EXHIBIT 10.2
MEMORANDUM OF UNDERSTANDING
WHEREAS, certain actions have been filed in the Shelby County Chancery
Court, State of Tennessee or have been transferred to such court, and such
actions have been consolidated under the caption In re Storage USA, Inc.
Shareholder Litigation (the "Consolidated Action");
WHEREAS, the Consolidated Action was filed as a putative class actions
on behalf of public shareholders of Storage USA, Inc. ("Storage") naming as
defendants Storage, the members of the board of directors of Storage; Storage
USA Trust; SUSA Partnership; and Security Capital Group Incorporated ("Security
Capital") (collectively "Defendants"); and
WHEREAS, the Consolidated Action seeks injunctive relief, monetary
damages and/or rescission on the alleged ground that the conduct of the
defendants in connection with a proposal and agreement by Security Capital for a
transaction in which all of the public outstanding shares of Storage will be
converted into the right to receive $42 per share in cash from Security Capital
(the "Transaction") constitutes a breach of fiduciary duties to the public
shareholders of Storage by the defendants, in that, among other things, the
consideration offered for the shares by Security Capital is inadequate and
unfair and the Transaction is a result of conflict of interest; the directors of
Storage allegedly breached their fiduciary duties by structuring the agreement
with Security Capital so as to deprive themselves of the ability to consider
hypothetical competing proposals, thereby allegedly depriving the public
shareholders of Storage of the true value of their investment in Storage; and
WHEREAS, following negotiations between the parties, counsel for the
parties have reached an agreement in principle providing for the settlement of
the Consolidated Action on the terms and conditions set forth below; and
WHEREAS, counsel for the parties believe that the proposed settlement
(the "Settlement") is in the best interests of the parties and of Storage and
its public shareholders;
IT IS HEREBY AGREED IN PRINCIPLE AS FOLLOWS:
1. Defendants acknowledge that Security Capital will increase the
consideration to be paid in the Transaction from $42 per share to $42.50 per
share in exchange for plaintiffs' agreement to settle the Consolidated Action.
2. The parties to the Consolidated Action will attempt in good faith as
soon as practicable to use their best efforts to agree upon and execute an
appropriate Stipulation of Settlement (the "Stipulation") and such other
documentation as may be required in order to obtain final court approval of the
Settlement and the dismissal of the Consolidated Action upon the terms set forth
in this Memorandum of Understanding (collectively, the "Settlement Documents").
The Stipulation will expressly provide, inter alia, for certification of a
non-opt-out class for settlement purposes (consisting of all Storage
shareholders during the period beginning on September 10, 2001 through and
including the date of the consummation of the Transaction, other than defendants
and their affiliates), entry of a judgment of dismissal and for a
complete release and settlement of all claims against Defendants and their
predecessors, partners, successors, heirs, assigns, administrators, members,
parents, subsidiaries, affiliates and agents (including, without limitation, any
investment bankers, accountants or attorneys and any past or present officers,
directors, trustees, partners, and employees of defendants and their
predecessors, successors, parents, subsidiaries, affiliates and agents) which
have been or could have been asserted relating to the Transaction (the "Released
Claims"). The Released Claims will include all claims, whether based on federal,
state or common law, based in any way upon, or arising out of, the Transaction,
including any claims based upon or arising out of the actions of Storage,
Storage USA Trust, SUSA Partnership, Security Capital (including the officers,
directors, trustees, general partners and limited partners of Storage, Storage
USA Trust and SUSA Partnership, and Security Capital), the individual
defendants, and any claims relating to any of the negotiations, transactions,
agreements, disclosures, omissions, facts and allegations that are or could be
the subject of the Consolidated Action; the stipulation will further provide
that defendants have denied and continue to deny that they have committed or
attempted to commit any violations of law or breaches of duty to Storage or its
shareholders or otherwise; and that defendants are entering into the Stipulation
solely because the proposed Settlement as described above would eliminate the
burden, risk, and expense of further litigation. If any claims which are or
would be subject to the release and dismissal contemplated by the Settlement are
asserted against any person in any court prior to final approval of the
Settlement, Plaintiffs shall join, where possible, in any motion to dismiss or
stay such proceedings.
3. Upon execution of this memorandum, plaintiffs agree to stay all
prosecution of the Consolidated Action except for the implementation of the
Settlement. The parties to the Consolidated Action will present the Settlement
Documents to the Chancery Court of Shelby County, TN, for final approval as soon
as practicable following appropriate notice of the proposed Settlement to the
proposed class of shareholders of Storage and will use their best efforts to
obtain final court approval of the Settlement and the dismissal of the
Consolidated Action with prejudice as to all claims asserted or which could have
been asserted against defendants in the Consolidated Action and without costs to
any party (other than counsel fees and expenses as provided in paragraph 5
below). As used herein "final court approval" of the Settlement means that the
Court has entered an order approving the Settlement and that such order is
finally affirmed on appeal or by lapse of time or otherwise is no longer subject
to appeal.
4. The consummation of the Settlement (including the payment of
attorneys' fees and expenses awarded by the court to plaintiffs' counsel) is
subject to: (a) the drafting and execution of mutually acceptable Settlement
Documents; (b) the completion by plaintiffs of confirmatory discovery (including
document discovery and depositions) in the Consolidated Action reasonably
satisfactory to plaintiffs' counsel; (c) final court approval (as defined in
paragraph 3 above) of the Settlement and dismissal of the Consolidated Action
with prejudice and without awarding fees or costs to any party (except as
provided in paragraph 5 below); and (d) consummation of the Transaction. This
Memorandum of Understanding shall be voidable by any party hereto should any of
these conditions not be met. Should plaintiffs' counsel in the Consolidated
Action determine that the Settlement is not fair and reasonable, or should the
Court not approve the Settlement, or should the Settlement not be consummated
for failure of any of its conditions, then this Memorandum of Understanding
shall not be admissible for any purpose in any proceeding and it shall neither
be deemed to prejudice in any way the positions of the parties with respect to
the Consolidated Action nor entitle any party to recover any costs or expenses
incurred in connection with the implementation of this Memorandum of
Understanding. Defendants will provide copies of the draft public disclosure
documents concerning the Transaction to plaintiffs' counsel prior to
dissemination.
5. Plaintiffs' counsel intends to apply to the Court for an award of
attorneys' fees and disbursements in an aggregate amount of no more than
$2,750,000. Storage, or its successor on behalf of defendants, agrees to pay
attorneys' fees and expenses as awarded by the Court in an aggregate amount not
exceeding $2,750,000 to Schiffrin & Barroway, LLP, as receiving agent for
plaintiffs' counsel, within five (5) business days of final court approval of
the Settlement as defined in Paragraph 3 (assuming the conditions set forth in
paragraph 4 hereof have been met) and the entry of an order awarding fees and
expenses by the court. Security shall be responsible for payment of the
reasonable costs and expenses of providing notice of the Settlement to the
Class.
6. Miscellaneous: (a) This Memorandum of Understanding may be executed
in counterparts by any of the signatories hereto, including by fax or telecopy,
and as so executed shall constitute one agreement; (b) this Memorandum of
Understanding and the Settlement contemplated by it shall be governed by and
construed in accordance with the laws of the State of Tennessee without regard
to Tennessee conflict of laws rules; (c) this Memorandum of Understanding shall
be binding upon and inure to the benefit of the parties and their respective
agents, executors, heirs, successors and assigns, subject to the conditions set
forth herein; (d) each of the attorneys executing this Memorandum of
Understanding has been duly empowered and authorized by his/her respective
client(s) to do so; (e) plaintiffs and their counsel represent and warrant that
none of the claims or causes of action asserted in the Consolidated Action has
been assigned, encumbered or in any manner transferred in whole or in part; (f)
except as provided herein, defendants shall bear no expenses, costs, damages or
fees alleged or incurred by any named plaintiff, any member of the Class or
their respective attorneys, experts, advisors, agents or representatives; (g)
the provisions contained in this Memorandum of Understanding shall not be deemed
a presumption, concession or admission by any defendant of any breach of duty,
liability, default or wrongdoing as to any facts or claims alleged or asserted
in the Consolidated Action, or in any other actions or proceedings, and shall
not be interpreted, construed, deemed, invoked, offered or received in evidence
or otherwise used by any person in the Consolidated Action or in any other
action or proceeding of any nature whatsoever; and (h) this Memorandum of
Understanding may be modified or amended only by a writing signed by the
signatories hereto.
Dated: January 17, 2002
WACHTELL, LIPTON, ROSEN & KATZ
/s/ Paul K. Rowe
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Paul K. Rowe
51 West 52nd Street
New York, New York 10019
(212) 403-1210
Attorneys for Defendants Security Capital Group,
Blankenship, Sanders and McBride
HUNTON & WILLIAMS
/s/ Edward J. Fuhr
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Edward J. Fuhr
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23212
(804) 788-8201
Attorneys for Defendants Storage USA, Inc., Storage USA
Trust, SUSA Partnership, Jernigan, Colhoun, Coret,
Jorgensen, McCann and Thie
GOODWIN PROCTER, LLP
/s/ Stephen D. Poss
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Stephen D. Poss
Exchange Place
53 State Street
Boston, Massachusetts 02109
(617) 570-1886
Attorneys for Defendants Colhoun, Graf, Jorgensen,
McCann and Thie
SCHIFFRIN & BARROWAY, LLP
By: /s/ Marc A. Topaz
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Marc A. Topaz
Three Bala Plaza East
Suite 400
Bala Cynwyd, Pennsylvania 19004
(610) 667-7706
Plaintiffs Co-Lead Counsel
BERNSTEIN, LIEBHARD & LIFSHITZ, LLP
By: /s/ Stanley D. Bernstein
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Stanley D. Bernstein
10 East 40th Street
New York, New York 10016
(212) 779-1414
Plaintiffs Co-Lead Counsel