Exhibit 8
SECOND AMENDMENT TO STRATEGIC ALLIANCE AGREEMENT
THIS SECOND AMENDMENT TO STRATEGIC ALLIANCE AGREEMENT (the
"Amendment"), dated as of November 20, 1997, is made by and
among Storage USA, Inc., a Tennessee corporation (the "Com-
pany"), SUSA Partnership, L.P., a Tennessee limited partnership
(the "Operating Partnership"), Security Capital U.S. Realty, a
Luxembourg corporation ("USREALTY"), and Security Capital Hold-
ings S.A., a Luxembourg corporation and a wholly owned subsid-
iary of USREALTY ("Buyer") for the purpose of amending certain
provisions of the Strategic Alliance Agreement, dated as of
March 19, 1996, and amended on June 19, 1996, by and among the
Company, the Operating Partnership and USRealty and Buyer (the
"Agreement"). Capitalized terms not otherwise defined herein
shall have the meaning ascribed to them in the Agreement.
RECITAL
WHEREAS, the Company and Buyer believe that the amendments
contemplated hereby will permit Buyer to benefit from an
increased investment in the Company and will provide the
Company with increased flexibility to pursue its growth and
operating strategies;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein and for good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
Section 1. Advice of Actions. Section 3.2 of the
Agreement shall be amended and restated in its entirety as fol-
lows:
Section 3.2 Advice of Actions. Until the 20% Termi-
nation Date, if any, without first having consulted
with the representative of Investor designated by
Investor pursuant to this Section 3.2, the Company
will not seek approval by the Board of any proposal,
or enter into any definitive agreement, relating to:
a) the acquisition in a single transaction or
group of related transactions, whether by
merger, consolidation, purchase of stock or as-
sets or other business combination, of any busi-
ness or assets having a value in excess of
$25,000,000;
b) the sale or disposal in a single transaction
or group of related transactions of any assets,
whether by merger, consolidation, sale of stock
or assets or other business combination having a
value in excess of $25,000,000;
c) the incurrence or issuance of indebtedness
in a single transaction or group of related
transactions, the entering into a guaranty, or
the engagement in any other financing arrange-
ment in excess of $150,000,000;
d) the annual operating budget for the Company;
e) a material change in the executive manage-
ment of the Company;
f) any new material agreements or arrangements
with any members of the executive management of
the Company; or
g) the issuance by the Company of capital stock
of the Company or of options, rights or warrants
or other commitments to purchase or securities
convertible into (or exchangeable or redeemable
for) shares of capital stock of the Company, the
issuance by the Operating Partnership of Operat-
ing Partnership Units, or the issuance by a Sub-
sidiary of any equity interest, other than (i)
to the Company or a wholly owned Subsidiary
thereof, (ii) to limited partners of the Operat-
ing Partnership upon redemptions of Operating
Partnership Units, (iii) to directors or employ-
ees of the Company or a Subsidiary in connection
with any employee benefit plan approved by the
shareholders of the Company and (iv) issuances
having a value less than $150,000,000.
Notwithstanding the foregoing, the Company shall
have no obligation to accept or comply with any
advice offered by Investor or its designated
representative in any consultation referred to
in this Section 3.2. The designated
representative of Investor, for purposes of this
Section 3.2, initially shall be Xxxxx Xxxx.
Investor shall provide the Company with ten
days' prior written notice of any replacement of
the designated representative.
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Section 2. Right to Participate. Section 4.2 of the
Agreement shall be amended to add the following subsection (f)
as follows:
(f) Notwithstanding any provision contained in
Section 4.2 to the contrary, the right of
Investor to participate granted pursuant to sub-
section (a) hereof shall be limited, in the case
of any issuance or sale of capital stock, to a
maximum participation percentage of 35% of the
securities to be issued or sold by the Company
or a Large Subsidiary in such issuance or sale.
Section 3. Standstill Period. Section 5.1 of the
Agreement shall be amended by deleting clause (x) of the intro-
duction to Section 5.1(a) and replacing it with the following:
(x) June 5, 2003, or
Section 4. Ownership Limitation. Section 5.2(a)(iii)
shall be amended and restated in its entirety as follows:
(iii) purchase or otherwise acquire shares of Com-
pany Stock (or options, rights or warrants or other
commitments to purchase and securities convertible
into (or exchangeable or redeemable for) shares of
Company Stock) as a result of which, after giving
effect to such purchase or acquisition, Investor and
its Affiliates will Beneficially Own more than 42.5%
of the outstanding shares of Company Common Stock, on
a fully diluted basis;
USRealty and Buyer agree that any violation or attempted
violation by USRealty, Buyer or any Affiliate thereof of the
Special Shareholder Limit (as defined in the Company Charter),
as modified pursuant to this Agreement, will result in, to the
extent necessary, the exchange of shares held by such Person
for Excess Shares (as defined in the Company Charter) in
accordance with Section 12.3 of Paragraph 12 of the Company
Charter.
Section 5. Waiver of Ownership Limitation. (a) Section
5.8 shall be amended and restated in its entirety as follows:
Section 5.8 Waiver of Ownership Limitation. Subject
to the provision of the third sentence of this Sec-
tion 5.8, the Company shall take all actions, includ-
ing by providing any necessary exemptions from or
amendments to (A) the ownership limitations contained
in Paragraph 12 of the Company Charter or (B) any
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agreement or instrument which governs ownership of
shares of Company stock by any person, necessary to
permit Investor to Beneficially Own up to and includ-
ing 42.5% of the outstanding shares of Company Common
Stock. If any third party shall be given the right
to Beneficially Own more than 42.5% of the outstand-
ing shares of Company Common Stock, the Company shall
take all actions (including by providing the forego-
ing exemptions and amendments) to waive any and all
restrictions on and limitations to Investor's owner-
ship of shares of Company Stock. From and after the
15% Termination Date, if any, the Company shall take
all actions, including by providing any necessary
exemptions from or amendments to (A) the ownership
limitations contained in Paragraph 12 of the Company
Charter or (B) any agreement or instrument which gov-
erns ownership of shares of Company Stock by any per-
son, necessary to permit Investor to Beneficially Own
up to and including 15% of the outstanding shares of
Company Common Stock, but shall not be required to
take any action to permit Investor to Beneficially
Own more than 15% of the outstanding shares of Com-
pany Common Stock. From and after the first date on
which Investor does not own at least 9.8% of the out-
standing shares of Company Common Stock, if any, the
Company shall take all actions, including by provid-
ing any necessary exemptions from or amendments to
(A) the ownership limitations contained in Paragraph
12 of the Company Charter or (B) any agreement or
instrument which governs ownership of shares of Com-
pany Stock by any person, necessary to permit Inves-
tor to Beneficially own up to and including 9.8% of
the outstanding shares of Company Common Stock, but
shall not be required to take any action to permit
Investor to Beneficially own more than 9.8% of the
outstanding shares of Company Common Stock. Notwith-
standing the foregoing, Investor or the Company may
at any time acquire Beneficial Ownership of the secu-
rities of such other party or its Affiliates to the
extent permitted by applicable law and the provisions
of the organizational documents of such party or its
Affiliates, as applicable, and other agreements from
time to time governing the ownership of such securi-
ties.
(b) The Company represents and warrants to USRealty and
Buyer that the Board of Directors of the Company has adopted
the resolution attached hereto as Exhibit A and has taken all
other action necessary pursuant to Section 12.12 of the Company
Charter to increase irrevocably and permanently (subject to any
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contrary provision of Section 5.8 of the Strategic Alliance
Agreement or Section 12.9 of the Company Charter) the Special
Shareholder Limit from 37.5% to 42.5% of the outstanding Shares
(as defined in the Company Charter) of the Company. Upon the
request of USRealty and Buyer, the Board of Directors will
authorize and recommend for approval (and shall not thereafter
withdraw or modify such recommendation) by the Shareholders of
the Company at the next annual meeting of shareholders an
amendment to Article 12 of the Company's Charter in a form
reasonably approved by USRealty and Buyer to change all
references therein from 37.5% to 42.5% and to make such other
amendments thereto as USRealty and Buyer reasonably may request
consistent with the increase in the Special Shareholder Limit
from 37.5% to 42.5%. The Company will further take action
reasonably calculated to put its shareholders and prospective
shareholders on notice of the modifications contemplated by
this Amendment.
(c) From and after the date hereof, Section 12.21 of the
Company Charter shall apply to the Special Shareholders (as
defined in the Company Charter) as if (a) the first sentence of
said Section 12.21 did not contain the parenthetical clause
"(other than a Special Shareholder)" and (b) such Section did
not contain the parenthetical assumptions "(determined assuming
that the Special Shareholders are Non-U.S. Persons and own a
percentage of the outstanding shares of capital stock of the
Corporation (by value) equal to 37.5%)" in the two places that
they appear, and, in lieu of such assumptions, required that
Section 12.21 be applied to the Special Shareholders by taking
in account the Special Shareholders' actual share ownership and
actual status under the definition of "Non-U.S. Person." The
preceding sentence shall not apply from and after the date on
which the Special Shareholder notifies the Corporation in writ-
ing that such sentence shall no longer have any force or ef-
fect.
Section 6. Limitation on Corporate Actions. Section 6.1
of the Agreement shall be amended to insert the following
subsection immediately after 6.1(b);
(c)(i) Notwithstanding the restrictions contained in
Section 6.1(a)(B) and Section 6.1(b)(i)(C) hereof,
the Company or the Operating Partnership shall be
permitted (subject to the other restrictions set
forth in this Agreement) to acquire or hold interests
in an entity that (w) owns a Self-Storage Facility or
Facilities in the United States, (x) is wholly-owned
directly or indirectly by the Company, (y) is not a
corporation and does not elect to be treated as an
association taxable as a corporation under Treasury
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Regulation Section 301.7701-3(2)(a) and (z) will be
disregarded as an entity separate from its owner for
federal income tax purposes (an "Entity"). Subject
to Section 6.1(c)(ii), Self-Storage Facilities that
are actively managed by employees of the Operating
Partnership or an Entity owned by the Company or the
Operating Partnership in the manner described in the
immediately preceding sentence shall not be included
in determining the asset limitations of Section
6.1(a)(B) and 6.1(b)(i)(C) hereof and shall be con-
sidered active assets that give rise to active rental
income for purposes of this Agreement.
(ii) The Company and the Operating Partnership agree
that, if there is a change in applicable law or the
interpretations thereof or in applicable regulations
or administrative interpretations promulgated by the
Internal Revenue Service or any successor agency that
USRealty or Buyer reasonably determines would result
in the Self-Storage Facilities held by any Entity
referred to in the preceding subsection (i) or such
Entity being considered to be "passive assets" of the
Company or the Operating Partnership, as the case may
be, or that would result in the income from such En-
tity or facilities being characterized as "passive
income" of the Company or the Operating Partnership,
as the case may be, in each case under the "passive
foreign investment company" provisions of the Inter-
nal Revenue Code of 1986, as amended, then, upon
written request of USRealty or Buyer, the Company and
SUSA Partnership promptly will cause the property-
level management and staff at the Self-Storage Fa-
cilities to become employees of the property-owning
entity and SUSA Partnership will execute and cause
the property-owning entity to execute and at all
times thereafter perform and comply with an Adminis-
trative Agreement in the form attached as Exhibit A
to this Amendment (or in another form requested by
USRealty or Buyer to the extent required as a result
of any such change in law or the interpretation
thereof).
Section 7. Confirmation, Representation. (a) All
provisions of the Agreement not modified by this Amendment
shall remain in full force and effect and no provision of the
Agreement or any other document relating thereto is hereby
waived or modified, the Company and the Operating Partnership
having represented that they currently are in compliance with
all such other provisions (as amended or waived).
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(b) The Company represents and warrants to USRealty and
Buyer that, to the best of the Company's knowledge, as of the
date hereof and assuming that USRealty and Buyer own 42.5% of
the outstanding Company Common Stock, the Company is a
"domestically-controlled" REIT within the meaning of Code Sec-
tion 897(h)(4)(B).
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, this Amendment is signed by or on
behalf of each of the parties hereto as of the day first above
written.
STORAGE USA, INC.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Chief Financial
Officer
SUSA PARTNERSHIP, L.P.
By: STORAGE USA, INC., General
Partner
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Chief Financial
Officer
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: Vice President
SECURITY CAPITAL USREALTY
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: Vice President
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