of Sovran and
its subsidiaries (including, without limitation, SALP
and its subsidiaries) as at the end of such quarter,
and the related unaudited consolidated and
consolidating (for Subsidiaries which own Real Estate,
if any Subsidiary becomes the owner of Real Estate
pursuant to Section 7.6 or Section 7.7 hereof)
statements of income, funds available for distribution
and cash flows for the portion of Sovran's fiscal year
then elapsed;
all in reasonable detail and prepared in accordance with
GAAP, together with a certification by the principal
financial officer of SALP or Sovran, as applicable, that the
information contained in such financial statements fairly
presents the financial position of SALP or Sovran (as the
case may be) and its subsidiaries on the date thereof
(subject to year-end adjustments);
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a
statement in the form of Exhibit D hereto signed by the
chief financial officer of SALP or Sovran, as applicable,
and (if applicable) reconciliations to reflect changes in
GAAP since September 30, 1998; and, in the case of Sovran,
setting forth in reasonable detail computations evidencing
compliance with the covenants contained in Section 9 hereof;
(d) promptly as they become available, a copy of each
report (including any so-called management letters)
submitted to any Borrower or any Guarantor or any of their
respective subsidiaries by the Accountants in connection
with each annual audit of the books of any Borrower or any
Guarantor or such subsidiary by such Accountants or in
connection with any interim audit thereof pertaining to any
phase of the business of any Borrower or any Guarantor or
any such subsidiary;
(e) contemporaneously with the filing or mailing
thereof, copies of all material of a financial nature sent
to the holders of any Indebtedness of any Borrower or any
Guarantor (other than the Loans) for borrowed money, to the
extent that the information or disclosure contained in such
material refers to or could reasonably be expected to have a
material adverse effect on the business, assets, financial
condition or prospects, or operations of any Borrower or any
Guarantor;
(f) contemporaneously with the filing or mailing
thereof, copies of all material of a financial nature filed
with the SEC or sent to the stockholders of Sovran;
(g) as soon as practicable, but in any event not later
than ninety (90) days after the end of each fiscal year of
Sovran, copies of the Form 10-K statement filed by Sovran
with the SEC for such fiscal year, and as soon as
practicable, but in any event not later than forty-five (45)
days after the end of each fiscal quarter of Sovran, copies
of the Form 10-Q statement filed by Sovran with the SEC for
such fiscal quarter; and
(h) from time to time such other financial data and
information about the Borrowers, the Guarantors, their
respective Subsidiaries, the Real Estate and the Partially-
Owned Entities which is prepared by such Person in the
normal course of its business or is required for securities
and tax law compliance as the Agent or any Lender may
reasonably request, including without limitation occupancy
information, existing environmental reports, and insurance
certificates with respect to the Real Estate (including the
Unencumbered Properties) and tax returns.
Section 7.5. Notices.
(a) Defaults. Each Borrower will, and will cause each
Guarantor, as applicable, to, promptly notify the Agent in
writing of the occurrence of any default, Default or Event
of Default. If any Person shall give any notice or take any
other action in respect of (x) a claimed default (whether or
not constituting a Default or an Event of Default) under
this Agreement or (y) a claimed default by any Borrower, any
Guarantor or any of their respective Subsidiaries, as
applicable, under any note, evidence of Indebtedness,
indenture or other obligation to which or with respect to
which any of them is a party or obligor, whether as
principal, guarantor or surety, and such default would
permit the holder of such note or obligation or other
evidence of Indebtedness to accelerate the maturity thereof
or otherwise cause the entire Indebtedness to become due,
such Borrower or such Guarantor, as the case may be, shall
forthwith give written notice thereof to the Agent,
describing the notice or action and the nature of the
claimed failure to comply.
(b) Environmental Events. Each Borrower will, and
will cause each Guarantor to, promptly give notice in
writing to the Agent (i) upon such Borrower's or such
Guarantor's obtaining knowledge of any material violation of
any Environmental Law regarding any Real Estate or such
Borrower's or such Guarantor's operations or the operations
of any of their Subsidiaries, (ii) upon such Borrower's or
such Guarantor's obtaining knowledge of any known Release of
any Hazardous Substance at, from, or into any Real Estate
which it reports in writing or is reportable by it in
writing to any governmental authority and which is material
in amount or nature or which could materially affect the
value of such Real Estate, (iii) upon such Borrower's or
such Guarantor's receipt of any notice of material violation
of any Environmental Laws or of any material Release of
Hazardous Substances in violation of any Environmental Laws
or any matter that may be a Disqualifying Environmental
Event, including a notice or claim of liability or potential
responsibility from any third party (including without
limitation any federal, state or local governmental
officials) and including notice of any formal inquiry,
proceeding, demand, investigation or other action with
regard to (A) such Borrower's or such Guarantor's or any
other Person's operation of any Real Estate, (B)
contamination on, from or into any Real Estate, or (C)
investigation or remediation of off-site locations at which
such Borrower or such Guarantor or any of its predecessors
are alleged to have directly or indirectly disposed of
Hazardous Substances, or (iv) upon such Borrower's or such
Guarantor's obtaining knowledge that any expense or loss has
been incurred by such governmental authority in connection
with the assessment, containment, removal or remediation of
any Hazardous Substances with respect to which such Borrower
or such Guarantor or any Partially-Owned Entity may be
liable or for which a lien may be imposed on any Real
Estate; any of which events described in clauses (i) through
(iv) above would have a material adverse effect on the
business, assets or financial condition of any Borrower, any
Guarantor or any of their respective Subsidiaries, or
constitutes a Disqualifying Environmental Event with respect
to any Unencumbered Property.
(c) Notification of Claims against Unencumbered
Properties. Each Borrower will, and will cause each
Guarantor to, promptly upon becoming aware thereof, notify
the Agent in writing of any setoff, claims, withholdings or
other defenses to which any of the Unencumbered Properties
are subject, which (i) would have a material adverse effect
on (x) the business, assets or financial condition of any
Borrower, any Guarantor or any of their respective
Subsidiaries, or (y) the value of such Unencumbered
Property, or (ii) with respect to such Unencumbered
Property, constitute a Disqualifying Environmental Event, a
Disqualifying Legal Event, a Disqualifying Building Event or
a Lien which is not a Permitted Lien.
(d) Notice of Litigation and Judgments. Each Borrower
will, and will cause each Guarantor to, and the Borrowers
will cause each of their respective Subsidiaries to, give
notice to the Agent in writing within ten (10) days of
becoming aware of any litigation or proceedings threatened
in writing or any pending litigation and proceedings an
adverse determination in which could materially affect any
Borrower, any Guarantor or any of their respective
Subsidiaries or any Unencumbered Property or to which any
Borrower, any Guarantor or any of their respective
Subsidiaries is or is to become a party involving an
uninsured claim against any Borrower, any Guarantor or any
of their respective Subsidiaries that could reasonably be
expected to have a materially adverse effect on such
Borrower or such Guarantor or their respective properties,
business, assets, financial condition or prospects or on the
value or operation of the Unencumbered Properties and
stating the nature and status of such litigation or
proceedings. Each Borrower will, and will cause each of the
Guarantors and the Subsidiaries to, give notice to the
Agent, in writing, in form and detail reasonably
satisfactory to the Agent, within ten (10) days of any
judgment not covered by insurance, final or otherwise,
against any Borrower, any Guarantor or any of their
Subsidiaries in an amount in excess of $100,000.
(e) Acquisition of Real Estate. The Borrower
Representative shall notify the Agent in writing within
seven (7) days of the acquisition of any Real Estate by any
Borrower, any Guarantor, any of their respective
Subsidiaries or any Partially-Owned Entity (whether or not
such acquisition was made with proceeds of the Term Loan),
which notice shall include, with respect to such Real
Estate, its owner (if other than SALP), its address, a brief
description, a summary of occupancy levels, a pro forma and
historic (if available) income statement and a summary of
the key business terms of such acquisition (including
sources and uses of funds for such acquisition), a summary
of the principal terms of any financing for such Real
Estate, and a statement as to whether such Real Estate
qualifies as an Unencumbered Property.
Section 7.6. Existence of SALP, Holdings and Subsidiary
Guarantors; Maintenance of Properties. SALP for itself and for
Holdings and each Subsidiary Guarantor (insofar as any such
statements relate to Holdings or such Subsidiary Guarantor) will
do or cause to be done all things necessary to, and shall,
preserve and keep in full force and effect its existence as a
limited partnership, corporation or another legally constituted
entity, and will do or cause to be done all things necessary to
preserve and keep in full force all of its rights and franchises
and those of its Subsidiaries, and will not, and will not cause
or permit any of its Subsidiaries to, convert to a limited
liability company or a limited liability partnership. SALP shall
be the owner of substantially all of the Real Estate owned by the
Borrowers and their respective Subsidiaries and shall not permit
any Subsidiary of any Borrower to own any Real Estate without the
prior written consent of the Required Lenders, and then only in
specific circumstances outside of the ordinary course of
business. In any such case, such Subsidiary shall be wholly-
owned by Sovran or SALP and shall become a Subsidiary Guarantor.
SALP (a) will cause all necessary repairs, renewals,
replacements, betterments and improvements to be made to all Real
Estate owned or controlled by it or by any of its Subsidiaries or
any Subsidiary Guarantor, all as in the judgment of SALP or such
Subsidiary or such Subsidiary Guarantor may be necessary so that
the business carried on in connection therewith may be properly
conducted at all times, subject to the terms of the applicable
Leases and partnership agreements or other entity charter
documents, (b) will cause all of its other properties and those
of its Subsidiaries and the Subsidiary Guarantors used or useful
in the conduct of its business or the business of its
Subsidiaries or such Subsidiary Guarantor to be maintained and
kept in good condition, repair and working order and supplied
with all necessary equipment, and (c) will, and will cause each
of its Subsidiaries and each Subsidiary Guarantor to, continue to
engage exclusively in the business of owning and operating self
storage facilities, which self storage facilities shall be known
primarily as "Uncle BoB's Self Storage"; provided, that nothing
in this Agreement shall prevent the Borrowers from entering into
Tower Leases or occasional non-material Leases of retail or
office space incidental to the Borrowers' owning and operating
self storage facilities; and provided further that nothing in
this Section 7.6 shall prevent any Borrower from discontinuing
the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the
judgment of SALP, desirable in the conduct of its or their
business and such discontinuance does not cause a Default or an
Event of Default hereunder and does not in the aggregate
materially adversely affect the business of the Borrowers and
their respective Subsidiaries on a consolidated basis. Holdings
shall at all times be a wholly-owned Subsidiary of Sovran and the
sole general partner of SALP.
Section 7.7. Existence of Sovran; Maintenance of REIT
Status of Sovran; Maintenance of Properties. Sovran will do or
cause to be done all things necessary to preserve and keep in
full force and effect its existence as a Maryland corporation.
Sovran will at all times maintain its status as a REIT and not to
take any action which could lead to its disqualification as a
REIT. Sovran shall at all times maintain its listing on the New
York Stock Exchange. Sovran will continue to operate as a fully-
integrated, self-administered and self-managed real estate
investment trust which, together with its Subsidiaries
(including, without limitation SALP) owns and operates an
improved property portfolio comprised exclusively of self-storage
facilities. Sovran will not engage in any business other than
the business of acting as a REIT and serving as a limited partner
of SALP and as a member, partner or stockholder of other Persons
as permitted by this Agreement. Sovran shall conduct all or
substantially all of its business operations through SALP, and
shall not own real estate assets outside of its interests in
SALP. Sovran shall cause SALP to own substantially all of the
Real Estate owned by the Borrowers and their respective
Subsidiaries and shall not permit any Subsidiary of any Borrower
to become the owner of any Real Estate without the prior written
consent of the Required Lenders, and then only in specific
circumstances outside of the ordinary course of business. In any
such case, such Subsidiary shall be wholly-owned by Sovran or
SALP and shall become a Subsidiary Guarantor. Sovran shall do or
cause to be done all things necessary to preserve and keep in
full force all of its rights and franchises and those of its
Subsidiaries. Sovran shall (a) cause all of its properties and
those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and
kept in good condition, repair and working order and supplied
with all necessary equipment, (b) cause to be made all necessary
repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of Sovran may be necessary so
that the business carried on in connection therewith may be
properly and advantageously conducted at all times, and (c) cause
SALP and each of its Subsidiaries to continue to engage
exclusively in the business of owning and operating self storage
facilities, which self-storage facilities shall be known
primarily as "Uncle BoB's Self Storage"; provided that nothing in
this Section 7.7 shall prevent Sovran from discontinuing the
operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the
judgment of Sovran, desirable in the conduct of its or their
business and such discontinuance does not cause a Default or an
Event of Default hereunder and does not in the aggregate
materially adversely affect the business of Sovran and its
Subsidiaries on a consolidated basis.
Section 7.8. Insurance. Each Borrower will, and will cause
each Guarantor to, maintain with respect to its properties, and
will cause each of its Subsidiaries to maintain with financially
sound and reputable insurers, insurance with respect to such
properties and its business against such casualties and
contingencies as shall be in accordance with the general
practices of businesses having similar operations and real estate
portfolios in similar geographic areas and in amounts, containing
such terms, in such forms and for such periods as may be
reasonable and prudent.
Section 7.9. Taxes. Each Borrower will, and will cause
each Guarantor to, pay or cause to be paid real estate taxes,
other taxes, assessments and other governmental charges against
the Real Estate before the same become delinquent and will duly
pay and discharge, or cause to be paid and discharged, before the
same shall become overdue, all taxes, assessments and other
governmental charges imposed upon its sales and activities, or
any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if
unpaid might by law become a lien or charge upon any of the Real
Estate; provided that any such tax, assessment, charge, levy or
claim need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings
and if such Borrower or such Guarantor shall have set aside on
its books adequate reserves with respect thereto; and provided
further that such Borrower or such Guarantor will pay all such
taxes, assessments, charges, levies or claims forthwith upon the
commencement of proceedings to foreclose any lien that may have
attached as security therefor. If requested by the Agent, the
Borrowers will provide evidence of the payment of real estate
taxes, other taxes, assessments and other governmental charges
against the Real Estate in the form of receipted tax bills or
other form reasonably acceptable to the Agent.
Section 7.10. Inspection of Properties and Books. Each
Borrower will, and will cause each Guarantor to, permit the
Lenders, through the Agent or any of the Lenders' other
designated representatives, to visit and inspect any of the
properties of any Borrower, any Guarantor or any of their
respective Subsidiaries, to examine the books of account of the
Borrowers, the Guarantors and their respective Subsidiaries (and
to make copies thereof and extracts therefrom) and to discuss the
affairs, finances and accounts of the Borrowers, the Guarantors
and their respective Subsidiaries with, and to be advised as to
the same by, its officers, all at such reasonable times and
intervals as the Agent may reasonably request; provided that the
Borrowers shall only be responsible for the costs and expenses
incurred by the Agent in connection with such inspections after
the occurrence and during the continuance of an Event of Default.
The Agent and each Lender agrees to keep any non-public
information delivered or made available by the Borrowers to it
confidential from anyone other than persons employed or retained
by the Agent or such Lender (including, without limitation,
employees, officers, attorneys and other advisors) who, in the
reasonable determination of the Agent or such Lender, reasonably
need to know such information and who are or are expected to
become engaged in evaluating, approving, structuring or
administering the Loans or rendering legal advice in connection
with the Loans; provided such employees, officers, attorneys and
other advisors agree to keep such information confidential in
accordance with this Section 7.10; and provided further that
nothing herein shall prevent the Agent or any Lender or persons
employed or retained by the Agent or such Lender from disclosing
such information (i) to any other Lender, (ii) to any other
person if reasonably incidental to the administration of the
Loans, (iii) upon the order of any court or administrative
agency, (iv) upon the request or demand of any regulatory agency
or authority, (v) which has been publicly disclosed other than as
a result of a disclosure by the Agent or any Lender which is not
permitted by this Agreement, (vi) in connection with any
litigation to which the Agent, any Lender, or their respective
Affiliates may be a party, (vii) to the extent reasonably
required in connection with the exercise of any remedy hereunder,
(viii) to the Agent's or such Lender's Affiliates, legal counsel
and independent auditors, (ix) to any actual or proposed
participant or Eligible Assignee of all or part of its rights
hereunder, and (x) as otherwise required by law.
Section 7.11. Compliance with Laws, Contracts, Licenses,
and Permits. Each Borrower will, and will cause each Guarantor
to, comply with, and will cause each of their respective
Subsidiaries to comply with (a) all applicable laws and
regulations now or hereafter in effect wherever its business is
conducted, including, without limitation, all Environmental Laws
and all applicable federal and state securities laws, (b) the
provisions of its partnership agreement and certificate or
corporate charter and other charter documents and by-laws, as
applicable, (c) all material agreements and instruments to which
it is a party or by which it or any of its properties may be
bound (including the Real Estate and the Leases) and (d) all
applicable decrees, orders, and judgments. If at any time while
any portion of the Term Loan remains outstanding, any Permit
shall become necessary or required in order that any Borrower may
fulfill any of its obligations hereunder, the Borrowers and the
Guarantors will immediately take or cause to be taken all
reasonable steps within the power of the Borrowers or the
Guarantors, as applicable, to obtain such Permit and furnish the
Agent with evidence thereof.
Section 7.12. Use of Proceeds. Subject at all times to the
other provisions of this Agreement, the Borrowers will use the
proceeds of the Loans solely to finance (a) the acquisition,
renovation and construction of self storage facilities, (b) the
repayment of Indebtedness, and (c) general working capital needs.
Section 7.13. Acquisition of Unencumbered Properties. In
addition to the requirements of Section 7.5(e), the Borrowers
shall, within seven (7) Business Days of the acquisition of an
Unencumbered Property or the qualification of any Real Estate as
an Unencumbered Property, deliver to the Agent a copy of the
Title Policy and the final environmental site assessment for such
Unencumbered Property. Such Title Policies and environmental
site assessments, as well as insurance certificates, shall not be
forwarded to the Lenders by the Agent, but shall be available for
inspection by the Lenders at the Agent's Head Office.
Section 7.14. Additional Guarantors; Solvency of
Guarantors.
(a) If, after the Closing Date, a Subsidiary of any
Borrower acquires any Real Estate in accordance with Section
7.6 and Section 7.7 that otherwise qualifies as an
Unencumbered Property but is owned by a Person other than a
then Borrower or Guarantor, the Borrowers shall cause such
Person (which Person must be or become a wholly-owned
Subsidiary of SALP or Sovran) to execute and deliver a
Guaranty to the Agent and the Lenders in substantially the
form of Exhibit B hereto prior to such Real Estate's
becoming an Unencumbered Property hereunder. Such Guaranty
shall evidence consideration and equivalent value. The
Borrowers will not permit any Guarantor that owns any
Unencumbered Properties to have any Subsidiaries.
(b) The Borrowers shall cause each of the Subsidiary
Guarantors to remain solvent and shall provide each of the
Subsidiary Guarantors with such funds and assets as such
Subsidiary Guarantor shall require in the operation of its
business, all in consideration of such Guarantor's execution
and delivery of its Guaranty.
Section 7.15. Further Assurances. Each Borrower will, and
will cause each Guarantor to, cooperate with, and to cause each
of its Subsidiaries to cooperate with, the Agent and the Lenders
and execute such further instruments and documents as the Lenders
or the Agent shall reasonably request to carry out to their
satisfaction the transactions contemplated by this Agreement and
the other Loan Documents.
Section 7.16. Form of Lease. The Borrowers shall cause
every lease for self storage space at an Unencumbered Property to
be substantially in the form of Schedule 7.16 with such changes
as required by applicable law or competitive market conditions
generally applicable to self storage facilities in the market of
such Unencumbered Property, provided, however, Leases of storage
space to tower development firms or communications carriers (who
are also entering into or have entered into Tower Leases or are
subtenants under Tower Leases), with such space to be used to
store equipment for use in connection with a tower or monopole
located or to be located on the site, may be on such terms as may
be reasonably negotiated by the Borrowers and containing the
relocation clauses as and when required in Tower Leases in
accordance with the terms of this Agreement.
Section 7.17. Environmental Indemnification. The Borrowers
jointly and severally covenant and agree that they will indemnify
and hold the Agent and each Lender, and each of their respective
Affiliates, harmless from and against any and all claims,
expense, damage, loss or liability incurred by the Agent or any
Lender (including all reasonable costs of legal representation
incurred by the Agent or any Lender, but excluding, as
applicable, for the Agent or a Lender any claim, expense, damage,
loss or liability as a result of the gross negligence or willful
misconduct of the Agent or such Lender or any of their respective
Affiliates) relating to (a) any Release or threatened Release of
Hazardous Substances on any Real Estate; (b) any violation of any
Environmental Laws with respect to conditions at any Real Estate
or the operations conducted thereon; (c) the investigation or
remediation of off-site locations at which any Borrower, any
Guarantor or any of their respective Subsidiaries or their
predecessors are alleged to have directly or indirectly disposed
of Hazardous Substances; or (d) any action, suit, proceeding or
investigation brought or threatened with respect to any Hazardous
Substances relating to Real Estate (including, but not limited
to, claims with respect to wrongful death, personal injury or
damage to property). It is expressly acknowledged by each
Borrower that this covenant of indemnification shall survive the
payment of the Loans and shall inure to the benefit of the Agent
and the Lenders and their respective Affiliates, their respective
successors, and their respective assigns under the Loan Documents
permitted under this Agreement.
Section 7.18. Response Actions. Each Borrower covenants
and agrees that if any Release or disposal of Hazardous
Substances shall occur or shall have occurred on any Real Estate
owned by it or any of its Subsidiaries, such Borrower will cause
the prompt containment and removal of such Hazardous Substances
and remediation of such Real Estate as necessary to comply with
all Environmental Laws or to preserve the value of such Real
Estate.
Section 7.19. Environmental Assessments. If the Required
Lenders have reasonable grounds to believe that a Disqualifying
Environmental Event has occurred with respect to any Unencumbered
Property, after reasonable notice by the Agent, whether or not a
Default or an Event of Default shall have occurred, the Required
Lenders may determine that the affected Real Estate no longer
qualifies as an Unencumbered Property; provided that prior to
making such determination, the Agent shall give the Borrower
Representative reasonable notice and the opportunity to obtain
one or more environmental assessments or audits of such
Unencumbered Property prepared by a hydrogeologist, an
independent engineer or other qualified consultant or expert
approved by the Agent, which approval will not be unreasonably
withheld, to evaluate or confirm (i) whether any Release of
Hazardous Substances has occurred in the soil or water at such
Unencumbered Property and (ii) whether the use and operation of
such Unencumbered Property materially complies with all
Environmental Laws (including not being subject to a matter that
is a Disqualifying Environmental Event). Such assessment will
then be used by the Agent to determine whether a Disqualifying
Environmental Event has in fact occurred with respect to such
Unencumbered Property. All such environmental assessments shall
be at the sole cost and expense of the Borrowers.
Section 7.20. Employee Benefit Plans.
(a) In General. Each Employee Benefit Plan maintained
by any Borrower, any Guarantor or any of their respective
ERISA Affiliates will be operated in compliance in all
material respects with the provisions of ERISA and, to the
extent applicable, the Code, including but not limited to
the provisions thereunder respecting prohibited
transactions.
(b) Terminability of Welfare Plans. With respect to
each Employee Benefit Plan maintained by any Borrower, any
Guarantor or any of their respective ERISA Affiliates which
is an employee welfare benefit plan within the meaning of
Section 3(1) or Section 3(2)(B) of ERISA, such Borrower,
such Guarantor, or any of their respective ERISA Affiliates,
as the case may be, has the right to terminate each such
plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) without
liability other than liability to pay claims incurred prior
to the date of termination.
(c) Unfunded or Underfunded Liabilities. The
Borrowers will not, and will not permit any Guarantor to, at
any time, have accruing or accrued unfunded or underfunded
liabilities with respect to any Employee Benefit Plan,
Guaranteed Pension Plan or Multiemployer Plan, or permit any
condition to exist under any Multiemployer Plan that would
create a withdrawal liability.
Section 7.21. No Amendments to Certain Documents. The
Borrowers will not, and will not permit any Guarantor to, at any
time cause or permit its certificate of limited partnership,
agreement of limited partnership, articles of incorporation, by-
laws or other charter documents, as the case may be, to be
modified, amended or supplemented in any respect whatever,
without (in each case) the express prior written consent or
approval of the Required Lenders, if such changes would affect
Sovran's REIT status or otherwise materially adversely affect the
rights of the Agent and the Lenders hereunder or under any other
Loan Document.
Section 7.22. Intentionally Omitted.
Section 7.23. Management. Except by reason of death or
incapacity, at least two (2) of the Key Management Individuals
(as hereinafter defined) shall remain active in the executive
and/or operational management, in their current positions and
with their current responsibilities (or more senior positions
with requisite greater responsibilities), of Sovran; provided,
however, if at least two (2) of the Key Management Individuals
are not so active in such positions and with such
responsibilities (except by reason of death or incapacity as
aforesaid), then within ninety (90) days of the occurrence of
such event, Sovran shall propose and appoint such individual(s)
of comparable experience, reputation and otherwise reasonably
acceptable to the Required Lenders to such position(s) such that,
after such appointment, such acceptable replacement individuals,
together with the Key Management Individuals remaining so active
with Sovran in such positions and with such responsibilities,
total at least two (2). For purposes hereof, "Key Management
Individuals" shall mean and include Robert J. Attea, Kenneth F.
Myszka and David L. Rogers.
Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS AND
THE GUARANTORS. Each Borrower for itself and on behalf of the
Guarantors covenants and agrees that, so long as any portion of
the Term Loan remains outstanding:
Section 8.1. Restrictions on Indebtedness.
The Borrowers and the Guarantors may, and may permit their
respective Subsidiaries to, create, incur, assume, guarantee or
be or remain liable for, contingently or otherwise, any
Indebtedness other than the specific Indebtedness which is
prohibited under this Section 8.1 and with respect to which each
of the Borrowers and the Guarantors will not, and will not permit
any Subsidiary to, create, incur, assume, guarantee or be or
remain liable for, contingently or otherwise, singularly or in
the aggregate as follows:
(a) Intentionally Omitted;
(b) Indebtedness which would result in a Default or
Event of Default under Section 9 hereof or under any other
provision of this Agreement;
(c) An aggregate amount in excess of $1,000,000 at any
one time in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and
supplies for which payment therefor is required to be made
in accordance with the provisions of Section 7.9 and has not
been timely made;
(d) An aggregate amount in excess of $1,000,000 at any
one time in respect of uninsured judgments or awards, with
respect to which the applicable periods for taking appeals
have expired, or with respect to which final and
unappealable judgments or awards have been rendered; and
(e) Current unsecured liabilities incurred in the
ordinary course of business, which (i) are overdue for more
than sixty (60) days, (ii) exceed $1,000,000 in the
aggregate at any one time, and (iii) are not being contested
in good faith.
The terms and provisions of this Section 8.1 are in addition
to, and not in limitation of, the covenants set forth in Section
9 of this Agreement.
Notwithstanding anything contained herein to the contrary,
the Borrowers and the Guarantors will not, and will not permit
any Subsidiary to, incur any Indebtedness for borrowed money
which, together with other Indebtedness for borrowed money
incurred by any Borrower, any Guarantor, and any Subsidiary since
the date of the most recent compliance certificate delivered to
the Agent in accordance with this Agreement, exceeds $5,000,000
in the aggregate unless the Borrowers shall have delivered a
compliance certificate in the form of Exhibit D hereto to the
Agent evidencing covenant compliance at the time of delivery of
the certificate and on a pro-forma basis after giving effect to
such proposed Indebtedness.
Section 8.2. Restrictions on Liens, Etc. None of any
Borrower, any Guarantor, any Operating Subsidiary and any wholly-
owned Subsidiary will: (a) create or incur or suffer to be
created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any
kind upon any of its property or assets of any character whether
now owned or hereafter acquired, or upon the income or profits
therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the
same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (c)
acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase
money security agreement, device or arrangement; (d) suffer to
exist for a period of more than thirty (30) days after the same
shall have been incurred any Indebtedness or claim or demand
against it that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over
its general creditors; or (e) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles,
chattel paper or instruments, with or without recourse (the
foregoing items (a) through (e) being sometimes referred to in
this Section 8.2 collectively as "Liens"), provided that the
Borrowers, the Guarantors and any Subsidiary may create or incur
or suffer to be created or incurred or to exist:
(i) Liens securing taxes, assessments,
governmental charges or levies or claims for labor,
material and supplies, the Indebtedness with respect to
which is not prohibited by Section 8.1(d);
(ii) deposits or pledges made in connection with,
or to secure payment of, worker's compensation,
unemployment insurance, old age pensions or other
social security obligations; and deposits with utility
companies and other similar deposits made in the
ordinary course of business;
(iii) Liens (other than affecting the Unencumbered
Properties) in respect of judgments or awards, the
Indebtedness with respect to which is not prohibited by
Section 8.1(e);
(iv) encumbrances on properties consisting of
easements, rights of way, covenants, restrictions on
the use of real property and defects and irregularities
in the title thereto; landlord's or lessor's Liens
under Leases to which any Borrower, any Guarantor, or
any Subsidiary is a party or bound; purchase options
granted at a price not less than the market value of
such property; and other minor Liens or encumbrances on
properties, none of which interferes materially and
adversely with the use of the property affected in the
ordinary conduct of the business of the owner thereof,
and which matters (x) do not individually or in the
aggregate have a material adverse effect on the
business of any Borrower, any Guarantor or any of their
respective Subsidiaries or (xx) do not make title to
such property unmarketable by the conveyancing
standards in effect where such property is located;
(v) any Leases (excluding "synthetic leases")
entered into good faith with Persons that are not
Affiliates; provided that Leases with Affiliates on
market terms and with monthly market rent payments
required to be paid are Permitted Liens;
(vi) Liens and other encumbrances or rights of
others which exist on the date of this Agreement and
which do not otherwise constitute a breach of this
Agreement; provided that nothing in this clause (vi)
shall be deemed or construed to permit an Unencumbered
Property to be subject to a Lien to secure
Indebtedness;
(vii) as to Real Estate which are acquired after
the date of this Agreement, Liens and other
encumbrances or rights of others which exist on the
date of acquisition and which do not otherwise
constitute a breach of this Agreement; provided that
nothing in this clause (vii) shall be deemed or
construed to permit an Unencumbered Property to be
subject to a Lien to secure Indebtedness;
(viii) Liens affecting the Unencumbered Properties
in respect of judgments or awards that have been in
force for less than the applicable period for taking an
appeal, so long as execution is not levied thereunder
or in respect of which, at the time, a good faith
appeal or proceeding for review is being prosecuted,
and in respect of which a stay of execution shall have
been obtained pending such appeal or review; provided
that the Borrowers shall have obtained a bond or
insurance with respect thereto to the Agent's
reasonable satisfaction, and, provided further, such
Lien does not constitute a Disqualifying Environmental
Event, a Disqualifying Building Event or a
Disqualifying Legal Event;
(ix) Liens securing Indebtedness for the purchase
price of capital assets (other than Real Estate but
including Indebtedness in respect of Capitalized Leases
for equipment and other equipment leases) to the extent
not otherwise prohibited by Section 8.1; and
(x) other Liens (other than affecting the
Unencumbered Properties) in connection with any
Indebtedness permitted under Section 8.1 which do not
otherwise result in a Default or Event of Default under
this Agreement.
Notwithstanding the foregoing provisions of this Section
8.2, the failure of any Unencumbered Property to comply with the
covenants set forth in this Section 8.2 shall result in such
Unencumbered Property's disqualification as Unencumbered Property
under this Agreement, but such disqualification shall not by
itself constitute a Default or Event of Default, unless such
disqualification causes a Default or an Event of Default under
another provision of this Agreement; and provided further that
for so long as the Revolving Credit Agreement remains in effect
and continues to include restrictions on liens equivalent to this
Section 8.2, this Section 8.2 shall have no force or effect, but
upon the termination of the Revolving Credit Agreement, without
further act or deed on the part of the Agent, the Banks, any
Borrower or any Guarantor, this Section 8.2 shall be in full
force and effect.
Section 8.3. Restrictions on Investments. None of any
Borrower, any Guarantor, or any Subsidiary will make or permit to
exist or to remain outstanding any Investment except Investments
in:
(a) marketable direct or guaranteed obligations of the
United States of America that mature within one (1) year
from the date of purchase;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having
total assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper"
issued by a corporation organized and existing under the
laws of the United States of America or any state thereof
that at the time of purchase have been rated and the ratings
for which are not less than "P 1" if rated by Moody's
Investors Service, Inc., and its successors, and not less
than "A 1" if rated by Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., and its successors;
(d) Investments existing on the Closing Date and
listed on Schedule 8.3(d) hereto;
(e) So long as no Default or Event of Default has
occurred and is continuing or would occur after giving
effect thereto, acquisitions of Real Estate consisting of
self storage facilities and the equity of Persons whose
primary operations consist of the ownership, development,
operation and management of self storage facilities;
provided, however that (i) the Borrowers shall not, and
shall not permit any Guarantor or any of its Subsidiaries
to, acquire any such Real Estate without the prior written
consent of the Agent if the environmental investigation for
such Real Estate determines that the potential environmental
remediation costs and other environmental liabilities
associated with such Real Estate exceed $200,000; and (ii)
the Borrowers shall not permit any of their Subsidiaries
which is not a Borrower or a Guarantor, or which does not
become a Borrower or a Guarantor, to acquire any
Unencumbered Property, and in all cases such Guarantor shall
be a wholly-owned Subsidiary of SALP or Sovran;
(f) any Investments now or hereafter made in any
Subsidiary;
(g) Investments in respect of (1) equipment, inventory
and other tangible personal property acquired in the
ordinary course of business, (2) current trade and customer
accounts receivable for services rendered in the ordinary
course of business and payable in accordance with customary
trade terms, (3) advances to employees for travel expenses,
drawing accounts and similar expenditures, and (4) prepaid
expenses made in the ordinary course of business;
(h) any other Investments made in the ordinary course
of business and consistent with past business practices;
(i) interest rate hedges in connection with
Indebtedness; and
(j) shares of so-called "money market funds"
registered with the SEC under the Investment Company Act of
1940 which maintain a level per-share value, invest
principally in marketable direct or guaranteed obligations
of the United States of America and agencies and
instrumentalities thereof, and have total assets in excess
of $50,000,000.
Section 8.4. Merger, Consolidation and Disposition of
Assets.
None of any Borrower, any Guarantor, any Operating
Subsidiary or any wholly-owned Subsidiary will:
(a) Become a party to any merger, consolidation or
reorganization without the prior written consent of the
Lenders, except that so long as no Default or Event of
Default has occurred and is continuing, or would occur after
giving effect thereto, the merger, consolidation or
reorganization of one or more Persons with and into any
Borrower, any Guarantor, or any wholly-owned Subsidiary,
shall be permitted if such action is not hostile, any
Borrower, any Guarantor, or any wholly-owned Subsidiary, as
the case may be, is the surviving entity and such merger,
consolidation or reorganization does not cause a breach of
Section 7.23; provided that for any such merger,
consolidation or reorganization (other than (w) the merger
or consolidation of one or more Subsidiaries of SALP with
and into SALP, (x) the merger or consolidation of two or
more Subsidiaries of SALP, (y) the merger or consolidation
of one or more Subsidiaries of Sovran with and into Sovran,
or (z) the merger or consolidation of two or more
Subsidiaries of Sovran), the Borrowers shall provide to the
Agent a statement in the form of Exhibit D hereto signed by
the chief financial officer or treasurer of the Borrower
Representative and setting forth in reasonable detail
computations evidencing compliance with the covenants
contained in Section 9 hereof and certifying that no Default
or Event of Default has occurred and is continuing, or would
occur and be continuing after giving effect to such merger,
consolidation or reorganization and all liabilities, fixed
or contingent, pursuant thereto;
(b) Sell, transfer or otherwise dispose of
(collectively and individually, "Sell" or a "Sale") or grant
a Lien to secure Indebtedness (an "Indebtedness Lien") on
any of its now owned or hereafter acquired assets without
obtaining the prior written consent of the Required Lenders
except for:
(i) the Sale of or granting of an Indebtedness
Lien on any Unencumbered Property so long as no Default
or Event of Default has then occurred and is
continuing, or would occur and be continuing after
giving effect to such Sale or Indebtedness Lien;
provided, that prior to any Sale of any Unencumbered
Property or the granting of an Indebtedness Lien on any
Unencumbered Property under this clause (i), the
Borrowers shall provide to the Agent a statement in the
form of Exhibit D hereto signed by the chief financial
officer or treasurer of the Borrower Representative and
setting forth in reasonable detail computations
evidencing compliance with the covenants contained in
Section 9 hereof and certifying that no Default or
Event of Default has occurred and is continuing, or
would occur and be continuing after giving effect to
such proposed Sale or Indebtedness Lien and all
liabilities, fixed or contingent, pursuant thereto; and
(ii) the Sale of or the granting of an
Indebtedness Lien on any of its now owned or hereafter
acquired assets (other than any Unencumbered Property)
so long as no Event of Default has then occurred and is
continuing and no Default or Event of Default would
occur and be continuing after giving effect to such
Sale or Indebtedness Lien and all other Sales (to be)
made and Indebtedness Liens (to be) granted under this
clause (ii); provided, that (x) if such Sale or
Indebtedness Lien is made or granted under this clause
(ii) while a Default is continuing, such Sale or
Indebtedness Lien (together with other Sales and
Indebtedness Liens under this clause (ii)) cures (or
would cure) such Default before it becomes an Event of
Default, (y) if multiple Sales or grantings of
Indebtedness Liens are undertaken pursuant to the
foregoing subclause (x) to cure a Default, the
Borrowers shall apply the net proceeds of each such
Sale or Indebtedness Lien remaining after application
to such cure to the repayment of the Term Loans until
such Default has been fully cured, and (z) prior to the
Sale of any asset or the granting of an Indebtedness
Lien on any asset under this clause (ii), the Borrowers
shall provide to the Agent a statement in the form of
Exhibit D hereto signed by the chief financial officer
or treasurer of the Borrower Representative and setting
forth in reasonable detail computations evidencing
compliance with the covenants contained in Section 9
hereof and certifying that no Default or Event of
Default would occur and be continuing after giving
effect to all such proposed Sales or Indebtedness Liens
and all liabilities, fixed or contingent, pursuant
thereto.
Section 8.5. Sale and Leaseback. The Borrowers will not,
and will not permit any Guarantor or any of their respective
Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby any Borrower, any Guarantor or any of their
respective Subsidiaries shall sell or transfer any property owned
by it in order then or thereafter to lease such property.
Section 8.6. Compliance with Environmental Laws. None of
any Borrower, any Guarantor, or any Subsidiary will do any of the
following: (a) use any of the Real Estate or any portion thereof
as a facility for the handling, processing, storage or disposal
of Hazardous Substances except for quantities of Hazardous
Substances used in the ordinary course of business and in
compliance with all applicable Environmental Laws, (b) cause or
permit to be located on any of the Real Estate any underground
tank or other underground storage receptacle for Hazardous
Substances except in full compliance with Environmental Laws, (c)
generate any Hazardous Substances on any of the Real Estate
except in full compliance with Environmental Laws, or (d) conduct
any activity at any Real Estate or use any Real Estate in any
manner so as to cause a Release or a violation of any
Environmental Law; provided that a breach of this covenant shall
result in the exclusion of the affected Real Estate from the
calculation of the covenants set forth in Section 9, but shall
only constitute an Event of Default under Section 12.1(c) hereof
if such breach has a material adverse effect on the Borrowers and
their Subsidiaries, taken as a whole, or materially impairs the
ability of the Borrowers to fulfill their obligations to the
Lenders under this Agreement.
Section 8.7. Distributions.
(a) The Borrowers will not in any period of four (4)
consecutive completed fiscal quarters make (i) Distributions
in such period in excess of 90% of Funds From Operations for
such period or (ii) any Distributions during any period when
any Event of Default has occurred and is continuing;
provided, however, that the Borrowers may at all times make
Distributions to the extent (after taking into account all
available funds of Sovran from all other sources) required
in order to enable Sovran to continue to qualify as a REIT.
In the event that Sovran or SALP raises equity during the
term of this Agreement, the permitted percentage of
Distributions will be adjusted based on the total declared
distribution per share and partnership units over the most
recent four (4) quarters to Funds From Operations per
weighted average share and partnership unit based on the
most recent four (4) quarters.
(b) Sovran will not, during any period when any Event
of Default has occurred and is continuing, make any
Distributions in excess of the Distributions required to be
made by Sovran in order to maintain its status as a REIT.
Section 8.8. Employee Benefit Plans. None of any Borrower,
any Guarantor or any ERISA Affiliate will
(a) engage in any "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code
which could result in a material liability for any Borrower,
any Guarantor or any of their respective Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in
Section 302 of ERISA, whether or not such deficiency is or
may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan
to an extent which, or terminate any Guaranteed Pension Plan
in a manner which, could result in the imposition of a lien
or encumbrance on the assets of any Borrower, any Guarantor
or any of their respective Subsidiaries pursuant to Section
302(f) or Section 4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances
requiring the posting of security pursuant to Section 307
of ERISA or Section 401(a)(29) of the Code; or
(e) permit or take any action which would result in
the aggregate benefit liabilities (with the meaning of
Section 4001 of ERISA) of all Guaranteed Pension Plans
exceeding the value of the aggregate assets of such Plans,
disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit
liabilities.
Section 8.9. Fiscal Year. The Borrowers will not, and will
not permit the Guarantors or any of their respective Subsidiaries
to, change the date of the end of its fiscal year from that set
forth in Section 6.5.
Section 8.10. Amsdell Litigation. The Borrower will not,
and will not permit, release of the indemnifications relating to
the litigation of Robert Amsdell described on Schedule 6.7 or the
collateral for such indemnification as described on Schedule 6.7.
Section 8.11. Negative Pledge. From and after the date
hereof, neither any Borrower nor any Guarantor will, and will not
permit any Subsidiary to, enter into any agreement containing any
provision prohibiting the creation or assumption of any Lien upon
its properties (other than prohibitions on liens for particular
assets (other than an Unencumbered Property) set forth in a
security instrument in connection with Indebtedness for such
assets and the granting or effect of such liens does not
otherwise constitute a Default or Event of Default), revenues or
assets, whether now owned or hereafter acquired, or restricting
the ability of the Borrowers or the Guarantors to amend or modify
this Agreement or any other Loan Document; provided, however,
that so long as the Revolving Credit Agreement remains in effect
and continues to include a negative pledge restriction equivalent
to this Section 8.11, this Section 8.11 shall have no force or
effect, but upon the termination of the Revolving Credit
Agreement, without further act or deed on the part of the Agent,
the Banks, any Borrower or any Guarantor, this Section 8.11 shall
be in full force and effect.
Section 9. FINANCIAL COVENANTS OF THE BORROWERS. Each of
the Borrowers covenants and agrees that, so long as any portion
of the Term Loan remains outstanding:
Section 9.1. Leverage Ratio. As at the end of any fiscal
quarter or other date of measurement, the Borrowers shall not
permit Consolidated Total Liabilities to exceed 50% of
Consolidated Capitalized Value.
Section 9.2. Secured Indebtedness. As at the end of any
fiscal quarter or other date of measurement, the Borrowers shall
not permit Consolidated Secured Indebtedness to exceed 25% of
Consolidated Capitalized Value.
Section 9.3. Tangible Net Worth. As at the end of any
fiscal quarter or any other date of measurement, the Borrowers
shall not permit Consolidated Tangible Net Worth to be less than
the sum of (a) $209,093,300 plus (b) 80% of the sum of (i) the
aggregate proceeds received by Sovran (net of fees and expenses
customarily incurred in transactions of such type) in connection
with any offering of stock in Sovran and (ii) the aggregate value
of operating units issued by SALP in connection with asset or
stock acquisitions (valued at the time of issuance by reference
to the terms of the agreement pursuant to which such units are
issued), in each case after the Closing Date and on or prior to
the date such determination of Consolidated Tangible Net Worth is
made.
Section 9.4. Debt Service and Fixed Charge Coverages.
(a) Debt Service Coverage. As at the end of any
fiscal quarter or other date of measurement, the Borrowers
shall not permit Consolidated Adjusted EBITDA for the two
(2) most recent, complete, consecutive fiscal quarters to be
less than two (2) times Consolidated Assumed Amortizing Debt
Service Charges.
(b) Fixed Charge Coverage. As at the end of any
fiscal quarter or other date of measurement, the Borrowers
shall not permit Consolidated Adjusted EBITDA for the two
(2) most recent, complete, consecutive fiscal quarters to be
less than 1.8 times the sum of Consolidated Assumed
Amortizing Debt Service Charges plus Preferred Dividends for
the two (2) most recent, complete, consecutive fiscal
quarters.
Section 9.5. Unimproved Land. As at the end of any fiscal
quarter or other date of measurement, the Borrowers shall not
permit the book value of Unimproved Land to exceed 10% of
Consolidated Capitalized Value.
Section 9.6. Construction-in-Process. As at the end of any
fiscal quarter or other date of measurement, the Borrowers shall
not permit the aggregate Budgeted Project Costs of all
Construction-in-Process to exceed 10% of Consolidated Capitalized
Value.
Section 9.7. Promissory Notes. As at the end of any fiscal
quarter or other date of measurement, the Borrowers shall not
permit the book value of Indebtedness of third parties to the
Borrowers or their Subsidiaries for borrowed money or other
liquid or liquifiable obligations, whether secured or unsecured,
to exceed 10% of Consolidated Capitalized Value.
Section 9.8. Unimproved Land, Construction-in-Process and
Notes. As at the end of any fiscal quarter or other date of
measurement, the Borrowers shall not permit (a) the sum of (i)
the book value of Unimproved Land plus (ii) the aggregate
Budgeted Project Costs of all Construction-in-Process plus (iii)
the book value of Indebtedness of third parties to the Borrowers
or their Subsidiaries for borrowed money or other liquid or
liquifiable obligations, whether secured or unsecured, to exceed
(b) 20% of Consolidated Capitalized Value.
Section 9.9. Joint Venture Ownership Interest. As at the
end of any fiscal quarter or other date of measurement, the
Borrowers shall not permit Joint Venture Ownership Interest Value
to exceed 10% of Consolidated Capitalized Value.
Section 9.10. Unhedged Variable Rate Debt. As at the end
of any fiscal quarter, the Borrowers shall not permit the value
of Unhedged Variable Rate Indebtedness to exceed 20% of
Consolidated Capitalized Value for any two (2) consecutive fiscal
quarters.
Section 9.11. Unsecured Indebtedness. As at the end of any
fiscal quarter or other date of measurement, the Borrowers shall
not permit Consolidated Unsecured Indebtedness to exceed 45% of
aggregate Capitalized Unencumbered Property Value for all
Unencumbered Properties .
Section 9.12. Unencumbered Property Debt Service
Coverage. As at the end of any fiscal quarter or other date of
measurement, the Borrowers shall not permit the aggregate
Adjusted Unencumbered Property NOI for all Unencumbered
Properties for the two (2) most recent, complete, consecutive
fiscal quarters to be less than two (2) times Consolidated
Assumed Amortizing Unsecured Debt Service Charges.
Section 9.13. Covenant Calculations.
(a) For purposes of the calculations to be made
pursuant to Sections 9.1-9.12 (and the defined terms
relevant thereto, including, without limitation, those
relating to "debt service"), references to Indebtedness or
liabilities of the Borrowers shall mean Indebtedness or
liabilities (including, without limitation, Consolidated
Total Liabilities) of the Borrowers, plus (but without
double-counting):
(i) all Indebtedness or liabilities of the
Operating Subsidiaries, the Guarantors and any other
wholly-owned Subsidiary (excluding any such
Indebtedness or liabilities owed to the Borrowers or
any Guarantor),
(ii) all Indebtedness or liabilities of each
Partially-Owned Entity (including Capitalized Leases),
but only to the extent, if any, that said Indebtedness
or liability is Recourse to any of the Borrowers, the
Guarantors or their respective Subsidiaries or any of
their respective assets (other than their respective
interests in such Partially-Owned Entity), and
(iii) Indebtedness or liabilities of each
Partially-Owned Entity to the extent of the pro-rata
share of such Indebtedness or liability allocable to
any of the Borrowers, the Guarantors or their
respective Subsidiaries, if the Indebtedness or
liability of such Partially-Owned Entity is Without
Recourse to such Person or its assets (other than its
interest in such Partially-Owned Entity).
(b) For purposes of Sections 9.1-9.12 hereof,
Consolidated Adjusted EBITDA and Adjusted Unencumbered
Property NOI (and all defined terms and calculations using
such terms) shall be adjusted to (i) deduct the actual
results of any Real Estate disposed of by a Borrower, a
Guarantor or any of their respective Subsidiaries during the
relevant fiscal period, and (ii) include the pro forma
results of any Real Estate acquired by a Borrower, a
Guarantor or any of their respective Subsidiaries during the
relevant fiscal period, with such pro forma results being
calculated by (x) using the Borrowers' pro forma projections
for such acquired property, subject to the Agent's
reasonable approval, if such property has been owned by a
Borrower, a Guarantor or any of their respective
Subsidiaries for less than one complete fiscal quarter or
(y) using the actual results for such acquired property and
adjusting such results for the appropriate period of time
required by the applicable financial covenant, if such
property has been owned by a Borrower, a Guarantor or any of
their respective Subsidiaries for at least one complete
fiscal quarter.
(c) For purposes of Sections 9.1-9.12 hereof,
Consolidated Adjusted EBITDA and Adjusted Unencumbered
Property NOI (and the defined terms and calculations using
such terms) shall be adjusted, to the extent applicable, to
include the pro rata share of results attributable to the
Borrowers from unconsolidated Subsidiaries of the Borrowers
and their respective Subsidiaries and from unconsolidated
Partially-Owned Entities.
Section 10. CONDITIONS TO THE CLOSING DATE. The
obligations of the Lenders to make the Term Loan shall be subject
to the satisfaction of the following conditions precedent on or
prior to December 22, 1998:
Section 10.1. Loan Documents. Each of the Loan Documents
shall have been duly executed and delivered by the respective
parties thereto and shall be in full force and effect.
Section 10.2. Certified Copies of Organization Documents.
The Agent shall have received from each Borrower and Holdings a
copy, certified as of the Closing Date by a duly authorized
officer of such Person (or its general partner, in the case of
SALP), to be true and complete, of each of its certificate of
limited partnership, agreement of limited partnership,
incorporation documents, by-laws, and/or other organizational
documents as in effect on the Closing Date, along with any other
organization documents of any Borrower (and its general partner,
in the case of SALP) or Holdings, as the case may be, and each as
in effect on the date of such certification.
Section 10.3. By-laws; Resolutions. All action on the part
of the Borrowers and Holdings necessary for the valid execution,
delivery and performance by the Borrowers and Holdings of this
Agreement and the other Loan Documents to which either of them is
or is to become a party shall have been duly and effectively
taken, and evidence thereof satisfactory to the Lenders shall
have been provided to the Agent. Without limiting the foregoing,
the Agent shall have received from Holdings true copies of its
by-laws and the resolutions adopted by its board of directors
authorizing the transactions described herein and evidencing the
due authorization, execution and delivery of the Loan Documents
to which SALP and Holdings are a party, each certified by the
secretary as of a recent date to be true and complete.
Section 10.4. Incumbency Certificate; Authorized Signers.
The Agent shall have received from each of the Borrowers and
Holdings an incumbency certificate, dated as of the Closing Date,
signed by a duly authorized officer such Person and giving the
name of each individual who shall be authorized: (a) to sign, in
the name and on behalf of such Person, each of the Loan Documents
to which such Person is or is to become a party; (b) in the case
of the Borrower Representative, to make Completed Term Loan
Requests and Conversion Requests on behalf of the Borrowers; and
(c) in the case of the Borrower Representative, to give notices
and to take other action on behalf of the Borrowers and the
Guarantors under the Loan Documents.
Section 10.5. Title Policies. The Agent (on behalf of the
Lenders) shall have received copies of the Title Policies for all
Real Estate which are Unencumbered Properties as of the Closing
Date.
Section 10.6. Certificates of Insurance. The Agent shall
have received (a) current certificates of insurance as to all of
the insurance maintained by each Borrower and their respective
Subsidiaries on the Real Estate (including flood insurance if
necessary) from the insurer or an independent insurance broker,
identifying insurers, types of insurance, insurance limits, and
policy terms; and (b) such further information and certificates
from the Borrowers, their insurers and insurance brokers as the
Agent may reasonably request.
Section 10.7. Environmental Site Assessments. The Agent
shall have received environmental site assessments from a
hydrogeologist, environmental engineer, qualified consultant or
other expert and in form and substance satisfactory to the Agent,
covering all Unencumbered Properties and all other real property
in respect of which any Borrower or any of its Subsidiaries may
have material liability, whether contingent or otherwise, for
dumping or disposal of Hazardous Substances or otherwise with
respect to Environmental Laws, such site assessments to be dated
as of a recent date.
Section 10.8. Opinion of Counsel Concerning Organization
and Loan Documents. Each of the Lenders and the Agent shall have
received favorable opinions addressed to the Lenders and the
Agent in form and substance satisfactory to the Lenders and the
Agent from Phillips, Lytle, Hitchcock, Blaine & Huber LLP, as
counsel to the Borrowers and their respective Subsidiaries with
respect to New York law and certain matters of Delaware and
Maryland corporate law and as counsel to Sovran, with respect to
Maryland law.
Section 10.9. Tax and Securities Law Compliance. Each of
the Lenders and the Agent shall also have received from Phillips,
Lytle, Hitchcock, Blaine & Huber LLP, as counsel to the
Borrowers, a favorable opinion addressed to the Lenders and the
Agent, in form and substance satisfactory to each of the Lenders
and the Agent, with respect to the qualification of Sovran as a
REIT and certain other tax and securities laws matters.
Section 10.10. Guaranties. Each of the Guaranties to be
executed and delivered on the Closing Date shall have been duly
executed and delivered by the Guarantor thereunder.
Section 10.11. Certifications from Government Officials;
UCC-11 Reports. The Agent shall have received (i) certifications
from government officials evidencing the legal existence, good
standing and foreign qualification of each Borrower and each
Guarantor, along with a certified copy of the certificate of
limited partnership or certificate of incorporation of each
Borrower and each Guarantor, all as of the most recent
practicable date; and (ii) UCC-11 search results from the
appropriate jurisdictions for each Borrower and each Guarantor
with respect to the Unencumbered Properties.
Section 10.12. Proceedings and Documents. All proceedings
in connection with the transactions contemplated by this
Agreement, the other Loan Documents and all other documents
incident thereto shall be satisfactory in form and substance to
each of the Lenders and to the Agent's counsel, and the Agent,
each of the Lenders and such counsel shall have received all
information and such counterpart originals or certified or other
copies of such documents as the Agent may reasonably request.
Section 10.13. Fees. The Borrowers shall have paid to the
Agent, for the accounts of the Lenders or for its own account, as
applicable, all of the fees and expenses that are due and payable
as of the Closing Date in accordance with this Agreement and the
Fee Letter.
Section 10.14. Compliance Certificates. The Borrowers
shall have delivered compliance certificates in the form of
Exhibit D hereto evidencing compliance with the covenants set
forth in Section 9 hereof for the fiscal quarter ended September
30, 1998, and for the Closing Date.
Section 10.15. Existing Indebtedness. The existing of
record indebtedness of the Borrowers to Fleet in the amount of
$40,000,000 pursuant to that certain Term Loan Agreement, dated
as of June 26, 1998, as amended, among Sovran, SALP, Holdings and
Fleet, shall have been satisfied in full or will be satisfied in
full with the proceeds of the Term Loan, and satisfactory
evidence of the foregoing shall have been provided to the Agent.
Section 10.16. Subsequent Guarantors. As a condition to
the effectiveness of any subsequent Guaranty, each subsequent
Guarantor shall deliver such documents, agreements, instruments
and opinions as the Agent shall require as to such Guarantor and
the Unencumbered Property owned by such Guarantor that are
analogous to the deliveries made by the Guarantors as of the
Closing Date pursuant to Section 10.2 through Section 10.8,
Section 10.10 and Section 10.11.
Section 10.17. Representations True; No Event of Default;
Compliance Certificate. Each of the representations and
warranties of the Borrowers and the Guarantors contained in this
Agreement, the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with this
Agreement shall be true as of the Closing Date, and no Default or
Event of Default under this Agreement shall have occurred and be
continuing as of the Closing Date.
Section 10.18. No Legal Impediment. No change shall have
occurred in any law or regulations thereunder or interpretations
thereof that in the reasonable opinion of the Agent or any Lender
would make it illegal for any Lender to make such Loan.
Section 10.19. Governmental Regulation. Each Lender shall
have received such statements in substance and form reasonably
satisfactory to such Lender as such Lender shall require for the
purpose of compliance with any applicable regulations of the
Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
Section 11. CERTAIN ADDITIONAL CONDITIONS TO THE SECOND
CLOSING DATE. The obligations of the Lenders to cause the Second
Closing Date to occur shall be subject to the satisfaction of the
following conditions precedent:
Section 11.1. Representations True; No Event of Default;
Compliance Certificate. Each of the representations and
warranties of the Borrowers and the Guarantors contained in this
Agreement, the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with this
Agreement shall be true as of the date as of which they were made
and shall also be true at and as of the Second Closing Date, with
the same effect as if made at and as of that time; no Default or
Event of Default under this Agreement shall have occurred and be
continuing on the Second Closing Date; and all of the conditions
set forth in Section 10 shall remain satisfied.
Section 11.2. No Legal Impediment. No change shall have
occurred in any law or regulations thereunder or interpretations
thereof that in the reasonable opinion of the Agent or any Lender
would make it illegal for any Lender to make such Loan.
Section 11.3. Governmental Regulation. Each Lender shall
have received such statements in substance and form reasonably
satisfactory to such Lender as such Lender shall require for the
purpose of compliance with any applicable regulations of the
Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
Section 11.4. Compliance Certificates. The Borrowers shall
have delivered compliance certificates in the form of Exhibit E
hereto evidencing compliance with the covenants set forth in
Section 9 hereof as of the Second Closing Date.
Section 11.5. No Adverse Change. From the Closing Date, no
material adverse change shall have occurred in the financial
condition, assets or business of any Borrower or Guarantor.
Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 12.1. Events of Default and Acceleration. If any
of the following events ("Events of Default") shall occur:
(a) the Borrowers shall fail to pay any principal of
the Term Loan when the same shall become due and payable,
whether at the stated date of maturity or any accelerated
date of maturity or at any other date fixed for payment;
(b) the Borrowers shall fail to pay any interest on
any portion of the Term Loan, the Administrative Agent Fee
or any other sums due hereunder or under any of the other
Loan Documents (including, without limitation, amounts due
under Section 7.17) when the same shall become due and
payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for
payment, and such failure continues for five (5) days;
(c) any Borrower or any Guarantor or any of their
respective Subsidiaries shall fail to comply with any of
their respective covenants contained in Section 7.1, Section
7.6, Section 7.7, Section 7.8, Section 7.9, Section 7.12,
Section 7.21, Section 7.23, Section 8 or Section 9;
(d) any Borrower or any Guarantor or any of their
respective Subsidiaries shall fail to perform any other
term, covenant or agreement contained herein or in any other
Loan Document (other than those specified elsewhere in this
Section 12) and such failure continues for thirty (30) days;
(e) any representation or warranty of any Borrower or
any Guarantor or any of their respective Subsidiaries in
this Agreement or any of the other Loan Documents or in any
other document or instrument delivered pursuant to or in
connection with this Agreement shall prove to have been
false in any material respect upon the date when made or
deemed to have been made or repeated;
(f) any Borrower or any Guarantor or any of their
respective Subsidiaries shall (i) fail to pay at maturity,
or within any applicable period of grace, any obligation for
borrowed money or credit received or in respect of any
Capitalized Leases (x) in respect of any Recourse
obligations or credit or (y) in respect of any Without
Recourse obligations or credit which total in an aggregate
amount in excess of $10,000,000, or (ii) fail to observe or
perform any material term, covenant or agreement contained
in any agreement by which it is bound, evidencing or
securing borrowed money or credit received or in respect of
any Capitalized Leases (x) in respect of any Recourse
obligations or credit or (y) in respect of any Without
Recourse obligations or credit in an aggregate amount in
excess of $10,000,000, in either case for such period of
time (after the giving of appropriate notice if required) as
would permit the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity
thereof;
(g) any Borrower, any Guarantor or any of their
respective Subsidiaries shall make an assignment for the
benefit of creditors, or admit in writing its inability to
pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment
of a trustee or other custodian, liquidator or receiver of
any Borrower, any Guarantor or any of their respective
Subsidiaries or of any substantial part of the properties or
assets of any Borrower, any Guarantor or any of their
respective Subsidiaries or shall commence any case or other
proceeding relating to any Borrower, any Guarantor or any of
their respective Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any
action to authorize or in furtherance of any of the
foregoing, or if any such petition or application shall be
filed or any such case or other proceeding shall be
commenced against any Borrower, any Guarantor or any of
their respective Subsidiaries and (i) any Borrower, any
Guarantor or any of their respective Subsidiaries shall
indicate its approval thereof, consent thereto or
acquiescence therein or (ii) any such petition, application,
case or other proceeding shall continue undismissed, or
unstayed and in effect, for a period of sixty (60) days;
(h) a decree or order is entered appointing any
trustee, custodian, liquidator or receiver or adjudicating
any Borrower, any Guarantor or any of their respective
Subsidiaries bankrupt or insolvent, or approving a petition
in any such case or other proceeding, or a decree or order
for relief is entered in respect of any Borrower, any
Guarantor or any of their respective Subsidiaries in an
involuntary case under federal bankruptcy laws as now or
hereafter constituted;
(i) there shall remain in force, undischarged,
unsatisfied and unstayed, for more than thirty (30) days,
whether or not consecutive, any uninsured final judgment
against any Borrower, any Guarantor or any of their
respective Subsidiaries that, with other outstanding
uninsured final judgments, undischarged, unsatisfied and
unstayed, against any Borrower, any Guarantor or any of
their respective Subsidiaries exceeds in the aggregate
$1,000,000;
(j) any of the Loan Documents or any material
provision of any Loan Documents shall be cancelled,
terminated, revoked or rescinded otherwise than in
accordance with the terms thereof or with the express prior
written agreement, consent or approval of the Agent, or any
Guaranty shall be cancelled, terminated, revoked or
rescinded at any time or for any reason whatsoever, or any
action at law, suit or in equity or other legal proceeding
to make unenforceable, cancel, revoke or rescind any of the
Loan Documents shall be commenced by or on behalf of any
Borrower or any of its Subsidiaries or any Guarantor or any
of its Subsidiaries, or any court or any other governmental
or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable as to
any material terms thereof;
(k) any "Event of Default" or default (after notice
and expiration of any period of grace, to the extent
provided, and if none is specifically provided, then for a
period of thirty (30) days after notice), as defined or
provided in any of the other Loan Documents, shall occur and
be continuing;
(l) any Borrower or any ERISA Affiliate incurs any
liability to the PBGC or a Guaranteed Pension Plan pursuant
to Title IV of ERISA in an aggregate amount exceeding
$500,000, or any Borrower or any ERISA Affiliate is assessed
withdrawal liability pursuant to Title IV of ERISA by a
Multiemployer Plan requiring aggregate annual payments
exceeding $500,000, or any of the following occurs with
respect to a Guaranteed Pension Plan: (i) an ERISA
Reportable Event, or a failure to make a required
installment or other payment (within the meaning of Section
302(f)(1) of ERISA), provided that the Agent determines in
its reasonable discretion that such event (A) could be
expected to result in liability of any Borrower or any of
their respective Subsidiaries to the PBGC or such Guaranteed
Pension Plan in an aggregate amount exceeding $500,000 and
(B) could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC, for the appointment by
the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan or for the
imposition of a lien in favor of such Guaranteed Pension
Plan; or (ii) the appointment by a United States District
Court of a trustee to administer such Guaranteed Pension
Plan; or (iii) the institution by the PBGC of proceedings to
terminate such Guaranteed Pension Plan; or
(m) any person or group of persons (within the meaning
of Section 13 or 14 of the Securities Exchange Act of 1934,
as amended) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 20% or more of the
outstanding shares of common stock of Sovran; or, during any
period of twelve consecutive calendar months, individuals
who were directors of Sovran on the first day of such period
(together with directors whose election by the Board of
Directors or whose nomination for election by Sovran's
stockholders was approved by a vote of at least two-thirds
of the members of the Board of Directors then in office who
either were members of the Board of Directors on the Closing
Date or whose election or nomination for election was
previously so approved) shall cease to constitute a majority
of the board of directors of Sovran;
(n) any "Event of Default" under the Revolving Credit
Agreement as of the date hereof without amendment,
modification or waiver [irrespective of whether such Event
of Default has been waived by the "Lenders" under the
Revolving Credit Agreement.]
then, and in any such event, so long as the same may be
continuing, the Agent may, and upon the request of the Required
Lenders shall, by notice in writing to the Borrowers, declare all
amounts owing with respect to this Agreement, the Notes and the
other Loan Documents to be, and they shall thereupon forthwith
become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived by each Borrower and each Guarantor; provided
that in the event of any Event of Default specified in Section
12.1(g) or Section 12.1(h), all such amounts shall become
immediately due and payable automatically and without any
requirement of notice from any of the Lenders or the any of Agent
or action by the Lenders or the Agent.
Section 12.2. Intentionally Omitted.
Section 12.3. Remedies. In the event that one or more
Events of Default shall have occurred and be continuing, whether
or not the Lenders shall have accelerated the maturity of the
Term Loan pursuant to Section 12.1, the Required Lenders may
direct the Agent to proceed to protect and enforce the rights and
remedies of the Agent and the Lenders under this Agreement, the
Notes, any or all of the other Loan Documents or under applicable
law by suit in equity, action at law or other appropriate
proceeding (including for the specific performance of any
covenant or agreement contained in this Agreement or the other
Loan Documents or any instrument pursuant to which the
Obligations are evidenced and the obtaining of the appointment of
a receiver) and, if any amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof
or any other legal or equitable right or remedy of the Agent and
the Lenders under the Loan Documents or applicable law. No
remedy herein conferred upon the Lenders or the Agent or the
holder of any Note is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or under any of
the other Loan Documents or now or hereafter existing at law or
in equity or by statute or any other provision of law.
Section 13. SETOFF. Without demand or notice to the extent
permitted by applicable law, during the continuance of any Event
of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the
branch at which such deposits are held, but specifically
excluding tenant security deposits, other fiduciary accounts and
other segregated escrow accounts required to be maintained by any
of the Borrowers for the benefit of any third party) or other
sums credited by or due from any of the Lenders to any of the
Borrowers or any other property of any of the Borrowers in the
possession of the Agent or a Lender may be applied to or set off
against the payment of the Obligations. Each of the Lenders
agrees with each other Lender that (a) if pursuant to any
agreement between such Lender and any Borrower (other than this
Agreement or any other Loan Document), an amount to be set off is
to be applied to Indebtedness of any Borrower to such Lender,
other than with respect to the Obligations, such amount shall be
applied ratably to such other Indebtedness and to the
Obligations, and (b) if such Lender shall receive from any
Borrower, whether by voluntary payment, exercise of the right of
setoff, counterclaim, cross action, enforcement of the
Obligations by proceedings against such Borrower at law or in
equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Note or Notes
held by such Lender any amount in excess of its ratable portion
of the payments received by all of the Lenders with respect to
the Notes held by all of the Lenders, such Lender will make such
disposition and arrangements with the other Lenders with respect
to such excess, either by way of distribution, pro tanto
assignment of claims, subrogation or otherwise, as shall result
in each Lender receiving in respect of the Notes held by it, its
proportionate payment as contemplated by this Agreement; provided
that if all or any part of such excess payment is thereafter
recovered from such Lender, such disposition and arrangements
shall be rescinded and the amount restored to the extent of such
recovery, but without interest. Notwithstanding the foregoing,
no Lender shall exercise a right of setoff if such exercise would
limit or prevent the exercise of any other remedy or other
recourse against any Borrower.
Section 14. THE AGENT.
Section 14.1. Authorization.
(a) The Agent is authorized to take such action on
behalf of each of the Lenders and to exercise all such
powers as are hereunder and under any of the other Loan
Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not
expressly assumed herein or therein shall be implied to have
been assumed by the Agent. The relationship between the
Agent and the Lenders is and shall be that of agent and
principal only, and nothing contained in this Agreement or
any of the other Loan Documents shall be construed to
constitute the Agent as a trustee or fiduciary for any
Lender.
(b) Each Borrower and each Guarantor, without further
inquiry or investigation, shall, and is hereby authorized by
the Lenders to, assume that all actions taken by the Agent
hereunder and in connection with or under the Loan Documents
are duly authorized by the Lenders. The Lenders shall
notify the Borrowers of any successor to Agent by a writing
signed by Required Lenders, which successor shall be
reasonably acceptable to the Borrowers so long as no Default
or Event of Default has occurred and is continuing.
Section 14.2. Employees and Agents. The Agent may exercise
its powers and execute its duties by or through employees or
agents and shall be entitled to take, and to rely on, advice of
counsel concerning all matters pertaining to its rights and
duties under this Agreement and the other Loan Documents. The
Agent may utilize the services of such Persons as the Agent in
its sole discretion may reasonably determine, and all reasonable
fees and expenses of any such Persons shall be paid by the
Borrowers if so provided in Section 15 hereof.
Section 14.3. No Liability. Neither the Agent, nor any of
its shareholders, directors, officers or employees nor any other
Person assisting them in their duties nor any agent or employee
thereof, shall be liable for any waiver, consent or approval
given or any action taken, or omitted to be taken, in good faith
by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the
consequences of any oversight or error of judgment whatsoever,
except that the Agent may be liable for losses due to its willful
misconduct or gross negligence.
Section 14.4. No Representations. The Agent shall not be
responsible for the execution or validity or enforceability of
this Agreement, the Notes, or any of the other Loan Documents or
for the validity, enforceability or collectibility of any such
amounts owing with respect to the Notes, or for any recitals or
statements, warranties or representations made herein or in any
of the other Loan Documents or in any certificate or instrument
hereafter furnished to it by or on behalf of any Guarantor or any
Borrower or any of their respective Subsidiaries, or be bound to
ascertain or inquire as to the performance or observance of any
of the terms, conditions, covenants or agreements in this
Agreement or the other Loan Documents. The Agent shall not be
bound to ascertain whether any notice, consent, waiver or request
delivered to it by any Borrower or any Guarantor or any holder of
any of the Notes shall have been duly authorized or is true,
accurate and complete. The Agent has not made nor does it now
make any representations or warranties, express or implied, nor
does it assume any liability to the Lenders, with respect to the
credit worthiness or financial condition of any Borrower or any
of its Subsidiaries or any Guarantor or any of the Subsidiaries
or any tenant under a Lease or any other entity. Each Lender
acknowledges that it has, independently and without reliance upon
the Agent or any other Lender, and based upon such information
and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
Section 14.5. Payments.
(a) A payment by the Borrowers to the Agent hereunder
or any of the other Loan Documents for the account of any
Lender shall constitute a payment to such Lender. The Agent
agrees to distribute to each Lender such Lender's pro rata
share of payments received by the Agent for the account of
the Lenders, as provided herein or in any of the other Loan
Documents. All such payments shall be made on the date
received, if before 1:00 p.m., and if after 1:00 p.m., on
the next Business Day. If payment is not made on the day
received, interest thereon at the overnight federal funds
effective rate shall be paid pro rata to the Lenders.
(b) If in the reasonable opinion of the Agent the
distribution of any amount received by it in such capacity
hereunder, under the Notes or under any of the other Loan
Documents might involve it in material liability, it may
refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of
competent jurisdiction, provided that interest thereon at
the overnight federal funds effective rate shall be paid pro
rata to the Lenders. If a court of competent jurisdiction
shall adjudge that any amount received and distributed by
the Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the
Agent its proportionate share of the amount so adjudged to
be repaid or shall pay over the same in such manner and to
such Persons as shall be determined by such court.
(c) Notwithstanding anything to the contrary contained
in this Agreement or any of the other Loan Documents, any
Lender that fails to comply with the provisions of Section
13 with respect to making dispositions and arrangements with
the other Lenders, where such Lender's share of any payment
received, whether by setoff or otherwise, is in excess of
its pro rata share of such payments due and payable to all
of the Lenders, in each case as, when and to the full extent
required by the provisions of this Agreement, or to adjust
promptly such Lender's outstanding principal and its pro
rata Commitment Percentage as provided in Section 2.1, shall
be deemed delinquent (a "Delinquent Lender") and shall be
deemed a Delinquent Lender until such time as such
delinquency is satisfied. A Delinquent Lender shall be
deemed to have assigned any and all payments due to it from
the Borrowers, whether on account of outstanding Loans,
interest, fees or otherwise, to the remaining nondelinquent
Lenders for application to, and reduction of, their
respective pro rata shares of all outstanding Loans. The
Delinquent Lender hereby authorizes the Agent to distribute
such payments to the nondelinquent Lenders in proportion to
their respective pro rata shares of all outstanding Loans.
If not previously satisfied directly by the Delinquent
Lender, a Delinquent Lender shall be deemed to have
satisfied in full a delinquency when and if, as a result of
application of the assigned payments to all outstanding
Loans of the nondelinquent Lenders, the Lenders' respective
pro rata shares of all outstanding Loans have returned to
those in effect immediately prior to such delinquency and
without giving effect to the nonpayment causing such
delinquency.
Section 14.6. Holders of Notes. The Agent may deem and
treat the payee of any Notes as the absolute owner thereof for
all purposes hereof until it shall have been furnished in writing
with a different name by such payee or by a subsequent holder,
assignee or transferee.
Section 14.7. Indemnity. The Lenders ratably and severally
agree hereby to indemnify and hold harmless the Agent and its
Affiliates from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent has not been
reimbursed by the Borrowers as required by Section 15), and
liabilities of every nature and character arising out of or
related to this Agreement, the Notes, or any of the other Loan
Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agent's actions taken hereunder or thereunder,
except to the extent that any of the same shall be directly
caused by the Agent's willful misconduct or gross negligence.
Section 14.8. Agent as Lender. In its individual capacity
as a Lender, Fleet shall have the same obligations and the same
rights, powers and privileges in respect to its Commitment and
the Loans made by it, and as the holder of any of the Notes, as
it would have were it not also the Agent.
Section 14.9. Notification of Defaults and Events of
Default. Each Lender hereby agrees that, upon learning of the
existence of a default, Default or an Event of Default, it shall
(to the extent notice has not previously been provided) promptly
notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this Section 14.9 it shall promptly
notify the other Lenders of the existence of such default,
Default or Event of Default.
Section 14.10. Duties in the Case of Enforcement. In case
one or more Events of Default have occurred and shall be
continuing, and whether or not acceleration of the Obligations
shall have occurred, the Agent shall, if (a) so requested by the
Required Lenders and (b) the Lenders have provided to the Agent
such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to
enforce the provisions of this Agreement and exercise all or any
such other legal and equitable and other rights or remedies as it
may have in respect of enforcement of the Lenders' rights against
the Borrowers and the Guarantors under this Agreement and the
other Loan Documents. The Required Lenders may direct the Agent
in writing as to the method and the extent (other than when such
direction requires Unanimous Lender Approval under Section 25) of
any such enforcement, the Lenders (including any Lender which is
not one of the Required Lenders) hereby agreeing to ratably and
severally indemnify and hold the Agent harmless from all
liabilities incurred in respect of all actions taken or omitted
in accordance with such directions, provided that the Agent need
not comply with any such direction to the extent that the Agent
reasonably believes the Agent's compliance with such direction to
be unlawful or commercially unreasonable in any applicable
jurisdiction.
Section 14.11. Successor Agent. Fleet, or any successor
Agent, may resign as Agent at any time by giving written notice
thereof to the Lenders and to the Borrowers. In addition, the
Required Lenders may remove the Agent in the event of the Agent's
gross negligence or willful misconduct or in the event that the
Agent ceases to hold a Commitment greater or equal to the lesser
of (a) $15,000,000 or (b) a Commitment Percentage of at least
twenty percent (20%) under this Agreement. Any such resignation
or removal shall be effective upon appointment and acceptance of
a successor Agent, as hereinafter provided. Upon any such
resignation or removal, the Required Lenders shall have the right
to appoint a successor Agent, which is a Lender under this
Agreement, provided that so long as no Default or Event of
Default has occurred and is continuing the Borrowers shall have
the right to approve any successor Agent, which approval shall
not be unreasonably withheld. If, in the case of a resignation
by the Agent, no successor Agent shall have been so appointed by
the Required Lenders and approved by the Borrowers, and shall
have accepted such appointment, within thirty (30) days after the
retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint any one of
the other Lenders as a successor Agent. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or
removed Agent, and the retiring or removed Agent shall be
discharged from all further duties and obligations as Agent under
this Agreement. After any Agent's resignation or removal
hereunder as Agent, the provisions of this Section 14 shall inure
to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
Section 14.12. Notices. Any notices or other information
required hereunder to be provided to the Agent shall be forwarded
by the Agent to each of the Lenders on the same day (if
practicable) and, in any case, on the next Business Day
following the Agent's receipt thereof.
Section 15. EXPENSES. The Borrowers jointly and severally
agree to pay (a) the reasonable costs of producing and
reproducing this Agreement, the other Loan Documents and the
other agreements and instruments mentioned herein, (b) the
reasonable fees, expenses and disbursements of the Agent's
outside counsel or any local counsel to the Agent incurred in
connection with the preparation, administration or interpretation
of the Loan Documents and other instruments mentioned herein,
each closing hereunder, and amendments, modifications, approvals,
consents or waivers hereto or hereunder, (c) the fees, expenses
and disbursements of the Agent incurred by the Agent in
connection with the preparation, administration or interpretation
of the Loan Documents and other instruments mentioned herein, any
amendments, modifications, approvals, consents or waivers hereto
or hereunder, or the cancellation of any Loan Document upon
payment in full in cash of all of the Obligations or pursuant to
any terms of such Loan Document for providing for such
cancellation, including, without limitation, the fees and
disbursements of the Agent's counsel in preparing the
documentation, (d) the fees, costs, expenses and disbursements of
the Agent and its Affiliates incurred in connection with the
syndication and/or participations of the Loans, including,
without limitation, costs of preparing syndication materials and
photocopying costs, which syndication costs and expenses shall be
payable by the Borrowers regardless of whether the Loans are
ultimately syndicated, (e) all reasonable expenses (including
reasonable attorneys' fees and costs, which attorneys may be
employees of any Lender or the Agent, and the fees and costs of
appraisers, engineers, investment bankers, surveyors or other
experts retained by any Lender or the Agent in connection with
any such enforcement proceedings) incurred by any Lender or the
Agent in connection with (i) the enforcement of or preservation
of rights under any of the Loan Documents against any Borrower or
any of its Subsidiaries or any Guarantor or the administration
thereof after the occurrence and during the continuance of a
Default or Event of Default (including, without limitation,
expenses incurred in any restructuring and/or "workout" of the
Loans), and (ii) subject to the limitation set forth in Section
16 hereof, any litigation, proceeding or dispute whether arising
hereunder or otherwise, in any way related to any Lender's or the
Agent's relationship with any Borrower or any of its Subsidiaries
or any Guarantor, (f) all reasonable fees, expenses and
disbursements of the Agent incurred in connection with UCC
searches and (g) all costs incurred by the Agent in the future in
connection with its inspection of the Unencumbered Properties
after the occurrence and during the continuance of an Event of
Default. The covenants of this Section 15 shall survive payment
or satisfaction of payment of amounts owing with respect to the
Notes.
Section 16. INDEMNIFICATION. The Borrowers jointly and
severally agree to indemnify and hold harmless the Agent and each
of the Lenders and the shareholders, directors, agents, officers,
subsidiaries and affiliates of the Agent and each of the Lenders
(each group consisting of the Agent or a Lender and its
respective shareholders, directors, agents, officers,
subsidiaries and affiliates being an "Indemnified Lender's
Group") from and against any and all claims, actions and suits,
whether groundless or otherwise, and from and against any and all
liabilities, losses, settlement payments, obligations, damages
and expenses of every nature and character, arising out of this
Agreement or any of the other Loan Documents or the transactions
contemplated hereby or thereby or which otherwise arise in
connection with the financing, including, without limitation, (a)
any actual or proposed use by any Borrower or any of its
Subsidiaries of the proceeds of the Term Loan, (b) any Borrower
or any of its Subsidiaries or any Guarantor entering into or
performing this Agreement or any of the other Loan Documents or
the transactions contemplated by this Agreement or any of the
other Loan Documents, or (c) pursuant to Section 7.17 hereof, in
each case including, without limitation, the reasonable fees and
disbursements of counsel and allocated costs of internal counsel
incurred in connection with any such investigation, litigation or
other proceeding, provided, however, that the Borrowers shall not
be obligated under this Section 16 to indemnify any Person for
liabilities arising from the gross negligence or willful
misconduct of such Person or of any other Person in the
Indemnified Lender's Group of which such Person is a member (but
such indemnification shall continue to apply to all other Persons
including all other Indemnified Lender's Groups). Each Person to
be indemnified under this Section 16 shall give the Borrowers
notice of any claim as to which it is seeking indemnification
under this Section 16 promptly after becoming aware of the same
(which shall constitute notice for all Indemnified Lender's
Groups), but such Person's failure to give prompt notice shall
not affect the obligations of the Borrowers under this Section 16
unless such failure prejudices the legal rights of the Borrowers
regarding such indemnity. In litigation, or the preparation
therefor, the Borrowers shall be entitled to select counsel
reasonably acceptable to the Required Lenders, and the Lenders
(as approved by the Required Lenders) shall be entitled to select
their own supervisory counsel and, in addition to the foregoing
indemnity, the Borrowers agree to pay promptly the reasonable
fees and expenses of each such counsel if (i) in the reasonable
opinion of the Agent, use of counsel of the Borrowers' choice
could reasonably be expected to give rise to a conflict of
interest, (ii) the Borrowers shall not have employed counsel
reasonably satisfactory to the Agent and the Lenders within a
reasonable time after notice of the institution of any such
litigation or proceeding or (iii) the Borrower Representative
authorizes the Agent and the Lenders to employ separate counsel
at the Borrowers' expense. If and to the extent that the
obligations of the Borrowers under this Section 16 are
unenforceable for any reason, the Borrowers hereby agree to make
the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The
provisions of this Section 16 shall survive the repayment of the
Term Loan and the termination of the obligations of the Lenders
hereunder and shall continue in full force and effect as long as
the possibility of any such claim, action, cause of action or
suit exists.
Section 17. SURVIVAL OF COVENANTS, ETC. All covenants,
agreements, representations and warranties made herein, in the
Notes, in any of the other Loan Documents or in any documents or
other papers delivered by or on behalf of any Borrower or any of
its Subsidiaries or any Guarantor pursuant hereto shall be deemed
to have been relied upon by the Lenders and the Agent,
notwithstanding any investigation heretofore or hereafter made by
any of them, and shall survive the making by the Lenders of the
Term Loan, as herein contemplated, and shall continue in full
force and effect so long as any amount due under this Agreement
or the Notes or any of the other Loan Documents remains
outstanding. The indemnification obligations of the Borrowers
provided herein and in the other Loan Documents shall survive the
full repayment of amounts due and the termination of the
obligations of the Lenders hereunder and thereunder to the extent
provided herein and therein. All statements contained in any
certificate or other paper delivered to any Lender or the Agent
at any time by or on behalf of any Borrower or any of its
Subsidiaries or any Guarantor pursuant hereto or in connection
with the transactions contemplated hereby shall constitute
representations and warranties by such Borrower or such
Subsidiary or such Guarantor hereunder.
Section 18. ASSIGNMENT; PARTICIPATIONS; ETC.
Section 18.1. Conditions to Assignment by Lenders. Except
as provided herein, each Lender may assign to one or more
Eligible Assignees all or a portion of its interests, rights and
obligations under this Agreement (including all or a portion of
its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, and the Notes held by it);
provided that (a) the Agent and, unless an Event of Default shall
have occurred and be continuing, the Borrower Representative each
shall have the right to approve any Eligible Assignee, which
approval by the Borrower Representative shall not be unreasonably
withheld or delayed, (b) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning
Lender's rights and obligations under this Agreement, (c) each
such assignment shall be in a minimum amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, (d) unless the
assigning Lender shall have assigned its entire Commitment, each
Lender shall have at all times an amount of its Commitment of not
less than $5,000,000 and (e) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register
(as hereinafter defined), an assignment and assumption,
substantially in the form of Exhibit F hereto (an "Assignment and
Assumption"), together with any Notes subject to such assignment.
Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and
Assumption, which effective date shall be at least five (5)
Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in
such Assignment and Assumption, have the rights and obligations
of a Lender hereunder and thereunder, and (ii) the assigning
Lender shall, to the extent provided in such assignment and upon
payment to the Agent of the registration fee referred to in
Section 18.3, be released from its obligations under this
Agreement.
Section 18.2. Certain Representations and Warranties;
Limitations; Covenants. By executing and delivering an
Assignment and Assumption, the parties to the assignment
thereunder confirm to and agree with each other and the other
parties hereto as follows: (a) other than the representation and
warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse
claim, the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, the other
Loan Documents or any other instrument or document furnished
pursuant hereto; (b) the assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the
financial condition of any Borrower or any of its Subsidiaries or
any Guarantor or any other Person primarily or secondarily liable
in respect of any of the Obligations, or the performance or
observance by any Borrower or any of its Subsidiaries or any
Guarantor or any other Person primarily or secondarily liable in
respect of any of the Obligations of any of their obligations
under this Agreement or any of the other Loan Documents or any
other instrument or document furnished pursuant hereto or
thereto; (c) such assignee confirms that it has received a copy
of this Agreement, together with copies of the most recent
financial statements referred to in Section 6.4 and Section 7.4
and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter
into such Assignment and Assumption; (d) such assignee will,
independently and without reliance upon the assigning Lender, the
Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action
under this Agreement; (e) such assignee represents and warrants
that it is an Eligible Assignee; (f) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to the Agent by the terms hereof
or thereof, together with such powers as are reasonably
incidental thereto; (g) such assignee agrees that it will perform
in accordance with their terms all of the obligations that by the
terms of this Agreement are required to be performed by it as a
Lender; and (h) such assignee represents and warrants that it is
legally authorized to enter into such Assignment and Assumption.
Section 18.3. Register. The Agent shall maintain a copy of
each Assignment and Assumption delivered to it and a register or
similar list (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment Percentages of,
and principal amount of the Loans owing to, the Lenders from time
to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrowers, the Agent and the
Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the
Borrowers and the Lenders at any reasonable time and from time to
time upon reasonable prior notice. Upon each such recordation,
the assigning Lender agrees to pay to the Agent a registration
fee in the sum of $2,500.
Section 18.4. New Term Notes. Upon its receipt of an
Assignment and Assumption executed by the parties to such
assignment, together with each Note subject to such assignment,
the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrowers
and the Lenders (other than the assigning Lender). Within five
(5) Business Days after receipt of such notice, the Borrowers, at
its own expense, (i) shall execute and deliver to the Agent, in
exchange for each surrendered Note, a new Note to the order of
such Eligible Assignee in an amount equal to the amount assumed
by such Eligible Assignee pursuant to such Assignment and
Assumption and, if the assigning Lender has retained some portion
of its obligations hereunder, a new Note to the order of the
assigning Lender in an amount equal to the amount retained by it
hereunder and (ii) shall deliver an opinion from counsel to the
Borrowers in substantially the form delivered on the Closing Date
pursuant to Section 10.8 as to the enforceability of such new
Notes. Such new Notes shall provide that they are replacements
for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered
Notes, shall be dated the effective date of such Assignment and
Assumption and shall otherwise be in substantially the form of
the assigned Notes. The surrendered Notes shall be cancelled and
returned to the Borrowers.
Section 18.5. Participations. Each Lender may sell
participations to one or more banks or other entities in all or a
portion of such Lender's rights and obligations under this
Agreement and the other Loan Documents; provided that (a) each
such participation shall be in an amount of not less than
$10,000,000, (b) any such sale or participation shall not affect
the rights and duties of the selling Lender hereunder to the
Borrowers and the Agent and the Lender shall continue to exercise
all approvals, disapprovals and other functions of a Lender, (c)
the only rights granted to the participant pursuant to such
participation arrangements with respect to waivers, amendments or
modifications of, or approvals under, the Loan Documents shall be
the rights to approve waivers, amendments or modifications that
would reduce the principal of or the interest rate on any Loans,
extend the term or increase the amount of the Commitment of such
Lender as it relates to such participant, reduce the amount of
any fees to which such participant is entitled or extend any
regularly scheduled payment date for principal or interest, and
(d) no participant shall have the right to grant further
participations or assign its rights, obligations or interests
under such participation to other Persons without the prior
written consent of the Agent.
Section 18.6. Pledge by Lender. Notwithstanding any other
provision of this Agreement, any Lender at no cost to the
Borrowers may at any time pledge all or any portion of its
interest and rights under this Agreement (including all or any
portion of its Notes) to any of the twelve Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act, 12 U.S.C.
Section 341. No such pledge or the enforcement thereof shall
release the pledgor Lender from its obligations hereunder or
under any of the other Loan Documents.
Section 18.7. No Assignment by Borrowers. None of the
Borrowers shall assign or transfer any of its rights or
obligations under any of the Loan Documents without prior
Unanimous Lender Approval.
Section 18.8. Disclosure. The Borrowers agree that, in
addition to disclosures made in accordance with standard banking
practices, any Lender may disclose information obtained by such
Lender pursuant to this Agreement to assignees or participants
and potential assignees or participants hereunder; provided that
such assignees or potential assignees shall be Eligible
Assignees. Any such disclosed information shall be treated by
any assignee or participant with the same standard of
confidentiality set forth in Section 7.10 hereof.
Section 18.9. Syndication. The Borrowers acknowledge that
the Agent intends, and shall have the right, by itself or through
its Affiliates, to syndicate or enter into co-lending
arrangements with respect to a portion of the Term Loan and the
Total Commitment pursuant to this Section 18, and the Borrowers
agree to cooperate with the Agent's and its Affiliate's
syndication and/or co-lending efforts, such cooperation to
include, without limitation, the provision of information
reasonably requested by potential syndicate members.
Section 19. NOTICES, ETC. Except as otherwise expressly
provided in this Agreement, all notices and other communications
made or required to be given pursuant to this Agreement or the
Notes shall be in writing and shall be delivered in hand, mailed
by United States registered or certified first class mail,
postage prepaid, sent by overnight courier, or sent by facsimile
and confirmed by delivery via courier or postal service,
addressed as follows:
(a) if to any Borrower or any Guarantor, to the
Borrower Representative at Sovran Self Storage, Inc., 5166
Main Street, Williamsville, New York 14221, Attention:
Mr. David L. Rogers, Chief Financial Officer, with a copy to
Phillips, Lytle, Hitchcock, Blaine & Huber LLP, One Marine
Midland Center, Buffalo, New York 14203, Attention: Mr.
Frederick G. Attea, or to such other address for notice as
the Borrower Representative or any Guarantor shall have last
furnished in writing to the Agent;
(b) if the Agent, at 111 Westminster Street, Mail Code
RI-MO-215, Providence, Rhode Island 02903, Attention: Mark
E. Dalton, Senior Vice President, or such other address for
notice as Fleet shall have last furnished in writing to the
Borrowers, with a copy to Paul M. Vaughn, Esq., Bingham Dana
LLP, 150 Federal Street, Boston, Massachusetts 02110, or at
such other address for notice as Fleet shall last have
furnished in writing to the Person giving the notice; and
additionally, for any Completed Loan Request,
Continuation/Conversion Notice, or Repayment Notice, to
Agency Services, Fleet Corporate Administration, Mail Stop
MA-OF-DO5P, One Federal Street, Boston, Massachusetts 02110,
Attention: Timothy J. Callahan, Senior Loan Administrator;
and
(c) if to any Lender, at such Lender's address set
forth on Schedule 1 hereto, or such other address for notice
as such Lender shall have last furnished in writing to the
Person giving the notice.
Any such notice or demand shall be deemed to have been duly
given or made and to have become effective (i) if delivered by
hand, overnight courier or facsimile to the party to which it is
directed, at the time of the receipt thereof by such party or the
sending of such facsimile with electronic confirmation of receipt
and (ii) if sent by registered or certified first-class mail,
postage prepaid, on the fifth Business Day following the mailing
thereof.
Section 20. GOVERNING LAW; CONSENT TO JURISDICTION AND
SERVICE. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS,
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS
UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). EACH OF THE BORROWERS AND THE
GUARANTORS AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK, NEW YORK
OR ANY FEDERAL COURT SITTING IN NEW YORK, NEW YORK AND CONSENTS
TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS AND THE SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWERS OR THE
GUARANTORS BY MAIL AT THE ADDRESS SPECIFIED IN Section 19. THE
BORROWERS AND EACH OF THE GUARANTORS HEREBY WAIVES ANY OBJECTION
THAT EITHER OF THEM MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
Section 21. HEADINGS. The captions in this Agreement are
for convenience of reference only and shall not define or limit
the provisions hereof.
Section 22. COUNTERPARTS. This Agreement and any amendment
hereof may be executed in several counterparts and by each party
on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall
not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is
sought.
Section 23. ENTIRE AGREEMENT, ETC. The Loan Documents and
any other documents executed in connection herewith or therewith
express the entire understanding of the parties with respect to
the transactions contemplated hereby. Neither this Agreement nor
any term hereof may be changed, waived, discharged or terminated,
except as provided in Section 25.
Section 24. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE
CLAIMS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, EACH
OF THE BORROWERS, EACH OF THE GUARANTORS, THE AGENT AND EACH OF
THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE TERM NOTES OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. EXCEPT TO THE EXTENT EXPRESSLY
PROHIBITED BY LAW, EACH OF THE BORROWERS AND EACH OF THE
GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHT ANY OF THEM MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH OF THE BORROWERS
AND THE GUARANTORS (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGE THAT THE AGENT AND THE LENDERS HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH
THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS CONTAINED HEREIN.
Section 25. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as
otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given,
and any term of this Agreement or of any of the other Loan
Documents may be amended, and the performance or observance by
any Borrower or any Guarantor of any terms of this Agreement or
the other Loan Documents or the continuance of any default,
Default or Event of Default may be waived (either generally or in
a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Required Lenders.
Notwithstanding the foregoing, Unanimous Lender Approval shall be
required for any amendment, modification or waiver of this
Agreement that:
(i) reduces or forgives any principal of any
unpaid Loan or any interest thereon (including any
interest "breakage" costs) or any fees due any Lender
hereunder, or permits any prepayment not otherwise
permitted hereunder; or
(ii) changes the unpaid principal amount of, or
the rate of interest on, any Loan; or
(iii) changes the date fixed for any payment of
principal of or interest on any Loan (including,
without limitation, any extension of the Maturity Date)
or any fees payable hereunder; or
(iv) changes the amount of any Lender's Commitment
(other than pursuant to an assignment permitted under
Section 18.1 hereof) or increases the amount of the
Total Commitment; or
(v) releases or reduces the liability of any
Guarantor pursuant to its Guaranty other than as
provided in Section 5; or
(vi) modifies this Section 25 or any other
provision herein or in any other Loan Document which by
the terms thereof expressly requires Unanimous Lender
Approval; or
(vii) amends any of the provisions governing
funding contained in Section 2 hereof; or
(viii) changes the rights, duties or obligations of
the Agent specified in Section 14 hereof (provided that
no amendment or modification to such Section 14 or to
the fee payable to the Agent under this Agreement may
be made without the prior written consent of the
Agent); or
(ix) changes the definitions of Required Lenders
or Unanimous Lender Approval.
No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of the Agent
or the Lenders or any Lender in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial to such
right or any other rights of the Agent or the Lenders. No notice
to or demand upon any Borrower shall entitle any Borrower to
other or further notice or demand in similar or other
circumstances.
Section 26. SEVERABILITY. The provisions of this Agreement
are severable, and if any one clause or provision hereof shall be
held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or
provision of this Agreement in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as a sealed instrument as of the date first set forth
above.
SOVRAN SELF STORAGE, INC.
By:/s/ David Rogers
Name: David Rogers
Title: Chief Financial Officer
SOVRAN ACQUISITION LIMITED
PARTNERSHIP
By: Sovran Holdings Inc.,
its general partner
By:/s/ David Rogers
Name: David Rogers
Title: Chief Financial Officer
FLEET NATIONAL BANK,
individually and as Agent
By:/s/ Mark E. Dalton
Name: Mark E. Dalton
Title: Senior Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY
By:/s/ Paul T. Pitman
Name: Paul T. Pitman
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By:/s/ Randall Cornelius
Name: Randall Cornelius
Title: Commercial Banking Officer
USTRUST
By:/s/ James P. McGoldrick
Name: James P. McGoldrick
Title: Vice President
CITIZENS BANK OF RHODE ISLAND
By:/s/ Lawrence S. Hershoff
Name: Lawrence S. Hershoff
Title: Vice President
Schedule 1
Lender Commitment Amount Commitment Percentage
______ _________________ _____________________
Fleet National Bank
One Federal Street
Boston, MA 02110 $17,500,000 23.33%
Manufacturers and Traders
Trust Company
One Fountain Plaza, 12th Floor
Buffalo, NY 14203 $17,500,000 23.33%
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Real Estate Banking
Pittsburgh, PA 15222 $15,000,000 20%
USTrust
40 Court Street
Boston, MA 02108 $12,500,000 16.67%
Citizens Bank of Rhode Island
One Citizens Plaza
Providence, RI 02903-1339 $12,500,000 16.67%
TOTAL $75,000,000 100%
Exhibit A
TERM NOTE
$__________December 22, 1998
FOR VALUE RECEIVED, the undersigned SOVRAN SELF STORAGE,
INC., a Maryland corporation ("Sovran"), and the undersigned
SOVRAN ACQUISITION LIMITED PARTNERSHIP, a Delaware limited
partnership ("SALP" and together with Sovran, collectively
referred to herein as the "Borrowers" and individually as a
"Borrower"), hereby jointly and severally promise to pay to the
order of FLEET NATIONAL BANK, a national banking association
("Fleet"):
(a) prior to or on the Maturity Date the principal
amount of __________ Dollars ($__________) which principal
amount is the portion of the Term Loan advanced by Fleet to
the Borrowers pursuant to the Term Loan Agreement, dated as
of December 22, 1998 (as amended and in effect from time to
time, the "Term Loan Agreement") among the Borrowers and
Fleet; and
(b) interest on the principal balance hereof from time
to time outstanding at the times and at the rate or rates
provided in the Term Loan Agreement and any other sums or
fees due thereunder.
This Note evidences borrowings under and has been issued by
the Borrowers in accordance with the terms of the Term Loan
Agreement. Fleet and any holder hereof pursuant to the Term Loan
Agreement or by operation of law is entitled to the benefits of
the Term Loan Agreement and the other Loan Documents, and may
enforce the agreements of the Borrower contained therein, and any
holder hereof may exercise the respective remedies provided for
thereby or otherwise available in respect thereof, all in
accordance with the respective terms thereof. All capitalized
terms used in this Note and not otherwise defined herein shall
have the same meanings herein as in the Term Loan Agreement.
The Borrowers irrevocably authorize Fleet to make or cause
to be made, at or about the time of the Drawdown Date of the Term
Loan or at the time of receipt of any payment of principal of
this Note, an appropriate notation on the grid attached to this
Note, or the continuation of such grid, or any other similar
record, including computer records, reflecting the making of such
Term Loan or (as the case may be) the receipt of such payment.
The outstanding amount of the Term Loan set forth on the grid
attached to this Note, or the continuation of such grid, or any
other similar record, including computer records, maintained by
Fleet with respect to the Term Loan shall be prima facie evidence
of the principal amount thereof owing and unpaid to Fleet, but
the failure to record, or any error in so recording, any such
amount on any such grid, continuation or other record shall not
limit or otherwise affect the obligation of the Borrowers
hereunder or under the Term Loan Agreement to make payments of
principal of and interest on this Note when due to the extent of
the unpaid principal and interest amount as of any date of
determination.
The Borrowers have the right in certain circumstances and
the obligation under certain other circumstances to prepay the
whole or part of the principal of this Note on the terms and
conditions specified in the Term Loan Agreement.
If any one or more of the Events of Default shall occur, the
entire unpaid principal amount of this Note and all of the unpaid
interest accrued thereon and any other charges or amounts due
under any of the Loan Documents may become or be declared due and
payable in the manner and with the effect provided in the Term
Loan Agreement.
No delay or omission on the part of Fleet or any holder
hereof in exercising any right hereunder shall operate as a
waiver of such right or of any other rights of Fleet or such
holder, nor shall any delay, omission or waiver on any one
occasion be deemed a bar or waiver of the same or any other right
on any further occasion.
The Borrowers and every endorser and guarantor of this Note
or the obligations represented hereby waives presentment, demand,
notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or
enforcement of this Note, and assents to any extension or
postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of collateral and to the
addition or release of any other party or person primarily or
secondarily liable.
THIS NOTE AND THE OBLIGATIONS OF THE BORROWERS HEREUNDER
SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK (EXCLUDING THE LAWS
APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE BORROWERS
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW
YORK, NEW YORK OR ANY FEDERAL COURT SITTING IN NEW YORK, NEW YORK
AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS AND
THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWERS BY MAIL AT THE ADDRESS SPECIFIED IN Section 12.4 OF THE
TERM LOAN AGREEMENT. EACH OF THE BORROWERS HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
This Note shall be deemed to take effect as a sealed
instrument under the laws of the State of New York.
IN WITNESS WHEREOF, each of the undersigned has caused this
Term Note to be sealed and signed in its corporate or partnership
name by its duly authorized officer as of the day and year first
above written.
SOVRAN SELF STORAGE, INC.
WITNESS:
_________________________ By: ______________________________
Name:
Title:
SOVRAN ACQUISITION LIMITED
PARTNERSHIP
By: Sovran Holdings Inc., its
general partner
WITNESS:
_________________________ By: ______________________________
Name:
Title:
Amount of Balance of
Amount Principal Paid Principal Notation
Date of Term Loan or Prepaid Unpaid Made By:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Exhibit B
Form of Guaranty
(attached)
Exhibit C
[Form of Notice of Continuation/Conversion]
Fleet National Bank, as Agent Fleet National Bank, as Agent
111 Westminster Street Agency Service
RI-MO-2151 Fleet Corporation Administration
Providence, Rhode Island 02902 Mail Stop: MAOFD05P
Attn: Mark E. Dalton One Federal Street
Senior Vice President Boston, Massachusetts 02110
Attn: Timothy J. Callahan
Senior Loan Administrator
Gentlemen:
Reference is made to that certain Term Loan Agreement dated
as of December 22, 1998 (such agreement, as it may be or may have
been amended, restated, supplemented or otherwise modified from
time to time, the "Term Loan"; capitalized terms used herein
without definition shall have the respective meanings assigned to
those terms in the Term Loan Agreement) among Sovran Self
Storage, Inc., Sovran Acquisition Limited Partnership, the
institutions from time to time party thereto as Lenders and Fleet
National Bank, as Agent. The Borrowers hereby give you notice
pursuant to Section 2.6 of the Term Loan Agreement for the Loans
specified below that they elect to:
1. [Continue as LIBOR Rate Loans $_________ in aggregate
principal amount of the outstanding LIBOR Rate Loans, the current
Interest Period of which ends of _________, ____].
Convert to [Prime Rate Loans] [LIBOR Rate Loans] $__________
in aggregate principal amount of the outstanding [LIBOR Rate
Loans], [Prime Rate Loans] the current Interest Period of which
ends of ________].
2. The date for such [continuation] [conversion] shall be
_______________.
3. [The Interest Period for such continued or converted
(as applicable) LIBOR Rate Loans is requested to be [a
_____________ month period].
The Borrower Representative hereby certifies to the Agent
and each of the Lenders on behalf of each Borrower that it is
authorized to execute this notice on behalf of the Borrowers, no
Default or Event of Default has occurred and is continuing, on
the date hereof there are no other prohibitions under the Term
Loan Agreement to the requested [conversion/continuation], the
requested [conversion/continuation] is in accordance with the
provisions of Section 2.6 of the Term Loan Agreement.
Executed as of this _____ day of ____________, ____.
SOVRAN SELF STORAGE, INC.
By:
Name:
Title:
Exhibit D-1
COMPLIANCE CERTIFICATE
OF CHIEF FINANCIAL OFFICER
(Sovran Financial Statements)
The undersigned Chief Financial Officer of Sovran Self
Storage, Inc., ("Sovran") HEREBY CERTIFIES THAT:
This compliance certificate is furnished pursuant to Section
7.4(c) of the Term Loan Agreement dated as of December 22, 1998
among Sovran, Sovran Acquisition Limited Partnership (together
with Sovran, collectively referred to herein as the "Borrowers"),
Fleet National Bank, individually and as Agent, certain other
Lenders and other parties as provided therein (as the same may
now or hereafter be amended from time to time, the "Term Loan
Agreement"). Unless otherwise defined herein, the terms used in
this Compliance Certificate and Schedule 1 attached hereto have
the meanings given them in the Term Loan Agreement.
As required by Section 7.4(c) of the Term Loan Agreement,
the consolidated (and consolidating, if required under the Term
Loan Agreement) financial statements of Sovran and its respective
subsidiaries (as defined in the Term Loan Agreement) for the
[year] [quarter] ended ______, ____ (the "Financial Statements")
prepared in accordance with GAAP (subject, in the case of
quarterly statements, to year-end adjustments none of which are
anticipated to be materially adverse, except as specifically
disclosed in this compliance certificate) accompany this
Compliance Certificate. The Financial Statements present fairly
the financial position of Sovran and its subsidiaries as at the
date thereof and the results of operations of Sovran and its
subsidiaries for the period covered thereby.
Schedule 1 attached hereto sets forth the financial data and
computations evidencing the Borrowers' compliance with the
covenants contained in Section 9 of the Term Loan Agreement, all
of which data and computations, to the knowledge and belief of
the chief financial officer executing and delivering this
Compliance Certificate on behalf of Sovran, as Borrower
Representative (the "Chief Financial Officer"), are true,
complete and correct.
The activities of Sovran and its subsidiaries during the
period covered by the Financial Statements have been reviewed by
the Chief Financial Officer and/or by employees or agents under
his immediate supervision. Based upon such review, during the
period covered by the Financial Statements, and as of the date of
this Certificate, no Default or Event of Default has occurred and
is continuing, except as specifically disclosed in this
compliance certificate.
The Chief Financial Officer certifies that he is authorized
to execute and deliver this Compliance Certificate on behalf of
Sovran, as Borrower Representative.
Executed as of this __ day of ___________, ____.
SOVRAN SELF STORAGE, INC.
By: ______________________________
Name:
Title:
Exhibit D-2
COMPLIANCE CERTIFICATE
OF CHIEF FINANCIAL OFFICER
(SALP Financial Statements)
The undersigned Chief Financial Officer of Sovran
Acquisition Limited Partnership ("SALP") HEREBY CERTIFIES THAT:
This compliance certificate is furnished pursuant to Section
7.4(c) of the Term Loan Agreement dated as of December 22, 1998
among SALP, Sovran Self Storage, Inc. (together with SALP,
collectively referred to herein as the "Borrowers"), Fleet
National Bank, individually and as Agent, certain other Lenders
and other parties as provided therein (as the same may now or
hereafter be amended from time to time, the "Term Loan
Agreement"). Unless otherwise defined herein, the terms used in
this compliance certificate and Schedule 1 attached hereto have
the meanings given them in the Term Loan Agreement.
As required by Section 7.4(c) of the Term Loan Agreement,
financial statements of SALP and its subsidiaries (as defined in
the Term Loan Agreement) for the [year] [quarter] ended ______,
____ (the "Financial Statements") prepared in accordance with
GAAP (subject, in the case of quarterly statements, to year-end
adjustments none of which are anticipated to be materially
adverse, except as specifically disclosed in this compliance
certificate) accompany this compliance certificate. The
Financial Statements delivered herewith present fairly the
financial position of SALP and its subsidiaries as at the date
thereof and the results of operations of SALP and its
subsidiaries for the period covered thereby.
The activities of SALP and its subsidiaries during the
period covered by the Financial Statements have been reviewed by
the chief financial officer of SALP and/or by employees or agents
under his immediate supervision. Based upon such review, during
the period covered by the Financial Statements, and as of the
date of this compliance certificate, no Default or Event of
Default has occurred and is continuing, except as specifically
disclosed in this compliance certificate.
The undersigned Chief Financial Officer of SALP certifies
that he is authorized to execute and deliver this compliance
certificate on behalf of SALP.
Executed as of this __ day of ___________, ____.
SOVRAN ACQUISITION LIMITED
PARTNERSHIP
By: Sovran Holdings Inc., its
general partner
By: ______________________________
Name:
Title:
Exhibit D-3
COMPLIANCE CERTIFICATE
OF CHIEF FINANCIAL OFFICER
(Incurrence of Indebtedness)
The undersigned, being the Chief Financial Officer of Sovran
Self Storage, Inc. ("Sovran" and together with Sovran Acquisition
Limited Partnership, collectively referred to herein as the
"Borrowers"), HEREBY CERTIFIES THAT:
This compliance certificate is furnished pursuant to Section
8.1 of the Term Loan Agreement dated as of December 22, 1998
among the Borrowers, Fleet National Bank, individually and as
Agent, certain other Lenders and other parties as provided
therein (as the same may now or hereafter be amended from time to
time, the "Term Loan Agreement"). Unless otherwise defined
herein, the terms used in this compliance certificate and
Schedule 1 attached hereto have the meanings given them in the
Term Loan Agreement.
The Borrowers hereby give the Agent notice that a Borrower,
a Guarantor or a Subsidiary plans to incur Indebtedness for
borrowed money which will cause the aggregate amount of
Indebtedness for borrowed money incurred since delivery of the
most recent compliance certificate to exceed $5,000,000.
Schedule 1 attached hereto sets forth the financial data and
computations evidencing the Borrowers' compliance with the
covenants contained in Section 9.1, Section 9.2, Section 9.3 and
Section 9.11 of the Term Loan Agreement on a pro forma basis
after giving effect to such Indebtedness for borrowed money, all
of which data and computations, to the best knowledge and belief
of the chief financial officer executing and delivering this
compliance certificate on behalf of Sovran, as Borrower
Representative (the "Chief Financial Officer"), are true,
complete and correct.
The activities of the Borrower, the Guarantor or the
Subsidiary, as applicable, have been reviewed by the Chief
Financial Officers and/or by employees or agents under his
immediate supervision. The Chief Financial Officer certifies
that he is authorized to execute and deliver this compliance
certificate on behalf of Sovran, as Borrower Representative.
Executed as of this __ day of ___________, ____.
SOVRAN SELF STORAGE, INC.
By: ______________________________
Name:
Title:
Exhibit D-4
COMPLIANCE CERTIFICATE OF
[CHIEF FINANCIAL OFFICER/TREASURER]
(Merger, Consolidation or Reorganization)
The undersigned, being the [Chief Financial
Officer/Treasurer] of Sovran Self Storage, Inc. ("Sovran"),
HEREBY CERTIFIES THAT:
This compliance certificate is furnished pursuant to Section
8.4(a) of the Term Loan Agreement dated as of December 22, 1998
among Sovran, Sovran Acquisition Limited Partnership ("SALP" and
together with Sovran, collectively referred to herein as the
"Borrowers"), Fleet National Bank, individually and as Agent,
certain other Lenders and other parties as provided therein (as
the same may now or hereafter be amended from time to time, the
"Term Loan Agreement"). Unless otherwise defined herein, the
terms used in this compliance certificate and Schedule 1 attached
hereto have the meanings given them in the Term Loan Agreement.
The undersigned hereby gives the Agent notice that a
Borrower, a Guarantor, an Operating Subsidiary or a wholly-owned
Subsidiary plans to become a party to a merger, consolidation or
reorganization requiring a compliance certificate under Section
8.4(a) of the Term Loan Agreement.
Schedule 1 attached hereto sets forth the financial data and
computations evidencing the Borrowers' compliance with the
covenants contained in Section 9 of the Term Loan Agreement on a
pro forma basis, all of which data and computations, to the best
knowledge and belief of the [chief financial officer/treasurer]
executing and delivering this compliance certificate (the "[Chief
Financial Officer/Treasurer]"), are true, complete and correct.
Furthermore, the undersigned certifies that no Default or Event
of Default has occurred and is continuing, or would occur and be
continuing after giving effect to such merger, consolidation or
reorganization and all liabilities, fixed or contingent, pursuant
thereto;
The activities of the Borrower, the Guarantor, the Operating
Subsidiary or the wholly-owned Subsidiary, as applicable, have
been reviewed by the [Chief Financial Officer/Treasurer] and/or
by employees or agents under his immediate supervision. The
[Chief Financial Officer/Treasurer] certifies that he is
authorized to execute and deliver this compliance certificate on
behalf of the Borrower Representative.
Executed as of this __ day of ___________, ____.
SOVRAN SELF STORAGE, INC.
By: ______________________________
Name:
Title:
Exhibit D-5
COMPLIANCE CERTIFICATE OF
[CHIEF FINANCIAL OFFICER/TREASURER]
(Disposition of Unencumbered Property)
The undersigned [Chief Financial Officer/Treasurer] of
Sovran Self Storage, Inc. ("Sovran") HEREBY CERTIFIES THAT:
This compliance certificate is furnished pursuant to Section
8.4(b)(i) or Section 8.4(b)(ii) of the Term Loan Agreement dated
as of December 22, 1998 among Sovran, Sovran Acquisition Limited
Partnership (together with Sovran, collectively referred to
herein as the "Borrowers"), Fleet National Bank, individually and
as Agent, certain other Lenders and other parties as provided
therein (as the same may now or hereafter be amended from time to
time, the "Term Loan Agreement"). Sovran, as Borrower
Representative hereby gives the Agent notice of the intention of
a Borrower, a Guarantor, an Operating Subsidiary or a wholly-
owned Subsidiary to Sell or to grant an Indebtedness Lien on an
Unencumbered Property or other asset pursuant to Section
8.4(b)(i) or Section 8.4(b)(ii) of the Term Loan Agreement.
Unless otherwise defined herein, the terms used in this
Compliance Certificate and Schedule 1 attached hereto have the
meanings described in the Term Loan Agreement.
Schedule 1 attached hereto sets forth the financial data and
computations evidencing the Borrowers' compliance with the
covenants contained in Section 9 of the Term Loan Agreement on a
pro forma basis after giving effect to such proposed Sale or
Indebtedness Lien and all liabilities, fixed or contingent,
pursuant thereto, all of which data and computations, to the
knowledge and belief of the [chief financial officer/treasurer]
executing and delivering this compliance certificate on behalf of
Sovran (the "[Chief Financial Officer"/"Treasurer]"), are true,
complete and correct.
The activities of the Borrowers, the Guarantor, the
Operating Subsidiary or the wholly-owned Subsidiary, as
applicable, have been reviewed by the [Chief Financial
Officer/Treasurer] and/or by employees or agents under his
immediate supervision. Based upon such review, to the best
knowledge and belief of the [Chief Financial Officer/Treasurer],
[(for Section 8.4(b)(i)) both before and after giving effect to
the proposed Sale or Indebtedness Lien and all liabilities, fixed
or contingent, pursuant thereto, no Default or Event of Default
exists or will exist under any Loan Document.]
[(for Section 8.4(b)(ii)) before giving effect to the proposed
Sale or Indebtedness Lien and all liabilities, fixed or
contingent, pursuant thereto, no Event of Default exists under
any Loan Document; provided, that if such Sale or Indebtedness
Lien is to be made while a Default is continuing, such Sale or
Indebtedness Lien (together with other Sales and Indebtedness
Liens) will cure the Default before it becomes an Event of
Default; and if multiple Sales or Indebtedness Liens are
contemplated, the Borrowers shall apply the net proceeds of each
Sale or Indebtedness Lien to the repayment of the Term Loans
until such Default has been fully cured. After giving effect to
the proposed Sale or Indebtedness Lien and all liabilities, fixed
or contingent, pursuant thereto, no Default or Event of Default
will exist under any Loan Document.]
The [Chief Financial Officer/Treasurer] certifies that he is
authorized to execute and deliver this Compliance Certificate on
behalf of Sovran, as Borrower Representative.
Executed as of this __ day of ___________, ____.
SOVRAN SELF STORAGE, INC.
By: ______________________________
Name:
Title:
Exhibit D-6
COMPLIANCE CERTIFICATE
OF CHIEF FINANCIAL OFFICERS
(Closing Condition)
Each of the undersigned, being the Chief Financial Officers
of Sovran Self Storage, Inc. ("Sovran") and Sovran Acquisition
Limited Partnership ("SALP" and together with Sovran,
collectively referred to herein as the "Borrowers"), HEREBY
CERTIFIES THAT:
This Compliance Certificate is furnished pursuant to Section
10.14 of the Term Loan Agreement dated as of December 22, 1998
among the Borrowers, Fleet National Bank, individually and as
Agent, certain other Lenders and other parties as provided
therein (as the same may now or hereafter be amended from time to
time, the "Term Loan Agreement"). Unless otherwise defined
herein, the terms used in this Compliance Certificate and
Schedule 1 attached hereto have the meanings given them in the
Term Loan Agreement.
Schedule 1 attached hereto sets forth the financial data and
computations evidencing the Borrowers' compliance with the
covenants contained in Section 9 of the Term Loan Agreement, all
of which data and computations, to the best knowledge and belief
of the chief financial officers executing and delivering this
compliance certificate on behalf of the Borrowers (the "Chief
Financial Officers"), are true, complete and correct.
Each of the Chief Financial Officers hereby certifies, in
accordance with the provisions of Section 10.14 of the Term Loan
Agreement, that the representations and warranties of the
Borrowers contained in the Term Loan Agreement and in each
document and instrument delivered pursuant to or in connection
therewith are true as of the date hereof and that no Default or
Event of Default has occurred and is continuing on the date
hereof.
Each of the Chief Financial Officers certifies that he is
authorized to execute and deliver this compliance certificate on
behalf of Sovran or SALP, as the case may be.
Executed as of this __ day of ___________, 19__.
SOVRAN SELF STORAGE, INC. SOVRAN ACQUISITION LIMITED
PARTNERSHIP
By: Sovran Holdings Inc., its
general partner
By: ________________________ By: ______________________________
Name: Name:
Title: Title:
Exhibit E
COMPLIANCE CERTIFICATE
OF CHIEF FINANCIAL OFFICERS
(Closing Condition for Second Closing)
Each of the undersigned, being the Chief Financial Officers
of Sovran Self Storage, Inc. ("Sovran") and Sovran Acquisition
Limited Partnership ("SALP" and together with Sovran,
collectively referred to herein as the "Borrowers"), HEREBY
CERTIFIES THAT:
This Compliance Certificate is furnished pursuant to Section
11.4 of the Term Loan Agreement dated as of December 22, 1998
among the Borrowers, Fleet National Bank, individually and as
Agent, certain other Lenders and other parties as provided
therein (as the same may now or hereafter be amended from time to
time, the "Term Loan Agreement"). Unless otherwise defined
herein, the terms used in this Compliance Certificate and
Schedule 1 attached hereto have the meanings given them in the
Term Loan Agreement.
Schedule 1 attached hereto sets forth the financial data and
computations evidencing the Borrowers' compliance with the
covenants contained in Section 9 of the Term Loan Agreement, all
of which data and computations, to the best knowledge and belief
of the chief financial officers executing and delivering this
compliance certificate on behalf of the Borrowers (the "Chief
Financial Officers"), are true, complete and correct.
Each of the Chief Financial Officers hereby certifies, in
accordance with the provisions of Section 11.4 of the Term Loan
Agreement, that the representations and warranties of the
Borrowers contained in the Term Loan Agreement and in each
document and instrument delivered pursuant to or in connection
therewith are true as of the date hereof and that no Default or
Event of Default has occurred and is continuing on the date
hereof.
Each of the Chief Financial Officers certifies that he is
authorized to execute and deliver this compliance certificate on
behalf of Sovran or SALP, as the case may be.
Executed as of this __ day of ___________, 19__.
SOVRAN SELF STORAGE, INC. SOVRAN ACQUISITION LIMITED
PARTNERSHIP
By: Sovran Holdings Inc., its
general partner
By: _______________________ By: ______________________________
Name: Name:
Title: Title:
Exhibit F
[Form of Assignment and Assumption Agreement]
ASSIGNMENT AND ASSUMPTION AGREEMENT
Dated as of _____________ ___, 19__
Reference is made to the Term Loan Agreement, dated as of
December 22, 1998 (as amended and in effect from time to time,
the "Term Loan Agreement"), among Sovran Self Storage, Inc.
("Sovran"), Sovran Acquisition Limited Partnership (together with
Sovran, collectively referred to herein as the "Borrowers"),
Fleet National Bank, as agent (the "Agent"), the lending
institutions referred to therein as Lenders (the "Lenders") and
other parties as stated therein. Capitalized terms used herein
and not otherwise defined shall have the meanings assigned to
such terms in the Term Loan Agreement.
____________________________________ (the "Assignor") and
______________________ (the "Assignee") agree as follows:
1. Assignment. Subject to the terms and conditions of this
Assignment and Assumption Agreement and Section 18.1 and Section
18.2 of the Term Loan Agreement, the Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and
assumes without recourse to the Assignor, a $____________
interest in and to the rights, benefits, indemnities and
obligations of the Assignor under the Term Loan Agreement equal
to ______% in respect of the Total Commitment immediately prior
to the Effective Date (as hereinafter defined).
2. Assignor's Representations. The Assignor (i) represents
and warrants that (A) it is legally authorized to enter into this
Assignment and Assumption Agreement, (B) as of the date hereof,
its Commitment is $__________, its Commitment Percentage is
________% and the aggregate outstanding principal balance of its
Term Loans equals $__________ (in each case without giving effect
to the assignment contemplated hereby or any other contemplated
assignments which have not yet become effective), and (C)
immediately after giving effect to all assignments which have not
yet become effective, the Assignor's Commitment Percentage will
be sufficient to give effect to this Assignment and Assumption
Agreement, (ii) makes no representation or warranty, express or
implied, and assumes no responsibility with respect to any
statements, warranties or representations made in or in
connection with the Term Loan Agreement or any of the other Loan
Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Term Loan Agreement, the
other Loan Documents or any other instrument or document
furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder
free and clear of any claim or encumbrance; (iii) makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or any of its
Subsidiaries or any other Person primarily or secondarily liable
in respect of any of the Obligations, or the performance or
observance by the Borrowers or any of its Subsidiaries or any
other Person primarily or secondarily liable in respect of any of
the Obligations of any of its obligations under the Term Loan
Agreement or any of the other Loan Documents or any other
instrument or document delivered or executed pursuant thereto;
and (iv) has delivered to the Agent for return to the Borrowers
the Note(s) delivered to it under the Term Loan Agreement and
requests that the Borrower exchange such Note(s) for new Note(s)
payable to each of the Assignor and Assignee as follows:
Note Payable to
the Order of: Amount of Note
[Name of Assignor] [($________)]
[Name of Assignee] [($________)]
3. Assignee's Representations. The Assignee (i) represents
and warrants that (A) it is duly and legally authorized to enter
into this Assignment and Assumption Agreement, (B) the execution,
delivery and performance of this Assignment and Assumption
Agreement do not conflict with any provision of law or of the
charter or by-laws of the Assignee, or of any agreement binding
on the Assignee, (C) all acts, conditions and things required to
be done and performed and to have occurred prior to the
execution, delivery and performance of this Assignment and
Assumption Agreement, and to render the same the legal, valid and
binding obligation of the Assignee, enforceable against it in
accordance with its terms, have been done and performed and have
occurred in due and strict compliance with all applicable laws;
(ii) confirms that it has received a copy of the Term Loan
Agreement, together with copies of the most recent financial
statements delivered pursuant to Sections 6.4 and 7.4 thereof and
such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this
Assignment and Assumption Agreement; (iii) agrees that it will,
independently and without reliance upon the Assignor, the Agent
or any other Lenders and based on such documents and information
as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the
Term Loan Agreement; (iv) represents and warrants that it is an
Eligible Assignee; (v) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers
under the Term Loan Agreement and the other Loan Documents as are
delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto; and (vi) agrees that
it will perform in accordance with their terms all the
obligations which by the terms of the Term Loan Agreement are
required to be performed by it as a Lender.
4. Effective Date. The effective date for this Assignment
and Assumption Agreement shall be _______ ___, 19__ (the
"Effective Date"). Following the execution of this Assignment
and Assumption Agreement, each party hereto shall deliver its
duly executed counterpart hereof to the Agent for acceptance by
the Agent and recording in the Register by the Agent.
5. Rights Under Term Loan Agreement. Upon such acceptance
and recording, from and after the Effective Date, (i) the
Assignee shall be a party to the Term Loan Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have
the rights and obligations of a Lender thereunder, and (ii) the
Assignor shall, with respect to that portion of its interest
under the Term Loan Agreement assigned hereunder, relinquish its
rights and be released from its obligations under the Term Loan
Agreement; provided, however, that the Assignor shall retain its
rights to be indemnified pursuant to Section 16 of the Term Loan
Agreement with respect to any claims or actions arising prior to
the Effective Date.
6. Payments. Upon such acceptance of this Assignment and
Assumption Agreement by the Agent and such recording, from and
after the Effective Date, the Agent shall make all payments in
respect of the rights and interests assigned hereby (including
payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor and the Assignee shall make any
appropriate adjustments in payments for periods prior to the
Effective Date by the Agent or with respect to the making of this
assignment directly between themselves.
7. Governing Law. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT
IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT TO BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS).
8. Counterparts. This Assignment and Assumption Agreement
may be executed in any number of counterparts which shall
together constitute but one and the same agreement.
IN WITNESS WHEREOF, intending to be legally bound, each of
the undersigned has caused this Assignment and Assumption
Agreement to be executed on its behalf by its officer thereunto
duly authorized, as of the date first above written.
ASSIGNOR:
_________________________________
By: ______________________________
Name:
Title:
ASSIGNOR:
_________________________________
By: ______________________________
Name:
Title:
FLEET NATIONAL BANK, as Agent
By: ______________________________
Name:
Title:
Exhibit G
[Form of Term Loan Request]
Fleet National Bank
111 Westminster Street
RI-MO-215
Providence, Rhode Island 02902
Attn: Mark E. Dalton
Vice President
TERM LOAN REQUEST
This Loan Request is made pursuant to Section 2.2 of the
Term Loan Agreement, dated as of December 22, 1998, among Sovran
Self Storage, Inc., a Maryland corporation ("Sovran"), Sovran
Acquisition Limited Partnership, a Delaware limited partnership
(together with Sovran, collectively referred to herein as the
"Borrowers"), Fleet National Bank (as the same may now or
hereafter be amended from time to time, the "Term Loan
Agreement"). Unless otherwise defined herein, the terms used in
this Loan Request have the meanings given them in the Term Loan
Agreement.
1. Sovran, as Borrower Representative hereby requests a Term
Loan in the principal amount of $_______________.
2. The proposed Drawdown Date of the Term Loan is:
_________ ____, 19__
3. The Interest Period requested for the Term Loan requested in
this Loan Request (if any) is:
___________________
4. The Type of Term Loan being requested in this Loan Request
is:
_____ Prime Rate Loan
_____ LIBOR Rate Loan
WITNESS my hand this ___ day of _______, 19__.
SOVRAN SELF STORAGE, INC.
By: ______________________________
Name:
Title:
Exhibit 13
an Self Storage, Inc. is a real estate investment trust (REIT),
that owns, acquires, develops and manages self-storage
facilities.
At December 31, 1998, Sovran owned and operated over 200
facilities, making it one of the largest self-storage operators
in the country.
The Company provides convenient, low cost storage space to over
80,000 commercial and residential customers, primarily in the
Eastern United States and Texas.
Sovran's common shares are traded on the New York Stock Exchange
under the symbol "SSS".
The Company maintains two interactive websites at
www.sovranss.com
www.unclebobsselfstorage.com
Financial Highlights
Amounts in thousands, except share, per share and property data.
ting Data 1998 1997 1996 1995*
____ ____ ____ ____
Revenues $69,360 $49,354 $33,597 $22,474
Net Operating Income*** 49,908 35,691 24,471 16,311
Funds From Operations
(FFO)** 33,932 29,487 19,793 9,904
FFO per share (diluted) $2.76 $2.49 $2.37 *
Net income per share
(diluted) $1.91 $1.96 $1.87 *
Dividends declared
per common share $2.20 $2.12 $2.05 *
Balance Sheet Data
Investment in property,
at cost $502,502 $333,036 $220,711 $159,461
Debt $190,059 $39,559 $0 $5,000
Common shares
outstanding 12,312,756 12,221,121 10,706,671 7,542,171
Property Data
Number of stores 205 155 111 82
Net rentable
square feet 11,600,000 8,300,000 5,823,000 4,309,000
* 1995 results shown pro-forma since the Company did not begin
operations until June 26, 1995. Per share computations are not applicable.
** Funds from operations ("FFO") means income (loss) before minority
interest and extraordinary item (computed in accordance with GAAP) adjusted
as follows: (i) plus depreciation of real estate assets and amortization of
intangible assets exclusive of deferred financing costs, (ii)plus
significant non-recurring events (unsuccessful debt offering costs in
1998), and (iii) less FFO attributable to minority interest. FFO is a
supplemental performance measure for REITs as defined by the National
Association of Real Estate Investment Trusts, Inc. FFO is presented because
analysts consider FFO to be one measure of the performance of the Company.
FFO does not take into consideration scheduled principal payments on debt,
capital improvements and other obligations of the Company. Accordingly, FFO
is not a substitute for the Company's cash flow or net income as a measure
of the Company's liquidity or operating performance or ability to pay
dividends.
*** Net operating income is defined as revenues less property operations
and maintenance and real estate taxes.
TO OUR SHAREHOLDERS
as a year of great accomplishment for Sovran Self Storage,
Inc. We added 50 outstanding properties to our portfolio, more
than we acquired in any other year. We entered four new markets,
and greatly expanded our presence in 18 others. So as to better
service our customers, we upgraded 51 of our stores, providing
increased security, convenience and amenities. A program of
"expanding and enhancing" our portfolio was implemented during
the year, and by the end of 1999, we will have added buildings,
parking spaces and/or climate control to 33 stores, further
increasing their value.
Occupancy remained strong at over 86%, and revenues
increased by 40%. Net operating income also increased 40% over
1997's level. This growth was accomplished while maintaining
strong discipline and control over our asset base, adding
experienced management personnel and upgrading systems where
required. Of great potential impact was the formation of a
separate corporate marketing group that will initiate and
coordinate sales to national corporate clients.
The Company attained an investment grade rating on its
corporate debt during 1998, and implemented a dividend
reinvestment plan and stock repurchase program. These
initiatives allow Sovran to expand its shareholder base, take
advantage of fluctuating capital market conditions, and better
manage its equity needs. New financing was also procured; a $75
million unsecured term note was negotiated, providing the Company
with increased liquidity at lower cost. Sovran's balance sheet
remains strong and flexible; at year end, its debt to market
capitalization was only 36%, and virtually all of its assets were
unencumbered.
Customer awareness of self-storage continues to grow.
Demand for space outpaced supply in most markets in 1998,
allowing for rate increases and property expansion. While there
are some pockets of increased building, we expect solid increases
in rents and yield throughout our portfolio in 1999.
The industry remains fragmented in terms of property
ownership. There are over 26,000 self-storage facilities
throughout the United States. We and the other three storage
REIT's control just 8% of these facilities; the opportunity for
growth and profit is considerable.
We continue to build Sovran on the strength of sound real
estate fundamentals and business practices. We believe we are in
the right industry at the right time, and that we have the
personnel, the structure and the strategy to create wealth and
value for you, our fellow shareholders.
Robert J. Attea Kenneth F. Myszka
Chairman and Chief President and Chief
Executive Officer Operating Officer
THE INDUSTRY
torage facilities are commercial rental properties that
provide customers with individual storage units ranging in size
from 16 sq. ft. to 600 sq. ft. The buildings are typically one
story metal or cinderblock structures with concrete floors and
roll-up doors. The most efficient storage properties have 40,000
to 80,000 sq. ft. of storage space encompassing 400 to 800 self
contained storage units.
Self-storage provides its customers with:
- - - convenience
- - - affordability
- - - security
- - - lack of long-term commitment
- - - flexibility
Customers use self-storage for a variety of reasons, usually
driven by a mode of change. Relocation, attending college,
divorce, reducing home size, death, business expansion, business
downsizing, and military reassignments are all occasions to store
furnishings, inventories and personal possessions. There are
also many customers who use self-storage as an extension of their
living space, notably apartment dwellers and homeowners,
particularly in the Southeast and Southwest, where houses are
often constructed without basements, attics or garages.
Commercial customers have become a fast growing and important
segment of the tenant base; subcontractors' building supplies,
pharmaceutical representatives' samples, retailers' seasonal
inventory and distributors' merchandise can all be stored
conveniently and economically at professionally operated storage
facilities.
Quality self-storage facilities exhibit the following
characteristics:
- - - well located; high visibility
- - - wide aisles; easy access
- - - commercial tenant services
- - - security, auto entry
- - - full time manager/leasing agent
Ownership of the more than 26,000 self-storage facilities in the
United States remains very fragmented. Sovran and three other
REIT's comprise but 8% of the ownership of these properties.
There are a few privately owned companies who operate storage
facilities, but by far the great majority of properties are owned
by individuals, families and small partnerships who control three
or fewer facilities.
Distribution of Properties as of December 31, 1998
#
State Properties % Sq. Feet % # of Units %
_____ __________ __ ________ __ __________ __
Alabama 7 3.4 383,940 3.3 2,794 2.7
Connecticut 3 1.5 122,085 1.1 951 0.9
Florida 45 22.0 2,723,832 23.7 26,216 25.4
Georgia 20 9.8 1,062,237 9.2 8,797 8.5
Louisiana 2 1.0 117,555 1.0 858 0.8
Maryland 4 2.0 162,465 1.4 1,935 1.9
Massachusetts 6 2.9 263,950 2.3 2,382 2.3
Michigan 6 2.9 428,891 3.7 4,348 4.2
Mississippi 4 2.0 200,148 1.7 1,553 1.5
New Hampshire 1 0.5 62,825 0.5 547 0.5
New York 9 4.4 490,504 4.2 4,213 4.1
North Carolina 15 7.3 750,744 6.5 7,199 7.0
Ohio 18 8.8 1,028,250 8.9 8,695 8.4
Pennsylvania 7 3.4 399,040 3.5 3,169 3.1
Rhode Island 2 1.0 111,645 1.0 1,064 1.0
South Carolina 7 3.4 336,157 2.9 2,724 2.6
Tennessee 4 2.0 209,140 1.8 1,714 1.7
Texas 27 13.0 1,689,812 14.6 14,517 14.0
Virginia 18 8.7 1,024,815 8.7 9,668 9.4
___ _____ __________ _____ _______ _____
205 100.0 11,568,035 100.0 103,344 100.0
SOVRAN OPERATIONS IN 1998
Much was accomplished operationally at Sovran during the
past year. Our streamlined acquisition team, the recently
centralized property management group and a talented staff of
financial and MIS experts combined with our 205 store managers to
achieve record revenues and profits.
During 1998 we:
- - - Increased revenues by over 40%
- - - Increased Net Operating Income by 40% on overall margins of
72%
- - - Acquired 50 new stores at a cost of $157 million
- - - Expanded into two new states and four new markets
- - - Significantly improved 51 stores, implementing a new color
scheme, better signage and enhanced curb appeal
- - - Began an expansion and enhancement program to add more
rental space, climate control and parking spaces to many of
our facilities.
- - - Initiated a national marketing program, providing customized
rental packages to customers who have need for storage space
in multiple markets.
A big part of our growth is a result of integrating newly
acquired stores into our operating system as quickly as possible.
The value of the new acquisitions is significantly enhanced when
Company marketing techniques, expense reductions and MIS and
accounting controls are implemented. Further, after Sovran
personnel have operated the property for a six to nine month
period, market trends and customer needs can be ascertained, and
acan be developed to expand and enhance the store accordingly.
Sovran has added almost 100 stores to its portfolio in the past
two years, and is ready to exploit the latent market potential of
many of them in 1999.
Sovran's growth in 1998, and indeed, since its initial
public offering in 1995, has been achieved under the aegis of
fiscal discipline and control. Capital is a precious commodity
to both the Company and to our shareholders; we manage it
carefully and apply it prudently.
To maintain a sound financial structure, in 1998 the Company:
- - - Renegotiated its line of credit, doubling its borrowing
capacity to $150 million, and unencumbering 74 properties
that had previously been mortgaged.
- - - Attained investment grade ratings on its corporate debt from
Moody's, Standard and Poor's and Duff & Phelps.
- - - Issued 419,000 Operating Partnership Units as partial
payment for eight storage properties. When market
conditions allow, operating units remain an attractive form
of currency to induce owners to sell their facilities to the
Company.
- - - Obtained unsecured term note financing of $75 million.
- - - Implemented Dividend Reinvestment and Stock Purchase Plan.
- - - Implemented share repurchase program.
- - - Maintained a strong and flexible balance sheet despite
difficult capital market conditions. Sovran's debt to total
market capitalization was 36% at year-end, and its debt
service coverage was a healthy 4.7 times in 1998.
- - - Increased the common stock dividend almost 4% in the 3rd
quarter of 1998, to $0.56 per share per quarter. At a year-
end share price of $25.13, this resulted in a yield of
almost 9%. Despite this high return, the dividend payout
ratio was reduced to 78% (on 4th quarter 1998 FFO),
providing strong coverage.
SOVRAN IN 1999
It has been our practice with every annual report to look
ahead, and lay out our plans and goals for the coming year. Our
plan remains the same - controlled growth, at a strong and steady
pace, to create long-term profitability and increased shareholder
value.
In 1999 we expect to:
- - - Achieve increased sales and net operating income from our
core group of 205 stores. This growth should result from
the recent store improvement program, our national corporate
initiative and ongoing aggressive marketing at the store
level.
- - - Significantly expand and enhance our existing portfolio.
Opportunities have been identified at 33 of our stores to
add storage units, retro-fit for climate control, and
otherwise provide product to expand the existing customer
base. By using an internal rate of return hurdle of 15% to
allocate capital to these projects, excellent growth is
expected.
- - - Add selectively to the property portfolio via opportunistic
acquisitions. We expect to continue, albeit at a somewhat
reduced level, to acquire quality properties in markets that
fit our overall strategic plan. Inasmuch as we do not
foresee the capital markets opening to REIT's in 1999, we
are not basing our growth plan on the issuance of common
equity or operating partnership units. Rather, we will fund
our acquisition growth with the available capacity on our
credit line, a moderate layer of new debt, and/or a joint
venture acquisition partnership. Naturally, continued care
will be taken to maintain the Company's strong and flexible
capital position.
- - - Improve the Company's exposure to the Investment Community.
Efforts were initiated in 1998 to increase interest in
Sovran's common stock. Such activity will be redoubled
through 1999.
Selected Financial Data
Company Predecessor (a)
_____________________________________________ ______________________
For For
Period Period
From From At or For
At or For Year Ended 6/26/95 1/1/95 Year
(dollars in thousands, December 31, to to Ended
except per share data) 1998 1997 1996 12/31/95 6/25/95 12/31/94
____ ____ ____ _________ _______ __________
Operating Data
Operating revenues $ 69,360 $ 49,354 $ 33,597 $ 12,942 $ 9,532 $ 18,530
Income before extraordinary item 23,897 23,119 15,659 6,744 311 1,836
Net income 23,540 23,119 15,659 6,744 311 1,836
Income per share before
extraordinary item - basic 1.94 1.97 1.88 0.91 - -
Net income per common
share - basic 1.91 1.97 1.88 0.91 - -
Net income per common
share - diluted 1.91 1.96 1.87 0.91 - -
Dividends declared per
common share 2.20 2.12 2.05 1.04 - -
Balance Sheet Data
Investment in storage
facilities at cost $502,502 $333,036 $220,711 $159,461 $114,008 $91,889
Total assets 490,124 327,073 235,415 160,437 84,527 82,733
Total debt 190,059 39,559 - 5,000 69,102 66,340
Total liabilities 203,439 50,319 8,131 10,697 71,311 69,014
Other Data
Net cash provided by
operating activities $34,151 $31,159 $20,152 $7,188 $2,003 $5,428
Net cash used in investing
activities (153,367) (98,765) (58,760) (157,965) (3,340) (6,609)
Net cash provided by financing
activities 119,633 53,486 54,563 151,509 507 1,030
Funds from operations available
to common shareholders (b) 33,932 29,487 19,793 8,036 - -
(a) The Company began operations on June 26, 1995, and has no
historical results of operations before that date. Results
prior to June 26, 1995 relate to Sovran Capital, Inc. and
the Sovran Partnerships.
(b) Funds from operations ("FFO") means income (loss) before
minority interest and extraordinary item (computed in
accordance with GAAP) adjusted as follows: (i) plus
depreciation of real estate assets and amortization of
intangible assets exclusive of deferred financing costs,
(ii)plus significant non-recurring events (unsuccessful debt
offering costs in 1998), and (iii) less FFO attributable to
minority interest. FFO is a supplemental performance
measure for REITs as defined by the National Association of
Real Estate Investment Trusts, Inc. FFO is presented because
analysts consider FFO to be one measure of the performance
of the Company. FFO does not take into consideration
scheduled principal payments on debt, capital improvements
and other obligations of the Company. Accordingly, FFO is
not a substitute for the Company's cash flow or net income
as a measure of the Company's liquidity or operating
performance or ability to pay dividends.
SOVRAN SELF STORAGE, INC. CONSOLIDATED BALANCE SHEETS
December 31,
_________________
(dollars in thousands, except share data) 1998 1997
____ ____
Assets
Investment in storage facilities:
Land $ 102,864 $ 71,391
Building and equipment 399,638 261,645
_________ _________
502,502 333,036
Less: accumulated depreciation (21,339) (11,639)
_________ _________
Investments in storage facilities, net 481,163 321,397
Cash and cash equivalents 2,984 2,567
Accounts receivable 1,699 834
Prepaid expenses and other assets 4,278 2,275
_________ _________
Total Assets $ 490,124 $ 327,073
Liabilities
Line of credit $ 112,000 $ 36,000
Term note 75,000 -
Accounts payable and accrued liabilities 3,542 2,167
Deferred revenue 2,943 1,994
Accrued dividends 6,895 6,599
Mortgage payable 3,059 3,559
_________ _________
Total Liabilities 203,439 50,319
Minority interest 24,020 12,843
Shareholders' Equity
Common stock $.01 par value,
100,000,000 shares authorized,
12,312,756 shares outstanding
(12,221,121 at December 31, 1997) 124 122
Preferred stock, 10,000,000 shares
authorized, none issued and
outstanding, 250,000 shares designated
as Series A Junior Participating
Preferred Stock,$.01 par value - -
Additional paid-in capital 274,638 269,982
Unearned restricted stock (418) (32)
Dividends in excess of net income (9,689) (6,161)
Treasury stock at cost, 75,700 shares (1,990) -
________ ________
Total Shareholders' Equity 262,665 263,911
Total Liabilities and
Shareholders' Equity $ 490,124 $ 327,073
See notes to financial statements.
SOVRAN SELF STORAGE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
_________________________
(dollars in thousands, except share data) 1998 1997 1996
____ ____ ____
Revenues
Rental income $68,231 $48,584 $32,946
Interest and other income 1,129 770 651
_______ _______ _______
Total revenues 69,360 49,354 33,597
Expenses
Property operations and maintenance 13,793 9,708 6,662
Real estate taxes 5,659 3,955 2,464
General and administrative 4,849 2,757 2,282
Interest 9,601 2,166 1,924
Depreciation and amortization 10,303 7,005 4,583
_______ _______ _______
Total expenses 44,205 25,591 17,915
_______ _______ _______
Income before minority interest
and extraordinary item 25,155 23,763 15,682
Minority interest (1,258) (644) (23)
_______ _______ _______
Income before extraordinary item 23,897 23,119 15,659
Extraordinary loss on extinguishment of debt (357) - -
_______ _______ _______
Net Income $23,540 $23,119 $15,659
Earnings per share before extraordinary
item - basic 1.94 1.97 1.88
Extraordinary loss (0.03) - -
______ _______ ______
Earnings per share - basic $1.91 $1.97 $1.88
Earnings per share - diluted $1.91 $1.96 $1.87
Dividends declared per share $2.20 $2.12 $2.05
See notes to financial statements.
SOVRAN SELF STORAGE, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Additional Unearned Dividends in
Stock Common Paid-in Restricted Excess of Treasury Total
Shares Stock Capital Stock Net Income Stock Equity
______ _______ _________ __________ ____________ ________ ______
(dollars in thousands, except share data)
Balance January 1, 1996 7,542,171 $ 75 $150,727 $ - $ (1,062) $ - $ 149,740
Issuance of common stock 3,162,500 32 76,941 - - - 76,973
Issuance of restricted stock 2,000 - 51 (51) - - -
Earned portion of
restricted stock - - - 12 - - 12
Net income - - - - 15,659 - 15,659
Dividends - - - - (18,755) - (18,755)
__________ _____ ________ ______ _________ _______ _________
Balance December 31, 1996 10,706,671 107 227,719 (39) (4,158) - 223,629
Issuance of common stock 1,500,000 15 41,929 - - - 41,944
Exercise of stock options 14,250 - 328 - - - 328
Issuance of restricted stock 200 - 6 (6) - - -
Earned portion of
restricted stock - - - 13 - - 13
Net income - - - - 23,119 - 23,119
Dividends - - - - (25,122) - (25,122)
__________ _____ ________ ______ _________ _______ _________
Balance December 31, 1997 12,221,121 122 269,982 (32) (6,161) - 263,911
Net proceeds from issuance
of stock through Dividend
Reinvestment and Stock
Purchase Plan 26,543 1 537 - - - 538
Issuance of common stock to
acquire storage facility 109,842 1 3,335 - - - 3,336
Exercise of stock options 15,750 - 362 - - - 362
Issuance of restricted stock 15,200 - 422 (422) - - -
Earned portion of
restricted stock - - - 36 - - 36
Purchase of treasury shares - - - - - (1,990) (1,990)
Net income - - - - 23,540 - 23,540
Dividends - - - - (27,068) - (27,068)
__________ _____ ________ ______ _________ _______ _________
Balance December 31, 1998 12,388,456 $124 $274,638 $(418) $(9,689) $(1,990) $262,665
See notes to financial statements.
SOVRAN SELF STORAGE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
____________________________
(dollars in thousands) 1998 1997 1996
____ ____ ____
Operating Activities
Net income $ 23,540 $ 23,119 $ 15,659
Adjustments to reconcile net
income to net cash provided
by operating activities:
Extraordinary loss 357 - -
Depreciation and amortization 10,303 7,005 4,583
Minority interest 1,258 644 23
Restricted stock earned 36 13 12
Changes in assets and liabilities:
Accounts receivable (812) (162) (145)
Prepaid expenses and other assets (1,051) (283) (1)
Accounts payable and other liabilities 483 894 157
Deferred revenue 37 (71) 45
_______ _______ ______
Net cash provided by operating
activities 34,151 31,159 20,152
Investing Activities
Additions to storage facilities (153,367) (98,970) (57,160)
Other assets - 205 (1,600)
_______ _______ ______
Net cash used in investing
activities (153,367) (98,765) (58,760)
Financing Activities
Net proceeds from sale of
common stock 900 42,273 76,973
Proceeds from (payments on)
line of credit 76,000 36,000 (5,000)
Proceeds from term note 75,000 - -
Financing costs (1,824) - (386)
Dividends paid (26,772) (24,090) (16,997)
Minority interest distributions (1,181) (697) (27)
Purchase of treasury stock (1,990) - -
Mortgage principal payments (500) - -
_______ _______ _______
Net cash provided by
financing activities 119,633 53,486 54,563
_______ _______ _______
Net increase (decrease) in cash 417 (14,120) 15,955
Cash at beginning of period 2,567 16,687 732
_______ _______ _______
Cash at end of period $ 2,984 $ 2,567 $16,687
See notes to financial statements.
Year Ended December 31,
______________________________
(dollars in thousands) 1998 1997 1996
____ ____ ____
Supplemental cash flow information
Cash paid for interest $ 9,024 $ 2,238 $ 1,842
Storage facilities acquired
through issuance of Operating
Partnership Units and Common Stock 14,703 9,240 3,659
Storage facilities acquired through
assumption of mortgage - 3,559 -
Fair value of net liabilities assumed
on the acquisition of storage
facilities 1,458 4,144 434
Dividends declared but unpaid at December 31, 1998, 1997 and 1996 were
$6,895, $6,599, and $5,567, respectively.
See notes to financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sovran Self Storage, Inc. - December 31, 1998
1. ORGANIZATION
Sovran Self Storage, Inc. (the "Company"), a self-
administered and self-managed real estate investment trust (a
REIT), was formed on April 19, 1995 to own and operate self-
storage facilities throughout the United States. On June 26,
1995, the Company commenced operations effective with the
completion of its initial public offering of 5,890,000 shares.
Since its formation the Company has purchased a total of 131
(fifty in 1998, forty-four in 1997, twenty-nine in 1996 and eight
in 1995) self storage properties from unaffiliated third parties,
increasing the total number of self-storage properties owned at
December 31, 1998 to 205 properties, most of which are in the
eastern United States and Texas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: All of the Company's assets are owned by,
and all its operations are conducted through, Sovran Acquisition
Limited Partnership (the Operating Partnership). Sovran Holdings,
Inc., a wholly-owned subsidiary of the Company (the Subsidiary),
is the sole general partner; and the Company is a limited partner
of the Partnership, and thereby controls the operations of the
Operating Partnership holding a 93.45% ownership interest therein
as of December 31, 1998. The remaining ownership interests in the
Operating Partnership (the "Units") are held by certain former
owners of assets acquired by the Operating Partnership subsequent
to its formation. The consolidated financial statements of the
Company include the accounts of the Company, the Partnership, and
the wholly-owned Subsidiary. All intercompany transactions and
balances have been eliminated.
Cash and Cash Equivalents: The Company considers all highly
liquid debt instruments purchased with maturity of three months
or less to be cash equivalents.
Revenue Recognition: Rental income is recorded when earned.
Rental income received prior to the start of the rental period is
included in deferred revenue.
Interest and Other Income: Other income consists primarily of
interest income, sales of storage-related merchandise (locks and
packing supplies) and commissions from truck rentals.
Investment in Storage Facilities: Storage facilities are recorded
at cost. Depreciation is computed using the straight line method
over estimated useful lives of forty years for buildings and
improvements, and five to twenty years for furniture, fixtures
and equipment. Expenditures for significant renovations or
improvements which extend the useful life of assets are
capitalized. Repair and maintenance costs are expensed as
incurred.
Whenever events or changes in circumstances indicate that
the basis of the Company's property may not be recoverable, the
Company's policy is to assess any impairment of value.
Impairment is evaluated based upon comparing the sum of the
expected undiscounted future cash flows to the carrying value of
the property; on a property by property basis. If the sum of the
cash flow is less than the carrying amount, an impairment loss is
recognized for the amount by which the carrying amount of the
asset exceeds the fair value of the asset. At December 31, 1998
and 1997, no assets had been determined to be impaired under this
policy, and, accordingly, this policy had no impact on the
Company's financial position or results of operations.
Prepaid Expenses and Other Assets: Included in prepaid expenses
and other assets are prepaid expenses and intangible assets. The
intangible assets at December 31, 1998, consist primarily of loan
acquisition costs of approximately $1,824, net of accumulated
amortization of approximately $244; organizational costs of
approximately $63, net of accumulated amortization of
approximately $42; and covenants not to compete of $785, net of
accumulated amortization of $555. Loan acquisition costs are
amortized over the terms of the related debt; organization costs
are amortized over five years; and the covenants are amortized
over the contract periods. Amortization expense was $541, $794
and $620 for the periods ended December 31, 1998, 1997 and 1996,
respectively.
Minority Interest: The minority interest reflects the outside
ownership interest of the limited partners of the Operating
Partnership. Amounts allocated to these interests are reflected
as an expense in the income statement and increase the minority
interest in the balance sheet. Distributions to these partners
reduce this balance. At December 31, 1998, minority interest
ownership was 863,037 partnership units or 6.55%.
Income Taxes: The Company qualifies as a REIT under the Internal
Revenue Code of 1986, as amended, and will generally not be
subject to corporate income taxes to the extent it distributes at
least 95% of its taxable income to its shareholders and complies
with certain other requirements. Accordingly, no provision has
been made for income taxes in the accompanying financial
statements.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
3. EARNINGS PER SHARE
The Company reports earnings per share data in accordance
with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." The following table sets forth the
computation of basic and diluted earnings per share.
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
(Dollars in thousands, 1998 1997 1996
except per share data)
_________________________________________________________________
Numerator:
Net Income $ 23,540 $ 23,119 $15,659
_________________________________________________________________
Denominator
Denominator for basic
earnings per share -
weighted average
shares 12,294 11,759 8,329
_________________________________________________________________
Effect of Dilutive Securities:
Stock options 38 62 35
Denominator for diluted
earnings per share -
adjusted weighted - average
shares and assumed
conversion 12,332 11,821 8,364
_________________________________________________________________
Basic Earnings per Share $ 1.91 $ 1.97 $1.88
_________________________________________________________________
Diluted Earnings per Share $ 1.91 $ 1.96 $1.87
_________________________________________________________________
4. INVESTMENT IN STORAGE FACILITIES
The following summarizes activity in storage facilities during
the years ended December 31, 1998 and December 31, 1997
(Dollars in Thousands) 1998 1997
________________________________________________________________
Cost:
Beginning balance $333,036 $220,711
Property acquisitions 157,080 106,926
Improvements and equipment additions 12,940 5,527
Dispositions (554) (128)
________________________________________________________________
Ending balance $502,502 $333,036
________________________________________________________________
Accumulated Depreciation:
Beginning balance $ 11,639 $ 5,457
Additions during the year 9,762 6,211
Dispositions (62) (29)
________________________________________________________________
Ending balance $ 21,339 $ 11,639
________________________________________________________________
5. UNSECURED LINE OF CREDIT AND TERM NOTE
In February 1998, the Company entered into a new $150
million unsecured credit facility which replaced in its entirety
the Company's $75 million revolving credit facility. The new
facility matures February 2001 and provides for funds at LIBOR
plus 1.25%, a savings of 65 basis points over the Company's old
facility. The average interest rate at December 31, 1998 on the
line of credit was approximately 6.6%. At December 31, 1998,
there was $38 million available on the line. As a result of the
new credit facility, in 1998 the Company recorded an
extraordinary loss on the extinguishment of debt of $357,000
representing the unamortized financing costs of the former
revolving credit facility and related costs.
In December 1998, the Company entered into a $75 million
unsecured term note that matures on December 22, 2000 and bears
interest at LIBOR plus 1.50% (approximately 6.8% at December 31,
1998).
The Company entered into interest rate swap agreements to
manage its exposure to interest rate changes. The swaps involve
the exchange of fixed and variable interest rate payments without
exchanging the notional principal amount. Payments or receipts
on the agreements are recorded monthly as adjustments to interest
expense. At December 31, 1998, the Company had interest rate
swaps with notional amounts of $40 million through June 1999 and
$55 million through December 1999. Under these agreements the
Company receives a floating interest rate based upon LIBOR and
pays a fixed interest rate of 5.78% on the $40 million amount and
5.12% on the $55 million amount. The net carrying amount of the
Company's debt instruments approximates fair value.
6. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma information shows the
results of operations as though the acquisitions of storage
facilities in 1998 and 1997, and the common stock offering in
1997 had all occurred as of the beginning of 1997.
Year ended December 31,
______________________________
(Dollars in thousands,
except share data) 1998 1997
_________________________________________________________________
Total revenues $ 76,952 $ 73,699
_________________________________________________________________
Total expenses (51,294) (49,376)
_________________________________________________________________
Minority interest (1,657) (1,593)
_________________________________________________________________
Income before extraordinary loss 24,001 22,730
________________________________________________________________
Net Income $ 23,644 $ 22,730
_________________________________________________________________
Earnings per share before
extraordinary loss - basic $ 1.95 $ 1.85
_________________________________________________________________
Earnings per share - basic $ 1.92 $ 1.85
_________________________________________________________________
Earnings per share - diluted $ 1.92 $ 1.85
_________________________________________________________________
Common shares used in basic
earnings per share calculation 12,312,756 12,312,756
_________________________________________________________________
Such unaudited pro forma information is based upon the
historical consolidated statements of operations of the Company.
It should be read in conjunction with the financial statements of
the Company and notes thereto. In management's opinion, all
adjustments necessary to reflect the effects of these
transactions have been made. This unaudited pro forma statement
does not purport to represent what the actual results of
operations of the Company would have been assuming such
transactions had been completed as set forth above, nor does it
purport to represent the results of operations for future
periods.
7. STOCK OPTIONS
The Company continues to account for stock-based
compensation using the measurement prescribed by APB Opinion No.
25 which does not recognize compensation expense because the
exercise price of the stock options equals the market price of
the underlying stock on the date of grant. Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," requires companies that choose not to adopt the
new fair value accounting rules to disclose pro forma net income
and earnings per share under the new method.
The Company has established the 1995 Award and Option Plan
(the Plan) for the purpose of attracting and retaining the
Company's executive officers and other employees. The options
vest ratably over four and five years, and must be exercised
within ten years from the date of grant. The exercise price for
qualified incentive stock options must be at least equal to the
fair market value at the date of grant. As of December 31, 1998,
options for 350,100 shares were outstanding under the Plan. The
total options available under the Plan (including restricted
stock issuances) is 400,000.
The Company also established the 1995 Outside Directors'
Stock Option Plan (the Non-employee Plan) for the purpose of
attracting and retaining the services of experienced and
knowledgeable outside directors. The Non-employee Plan provides
for the annual granting of options to purchase 2,500 shares of
common stock to each eligible director. Such options vest over a
one year period for initial awards and immediately upon
subsequent grants. The total shares reserved under the Non-
employee Plan is 50,000. The exercise price for options granted
under the Non-employee Plan is equal to fair market value at date
of grant. As of December 31, 1998, options for 37,500 shares were
outstanding under the Non-employee Plan.
The fair value for the stock options was estimated at the
date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free interest rate
of 5.5% for 1998 and 6% for 1997; dividend yield of 8% for 1998
and 7% for 1997, volatility factor of the expected market price
of the Company's common stock of .19 for 1998 and .16 for 1997.
The Black-Scholes options valuation model was developed for
use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options'
vesting period. The Company's pro forma information for the years
ended December 31,1998 and 1997 follows (in thousands, except for
earnings per share information).
1998 1997
_________________________________________________________________
Pro forma net income $ 23,382 $ 22,976
Pro forma earnings per share: Basic $ 1.90 $ 1.96
Diluted $ 1.90 $ 1.95
The pro forma effect on earnings for the year ended December 31,
1996 was immaterial.
The Company has also issued 17,400 shares of restricted
stock to employees which vest over four and five year periods.
The fair value of the restricted stock on the date of grant
ranged from $25.88 to $29.19. The Company charges unearned
compensation, a component of shareholders' equity, for the market
value of shares as they are issued. The unearned portion is then
amortized over the vesting period.
A summary of the Company's stock option activity and related
information for the years ended December 31 follows:
1998 1997 1996
___________________________________________________________________________
Weighted Weighted Weighted
average average average
exercise exercise exercise
Options price Options price Options price
___________________________________________________________________________
Outstanding at
beginning of year: 295,250 $25.36 293,500 $ 23.97 268,000 $23.00
Granted 110,350 27.91 34,000 29.93 28,000 25.92
Exercised (15,750) 23.00 (14,250) 23.00 - -
Forfeited (2,250) 23.00 (18,000) 24.53 (2,500) 23.00
___________________________________________________________________________
Outstanding at end
of year 387,600 $25.99 295,250 $ 25.36 293,500 $23.97
___________________________________________________________________________
Exercisable at end
of year 208,500 $24.19 146,750 $ 25.12 82,000 $23.48
___________________________________________________________________________
Exercise prices for options outstanding as of December 31, 1998 ranged from
$23.00 to $30.06. The weighted average remaining contractual life of those
options is 6.7 years.
8. RETIREMENT PLAN
Employees of the Company qualifying under certain age and service
requirements are eligible to be a participant in a 401(K) Plan which was
effective September 1, 1997. The Company contributes to the Plan at the
rate of 50% of the first 4% of gross wages. Total expense to the Company
was approximately $53,000 and $15,000 for the years ended December 31, 1998
and 1997, respectively.
9. SHAREHOLDER RIGHTS PLAN
In November 1996, the Company adopted a Shareholder Rights Plan and
declared a dividend distribution of one Right for each outstanding share of
common stock. Under certain conditions, each Right may be exercised to
purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock at a purchase price of $75, subject to adjustment. The
Rights will be exercisable only if a person or group has acquired 10% or
more of the outstanding shares of common stock, or following the
commencement of a tender or exchange offer for 10% or more of such
outstanding shares of common stock. If a person or group acquires more than
10% of the then outstanding shares of common stock, each Right will entitle
its holder to receive, upon exercise, common stock having a value equal to
two times the exercise price of the Right. In addition, if the Company is
acquired in a merger or other business combination transaction, each Right
will entitle its holder to purchase that number of the acquiring Company's
common shares having a market value of twice the Right's exercise price.
The Company will be entitled to redeem the Rights at $.01 per Right at any
time prior to the earlier of the expiration of the Rights in November 2006
or the time that a person has acquired a 10% position. The Rights do not
have voting or dividend rights, and until they become exercisable, have no
dilutive effect on the Company's earnings.
10. PREFERRED STOCK
The Company has authorized 10,000,000 shares of preferred stock, of
which 250,000 shares have been designated as Series A Junior Participating
Cumulative Preferred Stock with a $.01 par value. Upon issuance, the Series
A Junior Preferred Stock will have certain voting, dividend and liquidation
preferences over common stock, as described in the Form 8-K filed
December 3, 1996.
11. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of quarterly results of operations for the
years ended December 31, 1998 and 1997 (dollars in thousands, except per
share data)
1998 Quarter Ended
________________________________________________
March 31 June 30 Sept. 30 Dec. 31
________________________________________________
Revenue $14,375 $16,442 $19,107 $19,436
Income before
extraordinary loss $ 6,005 $ 6,052 $ 6,200 $ 5,640
Net Income $ 5,648 $ 6,052 $ 6,200 $ 5,640
Net Income Per
Common Share (Note 3):
Before extraordinary
loss - Basic $ 0.49 $ 0.49 $ 0.50 $ 0.46
Basic $ 0.46 $ 0.49 $ 0.50 $ 0.46
Diluted $ 0.46 $ 0.49 $ 0.50 $ 0.46
___________________________________________________________________________
1997 Quarter Ended
________________________________________________
March 31 June 30 Sept. 30 Dec. 31
________________________________________________
Revenue $10,732 $11,938 $13,320 $13,364
Net Income $ 4,871 $ 6,003 $ 6,359 $ 5,886
Net Income Per Common
Share (Note 3):
Basic $ 0.46 $ 0.50 $ 0.52 $ 0.49
Diluted $ 0.46 $ 0.50 $ 0.52 $ 0.48
___________________________________________________________________________
12. COMMITMENTS AND CONTINGENCIES
The Company's current practice is to conduct environmental
investigations in connection with property acquisitions. At this
time, the Company is not aware of any environmental contamination
of any of its facilities which individually or in the aggregate
would be material to the Company's overall business, financial
condition, or results of operations.
As of December 31, 1998, the Company had entered into
contracts for the purchase of six facilities. These facilities
were acquired in January and February, 1999 for a total cost of
$15,310,000.
13. LEGAL PROCEEDINGS
A former business associate (Plaintiff) of certain officers
and directors of the Company, including Robert J. Attea, Kenneth
F. Myszka, David L. Rogers and Charles E. Lannon, filed a lawsuit
against the Company on June 13, 1995 in the United States
District Court for the Northern District of Ohio. The Plaintiff
has since amended the complaint in the lawsuit alleging breach of
fiduciary duty, breach of contract, breach of general
partnership/joint venture arrangement, breach of duty of good
faith, fraud and deceit, and other causes of action including
declaratory judgement as to the Plaintiff's continuing interest
in the Company. The Plaintiff is seeking money damages in excess
of $15 million, as well as punitive damages and declaratory and
injunctive relief (including the imposition of a constructive
trust on assets of the Company in which the Plaintiff claims to
have a continuing interest) and an accounting. The amended
complaint also added Messrs. Attea, Myszka, Rogers and Lannon as
additional defendants. The parties are currently involved in
discovery. The Company intends to vigorously defend the lawsuit.
Messrs. Attea, Myszka, Rogers and Lannon have agreed to indemnify
the Company for costs and any loss arising from the lawsuit. The
Company believes that the actual amount of the Plaintiff's
recovery in this matter if any, would be within the ability of
these individuals to provide indemnification. The Company does
not believe that the lawsuit will have a material, adverse effect
upon the Company.
14. INTERNAL PROPERTY ACQUISITION COSTS
On March 19, 1998 the Financial Accounting Standards Board
Emerging Issues Task Force reached a consensus as to the
accounting for internal acquisition costs incurred in connection
with real property. The Task Force consensus indicates that
internal costs related to the acquisition of operating properties
should be expensed as incurred. The Company had previously
capitalized such costs and has complied with the consensus
prospectively. The amount of such costs capitalized in 1998
(through the date of the pronouncement) and 1997 were $238,000
and $728,000, respectively.
Report of Independent Auditors
The Board of Directors and Shareholders
Sovran Self Storage, Inc.:
We have audited the accompanying consolidated balance sheets
of Sovran Self Storage, Inc. as of December 31, 1998 and 1997 and
the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period
ended December 31,1998. These financial statements are the
responsibility of the management of Sovran Self Storage, Inc. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Sovran Self Storage, Inc. as
of December 31, 1998 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Buffalo, New York
January 29, 1999
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated
financial condition and results of operations should be read in
conjunction with the financial statements and notes thereto
included elsewhere in this report.
When used in this discussion and elsewhere in this document,
the words "intends," "believes," "anticipates," and similar
expressions are intended to identify "forward-looking statements"
within the meaning of that term in Section 27A of the Securities
Act of 1933 and in Section 21E of Securities Exchange Act of
1934. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company to be
materially different from those expressed or implied by such
forward-looking statements. Such factors include, but are not
limited to, the effect of competition from new self-storage
facilities, which would cause rents and occupancy rates to
decline; the Company's ability to evaluate, finance and integrate
acquired businesses into the Company's existing business and
operations; the Company's ability to effectively compete in the
industries in which it does business; the Company's cash flow may
be insufficient to meet required payments of principal and
interest; and tax law changes which may change the taxability of
future income.
RESULTS OF OPERATIONS
Year Ended December 31, 1998 compared to Year Ended
December 31, 1997
In 1998, the Company recorded rental revenues of $68.2
million, an increase of $19.6 million or 40% when compared to
1997 rental revenues of $48.6 million. Of this, $18.4 million
resulted from the acquisition of fifty stores during 1998 and
from having the 1997 acquisitions included for a full year of
operations. The additional $1.2 million increase resulted from
increased revenues at the 111 core properties considered in same
store sales. For this core group, revenues increased 3.8%,
primarily as the result of rental rate increases which were
slightly offset by an average occupancy decrease of 1% to 86.4%.
Interest and other income increased to $1.1 million in 1998 from
$.8 million in 1997.
Property operating and real estate tax expense increased
$5.8 million or 42% during the period. Of this, $5.5 million was
incurred by the facilities acquired in 1998 and from having the
1997 acquisitions included for a full year of operations, and
$0.3 million additional cost was incurred in the operation of the
111 core properties.
General and administrative expenses increased $2.1 million
in 1998. Of the increase, $.5 million related to the costs
associated with the unsuccessful public debt offering in 1998.
The additional increase was primarily a result of increased
supervisory and accounting costs associated with the operation of
an increased number of properties, and the change in the
treatment of internal property acquisition costs as discussed in
Note 14 to the consolidated financial statements.
In 1998, interest expense increased to $9.6 million from
$2.2 million as a result of increased borrowings under the line
of credit and term note. The credit facility and term note were
utilized throughout 1998 to fund the purchase of the fifty
stores, as opposed to 1997 in which the Company issued additional
common stock to fund a portion of the acquired stores.
Depreciation and amortization expense increased to $10.3
million from $7.0 million, primarily as a result of the
additional depreciation taken on the $170 million of real estate
assets acquired in 1998 and a full year of depreciation on 1997
acquisitions.
Earnings before interest, depreciation and amortization,
minority interest and extraordinary loss increased 36.8% from
$32.9 million in 1997 to $45.1 million in 1998 as a result of the
aforementioned items.
A $.36 million extraordinary loss was recorded in 1998 when
the Company's former unsecured credit facility was replaced with
a new line of credit with more favorable terms.
Year Ended December 31, 1997 compared to Year Ended December 31,
1996
Rental revenues improved from $32.9 million for the year
ended December 31, 1996 to $48.6 million for the year ended
December 31, 1997, an increase of $15.7 million, or 48%. Of this,
$10.4 million resulted from the acquisition of forty-four
properties during 1997, $4.3 million resulted from having the
1996 acquisitions included for a full year of operations, and $1
million resulted from increased revenues at the eighty-two core
properties considered in same store sales. For this core group,
revenues increased 3.8%, primarily as the result of rental rate
increases, as average occupancy was unchanged from 1996's level
of 87.8%. Interest and other income increased slightly to $0.8
million in 1997.
Property operating and real estate tax expense increased
$4.5 million or 49% during the period. Of this, $3.1 million was
incurred by the facilities acquired in 1997, $1.3 million
resulted from the having the 1996 acquisitions included for a
full year of operations, and $0.1 million additional cost was
incurred in the operation of the eighty-two core properties.
General and administrative expenses increased $0.5 million,
primarily as a result of increased supervisory and accounting
costs associated with the operation of an increased number of
properties.
Interest expense of $2.2 million in 1997 resulted primarily
from borrowings on the Company's line of credit facility (a
mortgage loan assumed in an acquisition transaction required
interest payments of $0.2 million). The Company had borrowings
outstanding of $42 million before paying off the balance with the
proceeds of a common stock offering in April 1997. The credit
facility was then utilized throughout the balance of the year to
fund further acquisitions, so that by the end of the year, the
amount outstanding on the line was $36 million.
Depreciation and amortization expense increased to $7
million from $4.6 million, primarily as a result of the
additional depreciation taken on the $112 million of real estate
assets acquired in 1997 and a full year of depreciation on 1996
acquisitions.
Earnings before interest, depreciation and amortization, and
minority interest increased $10.7 million or 48%, in 1997 as a
result of the aforementioned items.
Pro Forma Year Ended December 31, 1998 compared to Pro Forma Year
Ended December 31, 1997
The following unaudited pro forma information shows the
results of operations as though the acquisitions of storage
facilities in 1998 and 1997, and the common stock offerings in
1997 had all occurred as of the beginning of 1997.
Year Ended December 31,
(Dollars in thousands) 1998 1997
_________________________________________________________________
Revenues:
Rental income $75,683 $72,557
Interest and other income 1,269 1,142
_________________________________________________________________
Total revenues 76,952 73,699
_________________________________________________________________
Expenses:
Property operations and
maintenance 15,576 15,019
Real estate taxes 6,333 5,972
General and administrative 4,900 3,900
Interest 12,976 12,976
Depreciation and amortization 11,509 11,509
_________________________________________________________________
Total expenses 51,294 49,376
_________________________________________________________________
Income before minority interest and
extraordinary item 25,658 24,323
Minority interest (1,657) (1,593)
_________________________________________________________________
Income before extraordinary item $ 24,001 $ 22,730
Extraordinary loss on extinguishment
of debt (357) -
_________________________________________________________________
Net income $ 23,644 $ 22,730
_________________________________________________________________
Rental revenue of $76.9 million in 1998 increased by 4.4%
over 1997's revenues of $73.7 million, primarily as a result of
rate increases at the stores.
Operating expenses and real estate taxes in 1998 were $21.9
million, as compared to $20.9 million in 1997, an increase of
4.4%. While cost efficiencies were enjoyed regarding insurance
and yellow-page advertising, these savings were offset by the
Company's paying higher wages to attract professional managers,
and increased property taxes.
General and administrative costs were determined by the
Company's historical costs incurred in the management of 205
properties.
Interest expense in both years was determined by applying
the year-end rate and the applicable non-usage fee associated
with the Company's $150 million credit facility and $75 million
term note.
Such unaudited pro forma information is based upon the
historical consolidated statements of operations of the Company.
It should be read in conjunction with the financial statements of
the Company and notes thereto. In management's opinion, all
adjustments necessary to reflect the effects of these
transactions have been made. This unaudited pro forma statement
does not purport to represent what the actual results of
operations of the Company would have been assuming such
transactions had been completed as set forth above, nor does it
purport to represent the results of operations for future
periods.
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources, Unsecured Line of Credit and Term Note
Prior to 1998, the Company relied principally on equity
capital, using the proceeds of the offerings to repay
indebtedness, to purchase additional properties, and to acquire
limited partners' interests in the Sovran Partnerships.
The equity offerings have been supplemented with borrowings
on the Company's line of credit which was replaced on
February 20, 1998, by a three-year, $150 million unsecured line.
The commitment fee on the new line was $750,000, and interest is
payable monthly at 125 basis points above LIBOR. The use of the
unsecured line of credit has allowed 99% of the Company's
portfolio to be unsecured as of December 31, 1998. The available
balance on the unsecured credit line at December 31, 1998 was $38
million.
In 1998, the Company secured investment grade ratings from
Standard and Poors (BBB-), Moodys (Baa3), and Duff and Phelps
(BBB-). This provided for reduced borrowing costs (12.5 basis
points) under the unsecured line of credit instrument.
In 1998, Sovran attempted to enter the public debt markets
with the issuance of senior notes. The note offerings were not
executed as management determined market conditions required
payment of unfavorable interest rates. The Company opted instead
to enter a $75 million two-year unsecured term note with a
syndicate of banks at an interest rate of LIBOR plus 1.50%. The
proceeds were used to repay a short-term note and to pay down a
portion of the unsecured line of credit.
In addition to the equity and debt capital, the Company
issued $11.4 million and $9.2 million of Operating Partnership
Units in 1998 and 1997, respectively, in exchange for self
storage facilities.
In 1998, the Company repurchased $2 million of Common Stock
as part of a program authorized by the Board of Directors.
Acquisition of Properties
During 1998 the Company used borrowings pursuant to the line
of credit and term note and the issuance of Operating Partnership
Units to acquire 50 properties comprising 3.2 million square feet
from unaffiliated storage operators. These properties are
located in existing markets in Alabama, Florida, Georgia,
Massachusetts, Michigan, Mississippi, New York, North Carolina,
Ohio, Rhode Island, Texas, and Virginia. The Company also
entered two new states, New Hampshire and Tennessee during 1998.
In 1997, forty-four facilities totaling 2.5 million square feet
were acquired. At December 31,1998, a total of 205 facilities and
11.6 million square feet of net rentable storage space was owned
and operated by the Company in 19 states.
Internal Property Acquisition Costs
As a result of a recent consensus reached by the Financial
Accounting Standards Board Emerging Issues Task Force, the
Company no longer capitalizes internal costs related to the
acquisition of operating properties. The amount of such costs
capitalized in 1998 (through the effective date of the
pronouncement) and 1997 was $238,000 and $728,000, respectively.
Future Acquisition and Development Plans
The Company's external growth strategy is to increase the
number of facilities it owns by acquiring suitable facilities in
markets in which it already has operations, or to expand in new
markets by acquiring several facilities at once in those new
markets.
At December 31, 1998, the Company had contracts totaling
$15.3 million to acquire additional properties in Providence, RI
and Lafayette, LA.
The Company will continue to aggressively pursue the
acquisition of quality self-storage properties in markets where
it already operates, and in strategic new markets where a
substantial property base can be quickly established.
The Company also intends to expand and enhance certain of
its existing facilities by building additional storage buildings
on presently vacant land and by installing climate control and
enhanced security systems at selected sites.
REIT Qualification and Distribution Requirements
As a REIT, the Company is not required to pay federal income
tax on income that it distributes to its shareholders, provided
that the amount distributed is equal to at least 95% of taxable
income. These distributions must be made in the year to which
they relate, or in the following year if declared before the
Company files its federal income tax return, and if it is paid
before the first regular dividend of the following year. The
first distribution of 1999 may be applied toward the Company's
1998 distribution requirement.
As a REIT, the Company must derive at least 95% of its total
gross income from income related to real property, interest and
dividends. In 1998, the Company's percentage of revenue from such
sources exceeded 97%, thereby passing the 95% test, and no
special measures are expected to be required to enable the
Company to maintain its REIT designation.
INTEREST RATE RISK
The Company entered into interest rate swap agreements to
manage its exposure to interest rate changes. The swaps involve
the exchange of fixed and variable interest rate payments without
exchanging the notional principal amount. Payments or receipts
on the agreements are recorded monthly as adjustments to interest
expense. At December 31, 1998, the Company had interest rate
swaps with notional amounts of $40 million through June 1999 and
$55 million through December 1999. Under these agreements the
Company receives a floating interest rate based upon LIBOR and
pays a fixed interest rate of 5.78% on the $40 million amount and
5.12% on the $55 million amount.
Based upon the Company's indebtedness at December 31, 1998,
and taking the interest rate swap agreements into account, a 1%
increase in interest rates would result in an increase to
interest expense of approximately $1.3 million.
INFLATION
The Company does not believe that inflation has had or will
have a direct effect on its operations. Substantially all of the
leases at the facilities allow for monthly rent increases, which
provide the Company with the opportunity to achieve increases in
rental income as each lease matures.
SEASONALITY
The Company's revenues typically have been higher in the
third and fourth quarter, primarily because the Company increases
its rental rates on most of its storage units at the beginning of
May and, to a lesser extent, because self-storage facilities tend
to experience greater occupancy during the late spring, summer
and early fall months due to the greater incidence of residential
moves during these periods. However, the Company believes that
its tenant mix, diverse geographic locations, rental structure
and expense structure provide adequate protection against undue
fluctuations in cash flows and net revenues during off-peak
seasons. Thus, the Company does not expect seasonality to affect
materially distributions to shareholders.
IMPACT OF YEAR 2000
The Company employs several different computer systems for
financial reporting, property management, asset control and
payroll. These systems are purchased by the Company from third
parties and therefore there is no internally generated
programming code. The Company has been assessing and testing its
systems to determine if its hardware and software will function
properly with respect to dates in the Year 2000 and thereafter,
and no significant problems were noted. The Company's critical
applications relating to financial reporting, property management
and asset control have been updated to Year 2000 compliant
versions within the last year as part of the normal maintenance
agreements.
The Company communicates electronically with certain outside
vendors in the banking and payroll processing areas. The Company
has been advised by these vendors that their systems are or will
be Year 2000 compliant. The Company has identified and evaluated
certain other systems that may be impacted by the Year 2000, such
as gates, security systems and elevators. The Company expects the
implementation of any required solutions to be completed by
December 31, 1999, and the cost to be less than $50,000. The
Company is not aware of any other vendors or suppliers for which
the Year 2000 would materially impact the Company's business. The
Company has no means of ensuring that outside companies will be
Year 2000 compliant, and there can be no assurance that the
Company has identified all such companies.
The Company will continue to address the Year 2000
throughout 1999 and has developed a contingency plan if the
implementations are not completed timely. Under a worst case
scenario, the Company will have the ability to revert to a manual
system to operate its self-storage stores if any issues with the
Year 2000 are encountered. Despite the approach being taken to
prevent a Year 2000 problem, the Company cannot be completely
sure that issues will not arise, or events will not occur that
could have material adverse affects on the Company's results of
operations or financial condition.
Year 2000 costs and the date on which the Company believes
that it will be Year 2000 compliant are based upon management's
best estimates that were derived utilizing numerous assumptions
of future events. There can be no assurance that these estimates
are achievable and actual results could differ materially from
estimates.
OFFICERS DIRECTORS
ROBERT J. ATTEA
(also Director)
Chairman of the Board and
Chief Executive Officer
KENNETH F. MYSZKA
(also Director)
President and
Chief Operating Officer
DAVID L. ROGERS
Chief Financial Officer
JOHN BURNS, CPA
Chairman
Sterling, a Division of
National City Bank
MICHAEL A. ELIA
President and
Chief Executive Officer
Sevenson Environmental
Services, Inc.
ANTHONY GAMMIE
Chairman of the Board
Bowater Incorporated
(retired)
CHARLES E. LANNON
President
Strategic Capital, LLC
SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
5166 Main Street
Williamsville, New York 14221
716-633-1850
REGISTRAR AND TRANSFER AGENT
American Stock Transfer
& Trust Company
40 Wall Street
New York, New York 10005
718-921-8200
ANNUAL MEETING
May 25, 1999
Courtyard By Marriott
25050 Sperry Drive
Westlake, OH 44145
11:00 a.m. (e.d.t.)
SOVRAN'S WEBSITES
http://www.sovranss.com
http://www.unclebobsselfstorage.com
FORM 10-K REPORT
A copy of the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, filed with the Securities Exchange
Commission, will be furnished to shareholders without charge upon
written request.
Please contact Christine M. Aguglia, 716-633-1850
INVESTOR RELATIONS
For more information or to receive Sovran's quarterly reports,
please contact Joan M. Light, 716-633-1850
INDEPENDENT AUDITORS
Ernst & Young LLP
1400 Key Tower
Buffalo, New York 14202
STOCK INFORMATION
Exchange: New York Stock Exchange
Listing Symbol: SSS
Average Daily Trading Volume: 33,579
The following table sets forth the high and low sales prices of
the Common Stock on the New York Stock Exchange composite tapes
for the period from January 1, 1996 to December 31, 1998.
Range
Quarter High Low
_________________________________________________________________
1996
_________________________________________________________________
1st 27.5 25
2nd 27.125 24.625
3rd 27 24.625
4th 31.25 25.625
_________________________________________________________________
1997
_________________________________________________________________
1st 32 29.375
2nd 30.875 28
3rd 31.75 28.625
4th 32.4375 28.6875
_________________________________________________________________
1998
_________________________________________________________________
1st 32.625 28.75
2nd 29.75 26.188
3rd 29.125 21.25
4th 26.625 23.563
As of December 31, 1998 there were approximately 444 shareholders
of record of the Common Stock.
Exhibit 23
Consent and Report of Independent Auditors
Board of Directors
Sovran Self Storage, Inc.
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Sovran Self Storage, Inc. of our report
dated January 29, 1999, included in the 1998 Annual Report to
Shareholders of Sovran Self Storage, Inc.
Our audits also included the financial statement schedule of
Sovran Self Storage, Inc. listed in Item 14(a). This schedule is
the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above,
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material
respects the financial information set forth therein.
We also consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 333-21679) pertaining to the
1995 Award and Option Plan and the 1995 Directors' Stock Option
Plan of Sovran Self Storage, Inc. and in the Registration
Statement (Form S-3 No. 333-64735) pertaining to the Dividend
Reinvestment and Stock Purchase Plan of Sovran Self Storage, Inc.
of our report dated January 29, 1999, with respect to the
consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph
with respect to the financial statement schedule included in this
Annual Report (Form 10-K) of Sovran Self Storage, Inc.
We also consent to the incorporation by reference in the
Registration Statement (Form S-3 No. 333-51169) of Sovran Self
Storage, Inc. and Sovran Acquisition Limited Partnership and in
the related Prospectus of our report dated January 29, 1999 with
respect to the consolidated financial statements incorporated
herein by reference, and our report included in this Annual
Report (Form 10-K) of Sovran Self Storage, Inc.
ERNST & YOUNG LLP
Buffalo, New York
March 26, 1999