SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
</Table>
SOVRAN SELF STORAGE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
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----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
SOVRAN SELF STORAGE, INC.
6467 Main Street
Buffalo, New York 14221
Dear Shareholder:
You are cordially invited to attend the 2004 Annual Meeting of Shareholders
on Thursday, May 13, 2004 at The Courtyard by Marriott, 4100 Sheridan Drive,
Williamsville, New York 14221. The Annual Meeting will begin promptly at 11:00
a.m. (E.D.T.).
The enclosed Notice and Proxy Statement contain details concerning the
business to come before the meeting. You will note that the Board of Directors
of the Company recommends a vote "FOR" the election of six Directors to serve
until the 2005 Annual Meeting of Shareholders, "FOR" the amendments to the
Sovran Self Storage, Inc. 1995 Outside Directors' Stock Option Plan, "FOR" the
amendment to the Deferred Compensation Plan for Directors of Sovran Self
Storage, Inc., and "FOR" the ratification of the appointment of Ernst & Young
LLP as independent auditors of the Company for the 2004 fiscal year.
The vote of every Shareholder is important. You may vote your shares via
the toll free telephone number or via the Internet (see instructions on the
enclosed proxy card) or you may sign and date the accompanying proxy card and
return it promptly in the postage paid envelope provided. Returning your
completed proxy card will not prevent you from voting in person at the meeting
should you be present and wish to do so. Please note that the telephone number
is available only for calls originating in the United States or Canada. Please
take the time to vote. As explained in the Proxy Statement, you may withdraw
your proxy at any time before it is actually voted at the meeting.
If you plan to attend the meeting in person, please remember to bring a
form of personal identification with you and, if you are acting as a proxy for
another Shareholder, please bring written confirmation from the record owner
that you are acting as a proxy. If you will need special assistance at the
meeting, please contact Sovran Investor Relations at (716) 633-1850.
The Board of Directors and management look forward to greeting those
Shareholders who are able to attend the Annual Meeting.
Sincerely,
DAVID L. ROGERS
Secretary
April 8, 2004
SOVRAN SELF STORAGE, INC.
6467 Main Street
Buffalo, New York 14221
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
TO THE SHAREHOLDERS OF SOVRAN SELF STORAGE, INC.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of Sovran
Self Storage, Inc. (the "Company") will be held at The Courtyard by Marriott,
4100 Sheridan Drive, Williamsville, New York 14221, on Thursday, May 13, 2004,
at 11:00 a.m. (E.D.T.), to consider and take action on the following:
1. The election of six Directors of the Company to hold office until
the next Annual Meeting of Shareholders and until their successors
are elected and qualified.
2. Amendments to the Sovran Self Storage, Inc. 1995 Outside Directors'
Stock Option Plan to (a) provide for the automatic annual grant to
non-employee members of the Company's Board of Directors of
restricted stock in addition to stock options, (b) reduce the size
of the automatic annual grant of stock options from options to
purchase 3,500 shares to options to purchase 2,000 shares of the
Company's common stock, and (c) change the manner in which the
exercise period is determined for future options granted under such
plan.
3. An amendment to the Deferred Compensation Plan for Directors of
Sovran Self Storage, Inc. to increase the number of shares of the
Company's common stock that may be issued thereunder from 20,000 to
45,000.
4. The ratification of the appointment by the Board of Directors of
Ernst & Young LLP as independent accountants to audit the accounts
of the Company for the fiscal year ending December 31, 2004.
5. The transaction of such other business as may properly come before
the meeting or any adjournments thereof.
FURTHER NOTICE IS HEREBY GIVEN that the stock transfer books of the Company
will not be closed, but only Shareholders of record at the close of business on
April 2, 2004 will be entitled to notice of the meeting and to vote at the
meeting.
SHAREHOLDERS WHO WILL BE UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON MAY
ATTEND THE MEETING BY PROXY. SUCH SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE,
SIGN AND RETURN THE PROXY CARD IN THE ENVELOPE ENCLOSED OR TO VOTE THEIR PROXY
BY TELEPHONE OR VIA THE INTERNET AS DESCRIBED ON THE ENCLOSED PROXY CARD.
By Order of the Board of Directors,
DAVID L. ROGERS
Secretary
Buffalo, New York
April 8, 2004
SOVRAN SELF STORAGE, INC.
6467 Main Street
Buffalo, New York 14221
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
------------------------
This Proxy Statement and the enclosed form of proxy are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Sovran Self Storage, Inc. (the "Company") for the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Thursday, May 13, 2004 at
11:00 a.m. (E.D.T.) at The Courtyard by Marriott, 4100 Sheridan Drive,
Williamsville, New York 14221, and at any adjournment thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders. Only
Shareholders of record at the close of business on April 2, 2004 are entitled to
notice of and to vote at the meeting. This Proxy Statement and the enclosed form
of proxy are first being mailed to Shareholders on or about April 8, 2004.
Shareholders of record may vote by (i) attending the meeting, (ii) using
the toll-free telephone number shown on the proxy card, (iii) voting via the
Internet at the address shown on the proxy card, or (iv) marking, dating,
signing and returning the enclosed proxy card. Returning your completed proxy
will not prevent you from voting in person at the meeting should you be present
and wish to do so. The proxy may be revoked at any time before it is voted by
delivering to the Secretary of the Company a written revocation or a duly
executed proxy (including a telephone or Internet vote) as of a later date, or
by attending the Annual Meeting and voting in person.
The entire cost of preparing, assembling and mailing the proxy material
will be borne by the Company. The Company will reimburse brokerage firms, banks
and other securities custodians for their expenses in forwarding proxy materials
to their principals. Solicitations other than by mail may be made by officers or
by regular employees of the Company without additional compensation.
Only Shareholders of record at the close of business on April 2, 2004, are
entitled to notice of and to vote at the Annual Meeting and at all adjournments
thereof. At the close of business on April 2, 2004, there were issued and
outstanding 14,785,974 shares of the Company's common stock ("Common Stock").
Each share of Common Stock has one vote. A majority of shares entitled to vote
at the Annual Meeting will constitute a quorum. If a share is represented for
any purpose at the meeting, it is deemed to be present for all other purposes.
Abstentions and shares held of record by a broker or its nominee ("Broker
Shares") that are voted on any matter are included in determining the number of
votes present. Broker Shares that are not voted on any matter at the Annual
Meeting will not be included in determining whether a quorum is present.
THE COMPANY WILL PROVIDE SHAREHOLDERS, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE PERIOD ENDED DECEMBER 31, 2003, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO, ON WRITTEN REQUEST TO DAVID L. ROGERS,
SECRETARY OF THE COMPANY, AT 6467 MAIN STREET, BUFFALO, NEW YORK 14221.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth for each holder of five percent or more of
the Company's outstanding stock, each current Director, each nominee for
Director and each of the executive officers named in the Summary Compensation
Table and for all Directors and executive officers as a group, information
concerning beneficial ownership of Common Stock. Unless otherwise stated, to the
best of the Company's knowledge, each person has sole voting and investment
power with respect to the shares listed.
<Table>
<Caption>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
NAME AND ADDRESS OF AS OF APRIL 2, 2004 PERCENT OF
BENEFICIAL OWNERS (1) (2)(3)(4) COMMON STOCK OWNED
- --------------------- ------------------- ------------------
Cohen & Steers Capital Management, Inc.(5)...... 747,000 5.05%
Robert J. Attea................................. 190,923 1.29%
Kenneth F. Myszka............................... 189,955 1.28%
Charles E. Lannon............................... 152,200 1.03%
John E. Burns................................... 0 *
Michael A. Elia................................. 26,000 *
Anthony P. Gammie............................... 38,932 *
David L. Rogers................................. 129,348 *
Directors and Executive Officers as a Group
(seven persons)............................... 727,358 4.92%
</Table>
- ---------------
* Represents beneficial ownership of less than 1% of outstanding Common Stock
on April 2, 2004.
(1) The address for Cohen & Steers Capital Management, Inc. is 757 Third Avenue,
New York, New York 10017. The address for all other owners is c/o Sovran
Self Storage, Inc., 6467 Main Street, Buffalo, New York 14221.
(2) Includes 10,055, 10,055, 18,000, 26,000, 26,000 and 10,055 shares of Common
Stock that may be acquired by Messrs. Attea, Myszka, Lannon, Elia, Gammie
and Rogers, respectively, through the exercise, within sixty days, of
options granted under the 1995 Award and Option Plan and the 1995 Outside
Directors' Stock Option Plan.
(3) Excludes 4,544, 4,544, 4,038 and 2,340 shares of Common Stock issuable to
each of Messrs. Burns, Elia, Gammie and Lannon, respectively, in payment of
amounts credited to their accounts under the Company's Deferred Compensation
Plan for Directors.
(4) Includes 49,786, 44,556 and 44,556 shares of restricted stock as to which
the Messrs. Attea, Myszka and Rogers, respectively, have voting power but no
investment power.
(5) All information relating to Cohen & Steers Capital Management, Inc. is
derived from the Schedule 13G filed by it on February 17, 2004. The Company
has not verified this information.
2
1. ELECTION OF DIRECTORS
It is intended that the proxies solicited by the Board of Directors will,
unless otherwise directed, be voted to elect the nominees for Director named
below. Assuming a quorum is present, Directors are elected by a plurality of the
affirmative votes cast; accordingly, votes withheld and broker non-votes will
have no effect. The nominees proposed are all presently members of the Board.
DIRECTOR INDEPENDENCE
The Board of Directors has reviewed all transactions or relationships
between each director, or any member of his or her immediate family and the
Company, its senior management and its independent auditor. Based on this review
and as required by the independence standards of the New York Stock Exchange
("NYSE"), the Board of Directors has affirmatively determined that all
non-employee directors are independent from management and its independent
auditor within the meaning of the NYSE listing standards.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
The nominees named herein will hold office until the next succeeding Annual
Meeting of Shareholders and until their successors are duly elected and
qualified. In the event any nominee becomes unavailable and a vacancy exists, it
is intended that the persons named in the proxy may vote for a substitute who
will be recommended by the Nominating Committee of the Board of Directors. The
Board of Directors has no reason to believe that any of the nominees will be
unable to serve as Directors.
The following information with respect to business experience of nominees
for election to the Board of Directors and the continuing directors has been
furnished by the respective directors or nominees or obtained from the records
of the Company.
<Table>
<Caption>
NAME AGE TITLE AND PRINCIPAL OCCUPATION
- ---- --- ------------------------------
Robert J. Attea...................... 62 Chairman of the Board and Chief Executive Officer since
March 1997.
Kenneth F. Myszka.................... 55 President, Chief Operating Officer and Director since
March 1997.
John E. Burns........................ 57 Director since 1995. Mr. Burns is President of Altus
Capital, L.L.C., an investment management company. From
1998 through 2000, Mr. Burns was Chairman of Sterling,
a division of National City Bank, which provides tax
and financial counseling services to affluent families.
Michael A. Elia...................... 52 Director since 1995. Mr. Elia is President, Chief
Executive Officer and a director of Sevenson
Environmental Services, Inc., from 1984 to March 2002.
Anthony P. Gammie.................... 69 Director since 1995. From 1985 through March of 1996,
Mr. Gammie was Chairman of the Board and Chief
Executive Officer of Bowater Incorporated.
Charles E. Lannon.................... 56 Director since 1995. Mr. Lannon is the President of
Strategic Capital, Inc., a consulting firm.
</Table>
EXECUTIVE OFFICERS OF THE COMPANY
<Table>
<Caption>
NAME AGE TITLE
- ---- --- -----
Robert J. Attea...................... 62 Chairman of the Board and Chief Executive
Officer
Kenneth F. Myszka.................... 55 President and Chief Operating Officer
David L. Rogers...................... 48 Chief Financial Officer and Secretary
</Table>
David L. Rogers. From 1995 to the present, David L. Rogers has served as
the Company's Chief Financial Officer and Secretary.
3
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
The Board of Directors held five meetings during the fiscal year ended
December 31, 2003. Each incumbent director attended at least 75% of the
aggregate total number of meetings held by the Board of Directors and all
committees on which he served.
The Board of Directors has three committees with the principal functions
described below. The charter of each committee is posted on the Company's web
site at www.sovranss.com. A copy of each charter is available in print to any
shareholder upon request to the Company at 6467 Main Street, Buffalo, New York,
or by telephone call to the Company at (716) 633-1850.
Audit Committee. The Audit Committee is composed of Messrs. Burns, Elia
and Gammie. The Audit Committee is established to oversee the accounting and
financial reporting processes and audits of the financial statements of the
Company. The committee assists the Board of Directors in oversight of the
quality and integrity of the Company's financial reports, the Company's
compliance with legal and regulatory requirements, the independent auditor's
qualifications and independence and the performance of the Company's internal
audit function, as well as accounting and reporting processes.
The Audit Committee is composed entirely of directors who are not employees
of the Company and have no relationship to the Company that would interfere with
a director's independence from management and the Company, including
independence within the meaning of applicable NYSE listing standards. Each
member must be "financially literate" under recently revised NYSE listing
standards, or become financially literate within a reasonable period of time
after appointment. The Securities and Exchange Commission ("SEC") has adopted
rules to implement certain requirements of the Sarbanes-Oxley Act of 2002
pertaining to public company audit committees. One of the rules adopted by the
SEC requires a company to disclose whether it has an "Audit Committee Financial
Expert" serving on its audit committee. The Board of Directors has determined
that all members of the Audit Committee are financially literate and that Audit
Committee member John E. Burns meets the definition of an "Audit Committee
Financial Expert."
The Audit Committee's duties are set forth in its charter, which is
attached hereto as Annex A and can be found on the Company's web site at
www.sovranss.com. Additional information regarding the Audit Committee and the
Company's independent auditor is disclosed in the Report of the Audit Committee
below. The Audit Committee held five meetings during the fiscal year ended
December 31, 2003. At each of the meetings, the Audit Committee met in private
session with the Company's independent auditor and, at one of the meetings, met
in private session with the Company's internal auditor.
Compensation Committee. The Compensation Committee is composed of Messrs.
Burns, Elia and Gammie, each of whom is independent within the meaning of
applicable NYSE listing standards. The Compensation Committee makes decisions
with respect to compensation of executive officers and administers the Company's
1995 Award and Option Plan. The functions of the Compensation Committee are
further described below under the caption "Executive Compensation" and in its
charter, which can be found on the Company's web site at www.sovranss.com. The
Compensation Committee held one meeting during the fiscal year ended December
31, 2003.
Governance Committee. The Governance Committee of the Board of Directors
was recently formed and serves as the Company's nominating committee. The
Governance Committee is composed of Messrs. Burns, Elia and Gammie, each of whom
is independent within the meaning of applicable NYSE listing standards. This
Governance Committee's functions are set forth in its charter, which can be
found on the Company's web site at www.sovranss.com, and include assisting the
Board of Directors by identifying individuals qualified to become Board members
and recommending director nominees for the annual meeting of shareholders,
recommending to the Board the Corporate Governance Principles applicable to the
Company, leading the Board of Directors in its annual review of the Board's
performance, and recommending the Board of Directors' director nominees for each
committee. The Governance Committee must annually review the adequacy of its
charter and its own performance. The Governance Committee does not have an
express policy with regard to consideration of director candidates recommended
by shareholders, but it will consider director candidates proposed by
shareholders. Those candidates must be highly qualified, exhibiting the
experience and
4
expertise required of the Board of Directors' own pool of candidates and
interest in the Company's businesses, and also the ability to attend and prepare
for Board of Directors, committee and shareholder meetings. Any candidate must
state in advance his or her willingness and interest in serving on the Board of
Directors. Candidates should represent the interests of all shareholders and not
those of a special interest group. A shareholder wishing to nominate a candidate
should do so in accordance with the guidelines set forth below under the caption
"Proposals of Shareholders for the 2005 Annual Meeting." No meetings of the
Governance Committee were held during 2003, as the committee was not yet formed.
The Report of the Audit Committee that follows, the Audit Committee Charter
attached as Annex A to this Proxy Statement, the Compensation Committee Report
on page 7 and the Performance Graph on page 10 shall not be deemed to be
"soliciting material" or to be filed with the Securities and Exchange Commission
or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934,
or to the liabilities of Section 18 of that act. Notwithstanding anything to the
contrary set forth in any of the Company's previous filings under the Securities
Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future
filings, including this Proxy Statement, in whole or in part, neither of the
reports nor the Performance Graph shall be incorporated by reference into any
such filings.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors' independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board and considered the compatibility of non-audit
services with the auditors' independence.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The Committee meets with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, and subject
to the limitations on the role and responsibilities of the Committee set forth
in its charter, the Committee recommended to the Board of Directors (and the
Board approved) that the audited financial statements be included in the Annual
Report on Form 10-K for the year ended December 31, 2003 for filing with the
Securities and Exchange Commission. The Committee and the Board have also
recommended, subject to Shareholder approval, the selection of the Company's
independent auditors.
Audit Committee
JOHN E. BURNS, CHAIR
MICHAEL A. ELIA
ANTHONY P. GAMMIE
5
COMPENSATION OF DIRECTORS
The Company pays its Directors who are not also officers of the Company an
annual fee of $18,000. An additional $2,500 is paid to each chair of the Audit,
Compensation and Governance Committees, and an additional $5,000 is paid to each
member of the Audit Committee. Outside Directors are also paid a meeting fee of
$1,000 for each special meeting attended. In addition, the Company will
reimburse all Directors for expenses incurred in attending meetings. Under the
Deferred Compensation Plan for Directors, outside Directors may elect to have
all or part of their fees credited to a deferred compensation account in the
form of Units. The number of Units credited will be equal to the number of
shares of Common Stock that could have been purchased using the closing price of
Common Stock on the day immediately preceding the date on which the fees were
payable. When the Company declares cash dividends on its Common Stock,
additional Units will be credited to the deferred compensation accounts based on
the reinvestment of the "dividend" on the Units credited to the deferred
compensation accounts on the dividend record dates. Amounts credited to the
deferred compensation accounts will be paid to Directors in the form of shares
of Common Stock, the number of which shares will equal the number of Units
credited to the accounts. The Deferred Compensation Plan for Directors is
proposed to be amended. See page 13.
Pursuant to the 1995 Outside Directors' Stock Option Plan, each Director
who is not an officer or employee of the Company is granted, effective as of the
Director's initial election or appointment, an option to acquire 3,500 shares of
Common Stock at the fair market value of the Common Stock on the date of grant,
and will, as of the close of each annual shareholders' meeting thereafter, be
granted an option to acquire an additional 3,500 shares of Common Stock at the
fair market value of the Common Stock on the date of grant. The initial options
for 3,500 shares of Common Stock are exercisable one year from the date of
grant; the Directors' options awarded annually thereafter vest immediately. The
exercise price is payable in cash or by delivery of shares of Common Stock owned
by the Director, or a combination of cash and shares. Two Directors exercised
options for 40,000 shares of Common Stock during 2003. The 1995 Outside
Directors' Stock Option Plan is proposed to be amended. See page 11.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and officers, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC") and the New
York Stock Exchange. Directors, officers and greater-than-10% shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) reports they file. Based solely on review of information furnished to the
Company and reports filed through the Company, the Company believes that all
Section 16(a) filing requirements applicable to its Directors, officers and
greater-than-10% beneficial owners were complied with during 2003.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED ABOVE.
6
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives are made by the
Compensation Committee of the Board of Directors. During 2003 the Compensation
Committee consisted of Messrs. Burns, Elia and Gammie, each of whom is an
independent Director. All decisions by the Compensation Committee relating to
the compensation of the Company's executive officers are reviewed by the full
Board of Directors. No officer or employee of the Company participated in the
deliberations of the Compensation Committee or the Board of Directors concerning
executive officer compensation.
The Company retains a compensation consulting firm to review the Company's
executive compensation program, evaluate its competitiveness and make
recommendations that would enable the Company to motivate and retain top
executives with a view to maximizing Shareholder value. The consulting firm
focused on base salary, annual incentives and long-term incentives and utilized
published survey data and information from a peer group of companies in the
public storage REIT industry. The Compensation Committee used the advice of the
consulting firm, as well as other relevant information, as the basis for its
decisions on executive compensation in 2003.
The Company's executive compensation policies are to provide competitive
levels of compensation that integrate pay with the Company's performance goals,
reward profitability, recognize individual initiative and achievements, and
assist the Company in attracting and retaining qualified executives. In 2003,
these policies were carried out through the compensation components of salary,
incentive compensation and perquisites. In addition, the Committee treats the
tax deductibility of executive compensation as an important factor in its
decision-making, since the deductibility may affect the required REIT
distributions.
A competitive salary structure is the most fundamental component of
executive compensation used by the Compensation Committee to assist in
attracting and retaining qualified executives. Salaries for the executive
officers for 2003 were established based on these fundamentals.
The Company maintains an incentive compensation plan which provides for the
payment of bonuses to the executive officers based upon the achievement of
specified increases in the Company's Funds from Operations per Common Share and
other performance criteria and upon such participant's base compensation as
shown for the named executive officers in the Summary Compensation Table, for
the year in which the increase occurred. The bonuses may be paid in cash,
restricted stock or a combination of cash and restricted stock. The application
of these criteria resulted in the bonuses reflected in the Summary Compensation
Table. In March 2004, restricted stock was granted as a bonus to management
based upon their performance during the Company's 2003 fiscal year.
Perquisites, which include an automobile allowance and reimbursement of
miscellaneous expenses, do not relate directly to the Company's performance.
Instead, these relatively inexpensive components of executive compensation are
primarily viewed as necessary to keep compensation levels competitive and to
assist in attracting and retaining qualified executives.
In 2003, no stock options or restricted stock were granted to executive
officers. However, in March 2004, restricted stock was granted as a bonus to the
Company's executive officers based upon their performance during the Company's
2003 fiscal year.
The Compensation Committee's approach to establish Mr. Attea's compensation
does not differ from the approach to establish all executive compensation and is
in keeping with the policies previously stated. The Board of Directors did not
modify or reject any action or recommendation by the Compensation Committee in
any material way.
Compensation Committee
MICHAEL A. ELIA, CHAIR
JOHN E. BURNS
ANTHONY P. GAMMIE
7
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
ANNUAL COMPENSATION AWARDS
COMPENSATION ------------------------
----------------- RESTRICTED SECURITIES ALL
BASE STOCK UNDERLYING OTHER
FISCAL SALARY BONUS AWARD OPTIONS COMPENSATIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)(2)
- --------------------------- ------ -------- ----- ---------- ---------- -------------
Robert J. Attea.............. 2003 $324,450 $0 $130,189 0 $3,715
Chairman of the Board and 2002 $309,000 $0 $198,002 0 $1,938
Chief Executive Officer 2001 $292,000 $0 $689,270 20,000 $2,262
Kenneth F. Myszka............ 2003 $315,798 $0 $126,399 0 $3,715
President and Chief 2002 $300,760 $0 $193,761 0 $1,938
Operating Officer 2001 $292,000 $0 $581,270 40,000 $2,262
David L. Rogers.............. 2003 $315,798 $0 $126,399 0 $3,715
Chief Financial Officer 2002 $300,760 $0 $193,761 0 $1,938
and Secretary 2001 $292,000 $0 $581,270 40,000 $2,262
</Table>
- ---------------
(1) The amounts shown represent the value of restricted stock issued to the
named executive officers pursuant to the Company's 1995 Award and Option
Plan as follows: March 18, 2004 -- 3,295, 3,202, and 3,202 shares to Messrs.
Attea, Myszka and Rogers, respectively; August 5, 2002 -- 6,256, 6,122, and
6,122 shares to Messrs. Attea, Myszka and Rogers, respectively; December 20,
2001 -- 6,055 shares to each of Messrs. Attea, Myszka and Rogers; and
February 9, 2001 -- 23,400, 18,400 and 18,400 shares to Messrs. Attea,
Myszka and Rogers, respectively. The restricted shares issued on March 18,
2004 vest at the rate of 20% per year beginning on the foregoing dates and
dividends are paid on the shares. As of December 31, 2003, the number and
fair market value of all shares of restricted stock held by the named
executive officers were as follows: Mr. Attea -- 46,488 shares, $1,727,029;
Mr. Myszka -- 41,354 shares, $1,536,301; and Mr. Rogers -- 41,354 shares,
$1,536,301.
(2) Represents employer matching contributions under the Company's 401(k) Plan.
AGGREGATED OPTION EXERCISES IN FISCAL 2003
AND FISCAL YEAR-END VALUES
The following table summarizes stock options exercised by the named
executive officers during 2003 and the total number of options held by each
listed individual as of December 31, 2003.
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END (#) OPTIONS AT YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- ----------- -------------
Robert J. Attea........ 50,795 $357,736 18,055 10,000 $170,845 $155,500
Kenneth F. Myszka...... 60,795 $454,124 18,055 20,000 $170,845 $311,000
David L. Rogers........ 60,795 $454,124 18,055 20,000 $170,845 $311,000
</Table>
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted under the Sovran Self Storage, Inc. 1995
Award and Option Plan (the "1995 Award Plan") during 2003 to the named executive
officers.
8
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 31, 2003,
with respect to equity compensation plans under which shares of Common Stock may
be issued.
<Table>
<Caption>
WEIGHTED
AVERAGE
NUMBER OF SECURITIES TO EXERCISE PRICE OF
BE ISSUED UPON EXERCISE OUTSTANDING
OF OUTSTANDING OPTIONS, OPTIONS, NUMBER OF SECURITIES
WARRANTS AND RIGHTS WARRANTS REMAINING AVAILABLE
PLAN CATEGORY (#) AND RIGHTS ($) FOR FUTURE ISSUANCE (#)
- ------------- ----------------------- ----------------- -----------------------
Equity compensation plans approved by
shareholders:
1995 Award and Option Plan............ 368,165 $24.32 355,658
1995 Outside Directors' Stock Option
Plan............................... 75,500 $26.58 48,500
Deferred Compensation Plan for
Directors (1)...................... 16,168 N/A 3,832
Equity compensation plans not approved
by shareholders:...................... N/A N/A N/A
</Table>
- ---------------
(1) Under the Deferred Compensation Plan for Directors, non-employee Directors
may defer all or part of their Directors' fees that are otherwise payable in
cash. Directors' fees that are deferred under the Plan will be credited to
each Director's account under the Plan in the form of Units. The number of
Units credited is determined by dividing the amount of Directors' fees
deferred by the closing price of Common Stock on the New York Stock Exchange
on the day immediately preceding the day upon which Directors' fees
otherwise would be paid by the Company. A Director is credited with
additional Units for dividends on the shares of Common Stock represented by
Units in such Director' Account. A Director may elect to receive the shares
in a lump sum on a date specified by the Director or in quarterly or annual
installments over a specified period and commencing on a specified date.
EMPLOYMENT AGREEMENTS
In 1995, the Company entered into employment agreements with Messrs. Attea,
Myszka and Rogers that require each of them to devote their full business time
to the Company. Each employment agreement has a three-year term with an
automatic extension each year for an additional year. The employment agreements
provide for certain severance payments in the event of the executive's death or
disability, his termination without cause or his resignation with good reason.
Each employment agreement prohibits the executive, during employment and during
the two-year period following termination of employment, from engaging in the
self-storage business.
CERTAIN TRANSACTIONS
The Company is a party to two joint ventures, one of which was formed in
2000 and the other in 2001, pursuant to which the Company and its respective
joint venture partners each contributed self-storage facilities. In late 2001
and early 2002, the joint ventures engaged in financing transactions with
institutional lenders. To address certain requirements imposed by the lenders,
the Company transferred certain management functions of each joint venture, and
made a contribution of 2% of its interest in the joint venture, to a newly
formed corporation (each, a "Manager") in which the Company received a 49%
interest; however, the Company continues to manage the day-to-day operations of
the storage facilities. In return for its contribution to each Manager, the
Company received consideration having a value determined by it to be equal to
the value of its contribution. In connection with the financing transactions,
Frederick G. Attea (brother of the Company's Chief Executive Officer) and two
unrelated individuals purchased interests in the Managers. Mr. Attea acquired a
19% interest in each Manager for $76,300 in the aggregate, which was at a
per-share price equal to the consideration paid by the other investors,
including the Company. Mr. Attea also acquired a
9
minority interest in the Locke Group LLC, which owns an indirect minority
interest in each joint venture. The joint ventures paid $892,000 in management
fees to the Company in 2003.
Frederick G. Attea is a partner of the law firm of Phillips Lytle LLP,
which has represented and is currently representing the Company.
The Company has a Facilities Services Agreement with several businesses
owned by Mr. Lannon whereby such businesses pay for the use of certain common
facilities in the Company's offices negotiated by the parties at arms-length.
Charges under the Facilities Services Agreement are periodically reviewed by the
Audit Committee of the Company's Board of Directors.
During 2003, the Company employed the brother-in-law of its Chief Executive
Officer as its Vice President of Sales and Marketing, the brother of its
President as its Vice President of Joint Ventures, and the brother of its Chief
Financial Officer as its Vice President of Truck Operations. The average annual
salary and bonus paid to these three individuals was $76,500 during 2003.
CORPORATE PERFORMANCE GRAPH
The following chart and line-graph presentation compares (i) the Company's
shareholder return on an indexed basis since December 31, 1998 with (ii) the S&P
Stock Index and (iii) the National Association of Real Estate Investment Trusts
Equity Index.
PERFORMANCE GRAPH
[LINE GRAPH]
CUMULATIVE TOTAL SHAREHOLDER RETURN
SOVRAN SELF STORAGE, INC.
DECEMBER 31, 1998 -- DECEMBER 31, 2003
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1999 2000 2001 2002 2003
- ----------------------------------------------------------------------------------------------------------------
S&P 100.00 121.04 110.01 96.94 75.51 97.17
- ----------------------------------------------------------------------------------------------------------------
NAREIT 100.00 95.38 120.53 137.32 142.56 195.49
- ----------------------------------------------------------------------------------------------------------------
SSS 100.00 81.34 97.43 167.85 164.92 230.06
- ----------------------------------------------------------------------------------------------------------------
</Table>
The foregoing item assumes $100.00 invested on December 31, 1998, with
dividends reinvested.
10
2. AMENDMENT TO THE 1995 OUTSIDE DIRECTORS' STOCK OPTION PLAN
The Board of Directors has approved, subject to Shareholder approval, an
amendment (the "Amendment") to the Company's 1995 Outside Directors' Stock
Option Plan, as amended (the "Directors' Plan") to (a) provide for the automatic
annual grant to each Outside Director of a number of shares of restricted stock
equal to the annual fee paid to such Outside Director multiplied by 0.8 and
divided by the fair market value of a share of Common Stock on the date of
grant, in addition to stock options, (b) reduce the size of the automatic annual
grant of stock options from options to purchase 3,500 shares of Common Stock to
options to purchase 2,000 shares of Common Stock, and (c) change the end of the
exercise period for future options granted under the Directors' Plan from the
earlier of (i) the tenth anniversary of the date of the option's grant, or (ii)
the date on which the outside Director to whom such option was granted ceases to
serve as a director of the Company to later of (i) the tenth anniversary of the
date of the option's grant, or (ii) one year following the date on which the
Outside Director to whom such option was granted ceases to serve as a director
of the Company. Furthermore, the Amendment would provide that, in the event of
an Outside Director's death during the exercise term of any option, the personal
representative of the Outside Director may exercise any outstanding options held
by such outside Director not previously exercised during the one-year period
following the Outside Director's death. These proposed amendments to the
Directors' Plan were developed in consultation with a compensation consultant.
Under the Directors' Plan, adopted by Shareholders in 1995, the maximum
number of shares of Common Stock that may be issued under the Directors' Plan
was 50,000, subject to equitable adjustment. The Directors' Plan was amended
with the approval of Shareholders in 1999 to (i) increase the number of shares
of Common Stock authorized to be issued under the Directors' Plan from 50,000 to
100,000, and (ii) to increase the number of shares of Common Stock covered by
initial and annual grants to be made under the Directors' Plan from 2,500 to
3,000. The Directors' Plan was further amended with the approval of Shareholders
in 2003 to (i) provide for an increase in the number of shares of Common Stock
authorized to be issued under the Directors' Plan from 100,000 to 150,000, and
(ii) to increase the number of shares of Common Stock covered by initial and
annual grants to be made under the Directors' Plan from 3,000 to 3,500.
The purpose of the Directors' Plan is to promote the long-term financial
success of the Company and thereby increase Shareholder value by enabling the
Company to attract and retain outstanding Outside Directors whose judgment,
interest and special efforts are essential to the conduct of the Company's
operations. The proposed amendments to the Directors' Plan, which, if approved
by Shareholders, would result in a reduction in the size of the annual option
grant to Outside Directors and the addition of a restricted stock component to
the annual awards to Outside Directors, was designed in consultation with a
compensation consultant in an effort to update the manner in which Outside
Directors are compensated consistent with evolving market practices at
comparable companies. With respect to the proposed change to the exercise period
of stock options granted under the Directors' Plan, the Company believes that
the existing exercise period under the Plan forces outside Directors with longer
tenures on the Board of Directors to exercise stock options granted under the
Directors' Plan while the Outside Directors may wish to continue to hold the
options. As the exercise of a stock option granted under the Directors' Plan is
a taxable event to the outside Directors, the outside Directors typically sell
all or part of the shares acquired upon exercise thereof in order to pay the
taxes related to the exercise. Accordingly, the existing exercise period may
have the effect of reducing the Outside Directors financial interest in Common
Stock and, accordingly, works counter to the benefits that the Directors' Plan
seeks to promote. The proposed amendment to the Directors' Plan would permit
outside Directors to continue to hold options hereafter granted under the
Directors' Plan without exercising them during their term of service on the
Board of Directors and for one year after the end of their term of service. For
these reasons, the Company proposes the amendment to exercise period provision
of the Directors' Plan described above.
The following is a summary of the principal provisions of the Directors'
Plan, after giving effect to the proposed Amendment.
Under the Directors' Plan, each Director who is not an officer or employee
of the Company will be granted, effective as of the Outside Director's initial
election or appointment to the Board, an option to acquire
11
3,500 shares of Common Stock at the fair market value of a shares of Common
Stock on the date the option is granted, and will, effective as of the close of
each annual shareholders' meeting thereafter, be granted an option to acquire an
additional 2,000 shares of Common Stock at the fair market value of a share of
Common Stock on the date of grant and a number of shares of restricted stock
("Restricted Stock") equal to the annual fee paid to such Outside Director
multiplied by 0.8 and divided by the fair market value of a share of Common
Stock on the date of grant. Restricted Stock granted pursuant to the Directors'
Plan would vest one year following the date of grant if the Outside Director to
whom such grant was made is a member of the Board of Directors as of such date;
provided, however, that such Restricted Stock shall immediately vest upon any of
(i) such Outside Director's death or disability while he is serving on the Board
of Directors, and (ii) a Significant Corporate Event (as defined below). A
Director does not have taxable income at the time Restricted Stock is granted
(unless the Outside Director elects to be taxed at that time), but does have
taxable income at the time of vesting of the Restricted Stock in an amount equal
the fair market value of the Restricted Stock on the date of vesting.
The initial options for 3,500 shares of Common Stock are exercisable
beginning one year from the date of grant; options awarded annually thereafter
vest immediately. No options may be transferred other than by will or the laws
of descent and distribution. The exercise price of options granted under the
Directors' Plan may be paid in cash or, if permitted by the Board of Directors
or its authorized committee, by exchanging shares of Common Stock owned by the
optionee, or a combination of cash and shares. The value of shares exchanged in
full or partial payment of the exercise price will be based on the fair market
value of the shares at the time the option is exercised. The Company may
facilitate the cashless exercise of options through customary brokerage
arrangements.
Under the Directors' Plan, options terminate and cease to be exercisable on
the later of (i) the tenth anniversary of the date of the option's grant, or
(ii) one year following the date on which the Outside Director to whom such
option was granted ceases to serve as a director of the Company. In the event of
an outside Director's death during the exercise term of any option, the personal
representative of the Outside Director may exercise any outstanding options held
by such Outside Director not theretofore exercised during the one-year period
following the outside Director's death.
In the event of (i) the dissolution or liquidation of the Company, (ii) a
merger, reorganization or consolidation in which the Company is acquired by
another person or in which the Company is not the surviving corporation, or
(iii) the sale of all or substantially all of the outstanding Common Stock or
assets of the Company to another entity (each, a "Significant Corporate Event"),
the Directors' Plan and outstanding options will terminate unless provision is
made for the assumption of outstanding options or the substitution of new
options for outstanding options. In the event of such termination, any
unexercised portion of outstanding options which is vested and exercisable at
that time shall be exercisable for at least 15 days prior to the date of such
termination.
In the event of a stock dividend, stock split, merger, consolidation or
other change in the Company's capital structure, the maximum number of shares of
Common Stock available for issuance under the Directors' Plan and the number of
shares of Common Stock subject to outstanding options (together with the
respective exercise prices) will be appropriately adjusted.
A Director does not have taxable income at the time options are granted,
but does have taxable income at the time of exercise equal to the difference
between the purchase price of the shares and the fair market value of the shares
on the date of exercise. An equal amount may be claimed as a deduction by the
Company.
If a Director exercises an option by transferring shares of Company's
Common Stock to the Company to pay all or part of the purchase price, the
Director will not recognize gain or loss with respect to the already owned
shares exchanged. The number of shares of Common Stock received upon exercise of
the option equal to the number of shares exchanged will have a basis and holding
period equal to the basis and holding period the option holder had in the shares
exchanged. The fair market value of the additional shares received will be
includible in the Director's income upon exercise and the Director's basis in
such shares will equal such value. An equal amount may be claimed as a deduction
by the Company.
12
Only a Director who is not an officer or employee of the Company is
eligible to receive option and Restricted Stock grants under the Directors'
Plan. The approximate number of persons eligible to participate in the
Directors' Plan is four. As of April 2, 2004, the per share closing sale price
of Common Stock, as reported by the New York Stock Exchange, was $42.20. If all
of the nominees for election to the Board are elected and the Amendment is
approved by Shareholders, the option and Restricted Stock grants in 2004 under
the Directors' Plan will be as set forth below.
NEW PLAN BENEFITS
1995 OUTSIDE DIRECTORS STOCK OPTION PLAN, AS AMENDED
<Table>
<Caption>
NUMBER OF SHARES
OF COMMON STOCK NUMBER OF SHARES DOLLAR VALUE
DIRECTOR NAME UNDERLYING OPTION GRANTS OF RESTRICTED STOCK OF GRANT (1)(2)
------------- ------------------------ ------------------- ---------------
John E. Burns..................... 2,000 (2) $24,420
Michael A. Elia................... 2,000 (2) $24,420
Anthony P. Gammie................. 2,000 (2) $24,420
Charles E. Lannon................. 2,000 (2) $24,420
Non-Employee Directors as a
Group........................... 8,000 (2) $97,680
</Table>
- ---------------
(1) Using the Black-Scholes option valuation model, the Company estimates that
the fair value of options that will be granted under the Directors' Plan in
2004 will be $2.21 per share of Common Stock covered by the option. This
estimate was arrived at by using the following weighted average assumptions:
risk-free interest rate of 3.5%, dividend yield of 7%, and volatility factor
of the expected market price of the shares of Common Stock of .19. The
Black-Scholes model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable.
In addition, The Black-Scholes model requires the input of highly subjective
assumptions, including the expected stock price volatility. Because the
stock options granted under the Directors' Plan have characteristics that
are significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect the fair
value estimate, the Company cannot assure you that the Black-Scholes model
provides a reliable measure of the fair value of the options granted under
the Directors' Plan.
(2) The annual fee paid to each Outside Director in 2004 will be $25,000. The
number of shares of Restricted Stock granted to each Outside Director cannot
be determined as it will be equal to $25,000 multiplied by 0.8 (or $20,000)
divided by the fair market value of a share of Common Stock on the date of
grant. Accordingly, the value of the Restricted Stock granted to each
Outside Director, if the amendments to the Directors' Plan are approved by
Shareholders, would be $20,000.
Approval of the Amendment requires the affirmative vote of a majority of
the shares of Common Stock present and entitled to vote at the Annual Meeting,
provided that a majority of the outstanding shares of Common Stock vote on the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE 1995 OUTSIDE DIRECTORS' STOCK OPTION PLAN.
3. AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF SOVRAN SELF STORAGE, INC.
The Board of Directors has adopted a resolution recommending that
Shareholders consider and approve a proposal to amend the Deferred Compensation
Plan for Directors of Sovran Self Storage, Inc. (the "Deferred Compensation
Plan") in order to increase the number of shares available for issuance under
the Deferred Compensation Plan from 20,000 to 45,000 shares of Common Stock.
The Deferred Compensation Plan is intended to provide non-employee
Directors the opportunity to defer the receipt of their annual retainer fees and
fees for attendance at meetings of the Board of Directors and its committees and
to receive those deferred fees in the form of shares of Common Stock. All
non-employee
13
Directors (currently, four persons) will be eligible to participate in the
Deferred Compensation Plan. The maximum number of shares that may be issued
under the Plan currently is 20,000, subject to adjustment to reflect certain
changes in capitalization, such as stock splits, stock dividends or
recapitalizations. The full text of the Deferred Compensation Plan, as it is
proposed to be amended, is included as an appendix to this Proxy Statement, and
the following description of the material terms of the Deferred Compensation
Plan is qualified in its entirety by reference to the full text of the Deferred
Compensation Plan.
The Deferred Compensation Plan permits non-employee Directors to defer to a
later year receipt of all or a portion of their annual retainer and meeting fees
("Compensation") that otherwise would be includible in income for tax purposes
in the year in which it would have been paid. Under current tax laws, no income
will be recognized by a Director at the time of deferral. Upon payment, a
Director will recognize ordinary income in an amount equal to the sum of the
fair market value of the shares of Common Stock received and the cash received
for any fractional share. The Company will be entitled to a deduction equal to
the income recognized by the Director.
Under the Deferred Compensation Plan, non-employee Directors may defer all
or part of their Compensation otherwise payable in cash. Compensation which is
deferred will be credited to each Director's account under the Deferred
Compensation Plan ("Account") in the form of Units. The number of Units credited
will be determined by dividing the amount of Compensation deferred by the
closing price of Common Stock on the New York Stock Exchange (the "Stock Price")
on the immediately preceding day. When cash dividends are paid on Common Stock
the Director's Account will be credited with a number of Units determined by
multiplying the number of Units in the Account on the dividend record date by
the per-share dividend amount and then dividing the product by the Stock Price
on the dividend record date. In the case of stock dividends, the Director's
Account will be credited with a number of Units determined by multiplying the
number of Units in the Account by the stock dividend declared.
All amounts credited to a Director's Account will be paid to the Director
in the form of shares of Common Stock, the number of which shares will equal the
number of Units credited to the Director's Account. A Director may elect to
receive the shares in a lump sum on a date specified by the Director or in
quarterly or annual installments over a specified period and commencing on a
specified date. If a Director makes no election, shares will be distributed in a
lump sum within ten days of the cessation of the Director's services as a
Director. In the event of a Director's Disability (as defined in the Deferred
Compensation Plan) or death, all amounts credited to the Director's Account as
of the date of disability or death will be paid promptly in a lump sum to the
Director or to the beneficiary designated by the Director, or if none, to the
Director's estate.
If a Change In Control (as defined in the Deferred Compensation Plan)
occurs and a Director ceases to be a Director within two years thereafter, then
all amounts credited to the Director's Account as of such date of termination
will be paid promptly in a lump sum.
The Deferred Compensation Plan permits a Director, with the approval of the
Board of Directors, to withdraw, in the form of shares, amounts credited to the
Director's Account in the case of financial hardship in the nature of an
emergency. However, the amount withdrawn cannot exceed the amount reasonably
necessary to meet the financial hardship.
The Deferred Compensation Plan may be amended or terminated at any time by
the Board of Directors, but no amendment or termination shall affect amounts
previously credited to a Director's Account.
Only a Director who is not an officer or employee of the Company is
eligible to participate in the Deferred Compensation Plan. The approximate
number of persons eligible to participate in the Deferred Compensation Plan is
four. As of April 2, 2004, the per share closing sale price of Common Stock, as
reported by the New York Stock Exchange, was $42.20. Because the aggregate
benefits under the Deferred Compensation Plan are dependent upon the number of
outside Directors who elect to participate in the Deferred Compensation Plan,
the portion of their Compensation that participating Directors elect to defer
and the market price of Common Stock when deferred Compensation and dividends
are credited to their Accounts, it is not possible to predict what benefits will
be received under the Deferred Compensation Plan. The number of Units credited
to
14
Directors' Accounts in respect of deferral of Compensation for 2003 under the
Deferred Compensation Plan was as set forth below.
NEW PLAN BENEFITS
DEFERRED COMPENSATION PLAN FOR DIRECTORS, AS AMENDED
<Table>
<Caption>
NUMBER OF DOLLAR VALUE
DIRECTOR NAME UNITS OF GRANT (1)
- ------------- --------- ------------
John E. Burns............................................... 961.18 $0
Michael A. Elia............................................. 961.18 $0
Anthony P. Gammie........................................... 866.94 $0
Charles E. Lannon........................................... 678.48 $0
-------- --
Non-Employee Directors as a Group........................... 3,467.78 $0
</Table>
- ---------------
(1) As the amount of Compensation earned by a Director, and which the Director
elects to defer pursuant to the Deferred Compensation Plan, is converted at
into Units under the Deferred Compensation Plan determined by dividing the
amount of such Compensation by the Stock Price on the immediately preceding
day, the grant of Units to each Director is an exchange of Compensation
(that is otherwise immediately payable in cash) for Units at the market
price. Accordingly, although the Units granted have a value, the Company
cancels an obligation to the Directors having an equal value, so the grant
of Units involves no incremental outlay by the Company.
Approval of the Deferred Compensation Plan requires the affirmative vote of
a majority of the shares of Company's Common Stock present and entitled to vote
at the Annual Meeting, provided that a majority of the outstanding shares of
Common Stock vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE DEFERRED COMPENSATION PLAN FOR DIRECTORS.
4. APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the Shareholders, the Board of Directors has
reappointed Ernst & Young LLP as independent accountants to audit the financial
statements of the Company for the current fiscal year. Fees billed to the
Company for fiscal years 2003 and 2002 by Ernst & Young LLP were as follows:
<Table>
<Caption>
2003 2002
------- -------
Audit Fees.................................................. $68,000 $88,300
Audit-Related Fees.......................................... $15,260 $ 5,500
Tax Fees.................................................... $77,390 $74,260
All Other Fees.............................................. $ 0 $ 0
</Table>
The audit fees in 2002 include services related to the Company's issuance of
Series C Preferred Stock. The audit-related fees in 2003 include the audit of
the Company's 401(k) plan and consultations regarding various requirements of
the Sarbanes-Oxley Act of 2002.
The Audit Committee has adopted a policy that requires advance approval of
the Audit Committee for all audit, audit-related, tax services, and other
services to be provided by the independent auditor to the Company. The Audit
Committee has delegated to its Chairman authority to approve permitted services,
provided that the Chairman reports any decisions to the Audit Committee at its
next scheduled meeting.
Representatives of the firm of Ernst & Young LLP are expected to be present
at the Annual Meeting and will have an opportunity to make a statement if they
so desire and will be available to respond to appropriate questions.
15
THE AUDIT COMMITTEE AND BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
CORPORATE GOVERNANCE
Corporate Governance Guidelines. The Board of Directors adopted Corporate
Governance Principles to reflect recent changes in NYSE listing standards. These
principles require that a majority of directors on the Board of Directors meet
the criteria for independence defined by the NYSE. The Company already met this
independence standard, and the new rules did not necessitate changes to the
Board of Directors membership. From time to time, the Board of Directors may
revise the Corporate Governance Principles in response to changing regulatory
requirements, evolving best practices and the concerns of the Company's
shareholders and other constituencies. The Corporate Governance Guidelines are
published on the Company's web site at www.sovranss.com.
Code of Ethics and Code of Ethics for Senior Financial Officers. All of the
Company's employees, including the Company's Chief Executive Officer and other
senior executives, are required to comply with the Company's Code of Ethics to
help ensure that the Company's business is conducted in accordance with the
highest standards of moral and ethical behavior. The Board of Directors recently
adopted a Code of Ethics for Senior Financial Officers applicable to the
Company's principal executive officer, principal financial officer and principal
accounting officer and controller, each of whom is bound by the provisions set
forth in the Code of Ethics relating to ethical conduct, conflicts of interest
and compliance with the law. The Code of Ethics and Code of Ethics for Senior
Financial Officers are published on the Company's web site at www.sovranss.com.
Complaint Procedure; Communications with Directors. The Sarbanes-Oxley Act
of 2002 requires companies to maintain procedures to receive, retain and treat
complaints received regarding accounting, internal accounting controls or
auditing matters and to allow for the confidential and anonymous submission by
employees of concerns regarding questionable accounting or auditing matters. The
Company currently has such procedures in place. Any employee of the Company may
report concerns regarding these matters in the manner specified in the Company's
Employee Complaint Procedures for Accounting and Auditing Matters, which is
published on the Company's web site at www.sovranss.com.
The Board of Directors has also established a process for shareholders to
send communications to the independent directors serving on the Board of
Directors. Shareholders may communicate with the Board of Directors by calling
(716) 633-1850 ext. 116 or by writing to Company's Secretary. Communications
sent to the Company addressed to the Board of Directors by these methods will be
screened by the Secretary for appropriateness before either forwarding or
notifying the independent director of receipt of a communication.
PROPOSALS OF SHAREHOLDERS FOR THE 2005 ANNUAL MEETING
To be considered for inclusion in the proxy materials for the 2005 Annual
Meeting of Shareholders, Shareholder proposals must be received by the Secretary
of the Company, 6467 Main Street, Buffalo, New York 14221, no later than
December 9, 2004.
The Company's By-Laws set forth the procedure to be followed by a
Shareholder who wishes to recommend one or more persons for nomination to the
Board of Directors or present a proposal at an Annual Meeting (other than a
proposal submitted for inclusion in the Company's proxy materials). Only a
Shareholder of record entitled to vote at an Annual Meeting may present a
proposal and must give timely written notice thereof to the Secretary of the
Company at the address noted above. Generally, such notice must be received by
the Company not less than 75 days nor more than 180 days prior to the
anniversary date of the immediately preceding Annual Meeting. However, if such
meeting is called for a date more than seven days prior to the anniversary date,
then the notice must be received not later than the close of business on (i) the
20th day following the earlier of (a) the date on which notice of the date of
the meeting was mailed to Shareholders or (b) the date on which the date of such
meeting was publicly disclosed, or (ii) if the date of notice or public
disclosure occurs more than 75 days prior to the scheduled date of the meeting,
then the later
16
of (a) the 20th day following the first to occur of such notice or public
disclosure or (b) the 75th day prior to the scheduled date of the meeting.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors of the Company did not contemplate or expect that any business other
than that pertaining to the subjects referred to in this Proxy Statement would
be brought up for action at the meeting, but in the event that other business
calling for a Shareholders' vote does properly come before the meeting, the
Proxies will vote thereon according to their best judgment in the interest of
the Company.
By Order of the Board of Directors,
DAVID L. ROGERS
Secretary
April 8, 2004
17
ANNEX A
SOVRAN SELF STORAGE, INC.
AUDIT COMMITTEE CHARTER
I. Organization.
This charter governs the operations of the audit committee (the
"Committee") of the Board (the "Board") of Sovran Self Storage, Inc. ("Sovran").
The Committee shall review and reassess this charter at least annually and
obtain the approval of the Board. The Committee shall be members of, and
appointed by, the Board and shall comprise at least three directors, each of
whom are independent of management and Sovran. Members of the Committee shall be
considered independent as long as they do not accept any consulting, advisory,
or other compensatory fee from Sovran and are not an affiliated person of Sovran
or its subsidiaries, and meet the independence requirements of the New York
Stock Exchange. All Committee members shall be financially literate, and at
least one member shall be an "audit committee financial expert," as defined by
regulations of the Securities and Exchange Commission (the "SEC").
II. Purpose.
The Committee shall provide assistance to the Board in fulfilling their
oversight responsibility to the shareholders, potential shareholders, the
investment community, and others relating to the following matters: the
integrity of Sovran's financial statements; the financial reporting process; the
systems of internal accounting and financial controls; the performance of
Sovran's internal audit function and independent auditors; the independent
auditor's qualifications and independence; and Sovran's compliance with ethics
policies and legal and regulatory requirements. In so doing, it is the
responsibility of the Committee to maintain free and open communication between
the Committee, independent auditors, the internal auditors, and management of
Sovran.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of Sovran and the authority to engage
independent counsel and other advisers as it determines necessary to carry out
its duties.
III. Duties and Responsibilities.
The primary responsibility of the Committee is to oversee Sovran's
financial reporting process on behalf of the board and report the results of
their activities to the board. While the Committee has the responsibilities and
powers set forth in this charter, it is not the duty of the audit committee to
plan or conduct audits or to determine that Sovran's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. Management is responsible for the preparation, presentation, and
integrity of Sovran's financial statements and for the appropriateness of the
accounting principles and reporting policies that are used by Sovran. The
independent auditors are responsible for auditing Sovran's financial statements
and for reviewing Sovran's unaudited interim financial statements.
The Committee, in carrying out its responsibilities, believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and circumstances. The Committee should take appropriate actions to
set the overall corporate "tone" for quality financial reporting, sound business
risk practices, and ethical behavior. The following shall be the principal
duties and responsibilities of the audit committee. These are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
The Committee shall be directly responsible for the appointment, retention,
and termination of the independent auditors (subject, if applicable, to
shareholder ratification), and the independent auditors must report directly to
the audit committee. The Committee also shall be directly responsible for the
oversight of the work of the independent auditors, including resolution of
disagreements between management and the auditor regarding financial reporting.
The Committee shall pre-approve all audit and non-audit services
18
provided by the independent auditors and shall not engage the independent
auditors to perform the specific non-audit services proscribed by law or
regulation. The Committee may delegate pre-approval authority to a member of the
audit committee. The decisions of any Committee member to whom pre-approval
authority is delegated must be presented to the full Committee at its next
scheduled meeting.
At least annually, the Committee shall obtain and review a report by the
independent auditors describing the following:
- The firm's internal quality control procedures;
- Any material issues raised by the most recent internal quality control
review, or peer review, of the firm, or by any inquiry or investigation
by governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the firm,
and any steps taken to deal with any such issues; and
- All relationships between the independent auditor and Sovran (to assess
the auditor's independence).
In addition, the Committee shall set clear hiring policies for employees or
former employees of the independent auditors that meet the SEC regulations and
stock exchange listing standards.
The Committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits, including the
adequacy of staffing and compensation. Also, the Committee shall discuss with
management, the internal auditors, and the independent auditors the adequacy and
effectiveness of the accounting and financial controls, including Sovran's
policies and procedures to assess, monitor, and manage business risk, and legal
and ethical compliance programs (e.g., Sovran's Code of Conduct).
The Committee shall meet separately periodically with management, the
internal auditors, and the independent auditors to discuss issues and concerns
warranting committee attention. The Committee shall provide sufficient
opportunity for the internal auditors and the independent auditors to meet
privately with the members of the Committee. The Committee shall review with the
independent auditor any audit problems or difficulties and management's
response.
The Committee shall receive a report from the independent auditor, prior to
the filing of its audit report with the SEC, on all critical accounting policies
and practices of Sovran, all material alternative treatments of financial
information within generally accepted accounting principles that have been
discussed with management, including the ramifications of the use of such
alternative treatments and disclosures and the treatment preferred by the
independent auditor, and other material written communications between the
independent auditor and management.
The Committee shall review management's assertion on its assessment of the
effectiveness of internal controls as of the end of the most recent fiscal year
and the independent auditors' report on management's assertion.
The Committee shall review and discuss earnings press releases, as well as
financial information and earnings guidance provided to analysts and rating
agencies.
The Committee shall review the interim financial statements and disclosures
under Management's Discussion and Analysis of Financial Condition and Results of
Operations with management and the independent auditors prior to the filing of
Sovran's Quarterly Report on Form 10-Q. Also, the Committee shall discuss the
results of the quarterly review and any other matters required to be
communicated to the Committee by the independent auditors under generally
accepted auditing standards.
The Committee shall review with management and the independent auditors the
financial statements and disclosures under Management's Discussion and Analysis
of Financial Condition and Results of Operations to be included in Sovran's
Annual Report on Form 10-K (or the annual report to shareholders if distributed
prior to the filing of Form 10-K), including their judgment about the quality,
not just the acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the financial
statements. Also, the Committee shall discuss the results of the annual audit
and any other matters
19
required to be communicated to the Committee by the independent auditors under
generally accepted auditing standards.
The Committee shall establish procedures for the receipt, retention, and
treatment of complaints received by the issuer regarding accounting, internal
accounting controls, or auditing matters, and the confidential, anonymous
submission by employees of the issuer of concerns regarding questionable
accounting or auditing matters.
The Committee shall receive corporate attorneys' reports of evidence of a
material violation of securities laws or breaches of fiduciary duty.
The Committee also prepares its report to be included in Sovran's annual
proxy statement, as required by SEC regulations.
The Committee shall perform an evaluation of its performance at least
annually to determine whether it is functioning effectively.
20
SOVRAN SELF STORAGE, INC.
1995 OUTSIDE DIRECTORS' STOCK OPTION PLAN
SECTION 1.
PURPOSE
1.1 The purpose of the "SOVRAN SELF STORAGE, INC. 1995 OUTSIDE DIRECTORS'
STOCK OPTION PLAN" (the "Plan") is to foster and promote the long-term financial
success of the Company and materially increase stockholder value by enabling the
Company to attract and retain the services of outstanding Outside Directors (as
defined herein) whose judgment, interest, and special effort is essential to the
successful conduct of its operations.
SECTION 2.
DEFINITIONS
2.1 "Annual Award" means an Option for 2,000 shares of Stock and a number
of shares of Restricted Stock equal to the base annual fee paid by the Company
to each Outside Director multiplied by 0.8 and divided by the Fair Market Value
on the date of the Annual Award.
2.2 "Awards" means Annual Awards and Initial Awards.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Company" means Sovran Self Storage, Inc., a Maryland corporation, and
any successor thereto.
2.5 "Disability" means total disability, which if the Outside Director were
an employee of the Company, would be treated as a total disability under the
terms of the Company's long-term disability plan for employees, as in effect
from time to time.
2.6 "Fair Market Value" on any date means the average of the high and low
sales prices of a share of Stock as reflected in the report of consolidated
trading of New York Stock Exchange-listed securities (or, if the Stock is not
then listed on the New York Stock Exchange ("NYSE"), the principal public
trading market for such shares) for that date (or if no shares of Stock were
traded on the NYSE or such other principal public trading market on that date,
the next preceding date that shares of Stock were so traded) published in the
Midwest Edition of The Wall Street Journal; provided, however, that if no shares
of Stock have been publicly traded for more than ten (10) days immediately
preceding such date, then the Fair Market Value of a share of Stock shall be
determined by the Board or its authorized Committee in such manner as it may
deem appropriate.
2.7 "Initial Award" means an Option for 3,500 shares of Stock.
2.8 "Option" means the right to purchase Stock at a stated price for a
specified period of time. All Options granted under the Plan shall be
non-statutory options not entitled to special tax treatment under Section 422 of
the Internal Revenue Code, as amended.
2.9 "Outside Director" means each person who, on the date of an Initial
Award or as of the close of the day on which an Annual Award is granted, is a
director of the Company and who, as of such day, is not otherwise an officer or
employee of the Company or any of its subsidiaries.
2.10 "Restricted Stock" means Stock granted to an Outside Director pursuant
to an Annual Award under the Plan.
2.10 "Stock" means the common stock of the Company, $.01 par value per
share.
21
SECTION 3.
ELIGIBILITY AND PARTICIPATION
Each Outside Director shall participate in the Plan.
SECTION 4.
STOCK SUBJECT TO PLAN
4.1 Number. The total number of shares of Stock subject to Awards under the
Plan may not exceed 150,000 shares, subject to adjustment pursuant to Section
4.3. The shares to be delivered under the Plan may consist, in whole or in part,
of treasury Stock or authorized but unissued Stock, not reserved for any other
purpose.
4.2 Canceled or Terminated Awards. Any shares of Stock subject to an Option
or a grant of Restricted Stock that for any reason is canceled or terminated
without the issuance of Stock or does not vest shall again be available for
Awards under the Plan. Any shares of Restricted Stock granted pursuant to an
Annual Award under this Plan that do not vest shall be automatically cancelled
and shall again be available for Awards under the Plan.
4.3 Adjustment in Capitalization. In the event of any Stock dividend or
Stock split, recapitalization (including, without limitation, the payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of shares, or other similar
corporate change in which the Company survives the transaction, the aggregate
number of shares of Stock available for issuance hereunder or subject to Options
and the respective exercise prices of outstanding Options shall be appropriately
adjusted by the Board or its authorized Committee, whose determination shall be
conclusive; provided, however, that any fractional shares resulting from any
such adjustment shall be disregarded.
SECTION 5.
STOCK OPTIONS AND RESTRICTED STOCK
5.1 Grant of Options and Restricted Stock.
(a) Initial Awards. Effective on the later of the date of the
completion of the initial public offering of shares of Stock or the date
the Outside Director is first elected or appointed to the Board, each
Outside Director who has not previously been granted an Initial Award shall
be granted an Initial Award.
(b) Annual Awards. Thereafter, effective as of the close of each
annual meeting of the stockholders of the Company, each Outside Director
shall be granted an Annual Award.
(c) Option Agreement; Restricted Stock Agreement. Each Option shall be
evidenced by an Option agreement that shall specify the exercise price, the
term of the Option, the number of shares of Stock to which the Option
pertains and such other matters, not inconsistent herewith, as the
Committee deems necessary or appropriate. Each grant of Restricted Stock
shall be evidenced by an Restricted Stock agreement that shall specify the
number of shares of Restricted Stock to which the grant pertains and such
other matters, not inconsistent herewith, as the Committee deems necessary
or appropriate.
(d) Limitations. All grants of Options and Restricted Stock under the
Plan shall be subject to the availability of shares hereunder, and no
Option or Restricted Stock shall be granted under the Plan to the extent
necessary to prevent Outside Directors serving as the administrators of any
of the Company's other stock option or employee benefit plans from failing
to qualify as "disinterested persons" under Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3").
5.2 Option Price. Each Option granted pursuant to the Plan shall have an
exercise price equal to the Fair Market Value of a share of Stock on the date
the Option is granted.
22
5.3 Vesting and Exercise of Options; Vesting of Restricted Stock.
(a) Initial Awards. Options granted pursuant to an Initial Award under
this Plan shall vest and become exercisable on the first anniversary of the
date of grant.
(b) Annual Awards. Options granted pursuant to an Annual Award under
this Plan shall be immediately vested and exercisable on the date of grant.
Restricted Stock granted pursuant to an Annual Award under this Plan shall
vest one year following the date of grant if the Outside Director to whom
such grant was made is a member of the Board as of such date; provided,
however, that such Restricted Stock shall immediately vest upon any of (i)
such Outside Director's death or disability while he is serving on the
Board, and (ii) a Significant Corporate Event.
(c) Exercise Period. Options hereafter granted under the Plan shall
terminate and cease to be exercisable on the later of (i) the tenth
anniversary of the date of the Option's grant, or (ii) one year following
the date on which the Outside Director to whom such Option was granted
ceases to serve as a director of the Company. In the event of an Outside
Director's death during the exercise period of any Option, the personal
representative of the Outside Director may exercise any outstanding Options
held by such Outside Director not theretofore exercised during the one-year
period following such Outside Director's death.
5.4 Services as an Employee. Notwithstanding any other provision of the
Plan, if an Outside Director becomes an employee of the Company or any of its
subsidiaries (a "Former Outside Director"), the Former Outside Director shall be
treated as continuing in service for purposes of this Plan, but shall not be
eligible to receive Annual Awards while an employee or for one full year
thereafter. If during this period of ineligibility the Former Outside Director
ceases to be an employee, the provisions of Section 5.3(c) shall continue to be
applicable.
5.5 Exercise. Options may be exercised, in whole or in part and only to the
extent then exercisable, by giving written notice of exercise to the Company
accompanied by full payment of the Option price by one or more of the following
methods of payment:
(a) In cash, by certified or bank check or other instrument acceptable
to the Board or its authorized committee;
(b) In the form of shares of Stock that are not then subject to
restrictions under any Company plan, if permitted by the Board or its
authorized committee, in its discretion. Such surrendered shares shall be
valued at Fair Market Value on the date of exercise; or
(c) By the Outside Director delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the Option price; provided that in the event the
Outside Director chooses to pay the Option price as so provided, the
Outside Director and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the Company shall
prescribe as a condition of such payment procedure. Payment instruments
will be received subject to collection.
SECTION 6.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Plan shall be administered in accordance with Rule 16b-3 by the Board
or an authorized committee thereof (in which case all references to the Board
shall refer to such committee while such committee administers this Plan), which
shall make any determination under or interpretation of any provision of the
Plan and any Option or Restricted Stock grant. Any of the foregoing actions
taken by the Board shall be final and conclusive. The Board may terminate or
suspend the Plan, and may amend and make such changes in and additions to the
Plan (and, with the consent of the applicable Outside Director, any outstanding
Option or Restricted Stock grant) as it may deem proper and in the best interest
of the Company; provided, however,
23
that no such action shall adversely affect or impair any Options or Restricted
Stock theretofore granted under the Plan without the consent of the applicable
Outside Director; and provided further, however, that no amendment (i)
increasing the maximum number of shares of Stock which may be issued under the
Plan, except as provided in Section 4.3, (ii) extending the term of the Plan or
any Option, (iii) changing the requirements as to eligibility for participation
in the Plan, or (iv) otherwise requiring approval of stockholders under Rule
16b-3, shall be adopted without the approval of stockholders. Notwithstanding
anything to the contrary herein, the Plan shall not be amended more than once in
every six month period, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder.
SECTION 7.
EFFECT OF CERTAIN TRANSACTIONS
In the case of (a) the dissolution or liquidation of the Company, (b) a
merger, reorganization or consolidation in which the Company is acquired by
another person or in which the Company is not the surviving corporation, or (c)
the sale of all or substantially all of the outstanding Stock or assets of the
Company to another entity (each such event, a "Significant Corporate Event"),
the Plan and Options issued hereunder shall terminate on the effective date of
such dissolution, liquidation, merger, reorganization, consolidation or sale,
unless provision is made in such transaction for the assumption of Options
theretofore granted under the Plan or the substitution for such Options of a new
stock option of the successor corporation or a parent or subsidiary thereof,
with appropriate adjustment as to the number and kind of shares and the per
share exercise price, such as provided in Section 4.3 of the Plan. In the event
of any transaction which will trigger such termination, the Company shall give
written notice thereof to the Outside Directors at least twenty days prior to
the effective date of such transaction or the record date on which stockholders
of the Company entitled to participate in such transaction shall be determined,
whichever comes first. In the event of such termination, any unexercised portion
of outstanding Options, which is vested and exercisable at that time, shall be
exercisable for at least 15 days prior to the date of such termination;
provided, however, that in no event shall any Option be exercisable after the
applicable expiration date for the Option.
SECTION 8.
MISCELLANEOUS PROVISIONS
8.1 Nontransferability of Awards. No Options may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. All rights with respect to Options
granted to an Outside Director shall be exercisable during his lifetime only by
him.
8.2 Rights As A Stockholder. An Outside Director or a transferee of an
Option shall not have any rights as a stockholder with respect to any shares of
Stock issuable upon exercise of an Option until the date of the receipt of
payment by the Company. No adjustments pursuant to Section 4.3 shall be made as
to any Option for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is after such date.
8.3 No Guarantee of Membership. Nothing in the Plan shall confer upon an
Outside Director the right to remain a member of the Board.
8.4 Requirements of Law. The granting and issuance of Restricted Stock, the
granting of Options and the issuance of shares of Stock upon the exercise of
Options shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental or self-regulatory or other agencies as may
be required.
8.5 Term of Plan. The Plan shall be effective upon its approval by the
stockholders of the Company. The Plan shall continue in effect, unless sooner
terminated or suspended pursuant to Section 6, until the tenth anniversary of
the date on which it is approved by the stockholders of the Company, so long as
the total number of shares of Stock purchased or granted under the Plan or
subject to outstanding Options does not
24
exceed the number of shares of Stock specified in Section 4.1, subject to
adjustment pursuant to Section 4.3. Notwithstanding the foregoing, each Option
granted under the Plan shall remain in effect until such Option has been
exercised or has terminated in accordance with its terms and the terms of the
Plan.
8.6 Separability. In case any provision of the Plan shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.7 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of New York.
25
DEFERRED COMPENSATION PLAN FOR DIRECTORS
1. Purpose and Eligibility
Sovran Self Storage, Inc. (the "Corporation") hereby establishes the
Deferred Compensation Plan for Directors (the "Plan") the purpose of which is to
provide Directors of the Corporation who are not employees of the Corporation
the opportunity to defer to a future date the receipt of their annual retainer
fees and fees for attendance at Board and Committee meetings ("Compensation").
Nothing contained in this Plan shall be deemed to constitute an employment
contract or agreement between the Directors and the Corporation.
2. Election
A Director may at any time elect to defer receipt of all or a portion of
Compensation not yet earned. For 1999, an election shall be made by May 25,
1999. For new Directors, an election for the first year of service shall be made
within fifteen (15) days of becoming a Director. For each subsequent year, an
election must be made prior to the start of the year for which the election is
to be applicable. Such election shall be in writing, shall specify the method of
payment of deferred amounts in accordance with Paragraph 5, and shall continue
until amended or terminated by written notice delivered to the Corporation. Such
notice of amendment or termination shall not affect previously deferred
Compensation.
3. Shares Subject to Plan
(a) Subject to adjustment as provided in subparagraph (b), the number of
shares of the Corporation's common stock (the "Stock") reserved for issuance
pursuant to Paragraph 5 of the Plan is 45,000 shares. Stock issued under the
Plan may consist, in whole or in part, of authorized and unissued shares or
treasury shares.
(b) The number of shares of Stock reserved for issuance under the Plan
shall be appropriately adjusted to take into account any changes in the number
of outstanding shares of Stock resulting from split-ups or combinations of
shares or recapitalizations.
4. Maintenance of Deferred Account
(a) Compensation which is deferred shall be credited, in accordance with
each Director's election, to his or her account ("Account") as of the date on
which current payment otherwise would have been made (the "Payment Date") based
on the value of the Stock; the number of Units credited from time to time to
each Account shall be:
- With Respect to Compensation Deferred: The number obtained by dividing
the amount of Compensation otherwise payable on the Payment Date by 100%
of the closing price of the Stock on the New York Stock Exchange (such
closing price being the "Stock Price") on the immediately preceding
business day;
- With Respect to Cash Dividends: The number obtained by multiplying the
number of Units in the Account by any cash dividends declared by the
Corporation on the Stock and dividing the product by 100% of the Stock
Price on the related dividend record date; and
- With Respect to Stock Dividends: The number obtained by multiplying the
number of Units in the Account by the stock dividend declared.
(b) The number of Units credited to each Account shall be appropriately
adjusted to take into account any changes in the number of outstanding shares of
Stock resulting from split-ups or combinations of shares or recapitalizations.
(c) The Plan is intended to constitute an "unfunded" plan for deferred
compensation. The establishment of or allocation to Accounts shall not vest in
any participant any right, title or interest in or to any specific assets of the
Corporation nor shall the Corporation be required to purchase any Stock.
However, in the event the Corporation should purchase such Stock, it shall not
be required to exercise any option or right with respect to such Stock, or if it
wishes to exercise any option or right under such Stock, it shall not be
required to exercise such option or right in any particular manner. With respect
to the Corporation's obligations under the Plan, the participant shall have no
rights that are greater than those of a general creditor of the Corporation.
26
(d) Within forty-five (45) days after the end of a calendar year, the
Corporation shall provide each Director who is participating in the Plan with a
statement listing the balance of such Director's Account as of the end of the
year.
5. PAYMENT OF DEFERRED AMOUNTS
(a) All amounts credited to an Account shall be paid to the Director in
shares of Stock (other than cash in lieu of fractional shares) either:
(i) in a lump sum on a date specified by the Director on his election
form and in a number of shares equal to the number of Units then credited
to the Director's Account, or
(ii) in quarterly or annual installments over such period and
commencing at such time as the Director shall have elected, on his or her
election form, each installment being equal to a number of shares equal to
the number of Units then credited to the Director's Account divided by the
number of installments remaining to be paid; or
(iii) in a lump sum within ten (10) business days of the termination
of the Director's service as a director if the Director has not elected a
different payment date on his election form and in number of shares equal
to the number of Units then credited to the Director's Account.
(b) In the event of a Director's death or Disability (as defined below),
all amounts credited to his or her Account as of his or her date of death or
Disability shall be paid promptly in a lump sum, in shares of Stock equal to the
number of Units as of such date, to the Beneficiary designated on the Director's
election form or, if none, to his estate. "Disability" means the inability, due
to illness or injury, to engage in any gainful occupation for which the
individual is suited by education, training or experience, which condition
continues for at least six (6) months.
(c) If a Change in Control occurs and the participant ceases to be a
Director (other than by reason of death, Disability, retirement or Termination
for Cause) within two years thereafter, then upon the date of any such
occurrence, all amounts credited to the participant's Account as of such date
shall be paid promptly in a lump sum, in shares of Stock equal to the number of
Units as of such date, to the Director. A "Change in Control" shall occur if (i)
any person, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, shall become the beneficial owner of shares of the Company
with respect to which 20% or more of the total number of votes for the election
of the Board of Directors of the Company may be cast; (ii) as a result of, or in
connection with, any cash tender offer, exchange offer, merger or other business
combination, sale of assets or contested election or combination of the
foregoing, the persons who were prior to the institution thereof directors of
the Company shall cease to constitute a majority of the Board of Directors of
the Company; and (iii) stockholders of the Company shall approve an agreement
pursuant to which the Company will cease to be an independent publicly owned
corporation or for a sale or other disposition of all or substantially all of
the assets of the Company. "Termination for Cause" means termination which is
effected by reason of fraud, deceit, or other gross misconduct by the Director
performed within the scope of his duties as Director.
(d) Upon approval of the Board of Directors, a Director participating in
the Plan may withdraw all or a portion of the balance of Units in such
Director's Account, in shares of Stock equal to the number of Units withdrawn,
in the case of financial hardship in the nature of an emergency; provided
however that the amount of such withdrawal cannot exceed the amount reasonably
necessary to meet the financial hardship. The Board of Directors shall have the
sole discretion to determine the circumstances under which such withdrawals are
permitted.
6. Non-Assignment
(a) No right to receive payments under this Plan shall be transferable or
assignable by a Director except by will or in accordance with the laws of
descent and distribution. All amounts of Compensation deferred under this Plan,
all property and rights which may be purchased by the Corporation with such
amounts and all income attributable to such amounts, property and rights shall
remain the sole property and rights of the
27
Corporation (without being restricted to the provision of benefits under this
Plan) subject only to the claims of the Corporation's general creditors.
(b) No modification of the time or manner of payment under the Plan shall
be authorized if and to the extent that such authorization or the making of such
modification would constitute "constructive receipt" on the part of a
participant of amounts credited to his or her Account under the federal income
tax laws.
7. Effective Date and Termination
This Plan shall be effective with respect to any compensation earned by a
Director on and after May 25, 1999 and may be amended or terminated at any time
by resolution of the Board, but no amendment or termination shall affect amounts
previously credited to a Director's Account.
28
ANNUAL MEETING OF SHAREHOLDERS OF
SOVRAN SELF STORAGE, INC.
MAY 13, 2004
------------------------------
PROXY VOTING INSTRUCTIONS
------------------------------
<Table>
<Caption>
MAIL - Date, sign and mail your proxy card in the
envelope provided as soon as possible.
- OR -
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) -----------------------------
from any touch-tone telephone and follow the instructions. COMPANY NUMBER
Have your proxy card available when you call. -----------------------------
- OR - ACCOUNT NUMBER
INTERNET - Access "WWW.VOTEPROXY.COM" and follow the on-screen -----------------------------
instructions. Have your proxy card available when you access
the web page. -----------------------------
Please detach along perforated line and mail in the envelope provided IF you
are not voting via telephone or the Internet
- --------------------------------------------------------------------------------
THE DIRECTORS RECOMMEND A VOTE FOR ELECTION OF ALL NOMINEES AND FOR
PROPOSALS 2, 3 AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
- --------------------------------------------------------------------------------
<Table>
<Caption>
FOR AGAINST ABSTAIN
1. Election of Directors 2. Approval of Amendments to the 1995 Outside Directors' [ ] [ ] [ ]
Stock Option Plan.
NOMINEES: 3. Approval of Amendment to the Deferred Compensation Plan [ ] [ ] [ ]
[ ] FOR ALL NOMINEES O Robert J. Attea for Directors.
O Kenneth F. Myszka
[ ] WITHHOLD AUTHORITY O John E. Burns 4. Ratification of the appointment of Ernst & Young LLP as [ ] [ ] [ ]
FOR ALL NOMINEES O Michael A. Elia independent auditors for fiscal year 2004.
O Anthony P. Gammie
[ ] FOR ALL EXCEPT O Charles E. Lannon 5. In their discretion, the proxies are authorized to vote upon any other
(See instructions below) matters of business which may properly come before the meeting and any
adjournment(s) thereof.
INSTRUCTION: To withhold authority to vote for THE PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the PLEASE MARK, SIGN, DATE & RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
circle next to each nominee you
wish to withhold, as shown here: [X] TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE HEREOF.
- --------------------------------------------------
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING. [ ]
</Table>
- --------------------------------------------------
To change the address on your account, please
check the box at right and indicate your new
address in the address space above. Please note [ ]
that changes to the registered name(s) on the
account may not be submitted via this method.
- --------------------------------------------------
Signature of Shareholder ____________________ Date: _______________ Signature of Shareholder __________________ Date: ___________
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
ANNUAL MEETING OF SHAREHOLDERS OF
SOVRAN SELF STORAGE, INC.
MAY 13, 2004
Please date, sign and mail your proxy card in
the envelope provided as soon as possible.
Please detach along perforated line and mail in the envelope provided.
- --------------------------------------------------------------------------------
THE DIRECTORS RECOMMEND A VOTE FOR ELECTION OF ALL NOMINEES AND FOR
PROPOSALS 2, 3 AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
- --------------------------------------------------------------------------------
<Table>
<Caption>
FOR AGAINST ABSTAIN
1. Election of Directors 2. Approval of Amendments to the 1995 Outside Directors' [ ] [ ] [ ]
Stock Option Plan.
NOMINEES: 3. Approval of Amendment to the Deferred Compensation Plan [ ] [ ] [ ]
[ ] FOR ALL NOMINEES O Robert J. Attea for Directors.
O Kenneth F. Myszka
[ ] WITHHOLD AUTHORITY O John E. Burns 4. Ratification of the appointment of Ernst & Young LLP as [ ] [ ] [ ]
FOR ALL NOMINEES O Michael A. Elia independent auditors for fiscal year 2004.
O Anthony P. Gammie
[ ] FOR ALL EXCEPT O Charles E. Lannon 5. In their discretion, the proxies are authorized to vote upon any other
(See instructions below) matters of business which may properly come before the meeting and any
adjournment(s) thereof.
INSTRUCTION: To withhold authority to vote for THE PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the PLEASE MARK, SIGN, DATE & RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
circle next to each nominee you
wish to withhold, as shown here: [X] TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE SIDE HEREOF.
- --------------------------------------------------
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE MEETING. [ ]
</Table>
- --------------------------------------------------
To change the address on your account, please
check the box at right and indicate your new
address in the address space above. Please note [ ]
that changes to the registered name(s) on the
account may not be submitted via this method.
- --------------------------------------------------
Signature of Shareholder ____________________ Date: _______________ Signature of Shareholder __________________ Date: ___________
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
SOVRAN SELF STORAGE, INC.
SOLICITED BY THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS - MAY 13, 2004
Robert J. Attea, Kenneth F. Myszka and David L. Rogers, and each of them
with full power of substitution, are hereby appointed proxies to vote all shares
(unless a lesser number is specified on the other side) of the stock of Sovran
Self Storage, Inc. that are held of record by the undersigned on April 2, 2004
at the Annual Meeting of Shareholders of Sovran Self Storage, Inc., to be held
at The Courtyard by Marriott, 4100 Sheridan Drive, Williamsville, New York, on
May 13, 2004 at 11:00 a.m., local time, and any adjournments thereof, with all
powers the undersigned would possess if personally present, for the election of
directors, on each of the other matters described in the Proxy Statement and
otherwise in their discretion.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDERS. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR PROPOSALS
1, 2, 3 AND 4.
PLEASE RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
COMMENTS:
- --------------------------------------------------------------------------------